Did you say customer segmentation? Well, not so fast, please!

Customer segmentation is essential to specify how you will improve your product, experience, and brand for your customers. However, you shouldn’t rush into it… remember that it allows you to “understand what influences their choices (correlation) rather than what causes them to buy your products or services (causality) ¹.” When you start planning your segmentation, you’ll choose an outcome for which you want to better understand the correlations. The outcome on which you segment will guide the choice of factors/characteristics to use in defining, describing, and understanding customer segments. Therefore, choosing the outcome on which you decide to segment is key, and it shouldn’t be too generic if you want to understand the right correlations.

I hope this doesn’t seem like a frivolous detail to you because it could impact the ROI of your segmentation efforts. In fact, if you segment your customers around an outcome that is too generic, you may end up being able to understand and predict common consumption behaviours (that you could have read about in general publications on your industry) rather than comprehending specific ones that are relevant to your product, brand, and experience.

Considering that segmentation is both an art and a science, make sure that you start with the right perspective to scope your customer segmentation. Anything can be segmented—the art emerges when you choose the right outcome along with the right data to include in or exclude from your model. I think a classic management concept may help you improve the relevance of your segmentation. Let’s take a step back…

1. First, answer this question: Which job to be done (JTBD) are your customers hiring you for?

Increasing your understanding of the job to be done (JTBD) that your customers are hiring you for will allow you to specify the outcome you are segmenting on. The JTBD isn’t a new concept—Clayton M. Christensen wrote about it in the early 2000s,^1,2,3 and it has been the centre of the Outcome-Driven Innovation⁴ theory for almost two decades.  However, it’s a concept that is almost always forgotten whereas it should be the first reflection when embarking on anything that aims to improve your product, service, and customer experience. It should come before any attempts at segmenting your customers.

A JTBD isn’t the product or service you’re selling—you need to think further about the context and the different circumtances³ around the buying process. The customer may be trying to achieve something that goes beyond functionality; he or she may need to fulfill a social or an emotional need^1,2.

EXAMPLE – PART I:
To illustrate what I’m saying in this article in a more tangible way, here’s an example about a company I admire: Peloton Interactive^5,6.

Peloton’s founders came up with their idea after experiencing a gap for a JTBD in the market:

“I need to have access to boutique-style immersive training as much as I want while balancing everything else (work, spouse, and kids).”

More specifically, two dimensions could complete this statement:

• Functional dimension: The training must be effective, intense, immersive, and of high-quality. There must be limited scheduling and location constraints.
• Social/emotional dimension: It must be fun. It should provide a sense of community. It should also offer the possibility of competing with other members if desired. Finally, it has to enable customers to balance their other important social interactions.

When segmenting their customers or potential customers, Peloton should have their JTBD in mind rather than a simple outcome such as “needs and expectations toward a gym.”

2. Then, think of what influences (correlates with) customer expectations your JTBD.

Your target customers, their needs, and their expectations vary depending on the JTBD. Hence, each JTBD should have its own customer segmentation. This will allow you to specify the outcome on which you will scope your segmentation; it will guide your choices on what should be included in or excluded from the model to segment your customers. The choices of factors/characteristics to use in defining, describing, and understanding customer segments for a JTBD should take into consideration the context around it, not just sociodemographic characteristics and general behaviours.

EXAMPLE – PART II:
In Peloton’s case, it means that they shouldn’t just segment customers on generic characteristics such as:

• Sociodemographic information
• Training frequency
• Average training length
• Favourite training activity, etc.

Instead, they should also consider characteristics that may influence expectations toward their JTBD such as:

• Average space for training equipment in the customer’s home
• Existing boutique training studio membership
• Level of importance of boutique gym attributes (e.g., music, lighting, social interaction during training, etc.)
• Need for competition (e.g., against others, in comparison to their own performance statistics only, no need for competition)
• The level of importance of data and tracking
• Type of information tracked (e.g., time, calories, km, etc.)
• Preferred training equipment, etc.

As I said in my introduction, you can segment anything. You know you have the right segmentation when it naturally helps you make your strategies and actions more precise. The right segmentation isn’t forced; you’ll smile when you see it. It will be an “aha” moment. The right segmentation allows for greater storytelling around each segment which increases the ease of understanding of segmentation and the segments themselves; thus, it increases the stickiness inside your company from frontline employees to executives.

In conclusion…

As a leader (a product, experience, or brand owner) make sure you are able to write down the JTBD that your consumers are hiring you for (rather than alternatives or competitors). Discuss and observe your customers for a few hours or even days to confirm it. Ask some of your team members and your trusted advisors to do so too. Then, think of the factors/customer characteristics that may influence the needs or preferences for the JTBD. Once you have all that, you’ll be ready to scope your segmentation. You may need to gather additional data before starting, but going fast is never the right way to perform a segmentation anyway.

Notes:

1. Clayton M. Christensen – Harvard Business School Online – Disruptive Strategy – Fall 2020
2. HBR – Know Your Customers’ “Jobs to Be Done” – https://hbr.org/2016/09/know-your-customers-jobs-to-be-done
3. Christensen Institute
4. Tony Ulwick – The History of Jobs-to-be-Done and Outcome-Driven Innovation – https://jobs-to-be-done.com/the-history-of-jobs-to-be-done-and-outcome-driven-innovation-a2fdfd0c7a9a
5. Peloton Interactive – Corporate Website – Section: Our Story https://www.onepeloton.ca/company
6. Peloton Interactive Annual Report 2020 – Form 10-K – https://investor.onepeloton.com/node/7316/html