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Thursday, December 16, 2004

Two Things Marketers can do


I had a great marketing professor in graduate school who was a very successful businessman who taught only one course – a marketing course for those interested in marketing technology products. He used to say that marketing was very simple – in fact there were only two real requirements for a marketer: differentiating the product or service from the competition and segmenting the customer base. He felt very strongly that if you can segment your customer base and speak directly to those customers who care about your product or service and if you could clearly differentiate your products against your competition, the battle was won. Note that these concepts – differentiation and segmentation – are very strategic in nature.

Often there is a sense that marketing should be “doing” something, rather than taking a careful consideration of the problem at hand. Too often, segmentation and differentiation are not fully considered. Let’s look at what happens if one or the other is not completely thought through. Consider a product that is very differentiated from its competitors. It has unique capabilities and features. However, the developer of this product has done little or no segmentation of the prospect base. Which customers will want this new product? Which will care about the differentiators? Which customers like the new product but cannot switch due to technological barriers? How should we reach the prospects that might care about the technological advance?

As we all know, good technology does not guarantee a winning product. The market has to know, and more importantly has to care, about the features and benefits for the product to be successful. A good example of differentiation without segmentation is the “3G” market in Europe. Several years ago, most wireless firms in Europe spent billions to establish the licenses and infrastructure to offer 3G (third generation) services on a cell phone. Wireless firms advertised the ability to watch movies on the phone and use the phone as an electronic wallet. The phones and services were rolled out – but few were purchased. Why? Because few people cared about the advertised services. Now let’s consider segmentation without differentiation. If I carefully evaluate the general market and identify unique customer groups within a prospect base, I can find differences in their wants and needs. However, if I do not successfully differentiate my product or service to those customer groups, they will not understand it and will not buy it.

In many cases, I can sell the same product or service to many different unique customer segments by changing the messaging and possibly the packaging of the product, while the base product remains virtually the same. However I have to differentiate my product for each of these customer groups before they will notice it or buy it. A great example of segmentation without differentiation is a retail bank. Most banks know how many services you use as a customer (do you have a deposit account, do you have a checking account, do you use the ATM, do you visit online, etc) and they know your value as a customer. In many cases they know your marital status, job status, income levels and fluctuations. Yet virtually all customers receive the same services and offerings from retail banks. Banks have not capitalized or differentiated themselves by offering services and features to easily defined marketing segments.

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