From Innosight and authored by Clayton M. Christensen, Scott D. Anthony, Gerald Berstell, Denise Nitterhouse
The market segmentation scheme that a company chooses to adopt is a decision of vast consequence. It determines what that company decides to produce, how it will take those products to market, who it believes its competitors to be and how large it believes its market opportunities to be. Yet many managers give little thought to whether their segmentation of the market is leading their marketing efforts in the right direction. Most companies segment along lines defined by the characteristics of their products (category or price) or customers (age, gender, marital status and income level). Some business-to-business companies slice their markets by industry; others by size of business. The problem with such segmentation schemes is that they are static. Customers’ buying behaviors change far more often than their demographics, psychographics or attitudes. Demographic data cannot explain why a man takes a date to a movie on one night but orders in pizza to watch a DVD from Netflix Inc. the next.
Product and customer characteristics are poor indicators of customer behavior, because from the customer’s perspective that is not how markets are structured. Customers’ purchase decisions don’t necessarily conform to those of the “average” customer in their demographic; nor do they confine the search for solutions within a product category. Rather, customers just find themselves needing to get things done. When customers find that they need to get a job done, they “hire” products or services to do the job. This means that marketers need to understand the jobs that arise in customers’ lives for which their products might be hired. Most of the “home runs” of marketing history were hit by marketers who saw the world this way. The “strike outs” of marketing history, in contrast, generally have been the result of focusing on developing products with better features and functions or of attempting to decipher what the average customer in a demographic wants.
In a discussion, I had with Alex Osterwalder this week he spent a great deal time talking about this concept and how it relates to Customer Value. Alex is the author of the Business Model Generation and next weeks podcast guest.
This is a similar concept to Service Design via Service-Dominant Logic where the foundational belief is that value is derived through the use of your product/service. Your product/service is only an enabler of value. Utilizing this concept, can your product/service be given away for free and as a result be paid for through the use of it? Let’s say Xerox gives a printer and services the printer for free and gets paid on the use of it. Zipcar is another example – you only pay when you use it. There may be a minor membership fee but the real cost would be associated with the use of the product.
Does anyone have other examples where the value in use concept is used?
Is highlighting ‘value in use” an effective marketing tactic?
Can you segment markets through how you use a product?
Do you have other question that this concept raises?
Join the conversation on this subject at the Lean Marketing Lab.
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