The desired outcome of Competency #1 is to describe your intended customers with sufficient clarity to enable sound decisions, the development of purposeful innovation, value creation to address their highest priority needs, and messaging that establishes clear differentiation. The most visible manifestation of this ability takes the form of customer-centric, market segmentation. The ability to segment customers enables the purposeful selection of customer groupings that provide necessary growth, while avoiding dead-end alternatives. Market segmentation is not based on your product lines or product types. Your segmentation must be centered on your customers — current and future. While many companies profess to have the skills to develop, validate, and utilize segmentation, our experience indicates that this area requires considerable improvement. Your segmentation must clearly: * Define the targeted customer * Their area of application * Their desired outcome * The environment where they perform their activities Note that in the above criteria, your products are not mentioned, it’s all about your customers. The ability to develop and use market segmentation enables better business decisions in a shorter time frame. Market segmentation enables better deployment of limited resources and the creation of defensible market positions. As a side benefit, market segmentation allows you to prioritize product development programs because everyone in your organization shares a common view of the “playing field” enabled by segmentation. Further, clear segmentation is critical to directing your distribution channels3 to focus on the right customers and avoid “force fitting” products in segments for which it was not designed. !!Fundamental Questions * Is your current market segmentation based on customers, their applications, and the results they wish to achieve? * Do you require every product proposals to make the business case based on consistent market segmentation? * Do you make all decisions about growing profits based on a valid, customer-centric market segmentation? !!Starting Points * Require every product manager to present the latest market segmentation, assess against a clear criteria, and develop an improvement plan with deliverables within three months ― or sooner. * Ensure that your marketing team acquires the right knowledge, skills, and motivation to deliver customer centric segmentation schemes that enable solid business decisions.