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.
Josh Kaufman says:
“Year after year, surveys show that “owning my own business” is a goal for over half of the working adult population. Despite that, very few people actually muster the courage to actually start a business. That’s a shame: starting and running a business can be much easier than you think.
The premise of Go It Alone is simple: you can create a profitable business all by yourself, without employees, loans, or venture capital funding. Even better, your new business doesn’t have to be “small”: with some smart thinking and advance planning, there’s no limit to your potential profitability.
The major trend shift that makes this possible is technology: it’s now possible to make use of business services that used to cost tens of thousands of dollars for a few dollars a month. Combined with the ability to hire outsourced help from all over the world in lieu of hiring employees, smart entrepreneurs can make more money, set their own schedule, and choose their own projects. Comparative advantage works.
Go It Alone changed the way I run my business, and I refer to it constantly. If you’ve been wondering whether or not entrepreneurship is for you, read this book.”
Here is the link to the book.
In my coaching sessions, I ask executives to behave as if they are the CEO of their lives. As a CEO you need to:
1. Develop yourself as a product or service that people desire
You are multiple products to multiple markets depending on the role you play. When you act as a subordinate, you need to convince your boss that you are an ideal product and he should keep you. When you act as a boss, you need to convince your subordinates that you are the best boss. Being the best means being the best product or delivering the best service.
2. Market yourself to all customers, internal and external to the organisation
3. Run your finances i.e. reduce costs and increase revenue to more than costs
4. Create your own motivation and recruit people to help you (network)
5. Use technology to make their processes more efficient
You need to improve all the above processes by using the right technology – be it blogs, a rudimentary CRM system, a list of birthdays in your calendar and your to-do list.
I typically do not differentiate between personal and professional life.
This article by Gibson talks about the same thing with reference to empowering employees to act as CEOs.
To quote Gibson, “Giving everyone the responsibility to set their own agenda, prioritize resources, and pull in the right people has also made our office more efficient.”
The following list books are mentioned in Entrepreneur Myths by Damir Perge :
- Out of Control: The New Biology of Machines, Social Systems, & the Economic World by Kevin Kelly. This book will change your way of looking at the world. And yes, you are not in control no matter what you think.
- Bionomics: Economy as Ecosystem by Michael Rothschild. Every entrepreneur needs to read this book. It’s genius. You’ll be humbled by its brilliance. It will change you forever.
- Natural Capitalism: Creating the Next Industrial Revolution byPaul Hawken. This is the Bible for Green Business. A revolutionary book even today.
- The Tipping Point: How Little Things Can Make a Big Difference by Malcolm Gladwell. This is the bible when it comes to understanding anything viral.
- The Web of Life: A New Scientific Understanding of Living Systems by Fritjof Capra
- Complexity: The Emerging Science at the Edge of Order and Chaos by M. Mitchell Waldrop. Running a company is chaotic. You can learn much about management from this book.
- Toyota Production System: Beyond Large-Scale Production byTaiichi Ohno. Forget Henry Ford. The real genius behind manufacturing and operations is Taiichi Ohno. Must read for operations of any business.
- A Study of the Toyota Production System: From an Industrial Engineering Viewpoint (Produce What is Needed, When it’s Needed) by Shigeo Shingo. Shigeo Shingo and Taiichi Ohno are absolutely brilliant. They have changed business forever.
- Six Thinking Hats by Edward de Bono. Re-wire your brain and use your six thinking hats to become a better entrepreneur. Most seminal book on how to use your brain.
- Developing Products in Half the Time: New Rules, New Tools byPreston G. Smith and Donald Reinertsen. Must read for any entrepreneur. If you haven’t read it, you’re losing money and market share.
- The Entrepreneur’s Master Planning Guide : How to Launch a Successful Business by John A. Welsh and Jerry White. The book that started me on becoming a member of Entrepreneurholics Anonymous. I took their class when I was a newbie entrepreneur.
- Eco-Economy: Building an Economy for the Earth by Lester R. Brown. This book will inspire you, depress you and make you want to change the world by becoming green.
- Crossing the Chasm by Geoffrey A. Moore. If you don’t read this book, you’re not an entrepreneur. This is a classic.
