The Challenge of Segmentation

Segmentation is a difficult thing to wrangle sometimes. When internet-based sales starting picking up steam ten years ago, people weren’t sure how to respond, though the thought process really shouldn’t have been much different than for catalog sales. The main difference is that the catalog was now online and accessible to anyone who was interested.

What the internet, and catalogs for that matter, gives you is another channel for selling to customers, even if the audience is different. Thus is the challenge of segmentation. The essential question is this: what do you offer to sell people, where and at what price? OK, maybe it’s three questions. Regardless, there are four basic ways to segment your offering:

  1. Selling the same brand, with the same features and pricing, through different channels—You offer the same thing online or in a catalog that you do at retail for the same price.
  2. Selling the same brand, with differing features and pricing, but through the same channel—Your retail offerings for the same brand are priced differently, based on the features.
  3. Selling the same brand, with differing features and/or pricing, through different channels—What you offer online is exclusive to the channel and different than what you sell at retail, even for the same brand and similar product.
  4. Selling the same product, with the same features, different pricing and brand names, through the same channels—You offer the same product with the same features and through the same channel (online or catalog or retail) but under different brand names.

What’s going to work best for you depends on the product you sell, the channels available to you and your customers and how effectively you can manage the process. A major concern will be how the channels (or brands from option 4) compete with each other and cannibalize sales. Sometimes, none of these options make sense as there is only one way to sell your particular product.

But make no assumptions. Explore the options. Do some tests. See what makes the most sense. And most importantly, sell to your customers where they are, at the price they expect to find and with the features and benefits that deliver on your brand promise.

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Let Me Shop

I was out shopping (browsing, really) at some shops this weekend. In one of the stores, I was particularly interested in a couple of shirts. As I am checking out one of the shirts, deciding whether to buy, one of the salespeople walks up to me and points me to a table of sale items a few feet away.

Admittedly, I became curious and checked it out. Unfortunately, for them, I lost interest in the shirts I was considering and had no interest in the sales items.

I walked out without making a purchase. Alas, another sale thwarted by someone being a little too helpful.

Here are a few hints:

  • Don’t ask yes or no questions. 99% of the time, the answer will be no.
  • Don’t divert someone from a higher ticket sale to a lower one, unless it’s what they need or it’s right for them.
  • Engage the customer to find out what they are looking to purchase. What is holding up their decision? What can you do to help them along?

If you go shopping and don’t have an engaging experience and don’t buy something or as much as a result, then don’t replicate that in your own job. That’s just not smart.

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Management by Karma

A situation came up at work the other day that was eerily similar to others I have experienced or witnessed several times in my career. The basic premise is that two or more organizations that work together come to so sort of a crucial decision point. The final outcome will result in either winners and losers or something that is mutually beneficial (what most people like to refer to as win-win).

There are two ways to approach it. One entails devising a win-at-any-cost strategy. While you may come out with the big score, you have now established yourself/company/brand as one only interested in the score and not long-term health and success.

The other focuses more on elevating everyone involved to a new level, seeking to do what’s right for all (or the greatest possible number) and fostering a long-term, positive relationship. It’s what I like to call the good karma approach. Yes, you do risk putting yourself at a significant disadvantage, but if you are working with the right partner, the good karma will return. If it’s the wrong partner, you will soon know, and that will be your cue to exit. And their bad karma will catch up with them.

Managing your brand based on good karma leads to a slower, yet steadier growth with a solid foundation. Really, it’s the right thing to do.

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Find a Middle Ground

Many companies approach managing their brand in one of two ways. Some will take a conservative approach, wanting to stay true to the brand and not take too many, if any, risks. Others focus on shiny new objects, looking to use the latest and greatest or the next hot thing.

For a company’s long-term success, there needs to be a middle ground, a balance between staying true to the brand, while exploring new ways to communicate that consistent message. And the way to do that is to stay anchored while exploring. Yes, it sounds a bit contradictory or even oxymoronish (some might want to drop the oxy part).

But it works. Start by documenting, specifically, what your desired result is. Indentify how, what you are doing fits with the overall strategy. Write your central message, tone and key points on paper. Get agreement that it accurately reflects the brand.

