* Herb Brotspies is an Adjunct Professor of Marketing (Retired) at Nova Southeastern University. For further information, contact Dr. Brotspies at email@example.com or (561) 302-3060.
Saturday, September 28, 2019
Market segmentation is a fundamental concept in identifying profitable business opportunities. Market segmentation divides markets into subsets of consumers or businesses who share a similar set of needs and wants, evaluating the subset segments, and then implementing strategies to target high value segments.
Segmentation is widely used in consumer marketing. This becomes very obvious walking down the aisles of your local supermarket seeing product form segmentation such as liquid laundry detergent or powder, special shaving products for African American men, or easy to prepare food products targeted to the working parent.
In sharp contrast is business to business (B2B) where recent research shows limited use of market segmentation and where it is used, little value is received. It may be that segmenting business markets is more complex than consumer markets because business to business marketing is much more than a simplistic approach of finding customers who may be interested in your product.
Historically, B2B was viewed as the segmentation between the seller and buyer using a variety of segmentation bases including demographics, sometimes called firmographics, operating variables, purchasing approaches, situational factors, and buyers’ personal characteristics. Simply, whoever bought from you was the focus of the segmentation analysis.
Today, B2B marketers recognize there are situations where the company buying your product is not the ultimate user or consumer. So, segmentation is more than just B2B. At times it is B2B2B or even B2B2C (consumer), thus segmentation requires a different approach.
B2B in its simplest form is when a business sells its products to another business who uses the product themselves. For example, B2B is selling commercial dishwashers directly to restaurants. The restaurant market may be segmented by large restaurants or hotels depending on segmentation criteria. Based on analysis, the commercial dishwasher company decides to focus sales on restaurants with seating capacity of at least 150 people.
This is not to be confused where a business sells products to business intermediaries who resell the product. When Coca Cola sells soft drinks to Wal-Mart, Coca Cola segments the market on the basis of consumer use of soft drinks and uses the B2B intermediary as a channel of distribution. However, Coca Cola may also segment the carbonated drink market by outlet type, food stores, drug stores, mass merchandisers, small grocery stores, convenience stores, and other outlet types.
B2B2B & B2B2C
But what happens when a business sells its product to a business customer and that customer incorporates the product into its own product for resale to either another business or to consumers? Does the segmentation method change? Do they look at segmentation differently? Do they attempt to segment the market on the basis of their customer or do they also look at the business segments of their customers?
Several examples can help clarify this. XYZ Company manufactures electric motors. Electric motors have widespread application for use in other companies’ products. They are used as components in elevators, escalators, water pumps, oil industry pumps, even electric motors for aircraft. XYZ segments the market not on the customer purchasing their product as a component first, but rather on the application of XYZ’s capabilities. They develop segmentation criteria for different industries using pumps taking into consideration their own capabilities and strategy. Once they determine that the market for elevator motors and aircraft electric motors are growing but oil industry pumps and water pumps are not, they then focus on segmenting the suppliers to these industries. In essence, the demand for their products is derived from the demand of their customers’ products.
This is also evident in the high technology industry. Chip makers sell to Apple, Lenovo, Compaq, HP, Samsung, and Dell, for use in consumer products such as cell phones, computers, and tablets and now smart televisions. Consumer behavior drives demand for these products. So, a chip maker must understand their customer’s customer. A chip maker will also sell chips to companies for application for cloud computing such as Dropbox, Amazon, and HP Enterprises. The sales for the cloud businesses of Dropbox, Amazon, and HP Enterprises are driven in part by consumer demand for cloud storage or cloud applications. Companies in the B2B2C business must develop segmentation skills in the consumer market such as psychographic and behavioral bases for segmentation. Thus, additional segmentation skills are required beyond the B2B segmentation skills for B2B2C companies.
In a recent report to analysts, Intel revealed they are reducing investment spending in software, personal computers, and phones and tablets while investing more in data centers with cloud computing, retail solutions, transportation and automotive, smart homes and buildings, and industrial and energy. These are consumer driven segments. They will then focus on companies who are strong in the growth segments they identified.
Qualcomm similarly looks at the end user of their customers in deciding product developments, sales, and marketing priorities. They have identified segments where consumers drive demand including technology for the automotive market, smart homes, mobile computing, and wearables.
Segmenting business markets is no longer just looking at your company’s customers or potential customers. With the recognition of B2B2B and B2B2C, segmentation is now focusing on the market segments served by the customers to drive investments in product development, sales, and marketing effort.
* Herb Brotspies is an Adjunct Professor of Marketing (Retired) at Nova Southeastern University. For further information, contact Dr. Brotspies at firstname.lastname@example.org or (561) 302-3060.
Sunday, September 15, 2019
The dominance of the service sector, global competition, rising labor and technology costs and demanding customers forces companies to create excellent customer experiences or fail. In the Now Economy, Companies must know their customer’s definition of service quality (SQ). Organizations have to provide service experiences that meet or exceed customer expectations at a reasonable price.
It’s all about the service experience! Research has found that about 70% of customer defections are due to service problems. Customers evaluate service encounters to assess the quality of a firm’s offerings and whether they will continue do business with them in the future.
