What is agile project management?

 Agile project management is an iterative approach to delivering a project throughout its life cycle.

Iterative or agile life cycles are composed of several iterations or incremental steps towards the completion of a project. Iterative approaches are frequently used in software development projects to promote velocity and adaptability since the benefit of iteration is that you can adjust as you go along rather than following a linear path. One of the aims of an agile or iterative approach is to release benefits throughout the process rather than only at the end. At the core, agile projects should exhibit central values and behaviours of trust, flexibility, empowerment and collaboration.

Why do you need agile in project management?

Agile is a philosophy that concentrates on empowered people and their interactions and early and constant delivery of value into an enterprise. Agile has enduring appeal and ‘proved’ itself in software development. However, although the arguments are compelling, evidence that it is more beneficial than alternative approaches remains largely anecdotal.

What are the benefits of agile working?

Agile could be a project delivery ‘placebo’; working because those involved want it to. Agile empowers people; builds accountability, encourages diversity of ideas, allows the early release of benefits, and promotes continuous improvement. It allows decisions to be tested and rejected early with feedback loops providing benefits that are not as evident in waterfall. 

In addition, it helps deliver change when requirements are uncertain, helps build client and user engagement by focuses on what is most beneficial, changes are incremental improvements which can help support cultural change.  Agile can help with decision making as feedback loops help save money, re-invest and realise quick wins. 

However...

Agile focuses on small incremental changes and the challenge is that the bigger picture can become lost and create uncertainty amongst stakeholders. Building consensus takes time and challenges many norms and expectations. Resource cost can be higher; co-locating teams or invest in infrastructure for them to work together remotely. The onus can be perceived to shift from the empowered end-user to the empowered project team with a risk that benefits are lost because the project team is focused on the wrong things.

When to adopt an agile approach

A critical governance decision is to select the appropriate approach as part of the project strategy. Level of certainty versus time to market is the balance that needs to be considered when selecting suitable projects to go agile. Organisations have to be realistic: the objective is not agile but good delivery, and a measured assessment of the preferred approach is essential to achieve that goal. This is defined by the project type, its objectives and its environment. 

Agile is not a panacea, many practice its principles without knowing. Projects delivering end-user benefits is an agile principle which should also exist using traditional methodologies. Collaborative working will always: improve benefits; speed up delivery, improve quality, satisfy stakeholders and realise efficiencies.

What are the principles of agile working?

Agile is a framework and a working mind-set which helps respond to changing requirements. It focuses on delivering maximum value against business priorities in the time and budget allowed, especially when the drive to deliver is greater than the risk. There are four principles which are typically used to highlight the difference between agile and waterfall (or more traditional) approaches to project management:

• Customer collaboration over contract negotiation

In an agile environment, how a project is delivered is driven by a team working with end users, focus is on a core deliverable and iterating over time.  Allowing the user to drive the design of a project can make a significant difference to project outcomes. Agile favours benefits and innovation through collaboration with a particular focus on customer satisfaction, quality, teamwork and effective management.

• Individuals and interaction over process and tools

Agile emphasises a shift from a control to consensus. Focus is on people achieving benefits through engaged, accountable, high performing teams with focus on sharing data, openness, team communication and learning from feedback. This often requires behaviour change; those playing management roles become in and of the team both serving and leading to create commitment and accountability to an end goal.

• Responding to change over following a structured plan

The traditional ‘waterfall’ uses an agreed scope to create a time and resources plan. Agile establishes the resources and time which ultimately drive scope. There will be a number of time and cost delivery windows, sprints, through which the project will evolve.

An agile environment establishes a minimum viable product (MVP); the core project deliverable to trigger the start of a delivery. This is likely to change as the project team realises other opportunities or benefits that become available throughout each sprint.

• Prototyping/working solutions over comprehensive documentation

The team owns the MVP working together to develop the product; what they will deliver and how they will deliver it. The delivery team is ‘cocooned’ to focus on the solution to the problem they are dealing with. The team will make constant adjustments to the scope of the product.

What are agile methods/ what are agile methodologies

Agile is a family of development methodologies where requirements and solutions are developed iteratively and incrementally throughout the project life cycle. Agile methods integrate planning with execution, allowing an organisation to create a working mindset that helps a team respond effectively to these changing requirements.

Agile does not prescribe one particular way of working. Rather it provides a framework which describes a collection of tools, structure, culture and discipline to enable a project or programme to embrace changes in requirements.

• The agile, or iterative, project promotes collaborative working, especially with the customer. This involves the customer being embedded in the team, providing the team with constant and regular feedback on deliverables and functionality of the end product.
• The best agile approaches are very disciplined and can, and should, be integrated into corporate procedures such as governance.
• An agile project's defining characteristic is that it produces and delivers work in short bursts (or Sprints) of anything up to a few weeks. These are repeated to refine the working deliverable until it meets the client's requirements.

Examples of agile methodologies

There are several methodologies that can be used to manage an agile project; three of the most popular being Kanban, Scrum and Lean.

Where traditional project management will establish a detailed plan and detailed requirements at the start then attempt to follow the plan, agile starts work with a rough idea of what is required and by delivering something in a short period of time, clarifies the requirements as the project progresses.

These frequent iterative processes are a core characteristic of an agile project and, because of this way of working, collaborative relationships are established between stakeholders and the team members delivering the work.

Here are some more agile methodologies:

• DAD (disciplined agile delivery) – a process-decision framework.
• DSDM, or dynamic systems development method – agile development methodology, now changed to the ‘DSDM project management framework’.
• Kanban – a method for managing work, with an emphasis on just-in-time delivery.
• Kanban board – a work and workflow visualisation tool which summarises the status, progress, and issues related to the work.
• Lean – a method of working focused on ‘eliminating waste’ by avoiding anything that does not produce value for the customer.
• LeSS (large-scale Scrum) – agile development method.
• RAD (rapid application development) – agile development method; enables developers to build solutions quickly by talking directly to end users to meet business requirement.
• SAFe (scaled agile framework enterprise) – agile methodology used for software development.
• Scaled agile – agile scaled up to large projects or programmes, for example by having multiple sub-projects, creating tranches of projects, etc.
• Scrum – an agile methodology commonly used in software development, where regular team meetings review progress of a single development phase (or Sprint).  
• Scrum of scrums – a technique to operate Scrum at scale, for multiple teams working on the same product.
• XP (eXtreme Programming) – agile development methodology used in software development; allows programmers to decide the scope of deliveries.

