Monday, 11 April 2011

Lessons from dog food - if you're not doing segmentation, you're not doing marketing

What does "marketing" mean? My guess is that you'd get a lot of different answers to that question. Marketing is something we think we understand from general knowledge and from being the target of so much of it in our daily lives. We hardly need to have it explained to us. How true is that?

Once, while working for a previous employer, I was asked to conclude a contract with Cranfield University, to enable 20 members of the Marketing department to attend a two week residential course on strategic marketing. Somehow, in return for my help, I managed to extract a promise that I could attend the course. 
I wouldn't pretend for a minute that a two week course taught me marketing, but it did teach me that marketing is a serious discipline which has become highly professionalized and that there is much more to it than we experience as consumers. 

A large proportion of the course I took at Cranfield was based on the work of Professor Malcolm McDonald. You can read about this more fully in his current book - http://amzn.to/ea0FKU. As he puts it, "the central idea of marketing is of a matching between a company's capabilities and the wants of customers in order to achieve the objectives of both parties". The marketing process is then described as (i) defining markets (ii) quantifying the needs of customer groups (segments) (iii) determining the value propositions to meet these needs ... etc


A key part of this process is what's called "segmentation", which means grouping together customers based on their needs. To be meaningful, a "segment" has to reflect a genuine set of needs of a particular group of customers. A classification that groups customers together in a way which is not grounded on their underlying needs may be a legitimate way of organizing them, but isn't a real segment.


That's a dry and technical explanation, so let's explore the idea through something more accessible. How about dog food. 


Some dog food is sold as being suitable for small dogs. You've probably seen the commercials on TV. But small dogs cannot be a real segment. Why not? Well there's a first level, obvious answer. Dogs aren't consumers and they don't have any money, so who cares? Let's ask the right question. Can the owners of small dogs be a real segment? It's tempting to think that they might be, but the answer is no. Unless size is a proxy for something else, why would the size of a dog drive the needs of its owners? 


Let's propose an alternative suggestion for some real segments. Some dogs are working dogs, either on a farm, as sniffer dogs, as guards or as guide dogs. The owners of these kinds of dogs have a similar set of needs - the dog has a purpose and they will buy accordingly. Some dogs are family pets. The dog is a companion for family members, again something which will determine how the owner buys. Some dogs are fashion accessories - bought by the likes of Paris Hilton and those who want to project the same image. Some dogs are substitute children, on whom the owners will lavish money. No doubt there are other segments and perhaps each of the ones I've listed can be further sub-divided.


If you don't believe there's something to this set of proposed segments, ask yourself if a farmer in the Welsh hills would buy their sheep dog a Swarovski studded coat. I doubt it, but certainly there is a market for luxury coats for dogs. You just need to aim them at the right segment.


Whatever the product or service it is that an identified segment needs, you position and price the product or service accordingly. At this point, it's important to note that there are times when the price needs to be high or the product won't sell.  If you take your partner for a special celebration meal at a fancy restaurant, you don't want the waiter saying "I can cut you a great deal on the special". It's going to spoil the moment. I've heard the head of marketing at Prada explaining on TV that certain handbags won't sell if they are priced at less than $1,000. Some items need to be expensive to be worth having.


So, how does all this apply to lawyers? 
In an immortal quote, Neil Rose (@legalfutures) puts it like this: "solicitors are to marketing what Julian Clary is to cage fighting" (see http://bit.ly/fQ04oY). That may be a little strong, but it is certainly memorable. 

Law firms vary greatly in the sophistication of their approach to marketing, but nobody could describe the sector as marketing-led.
I think a lot of firms make the same kind of mistake as the sellers of the dog food for small dogs. They don't base their marketing on real segments.

As someone who spends large seven figure sums on legal services, I'm the target of a lot of marketing from law firms. Perhaps I'm in the segment of dog owners that wants a faux diamond coat in electric pink. Or perhaps I want an excellent whistle that can be heard across the valley. Judging by the rather random nature of the marketing I'm subjected to, I can tell you with certainty that, when it comes to understanding which segments I'm in, not many people in law firms are trying to find out.


Surely it's time for lawyers to get serious about marketing and professionalize their approach.

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Next time, I'm going to argue that manufacturing cars has something to teach smart professionals like lawyers. The post will be called: "Toyota's manufacturing system. Even the doctors are using it".