Execution Genius Part II: Know Thy Customer
In the course of our work, we’re often struck by how many of our clients have only a broad idea of who their target customer is or should be. Even if a product or service is meant for mass-sized general markets, clear customer identification and thoughtful segmentations are important building blocks in the ability to successfully execute business goals.
Just because a segment is large doesn’t mean it’s monolithic. We often hear this mistake at the very outset of product planning. It’s easy to show optimistic projections when the target market is “women from age X to Y” or “families with kids.” Sensible plans come from highly-focused segmentation, gathered from many data points. If your company doesn’t have this level of information already, it will need to build a framework to accumulate the data and analysis necessary to develop this competency over time.
A large total available market (TAM) for any product or service is wonderful. Research that narrows the TAM into SAM (serviceable available market) and SOM (serviceable obtainable market) is obviously important work. Understanding possibilities is the first step toward creating probabilities, which are of course the first goal of any marketing effort. That said, it’s important to remember that SAM and SOM are not just simple geographic or economic subdivisions of the TAM.
Today, consumers are empowered with more buying choices than ever. Their decisions are often made through extensive research on the web, or vice versa through social media. Other consumers simply go by user reviews or believe a trusted influencer. One of the oldest clichés I’ve heard in the consumer electronics business is that there’s no such thing as a bad product, there’s only the wrong product for the wrong consumer. That feels truer today than ever.
The “senior market” is an easy example of why segmenting is needed. There are 54 million people aged 65+ in the U.S. today, more than 16% of the population. By the end of this decade that will jump to 73 million, and many countries are even older than we are, per capita. Globally, that’s a really big TAM. The first Baby Boomers started turning senior in 2010, so it’s not like nobody saw the opportunities coming. Yet more than ten years later, we still can’t point to a single new product, service or brand that we can immediately associate with top-of-mind uptake and loyalty from this huge market. Why?
One reason is that like most mass markets, this one is made up of innumerable niches. There are 70 year old’s that run marathons and those that are housebound. Boomers – the new seniors – have more comparatively more money than younger generations, but while many are comfortable, others get by month to month. Some have nearby family and social opportunities; others live without them. The TAM-SAM-SOM opportunities of this sector are all huge, but the customers come in every shade of economic, cultural, physical and emotional condition. Beyond age (and what comes with it) what do the customers have in common?
The traditional methods of segmentation relied on geography, demographics, behaviors and psychographics. In an age of deep personalization, these headers are just the starting point. Customers have more buying options than ever and increasingly expect products and services that match their specific needs. These can vary quite a bit, as every consumer has priorities and preferences regarding price, brand, perceived quality, convenience, ease and so on. Your company needs to study these data points through all available resources before it commits to building product. Surveys, focus groups and research agencies are all cheaper than failure.
In fact, deep customer knowledge often becomes the game plan for actual product development. One school of thought holds that new products should be designed from the ground up to meet specific features that customers care about and will pay for, and for how much. Of course, risk mitigation isn’t the same as innovation, and me-too products don’t always succeed, so that approach doesn’t hold up across the board. Knowing your customers does.