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Research Expertise || Segmentation and Prime Prospect Targeting

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Segmentation and Prime Prospect Targeting

CM&B has pioneered the development of a prospect targeting methodology we call Prime Prospect Analysis (PPA). The goal of PPA is to answer two critical questions on the minds of every marketer:

  • Who are my best prospects for growth?
  • How do I reach them?

The conceptual underpinnings are simple. For every product or service, there is a group of core customers and there are a group of prospects who "resemble" these customers in terms of attitudes, values, demographics and behaviors. These are the prime prospects.

Identifying the prime prospects for a product or service entails three steps:

Step 1 - Discriminant Function Analysis

Research begins by identifying the survey measures that are most correlated with purchase of a given product or service. Then, a DFA is run to identify those items that are the best predictors of purchase in a stepwise fashion. These discriminant functions provide a series of "weights" that can be used to classify respondents according to whether they are likely customers or not.

Step 2 - Using These Weights to Classify the Prime Prospects

The second step in the process is to use the DFA to classify respondents according to whether they are "predicted" to be customers or not. The prediction equation results are cross-tabulated against actual purchase, creating several possible segments. Here is a typical breakout of 4 segments:

Core Customers - This group of individuals is made up of regular customers who are "predicted" to be regular customers.

Vulnerable Customers - This group of individuals share fewer of the characteristics that are associated with being a regular customer, yet they are current customers.

Prime Prospects - These respondents share many of the key characteristics of regular customers, but for whatever reason are not customers. These folks are your primary target for growth.

Remote Prospects - These respondents share few of the characteristics of regular customers and are not customers. They represent limited opportunity.

Step 3 - Using the Segmentation to Better Understand Market Opportunities

Once these groups have been identified, we can then use them in cross-tabulations or in other multivariate analyses to answer such questions as:

  • How many core customers are there?

  • How many of our current customers are vulnerable? Is there some common characteristic that defines them?

  • How many prime prospects are there? Are there enough to meet our growth objectives? What common characteristic defines them? How do we identify them?

Unlike other types of segmentation techniques that might or might not prove useful in explaining why someone is a customer, the beauty of Prime Prospects Analysis is that it is a segmentation technique designed expressly to focus on the drivers of purchase.