• Difference between agile and waterfall approaches to project management 

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There are four principles which are typically used to highlight the difference between agile and waterfall (or more traditional) approaches to project management:

• Customer collaboration over contract negotiation;
• Individuals and interaction over process and tools;
• Responding to change over following a structured plan;
• Prototyping/working solutions over comprehensive documentation.

Traditional 'waterfall’ approaches will tend to treat scope as the driver and calculate the consequential time and cost; whereas ‘agile’ commits set resources over limited periods to deliver products that are developed over successive cycles.

Agile and waterfall approaches to project management exist on a continuum of techniques that should be adopted as appropriate to the goals of the project and the organisational culture of the delivery environment.

Overall, agile and waterfall approaches to project management both bring strengths and weaknesses to project delivery, and professionals should adopt a ‘golf-bag’ approach to selecting the right techniques that best suit the project, the project environment and the contracting parties with an emphasis on the behaviours, leadership and governance, rather than methods, that create the best opportunities for successful project delivery.

Pros and cons from The Practical Adoption of Agile Methodologies:

Agile project management glossary

Agile terminology can be confusing. We have compiled a list of the most common agile terms you may come across, and their definitions:

• Agile – a project management approach based on delivering requirements iteratively and incrementally throughout the life cycle.
• Agile development – an umbrella term specifically for iterative software development methodologies. Popular methods include Scrum, Lean, DSDM and eXtreme Programming (XP).
• Agile Manifesto – describes the four principles of agile development: 1. Individuals and interactions over processes and tools. 2. Working software over comprehensive documentation. 3. Customer collaboration over contract negotiation. 4. Responding to change over following a plan.
• Backlog – prioritised work still to be completed (see Requirements).
• Burn down chart – used to monitor progress; shows work still to complete (the Backlog) versus total time.
• Cadence – the number of days or weeks in a Sprint or release; the length of the team’s development cycle. 
• Ceremonies – meetings, often a daily planning meeting, that identify what has been done, what is to be done and the barriers to success.
• DAD (disciplined agile delivery) – a process-decision framework.
• Daily Scrum – stand-up team meeting. A plan, do, review daily session.
• DevOps (development/operations) – bridges the gap between agile teams and operational delivery to production.
• DSDM (dynamic systems development method) – agile development methodology, now changed to the ‘DSDM project management framework’.
• Kanban – a method for managing work, with an emphasis on just-in-time delivery.
• Kanban board – a work and workflow visualisation tool which summarises the status, progress, and issues related to the work.
• Lean – a method of working focused on ‘eliminating waste’ by avoiding anything that does not produce value for the customer.
• LeSS (large-scale Scrum) – agile development method.
• RAD (rapid application development) – agile development method; enables developers to build solutions quickly by talking directly to end users to meet business requirement.
• Requirements – are written as ‘stories’ that are collated into a prioritised list called the ‘Backlog’.
• SAFe (scaled agile framework enterprise) – agile methodology used for software development.
• Scaled agile – agile scaled up to large projects or programmes, for example by having multiple sub-projects, creating tranches of projects, etc.
• Scrum – agile methodology commonly used in software development, where regular team meetings review progress of a single development phase (or Sprint).  
• Scrum of scrums – a technique to operate Scrum at scale, for multiple teams working on the same product.
• Scrum master – the person who oversees the development process and who makes sure everyone adheres to an agreed way of working.
• Sprints – a short development phase within a larger project defined by available time (‘timeboxes’) and resources.
• Sprint retrospective – a review of a Sprint providing lessons learned with the aim of promoting continuous improvement.
• Stories – see Requirements.
• Timeboxes – see Sprints.
• Velocity – a measure of work completed during a single development phase or Sprint.
• Waterfall – a sequential project management approach that seeks to capture detailed requirements upfront; the opposite to agile.
• XP (eXtreme Programming) – agile development methodology used in software development; allows programmers to decide the scope of deliveries.

Interview with Sue Clarke videos

This APM Research Fund study builds on the 2015 APM North West Volunteer study on the practical adoption of agile methodologies which provided a review of approaches at a project level, this study aims to investigate the level of practical adoption of those programme and portfolio components addressed by scaled agile methodologies. 

The objective of the study was to understand the extent to which scaled agile tools, techniques and roles are practically in place in corporate portfolio, programme, project and development management methodologies, to determine the level of corporate commitment to exploiting scaled agile, e.g. pilot, full use, selective based on need, as well as drivers for selection or deselection of the framework based on the overheads.

Can agile be scaled?

This APM Research Fund study builds on the 2015 APM North West Volunteer study on the practical adoption of agile methodologies which provided a review of approaches at a project level, this study aims to investigate the level of practical adoption of those programme and portfolio components addressed by Scaled Agile methodologies. 

The objective of the study was to understand the extent to which scaled agile tools, techniques and roles are practically in place in corporate portfolio, programme, project and development management methodologies, to determine the level of corporate commitment to exploiting scaled agile, e.g. pilot, full use, selective based on need, as well as drivers for selection or deselection of the framework based on the overheads

Who is the intended audience?

The proposed target audience is APM corporate members and their employees but would also be of interest to individual practitioners, training providers and those who are considering or have adopted Agile and now want to expand its use, or who have been struggling to align timeframes and products across multiple agile deliveries.

Why is it important?

We hope that the findings help to improve the understanding of Scaled Agile adoption, and identify practical steps rather than theory, for members, both corporate and individual, to understand what they may need to consider when adopting any scaled agile methodology.

The findings help provide an overview of the state of the uptake of scaled agile project management in the North West whilst understanding the methods, tools and techniques from project professionals to add to the understanding of good practice.

Who took part in the research?

To avoid concern about gaining approval to publish, even anonymously, potentially sensitive information about project performance, individual project managers, rather than corporates, were approached for interviews.

The research is based on an online survey and interviews with 12 project managers who all had had first-hand experience of leading and delivering agile projects of varying sizes worth on average around £20 million. All participants had recognised agile project management or management qualifications.  Only one project manager had used agile for non-IT delivery. All had undertaken some form of formal training or accreditation in at least one scaled agile management approach.

What did we discover?

