Archive for the ‘Segmentation’ Category
Small companies, namely those employing fewer than 50 people, account for over 99% of all businesses in any country. They are run by people who know their trade. Most of them have been in existence for more than 10 years compared to the job hoppers in large companies who switch positions like musical chairs. The owners of small businesses have seen the good times and bad times and they know how to deal with them.
Small businesses are chameleons and able to adjust quickly to change. By their very nature they are optimistic although typically not risk takers. Once their business is up and running, the proprietor will look after it like a baby.
Small businesses rent properties, buy utilities, spend their money at local wholesalers, and require the services of lawyers and accountants. People selling to a small business do not need a purchase order number. The decision-maker who writes the check is very often the person that picks up the phone. Things happen quickly and easily in small businesses compared to larger organizations.
Small businesses tend to drive innovation. Big companies innovate processes rather than products. In a swathing generalization: Large companies can be both slow at adapting and very defensive of their strong positions, whereas small businesses have a greater ability to be nimble and have, in effect, almost nothing to lose by trying out new ideas.
Governments and large corporates do not understand small businesses. Their culture is completely different. Big businesses speak and sell to big customers and do not comprehend the culture and language of small businesses. They are missing a huge opportunity.
Understanding small businesses is the starting point of doing business with them. It is not enough to think about their trade and activity. Knowing whether a company supplies accounting services or makes X-ray machines is not particularly helpful. It is more useful to know if the company has plans for growth or cash flow problems, or if it is traditional or modern in its business methods. This type of segmentation will ensure that communications aimed at small businesses resonate.
To do business with small companies, it is necessary to have a deep understanding of them in terms of their attitudes and what drives them, how they behave and most crucially what their needs are. Small companies are the Cinderellas of the business world; finding a glass slipper to fit them would make them excellent partners.
Contact Caroline Harrison: firstname.lastname@example.org
Emma Flood’s latest Business Surgery looks at differing strategies for success and how market research can play a part
I recently read an article on mckinseyquarterly.com which discussed the different strategies of two global companies. One of the companies followed the same investment pattern of allocating capital to each business unit every year, whilst the other evaluated the performance and potential of each business unit, and shared budgets accordingly…
Although the author is discussing the strategy based on internal factors, the strategies of these two companies immediately took my mind to thinking about segmentation research, and the value this has in both assigning budgets and informing strategy. Segmentation research is all about maximising opportunities, through identifying and evaluating the segments of the market which offer the most potential (and the most profit) to the business. Although the McKinsey article focused on the internal aspects of the business (i.e. the SBUs), there are interesting parallels between the two companies mentioned, and that of our approach to segmentation…
At B2B International, we consider another key value of segmentation research is to inform or create a strategy which differentiates your business in the eyes of customers; therefore giving your business a competitive advantage. When we think of using segmentation research to differentiate our business, we are striving towards a needs-based segmentation.
A segmentation could be based on firmographics (i.e. company size, geographic location, etc), behaviour (i.e. frequency of purchase, products/services purchased, channel), or the third (and most challenging) option, a needs-based segmentation. The needs-based segmentation understands the precise needs by customer group i.e. the need to choose suppliers that offer quality products, suppliers that are committed to the market, and suppliers that can be trusted, etc. Understanding the needs of the market, and segmenting by these, provides knowledge that only your business has access to and, as such, it is not as easily copied as firmographic- or behaviour-based segmentations. Using a needs-based segmentation can therefore provide a differential, and competitive advantage to your business.
Drawing on the point in the second excerpt above, that the vast majority of companies behave in the way that Company A behaves, it is easy to see why using a strategy based on evaluation, rather than tradition, allows the business to better invest its capital, and reaps the benefits of business growth and profit.
To read more about how B2B International can help your business using segmentation research, please visit: http://www.b2binternational.com/research-and-intelligence/segmentation/
Marc Brokenbrow’s latest Business Surgery takes a look the possible reasons behind the recent demise of high street retailer Game.
