Segmentation for Management

Consultants & Business Analysts

A practical guide on how to analyze segments of customers
during consulting projects

1
If you are participating in a consulting project devoted to Sales & Marketing or Strategy most
likely you will have to either do segmentation or analyze existing segments of customers. 2
You will try to achieve it on the bases of internal data,
market research as well as other external data.
3
In this course, I will teach how to perform fast and efficiently segmentation of
customers and analysis of existing segments during consulting projects. 4
 Target Group What you will learn What you will get

 Management Consultants &  How you can segment customers?  Ready made analyses in Excel
Business Analysts  Crucial Excel formulas you will  List of Recommended readings
 Analysts working in Strategic need to do segmentation (articles, books)
Departments, Marketing  How to do simple segmentations
Departments in Excel using internal or external
 Analysts working in PE, VC funds data

5
Essential Concepts in Essential Excel for
Segmentation Case Studies
Segmentation Segmentation

Segmentation using
Jobs to Be Done framework
external data

6
 This course will help you perform fast and
efficiently segmentation and analysis of customer
segments on the level of top management
consultants

7
How the course is
organized

8
In business you have to make a lot of important decisions

In this course, I will teach how to perform fast and efficiently segmentation of
customers and analysis of existing segments during consulting projects. 9
Essential Concepts in Essential Excel for
Segmentation Case Studies
Segmentation Segmentation

Segmentation using
Jobs to Be Done framework
external data

10
Essential Concepts in B2C
Segmentation

11
 Essential Concepts in B2C
Segmentation – Introduction

12
Segmentation is vital for every business. It helps you make decisions on strategy, products,
branding. In this section, we will have a look at essential methods used to segment the B2C market.13
In this section we will talk about the following things

Why we want to segment? Process of segmentation Methods for segmentation

Case studies in
Examples of segmentation Segmentation vs Targeting
segmentation

Targeting vs Products

14
Why we want to segment?

15
Segmentation allows us to do a lot of things

Helps you pick the right 4P Mix

Understand customers (Product, Place, Price,
Promotion)

Measure segments Notice opportunities

Define your strategy Notice threats

Target customers

16
Process of segmentation

17
 The process of preparing segmentation consist of 5 main stages

Choose
Check what data are Create segmentation Do necessary
segmentation Analyze segments
available sample changes
method

 Segmentation can  Data will determine  The segmentation  Analyze needs and  Do necessary
only be done if you what segmentation method that you expectations of changes to your
have specific type you can do have selected may targeted segments business model
of data  Check how top not give you the and customers  Adjust strategy,
 Check what data firms in a specific desired results  Using data from the product, price or
you have industry are  Check the selected segmentation promotion,
 Check what data segmenting the segmentation analysis define if positioning, brand
you can gather to market method on a and what should be structure
help you with the  Based on available sample of changed to adjust
segmentation data define criteria customers appropriate
that will help you  Check whether the business areas to
select optimal segmentation meet the needs and
segmentation generates expected expectations of
method results and is useful customers

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Methods for segmentation

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 Let’s have a look at the main methods of segmentation used in B2C

Segmentation

Geographic Demographic Behavioral Psychographic

Mixed
segmentation segmentation segmentation segmentation

20
Geographic segmentation

21
One of the first types of segmentation used is geographic
segmentation. Let’s see how and when we use it in practice. 22
In geographic segmentation we divide customers by physical areas

Country Location in the city

Region Density

Size of city Climate

23
Let’s have a look at geographic segmentation used by many FMCG firms

Northern Europe

Eastern Europe

Russia, Ukraine Belarus

Southeast Europe

Southern Europe

Western Europe

24
Below we have an example of customer segmentation by size of cities used by
Retailers and B2C Services
Population per city
Gdansk In thousand

Above 800
Elblag

Szczecin 800 - 600

Bydgoszcz
Olsztyn
600 - 400

Bialystok 400 - 200

Poznan
Warsaw
200 - 50

> 50
Lodz
Zielona Gora

Lublin

Radom
Wroclaw

Katowice
Krakow

Rzeszow

25
Below example of customer segmentation in B2B based on cost of transport
used in commodity

Cost of transportation
EUR/l

0.00 - 0.02

0.02 - 0.04

0.04 - 0.06

0.06 - 0.09

> 0.9

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Let’s see when the geographic segmentation is a good choice

Geography or location impacts We can get better sales if we

customer choices differentiate the product

Legal systems & legal

We need a simple method that
requirements are different in
we can use to scale the business
every location

We have a limited budget for in- We want to organize the

depth analyses business around the segments

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Let’s see in what industries this method is most often used

Restaurants FMCG

B2C Services Hotels

Some marketplaces i.e. for

Retail
doctors, cabs

28
 Geographic segmentation for
convenience stores – Introduction

29
Let’s imagine that we were asked to analyze the geographic segmentation of customers
who make purchases in convenience stores. Let’s have a look at assumptions and data. 30
 A few information about the firm that we will be analyzing

Based on consumer research we have

identify segments

We have defined also 3 purchasing

missions

We know how many customers are in

every segment

Calculate customer value per segment

and size of every segment
31
Based on discussion with the Managers and interviews with customers we have
divided the market into 4 segments

Total market

Shopping Malls
Street locations Office locations Local stores
locations
 Customers buying in  Customers buying in  Customers buying in  Customers buying in
stores located on the stores located in large stores located in the stores located near
main streets in city shopping centers Office parks small housing estates
centers

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 On top of that we can distinguish the following 3 buying missions

Description of the mission

 During this mission the customer buys small number of products

 It can be linked to impulse buying, buying missing item that was not bough during visit to supermarket or finding a snack to
help him survive till lunch
Small purchases
 Average number of products bought: from 1 to 3
 During this mission customers buy mainly: sweets, chewing gums, yoghurts, small bottles of juice, chips, protein bars etc.

 Purchases of bigger number of products

 It can be linked to impulse or everyday buying
Big purchases
 Average number of products bought: more than 3
 During this mission customers buy everyday products (bread, milk, diary products, meats, water in big bottles etc) as well as
impulse products ( sweets, chewing gums as well as yogurts, etc.).
 Alternative to having a lunch at a restaurant or cafeteria
Hot Foods & Ready  Average number of products bought: from 1 to 5
Meals  During this mission customers buy mainly: take-out coffee or tea, hotdog, fast-food, ready meals, soups, snacks, fresh juice etc.

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 Let’s have a look at some general data for every segment by missions

Hot Foods & Ready

Small purchases Big purchases Meals

 # of products bought: 3 items  # of products in basket: 10 items  # of products in basket: 2 items

Street locations  ATV: EUR 50  ATV: EUR 40  ATV: EUR 30
 Product range: First need products  Product range: Everyday products  Product range: Take away

 # of products bought: 1 items  # of products in basket: 50 items  # of products in basket: 1 items

Shopping Malls  ATV: EUR 15  ATV: EUR 100  ATV: EUR 10
locations  Product range: First need products  Product range: Everyday products  Product range: Take away

 # of products bought: 1 items  # of products in basket: 10 items  # of products in basket: 3 items

Office locations  ATV: EUR 35  ATV: EUR 20  ATV: EUR 45
 Product range: First need products  Product range: First need or  Product range: Take away
Everyday products

 # of products bought: 1 items  # of products in basket: 15 items  # of products in basket: 1 items

Local stores  ATV: EUR 40  ATV: EUR 50  ATV: EUR 10
 Product range: First need products  Product range: First need and  Product range: Take away or First
or Everyday products Everyday products need products

* ATV – Average Transaction value 34

Based on consumer research we have information on how often people
from different segments perform specific mission

Share of purchasing missions in following segments

In %

15% 15%
25%
40%
20%

40% 15% 65%

65%
45%
35%
20%

Street locations Shopping Malls locations Office locations Local stores

Small purchases Big purchases Hot Foods & Ready Meals

35
Below the results that we got from our estimations

Weighted Average Transaction Value (ATV) by segments

In EUR

45 48
42
37

Street locations Shopping Malls locations Office locations Local stores

Weighted Average Item Per Transaction (IPT) by segments

# of items

13
6 2 6

Street locations Shopping Malls locations Office locations Local stores

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Demographic segmentation

37
One of the most popular and commonly used types of market segmentation is
demographic segmentation. Let’s see when and how it is used. 38
In the demographic segmentation, we use the following characteristics
to divide customers into groups

Age Income

Gender Occupation

Family size Education

The lifecycle of the family Nationality

39
 Below are examples of dividing customer by age and price sensitivity in
a cosmetic company
Price segment Total for the
price range:

9% 16% 5% 30%

EUR 20

61% 8% 6% 70%

Age
Segment
20 - 30 30 - 50 50 +

Total for the age group 70% 24% 6%

40
 Let’s have a look at example of segmentation used for SMCG like furniture, cars,
accessories for the home
Age Married? Employed? Kids at home? Segments

NO
Supported
NO persons
YES
NO
NO
YES Adult singles
Less than 40 YES

NO Young Family
YES
YES

Mature Family
NO
NO
YES
More than 40
NO Empty Nest
YES
YES
41
 Below are examples of differentiating client types by age and income for
furniture markets
Income Age Groups
15 – 24 25 – 34 35 – 34 45 – 54 Above 55
Young and
Aspiring
Less than 1 000 free
customers
customers

1 000 – 3 000

Experimenting Conservatives
3 000 – 5 000 customers customers

5 000 – 7 000

Above 7 000 Premium

customers

Young, single people not living at home Married couples with children, looking for
new experiences
Newly married couples young, no children
Settled, disliking change, middle age
customers
Wealthy customers of all ages 42
 Below an example of segmentation used by Home Improvement / DIY retailers

