How to Discover Your Market Segmentation
Clearly Elon Musk's Starlink is Experimenting on Live Customers and Willing to Adjust Anything
Last year Elon Musk rolled out his satellite internet service and it immediately sold out. When the supply of antennas and bandwidth finally caught up, Starlink realized that people with RVs would pay more to be able to move their internet around. So Elon created an RV plan and raised the price from $110 to $135 per month for customers that wanted to move around. In fact the service was exactly the same, but the Starlink people could see the antennas moving – so they told those customers they had to have the RV plan.
Then they looked at the data again and saw a bunch of those “RV” customers driving around on the water. So just this month Starlink raised the price again for customers on boats and put a cap on the bandwidth. Reduced service, now $250 per month.
In marketing this is called segmentation. Home customer segment, $110 per month. RV customer segment $135. Marine customer segment $250. Propper segmentation makes positioning, pricing, and selling much easier. Unlike Starlink, most companies do deep research for their segmentation before they settle on strategy or the price.
In addition to getting the price right, targeting the right customer segmentation will improve the performance of sales and marketing activities. Fish where the fish are as the saying goes. Here are a few practical methods for deciphering customer segmentation.
Run some campaigns to randomly selected targets and look for patterns in the results. Make sure you have enough data and look at it from all angles. What looks like an industry segment can also be a geographic segment or a company size segment.
Armed with some hypotheses from the prior step, create some test segments and test them against a random control group or each other. Whenever possible talk with customers to enhance your understanding of their purchasing behavior.
Brainstorm some left field hypotheses and test them against a known segment.
Remember that the marketplace is always changing and be willing to adjust your conclusions as conditions change. Changing conditions may include behavior of competitors, but also larger conditions like the economy or even public health conditions.
These ideas are not rocket science. If we were to ask the marketing people at Starlink, they would probably say they use similar steps to derive their segmentation. The only real difference is where we were talking about running marketing experiments, they are experimenting on live customers. This is a bit unorthodox because most companies are not as mentally flexible as Elon Musk. Clearly it does not bother Elon that changes had to be made to the price.
As a customer, after paying $600 for an antenna, it is a bit irritating that the monthly price could be changed so much. But I doubt many boaters will complain. Even $250 a month is a great deal for satellite internet for a boat. The next time you walk through a marina, look for the Starlink antennas… they are everywhere.
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