If you're nudging and nurdling through this economic debacle, like the rest of us, chances are you’re going to want to step back at some point and have a cheeky look at your strategy.
And if you do decide to check up on your strategy, the best place to start is your segmentation because it's the basic way you can make choices about markets, branding, pricing - you name it.
Kipling might have some ideas.
Rudyard Kipling wrote The Jungle Book - the tale of Mowgli (the man-cub) and his adventures in the Indian jungle. Now, he was also kind of a colonial British India chap, so I suspect he might be on the wrong side of the zeitgeist, along with Winston - but I digress.
A few things may have changed for different segments in your market.
Unsurprisingly for the moment, most industries are seeing segments shifting around a bit. As a simple example: in the bike market, e-bike sales are growing strongly because the commuter segment wants alternative ways to get around the city. And more on the downside, in my business most of our enterprise corporate strategy work is done in teams via group facilitation - and that segment is temporarily unavailable.
Could a look at your market segmentation be a worthwhile exercise for you?
If you answer "No" to any of these questions, perhaps a little inspiration from Rudyard could be useful.
Can you describe your industry and market to someone? (don’t laugh - this is not as easy as it sounds!) (Yes/No)
Do you use a current segmentation model or map? (Could you jot a map of your market on a napkin to explain it to a new sales rep?) (Yes/No)
Do you think it is fairly useful? (Is it based on customer research or is it just a guess? Either way, does it help explain how things are?) (Yes/No)
Does it help you clarify your options and help you discuss, evaluate and make choices? (Yes/No)
The last point, point 4, is the big one. Your segmentation has to help you make choices.
Which is where the metaphor of a map is helpful and I will bring in Rudyard Kipling.
Jungle Book segmentation - where COULD you go?
If you're in the jungle, maps are helpful because they show you your options and let you make some decisions about where you are trying to go.
Here’s a map of Mowgli’s territory from an old version of The Jungle Book (I added the letters and arrows).
Above: The Jungle Book map gives Mowgli some options (segments) to choose from
Same with good market segmentation. It will help you work out where you are. And it will help you choose where you want to go. Again, the important word here being, “choose” because all of this is really about making choices to help you succeed.
Look at the Jungle Book map again and imagine you are Mowgli.
If you started at point (A), where are some places you could choose to go?
You could go up the Hills (B), or you might think about going down the river to the Pools (C), or off to the Jungle (D). Or perhaps you might be quite happy staying right where you are!
Obviously these are quite distinctive options. And if you are Mowgli, some might be a big mistake while others might look attractive.
Above: Mowgli, de Beque (1924)
It's the same with your market segmentation and the strategy you develop from it.
Jungle Book choices - where SHOULD you go?
Segmentation is external to your firm - it is about where you could compete. But in the end, you still have to look internally as well to see what's attractive for you - not just what might be theoretically possible.
In other words, you have to switch questions from "where COULD we go?" to "where SHOULD we go?"
What's attractive obviously depends a bit on who you are (your strengths and weaknesses) and what competition or other features might make life difficult if you aim for different spots.
For example, in our Jungle Book example:
If you are MOWGLI (the boy), then the VILLAGE might be an attractive destination to choose, while the JUNGLE, being full of hungry animals, might not.
If you are BALOO (the bear), the JUNGLE looks great - but a VILLAGE full of humans might not be a good idea.
And if you are JAKALA (the crocodile) then the POOLS are a great spot to be but go anywhere else you might end up as a handbag.
So, it's the interaction between your possible market segments (options from your map) and your strengths that help you decide where to aim.
But you still need a strategy.
Jungle Book strategy: how WILL you get there?
Let’s say you're Mowgli again. You decide you want to go to the other side of the Pools at (C). Maybe there is a big feast there, or a gold mine, or a girl - or something.
At the same time, you know Jakala the crocodile will be there, and that he likes to eat boys like you. So now you have framed your challenge, which is something like:
"How on earth can I get to the other side of the Pools without being eaten by Jakala."
Above: Swimming there might be the wrong option: Jakala is waiting for you!
Next, you think about how to meet the challenge.
And you decide you will build a boat and row across with your bear friend, Baloo.
That is your strategy.
Good strategy works like this.