Clients types Mission

Apartment Decorations and

1 room renovation House Moving No specific reason
renovation accessories

 20%  15%  15%  40%  10%

Amateur buyers

 35%  35%  15%  10%  5%

Experienced buyers

 40%  30%  10%  10%  10%

Renovating firms

 0%  0%  0%  0%  100%
Wanderers
(Just looking around)

43
Let’s see when the Demographic Segmentation is a good choice

Choice of product is mainly Customer behavior is pretty

influenced by demographics stable

You gather demographic data on Geography / location will be less

your customer important

You cannot measure customer

behavior directly

44
Let’s see in what industries is most often used

FMCG B2C Services

SMCG Financial Services

Retail

45
Demographic segmentation for
Fashion – Case Introduction

46
You were hired by a Fashion Retailer to segment the market and analyze the value of
customers as well as the size of segments. Let’s look at the assumptions and data. 47
 A few information about the firm that we will be analyzing

You have decided to use demographic

segmentation

Based on data you have identified 4

buying missions

We know how many customers are in

every segment

Calculate customer value per segment

and size of every segment
48
We first divided the market by gender. Kids are put in a separate group

Customers

Woman Man Kids

49
 We also add the age criteria. In this way, we got 5 segments.

Description

 Client age: less than 15

 Occupation: students
Kids  Purchasing power: Small. At younger age purchases are driven by parents. Later on they buy more independently mainly inexpensive
products, gadgets, basics

 Clients age: 16 – 34
 Occupation: mainly high school and university students, some of them do some part-time work
Young women  Purchasing power: Medium. They spends their money mainly on standard clothes, like: t-shirts, jeans, jackets, dresses but also buy a lot of
cheap accessories

 Clients age: 35 +
Older women  Occupation: Office workers, service workers, factory workers
 Purchasing power: High. They buy both basic clothes for everyday use as well as premium clothes. Some also buy clothes from designers

 Clients age: 16 – 34
Young men  Occupation: mainly high school and university students, some of them do some part-time work
 Purchasing power: Medium. They spends their money mainly on standard clothes, like: t-shirts, jeans, jackets, dresses, caps

 Clients age: 35 +
Older men  Occupation: Office workers, service workers, factory workers, farmers
 Purchasing power: High. They spends their money mainly on suits, shirts, sport clothes, causal business clothes

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 In the example we can distinguish the following buying missions.

Description of the mission

 Purchase of products for special occasions like: wedding, party, festival, vacation
Special occasion  During this mission consumers are willing to pay more for clothes and accessories than they usually spend
buying  During this mission customers buy mainly: dresses, suits, shirts, pants, shoes, accessories

 Purchase of everyday use products

 During this mission customers buy only this products that they really need
Standard buying  During this mission customers buy mainly: underwear, socks, t-shirts, jeans, hoodies

 During this mission, the customers buys products under the influence of emotions
 They often decide to buy products because of current promotions or sale
Impulse buying  During this mission customers buy manly: shoes, bags, branded clothes or accessories

 During this mission the customers buys products because of changes in life like: getting pregnant, change of taste, losing or gaining
weight, breaking up with your boyfriend or girlfriend, ,
Exchange wardrobe  During this mission the customer will buy many different products

51
 Let’s have a look at examples of demographic segmentation of customers who
buy in fashion stores
Special occasion
buying Standard buying Impulse buying Exchange wardrobe

 # of products bought:  # of products bought:  # of products bought:  # of products bought:

Kids 1 items 1 items 1 items 10 items
 ATV*: EUR 15  ATV: EUR 10  ATV: EUR 10  ATV: EUR 60

 # of products bought:  # of products bought:  # of products bought:  # of products bought:

Young women 2 items 2 items 2 items 5 items
 ATV: EUR 40  ATV: EUR 30  ATV: EUR 25  ATV: EUR 60

 # of products bought:  # of products bought:  # of products bought:  # of products bought:

Older women 3 items 3 items 3 items 4 items
 ATV: EUR 70  ATV: EUR 60  ATV: EUR 60  ATV: EUR 70

 # of products bought:  # of products bought:  # of products bought:  # of products bought:

Young men 1 items 2 items 1 items 3 items
 ATV: EUR 50  ATV: EUR 30  ATV: EUR 15  ATV: EUR 40

 # of products bought:  # of products bought:  # of products bought:  # of products bought:

Older men 1 items 2 items 2 items 5 items
 ATV: EUR 60  ATV: EUR 40  ATV: EUR 40  ATV: EUR 55

* ATV – Average Transaction value 52

Based on consumer research we have information on how often people
from different segments perform specific missions.

Share of shopping missions in following segments

In %

10%
15%
20%
5%
30%
35%
10%
10%

20% 30%
65% 45%
50%

25%
25%

30%
20% 20% 20%
15%

Kids Young women Older women Young men Older men

Special occasion buying Standard buying Impulse buying Exchange buying

53
Let’s have a look at ATV and IPT in following segments

Weighted Average Transaction Value (ATV) by segments

In EUR
65
48
42
34
21

Kids Young women Older women Young men Older men

Weighted Average Item Per Transaction (IPT) by segments

# of items

3,1 3,3
2,8
2,2
1,9

Kids Young women Older women Young men Older men

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Behavioral segmentation

55
If you gather a lot of information on customer behavior you can consider
using behavioral segmentation. Let’s see when and how it is used. 56
In the behavioral segmentation, we divide customers by following
characteristics

Product usage rate Historical behavior

Loyalty status Ready to buy stage

Benefit sought User / Customer status

57
Below is an example of behavioral segmentation of mobile games users

Frequency of use

High
 Medium users –  Heavy users –
customers who use customers who use
product very often but product constantly
in short sessions

 Non users – customers  Light users –

who do not use customers who use
product product from time to
time but in long
sessions

Low
Length of use
Short Long

58
 Let’s have a look at customers segmentation for consumer goods based on their
satisfaction and loyalty

Satisfaction Loyalty Segments

Promoters
HIGH
BIG
LOW
Hesitant

Customers

Future Ex
HIGH
SMALL
LOW
Detractors

59
Let’s see when the behavioral segmentation is a good choice

Geographical and demographical

Customer behavior is a good
data does not suffice to segment
indication of his needs
the market

You can track a customer behavior Behavior may be used to adjust not
in real time the product but rather messaging

You can provide product the

customer needs based on his
behavior

60
Let’s see in what industries is most often used

E-commerce Consumer goods

Marketplaces Multichannel Retailers

SaaS Financial Services

Airlines

61
 Behavioral segmentation for
Multichannel – Case Introduction

62
Imagine that you were hired to prepare a behavioral segmentation for
a multichannel apparel firm. Let’s have a look at how you can do that.63
 Let’s have a look at the firm

You have defined 3 main segments

You have also identified 4 main

purchasing missions

We know how many customers are in

every segment

Calculate customer value per segment

and size of every segment
64
Let’s have a look at how we can divide the segments of the company

Total Market

Pure Online Pure Offline Multichannel

 Customers who prefer  Customers who prefer  Customers who use

online shopping shopping in physical both channels
 They never use the stores with the
offline stores opportunity to see and
try the products

65
 In the example we can distinguish the following buying missions

Description of the mission

 Purchase of products for special occasions like: wedding, party, festival, vacation
Special occasion  During this mission consumers are willing to pay more for clothes and accessories than they usually spend
buying  During this mission customers buy mainly: dresses, suits, shirts, pants, shoes, accessories

 Purchase of everyday use products

 During this mission customers buy only this products that they really need
Standard buying  During this mission customers buy mainly: underwear, socks, t-shirts, jeans, hoodies

 During this mission the customers buys products under the influence of emotions
 They often decide to buy products because of current promotions or sale
Impulse buying  During this mission customers buy manly: shoes, bags, branded clothes or accessories

 During this mission the customers buys products because of changes in life like: getting pregnant, change of taste, losing or gaining
weight, breaking up with your boyfriend or girlfriend,
Exchange wardrobe  During this mission the customer will buy many different products

66
 Let’s have a look at examples of behavioral segmentation

Special occasion Exchange wardrobe

buying Standard buying Impulse buying buying

2 items 2 items 2 items 5 items

EUR 52 EUR 38 EUR 37 EUR 65
Pure Online
+ 1 item + 1 item + 1 item +2 item

1 items 2 items 1 items 4 items

Pure Offline EUR 30 EUR 25 EUR 20 EUR 35
+ 0 item + 1 item + 0 item + 1 item

2 items 3 items 2 items 6 items

Multichannel EUR 50 EUR 40 EUR 32 EUR 50

+ 1 item + 1 item + 1 item +1 item

IPT – Item Per Transaction ATV – Average Transaction Value # of additional items added to the basket 67
Based on consumer research we have information on how often people
from different segments perform specific missions.