We hope that the findings help provide a useful overview of the state of the uptake of scaled agile project management in the North West whilst enhancing understanding around the practices, tools and techniques from practitioners to add to the existing understanding of good practice. However, it proved difficult to have a complete interview about agile project management without falling into the discussions around agile development. Consequently, some of the findings relate more to scaled agile development methods in a project/programme context. Therefore, further research questions are indicated into why the adoption of agile project management is still confused with agile development approaches.

Findings included:

• Agile project management and agile development are not necessarily seen as different practices and the terms are used interchangeably.
• Adoption is limited and still largely restricted to use by IT; however, the determining factor is the existing maturity of agile adoption. Agile is still predominantly seen by the majority of study participants as a development approach, rather than a project management framework.
• An agile enterprise portfolio can provide the right environment to gain executive Support
• Most organisations start with a pilot, then decide on whether to simply scale up a team method or go for an enterprise-driven framework when success can be proven.
• Drivers for adoption of scaled agile were determined by the participant programme managers rather than from a corporate appetite and are mainly related to speed to market.
• The mindset is more important than the method, as most techniques are adaptable and transferable.
• HR support for reward mechanisms and multiskilled job profiles is needed to aid new ways of working.
• The change in reporting approach is radical – reporting under the new approach needs careful consideration, explanation and practice

Further research is needed to understand how to scale up team-level agile project management methods.

What were the main challenges?

• Obtaining participating organisations and individuals that provided a good cross section of the UK project profession that enabled handover to be assessed across a range of business sectors. The projects delivered by the participants were, in the main, IT solutions; this could be due to some membership or network bias
• It proved difficult to have a complete interview about agile project management without falling into the discussions around agile development
• https://bit.ly/3sjZ2Sj

• What Is Agile Project Management in Business?

• Max Freedman

• While adding more steps, the agile project management model can help you provide a more transparent collaborative process.

  When working on a project, you can take a variety of approaches to complete it. It is always best to set a course of action from the start. Project managers often turn to specific models when sketching out their plans for completion. Traditional project management models focus on five steps: initiation, planning, execution, monitoring and completion.

  Agile project management is another approach. With the agile project management model, there are often far more than five steps, but this doesn't necessarily mean the project will take longer. In fact, your team could complete the project sooner. That's part of the reason why agile project management is becoming common in many industries.

  What is agile project management (APM)?

  Agile project management is an iterative approach to project management. In the agile method, you complete small steps, known as "iterations," to finish a project. A product of some sort typically follows an iteration, with clients immediately able to give their feedback on these products. As such, in the agile process, you move away from working on large projects for long periods without outside involvement. The goal is to focus on a series of smaller tasks that more deftly meet your long-term goals as well as your clients'.

  What is the difference between project management and agile project management?

  Whereas the traditional project management and product development process follows a linear path, agile methodology is nonlinear and thus allows for deviance from an ordered set of steps.

  APM comprises short tasks that facilitate quicker routes to product development and more frequent, thorough feedback from clients. In turn, teamwork and collaboration become easier, since more feedback on more products is available. [Read related article: Pros and Cons of 7 Project Management Styles]

• Who uses agile management?

  Agile management is most common in software development and IT. That's because the iterations of an agile software development project result in client feedback along the way, so software developers can adjust small lines of code as a project develops instead of conducting a massive overhaul upon completion. As any developer knows, changes to one line of code can set off a ripple effect of additional changes – a sort of chaos sequence that agile project management helps to avoid.

  Of course, agile management isn't solely a software strategy. It's becoming common in several industries prone to uncertainty, such as marketing, automotive manufacturing and even the military. All these industries stand to benefit from a key advantage of the iterative approach: building a solution in real time instead of working toward an inflexible, predefined outcome.

  What are the four core values of agile project management?

  When implementing APM practices into your company's operations, start by transforming its four core values into the basis of all your workflows. These are the core values, as outlined in the Agile Manifesto:

  1. Individuals and interactions over processes and tools
  2. Working software over comprehensive documentation
  3. Customer collaboration over contract negotiation
  4. Responding to change over following a plan

  Although the second core value mentions software, you can theoretically apply the logic of working parts over thorough documentation to any long-term project. Learning another key component of the Agile Manifesto – its 12 principles – may help you see how.

  What are the 12 principles of agile?

  These are the 12 principles of agile project management from the Agile Manifesto. (Keep in mind that you can replace the word "software" with whatever product your company sells.)

  1. "Our highest priority is to satisfy the customer through early and continuous delivery of valuable software." Some clients may become uneasy when they don't see any finished products or other clear updates after extended periods of work. The early and continuous delivery described in the Agile Manifesto circumvents this issue.
     
     
  2. "Welcome changing requirements, even late in development. Agile processes harness change for the customer's competitive advantage." This way, you work not toward a rigid idea of a solution, but an ever-adapting product that addresses the pain point identified long before the solution was fully clear.
     
     
  3. "Deliver working software frequently, from a couple of weeks to a couple of months, with a preference for the shorter timescale." With each deliverable you provide to a client, you lessen the chances that you'll need to make massive changes to one part of a project that will have a ripple effect on other parts. You also increase your transparency and ability to collaborate, thus keeping your clients happier.
     
     
  4. "Business people and developers must work together daily throughout the project." This principle reminds project teams that those who prioritize business may have different views and needs from those who focus on product research and development. As such, it can be easy to drift away from shared goals without daily collaboration.
     
     
  5. "Build projects around motivated individuals. Give them the environment and support they need, and trust them to get the job done." Creating a space in which team members have the tools and supervisor support to move through iterations is key to efficiently guiding a project from loose idea to firm final product.
     
     
  6. "The most efficient and effective method of conveying information to and within a development team is face-to-face conversation." No, you shouldn't entirely forgo email, phone, and digital communication, but real-time conversations may be best for identifying challenges and brainstorming feasible solutions. They're also best for explaining progress and next steps to clients.
     
     
  7. "Working software is the primary measure of progress." Showing results and products is the easiest way to demonstrate that you're addressing the needs you've identified, even if your way of doing so looks different than initially expected.
     
     
  8. "Agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely." Establishing consistent workflows in which team members know how much work they should expect to put into a project is part and parcel of agile project management. With these workflows in place, team members won't become overwhelmed and will be able to properly move a project forward.
     
