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Hallmarks of Successful & Actionable Market Segmentation Programs:
  1. Senior Management support and acceptance. Since a successful segmentation is both a reflection of corporate strategy and one of the major inputs to corporate strategy, it essential to have full senior management support. This also implies that senior management needs to have relative close involvement in the development process. Too often market structure studies designed and executed at research staff levels and do not include the strategic mandates of senior management.
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  3. Balanced focus on implementation as well as research approach. Problems often arise when the segmentation merely is an artifact of an analytical technique and not aligned with strategic objectives. The most actionable segmentation is rarely the same solution that is analytically optimal. To be successful, you must “begin with the end in mind” and always be thinking about implementation.
  4. Strong buy-in from key stakeholders . More than in any other market research activity, it is absolutely critical to get the key organizational constituencies involved in the process early. Many segmentation failures become apparent when the individuals who need to execute strategy in the marketplace are merely presented with the complete segmentation, but were never involved in the process. See also remarks about hypothesis testing, below.
  5. Derived segments are significantly different in terms of their response to changes in the marketing mix. The most frequent grievance with segmentation schemes is their lack of “actionability”. The primary reason is that “actionability” was never considered in the up-front design of the segmentation research. The most basic step to ensure actionability is to continuously test segments for measurable differences in response to marketing mix variables – after all, those are the most obvious actions an organization will take. But it is equally important to identify additional, less obvious, action-items during the planning and design phase.
  6. Segmentation is based on an appropriate alignment of basis variables and segmentation technique. Some segmentations are based on measuring everything there is to measure about a consumer and then segmenting based on a combination of attitudes, behaviors, usage patterns, occasions, demographics etc. Not only is it typically difficult to derive well-differentiated segments on these mixtures of basis variables, but also there are also technical problems with this approach. Different measures lend themselves to different segmentation techniques and analytical procedures. One cannot take full advantage of the optimal array of techniques when too many different measures are included in a single segmentation scheme. One solution to this problem is the development of a multi-dimensional segmentation scheme.
  7. Segmentation is derived from the correct basis variables. While this may seem obvious, it is surprising how many segmentations are based on variables like attitudes or lifestyles, which rarely correlate well with response to changes in marketing mix. A segmentation strategy based on the wrong basis variables will never be actionable, and may be quite harmful.
  8. The segmentation is developed based on reasoned hypotheses about the market. In most business situations, we can develop hypotheses about possible segmentation schemes. Few researchers recognize that most segmentation techniques can and perhaps should be used in a confirmatory fashion. Hypothesis-driven segmentations are almost by definition more actionable.