Share of purchasing missions in following segments

In %

15%
20%
35%
20%
20%

15%
30%

20% 40%

35%
30%
20%

Pure Online Pure Offline Multichannel

Special occasion buying Standard buying Impulse buying Exchange wardrobe buying

68
Let’s have a look on ATV and IPT in following segment

Weighted Average Transaction Value (ATV) by segments

In EUR per transaction
86

29
3

Pure Online Pure Offline Multichannel

Weighted Average Item Per Transaction (IPT) by segments

# of items per transaction

2 2 3

Pure Online Pure Offline Multichannel

69
Psychographic segmentation

70
People within the same demographic group may still make different choices.
Let’s have a look at how and when to use psychographic segmentation. 71
In psychographic segmentation, we divide customers by following
characteristics

Attitude Interests

Believes Opinions

Lifestyle Values

Social Class

72
 Below an example of segmentation of customers by their lifestyle in car
industry

Segment  Customers interested in  Eco-friendly /  Customers looking for safety

luxury Environmentally friendly
customers

Values  Self-fulfillment and enjoyment  Caring for others and what  Safety of family and others
surrounds us

Expectations of the  Speed  Simplicity  Safety

product  Easy to drive  High technology  Comfort
 Caring about environment and
minimizing his impact

Product description  Big interior space  Eco sustainable (made from  High quality of materials yet
 Spacious trunk recyclable materials) nothing fancy
 Easy to drive  Zero or low emission  Reliable and durable car
 High performance  Eco friendly equipment  Safe equipment:
 Special materials used for the  Durable so can be used for o Safe front airbags
interior design many years o Special side – curtain
 Advanced software and added  Advanced software improving airbags
services car after the purchase o Electronic stability control
73
Below are examples of differentiating client types by their personality in
fashion company

10% 14%

16%

30%

30%

Ambitious Functional Conservative Aesthetic Fullfield

74
 Below are examples of differentiating client types by their personality in
fashion company
Description

 Customers who are the most involved in the purchase of new clothes
 Appearance is the most important for them, therefore they are ready to spend any money on clothes
Ambitious  They love when others admire them or pay attention to things they wear
 They follow all new trends from the fashion world

 Customers strongly involved in the purchase of new clothes

 They don't like shopping, which is why they like to do buy more at once, to limit visits to shopping malls
Fulfilled  They attach importance to appearance, therefore they choose expensive and good quality things that will stay for longer
with them

 Customers with a moderate level of involvement in the purchases of new clothes

 They like good looking, functional and comfortable clothes that are reflection of their personality
Functional  They are skeptical to big changes, so they buy clothes of similar colors or cut

 Clients strongly involved in the purchase of new clothes but with the limited budget
 They attach importance to appearance, but because of the limited budget they are waiting for discounts and promotions
Aesthetic  They like nice products and they will hunt them until they get them

 Customers with the lowest involvement in the purchase of new clothes

 They don't like any changes in their look
Conservative  They don’t like shopping or spending money on that
 Clothes and accessories are irrelevant to them, so they buy cheap and low-quality products 75
 Below are examples of segmentation of customers in terms of their
beliefs and approaches to organic food

Segment  Health oriented  Environmentally  Food quality oriented  Local production

customers oriented customers customers oriented customers

Description  Customers who buy  Customers who buy  Customers who buy  Customers who buy
organic food because organic food because organic food because organic food because
they believe it’s they believe its better they look for natural they want to support
healthier for for environment for taste and high quality local farmers and their
themselves or their example if it comes of food business
families about amount of water
consumption to all
production processes

76
Below are examples of segmentation of customers by their personality
profiles and characteristics used in consumer goods

Personality profiles Personality characteristics

 Dominant customer  Assertiveness

 Timid customer  Openness to experience
 Seeker customer  Openness to others
 Average customer  Leadership
 Empathy
 Emotionality

77
 Below are examples of differentiating customers by their personality
profile and characteristics used for consumer goods

5 5
4,8

4,4 4,4
4,2 4,2
4 4

3,6
3,4 3,4
3,2
3,1
3
2,8 3,2 3,1
2,6 3,1 3
2,8

Personality characteristic Assertiveness Openness to Openness to others Leadership Empathy Emotionality

experience

Personality profiles Dominant Timid Seeker Average

78
Let’s see when the psychographic segmentation is a good choice

Choice of product is driven rather Requires consistency in choices

by values, status etc. based on values, lifestyle

Psychographic segmentation is
used when demographic is not Not good for impulse products
sufficient

Psychographic segmentation is
A great choice for products that
used when geographical is not
express your status
sufficient

79
Let’s see in what industries is most often used

FMCG esp. products related to

Some B2C services
status

SMCG esp. cars Entertainment

Retail especially Fashion Travel

80
Segmentation vs Targeting

81
Let’s start with a short definition

 In targeting you evaluate segments and you decide which you will
concentrate on
 You can pick 1 segment, a few segments, or attack all segments at
Targeting
= once
 In evaluation, you look at: the size of the segments, profitability of
segments, and how easy it is to conquer a specific segment
 Certain segments may require modification of the product, different
sales channels, different marketing

82
 Let’s have a look at an example of segmentation from cosmetics
industry
Price segment Total for the
price range:

9% 16% 5% 30%

EUR 20

61% 8% 6% 70%

Age
Segment
20 - 30 30 - 50 50 +

Total for the age group 70% 24% 6%

83
 Let’s assume that we have decided to target only the 30-50 segments

Price segment Total for the

price range:

9% 16% 5% 30%

EUR 20

61% 8% 6% 70%

Age
Segment
20 - 30 30 - 50 50 +

Total for the age group 70% 24% 6%

84
 Apart from providing 1 same product to the whole market we have 5
different potential approaches*
Mx Market

Px Product

M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3 M1 M2 M3

P1 P1 P1 P1 P1

P2 P2 P2 P2 P2

P3 P3 P3 P3 P3

Single – Segment Selective Market Product Full Market

Concentration Specialization Specialization Specialization Coverage

85
*Philip Kotler “Marketing Management”
We can also group the approaches in 2 groups

Targeting

Selective Extensive

Focus strategy Full coverage

Market specialization strategy Mass marketing

Niche strategy Product specialization

86
Targeting vs Products

87
There are 3 main approaches when it comes to adjusting your product
to segments
Targeting vs product

Segmentation with no Segmentation with

No segmentation
adjustments adjustments

One segment Many segments Many segments

One product One product Many products

One marketing mix One marketing mix Many marketing mix

88
Let’s have a look at how targeting looks like for example in airlines

Targeting vs product

Segmentation with no Segmentation with

No segmentation
adjustments adjustments

Airlines at the beginning Low cost carriers Traditional airlines

Southwest Airlines Lufthansa

Ryanair Emirates

Delta

89
Sources of data for
segmentation

90
To segment the market you need data. Let’s see
where you can look for the data that you will need.91
Let’s have a look at the main sources of data for segmentation

Surveys & Consumer Research Customer Reviews

Data from your website / Ready-made consumer reports

social media and consumer surveys i.e. TGI

Internal Transactional Data Public Data

Data gathered on the behavior

Loyalty Program
of customers

Market Data Aggregators i.e.

AC Nielsen

92
Essential Concepts in B2B
Segmentation

93
 Essential Concepts in B2B
Segmentation – Introduction

94
In this section, we are going to explore some methods of
segmentation that can be used on B2B markets. 95
In this section, we will talk about the following things

Most often used How to segment if you

Segmentation Methods have many Business Units

96
Most often used Segmentation
Methods for B2B

97
Let’s have a look at how B2C segmentation differs from B2B
segmentation

B2C Segmentation B2B Segmentation

Geographic Geographic

Demographic Firmographic

Behavioral Behavioral

Psychographic Psychographic / Role

98
 Let’s have a look at the main methods of segmentation used in B2B

Segmentation

Geographic Firmographic Behavioral Psychographic / Role

segmentation segmentation segmentation segmentation

Continent Industry How much they buy

Country Number of employees Usage rate of the product

State Revenue User status

City Attitude towards the

Market position
product/ service

Sales channels

99
Below example of customer segmentation in B2B based on cost of transport
used in commodity

Cost of transportation
EUR/l

0.00 - 0.02

0.02 - 0.04

0.04 - 0.06

0.06 - 0.09

> 0.9

100
 Let’s have a look at how we can use firmographic segmentation to analyze the
industries in which the alcohol producer operates

Alcohol
producer

Pharmaceutical Cosmetics
Food industry Fuel industry Others industry
industry industry

Shares in
 11%  22%  31%  4%  32%
Revenues

Shares in
 13%  17%  32%  3%  35%
Gross Margin

Shares in
 13%  17%  32%  3%  35%
Net Margin

101
 Let’s have a look at how we can divide the (B2B) customers by channels if
you were working for FMCG producer

FMCG Producer

Traditional Convenience E-commerces & Own

Supermarkets Discounts stores
Stores Retail Chain Marketplaces e-commerce

102
 Let’s have a look at the main methods of segmentation used in B2B

Segmentation

Geographic Firmographic Behavioral Psychographic / Role

segmentation segmentation segmentation segmentation

Continent Industry How much they buy Sales

Country Number of employees Usage rate of the product Marketing

State Revenue User status Research

City Attitude towards the

Market position
product/ service

Sales channels

103
How to segment if you have
many Business Units

104
If you operate more than 1 business you should have
a separate segmentation for every business unit. 105
Let’s have a look at an example of furniture producer

Furniture Producer

B2B Sales B2C Sales

Retail chains in Western Retail chains in Eastern Ambitious

Europe Europe

E – Commerce in Western E – Commerce in Eastern Fulfilled

Europe Europe

Marketplace in Western Marketplace in Eastern Functional

Europe Europe

HORECA in Western Europe HORECA in Eastern Europe Aesthetic

106
Essential Excel for Segmentation

107
Essential Excel for Segmentation
– Introduction

108
One of the most often used tools for segmentation is Excel. In this section, I will show
you the essential formulas that will help you segment customers and analyze them. 109
In this section we will talk about the following things

How to assign categories

How to assign categories
VLOOKUP function using HLOOKUP, VLOOKUP,
using SUMIFS
MATCH

Pivot Tables Pivot Charts Slicers

110
Functions in Excel

111
… A function is a preset formula in Excel and that is intended to carry
out specific calculations. Let’s have a look at how we can use it. 112
In order to work correctly in Excel, a function must be written in a
specific way. Below example of SUM function that adds up 2 elements

