Customer Segmentation Toolkit Introduction

CUSTOMER SEGMENTATION TOOLKIT INTRODUCTION

How To Use This Segmentation Toolkit Table of Contents

Follow the decision tree to see how much you may already know about customer segmentation. Your knowledge level will lead you to path A, B, C, or D. That path will then guide you through the toolkit elements that can benefit your organization the most. INTRODUCTION 1 START HERE Quite confident. D How MAKING THE CASE 4 A B C experienced are Somewhat, you with customer or not very research and experienced. FINDING THE STARTING POINT 13 A B C segmentation? No, really. How well do you know your customers? SEGMENTATION PROCESS 20 How well do you Like the D know the market back of Step 1: Define Your Objective 21 B C Somewhat, or you’re considering my hand. not very experienced. segmenting? Step 2: Pick Your Population 23 B C Could learn more! D Step 3: Brainstorm 25 A B C

Do you have Step 4: Conduct Informal Qualitative Research 29 A C How interested any resources Maybe I Interested. for conducting are you in learning could dig C Tell me more. Step 5: Dig into Existing Data 30 more? a segmentation a bit deeper. effort? Step 6: Develop Hypothesis Segmentation 34 A C D

Step 7a: Conduct Additional Research 36 B

Step 7b: Engage a Market Research Firm (optional) 38 B Not very interested. Yes I’m interested! I have Yes I’m interested! I have I know my customers really D I’m more concerned with some budget time but not well. I’m not sure what this Step 8: Refine and Finalize Segmentation 42 B other issues and projects. but not much time. much budget. toolkit can teach me that I don’t already know. D Step 9: Showcase Your Results 45 B C

Step 10: Apply Your Findings 47 B C D A B C Step 11: Track and Measure 49 B C Path A offers a Some external There are some Skim the toolkit along few basics to keep expertise might really great ways to pick path D. You may find a ADDITIONAL RESOURCES 50 in mind for later. help your organization. up knowledge without few tips and tricks Follow path B for time- high costs. Follow you’ll like. saving options. path C for low-cost SOURCES 52 options.

If you have both time and budget, consider looking over the entire toolkit. 1 INTRODUCTION

Resources Introduction

Look for these icons throughout the toolkit. Each indicates more in-depth information on a subject or Traditionally, financial service providers have considered low-income consumers helpful resources. as a single segment. Microfinance institutions were formed specifically to target this segment – historically with a monoproduct offering. But some financial service providers have begun to see more potential in the segment while others still wonder what steps to take toward understanding it. Case Studies Learn from Other Organizations Customer research such as the Financial Diaries and other demand studies show that the low-income or mass market is not one single segment; people’s worries, Evidence of the value of customer segmentation from financial service wants, needs, and behaviors are nuanced. providers who’ve invested in this approach and methods. Customer segmentation allows organizations to divide a market into subsets of customers that have, or are perceived to have, common needs, interests, Experiments and priorities – then design and implement strategies targeted toward them. An Put Customer Segmentation into Action essential tool, segmentation helps organizations serve low-income markets by understanding important common characteristics of their customer base, which can Practical exercises that help you get closer to your customers and make the difference between an underutilized service and one that resonates with add segmentation as a core competency. Many of these experiments customers. can be done in as little as an hour or two. Segmentation also allows financial service providers who’ve previously only focused on high-value customers to focus their energy on other value segments. References The growth in the number of organizations that offer services to the poor shows Build Your Customer Segmentation Knowledge Base that this opportunity is real.

Curated research and reference materials that build your internal This Customer Segmentation Toolkit provides practical guidance on how to use knowledge base and increase the impact of customer segmentation within your organization. segmentation to better serve the needs of your customers and improve customer experience overall. Despite increases in access, there are still poor households that don’t have access to a full range of financial services. Segmentation unlocks Tools opportunities for innovation that can offer value to both customers and providers. Plan and Execute Customer Segmentation Activities THIS CUSTOMER SEGMENTATION TOOLKIT IS DESIGNED FOR: Robust tools that help you integrate and manage customer segmentation initiatives within your organization – including project • Organizations with a strong interest in or a mandate to serve low-income and mass planning tools, key frameworks, and design methods. market customers. • Financial service providers with business challenges that may be addressed by a more nuanced understanding of their customers. • A wide range of senior leadership, mid-level managers, researchers, and analysts interested in customer segmentation. It provides summaries, tools, links, and other details. 2 INTRODUCTION 3 INTRODUCTION

Customer segmentation reveals nuances in A bird’s-eye view of the market demographics, attitudes, and may tell you there’s an overall behaviors. These difference opportunity but provides no insight may help you identify where your into various customer needs or products and services can fill who to focus on. unmet needs and provide the most value to you and your customers.

When you begin to divide a market by key customer characteristics, big differences in customer value reveal themselves. The pie chart below illustrates a segmentation exercise applied to This example looks at the market for financial services in a large unbanked population: transportation demographics. Each “pie slice” represents an opportunity area. Slices 2 and 4 elaborate specific details uncovered in the segmentation.

TOTAL MARKET OPPORTUNITY = ~$100M Market Value: $18.75M Average Opportunity: $25 per year Number of People: 750K The market (5M people) seems to be interested in a variety of products – from current accounts and GROUP CHARACTERISTICS small loans to savings products. Some people are 1 2 • Need for financial transactions for their moderately served by the competition, but a large portion successful businesses • 20 percent are currently unbanked (40 percent) are currently not served by any financial institution at all. 3 ADAPTED MESSAGING Appeal to efficiency (time and cost savings) 5 4 Market Value: $6.25M Average Opportunity: $10 per year Number of People: 625K Average Opportunity Number of People Average Opportunity Number of People Not a target due to segment size and low average opportunity per customer VOLUME = TOTAL MARKET VOLUME = TOTAL MARKET OPPORTUNITY OPPORTUNITY D D 4 A B C 5 A B C

Why Conduct a Segmentation?

Customer segmentation can help you divide a diverse market into a number of smaller, more homogeneous markets based on one or more meaningful characteristics. Segmentation helps you better understand your customers and their various needs and wants.

This chapter elaborates on how segmentation can help:

A. Improve your understanding of current and potential customers

B. Address business challenges and opportunities

C. Identify and estimate market opportunities

D. Tailor products, services, and customer experiences

E. Shape communications

The scope of your segmentation strategy depends on the maturity of your organization, the diversity of your market, your timeline, and budget.

1 MAKING THE CASE

CGAP Photo Contest. Photo by Wirawan. 2015 D D 6 A B C 7 A B C

A. Improve Your Understanding of B. Address Business Challenges and Current and Potential Customers Opportunities

“When you engage with your customers and are Transaction and sales data may be interesting for You probably agree that increased customer knowledge is of value to your organization. A better understanding open with them, you earn their trust, they give you trend analysis, but it won’t tell you why your customers of the needs and wants of current and potential customers may be the key to addressing current challenges and feedback, and you can establish an iterative process behave certain ways or what they may unlocking new market opportunities. for co-innovation.” do in the future. Segmentation can help address the following challenges and opportunities: – Director of Consumer Insights, Unilever Above all, customer segmentation and research allows You may be surprised to hear the variety of opinions your organization to improve the value proposition your customers have about your organization and and experiences you offer customers through a better your offerings. In essence, this is the goal of consumer understanding of their actual needs and desires. CHALLENGE OPPORTUNITY insights – to understand the “voice of the customer.”

ACQUISITION Increase customer awareness Expand customer base

Increase uptake of products and services Reduce dormancy USE Improve customer value proposition

RETENTION Increase customer loyalty Increase customer lifetime value Case Study: Bank BTPN, Indonesia Enter a new market Save for stagnant growth IMPROVING CUSTOMER UNDERSTANDING THROUGH RESEARCH EXPANSION Launch a new product or service In 2012, Bank BTPN launched BTPN WOW!, a mobile savings wallet designed for basic cell phones and geared toward low-income Indonesians. Although already focused on and For more details on choosing a business objective for your segmentation, see pages 21 and 22. serving 1.4M mass market customers, BTPN wanted to tailor the offering through deeper customer knowledge. With the help of CGAP, frog design, and Dalberg Development Advisors, they launched a research project.

The team interviewed 70+ customers, agents, and experts in the first round of research. Synthesized learnings resulted in the development of five relevantpersonas – representations of individuals based on attitudes, interactions, psychological profiles, aspirations, behaviors, and standard demographics.

BTPN leadership remarked that this was the first time they’d seen their customer base represented in such a human way. Targeting the new product to the right kind of customers influenced the way it was rolled out.

A bus driver counts his money, Indonesia. Photo by frog design. 2013 D D 8 A B C 9 A B C

C. Identify and Estimate Market Opportunities Experiments WHAT’S THE POTENTIAL OF THE UNBANKED CUSTOMERS IN YOUR MARKET? Download the Excel workbook (link below), and adjust the sample inputs to see the potential size of your market. You Two billion people around the world – more than half the adult population – are currently unbanked.1 Reaching may be surprised at how significant it is! even a small portion of this market offers significant potential.

Segmentation helps identify potential customers with the greatest unmet needs and the most willingness to adopt your products and services. Once you identify specific segments you can estimate the size of the market Select country opportunity to be gained by better serving them and prioritize resources accordingly. DATA INPUTS Indonesia

Consider the case study below about UBL Bank in Pakistan. Segmentation allowed the bank to estimate the size of Do not have an account because… various customer segments and the opportunity to serve diverse needs. Gender Age Group Education Male 15-25 Primary or less Y N ANY Female 26-35 Secondary …too far away 36-45 University or …too expensive greater 46-60 …lack documentation 60+ …lack trust …lack money …religious reasons Case Study: UBL Bank, Pakistan …family member already has one LOOKING AT THE UN(DER)BANKED MARKET UBL Bank carried out customer segmentation based on: • Customer knowledge and use of financial services • Customer trust in formal financial institutions ASSUMPTIONS OUTPUTS • Degree to which customers save % of relevant unbanked market Total unbanked population 141,551,765 In the table below, the Heavy User and Early Adopter segments represent the highest per household market attained 20% opportunity and demonstrate the greatest willingness to use UBL’s products and services. Relevant unbanked population 24,214,300 Revenue earned per person, This segmentation allowed the bank to identify the largest market opportunities and tailor value propositions to best per year $20.00 Attained unbanked population 1,210,715 meet customer needs.

Heavy User Potential Revenue $24,214,300

Overall Opportunity Market Average per Household Early Moderate Traditionalist Super Adopter Interest Saver To complete this experiment for your country or to customize inputs, download the full Excel workbook. Households

C D D 10 A B C 11 A B C

D. Tailor Products, Services, and Experiences E. Shape Communications

“Any customer can have a car painted any color that A key aspect of any product or service is the customer In the same way that products, services, and Upon completion of a segmentation exercise, the he wants, so long as it is black.” experience attached to it. In interviews with customers experiences can be designed to fit target segments, campaign message, “Take your bank everywhere,” was – Henry Ford, 1908 about the process they went through to transfer money, messaging may be adjusted as well. From mass replaced with advertisements specifically tailored to people described their experience and defined “good” campaigns to text messages to the language that tellers each segment identified. Henry Ford’s bold statement was accurate; his product customer service in a variety of ways. use at the point of transaction, communications can be Centenary Bank used the ads to clearly communicate was so revolutionary that customer segmentation was tailored to particular customer groups. not initially important. But as the market matured, it was Traders, for example, were very impressed with the PIN the value of the product to target customers and time to identify market segments and start adjusting security function and confirmation of SMS transactions. Centenary Bank in Uganda was excited to launch a new distinguish itself from the competition. The bank’s product to the needs of various users. On the other hand, businesspeople were more mobile bank offering, but their generic campaign had combined go-to-market efforts saw 38,000 users make interested in the prestige of the service and amenities achieved mediocre success. 130,000 transactions within the first four months of Cars with extra space and greater durability were built like a comfortable waiting area, potentially with wifi. launch. for farmworkers. More luxurious models were designed for those seeking prestige. Fast forward to today and consider the many models now available to meet the market’s diverse needs and preferences.

