Rule 6: Segmentation

The Segmentation Rule:  Tailor Implementation Strategies To Both Customers and Employees

As far back as most everyone can remember, we’ve known the critical marketing importance of Customer Segmentation: separating and grouping similar customers based on their characteristics, needs, behaviors and other criteria.  Then, creating and executing marketing, sales, delivery and service strategies to optimize revenue from, and satisfaction of, those groups based on their differentiation.

Unfortunately, while most organizations continue to invest significant resources on understanding and segmenting the customer database, they’ve done little or nothing about understanding and segmenting the skills, characteristics, needs, expectations and behaviors of their workforce:  Employee Segmentation.

The result: your least qualified and interested employees are too often serving your most profitable and valuable customers.  The realities of Employee Segmentation are these:

  • Employees, like customers, have a “Lifecycle”. Generally, at the highest level, the Employee Lifecycle is something like: “Temporary Job, Full-Time Job, Short-Term Career, Long-Term Career, Avocation/Owner”.
  • Workforce members have different needs, priorities, and behaviors based on their place in the Employee Lifecycle, and those will dictate What and How employees do, especially with customers and managers.
  • Employee Turnover is much more volatile, and changes with greater velocity, than Customer Turnover.
  • Employee Turnover velocity is faster the closer employees are to direct customer contact.
  • Employee Turnover velocity is accelerated by greater degrees of Uncertainty within an enterprise.
  • In terms of direct and indirect costs, and lost revenues, Employee Turnover is extraordinarily costly.

As a fundamental consequence, customers experience significant levels of Service Uncertainty when dealing with enterprises with high velocity Employee Turnover.  Realize that the Certainty Principle also dictates Customer behavior.  Thus, in market and customer segments where Service is of greater importance, customers will involve themselves less, and participate less, with enterprises that create excess Uncertainty.

This is a significant reason why traditional consumer financial institutions have lost market share to specialty firms  in the higher net worth customer segments: it has much less to do with the products (which are largely generic anyway), than with the relative workforces and the Service levels they provide.

This is also why the growth of many traditional firms has struggled in recent years as their historic customer base migrates into new segments that require and expect higher quality service and products.

The key to success here is to institutionalize processes that identify where your workforce members are along the Employee Lifecycle, and that identify the individual skills, characteristics, needs, and behaviors of the workforce.

Then, in your marketing, sales and service strategy and tactic development and execution (both in process and technology), match the appropriate workforce members with the appropriate customers:  Aligning relevant Employee Segments to related Customer Segments to optimize Service Certainty and customer satisfaction.

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>>> Rule 7