Cardinal Academy

This segment explains why traditional market segmentation methodologies often improve products in ways that are irrelevant to customers’ needs. It also explains why jobs-based market segmentation enables us to more reliably predict the product and service changes that will result in increased customer demand.

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No matter how you look at it, it’s hard to argue that our market segmentation methods are working. New products are failing at the stunning rate of between 40-90% depending on the category. A primary reason is that product and customer based market segmentation models are improving products in ways that are irrelevant to their customers’ needs. A better way to think about market segmentation is to make jobs the fundamental unit of analysis. The purpose brands that emerge from this process create greater opportunities for differentiation, premium pricing and future growth

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Jobs-based market segmentation is less of a method for collecting data than it is a method for viewing data through a new lens. Companies that successfully implement this approach answer six basic questions. The first is what progress are your customers trying to make? Specifically, what are the functional, social and emotional dimensions of the desired progress? Second, what are the circumstances of the struggle? Who, where, when and while doing what? Third, are there significant pockets of non-consumption? Fourth, can you spot workarounds and other compensating behaviors? Fifth, can you identify jobs that customers don’t want to do?  And sixth, are you observing unusual uses of existing products and services.

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One of the most critical strategic imperatives is the decision about where to play. This decision requires you to clarify “which jobs you will perform for your customers” and “which jobs you won’t”. This decision demands tradeoffs, requires the courage to ignore the herd and becomes even more important as the level of competition intensifies. Effective where to play decisions must answer three fundamental questions: 1) what jobs can you be best in the world at, 2) what jobs can you do profitably, and 3) what jobs are you passionate about doing?

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Defining how to win describes the activities that you will do differently than rivals to distinguish the jobs that you have chosen to perform for your customers. One of the most common strategy traps is to failure to perform a different set of activities than your rivals do. The alignment of activities is also critical because individual activities often affect one another. When activities are consistent and reinforcing, the competitive advantage accumulates rather than eroding or offsetting. Companies like Southwest Airlines and Ikea outperform rivals because the cumulative effect of their activity systems are hard to replicate.

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There are four basic roots of human engagement – the desire for purpose, mastery, autonomy and belonging. For these roots to flourish, leaders must 1) free people to pursue the new direction, 2) explain the relevance of the plans they’re proposing, 3) show that they understand reality, 4) make their people feel safe, 5) involve them in key decisions and 6) show them the big picture.

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This segment highlights the most common barrier to effective product positioning and explains why attention to this detail will set you up for success.

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One of the most common misperceptions about positioning is that it should focus almost exclusively on differentiators. Points of parity are the minimum requirements to compete in a given category and they can be just as important to your success as differentiators. But establishing points of parity isn’t enough, they must be communicated repeatedly to prospects in order to lower their barriers to uptake. Finally, points of parity are always evolving so brands need to keep pace with their respective categories and develop new sources of differentiation when necessary.

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This segment explains the critical role that emotion plays in human decisionmaking. It also explains why marketers that engage prospects on both rational and emotional levels create more resonance and drive more action.

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According to Robert Cialdini, there are six basic principles of persuasion: Scarcity, social proof, authority, consistency, reciprocity and liking. These principles are deeply rooted in our behavioral psychology and that’s what makes them so compelling. Consequently, effective communication campaigns should begin with an assessment of the principles that can be leveraged. While the application of a single principle is good, the use of two or three in combination is almost certainly better.

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According to Robert Cialdini, there are six basic principles of persuasion: Scarcity, social proof, authority, consistency, reciprocity and liking. These principles are deeply rooted in our behavioral psychology and that’s what makes them so compelling. Consequently, effective communication campaigns should begin with an assessment of the principles that can be leveraged. While the application of a single principle is good, the use of two or three in combination is almost certainly better.

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There are three common methods for measuring marketing outcomes: Test versus control analysis, regression analysis and probability analysis. Test versus control analysis is the gold standard because it provides the most accurate assessment of promotional impact. Regression analysis can be a useful tool for identifying promotional relationships but results should be interpreted with caution since correlation does not imply causation. Finally, probability analysis can be useful for estimating the promotional impact of programs that have yet to be implemented.

