Social CRM


Howard Moskowitz’s Horizontal Segmentation Secret Sauce

In a Ted Talk from 2004 that I watched a the other day, Malcolm Gladwell spoke about Howard Moskowitz. You might recall the New Yorker writer made a name for himself with the publication of The Tipping Point and several other works that focus on the unpredictable things that people do in the course of normal lives. Gladwell’s Ted Talk gave me an insight about CRM.

Howard Moskowitz is a Harvard-educated psychophysicist — whatever that is — who has made his bones in market research. Moskowitz works in the food industry, of all things, and his great insight was that very often there is no single, perfect version of a product, just as there is no single monolithic customer. There are several product types that are attuned to the needs of clusters of customers.

Moskowitz’s contribution was in discovering that there is not a single big bell curve of a market for most things, but he also showed that the market is not infinite or even made up of innumerable markets of one. He showed that there is a multiple but finite number of clusters, of horizontal customer segments, in anything. His breakthrough was to show that there are sizable markets for multiple kinds of spaghetti sauce, and that sauce is not a monolithic idea.

Horizontal Segmentation

By evolving from a one-size-fits-all approach to one that embraces customer diversity, Moskowitz was able to improve customer experiences with food products from coffee to cola to spaghetti sauce and beyond. Embracing diversity goes by the name of horizontal segmentation, and it applies equally well to food products as it does to other customer experiences. For what is a food product but a customer experience in material form? Horizontal segmentation seeks to understand what customers want and then to deliver it.

In our own design of customer experiences, we often ignore horizontal segmentation and simply try to deliver an experience that most people will find acceptable, which is to say our Platonic conception of the experience. In fact, smart companies are designing customer experiences leaving nothing to chance. But what’s acceptable to the big bell curve is very different from wowing the customer.

In customer service, for instance, we’re at least on the right track, because service suites offer a range of communication modes today. With these modes, a customer can at least select the setting of an interaction. But what about the content of the interaction?

On the Fly and Just in Time

This issue highlights the importance of social media tools that capture customer input and render it in the moment. They can do what Moskowitz did for a fraction of the cost and time. If a vendor or service provider can be in the moment with the customer, a vendor is more likely to be able to respond to a need as it happens. This amounts to horizontal segmentation on the fly or just-in-time horizontal segmentation.

If you link together enough such interactions, you can deliver a differentiated customer experience in the same way that you deliver a movie — by rendering a lot of still frames in rapid succession. But note that the key is in the ability to rapidly respond, it has less to do with the medium you use, and it’s far away from the metrics we love to track, like time in queue or ensuring we use the customer’s name or anything else that is temporal but off the mark.

Horizontal segmentation on the fly solves part of a problem. It helps us get through a customer experience at hand, but it doesn’t give much insight into better alternatives. If Moskowitz had stopped at the sauce at hand, today we’d have a very good conception of traditional spaghetti sauce, but we’d be unaware that deep in the marketplace there were opportunities for more chunky or garlicky concoctions. The sauce companies made a lot of additional money catering to new tastes, but only once they had done the research and began to offer multiple alternatives.

So while being in the moment is important, it’s not enough. It’s still critical to use social tools to ask the marketplace open-ended questions in order to capture unique insights. You don’t know where these insights will lead, but it’s a sure bet that they are literally the secret sauce for differentiated products and customer experiences in an era when commoditization is turning our perspective into shades of gray.

Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant’s research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is the author of Hello, Ladies! Dispatches from the Social CRM Frontier and can be reached at [email protected].

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