Segmentation

The idea of segmentation has spread beyond its consumer origins

Segmentation is the process of slicing a market for a particular product or service into a number of different segments. The segments are usually based on factors such as demographics, beliefs or the occasion of use of the product. One segment of the market for video cameras, for instance, might be the group of people who have new-born babies. Another could be the group of people visiting relatives who live abroad.

Once different segments of a market have been identified, suppliers to that market can target their advertising and promotional efforts more accurately and more profitably. Different segments can be reached through the most appropriate channel: parents of new-borns through ante-natal clinics, for instance, and foreign travellers through airlines’ websites.

Each market segment represents a group of potential customers with common characteristics. In consumer markets, segmentation is usually based on the following:

• Demographic factors - Gender, age, family size, and so on.

• Geography - In most countries there are marked differences in the consumer preferences of different regions. The consumption of wine in the north of England, for example, is very different from that in the south.

• Social factors - One classic segmentation is by income and occupation, but this is proving to be less and less useful. There are a lot of extremely wealthy people who do not spend much, and vice versa. So the focus is shifting to lifestyle. In recent years, marketers have become more interested in categorising consumers as “generation Xers” or “the millennial generation” rather than by the size of their bank accounts. Consumers are thought to have more in common with people from the same generation than with any other grouping.

Industrial markets have been notoriously more difficult to segment than consumer markets. Firms find it hard to decide which factors are most useful for categorising their corporate clients. Should it be size, industry sector, or geography? Computer-maker Hewlett-Packard segmented its big industrial customers into five categories based on the value of their purchases and the complexity of their IT systems.

Segmentation was in part a reaction against the mass-marketing tactics sparked off by Henry Ford when he said that customers could buy his Model T car “in any colour as long as it’s black”. Many of its classifications, however, have proved to be of little use. Baby boomers have been found to have little more in common than their defining characteristic: a birthdate in the years following the second world war. John Forsyth, a consultant, wrote in McKinsey Quarterly in 1999.

The internet promises to provide new opportunities for segmentation. It offers continuous opportunities to capture information about customer behaviour. Consumers identify themselves and their characteristics by their electronic participation in particular interest groups, and by their general online behaviour.

(The Economist)

Key point for Communication

Let’s start with the famous quote - "Great Communicators Are Great Explainers" by John Baldoni.

Good communicators know they need to use energy and enthusiasm to persuade their audience. Great communicators know they also need to explain what all the excitement is about. Next time you need to share something important, be sure you convey enthusiasm, but also clearly explain what is at stake and answer the question "What does it mean?" Lay out what the issue, initiative, or problem is — and be clear about what it isn't. Use metaphors only if they are helpful to your point and share details that support your claims. Then, define what you want people to do by establishing clear expectations. Don't lose or confuse your audience with too many details, though — save those for written communications.

Pleasing Wall Street is a Poor Excuse

(From Harvard Business Review)
Outsourcing, in and of itself, isn't responsible for the erosion of America's high tech infrastructure. The short-term thinking that led to a lot of bad outsourcing decisions is the root cause. And short-term thinking isn't a problem confined to the executive suite.

Managers who focus on maximizing short-term profits end up driving out things that generate long-term value — like R&D. They use all sorts of excuses when they make those decisions, including the need to please Wall Street and create shareholder value. But they're just excuses for poor thinking.

There is a need of business leaders who have a respect for technical issues even if they don't have technical backgrounds. Technical understanding should be a core competency of any company.

Align Employee and Company Priorities

Lucky managers find that their employees' interests naturally align with company priorities. If you're not one of the lucky ones, here are three ways to line up what your employees care about with what your company needs to get done:

Know your employees' priorities - Don't wait for review time. Regularly ask your employees what they care most about. As a manager, you need to know what drives them.
Communicate company priorities - Tell employees what the company needs to achieve in the next week, month, and year. Be clear and consistent, and do this often.
Align interests to responsibilities - Now that both agendas are clear, try as much as possible to channel employees' interests into relevant company priorities.

