One Market Segmentation Approach That Is Surprisingly Actionable
We live in a divisive culture where there is money to be made through endless division and segmentation. It is most evident in today’s news media but it is just as prevalent in marketing. How many e-books with unique insights on marketing to Millennials have you come across in the last month? Probably more than a few.
Everyone is feverishly looking for that one silver bullet, that small edge over the competition. However, take a step back for just a second and consider what you are actually being told about a particular generation. You will quickly realize how absurd it is to prescribe any sort of uniform views, behaviors or qualities to 75 million people!
It quickly becomes a “garbage in, garbage out” exercise with several obvious pitfalls:
- It implicitly groups tens of millions of consumers into neat buckets. Statements like “Millennials like this” or “Baby Boomers want that” are so broad that they are practically meaningless. For example, I’m in my 30s, I have 2 kids and live in the suburbs. I drive a vehicle that comes dangerously close to looking like a minivan. I have friends that are the same age as me but live in the city, they are single and don’t drive. As consumers, we have radically different needs and preferences.
- It assumes a constant set of preferences and behaviors over time. In ten years, the Millennials will still be the same generation but will they be the technology-obsessed, urban dwelling population with no kids? Somehow I doubt it. Again, once my friends from the above example get married and start families, their preferences will shift dramatically.
- It confuses correlation with causation. Just because 67% of Baby Boomers say they want to stay active does not mean that this is the reason why Jack bought a treadmill from Sears last month. In other words, this level of analysis gives you very little actionable data.
Many companies that worry obsessively about the next generation not buying their products just have to be patient. I’ve talked about Toyota’s attempt to reach the “youth” with their Scion brand. Two generations later, Toyota finally decided that people do want to buy their boring cars after all.
If generational segmentation is not going to cut it, what are some of the alternatives? Let me propose two approaches. Try them out and see if they help you clarify your market segmentation strategy (or create one, if you haven’t done so already).
Better Approach – Life Stages
An alternative way to think about your market is through life stages. With the life stage approach, the demographic is less important than the lifestyle, which shapes the needs of a particular consumer.
Many companies already use this approach. For example, when families have kids, they are often thinking of buying a new home and a new car. When it’s just you driving that old Civic, you’re not thinking about safety. As soon as you need to put a tiny human in the back seat, you become susceptible to the safety pitch from the likes of Volvo and Subaru.
The important takeaway here is that the preferences do change as we move between life stages. A lot of our day-to-day decisions are set to autopilot and we don’t think too much about the detergent we buy or the coffee we like. However, there are certain milestones in our lives that disrupt the routine and make us reconsider the choices we keep making automatically.
Best Approach – Job to be Done
Building on the life stage thinking, my preferred approach is to think about the job your product is being “hired” to do. In other words, what does your customer hope to accomplish with your product? This sort of thought process also opens your mind to new ways of looking at your own products or services.
For example, let’s use a fictional ABC Movers moving company as an example. At the very basic level, the job of a moving company is to move some boxes and furniture from point A to point B. It’s pretty much a commodity. However, what does a consumer hiring a moving company want to accomplish? Perhaps an entire family is being uprooted to relocate for a new job. Maybe a retired couple is finally making a move to that Florida or Costa Rica vacation home they’ve had for a while. Whatever the case may be, the consumer’s goal is never to just move some boxes around.
As a result, ABC Movers can target these consumers with a much more effective messaging and placements they might not have considered before. The company could make an emotional appeal and sympathize with the difficulty of moving an entire family to a new place or the dream of an exotic retirement finally coming true.
Going one step further, ABC Movers could come up with additional services that better address their customers’ goals and break out of the commodity position they occupy with all of their competitors. They could focus on relocating retirees to communities in Florida and offer additional valuable services relevant to that particular audience. The ultimate goal is to get away from competing purely on price with cookie-cutter products or services.
I’ve learned this approach from Clayton Christensen (of Innovator’s Dilemma fame) and you can read more about it in his excellent HBR article.
You might be surprised to get this sort of information from a self-professed direct response marketer. However, I strongly believe that no amount of clever tactics is going to help you succeed if you are chasing after the wrong audience or have not thought strategically about your marketing efforts. You need to have a strong foundation in order to build a successful business on top of it.