Guide to Segmentation

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Guide to Segmentation Because one size doesnt
fit all
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When we segment, we know who our different
customers are and can design things around them
its as simple as that
Gemma Richardson The National Archives
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Contents
Section 1 Introduction
Section 4 Case studies
Section 2 The basics of segmentation
At the back of the guide is a glossary of terms
used. Throughout the guide youll find these
icons indicating some of the key things you might
want to look out for
Section 3 How to do it
GUIDE TO SEGMENTATION
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Segmentation in action As part of its efforts to
tackle pensioner poverty, The Pension Service
came up with a way of dividing its customer base
of around 13 million people to reflect their
different needs and circumstances. This
segmentation of customers provides a basis for
focusing resource on people who most need help,
and for developing and delivering the services
and messages that are most appropriate for each
segment. An example of this is being piloted now.
Historically, anyone calling The Pension Service
about a change of circumstance was given
information about pension credits. This
typically took up about 3 minutes of a 9 minute
call but, for many customers, wasnt relevant.
Using segmentation data, operators will now be
able to determine whether the information will be
relevant to a given customer and only provide it
where needed. This means a more tailored and
appropriate service for customers and, through
careful targeting, The Pension Service can spend
more time with customers who need it, with no
impact on call handling performance.
Prosperous independents Usually couples. Good
level of income, tend to live in good housing and
claim few benefits
Urban underprivileged Usually older, single
pensioners. Little income or wealth and engage
with DWP in order to claim benefits
Shown here are two of the six segments developed
by The Pension Service
We set out to create something very actionable,
based on our understanding of real customers
Roger Westerbeek The Pension Service
GUIDE TO SEGMENTATION
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Section 1 Introduction
Section 1 Introduction
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• Segmentation is the sub-dividing of people with
  distinctive shared needs and characteristics into
  reachable groups, based on three dimensions
• Who they are
• What they do
• How they think and feel

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Introduction Why bother with segmentation?
Across all areas of government theres a growing
emphasis on getting closer to customers, to
design and deliver services that meet the needs
of people and businesses rather than the needs of
government. This is reflected in the
cross-government Service Transformation
Agreement, which set out the need for
departments, agencies and local government to
show how they are improving customers
experiences of their services. Segmentation is
one of the tools that can help do this. At its
simplest, segmentation is about classifying a
population into different groups, recognising
that not all people are the same or need the same
things. Its purpose is to help us understand
different people and their varying needs so that
we can tailor our services and target limited
resources more effectively. The guide describes
how to segment and how to use the results of
segmentation. It gives a suggested approach that
should be flexible enough to work across a range
of needs, circumstances and budgets. It can be
used by anyone in public services who has to deal
with different customer groups and meet their
varying needs.
Segmentation can help deliver a better
understanding of customers, leading to more
effective policy, better targeting of limited
resources, and improved take-up of services
A full range of tools that can help is set out
in Successful Service Design Turning innovation
into practice. See Page 12 for details of how
to access this document.
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Examples of segmentation in government
Dividing the population by age for payment of
child benefit or pensions
Providing a varied range of services to different
wards within a Local Authority
Identifying businesses that need most help with
tax, and providing extra support for them
Identifying the people most likely to drive
dangerously, and targeting policy comms
interventions at those people
GUIDE TO SEGMENTATION
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These are simple, everyday examples that you
might not even think of as segmentation, but
thats exactly what they are. Understanding the
differences between people, and the different
things they want and need is a big part of what
most of us do. Segmentation just puts a name
to that process.
Identifying reasons why different types of people
contact the council, and providing appropriate
channels
Focusing health initiatives on high risk groups,
such as older smokers who dont think much about
their health
Targeting benefits to help those people in
greatest need
Finding and working with champions who believe
passionately in a cause or initiative
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The role of segmentation What it is (and isnt)
We should focus on achieving a fair outcome for
everyone, rather than on treating everyone in the
same way
Segmentation can be simple and straightforward.
Its part of everyday life. Changing rooms
segment us into men and women. Hospitals segment
us according to why or how were being treated.
Small and simple segmentations can lead to great
results and often this is all thats needed. It
should start from the customer, not from
government. The best segmentations involve
cross-government thinking, to share insight and
get a customer-focused perspective. Segmentation
isnt about helping one group at the expense of
another. Its about understanding the varying
needs of different groups, to find the best
solution for each. Its not just for
communicators. Segmentation certainly helps
them, but its also key to successful policy and
delivery. Its often one of the first tools to
use. Before you carry out Customer Journey
Mapping or Satisfaction Measurement, it usually
helps to think first about the customer segments
youre going to be looking at.. .but
segmentations not an end in itself. Think of it
as a tool that can help you understand people
better and make best use of the customer data
that you have.
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What its used for
Targeting resources
Targeting communications
Colchester Borough CouncilWere able to target
direct mail in one key initiative they halved
the number of mailings and doubled the response
Sport England Understood how to invest resources
in a way most likely to increase sports
participation
Understanding how to allocate resources between
different groups for maximum cost benefit
Understanding the messages and communication
channels that will work best for different groups
Efficiency savings
Improved customer experience
Child Maintenance Enforcement
Commission Identified how to improve most vital
parts of customer journeys for each segment
HMRC Using segmentation, HMRC focused help to all
its customers where it was needed most, whilst
reducing its overall costs
Segmentation can help inform policy, delivery and
communication
Understanding where cost savings can be made with
the minimum negative impact on customers
Understanding how to provide a better experience
throughout the customer journey
Better service design
Setting strategic priorities
Defra Used segmentation to focus energy
efficiency interventions on groups most likely
to respond
London Borough of Barnet Used segmentation to
plan the best mix of services to put into a new
building
Understanding how tailoring service elements for
different groups can increase usage and
satisfaction
Understanding which groups can make the largest
contribution to achieving a desired outcome
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The benefits of segmentation
Who stands to gain? Good segmentation delivers a
winwin situation. You can develop tailored
policies that deliver a better customer
experience with better operational efficiency.

