When consumers or businesses have a problem, they need to
hire a product or service to do a job. An obvious example is when you have a
leak, you need a plumber.
But if you want to shampoo your hair you have dozens if not hundreds of choices. If I want to shampoo my hair and manage my dandruff,
I might hire Head and Shoulders for that specific job.
If I want to avoid itching and scratchy dry
skin, you might hire Oil of Olay moisturizer with aloe vera instead of 32 other choices.
Each product gets hired to do a
specific job in a specific segment.
Segmentation is wildly important yet often misunderstood by
How the job gets done is the really important part of
segmentation work. Outcome-based segments is what consulting firm Strategyn focuses on in their practice and they shines a bright light on this topic in their effort to understand what
truly makes customers different?
You can’t just use simple 1950’s style methods like age,
geography, sex, household income, etc. Or in business, you might segment based on small business versus large or vertical markets like healthcare versus transportation.
The deeper layer to explore is the needs
state of discrete segments and to truly understand what makes consumers
different. Twins who have common DNA may
value fancy coffee drinks differently where one favors Dunkin’ Donuts versus
Starbucks. General Managers running a healthcare or transportation may have common needs and desire similar 'jobs' for certain products.
Segmentation is interested in the shared value
of a specific targeted community.
In a white paper about this outcome based approach to
segments, Strategyn outlines an example with Motorola and their two-way radios.
Previously they sold and marketed these products to distinct vertical segments
like utilities or public service sectors. When they started to look deeper,
they found three distinct outcome-based needs from their customers.
One was for
covert communications, one for dangerous situation that demanded 100%
effectiveness and the final group for team and group coordination activities.
When Motorola refined the marketing messages for those groups, they found they
could sell a less expensive product to three distinct segments with different
outcome needs and expectations. Thus more customers were satisfied with a
product made for them. The business unit grew by 18% because their customers
were ‘hiring’ a specific product to do a well-defined job.
For those of us who love metaphors, think of a tool box. You
don’t hire a screw driver to do what a hammer can do.
Apply the Lessons in Segmenting Your Opportunities.
SURVEY: How clearly do you understand why customers
hire your product? Can you survey a large enough sample to understand and see
clusters of different needs as well as the common needs too?
UNMET NEEDS: Do you truly understand the unmet needs
within the larger target of customers? You may be selling a toolbox filled with
screw drivers to customers who need to knock a nail into a piece of wood. Or,
more specifically, you may be selling flat head screw drivers to customers who
have Philips head screws.
PLATFORM OF PRODUCTS: You may need to have a platform of products
that meet clustered outcomes. Of course no one wants too many products, but a
wrench, hammer or screw driver have multiple sub-segments based on the outcome
of effort. A common platform (brand) may enable you to have a few distinct
products built on outcome requirements.
Outcome based segmentation allows you to see your market in a new light and to
more deeply understand the needs of a community. If you are looking for growth,
perhaps you need to rethink, reexamine and redefine who you are trying to reach
and to understand the job they might hire your product or service to do for
To read the full whitepaper on this topic, go to www.strategyn.com and look for the article
called Outcome-based Segmentation. Their CEO's book, What Customers Want is on my reading list and I'll review it on future blog post.
Do you need help in thinking through the segments of your
marketplace? Let’s talk. Connect with me through Clarity and I’ll help you sort
out some new opportunities.
Labels: Anthony Ulwick, marketing, Marketing Moments, outcome-based segmentation, segmentation, strategyn