= SUM ( A1 ; A5 )

Equals sign Function name Arguments

113
Let’s have a look at how we can define the following formula elements

Value in cell A1 Separator Value in cell A5

= SUM ( A1 ; A5 )

Equals sign Function name Arguments

114
 When writing the formula, it is worth to remember that we can use two
different separators between values, which affect the final result of the
formula

= SUM ( A1 ; A5 ) = SUM ( A1 : A5 )

Equals Function name Arguments Equals Function name Arguments

sign sign

 We use “;” which we call a semicolon, in order to

 We use “:” which we call a colon, in order to
separate different values. In this case the function
suggest a range of arguments from the beginning
would sum values in cell A1 and in cell A5
(A1) till the end (A5). In other words here we ask
Excel, to add values in cells from A1 to A5

115
 If you have USA setting then instead of the semicolon you may have as a
separating sign coma

= SUM ( A1 , A5 ) = SUM ( A1 : A5 )

Equals Function name Arguments Equals Function name Arguments

sign sign

 We use “,” in other words a comma, in order to

 We use “:” which we call a colon, in order to
separate different values. In this case the function
suggest a range of arguments from the beginning
would sum values in cell A1 and in cell A5
(A1) till the end (A5). In other words here we ask
Excel, to add values in cells from A1 to A5

116
 Below the basic Excel functions that you will be using

Function Formula in Excel Example Description

=SUM(number1; [number2]; …)) =SUM(A1:A5)  Function that adds all numbers

SUM in a range of cells and returns
the result

=AVERAGE(number1; [number2]; …) =AVERAGE(A1:A5)  Function that calculates

AVERAGE the average (arithmetic mean) of
a group of numbers

=COUNT(value1; [value2]; …) =COUNT(A1:A5)  Function that counts the number

COUNT of cells that contain numbers,
and counts numbers within the
list of arguments
=MIN(value1; [value2]; …) =MIN(A1:A5)  Function that returns the
MIN smallest numeric value in a
range of values

=MAX(value1; [value2]; …) =MAX(A1:A5)  Function returns the largest

MAX value from the numbers
provided

117
Comma or Semicolon?

118
Excel is not standardized when it comes to separators it uses. This will depend
on your settings. I use the continental European settings (Semicolons)

Semicolon Comma

; ,
 This separator is used in the  This separator is used in the
continental Europe to separate USA to separate elements in
elements in the function the function

119
 That is why when you watch my movies in my formulas you will see
semicolons

= SUM ( A1 ; A5 ) = SUM ( A1 , A5 )

Equals Function name Arguments Equals Function name Arguments

sign sign

 This is what you will see if you have the continental

 This is what you will see if you have the continental
European settings if you open Excel files
USA settings if you open Excel files
 We use “;” in other words a semicolon, in order to
 We use “,” in other words a comma, in order to
separate different values. In this case the function
separate different values. In this case the function
would sum values in cell A1 and in cell A5
would sum values in cell A1 and in cell A5
120
Luckily if you open Excel files attached to lecture he will automatically
translate my settings to settings used by yours

 This separator you will see if  This separator you will see if
you have European settings you have USA or similar
settings

Semicolon Comma

; ,

121
Blocking the address

122
If you copy a formula and you don’t block it, Excel will alter the formula
using your current position

= SUM(A2:C2)

= SUM(A4:C4)

= SUM(A1:A6) = SUM(C1:C6)

123
To avoid that you should block the address. We can block the address by
putting sign $ before the element you want to block

 You have blocked the column A

$A1

 You have blocked the row 1

A$1

 You have blocked the cell A1

$A$1

124
Let’s go to our example of copying a formula from D2 to D4. As you can
see the formula has adjusted – it changed the row from 2 to 4

= SUM(A2:C2)

= SUM(A4:C4)

125
If we block the column and copy the formula to another row nothing
will change. Since the row was not block it will change from 2 to 4

= SUM($A2:$C2)

= SUM($A4:$C4)

126
However, if you block the row with a $ before copying from D2 to D4
you will see that in D4 we will have a sum of row 2 not 4

= SUM(A$2:C$2)

= SUM(A$2:C$2)

127
Now let’s use the second example in A9 we have a sum of all the cells in
column A that are between row 1 and 6

= SUM(A1:A6)

128
When you copy the formula from A9 to C9 without blocking, Excel will
adjust the formula. In C9 you will be summing elements from column C

= SUM(A1:A6) = SUM(C1:C6)

129
If you block the rows nothing will happen when you copy the formula from A9
to C9. The Excel will change the column from A to C as it was not blocked

= SUM(A$1:A$6) = SUM(C$1:C$6)

130
However, if you block the column and copy the formula from A9 to C9 you will
see that we will be still summing up elements from column A not C.

= SUM($A1:$A6) = SUM($A1:$A6)

131
SUMPRODUCT

132
Imagine we got a list of products to buy. We would like to calculate how
much we should spend to buy them.

Product Quantity Price per unit

Product 1 10 $ 50

Product 2 8 $ 89

Product 3 3 $ 130

Product 4 22 $ 90

Product 5 4 $ 17

Product 6 37 $ 76

133
Of course, we can try do it manually, but with a large number of records
it becomes really complicated

Product Quantity Price per unit

Product 1 10 $ 50 10 x 50 = 500

Product 2 8 $ 89 8 x 89 = 712

Product 3 3 $ 130 3 x 130 = 390

Product 4 22 $ 90 22 x 90 = 1 980

Product 5 4 $ 17 4 x 17 = 68

Product 6 37 $ 76 37 x 76 = 2 812

6 462

134
To improve this process, we can use SUMPRODUCT formula, which will do
the calculations by us and return the sum of the products of corresponding
ranges or arrays

Product Quantity Price per unit

Product 1 10 $ 50

Product 2 8 $ 89

Product 3 3 $ 130

Product 4 22 $ 90

Product 5 4 $ 17

Product 6 37 $ 76

135
 Let’s see how the SUMPRODUCT function works

(
= SUMPRODUCT ( Array 1 ; Array 2

 The first array argument whose  The second array argument whose
components you want to multiply components you want to multiply
and then add and then add

136
Rules for Excel

137
What rules should be used when building analysis in Excel

Usage of colors Shortcuts

Consistency between sheets No mouse

Pyramid principle Description

1-source rule Data source

Repetition of variables Master sheet

138
 The most useful functions

Basic functions Financial / Mathematical Others

 SUMIF / SUMIFS  RAND / RANDBETWEEN  Pivot

 COUNTIF / COUNTIFS  MOD  Slicer
 HLOOKUP  NPV  Relative addresses
 VLOOKUP  IRR  Formats
 MATCH  ABS  Hyperlink
 SUMPRODUCT  MAX / MIN  Remove Duplicates
 IF  CORREL  Filters
 AND / OR  Sorting
 IFERROR  Data Validation
 AVERAGEIF  Trace Dependents / Precedent
 LEFT / RIGH / MID  Analysis Tool Pack
 FIND
 CONCATENATE
 YEAR / MONTH / DAY
 ROUND / ROUNDUP /
ROUNDDOWN
 TODAY
 VALUE
 WEEKDAY
139
VLOOKUP

140
Let’s start with a short definition

 Vertical lookup also known as VLOOKUP is one of the most popular

functions in Excel
 It’s specifically designed to navigate through database sources and
VLOOKUP
= tables to retrieve data
 The function performs vertical searches down a specific column by
looking for a value in the first column of a table and returning a
value on the same row in a specific column
 VLOOKUP only works by looking to the right for matching
information and returns the first match only

141
 Let’s imagine that we have 2 tables in separate sheets

Table 1
Table 2

Name & Name &

Basic Salary Bonuses Department
Surname Surname
Person 1 $ 1 300 $300 Person 1 Marketing

Person 2 $ 1 500 $200 Person 2 HR

Person 3 $ 1 600 $550 Person 3 Operations

Person 4 $ 1 900 $400 Person 4 Finnace

Person 5 $ 1 700 $900 Person 5 Accounting

Person 6 $ 1 400 $400 Person 6 IT

142
 We would like to combine data using VLOOKUP function. To do that, we
should transfer data from column “Department” from Table 2 to Table 1

Table 1
Table 2

Name & Name &

Basic Salary Bonuses Department Department
Surname Surname
Person 1 $ 1 300 $300 Person 1 Marketing

Person 2 $ 1 500 $200 Person 2 HR

Person 3 $ 1 600 $550 Person 3 Operations

Person 4 $ 1 900 $400 Person 4 Finnace

Person 5 $ 1 700 $900 Person 5 Accounting

Person 6 $ 1 400 $400 Person 6 IT

143
 Once you apply the VLOOKUP function the right values will appear in
Table 1

Table 1
Table 2

Name & Name &

Basic Salary Bonuses Department Department
Surname Surname
Person 1 $ 1 300 $300 Person 1 Marketing

Person 2 $ 1 500 $200 Person 2 HR

Person 3 $ 1 600 $550 Person 3 Operations

Person 4 $ 1 900 $400 Person 4 Finnace

Person 5 $ 1 700 $900 Person 5 Accounting

Person 6 $ 1 400 $400 Person 6 IT

144
 Once you apply the VLOOKUP function the right values will appear in
Table 1

Table 1
Table 2

Name & Name &

Basic Salary Bonuses Department Department
Surname Surname
Person 1 $ 1 300 $300 Marketing Person 1 Marketing

