Week 4 - Segmentation and Customer Obsession

Successful businesses obsess over their customers. One of the primary tools businesses use to accomplish this is segmentation. Segmentation is the identification of clusters of consumers with homogeneous purchasing behavior. More specifically, segmentation is identifying customers with similar needs, habits or attitudes that can be addressed through marketing. Without segmentation businesses have no choice but to market their product very broadly. Segmentation facilitates the process of customer obsession through identifying different customer segments for a business to target. Once a business has identified the market segments, they evaluate them and choose a market(s) to target. The next step is to create a positioning strategy that differentiates the business’s product offering and emphasizes selling points that customers in that market would find meaningful. This process allows the business to focus with precision on specific markets with specific products and marketing strategies. Ultimately, this process should reveal the unmet needs of customers and create a product to meet those needs. This process and the constant reevaluation of segmentation breeds customer obsession and one company that does this very well is Procter and Gamble.

P&G sells products that are generally targeted to everyone, so do they use segmentation? Yes. I’m going to steal from Dr. Talbott’s lecture and use P&G’s Tide as an example. Tide is a laundry detergent that conceivably (and hopefully) everyone that is responsible for washing clothes would be interested in. Laundry detergent isn’t necessarily a product that screams the need for a variety of choices, but that’s exactly what Tide has discovered. Through segmentation, Tide has discovered many different market segments and has created specific products for those segments. Take a look at the picture below. On the left, the product filter identifies six needs that Tide addresses and five different ways of applying it! Obsessing over the customer through the process of market segmentation has allowed Tide to discover niche segments that their one-size-fits all product was not addressing. The picture below is a screenshot of the Tide home page, and a basic Tide isn’t even on the front page! Segmentation leads to obsession, and obsession leads to this many types of laundry detergent!

 

 

Week 3 - Finding the Perfect Game of Halo

Readings - Ch 3 & 4

Videos - Talbott lecture, Rosling, Gladwell, Shiv, Google Car

Article - Product Flops 2012

 

 

The Gladwell video about choice and the variability of our tastes was very interesting. When I think of recent examples of what Gladwell was talking about I think of Halo. Halo is a popular video game about space marines killing aliens. Nothing too original, but where Halo really thrives is online multiplayer. Online multiplayer can best be described as dropping a bunch of gun-toting humans into a virtual world and telling them to go shoot each other. Online multiplayer is the primary draw for any online first person shooter game, so it’s critical that these games deliver a great multiplayer experience. Halo does this in two important ways.

First, Halo gives gamers an incredible amount of choice when it comes to what type of game to play with other people. Do you feel like just using sniper rifles? There is a game mode for that. Do you want to work with a team? There’s a mode for that. Want to go it alone? Yup, there’s a mode for that? Want to be a part of a large battle with tanks and airplanes? Check. Want to play a virtual game of rugby? Check! Want to play Zombie survival mode? Yes, it has that to. Halo’s different game modes cater to the many individual tastes of their many different customers. All of their customers have the shared desire to stroll around a virtual world with a machine gun, but that are many different ways you can enjoy that experience. Some modes are serious, while others are light-hearted. Some modes stress teamwork, while others promote individual skill and the list goes on.

Second, Halo strives to put you in the perfect multiplayer game. Halo does this by calculating your individual skill. Basically, they measure how good you are. You’re assigned a skill level, and each time you play you’re placed in matches with players of similar skills. Then at the end of each game Halo gathers your new performance data and adds it to your existing data to calculate a new skill. This is a great feature that allows new gamers to learn the ropes while keeping the virtual Navy Seals at bay. It’s best for everyone when people of varying skills are kept out of the same game. When this happens the game becomes too easy for some and very demoralizing for others. Recently, Halo took this a step further and started calculating individual skills for all of their game types. So for example, players now have a respective skill level for team death match, king of the hill, and capture the flag. Halo did this because they realized that most gamers excel in a few game modes while struggling in others, so an overall skill didn’t capture this level of variability between game modes.

