How a Small Colombian Language Training Institute is Reshaping its Marketing Strategy by Esteban Ochoa * [32]

Established in 1978, A.V.C is a premium language institute in Medellin, Colombia. The firm utilizes a customer intimacy strategy. The Institute developed strong relationships with  students by having an open-door policy about personal/life issues, granting scholarships based on program excellence, regular communication with family members, and an end-of-year award ceremony.

A.V.C. offers programs in English, French, German, and Italian to a Spanish-speaking market. Although the Institute has been in business for more than 40 years, only 600 students achieved full proficiency in their chosen languages and graduated. Given the difficulty of the program, nearly half of the students were unable to complete the coursework. The Institute has always focused on offering small classes, custom-tailored learning programs, and tutoring sessions with an emphasis on building lifelong customer relationships. Graduates still visit the school and often send their own children there.

Although A.V.C reached a high level of customer intimacy with students and alumni, due to lack of technological preparation, the Institute had to close at the beginning of the COVID-19 pandemic and lay off 85% of its employees. Service firms have had to look for ways to operate remotely to survive. VOC Digital was retained to re-imagine A.V.C.’s business model. The project started with identifying the right target market. Additionally, new sources of income were required to fund the virtualization of the different courses and re-hire of teachers.

Instead of looking to compete in the crowded city, VOC targeted rural residents, ages 15 through 45 in the outskirts of Medellin, Colombia. Using a geodemographic segmentation approach, there were two reasons that rural Colombian towns were selected as the target market: 

1) Service availability: Typically, formal foreign language lessons in Colombia are limited to middle and upper-class families in the city and those studying in citadel universities. Rural residents generally leave their towns for opportunities that only the big cities can offer, education being one of them. The service itself is almost non-existent in rural communities. VOC Digital and A.V.C. recognize this untapped market opportunity.

2) Number of rural towns in Antioquia and throughout Colombia: In the west region of Antioquia alone (Antioquia is the equivalent of a state in the United States), there are approximately 23 rural towns with an average population of more than 25,000 residents. In all of rural Antioquia, which is only one state in Colombia, there are over 8.5 million inhabitants. Furthermore, Colombia has 32 departments or states (User, S. n.d.).

The solution for the an alternative income generation source will be supplied by renting out a large portion (75%) of the school (a land asset) as office spaces. The two-story building is located in a prime central location in the heart of downtown Medellin which adds value and demand due to heavy foot traffic. Creating a new revenue stream combined with the proposed segmentation strategy and digital technology (adding virtual courses) will reinvigorate the educational services offered.

VOC Digital is currently creating all of the online programs that combine small (in student count) recorded virtual classes, custom-tailored learning programs, and online tutoring all under one centralized portal designed for cell phones which is funded by the rental spaces. All of the guides, course materials, and tests given will be compatible and optimized as well for mobile devices. Such a seamless integration is not only to make the program more user-friendly and accessible to its future student body but to be able to do it at a cost low enough to establish an ongoing relationship with consumers in rural Colombia. 

The hiring process for teachers begins in June 2021 and will be finalized by November 2021. A pilot course is set to launch at the end of the second quarter of 2022 to collect real time user data and will be offered free of charge to 15 individuals. During the remainder of 2022, three more free courses will be opened to further improve user experience and build customer intimacy with the first set of students taking language classes via the new approach. The launch of all the courses is planned for the start of 2023. Data will be collected monthly to continue to improve user experience. A.V.C is excited about the new strategy and creating long-term value for its clients.

