Many students in b-school find it very difficult to clearly understand the concepts of segmentation, targeting and positioning. Segmentation is easy, most grasp it immediately. After all, segmentation is simply slotting things together based on certain shared characteristics. Take Airbnb.com for example.
It’s users can be divided into two primary segments:
- those who are seeking a place to stay,
- those who have a place they want to rent out.
So that’s segmentation for you; simple to understand and visualize. What trips most people though, is targeting and positioning. I don’t know why exactly, but it does. Therefore, dear reader, this is my attempt to explain the entire STP concept using a pizza. Mind you, it isn’t a robust analogy and will fall apart with the slightest of prodding, but it’s good for a primer.
Assuming the pizza is your customer base you segment it into 4 equal pieces, or 8 equal pieces, or 6 equal pieces. However, you could also segment it in such a way that each piece received the different collections of cheese.
Just like pizza, customers are segmented in many ways which are specific to businesses and industries.
After you’ve got your segments neatly cut up, you decide which piece to eat first. It could be the one with all the olives, or maybe you’re scared that’ll trigger your allergic reaction so you pick the piece with all the meat. This is targeting. In the real world, it’s about choosing which customer segment you want to serve first. Larger organizations can afford to target multiple segments at the same time but startups are usually best off targeting one segment.
Choosing which segment to target first is itself a decision that requires a lot of homework. Startups seeking funding are usually asked about the “market size and potential”. This essentially translates to
Number of customers for your solution * Amount they’re willing to spend on your solution
Market size and potential are one way to choose your target market. Some other reasons are found here.
Positioning is how you (or your business) is going to come across to the customer segment. So in our analogy if the pizza slice is the customer segment you have chosen to eat (targeted), then positioning is how you eat it.
You could be the person who eats it with a fork, so your customer base thinks of you as well-mannered and cultured. You could be the guy who eats it using his fingers, with a beer in the other hand, so your customer segment thinks of you as casual and chill. Essentially, based on your communication (in any form), you come across as something/someone to the customer, and that my dear reader, is called positioning.
This post was in the works for a long long time, but I only completed it after reading my friend Jayant Rana’s post “Segmentation, Targeting & Positioning in the Real World“.
Your comments, as always, are solicited.
Just came across this and it pissed me off so bad I had to make a quick image out of this. If any of you are baiting and switching your visitors, please stop doing it because it’s one massive mindfuck.
Was reading an article on Forbes.com when something interesting caught my eye.
When I clicked through to the Most Popular hoping to read about the billionaire dude/family that owns Red Bull, it simply wasn’t there. Massive mindfuck resulted in this quick post.
While a Bait and Switch might work in real-life retail, it doesn’t in the online world. In the former, when a customer walks in to the store expecting a certain discount or offer, he’s comes after making an investment of time and effort to get dressed, get into the car, seek out your store, finding a spot in congested parking lots and finally, walk in. This investment is a deterrent that makes him stay and buy something else.
Online, there’s no effort. In fact, when you try to pull crap like that, there’s an incentive for people to vent; some in the comments, some through posts like this and some by inciting Anonymous to DDOS the crap out of your servers.
Once upon a time I wanted to get in to MICA. After receiving an interview call, I decided to look up some alumni. Out of the many I sent friend requests to, only Siddharth Soni replied. We’ve been friends ever since.
Siddharth recently wrote a blog post asking “How much should customer service guys be paid?“. In the post, Sid says that marketing and sales professionals attract customers to a business but it is the customer service people who actually “fulfill the promise” and therefore, they deserve to be paid equally well. Here, he’s not talking of Customer Service as the guys at the call centre, but anyone engaged in the “delivery of the promise”. This could mean the lady at the front desk, the Relationship Manager at the bank or even the aircraft pilot.
My answer to “How much should a customer service person be paid?” is, “it depends“. What does it depend on? How integral is the Customer Service to the Customer Value Proposition.
Let me explain. You go to a small family owned restaurant close to your place for a quick meal. It’s a slow Tuesday afternoon and the owner says that no waiters are available, so it’s “self service”. Will you be disappointed and expect to pay less? I don’t think so. It’s more like “Fine, I’ll get my own grub from the counter, no issues”.
I would, because the Hooters Girls are an integral part of the experience at Hooters restaurant. In fact, for them, I’m ready to pay a premium price on the food. Why is this so? Because the value being promised by Hooters as stated in their Mission Statement is
We are committed to providing an environment of employee growth and development so that we can provide every guest a unique, entertaining dining experience in a fun and casual atmosphere delivered by attractive, vivacious Hooters Girls while making positive contributions to the communities in which we live.
As you can see, no Hooters Girls = “No complete value” as promised by them. My point is this, if the Customer Service (CS) being provided is an integral or a large part of the promised value, then the CS professionals will be paid relatively well. For example – in Management Consulting, the greatest amount of value is provided by consultants so they’re very highly paid. Take banks, where the highest paid professionals are the investment bankers that give awesome returns to investors.
Let’s get back to Siddharth.
