“It says ‘First’ on the seat”. An unintended consequence of a generally fine rebranding in 1998 was First Great Western’s (First) on board signage that had economy passengers struggling to find a seat which was not branded as ‘First’. Many years on, passengers are asking questions about more than a seat head antimacassar, but more about cabin segmentation.
Unusually for a London commuter, I get to choose and compare rail services. What does that tell me about whether Chiltern or First put the customer first? And what conclusions can be drawn about whether customer segmentation is alive and working well?
One of the foundations of product development is market and customer segmentation. Does that process still deserve its place, in the space between mass marketing and personalised preferences? Arguably yes, but not if applied without knowing the consequences.
Segmentation applied poorly is more damaging to brands and earnings than would be treating all customers as equal when they are not.
Let’s consider those rail operators, with largely captive audiences at peak times. It is evidently easier for a ‘challenger’ brand, Chiltern, to identify needs, see what people value, and put it all out there. ‘On-board Wi-Fi’, you’ve got it. ‘Digital QR ticketing’, it’s yours. Run of the train standard cabin class throughout, why not? In comparison, with a longer established franchise, First Great Western has, it seems to me, become a stopping service. Too big to adapt fast. Too few innovations provided promptly or generously. Too many commuters are paying £5,000 season tickets to stand outside half empty first class cabins.
Service developers need to ask themselves a few tough questions if they are to use segment based design that leads to a segment based customer experience and pricing:
- Beyond the fundamental segments (price, place, speed etc.) do we actually use the segments we have on preferences?
- If we can deliver a common product across all segments at no on-cost (hotel Wi-Fi in lobby, or rooms at a price) why would we not build loyalty by a service offering?
- Are segments tracked through to actual behaviours?
- Have multiple tiers of segment types obscured from us the nature of customer attitudes and behaviour?
There is a decent science, technology-enabled, to be applied to brand development. Segmentation deserves a place in between ‘one size fits all’ and ‘big data overload on individuals’ preferences’. It can help to ensure that you can strive for low cost production, based on some predicted demand response. For that to work, service providers, for instance, rail companies need to apply a simple checklist we might offer:
- Use segments that evolve from real time transactions, not simply from ad hoc research – use research to identify the segments, but other methods to track them
- Retain segments that are distinct and contiguous, alongside each other, not overlapping nor leaving a dark quarter typically called ‘other’
- Routinely test how your segmented offering matches up to market entrants, where their disruptive design can change how a customer views our comparative offer
- Where you can convert a discriminatory segmented offer back into core delivery for all with a net gain in satisfaction and no erosion of value, go for it
Market segmentation has been a terrific tool for marketing and media refinement, and it continues to be, as long as developers can treat all customers, loyal or lapsed, both fairly equitably. Not all customers are equal, or right, or first, but each can tell us why our brand works for them or not. With the understanding of that comes the realisation of something we might begin to call ‘assertive segmentation’ – confident, assured, active engagement.
PostScript: This June 2014 should see First Great Western back in front, having agreed with the Department for Transport to increase standard class capacity on High Speed Trains, by converting some of its first class carriages.
The short term quick fix, beloved of nimble marketers, has been to convert First cabins to Standard, by removing the head cover signage that started the uncertainty – what cabin am I in, who am I, and all that.
The deal will create almost 3,000 more standard class seats a day for customers across the network and deliver nearly 16% more standard class accommodation on high speed services into London in the busy morning peak. The first completed carriages are expected to be running in June 2014, with the entire fleet completed by late summer 2015.The programme to provide additional standard class seats is being funded by the Department for Transport, while the changes to first class accommodation are being funded by First Great Western.