Implosion Points: Segmenting Markets and Genotypes | Guy Smith

So you have a group of people who don't look at their market accurately. They don't know how to articulate a value proposition, much less fold it into a brand statement. And then they have this problem that they are unwilling to settle for a smaller part of the market in order to assure their success. They can't see the forest for the trees. They can't even tell that there's different species of trees. of trees in the forest, much less that it takes different axes and saws to cut down different types of trees. This gets us into the painful subject of segmentation. Most founders are bad at segmentation. Even the ones who understand it on a conceptual level do not do great segmentation. And the reason is that they are reluctant to sell to something less than their whole market. Segmentation, when you get into the big leagues, is insane. You will end up with multidimensional segmentation models that try to map not only every segment of the market and every subsegment of the market, but each one of the personas that you have to sell to with inside of each one of those subsegments. As a founder, you don't have to worry about it. This is probably as complex as your segmentation chart will ever get. But note that no matter what your product is, you're going to go out to the market and you're going to see that there are different groups that you can sell to. Understand you cannot, in the beginning, sell to all of them at once. You don't have the resources, you don't have the time, you don't have all the features to make a whole product for every segment, so you need to pick and choose. And when you read Crossing the Chasm, you know that you need to pick— That beachhead segment. You need to find that one that's going to be your winner, the one that you can make defensible over time, and then focus relentlessly on that. The other thing that a lot of founders don't realize is that for anything more complex than sand, you usually have one or more, or 2 or more buyers in the buying process. Here's a fun game to play. This Saturday morning, wake up early for a change. Turn on the TV, watch Saturday morning cartoons, and specifically watch the breakfast cereal cartoons, or advertisements. What you see is fun, happiness, animated figures, primary colors. Who's the target market? Kids. Kids. Now go to the grocery store on Monday, find that exact box of cereal up on the shelf, And tell me what the banner across the top or the little badge on the corner says. It says, made with whole grains. Who's the target market that's selling to? Parents. Parents. So even something as simple as breakfast cereals has at least 2 personas that you have to sell to. Now imagine coming up with the next great CRM system and all the different personas you have to sell to. and marketing, and sales, and admin, and tech support, and blah, blah, blah, blah, blah. One of the truisms is that if you do not sell to everybody on the decision matrix, somebody can veto you. When I took over marketing North America for SUSE Linux, Red Hat owned the mind of the techies. If you asked a techie about Linux, they said, oh, Red Hat, yeah, I've got that running on these servers back here. We ran into a problem. If SUSE was going to try to communicate to the techies, we would lose, 'cause that battle had already been lost. So we backpedaled. One of the other personas that you have to sell to for Linux and infrastructure is the CXO, your Chief Technology Officer, your Chief Information Officer. So we devised most of our campaign to talk to those people. That's one way to win a market if you have some stiff competition. Find out who has veto power and find out who can veto the vetoer. The techies could veto Suza coming in, but they can't veto their CIO. And that's one of the ways that we won. So you have to segment. You have to sub-segment. You have to map your personas. You have to map the motivations of your personas, both the logical and the emotional. And then address all of that in your outgoing market communications. Now, sec— yes, go ahead. I'm sorry to interrupt, but where is the difference between genotypes and segments? I mean, how can I differentiate studies, segment and genotype? Great. The question was, what's the difference between a segment and a genotype or a persona. We use genotype in my company, and other people use the word persona. A segment is a portion of the market defined by commonality of need. So in other words, in segment 1, let's say these people have a list of 10 features that they absolutely have to have. That's one segment. If the people in segment 2 only need 8 of those features, but they have 3 other features that they need, They have a different set of needs, so that's a different segment. Genotypes are people. Commonly we use job titles, at least in B2B, to identify who a persona is, but a persona is a person who has a certain specific set of job-related or personal goals that they need to achieve. So in other words, imagine our typical IT shop. The CIO has one set of needs. He has some very strategic thoughts about what he needs to accomplish over the next 5 years in terms of infrastructure, applications, blah, blah, blah. But he also has other goals, like he wants to reduce the total number of technologies in his shop. He wants to reduce his payroll, or at least keep it from growing. He wants to reduce his tech support calls, things like that. The server admin guys, and I spent 10 years being a techie over at NASA, And other places, they have much different needs and desires. They want the hardware to quit blowing up. They want the operating system to be stable for at least more than an hour. Those are Microsoft shops, by the way. I shouldn't tell this war story, but I love it too much. I managed to get a room of 6,000 people to groan in unison. I was on stage with the with the CEO of Novell Corporation during BrainShare, and I had him and Linus Torvalds, the inventor of Linux, off to my left. And part of what I had to do was demonstrate that you could actually, over a network, boot a computer and install an operating system on it. So we've got these big monitors, they flip over to monitor number 2, it's black, because that's the computer that we're going to turn on remotely. And I said, on this monitor here, you see a dead computer, better known as a Microsoft Windows server, in its normal operating state. 6,000 people who hate Microsoft groaned in unison. It's a beautiful sound, it really is. So, back to your question. The genotypes, or the personas, are the people. You have to understand what makes their hearts and their minds go. One of the last real jobs that I had, I got to redefine an organization from the ground up. We sold software which was tied into utilities, and it would alert people when the network was down, or when there were trouble tickets that needed to be answered, et cetera, et cetera. Horrible market, but at the time, we had numerous competitors. When I looked at the key buyers in the 2 segments that we were going after, we noticed one similarity, and that was that they had extremely stressful jobs. So the tagline for the product, and it appeared in all of our advertising, was peace of mind. What does that have to do with software? Nothing. But it had everything to do with those people's jobs. They would see our advertisements. They would see us at a trade show booth. And they could tell from the diagram and the little feature list off to the left what we did. But that's not what we were selling them. We were selling them that this will make your job less stressful. You have to do both halves of the human brain. And that's why you need to know your genotypes. So when you get into segmentation, one of the things that you should do, not always necessary, but I advise it, is to come up with a segment scorecard. And what you do is at a very high level, rough guessing is allowed, you try to calculate how tough it is to sell to people in that segment, how much of the market is left, is it already saturated or is there a lot of bad room, how many tough competitors do I have. Then from that, what is our revenue, what is our cost to sell, what is our cost to support. And what you're going to find out is that there's going to be one or two segments that are clearly better than all of your other choices. If you're still in the design phase of your product, you need to step back, look at those target segments, and figure out what your product doesn't have that it absolutely has to have for those segments. The reason this is important is that by picking the right segment, you're going to have much faster revenues. You're going to have much lower cost of selling. You're probably going to have less tech support and administrative support as well because your customers are going to be very interactive in terms of it being successful. If you don't do this, then you're just guessing. If you walk into a segment where your competitors are ready to kick your butt, if you walk into a segment where the customers go, eh, then you're going to burn out all of your cash and get nowhere.