“Outcome-Based Segmentation” – Anthony Ulwick
Tony Ulwick is the pioneer of jobs-to-be-done theory, the inventor of the Outcome-Driven Innovation® (ODI) process, and the founder of the strategy and innovation consulting firm Strategyn. He is the author of Jobs to be Done: Theory to Practice (IDEA BITE PRESS) and numerous articles in Harvard Business Review and Sloan Management Review.
Some would argue that segmentation is the single most important and profound marketing task.
The famous marketer Theodore Levitt went so far as to say: “If you’re not thinking segments, you’re not thinking.” Based on what we now know 30 years later, I would paraphrase him and say: “If you’re not thinking outcome segments, you’re not thinking.” In other words, the new era of job-to-be-done and outcomes-based marketing forces us to rethink the discipline of market segmentation.
In the 1950s market segmentation was based purely on demographic characteristics such as age, geographic location, or gender. This information was the only type of data that was easily collected and readily available, and marketers used it to create market segments.
In the mid-1960s marketers added psychographic data to their segmentation efforts. They gathered information about customer traits and attitudes toward products and services and used it to produce more specific customer profiles.
In the 1970s organizations installed large transaction databases and captured real-time point-of-purchase data. These technological advancements enabled marketers to create purchase behavior segments.
In the 1980s companies embraced needs-based segmentation. Powerful computers and sophisticated clustering techniques allowed researchers to classify customers into segments based on what product features and benefits were most appealing to them.
While needs-based segments were a step forward, research over the last decade or so tells us it often led us astray. Why? Because customers struggle with telling researchers what they really need. Any given purchase is part of a complex job completion process with anywhere from 50 to 150 outcomes. If we simply ask customers about product features and benefits, then we fail to examine the intricacies of their process and the outcomes they seek every step along the way.
Today’s best market segmentation efforts are founded on a detailed understanding of the job to be done and how customers rate importance and satisfaction for each step or outcome of the job completion process. This information is then utilized by the marketer to craft powerful messages and programs that are uniquely salient to each segment.
Let’s take some examples:
- The food and agribusiness conglomerate J.R. Simplot Company isolated a segment of restauranteurs who wanted a French fry that would last longer in holding without losing its attractive properties.
- The dental products company Dentsply discovered a segment of dentists that believed the quality of a tooth restoration depended on the ability to consistently and predictably produce solid bonds.
- Bosch focused on a segment of drill–driver users who wanted the tool optimized for driving and rarely used it as a drill. The segment was created to address a unique opportunity and helped the company design targeted and effective marketing programs.
Outcome-based market segmentation represents a significant disciplinary leap. It focuses on real opportunities: measurable activities that are underserved by the competition.