Innovation Inspiration: Rediscovering Segmentation For Innovation & Portfolio Strategy

09 Apr 2009|Added Value

CEO Added ValueIn the current economic climate, we’re seeing more and more clients take the opportunity to ask themselves fundamental strategic questions about their category and customer marketing strategy. So this month we look at the impact of the crisis on customer segmentation and the implications for innovation and brand portfolio strategy: what’s changed and what should you be thinking about?

Writing in the Harvard Business Review, David Yankelovich and David Meer argue that what passes for segmentation these days is just a “source of human types…narrowly focused on the needs of advertising”. Segmentation has to work harder and inform brand and innovation strategy.

Read More: Rediscovering Market Segmentation

Also in the HBR, Larry Selden and Ian C. MacMillan pick up on the role of segmentation in innovation strategy by talking about the need for customer-centric discipline in the innovation process. The first step is segmentation and the identification of core customer segments; then, it’s about developing mutually beneficial value propositions.

Read More: Manage Customer Centric Innovation – Systematically

Writing again in December 2008, Larry Selden and Ian C. MacMillan feel that “it’s an ideal time to go on the strategic offensive”. Re-configuring customer segments will allow you to identify new opportunities that arise and thereby take a greater share of your industry’s pool of capital: “while your competition mindlessly cuts costs, you should reconfigure your customer segments strategically to increase both market share and market capitalization.”

Read More: Change with Your Customers – and Win Big

McKinsey agrees. Sean R. Collins, Peter W. Dahlstrom and Marc Singer argue that fragmenting customer needs, proliferating distribution & media channels and market polarisation are “dramatically increasing the importance of effective customer segmentation management.” What is truly lacking is the ability to implement effective strategies on the back of segmentation projects.

Read More: Managing your Business as if Customer Segments Matter

And the implications for brand portfolio strategy? Despite the fact that many brands barely make money, companies spend vast amounts on acquisition, brand stretch and new brand launch, writes Nirmalya Kumar in the HBR, and the unwritten chapter in the marketer’s handbook is “brand killing” – based on rigorous brand portfolio management.

Read More: Kill a Brand, Keep a Customer

For Stephen J. Carlotti Jr, Mary Ellen Coe and Jesko Perrey at McKinsey, the brand proliferation issue is one of practice, not theory. The pressure on marketers to produce growth means that they often react by launching new product lines rather than thinking of pruning.

Read More: Making Brand Portfolios Work

By Jonathan Hall, CEO Added Value France

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