Person 2 $ 1 500 $200 HR Person 2 HR

Person 3 $ 1 600 $550 Operations Person 3 Operations

Person 4 $ 1 900 $400 Finnace Person 4 Finnace

Person 5 $ 1 700 $900 Accounting Person 5 Accounting

Person 6 $ 1 400 $400 IT Person 6 IT

145
 The Department column can be inserted in different places in the original
table. Below examples of 2 options.

Option 1 Option 2

Name & Name &

Basic Salary Bonuses Department Department
Basic Salary Bonuses
Basic Salary Bonuses
Surname Surname
Person 1 $ 1 300 $300 Marketing Person 1 Marketing
$ 1 300 $ 1$300
300 $300

Person 2 $ 1 500 $200 HR Person 2 $ 1HR

500 $ 1$200
500 $200

Person 3 $ 1 600 $550 Operations Person 3 Operations

$ 1 600 $ 1$550
600 $550

Person 4 $ 1 900 $400 Finnace Person 4 Finnace

$ 1 900 $ 1$400
900 $400

Person 5 $ 1 700 $900 Accounting Person 5 Accounting

$ 1 700 $ 1$900
700 $900

Person 6 $ 1 400 $400 IT Person 6 $ 1IT400 $ 1$400

400 $400

146
 Let’s see what the VLOOKUP function looks like

From which column

The record you Table where we can (
= VLOOKUP ( ; ; should the formula ; Type of match
want to look for find the record
get the data

147
 For our example it would roughly look like this

From which column

The record you Table where we can (
= VLOOKUP ( ; ; should the formula ; Type of match
want to look for find the record
get the data

Name & surname of In which column (in

Table 2 with the (
= VLOOKUP ( the person I’m ; ; Table 2) is the ; 0
departments
looking for department

148
What is exact or approximate match in VLOOKUP and how to use it

Type of match

Exact match Approximate match

(„0” or „False”) („1” or „True”)

 Means an exact match  Stands for approximate match

 If there is no value that is equal  It’s useful when you will be
to the searched value, the looking for a value within
error # N / A is returned! (no certain intervals
data)  Approximate match is the
default range lookup in the
formula
 When no instruction is given,
Excel assumes the lookup
refers to an approximate
match

149
 VLOOKUP with
approximate match

150
 Let’s imagine that we have 2 tables in separate sheets. We want to
assign the grade to a person based on his performance on a test

Table 1 Table 2

Name &
Test results Grade Points from … Points to … Grade
Surname
Person 1 10% 0% 20% F

Person 2 55% 21% 40% E

Person 3 79% 41% 60% D

Person 4 80% 61% 80% C

Person 5 93% 81% 90% B

Person 6 42% 91% A

151
 In Table 1 we have results of test for every person

Table 1 Table 2

Name &
Test results Grade Points from.. Points to.. Grade
Surname
Person 1 10% 0% 20% F

Person 2 55% 21% 40% E

Person 3 79% 41% 60% D

Person 4 80% 61% 80% C

Person 5 93% 81% 90% B

Person 6 42% 91% A

152
 Grades are defined by intervals in Table 2. For example a person will get
a grade E, if the test result is between 21% to 40%

Table 1 Table 2

Name &
Test results Grade Points from.. Points to.. Grade
Surname
Person 1 10% 0% 20% F

Person 2 55% 21% 40% E

Person 3 79% 41% 60% D

Person 4 80% 61% 80% C

Person 5 93% 81% 90% B

Person 6 42% 91% A

153
 If he or she got between 61% and 80% we would give him or her C

Table 1 Table 2

Name &
Test results Grade Points from.. Points to.. Grade
Surname
Person 1 10% 0% 20% F

Person 2 55% 21% 40% E

Person 3 79% 41% 60% D

Person 4 80% 61% 80% C

Person 5 93% 81% 90% B

Person 6 42% 91% A

154
 We would like to combine data using VLOOKUP function with ranges. At the
end we would like to transfer grades from Table 2 to Table 1

Table 1 Table 2

Name &
Test results Grade Points from.. Points to.. Grade
Surname
Person 1 10% 0% 20% F

Person 2 55% 21% 40% E

Person 3 79% 41% 60% D

Person 4 80% 61% 80% C

Person 5 93% 81% 90% B

Person 6 42% 91% A

155
 Since here we have intervals that define our choices in the VLOOKUP
function in the end for the type of Match we should put 1

From which column

The record you Table where we can (
= VLOOKUP ( ; ; should the formula ; Type of match
want to look for find the record
get the data

Table with rules for In which column (

= VLOOKUP ( Test result ; ; ; 1
grades are the grades?

156
What can you use the
VLOOKUP for?

157
 What you can do with VLOOKUP

1 Merging data

2 Assigning categories

3 Instead of IF VLOOKUP ≈ IF

158
How to assign categories based on
2 criteria using VLOOKUP only?

159
 What is the probability of success of your startup?

What business model you

Marketplace 2 SaaS 1
are after?

How much money you

<300 >300 <300 >300
have?
10 20 10 20

12 22 11 21

160
How to assign categories based on 3
and more criteria using VLOOKUP?

161
 What is the probability of success of your startup?

What business model you are after? Marketplace 2 SaaS 1

How much money you have? <300 10 >300 20 <300 10 >300 20

Which country your startup is based in? Poland USA Poland USA Poland USA Poland USA

100 200 100 200 100 200 100 200

112 212 122 222 111 211 121 221

7% 16% 11% 20% 9% 12% 14% 15%

162
HLOOKUP

163
 Let’s imagine that we have 2 tables in separate sheets

Table 1 Table 2

Commission Interest rate Commission

Bank A Interest
Bank Brate Bank C

Loan
Bank A 0% 5% Bank C 2%000
$ 20 1,5%
$ 30 000 $ 25 000
amount

Bank B 1% 2%

Bank C 2% 1,5%

164
 We would like to combine data using HLOOKUP function. To do that, we
should transfer data from row “Loan amount” from Table 2 to Table 1

Table 1 Table 2

Loan Commission Interest rate

Commission Interest rate Bank A Bank B Bank C
amount

Bank A 0% 5% Loan
Bank C 2%000
$ 20 1,5%
$ 30 000 $ 25 000
amount

Bank B 1% 2%

Bank C 2% 1,5%

165
 Let’s see what the HLOOKUP function will do

From where you Type of match to

Value you want to Where you want to (
= HLOOKUP ( ; ; want to fetch the ; perform; exact or
lookup find lookup value
resulting value approximate

The cell where we

Table 2 with loan From which raw I (
= HLOOKUP ( have the Bank ; ; ; 0
amounts should get the data
name

166
MATCH

167
Imagine that you have a list with names of fruits. If you are looking for
pineapple, the MATCH function will allow you to identify its position on the list

1 Type of fruit

2 Orange

3 Grapefruit

4 Peach

5 Pineapple

6 Raspberry

7 Banana

168
 Remember that the position will depend on area you select. In Option 1
the pineapple will be in position 5 and in Option 2 in position 4

Option 1 Option 2

A A

1 Type of fruit 1 Type of fruit

2 Orange 2 Orange

3 Grapefruit 3 Grapefruit

4 Peach 4 Peach

5 Pineapple 5 Pineapple

6 Raspberry 6 Raspberry

7 Banana 7 Banana

169
 Let’s see how the MATCH function works

What I’m looking Where I’m looking (

= MATCH ( ; ; Match type
for? for

The word (
= MATCH ( ; The fruit list ; 0
“pineapple”

170
Below the examples what kind of match type we can we can distinguish
in MATCH function

Type of match

Match type „1” Match type „0” Match type „-1”

 Searches for a value greater  Returns the exact match  Returns the value less than the
than the lookup value lookup value

171
INDEX

172
Imagine that to the list with the names of fruits, we have added data
related to quarterly sales

Type of fruit Sales in Q1 Sales in Q2 Sales in Q3 Sales in Q4

Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

173
The INDEX function returns a value in a table based on a set of
coordinates for the column and row

174
We can use INDEX function for example to find out what was the
pineapple sales in the second quarter

Type of fruit Sales in Q1 Sales in Q2 Sales in Q3 Sales in Q4

Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

175
 Let’s see how the INDEX function works

In what row is the In what column is the (

= INDEX ( Table with the data ; data I’m looking for
; data I’m looking for

Row in which we
Column in which we (
= INDEX ( Table with sales data ; have result for ; have Sales in Q2
pineapples

176
 Knowing how this function works, let's see how we can describe it using
following cell addresses as example

A B C D E

1 Type of fruit Sales in Q1 Sales in Q2 Sales in Q3 Sales in Q4

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

177
 Let’s see how the INDEX function works

In what row is the In what column is the (

= INDEX ( Table with the data ; data I’m looking for
; data I’m looking for

(
= INDEX ( A1:E7 ; 5 ; 3

178
 But what we should do in case we want to create a dynamic lookup? We can
combine functions INDEX and MATCH – let’s see how it works in next lecture

A B C D E

1 Type of fruit Sales in Q1 Sales in Q2 Sales in Q3 Sales in Q4

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

179
INDEX & MATCH

180
 Now that we've covered the basics of INDEX and MATCH, let’s have a
look at how we can combine the two functions in a single formula

A B C D E

1 Type of fruit Q1 Q2 Q3 Q4

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

181
 Let’s start with a short example. Imagine that we want to write a
formula that returns the sales number in Q3 for a peach

A B C D E

1 Type of fruit Q1 Q2 Q3 Q4

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

182
 From the last section we know, that we can use INDEX formula to find a
looking value, but we have to complete the information about the column
and row ourselves

In what row is the In what column is the (

= INDEX ( Table with the data ; data I’m looking for
; data I’m looking for

(
= INDEX ( A1:E7 ; 4 ; 4

183
 If we don't want to hardcode numbers, we should create
a dynamic lookup and combine INDEX formula with MATCH formula

