The virtue and risk of segmentation
We have heard of the saying, “Divide and Rule.” In Marketing, we call it segmentation, wherein we break up our target market by Demographics (who we are), Attitudes (What we think and believe) and Behaviour (What we do).
Segmentation is risky and expensive. We need to ensure that we have created the right target segments, and we need to ensure that we are hitting each segment with the right marketing message.
A marketing message has two parts.
- Identification of an existing need or creation of a need leading to a dissatisfaction with the current state
- That this need can be satisfied by purchasing our product.
When the British segmented India, they fomented competition between various rulers. They catered to a need of one-up-man-ship, playing on the self esteem of the rulers and and their need to feel superior to others. The recognition and reward system (Raya-bahadurs etc., supply of guns, cannons, soldiers, training, preferred customer status) was used to foment dissatisfaction.
After 1857, the princely states were downplayed and there was a need for another segmentation strategy. This was done by using the caste system, the religions and by the promotion of a new ruling class like the Zamindars.
Look at the trend. The cost of creating and maintaining the earlier segmentation of 500 odd princely states was exorbitant and therefore control was inadequate. Each state had different problems and therefore different needs. The French, the Dutch and the Portuguese, therefore, were able to maintain a stronghold in certain parts of India. The 1857 revolt happened because of this lack of control.
After 1857, the segmentation method was pan-India. Demographics using religion, caste and class was more cost effective, as the needs were more homogenised, and the cost of creating the right marketing message was easier. Penetration into these segments by outsiders was difficult as these segments were not open to outside influences. The religious leaders determined the actions of their flock. A Brahmin did not listen to any one but a more superior Brahmin. Although the cost of maintaining a segment was low, the effectiveness of the segment was also low.
The cost of creating a new segment like “class” was high. The British originally created a ruling class and a ruled class. The focus was on the ruling class, and it was hoped that the ruling class could determine the behaviour and buying pattern of the ruled class. This did not happen.
Homogenisation of a market (de-segmentation)
The management dilemma is evident. Segmentation allows for better penetration, but the cost of segmentation is higher.
This is where Thomas Babington Macaulay came up with a masterpiece of marketing strategy of creating a large segment that:
- Could be controlled in terms of behaviour
- Has a common communication strategy so that the marketing message is not lost in translation
- Is large enough to impact revenues and profits.
His strategy is called Macaulayism. Wikipedia says, “The English form of educational instruction was directly imported to India under Macaulay’s watchful eye and the English language was established as the main vehicle of instruction. It was hoped to establish a new cultural elite in the colony and that the ideas of this new English-speaking and British-educated group would refine the vernacular dialects of the country, enrich those dialects with terms of science borrowed from the Western nomenclature and render them fit vehicles for conveying knowledge to the great mass of the population.”
Look at the underlined phrases and you will realise that all the 3 needs mentioned above are fulfilled.
- By creating the English speaking middle class, the British created a market for products of Industrial Britain.
- The British created a society mirroring its own social norms and therefore gained acceptability in India. To penetrate religious strongholds, it created reformers from the middle class that over-emphasised the evils of religion and therefore promote a milder and more “enlightened” form of religion and society.
- The common language allowed the British to use their superior command over the English language to control knowledge dissemination and the marketing messages. It allowed other Britishers to communicate directly with the masses.
- By creating a need to strive towards British ideals and norms, a new dissatisfaction was created, which could only be satisfied by British products, British rewards and recognition ((Knighthood, Rayabahadurs, inclusion in the Indian Civil Service).
In one shot, Macaulay created economic and political control by controlling the attitude and behaviour of an influential mass that cut across most demographics.
I had mentioned some time ago about the distaste with which people regard sales.
I wish to reiterate the reasons why Sales is necessary in a career
- During the placement process, I have observed a direct correlation between the ability to sell and the impress to impress the recruiters.
- These are uncertain times. All companies are looking to retain market share and revenues. Sales is king.
- We need to face our fears. Else, the fear remains in our mind and we somehow create the very situation we wish to avoid. It would, therefore, make sense to not to fear sales.
- You’ll learn to negotiate.
- You’ll learn to close.
- You’ll learn persistence.
- You’ll learn self-discipline.
- You’ll gain self-confidence.
The last five has been mentioned in the following article by Jeff Haden.
The interview is the place where your buyer and you, the seller, meet. A bad salesperson is one who harps about the features of the product, a mediocre salesperson will talk about the advantages of the product and a good salesperson will talk about the benefits of the product to the customer.
What is the process of coming up with the best sales pitch?
This document has a list of questions, which if answered, will help you create the sales pitch about yourself. Remember, however, that the pitch changes with each customer, and trying to use the same pitch on all customers is counterproductive. Do not try to sell yourself in the same way to all companies.
