When talking to marketing managers, the subject of segmentation often comes up. The conversation can seem forced and usually takes a turn from casual talk about business to a certain bitter formality, probably because now we’re talking about data. These marketing managers have never tasted our variety of data, theirs is like the grubs on Fear Factor .

Expensive : Complicated : Useless

These are words they have used to describe segmentation! Further investigation usually reveals that their segmentation study was conducted so long ago that no one really remembers why. In one case, some muckety-muck told a group of analysts to do it and so they did exactly what he told them to do. No one really knew why it was being done.

Of course then nosy consultants like me come along and ask the question. Why did you do this segmentation? What does it all mean? It used to shock me when they would say that “it’s just the way we have always done it”.

Segmentation is not about grouping data for the sake of grouping data. Segmentation should have purpose. It should be used to solve a particular problem. It is useful for determining sales regions/territories, marketing message and campaign optimization, risk management, web visitor behavior classification etc etc etc.

At the end of the day, your segmentation should tell your group or organization exactly how to focus on a particular audience. Keep in mind that an organizational segmentation is typically a pretty intense exercise, but that you might segment campaign audiences or web traffic on the fly and change it to suit your needs as campaign messaging changes or web traffic ebbs and flows.

Just remember that if your segmentation model does not include factors that drive the problem that you are trying to solve, you should not expect it to be highly actionable. I often am asked “Hey, can you do something with this data? How about a segmentation?” and am given Dun and Bradstreet profiles and customer/prospect information and little else. There is a lot of directional information I can derive about the way that you do business from this data, but I’m sort of left licking my finger and holding it in the air when you ask me how to use the segmentation to drive your media. If the segmentation is actionable, I would say that you should focus on your core, growth and niche segments.

To succeed:
* Start with a problem to solve. It can be as simple as not knowing where the company is the most profitable.

* Insist on historical transaction data that includes both demographic and actionable information. For example, profit margins for sales, conversions for campaigns and goal related metrics for web sites.

* Make sure that you understand the segments that were created and that they make sense to your business. There are n ways to look at data sets. They should be easy to understand as well as to act on. Too many segments can be unwieldy and difficult to act on. Too few can leave you without focus.

The awesomeness of your segmentation depends on following the aforementioned. There are other subtleties to this kind of exercise that are learned over time, but these are basics akin to boil water, put tea bag in cup, pour water. Happy segmenting!