Case Study: Oversea-Chinese Banking Corporation, China Case Study: Centenary Bank, Uganda TARGETING THE YOUTH MARKET GO-TO-MARKET MESSAGING LESSONS Oversea-Chinese Banking Corporation (OCBC) identified Without segmentation, Centenary Bank’s “Take your bank But once the bank used segmentation to understand Generation Y as a segment they wanted to target. What everywhere” messaging was generic and did not resonate their target customers, they were able to tailor was next? The bank dove wholeheartedly into in-depth strongly with customers: messaging to address some of the pain points uncovered customer research to identify new ways to shape their by customer research: offerings. As David McQuillen, OCBC Head of Group Customer Experience, put it, “We hung out with them at malls, ate dinner with them, went shopping and clubbing with them, and spent a lot of time looking in their wallets and talking about money.”

Some changes OCBC made for the youth market: • Removed fees for customers under 26 • Offered savings “jars’”with customizable names so customers could save specifically for their “new iPad” or a “trip to Bali” • Offered 100+ card designs so customers could personalize their experience “Access Your “Make Payments “Save Time and • Changed the in-person experience so special bank branches looked more Salary” Directly from Transportation like a retail environment (i.e., an Apple store) than a standard bank Salaried workers Your Account” Costs” • Simplified the website to streamline online interactions wanted to The youth market The business withdraw money wanted to spend community Three years in, increased sign-ups and evidence that the product is being used in many places makes this case in smaller less time in long wanted to save a positive example of how to market to youth. amounts more bank queues and time by not regularly, not receive funds having to travel just all at once. from relatives to a bank to more easily. handle daily transactions. D 12 A B C 13 A B C

A Final Note: Debunking Segmentation Myths

By now you’re probably convinced of the value of segmentation – but you may still have a few reservations. Let’s dispel some common myths:

SEGMENTATION COSTS TOO SEGMENTATION IS TOO SEGMENTATION IS AN MUCH. COMPLICATED. WE DON’T ACADEMIC EXERCISE AND NEED IT. DOESN’T WORK Segmentation doesn’t have to IN PRACTICE. cost a lot. There are several The segmentation process may ways your organization can appear to be complex and it Although there are cases produce great results with few may seem easier just to replicate where organizations produce resources, including focusing solutions that worked in other segmentations that are too on information that’s already markets. But, for example, the complex for their needs, poor gathered and readily available. experience of mobile network execution of a good tool is not If you decide to make a large operators trying to apply the a reason to shy away from it. investment in segmentation, M-pesa money transfer model to Segmentation can be a great return can be quite high. But other countries provides more success if you: even a small upfront budget than half a dozen reasons why 1. Keep business objectives can help ensure the success the copy-cat approach may not clear and focused. Don’t of a new product launch and work well. overreach. improve customer retention in This toolkit lays out and 2. Don’t completely outsource the long run. describes the steps to to a market research firm. segmentation in a practical way, Use your expertise to guide including tools and templates the segmentation. that simplify the process. 3. Ensure buy-in by keeping 2 key stakeholders involved in the process. FINDING THE STARTING POINT 14 A B C 15 A B C

Where Should You Start? Does It Make Sense to Do a 1 Segmentation Exercise Now? This chapter helps you navigate some important issues and identify a starting point in the segmentation process.

Take the following quiz. Circle your responses, then add up your points to see where you fall on the scale at the bottom of the page.

DISAGREE UNSURE AGREE Does it make sense to do a segmentation now? 1 We’re facing serious business challenges that could be addressed through a better 0 points 1 point 2 points understanding of existing customers

Based on your current situation, do you need 2 a formal or informal segmentation? We believe there are a significant number of potential customers to serve 0 points 1 point 2 points

Currently, we don’t have a strong 3 Who should be involved in the segmentation process? understanding of our customers or 0 points 1 point 2 points their needs

Management fully supports a segmentation exercise 0 points 1 point 2 points

We’re willing to commit a certain amount of resources to complete a segmentation 0 points 1 point 2 points exercise well

We’re ready and capable of adapting product offerings and communications 0 points 1 point 2 points to different customer groups

Should we take on a customer segmentation now?

0-4 points 5-8 points 9-12 points

NOT REALLY. YES. DEFINITELY. Wait and revisit Consider a more Conduct a formal these questions informal process segmentation in 6-12 months. (see following page). (see following page).

CGAP Photo Contest. Photo by Relativo. 2015 16 A B C 17 A B C

2 Formal vs. Informal Segmentation

Formal Segmentation compared with Informal Segmentation Formal Segmentation compared with Informal Segmentation

STEP STEP 1 Define Your Objective 1 Define Your Objective

STEP STEP 2 Pick Your Population 2 Pick Your Population

STEP STEP 3 Brainstorm 3 Brainstorm

STEP STEP 4 Conduct Informal Qualitative Research 4 Conduct Informal Qualitative Research

STEP STEP 5 Dig into Existing Data 5 Dig into Existing Data

STEP STEP Ideally, segmentation Develop Hypothesis Segmentation Ideally, segmentation Develop Hypothesis Segmentation is an ongoing process 6 is an ongoing process 6 where insights feed where insights feed back into evaluating STEP back into evaluating business objectives 7a Conduct Additional Research business objectives Conduct Additional Research

STEP 7b Engage a Market Resarch Firm (optional) Engage a Market Resarch Firm (optional)

STEP 8 Refine and Finalize Segmentation Refine and Finalize Segmentation

STEP STEP 9 Showcase Your Results 9 Showcase Your Results

STEP STEP 10 Apply Your Findings 10 Apply Your Findings

STEP STEP 11 Track and Measure 11 Track and Measure 18 A B C 19 A B C

Who Should Be Involved in the Viewing segmentation as a clean, linear process can be 3 misleading. Very few (if any) segmentation projects that CGAP has taken part in have progressed through the Segmentation Process? steps in perfect order.

It’s wise to revisit your assumptions and decisions At this point, identify the people who are crucial to your segmentation outcome and bring them in. The table below frequently. Are you sure your business objective makes lists functional groups and their potential segmentation roles. Consider the functions of your own team and decide sense? Is it too aggressive – or not aggressive enough? whether they should be a part of the exercise. If your organization is small and doesn’t include all these functions, Maybe your initial hypothesis needs to be revisited after think about which team members may take on the general roles a segmentation requires. you’ve completed some research. AT A MINIMUM Take your time. Remember that revisiting decisions You’ll need a project lead from strategy, marketing, or product development; support from at least one more is not a negative, it’s a step toward making the end junior-level person; and high-level buy-in from at least one senior executive. result more useful. Often, you’ll decide to further divide segments into subsegments.

It’s easy to lose focus. Always revisit your initial assumptions and objectives. FUNCTIONAL PLACEMENT IN POTENTIAL ROLE GROUP ORGANIZATIONAL STRUCTURE IN SEGMENTATION

Design and User Research Generally part of product development. Include in any exercise, especially if product Occasionally placed under marketing or an adjustments are a possibility independent department

Strategy Generally works closely with CEO Potentially leads segmentation. Include in any exercise, especially if broad strategic decisions are part of possible outputs

Marketing Internal department Potentially leads segmentation. Include in any exercise, especially if broad strategic decisions are part of possible outputs

Product Development Generally led by a director Potentially leads segmentation. Include in any of product development exercise, especially if product adjustments are part of possible outputs

Analytics Generally part of product development, Include if responsible for segmentation analytics although some serve in marketing and strategy

Sales Internal department Include senior-level staff if adjustments to sales process are possible, or if targeting potential outcomes

Information Technology Internal department Include if internal systems adjustments are required to track segments or obtain complex data

Customer Support Internal department Likely to be helpful as inputs into customer types Interviewee prioritizes consumption choices, Kenya. Photo by Continuum. 2013 D 20 21 B C

STEP 1 Define Your Objective

Approach Worksheet

What are the business objectives you are looking to accomplish with this segmentation effort? Where do they fit on the spectrum of strategic to tactical? Strategic Tactical Potential questions to think through • What are the main business issues • Are you looking to improve the facing the organization right now? Approachperformance Worksheet of a specific offering? (cont.) • What are the underlying assumptions • Are you launching a new product and your organization is currently makingWhat do youneed think to identifyare the specificmost important aspects of yourcharacteristics? about their customers Which segmentationcustomer base? types fit your business objectives (circle one or two below)? Describe your business objectives below LIFESTYLE DEMOGRAPHIC ATTITUDINAL BEHAVIORAL (PSYCHOGRAPHIC)

Use in situations with Use it when Use when Use when identifying Tools low resources/time conducting a moreWorksheet considering 3.1 specific exploratory search, messaging options, product/service What is your target market for this research effort? ideally in or considering opportunities or Circle the relevant market below complement with offerings at a more problems other variables strategic level• Outline of business objec/ves and expected segmenta/on type (from chapter 2) Materials • Results from ini/al data analyses and research Macro Medium Easy to target Micro/’Niche’Intuitively required  Identifies  Highly predictive • Mee/ng agenda (E.g. Kenya) (e.g, Mass- Not market predictive in of (e.g.,appealing small holder underlying drivers of consumer ACCOMPANYING WORKSHEETS Kenya)behavior -farmersNot predictive in Kenya) of and beliefs behavior behavior - Hard to target, - May not provide Hard to target may not predict insight for - • Project Sponsor: Decision maker for implementa/on of segmenta/on results Describe the population you’re looking to better understand and why you’ve selected it behavior messaging • Project lead: Reports to the project sponsor and leads segmenta/on eﬀort • Other stakeholders: Representa/ves from one or more of the following func/ons; Identify characteristics you’re interested in among the following categories• Organiza/onal leadership Suggested • Marke/ng/adver/sing LIFESTYLE A0endees DEMOGRAPHIC ATTITUDINAL • Sales BEHAVIORAL (PSYCHOGRAPHIC) What is the purpose of the effort? • Product design/development • Finance When completing steps 1, 2, and 3 in this chapter, take advantage of the Circle the relevant purpose below  Age  Hobbies  Views on need for  Specific product • Research leads: People involved in and responsible for research/analyses  Gender  Religious beliefs offering usage Exploratory  Income PredictivePolitical views  Rationale for  Similar products   Seeking deeper insight into how Education- Or - “Solving for”Interest a specific in new desired usage/non-usage usage  Location technologies  Interest in product  Usage intent for populations break out outcome  Ethnicity  features1. Recap of new business product objec@ves and segmenta@on type selec@ons    worksheets provided. Use the worksheets to record decisions, and look back on  2. Review of results from ini@al data analysis     If Exploratory, what are you trying to learn about your customers? 3. Brainstorming session     If Predictive, what is/are the outcome(s) that you are testing for? • List hypotheses resul/ng from ini/al analysis     Suggested • Poten/al exercises: “A day in the life” or “Buying Process” Agenda • Consolidate results and draP hypothe/cal segments, if possible providing a What types of research do you think will be most important for your work?descrip/ve name for each group them to gain clarity moving forward. Identify research methods you plan on using below (consider the characteristics• Sense check selected segmenta/on against objec/ves above) 4. Develop plan for tes@ng hypotheses; what informa@on needs to be gathered either prove or disprove any of the hypotheses Qualitative Quantitative

 In-depth Interviews  Surveys• Impar@al Moderator: While having an impar/al moderator isn’t required, we  Focus Groups  Customersuggest data analysis having this person to make sure that they are focused on holding a good  Ethnography  Conjoint analysisdiscussion without also having to think about their own contribu/ons to the   Max-diff content   Misc. Tips • Addi@onal characteris@cs: We recommend really pushing your organiza/on to expand their op/on set here. It can be easy to default standard op/ons, but the key characteris/c might be outside that list and seem obvious aPer-‐the-‐fact. • Hypothesis characteris@cs: Pushing yourself to form a strong hypothesis can make or break the project. Focusing research is key.

