Market Segmentation - Broken Approach

Business of Software - Clay Christensen (Photo credit: betsyweber)

Market Segmentation - Broken Approach

Highlights by David Willden

Clayton Christensen believes the traditional approach to segmenting markets is problematic.   When we segment markets,  we usually categorize customers by a demographic segment or one of our product categories.   Does this approach really make sense?   Does our market segmentation analysis or our product category really help us to ask the right questions? 

Clayton suggests that people primarily purchase because they have a job they want to accomplish,  and they want help in successfully performing the job.   

A Better Way to Segment:  What Marketers Can Learn from a Milkshake

Clayton Christensen provided insight into what marketers can learn about segmentation from studying why customers "hire" milkshakes.   Clay, you've said that you believe that the fundamental paradigm of how to segment markets is broken.  Could you please explain?  Christensen:  Why we are marketing, we're playing in the categorization world.  If you're insight the company looking out onto the market, it appears as though the market is structured by customer category or by product category.  Therefore, we segment markets either by the attributes of the customers or the characteristics of the products.  Then we try and find correlations between the attributes and probability that customers will buy.  But the fact that I'm in a certain demographic segment doesn't cause me to buy a product.  The propensity to buy might be associated those characteristics, but it isn't the causal mechanism.  

Linke to article - Marketing Segmentation - Broken Approach

Market Segmentation