No More One Size Fits All

Breaking down the larger customer population into subgroups that share similar characteristics allows organizations to service the unique needs of each group more efficiently and effectively, writes William D. Eggers.
by | November 14, 2007
 

Imagine the recent immigration reform bill had actually passed (instead of going down in defeat in Congress). And, you were the lucky federal official whose job was its implementation. First, this means documenting -- from scratch -- the estimated 12 million undocumented illegal immigrants in the U.S. Many of these illegal immigrants speak little or no English. You have to convince them to come out of the shadows and enroll in the newly created guest worker program. How would you go about doing this?

This component of the failed immigration bill did not receive a lot of attention outside the Beltway during the entire debate. Why not? Because politicians, the media and we citizens like to debate "policy" and leave the boring implementation stuff to the "bureaucrats" to figure out.

But the obstacles to implementation are daunting (as those who did spend a lot of time thinking about them will assure you). In this case, it would have required designing an approach to process those 12 million foreign workers who range from health professionals and engineers to domestic workers and restaurant employees; who speak different languages; have different levels of work experience; and trust the U.S. government to varying degrees.

One answer to this dilemma is a widely used business tool called customer segmentation. This tool recognizes that customers typically have different needs, preferences and behaviors. Appealing to each one individually isn't feasible. Breaking down the larger customer population into subgroups that share similar characteristics, however, allows organizations to service the unique needs of each group more efficiently and effectively. This approach is much more manageable than trying to develop an umbrella that encompasses "everyone" and thus often ends up being relevant and responsive to no one.

For example, processing an application for a work permit from the foreign worker who only speaks Spanish, and is a relatively new immigrant, is going to be very different from registering an immigrant with a good command of the English language and who has lived in the United States for many years. The Spanish speaker might require customized attention in Spanish and in-person help to understand the different requirements and compliance conditions. This might call for sending mobile information centers staffed with Spanish speakers to pick-up locations for day workers during peak times to enroll the workers.

On the other hand, a certain percentage of English-speaking immigrants would require significantly less expensive services to be properly processed. They would need nothing more than to be directed to sign up via a Web site or toll-free telephone number. Reaching this group requires knowing which communication channels receive the most traffic and tailoring the message in such a way as to encourage immigrants to enroll through their preferred channel.

Immigration reform is not the only government initiative that could benefit from a rigorous application of this concept.

Consider the 2005 rollout of the Medicare Prescription Drug Plan. The Centers for Medicare and Medicaid Services had to find a quick way to enroll 40 million seniors in the program.

The wrong approach is to try to serve everyone in this market in the same way. After all, the senior population includes everyone from a 63-year-old who runs marathons and is highly proficient with computers to a 93-year-old with failing faculties. A more effective rollout strategy would use market data, focus groups and surveys to divide the senior group into four to six separate markets of 5-7 million people each.

Customer segmentation can also come in handy when trying to improve citizens' satisfaction with the government. Consider the Internal Revenue Service. It's hard to think of a more diverse customer group than the American taxpaying population. Back in the late 1990s, the IRS identified four major taxpayer segments and reorganized its operations to meet each segment's unique needs.

More recently, the IRS thoroughly analyzed its customers' preferences and behaviors. Several distinct groups emerged, ranging from the self-proclaimed experts who confidently navigate the tax code maze, to the tech adopters who wouldn't dream of manually filling out their 1040s, to those who are intimidated by the entire process of filing taxes.

Each group exhibits certain preferences in how they interact with the IRS, and each will respond differently to customer-service strategies. For example, most tech adopters actually prepare the return on their home computers, often using off-the-shelf software, but relatively few file their returns online. This makes them a prime target for the IRS' efforts to increase e-file adoption.

Meanwhile, those taxpayers who are intimidated or confused by the complex tax system, and those who have complicated tax circumstances, are more likely to turn to tax practitioners and are much less likely to contact the IRS directly. The IRS can make its services more visible and attractive by targeting those tax practitioners and through improved marketing for the direct service channels available to taxpayers.

Government cannot be run like a business. It has a different mission and a different set of constraints than the private sector. However, this does not mean the public sector can't learn from business. The art and science of customer segmentation can help government agencies serve the U.S. population better, whether it's rolling out a new program or improving the delivery of an existing service.

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