Siddharth runs Mississippi Earrings, an online/offline store dedicated to earrings. As you’ll notice, earrings are products while all my previous examples have been of service based businesses. How much value then, can CS offer when customers are walking in for a product?
To answer this, I would like to draw your attention, dear reader, to Apple’s Genius Bars. A Genius Bar is essentially a tech support centre inside every Apple Retail store where highly trained “Geniuses” help customers with any problems they might have. Quoting this Wall Street Journal article, stores have sales associates that are taught an unusual sales philosophy: not to sell, but rather to help customers solve problems.
“Your job is to understand all of your customers’ needs—some of which they may not even realize they have,” one training manual says
And the result: Customer Growth Partners says that Best Buy makes about 1% profit margin (before taxes and excluding online sales), while Needham & Co. reports that Apple makes 26.9% profit margin from its stores.
Can Siddharth do the same with Customer Service at Mississippi Earrings? I think he can. In my opinion, the two most important steps are
- Train his staff extensively on the products available, the latest fashions, the different segments of customers who walk in and make sure they’re super helpful when it comes to giving advice about selecting earrings based on event, dress, personality, budget, use, etc.
- Communicate the availability of this extra value to the customers.
At the end of it all, it isn’t about Customer Service, Marketing or Sales or whatever. It’s about who’s making the paying customer walk-in. Marketing and Sales guys do that since it’s their Job Description. A just-another-CS person doesn’t do that. An exceptional CS person becomes a reason for customers to walk back in, just to hear his opinion or tap upon his knowledge.
Dear reader, if you feel this isn’t correct or have examples that go against what’s written in this post, please do put that down in the comments. I’d love to have a conversation with you on the same.
A few months ago, I interviewed with Flipkart for a job. They threw me out after the second (and final) round of interviews.
I was really hoping to get through, and to shore up my candidature I decided to create a show-and-tell before the d-day. It was some work/project and even a small little speech that I had done/gave-earlier which clearly (or so I thought) demonstrated that I neatly fit in with the skill-set required and their culture.
A day before that, I ran my “show-and-tell” through with a friend, who said “Dude, my dad has interviewed thousands of candidates for the Indian Armed Forces and he once told me: more than trying to sell yourself, just answer the interviewer’s questions well and you’ll get through”.
I ignored his advice and went in with guns blazing. Asked the interviewer if I could show him the stuff as soon as I stepped in to the room. He agreed and patiently listened to me go on and on for about 5 minutes. Then he asked a few questions and finally went through my CV.
I was through to the second round. Emboldened, I decide on an encore. Again, went in firing from the hips and again, the person on the other side of the table listened patiently. He asked a lot of questions, which I thought I answered well. I stepped out happy and expecting a job offer.
That’s where the cute bit ends. They rejected me and I received feedback that “he seemed to be desperate”.
After the initial bouts of depression, I had my usual tonic of a drunken night out and lots of blabbering to uninterested friends.
When my head cleared, I thought about it. For your benefit dear reader (and as a reminder to future ‘me’), here’s what I think I did wrong:
Now I’m sure you’ll realize that this approach could have worked in some other situation, however, at the end of the day the interviewer was looking for a solution to a problem he had. His organization requires a role filled and he was tasked with finding the right person. Questions about the same are swirling in his mind when I walk in and start making a sales pitch that nowhere addressed the issues he was facing.
Edit on 11th April, 2012: After seeing the comments on http://therodinhoods.com/profiles/blogs/why-flipkart-rejected-me-after-the-job-interview, have decided to explain exactly what happened.
The profile on offer was Business Development. That is legacy designation (because initially, all Flipkart work meant Biz Dev) for Category Managers of various categories like Books, Computers, Cameras, Gaming, etc. I went in with my laptop and started off by showing the following
- Sales – explained how we raised angel funding for our second startup and the role I played
- UI Design – showed some of the design work I’d done for website, college mags and events
- Culture: Customer Focus/Obsession (Flipkart is crazy about this, and I agree with them) – a blog post written long ago where I exhort that Understanding Consumer Behaviour should be the most important of MBA teachings
- Culture: Teamwork – showed a video recording of a speech I gave after our team won a college sports tourney. In the recording, I repeatedly talk about teamwork and how as a cohesive unit we beat much stronger teams who fell in disarray.
Then I gave him three business ideas that Flipkart might be able to implement. This was because I still believe that one is supposed to provide value; be it to the customer, the employer or whoever is paying you cash. I thought I’d display that I came prepared with three things that might work.
- Idea One: Using FK’s customer service division to take feedback from customers by outbound calling. Suppose Nokia launches a new phone (let’s call it E100) and it knows that E100 sales on FK are considerable, so Nokia pays Flipkart to have its Customer Service Execs call people who’ve bought an E100 from FK after a month or so and take feedback. In it’s essence, it’s market research after a product is out in the market
- Idea Two: Self publishing of books by authors. See details on this Techcrunch article by James Altucher – http://techcrunch.com/2012/01/28/why-every-entrepreneur-should-self-publish-a-book/
- Idea Three: Ok, I forgot this one.