     
  9. "Continuous attention to technical excellence and good design enhances agility." Agile project management is iterative, not long-term. As such, team members may find it easier to consistently focus on quality, not quantity. This means fewer mistakes to fix later and thus higher agility in completing projects.
     
     
  10. "Simplicity – the art of maximizing the amount of work not done – is essential." Agile project management seeks to maximize efficiency and limit the number of massive changes that need to be made after a project is supposed to be finished.
      
      
  11. "The best architectures, requirements, and designs emerge from self-organizing teams." Your team should decide for itself how to best divide work and meet the client's needs.
      
      
  12. "At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly." The iterative process, while partially intended to avoid massive last-moment changes, can never be perfect. That's why teams should regularly review their processes and figure out how to improve on them moving forward.

  What is the agile project management process?

  There are two primary models for the agile project management process: Scrum and Kanban. While there are differences between the two, their approaches comprise roughly the same six primary steps:

  1. Project plans

  Just as in traditional project management, you should at least set some basic frameworks – problems to be solved, possible solutions – before getting started. If you're using Scrum methodology, the Scrum master will lead the team in mapping this path.

  2. Project maps

  The map planned in the previous step should comprise each deliverable to be worked toward during an iteration. In both the Scrum and Kanban methods, these steps should be defined, but only in Scrum should a firm timeline be set. In Kanban, you can instead use a Kanban board to manage your team's workload. Other project management tools will likely come in handy for mapping as well.

  3. Deliverable dates

  In this step, you can turn to your Scrum board to establish firm timelines for completing each iteration, or you can use your Kanban board to get a rough sense of how long each task might take. A Gantt chart, which provides a visual representation of a project schedule, may also prove helpful.

  4. Division of labor

  With your path and deadlines in place, assign work to each member of your team. Simplicity is essential, so you should evenly distribute the workload among your entire team. Visual workflow representations may help you achieve this goal.

  5. Regular updates

  To achieve the final of the 12 agile principles, commit to daily meetings in which team members state what they've achieved and what's next for them. Keep these meetings brief in accordance with the simplicity principle, but not so short that team members have no valuable information.

  6. Client interaction

  In the final stage of agile project management, the client joins. You unveil your iteration's deliverable to the client and determine how to implement any requested changes. You will also discuss workflow improvements and achievements to determine how you can improve your process on the next go-round.

  Benefits of agile project management

  These are some of the benefits of transitioning your company to agile project management:

  • Less uncertainty. Agile project management originated in the software industry because developers often identify a need and then gradually figure out how the solution will look. The iterations and regular feedback of APM allow development teams to efficiently reshape their products to better suit the identified need. This results in a final product that requires fewer changes than it might have with traditional project management approaches.
    
    
  • Higher-quality products. With improvements and client feedback at every step of the way (instead of it all coming at the end), your products will be better suited to address the problems you initially identified.
    
    
  • Stronger collaboration. The six steps outlined in the agile management process make for improved, more frequent collaboration between not just your team members, but your company and its clients too.
    
    
  • Fewer wasted resources. The simplicity principle of agile project management manifests as fewer employee hours spent working on a project, and your employees' time is among your most important resources. So is money – and with more consistent client feedback, you'll encounter fewer instances of spending more money to fix mistakes you could have avoided in the first place. 

  At the end of the day, agile project management benefits everyone involved, both in and outside your company.

  https://bit.ly/34CSF4D

Market Segmentation in B2B Markets

 Satisfying people’s needs and making a profit along the way is the purpose of marketing. However, people’s needs differ and therefore satisfying them may require different approaches. Identifying needs and recognizing differences between groups of customers is at the heart of marketing.

What Is Marketing If It Is Not About Segmentation?

CVS Pharmacy is one of the most successful drug store chains in America. What is the reason for this success? They understand their market and have approached it through market segmentation and targeting.

The company looked at its customer base and found that 80 percent are women. With this in mind, CVS redesigned 1,200 of its 6,200 stores to meet the needs of busy, multi-tasking women by offering shorter wait times for prescriptions, wider and better-lit shopping aisles, and more beauty products. In doing so it fulfilled the requirement of all good marketing orientated companies – it identified the needs of its customers and organized its offer to better meet them. This is at the heart of all good marketing – meeting customers’ needs profitably, and allocating finite resources in such a way that profit is maximized. This means not wasting time or resources on customers who would be less profitable, and treating the key targets not as one homogeneous population but as distinct groups with distinct needs.

It is very rare for even two customers to have identical needs to each other. In a perfect world, we would identify those customers that we deem to be profitable, and then treat each one of those individually according to their unique needs. In any market with a sizable target audience, even this is likely to require more resources than is practical or profitable. To reiterate, segmentation, like marketing itself, is all about the profitable satisfaction of customers’ needs. It is designed to be a practical tool, balancing idealism against practicality and coming up with a solution that maximizes profit.

This means we have to be clever in targeting our offers at people who really do want them, need them and are willing to pay for them. Equally, we have to be strong in setting aside those who do not. We have to choose our target audience on the basis of our capabilities and strengths. In other words we have to choose our own battlefield where we are confident that we are more attractive than our competitors. This early observation is fundamental, as it requires us to think as hard about where we don’t want to sell our product as where we do.

This brings us to the consideration of the difference between marketing and selling. Selling focuses on the product in hand and our pressure to get rid of it, almost regardless of the needs of the customer. It is clear that brutal selling may leave a customer with a product they wish they had never bought and, therefore, they may never return as a customer again. Marketing takes a longer-term view. Marketing, and in particular segmentation, concerns itself with the matching of customers’ needs with suppliers’ needs and capabilities. More time and effort may be required but the customer is more likely to be comfortable with their decision and be loyal.

The fundamentals of marketing are the same fundamentals of segmentation. Know your customers, know how they differ, and have a clear proposition that lights their fire. We will return to these issues but first we will examine the differences between consumer and business-to-business markets, as our challenge is to arrive at a business-to-business segmentation.

B2B Customer Segmentation Challenges

Business-to-business markets are characterized in a number of ways that makes them very different to their consumer cousins. Below we summarize the main differences between consumer and business-to-business markets, and set out the implications for market segmentation:

1) B2B markets have a more complex decision-making unit: In most households, even the most complex and expensive of purchases are confined to the small family unit, while the purchase of items such as food, clothes and cigarettes usually involves just one person. Other than low-value, low-risk items such as paperclips, the decision-making unit in businesses is far more complicated. The purchase of a piece of plant equipment may involve technical experts, purchasing experts, board members, production managers and health and safety experts, each of these participants having their own set of (not always evident) priorities.

