I may be dating myself with this headline, but I’m hoping at least a few of my readers remember those Silkience hair care commercials from the 70’s because it helps make an important point about targeting.

You see, back then Silkience was marketed as a “self-adjusting” hair care brand and its popular commercials featured three women with different hair care needs. (I haven’t been able to find the actual spot that includes the “Chisa” line, but this is a good representation the campaign.)

Silkience worked, one ad claimed, by scientifically pinpointing where each woman needed conditioner – the blond needed the product at her roots, the brunette needed it all over, and Chisa, the Asian woman, needed it only on the ends of her hair.

If the trio seems to typecast women and be as stereotypical as Charlies’ Angels, I’m sure the spot got its inspiration from the show – and that’s the point. The ad, which was perfectly acceptable back then, would be too politically incorrect by today’s standards.

In the current hyper-inclusive, don’t-want-to-offend-anyone culture, a spot that dares to point out people’s special needs based on their ethnicity seems insensitive at best, racist at worst. And it’s not just ethnically-targeted efforts that marketers shy away from. Many companies avoid explicitly targeting men out of fear of offending women, older consumers out of fear of turning off younger ones, low-income families out of fear of alienating the more well-to-do.

Marketers don’t want to seem exclusionary, so they dilute their messages and stay away from media, locations, sponsorships, and any other signals that seem overtly discriminating. The problem is, by not clearly appealing to a single target, a brand loses its distinctiveness and draw.

On the other hand, a clearly targeted message and offering resonates with the intended customers and attracts them like a lighthouse to the brand. Bloomberg BusinessWeek has reported in recent months on three companies that are effectively using an exclusive target to differentiate their brands:

1.  Destination XL, a higher-end apparel retailer for the big-and-tall male set. Owned by Casual Male Retail Group, the largest U.S. big-and-tall retailing chain, Destination XL is finding success where traditional stores have fallen short (pardon the pun.)

The stores have wider aisles and larger dressing rooms to meet the needs of a, er, growing customer segment. High ceilings, track lighting, and hardwood floors, combined with a broad selection and higher quality brands attract large men who’ve been turned off by the cheap products found in mass merchandisers and the stigma of shopping at the end of the rack at department stores.

A BusinessWeek article reported that the NPD Group says, “A generation ago few male shoppers defined themselves by body type; now more than half of U.S. men self-identify as big, tall, or short, and they’re more willing to be marketed to as such.”

In a full embrace of this shift, Destination XL plans to open 50 stores this year. And they leave no doubt about it – the chain’s tagline: “A World of XL has arrived.”

2.  The Tropicana hotel and casino in Las Vegas. The casino’s owners, Alex Yemenidijian and Gerald Schwartz, who rescued the failing property from bankruptcy and bedbugs, have re-designed it to be “the best damn pretty good hotel on the Strip,” according to BusinessWeek.

Instead of rebuilding the property with luxury boutiques, celebrity chefs, and headlining entertainers, they went “full middlebrow.” The casino features a Las Vegas Mob Experience interactive museum, $5 blackjack tables, and shows from performers like Gladys Knight. The Tropicana unapologetically targets the market that Yemenidijian says is “between the low end and the snob…the vast majority of the country.”

Occupancy rates and customer reviews are up, since this approach to attracting a distinct crowd stands out in the sea of Vegas sameness and fills a real market need.

3.  Megabus, a “Chinatown bus”-style provider of transportation for young travelers on a budget. With its street-side pickup, express travel between midsized cities, cut-rate fares, and on-board Wi-Fi, MegaBus has cracked the code in appealing to a particular segment of the traveling population.

The company’s operating model is ideal for the 18-34 set, many of whom rely on the service during breaks from college for transportation home or to explore the country. Three-quarters of MegaBus riders fit that demographic.

BusinessWeek reported that analysts concede MegaBus is too down-market to draw business travelers or to go fully mainstream, but with ridership expanding 48% in 2010, the company’s focus doesn’t seem to be limiting. And, if social media chatter is any indication, it’s become quite the popular choice among its target.

BusinessWeek claims Megabus and its parent company Coach USA “have fundamentally change the way Americans – especially the young – travel, so much that they may help kill plans for new railroads.”