One of the most critical steps in conducting a customer segmentation is to clearly define your business objectives. The success of your segmentation depends on it. Use steps a, b, and c below to define your objectives.

Is it more effective for your organization to focus on broad strategic questions or more tactical issues? a Use the questions below to define your priorities.

TACTICAL STRATEGIC Specific decisions related to products and services, High-level decisions about business direction communications, and operations

• What are the main business issues your • Do you think you need to adjust your offerings organization faces right now? Do they center or improve messaging? 3 around opportunities – or problems that need to be solved? • Do you want to target specific segments that may require adjusting your offerings and • Which of these issues is specific to your current messaging? CUSTOMER or potential customers? • Do you plan to launch new products and • Do you have particular goals regarding current services or expand into new markets? SEGMENTATION or potential customers? • Are you being challenged by new competition? • What are the underlying assumptions PROCESS your organization currently makes about • Is use or purchasing down for any reason? customers?

• Do you need to test those assumptions? D 22 B C 23 B C

STEP What are your given assumptions about your segmentation exercise? Which parts of your 2 Pick Your Population b organization‘s strategy are set and cannot be changed (e.g., focus on low-income customers, mobile money products only, etc.)?

After selecting your business objective, the next step in a segmentation is to identify a population of current and potential customers to analyze. Form your business objectives by putting together your answers from “a” and “b” above. The c challenges and opportunities listed below may match your objectives and are a good place to start a Think about how your newly specified business objective may influence relevant customers. Would you like your segmentation. segmentation to be tactical in nature, i.e., focus on specific groups? Or should it be more strategic and benefit from considering a wider population? Do you want to acquire new customers or retain current ones? Your answers to these questions act as guidelines for who to consider. CHALLENGE OPPORTUNITY A few other questions to consider: • What’s the total population set that may need your products or services? ACQUISITION Increase customer awareness Expand customer base • Do you want to review all of these populations?

Increase uptake of product offerings • If not, why exclude certain customers? Reduce dormancy USE Improve customer value proposition By defining a market, you’re basically performing a rough segmentation or prioritization exercise. These decisions are often linked to simple characteristics like income or geography, but they may also be linked to more complex RETENTION Increase customer loyalty Increase customer lifetime value attributes.

Even if you think you know a population, push yourself to challenge your assumptions before you continue. Enter new markets Save for stagnant growth EXPANSION Launch new products and services

CGAP Photo Contest. Photo by Das. 2015 Bank BTPN, Indonesia. Photo by frog design. 2013 D 24 B C 25 A B C

STEP Brainstorm Case Study: Digicel, Haiti 3 CHOOSING A RELEVANT CUSTOMER POPULATION FOR SEGMENTATION As part of their mobile money refresh strategy and to increase users, Digicel ran a customer segmentation. In considering the relevant universe of customers to segment, Digicel mapped out the intersection of all potential customers and You probably already have an idea of what your customer segments look like. But it‘s important to factor customers that currently use their mobile money transfer services. in personal experience and intuition when it comes to forming your segmentation hypotheses.

The exercise prompted three questions that you can apply to your own segmentation: Brainstorming sessions are good way to do this – assuming the right people are in the room and the right questions are asked. a What’s the total population set that may need your products and services? Use the worksheet on page 21 as a starting point for running your meeting. It includes materials to prepare, people to include, a draft agenda, plus tips and recommendations on brainstorming. b Do you want to review all of these populations? EXERCISE 1 BRAINSTORM RELEVANT CUSTOMER CHARACTERISTICS

c If not, why exclude certain customers? First, review the segmentation variables listed below and the advantages and disadvantages of each. DEMOGRAPHIC LIFESTYLE BEHAVIORAL ATTITUDINAL GENERAL SPECIFIC TO YOUR OFFERING Simple data points General questions Behaviors or practices Relevant attitudes, often readily available, around interests, activities, related to a beliefs, or values such as gender, income, values, beliefs specific offering related to an offering All potential customers in Haiti Non-users of P2P geography, etc. or transfer services Current Digicel customers Users of P2P or SAMPLE SEGMENTATIONS transfer services Current money transfer customers • Males living in rural areas • Young go-getters • High loan use, low savings • Financial worrier • Students with mobile • Homemakers • Repatriation recipients • Rationalist – emotionally devices • Community influencers • Traditional savers removed from financial Digicel decided to focus on their mobile network Across the Digicel customer base, there were • Low-income adults decision-making service customers since they already collected customers who currently did not use formal or information on this segment’s phone use and behavior, informal money transfer services. These customers ADVANTAGES and it was easy to text them about telecom-related were de-prioritized to focus research on current users • Easy to understand • Intuitively appealing • Highly predictive of • Identifies underlying • Easy to target • Fits well with brand (current) drivers and beliefs promotions. Digicel’s logical next step – and their key of person-to-person (P2P) or transfer services. • Data often readily available messaging consumer behavior • Provides insight for business objective – was to expand money transfer messaging and advertising services by focusing on the current mobile network operator customers that form a large part of the DISADVANTAGES Haitian adult population. • Not predictive of behavior • Not predictive of behavior, • Does not predict future • Difficult to identify especially for financial behavior segments services • May not provide insights • May not predict behavior • Difficult to identify for messaging segments

WHEN TO USE EACH TYPE Best for simple targeting. Use sparingly, Use when trying to Use when trying to Very helpful to combine with ideally in complement understand customer understand rationale other variables. with other variables. preferences. Best for behaviors. Very when combined with powerful for communication. attitudinal variables. Best when combined with behavioral variables.

Segmentation can be a mix of types of variables. David Meer’s Harvard Business Review article, “Rediscovering Market Segmentation,” offers greater context. D D 26 A B C 27 A B C

Now that you have the basics on overall variables, think about which are most relevant to your customers and your situation. Dig into the list below and circle those that apply. Consider advantages and disadvantages from the EXERCISE 3 BUYING PROCESS previous page. In this exercise, map out each step of your customer buying process. Potential variables to get you started 1. NEED RECOGNITION May be a single event trigger (e.g., need a loan) DEMOGRAPHIC LIFESTYLE BEHAVIORAL ATTITUDINAL AND PROBLEM AWARENESS or a more routine item (e.g., deposit business proceeds) GENERAL SPECIFIC TO YOUR OFFERING • Age (younger, middle age, • Level of responsibilities / • Financially proactive • Open to learning about new older) relaxed vs. busy lifestyle (saves, budgets) technology May be as simple as asking peers for advice or going to multiple 2. INFORMATION SEARCH • Location (urban, peri-urban, • Spontaneous vs. planner • Purchases frequency • Seeks / highly values cost banks / mobile network operators to get the best rate rural, deep rural) (personal and business) savings with phone use • Stressed vs. relaxed • Gender (male, female) • Cell phone use: sends / • Seeks / highly values • Risk profile receives SMS, calls, checks promotions with phone use • Children (Yes / No) • “Connected” / social balance, uses USSD menu • Concerned about safety of 3. EVALUATION OF Alternatives may include not using a bank at all (e.g., hiding money • Proximity to family members (Yes / No) • Proficient with phone carrying money in general ALTERNATIVES under the mattress) • Literacy / numeracy • Entrepreneur (Yes / No) (commands, use) • Associations with organization • Income / poverty level • Homemaker (Yes / No) • Purchases phone recharge • Values convenience (speed) frequently (Yes / No) • International monetary • Has many leisure activities / of money transfers transfer recipient (Yes / No) expenses (Yes / No) • Knowledge of money How difficult is it for your customers to register? Is it simple enough • Values reliability of 4. REGISTRATION transfers (none, low, medium, to encourage further use? • Social transfer beneficiary • Social standing money transfers (Yes / No) high) • Values cost savings (transport • Frequency of sending money • Level of education vs. comp.) of money transfers • Freqency of receiving money • Employment status • Has emotional barriers to 5. PURCHASE / USE May be another customer drop-off point. What’s the cause? • Type of employment / source • Amount of transfers using money transfers (trust, of income (low, medium, high) fear, etc.) • Frequency of income (daily, • Level of loyalty to money • Has rational barriers to using monthly, unpredictable) transfer products (low, money transfers (relevance, medium, high) perception of benefits, etc.) How do your customers feel about their purchase or the way they • Has bank account 6. POST-PURCHASE / USE (Yes / No) • “Stores” money vs. “saves” • Optimist / aspirational interact with the new product or service? (Yes / No) • Has mobile wallet • Most frequently used (no, mini, standard) transaction type (current • Need / desire for prestige money transfer users) (Yes / No) • Has national ID card (Yes / No) • Use of internet • Perception and importance of Think about how these steps break out for different customers. In step 2, for example, how do customers learn social norms • Has structural barriers • Use of phone games about your products and services? If by word-of-mouth, who are their trusted advisors? to using money transfers (access, convenience) In steps 3 and 5, what convinces potential customers to use your products and services? Why might they choose not to?