These two important features of Halo allow it to deliver an unparalleled gaming experience that delivers an experience individually tailored for each customer.

Week 3 - Dr. Rosling

 

Dr. Rosling’s lecture provided many valuable insights into the health and wealth of developing nations.  He was not trying to solve the problems of the developing world, but he illustrated how you could harness data to debunk myths and make informed decisions.  The dataset that I found the most interesting was the one regarding child survival and GDP per capita.  Rosling showed that there was a strong linearity between child survival and wealth.  This was not a surprise, but once he broke out the continents and regions of the world into individual plots on the graph it become more interesting.  Sub Saharan Africa was plotted very low on the graph (low GDP and child survival), but once you exploded the data you could see that there was more variability among the countries.  From this you could identify what countries have had more success than others.  Rosling then went down even deeper into the data to show how there was variability within the country depending on the GDP per capita of citizens.  I believe the point Rosling was making about this dataset was the need to drill deeper into the data.  Once you drill into the data you can ask better questions and possibly prescribe better solutions for what you are trying to solve.  The same thing can be applied in Marketing.  We can segment our markets into consumers with homogenous buying habits and target specific products to deliver value to them.  If we don’t segment and instead prescribe a one size fits all solution we will likely fall short of our ultimate goal.

I also enjoyed the visual presentation of Dr. Rosling’s data.  I think if you muted his dialogue, or couldn’t understand his accent, you would understand most of what was being presented.  The visuals clearly showed trends over time, especially the first dataset on family size and life expectancy.  Rosling was debunking a myth held by his students that said there are two distinct groups in the world: one with large families and short life expectancies, and the other with smaller families and longer life expectancies.  This was true in 1960, but as Rosling set the data in motion it became clear that third world countries are now also having smaller families and enjoying longer life expectancies.  Basically, the visual demonstrated the point much better than Rosling could have ever said it.  The dataset covering daily wages also benefitted from the visual illustration of the point Rosling was making.  The visuals also showed the clear relationship between variables, especially the child survival rates and GDP per capita. Rosling’s powerful visuals were able to take larges sets of data and wield them into a strong concise message.

Week 3 - Researching and Understanding Customers

I believe my company understands its customers.  I work for Carrier, and we sell many things, but my segment of the business deals with residential furnaces.  Our end customers are home owners who desire to live in a warm house when it’s cold outside.  Carrier understands that most of these customers had little to no input deciding which furnace sits in their house.  Most customers just want the big metal box to work and do its job efficiently.  By and large, our end customers do not have a particular brand loyalty.  I believe this point was proven recently during a friendly chat with a neighbor. 

This neighbor, who works in marketing, made the statement that my company was failing at marketing our products because he didn’t know anything about them.  He said he had just replaced his old furnace and was not even aware of the fact that Carrier sold furnaces!  So surely our company was failing at targeting home owners in his situation.  I work in Finance, so I didn’t want to get into defending Carrier’s marketing strategy with a marketing guy, so I chose not to argue with him.  But, I did ask him what brand of furnace he ended up purchasing for his home.  I said, “Was it a Lennox, Trane or Bryant”?  He paused for a while and then said, “I actually don’t know what brand it is”.  Oh, OK then!

Carrier is aware of this, so while they are not our end customers, we pay particular attention to researching the needs of our dealers.  Quick overview of our business: Carrier builds furnaces, sends them to distributors, distributors sell them to dealers, dealers are the people home owners and builders call to install and service furnaces.  Dealers are our salesmen.  Dealers make money selling and servicing furnaces.  So, recently we started designing furnaces that cater to the needs of our dealers.  Dealers want furnaces that are not time consuming to install and service.  So, to find out how we can design a better furnace for our dealers we researched the specific problems they encountered on the job site.  Then we addressed their concerns by incorporating job site specific fixes into the design of our new furnace.  Most of the modifications are things a home owner would never notice.  We hope a preference for working on our product will create brand loyalty among dealers.  Once we create brand loyalty amongst the dealer community the theory is they will be more likely to sell and recommend our product to the real end customer.