Reference

User, S. (n.d.). 3.2.1-Proyecciones de población según ÁREA GEOGRÁFICA en Los municipios DE antioquia. Años 2015 - 2017. Retrieved March 21, 2021, from http://www.antioquiadatos.gov.co/index.php/3-2-1-proyecciones-de-poblacion-segun-area-geografica-en-los-municipios-de-antioquia-anos-2015-2016

* Esteban Ochoa is the owner of VOC Digital, a marketing agency. He may be reached at: vocdigitalco@gmail.com  

 

 

 

 

 

 

 

 

 

  

 

Segmenting Business Markets - A New Approach by Herb Brotspies * [6]

Market segmentation is a fundamental concept in identifying profitable business opportunities.  Market segmentation divides markets into subsets of consumers or businesses who share a similar set of needs and wants, evaluating the subset segments, and then implementing strategies to target high value segments. 

Segmentation is widely used in consumer marketing. This becomes very obvious walking down the aisles of your local supermarket seeing product form segmentation such as liquid laundry detergent or powder, special shaving products for African American men, or easy to prepare food products targeted to the working parent.

In sharp contrast is business to business (B2B) where recent research shows limited use of market segmentation and where it is used, little value is received. It may be that segmenting business markets is more complex than consumer markets because business to business marketing is much more than a simplistic approach of finding customers who may be interested in your product.

Historically, B2B was viewed as the segmentation between the seller and buyer using a variety of segmentation bases including demographics, sometimes called firmographics, operating variables, purchasing approaches, situational factors, and buyers’ personal characteristics.  Simply, whoever bought from you was the focus of the segmentation analysis.

Today, B2B marketers recognize there are situations where the company buying your product is not the ultimate user or consumer. So, segmentation is more than just B2B. At times it is B2B2B or even B2B2C (consumer), thus segmentation requires a different approach.

B2B

B2B in its simplest form is when a business sells its products to another business who uses the product themselves.  For example, B2B is selling commercial dishwashers directly to restaurants.  The restaurant market may be segmented by large restaurants or hotels depending on segmentation criteria.  Based on analysis, the commercial dishwasher company decides to focus sales on restaurants with seating capacity of at least 150 people. 

This is not to be confused where a business sells products to business intermediaries who resell the product. When Coca Cola sells soft drinks to Wal-Mart, Coca Cola segments the market on the basis of consumer use of soft drinks and uses the B2B intermediary as a channel of distribution. However, Coca Cola may also segment the carbonated drink market by outlet type, food stores, drug stores, mass merchandisers, small grocery stores, convenience stores, and other outlet types.

B2B2B & B2B2C

But what happens when a business sells its product to a business customer and that customer incorporates the product into its own product for resale to either another business or to consumers? Does the segmentation method change? Do they look at segmentation differently?  Do they attempt to segment the market on the basis of their customer or do they also look at the business segments of their customers?

B2B2B

Several examples can help clarify this. XYZ Company manufactures electric motors. Electric motors have widespread application for use in other companies’ products. They are used as components in elevators, escalators, water pumps, oil industry pumps, even electric motors for aircraft.  XYZ segments the market not on the customer purchasing their product as a component first, but rather on the application of XYZ’s capabilities. They develop segmentation criteria for different industries using pumps taking into consideration their own capabilities and strategy.  Once they determine that the market for elevator motors and aircraft electric motors are growing but oil industry pumps and water pumps are not, they then focus on segmenting the suppliers to these industries.  In essence, the demand for their products is derived from the demand of their customers’ products.

B2B2C

This is also evident in the high technology industry. Chip makers sell to Apple, Lenovo, Compaq, HP, Samsung, and Dell, for use in consumer products such as cell phones, computers, and tablets and now smart televisions. Consumer behavior drives demand for these products.  So, a chip maker must understand their customer’s customer. A chip maker will also sell chips to companies for application for cloud computing such as Dropbox, Amazon, and HP Enterprises.  The sales for the cloud businesses of Dropbox, Amazon, and HP Enterprises are driven in part by consumer demand for cloud storage or cloud applications. Companies in the B2B2C business must develop segmentation skills in the consumer market such as psychographic and behavioral bases for segmentation. Thus, additional segmentation skills are required beyond the B2B segmentation skills for B2B2C companies.