Use sticky notes on a whiteboard to map out all possible paths customers may take through the buying process. If you’re feeling ambitious, assign a percentage to the number of customers that take each option at each step. EXERCISE 2 A DAY IN THE LIFE OF YOUR CUSTOMER Next, choose one of the paths you created. What type of customer would take it? How are they different from customers who would take other paths? Repeat the process until you’ve thought through a few paths. Have each person in your brainstorming session complete this exercise separately. Afterwards, compare notes and discuss your results. Test your thinking by looking at the customer journey and identifying the biggest customer drop-off points. See if your group agrees on these points, then relate them to previous conversations about which path particular Close your eyes and imagine one of your customers. Think about what they look like, where they live, what they do customers follow. for a living. Imagine a day in their life. What’s the first thing they do in the morning? Are they going to have a busy day? What do they do with their free time? What challenges do they face throughout the day? Take a look at the case study on the following page to see an example of an adoption pathway and to learn Next, think about how your customer uses financial products and services. When do they use them and why? Would more about drop-off points. they choose your products and services over the competition? Why? What do they like about them? What do they dislike? D 28 A B C 29 A C

STEP Conduct Informal Qualitative 4 Research Case Study: Adoption Pathway ADOPTION PATHWAY FOR A FINANCIAL SERVICE PROVIDER Now that you’ve done some initial brainstorming, it’s a Here’s a sample adoption pathway (similar to the buying process) that a financial service provider brainstormed during trials of this toolkit. good idea to test your concepts with actual customers. There are many ways to conduct quick and inexpensive STEPS POTENTIAL BARRIERS qualitative research. The four methods below provide more context on customer experience without the heavy investment of formal primary research. • Illiteracy / inumeracy • Lack of access AWARENESS • Lack of product relevance The financial service provider • Product not known in network identified the step between Awareness and Consideration as where most of their potential customers sit. Within • Issues with registration that step there are customers with drop-off points that can • Selection of an alternative be addressed. option CONSIDERATION • Lack of perceived benefits • Word-of-mouth (positive or negative feedback) COFFEE WITH CUSTOMERS CUSTOMER SKETCHES

• Forget PIN Start impromptu conversations with a group of A customer sketch is a simple exercise to start customers while they visit your branch. This is a characterizing your customer and learn where you • Prefer to cash out great way to learn about their experience without may lack information. • Lack of awareness of full getting into the logistics of a formal focus group. range of product options ADOPTION (USE) • Confusing functionality / process • Network downtime • Insufficient agent liquidity FOLLOW FRONT-LINE STAFF MYSTERY SHOPPING

Shadowing is a basic observation technique Mystery shopping is a quick and easy way to get an CONSISTENT / that allows you to unobtrusively learn about impartial view of the customer experience at your EXPANDED USE an experience from the perspective of a single organization or a competitor’s. It often provides customer. Following a front-line staff member will a better understanding of the pain points you’ve help you uncover patterns and insights about the heard about but didn’t truly comprehend. Check out After completing brainstorming exercises 1, 2, and 3, write down your initial ideas on possible interface between staff and customers. the CGAP article on mystery shopping in Mexico. segmentations before moving on to additional analyses. 30 C 31 C

WHEN YOU ENGAGE STEP WITH YOUR CUSTOMERS 5 Dig into Existing Data AND ARE OPEN WITH THEM, DIRECTOR CONSUMER INSIGHTS Once you’ve collected relevant data, what’s the next step? Keep in mind that data analysis can become an endless UNILEVER process,YO butU you EARN can avoid this TH if youEIR have aTR relativelyUS specificT, idea of what you want to produce. Following are six perspectivesTHEY on analyzingGIVE transaction YOU data. FEED You mayBA use thisCK process, to analyze other types of data as well. To begin using data, think through what’s available internally and externally. Internal data may include customer a Outline the contents of your data. Which variables are available, and for what time periods? How many rows registration or transaction information and previously completed qualitative or quantitative studies. For external ANdo youD have?YO (IfU more CAN than one ES hundredTA thousand,BLIS Hconsider using a program like Access or SQL.) data, look to census data, public data, and academic studies. The following references and resources can help you get started. AN ITERATIVE PROCESS

b FOIdentifyR COdesired-I outcomesNNOV of yourAT analysis.ION What questions are you specifically asking? What answers do you 4 expect? The more specific you are here, the better. Drawing charts of the content you want to build is a great DIREtechniqueCTOR (fillCONSUM in with “dummy”ER INSIGHTS data to start). UNILEVER 2 Heavy Early Super HENRY FORD, 1908 User Adopter Moderate Interest Traditionalist Saver References / ResourcesOpp/HH (rs) ($3.3M) ($9.3M) ($21.3M) ($7.4M) ($2.6M) Don’t underestimate the importance of starting with high-level aggregate statistics. For example, what’s the 0 c DATA 0 2141618 0 2 416 overall average? The tenth percentile? The ninetieth? • Country census data. Important data on population statistics, includingMM geographies HHs and demographics. http://ghdx.healthdata.org/data-type/census

• Financial inclusion insights. Intermedia provides survey data and views of eight countries in Sub-Saharan Africa and South Asia. http://finclusion.org/datacenter/ EXAMPLES: TRANSACTION DATA ANALYSIS • Finscope. Nationally representative consumer and small business surveys in the financial sector. http://www.finmark.org.za/finscope/ Start with an aggregate view to get an understanding • Global Findex. Data provided by the World Bank includes dashboards across countries, key metrics, and raw data. of both the data and the accounts within http://data.worldbank.org/topic/financial-sector

• Industry data reports collected in a number of areas, i.e., financial inclusion insights and reports by Frost & Sullivan, AMOUNT + NUMBER OF TRANSACTIONS BY TYPE FOR ACCOUNT QUINTILES Account quintiles by total in-going / outgoing money in account over past 12 months ThomsonDATA Reuters, INPUTS etc. http://finclusion.org/datacenter/ Select country Afghanistan Amount Number of Transactions • Micro-insurance coverage data by nation.Gender http://www.microinsurancenetwork.org/world-map-microinsurance Male Female • Useful Data Sources Measuring Financial Inclusion – a financial inclusion guide by CGAP.http://www.cgap.org/blog/10- 14% Age Group Income Quintile Education Outflows 29% 28% 28% useful-data-sources-measuring-financial-inclusion 41% 33% Other 45% 44% 39% 15-25 Lowest 20% Primary or less Buy 35% 40% 36% 26% 5% 26-35 Second Lowest 20% Secondary Billpay 6% DATA ANALYSIS CONSIDERATIONS Send $ 5% 25% 5% 11% 27% 24% 36-45 Middle 20% Tertiary or greater Withdrawal 7% 14% 10% 15% 22% 6% 6% 7% • Seven steps of data analysis. A walk-through46-60 of how to approachSecond data Highest analysis. 20% 7% 6% 6% Inflows 12% 44% 45% http://www.oracle.com/us/corporate/profit/big-ideas/052313-gshapira-1951392.html60+ Highest 20% Other 40% 44% 38% 32% 28% 33% 30% 30% 28% Receive $ 20% • Top Ten Tips for completing data analysis. A collection of tips and tricks for completing data analysis. Deposit http://www.statsmakemecry.com/smmctheblog/top-ten-tips-for-data-analysis-to-make-your-%20research-life-ea.html Q1 Q2 Q3 Q4 Q5 Avg Q1 Q2 Q3 Q4 Q5 Avg

Total 5M 16M 20M 40M 150M 231M 121 115k 132k 155M 225k 150k % of relevant unbanked market attained 20% EXCEL ASSUMPTIONS Per Account 40 128 220 420 978 365 22.3 24.3 25.029.1 42.0 27.3 • Excel tips, tricks, and how-to’s to enable $your earned analyses. per person attained per year $5.00 http://www.pointit.com/blog/excel_tips_and_tricks_for_a_successful_and_%20efficient_data_analysis Receive $: 2.6 x 250= 7 • How to use Pivot Tables for data analysis. A very helpful tool for quickly examining the effects different variables have on 120 each other. http://fiveminutelessons.com/learn-microsoft-excel/how-create-pivot-table-excel Other: Total unbanked population 17,329,409 Withdrawal: OUTPUTS 100 0.6 x 21 = 12 Relevant unbanked population 11,340,411 12.2 x 7.2= 84 Adjustment: ESTIMATING THE MARKET OPPORTUNITY & PRIORITIZATION Relevant unbanked population attained 1,134,041 80 0.4 x 25= 11 Send $: 60 3 x 2.5= 8 What market data is available? Which segments hold the most value? What competion exists for this segment? How do your offerings fit in this segment? POTENTIAL SIZE OF PRIZE 40 Deposit Bill Pay: • Did your segmentation research • By numbers and average opportu- • Is it a highly competive segment? • Do you o erings currently match $ 5,670,206 15.8 transactions 1.2 x 5= 6 Buy: already gather data to assist with nity, which segments hold the most the segment? 20 x 5 per transaction 19 x 0.2= 4 market sizing, or is further research poten0al value? 80 total Do you have the ability to alter needed? • - • Which segments are the most likely your o erings to ﬁt them? 0102030405060 to increase in value over 0me? • How do you suspect your o ering will fare against the competion? Customer “saved” up a significant amount before Note: Ability to tailor products / services and shape communications impacts the potential value 80 a large transfer of money, Frequent pattern of deposit potentially for taxes due to 60 send. Potentially for business timing of transfer purposes due to frequency TAILORING PRODUCT / SERVICES SHAPING COMMUNICATIONS 40

To what extent the offering(s) can be altered? What messages would resonate best with target segments? 20

• Is the organization considering the development of an en0re new o ering, or • Can you address specific concerns or spirations directly? are only slight adjustments possible? 0 • Point out most valued features of the product / service? Jan Feb Mar Apr May JunJul • What is the organiza0on’s appe0te for further changes?

Which channel(s) will be most effective to reach your target segment(s)? Acct. valueDeposit WithdrawalSend $Airtime What needs to be changed? • Is your target market tech savvy? Do they commute? Do they rely on word of mouth or • First idenify those product characteris0cs that are deal-‐breakers for your personal connections? Think through how they receive information on products and target segment and ensure those are right. ensure your advertising / messaging fits this

• For other characteristics that don’t truly maHer, it maybe Her to be slightly o the mark if it enables sales toother segments WHEN YOU ENGAGE WITH YOUR CUSTOMERS AND ARE OPEN WITH THEM, DIRECTOR CONSUMER INSIGHTS UNILEVER YOU EARN THEIR TRUST, THEY GIVE YOU FEEDBACK, AND YOU CAN ESTABLISH AN ITERATIVE PROCESS FOR CO-INNOVATION 4 DIRECTOR CONSUMER INSIGHTS UNILEVER WHEN YOU ENGA2 GE Heavy Early Super HENRY FORD, 1908 WITH YOUR CUSTUserOMAdopter ERSModerate Interest Traditionalist Saver

Opp/HH (rs) ($3.3M) ($9.3M) ($21.3M) ($7.4M) ($2.6M) 0 AND ARE OPEN WITH0 21 TH41EM61,8 0 2 416 DIRECTOR CONSUMER INSIGHTS UNILEVER YOU EARN THEIR TRUST, MM HHs THEY GIVE YOU FEEDBACK, AND YOU CAN ESTABLISH AN ITERATIVE PROCESS FOR CO-INNOVATION 4 DIRECTOR CONSUMER INSIGHTS UNILEVER Select country Afghanistan 2 DATA INPUTS Heavy Early Super Amount Number of Transactions HENRY FORD, 1908 User Adopter Moderate Interest Traditionalist Saver Gender Male Female

Opp/HH (rs) ($3.3M) ($9.3M) ($21.3M) ($7.4M) ($2.6M) 0 14% 0 2141618 0 2 416 Age Group Income Quintile Education Outflows 29% 28% 28% 41% 33% Other 45% MM HHs 44% 39% 15-25 Lowest 20% Primary or less Buy 35% 40% 36% 26% 5% 26-35 Second Lowest 20% Secondary Billpay 6% Send $ 5% 25% 5% 11% 27% 24% 36-45 Middle 20% Tertiary or greater Withdrawal 7% 14% 10% 15% 22% 6% 6% 7% 46-60 Second Highest 20% 7% 6% 6% Inflows 12% 44% 45% 60+ Highest 20% Other 40% 44% 38% 32% 28% 33% 30% 30% 28% Receive $ 20% Deposit Q1 Q2 Q3 Q4 Q5 Avg Q1 Q2 Q3 Q4 Q5 Avg

