Don’t Segment Markets – “Hire” the Product

The conventional wisdom is to segment markets by such things as demographics, psychographics, geographics, benefit/usage, buyer behavior dynamics and so forth. Now Harvard Prof. Clayton Christensen and a team of academic and real world marketing practitioners has come up with a novel approach focused on “hiring” the product to perform a specific task. They call this new paradigm — segmenting by job.

The new theory is crystallized in an article called “Finding the Right Job for Your Product” and is published in the Spring 2007 MIT SLOAN MANAGEMENT REVIEW. Christensen’s co-authors include Scott B. Anthony, president of Watertown (MA)-based Innosight LLC, an innovation consulting company; Gerald Berstell, a Chicago-based customer-case researcher who owns a full-service market research firm focused on revitalizing declining established products and re-launching failed new products, and Denise Nitterhouse, an associate professor of accountancy and management information systems at Chicago’s DePaul University.

Christensen and his team write that product and customer characteristics are “poor indicators of customer behavior, because from the customer’s perspective, that is not how the markets are structured.” They write that a purchase decision doesn’t necessarily conform to “average” customer characteristics. “Rather, customers just find themselves needing to get jobs done…and “hire” products or services to do that job.”

“Most of the ‘home runs’ of marketing history were hit by marketers who saw the world this way,” they write. “The ‘strike-outs’ of marketing history, by contrast, generally have been a result of focusing on developing products with better features and functions or of attempting to decipher what the average customer in the demographic wants.”

Milkshake Example

They use, as an example, an observable analysis of people who buy milkshakes at fast-food restaurants. Research showed that an inordinate number of shakes were sold in the early morning. Why? Customer consumed them in their cars on the way to work. The reason: these customers had long, boring commutes. Although they weren’t interested in breakfast, they wanted to buy something that would stave off their 10 a.m. hunger pangs. Moreover, they found that milkshakes did that job better than gooey bagels or donuts. They were also interested in something that would last 20 minutes.

Once the marketers understood the “job,” it was easy to make improvements — like make the shake even thicker and swirl in little fruit chunks. Going further, they could dispense the shakes from machines in the front of the fast-food store using swipe cards. This saves the user the time of waiting in line.

“Understanding the job and improving the product on dimensions of experience so that it does the job better would cause the company’s milkshakes to gain share against the real competition — not just competing chains’ milkshakes, but donuts, bagels, bananas and boredom,” they write. “This would grow the category.”

More Benefits of Segmenting by Job

Another benefit of segmenting by job, according to the Christensen group, is that it helps companies escape the traditional “positioning paradigm.” They write: “The problem with the positioning paradigm is that even when marketers find open spaces into which unique products can be slotted, customers often don’t value the differentiation and competitors find it easy to copy….When a company begins to view market structure by job, however, it can break away from the traditional treadmill of positioning and differentiate itself on the dimensions of performance that are salient to jobs that customers need to get done.”

Another aspect of their theory is that sometimes the job a customer needs done is “aspirational.” They define this as “the need to feel a certain way — perhaps macho, pampered or prestigious — arises in many of our lives on occasion. In such situations it is often the brand itself more than the functional dimensions of the product, that does the job. When we find ourselves needing to do one of these jobs, we can hire a branded product — Gucci, Louis Vuitton, Virgin and so on — the very purpose of which is to provide such experiences.”

Finding the Job

In trying to figure the job that needs to be done, the authors again shun the traditional process of deciphering data bases. Instead they advocate customer observation. “It requires watching, participating, writing and thinking. It entails knowing where to look, what to look for, how to look for it and how to interpret what you find.”

The essence of the theory is “The problem with focusing on customer needs is that a customer needs different things at different times. The job is a more stable focus because it exists independently from the customer.”