In a recent report to analysts, Intel revealed they are reducing investment spending in software, personal computers, and phones and tablets while investing more in data centers with cloud computing, retail solutions, transportation and automotive, smart homes and buildings, and industrial and energy. These are consumer driven segments. They will then focus on companies who are strong in the growth segments they identified. 

Qualcomm similarly looks at the end user of their customers in deciding product developments, sales, and marketing priorities. They have identified segments where consumers drive demand including technology for the automotive market, smart homes, mobile computing, and wearables.  

Segmenting business markets is no longer just looking at your company’s customers or potential customers. With the recognition of B2B2B and B2B2C, segmentation is now focusing on the market segments served by the customers to drive investments in product development, sales, and marketing effort.  

* Herb Brotspies is an Adjunct Professor of Marketing (Retired) at Nova Southeastern University. For further information, contact Dr. Brotspies at hvb95@aol.com or (561) 302-3060.

Enhancing the Value of Segmentation [4]

[You can drive your business or be driven out of business.  B.C. Forbes]

Does your company suffer from any of the following marketing deficiencies – fuzzy business mission, unclear objectives, information that is not decision oriented, lack of agreement as to segmentation’s real role in the organization, products/services that reflect corporate desires rather than customer needs, unfocused IMC strategy, and/or failure to attack niche markets and customize offerings? 

Over the years, many top B2B marketing executives have asked me how to build and implement a true segmentation-driven culture in their organizations. Based on my more than 20 years of experience as a professor, researcher, and consultant, here are a few of my thoughts on how to get the segmentation process in high gear.

1. Create a 1-day segmentation training workshop for the marketing group to generate excitement and stimulate project development. This will lead to a set of specific, market-based strategic initiatives and research opportunities. Bayer Diagnostics, Citrix Systems, Motorola and other companies have implemented such a plan. 

2. Begin with 3-5 small, focused and low-cost initiatives to demonstrate success and build enthusiasm. Realize that all segmentation projects may not be a resounding success (good news -- most will be if properly designed and executed). Cordis, a Johnson & Johnson company, benefited from the strategy of hitting many singles rather than going for grand-slam homeruns.  

3. Review previous segmentation studies and make sense of the summary reports. Via a meta-analysis methodology, a fresh set of objective eyes can add significant value to good work and extend segmentation reports buried in computer files or file drawers. At one time, Blue Cross Blue Shield of Florida had undertaken 18 segmentation studies with no synthesis, integration or strategic analysis.

4. As Intel learned, segmentation audits with marketing managers, channel members and customers can pinpoint current and potential problems as well as overlooked market opportunities and niches. 

5. Successful segmentation means being able to answer these 6 “what” questions -- what do you want to accomplish? (e.g., find new markets, get better customers, upgrade business relationships, align products to customer desires, create a segmentation model/typology, etc.); what methodologies will help you get the necessary information?; what is unique about your segmentation view of the world?; what is your budget?; what is your timeline?; and, what are reasonable expectations for the work?

I leave you with 5 thoughts to share with your management team to get them inspired and on-board to invest in segmentation thinking.

> I am convinced that market leadership is dependent upon how successful firms are at defining and selecting markets appropriate to their capabilities, resources and competitive situation.

> Segmentation findings provide a systematic basis for controlled market coverage as opposed to the hit-or-miss, random efforts of mass or unfocused marketing.

>Segmentation-based marketing is the essence of sound business strategy and value creation.

>Segmentation will continue to grow in stature as a fundamental marketing tool and foundation for marketing strategy in business organizations, large and small.

> A more thoughtful approach for market selection can assist marketers design winning target marketing strategies.

Realize that firms in all industry sectors are discovering the power of strategic segmentation as a marketing tool for attracting and retaining customers in fast changing, globally competitive markets. How about you?

This blog post is the 4th in a series from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information, contact Art Weinstein at artweinstein9@gmail.com , 954-309-0901, www.artweinstein.com .