Marketing Segmentation – Broken Approach

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

Marketing Segmentation – Broken Approach

Highlights by David Willden

Clayton Christensen believes the traditional  marketing segmentation approach problematic.

When marketing segmentation is typically done, one usually categorizes customers by either a demographic segment or by a product category. The fact that someone is in our demographic segment does not cause them to buy a product. The inclination to purchase could possibly be related with demographics, however it not the causal mechanism.

What exactly causes or motivates us to buy? We purchase primarily because we something (e.g., a job) to do and we need help. We buy products to help us complete the job. If I really would like to forecast wither or not a customer will purchase my product, I don’t think we should segment markets by demographic or product factors. Instead, we should attempt to outline segments based on the various jobs that people are trying to complete.

A Better Way to Segment: What Marketers Can Learn from a Milkshake | IT Services Marketing Association

Tuesday, April 3rd, 2007 By Clayton Christensen, Harvard Business School professor, co-founder of Innosight LLC, and author of The Innovators Dilemma, The Innovator’s Solution, and Seeing What’s Next, recently provided insight into what marketers can learn about segmentation from studying why consumers “hire” milkshakes. ITSMA: Clay, you’ve said that you believe that the fundamental paradigm of how to segment markets is broken. Could you please explain? Christensen: When we are marketing, we’re playing in the categorization world. If you’re inside 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 to find correlations between the attributes and the 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 with those characteristics, but it isn’t the causal mechanism.

Marketing Segmentation