The process of sales is to start with the universe of ‘suspects’ who could possibly buy my product (here I can very creative in creating this universe, thinking laterally helps), then based on some criteria narrow it down to ‘prospects’ – these are persons with whom I will have to seek appointments (called approach), then I will spend some time (2-3 times) meeting these people, then get down to ‘negotiation’ then ‘close’ the deal and then get a cheque (order).
The conversion ratio for each stage is different for different industries. Say, the conversion ratio is 2:1 at each stage (S.P.A.N.C.O), this means for one order, I need two closes, 4 negotiations, 8 approaches, 16 prospects and 32 suspects.
As a poor sales man, I will create 32 suspects and then run though the sales cycle to get one order. Suppose this takes 14 days. If I, then, start the new cycle, I will get an order after 14 days. That means, in a 8 week program, like SIP, I will get 4 orders.
As a good salesman, I will
- start day 1 with 32 suspects,
- start day 2 with 32 new suspects and 16 prospects of day 1,
- start day 3 with 32 new suspects, 16 prospects of day 2 and 8 approaches of day 1
- start day 4 with 32 new suspects, 16 prospects of day 3 and 8 approaches of day 2 and 4 negotiations from day 1…etc.
This means every day I will have to spend time creating a new set of suspects and following up with the funnel of the previous days.
My sales is limited by
- how I manage time each day
- how fast I move from one stage to another, and
- how good is my conversion ratio
To be a good sales person, I need to start thinking, check out the best sales person in my company, talk to him, accompany him …take short-cuts to learn the best practices.
BUT I MUST MANAGE MY NUMBERS AND MY TIME RELENTLESSLY.
If I am waiting in the reception, I should pick up my mobile and start finding out suspects and their details, start talking to prospects to get an appointment….
Good salespeople are NOT people with the gift of the gab, they are people who are focussed on their numbers.
When I talk to MBA students about sales as a career, a distasteful look fleets across their faces. I sympathise. The image of a sales person conning you into buying something you do not need comes to mind. I did hardcore sales for 2 years and then decided never to do it again. Lo and behold, for the last 10 odd years I have been spending an increasing proportion of my time selling. As I grow more senior in an organisation, I am selling my organisation’s products to customers, the organisation’s prospects to shareholders and the organisation’s values to current and prospective employees.
The reason selling seems distasteful is probably because I am dependent on the ‘buyer’ to make a decision and therefore I am in his power. Maybe this hurts my ego. Another reason could be that there is no set formula for success and we need to make a new effort and come up with a new tactic for each sale. This means we need to understand and adapt to each situation as it comes. There is no predictability and so a perceived loss of control.
Is convincing people not selling? Am I not spending my day in and outside office convincing and being convinced. How can I escape selling?
So let us get real. We sell all our life and sales is unpredictable. There is statistically a 50 percent chance of success or failure. If our success rate more that 50%, we are ahead of the curve.
Although there is no formula, I have adapted the old Xerox methodology for selling. This was called the SPANCO method.
Suspect – list of all potential customers that I need to convince
Prospect – a short list of qualified suspects
Approach – what tactics do i adopt for each customer
Negotiate – Come to terms, monetary and otherwise
Close – get a letter of intent or be the only one in the running
Order – get the money or a contract
In order to sell anything, including myself for a job, I can follow this method.
- S: I make a list of all potential companies that I can apply to.
- P: I create a set of criteria to short list the targets. This can be based on location, salary, other perks, culture, learning potential, availability of jobs, seniors’ feedback, competition with other job seekers, company financials, company potential etc. I give weight to each of these criteria in order of importance. I then do my research and give points for each criteria (simple one is: 1 for favourable, 0 for no information, -1 for unfavourable). I then perform a weighted average calculation for each suspect and come up with a short list of companies.
- A: For each company, I find out who to contact, what is the job, how to meet the person, what makes that person tick (what is in it for him), why will they take me, where and when should I meet the person, in essence the who/ what/ where/ why/ when/ how of each prospect. I need to have a 3-line pitch ready. This is when I customise my resume based on the requirement (equivalent to a proposal).
- I do the homework and then I approach the company. Once I have reached a decision maker I make my short pitch and get him to engage so that there is a follow up action. I cannot get a sale done in one meeting and this this stage takes time, with different meetings, different deliverables and maybe different approaches.
- N: Once the prospect is convinced about the product (me), he needs to get the company to shell out money (salary). So a negotiation starts with maybe the purchase department (HR in this case). This is the time when I need to evaluate the relative merits and demerits of the competition, so I need to know who is the competition and I project myself as the ideal product for the job in the most cost effective way.
- C: This stage is when I am the only candidate in the running and the numbers have been negotiated. This is where I am waiting for an appointment letter. Many times, specially like now, these letters can be withdrawn or a renegotiation can happen.
- O: This is when I have actually joined or I have a proper contract with the company, the PF has been set up and I am a bona fide employee.