Segmenting a target audience that is at once multifaceted, complex, oblique and ephemeral is an extremely demanding task. Do we segment the companies in which these decision makers work, or do we segment the decision makers themselves? Do we identify one key decision maker per company, and segment the key decision makers. In short, who exactly is the target audience and who should we be segmenting?

2) B2B buyers are more “rational”: The view that b2b buyers are more rational than consumer buyers is perhaps controversial, but we believe true. Would the consumer who spends $3,000 on a leather jacket that is less warm and durable than the $300 jacket next-door make a similar decision in the workplace? Consumers tend to buy what they want; b2b buyers generally buy what they need.

It perhaps therefore follows that segmenting a business audience based on needs should be easier than segmenting a consumer audience. In business-to-business markets it is critical to identify the drivers of customer needs. These often boil down to relatively simple identifiers such as company size, volume purchased or job function. These identifiers often enable needs and therefore segments to be quite accurately predicted.

3) B2B products are often more complex: Just as the decision-making unit is often complex in business-to-business markets, so too are b2b products themselves. Even complex consumer purchases such as cars and stereos tend to be chosen on the basis of fairly simple criteria. Conversely, even the simplest of b2b products might have to be integrated into a larger system, making the involvement of a qualified expert necessary. Whereas consumer products are usually standardized, b2b purchases are frequently tailored.

This raises the question as to whether segmentation is possible in such markets – if every customer has complex and completely different needs, it could be argued that we have a separate segment for every single customer. In most business-to-business markets, a small number of key customers are so important that they “rise above” the segmentation and are regarded as segments in their own right, with a dedicated account manager. Beneath these key customers, however, lies an array of companies that have similar and modest enough requirements to be grouped into segments.

4) B2B target audiences are smaller than consumer target audiences: Almost all business-to-business markets exhibit a customer distribution that confirms the Pareto Principle or 80:20 rule. A small number of customers dominate the sales ledger. Nor are we talking thousands and millions of customers. It is not unusual, even in the largest business-to-business companies, to have 100 or fewer customers that really make a difference to sales. One implication is that b2b markets generally have fewer needs-based segments than consumer segments – the volume of data is such that achieving enough granularity for more than 3 or 4 segments is often impossible.

5) Personal relationships are more important in b2b markets: A small customer base that buys regularly from the business-to-business supplier is relatively easy to talk to. Sales and technical representatives visit the customers. People are on first-name terms. Personal relationships and trust develop. It is not unusual for a business-to-business supplier to have customers that have been loyal and committed for many years.

There are a number of market segmentation implications here. First, while the degree of relationship focus may vary from one segmentation to another, most segments in most b2b markets demand a level of personal service. This raises an issue at the core of b2b segmentation – everyone may want a personal relationship, but who is willing to pay for it? This is where the supplier must make firm choices, deciding to offer a relationship only to those who will pay the appropriate premium for it. On a practical level, it also means that market research must be conducted to provide a full understanding of exactly what “relationship” comprises. To a premium segment, it may consist of regular face-to-face visits, whilst to a price-conscious segment a quarterly phone call may be adequate.

6) B2B buyers are longer-term buyers: Whilst consumers do buy items such as houses and cars which are long-term purchases, these incidences are relatively rare. Long-term purchases – or at least purchases which are expected to be repeated over a long period of time – are more common in business-to-business markets, where capital machinery, components and continually used consumables are prevalent. In addition, the long-term products and services required by businesses are more likely to require service back-up from the supplier than is the case in consumer markets. A computer network, a new item of machinery, a photocopier or a fleet of vehicles usually require far more extensive aftersales service than a house or the single vehicle purchased by a consumer. Businesses’ repeat purchases (machine parts, office consumables, for example) will also require ongoing expertise and services in terms of delivery, implementation/installation advice, etc that are less likely to be demanded by consumers.

In one sense this makes life easier in terms of b2b segmentation. Segments tend to be less subject to whim or rapid change, meaning that once an accurate segmentation has been established, it evolves relatively slowly and is therefore a durable strategic tool. The risk of this, and something which is evident in many industrial companies, is that business-to-business marketers can be complacent and pay inadequate attention to the changing needs and characteristics of customers over time. This can have grave consequences in terms of the profitability of a segment, as customers are faced with out-of-date messages or benefits that they are not paying for.

7) B2B markets drive innovation less than consumer markets: B2B companies that innovate usually do so as a response to an innovation that has happened further upstream. In contrast with FMCG companies, they have the comparative luxury of responding to trends rather than having to predict or even drive them. In other words, B2B companies have the time to continually re-evaluate their segments and CVPs and respond promptly to the evolving needs of their clients.

8) B2B markets have fewer behavioral and needs-based segments: The small number of segments typical to b2b markets is in itself a key distinguishing factor of business-to-business markets. Our experience of over 2,500 business-to-business studies shows that B2B markets typically have far fewer behavioral or needs-based segments than is the case with consumer markets. Whereas it is not uncommon for an FMCG market to boast 10, 12 or more segments, the average business-to-business study typically produces 3 or 4.

Part of the reason for this is the smaller target audience in business-to-business markets. In a consumer market with tens of thousands of potential customers, it is practical and economical to divide the market into 10 or 12 distinguishable segments, even if several of the segments are only separated by small nuances of behavior or need. This is patently not the case when the target audience consists of a couple of hundred business buyers.

The main reason for the smaller number of segments, however, is simply that a business audience’s behavior or needs vary less than that of a (less rational) consumer audience. Whims, insecurities, indulgences and so on are far less likely to come to the buyer’s mind when the purchase is for a place of work rather than for oneself or a close family member. And the numerous colleagues that get involved in a B2B buying decision, and the workplace norms established over time, filter out many of the extremes of behavior that may otherwise manifest themselves if the decision were left to one person with no accountability to others.

