Target Segment has many definitions, and one of the definitions can be “Group of customers to whom same product/service will appeal”. Generally, Target segmentation is based on the product type, by price point, demographics, psycho-graphics etc.. Design Thinking too has these research methods and data, but we as designers try to segment based on the needs, jobs to be done in different circumstances and emotional quotient.
An example from the book of Clayton Christensen
A Quick-service restaurant wanted to improve its milkshake sales and profit.The chain segmented its customers by characteristics of existing milkshake customers. They explored whether making the shakes thicker, chocolatier, cheaper or chunkier would satisfy the user better. The chain got clear inputs, but none of the improvements to the product altered sales or profits.
They approached designers to do a user study.
“As a designer we believe in observing users, acting like users, spending time with them. Then we would like to speak to customers, collecting data, insights indirectly through stories from the users”
After spending hours in the restaurant, traveling along with some users to their places, they chronicled the data. They recorded the time of each milkshake purchase, what other products customer purchased, reasons behind the same, whether the consumer was alone or with a group, whether they consumed in the premises or drove off, and so on.
“The most surprising insight was half of all the milkshakes were bought in the early morning. Most of the time, the milkshake was the only item these customers purchased, and it was rarely consumed in the restaurant”
Most of these morning customers faced a long, boring commute and needed something to make the commute more interesting. They were not hungry, but if they did not eat any, they would be hungry by 10.00AM. They also have time constraints and were in a hurry, were often wearing the work clothes, and most had only one free hand since they will drive.
When customers looked around other options for the morning commute, eg. Bagels, got crumbs all over their clothes and the car, banana-but eaten too fast and did not solve the boring problem, Sausage, ham or egg sandwiches that the restaurant sold for breakfast made their hands and the steering wheel greasy, doughnuts didn’t last longer.
“So, milkshake did the better job. In customer’s mind, the morning milkshake competes against boredom, bagels, bananas, doughnuts etc…”
So, how will you make their life easier? Quick instant service, Quick Billing, self-servicing machine, Can we make the shaking bit thicker to last long, can we swirl in tiny chunks of fruit to provide healthy value and increase the time of consuming, etc… Solutions can be any which has to meet user’s needs and with the resources in the restaurant.
Similarly, if the team did research on people who commuted and didn’t take milkshake and those factors would have helped them to arrive at a better solution. Not sure whether they did, but sales got turned around. Through research, they also identified another segment and solution for the same, which I’m not covering now, as the post would be longer.
Honda Super Cub in the USA
In 1950’s Honda wanted to enter USA Bike market. During that time, American Bike market was small and dominated by Harley Davidson.
Image Source: Wikipedia
“Motorbike riders are generally seen as outsiders, an image shaped by Hollywood”
Honda entered the market with 250cc, 305cc larger bikes like Harley Davidson since Americans travel longer distances, unlike Japanese. But Honda’s bikes were not robust enough and started getting into a lot of maintenance troubles. The bikes were not meant for long distance travel. Their sales were terrible.
Meanwhile, the Honda staff in the USA started driving 50cc Supercub in the streets, hills, ran errands. Supercub started getting people’s attention.
“When you become a user, you live like a user, you can connect your product easily with the user. Your needs are your user’s needs”
Since staff lived like a local people, among them, they could identify the target segment and their needs.
“The team identified that there was a large segment of people, who wanted an inexpensive, convenient vehicle for short trips around the town”
This Supercub became a super hit with people, and the sales soared sky high.
IKEA furniture retailer
We all know that IKEA provides well-designed, inexpensive, functional home furnishing products at low price. Their target segment is blue-collar employees, Middle-income earners, customers who are happy to trade off cost(not product quality) for service. How did IKEA arrive for this target segment? As I said, when you live like a user, you will understand their concern, needs, limitations and will help you in the effective design of the product, arriving at a right positioning strategy.
“IKEA’s founder Ingvar Kamprad lived in a village, where people have a reputation of working hard, living frugally and making the most of their limited resources”