Jobs-Based Market Segmentation Is Not a Remedy to Marketing Malpractice
We share the same frustrations as innovation guru Clayton M. Christensen, Intuit’s Cofounder and Chairman Scott Cook, and the Advertising Research Foundation’s Chief Strategy Officer Taddy Hall, the authors of an article in the Harvard Business Review, “Marketing Malpractice: The Cause and the Cure,” with conventional approaches to market segmentation. They write, “the prevailing methods of [market] segmentation that budding managers learn in business schools then practice in the marketing departments of good companies are actually a key reason that new product innovation has become a gamble in which the odds of winning are horrifyingly low.” They cite scenarios based on product-type and price point (e.g., this group wants a big expensive drill, this group wants a small but expensive drill, while that group wants a small, cheap drill) and type of customer (e.g., small, medium, large businesses; heavy, medium, light users; Baby Boomers, Gen Xers, Gen Yers, Echo Boomers, etc.) as examples of “broken paradigms of market segmentation.”
Since market segmentation, and subsequently targeting strategy development, is one of the least well-developed skills in marketing today, we are happy to see one of marketing’s dirty little secrets exposed in such a prestigious publication. At the same time, however, we have serious concerns about their recommended approach. Christensen et. al offer as an alternative defining buyer groups by the “jobs” that need to get done. “If a marketer can understand the job, design a product and associated experiences in purchase and use to do that job, and deliver it in a way that reinforces its intended use,” they explain, “then when customers find themselves needing to get that job done, they will hire that product.”
Unfortunately, the authors’ job-based segmentation scenario is not new. In various forms, it’s been around for two decades. It sounds identical to the occasions or situational segmentation many companies—McDonald’s, most of the leading car manufacturers, and distilled spirits companies are ones we know of, for instance—already use today. To the authors’ point, there are many, many categories where the specific job the buyer needs to get done, occasion, or situation has a major impact on the needs and problems customers have and are looking for products and services to solve. The authors talk about cars: you might be looking for a car for a child who’s graduating from college; a car that will only be used to get you to and from the train each day; or a car that will impress your neighbors. Wine is another example. You might be looking for a wine for a special date; wine that will impress your neighbors; or a wine for a casual dinner at home. A quick service restaurant is yet another instance. You might go for a quick cup of coffee in the morning; a treat after a great presentation or a hard-week at work; or for fun place to take the kids for their dinner. In these cases and many others, segmenting the market by situation or occasion offers important insights for strategy and programs.
What the authors don’t seem to have considered are the categories where buyer interest in particular attributes or benefits of a product or service is a function of individual needs, problems, pains, preferences, and are not influenced by a distinct or unique event or issue, a time-period, a particular day-part, etc. in the buyer’s life. For instance, whether you are brushing your teeth before a big date, before bed, before going to a wedding, or before going to the dentist, your needs and problems don’t change dramatically. You want to fight cavities, have fresh breath, have a whiter smile, protect sensitive teeth, etc. In the market for life insurance? Whether you’re shopping for life insurance for yourself or for a loved-one, you want a brand with a proven track-record that’s going to be financially solvent for a long time, offers a variety of products, is sold by reputable agents, etc. These attributes and benefits are all technically “jobs” the product does for you, that’s true, and could form the basis of a compelling positioning strategy—the reason for buying you promote to buyers. But we’re not sure they form the basis of a workable market segmentation scheme. There’s too many potential “jobs—five or six different customer groups is one thing, but 25 to 30 is another. Besides, aren’t jobs in these cases more like the product “features and functions” that the authors rightly contend should not form the basis of segmentation?
Noticeably absent from all the authors’ discussion of job-based segmentation is any mention of profitability. Perhaps this is implicit in the authors’ minds—that marketers would consider the feasibility and costs associated with doing a job, as well as a buyer’s price sensitivity—but we find it a troubling omission. It goes without saying that companies want to direct their marketing efforts to the group (or groups) of buyers that represent the highest economic value to the brand. Who in their right mind would want to go after folks who are uninterested in the brand, ultra-price sensitive, and uninvolved in the category? After they have the market segmented into different groups and marketers go to select a target, the question they should to ask is not, “is there a job that a group of buyers wants/needs to get done that we can do for them,” but “is there a job that a group of buyers wants/needs to get done that we can do for them profitably?”
Other profit-related criteria that marketers should consider include whether a segment is sufficient in size to merit disproportionate attention (e.g., 10 to 30 percent); growing rather than shrinking over time; and different demographically and therefore differentially reachable with media, salespeople, channels, etc. The mere existence of (or ability to create) a product or service in a company’s arsenal that addresses a job the members of a particular segment need to get done is not any indication of the potential ROI of marketing investments aimed at one segment versus another.
Most disturbing to us is the emphasis throughout the article on “the job, not the customer” as “the fundamental unit of analysis for a marketer.” “Why do so many marketers try to understand the consumer rather than the job?” the authors opine. Most marketers generally ignore the customer to begin with so to encourage ignoring the customer borders on marketing malpractice itself.
Developing an actionable marketing segmentation that will enable a marketer to select a target group of buyers—which is why you do segmentation in the first place—that has the highest probability of returning a significant return on marketing investment, requires specific, individual-level customer information. If you just focus on the job and not the customer, you’ll likely end up with some internally generated ideas about the jobs customers need to get done, but no information about what their brand preferences, consumption patterns, demographics, and media exposure patterns—in other words, the elements that help marketers create distinctly different buyer groups. Sure, focusing on the job is great for generating new product ideas, but it doesn’t do much for the other elements of marketing strategy.
The most effective way marketers have used the kind of job-based segmentation that the authors describe is to do a segmentation that is based on the customer—identifying the factors most predictive of profitability—and super-impose a job-based segmentation over it. In the categories where the specific job the buyer needs to get done, occasion, or situation has a major impact on the needs and problems customers have, most buyers will move in and out of different segments at different times. In the case of a quick service restaurant, for example, a target buyer might go in the morning for a quick cup of coffee on their way to work every day, go every couple of days for an afternoon treat, and every now and then take this kids out to a fun dinner. By understanding what jobs or occasions for which the most profitable customers might use a product, service, or brand most frequently, a marketer can better tailor marketing programs, products, services, etc. If the most profitable customers for wine, for instance, most frequently purchase the product for special events and to impress their friends, there’s guidance on positioning, advertising messaging and timing, and more right there.
Again, we applaud the authors for raising the issue of poor segmentation as a root cause of routine marketing failure and we think their focus on jobs products and services can do has important implications for positioning and new product/service development. But when it comes to segmenting the market, a job-based approach is not new or universally applicable and a singular focus on the job, as opposed to the customer, is more dangerous than productive.