According to Miklos Sarvary, "Market segmentation consists of dividing the market into groups of potential customers - called market segments - with distinct characteristics, behaviors, or needs". He also points out two types of segmentation in the article. The first is segmentation based on benefits sought by customers. The second is segmentation based on observable characteristics of customers. Each marketer has a choice of how to go about these two segments, but generally it is easier in practice to identify a segment based on a demographic. However, to be a truly effective marketer, these demographic segments must correlate in some manner to the benefits sought by customers. Honing in on the benefits is the key step to work towards customer obsession.
Segmentation as a facilitator to customer obsession
Now some may see the word obsession and feel that it is a bit extreme, but look at the successful companies in the market and it isn't to far off. Apple, Google, Disney, and USAA are just a few of the companies that come to mind when we talk about customer obsession. These companies strive day-in, day-out to provide for the needs and benefits sought by their customers.
Andreas von der Heydt has written several fantastic blog posts on his LinkedIn page about customer satisfaction and obsession. One of the posts, titled "Help, I'm Customer Obsessed" lists two fundamental rules of customer obsession.
1. Make sure that you do everything to make your customers happy.
2. Customers first, then brand, then revenue, then profit.
The first point really goes back to your decisions made during market segmentation. It is critical that the correct segment is chosen based off the benefits desired and the make-up of that segment. If your company is trying to market a product to a customer segment that is not interested, the business will suffer.
The second point gets right at the heart of being customer obsessed. If company's always live by the default that customers are first, then their decision making process will be simplified. This again, goes back to ensuring that the correct market is selected.
Now both of the comments above do not mean that the company has to get their market segment perfect the first time. The company will most likely need to be flexible to changes in the environment and economy some time after their initial assessment was done. The key here is to continually assess the benefits being sought by your particular segment.
Sarvary, Miklos. "Market Segmentation, Target Market Selection, and Positioning". HBR No. 501-018
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