• Better customer experience
• You get closer to knowing your customers. Better
  understanding means you can focus on the things
  that really matter to people
• You can develop appropriate new products and
  services for particular groups
• The things people see or experience are relevant
  and appropriate for them
• Theyre delivered in the right way at the right
  time

• Greater efficiency
• Limited resources can be targeted more
  effectively
• You can identify where to save money with minimal
  impact on the customer
• You can target research at the groups you really
  need to understand
• You can forecast, analyse and track results better

Its not quite as good as one on one
intervention, but its a huge improvement on one
size fits all
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HMRC Tax Credits Around six million customers are
entitled to tax credits, and their dependence on
these credits, as well as their ability to
navigate the system, varies significantly. As
part of the Tax Credits Transformation Programme,
HMRC set out to create services and communication
products tailored to reflect this variation in
customer needs. HMRC particularly wanted to help
vulnerable customers - those who needed more
support, and were more likely to suffer real
hardship if things went wrong. Building on the
knowledge of frontline staff, three crucial
factors were identified which tended to be
associated with these customers big awards (when
these go wrong, they go wrong in a big way),
complicated awards (e.g. multiple incomes,
childcare element) and previous behaviour in
terms of whether they had contacted HMRC. Using
these factors, identifiable from information in
their own systems, HMRC were able to pinpoint
vulnerable customers and have introduced new
measures to help them such as proactive
provision of extra telephone support. In one
pilot initiative, vulnerable customers were
targeted with help to renew their tax credits
awards. This prevented between 3m and 5m of
overpayments and was rolled out nationally this
year.
We needed something simple and practical that
we could action without needing to ask people a
dozen different questions
Paul Gerrard HMRC Tax Credits
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Other resources
How to Measure Customer Satisfaction
Successful Service Design
Customer Journey Mapping guidance
This guide is available in both printed format,
and online via the Cabinet Office website (the
address of which is given on the right). There is
a supporting Toolkit with extra tools, pro
formas and checklists, which is also available
via the website. You may also find helpful the
other sources referenced here, which deal further
with segmentation and related topics. For more
information about any of these sources, please
contact customerinsight_at_ cabinet-office.x.gsi.gov
.uk
Customer Insight in Public Services A Primer
Promoting Customer Satisfaction
All the documents shown above are available via
the Cabinet Office website http//www.cabinetoffi
ce.gov.uk/public_service_reform/delivery_council/w
orkplan.aspxpublications
Local Authority/IDeA Guide to Segmentation http
//www.lga.gov.uk/lga/aio/37774
Government Communication Network Engage
programme https//www.comms.gov.uk/