Monetizing Innovation

Chapter 5Don't Default to a One-Size-Fits-All SolutionLike It or Not, Your Customers Are Different

In the previous chapter, we discussed why you need to have the value and willingness-to-pay (WTP) talk early. But not all your customers have the same WTP. We have not found a single market where customer needs are homogeneous. Yet, time and again, companies design products for the “average” customer.

The reality is your customers are different, whether you like it or not. They have very different needs, differing abilities to pay, and they vary by the degree to which they value your product's key benefits. The only way to cope with this variance is to embrace customer segmentation.

Customer segmentation is the most talked about and at the same time the most misused concept in product design. Why? A guessing game will help explain.

Here we go. Guess the identity of this person: famous Englishman, wealthy, 67 years old, married, two children, and lives in a castle. Of course, you know who we're talking about. Or do you? We'll bet 90 percent of you guessed Prince Charles. While that is absolutely correct, the description also fits Ozzy Osbourne. He's someone every baby boomer rock music fan will know from the early 1970s heavy metal band Black Sabbath, and their children will know him as the star of the early 2000s TV reality show The Osbournes. Even though Prince Charles's and Ozzy's customer personas are similar based on certain characteristics, their needs and preferences undoubtedly ...