Total 5M 16M 20M 40M 150M 231M 121 115k 132k 155M 225k 150k % of relevant unbanked market attained 20% ASSUMPTIONS 32 C Per Account 40 128 220 420 978 36533 22.3 24.3 25.029.1 42.0 27.3 C Select country Afghanistan DATA INPUTS $ earned per person attained per year $5.00 Amount Number of Transactions Gender Male Female Receive $: 14% 2.6 x 250= 7 Age Group Income Quintile Education Outflows 29% 28% 28% 41% 33% 120 Other 45% 44% 39% Other: 15-25 Lowest 20% Primary or less Buy Total35% unbanked40% population36% 17,329,409 26% 5% Withdrawal: 26-35 Second Lowest 20% Secondary OUTPUTS Billpay 6% 100 0.6 x 21 = 12 Push beyondSend averages $ to moreRelevant specific unbanked inquiries. population How do the average5% number25%11,340,411 of transactions vary for those Get specific with your customers. Sometimes12.2 the x 7.2 “average”= 84 doesn’t represent any customer since a wide 5% 11% 27% 24% 36-45 Middle 20% Tertiary or greater Withdrawal 7% 14% 10% 15% 22% e Adjustment: d who spend a lot vs. those who spend little? Those who spend frequently6% vs. infrequently? range of groups form that average. Look at a number of specific account actions to inspire further analysis 6% 7% 1,134,041 80 ESTIMATING THE MARKET OPPORTUNITY & PRIORITIZATION 46-60 Second Highest 20% Relevant unbanked population attained 7% 6% 6% 0.4 x 25= 11 Inflows 12% 44% 45% and insights. Send $: 60+ Highest 20% Other 40% 44% 38% 32% 28% 33% 30% 30% 28% 60 Receive $ 20% 3 x 2.5= 8 Deposit What market data is available? Which segments hold the most value? What competion exists for this segment? How do your offerings fit in this segment? Dig deeper and look at groups of accounts in a way that’s relevant to your segmentation 40 Deposit Bill Pay: POTENTIAL SIZEQ1 OFQ2 PRIZEQ3 Q4 Q5 Avg Q1 Q2 Q3 Q4 Q5 Avg • Did your segmentation research • By numbers and average opportu- • Is it a highly competive segment? • Do you o erings currently match $ 5,670,206 Pull15.8 out transactions specific examples to generate1.2 xhypotheses 5= 6 Buy: already gather data to assist with nity, which segments hold the most the segment? Total 5M 16M 20M 40M 150M 231M 121 115k 132k 155M 225k 150k 20 andx build5 per atransaction fuller picture away from the “average” 19 x 0.2= 4 % of relevant unbanked market attained 20% OVERVIEW OF AMOUNT + NUMBER OF AVERAGE TRANSACTIONS BY TYPE 80 total market sizing, or is further research poten0al value? ASSUMPTIONS Per Account 40 128 220 420 978 365 22.3 24.3 25.029.1 42.0 27.3 • Do you have the ability to alter Accounts with a majority of money in-flow from deposits - needed? $ earned per person attained per year $5.00 • Which segments are the most likely your o erings to ﬁt them? 0102REVIEW OF03 SPECIFIC ACCOUNT04 TRANSACTIONS05060 Account with majority of transactions as “sending money” to increase in value over 0me? Receive $: • How do you suspect your o ering 2.6 x 250= 7 will fare against the competion? 120 Other: Customer “saved” up a Total unbanked population 17,329,409 Withdrawal: OUTPUTS 100 0.6 x 21 = 12 Relevant unbanked population 11,340,411 12.2 x 7.2= 84 significant amount before Note: Ability to tailor products / services and shape communications impacts the potential value Adjustment: 80 a large transfer of money, ESTIMATING THE MARKET OPPORTUNITY & PRIORITIZATION Relevant unbanked population attained 1,134,041 80 0.4 x 25= 11 Send $: Frequent pattern of deposit potentially for taxes due to 60 60 3 x 2.5= 8 send. Potentially for business timing of transfer What market data is available? Which segments hold the most value? What competion exists for this segment? How do your offerings fit in this segment? Deposit purposes due to frequency TAILORING PRODUCT / SERVICES POTENTIAL SIZE OFSHAPING PRIZE COMMUNICATIONS 40 Bill Pay: 40 • Did your segmentation research • By numbers and average opportu- • Is it a highly competive segment? • Do you o erings currently match $ 5,670,206 15.8 transactions 1.2 x 5= 6 Buy: already gather data to assist with nity, which segments hold the most the segment? 20 x 5 per transaction 19 x 0.2= 4 market sizing, or is further research poten0al value? To what extent the offering(s) can be altered? What messages would resonate best with target segments? 80 total 20 • Do you have the ability to alter - needed? • Is the organization considering the development of an en0re new o ering, or • Can you address specific concerns or spirations directly? • Which segments are the most likely your o erings to ﬁt them? 0102030405060 to increase in value over 0me? are only slight adjustments possible? 0 • How do you suspect your o ering • Point out most valued features of the product / service? Jan Feb Mar Apr May JunJul • Whatwill is fare the against organiza0on’s the competion? appe0te for further changes? Customer “saved” up a Which channel(s) will be most effective to reach your target segment(s)? significant amount before Acct. valueDeposit WithdrawalSend $Airtime Note: Ability to tailor products / services and shape communications impacts the potentialWhat value needs to be changed? 80 • Is your target market tech savvy? Do they commute? Do they rely on word of mouth or a large transfer of money, • First idenify those product characteris0cs that are deal-‐breakers for your personal connections? Think through how they receive information on products and Frequent pattern of deposit potentially for taxes due to 60 target segment and ensure those are right. ensure your advertising / messaging fits this send. Potentially for business timing of transfer purposes due to frequency TAILORING PRODUCT / SERVICES SHAPING COMMUNICATIONS• For other characteristics that don’t truly maHer, it maybe Her to be slightly o 40 the mark if it enables sales toother segments To what extent the offering(s) can be altered? What messages would resonate best with target segments? 20 Reflect on what your data outputs mean. Do they confirm or dispel your original hypotheses? What are their f • Is the organization considering the development of an en0re new o ering, or • Can you address specific concerns or spirations directly? limitations? It’s easy to get a false sense of security from fancy charts and large datasets. Pay attention to are only slight adjustments possible? 0 what the data excludes and what you still may not know! • Point out most valued features of the product / service? Jan Feb Mar Apr May JunJul • What is the organiza0on’s appe0te for further changes?

• For other characteristics that don’t truly maHer, it maybe Her to be slightly o the mark if it enables sales toother segments

Entrepreneur, Indonesia. Photo by frog design. 2013 WHEN YOUWH ENGAENGE YOUWH ENENGA YOGEU ENGAGE WITH YOURWITH CUST YOOMURERWITH CUSTS YOOMURER CUSTS OMERS AND ARE OPENAND WITHARE OPEN ANTHDEM AREWITH, OPEN THEM WITH, THEM, DIRECTOR CONSUMER INSIGHTSDIRECTOR CONSUMER INSIGHTSDIRECTOR CONSUMER INSIGHTS UNILEVER UNILEVER UNILEVER YOU EARN THYOEIRU EARN TRUSYO THT,UEIR EARN TRUS THT,EIR TRUST, THEY GIVE THYOEYU FEED GIVEBATH YOCKEYU ,FEEDGIVE BAYOCKU FEED, BACK, AND YOU CANAND ES YOTAUBL CANANISHD ES YOTAU BLCANISH ESTABLISH AN ITERATIVANE PROCESITERATANIVSE ITPROCESERATIVSE PROCESS FOR CO-INNFOOVRAT COIO-INNNFOOVR ATCOIO-INNN OVATION 4 4 4 DIRECTOR CONSUMDIREER INSIGHTSCTOR CONSUMDIREER INSIGHTSCTOR CONSUMER INSIGHTS UNILEVER UNILEVER UNILEVER 2 2 2 Heavy Early Heavy Early Super Heavy Early Super Super HENRY FORD, 1908 HENRY FORD, 1908 HENRY FORD, 1908 User Adopter Moderate InterestUser AdopterTraditionalist ModerateSaver IntereUserst Adopter TraditionalistModerateSaver Interest Traditionalist Saver

Opp/HH (rs) ($3.3M) ($9.3M) ($21.3M)Opp/HH (rs) ($3.3M) ($9.3M) ($7.4M) ($2.6M($21.3M)Opp/HH (rs) ) ($3.3M) ($9.3M) ($7.4M) ($21.3M)($2.6M) ($7.4M) ($2.6M) 0 0 0 0 2141618 0 0212414161608 210 412 614186 0 2 416 MM HHs MM HHs MM HHs

DATA INPUTS DATASelect INPUTS country DATASelect INPUTSAfghanistan country Select Afghanistancountry Afghanistan Amount Amount Number of TransactionAmount sNumber of TransactionNumbers of Transactions Gender MaleGender Female MaleGender Female Male Female 14% 14% 14% Age Group Income QuintileAge Group IncomeEducation QuintileAge Group IncomeEducation Quintile Education Outflows Outflows Outflows 29% 28% 28% 29% 28% 28% 29% 28% 28% D D 41% 33%41% 33%41% 33% 34 A C 35 A C Other Other Other45% 45% 45% 44% 39% 44% 39% 44% 39% 15-25 Lowest 20%15-25 LowestPrimary 20%15-25 or less LowestPrimary 20% or less Primary or less Buy 35% 40%Buy 36% 35% Bu40%y 36% 35% 40% 36% 26% 26% 26% 5% 5% 5% 26-35 Second Lowest26-35 20% SecondSecondary Lowest26-35 20% SecondSecondary Lowest 20% Secondary Billpay Billpay Billpay 6% 6% 6% Send $ Send $ Send $ 5% 25% 5% 25% 5% 25% 5% 5% 11% 5% 27% 24%11% 27% 24%11% 27% 24% 36-45 Middle 20%36-45 MiddleTertiary 20%36-45 or greater MiddleTertiary 20% or greater Tertiary or greater Withdrawal 7%Withdrawal 14% 10% With7% drawal 15%14% 10% 7% 2215%%14% 10% 2215%% 22% 6% 6% 6% 6% 6% 7% 6% 7% 7% 46-60 Second Highest46-60 20% Second Highest46-60 20% Second Highest 20% 7% 6% 6%7% 6% 6%7% 6% 6% Inflows Inflows Inflows 12% 12% 12% 44% 45% 44% 45% 44% 45% STEP 60+ Highest 20%60+ Highest 60+20% Highest 20% Other 40%Other 44% 38% Othe40%r 44% 38% 40% 44% 38% 32% 28%32% 33% 30% 30% 28%28%32% 33% 30% 30% 28%28% 33% 30% 30% 28% Receive $ Receive $ Receive20% $ 20% 20% 6 Develop Hypothesis Segmentation Deposit Deposit Deposit Q1 Q2 Q3 Q4 Q5Q1 AvQ2g Q3 Q1Q4 Q2Q5Q1 Q3AvQ2g Q4Q3 Q5Q1Q4 AvQ2gQ5 Q3Avg Q4 Q5Q1 AvQ2g Q3 Q4 Q5 Avg

