Market Segmentation: What to Look For in A Project Proposal

Reople Ready To Run imagePlanning to hire a market research agency for a market segmentation study? Then you have probably issued an RFP and are waiting for the proposals to come in.

When they do, what should you be looking for? Here are a few practical tips about what you should see in a market segmentation proposal.  If you see these things, it tells you that this proposal is from an experienced market research firm that understands how to mitigate the risks specific to segmentation projects.

The Kickoff Meeting

Do they specify a kickoff meeting?  How do they describe it?  Do they discuss things like using it as an opportunity to generate hypotheses for the segmentation model? Will they use it as an opportunity to discuss existing models, or to show you case studies of past market segmentation models that they’ve developed?

The kickoff meeting for this type of study is an important time for everybody to come together from the client side, as well as from the agency side, to put their best thinking forward.

Anybody who forgets to mention a kickoff meeting or only mentions it in the most cursory manner is overlooking one of the most important parts of making sure that the market segmentation study goes smoothly. A kickoff meeting is a good best practice for any market research project process—and is especially critical for complex ones, such as segmentation.

Model Development

How does the proposal describe the process of developing a market segmentation model?  And how will it be delivered?  Will the agency come to you with a model at the end of the project and say, “Voila!  Here is your market segmentation model”? That approach usually does not work well.

Market segmentation is not an absolute science.  Usually by the time you’ve done an exhaustive analysis, you’ve found at least two or three viable models that are then evaluated for final selection, using some agreed upon criteria (such as fit with sales strategy, suitability for informing product roadmaps, etc.).

My preference is to have the client involved in that process. And the proposal should set that expectation by offering to involve the client, and stating that at the end of the analysis phase the agency will share the best model options and candidly discuss their relative merits and weaknesses. No model is perfect.

Any agency that just says, “We will find the best model and that’s the model we will present,” well frankly, that’s just too simplistic.

Now, is it possible that after exhaustive analysis one really attractive model does come about? Sure, but that’s never been my experience. In fact, I’ve done projects where we’ve had four or five reasonable models to choose between.

Actionability

Do they say anything in the proposal about what will make the market segmentation actionable?  For example, do they talk about how they will be sure to find customer groups that will be feasible for you to actually reach or identify? Do they lay out a framework for how their segmentation analysis will be designed to support the tactical or strategic decisions that you’re going to want to inform by using the model?

Timeline

Segmentation takes time.  It is an iterative process. If they claim that they’re going to be doing the analysis part of the project in 7 business days or less, be skeptical.

Visual Display Examples

It’s always important to get a sense of how well a company can communicate research results through visual displays.  If their proposal includes visual display examples that you find intuitive and logical, then that gives you a good idea that they’ll be able to do the same for your project. Given a choice, avoid market research firms that can’t communicate their research results clearly.  After all, when you select your segmentation model you will need to share it within your organization—an experienced agency knows that and will know how to help you successfully communicate the model to your audience.

Bottom line

Selecting an agency for a market segmentation project is a big decision. Compared to many other types of research studies, segmentation is more complex and therefore riskier.   Evaluate the proposals you’ve received carefully to weed out agencies that clearly are not experienced or are offering a too-simple-to-be-true solution.

[Any questions about hiring a market research agency for your next market segmentation study? Check out our online class here, or email your question to KKorostoff@ResearchRockstar.com or use this form to request more information: InfoRequest].

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