What did the interviewer say after all this?
Ok fine Siddharth, now let’s talk about e-commerce in India.
That right there was when I realized I had answered none of the questions in his mind. And this was reinforced when after discussing e-commerce in-depth, he switched to “supply chain”.
You see, dear reader, he didn’t give a damn about me knowing web dev, ui design or any of the other yada yada I was telling him about. He has far better people already handling those jobs. He wanted someone who understood online sales, e-commerce and “supply chain”, the primary differentiator through which Flipkart provides its customers the service that has made it famous.
Once again, we drill down to the basics here: Two ears and one mouth. I should have listened first and then spoken :-)
So here it is, the 2 minute guide to having an awesome professional and personal life. Simple stuff that I’ve come across on various blogs and websites. Almost all of it is research backed but I don’t remember the references. Will link to them as and when.
1) Professional – You know what’s the primary difference between an average professional and an exceptional one? Well, it ain’t the usual suspects of intelligence, IQ, EQ or networking skills. It is “taking initiatives that are aligned to organizational goals”. That right there is the one most important factor that distinguishes great performers from mediocre ones.
2) Marriage – Researchers don’t know what’s the best form of marriage (monogamy, polygamy, polyandry, etc) but what they do know is that the most stable, happy marriages are based on two correlated things: trust and honesty.
3) Happiness – Remember this and strive towards recreating this situation as many times as possible: happiness is being with people you love and who love you in return.
4) Love – Is basically your willingness to sacrifice stuff for someone else. Eg. sacrificing your time for that person, money, certain goals of yours and in extreme cases, even your life. The more two people are willing to sacrifice for each other (and know it), the happier and stronger they’ll feel when together.
5) Objects vs Experiences – Don’t buy consumer goods for the object itself, but buy stuff for the experiences they provide. To explain, don’t buy a tv because it’s an awesome tv with super blasting-surround-whirl-around sound, buy it because it’ll provide you moments with your friends/partner/kids/parents that you’ll later remember and cherish.
6) Being good at a certain task or activity – The key to being good at anything is practice. As much as you can. In fact, there’s already an accepted number of hours you need to practice something to become a world class expert, and that’s 10,000 hours.
About a fortnight ago, around 14 of us went to a bar for drinks and dinner. Most were about to leave Kolkata in a day or two and this was one of those “we might never meet again” things.
At the end of the table where I was seated, the other constituents of the party were as below
And this is what happened: the three vegetarians started to decide what to eat. They went at it for a full 15 minutes while the rest of us waited for their group discussion to get over. Finally, they settled on “Mix-Veg and Dal Fry with Roti”. It was only then that the waiter, who was hovering on the sidelines, took the order and consequently, we had to wait about 21 minutes before we got our first round of drinks. The delay was a buzzkill but fine, there were lessons rife in this situation.
What I realized was that in an attempt to take into account the tastes of various different customers, they finally settled on something that had small bits of everything but didn’t fully target anyone (Mix Veg) and since they were trying to keep everyone’s tastes in mind, they did not decide on different stuff that was enjoyed individually, but had stepped down to something that was acceptable to all. It wasn’t about catering to preferences, but simply, meeting requirements.
Taking this to a business situation, it is of utmost importance to understand your target market segments completely and create products that cater to their specific tastes and usage. Sometimes it can be overdone, but I’d still err on the side of over-tailoring instead of over-generalizing.
When it comes to startups, many try to make products that are awesomely complete, which is where they make their first mistake. The better thing to do in most cases is to make a minimum viable product and then keep a short feedback loop with customers, which should guide further product development. What I am suggesting is the release-early-release-often model, for which a huge case already exists. Here’s a good post in support of the same.
In my 25 years on our beautiful planet, whenever I have witnessed elections & politics in educational institutions, I’ve seen puppets come up. Interestingly, I’ve usually seen their downfall too.
Everything said and done, don’t ever be a puppet. It is one situation where you are almost certain to lose respect and credibility with no way of extricating yourself unscathed. Some of the reasons are:
- In the minds of your peers and the voters, there will forever be doubt that you’re pushing someone else’s agenda and not taking decisions in the best interests of those you lead. Therefore, they stop trusting you.
- There’s the thought in everyone’s mind that you’re not the best person for the job. If you had been, you should have won fair and square. This means your abilities are suspect before you’ve even started.
- The group that has put you up will want its pound-of-flesh. Which means you’re actually constrained in how you work.
- In a democratic setup, if there was a way to put you up, there almost certainly is a way to bring you down. The people who put you up will always use this as a way to control you.
- Everyone makes mistakes. Yours will just be reason for people to remind you of how you got there.
- And if you ever screw up royally, you’re alone. The peers will almost certainly fuck you, but most importantly, the person(s) who put you up will discard you like a used piece of toilet paper. Best of luck when that happens.
All in all, don’t ever be one. Rise on capabilities and not political maneuvering.