Based on the foundation of a good segmentation, you can put together all the bits in what Rumelt calls the strategy kernel, with the vital elements of:
Your destination (A to C, or from Council Rock to the Pools)
Your big challenge in the way (Water and a crocodile called Jakala)
Your guiding approach and coherent steps (Work with the friendly bear, get a boat, row over)
Remember, before you made any of these choices, you first had to understand your options. And to do understand your options, you used your map (segmentation).
...And that is why all good marketing strategy needs some effort put into the foundation of segmentation.
Now at this point, you may be thinking: "That is all pretty obvious. What I really need to know is how I can figure out my segmentation map in the first place?"
Glad you asked... Because Kipling can help again!
Kipling shows you how to segment - with a poem!
Kipling was a journalist and he wrote a poem for his daughter because he wanted to teach her to ask questions like a journalist. So he said this:
I keep six honest serving-men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who.
You may spot that the poem is a mnemonic for the "5Ws and H" model which are the journalist's questions and still taught to journalism students today.
Use Kipling's poem, you will always find a way to segment your market.
Introducing "5Ws and H."
The important thing about your segmentation is that it is external - by which I mean at least at first, it is really not about you.
Your segmentation is about your market and your customers.
The 5Ws and H framework is just a good way to split up thinking about your customers. It works for journalists and it will work for you too.
The simplest segmentation has always been by product type customers buy (WHAT).
To be honest, most companies can do this with no problem. It is like segmenting according to a trade catalogue. It can work.
But the 4 other Ws and the 1 H will give you far more options.
Let's look at a quick made-up example. If you sold, say, bulk ceramic roof tiles, like these:
And you used the 5-Ws-and-an-H, you might look at your segmentation options something like this:
WHAT
Tile type, size, specification, colour (etc)
WHY
Keep dry
Show off to neighbours
Retain house value
Appeal to buyers
Renovation
New home build
WHEN
Season: Winter, Summer
Sudden: Accidents, Storm Damage
Planned: New homes, extensions
HOW:
Direct to customer
Specialist wholesale
Chain retail hardware (Big Box, convenience)
Independent retail hardware
WHERE
Location of customer: Local, State, International
City or rural
New homes or renovation
WHO:
Size of customer: Small, medium or large companies
Type of customer: Roofers, Carpenters, Architects
You get the idea. As you can see it is pretty easy to come up with general ways you might segment a market. And from there you can start to look at how to win, like Mowgli in our example before.
However, the harder bit is settling on the way you and everyone else you work with will agree to look at the market.
How Do I Know When I Have a Useful Segmentation?
You know you're on the right track when your model really is helping you make good choices. (And, of course, in the end, when you see that these choices work to make more sales).
Some indicators you are on the right track are:
You start to "see" the more attractive - and less attractive - places you could go
The maps and segments help explain to people what you are trying to do, (even if that is to stay right where you are)
The segments help you see how your product or services solve problems for customers
You can start to feel there are segments you might be better suited to and others you should avoid
You can see segments that are "adjacent" and others that are a stretch for you to serve
If you're lucky enough to have a budget, there are a few ways you could work out which places offer more attractive opportunities (even doing volumetric analysis - which helps you understand the sizes of different segments, which can be important), or which places you will be best suited to go relative to competitors (competitive strategy).
But here's the interesting thing I have found after 25 years of doing segmentation, and 15 as an independent consultant. Maybe it is the most important thing I can suggest:
If you have this kind of segmentation discussion with the people that matter, then EVEN IF YOU DISAGREE*, the healthy discussion alone is still one of the highest-value things you can do to build your team and get alignment on your best strategy for winning.
(*I'm looking at you, Sales and Marketing!).
Good Luck!
© Matthew Braithwaite-Young, 2020
Matt is founder and principal of Turning Leaf, a strategic consulting firm. Matt has 25 years' experience in marketing strategy including client-side leadership roles at blue-chip firms Unilever and Diageo, and the last 15 years as an independent consultant. Matt has worked with large multinationals such as LVMH, Veolia and Kia, local giants such as Lendlease and the Federal Government. And his favourite work is helping local SMEs, family businesses and start-ups (the real engine room of the Australian economy). Good on you. If you read this far give me a bell, you obviously have good taste.