RESULT OBTAINED
Canonical method
Needs-based segmentation: grouping customers by what remains poorly served
What must be established
A useful analysis keeps its controls visible.
- 01
Express needs as outcomes expected in a usage situation, without naming a solution or a product.
- 02
Have each respondent rate the importance and the satisfaction of each outcome, on the same scale, with a dated sample.
- 03
Keep a segment only if its gaps clearly differ from the others, if it reappears in a second sample and if observable markers make it possible to reach it.
Decision reference
Make the next choice more explicit.
DECISION SUPPORTED
Which groups of customers share the same important, poorly served needs, and which of them justify a distinct offer or strategy?
DELIVERABLE TO KEEP
A map of needs-based segments, with for each one the poorly served outcomes, their gap, its estimated size, its recognition markers and the strategy it would call for.
NEXT ELEMENT TO EXAMINE
CriteriaExplore →List outcomes, not solutions
Asked what they want, customers describe solutions they already know: one more feature, a lower price, a shorter lead time from the current supplier. Needs-based segmentation asks a different question: in a given usage situation, what outcome are you trying to achieve? Each outcome is written as one sentence, with a measurable direction and no product name: reduce a line’s downtime during a breakdown, know before ordering whether the part is available, limit the risk of error during data entry. The list is built through interviews with customers, competitors’ customers and non-customers who manage otherwise, until new interviews no longer add any new outcome. It usually runs to a few dozen lines. This work is useful beyond segmentation: it describes the market in the customer’s language, and it remains valid when solutions change.
- Usage situation
- Expected outcome
- No product name
- Interviews until saturation
Measure the gap, then group customers
Each respondent rates, from 1 to 10, the importance of each outcome and their satisfaction with how they obtain it today. The gap is importance minus satisfaction, counted only when positive. By convention, an outcome is poorly served for a respondent when its importance reaches 7 and its gap 3; these thresholds are debatable, but they are set before looking at the data. Respondents whose gap profiles resemble each other are then grouped. The market average is misleading here. Simulated example, for the outcome know before ordering whether the part is available: the sample gives an average importance of 7.4 and a satisfaction of 6.1, a gap of 1.3 that looks harmless. But a group of 35% of respondents rates 9.2 and 4.0, a gap of 5.2, while the remaining 65% rate 6.4 and 7.2 and lack nothing. The average hides a pressing need for a third of the market: that group, not the average market, defines a segment.
- Importance and satisfaction
- Positive gap
- Thresholds set beforehand
- Gap profiles
Keep a segment only if it serves a decision
A statistical grouping is not yet a segment. Four tests qualify it. It must be distinct: its poorly served outcomes clearly differ from those of the other groups. It must be stable: it reappears in a second sample or in another period. It must be reachable: since needs appear in no file, observable markers are needed to recognise its members, such as site size, usage situation or purchasing channel. Finally, it must be large enough to deserve a response of its own. A segment that passes these tests calls for a different strategy: serve its poorly served outcomes better with a new offer, simplify and lighten the offer for a group served beyond what it asks, or decide not to serve it. Its attractiveness and priority are then judged, with the pages devoted to them. The map is measured again when an offer, one’s own or a competitor’s, changes a group’s satisfaction.
- Distinct
- Stable
- Reachable
- Large enough
DECISION ASSET
Map of needs-based segments
Each candidate segment is described by the outcomes it rates important and poorly served, then qualified: distinct, stable, reachable and large enough.
Outcomes
- Input
- Interviews in a usage situation
- Control
- Outcome or solution?
- Output
- List of outcomes
Ratings
- Input
- Importance and satisfaction
- Control
- Dated, sufficient sample?
- Output
- Gap per respondent
Groups
- Input
- Gap profiles
- Control
- Distinct and stable?
- Output
- Candidate segments
Access
- Input
- Observable markers
- Control
- Can they be found?
- Output
- Segment retained
- Ulwick, Turn Customer Input into Innovation, Harvard Business Review, 2002 (opens in a new tab)Why customers should be asked for the outcomes they seek rather than the solutions they imagine.
- Yankelovich and Meer, Rediscovering Market Segmentation, Harvard Business Review, 2006 (opens in a new tab)A case for non-demographic segmentation, based on needs and tied to the company’s decisions.
MOVE FROM ANALYSIS TO YOUR DECISION
Build a segmentation that makes it possible to choose
MOVE FROM ANALYSIS TO YOUR DECISION
Build a segmentation that makes it possible to choose
RETURN TO THE DECISION SYSTEM
See the canonical definition of marketing strategy→