Total 5M 16M 20M 40MTotal 150M5M 231M16M 20M 121Tota40Ml 115k150M5M 132k231M16M 155M20M225k12140M150k115k150M 132k231M 155M 225k121 150k115k 132k 155M 225k 150k % of relevant unbanked market% of relevant attained unbanked % market of20% relevant attained unbanked market20% attained 20% HOW MANY SEGMENTS DYNAMIC VS. STATIC SEGMENT IDENTIFICATION IN ASSUMPTIONS ASSUMPTIONS ASSUMPTIONS Per Account 40 128 Per220 Accoun420t 97840 365128 Per220 Accoun22.3420t 24.397840 25.365128029.1220 42.022.3420 27.324.3978 25.365029.1 42.022.3 27.324.3 25.029.1 42.0 27.3 It’s at this point that the various elements of segmentation come together. Revisit notes from your brainstorming DO YOU NEED? SEGMENTS PRACTICE $ earned per person attained$ earned per peryear person attained$ earned$5.00 per per year person attained$5.00 per year $5.00 sessions, informal qualitative research, and data analysis. What stands out as a viable segmentation? Does it make Receive $: Receive $: Receive $: sense? Does it fulfill your objective? Generally you want to create “Segmentations are viewed by When you implement a 2.6 x 250= 7 2.6 x 250= 7 2.6 x 250= 7 120 120 120 as many segments as you too many of their sponsors as segmentation it’s important Other: Other: Other: Total unbanked populationTotal unbanked population17,329,409Total unbanked population17,329,409 17,329,409 Withdrawal: Withdrawal: Withdrawal: find meaningful differences in one-time, go-for-broke efforts to to identify which segments OUTPUTS OUTPUTS OUTPUTS 100 0.6 x 21 = 12 100 0.6 x 21 = 12 100 0.6 x 21 = 12 Relevant unbanked populationRelevant unbanked populationRelevant11,340,411 unbanked population11,340,411 11,340,411 12.2 x 7.2= 84 12.2 x 7.2= 84 12.2 x 7.2= 84 behavior and attitudes related provide a comprehensive portrait customers belong to. If agents Adjustment: Adjustment: Adjustment: ESTIMATING THEESTIMATING MARKET OPPORTUNITY THEto ESTIMATINGyour MARKET products & and OPPORTUNITYPRIORITIZATION THEservices. MARKET of& OPPORTUNITY customers PRIORITIZATION that can inform & PRIORITIZATION all or other employees need Relevant unbanked populationRelevant attained unbanked populationRelevant1,134,041 attained unbanked population1,134,041 attained 1,134,041 80 0.4 x 25= 11 80 0.4 x 25= 11 80 0.4 x 25= 11 While exceptions may exist, subsequent marketing decisions. to easily identify segments, Send $: Send $: Send $: Case Study: Hypothesis Segmentation 60 60 603 x 2.5= 8 3 x 2.5= 8 3 x 2.5= 8 segmentation tends to produce In our view, segmentations should demographic characteristics are HYPOTHESIS SEGMENTATION What market data is available?What market dataWhich is available?segmentsbetweenWhat markethold four the dataand mostWhich isseven value?available? segments holdWhat the competionWhich mostbe part value?segments of exists an ongoing holdfor Whatthis the search segment? mostcompetion forvalue? existsHow fordooftenWhat yourthis required.competionsegment? offerings Alternatively,fit exists inHow this for do segment? this your segment? offerings fitHow in this do segment? your offerings fit inPOTENTIAL this segment? SIZEPOTENTIAL OF PRIZE SIZEPOTENTIAL OF PRIZE SIZE OF PRIZE 40 40Deposit 40Deposit Bill Pay: Deposit Bill Pay: Bill Pay: Did your segmentation researchDid your segmentationBy numbers researchDid and your average segmentation opportu-By numbers research and averageIs it a highlyopportu-By numbers competive and averagesegment?Is it a opportu- highly competiveDo you segment?Is o it eringsa highly currently competive matchDo segment?you o erings currentlyDo match you o erings currently match $ 5,670,206 $ 5,670,206 $ 5,670,206 15.8 transactions 15.8 transactions1.2 x 5= 6 15.8 transactionsBuy:1.2 x 5= 6 Buy:1.2 x 5= 6 Buy: The best way to describe hypothesis segmentation is with an example. In one of the trials of this• toolkit, a financial service• • segments.• • • •answers to important• business • segmentations• based• on • already gather data to assistalready with gather nity,data which to assist alreadysegments with gather hold datathenity, most to which assist segments with holdnity, the mostwhich segments hold the most the segment? the segment? the segment? 20 x 5 20 per transaction x 20 5 per transaction x 5 per19 xtransaction 0.2= 4 19 x 0.2= 4 19 x 0.2= 4 provider was considering three options to address their challenges and was starting to hone in on the one that might be questions as they arise.” behavioral or attitudinal 80 total 80 total 80 total the answer. Based on their needs, they were able to look at options 1 and 2 to determine the rightmarket kinds sizing, of products or is further based researchmarket sizing, orpoten0al is further value?market research sizing, orpoten0al is further value? research poten0al value? Exploring more tactical – David Meer2 • Do youcharacteristics have the ability can to be• alter Doused you – haveas the ability to• Do alter you have the ability to alter - - - on use cases as well as customers’ transactional histories. needed? needed? needed? • Which segmentsquestions are may the resultmost• Which likely in moresegments are the• mostWhich likely segments are the most likely yourlong o erings as customers to fit them? canyour be askedo erings to fit them?your o erings to fit them? 01020103020401030502040603050 0406050 060 to increasesegments, in value althoughover 0me?to increasethey can in be value over Effective0me?to increase segmentations in value over 0me? are Option 1 Option 2 Option 3 • Howa dosmall you set suspect of non-sensitive your• oHow ering do you suspect your• Howo ering do you suspect your o ering PRIORITY LEVEL USE CASE DRIVER BASED more expensive and difficult to dynamic. They concentrate on will questionsfare against that the placecompetion? themwill fare in against the competion?will fare against the competion? implement. You may also face consumers’ needs, attitudes, Examples Examples Examples segment groups. Customer “saved” upCustomer a “saved” Customerup a “saved” up a perception overload; thinking and behaviors, which often significant amount befsigniforeicant amountsignif beforeicant amount before Sometimes customer segments Note: Ability tothrough tailor products moreNote: than / Abilityservices seven to and tailor shape products Note:communications evolveAbility/ services toover tailorand impacts time. shape products They’re the communications potential / services value and impacts shape communicationsthe potential value impacts the potential value 80 80 80 a large transfer of monea largey, transfer of amone largey, transfer of money, can be identified using only segments in your head is quite a reshaped by market conditions Frequent pattern ofFrequent deposit pattern ofFrequent depositpotentiall pattern ofy fodepositr taxes potentiall due to y for taxepotentialls due to y for taxes due to internal data. In this case, challenge! such as fluctuating economics, 60 send. Potentially60 forsend. business Potentially 60 fosend.r business Potentially timing for business of transfer timing of transfer timing of transfer emerging consumer niches, and your segmentation needs to purposes due to frequencypurposes due to frpurposesequency due to frequency TAILORING PRODUCT / SERVICESTAILORING PRODUCT / SERVICESTAILORING PRODUCT / SERVICES SHAPING COMMUNICATIONSSHAPING COMMUNICATIONSSHAPING COMMUNICATIONS 40 40 40 Gold: High Bronze: Low Farmers buying Students Savings Prestige new technologies that evolve rely on data fields that your transactions transactions goods receiving funds seekers seekers rapidly. Once you identify your organization collects or plans to To what extent the offering(s)To what can beextent altered? the offering(s)To what can extent be altered? the offering(s) can be altered?What messages would resonateWhat best messages with target would segments? resonateWhat best messages with target would segments? resonate best with target segments? MORE GEN MORE GENERAL MORE GENERAL collect going forward. 20 20 20 Behavioral Segmentation Demographic + Behavioral Attitudinal Segmentation segments, it’s important to Segmentation • Is the organization considering• Is the the organization development considering of• an Is en0rethe theorganization new development o ering, considering or of an en0re the developmentnewtrack• Can o theirering, you address evolution. orof an en0respecific Customer new concerns• o Can ering, youor spirations oraddress specificdirectly? concerns• Can you or addressspirations specific directly? concerns or spirations directly? Based on priority level of Based on customers’ are only slightmost valuedadjustments arepossible? only slight adjustments are possible? only slight adjustments possible? 0 0 0 segmentation should be customers determined by Based on the circumstances in drivers, which influence their • Point out most valued features• Point of the out product most valued/ service? features• Point of theout product most valued / service? features of the product / service? Jan Feb JanMar FeAprb JanMarMay FebAprJunJMarMayul AprJunJMay ul JunJul transaction data. Customers are which customers would use a choice of money• What transfer is the organiza0on’s services. • appe0teWhat is thefor organiza0on’sfurther changes?• What appe0te is the for organiza0on’s further changes? appe0te forrevisited further regularlychanges? and redrawn assigned to a gold, bronze, or silver money transfer service. Loosely as soon as a segment loses its Acct. valueDeposit Acct.Withdrawa valueDlSepositend $AAcct.Wi thdrawavaluirtimeDe lSepositend $AWithdrawairtimelSend $Airtime group depending on their value to based on occupation and sender / relevance.Which channel(s) will be mostWhich effective channel(s) to reach will your be target mostWhich effectivesegment(s)? channel(s) to reach will your be most target effective segment(s)? to reach your target segment(s)? the organization. receiver distinction. What needs to be changed?What needs to be changed?What needs to be changed? • Is your target market tech savvy?• Is your Do theytarget commute? market tech Do •savvy?they Is your rely Do ontarget they word commute?market of mouth tech Do or savvy? they relyDo theyon word commute? of mouth Do or they rely on word of mouth or • First idenify those product• characteris0csFirst idenify those that product are •deal- First characteris0cs‐breakers idenify thosefor yourthat product are deal- characteris0cs‐breakers for personal that your are connections? deal-‐breakers Think for through personal your how connections? they receive Think information personalthrough on howconnections? products they receive and Think information through how on productsthey receive and information on products and ü Easy to find in transaction data ü Easy to communicate ü Good for competitivetarget segment positioning and ensure targetthose aresegment right. and ensure target those segment are right. and ensure those are right. ensure your advertising / messaging ensure fits your this advertising / messaging ensure your fits thisadvertising / messaging fits this internally + to tellers Prioritization based on ü Addresses customer needs ü • For other characteristics •that For don’t other truly characteristics maHer, it maybe• thatFor otherdon’t Her to trulycharacteristics be slightlymaHer, oit maybethat don’t Her truly to be maHer, slightly it omaybe Her to be slightly o clear definition of value ü “Cases” are fairly fixed ü Good for messaging the mark if it enables sales tootherthe mark segments if it enables sales the toother mark segmentsif it enables sales toother segments ü Useful for product development

X No insight into customer X Somewhat difficult to X Driver needs not very static, needs or lifetime value identify in data customers not mutually exclusive X Not useful for messaging X May not be mutually X Difficult to find in data or product design exclusive 36 B 37 B

STEP Each type of research offers its own methods, as noted below. However, for some of the more advanced techniques 7a Conduct Additional Research it’s best to partner with a market research firm when possible. QUALITATIVE QUANTITATIVE

You may wonder why to continue with additional primary research after reviewing all your data and brainstorming + Simple + Can fit a variety of hypothesis segments. If you simply don’t have the resources, that’s a good reason! Otherwise, consider the - Difficult to ensure analytics SURVEYS following questions before deciding about further research: INTERVIEWS truthful responses Carefully formed - Questionnaires and One-on-one interviews with set of questions sent wording need to be members of your target fine-tuned for best HOW FAR OFF COULD out to target WHAT’S AT STAKE? population results YOUR HYPOTHESES BE? population