Improving service quality is like taking vitamins, eating healthy and exercising regularly. Although the results may not be immediate, long-term benefits are significant. Managing service quality is not a “quick fix,” but rather a way of life for companies who are serious about improvement (e.g., Disney, FedEx, Ritz-Carlton, Singapore Airlines).
So, How Can We “Wow” Customers?
Here are 10 recommendations that lead to superior customer value:
1. Co-create services with customers. Learn what customers value by incorporating the voice of the customer into the service development process.
2. Focus your improvement programs outward, on market breakpoints. By defining and mapping customer journeys, you can see the service experience as the customer sees it. Realize that customers view service as a totality, not an isolated set of activities.
3. Create a tangible representation of service quality. Hertz #1 Club Gold service communicates a premium, value-added bundle of services to business travelers seeking a hassle-free car rental experience.
4. Use teamwork to promote service excellence — service workers who support one another and achieve together can avoid service burnout.
5. Create a culture of service obsession based on key SQ determinants such as professionalism, attitudes/ behaviors, accessibility and flexibility, reliability/ trustworthiness and service recovery.
6. Develop metrics that are specific in nature, such as a 99% on-time delivery rate or an average customer wait time for telephone orders of less than 20 seconds. Benchmark best practices for each service metric employed.
7. Employee selection, job design and training are crucial to building customer satisfaction and SQ. The ability to respond quickly, competently and pleasantly to customers needs to be a priority.
8. Reward quality efforts in marketing. Seek opportunities to reinforce quality behaviors when they occur. Reward employees on the basis of commitment and effort, not just sales outcomes.
9. Think of service as a seamless process, not a series of independent functions. Service quality occurs when the entire service experience is managed effectively and efficiently and the organization is aligned to respond to customer needs whether it’s at the pre-sale, sale or post-sale.
10. Integrate customer information across all sales channels. The information made available to online and offline service representatives should be consistent.
Checklist — How to Improve Service Quality
□ Does your company really listen to its customers? Give a specific example of how good listening improved the service experience.
□ Reliability means performing the promised services dependably and accurately. On a 10-point scale, where 1 is unreliable and 10 is perfectly reliable, rate your company and explain why.
□ How well does your company perform the service basics?”
□ How effectively does your company manage service design — systems, people and the physical environment? Provide an example of how lack of planning in one of these areas resulted in a “fail point” during a customer encounter.
□ Service recovery refers to how effectively companies respond to service failures. Cite an example when a service failure occurred and how it was handled.
□ Teamwork is an important dynamic in sustaining service workers’ motivation. How can you improve teamwork in your organization?
□ Internal service is crucial to service improvement, as customer satisfaction often mirrors employee satisfaction. To what extent does your company assess internal service quality?
This blog post is the 5th in a series extracted from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information, contact Art Weinstein at email@example.com , 954-309-0901, www.artweinstein.com .
Saturday, September 14, 2019
[You can drive your business or be driven out of business. B.C. Forbes]
Does your company suffer from any of the following marketing deficiencies – fuzzy business mission, unclear objectives, information that is not decision oriented, lack of agreement as to segmentation’s real role in the organization, products/services that reflect corporate desires rather than customer needs, unfocused IMC strategy, and/or failure to attack niche markets and customize offerings?
Over the years, many top B2B marketing executives have asked me how to build and implement a true segmentation-driven culture in their organizations. Based on my more than 20 years of experience as a professor, researcher, and consultant, here are a few of my thoughts on how to get the segmentation process in high gear.
1. Create a 1-day segmentation training workshop for the marketing group to generate excitement and stimulate project development. This will lead to a set of specific, market-based strategic initiatives and research opportunities. Bayer Diagnostics, Citrix Systems, Motorola and other companies have implemented such a plan.
2. Begin with 3-5 small, focused and low-cost initiatives to demonstrate success and build enthusiasm. Realize that all segmentation projects may not be a resounding success (good news -- most will be if properly designed and executed). Cordis, a Johnson & Johnson company, benefited from the strategy of hitting many singles rather than going for grand-slam homeruns.
3. Review previous segmentation studies and make sense of the summary reports. Via a meta-analysis methodology, a fresh set of objective eyes can add significant value to good work and extend segmentation reports buried in computer files or file drawers. At one time, Blue Cross Blue Shield of Florida had undertaken 18 segmentation studies with no synthesis, integration or strategic analysis.
4. As Intel learned, segmentation audits with marketing managers, channel members and customers can pinpoint current and potential problems as well as overlooked market opportunities and niches.
5. Successful segmentation means being able to answer these 6 questions -- ? (e.g., find new markets, get better customers, upgrade business relationships, align products to customer desires, create a segmentation model/typology, etc.); ?; ?; ?; ?; and, ?
I leave you with 5 thoughts to share with your management team to get them inspired and on-board to invest in segmentation thinking.
Realize that firms in all industry sectors are discovering the power of strategic segmentation as a marketing tool for attracting and retaining customers in fast changing, globally competitive markets. How about you?
