Question

Topic: Strategy

Segmenting Software, How Far Is Far Enough?

Posted by Anonymous on 4/15/2010 at 2:41 PM ET 350 Points
Here is the scenario. A client has 4 pieces of software each that do arguably the same thing. They are a database driven piece of kit for recruitment purposes. The software has, even at the lower spec the ability depending on the user, to be tailored to specific needs.

Because the maker is one of the industry leaders hey have found it necessary to take a step back at their products and having done so they have decided to launch a new piece of kit aimed at a more niche audience. The recruiters that place the most expensive talent.

The crux of it is, let's suppose the software does do a little more and let's face it it must otherwise what is the point? Where as all of the other pieces of kit have the same look and feel – appropriate for one man companies to high street recruiters to larger chains of recruiters, should this new piece of kit look completely different, have a completely different tone? Is severing the ties from it's "heritage" in terms of it not being and looking the same a bad move. Is being different crucial to making it work at targeting the recruiters that are top end?

Ok I have waffled on a bit but hopefully that makes sense. I do not want to give the brand name out at this stage but would welcome any thoughts on this. Many thanks. R
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RESPONSES

  • Posted by Peter (henna gaijin) on 4/15/2010 at 2:47 PM Accepted
    To boil it down - taking a product and making minor variations so you can sell it to another segment is done for money. You have a product that could be sold to many different people, but these different people are willing to pay different amounts for it. Your goal is to capture as much of the money as possible.

    The questions I would ask before segmenting:
    - is there a business reason to do so (generally, that you can get more money from the segment, or sell to a segment that you weren't able to reach before)?
    - can we effectively keep the segments separated such that most of the purchasers are buying from the appropriate segment?
    - is the potential gain more than the costs of making a new product and launching it?

    Regarding how it looks - that plays on both the second and third question. Will doing so help make it so that you can better segment (can the appropriate amount of money from each customer)? You would lose some benefit from tying the products together (if the current products have value), but gain in some ability to differentiate, so better sell to different segments. And are the benefits from changing more than what it will cost to make the changes?

    One example from software where they pretty much don't is Microsoft. In the past, they sold Microsoft Works in place of Office Suite as the way to segment the market. But that must not have worked, as now they offer a Home/Student version for about the 1/3rd of the price of the corporate version. But as far as I can tell, they are the same product. If you can segment using other means (channels, approvals, etc.), you may not need to change the product, as the Microsoft example perhaps shows.
  • Posted on 4/15/2010 at 4:12 PM Moderator
    This is really a positioning or branding issue. If the target audience or the key benefit is meaningfully different, then it is a different brand and should look different. If the target audience is mostly the same and the key benefit is pretty much like the old benefits, then it isn't really a new brand, just another line extension, and it should look like a member of the family.

    This sounds very much like any number of client discussions I've had over the years dealing with line extensions versus new brands. Maybe the client needs to define its objectives for the new offering element more clearly/specifically. Then you/we can make a recommendation that responds to that objective.
  • Posted by Jay Hamilton-Roth on 4/15/2010 at 6:41 PM Accepted
    From the customer's perspective, are the existing pieces of software different? Software can sometimes look very similar, but in the eyes of a tech person, the subtle differences for tuning, APIs, portability, white labeling, support, etc. matter a lot.

    Does your background allow you to understand the details of the differences (and the implications)? If so, then Michael's given you wise advice. If not, you really need to talk to the people who have purchased the various offerings and ask them why they chose what they did (to better understand the positioning in their minds). Once you understand better, then you'll have the knowledge to decide about the next product positioning.
  • Posted on 4/16/2010 at 6:30 AM Author
    Thanks so much for the answers so far. Loads to mull over, I will have a few discussions and get back to this, I need to find out and clarify are the differences enough to warrant a rebrand or not. R
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