Why are you conducting segmentation in the first How much do you trust the internal and external place? Is it to finalize a go-to-market strategy that data you collected? How sure is your team about could make or break a new product launch? If so, the hypotheses developed? Did you develop + Can help spur + Factual: shows actions participant ideas, SECONDARY DATA that have actually you may decide that the expense of additional several sets of hypothesis segments or did FOCUS GROUPS creativity ANALYSIS transpired Carefully moderated, research could help you avoid a costly failure. everyone agree on the same assessment? Similar to data prompted discussions with - “Groupthink” can elicit - Retrospective; analysis. Can be more groups from your target biased responses tough to pick out On the other hand, if you’re using this toolkit as an Share you hypothesis segmentation with a few advanced or include a wider population unmet needs exploratory exercise you may be better off saving of your agents or tellers. Do they recognize the range of sources resources. Think through the potential activities customer groups you came up with? your segmentation would affect, and consider the cost of possibly making a decision based on + Follows behaviors and + Tests actual behavior inaccurate information. ETHNOGRAPHY attitudes A/B TESTING in response to Close observation + Helps bypass certain Randomized different stimuli of select people’s participant-reported experiment with - May be difficult to actions with focused biases two variants, A and B, which estimate required questions (e.g., are the control - Time consuming sample size for attitudes, values, etc.) and treatment groups significant results If you’re considering conducting additional research, think through the mix of research methods and determine - Difficult to scale what you can do internally versus externally. Here’s some more detail about qualitative and quantitative methods:

1 =1 yellow= yellow SPECIFIC QUANTITATIVE TECHNIQUES 2 =2 green= green 3 =3 red= red 4 =4 dark= dark red red PURELY QUALITATIVE BLENDED / SEQUENTIAL PURELY QUANTITATIVE CONJOINT MAX DIFF RESEARCH RESEARCH RESEARCH Advanced research technique Advanced research technique to identify how people value to identify which attribute Focused on non-quantifiable Methods can be mixed within the same Research focused on measuring and different product and people find most important information, generally more exploratory study (e.g., a qualitative interview that quantifying. Can be exploratory but is service attributes includes a short survey) or sequential often for testing hypotheses

BEST USED WHEN...

…you’re completing more exploratory …you have sufficient time and resources …the burden of proof is high and you research on customer preferences and to conduct two research phases, require a precise estimate of market needs; there’s not sufficient secondary benefiting from the relative advantages opportunity research to form hypotheses; or the of qualitative and quantitative research nature of behavior change is so great that you require deep insights on actions and attitudes For further details, dig into www.mktresearch.org 38 B 39 B

STEP Engage a Market Research Firm 7b (optional) Case Study: Zoona, Zambia SETTING UP FOCUS GROUPS WITH AN EXTERNAL MARKET RESEARCH FIRM WITHOUT WITH Zoona, a money transfer and payment service, wanted to use focus groups to gain greater insights from current and MARKET RESEARCH STEPS MARKET RESEARCH potential customers. Given time and budgetary constraints, they engaged a local market research firm for several FIRM FIRM reasons: - Identify and research potential market research firms 1. Recruitment: With a short timeline, it was more efficient to have recruitment experts find focus group attendees.

- Develop Request for Quote based on project specifics 2. Moderation: Good moderators make focus groups look easy. In reality, however, it takes someone with a lot of skill and experience to successfully navigate a group and extract insights. Review quotes or proposals. Hold - brief discussions with market research firms 3. Cultural context / translation: Even if Zoona had a great moderator, the local market research firm understood cultural context and was able to translate languages of attendees from various regions and backgrounds. - Select market research firm Zoona still wanted to conduct part of the process in-house so they could control some outputs and save money. They used the following process: Decide on sample size

Decide on screening criteria and sampling approach

Develop screener MARKET RESEARCH RESEARCH PARTICIPANT DISCUSSION GUIDE FIRM SELECTION RECRUITMENT DEVELOPMENT Develop discussion guide / survey Decide on relevant customer Identify list of potential Create initial set of Translate discussion guide / survey (if necessary) population to research and firms from trusted questions based on previous number of focus groups recommendations questionnaires [Quantitative] Code survey if tested online, test for errors / bugs budget allows

Recruit respondents

Conduct brief interviews with Pre-test questions on [Qualtative] Conduct research, record notes Develop screening criteria short list of firms customers at Zoona booths [Quantitative] Code data based upon hypothesis (see sample questions (as well as with internal staff); segmentation exercises [Quantitative] Prepare and clean database on following page) adjust

Analyze findings

Conclusions and recommendations based on analysis External firm starts Refine and finalize discussion recruitment based guide with upon criteria market research firm FINANCIAL SERVICE MARKET RESEARCH COMBINATION Completed internally PROVIDER FIRM Completed with/by market research firm Conduct focus groups 40 B 41 B

If you plan to hire an external market research firm, here are some important things to consider:

• Talk through the business objectives you want to achieve and the role market research plays in your segmentation effort. A quality firm will help you understand and refine your objectives. Tools • Look for the firm’s desire to learn deeply about your organization’s issues and objectives. COST ESTIMATE WORKSHEET

• If possible, have the firm be a part of hypothesis discussions so they understand the greater context You’ve probably wondered how much all this is going to cost. While it’s difficult to provide specific figures, CGAP can provide input on various ranges you may expect to pay or produce in man-hours of what you’re looking for. for a given effort. • Don’t underestimate the hours your team may need to spend on the effort. Consider it a red flag if the firm plans to complete research in isolation from your team.

• Ask questions about the firm’s ability to complete segmentations using many different techniques. They should be able to cater methods to the situation at hand.

SPECIFIC QUESTIONS TO ASK A POTENTIAL MARKET RESEARCH FIRM

1) What’s your experience with qualitative and quantitative research methods in this market? a. What range of methods do you offer? b. What training does your project lead or team members have? c. Would you provide a few example of projects you’ve lead and what you learned? Would you provide references?

2) When conducting research in this market: a. What sampling methodology do you recommend for qualitative and quantitative research? b. For quantitative research, what are the variables you control to ensure a representive sample? c. Will the discussion guide / survey need to be translated into local languages? Which ones?

3) One thing we definitely want to ask participants is, “[Insert your question here]” How would you go about eliciting valuable responses to that question? a. How would you lead into the question to uncover more truthful, less guarded responses? b. What exercises would you recommend?

4) What’s your approach to quality control? a. For the process, qualitative outputs, and quantitative outputs? b. How do you plan to engage with our research team?

Interview with BISP beneficiaries, Pakistan. Photo by Continuum. 2013 D D 42 B 43 B

STEP 8 Refine and Finalize Segmentation d IDENTIFY FURTHER RESEARCH (IF NECESSARY)

You may choose to do further research. If so, what specifically do you need? Make sure your research has a definitive end. Refine you segmentation by reviewing the quantitative and qualitative information gathered. Then confirm or adjust You may decide that more sophisticated quantitative analyses are required. There are several options for your original hypothesis segmentation by following steps a through d below. statistical modeling that can help remove researcher bias in segmentation, identify statistically significant differences across your segments, and assess the size of your market opportunity more accurately PROCESS (including K-means / hierarchical clustering and latent class segmentation methods). For these more At this point, the foundation for finalizing your segmentation should be largely set. A strong hypothesis advanced techniques, it’s best to work with a qualified market research firm. segmentation backed by good qualitative and quantitative information gathering and clean analysis of these materials can make the complexities of segmentation easier. If you’d like a primer on advanced techniques, Theodoros Evgeniou from INSEAD provides a great summary. Mktresearch.org also offers snapshots of advancedtechniques .

a REVIEW YOUR RESEARCH FINDINGS

If you’ve completed qualitative research, first go through your notes or transcripts as a whole and jot down key themes and interesting findings. Do the same with quantitative findings. Have your team look over preliminary data cuts, tables, cross- tabs, etc. Check for statistical significance to determine which findings are most reliable. A helpful exercise is to have team members write findings on sticky notes and place them on a whiteboard. Arrange the notes in groups or categories. Once you’ve laid out a framework, look through your notes to find supporting quotes and additional details that add nuance to your conclusions.

b COMPARE FINDINGS TO YOUR SEGMENTATION HYPOTHESES AND OBJECTIVES

Your completed research should help you either confirm or reject the hypotheses laid out earlier. Check to see if this is the case. Were you able to test all hypotheses? Note which ones remain untested. Sense check your discussion by going back to the beginning. Review (and confirm) the overall objective of the exercise and how your team thought they’d complete the segmentation. Does the proposed segmentation meet your objectives? Why or why not? Are any key hypotheses or questions still unanswered?

Market in Indonesia. Photo by frog design. 2013 c CHECK YOUR INTUITION

Segmentation is a mix of art and science. As with most business decisions, there’s generally not a specific “aha!” moment when you realize you have the right segmentation. A good test is when segments help answer your business objectives and seem intuitively right. Ask around – do other stakeholders recognize these segments? Have they met these types of customers before? D D 44 B 45 B C

STEP 9 Showcase Your Results

Case Study When you’re ready to share the results of a segmentation with your organization, keep in mind that most EXAMPLES OF FITTING OBJECTIVES AND SEGMENTATION TYPES TOGETHER stakeholders want to hear outcomes first. It’s best to focus on results and why they’re useful. Some people care . Segmentation exercises are unique to each organization and the situation that confronts them. It’s impossible to put more about data points and processes, so be prepared for these questions as well. forth a set “if this, then do that” type of guide. However, here are a few examples and the logic for choosing each type of segmentation: Regardless of the characteristics used to drive your segmentation, it helps to depict segments in a personal way when sharing. Creating persona profiles rather than relying on tables and charts, for example, helps your audience digest the most important segment characteristics. Also, prepare examples of the types of things these customers SEGMENTATION TYPE / might say if you spoke with them. Actual and illustrative quotes bring segments to life. SITUATION RATIONALE RESEARCH METHODS For those who want to “see the numbers,” try to pull out the most salient points instead of pouring over tables and • Financial Service Provider 1 Financial Service Provider Due to the need to explore charts. For example, what are 3-5 characteristics that really differentiate each segment? Once you zero in, reveal the wanted to better understand 1 sought a segmentation customers more deeply and this data points that support them. their customers, improve based mostly on use-case (a being an initial segmentation, overall customer experience, combination of demographic qualitative research that A good segmentation is one that people feel good about. These segments are “easily recognizable.” and protect against new and behavioral characteristics), relied on focus groups was the competitive threats due to its ability to be easily focus. In total, eight focus groups understood across the of six or seven people were FSP 1 • The organizationMORE GENERAL wanted a organizationMORE and GENERAL be used to held, organizedMORE GENERAL by hypothesis segmentation that was easy to form specific product offerings segmentation communicate internally and with agents, and that would provide insights for concrete product changes for priority segments

• Financial Service Provider 2 Given the focus on developing In focusing on identifying market sought to move into the a strategy for a new product, opportunities, Financial Service unbanked market with a new Financial Service Provider 2 Provider 2 focused mostly on branchless banking product selected a behavioral and quantitative research but used attitudinal segmentation for its a mix of both. This included in- • They wanted to understand improved ability to predict future depth interviews, focus groups, which segments would be behavior. They felt confident in and a nationwide survey of 2,000 FSP 2 mostMORE profitable GENERAL and should their experienceMORE GENERAL and knowledge, unbankedMORE individuals GENERAL to identify be targeted first as well as in the resources they discrete segments with different had to put forth for the effort financial services needs and • In addition, they wanted to varying levels of sophistication understand the product and messaging changes that would be required for those segments