Obese men, middle America, and college students on a budget may not seem like attractive target segments — but as these companies show, it not only makes sense to go after them, it pays to be absolutely clear about your intentions.

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The MIT Enterprise Forum is a great program for gleaning business insights from real, live case studies.  Every month a CEO of a local, up and coming, high tech company presents an executive overview of his/her business and introduces two current challenges they’re facing.  Then an expert panel of advisors gives their advice and feedback and offers potential solutions to these challenges.  Audience members get to observe the presentation and panel interaction, and then offer their own questions and observations.  The following recaps lessons learned from this month’s program.

I’m not calling out the company or its founder here because this isn’t intended as a critique of them – rather, I’m hoping these lessons are helpful to all businesses.  But here’s a bit of background:

This month’s Forum covered an email marketing company which had experienced great success as a trailblazer years ago.  But now as the gap between the company and the competition has narrowed, the company realizes the need to respond with a robust next generation solution.  The founder explained the history of the company, introduced the company’s new offering, and asked for advice on the best customer value proposition for this new version – should it be a suite of brand management and marketing services OR an email marketing provider which also offers related services?  The panel was comprised of really smart businesspeople and I got a lot out of their discussion.

Below are nine lessons based on the panel’s advice as well as my own insights from the program:

1.  Don’t let your product define your vision – The key question of the case presentation was actually the wrong question.  Instead of trying to figure out whether to position the company as an integrated solutions provider or an email marketing provider, the company needs to first identify its brand vision.  It needs to figure out what it wants to stand for and what future it wants to create.  The values and attributes which define the company and differentiate it will be far more sustainable, extendable, and defensible than a product-based value proposition.

2.  Innovation isn’t always the answer – For many tech companies, innovation can be a knee-jerk reaction to commoditization.  As lower-priced competitors start stealing market share by offering the same products and services, it seems the only answer is to shore-up development and try to innovate your way into a new, less competitive space.  But that transition is not easily, cheaply, or quickly made – and there’s no guarantee commoditization won’t ultimately show up there too.  Instead of innovating simply for survival, perhaps the company would be better off figuring out how to thrive in a commoditized world — whether through a distinct feature set, target audience, or pricing strategy.

3.  The business you’re in may not be the real business you’re in – The company views itself as an email services provider and that may be the root of the problem.  With such a limited view of what business it’s in, the need to transition to a broader, more comprehensive offering seems obvious.

But if it were to re-frame the business from what it does to what it provides, it might see itself in the customer database business or in the message distribution business.  A database orientation would lead the company to focus on services managing relationships and optimizing the value of the database.  A distribution business might lead it to focus on efficiency and deliverability of communication across multiple channels and platforms.  Either direction provides a more focused path for the company than pursuing an amorphous “integrated solutions provider” platform.

4.  Know thy customer – Throughout the panel discussion it became clear that the company lacked clarity and insight on their customers.  The founder talked about targeting “marketing professionals” without acknowledging that this could include everyone from an account representative at an ad agency who manages email marketing for multiple clients, to a brand manager who is responsible for all marketing programs for his consumer packaged goods brand, to a small business owner who does her own B2B marketing.  “Everyone” is not a target strategy.  The company needs a robust market segmentation which indicates the differences in needs and drivers between segments as well as the current profitability and projected value of each segment, so it can determine which segments are its best targets.

5.  The customers you have may not be the ones you want – Further on the customer, the company must look beyond its current customer base.  The most valuable segments in the market or the ones driving market growth may be different from the ones which have fueled the company’s current business.  It’s important to understand who these prime prospects are and how they differ from existing customers in order to determine whether or not to target them instead.  And instead of feeling assured by positive feedback received from current customers, the company should solicit input and development collaboration from target prospects.

6.  Figure out the problem you can solve better than anyone else – The founder explained they designed their new product to solve as many problems as possible.  All of these problems fall under the broad umbrella of customers not having enough time, but they’re an unwieldy bunch of needs when grouped together.  It’s the classic mistake of trying to do a bunch of different things and ending up producing mediocre results, instead of being focused on doing a few things well.  The company needs to start by intimately understanding its target customers’ needs and then it should identify the one or two ways it can serve them better than others.