Now, evaluate how you can use the shiny objects to achieve the desired results. If it’s not the right fit, don’t try to force it. You’ll just do more damage. Often, the really cool stuff isn’t going to work for your brand. And that is perfectly fine. If you really want to do something with it, make it a hobby. After you play with it for a while, you’ll either find an effective way to incorporate it, or you’ll see that it wouldn’t have worked in the first place.

Either way, you are staying true to the brand. And that is most important.

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Understanding What You Really Sell

I am working on a new project that started with one purpose but morphed into another because of one “little” question: What is it we are really selling? At first glance, the answer may be obvious, but as you dig deeper and talk with your customers, you’re likely to find there’s more to it than that.

Let’s take a straightforward example like Coca-Cola®. They sell beverages, right? Of course they do. But they also sell their name, image and distribution. What about Honda®? They sell automobiles, motor cycles, lawn equipment, just about anything that can have an engine. And they sell fuel efficiency, technology and reliability.

When you are positioning your brand, you have to understand how your customers view you. To them, you are selling so much more than your product. You’re also selling key things that go with it—that list could include innovation, service, business opportunities, education, self-esteem, fulfillment, joy, entertainment. The possibilities are endless. In reality, you have to focus on just a few and do them exceptionally well.

And make sure they line up with what your customers have come to expect and rely on from you, or you will find yourself in a major disconnect.

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Passion and Lessons Learned

On Monday, I wrote a piece focusing on what Apple is doing from a business perspective to out maneuver PCs. My intention was to stay out of the PC versus Mac debate. In fact, I wanted to take a neutral position. Instead, my statement that “neither one is truly better than the other” was taken as a personal affront to Mac lovers. To anyone I offended with that statement, please accept my apologies.

According to some that commented, there are mounds of research supporting the Mac OS X as far superior to Windows. Admittedly, I haven’t read it. In my direct experience using a Macbook, however, I wasn’t blown away. But again, that wasn’t the point of the post.

I did learn a few things, though. First, that one statement made that post the most widely read post I have ever had, and it all happened in one day. The main driver was the fact that people are so passionate about Macs that they ran to see who was writing that “foolish”ness and “bullshit”. We should all want our customers to be that passionate about our brands!

Second, when you make (what turns out to be) a controversial statement, readers miss the point you are trying to make (judging by the fact that no one actually commented on the intended point). And that leads me to a bit of a conundrum: is it better for more people to read my post, even if they miss the point, or is it better for fewer people to read it and get the point? Perhaps the answer is somewhere in between. Which is a classic branding problem. You want to attract as many people as possible to your brand, but you also want them to get it, interact with it, become fans.

It’s finding that balance between volume and intense loyalty that makes a brand successful.

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Baggage Options

Well, we knew the time was coming when airlines would start charging us for darn near everything. Now they’re going to charge us for the first bag we check. Forget the fact that most travelers will attempt to cram everything into a carry-on bag too big to fit in any overhead compartment. I’m surprised, though, that no one has taken a more novel approach to the pricing.

One approach might be to charge people a flat airfare up to a specified total weight that includes the person traveling and his associated baggage. For every pound over that weight, the passenger is charged extra. That, however, may be viewed as discrimination.

A different method of pricing, however, could involve a bit of hedging. For instance, let’s say I book a flight today for a trip next month. I know that the trip will last three days. In all likelihood, I will check a bag. If I claim at the time I book it, charge me at that time. If I wait until I show up at the airport, then charge me a higher rate. This helps airlines determine ahead of time what their true cost of the flight will be. Additionally, they could set a limit to what they will accept on the flight in terms of weight, cutting people off when they reach that number. Anyone missing the cutoff will have to have their luggage arrive on another flight or through some other means.

Which brings me to another concept that likely will revive: shipping your luggage separately to arrive at your destination. Most people won’t want to plan that far ahead, but it can be highly efficient.

Sure, it would help if the airlines had a better economic model. And yes, the price of gas doesn’t help. But instead of just doing what everyone else is, be novel in your strategy, containing your costs, driving revenue and serving customers.

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