Economic Round-up

 America’s Federal Reserve kept interest rates at a level close to zero. The Fed’s accompanying statement, which markets were keenly awaiting for any sign of a shift in policy, reiterated its intent to keep rates “exceptionally low” for an “extended period”.

 The Bank of England decided to inject a further £25 billion ($42 billion) into the British economy through its quantitative easing programme, raising the cumulative total to £200 billion. The extra asset purchases will be made over the next three months, a slower rate than before.

 At a conference in London several leading bankers criticised new proposals for regulating banks that are “too big to fail”. Josef Ackermann, head of Deutsche Bank and chairman of the Institute of International Finance, defended large banks as the “most efficient” means of providing financial services to multinationals.

 In an effort to diversify its foreign reserves, India bought 200 tons of gold from the IMF during October, which will nudge the country into the top ten gold-holders worldwide. The news sent the price of gold to another high.

 UBS made an unexpected loss in the third quarter, as net outflows from clients mounted in its private-banking business. The Swiss bank earlier this year reached a settlement with American authorities over “secret” accounts.

 CIT, a lender to small businesses, filed for bankruptcy protection under a reorganisation plan that had been accepted by most of its bondholders. The move was widely anticipated as CIT struggled with $30 billion in debt, which its restructuring will reduce by a third. The company received a $2.3 billion bail-out last year—money that is now unlikely to be returned to taxpayers.
(From The Economist)

US Dollar Index – USDX

The USD Index measures the performance of the U.S. dollar against a basket of currencies: EUR, JPY, GBP, CAD, CHF and SEK. A measure of the value of the U.S. dollar relative to majority of its most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies. Currently, this index is calculated by factoring in the exchange rates of six major world currencies: the euro, Japanese yen, Canadian dollar, British pound, Swedish krona and Swiss franc.

It is a weighted geometric mean of the dollar's value compared only with:
. Euro (EUR), 57.6% weight
. Japanese yen (JPY), 13.6% weight
. Pound sterling (GBP), 11.9% weight
. Canadian dollar (CAD), 9.1% weight
. Swedish krona (SEK), 4.2% weight and
. Swiss franc (CHF) 3.6% weight.

The makeup of the "basket" has been altered only once, when several European currencies were subsumed by the Euro at the start of 1999. This index started in 1973 with a base of 100 and is relative to this base. This means that a value of 120 would suggest that the U.S. dollar experienced a 20% increase in value over the time period. It is possible to incorporate futures or options strategies on the USDX. These financial products currently trade on the New York Board Of Trade.

Twitter's Business Model

An interesting article recently published in 'Harvard Business Review' about Twitter's business model by David L. Smith who is the is the CEO of Mediasmith. I think everyone will like to go through it as anyone and everyone is talking about Twitter now.

It has become a popular game, even among investors who should know better, to dismiss Twitter based on lack of a business model. But there is a difference between not generating income and lack of a business model. I believe that, in just a few short months, Twitter will show the world that not only do they have a business model, but that theirs is the most sophisticated around. As the founders have admitted, they did not necessarily plan out their success. But the result of their outside funding and considerable valuation is that they have been free to watch and learn what might be possible.

Most publishers talk about the two common monetization streams — advertising and subscribers — as though there are no other options. As many have seen over the last year, dependence upon advertising is a slippery slope in a downturn.

Last week, Microsoft's Bing and Google announced "search deals" with Twitter, with Bing also making a deal with Facebook, allowing the search engines to show results related to "what is going on right now". They tried to build this and still may, but paying Twitter and Facebook is logical for now as they are rapidly becoming major referral engines to many sites.

In fact, these are traffic deals. Until now Google has been the only company on the planet to make major money by driving traffic to other sites. These deals are Twitter's first steps toward doing the same.