It is noticeable that the behavioral and needs-based segments that emerge in business-to-business markets are frequently similar across different industries. Needs-based segments in a typical business-to business market often resemble the following:

• A price-focused segment, which has a transactional outlook to doing business and does not seek any “extras”. Companies in this segment are often small, working to low margins and regard the product/service in question as of low strategic importance to their business.
• A quality and brand-focused segment, which wants the best possible product and is prepared to pay for it. Companies in this segment often work to high margins, are medium-sized or large, and regard the product/service as of high strategic importance.
• A service-focused segment, which has high requirements in terms of product quality and range, but also in terms of aftersales, delivery, etc. These companies tend to work in time-critical industries and can be small, medium or large. They are usually purchasing relatively high volumes.
• A partnership-focused segment, usually consisting of key accounts, which seeks trust and reliability and regards the supplier as a strategic partner. Such companies tend to be large, operate on relatively high margins, and regard the product or service in question as strategically important.

How To Segment

The benefits of b2b segmentation are not hard to grasp. The challenge is arriving at the most effective groupings.

A common approach in business-to-business markets is to apply a market segmentation based on company size. The consumption levels of business-to-business customers are so widely different that this often makes sense due to large companies usually thinking and acting differently to small ones. A further sophistication may be to classify customers into those who are identified as strategic to the future of the business, those who are important and therefore key and those who are smaller and can be considered more of a transactional typology.

These “demographic” segmentations, sometimes referred to as “firmographic” in business-to-business markets, are perfectly reasonable and may suffice. However, they do not offer that sustainable competitive advantage that competitors cannot copy. A more challenging segmentation is one based on behavior or needs. Certainly large companies may be of key or strategic value to a business but some want a low cost offer stripped bare of all services while others are demanding in every way. If both are treated the same, one or both will feel unfulfilled in some way and be vulnerable to the charms of the competition.

It is not easy to jump straight into a fully-fledged needs-based segmentation. Most companies are starting with some history of involvement in segmentation, even if it is only a north/south split of its sales force. Companies move down the road of segmentation learning all the way.

Figure 1: The Road To A Needs-Based Segmentation

There may be problems in developing a needs-based segmentation but this is at least an aspiration to drive towards. The question is “how?”

The starting point of any business-to-business segmentation is a good database. A well-maintained database is high on the list in any audit of marketing excellence in a business-to-business company. The database should, as a minimum, contain the obvious details of correct address and telephone number together with a purchase history. Ideally it should also contain contact names of people involved in the decision-making unit, though this does present problems of keeping it up to date.

Management is frequently blissfully unaware of the parlous state of its databases as it is rarely involved in inputting and maintaining data. Sometimes the best database in the company is the Christmas card list held close to the chest of every sales person.

A comprehensive and up-to-date database is only the start of the segmentation process. A mechanism is now needed for determining every need of every company on the database. The commonsense approach may appear to be to ask them. However, what questions would you ask and could you be sure of the answers? It is not that people lie but they may not be able to acknowledge the truth;

• Do people really buy a Porsche for engineering excellence?
• Do people really choose an Armani suit because it lasts so well?
• Do people, who say they buy their chemicals purely on price, never require any technical support or urgent deliveries from time to time?

Sometimes the simple question and the straightforward answer is enough. At other times a more sophisticated approach is required. Statistical techniques (specifically factor analysis) can be used to show the association between the overall satisfaction with a supplier and satisfaction of that supplier on a whole range of attributes that measure the customers’ needs. It can be determined that any individual attributes receiving high satisfaction scores must drive the overall satisfaction score and therefore be an important reason for choosing that supplier. In other words, instead of asking what factors are important, we can derive them. Buyers of Armani suits may show a strong link between overall satisfaction with the suit and attributes related to the brand and so point to the importance of the brand in the buying decision.

Using Statistics To Arrive At A Segmentation

The classification data on questionnaires provides demographic data while questions in the body of the interview determine aspects of behavior. Cross tabulations of data on these criteria allow us to see the different responses among groups of respondents. This is market segmentation at its simplest level and every researcher uses the computer tabulations of findings to establish groups of respondents with marked differences.

However, we can use statistical techniques, in particular multivariate analysis, to allow more sophisticated segments to emerge. In a b2b segmentation study (or even in a customer satisfaction study), respondents are asked to say to what extent they agree with a number of statements. These statements are designed to determine the needs and interests of the respondents. Typically there are a couple of dozen such statements, sometimes more. The possible combinations of groupings from 200 interviews are literally millions and we need some means of creating combinations that have a natural fit.

Using a technique known as factor analysis, statisticians can work out which groups of attributes best fit together. Looking through the different statements or attributes that make up these groupings it is usually possible to see common themes such as people who want low prices with few extras, people who want lots of services or add-ons and are prepared to pay for them, people who are concerned about environmental issues and so on. Factor analysis reduces the large number of attributes to a smaller but representative sub-set. These sub-sets are then given labels such as “price fighters”, “service seekers” and any other such terms that help the marketing team know exactly who they are addressing.

The groupings of needs that have been worked out by factor analysis are now run through further computations using a technique known as cluster analysis. These factors are presented to the cluster analysis whose algorithms rearrange the data into the partitions that have been specified and so determine how neatly the population fits into the different groupings.

The statistical approach to a needs-based segmentation has become extremely popular and it is certainly an important objective means of finding more interesting and possibly more relevant ways of addressing the customer base. However, the tastes and needs of populations are constantly changing and we should always be mindful of new segments that may not show up as more than a dot on the current radar screen. For example, if Guinness had carried out a needs-based segmentation among its customers in the 1960s, it may not have recognized the opportunity to re-position the drink as young and trendy. This segment was developed by a series of astute marketing campaigns.

Will The Segmentation Work?

By whatever means the segmentation is arrived at, be it by judgement, by classifying the database or by statistical techniques, the segments must pass a four-question test:

• Are they truly different in a meaningful way? If not then they are not a segment and should be collapsed into one of the others. In determining, if and how segments differ from one another, it is helpful to give each a characterizing nickname i.e. price fighters, range buyers, delivery buyers and whatever else suits. The name will ultimately become the shorthand description used in the company that immediately identifies the customer typology.
• Are the segments big enough? If they are not, they will require too much resource and energy.
• Do companies fall clearly into one of the segments? A company cannot be in more than one segment. This is unlike consumer segments where one week I may fit into an airline’s business-class segment and another week fit into low cost.
• Can each company be easily identified as belonging to a specific segment? The strongest criticism of needs-based segmentations is that they work well in theory but poorly in practice. Saying that there is a “partnership-focused” or “service-focused” segment is one thing; allocating companies to these segments and building sales and marketing activity around this is quite another. Combating this problem is not easy. In many cases, companies pick out the key firmographic characteristics of each needs-based segment and use these as segment identifiers. In other cases, “killer questions” based around needs are employed – the difficulty here is that significant resource is required to ask such questions to a whole database of potential customers.

