What's at stake when a company doesn't segment its portfolio

Usually, discussions about prices usually appears in moments of pressure. Not necessarily when the company is in a comfortable position to think deeply, but just when margins begin to deteriorate, when competition aggressively adjusts what is really at stake when a company does not segment its portfolio in terms of its rates or when demand shows signs of slowing. It is literally acting in a reactive way. In this context, pricing becomes an urgent issue, but rarely a structural issue.

From this urgency, it is common to observe attempts to "optimize prices" that are limited to superficial adjustments: linear increases, selective discounts, tactical promotions or partial revisions of the portfolio. However, behind many of these efforts is a more fundamental omission that is not usually evident in a first analysis: the absence of rigorous segmentation of supply.

This is not a minor or technical problem. It is a basic problem. Because when a company tries to manage prices without having previously defined how its product portfolio is structured and how that portfolio relates to different types of customers, what it is doing is operating on a system that has not been correctly modeled.

From this perspective, pricing ceases to be a strategic lever and becomes a series of isolated decisions, often guided by intuition or by external references that are not very contextualized.

This article, based on SYMSON's "Product Segmentation" webinar, addresses precisely this problem from a structural logic. It is not about understanding segmentation as a marketing exercise or as a static classification of the portfolio, but as the necessary starting point for any pricing strategy that aspires to be consistent over time.

The problem of trying to price a structure that has not been defined

One of the most recurrent ideas in business practice is the notion that the market "defines" prices. Under this assumption, organizations tend to look at the competition, analyze trends, and adjust their rates based on what they perceive as acceptable or viable. While this approach may make sense in certain contexts, it also introduces an important limitation: it pushes internal analysis into the background.

When there is no clear product segmentation, the company loses the ability to understand what it is really selling. Not in descriptive terms, but in economic and strategic terms. Products that are treated as equivalent may have different cost structures, disparate levels of differentiation, or completely different demand behaviors.

This implies that any attempt to fix prices in a homogeneous way is, at bottom, concealing a heterogeneity that has not been recognized.

The result of this approach usually manifests itself in two extremes. On the one hand, products with high margin potential that are underexploited because they are assigned an average price that does not capture their value. Here we leave money on the table. On the other hand, products with low contribution that are maintained in the portfolio under conditions that erode overall profitability.

From this perspective, the absence of segmentation not only limits the ability to capture value but also distorts the organization's reading of its own performance.



>> What is ABC Costing? <<

The persistence of the uniform approach in contexts where heterogeneity is the norm

Despite the accumulated evidence around the importance of segmentation, many organizations continue to operate under an approach that assumes, I would say, relative homogeneity in their customers and products. This phenomenon is not usually due to an explicit decision, but to a combination of organizational inertia, information limitations, and operational simplifications.

The so-called "one-size-fits-all" approach is, in essence, a response to complexity. When the data structure is insufficient or when management systems do not allow for clear differentiation between different segments, the organization tends to adopt general rules that simplify decision-making.

However, this simplification comes at a cost. Customers are not as willing to pay, value the same attributes, or respond in the same way to price changes. In the same way, products do not fulfill the same role within the portfolio, nor do they contribute uniformly to the margin, nor do they face the same level of competition.

This implies that a uniform approach is imprecise, and that it introduces systematically suboptimal decisions.

In contexts of stability, this type of inefficiencies can go unnoticed for a certain time. But in more volatile environments, where small variations in demand or costs have amplified effects, these distortions become apparent more quickly.

Economic volatility as a catalyst for ill-founded decisions

The context of "stagflation" – characterised by the combination of low economic growth and high inflation – introduces strain on price management. On the one hand, companies face cost pressures that push them to increase prices. On the other hand, the sensitivity of demand limits its ability to pass on these increases to the market.

In this scenario, segmentation becomes an operational necessity. We should not ask ourselves if it is convenient to segment, but how quickly the organization can build a structure that allows it to make differentiated decisions.

However, when this structure does not exist, decisions tend to be based on what is commonly described as "gut feeling". This does not necessarily imply improvisation, but rather a form of judgment based on experience, but without sufficient analytical support.

The problem is that, in volatile contexts, past experience is not always a good predictor of future behavior. Therefore, decisions that at other times would have seemed reasonable to us, become riskier when conditions change rapidly.

Segmentation as a mechanism to reveal margin opportunities that otherwise remain hidden

One of the most relevant contributions of segmentation is its ability to make visible patterns that are not evident in an aggregate analysis. When the portfolio is viewed as a whole, the differences between products tend to be diluted, and with them, the opportunities for optimization.

By disaggregating supply based on relevant attributes—such as quality, profitability, demand, or competitive intensity—the organization begins to identify where margins are being generated and where they are being lost.

This implies that segmentation is not just a classification tool, but a diagnostic mechanism. Based on this diagnosis, it is possible to design differentiated strategies that respond to the specific logic of each segment. In some cases, this may involve increasing prices to capture unrealized value. In others, it may require adjustments aimed at improving turnover or defending market share. What is relevant is that these decisions are no longer generic and begin to be aligned with the economic reality of each product group.


>> Real money isn't in the costs, it's in the price <<

The need to understand value from the customer's perspective and not just from the internal structure

Segmentation focused solely on product attributes can lead to an incomplete view if not complemented with customer analytics. This is because value is not an inherent property of the product, but a perception that is built in the interaction with different types of consumers.

