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Your Customer Segment is constantly changing: Are you prepared for it?

Your Customer Segment is constantly changing: Are you prepared for it?

Global trends are changing customer behavior at an increasingly high rate, here is what your business needs to do.

Gone are the days of mass marketing campaigns and bulk production aimed at winning over a large pool of so-called ‘average customers’.  For a growing number of consumers today, the products they consume are not just meant to satisfy their needs but also serve as a channel to express their individuality. Numerous submarkets and niches exist in the current market that demand exclusive strategies.  This has forced companies across the world to take another look at their customer segment, understand their needs and create products that cater to their unique needs.

The following trends in the technology and business landscape have influenced  this change:

    •  With the internet introducing new technologies and products to the world every day, it has become increasingly difficult to maintain a strong market share and loyal customers. 
    • The nature and demands of the consumer in every industry are constantly diversifying and shifting.
    •  Social media has emerged as a savior for small businesses that are not capable of investing immensely in marketing activities. A powerful ad on an Instagram page can lead to thousands of followers flooding in with product inquiries and purchases from any part of the world, in a matter of days. 
    • Third-party logistics companies and cheap tech-based solutions are making delivery and customer service easier, helping smaller customer-centric brands perform better than some big established companies. 

Could these trends pull your business down? Probably yes. 

Should you be worried about it now? Absolutely yes.

It is clearly time to re-evaluate customer segments and recalibrate product offerings.

Practical guide to customer segmentation

What is Customer Segmentation?

Customer segmentation refers to dividing markets into groups based on shared characteristics. Most commonly uses customer segmentation models for B2C businesses are: 

Customer Segmentation Models.Most commonly uses characteristics in customer segmentation models for B2C businesses are:Demographic characteristics such as gender, age, income, educational background, etc. Geographical limits can be based on countries, regions, states or cities. Behavioural patterns such as purchase frequency, brand loyalty, engagement, occasion etc. Interests and personality traits of the customer such as lifestyles, skills, interests, beliefs, values etc. Most companies use a combination of these factors to select profitable target customer segments.

Demographic segmentation: It is the most commonly used model of segmentation. Customers are divided into groups based on demographic characters such as gender, age, income, educational background, ethnicity or religion. 

Psychographic segmentation :This model is based on the interests and personality traits of the customer such as lifestyles, skills, beliefs, values, etc. It is becoming more popular among companies and leading companies have invested heavily in data analytics to explore psychographic factors of customer behavior. 

Geographical segmentation: This model uses the physical location of the customers to group them. The geographical limits can be based on countries, regions, states or even cities. It is suitable for small businesses with smaller marketing budgets to better judge their customers. It is also used by multinational companies to tackle cultural differences in different countries.

 Behavioral segmentation: Customers are grouped on the basis of their behavioral patterns such as purchase frequency, brand loyalty, engagement, purchase occasion etc. This model has been extensively used by e-commerce platforms to create customer profiles and group them.

Though these models provide a basis of classification, customer segmentation can be more complex. Most companies employ a combination of these models to select profitable customer segments.

Why segment your customers ?

Better focus on customer

Focusing on delivering value to a particular customer segment can help in designing and delivering products that meet customer’s specific needs. This customer centric approach would result in higher customer satisfaction and product adoption rate.

Increased competitive advantage

It is rather simple. More focused you are on delivering customer- centric products, the more value you create for the customer. The more value you create , the more attractive you are to them. Providing products that cater to specific needs of a customer segment would help accumulate more market share as compared to subpar competitors.

Better utilization of resources

Identifying the most and least profitable customers can save so much money and effort while conducting marketing campaigns. Prioritizing a high value customer segment can help in maintaining brand loyalty by constantly improving products and services. It can ensure higher profits and lower costs.

Handle saturation of the market

While concentrating on a new customer segment you may even discover areas with significant scope of growth. This could be an opportunity for your business to acquire market share in a niche market. In a market that has been saturated , creating a niche and serving customers in that particular segment can be a differentiating factor for any business.