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There are three common methods for measuring marketing outcomes: Test versus control analysis, regression analysis and probability analysis. Test versus control analysis is the gold standard because it provides the most accurate assessment of promotional impact. Regression analysis can be a useful tool for identifying promotional relationships but results should be interpreted with caution since correlation does not imply causation. Finally, probability analysis can be useful for estimating the promotional impact of programs that have yet to be implemented.

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Existing customers are more valuable than new ones for two reasons. The first is that they represent the overwhelming majority of total customers over the lifecycle of a brand. The second is that they’re more psychologically open to expanding their usage of an existing brand. New customers remain an important source of growth. We just need to be selective about the types of new customers that we approach.

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Timing is critical because the windows of opportunity for behavior change are small. We know from research that the potential for behavior change is greatest when traditional cues are no longer present. Savvy companies develop mechanisms for spotting these windows and engaging with their customers. Promotional efforts that fail to acknowledge these windows have the potential to squander vast resources.

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In 2007, the Sales Executive Council initiated a landmark study to understand the selling styles that are most effective in a down economy. Their research revealed that one selling style, the Challenger, significantly outperformed all others. Challengers outperform their peers by an even wider margin as the complexity of the selling process increases. What distinguishes Challengers from other reps is their ability to teach customers things they don’t already know, tailor their offerings to different stakeholders involved in the buying process and push customers to take action when they identify better solutions.

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What sets challengers apart from other reps is their ability to teach, tailor and take control of the sale. Challengers teach by reframing assumptions and then quantifying the ability of their offerings to either make more money or save more money for customers. It’s important to note that successful teaching always leads customers to your unique capabilities. Effective challengers also tailor their pitches depending on the industry, company, role and individual that they’re engaging with. This is critical because decision drivers can vary widely by group. Finally, challengers take charge of the conversation by separating viable prospects from price shoppers, creating urgency to take action and gaining commitment from customers to widen their frame of potential opportunities.

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Research across a wide range of industries suggests that small improvements in customer retention can yield massive improvements in operating profit. These dynamics are even more consequential in the era of subscription businesses. Consequently, leading companies invest significant time and effort in pre-framing the customer experience. They also heighten the emotional experience at purchase to reinforce their customers’ choices. Knowledge Test

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Smart companies take steps to minimize buyer’s remorse while orders are being fulfilled. They remove any potential barriers that can create negative first impressions. They also outline who’s who in their organizations and what they will be doing to support the customer. They explain what is happening now, what will happen next, why this step is necessary and how it contributes to the overall goal. Knowledge Test

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Smart companies celebrate customer success because it presents natural opportunities to extend existing contracts and secure new ones. Customers who welcome your product or service into their routine become emotionally open to expanding their use of your offerings. Smart companies offer these customers new reasons expand their relationships. They also focus on securing reviews and facilitating referrals from their loyal advocates. Knowledge Test

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Understanding when to focus, when to expand and when to redefine a core business has become leadership’s #1 imperative. While it is common for companies to abandon a core businesses too early, it is also common for them to cling to eroding ones for far too long. When core businesses actually are out of gas, it is usually for one of three reasons: 1) Your company is targeting a shrinking or shifting profit pool, 2) your company has inherently inferior economics, or 3) your company’s growth formula simply cannot be sustained. Knowledge Test

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Research on the disruption and redefinition of core businesses suggests that hidden assets often become the centerpiece of the new core business. And these hidden assets tend to fall into one of three categories: 1) Undervalued business platforms operating in your company today, 2) untapped insights into customers that enable you to satisfy a broader array of their needs, and 3) underexploited capabilities that can be redeployed successfully in adjacent segments. Knowledge Test

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Expansion into adjacent markets is a risky proposition that succeeds only about 25% of the time. Research suggests that successful companies share two common features: 1) A strong core business to build on and 2) a repeatable formula for adjacency expansion. While the majority of repeatable formulas are build upon customer driven insights, the efficient build out of networks and the application of core skills in new markets can be other viable ways to grow. Knowledge Test

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