MM5 -2. DON’T default to one size fit all.
The reality is your customers are different, whether you like it or not they have very different need, different ability to pay and they vary by the degree to which they value your product’s key benefits.
The prince and oozy might be similar in terms of prize but their need and characteristics are different. When it comes to innovation there is only one way to segment. Customer need, valu and their WTP.
From paper company some customer needed just in time delivery while other have warehouse, what feature and service really matters to most of the customer and what are they willing to pay. Price was the most important factor and then people were willing to pay for customer valued service which firm assumed is the cost to the firm.
- want price.
- want it now.
- want product only.
- want only the best. How high customer didn’t shed the light on what they wanted from the paper company.
Typical pitfall -
- segmenting too late. - if company build product for one size fit all, they risk creating product that no one get excited about.
- segmenting by observable characteristic - the best way to segment is need, value and wtp feature.
- having too many segments. Settle on one segment and use it through marketing, promoting and selling.
What best in class company do - you can act differently. The company prioritise and build the product for the segments with biggest opportunity. And avoid building one-size-fits-none product.
Segmentation gives you power to serve customer better by catering to their specific needs. And you make it easier for your customer to find the right product, make the purchase, and get the right level of service.
INSIGHTS, TIPS AND TRICKS-
-1. Begin with customer WTP data. And cluster according to their WTP, value and need.
-2. Let common sense be your guide in suing statistic.
-3. Fewer is more, theoretically each customer could be one segment, the opposite extreme would be treating whole market as one segment. The more segment height the complexity, sales, marketing, product and service.
-4. Don’t try to serve every segment, you are not obligated to serve each and every customer, service you develop should match your company overall financial and commercial goals.
-5. Describe the segment so you can address them. This is critical in writing commercial and ads, marketing and sales message.
Segmantion is what gives you monitizing power.