Capture new markets

Companies often target new customer segments by introduction of new products designed for that particular segment. However, it must lead to dilution of brand image. Many companies overcome this by introducing new brands designated for different segments of customers. Examples include Unilever which uses different brands to reach different markets or FedEx which uses different brands to provide different services.

Embrace market changes

Product life cycles are getting shorter. Once popular products are becoming obsolete quicker with faster technological advancement. For companies that are exploring new market possibilities to stay in the game, embracing a new customer segment can be the way to go. An interesting example is PepsiCo. Upon seeing that the market is shifting to healthier options, the multinational snack and beverage giant acquired health friendly brands like Quaker Oats and Tropicana.

Do customer segments remain the same over time ?

No, the nature of customer segments are always changing. For example, the product consumption patterns or product preferences of a middle-class family today is very different from that of the previous decade. With exposure to global trends and increased availability of a wide range of products, the needs and wants of each customer segment is continuously changing. New niches markets may develop that would require highly customized products.

How to identify and target your customer segment?

Different businesses have followed different methods to segment their market, some pretty complicated while others simpler alternatives. Given below are steps involved in identifying and targeting customer segments for SMEs.

Practical steps to identify and target your customer segment..Step 1 : Conduct a detailed market study. Step 2: Choose a suitable segmentation model.Step 3: Gain a clear understanding of customer expectations in the chosen segment.Step 4: Product design, development, launch, and marketing to attract customers within the segment.Step 5: Collect regular feedback and improve product offering

Step 1 : Conduct a detailed market study

A detailed market study is the most essential step to understanding your customers. It gives a clear picture of the market size, key competencies required, existing competitors, risks, and customer behavior. The data for the study can be collected from online resources or through field research. Expertise provided by business consultants and market research experts can also be valuable.

Step 2: Choose a suitable segmentation model.

Based on the insights from the market study, a business needs to split its customers into segments. This could be demographic, behavioral, psychographic, geographical, or a combination of these. The segmentation needs to be clear and practical. A niche market can also be identified in this step.

Step 3: Gain a clear understanding of customer expectations in the chosen segment.

In this step, the business needs to study the customer segment in detail by understanding the market size, recent trends, and expectations of service quality and value delivered. A clear idea of the competitor dynamics and expectations of the customer segment would help in developing an effective strategy and a successful business model.

Step 4: Product design, development, launch, and marketing to attract customers within the segment.

All aspects of the product must be created to meet the specific needs of the consumer. Marketing campaigns must be carried out through appropriate channels to targeted customers.

Step 5: Collect regular feedback and improve product offering

Feedback must be collected regularly to track customer satisfaction and to assess their changing needs. Analyzing sales patterns, customer behavior, and feedback can help in identifying product shortcomings and introducing improvements in the product offering.

Conclusion

Staying relevant in the market and maintaining a competitive advantage can be challenging in a rapidly changing business environment. A customer-centric approach and targeted marketing activities would be essential in differentiating you from your competitors. 

Every business, irrespective of how big or small it is, needs to be in tune with the expectations of the market to survive the implications of today’s rapidly changing business environment. Therefore, a customer-centric approach and targeted marketing strategy need to be developed to exploit the opportunities presented by the market.

With an extensive experience of serving over 100 clients across numerous industries, we continue to help businesses transform into successful ventures.

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Why You Should Do An Industry Research

Why Industry Research Matters?

Many times, promoters of new ventures ignore the trends that are happening in the industry on a global and national scale. They fall so much in love with their business idea, that they get short-sighted and see only the opportunity at hand. This can lead to very sad consequences. Imagine spending millions on a venture that gets disrupted by new technology or a shift in customer preference, and the venture goes out of business. If only the promoter had the common sense, to look up to the industry and see a Tsunami coming, he could have spent that millions of investment, his time, and effort on something that had a better prospect. 

