February 18, 2010

Customer Segments of 1: an Illusive Dream?

Traditional marketing has been self-absorbed in the notion of market segmentation.

The segmentation objective is to identify market clusters that exhibit similar characteristics in terms of common variables such as demographics, lifestyle, political and buying preferences, product usage behavior and so on. Once a segment with similar appropriate attributes has been identified the marketing role is to develop programs to exploit the revenue opportunity in each segment.

The assumption made in the marketing program is that each person in the segment ‘looks the same’. Each has the same demand characteristics. Each has the same needs, wants and desires.

The ‘average’ peson becomes the target and there will be sales hits when the target actually does behave like the average and there will be sales misses when they don’t look like the average person at all.

Nothing wrong with the Marketing 101 approach. But its not DiFFERENT.

Consider the following aspects of BE DiFFERENT Market Segmentation that sets it apart from the commonly-used methodology.

- BE DiFFERENT segmentation considers segmentation as a strategic exercise asking the question “How should I segment the market in order to expose as many opportunities as I can?” comon segmentation variables such as demograhics and geographics are given mild attention only: the focus is on determining the appropriate variable that will unlock the growth key for the organization.

- BE DiFFERENT segmentation is a process of segmentation that is driven by the intent to find differences in customer clusters in order to expose as many customer clusters as possible. The axiom followed is that opportunity comes from differences NOT similarities, and that the greater the number of clusters defined the more intelligence you have on every person in the cluster AND the better the ability to match a product or service with their specific needs. In other words the Customer Learning Factor increases with the number of customer clusters defined and with it the revenue opportunity.

- BE DiFFERENT segmentation, as described in the previous point tries to define as many different customer clusters as possible. The Customer Learning Factor increases as does the probability of making a sale due to the fact that you are better able to match your offering with the more precise needs. wants and desires of the individuals in each cluster.

- Finally, BE DiFFERENT segmentation is a continuous process of going deeper and deeper into a customer cluster. Obtaining more and more information on the individuals in the cluster. Looking for differences until the end result is a cluster of one. If you have one million customers, the result would be one million clusters or segments of 1.

What are the implications of a million clusters of 1?
- you would BE DiFFERENT as few would undertake the journey
- you would have deep intimate knowledge of each of your customers - Customer Learning Factor = infinity
- your sales potential would be off the charts
- you would outperform your competition
- your customers would love you - matching your solutions exactly to their needs
- you would thrive
- AND you would survive any unpredictable body blows you might suffer in an ever changing world.

All because you choose to change the way you look at Market Segmentation.

Final word. Its not really about achieving Clusters of 1 status. Its about putting in place a BE DiFFERENT marketing philosophy to treat segmentation as a continuous learning process of driving our knowledge-gathering down to the individual. If you define 1000,000 clusters of 10 are you on track? ABSOLUTELY! Keep on segmenting is the point.

Cheers,
Roy

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Related blogs
Think Value Additive
Marketing is in the VALUE CREATION Business
Customerize your Marketing
Customer Learning
Customer Secrets

Posted 2.18.10 at 10:54 am by Roy Osing | Permalink | Comments (0)

February 9, 2010

Do you speak ‘Customerese’?

When it comes to deciding whether or not your organization is REALLY customer-focused, obsessed, intimate, centric, or whatever other description you wish to use, you simply need to listen to your internal language.

Do the people in the organization speak Customerese? Does the customer vocabulary reflect the customer-serving philosophy of a BE DiFFERENT culture?

When it comes to truly existing for the customer, language speaks to intent and behavior and makes a difference; in the BE DiFFERENT garden, a rose is NOT a rose by any other name.

Off the top, i can think of a number of customer-intended words that are used in a variety of businesses. Do any of them resonate with you?

Passengers… readers… donors… callers… golfers… players… patients… calls… transactions… students.. cruisers… skiers… riders… pensioners… retirees… are common references made to the entity that generates revenue for your organization, be it for-profit or not-for-profit.

Question is, do these references shout out reverence for these wonderful people that create meaningful work for us? I don’t think so. They appear in most cases to be labels that talk to the activity that they engaged in rather that a unique person who has needs, wants, and desires that should be served. In fact this vocabulary actually gets in the way - it side-tracks us - from our behavior to serve and create dazzling experiences for people who return the favor with their continued loyalty.

Referring to a customer as a ‘call to be processed’, for example, suggests that the right behavior is to deal with what the person wants and then get rid of them as quickly as possible. A ‘student’ is there to learn what you teach them; a ‘patient’ receives the medical treatment decided by the medical practioner and the donor gives money to the charity asking for it.

All of this customer slang language describes the customer on the receiving end of organizational behavior rather than on the front end shaping what the behavior should be.

BE DiFFERENT organizations put the customer in the control position and exist to serve them in a way that respects their individuality, delights them with the service experience provided to them and honors them for deciding to do business with them as opposed to the other choices they have.

There will be some that say it really doesn’t matter what you call them and that it is merely semantics. Ask a student if they feel like a customer to the education system and is able to get a personalized approach to learning; ask a patient if their Doctor makes them feel special with a dazzling bed-side manner or ask a passenger on an airliner if the service staff ‘exists’ for them. I rest my case.

Customerese will not on its own create a customer-inspired organization, but it is a step in the right direction.

Remove any industry-speak language in you vocabulary and start referring to the objects of your affection as CUSTOMERS. Tell your employees why you are making the shift; explain the BE DiFFERENT cultural drivers behind your actionsand use the change as an opportunity to declare the customer-sering behaviors you expect to see.