I would never describe shopping as a hobby of mine or something that I particularly enjoy. I don’t like dealing with the crowds, making decisions on what to buy, or the difficulty of knowing whether I am getting value for money. In spite of all this, I still have to shop and one thing that has certainly made my life a lot easier (and more enjoyable) is internet shopping.
Now I am not writing this blog to tell you how wondrous internet shopping is (I’m a little late for that), but how important it is to engage with your customers and to facilitate their needs – and the importance of doing this continuously. You can’t just sit back and enjoy the good years because troubles can be lurking around the corner.
One prominent and present example of this is the demise of the well known UK high street giant Game. They were dominating the video games market and only 5 years ago made the acquisition of Gamestation, their greatest rival at the time. Although this was a very successful period for Game, they were slow to compete against rival internet companies such as play.com and eBay, who were taking a share of their sales in the online market. This definitely had a detrimental effect to Game and alongside a number of other reasons has lead to them going into administration.
In my opinion, I think the fundamental flaw for Game was not keeping up with its customers in terms of their needs and shopping habits. If they had been more customer-focused they may have chosen to concentrate their efforts on online sales channels, or even considered an acquisition of a web-based rival instead.
So was market research the solution for Game?
I think the answer is yes and the key to Game remaining customer-focused could well have been achieved by carrying out a customer needs based assessment. This would have allowed Game to keep in touch with their customers and to find out what they currently wanted and what they required in the future. An Online Reportal facility would have also been a very useful tool for Game and is something that our clients are increasingly requesting. It offers real-time results from a study and can aid the client by targeting customers who are deterred by the current service they are getting. The Online Reportal could have been crucial to Game’s survival. It would have shown them how people’s shopping habits were changing and, more importantly, it would have shown them at that precise moment, giving them time to implement change.
If you would like to know more about what we can do for you when it comes to a customer needs based assessment or would like more information on the Online Reportal facility available during a project, please feel free to contact us here at B2B International.
It never ceases to amaze how many times I discover sellers within client companies, who misunderstand the signals they get from their customers and – as a consequence – over-estimate the number of price-buying customers they have. My most famous case occurred ten years ago. I kicked off the first day of a three-day marketing workshop to be confronted by one seller: “Before we waste three days of our valuable time, could you just explain why I should spend three days in this workshop when 80% of my customers are Price Buyers?” – A not atypical challenge.
I was very interested by this claim, as I had personally never come across any market situation where there were so many Price Buyers and I had worked in a number of undifferentiated (some would say “commodity”) product-markets.
On that occasion ten years ago, I managed to convince my challenger to stay with the workshop. By the end of the three days he acknowledged and agreed fully that less than 30% of his customers were actually Price Buyers. The end result put several millions of Euros on to client’s bottom line that same year and sustained into the subsequent years.
This case highlights a very common issue and challenge for companies in many B2B markets and especially in the chemicals and plastics industry. Just imagine what that means to margins if we can misinterpret the needs of up to 50% of our customers!
So what are the causes of this widespread phenomenon and what can we do about it?
1. Buyers defences are high
Situation: Buyers are often between the rock and the hard place, under pressure to reduce raw material costs, whilst at the same time ensuring a continuous and timely supply of good quality products to the plant. That pressure is often manifested in a demand for better prices.
Remedy: Sellers need to understand how difficult it is for a buyer to be a GENUINE Price Buyer – it is not easy. To be a Price Buyer the customer must have the following conditions in place:
If the customer cannot demonstrate these conditions, they cannot be a Price Buyer…..and, by the way, any customer that comes back to the seller with the offer to win or keep the business if they match the price of an alternative supplier is NOT a Price Buyer. This behaviour is a clear indication of a preference to do business with you – you must discover the basis of that preference.
2. Sellers think they are selling commodities
Situation: The word commodity carries with it many connotations, not least that there is no value in marketing or customer segmentation; it’s all about getting the price right, as customers do not value anything else.
