To examine our market segmentation methodology, let’s consider the following market segmentation example: Motorola’s Radio Products Group manufactures mobile radios that are installed in vehicles and used to communicate with a dispatcher, a central location or other two-way radio users. After experiencing limited growth in what appeared to be a maturing market, Motorola looked for new ways to achieve their growth objectives.
For years, Motorola had been using a vertical industry classification to segment the radio market, e.g., utilities, public services, etc., and often recognized the inconsistencies in customer behavior within and across these segments. Intuitively, they knew another segmentation structure existed, but were unable to define it. The application of our outcome-based segmentation methodology enabled Motorola to discover the existence of three unique and previously unknown segments. One segment, which comprised 40% of the market, “hired” radio products to communicate privately, so as to not be overheard and to communicate discreetly or covertly, without being noticed by others. A second segment in this market segmentation example (28%) “hired” radio products so they could communicate with clear, unambiguous and uninterrupted communications when faced with dangerous, even life-threatening situations. The third segment (32%) “hired” radio products to communicate with teams and groups, coordinating activities and performing administrative tasks.
Up until this point, all products produced by Motorola, and its competitors, failed to address the outcomes uniquely desired in each segment with well-matched product and service offerings. A one-size-fits-all mentality perpetuated the industry. With the discovery of these segments, Motorola was able to optimize a radio product for each segment. The products included new features that addressed outcomes previously underserved and eliminated product features that addressed outcomes of little or no importance to the segment population.
The end result of this market segmentation example? Better products, at a lower price, with increased customer satisfaction. The resulting products accelerated revenue growth to 18% in a stagnant market, and secured the company’s leadership position in mobile radio products.