Week 2 – Addressing Customer Needs

Like I mentioned in my previous blog post, UTC is a large conglomerate with five different companies. Over the years I’ve learned a lot about these companies and I believe they do a great job of focusing on the needs of our customers.

My company has been increasingly focused on the need for increasing efficiency in large buildings. UTC offers a suite of products to address individual needs, but packages them in a way that creates even more value for the customer. One example of this is the synergy between Otis and Fire & Security (F&S) products. In a large high rise building there is significant building traffic when everyone arrives for work. Elevators can get backed up and once you get onto a packed elevator car it can take a while to reach your destination. To alleviate this morning traffic, and to provide efficient travel throughout the building, Otis elevators and F&S security scanners step in and direct traffic. To accomplish this, employees swipe their badge to enter the building and based on the floor of their office a screen directs them to a waiting elevator car. Based on the incoming badge swipes, the elevators are assigned a mix of employees to bring to similar parts of the building. The security scanners and elevators serve specific security and transportation needs, but together they provide a greater benefit to our customers.

Ecological considerations have challenged our company to adapt to a greater demand on product efficiency. So not only is it good enough to produce a superior product, we also have to address our customers desire to protect the environment. Pratt & Whitney designs jet engines, and their most recent engine is focused directly on our customer’s desire for eco-conscious air travel. Our newest engine uses a lot less jet fuel and is much quieter than previous jet engines. Another example of this is our newest Otis elevators with ReGen Technology. When the elevators are descending down the elevator shaft they store the energy that is created and use it to ascend back up the elevator shaft. Both of these products allow our customers to address ecological demands.

Sikorsky is a helicopter manufacturer, but it specifically meets the need of getting people to destinations not reachable by conventional means of transportation. So we have helicopters designed for travel to oil rigs, metropolitan areas, war zones, and types to handle search and rescue activities. But we also build small planes that allow people to fly to destinations that cannot be reached by larger planes. Sikorsky has always been a helicopter manufacturer, but it knows it’s in the market of transporting people to those “hard to reach” places!

Week 2 - Understanding Our Environment

Week 2

Read Ch 2 (done)

Video – Week 1 recap (done)

Video – Week 2 & 3 topics (done)

 

                I work for a conglomerate called United Technologies (UTC).  UTC is comprised of five very large companies, each of which has revenues in the billions of dollars.  At a high level, UTC’s primary markets are Aerospace and Building solutions.  We don’t build planes or buildings, but we do build jet engines, elevators, escalators and HVAC systems.  Learning about the SWOT analysis tool and specifically how companies assess their external environment has given me a new perspective on my company’s strategic moves.  There are seven elements to an analysis of a company’s external environment and I believe the three most important ones for my company are: political-legal, economic, and demographic.

                The government is a very important consideration for UTC, and any budgetary and legislative decisions can have a significant impact on our business.  A lot of my company’s products rely on Defense Department budgets and depending on which party is in power, could mean boom or bust!  Legislation can also have a significant impact.  In my factory alone we were preparing to build a new production line to satisfy a new EPA ruling on furnace efficiency until there ruling was reversed.  Three years ago this efficiency ruling was identified as an opportunity to sell more high-efficiency furnaces, so my company started upgrading their product line and production capacity.

                Economic trends also play a vital role in our company’s strategic decisions.  We closely monitor broad indicators of economic health and then more specific ones like housing starts.  In our factory we make production and staffing decisions for the next year based on the size of the market and our market share.  If we see an uptick in housing starts we might increase production, but if we see a fall in household income we may change our product mix in favor of lower cost units.

Demographic trends are critical to the success of my sister company Otis.  Otis is a manufacturer of elevators and escalators.  Otis makes money be selling new equipment (OEM market) and servicing existing equipment.  To succeed in the OEM market Otis needs to be very active in emerging markets.  The most important emerging market is China.  Years ago Otis noticed the urbanization trend happening across China as populations shifted from the countryside to the cities.  So, to take advantage of this trend, and the eventual construction of many new buildings, Otis moved their entire business development group to China!  These boots on the ground were also given a new elevator that would compete in lower cost low-rise residential buildings specific to the Chinese market.