Remedy: Sellers should think of these as UNDIFFERENTIATED PRODUCTS, which are just one part of the TOTAL OFFERING; this means that there may be still real possibilities to differentiate the offering on service levels (e.g. reliability or responsiveness) or on intangibles (e.g. reputation or relationship).
3. There is no meaningful and differentiating customer segmentation in place
Situation: Sellers have no reference points or supporting models to help them to distinguish different buying behaviours and different customer needs.
Remedy: Sellers need to be able to recognize the differences in need and behaviour of their customers. It can help to provide them with a customer segmentation model based on needs and values of different customer groups, encouraging them to seek out and recognize the differences and to gear the offering to fulfil the specific customer needs; for example:
4. There are no clearly defined customer value propositions
Situation: The seller has no clearly defined value propositions to offer to the customer, based on the segment to which they belong.
Remedy: Marketing needs to provide sellers with well-defined and clearly differentiated value propositions, providing them with the ammunition to beat the competition. Sellers fire the guns, marketers provide the bullets.
Each of the above segments demands a clearly different and differentiated value proposition with Product – Service – Intangibles and the 4R’s of sustainable differentiation
5. Sellers typically approach a customer with one offer rather than offering choice
Situation: Sellers are ill-equipped to offer choices to the customer, either because the marketers have given them no alternatives or they are not empowered nor authorised to develop their own alternatives and therefore make a single offer (“take it or leave it”).
Remedy: Customers need and value CHOICE. If you do not offer choice, they must seek alternatives from other suppliers in order to be able to run the trade-off process, which is typically the core of any buying decision-making process. Marketers must provide the sellers with a palette of offerings tailored to the needs of customers in specific segments and reflecting the importance and value of the customer to the supplier, so that sellers can offer their customer a genuine choice (“which of these offers best meets your needs at the price you are willing to pay?”).
Phil Allen is CEO and Value Creator at Marketing and Sales Excellence Practice, GEMS International GmbH.
For more information on how B2B International can help your business segment their customer base and more closely satisfy their needs and make a profit along the way then visit – Segmentation Research
A light-hearted discussion about cats and dogs this week led Simi Dhawan to question what drives behaviour and to what extent we should believe the statistics we are told.
Would you say that you are a dog person or a cat person? Common belief has it (or what I’m possibly more inclined to refer to as “semi-pseudo social philosophy”) that an individual either prefers one or the other – rarely both, as reflected in their personality.
It was a recent conversation with work colleagues over the weekend that led to this issue being raised wherein it was concluded that I was the latter following my inarguable mini-obsession with a colleague’s pet cats…….or rather, giant cats of the Maine Coon kind. For those of you unfamiliar with this breed, a short synopsis is that they originated in Maine, North America and are renowned for growing larger in size than your average domestic cat, characterised also by longer coats and a bushier tail. I include an exemplary picture below:
In a frenzied quest to curb my curiosity, I ran a quick internet search to see if I could find out whether my colleagues were right about my social disposition, carrying out a short “Pet Personality” quiz online at the following location: http://quiz.ivillage.com/home/tests/catdog.htm. After some rather banal questioning which commenced by asking me about my preference for a “Perfect Friday Night” (of which the possible tick box choices differentiated the socialites who enjoy “a wild night out” from the less extreme independent impartial persons who “prefer a quiet night in with a book” (original, eh?), the quiz concluded that I was indeed, a “Cat Person”, with the following personality traits:
Crumbs. My colleagues were right. However, having the typical Cat Personality trait of being intrigued by world mysteries (I would argue true in specific cases!), I decided that I wanted to dig deeper into how public opinions are formulated.
As a starting point (and whilst continuing on with this captivating “Cat” theme), I recall a colleague at the aforementioned gathering discussing the popular TV series “8 Out Of 10 Cats”. A majority will have probably heard of this, but for those who haven’t, the programme is centred on quizzing teams of celebrity respondents about various opinion poll findings and statistics. The title of the show was famously derived from a Whiskas Cat Food campaign which claimed that 8 Out Of 10 Cats prefer Whiskas. Whilst this campaign was one of the first to adopt this style – triggering others to do the same, the inevitable question “overlooked” is ‘What on Earth are these cats / cat owners comparing Whiskas to and saying they prefer it over?’ Is it another cat food product? Is it a multitude of cat food products? Is it something other than cat food such as Heinz Baked Beans (in which case, no contest really!)? What exactly is it?