Family, Pakistan. Photo by Continuum. 2013 D 46 B C 47 B C

STEP 10 Apply Your Findings

Case Study: Bank BTPN, Indonesia AN EXAMPLE OF HOW TO PRESENT SEGMENTS TO YOUR ORGANIZATION The most important step in segmentation is putting your findings to use. A perfect segmentation is worthless to your organization if it doesn’t lead to value creation. The question is, how do you make sure that happens? From Dalberg and frog design’s work on project Bertumbuh for Bank BTPN. Back in Chapter 1 we talked about the value of segmentation in terms of its ability to help you: SEGMENTATION PERSONA SNAPSHOTS • Uncover market opportunities and prioritize segments (focus resources) “ON THE VERGE” “THE ESCALATOR” • Tailor products and services Almost endless energy and possibilities; Making progress in a slow and steady • Shape communications focused on ST consumer desires way, is a big saver. Focus on lifestyle goals; business goals are simply a way to achieve them Now that you have your results, it’s important to brainstorm with appropriate teams in your organization to answer the following questions and develop a plan of action: “STUCK” “THE ELEVATOR” Not unusual to have to borrow to feed Success is the highest priority. Strong the family. Hard to envision future when drive, always looking for opportunities to immediate needs are such a challenge expand business or grow wealth ESTIMATING MARKET OPPORTUNITY AND PRIORITIZATION

“THE MOVING WALKWAY” “THE COMMUNITY HUB” What market data are available? What competition exists in each segment? Not progressing upward, but in an Trusted center of community. Highly • Did segmentation research gather data to assist with • Are they highly competitive segments? market sizing, or is further research required? emergency has enough buffer to respected for personal character traits How do your offerings fit each segment? keep from falling Which segments hold the most value? • Do your offerings currently match the segment? • By numbers and average opportunity, which segments • Do you have the ability to alter your offerings hold the most potential value? to fit? • Which segments are the most likely to increase • How do you expect your offerings to hold up SIMPLE DATA COMPARISON FOR “ON THE VERGE” in value over time? against the competition?

ENTREPRENEURIAL ROLE MODELS

ONE IN THE PRESENT

STRENGTH OF COMMUNITY REVISITING THE CUSTOMER JOURNEY AND VALUE PROPOSITION

PART OF THE COMMUNITY FABRIC Based on what you’ve learned about segment needs and preferences, what would be the ideal value proposition for your ENABLERS BLOCKERS NEEDS FINANCIAL LITERACY priority segments? AWARENESS OF GOOD / BAD, BUT NOT HOW MUCH How can their customer journey and experience be improved? • Facile with • Small income • Mentoring to make TECHNOLOGICAL LITERACY technology • No access dreams a reality FACILE WITH SMARTPHONES, APPS, AND MORE • Energy and to capital • Protection from possibility untrustworthy MOTIVATION AND DRIVE TAILORING PRODUCTS AND SERVICES SHAPING COMMUNICATIONS • Away from I BELIEVE IN THE POSSIBILITIES IN MY FUTURE of youth the emotional money schemes and people who’d To what extent can offerings be tailored? What messages resonate best with your target • Flexibility in location support of family take advantage AVAILABILITY OF RESERVES • Is your organization considering developing an entirely segments? and occupation of his youth NO RESERVES new offering, or are only slight adjustments possible? • Can you address specific concerns or aspirations • What’s your organization’s appetite for further directly? • Financial literacy MIX OF FINANCIAL TOOLS USES INFORMAL TOOLS ONLY change? • Point out valued features of products and services What needs to be changed? Which channels are most effective in reaching your • First, identify the product characteristics that are deal- target segments? breakers for your target segment and ensure they’re • Is your target tech savvy? Do they rely on word-of- correct mouth or personal connections? Think through how • For less important characteristics, it may be better to they receive information on products and ensure your be slightly off the mark if it enables broader reach to advertising and messaging fits other segments 48 B C 49 B C

STEP Of the five pillars of customer centricity identified by CGAP, segmentation is most relevant as a tool that helps 11 Track and Measure uncover customer insights. But it also touches upon aspects of the other pillars. Segmentation results and prioritization can help your organization become more focused and efficient across all pillars.

LEADERSHIP FOCUSING PEOPLE, TOOLS, CUSTOMER CREATING AND CULTURE OPERATIONS AND INSIGHTS EXPERIENCE VALUE REVISIT DATA TRACK SEGMENTS EMBED SEGMENTATION COLLECTION PROCESSES OVER TIME IN YOUR ORGANIZATION

Think through some of the To track segments over time, Build segmentation into data points you wish you had first profile them in your the daily language of your when you conducted you database. Ask agents to profile organization. Ensure that segmentation. a subset of customers using everyone – from sales to finance Customer-focused Focusing Collecting Based on insights Creating and surveys. Then use the results to – understands your segments What are some ways to collect leadership and operations on information, generated, design, measuring value match their data patterns to the and is up to date on how your culture customers – generating insights, concepts, test, at customer, firm, that data going forward? For rest of your customers. organization is performing in compliance, risk, informing strategy build, delivery, and society level example, adding a few questions IT, HR, finance, and customer scale, renewal each customer group. to your registration process or Incorporate segment size and marketing, legal, value propositions, training empowering data capture fields at the point key usage behaviors into your employees of transaction. basic reporting.

It’s also important to set up periodic surveys to sense- check segment size evolution and measure changes in behaviors HOW THE FIVE PILLARS RELATE TO SEGMENTATION and attitudes.

Segmentation Customer Segmentation is Customer Genuine should be centricity requires primarily a tool for experience can improvements in championed by shaping your uncovering deeper be tailored to services offered senior leaders to organization to insights about your meet different to customers further reinforce a fit the consumers customers and segment needs and benefit both the culture of listening you want to serve. uncovering new preferences – and organization and and adapting Insights from lenses through improve customer customers being your organization segmentation which to view satisfaction. served. Improved to best meet often leads to their behaviors, offerings reduce the needs of changes in how choices, needs, uptake and usage your customers. sales, support, and preferences. barriers for The goal should and other teams customers. be to make are structured segmentation to better serve habitual as well. customers. 50 51

Additional Resources Additional Resources

GENERAL FINANCIAL INCLUSION SOURCES OTHER RESOURCES

• Global Microscope on the regulatory environment for microfinance 2014 (including Excel spreadsheet). • Conjoint Analysis: A brief introduction on conjoint analysis from a market research consultancy. http://www.eiu.com/public/thankyou_download.aspx?activity=download&campaignid=microscope2014 http://www.mit.edu/~hauser/Papers/GreenTributeConjoint092302.pdf

• Personalities of the Underbanked. • An Introduction to MaxDiff: A short slide show presentation on how maximum difference http://www.finmark.org.za/wp-content/uploads/pubs/FS2012_FROG_personalities_of_the_underbanked_1.pdf scaling works – Parametric Marketing LLC. http://www.slideshare.net/surveyanalytics/sva000-an-introduction-to-max-diff-v2-200100824-11 • World Bank Consumer Protection and Financial Literacy Surveys. http://responsiblefinance.worldbank.org/surveys • A Massive Social Experiment On You Is Underway, and You Will Love It: An Introduction to A/B Testing as It’s Used in Modern Tech Organizations – Forbes. http://www.forbes.com/sites/parmyolson/2015/01/21/jawbone-guinea-pig-economy/ SEGMENTATION RESOURCES

• Averages Lie: Using Smart Segmentation to Find Growth – McKinsey. RELEVANT CGAP RESOURCES http://www.mckinseyonmarketingandsales.com/smart-segmentation-going-small-to-get-relevant • Insights Into Action: What Human Centered Design Means for Financial Inclusion. • Cluster Analysis and Segmentation – Theodoros Evgeniou, Professor, INSEAD Business School. http://www.cgap.org/publications/what-human-centered-design-means-financial-inclusion http://inseaddataanalytics.github.io/INSEADAnalytics/Report_s45.html • The Many Faces of the Poor: Mass Market Segmentation. • Handbook of Market Segmentation: Strategic Targeting for Business and Technology Firms – Art Weinstein http://www.cgap.org/blog/many-faces-poor-mass-market-segmentation (2004). http://www.amazon.com/Handbook-Market-Segmentation-Technology-Customized/dp/0789021579/ref=sr_1_1? • Mystery Shopping Infographic. s=books&ie=UTF8&qid=1443120916&sr=1-1&keywords=Handbook+of+Market+Segmentation:+Strategic+Target http://www.cgap.org/data/infographic-mystery-shopping-mexico ing+for+Business+and+Technology+Firms • Power of Micro-segmentation. • Latent Class Analysis – MarketResearch.org. http://www.cgap.org/blog/lessons-leadership-power-micro-segmentation http://mktresearch.org/wiki/Latent_Class_Analysis • Segmentation: A Tool to Enhance Activity Levels. • Market Segmentation: Conceptual and Methodological Foundations – Michel Wedel and Wagner Kamakura http://www.cgap.org/blog/segmentation-tool-enhance-activity-levels (2000). http://www.amazon.com/Market-Segmentation-Methodological-International-Quantitative/dp/0792386353 • Segmentation of Smallholder Households. http://www.cgap.org/publications/segmentation-smallholder-households • Market Segmentation: How to Do It and How to Profit From It – Malcolm McDonald and Ian Dunbar (2012). http://www.amazon.com/Market-Segmentation-How-Do-Profit/dp/1118432673/ref=sr_1_1?s=books&ie=UTF8&qi • Segmenting the “Bottom of the Pyramid” in Mexico. d=1443120932&sr=1-1&keywords=Market+Segmentation:+How+to+do+it+and+How+to+Profit+From+It http://www.cgap.org/blog/segmenting-%E2%80%9Cbottom-pyramid%E2%80%9D-mexico

• Rediscovering Market Segmentation – Harvard Business Review. • Understanding the Financial Service Needs of the Poor in Mexico. https://hbr.org/2006/02/rediscovering-market-segmentation http://www.cgap.org/publications/understanding-financial-service-needs-poor-mexico

• Segmentation and Positioning for Strategic Marketing Decisions – James H. Myers (1996). http://www.amazon.com/Segmentation-Positioning-Strategic-Marketing-Decisions/dp/0877572593

• Strategic Segmentation – Bain. http://www.bain.com/bainweb/pdfs/cms/public/bb_strategic_segmentation.pdf 52

Sources

CASE STUDIES

• Centenary Bank http://nextbillion.net/blogpost.aspx?blogid=5395 https://grameenfoundation.app.box.com/s/f85hrqqlkh1mjiqbwoayfzad5zw7g23v

• Digicel Based on CGAP internal experience

• Oversea-Chinese Banking Corp http://thefinancialbrand.com/18642/ocbc-frank-gen-y-banking-brand/ http://melicacy.com/?p=7389

• UBL Bank Based on CGAP internal experience

• Zoona Based on CGAP internal experience

EXERCISES

• Size of Prize Exercise http://datatopics.worldbank.org/financialinclusion/

• Expected Budget Work Based on CGAP internal experience

NOTES

1. http://www.worldbank.org/en/news/press-release/2015/04/15/massive-drop-in-number-of-unbanked-says- new-report

2. https://hbr.org/2006/02/rediscovering-market-segmentation

Young carpenter apprentice, Ghana. Photo by CGAP. 2013 PRODUCED BY

IN CONSULTATION WITH