This is applicable to those managing businesses at the moment. Before embarking on major re-investments or expansions, you need to study the future of your industry. If it has disruptions coming up, better shift that investment and effort, to something that has better prospects.

Doing research on your industry is not all about preventing a disaster from happening. It can also be a good means to identify new opportunities.

5 Reasons Why You Should Do An Industry Research

Industry research helps in changing ahead of your competitors.

It is common sense that you need to do things your competitors are not doing to stay ahead of them. Sometimes, these new measures or initiatives may not be things that can be done the next day. Especially if it involves substantial investment into say production, infrastructure or new training and grooming of staff etc.
So if your business is able to find a new disruption on the horizon, and you take the time in advance to invest and be prepared for it. Then when it happens, your business will be ready for it, while your competitors will need months to be in your position. By this time, you can capture their market share.
When consulting new ventures, we at AASC, ensure we do Industry trend studies in our Market Feasibility Studies, to ensure that such opportunities are not missed. Also when providing management consulting services to existing businesses, we do a process called Market Audit, where apart from studying the market, competitors and the customers of the client, we also study the developments in the industry to provide apt advice for the present and future.

Industry research helps in becoming a market leader

To know where the market leads and by acting on the clue, means naturally becoming the pioneer and the market leader. 

Industry research helps in better branding

Becoming a market leader, a pioneer or a thought leader creates a strong brand image among the target customer segments. It also makes the competitors identify your business as an industry leader.

Industry research helps in better understanding customers

Industry trends are usually triggered by customer changes or technological changes. Or industry changes triggered by customer preference changes, triggered by technological changes. Understanding these changes in customer segments or preference, helps in better communication, promotion, advertising, implementing internal changes and host of other important preparations. 

AASC assists businesses in these changes by studying these trends, and analysing its impact on the business and making strategic and tactical recommendations. And assisting your business to implement and manage the implementation of the recommendations.

Industry research helps in the diversification 

Industry research reveals the possible changes that can result from factors affecting the industry from technology, politics, climate, laws and customer preference changes. Every change is an opportunity. It’s about a river changing its course, not drying up. So knowing the industry trends means identifying new opportunities and diversifying into those areas. In certain cases, such opportunities can be beyond the capacity of your business (technological, knowhow, resource or capital constraints). In such cases, the diversification can be to a totally different industry. 

AASC is a Business Strategy & Management Consulting firm that serves Promoters to study, plan and set up new ventures, and Entrepreneurs to manage or grow their business, in a professional manner. 

To know more about AASC services for new ventures, please visit https://aascglobal.com/consulting-for-new-ventures-and-startups/

To know more about AASC services for businesses, please visit https://aascglobal.com/consulting-for-business-growth-and-expansion/

Call: +91-7558-900-800 or email info@aascglobal.com

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Location Does Matter

One of the biggest mistakes that promoters make, is falling in love with a business idea and believe that the idea will succeed no matter where it’s based.

Many a time, entrepreneurs start businesses they “think” people want, and get so hyped up about it. So much so that, if they didn’t get the right place, they start anywhere available, believing that customers will come to them. And that might not actually happen. The business fails.

Promoters spend a lot of time, sometimes even years, trying to find that one big idea that will click. A business idea is an opportunity that has potential in a market. But having a ‘Eureka’ moment is not enough to jump-start it as a business. 

For a good business idea to win, it has to satisfy several criteria. In this post, the ‘Location’ is our topic.

What is the point of starting a business where there are no target customers? That is why, when it comes to location, the right market has to be selected. So what is a market? It can be a village, a city, a district, a region or a state, or even a country or several countries. But it needs to have the target customer segment in it.

Once the market is selected, comes the second step. The exact location of serving the clients. This is specifically important where customers or clients have to physically visit the premises. 

