Vertical and Horizontal Segmentation. Deb Gabrielson April 18, 2000
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1 Vertical and Horizontal Segmentation Deb Gabrielson April 18, 2000
2 Segmentation - Why Do It? Leads to relevancy of communication and offer Better targeting - - more efficient use of marketing dollars Assist in prioritizing market campaigns Creates more customer focused communications vs. product focus
3 The Role of Market Segmentation What Company Wants Find, understand, and focus on mostvalued customer High Value Segmentation Scheme Market A of One+ Market B of One+ What Customer Wants Understand and treat me as a very important market of one Not High-Value Market C of One+ Market X,Y,Z of One+
4 Many Ways To Segment Demographic Industry Company size Location Operating Variables Technology User/nonuser status Customer capabilities
5 Many Ways To Segment Purchasing Approaches Suspect Inquiry First purchase Repeat purchase Long term or high value Situational Factors Urgency Specific application Size of order
6 Many Ways To Segment Personal Characteristics Loyalty Attitude toward risk And On And On...
7 Criteria for Evaluating Market Segmentation Segment Definition: Is each segment made up of customers who have similar/unique product and service needs? Is the segmentation clear and understandable to all affected functions? i.e., Channels, Marketing, Marcom Will the segmentation allow a customer to feel that he is being uniquely and knowledgeably targeted and treated? Can desired customers be found and reached using the segmentation approach? Is it actionable?
8 Criteria for Evaluating Market Segmentation Segment Definition: Does the segmentation force you to focus on and increase contact, penetration, and service to the highest value customers? Are the number of segments reasonable for the organization to handle?
9 Criteria for Evaluating Market Segmentation Segment Execution: Do you now have relationships that are closer, more in tune, with customers in each segment? Are you able to deliver more value to specific segments? Can you track segment performance? Can you predict segment needs? Is it less expensive to target customers by segment than to address the whole market? Have you modified your business processes, information systems and organization structure to match your customer segments?
10 U S WEST s Past Segmentation Schemes Service vs. Priority Owner/Operator vs. Manager Needs Based Classic vs. Complex Too High-Level Unable to Translate into Marketing Actions
11 Why Vertical Segments? Vertical industries are widely researched and measured We can find them with internal and external databases for targeting Growth opportunities in telecommunications have shifted from providing commodity services to customizes services Industry-specific solutions offer value-added services that create customer loyalty by developing close link to customers core business We can focus on selected industries or sub-segments which are growing faster than the national average
12 Transition From Segment Marketing to Creating Compelling Segment Solutions Segment Marketing Talk to them in their language Know their needs so we can show them Applications of our existing product lines in their industry Bundles of existing products most appropriate for their industry Segment Solutions Complete solutions to solve specific industry business problems Addressing core business needs will build strong long term relationships Higher margins than commodity services such as POTS lines
13 U S WEST s Experience Focus on Six Vertical Segments FIRE Professional Services CAM Retail Goods Retail Skilled Services MWT Analyze the top growing segments Compare the projected market growth to your growth Conduct research to understand specific needs, emerging trends Also look at Value Within Each Vertical Industry
14 U. S. Small Business Characteristics by Vertical Industry, 1997 All SB's (<100 Employees) A gri./ Mining A rchi./e ng./ Constr. Trans./ Comm./ Util. W holesale Trade R etail Trade Mfg. Size of companies Average Average Average Large Large Average Average Revenue growth rate Average Low High Low Average Average Low Telephone equipment spending A verage Lo w A verage High High High Lo w C ellular phone penetration Average Average Very high Low High Average Low PC penetration Average Average Average Average Average Low Very low PC spending Average Average Low Average Very Low Average Low Portable PC penetration Average Very low Average High Low Low Very low LAN penetration Average Average Low Average Low Very low Very low Internet usage Average Very low Average Average Low Average Low