Oh, one other thing, be ready for intense push-back. Some Doctors, for example, like ‘patients’ because it sustains their superior position. Be tenacious, hoever, and don’t relent. This is the right thing to do and your customers will thank you for it.

Cheers, Roy

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Related Blogs
Customerize your Language
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Posted 2.9.10 at 12:30 pm by Roy Osing | Permalink | Comments (0)

January 10, 2010

Don’t Reduce Price, Increase VALUE

So, here’s the situation: your price is $26.25 and our competitor’s price for the same product is $23.00. What options do you have to compete?

Your first choice is to reduce your price; this is the most common reaction. The problem is that unless you can reduce your costs of supplying the product all you do is reduce your margins. And, you have to prepare for another potential round of price reductions if your competitor decides to further reduce their prices.

I am not a fan of competing on price. It can be easily copied by your competition and it generally eats into your profits. It is NOT a BE DiFFERENT approach.

Your second choice is to add value to more than fill the $3.25 price gap. This is the BE DiFFERENT Practice that will not only set you apart from your competitors but will also give you the opportunity to enhance your margins. In addition, it makes it more difficult for your competition to copy your move. VALUE differences are tough to copy; price is easy.

Here’s a personal example of how this works. Lets say you are an author and your on-line book price is $3.25 higher than your competition. Matching the competition is really not an option as your cost structure is too high. You don’t have scale and scope advantages like the big on-line book sellers. To compete, the only choice you have is to add value to your on-line offering that they can’t match.

So you might decide to add two value components to differentiate your Offer:
- sign every copy of the book sold
- offer a 30 minute conversation with anyone who buys your book on any topic that interests the purchaser

Hard to copy. Adding real value. DiFFERENT.

Force yourself to look at adding value whenever you are confronted with a price difference. Resist the temptation to take the easy way out and drop your drawers on price. It generally doesn’t work and gives the illusion of an effective response.

Ask ‘What real value can I add to fill the price gap?’

Cheers, Roy Osing
Remember to follow me on Twitter
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Related blogs
Think Value Additive
Marketing is in the VALUE CREATION Business
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Posted 1.10.10 at 07:02 am by Roy Osing | Permalink | Comments (0)

January 1, 2010

BE DiFFERENT Marketing - Think Value Additive

Developing and marketing PRODUCTS is the way most companies compete today. Nothing wrong with that. But it’s not DiFFERENT. And it’s hard to find a unique niche where your competitors won’t find you. Product competition is always challenged with how to provide features others don’t. It’s a tough road, as the RIM Blackberry smartphone is discovering. Numerous competitors are now offering their own version of the smartphone with features they hope will gain them market share.

In my book, I advocate a Customerize Marketing discipline, rather than the traditional product-centric approach where the focus is on creating value-based holistic Offers that reflect a broad view of the target customer in terms of needs, wants and desires.

The key question is, of course, how do you move to the Offer creation mode when you have been stuck in the product-only gear for so long?

Here is the Value Additive Process.

First, start with your core product. It will be the anchor for your Offer.

Second, identify additional VALUE components that can be ‘wrapped around’ your core product. The choice of what value to add is based on what you know about your target customers. This is where Customer Learning pays off. If you have institutionalized the process of continuous customer learning, you will find the choice of what value to add relatively easy. Added value MUST reflect a relevant and compelling customer need or desire otherwise the Offer will not resonate with the customer at all .

Resist the temptation to add too many value components. Don’t complicate the Offer. Choose three additional value layers (Roy’s Rule of 3 remember?) that present a consistent and seamless value proposition to the customer and a ‘natural’ add-on to your core product. If the value components are not synergistc and don’t ‘work well’ together, your target customer group won’t understand and ‘get’ the overall benefits your Offer provides. Not a good place to be.

Choosing synergistic value components is critical in Offer creation in order to present a cohesive theme to the customer. If you are in the financial business, for example, with an anchor product of ‘financial advice’, you might consider value additive components such as on-line self management investment tracking tools and quarterly financial management seminars which all play well together rather than choosing components that have no direct relationship with one another and with the anchor product (wrapping a ski weekend in Whistler, for example around financial advice may not work so well).

Third, define the value proposition, or statement of benefit for your Offer. I am not talking about a statement that simply adds together the benefits of each Offer component. You need to describe the benefit impact of all components working together. In my example above, how might you define the collective benefits of financial advice, on-line tracking tools and regular seminars? You need to express the theme they collectively express. How about something like ‘investment self-management’? Not perfect but you get the idea.

Fourth, you need to brand your Offer reflecting the value proposition. There is no sense creating something new and not taking credit for your innovation. Too many organizations are into the bundling mentality where a la carte component packaging with discount pricing is used. That’s NOT what I advocate. Your new brand should reflect the collection of benefits provided. In the example that we have been using how about branding the Offer ‘The self-management Investment Plan’? Not bad.

Fifth, price your Offer in terms of the market value provided.Think Premium pricing. Avoid the bundling mentality of discounting the package based on the number of components in it. If you have hit the mark with relevant, compelling VALUE you should be able to command a premium price and realize healthy margins. If you can’t price your Offer at a high level I would suggest you have not defined the Offer well enough. Go back to the drawing board. Start over.

Cheers,
Roy Osing
Remember to follow me on Twitter
Take the BE DiFFERENT Quiz

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Posted 1.1.10 at 09:18 am by Roy Osing | Permalink | Comments (1)