iSixSigma

By Devanshu Darmora

Until recently, Six Sigma hadn't entered the marketing lexicon. But because the approach has generated impressive financial improvements in other areas, many CEOs are chomping at the bit to apply the methodology to marketing.

From a pure application standpoint, Six Sigma can be used in marketing anywhere from sales process reengineering to the creation of pricing leverage. The benefits can be better understood by examining where two of the most potentially fatal marketing flaws occur – targeting and positioning. Positioning without a target definition in mind is like playing soccer in a playfield without goal posts. If you try to sell to everyone, then you will probably end up selling to no one.

Targeting: A Case of Benign Neglect

Behind every great marketing strategy is a great target, yet many companies do not put proper effort into making targeting decisions. Very little time is spent considering the options and even less money is invested in research to help inform the decision. Often the targeting decision is made quickly, usually based on intuition and superficial information about category usage, demographics, classification codes, psychographic variables or presumed needs.

Not surprisingly, the folks that account for the most revenue – the so-called "heavy buyers," or the 15 percent of the market that accounts for 80 percent of sales – often look like the best prospects on paper and become the natural target selection for a majority of marketers. But target group revenues and profitability are not necessarily linearly related; heavy buyers often turn out to be the least profitable target to go after.

The heaviest buyers in any category are often more price conscious than the other 85 percent of the market, and because they tend to look just like any other buyer in the category, they are difficult to isolate through media vehicles and in commercial databases. Add to the heavy buyers these undesirable characteristics: They aren't particularly loyal – they are on the look out for the best deal because they are buying so much – and competitors are likely interested in their business and spending money to get it.

What is the best way to identify market segments? While many marketing managers use demographics, attitudes, behavior, heavy users/light users, it may also help to look at hundreds of different ways to segment the market, using all possible market drivers, from category involvement and product preference motivators to media habits and psychographics. By using all relevant factors, marketers can create distinct proprietary segments – segments competitors do not know exist – and then rank them by current and estimated profitability.

• Sufficient in size to merit disproportionate attention (e.g., 10 percent to 30 percent of the market), with potential profitability to the firm considerably greater than its size (e.g., 50 percent to 70 percent of total business).
• Growing rather than shrinking over time.
• Different demographically and therefore differentially reachable through media, sales people, direct response programs and so on.
• Has problems, needs or wants that are distinctly different from those of other segments.

Positioning: A Case of Criminal Negligence