Insights Article

Segmentation agency: how to pick the right one?
18th September 2017

Segmentation agency: how to pick the right one?

The trouble with segmentation is that once you start looking, you’re faced with endless agencies claiming to offer it. But be wary, the world is littered with mediocre segmentations or worse. How can you be sure you’re making a good choice? How can you find an agency with real segmentation expertise?

So if you’re thinking of appointing a segmentation agency, here are three areas worth exploring:

The methodology

Technique has a massive impact on segmentation outcomes. So ask what technique they use, and why, and watch out for bland, generic responses. If they suggest focus groups, stop right there. Qualitative data cannot deliver a meaningful segmentation at all. In quantitative research, the traditional and still most commonly used clustering techniques (such as K-means) have major flaws: you have to guess the right number of segments; different results from the same dataset; one big lumpy segment and a load of fuzzy, too-similar segments; no error-checking mechanism.

At Clusters, our unique methodology overcomes all these flaws. We ran a lab test to compare Clusters vs K-means, using exactly the same data and where the segments were obvious to the naked eye. K-Means achieved 62% accuracy, with over a third of customers in the wrong segment. Clusters achieved 96%.

Variables selection

Clustering creates segments from any data you put into it – but this doesn’t mean the segments will mean anything. It’s critical that your agency fully understand your business objectives and market characteristics in order to select the right variables that will generate meaningful segments useful for decision-making. Clusters have a clear, strongly-held and experience-based viewpoint on the data that delivers the most actionable segments.

How the segments will be communicated

Segmentation generates a large amount of data. But your agency should distil the results to be easily absorbed and used across a whole organisation. The most important two questions the segmentation answers are “who do we need target, and how?” and “who should we avoid?”. Once you have your targeting strategy, you need to understand each priority segment as a real person: how to interest and engage them, and how to convince them to buy and use your products and services.

Of course there is more to good segmentation than these 3 areas. But any segmentation agency worth its salt will get all 3 right. Unfortunately, many agencies deliver great creative outputs and workshops, but at the expense of analytical rigour, potentially leaving you with a vivid, but wrong or bland, set of segments.

By asking some tough questions, you stand a better chance of getting a segmentation that’s both vivid and rigorous. If you have any questions about this article, feel free to get in contact with us here.

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