Customer Segments or Customer Need States?

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Customer segments or customer need states? The answer is … both!

It’s an important distinction in which I work with my clients to understand and leverage. It is the difference between creating experiences based on customer segmentation versus customer need states.

To help make this distinction clear, I will use my son Andrew and myself as examples. Andrew is 27, a software engineer, and the father of a newborn little girl. As you might guess, I’m considerably older, a customer experience consultant, and I have no children or grandchildren living in my home.



Andrew and I represent very different consumer segments. Depending upon the business who is segmenting us, Andrew might be placed in a cohort with labels like Young Professional, Digital Native, or New Parent. In my case, the segmentation labels might be Empty Nester, Pre-retiree, or Grandparent.

While my son and I are genetically similar, we value different things based on our stage of life and the cultural influences that have shaped us. We also read different things, consume information differently, interact with technology in wildly diverse ways, and generally have different wants, needs, and desires.

Other people with similar life circumstances to Andrew are more similar to him than I am – thus, we represent different customer segments. For those reasons, brands should design their customer experiences based on the core segments they are seeking to serve.

Notice earlier that I said Andrew and I generally have different wants, needs, and desires. That’s the pivot point for the distinction.

In specific situations, Andrew and I have identical need states. Sometimes when we interact with a company, we are both in a rush. Sometimes neither us want to engage a salesperson and expect a self-serve option, and other times we want a well-trained person readily available. Our need states can be identical even though we come from different customer segments.

I’ll be releasing a new book in October titled The Airbnb Way (You can pre-order it now. As part of the pre-order promotion, you will get a signed copy, free U.S. shipping, an invitation to an exclusive webinar and discounted pricing when you use the code THANKS here).

In The Airbnb Way, I describe the importance of reading customer need states by highlighting the work of Danny Meyer. Here’s a brief snippet from the book:



During an interview for CBS’s 60 Minutes, Danny Meyer, legendary restaurateur and author of the book Setting the Table, emphasized that “everyone is walking around life wearing an invisible sign that says, ‘Make me feel important,’ and your job is to understand the size of the font of this invisible sign and how brightly it’s lit. So, make me feel important by leaving me alone. Make me feel important by letting me tell you everything I know about food. It’s our job to read that sign and to deliver the experience that that person needs.” Danny Meyer’s invisible-sign analogy encapsulates the refined art of customer experience excellence—reading the cues of your customer.

So the moral of the story is to learn about the demographics, psychographics, wants, needs, desires, and purchase drivers of your core customer segments AND teach team members to read (in Danny Meyer’s words) the invisible-signs that mark the need states of the customers in front of them.

I would love to hear about your efforts to understand your core customer segments. We can also discuss ways to enhance that understanding of segments while also training team members to identify and customize service delivery based on the need states of those they serve. You can set-up that discussion here.

3 COMMENTS

  1. Hi Joseph,
    This is a great article and completely agree it’s about designing the customer experience for the customer needs. We find that people often jump straight into customer segmentation without neither understanding their customer needs, wants and psychographics nor understanding the purpose of the segmentation. Customers can be segmented in any ways, it depends on the question you’re trying to answer as to how you segment them. Also, as you mentioned you and your son both have different consumption patterns, which is why understanding the context of the experience is so important and how heavily somebody is consuming your products and services.
    What do you find are the most common pitfalls of building customer knowledge to inform the customer experience?

  2. Ellie, sorry for the delayed response. I am in the throes of a book launch which is an explanation but not an excuse. You deserved a more timely response to your amazingly thoughtful comment. I would love to learn more about your segmentation services as many of my clients struggle to get past the factual description of their customers. They lack the insights of consumption patterns and value based drivers of purchase intent. Again I am sorry for not acknowledging your post sooner and for not getting more information from you on behalf of my clients.

  3. Hi Joseph,
    No worries at all, I hope your book launch is going well? I think moving beyond Customer demographics is often hard for most companies, due to several reasons. The absence of a robust data governance framework and process that enables the sharing of a single view of customer, siloed functions that don’t always share or record data to enable this single view and often the analytics capability to model customer data to translate this into different segmentation views to answer specific questions about customers. Are you finding these challenges in the US market?

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