The location in the market is crucial. It has to be located where it’s closest to the target customer and is easily accessible and visible to them. That is the reason why shops that are based in the right street but the wrong building fails. Or based in the right building but the wrong floor fails. Or based on the right floor but the wrong area fails. Or based in the right street but wrong visibility fails. It’s a very important matter and it’s a shame when a great business idea fails just because the location was not right.

So why do entrepreneurs make this mistake when it sounds like common sense? Several factors can play here.

One reason is the non-availability of space in the ideal location. In which case, we as Management Consultants would advise not to start now and wait for the right location to come up, or move into another market where the right space is available.

The second reason is the high rental of the properties in the right location. This is a tough reality and one has to be careful here. When faced with such a situation, the entrepreneur has to evaluate how much rent is viable for the business. This might be complicated for most entrepreneurs. In such cases, it’s ideal to engage management consultants or management consulting firms (like AASC) to do a detailed analysis on the financial viability of the location, and check if that rent is viable. Sometimes, a location that has high rent can still be a profitable option.

The third reason can be impatience to do a proper study. Promoters or entrepreneurs can fall in love with an idea, that they simply want to start ASAP. They get hold of the first property and launch the business there. And as the days pass by and they witness lower footfalls, they realize that the location or the building or the floor is not ideal for their customers. Here we as management consultants, always ask our clients to take it easy and do a proper study. In fact, a typical study at AASC takes about 2-3 months to complete. With the market study taking about 30 to 45 days. With such a detailed study, the pros and cons are evaluated before making a final verdict of not just the location but the business itself. 

The fourth reason can be overconfidence. The illusioned belief that the product or service that the entrepreneur intends to provide to the customer is so much in demand, or the price is so attractive or the quality is so high that the customer will seek them, no matter where they are. In most cases, it does not work. And the business goes belly. But in some rare cases, it can work- for some time. This is when the customers really do need it and they take the pain of reaching you despite the trouble or the inconvenience. But the moment a competitor starts the same business in a more ideal location, all the customers will move to him. Why? Customers are not loyal to any shop or brand, they are loyal to those who provide them what they want, when they want, where they want it, and in the way they want it.

Conclusion:

Don’t kill a beautiful business idea by starting it in the wrong place. This is applicable not just to retail outlets, it’s applicable to any business be it manufacturing, hospitality, service, or education. Even online businesses, have to be careful of the locations they choose. And another place to watch out for is the location in Search Engines, as customers use it to search for businesses. If it’s not on the first page, it’s not in a good location online.

It’s always recommended to start a business after a proper study. Do good market research, select the right business model, design the right management plans and systems and assess its financial feasibility. And since entrepreneurs might get emotionally inclined towards their business idea, and because in most cases promoters are not trained to do these works professionally… it’s better to engage professional management consultants like AASC (aascglobal.com)

So location does matter.

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The Different Generations in Market & Why They Buy

It is a wrong strategy to sell everything to everybody. Our products and services have to be customized to the needs of specific customer segments. Each customer segment has different needs, different pains, different jobs that need to be done, and different aspirations.

They are NOT SAME, hence what they need is NOT SAME.

So what happens when you sell the same to all customer segments? They will buy from you as long as they don’t have an option. And switch to a competitor the moment the competitor arrives with customized service or products. That’s the story of “successful” businesses having sudden death.

A study by McKinsey found some interesting insights about what drives consumption among each generation. And it’s worth knowing.

Consumption is viewed differently by each generation. For example, Generation Baby Boomers (born between 1940-59, those aged now at 60 to 79) viewed consumption as an expression of ideology (influenced by the global political turmoil of those times).

Generation X (born between 1960-79, aged now between 40 to 59), views consumption as a symbol of status.

While Generation Y or more popularly known as Millennials (born between 1980-94, now aged between 25 to 39), views consumption as an experience.

The youngest generation, Gen Z (born after 1995, that is aged below 25), views consumption as a search for truth. Their search for authenticity generates greater freedom of expression and greater openness to understanding different kinds of people and views.

So What Does It Mean To Your Business?

