Defining a Situational Market
Chapter 2: Principle 1—Growth comes by Capturing Situational Markets
Dear Friends, here’s the next installment in chapter 2. At the end of this post, I include the links to chapter 1 and chapter 2. More to come on Monday! Have a great weekend.
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Defining a Situational Market
A situation is a set of circumstances, or a contextual moment, in which an individual has a need. Needs that arise in particular situations are always the same, and they can be anticipated and designed for. The most lucrative situational needs to solve for are common, frequently occurring situations that many people experience.
Think of the original definition of a market. Think about vendors selling wares to individual buying customers. With that image in mind, now read this definition.
A market is a situation, where the customer has a need, the company has a solution, and value is exchanged. Whereas in the past, the customer had to leave the situation, go to the store, buy the solution, and then return to use the solution, today we can choose to remain in situ while visiting the market. Better still: smart technologies have enabled companies to customize experiences to the specific situation customers finds themselves in.
The Unlimited Potential of Situations
Frequency is the key factor to consider when developing a growth strategy. The more people do things, the more value there is in supporting those things with meaningful experiences. Think of the P&G example earlier. The company had to decide regarding the profitability of having two beauty serums available for purchase. Because their market model counts the number of people, specifically women, who use the original product, in order not to ‘cannibalize’ those counted women—their process, not mine!—they had to find a separate set of women to be buyers. Women who would pay more.
When markets are defined as situations, they don’t need to worry about cannibalizing their market (phew!). Instead, they need to find two distinct situations where people may want to use two separate products. Then they calculate the frequency of those situations. The two situations that immediately come to mind are:
Original formulation’s market: when people want to maintain their current quality of their face care.
New formulation’s market: when people want or need to dramatically improve the quality of their face care.
Within those two broad market categories, any number of situations could be supported:
When I am returning from vacation and have suffered a few sunburns (new formulation’s market).
When I am working from home and don’t want to take a lot of time to maintain my appearance (original formulation’s market).
When I am recovering from a skin treatment and need something simpler for my face (original formulation’s market).
I could keep going but you get the idea. Now, all of the people who are regular users of the original formulation have reasons to buy both formulations!
P&G’s market for its serums just doubled. And they didn’t have to cannibalize a single woman.
The greater the frequency of the situation (vacation skin recovery might only happen twice a year), the greater the usage—as long as the solution actually helps the individual with the situation.
This principle applies to markets for consumer goods, technology, services, experiential venues, healthcare—you name the solution, there’s a good chance that situational market sizing will grow the category faster than persona segmentation. Apple, Facebook, and Google don’t have solutions designed based on persona segmentation. There’s no way they are going to make the Sony mistake. What they have are solutions that are useful in many, many situations, large or small. Supporting a limitless number of situations gives them incredible frequency. And incredible frequency ensures that they get almost all of the customers all of the time. That’s market share.
Some people, wary about neologisms, may like this concept but want to simply keep the old labels their companies already use. They may want skip the whole ‘situation’ conversation and just tell leadership they’ve found a better way to size a market. Good luck with that. If you don’t explain the framework, don’t expect the concepts to last. Conflating the two types of markets will lead to confusion. Saying something like, “Our Premier Millennial customer is our target audience but really it’s anyone who is in this situation” is not a recipe for success.
Better to say, “Most of the people who find themselves in this situation are Millennials.” That’s clarifying without bringing in all of the persona segmentation baggage.
Why Not ‘Moments’ or ‘Occasions’ or JTBD?
I was explaining the idea of situational markets on a recent Experience Strategy podcast with another podcast host who focuses on employee experience. He listened for a bit as I described situational markets and then he said, “the first thing that comes to mind when I hear you talk about situations is ‘moments.’ Have you thought about calling them moments?”
You might be wondering the same thing. Is Dave just talking about moments, like Dan and Chip Heath do? Like all of CX does? Like most of marketing does? And the answer is ‘no.’ I’m not just talking about moments. A ‘moment’ is a brief period of time that is important for some reason. Historically, the most important moments were called ‘moments of truth.’ Advertisers and retailers loved to focus on these moments of truth. You might remember ‘the first moment of truth,’ which was at the point of sale, typically in store. Then there was the ‘second moment of truth,’ which was when the customer used the product. And then the advertising world discovered ‘the zero moment of truth,’ which was invariably the moment when the advertising campaign moved the customer from awareness to consideration of the product.
While most companies no longer talk about moments of truth, the notion of important moments continues today. We might call them ‘key moments’ but most companies still apply the same lens: a moment is a temporary period of time when people form an impression about the company or need help making a decision. Google introduced the idea of ‘micro-moments’ to industry to promote short, bursty advertising that fit into those small time periods when people are looking at their phones. These are not bad things to focus on.
They are just not what I am describing. And if you use the term ‘moment market’ you risk losing the meaning of the concept.
The same holds true for ‘occasions.’ A powerful word that means a special moment. I like to use the term occasion better than moment because it invokes a need to design. Companies can target moments with ads, but they have to design something to make it an occasion.
Both terms suffer from another problem. From the customer’s perspective—and trust me I’ve done a lot of research on this—moments are rare. And occasions are even more rare. Shopping in a store is not a ‘moment of truth’ for the shopper. It’s a moment of truth for the merchandiser. People don’t have ‘micro-moments,’ they simply meander, or get bored, or develop a habit of always checking their phones.
When we talk to families about special moments, they never bring up shopping in the store. Why would they? Remember the girl in Chapter 1. For her, the most meaningful moment was walking the dog with her dad. If she were inclined to business speak, she’d have said that dog walking is her ‘key moment.’ Not: being a part of a decision-making process designed by experts to push product.
‘Situation’ doesn’t have the baggage of ‘moments.’ But more importantly, it forces the company to focus on people as individuals who have specific needs that arise from their actual lived realities. ‘Situation’ suggests context. Situations are where needs arise. With smart and genius solutions, it’s possible for companies to go well beyond moment design toward developing solutions for common circumstances or situations.
In chapter 6, I will talk about the relationship between situational markets and jobs to be done. Companies who have a focus on jobs to be done tend to focus on the biggest job to be done possible (help me heal, help me get a message to a friend, help me find food I like). Situational markets are much more specific. Situational markets grow out of common or unique situations, not out of a broad-based need to eat, heal, or spend money. Both are important. By combining a focus on the job to be done with an ability to go after situational markets, companies can maximize their growth.
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This post about Experience Strategy Certification is also helpful.