Friday, September 13, 2019
Thursday, September 12, 2019
Wednesday, September 11, 2019
For more than 20 years, we have heard about the benefits, excitement, promise and impact of a digital revolution and a technologically-driven society. Concept albums by iconic rockers such as Radiohead (OK Computer), Rush (2112) and David Bowie (The Rise and Fall of Ziggy Stardust and the Spiders from Mars) sung about the all-encompassing power of technology – for good and evil -- before the new economy was born. And, a half century ago, Rod Serling relayed ironic tech-based themes in his brilliant television series, THE TWILIGHT ZONE (e.g., Time Enough at Last, Third from the Sun, To Serve Man, and so many more spell-binding episodes).
In the 1990s, Internet pioneers such as America Online, Amazon, Cisco Systems, Dell, eBay, E-Trade, Expedia, and Yahoo! dramatically changed how consumers and businesses bought products and services in a 24/7 global market space. A seismic shift in the new economy has taken shape over the past ten years led by the FAANGs -- Facebook, Apple, Amazon, Netflix and Alphabet’s Google. These digital leaders focus on speed, service, selection, sociability and solutions.
What has been the result of this 5-S transformation? Welcome to the Now Economy! Just as a toddler cannot possibly wait for a chocolate chip cookie and absolutely, positively must have it right now -- today’s consumers are equally impatient and demand immediate satisfaction. Hence, the rise of Amazon Dash, Fresh, and Prime; Apple’s iTunes; Couchsurfing; TaskRabbit; ZipCar; and a multitude of other “I gotta have it now!” business models.
Strategic differentiation combined with technology and consumers interest in choice has led to industry disruption. Marriott and Hilton have sure felt the effects of Airbnb in the lodging industry. Today, target marketing means segment-of-one personalization. Mass promotion has evolved into two-way dialogues with consumers and business users. Customer relationships lead to lifetime brand advocates. The new economy has morphed into the Now Economy!
The Now Economy is service dominant. This includes business, consumer, professional, and government services. Knowledge workers and the creative class turbocharge this economic sector. In addition, digital services (the platform economy) and consumer-to-consumer services have surged in the past 5-10 years. Realize that a strong traditional backbone of manufacturing, agri-business, construction, and infrastructure is still a key economic priority in industrialized nations. And, let’s not forget the trade segment (retail and wholesale), as well as the burgeoning e-commerce marketspace and the rise of smart products (e.g., appliances, energy regulation and the internet of things).
The 24/7 Now Economy is always-on and always open. Buyers will no longer accept shopping from 9 a.m. to 9 p.m. daily and noon to 6 p.m. on Sundays. Online shoppers will expect their orders to be delivered immediately, within the next two hours, or overnight (not in 5-10 business days). Bricks-and-clicks business models allow consumers to pick up their purchases at a neighborhood store. Sub-par customer service will not be tolerated. Buyers expect to be wowed with amazing experiences and will not settle for yesterday’s ordinary store visits.
Here's an example of the Now Economy in action.
I recently dropped my dogs off at a neighborhood pet spa for one-hour grooming services. I visit the Target Superstore down the street to grab a cup of dark roast in the mini Starbucks. The café is sparsely populated but employees (mostly millennials) drop by to consume premium coffee and pricy pastries. Occasional shoppers, largely female, young and old of all ethnicities, stop by to get their caffeine fixes, too. The fresh produce section in the grocery department is right across from me, part of the one-stop shopping experience. A hundred or so yards away is the embedded CVS Pharmacy -- once a formidable competitor and now a strategic partner. Paralleling the unstoppable movement towards online buying, I notice very few shoppers in this cavernous establishment. Is it any wonder that H.H. Gregg, Sears, Macy’s and dozens of other retail leaders have closed stores or went out of business? (The death of retail is a very real threat in the industry). I get a text message from the groomer – it’s time to pick up Maya and Payton.
The Now Economy is also about sharing and access. Users are bypassing traditional market structures and business channels to work directly with other consumers to solve individual problems – think about an Uber instead of a taxi. The redefinition of buyer behavior has spawned a vibrant consumer-to-consumer sector and impacts the future of work.
While most of us would love to be like Tim Ferriss, rich and only work four hours a week, such incredible wealth is unlikely. In the Now Economy, many individuals are turning to multiple entrepreneurial ventures to pay the bills to survive or thrive. Just as struggling musicians work hard and hope for that big break, many millennials (and others) are juggling multiple gigs such as driving for Lyft, creating apps, writing blogs, posting YouTube videos and starting innovative businesses as they seek the “big deal” and navigate their individual paths to success.
1. What impact does the Now Economy have on your personal life?
2. What impact does the Now Economy have on your professional life?
3. Is your company truly creating superior value in the Now Economy?
If not, what strategic changes are called for?
4. Identify 1-2 other companies that may ascend as a potential rival(s) to the FAANG giants.
This blog post is the 1st in a series extracted from Superior Customer Value – Finding and Keeping Customers in the Now Economy, 4th Ed. (2019, Routledge Publishing/ Taylor & Francis). For further information, contact Art Weinstein at firstname.lastname@example.org , 954-309-0901, www.artweinstein.com .
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