Defining markets and segments

Markets are defined simply as customer groupings. Adding more detail to this simple statement, from the perspective of your product, different customers fall into different choice groups. Each choice group decides to interact with and purchase products based on a different set of criteria. The official term for each customer grouping is a market. In a simple example, large households tend to buy milk in larger quantities than smaller households. From the perspective of the milk supplier, these are two different market segments: large and small households. In reality, developing market segments involves much larger set of variables. And your job as a product manager is to determine which market segments exist for your product and which variables are important to distinguish one segment from another.

The markets that you determine are the most interesting for your product are your target markets. In the milk example, if you produce gallons of milk, then larger households are your target market. Smaller households are not your target market.

Deciding on which target markets are valuable is the process of segmentation. To segment your market, you divide your customers into groups depending on the attributes they collectively share. These attributes are common needs, interests, and priorities.

Determining market segments

To begin the process of segmenting your market, the first decision is typically whether the product is oriented toward consumers (B2C) or businesses (B2B).

• Consumers: If your product is sold primarily to consumers, market segments are divided by the following initial attributes
  • Demographics: Age, sex, and income.
  • Psychographics: Different personality traits (such as outgoing, competitive, or homebody); values (such as family-oriented or live for today); and attitudes, interests, and lifestyles (such as urban, suburban, or rural).
  • Verticals: Interests such as hobbies, expertise, and education.

• Business: If your product is sold primarily to business, market segments are divided by the following attributes
  • Firmagraphics: You can subdivide companies by their industry, location, size, structure (such as LLC, corporation, or nonprofit), and performance.
  • Verticals: B2B segmenting commonly focuses on the vertical attribute because it’s the core business a company conducts (for example, telecommunication, construction, software development, or insurance).

Additional factors that you want to take into account include the following:

• Geographical segmentation: Where are your customers? What town, state, and even country?
• Cultural segmentation: Specific cultural and religious behaviors can help you distinguish the actions of one group from another.

Whenever you can distinguish between two groups of customers such that you need to change the way you market and communicate with them, you have different segments.

To bring segmentation to life, fill in the segmentation worksheet provided in Figure 5-1 for a product that you’re familiar with.

What is included in a persona description

Persona descriptions include the following information. Use Figure 5-2 to follow along with an example.

• Goal: What is the persona trying to accomplish? Frame the goal in the language of the customer, not the product: “Aneesh wants to buy the product as quickly as possible.”
• Role: What’s the persona’s role as part of the process of selecting a particular product? Flip to the section on persona roles for more details about this topic. For example, “Michael’s role is as a buyer of this product.”
• Background: Age, education, salary, and family status all may make a difference in how someone perceives products. Remember: Here you’re looking only at the aspects of a persona’s background that matter for your product. For example, the fact that a persona likes having credit cards that accumulate cash back may matter when she buys gas, but her marital status probably doesn’t.
• Attitude: What attitude does your persona have? Does she consider herself smart? Well read? Clumsy? The attitude should relate to the product in question. For example, clumsy would be an important attitude to track if you are the product manager for roller skates.
• Behavior: Faced with new technology, is your persona adventurous and able to figure out things on his own, or is he cautious and insistent on reading manuals?
• Insights: Insights covers the “anything else that matters” category. What other insights about this persona should your team be aware of? For example, if your product deals with sensitive personal information, has your persona had her identity stolen? Is she naïve about passwords, using “Password123” everywhere?

Developing personas

While useful, the process of developing great personas may take an extensive amount of time. That doesn’t mean that it isn’t a worthwhile effort. Here is a useful process for getting you going.

Observing customer visit courtesies

Visiting customers means being on your best business behavior. Here are a few simple guidelines to create a good impression for your customer during your visit:

• Arrive on time. Plan to get there a few minutes early so you can park, find the right building, and, if necessary, be moved to another building for the actual meeting.
• Dress appropriately. Depending where you work, casual dress may be typical. Even if your customer is wearing shorts, no shoes, and a ripped t-shirt, you should dress up. If the environment is casual, that means a jacket and dressed-down pants are appropriate. In more buttoned-up environments, suits work well. In typical business environments, women often dress one level up from whatever the men on the team are wearing.
• Be personable. Ask about your contacts as individuals before tackling the subject at hand. Starting with small talk convinces them that you care about them as people as well as customers. The people you’re visiting relax and share more details if you start with pleasantries.
• Be timely. If you asked for 30 minutes, leave when your time is up.
• Say thank you. Send an email or a card as soon as possible. (The latter is more memorable.) Outline what you discussed and follow up promptly on any actions you took after the meeting.

Interviewing customers

It’s a good idea to bring others from your team with you on customer visits, such as your user experience designer or engineers. If you bring engineers, make sure you choose ones who know enough not to talk about future product designs (the customer might assume these are commitments being made about what will be delivered) and who really want to listen to customer feedback.

Use customer visits as a perk for developers who do a great job. It allows them to travel with funding from the company and it gives them a chance to get a break from their routine and get out of the building once in a while.

Visiting customers is a great way to get feedback. Doing it well builds long-term benefits for both the customer and you. Follow these guidelines to get the most out of your interview:

• Keep a consistent process.

  Include these steps:

  • Goal: What’s your goal in conducting the visit? What are you looking to discover? Remember that as your discussion proceeds with a customer, new information may be uncovered. At that point, follow the customer’s lead and explore the new information without being tied to a rigid line of questions. You are effectively conducting market research. Read Chapter 6 for more details about market research guidelines.
  • Preparation: Prepare a list of guideline questions ahead of time and make sure to bring them with you. (Check out the nearby sidebar “Great customer interview questions” for a few suggestions.) If, during the interview, certain questions don’t make sense, don’t ask them.

• Utilize two roles during the interview.

  No, we don’t mean good cop/bad cop. Know going in which team member is the interviewer and which is the observer. If you are unable to source an observer to join you in a customer interview, go anyway.

  • Interviewer: This person asks the questions. Her job is to keep the conversation going as naturally as possible.
  • Observer: This person takes notes as she listens to the conversation. On occasion, she may notice that the interview has gotten off track and is missing a key question. The observer can then either bring the question up casually or pass a note to the interviewer. In general, bringing the question up as an “Oh, by the way…” comment helps the interview go more smoothly and naturally. After the point is made, the observer must return to his listening role.

You want interviews to be as close to a natural conversation as possible, albeit with a goal in mind. Of course, unlike most casual conversations, you also want to have some tangible record of what you discussed. To best achieve a balance between these two desires, take notebooks and, with the permission of the interviewee, possibly record the conversation. Most customers agree to have the conversation recorded as long as they know that it is only to share with your team members.

Try not to use a laptop to take notes though: The physical barrier of a screen, not to mention the sounds of a keyboard or mouse, can be very distracting and get in the way of the interview process.