I once saw a MAD Magazine cartoon that showed three gas pumps with different levels of octane and different prices. But the artist also showed the cutaway of the single below ground tank that provided the same exact same gas to each pump.
Funny, of course. But there’s some truth to the idea. Different people want different experiences, products and price points while meeting the same need. So in a product, like gas, that most people buy, sometimes the key to success is to sell slightly different products to different people.
In the 1970s, Howard Moskowitz was asked by Pepsi to determine what the perfect level of sweetness was for Diet Pepsi. The brand wanted to appeal to the largest audience. From the scattered data, he made the astonishing (and perhaps obvious now) realization that there was no perfect level of sweetness, only perfect levels, because people have different tastes for ‘perfection’.
When he applied that knowledge to Prego, he found that Americans generally had one of three preferences: plain, chunky, and spicy. Until then, Prego only had one flavor of spaghetti and so they developed a chunky variety.
Prego made $600 million dollars over 10 years from chunky spaghetti sauce.
Why am I telling you this?
When brands try to appeal to everyone by focusing on the ‘best’ sauce, they miss the fact that people like different sauces.
Segmenting Your Market
Communications, pricing, even how the product is sold, are all done in such a way as to appeal to these particular people. Market segmentation allows you to adapt these characteristics to your buyers based on demographic, purchase history, and behavior.
Where Should You Start?
1. Start with the why
Outline what you are trying to achieve by doing customer segmentation. Do you want more customers to convert, promote a new product, or just get feedback? Clarifying what you want to learn will help you take a more targeted approach in the next steps.
2. Determine the who
Define the people you want to reach – perhaps that is customers who only make one purchase or those that make referrals. You need to know the people you are trying to understand so that you can get in touch with them to learn more.
3. Begin with qualitative research
You want to understand behaviors, motivations, and challenges of the people buying your products or services. Keep in mind that, as well as you may know your buyers, you are not your target market (or maybe you are?). Starting with qualitative research when performing customer segmentation allows you to identify important concepts and touchpoints in your buyers.
4. Keep an open mind
Market segmentation research often reveals information that you weren’t looking for initially. Avoid getting so caught up in your pre-determined goal that you miss interesting insights that might be crucial to your strategy.
5. Use that knowledge to inform surveys
Now that you have the qualitative information, you can use quantitative research to get you the hard numbers that influence high-level executives. The questions should align with what you learned in the qualitative steps and your overall segmentation goals.
6. Prioritize Quality
Customer segmentation isn’t about creating the most segments or the biggest; prioritize profitability instead. You don’t want overly broad groups, nor do you want excessively narrow segments. A segment should be a group that makes the most sense for you to target your brand messaging to. And you may need to do more qualitative research, especially ethnography, to understand who your paper segment descriptions really are as people.
‘Perfect’ and ‘the best’ are subjective. When someone says, ‘These shoes are perfect’ or ‘That’s the best burger in the state’, they really mean ‘perfect for me’ and ‘the best for people like me’.
Instead of launching a wide array of products and mass marketing campaigns, focus your efforts on the people that are most likely to be your buyers.
BuyerSynthesis brings consumer insights to food, culture and clothing brands and their agencies to refine product strategy, user experience and communications.