A B C D E

1 Type of fruit Q1 Q2 Q3 Q4

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

184
 Let’s try using INDEX and MATCH formula, find out in which row the
searched value is located

A B C D E F G H

1 Type of fruit Q1 Q2 Q3 Q4 Fruit Peach

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456 Q3 $ 12 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

185
 Let’s see how the INDEX & MATCH formulas works together when we
look for the row using the match function

In what column is
Table with the In what row is the data I’m looking for
= INDEX ( data ; (in this case the fruit) ; the data I’m )
looking for

In what column is
Table with the What fruit I’m Where I’m
= INDEX ( data ; MATCH ( looking for ; looking for it ; Match type ) ; the data I’m )
looking for

186
 Let’s see how the INDEX & MATCH formulas works together when we
look for the row using the match function

In what column is
Table with the What fruit I’m Where I’m
= INDEX ( data ; MATCH ( looking for ; looking for it ; Match type ) ; the data I’m )
looking for

= INDEX ( A1:E7 ; MATCH ( “Peach” ; A1:A7 ; 0 ) ; 4 )

= INDEX ( A1:E7 ; MATCH ( H1 ; A1:A7 ; 0 ) ; 4 )

187
 For the Peach selected in H1, the MATCH function would return that it is in row
4 (in range A1:A7). This information would be used by INDEX function. If you
change the fruit in H1 it would automatically adjust

A B C D E F G H

1 Type of fruit Q1 Q2 Q3 Q4 Fruit Peach

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456 Sales in Q3 $ 12 456

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

188
 If you change to Banana in H1 we would return the sales in Q3 for Banana

A B C D E F G H

1 Type of fruit Q1 Q2 Q3 Q4 Fruit Banana

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456 Sales in Q3 $ 6 776

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

189
 Having information in which row the searched value is located. Let's try
to do the same with the column.

A B C D E F G H

1 Type of fruit Q1 Q2 Q3 Q4 Fruit Peach

2 Orange $ 3 456 $ 6 776 $ 7 253 $ 3 456 Quarter Q3

3 Grapefruit $ 2 386 $ 2 386 $ 3 456 $ 2 373 Sales $ 12 456

4 Peach $ 3 456 $ 3 456 $ 12 456 $ 3 456

5 Pineapple $ 6 776 $ 3 456 $ 6 765 $ 6 476

6 Raspberry $ 10 562 $ 2 386 $ 2 386 $ 2 386

7 Banana $ 17 253 $ 15 253 $ 6 776 $ 12 253

190
 Once we change the formula we don’t have to type in the row and column.
They will be found by MATCH function once we select in H1 the fruit type and
H2 Quarter we are interested in

Table with the What fruit I’m Where I’m

= INDEX ( data ; MATCH ( looking for ; looking for it ; Match type ) ; In what column is the data I’m looking for )

What quarter
Table with the What fruit I’m Where I’m Where I’m
= INDEX ( data ; MATCH ( looking for ; looking for it ; Match type ) ; MATCH ( I’m interested ; looking for it ; Match type )
in

191
 Once we change the formula we don’t have to type in the row and column.
They will be found by MATCH function once we select in H1 the fruit type and
H2 Quarter we are interested in

What quarter
Table with the What fruit I’m Where I’m Where I’m
= INDEX ( data ; MATCH ( looking for ; looking for it ; Match type ) ; MATCH ( I’m interested ; looking for it ; Match type )
in

= INDEX ( A1:E7 ; MATCH ( “Peach” ; A1:A7 ; 0 ) ; MATCH ( “Q3” ; A1:E1 ; 0 )

= INDEX ( A1:E7 ; MATCH ( H1 ; A1:A7 ; 0 ) ; MATCH ( H2 ; A1:E1 ; 0 )

192
 To sum up instead of putting specific row and column number I can make the
whole formula dynamic using 2 MATCH functions

Table with the In what row is the data I’m looking for In what column is the data I’m looking for
= INDEX ( data ; (in our case the fruit) ; (in our case the quarter of the year) )

What quarter
Table with the What fruit I’m Where I’m Where I’m
= INDEX ( data ; MATCH ( looking for ; looking for it ; Match type ) ; MATCH ( I’m interested ; looking for it ; Match type )
in

193
Let’s imagine that you work fro producer of milk products. The producer has decided
to use demographic market segmentation. Assign specific customers to segments 194
 A few information about the firm

The firm operates on many markets

They want to invest in new

products

To do that they have to segment

the market

They have decide to choose

demographic segmentation

195
 Let’s see how they have defined the segments
Age Married? Employed? Kids at home? Segments

NO
Supported
NO persons
YES
NO
NO
YES Adult singles
Less than 40 YES

NO Young Family
YES
YES

Mature Family
NO
NO
YES
More than 40
NO Empty Nest
YES
YES
196
 A small tip how to do it in Excel

To every option you Use SUMIFS function

Use VLOOKUP function
assign a number and to assign the number
You list all options to translate the Analyze Segments
the name of the representing the
number into name
segment segment

197
Pivot Tables and their
alternatives

198
Pivot Tables enable you do to a lot of things

Group big tables into

Fast analytics Filter things
categories

Pivot Tables

From general to specific

Dashboards of KPIs
analyses

199
For some purposes can be replaced with other functions

COUNTIFS

Pivot Tables SUMIFS

AVERAGEIFS

200
Segmentation Case Studies

201
Segmentation Case Studies –
Introduction

202
In the next lectures, we will have a look at 2 case studies

Analysis of customer
Analysis of transactions
segments in B2B

203
 Analysis of segments in
commodity – Case Introduction

204
Imagine that you were hired to help the alcohol producer analyze customer
segments and check their shares in revenues as well as margin generation. 205
 A few information about the firm

The manufacturer operates in many

European markets

The company produce and sales 3 products:

Ethanol 95, Ethanol 99 and Vodka

They have segmented customers by

industries

Analyze segments

206
Analysis of receipts
– Case Introduction

207
Let’s imagine that you were asked to analyze customer segments and
baskets using selected receipts from your client – a chain of gift stores. 208
 A few information about the firm that we will be analyzing

The firm has a chain of gift stores

They offer small gifts, books, stationery and

fashion items

You were asked to analyze behavior of

different segments

You also have to analyze different types of

baskets
209
Segmentation using
external data

210
Segmentation using external
data – Introduction

211
In some cases, you have no access to internal data, and you have to attempt to segment
customers just by looking at external data. Let’s have a look at how it can be done in practice.212
In this section we will talk about the following things

Online store-checks Customer review analysis – Sites for comparing

analysis – case study case study products

213
Online store-checks –
Introduction

214
In many cases you will have to do not only store checks in physical stores
but also in online stores. We will discuss this subject in this lecture. 215
Before going deeper into this lecture I would recommend revising the
lecture on offline store-checks

Offline store-check

216
 In the online store checks you can compare different types of stores

Compare offline to Compare offline to

Compare different Compare different
online for the same online for different
offline stores online stores
brand brands

Example  For example H&M offline to  For example H&M online to  For example H&M online to  For example H&M online to
Zara offline Zara online H&M offline Zara offline

Purpose  Understand difference in  Understand difference in  Understand difference in  You want to compare 2
product range and pricing product range and pricing product range and pricing brands
used in the offline world used in the online world policy used by the same  For one of them you don’t
brand in offline and online have the offline data i.e.
worlds. from another country. In this
 Do they have the same policy case you can use the online
or they use different sets of data as a proxy to make the
rules for the online and comparison.
offline world  This will require adjustments
so you can trulely ompare
the 2 brands

217
 Below the main methods you can use to do the online store-check

Use the API or ask Create a script to

Do the store-check Use data scraping Buy data from the
for data the automate the
manually tools 3rd party
provider process

218
Online store-checks – What
information you gather

219
During online store-check you most likely will be gathering the following
information

Name, photos of the product & Rules for organizing data on the
assigned categories webpage

Prices of specific products Rules for presenting data

Additional information on the

Available quantity
availability in offline stores

# of reviews Discounts on the product

220
Online store-checks – Case
Introduction

221
Let’s see how you can use the online store-checks to analyze the market.
This time around we will do a store-check for cosmetics 222
 A few information about what you have to do

You will concentrate only on

cosmetics for the face

You have data on 200 SKUs

You have information on the

brand, price, group, size

Analyze the data from the online

store-check
223
Using customer reviews –
Introduction

224
The information from customers is extremely important. Nowadays we have plenty of sites
that gather customers reviews. We will discuss how you can use them in market research 225
Below a short summary of what you can learn from sites with review

What customers pay attention You can estimate NPS (Net

to Promoter Score)

You can check how popular

Customer Segments
certain brands / solutions are

What current players are good In some cases you can contact
at the reviewer

What current players don’t do You learn the language used by

too well the customers

226
Using customer reviews –
Source

227
 Below some examples where you can find customer reviews

Consumer Goods SaaS Products Restaurants / Hotels Local Services

 Amazon  G2  Yelp  Yelp

 Walmart  Trust Radius  TripAdvisor  Google Reviews
 Best Buy  Software Advice  Airbnb  Facebook Reviews
 GetApp  Booking.com  Task Rabbit
 Founder Kit  DoorDash
 AppBot

228
Using Customer reviews – Case
Introduction

229
Imagine that you were hired by a firm to analyze the emailing software market and to tell
them whether there is a niche for them to create a new product. Use the customer reviews230
 A few information about what you have and what are your goals

