Extend your strategic reach with the customer groups/needs matrix

When I challenged the ‘wicked problems’ notion (see What makes a wicked business issue? and HOW to wrangle wicked business problems), I mentioned a framework for extending the reach of our strategy – the customer groups/needs matrix. (Walmart’s allegedly wicked problem was about how to escape market saturation limits for its low-price stores business model).

Here’s an example, used many years ago to assess the strategy-extension options for a multi-brand restaurant group. Consumer research identified both the demographic indicators relevant for the eating-out market and the ‘needs’ of each group on distinct types of occasion. (‘Refuelling’ is simply needing to eat, with no special purpose, e.g. from fast-food outlets).

Having identified the significant groups and needs in the market, it was easy to extend the research to estimate the scale of each – how many meals/week, for each need, does each group buy?

The customer groups-needs matrix in eating-out – historic scale (dark) and opportunity (light)

How to use this matrix – there’s much to go for here!

First, as the figure shows, we can assess both the existing scale of each segment and the un-served opportunity. The eating-out market today is many times larger than it was when the matrix was first used, not just because of higher disposable incomes, but also because many needs on the matrix were badly under-served. This is how to actually implement the Gary Hamel’s notion of “Competing for the Future”, where market share is pointless – it’s opportunity-share that matters.

Then we need to distinguish the scale (meals/week) from the value of each opportunity (£/week). The value of ‘celebration’ segment, for example, is more significant than it appears on this scale-chart because the spend/meal is greater than for each ‘can’t be bothered to cook’ meal, and much more than for each ‘refuelling’ meal.

Then …

  • We can use this matrix to design our offer. Each group and need clearly implies different characteristics for what we offer – not just the menu and its pricing, but the environment, the service-style – even the music and lighting. (A related tool – the Value Curve – can help with that).
  • … which implies what brand fit is possible – and its limits. A fast-food outlet will struggle to offer young couples an intimate meal, for example.
  • Nevertheless, a brand could stretch to serve multiple segments. The neighbourhood restaurants for which this matrix was first used was able to hit a large fraction of these targets, simply by [a] offering a diverse menu and [b] by changing other offer-characteristics at different times. So, no-kid couples got a subdued environment for late evening intimate meals; families got a more energetic experience at earlier hours; older adults got smaller meals at lunch-times.
  • Then, the matrix can be used for diversification. The company in this example (Whitbread PLC) was able to capture most of this matrix by offering different styles of restaurant – hundreds of outlets for some brands. (It has since realised value for shareholders by selling on some operations, notably by raising $3bn from the sale of Costa Coffee – a new ‘mini-treat’ need on that matrix – to Coca Cola Inc)

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