From this perspective, two products with similar characteristics may have different ratings depending on the customer segment they are aimed at. Therefore, effective segmentation requires integrating both dimensions: the product and the customer.

This involves incorporating geographical, demographic, behavioral and psychological variables that allow us to understand how different groups perceive and use the offer. It is not a matter of building complex profiles by themselves, but of identifying patterns that have implications for willingness to pay and purchasing behavior. At ICX we have a methodology called Persona Playbook precisely focused on this analysis.

When this integration is achieved, the organization begins to operate with a model closer to the reality of the market, where pricing decisions reflect what the company sells, as well as how that value is perceived by those who buy it. Here are the seven steps of the segmentation model proposed by SYMSON.

1. The logic of a structured segmentation model as a basis for consistent decisions

2. Product grouping as a mechanism to abandon the logic of the homogeneous catalogue

3. Customer segmentation as an essential complement to understanding value capture

4. The crossing of segments as a point where the strategy ceases to be abstract and becomes operational

5. The determination of the optimal price because of a previously defined strategy

6. The need to understand segmentation as a dynamic process and not as a one-off exercise

The seven-step segmentation model presented in the SYMSON webinar proposes a logical sequence that allows this structure to be built progressively. More than a set of isolated techniques, it is a process that connects different layers of information to arrive at informed pricing decisions.

The starting point is the identification of key product attributes. This stage forces the organization to make explicit criteria that are often implicit or distributed in different areas. Quality, for example, ceases to be a general perception and is broken down into specific dimensions such as performance or durability. Profitability is analyzed not as an aggregate, but as a specific contribution to the margin.

This exercise, although apparently basic, has important implications. It forces you to align definitions, clean up data, and build a common foundation on which subsequent decisions can be made.

Once the attributes have been defined, the next step is to group products based on relevant similarities. This grouping does not respond to traditional commercial criteria, but to economic logic.

The use of techniques such as ABC analysis makes it possible to classify products according to their contribution to the margin, which introduces a hierarchy that is not always evident in the commercial structure. Products that represent a high volume of sales may not be the most relevant from a profitability perspective, while others with lower visibility may have a disproportionate impact on the bottom line.

By building these groups, the organization begins to abandon the idea of a uniform catalog and recognizes that different products require different strategies. This means that pricing is no longer a cross-cutting function and becomes a series of segment-specific decisions.

In parallel to the product analysis, the model proposes to structure the customer base using variables that allow differentiating behaviors and value levels. The RFM (Recency, Frequency, Monetary Value) approach, for example, introduces a quantitative logic that facilitates this classification.

By analyzing the recency (how long ago the last interactions occurred), the frequency, and the monetary value of transactions, the organization can identify patterns that are not evident in an aggregate analysis. Customers who buy with high frequency but with low tickets, customers who make sporadic but high-value purchases, or customers who have recently stopped interacting.

Each of these profiles has different implications in terms of pricing and commercial strategy. What is relevant is that this segmentation allows us to understand not only how much customers buy, but also how and when they do it, which is essential to design strategies that maximize value capture.

One of the most relevant moments of the model is the crossover between product segments and customer segments. It is at this point where the information accumulated in the previous stages becomes a tool for decision-making.

By visualizing these intersections, the organization can identify combinations that represent high-margin opportunities, as well as those that require adjustments.

The concept of "sweet spot" emerges precisely from this analysis. It is not a single point, but a set of combinations where customer value and product profitability align favorably.

Based on this identification, it is possible to define differentiated strategies that respond to each quadrant. In some cases, the priority will be to keep prices high to capture value. In others, price adjustments will be necessary to stimulate demand or to compete in more sensitive segments.

One of the most relevant implications of this approach is that price is no longer the starting point and becomes the result of a series of previous decisions.

This contrasts with the common practice of defining prices based on costs plus pricing or external benchmarks (competition based pricing), without having built a deep understanding of the portfolio and the client.

The model states that the pricing strategy must be aligned with the company's overall strategy, whether it is customer-oriented, product leadership, or operational excellence. This alignment is not trivial. It implies that pricing cannot be optimized independently but must reflect the strategic priorities of the organization.

Finally, the model emphasizes that segmentation is not an activity that is performed once and then kept static. In changing environments, product attributes can evolve, customer behaviors can change, and market conditions can alter competitive dynamics.

This implies that segmentation must be monitored and adjusted on an ongoing basis.

The use of analytical tools and specialized software facilitates this process, but beyond technology, what is required is an organizational discipline that incorporates periodic review as part of management, because even the most sophisticated models tend to lose validity over time.

If you missed one point out of the 7, it was because I merged the original 3 and 4 points of the model because I consider them closely related.

Final reflection on segmentation as the basis for more conscious decisions

Product and customer segmentation is not a technical exercise aimed at improving the accuracy of a model. Rather, it is a process that forces the organization to confront the complexity of its own operation and structure it so that decisions reflect that complexity rather than oversimplifying it.

That is why when a company manages to move from a homogeneous logic to a segmented structure, it greatly improves its ability to set prices and also develops a deeper understanding of how value is generated and captured in its operation. That's why I ask you: How do you have your customer and product segments?