Choosing Segments To Work With

By plotting the different segments on an X Y grid it is possible to determine which are worth targeting and, equally important, which are not. The two factors that influence this decision are the attractiveness of the segment against the supplier’s competitive position within that segment. In this way it is possible to identify targets that justify resources in targeting and development. In the example below it may be thought that the price fighters offer no margin and are not worth targeting, even though they form a large segment. However, the traditionalists may be worth working on to see if they can be moved north and east to join a more attractive segment such as the range buyers, quality fanatics or delivery buyers.

Figure 2: The Directional Policy Matrix Used To Select (and De-Select) Segments

Final Thoughts

Segmentation is the first crucial step in marketing, and the key towards satisfying needs profitably. It is often the mix of where-what-who and why (the benefit or need) which is driving the segmentation. The grouping together of customers with common needs makes it possible to select target customers of interest and set marketing objectives for each of those segments. Once the objectives have been set, strategies can be developed to meet the objectives using the tactical weapons of product, price, promotion and place (route to market).

Written by Paul Hague & Matthew Harrison

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Brand strategy research & brand architecture research: Enhance your brand portfolio

 Make objective, strategic decisions about your corporate and product brand portfolio through structured and representative market research.

Brand strategy research & brand architecture research will help you grow your brands and avoid the risk of cross-brand cannibalization and overlapping marketing / product development expenses.

Our approach: The Emotional Engagement Ladder

• The more engaged a customer is with a brand, the greater emotional attachment there is to the brand.  Emotions play a major role in decision making and leading brands in a market are more successful in connecting with their customers on an emotional level.

• Through our research, we have identified four different levels of emotional engagement.  Through our research, we can assess which brands in your portfolio are positioned on which steps of the ladder (as well as any which do not emotionally engage with the market in a meaningful way).

• Armed with this understanding, companies can avoid cannibalization by aligning each brand with a specific market segment, while also striving to create stronger emotional connections with the market through each of its brands

Steer your brands to success

Far too many companies have product labels which they think are brands. However, a brand is something people ask for by name. A brand stands for something – something that has been engineered as a perception – not something that has simply arisen without direction.

In other words, a brand needs a strategy and, in developing one, it is worth asking these four important questions:

1. Will you have a monolithic brand (a single brand name under which you have sub brands) or separate independent brands each requiring their own brand strategy?
2. How do your brands fit together under the umbrella brand of your company name?
3. What is it that makes your products (or services) so special that they deserve to be a brand?
4. How many brands can you afford to have given that each brand will require nurturing and feeding with a marketing resource?

Case study: Measuring brand perceptions to inform brand portfolio expansion and alignment

Our client, a leading manufacturer of industrial and medical protection solutions, wanted to expand its product range into the life sciences market and sell protective equipment for use in environments such as clean rooms, where pharmaceuticals are produced.

In order to support the portfolio expansion, the manufacturer had recently acquired a brand, which was strong in this space. However, the image of the acquired brand was very different from the manufacturer’s image. Therefore, our client needed to determine how to properly align all the brands under its portfolio while still highlighting each brands’ individual strengths.

The Solution

We conducted 80 semi-structured telephone interviews with laboratory managers & similar roles about their needs & requirements when it came to disposable gloves, garments, and eye protection, brand perceptions of various PPE brands, and obtained their feedback on a series of messaging concepts to determine which resonated best with the target audience.

The Insight

As it turned out, our clients brand was quite well-known and seen as professional, while the acquired brand imagery was not preferred. It was recommended that our client incorporate the newly acquired brand under its brand portfolio with advertising and messaging that better reflected its expertise and experience serving the life sciences industry.

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What is brand equity?

 

Brand equity is the value added to a product or service as a direct result of the recognition and reputation of the brand.

The basic concept is very simple. If you are offered two computers with the same technical specifications, but one is unbranded and the other is a Dell, you would probably be more willing to pay for the Dell device. The brand is well known and trusted, and this implicit trust adds value to the product. People make choices like this all the time, and taken together, this adds significant value to Dell as a company, and we call this added value the brand equity.

The concept is simple enough to understand and intuitively true, but it is also notoriously difficult to measure. There is no agreed single definition of how to do this, with many different firms offering their own models and indexes.

The first question you need to ask when setting out to measure brand equity is where you want to measure it:

• Do you want to understand the total value added to the organization by the brand?
• The additional revenue generated from sales of a particular product or product group as a result of brand?
• The perceived positivity of a brand in the mind of a customer?

Measuring the total value added to the organization

A direct estimate of this can be made by adding up the value of all the estimable capital assets of an organization and comparing this figure to the market capitalization of the organization. The difference is attributed to the influence of the brand on shareholder perception of value and acts as an estimate for the brand equity across the organization.

market capitalization – capital assets = estimate for brand equity

Variations on this approach include Interbrand’s “Brand Valuation Model” and Brand Finance’s “Royalty Relief” approach, which both attempt to achieve a similar result by modelling what difference between the revenue expected without the benefit of the brand and the observed actual revenue.

Alternative approaches generally involve the creation of an index to measure relative brand equity between companies in a market. These measures tend to be based on subjective assessment of the relative impact of various factors informed by experience and supporting research. Factors included might be:

• market share
• relative pricing of equivalent products
• customer retention rates

Measuring the additional revenue generated from sales of a product or product group as a result of brand

The approach to measuring this is generally more consistent as Conjoint Analysis is a natural fit for this task.

The output of the analysis is a model of customer choices and we can simulate the current competitive market situation for a product category and compare this with the prediction if we replace our products with unbranded equivalents.

This can establish a “price premium” customers are willing to pay but can also be used to estimate the total additional revenue across the market for that product by identifying and comparing total expected revenue for the branded and unbranded offerings at optimal prices.

Measuring the perceived positivity of a brand in the mind of a customer

The basic starting point for measuring and comparing the appeal of brands to customers is to collect information about the breadth and quality of brand recall as well as measuring the associations the brand has with brand attributes. After this though, the approach to interpreting the results can vary a lot, with consultancies and agencies often having their own proprietary approaches to evaluating the positivity of brand perceptions.