- The Machine That Changed the World: The Story of Lean Production by James P. Womack. One of the most exciting books to read if you’re a serious entrepreneur.
- Hidden Order: How Adaptation Builds Complexity by John Holland. Must read for entrepreneurs who manage people. You can learn much from nature.
- Cradle to Cradle: Remaking the Way We Make Things by Michael Braungart. Revolutionary book on changing the way everyone does business. You’ll go green afterward.
- Positioning: The Battle for Your Mind by Al Ries. I read it in college. Still one of the best marketing books ever written. Must read.
- Wizard: The Life and Times of Nikola Tesla: Biography of a Genius by Marc Seifer. One of the three greatest scientists and inventors of all time.
- Biomimicry: Innovation Inspired by Nature by Janine M. Benyus. Business can learn much from nature. This book is a classic.
- Mass Customization: The New Frontier in Business Competition by B. Joseph Pine. One of my favorite books of all time. I’ve read it three times.
- Think and Grow Rich by Napoleon Hill. Your mind is the most powerful asset you have. Never forget it.
- Venture Deals: Be Smarter Than Your Lawyer or Venture Capitalist by Brad Feld and Jason Mendelson. You have to know the art of term sheets if you’re going to get money from a VC.
- The Writers Journey: Mythic Structure for Writers by Christopher Vogler. Everyone needs to learn to tell a story. Write one too. This is the book that teaches you fundamental principles of storytelling.
- The Richest Man in Town: The Twelve Commandments of Wealth by W. Randall Jones. You want to know how the rich got to be rich. This book provides the secrets of how some of the richest men in town got there. Entertaining and inspirational.
- Unleashing the IdeaVirus by Seth Godin. Anything Seth writes, you must read it. Although this is one of his earlier books, it’s a classic. Buy all his books – you’ll thank me later.
- Profit Patterns: 30 Ways to Anticpiate and Profit from Strategic Forces Reshaping Your Business by Adrian J. Slywotzky, David J. Morrison, Ted Moser, Kevin A. Mundt and James A. Quella. Enabling entrepreneurs to detail some of the possible patterns and scenarios in any business sector. At the end of the day, a venture —whether a startup or not, has to figure out how to make money.
- Competitive Strategy by Professor Michael Porter. The best strategy business book; a classic that should be read every year. This book is painful and wonderful at the same time. It is painful because it forces you, whether you want to or not, to think about competitive strategy for your business, and wonderful because you can get ideas on how to compete in the market.
- Competing Against Time: How Time-Based Competition is Reshaping Global Markets by George Stalk, Jr. and Thomas H. Hout. You’ve only got so much time to launch your venture, launch your product or service, raise that money and make it big. Sure, you may think you’re competing against other competitors in the marketplace but you’re also competing against time — time of the market.
- Turtles, Termites and Traffic Jams by Mitchel Resnick. The best way to learn the distributed way of thinking is by studying turtles, termites and traffic jams.
- Lean Thinking: Banish Waste and Create Wealth in Your Corporation by James P. Womack and Daniel T. Jones. This book stands the test of time. It is highly inspiring and educational because it teaches entrepreneurs how to become lean and efficient using the principles of the great Taiichi Ohno.
- Finding Flow: The Psychology of Engagement with Everyday Life by Mihaly Csikszenthmihalyi. In Finding Flow, one of the key points that you learn is that life is not about happiness but actually achieving flow in your personal and business life. Don’t worry — this is not a self-help book based on hype. It is more of a guide to achieving optimal flow.
- Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. No matter how great of an idea you have, at the end of the day, you have to be able to execute.
- Enchantment: The Art of Changing Hearts, Minds, and Actionsby Guy Kawasaki. I’ve met Guy a few times. He’s a likeable guy and this is a cool book. And that’s the point of this book but let me not ruin it. Buy and find out yourself.
- Blur: The Speed of Change in the Connected Economy by Stan Davis and Christopher Meyer. This book will keep you thinking. The authors look at how three factors in the wired world —speed, connectivity, and intangibles —are driving the increasing rate of change in the business marketplace.
- Built to Last: Successful Habits of Visionary Companies by Jim Collins. This is a book about visionary companies. Much can be learned from studying it.
