Circumstance Based Market Segmentation and Activist Products
by Ryan Brubaker
Last month, I finished reading a book titled The Innovator's Solution: Creating and Sustaining Successful Growth written by Clayton Christensen and Michael Raynor. While reading the forum thread titled A Business/Organizational Question to Answer started by Philip Coates, I was reminded of the key principle the authors put forth for companies trying to determine what products their customers will buy. This question was not the one Mr. Coates had in mind, but it is obviously an important one to answer when running a business. Although The Innovator's Solution focuses on the types of corporations you would see listed on a major stock exchange, I believe the principle they propose is very relevant to how the Rebirth of Reason website can shift its focus towards activism.
According to the authors of The Innovator's Solution, "60 percent of all new-product development efforts are scuttled before they ever reach the market. Of the 40 percent that do see the light of day, 40 percent fail to become profitable, and are withdrawn from the market (73). The authors state that this high failure rate is due to companies targeting market segments they defined using attribute-based segmentation. This type of market segmentation consists of defining product attributes and customer attributes and trying to find a correlation between the two. Instead, the authors suggest a circumstance-based segmentation strategy:
Predictable marketing requires an understanding of the circumstances in which customers buy or use things. Specifically, customers--people and companies--have "jobs" that arise regularly and need to get done. When customers become aware of a job that they need to get done in their lives, they look around for a product or service that they can "hire" to get the job done. This is how customers experience life.
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Put another way, the critical unit of analysis is the circumstance and not the customer (75).
On pages 75-78, the authors present an informative case study that clearly demonstrates their point. In the case-study, a fast-food restaurant wanted to improve its milkshake sales and profits. Its first attempt at improvement consisted of a study to segment its market and define profiles of the types of customers most likely to buy a milkshake. It then interviewed different customers based on these profiles to determine what attributes of the product (e.g. price, thickness) would increase their satisfaction. However, after receiving much valuable input, the company's sales and profits remained unchanged.
The company then brought in new researchers who took a circumstance-based approach. These researchers spent a day in the restaurant recording data that existed at the time of the purchase (e.g. time of purchase, other products purchased, where milkshake was consumed, etc...). To their surprise, almost half of the milkshakes were purchased in the morning. Customers who bought milkshakes in the morning rarely purchased any other products and rarely consumed the milkshake in the restaurant.
The researchers later interviewed these morning customers and found out that they were "hiring" the milkshakes to occupy themselves on long commutes to work. Compared to its competitors such as bagels and doughnuts, a milkshake was the best product for the "job," since it required a long time to consume, it didn't create any crumbs and it didn't get the drivers' hands sticky and interfere with their driving.
The researchers were also able to determine that milkshakes purchased later in the day were often bought by parents. The parents "hired" milkshakes as a way to appease their children after having spent the whole day answering "No" to them. However, the thickness of the milkshakes that was so welcomed by the early-morning customers, was a detriment to the children as they would spend too much time trying to consume the milkshakes through their straws. The milkshakes would often be disposed only half-eaten, after the parents decided that the meal time was over.
After completing the circumstance-based research, the restaurant had a clear picture of how it could improve its milkshake sales and profit. Milkshakes purchased in the morning should take longer to consume and take little effort to purchase. This circumstance suggests strategies such as adding chunks of real fruit to the milkshake or providing self-serve machines operated with a prepaid card. Milkshakes purchased in the afternoon should take less time to consume and appeal to a younger audience. This circumstance suggests strategies such as thinning the milkshakes and serving them in smaller, entertaining cups.
It certainly isn't a hard principle to grasp, but circumstance-based market segmentation provides a powerful way to determine whether a company is providing products that its customers will want. But how does it apply to the Rebirth of Reason website?
The first questions to ask are do the customers of this website desire to be activists, and if so, do they find themselves in situations where they would "hire" activist-based products to help them get a job done? I think the answer to both these questions is a resounding yes. It seems clear that the members of this website have a great respect for Mr. Rowlands and have the same desire to see Objectivism become a major philosophical movement throughout the world. And unless these members spend most of their time locked up in their homes, they most certainly find themselves in situations where they could use some product to help them with an activist "job."
Assuming that there is a market for activist products, the next questions to answer are what types of situations do activists face and what products could they "hire" to help them in these situations. There are already several products in The War Room that activists could "hire." Members struggling to find a project to which they can contribute can view a list of current projects that need resources. Members having trouble talking to others about Objectivism can browse several pages listing effective techniques for presenting Objectivist principles.
There are many other products that activists could "hire" for situations they face. Members with effective writing skills could create templates for letters to the editor that other members could use to submit to their local newspapers. Members wanting to start a local club could eventually "hire" the web application Luke Setzer envisions that replicates the functionality of Meetup.com. A web page could be created that allows users to submit activist success stories to provide encouragement and techniques that others could use. I'm certain that other members can come up with numerous other products they could create themselves or would "hire" in their quest to become activists.
As Rebirth of Reason shifts its focus toward activism, the War Room should become the central focus of the website. Members should act as both producers and consumers of the products available in the War Room. The founders of this website have built a solid foundation that can support circumstance-based products. It is up to the rest of the members to help continue the momentum and create a truly activist community.
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