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 marketers.
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.
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.
NEW OPPORTUNITIES: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 them.
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.
Jeffrey Slater
MomentSlater
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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.