You decided to concentrate on the

Mailchimp customers

Your boss proposed to concentrate

only on the users that have 3 stars

You have gathered data from 900

users by data scraping

Propose on which aspect they

should concentrate

231
Segmentation for Restaurants

232
Segmentation for Restaurants -
Introduction

233
Let’s now have a look at segmentation for restaurants. We will also talk
about things that you should do before you start the segmentation. 234
In this section we will talk about the following things

How to define segments for Example of customer Introduction to analyzing

the restaurant market segmentation the target group

Overview of some
techqniues that you can
use to research customers

235
Defining customer segments –
Restaurant case study

236
 There are number of criteria you can use to segment your market

Type for criteria you can use Examples

 Gender
• Usually men and women

• 0-12-year-old
 Age • 13-18-year-old
• 19-25-year-old
• 26-35-year-old etc.
• The capital
 Location • Big city, Average size city
• Suburbs, Center
• By states, provinces, districts
• Etc.
 Money spend per meal • 10-20 USDmax
• 21-35 USD
• 36-60 USD etc.
• daily
 Frequency of visits • 1 a week
• 1 a month
• From time to time (a few times a year)
 Type of cuisine you are serving • Italian
• Fast food
• Sushi etc.
237
 We recommend choosing 2 criteria to create sensible segmentation. Below an
example of such an attempt – we took the frequency of visit and the spending per 1
visit to divide the whole market into understandable pieces

Spending per 1 visit

Casual Wealthy
dating nomads

Stay at Fast food

home freaks
Frequency of visits
238
 After you have looked at the market it makes sense to pick 1 segment that will
become your primary target. For them you will be building the restaurant, so
you should know their preferences and needs

Spending per 1 visit

Casual Wealthy
dating nomads

Stay at Fast food

home freaks
Frequency of visits
239
After choosing the segment describe your ideal customer from this
segment

Age:  Couples age 25-35 with higher

salaries
Expectation to location:  Interesting, unique

Expectation to design:  Cozy, with little resemblance to

chains

Frequency of dining out  1 time every 2 months

Time spend in the restaurant on a  They spend a lot – on average

1 single visit 1.5 h per visit
Prices sensitivity  Small

Average Spending  100 USD / visit

Expected CAC  200 USD

240
How to analyze targeted customer
segment – Introduction

241
You cannot build everything for everybody so you should rather try to be
something for somebody – in this case specific segment. Therefore, you have to
answer some questions

Who you concentrate on?

What is their socio and demographic

profile?

What is important to them

How do they communicate?

What is their consumption level?

What they like and dislike in the

concept?

242
The last group of on-line tools puts at your disposal numerous solutions giving
you in-depth knowledge of your competitors and markets

Off-line interviews

On-line interviews

Marketplaces with recommendations

Targeted customer
Facebook Audience Insights
segment
Analyze profiles of your customers on
social media
Ready made reports on customer
segments

Food Bloggers
243
 Off-line interviews for
understanding – Known Concepts

244
 Where you can find respondents?

Where Type of business Comments

 all  Limited number of respondents;
 Small differences in demographics;
 The answers may be subjective;
 On the other hand, you can count on friends for honest answers
Family, Friends, Neighbours
 B2B  You can watch someone that does not necessarily have to reply with the
 Mobile application same;
 SaaS  Do not spam these people, only when they mentioned about an interesting
 Site media question you can speak to them;
Twitter

 SaaS  It allows you to reach a large demographic data;

 Site media  You do not have to have their in your contacts;
 B2B Services  There are specific groups you can join. They focus on specific topics
 B2B Products
LinkedIn
 Mobile application  All contacts are mutual
 Site media  By searching you can specify the size of the market, i.e. restaurants,
 Retail because they have own pages
 B2C Products  You can also join groups and invite them to participate in the tests or
Facebook  B2C Services interview
 UGC
 SaaS
245
 There are a few rules of interviewing to keep in mind:

 Minimum of 15 respondents

 Talking face to face

 Neutral place

 Do not record - take notes

 Prepare script of the interview with

ready questions

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 246
 People say what they think the other person wants to hear, so use
the 4 measures to prevent "guiding the witness" (push polling)
 Avoid biased expressions like: "Do you agree with that ..." – it may lead them to the answer you expect; ask questions in
Do not show reverse, so that he has to disagree with you to show that he cares about the problem
 When the respondent knows something about you, i.e. you're a vegetarian, he will be inclined to positively respond to
your questions about the protection of the environment
emotions  Look neutral, do not send signals, and do not suggest any point of view

 We get an honest answer when we put the respondent in uncomfortable situations, for example ask for prepayment of 100
EUR
Ask specific  The more specific questions, the more realistic answer
 Ask about friends. Do not ask him if he "smokes pot", but "what percentage of your friends are doing it" – reflects his approach
questions

 Ask 5 times the question "why"

Dwell on a
subject

 You can interview accompanied by a partner who will follow body language of respondents; maybe something causes nervous
ticks and indicates a sense of discomfort
Watch for  Columbo-style question: unexpected question that asked after you had already said goodbye to the respondent. In this way, you
signals can surprise and confirm or deny something important, what has been said earlier in an interview

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 247
Off-line interviews –
New concepts

248
As a part of the market research you have to define what characteristics should
have in your MVP. Off-line interviews are perfect for this purpose

Find a problem worth SOLVING Find a solution that someone will WANT
TO PAY for

This will determine the features and functionalities of

the MVP

249
Conducting face-to-face interviews is very important because it allows you to
find or confirm the existence of the problem

250
 There are a few rules of interviewing to keep in mind:

 Minimum of 15 respondents

 Talking face to face

 Neutral place

 Do not record - take notes

 Prepare script of the interview with

ready questions

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 251
 While interviewing have in mind the following advices:
 Highlight the aim of the meeting
Set the stage  Explain what you will talk about and what you will ask him to do

Identify the  Check which segment he/she belongs to

 Collect the demographic data and specify the segment to which belongs the respondent
segment
 Explain the problem
Introduce the  Explain how you came across the problem and why you believe it is important
problem  Sometimes not to lead the witness speak generally about problems in the respondent field or skip this stage entirely
/move it to the end of the interview

Test the  Ask the respondent to rank problems from the most important to the least important
 Ask about other related issues / problems they think are worth mentioning
problem
 Try to understand respondent ‘s point of view
Verify the  Discuss problems in the order of importance and how the respondent solves them what solution he is using
solution  If he does not show interest this it means that there is a discrepancy between your business model and the reality

 Ask for another meeting to discuss the solution (in the future this may be one of the first customers) once you have
Ask for something that shows
something  Ask for several contacts to his friends to also perform a conversation with them

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 252
 Pay attention to the signs saying that your idea is a good one:

 The respondent tried himself to  The respondent has a strong interest and
solve this problem passion in talking about the problem

Did they already

How interested
try to solve the
is he?
problem?
 The responder wants to pay for  The respondent is animated and
your solution right away leaning forward (positive body
language)

Money Nonverbal
communication
YES

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 253
 Disturbing signs that may show that the idea is not entirely good:

 Respondent did not  The respondent talks a lot

undertake any attempts to about everything but not
solve the problem about the problem

Did they already

How interested
try to solve the
is he?
 Respondent is not focused on
problem?  The respondent is slouching in his
chair of his shoulders are slumped;
the conversation and the
shows a lack of any interest (negative
topic; seems distracted
boy language

Focus Nonverbal
communication
NO

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 254
 Use interviews to answer 3 important questions:

Does the problem affect a How the problem has been

Is the problem serious?
large number of people? solved so far?

or
or

255
 You need to assess all interviews according to standardized
scores

Design assessment criteria Define responses Assign points

# options  4-10 criteria  3-4 closed replies  Fore example. use scoring system
from 0 to 10 points per answer

Description  Come up with at least 4 criteria for  Come up with 3 types of answers, to  Assign scores to answers for
scoring respondent's behavior which you can assign your example:
during the meeting observations, for example:  Yes-10 points ,
 Yes  More or less-5 points,
 More or less,  No-0 points
 No,
 or  Set the threshold for judging
 Yes, by itself, whether it makes sense to solve
 Yes, at my request, the problem or not – should be
 No around 75% of Maximal Total Score

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 256
 If the total score is below set threshold then you should
reconsider what to do next

Proceed with market

YES
research

Is the total score above the

threshold?
Abandon the idea

NO
Look for a subset of
interviewee for which the
total score was much
higher

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 257
 Below you can find some examples of evaluation criteria allowing you
to check what is the attitude of the respondent to the problem

 Did the respondent sort by importance the problems

presented by you?
 Has the respondent been undertaking any active steps to
solve his problem?
 Was the respondent focused during the interview and engaged
in the conversation?
 Did the respondent agree to another meeting related to the
presentation solution?
 Did the respondent refer you to other people with whom you
could talk?

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 258
Using the top-down and bottom-up analysis you can calculate for how many people
the problem is interesting enough so they can spend some money on the solution

TOP-DOWN ANALYSIS OF AVERAGE RESTAURANT REVENUES

 The total amount spend by people in the USA on eating in
restaurants
 The percentage of the amount spend in NY
 The number of restaurants
 The calculation of revenues per one restaurant

BOTTOM-UP ANALYSIS OF AVERAGE RESTAURANT REVENUES

 The average number of tables in a restaurant
 The percentage of reservation of tables and average price per
table
 Multiplying the number of days in the year (including seasonal
effects)
259
Suppose you want to design a new solution that helps people
lose weight…

260
…then you should check whether people are trying solve the
problem and if yes how do they do it?

