Tag: serve

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Tunnel-Vision Innovation

Excerpt from The Daily Drucker written by Peter Drucker

Often a prescription drug designed for a specific ailment sometimes ends up being used for some other quite different ailment.

When a new venture does succeed, more often than not it is in a market other than the one it was originally intended to serve, with products or services not quite those with which it had set out, bought in large part by customers it did not even think of when it started, and used for a host of purposes besides the ones for which the products were first designed. If a new venture does not anticipate this, organizing itself to take advantage of the unexpected and unseen markets; if it is not totally market-focused, if not market-driven, then it will succeed only in creating an opportunity for a competitor.

The new venture therefore needs to start out with the assumption that its product or service may find customers in markets no one thought of, for uses no one envisaged when the product or service was designed, and that it will be bought by customers outside its field of vision and even unknown to the new venture. If the new venture does not have such a market focus from the very beginning, all it is likely to create is the market for a competitor.

Action Point: When innovating, go with the market response, not with your preconceived ideas. Don’t marry your pet ideas about a new venture.

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Market Segmentation: Understanding Your Customers

Written by Dora Cheatham, Program Manager, Emerging Enterprise Center

“Any color-so long as it’s black.”  Why Henry Ford’s famous quote is no longer relevant.

When we utter Ford’s words today, they are often said in jest. Ford lived in a time of limited competition and his goal was straightforward:  minimize costs through mass production.  And the consumer was more than happy with the deal.  Today’s consumer is different:  he wants choice, lots of it, and with the proliferation of brands and channels, it’s there for the taking.  Whether you are a business or non-profit organization, selling a product or a service,  by segmenting  your market and customers into groups with similar needs and buying criteria, then adjusting your marketing mix to meet the needs of each group,  you enhance 

THE 5 CRITERIA FOR EFFECTIVE SEGMENTATION

  1. HOMOGENOUS—the needs within each segment should be               homogeneous within the segment and different from the other        segments.
  2. IDENTIFIABLE– the customers within the segment must be identifiable and specific.
  3. PROFITABLE—The more segments identified, the greater the opportunity to offer a targeted high value offer.  However, the number of segments identified should be balanced against the cost to serve those segments.
  4. ACCESSIBLE—the customers in the segments should be readily accessible in order to be able to serve effectively.
  5. ACTIONABLE—the segmentation should be such that the company can act on the segmentation to implement appropriate programs for each segment.

Once segmented, the business can then determine its business and marketing strategy on the segments themselves—their size, growth and profitability—the competition and the capabilities of the business.  Which segment(s) will you focus on?  Which segment(s) offer the greatest growth/profitability/maximum barriers to entry? Will your marketing mix (product, price, distribution, marketing message, processes, people) be the same for each segment or will they differ? The chart below shows the various marketing strategy options for business development based on market segmentation.