It is a common underpin of opinion polls used in advertising to state a loose statistic completely out of context, which excludes the comparative element that would allow it to make logical sense! We shouldn’t have to wait too long in an evening before any such campaign graces (or plagues!) our television screens. Yesterday evening, for example, I was informed that 9 out of 10 people with sensitive teeth do nothing about it (thanks Sensodyne Toothpaste) and that 9 out of 10 women would recommend the new “falsies” mascara range to a friend (thanks Maybelline). But in what context has this data been derived? Is this plausible data which has virtuously reached a conclusion from a fair and objective series of questions whereby respondents were introduced to a number of competitor products, or are we, the consumer, being led into a false sense of security by a set of makeshift claims? In other words, are these findings drawn from designing a study that is biased from the start, intending to flog us a “credible” product backed up by statistics?
In the case of our dog or cat person phenomenon, we could use our logic and life experience to assume that this has been clearly born as a by-product of social situations, based on the following premises:
Statistics and previous studies tell us that the majority of people are dog persons and not cat persons. I have to say that following a quick chat amongst my colleagues, this point was supported when only 2 out of 6 of us preferred our feline friends over our canine comrades. For more “concrete” evidence, I decided to review an epidemiological study conducted by the Department Of Veterinary Clinical Science in the University Of Liverpool (2007), which looked at 1,278 households in Cheshire (my local area!) to examine the different profiles of households who own dogs compared to those who don’t. The study indeed supported that dogs are the most popular household pet where 24% of those approached were confirmed as dog-owning out of a total of 52% who owned any type of pet (whilst cats came in at a close second with 22%). But did this yet tell me anything about their choices to own either one or the other? Could I yet attribute any of this to a particular personality trait?
Helping to answer this question, the study continued by asking these households what their main reason was for owning a dog, whereby 68% reported that it was for companionship (makes sense – dogs love to remain in the company of their owners versus the ever-wandering cat), whilst 42% reported that they’d always had a dog. The latter statistic brought into question then whether it is actually environmental factors which shape our decisions i.e. nurture, versus an inherent personality disposition i.e. nature. At this stage, my mind boggled more than before and so I eagerly read on……
The report then revealed a staggering statistic; 62% of households who did not own a dog when interviewed had actually owned one at some point previously in their lives! So does being raised with a dog make you less likely to own one? Actually, no. It would appear that social situations change over the lifespan, which is why certain households are more likely to own a dog. To back this up, some of the reasons people stated for not owning a dog included “working or being out all day” (26%) or “not having enough time for a dog” (15%), where evidently a large factor is lifestyle and the practicalities of looking after a pet which demands time rather than a dislike for dogs per se (which incidentally, was the reason reported by only a small 10% of households!)
By my reckoning, public opinions do appear to be rooted in everyday observations and conversations – very much like the one which instigated my Thursday Night Insight this week. However, I would argue that we should always be cautious about over-inflating the value we might attach to a standalone statistic without also taking into account some surrounding facts about the topic or area of interest itself. In today’s example, whilst labelling a person as a “Cat Personality” or a “Dog Personality” helps us to more easily (and mentally) pigeon-hole otherwise complex individuals into a certain segment of character traits, we should be able to accept that it is situations and environmental influences which play a significant part in driving behaviours…and that these can potentially change over time. This philosophy, of course, is one which stands true in all B2B markets where, similarly, you are certainly always better placed to make decisions after asking a sample of your target market the right questions, rather than simply second-guessing their thoughts, feelings and opinions based on secondary, or even dated research statistics.
In short, a poll conducted today, will not always stand true tomorrow……..and as for The Truth About Cats and Dogs……..I’d argue that your best bet is to ask the owners (the most complex breed of all!) themselves.