This word has been bandied around a lot, and many companies, colleges and people pay lip service to it. http://en.wikipedia.org/wiki/Social_entrepreneurship
- How do we create a sustainable enterprise that makes profits and fulfills social obligations?
- Can we help uplift the stature of the small town that we came from, where we were nurtured, before the city lights seduced us to the big city?
- How can we make more money that by having a job in the city?
- How can we have more stature and recognition than being a factory worker in a big corporation?
- Can we take the unemployed youth of our town, the girls who are prevented from having a career in another city and make something that will create wealth for the young people of our town?
How I wish that some more mentees used this example, and created a sustainable enterprise in their home towns.
Take a hypothetical example of a road accident that I am involved in. I am being very careful, driving under the speed limit and being responsible. But the driver of the bus that barrels into me was speeding, had a few drinks and thought he had the right of way. Further, he was trying to overtake another bus, competing with that driver to pick up passengers first. The driver of the other bus too wanted to win. Neither wins, but I lose a limb.
What should I believe?
- That it was God’s will, that he has some plans for me or some lessons that I have to learn? Is it karma, or consequence of something that I did in my past or current life?
- That it was a random/ unpredictable/ maybe explicable act, which happened due to a set of mental models created in the drivers who were therefore competing, coupled with their low self esteem which was compensated by the false bravado of a few drinks.
How should I react?
Based on either of the above, should I
- be inert or
- actively forgive the driver? or
- actively avenge my loss of limb by suing the truck company, or
- get the driver beaten up or any such reaction?
Are events random, or are they fated to happen?
If I look at a continuum of fate vs. deliberate action:
I could have, on one end, 100% dependency on God’s Will and the philosophy that everything is preordained.
Whatever happens to me, whether good or bad, is not of my making but “that of our stars,” as Shakespeare would say. I may explain my actions by saying that God put this decision in my mind, and at an extreme, Gods talks to me and tells me what to do – whether it is of positive consequences like Joan of Arc or negative like Charles Manson.
On the other end, I could believe that when I react to an event, I do so on the basis of my mental models and my beliefs.
These beliefs have been created based on my previous interactions with the world and my interpretation or learning from past events.
When I react, it is like throwing a stone into the water, and the ripples of my action impact a myriad of people in different ways. All these people react in different ways to my action based on their mental models and beliefs. Since I do not know their beliefs and how they were formed, it is not possible to predict what is the sum total of all their reactions and what will be the final impact of these actions.
It is sort of a Brownian motion, where random molecules collide with each other and therefore change their path. How people interact or react is based on their beliefs and since we cannot see into their mind, we cannot predict the course of action.
Hence, we would seem like a random event. These are inexplicable/ random/ unpredictable events which have a major impact on life as we know it. These random events are called “Outliers” by Malcolm Gladwell or “Black Swans” by Nissim Nicholas Taleb.
The last such random event was 9/11 according to the Western world.
In the middle of this continuum would be the 50 percent belief, that there is a grand scheme of things, and there is a randomness of nature.
We have to try our best to understand how people would react, but because we cannot be 100% certain, there will be an element of randomness, coupled with an incomprehensible hand of God. We have a tendency, after the event, to try and explain it rationally. If we cannot explain it rationally, we try to explain it as God’s Will, His Grand Plan about us.
The Impact of either fate or randomness
This entire continuum can lead to a belief that:
- we should not attempt anything either because God will take care of us, or
- the randomness of events will anyway render intended consequences of any of our actions futile.
So we can justify our inaction, our procrastination and laziness.
We have Indian philosophy from the Bhagwad Gita – of our right to action, but not to results. We have a piquant situation where we have a right to action, which (based on where you are on the continuum, has an element of pre-ordained) and no control on results (which is random or unpredictable at best).
Sort of drives the final nail into the coffin of inactivity and inertness.
If things are random or pre-ordained, how will I be motivated?
Motivation is based on
- the needs of a person, and
- the probability that the effort the person makes would lead to the fulfilment of the need.
If we say that we cannot predict the impact of the effort, why would we make the effort?
So forget about consequences?
Shall we follow the philosophy of existentialism, live for the moment, with no thought of either the past or the future? I am here and now, and only this is real? So there is no such thing as strategy or long term consequences? If I cannot control, why think about pollution, leaving this world a better place etc. Or it is God’s will?