Needs-Based Segmentation Approaches

𝗣𝗮𝗿𝘁 𝟮: 𝗦𝗲𝗴𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 This could totally flip your marketing mindset!👇 After looking into market research, I prepared a short segmentation use-case. Trying to show one thing - There are different ways to segment. Some are more useful and actionable. 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗔: 𝗦𝗲𝗴𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 Company A sells athletic shoes and has a broad segmentation. They rely on general features and promotions, assuming customers within a category have similar needs. Segments: Athletes: 5% growth, $400M Fitness Enthusiasts: 7%, $300M Casual Wearers: 3%, $300M 𝗖𝗼𝗺𝗽𝗮𝗻𝘆 𝗕: 𝗦𝗲𝗴𝗺𝗲𝗻𝘁𝗮𝘁𝗶𝗼𝗻 Company B segments its market granularly. They identify unmet consumer needs within each segment and develop products and marketing strategies to address them. They consider 4P preferences, the holistic consumer job to be done, points of market entry, drivers, triggers, barriers, alternatives, customer lifetime value (CLTV), and willingness to pay. 𝗔. 𝗔𝘁𝗵𝗹𝗲𝘁𝗲𝘀 𝘾𝙤𝙡𝙡𝙚𝙜𝙚 𝘼𝙩𝙝𝙡𝙚𝙩𝙚𝙨 Segment Size: $80M Unmet Need: Affordable high-performance shoes 4P Preferences: High-performance product, competitive pricing Holistic Job: Enhancing athletic performance on a budget Drivers/Triggers: Performance enhancement, affordability Barriers: Budget CLTV: $600 per customer Revenue Uplift Percentage: 10% (by addressing unmet needs) Size of the Prize: $80M * 0.10 = $8M 𝙍𝙚𝙘𝙧𝙚𝙖𝙩𝙞𝙤𝙣𝙖𝙡 𝘼𝙩𝙝𝙡𝙚𝙩𝙚𝙨 Segment Size: $120M Unmet Need: Versatile shoes for multiple sports 4P Preferences: Versatile product Holistic Job: Participation in various sports Drivers/Triggers: Versatility, value for money Barriers: Lack of specialized shoes for specific sports Alternatives: Multiple pairs of sport-specific shoes CLTV: $500 per customer Revenue Uplift Percentage: 9% (by addressing unmet needs) Size of the Prize: $120M * 0.09 = $10.8M 𝗕. 𝗙𝗶𝘁𝗻𝗲𝘀𝘀 𝗘𝗻𝘁𝗵𝘂𝘀𝗶𝗮𝘀𝘁𝘀 𝙂𝙮𝙢-𝙂𝙤𝙚𝙧𝙨 Segment Size: $100M Unmet Need: Superior support and comfort shoes 4P Preferences: High-quality product, premium pricing Holistic Job: Achieving fitness goals comfortably Drivers/Triggers: Support, comfort Barriers: Higher price point CLTV: $700 per customer Revenue Uplift Percentage: 12% (by addressing unmet needs) Size of the Prize: $100M * 0.12 = $12M 𝙍𝙪𝙣𝙣𝙚𝙧𝙨 Segment Size: $120M Unmet Need: Lightweight, durable running shoes 4P Preferences: Lightweight product, specialty running stores Holistic Job: Enhancing running performance Drivers/Triggers: Light weight, durability Barriers: Higher price CLTV: $800 per customer Revenue Uplift Percentage: 14% (by addressing unmet needs) Size of the Prize: $120M * 0.14 = $16.8M 𝗧𝗟𝗗𝗥 If you segment, don't just build a high level map of the market. Understand unmet consumer needs and the value behind. 𝗬𝗼𝘂 𝗟𝗶𝗸𝗲 𝗧𝗵𝗶𝘀 Repost, save, comment below. I'm Julia Kinner. My consulting firm JK & Associates SA focusses on growth strategy & and execution for D2C products & services.