261
The fundamental question to yourself: Do I want to deal with this problem over
the next 5 years?

262
 People say what they think the other person wants to hear, so use
the 4 measures to prevent "guiding the witness" (push polling)
 Avoid biased expressions like: "Do you agree with that ..." – it may lead them to the answer you expect; ask questions in
Do not show reverse, so that he has to disagree with you to show that he cares about the problem
 When the respondent knows something about you, i.e. you're a vegetarian, he will be inclined to positively respond to
your questions about the protection of the environment
emotions  Look neutral, do not send signals, and do not suggest any point of view

 We get an honest answer when we put the respondent in uncomfortable situations, for example ask for prepayment of 100
EUR
Ask specific  The more specific questions, the more realistic answer
 Ask about friends. Do not ask him if he "smokes pot", but "what percentage of your friends are doing it" – reflects his approach
questions

 Ask 5 times the question "why"

Dwell on a
subject

 You can interview accompanied by a partner who will follow body language of respondents; maybe something causes nervous
ticks and indicates a sense of discomfort
Watch for  Columbo-style question: unexpected question that asked after you had already said goodbye to the respondent. In this way, you
signals can surprise and confirm or deny something important, what has been said earlier in an interview

Source: Lean Analytics: Use Data to Build a Better Startup Faster; A. Croll, B. Yoskovitz; Running Lean, Ash Maurya 263
 Where you can find respondents?

Where Type of business Comments

 all  Limited number of respondents;
 Small differences in demographics;
 The answers may be subjective;
 On the other hand, you can count on friends for honest answers
Family, Friends, Neighbours
 B2B  You can watch someone that does not necessarily have to reply with the
 Mobile application same;
 SaaS  Do not spam these people, only when they mentioned about an interesting
 Site media question you can speak to them;
Twitter

 SaaS  It allows you to reach a large demographic data;

 Site media  You do not have to have their in your contacts;
 B2B Services  There are specific groups you can join. They focus on specific topics
 B2B Products
LinkedIn
 Mobile application  All contacts are mutual
 Site media  By searching you can specify the size of the market, i.e. restaurants,
 Retail because they have own pages
 B2C Products  You can also join groups and invite them to participate in the tests or
Facebook  B2C Services interview
 UGC
 SaaS
264
Jobs to be done framework

265
Jobs To Be Done framework –
Introduction

266
The Jobs to Be Done concept is a great tool to find a way to improve your
business or create a new business. That’s why we will discuss it in this section267
In this section we will talk about the following things

Jobs To Be Done – Jobs To Be Done – Jobs to Be Done – How to

Definition Examples use it to improve a product

Jobs to Be Done – How to

Jobs to Be Done – How to
use it to create a new Who is your competitor?
find them
product

268
Jobs To Be Done – Definition

269
Let’s start with a short definition

 When we buy a product we essentially hire the product to get a

specific job done.
Jobs To Be Done  We define the “job” as the progress that the person is trying to
Theory = make in particular circumstances and area
 The very same job can be done by totally different products or
services
 Therefore, don’t fall in fall with your product and don’t look too
narrowly at the competitive landscape
 Be obsessed with the problem and the job that the customer hires
you to do
 The same product for the specific customer can perform different
jobs in different circumstances

270
 Let’s see the process that will help you understand the Job To Be Done
for specific group of customers
What are the
What progress the What are the Are consumers How customers
obstacles preventing
person is trying to circumstances of the making do with defines a better
the customer from
achieve struggle imperfect solutions? solution?
progress

 You have to  You have to  You have to  You want to know  You should find out
understand what understand the understand what whether the how customers
are the functional, circumstances in the customers customers are using define “quality”, in
social and which the struggle struggles with, what imperfect solutions what dimensions
emotional is happening obstacles prevent to their problem. the new product or
dimensions of the  In other words you him from achieving  Some customers services has to be
desired progress have to understand the progress will use some sort  You should also
 In other words how the specific context  In other words what of workaround, understand the
the end result of the customer is stopping him combine 2-3 tradeoffs he is
should look like so  When and where it from achieving the separate products willing to make to
the customer is happens, what is progress he desires or services to get get this better
happy doing in the the job done performance
meantime and with  There may be also
whom some sort of
compensating
behavior

271
Bear in mind that the customer hires the product more than one time

Big Hire Little Hires

First moment of truth Second moments of truth

 This is the moment when you decide  This is the moment (after the
to buy the product or a service in the purchase) when he puts the product
hope that he will get the job done to use and can either get the
progress that he was hopping for or
he main be disappointed with the
result
 If the disappointment is big and there
is a better alternative on the horizon
he will fire the product

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Jobs to Be Done – Examples

273
Let’s try to define what jobs does the coffee

Helps me become
Wakes me up
focused

Warms me up Coffee I like the taste

Acceptable break at It is an opportunity to

work meet people

274
Let’s try to define what jobs does Facebook for an average customer

Gives me adrenaline Stay in touch with

boost people

I can see what my ex- Efficient way to

Facebook
boyfriend does communicate

I can show off I use it to kill boredom

275
Jobs to Be Done – How to use it
to improve an existing product

276
 Let’s see the process that will help you understand the Job To Be Done
for a specific group of customers

Implement the Change the

Understand the Jobs Define the changes Keep Focused on the
changes and adjust positioning and the
to Be Done to your product Jobs to Be Done
the organization messaging

 Define what  List the obstacles  Start one by one  Change the way you  Make sure that you
progress the that are preventing removing the communicate with don’t try to satisfy
customers desires, the customer from obstacles the customers too many jobs
what he hires you the achieving the preventing the  Adjust your  Don’t dilute too
to do with your desired progress customer from the messaging / much your brand by
product or a service  Estimate what is the desired progress marketing towards adding too many
 Try to understand cost and benefit of  Change the the job that you are new products and
also the implementing it organization of the solving, the services that are
experiences the  Decide which things firm to be centered progress you are not linked to the
customers seeks in you will do in the around the Jobs to helping the main job
order to make the first order / what Be Done customer to achieve  Design the KPI
progress obstacles you will  Adjust customer system to measure
 Analyze the remove experience how well you do the
functional, job
emotional and  Adjust your
social dimension of processes
their desire for  Adjust your
progress organizational chart
 Pay attention to
leading input KPIs
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Jobs to Be Done – How to use it
to create a new product

278
 Let’s see the process that will help you understand the Job To Be Done
for specific group of customers

Identify who is
Understand the Jobs Create the prototype Start selling & Keep Focused on the
currently doing the
to Be Done of the product marketing Jobs to Be Done
Job

 Define what  List the firms that  Create the  Adjust the  Make sure that you
progress the deliver the progress prototype of the positioning and the don’t try to satisfy
customers desires, / do the job product that you messaging to the too many jobs
what he hires you  Identify in what way can use to learn in jobs you have  Don’t dilute too
to do with your they fail the practices with the identify much your brand by
product or a service customer customer  Organize the firm adding too many
 Try to understand  Identify the non-  Modify the solution around the delivery new products and
also the users that have the till you reach of the job much services that are
experiences the problem but don’t product-market fit – better than current not linked to the
customers seeks in hire any product at your product does alternatives main job
order to make the all the job so well that  Identify and use to  Design the KPI
progress  Identify the we majority of your advantage the system to measure
 Analyze the workaround used customers would be push and pull forces how well you do the
functional, by the customers unhappy if your that may support job
emotional and product disappears the adoption of  Adjust your
social dimension of  Define what the your product processes
their desire for customers have to  Adjust customer  Adjust your
progress fire to hire you experience organizational chart
 Pay attention to
leading input KPIs
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Jobs to Be Done – How to find
them

280
 There are 5 main ways to find the Jobs to Be Done

Analyze
Observe jobs in your Analyze Spot unusual usage of
workarounds & Negative jobs
own life non-consumption the product
compensating behaviors

 Find a problem, a job that  In this method we  In this method you analyze  Look for what people  You can learn a lot by
is poorly solved or not concentrate on people cases where a lot of DON’T want to do observing how customer
solved at all that don’t hire any people are using some  People are able to pay for use your product,
 If you observe a small product or service sort of workarounds to totally removing certain especially if the product is
number of customers  In some cases it may solve their problem and things from their life used in a different way
most likely there will be suggest that the existing achieve progress than the company has
others as well solutions are not  The workaround suggests envisioned
sufficiently good so the that the jobs is really
customers choose to do important to the customer
nothing instead so he is using substitutes
 In other words Jobs to Be or combining together
Done exists but the different products to get
solutions are crappy the job done
 Ask yourself a question
who is not using your
product and why?
 You can use a top-down
approach for that

281
 Let’s have a look at some examples

Analyze
Observe jobs in your Analyze Spot unusual usage of
workarounds & Negative jobs
own life non-consumption the product
compensating behaviors

Procedures in Healthcare Arm & Hammer –

Khan Academy Airbnb hosts Open Table
(vaccination) Baking Soda

Kimberly-Clark & briefs ING Direct – accounts for Arm & Hammer –
Sony Walkman Autopilot in airplanes GM –Baking
OnStar system
Soda
(diapers for adults) low net worth people

Udemy Teachers

Podcasters / YouTuber /
Bloggers

Cosmetics for men

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Who is your competitor?

283
 Let’s guess the main competitors of Netflix

Other streaming platform Traditional TV Cinema Other online entertainment

Netflix HBO GO Cable channels Cinema YouTube

Traditional TV
Disney + Facebook
providers

Games including
Hulu Video on demand
Twitch

Amazon Video Online platforms of

Others
Amazon Prime traditional TV

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 Let’s guess the main competitors of a coffee at Starbucks

Other beverages at
Starbucks Coffee at other places Other places for a meeting Other places to work

Coffee at Starbucks Tea Coffee at home Cinema Working at home

Juice Coffee at work Restaurant Office

Coffee at other
Water Walk in the park Co-work space
restaurant

Shakes Vending Machine Others Others

285