Segmenting the Market

Chess expert Ron Curry said, “Controlling the center allows you to post active, mobile pieces on strong central squares while denying your opponent similar desirable development.”⁵ His advice about segmenting the board and controlling those segments is a good analogy for what you seek to accomplish in market segmentation—superior influence or bias in the segments most favorable to you. In deciding which market segments to target, you should consider not only the needs, price sensitivities, and buying habits of the customers in each segment but also their behavioral expectations and the norms of their behavioral experiences, which amount to the same thing. What provider behaviors are they accustomed to? What do they expect when they purchase from any provider serving their needs? The answers to these questions should offer insight into the behavioral differences that are possible within each market segment.

For example, until only a few years ago in the healthcare construction industry, every contractor suffered from the perception among healthcare providers that construction companies would cut corners, hide costs, slip schedules, and promise one thing but deliver another. A few forward-thinking healthcare constructors began in the 1990s to move away from what they called the “hard bid” image to become client-focused, relationship-based, open-book, integrity-driven organizations. In short, they based their futures on their ability to create trust where it had never existed before in their industry and markets. Essentially, these companies assessed how their markets perceived their industry; saw a golden opportunity to raise the behavioral bar; and then developed and implemented plans to grow market share by behaving very differently from the industry norm, both in acquiring the work and in performing it. In 1999 and 2000, these companies filled the top ten of Fortune magazine’s list of Most Admired Construction Companies. That’s conditioning the market.

To differentiate yourself behaviorally, you first have to understand the behavioral norms your customers have experienced, what Theodore Levitt would call the expected product.* Those norms may differ from one market segment to the next, so one goal of market segmentation should be to develop an understanding of the provider behaviors to which customers in each segment are accustomed and therefore expect as their normal experience. Next, you need to explore the two extremes of customers’ experiences—those notably unpleasant experiences that cause negative BD and those exceptionally delightful experiences that form positive differentiators. In shaping the behavioral expectations of your company, you want to establish safeguards against the occurrences of those negative behaviors and find ways to encourage or standardize the positive behaviors. But that may not be possible with all market segments. Some segments may include customers whose behavioral expectations exceed what you can affordably provide. So the challenge in market segmentation is to choose segments with customers whose behavioral expectations you can exceed. In short, there should be alignment between your target market segments and your capacity to deliver positive behavioral differentiation.