You can’t Segment a Market, a Market is There

Professor Malcolm McDonald, until recently was Professor of Marketing and Deputy Director, Cranfield University School of Management, with special responsibility for e-business, and is now an Emeritus Professor at the University as well as being an Honorary Professor at Warwick Business School. Coming from a background in business which included a number of years as Marketing Director of Canada Dry, Malcolm has successfully maintained a close link between academic rigour and commercial application. He has consulted to many major companies from the UK, Europe, USA, Far East, South-East Asia, Australasia and Africa, in the areas of strategic marketing and marketing planning, market segmentation, key account management, international marketing and marketing accountability. Malcolm is currently chairman of six companies and works with the operating boards of a number of the world’s leading multi-nationals on all continents. His company is Malcolm McDonald International.

In next two podcasts, Professor McDonald will give us some spirited advice about Marketing Segmentation. A brief excerpt from the podcast follows:

Joe: Can you start out with some of the basics of segmentation that we can briefly talk about to get us headed in the right direction?

Professor Malcolm McDonald:   Okay, well the first thing is that people — I always get cross when people say ‘we segment by’ and I say, no you don’t. I say that’s production orientation. It’s absolute production bullshit that. You don’t segment a market. A market is there; a 100% of something is bought and used. Our job is to get in there and find out what is bought, where they buy it, how did they buy it, why they buy it and who they are. The who they are comes later on because these were what I call micro segments and it’s very easy with a group of experienced executives to develop about 30 to 35 of those micro segments of different patterns of actual behavior. Not supposed behavior but actual behavior.

Once you’ve generated those, it’s very easy to get a piece clustering software and pull them together and you end up with between 7 and 9 segments. Now everybody in those segments isn’t exactly the same, but they’re more like the people in that segment than people in another segment. But once you’ve got that, even if you can’t change the product that you’re selling to them, and most companies can’t actually develop a product specifically for them, it’s the way you communicate with them. You’re actually giving them a message that’s hitting the right notes, appealing more to their needs and what they really need. My experience is you don’t have to do vast amounts of research. I mean that’s another industry that makes me very cross because so much of the money that’s spent on it is wasted because they go out and ask people stupid questions about what they want, and nobody ever in this world knows what they want.

I can give you an example of what I mean. Let’s take the 18th century where we had horses and carriages and somebody comes up to — you know, I’m in this carriage with you and a couple of other people and somebody stops the horse and opens the carriage door and says to me, what do you want? And I say, how kind of you to ask. Can you go away and invent the internal combustion engine for me, please? And they say, what’s that and I say, it’s the associated emission, the 0.0 gram of air-producing ions carrying one electrostatic quantity of electricity. And they say, that’s good, we are going to do that. And then they say to you, what do you want? And you say, well this whole stinks, could you go away and invent air-conditioning? And they say to the third person, what do you want? And they say, well could you invent windscreen wipers? And they say to the fourth person, what do you want? And they say, what about ABS brakes? Do you see Joe, it’s a load of total and utter nonsense. Absolute nonsense! And that’s why the market research industry is in such a mess.

But anyway, we‘re beginning to move away from the core subject. The point I’m making is that there is an actual market for anything that’s sold, the market segmentation process which is outlined in the book is to get in there and take it to pieces to find out groupings of people who have similar needs and that includes what they buy, where they buy it, how they buy it, how they use it and so on and so forth.

Once you understand that, the segmentation process getting 7, 8, 9 segments out becomes comparatively easy nd once you’ve got them, they never, ever change. They very, very rarely change those segments. They usually are pretty well the same across the globe as well. You might have more in one segment in France than in Britain and fewer in another but generally speaking, segments are the same all over the world. For me, if you don’t segment your market properly, you’re not going to get rich. For me, it’s the route to getting rich, doing it properly.

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