Target Segment has many definitions, and one of the definitions can be “Group of customers to whom same product/service will appeal”. Generally, Target segmentation is based on the product type, by price point, demographics, psychographics etc…
‘Design-Thinking’ too have the above classification methods for segmenting the customers. In addition to this, there is one more efficient method — Segmenting the users based on the needs, jobs to be done in different circumstances and emotional quotient.
An example from the book of Clayton Christensen
A Quick-service restaurant wanted to improve its milkshake sales and profit.The chain segmented its customers by characteristics of existing milkshake customers. Their research team explored whether making the shakes thicker, chocolatier, cheaper or chunkier would satisfy the user better. Based on the feedback received, the restaurant implemented the solutions but there was no improvement in the sales or profits.
They approached designers to do a user study.
As a designer we believe in collecting data by observing users, spending time with them, grasping their behaviours, collecting stories and finally understand their needs & desires.
After spending hours in the restaurant, travelling along with some users to their places, the design research team chronicled the data. They recorded the time of each milkshake purchase — looked at what other products a customer purchased along with the milkshake and reasons behind the same. They also noted whether the consumer came alone or accompanied by somebody, whether they consumed in the premises or drove off.
The most surprising insight was half of all the milkshakes were bought in the early morning. Most of the time, the milkshake was the only item these customers purchased, and it was rarely consumed in the restaurant.
The research team observed that those early morning customers were buying the milkshake, specifically to accomplish a particular job. The morning customers faced a long, boring commute to their office and needed something to make the journey more interesting. They were not hungry in the early morning, but if they did not eat any, they would be hungry by 10.00AM. They were always in a hurry and didn’t have time to consume food in the restaurant. They were often wearing the work clothes.
The team concluded that those customers needed something interesting to eat while commuting to the office — Which should not spoil their clothes, hands and the car. While driving, they had only one free hand. So, whatever option they choose should be comfortable enough to be consumed with one hand.
Those customers looked at other options for the morning commute, before deciding milkshakes. eg. Bagels — The customers would get crumbs all over their clothes and the car. Banana — It would be fine but eaten too fast and did not solve the boring problem of the long commute. Sausage, ham or egg sandwiches that the restaurant sold for breakfast made their hands and the steering wheel greasy and dirty. Doughnuts didn’t last long either.
So, milkshake did the better job. In customer’s mind, the morning milkshake competes against boredom, bagels, bananas, doughnuts etc…
So, how could QSR make the customer’s life easier? Quick instant service, Quick Billing, self-servicing machine, Can we make the milkshake a bit thicker to last long, can we swirl in tiny chunks of fruit to provide healthy value and increase the time of consuming?. Solutions could be based on the available resources and at the same time, it could help users to accomplish their intended jobs.
Similarly, the research team studied another type of customers and classified them according to their intended ‘Jobs-to-be-done’.
Honda Super Cub in the USA
In 1950’s Honda wanted to enter USA two-wheeler market. During that time, American Bike market was small and dominated by Harley Davidson.
Image Source: Wikipedia
Motorbike riders are generally seen as outsiders, an image shaped by Hollywood.
Honda entered the market with 250cc, 305cc bikes similar to Harley Davidson since Americans travelled long distances, unlike Japanese. But Honda’s bikes were not robust enough and started getting into a lot of maintenance troubles. The bikes were not meant for long-distance travel. This affected the sales. The Honda team in the USA sent vehicles back to Japan and asked them to re-design the vehicles for better reliability.
Meanwhile, the Honda staff in the USA started driving 50cc Supercub in the streets, hills for running errands. Supercub started gaining people’s attention.
When you live like a user, you would understand the hidden needs and desires. Your needs are your user’s needs. You can connect your product easily with user.
The staff soon identified a customer segment, who was looking for a small, inexpensive, convenient vehicle for running short trips around the town. This customer segment had different ‘Job’ requirements than the Harley Davidson’s consumer segment.
Since Honda staff lived among local people and lived like them, they could identify the target segment and their needs.
This Supercub became a super hit with people, and the sales soared sky high.