CUSTOMER SEGMENTATION: A must for digital innovations

CUSTOMER SEGMENTATION: A must for digital innovations

 

Have you ever said or heard someone saying “The average customer wants…”? Please remove this sentence from your vocabulary. There is no average customer, especially not for innovative digital products and services.

 

Learn how to easily find out whether or not your product and service has to be adapted to different customer segments.

Many developers think that the responsibility for targeted customer approach is limited to the marketer, but this does not hold true anymore. Many issues and lost opportunities with innovations are immanent to the product itself.

We all know that there are customers who enjoy trying out new technology, even if it’s tough, the UX not yet perfect and the software crashes at times. Another customer already gives up if there is only a single feature that does not instantly work as expected.

How come and how can you deal with such different expectations? Of course, it’s not enough to simply refer the latter customer to the manual or the FAQ section hoping he or she will be ok.

 

Why are customers so different?

The fact that customers are different will not go away. Rather the opposite. But we can learn why and in which way customers are different. We can find out how to distinguish and approach them one after another.

Everett Rogers, a sociologist, who developed the  diffusion of innovations theory laid the ground for a way to segment customers which is still valid today (LINK). Others like Geoffrey Moore elaborated the theory and found out how different customers react and adopt to innovations (LINK).

Different customers have different expectations

For digital products, different customer groups have very different expectations to be addressed

 

Innovative products are first bought by geeks, techies or fans of a brand who always want to be first. These innovators always want to check out new stuff as early as possible and sometimes be applauded by their peer group.

The next group in the diffusion cycle is the so-called early adopters, who are curious and open for new and fancy products, too. Most important, however: the benefit promise. The new product or service has to provide clear value added. In case the software still feels a little bit like a beta version, those early adopters won’t like it, but accept it in most cases.

The early majority, the next segment, is less forgivingly. The functionality of a product has to deliver clear value, but also has to be reliable in order to convince those customers to give up their current solution. The early majority does not want to deal with an immature product.

The mainstream customer belonging to the late majority has even higher expectations. Functionality and reliability have to be given. In order to make them change and give up their longstanding solution, the new product has to be priced attractively.

The last group, the laggards, can hardly be convinced of a new solution. They will not change unless their preferred solution is not available anymore.

 

Working with means leads to mediocrity at best

Customer A wants more features while customer B complains about too high a complexity caused by too many features. This is a typical result when analyzing customer satisfaction data. In many of those cases, developers and engineers shake their heads uncomprehendingly and finally simply do what they think is best.

What would you recommend to a vendor in such a case? Which customer to go after? Which need to fulfill?

Marketers know that one size does not always fit all and market researchers know how to properly analyze customer data. Nonetheless, for the sake of simplicity all customer data are all put in one basket and evaluated altogether in most cases.

What a terrible waste! All customer data for differentiation is on the table but not used. This often leads to wrong decisions and, even worse, managers and developers have learnt one more time that asking a customer will get you nowhere.

 

Understanding customers is too important to leave it to marketing

Especially in Germany, many companies are driven by engineering. Those companies do have marketing departments, but engineers struggle when working with subjective customer feedback. Engineers love to develop great stuff and they love complexity a little bit more than appreciated by their customers. Finally, marketing is asked to “sell it”. At this point it’s too late to adapt the product to different customer segments. The product is ready to launch although basics needs of the next customer segment are not met.

It would be helpful if R&D knows the needs of the all customer segments right in the beginning in order to align the product to those different needs.

 

When to consider different customer groups and when not

In which do we need to consider different segments? Basically, whenever we are dealing with innovations. This is particularly important for digital products because silver agers for example have very different needs compared to digital natives. And remember: Elder customers often have more money to spend, so it’s worth to have them in mind.

Segmentation can only be neglected if we talk about mature products in mature markets without any innovative potential and target at a very homogeneous customer group. Is this the case for your market?

We look forward to finding out how segmentation can help you to make the most out of your portfolio. Sounds interesting? Let’s talk.