Cutting the Gordian Knot
Imagine being in charge of a Maersk Line office in, say, Brazil, having to grow a market position at rates in excess of 15% per annum in order to cater to market developments and central capacity investments. Which customers and areas do you target in order to reach the target volumes?
Several times over the past 10 years, Maersk Line has tried to develop a segmentation model that could be made operational at Group level as well as in all 130 local offices in order to ensure coherent commercial focus and prioritisation. Previous attempts have all failed.
However, the management was determined to cut this seemingly Gordian knot of developing a framework that was widely accepted, simple enough to apply in a daily setting and yet able to encompass the complexity of market realities.
In the autumn of 2011, after nine months of hard work, Maersk Line was finally able to untangle the threads and start the global roll-out of a new segmentation framework. What made it work this time around?
What is segmentation?
The misunderstandings regarding segmentation are many, and the pitfalls on the way to success even more plentiful. Put very simplistically, segmentation is about prioritisation. However, when looking closer there is a need to agree on precisely what problem the segmentation efforts should solve. Is it growth or cost cutting? Is it to regain lost market share? To increase sales efficiency?
The purpose of the segmentation efforts will determine what segmentation models to apply at the strategic level, the tactical level and the operational level. The three levels are interconnected, and changes at one level will impact the others. Companies should define what they want and how to achieve it for all three of them.
Maersk Line is the world’s largest shipping company
million containers transported annually
Tackle and Solve
In the case of Maersk Line, the segmentation was to encompass all three levels, but with a distinct focus on defining and connecting the strategic and operational levels.
At the strategic level, the first step was to develop a strategic market model. In such a model, a segmentation grid is established on the basis of just two dimensions. This is an oversimplification of reality that trades off complexity for operational efficiency – but if made right, it still holds the potential to embrace vast complexity. After multiple analysis loops, the two primary dimensions of the model chosen in Maersk Line were cargo types and routes.
The next exercise was to define groups of cargo types with the same characteristics that represented different value to Maersk Line. An entanglement of 600-800 cargo types and 250+ routes was transformed into a segmentation grid consisting of 144 prioritised fields.
Each field was broken down according to the same logic, allowing every part of the organisation to find itself and to know which cargo types to focus on in which routes and corridors.
Where to grow?
STRATEGIC SEGMENTATION: Understanding the overall market landscape in order to identifying attractive market oportunities and prioritise segments
How to sell?
OPERATIONAL SEGMENTATION: Drive and manage operations and Projects in order to realise value where the customer meets the business
What to offer?
TACTICAL SEGMENTATION: Understanding custimer need, buying criteria and behaviour for prioritised segments in order to develop attractive offerings
Engage and mobilise
But what was it that made this particular segmentation project work for Maersk Line? The answer lies in the process leading up to the segmentation model and its implementation.
To make the defined segments of the model operational at all levels, a logical model with the right dimensions is not enough in itself; it must also be populated with the right data. And just as importantly, a common language to talk about segmentation must be established. And this is not done in a flash.
However, when done right, it enables the organisation to rank and prioritise segments according to the same principles, whether it is in London, São Paolo or any other harbour on the map.
One of the simple reasons why the previous segmentation efforts had failed was the fact that Maersk Line had not aligned the purpose of the model and
dimensions or the priorities and focus with all stakeholders involved. This time, months were spent discussing the dimensions.
The management was determined: Either we take it to the point where we believe it will work, or we drop the project entirely. So, what did it take to reach this point? The project group included all commercial departments as well as the local sales organisations and ensured an open and widespread dialogue with all major stakeholders.
Five pilot implementations were carried out on four continents, ensuring proof of concept, local adaptability and adjusting supporting business processes – admittedly a quite lengthy process. But this meant that the segmentation could be made operational and rolled out quickly – the model gave everyone the same frame of work.