Market segmentation is one of the fundamental building blocks of a prudent growth strategy for professional services firms. Segmentation defines and subdivides a large homogenous market into identifiable segments which have similar needs, wants, or demand characteristics.
Professional services firms can segment in many ways. Unfortunately, most firms fall down trying to be all things to all people. It just doesn’t work.
Right now, Toyota’s Swagger Wagon video is a big hit in the McKay household. I share this fact because I recently found myself explaining market segmentation to my children (Don’t ask. Just know that father-child marketing discussions are at least a four-generation tradition in the McKay clan). While my kids (ages 7, 9, and 10) are attracted to the video’s catchy lyrics, upbeat rhythm and comical storyline, I love the video because it is one of the best and most creative illustrations of market segmentation I have seen. Before I get to Swagger Wagon, let me say a few things about segmentation.
The best market segments share three qualities:
- They have similar attributes, wants or needs. (This gives you scalability.)
- They are growing. (This provides opportunity.)
- They are profitable. (Need I say more?)
There are several reasons market segmentation is fundamental to efficient growth and marketing effectiveness:
- Segmentation is client-centric. The best client conversations are one-to-one. Segmentation allows you to speak to specific needs of individuals, while sustaining the efficiency of one-to-many communication (watch Swagger Wagon).
- Segmentation increases profitability. Specializing gives you economies of scale in systems, marketing spend and service (think H&R Block).
- Segmentation enables faster growth. Focusing on a specific subset of needs provides clarity of message and the development of expertise (think Starbucks and coffee).
- Segmentation builds stronger brands. It helps you to clearly demonstrate how you can help and what you do (think Dent Doctor.)
- Segmentation reinforces culture. Focusing on client needs aligned with your “Why” engrains the “Why” in the organization and mutually reinforces the brand and culture (see Simon Sinek’s video on “How great leaders inspire action” on TED.com).
- Segmentation streamlines marketing and communication. Focusing on a specific subset of needs or attributes provides clarity of message (think Accenture and high performance).
One of the key attributes that prospects look for when selecting a consulting firm is a feeling that the consulting firm understands “me” and “my business.” Just listing “technology” under an industry tab on your website, posting a few whitepapers or saying you specialize in “family-owned” businesses in a brochure does not come close to building credibility, and most importantly, connection. You and your prospects already know that.
I encourage you to take a few minutes to watch Swagger Wagon.
Pay attention to your reaction. Does it excite you? Annoy you? Do you connect with it or wonder what the heck it is trying to say? Then ask yourself these questions about the video:
- To what sub-segment of the market is it speaking?
- What attributes are important to the segment?
- How are the attributes demonstrated?
- Do you think the video is effective?
- What does the video do for Toyota? The mini-van segment?
Now ask these same questions about your firm or practice. Your answers might surprise you. At a minimum, they will guide you to re-think how you are going to market.
Love it or hate it, Swagger Wagon illustrates the art of segmentation beautifully. For me, it speaks to a market segment of which I am proud to be a part. Just ask my precocious kids.