How To Segment Your Customer For Better Innovation

 

How To Segment Your Customer For Better Innovation

How do you look at your customers? Do you put a face to them? Do you make them real so that the team creating the innovations has a clear target?

The one thing that gets me going is when teams start talking about customers in terms that are meaningless to innovators. The one that I've come across most is when teams categorizes customers either by price point for the product (design a product that fits a $500 price point), channel (build a product for a specific retailer) or by where they live (build a product for Europe). This is what I call “market segmentation.”

To deliver information/vision to an innovation team, there must be a clear target, or set of target “customer segments” and ultimately a clear description of the customer.

So, how should you define your customer segment? There are a number views at customer segments that you can leverage. The key being that you need to define the segments that are right for you business.

Some example customer segmentation approaches include:

The Polk Company refers to 108 SuperNiches, which, when narrowed down to 26 Niches, correspond to letters of the alphabet. For example:

  • “A” for the richest (Already Affluent)
  • “B” for Big Spender Parents
  • “C” for Cash-to-Carry
  • “D” for Diamonds-to-Go
  • …….
  • “Z” – Zero Mobility.

Odyssey market research divides technology consumers into six segments

  • New Enthusiasts
  • Hopefuls
  • Faithfuls
  • Oldtimers
  • Independents
  • Surfers.

Discovery Channel tailors programming to eight groups of info-seeking viewers (the rest of them don't watch):

  • Entertain-Me's
  • Practicals
  • Scholars
  • Sociologists
  • Boy Toys
  • Machos
  • Here & Nows
  • Escapists.

Faith Popcorn's BrainReserve firm refers to segments based on life stages:

  • MOBY's (Mommy Older, Baby Younger)
  • DOBY's (the daddies)
  • former YUPPIES divided into PUPPIES (Poor Urban Professionals) and WOOF's (Well-Off Older Folks)
  • latchkey kids
  • Sandwichers (adults caught between caring for their children and their older parents)
  • SKIPPIE's (School Kids with Income and Purchasing Power).

MicroVisions 50's various “psychodemographic” lifestyle clusters such as:

  • Movers and Shakers
  • Lap of Luxury's
  • White Picket Fences
  • Young ‘n' Carefree
  • etc.

PRIZM (Potential Rating Index for Zip Markets), which classifies all U.S. neighborhoods into 62 demographically and psychographically distinct lifestyle clusters. Some example groups include:

  • Urban Gold Coast: Elite Urban Singles & Couples
  • New Empty Nests: Upscale Suburban Fringe Couples
  • Norma Rae-ville: Young Families in Bi-Racial Mill Towns

Mediamark Research divides the wealthiest 10 percent of U.S. households (“The Upper Deck”) by lifestyles:

  • The Good Life
  • Well-Feathered Nests
  • No Strings Attached
  • Nanny's in Charge
  • Two Careers.

 

There is no one size fits all for defining your customer segment. My challenge to you is to avoid the fallback of market segmentation and to instead embrace a well defined, deeply understand segmentation of your customer. The result is a clear target for your innovation team and ultimately a killer product that meets their needs.

Question: Which segment best defines you?

 

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Please note: I reserve the right to delete comments that are offensive or off-topic.

3 thoughts on “How To Segment Your Customer For Better Innovation

  1. Some companies fall into a trap of segmenting existing customers vs. devising aspirational customer segments, which is a slightly different distinction. Existing customers are already consuming your product, so focusing a business strategy on existing customers is limiting vs. a customer segmentation that extends beyond existing consumers, to include those who may not be your customer, but should be.

  2. I think designing to a specific price point can be very effective as long as the consumer experience drives the effort. Look at the Nintendo Wii… I’m sure that Nintendo’s internal research showed that the resistance point for consoles was $300USD. You’re not going to get an outstanding graphics experience, a la Xbox360 or PS3, for that price point, especially if you don’t intend to subsidize the hardware. So what do you do? Obviously, Nintendo found a great answer that shows a tremendous amount of innovation. Price point can be a very potent guide for innovation when the right team is involved.

  3. I like the last three methods you posted. They are much more descriptive and help me see them as people not as segments. I also recommend giving each a name, a picture, and describing their daily life. Things they interact with, things they enjoy to do, and things they hate to do. The last one will really get your creative juices going.

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