What Everybody Ought to Know About Market Segmenting
In a previous post I talked about the difference between fidelity services and convenience services. In the AEC reprographics industry this is mostly divided between design (A/E), and construction (C).
A/E = Fidelity
C = Convenience
For the industry to be successful it is important that the services provided to these two different market segments be differentiated. They should be differentiated by service, quality and price. Here are a couple of comments I have heard within the industry over the past few years.
"We don't sell to contractors because they are too cheap."
"I was forced to lower the price with my largest revenue customer [Architect], because he found the price I was charging to another customer [GC]."
"My customer would never accept the quality from that brand printer because they have high standards. I don't understand how the other guy gets away with it."
"We are losing bids because we just won't lower our price to the ridiculous prices that are being thrown around."
"I can't service the GC's at the cost structure I have in place."
"Those guys don't understand the value we provide."
"I just bought a shop in another city and they were selling the services for too low of a price so we went in and raised the prices to what they should be."
"I can't believe the other guy won a bid at that price. How can he do work at that price?"
When you take a step back and say what are the market requirements of each of these market segments and are you matching our services and price to those markets?
Quality - Architects and engineers typically demand high fidelity. The documents produced represent their work. They want it to look as professional as possible. Contractors don't care about the quality. They just need to be able to read the dimensions and understand what is expected of them. To satisfy architects you should be producing documents on the highest fidelity 600DPI printers(at least). To satisfy contractors you could use a lower quality 400DPI printer.
Service - Most companies who service architects and engineers spend a lot of time going back and forth with their customers making sure that all of the required files are present; making sure the right revisions are in place; and sometimes providing proofs to make sure the quality is acceptable. Contractors usually require you to simply print the documents that they gave you. There is very little back and forth and double checking.
Price - An architect or engineer is willing to pay more to make sure that their work product is represented correctly. Since it is their name on the documents they do care about the attention to detail and service that is provided. They are buying fidelity. They want a "triple shot, extra hot, no foam, caramel macchiato." The fact that they are often not spending their own money is also a factor. Contractors are looking for convenience. They want the drawings printed quickly and cost effectively. They are generally not willing to pay extra for the attention to detail, at least as it pertains to quality. There is value in the content management and revision control, but that service needs to be separated from the printing as they see printing as a necessary evil. They just want a cup of coffee and they can't understand why anyone would pay four bucks for a cup of coffee!
Those who understand that they are not providing simply printing to the AEC industry, but meeting the unique requirements of specific market segments can find hidden profits. Those who cannot differentiate between these market segments will be either overpricing their services and loosing business, or underpricing their services and losing money. Either one means decreased profits. In some cases you should be lowering your prices and in other cases you should be raising your prices, but you must also describe in detail what the differentiated services are for that price (i.e. resolution/DPI, quality control, turnaround time, etc.). There are many details to be worked out and expectations to be set or reset with customers. You also must have the internal process to make sure you can execute. Sure some say "it won't work in our market". What's the alternative?