At B2B International, we understand that most B2B markets are very different in terms of what attributes are important. With this in mind, our preferred approach is to use regression modelling to identify key drivers of engagement for the market we are investigating and to use this to develop a bespoke measure of appeal for brand in that market.

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“Good marketing makes the company look smart. Great marketing makes the customer feel smart.”

 

‘Brand equity’ is a phrase used in the marketing industry which describes the value of having a well-known brand name, based on the idea that the owner of a well-known brand name can generate more revenue simply from brand recognition; that is from products with that brand name than from products with a less well known name, as consumers believe that a product with a well-known name is better than products with less well-known names.

Brand equity refers to the value of a brand. In the research literature, brand equity has been studied from two different perspectives: cognitive psychology and information economics. According to cognitive psychology, brand equity lies in consumer’s awareness of brand features and associations, which drive attribute perceptions. According to information economics, a strong brand name works as a credible signal of product quality for imperfectly informed buyers and generates price premiums as a form of return to branding investments. It has been empirically demonstrated that brand equity plays an important role in the determination of price structure and, in particular, firms are able to charge price premiums that derive from brand equity after controlling for observed product differentiation.

Some marketing researchers have concluded that brands are one of the most valuable assets a company has, as brand equity is one of the factors which can increase the financial value of a brand to the brand owner, although not the only one. Elements that can be included in the valuation of brand equity include (but not limited to): changing market share, profit margins, consumer recognition of logos and other visual elements, brand language associations made by consumers, consumers’ perceptions of quality and other relevant brand values.

Consumers’ knowledge about a brand also governs how manufacturers and advertisers market the brand. Brand equity is created through strategic investments in communication channels and market education and appreciates through economic growth in profit margins, market share, prestige value, and critical associations. Generally, these strategic investments appreciate over time to deliver a return on investment. Brand equity can also appreciate without strategic direction.

While most brand equity research has taken place in consumer markets, the concept of brand equity is also important for understanding competitive dynamics and price structures of business-to-business markets. In industrial markets competition is often based on differences in product performance. It has been suggested however that firms may charge premiums that cannot be solely explained in terms of technological superiority and performance-related advantages. Such price premiums reflect the brand equity of reputable manufacturers.

Brand equity is strategically crucial, but famously difficult to quantify. Many experts have developed tools to analyze this asset, but there is no agreed way to measure it. As one of the serial challenges that marketing professionals and academics find with the concept of brand equity, the disconnect between quantitative and qualitative equity values is difficult to reconcile. Quantitative brand equity includes numerical values such as profit margins and market share, but fails to capture qualitative elements such as prestige and associations of interest. Overall, most marketing practitioners take a more qualitative approach to brand equity because of this challenge. In a survey of nearly 200 senior marketing managers, only 26 percent responded that they found the “brand equity” metric very useful.

WHAT IS THE PURPOSE OF BRAND EQUITY?

The purpose of brand equity metrics is to measure the value of a brand. A brand encompasses the name, logo, image, and perceptions that identify a product, service, or provider in the minds of customers. It takes shape in advertising, packaging, and other marketing communications, and becomes a focus of the relationship with consumers. In time, a brand comes to embody a promise about the goods it identifies—a promise about quality, performance, or other dimensions of value, which can influence consumers’ choices among competing products. When consumers trust a brand and find it relevant, they may select the offerings associated with that brand over those of competitors, even at a premium price. When a brand’s promise extends beyond a particular product, its owner may leverage it to enter new markets. For all these reasons, a brand can hold tremendous value, which is known as brand equity.

Brand Equity is best managed with the development of Brand Equity Goals, which are then used to track progress and performance.

Managing Brand Equity

One of the challenges in managing brands is the many changes that occur in the marketing environment. The marketing environment evolves and changes, often in very significant ways. Shifts in consumer behavior, competitive strategies, government regulations, and other aspects of the marketing environment can profoundly affect the fortunes of a brand. Besides these external forces, the firm itself may engage in a variety of activities and changes in strategic focus or direction that may necessitate adjustments in the way that its brands are being marketed. Consequently, effective brand management requires proactive strategies designed to at least maintain – if not actually enhance – brand equity in the face of these different forces.

Brand Reinforcement

As a company’s major enduring asset, a brand needs to be carefully managed so its value does not depreciate. Marketers can reinforce brand equity by consistently conveying the brand’s meaning in terms of

(1) what product it represents, what core benefits it supplies, and what needs it satisfies

(2) how the brand makes product superior and which strong, favorable, and unique brand associations should exist in consumers’ minds.

Both of these issues – brand meaning in terms of products, benefits, and needs as well as brand meaning in terms of product differentiation – depend on the firm’s general approach to product development, branding strategies, and other strategic concerns.

Brand Re-Genesis

Any new development in the marketing environment can affect a brand’s fortune. Nevertheless, a number of brands have managed to make impressive comebacks in recent years. Often, the first thing to do in revitalizing a brand is to understand what the sources of brand equity were to begin with. Are positive associations losing their strength or uniqueness? Have negative associations become linked to the brand? Then decide whether to retain the same positioning or create a new one, and if so, which new one.

Maintaining Brand Consistency

Without question, the most important consideration in reinforcing brands is the consistency of the marketing support that the brand receives – both in terms of the amount and nature of marketing support. Brand consistency is critical to maintaining the strength and favorability of brand associations. Brands that receive inadequate support, in terms of such things as shrinking research and development or marketing communication budgets, run the risk of becoming technologically disadvantaged or even obsolete.Consistency does not mean, however, that marketers should avoid making any changes in the marketing program. On the contrary, the opposite can be quite true – being consistent in managing brand equity may require numerous tactical shifts and changes in order to maintain the proper strategic thrust and direction of the brand. There are many ways that brand awareness and brand image can be created, maintained, or improved through carefully designed marketing programs. The tactics that may be most effective for a particular brand at any one time can certainly vary from those that may be most effective for the brand at another time. As a consequence, prices may move up or down, product features may be added or dropped, ad campaigns may employ different creative strategies and slogans, and different brand extensions may be introduced or withdrawn over time in order to create the same desired knowledge structures in consumers’ minds.

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