As an entrepreneur, you need to know who your customer should be. Which generation they belong to. And what prompts them to like your business and why they will buy from you.

Avoid targeting everybody. It doesn’t work long-term.

Now you know why they buy. Customize your business accordingly. The drive ahead is profitable but never easy.

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Next Retail Disruption: Brands Will Facilitate Sale of Used Products & Renting Them

We are all familiar with people buying second-hand cars, mobiles, books, etc. usually these are sold by third parties – not the companies themselves.

A major shopping and lifestyle cultural shift will happen. It can disrupt the way we shop.

Possibly this could be the next major disruption after online shopping came into existence.

So What Is Driving This Disruption?

New business models are disrupting the old models, as the customer preferences are changing. Generation Z and Millennials, who are inclined towards sustainability, experiencing life, and less inclined towards amassing assets, are embracing the idea of buying quality used products and selling them back (when not needed, instead of keeping them forever) or renting used products.

The success of Uber, Airbnb, Patagonia, and many others are good examples. This trend is soon to catch up, in all other industries, including furniture and even cloths & accessories. Buying used products or renting dresses etc are not seen with interest by customers who are Gen X or those earlier. But with Gen Z and Millennials (the growing customer segment) are very much open to using rented or used products. This is going to be a cultural shift in the shopping.

But the disruption is when, the brands themselves buy their unused products from customers and resell them in the market as seconds or on rent, by ensuring quality and certifying it. This is the major disruption to happen across the industry.

A McKinsey report states that the best data out there shows that 33% of the Gen Z and Millennials did some type of resale purchase or rental in 12 months. Now that’s a huge business opportunity.

Participation in that market is growing by 40% year over year. That’s fast growth.

But will brands offer to take back their products and reselling them, affect the sales of their new products (cannibalization, as it’s called) or affect cashflows as they buyback?

Not necessarily, if properly planned.

Companies need not buyback. Instead, they can offer gift coupons in return. This means the customer will use the coupon to buy something new as well. This is a win-win for both the buyer and the seller. Besides, it is a good opportunity to be connected with customers always.

As for cannibalization, it need not be so. The fact that the products can be given back to sellers after using, reduces the decision barrier for customers to try new things. The worry of “will it be a waste”, doesn’t bother them anymore. This could create an explosion of experimental buying from the customers. Thereby increasing sales and profitability.

So how does this affect the present business models of businesses?

Be proactive: Explore how you can enter this space. What can be bought back and resold? What can be rented?

Customer Segment:
Which customer segment should be attracted to this? Can a present “non-customer segment” be targeted? How to customize the business and its shopping experience to attract them? Will it affect the sales from the existing customer segment?

Product Quality Review: If a product has to be sold and resold, it has to be of good quality. Do your products have it? How many cycles will it go? What can be done to improve it? Businesses have to build products that are more durable and sustainable – so that they can have a long life. This can be a shift from the present “use and throw” products to more sustainable and durable products. This can save the environment.

Process Change: Study what process changes need to be implemented? What new activities need to be undertaken? Does it need resources and infrastructure? Businesses have to have a team or department, to accept the customer goods, quality checks them, make repairs or cleaning, repackaging it, new showrooms for it or dedicated places in existing showrooms, branding and marketing it, etc.

Re-Branding: The new service and its impact on the public should be structured to ensure brand images are not destroyed overnight. It has to be planned well to sync with the Gen Z and millennials who will be its main customers. Strong brands will have a boost, as more customers will opt for branded products as it available even on a rent basis.

New Channels: Businesses and entrepreneurs have to be ready with the channels for the new product line- the resale buying and selling.

Embrace Technology: Technology will also have to be involved to manage its e-commerce sale.

In short, for customers who are premium brand lovers who can’t afford them, good times are ahead.

For entrepreneurs, who are struggling to get a higher market share, this is a good opportunity to disrupt and penetrate the market.

Study -> Structure -> Disrupt ??