Using Customer Segmentation to Drive Service

Improvement at the London Borough of Hackney

1 Hackneys challenge
The London Borough of Hackney was a one-star authority
undertaking a major transformation project. Hackney knew that
the transformation needed to be focused on the customer, but
found it difficult to understand how different citizen behaviour
could be encouraged. A borough profile was in use, providing
basic information on age, ethnicity and so on, but there was no
consistent understanding between services of customer groups
and their needs. In order to tackle this problem, Hackney
needed to understand:

What is customer segmentation?

Customer segmentation involves
grouping customers according to
common needs, wants and
expectations in order to enable the
provision of tailored services in a cost
effective manner.
Segmentation is just one of a range of
tools available to Local Authorities to
generate Customer Insight and enable
them to be truly customer-focused. It
provides the evidence base to support
informed decision-making and ensure
resources are focused where they are
needed most.

Their customer groups: What were the key customer

groups? How many customers were in each group?
Where were they located in the borough?

Their interactions with the council: What services

did each group use? How did they access these
services? How satisfied were they with the service the Council provides?

The implications of this for service delivery: What did this mean for how Hackney
should deliver services to each customer group?

2 How customer segmentation was used

To answer these questions, RSe Consulting carried out a detailed customer segmentation exercise,
using data from sources such as Mosaic Public Sector, customer surveys and focus groups.
The initial exercise identified eight key segments in Hackney. Half the
population were concentrated in two lower-income segments, struggling
singles and breadline families. A further significant segment was H Dependent
elderly
identified called dynamic singles. This represented a group of young,
5%
childless, self-sufficient households that were not sufficiently recognised
or catered for by the council.
G Breadline

N/A
0%

Priviliged
families
3%
B Comfortable
empty nesters
1%
C Dynamic
singles
21%

families

30%
When additional customer data was analysed and overlaid
onto this segmentation, a detailed understanding of each segments
interactions with the council was developed:

Service use: Life stage and wealth emerged as the primary

determinants of service use. As expected, the poorer segments
were high users of needs-driven services such as council
F Struggling
singles
housing and benefits, whereas more well off segments were
28%
high users of discretionary services such as parking and
recycling. This analysis suggested that there was potential for clustering services together for
particular groups, for example in face to face contact points.

D Independent
elderly
0%
E Settled
families
12%

Dynamic singles

22%

A large, often non-visible group

Medium to high incomes

Young, without children
Some home ownership, but often private
renting
Primarily in the West and South of the
borough
Medium ethnic mix, approx half White British
Low users of many services mostly engage
about council tax, planning, parking and
waste
See Hackney as vibrant, interesting, slightly
raw and alive, part of real London, indeed of
global urban culture
Approximately 18,000 households
I quite like it
not perfect

Got our first

Wetherspoons
Oh No!

Channel use and preference: An understanding

of which channels each segment used and why
was built up from survey data and focus groups.
Dynamic singles for example, revealed a strong
preference for web-based services but were not
using them due to a lack of trust and confidence
that the system would actually work. This type of
information has helped Hackney to develop a
better understanding of how to actively migrate
different segments to cheaper access channels.

19/02/2007

70%

Satisfaction: Satisfaction varied

substantially between segments,
sometimes by up to 25%. The focus
groups helped to unpick why this
variance existed and what could be
done to improve satisfaction of
different segments.

3 What happens now?

Can be a
strugglebut
usually get
there in the end

65%
% satisfied with the Council

60%
55%
Average

50%
Housingits
just so hard to
get anything
done

45%
40%
35%
30%

Why is the
council always
so rude

Dependent
elderly
H

Breadline
families
G

F Struggling
singles

Settled
families
E

D Independent
elderly

C Dynamic
singles

B Comfortable
empty nesters

A Priviliged
families

Hackney is now using the results of the

segmentation to inform the roll-out of
their Service First strategy, including:
The design of channels and a
channel migration strategy
Determining how services are rolled into the contact centre
Supporting culture change
Going forward it will also be used to revise the overall business case for change and as a direct input
into how services are redesigned (the segmentation being used to prioritise where improvements
need to be made).
RSe Consulting is a specialist strategic consultancy committed to helping organisations that
provide public services achieve and maintain excellence. We are market leaders in the use of
Customer Insight in the public sector, and have written a paper for the LGA entitled Putting the
customer first: lessons from business. RSe places the customer at the heart of your organisation
and supports you in:
1. Developing Customer Insight, including:
Tools e.g. segmentation, journey analysis
Applications e.g. customer access strategies, channel migration strategies, payment
strategies
Strategies e.g. resourcing, customer-focused KPIs, information management
2. Customer-led service design and transformation
3. Related customer-led improvement work e.g. options appraisals and business cases
For more information on how customer segmentation could help your organisation please
contact Guy Mallison on guy.mallison@rseconsulting.co.uk or 020 7808 1120, or visit
www.rseconsulting.co.uk/services/customer_insight.html.