By Oluwole Dada
There is a moment in the life of almost every failed product that, in retrospect, reveals the precise point at which the outcome became inevitable. It is rarely in the advertising, or even in the product development phase. It is in a room, often months or years before the product reaches the market, where someone drew a box on a whiteboard and wrote inside it the words: “our target consumer.” The product failed because the box was drawn around the wrong people or possibly drawn correctly but then promptly ignored by everyone at the point of execution.
Segmentation, Targeting, and Positioning (STP), as it is known in marketing practice is the foundational framework of product commercialisation. It precedes pricing. It precedes distribution strategy. It precedes advertising. It precedes everything, because it answers the questions that every other commercial decision depends on: Who is this product for (segmentation)? Within that group, which consumers are we focusing our resources on (targeting)? And how do we want those consumers to think and feel about this product relative to everything else available to them (positioning)? Get these three questions right, and you have a commercial platform. Get any one of them wrong, and you have an expensive problem that no amount of marketing investment will fix.
Segmentation is the act of dividing a broad market into distinct groups of consumers who share characteristics relevant to their relationship with a product. The variables used to do this include demographics (age, income, gender, household size), geographics (region, urban or rural, climate), psychographics (lifestyle, values, attitudes, personality), and behavioural variables (purchase frequency, brand loyalty, usage occasion, benefit sought). Most marketing textbooks cover these variables. What they cover less thoroughly is the discipline required to use them honestly.
The discipline is that a segment must meet four criteria before it is worth targeting. First, it must be identifiable. That means you must be able to describe the people in it with enough precision to find them. Second, it must be accessible. That means you must be able to reach them through the channels and media available to you. Third, it must be substantial. That means it must be large enough and sufficiently economically active to generate the revenue the product needs to be commercially viable.
Lastly, it must be responsive. That means the people in it must actually need or want what the product offers.
When a brand manager selects a segment that fails on any one of the above four tests, the product has been aimed at a ghost. When Colgate launched a range of frozen ready meals in the United States in the 1980s. The segmentation logic, in retrospect, was easy to critique. Colgate identified health-conscious consumers as a growth segment and attempted to extend its oral care brand equity into food. The segment, health-conscious consumers, was real, identifiable, and substantial.
The error was in the behaviour variable. The behaviour pattern of health-conscious consumers in relation to oral hygiene and their behaviour pattern in relation to meal choices did not overlap in any commercially useful way. The segment existed but was not responsive to a Colgate food product. The brand extension failed within a year. No amount of distribution or advertising investment could repair the segmentation error at the foundation.
The Nigerian market offers an equally instructive case. When several telcos launched mobile financial services targeting the unbanked rural population in the mid-2000s, the segmentation was directionally correct. There was large population, low banking penetration, and an identifiable need. The error was in the accessibility variable. Many of the targeted consumers were in areas with limited network coverage, did not possess the entry-level handsets required, and lacked the agent network proximity to make the service practically usable. The segment was real but was not accessible at the point of launch.
Products that did not wait for the infrastructure to mature before scaling their commercial expectations found themselves with a failed launch on their hands. M-Pesa in Kenya succeeded in part because Safaricom built its agent network before aggressively scaling its consumer acquisition.
Accessibility was solved before targeting was expanded. The discipline of targeting is the selection of a specific group of consumers on whom marketing resources will be concentrated. Once a viable segment has been identified, the most appropriate action is targeting to avoid a waste of resources.
To avoid a product failing, you must get the segmentation right, you must target the right segment and position them accordingly. The issue of positioning will be discussed in detail in the next series.
Oluwole Dada is a general management and commercial executive. He is the author of THE LEADER’S LEVERAGE