15 Industries Included in Vertical Segments and Sub-Segments Manufacturing, Transportation and Wholesale Professional Services Transportation Petroleum pipeline Railroad transportation Trucking and courier services Warehousing and storage Postal Service Air transportation Water transportation Transportation Services (non commercial) Distribution Wholesale Motor vehicle supplies and new parts Lumber and other construction material Electronic parts and equipment Farm and garden machinery Industrial machinery and equipment Grain and field beans Farm products Durable goods Non-durable goods Manufacturing Rubber and misc. plastics Misc. manufacturing Metal and fabricated metal products Electronics and electrical equipment (excluding computers) Transportation equipment Measuring, analyzing and controlling equipment Textile and Apparel Lumber and wool product industry Computer and office equipment Paper and allied products Industrial machinery Printers and Publishers Furniture and fixtures Food products Petroleum Legal Services Medical Services Offices and clinics of doctors and dentists Hospitals and nursing homes Medical services Other Cable, radio and television stations Advertising agencies and advertising media and services Professional services Business associations Personnel, secretarial and court reporting Computer programming Funeral services, crematories Educational institutions and services Social services: daycare, job training, etc. Engineering, accounting, research, management and related services Veterinary services: domesticated animals
16 Industries Included in Vertical Segments and Sub-Segments Finance, Insurance, Real Estate Finance Credit and collection agencies Foreign banking and branches Depository institutions National commercial banks State commercial banks Credit Unions and Savings & Loans Mortgage bankers/loan correspondence Security/commodity brokers and dealers Insurance Insurance agents, brokers, and service Real Estate Surveillance and security systems Non residential building operators Apartment/rental building operators Real estate agents and managers Sub-dividers and developers Holding and Investment offices Retail and Skilled Services Business Services Photocopying and duplication services Photo finishing services & photo studios Wireless, cellular and misc. communications Courier services (except by air) Computer services Rental and Leasing Travel & Entertainment Tour, travel & transportation services Gasoline service stations Eating places Hotels and motels Commercial sports Golf courses and fitness facilities Misc. amusement and recreational Camp grounds Motion pictures and video rental Beauty shops and barbers Auto rental Museums, art galleries, botanical & zoological gardens Shoe repair Laundry, cleaning and garment services Misc. personal and retail services Maintenance & Repair Gas and electric services Skilled services Lawn and garden maintenance Automotive repair Pest control, cleaning & maintenance TV and appliance repair Misc. skilled repair Private household services
17 Industries Included in Vertical Segments and Sub-Segments Construction, Agriculture & Mining Construction Single family housing construction Nonresidential construction Plumbing, heating, air-conditioning electrical Roofing, siding and sheet metal work Concrete work Special trade contractors Carpentry and floor work Agriculture Agriculture production Agriculture services Veterinary services (non domesticated) Farm labor management Forestry Gaming Mining Metal, coal and oil, natural gas, and minerals Mining services Retail Goods Retail Stores Department Stores Prepackaged software Equipment rental and leasing General/specialty grocery stores Garden, auto and home Home furniture and equipment stores Auto and recreational vehicle dealers Drug stores Optical stores Liquor stores Specialty and novelty stores Apparel and accessory stores Auto and recreational vehicle dealers Mail order and non-store retailers
18 U S WEST s Horizontal Segments Home Office Primary Self-employed Part-time self-employed Telecommuters After hours corporate Start Up Less than 2 years old in business Entrepreneurs who have not yet opened for business but expect to within the next 6 months Hispanic
19 Primary Research to Provide Insight into Needs Phase I Qualitative one-on-one interviews mid-march representing a mix of small businesses in six segments Phase II Quantitative survey to measure needs and characteristics identified in qualitative phase. Telephone interview 1,200 customers in June followed by mail questionnaire to respondents. (690 returned questionnaires by cut-off) Phase III Follow-up qualitative to assess interest in solutions/packages developed from first two phases. Sample of customers were portioned into quotas for each of the six industrybased segments, as well as quotas for each of the value segments.
20 Top-Line Research Results Average monthly spend ranged from $867 to $1,305 Ratio of inbound/outbound calls ranged from 65 to 110 % inbound toll ranged from 9% to 40% % outbound toll ranged from 10% to 38% Mean number of lines at primary location ranged from 3.0 to 8.0 Use of conferencing varied dramatically Use of messaging and primary messaging system used varied
21 Top-Line Research Results Types of employees needing mobile communications and who they are communicating with varies by vertical segment Incidence of using cellular/pcs ranged from 62% to 92% Gross penetration of data communication elements ranged from 137% to 255% Incidence of transaction processing varied from 7% to 21% Incidence of internet access ranged from 45% to 71%
21 - MINING. 42 0.87% 221 Utilities 42 0.87% 6,152 0.68 23 - CONSTRUCTION
Total of State, Local Government and Private Sector 11 - AGRICULTURE, FORESTRY, FISHING & HUNTING 21 - MINING 4,824 71 1.47% 111 Crop Production 24 0.50% 2,754 0.87 112 Animal Production 35 0.73% 5,402
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