Don't segment your markets by personas and then: Assign unmet needs to each persona. Here’s why: It results in phantom segments (these are segments of people that don’t actually exist). Instead: Segment markets around unmet needs Then create needs-based personas that describe the resulting authentic segments. Why? In every market there are segments of people with different unmet needs. When it comes to creating winning product offerings: Product teams rely on market segmentation methods to discover these segments. They seek this information so they can create the optimal solution for each segment. The best way to discover groups of people with different unmet needs is to segment around unmet needs. This approach is called Outcome-Based Segmentation. It is part of the Outcome-Driven Innovation process. To segment in this manner means you must: - Define needs as measurable outcomes tied to the job the customer is trying to get done - Uncover all the customer needs that exist in a market - Ask a representative sample of people in the market which needs are unmet - Group together people who have the same unmet needs into segments Once the people are grouped into segments. You can analyze each segment to determine what makes it unique. You can describe and document the segment differences in a few paragraphs. This description communicates the information and context innovators need to build the optimal solution. We call this segment description a needs-based persona. **Follow me for daily insights on making innovation systematic and predictable.**

Market segmentation is often more about you than the market. Traditionally... we choose to cluster groups of people or companies based on some combination of their demographics (age, gender), psychographics (values, opinions, interests, behaviours) or firmographics (industry, company size, org structure). Personas and ICPs (ideal customer profiles) are often the output of these exercises. For example, on the B2C side your target persona might look like: Thrifty Tiffany the 34 year old mom with two kids, a cat, drives a 2014 jeep Cherokee who lives in the Northwest. On the B2B side your ICP might look more like: CFO Sam the 45 year old executive with a mid-market ($10M - $1B) aerospace company based in Virginia. While these personas might accurately represent specific niche audiences within the market, it's very likely that you'll end up lowballing the size of your potential customer base with them. Here's a better alternative. First: segment the market first by their needs. Tony Ulwick has published a lot of great content on this. By first understanding the jobs customers are trying to get done and how well their needs are being met, we can more accurately estimate the size of our market. The benefit to the business is that we then maximize the number of potential customers we have to serve. In a recent interview with Mimi Turner and Jann Martin Schwarz, Vassilis and I got to hear a related idea being born. In B2B, these needs, or jobs to be done (JTBD), are very often emotional. In B2B buying, Jann & Mimi discovered the top 5 emotional (JTBD) are 1. I felt I would be able to defend the decision, even if it went wrong. 2. I feel confident that the thing we are buying will do the job 3. I knew there would be downsides but I felt they could be managed 4. The Buyer Group were more or less aligned 5. The buying process was easy-ish No matter the product or service, using the emotional JBTD is a legitimate way to first understand and segment the market. This has massive downstream application as well when it comes to execution through the 4Ps and especially in the promotional creative & messaging. Think about CFO Sam - traditionally, we'd use his profile to mirror the creative so that it looks familiar to his workplace. We might use a picture of a guy with an airplane engine in the background and talk about the features of the product. But if we knew that creating confidence in the buying group of 15 people was the main job to be done, than the creative could appeal to all buyers in the decision making process rather than just targeting CFO Sam with the feature / benefits of the widgets. For more on this, check out our new episode on the complexities of B2B buying, our post-pod discussion or the interview on JTBD with Tony - links in the comments below.

Stop wasting time on outdated segmentation methods! Using demographics or psychographics to group your audience? You're setting yourself up for failure. By that logic, Prince Charles and Ozzy Osbourne would be in the same segment. Make sense? No, right? Here's how to do it better: 1. Focus on Jobs to be Done    ↳ Understand what task your customer is trying to accomplish with your product or service.      ↳ Think about the desired outcome, not just their age or where they live. 2. Identify Real Pain Points    ↳ People buy to solve problems. What issue does your product fix for them?      ↳ The bigger the pain, the more urgent their need, and the more valuable your solution becomes. 3. Consider the Alternatives    ↳ What are your customers using right now?      ↳ Understand why they might switch to your product and what barriers exist. 4. Understand Values and Fears    ↳ What does your customer care about? What are their fears?      ↳ This gives you a psychological advantage and helps you position your product more effectively. 5. Move Beyond Generic Segmentation    ↳ Demographics give you surface-level information, but understanding why customers act is what truly matters.      ↳ Don’t just focus on basic traits. Know what motivates their buying decisions. Pick one customer segment, dominate it, and expand from there. Traditional segmentation won’t cut it. It's time to think deeper and smarter. Focus on what matters: the problem you're solving and why your customer needs you. ✌️ -- P.S: Follow me Avi Gupta, for more such insights...