Week 1 In Review

Week 1 Material:
Chapter 1: Marketing Planning  (complete)
Marketing Myopia (complete)
Jeff Bezos Video (complete)

I really liked the Jeff Bezos video, but I was left with one main takeaway after his presentation: what is Zappos?  I had no clue, so I quickly looked it up to see what the fuss from Bezos was all about.  Turns out Zappos is an online site for shoes and clothes.  It's main claim to fame being female shoes.  OK, that's probably why I had never heard of them.  After reading the marketing planning chapter in our text it's clear that this was probably an unintentional side affect of their plan.  Why market their services to me? I could tell my wife about Zappos, but that seems like an unlikely way to drive traffic (men telling their wives to go shoe shopping??).  This ineffective advertising would more than likely drive up their cost per customer acquired.  So, I'm guessing if I looked into my wife's Cosmo or Vogue magazine I'm more likely to find a Zappos' ad than in my ESPN the magazine.  Based on Bezos support for Zappos I can only assume Zappos knows their customers very well, knows what they need, where to find them and how to get their attention!  So, when Zappos put their long term marketing plan together I was not apart of it and for good reason!

 

The overriding theme of the first three assignments was the importance of focusing on the customer.  It's a very simple concept and sounds kind of obvious.  But I can see how the focus can easily stray from the customer in a big successful multinational corporation like mine.  The Levitt article mentions the importance of having a CEO with a singular focus on the customer.  What if your CEO didn't have that focus?  What if your CEO was a Finance guy? Maybe the focus would be on cost cutting and margin expansion.  What if the CEO is from Operations? Maybe the focus is on lean manufacturing and quality.  What if it's an Engineer, and your company is so R&D focused that it's inventing products for the sake of inventing products.  These are all good strategies a company should have to address the wishes of shareholders, but not one can be the singular focus ahead of the customer!  Reading the Levitt article and thinking about the dangers of pigeon holing the focus of your company only stresses the importance of having a customer focused organization.

 

I work in Finance, I live in excel, I'm a go by the numbers type of guy, so Marketing is new territory for me.  The complexity of the marketing plan in the first chapter was very interesting.  When I think of marketing I think of advertising and Mad Men.  I also think of sitting with my Dad watching commercials and after almost every commercial him saying, "That was stupid".  It's interesting that some of these ads are the promotional product of a complex marketing plan.  Company X decides they want to meet a customer need,  they tailor a product for that need, they choose the market, they set the price,  and they choose the form of communicating that product and in some cases it ends with my Dad saying, "That was stupid".  I'm excited to learn more about creating a marketing plan in the weeks ahead!

Introduction

It's great to be back in school!  I turned 30 and started my MBA at Kelly last week.  I don't feel old, but maybe the stress of work, an MBA and most importantly a toddler will get me there.  Either way, I'm excited to be furthering my education at Kelly and looking forward to the challenge.

 

I'm currently a Financial Analyst for Carrier based in Indianapolis, IN.  Carrier is a world leader in the HVAC industry.  I work with the plant operations, and where I'm based Carrier manufactures all of their gas furnaces for the North American market (about 6,000+ furnaces a day).  Before I landed in Indianapolis, I spent two years in Connecticut working for Carrier's parent company United Technologies (UTC).  While in CT, I was apart of UTC's Financial Leadership program.  This program allowed me the pleasure of rotating through the different business units of UTC while experiencing different accounting and finance positions within the company.  I rotated through four outstanding companies: Carrier, Otis Elevators, Sikorsky Helicopters and Hamilton Sundstrand (Aerospace/Flight systems).  It was a great experience and the best position for me fresh out of college.  Completing my backward trek through my background, I attended the University of Kentucky and graduated in 2008 with degrees in Finance and Political science and a Minor in History.

I'm also married to my high school sweetheart and the proud father of an amazing two-year old boy.