7.  Just because you can doesn’t mean you should (aka “the Lycra principle”) – This is a corollary to the previous point.  With its new version, the company added a host of capabilities and features, some of which seem truly impressive.  But the result is an overwhelming home page and a user experience that actually gets in the way of the user accomplishing his/her mission.  This is a common problem among technology firms, where product development is driven by a product/engineering mindset vs. a customer needs mindset.

8.  Be confident but not arrogant – It seems the company has a distorted view of the competitive landscape.  On the one hand, the founder talked about many different competitors in different sectors (Constant Contact in email marketing, Facebook in community, etc.) – he struggles to identify where his company fits in.  He needs to be clearer about its competitive advantage and to be able to communicate it confidently and compellingly.

On the other hand, it seems the company is somewhat dismissive about the strength of its competitors.  The founder listed email marketing giants like Constant Contact and Exact Target as competitors but suggested that his company really only competes with a little known player because it’s the only one which rivals his company’s quality and robustness.  Overconfidence can be misleading.

9. “Once bitten, twice shy” may hold you back – Several years ago the founder brought in a CTO and essentially handed over the reins to him.  Unfortunately that person overpromised, under-delivered, and ultimately left the company stranded with indecipherable code and without a new product launch.  It’s clear the founder felt burned by this and is now gun shy about hiring in other leaders.  But it’s also clear he needs to bring in other people to help him run the company.  He needs a strong marketing leader to address many of the points above, and he’s going to have to trust this person to take the company to the next level.  At this point in the company’s lifestage, marketing needs to be the driver.

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New formats of existing retail brands seem to be popping up all over the place.  Best Buy Mobile was introduced a couple of years ago as a store-within-a-store concept — the company then launched standalone Best Buy Mobiles and recently announced plans to open 40 more this year. 

Petco just launched Unleashed (with more personalized service and “hipper attitude” than the original format) and Baskin-Robbins has been testing Cafe BR (featuring a make-your-own-sundae bar and higher-end desserts such as fondue) and BR Express (a smaller store focusing on soft-serve ice cream.)

These new formats seem to be a great way for retailers to appeal to more shopper need-states.  A need-state is defined by a group of consumers who seek similar product benefits and attributes in a particular usage occasion.  Need-state segmentation overlays usage occasions onto attitudinal classifications.

For example, in the snack foods category, there might be some consumers who are looking for a snack to tie them over between meals, while others are looking for something to eat post-workout (two different usage occasions) — but they share a desire for healthy alternative (same attitude).   Unlike attitudinal or demographic segmentation approaches which classify consumers into discrete groups, with need-state targeting, a single consumer can experience different need states over time — and thus be reached in multiple ways.

Typically need-states have been used by manufacturers to drive product development.  By understanding different purchase drivers, manufacturers develop different product variations and brand extensions — e.g., a healthy snack food that’s packaged in portable packaging might fulfill one need-state while a more traditional pack lends itself to another.

What’s interesting is that more retailers are getting in to the game.  Best Buy Mobile is targeted specifically to people shopping for cell phones and services.  These consumers may be the same ones who browse the aisles of the big box retailers’ regular stores in search of the latest gadget, but when they are specifically looking for a mobile solution, Best Buy wants Best Buy Mobile to be their go-to store.

Likewise, Petco’s Unleashed boasts a smaller format, is located in high-traffic locations, and emphasizes community — perfect for the pet parent who is already passing by the store and needs to drop in for a quick purchase or some friendly advice.  Baskin-Robbins’ Cafe BR concept seems more like a destination (a great post-movie date place), while BR Express’s name makes its target need-state clear.

With these new formats, these brands expand their appeal, giving existing customers more options and reaching new customers who previously hadn’t found the brand relevant or convenient.

New formats also provides other benefits:

• emphasizes select brand attributes — Best Buy Mobile is described as having “one of the largest selections of carriers, handsets and accessories available anywhere, as well as a highly-trained staff to help customers make the most of their mobile phones…Employees undergo at least 80 hours of intensive training, as well as continuing education on mobile phone technology and trends.“  As such, the new concept shores up Best Buy’s credentials in wide selection and knowledgeable staff.
• reinvigorates the brand image — Unleashed has a more urban contemporary feel than its master Petco brand.  By embodying these attributes, Unleashed helps update and improve Petco’s brand image.
• opens the brand to new opportunities — Jimmy Fitzgerald, VP of concept innovations for Baskin Robins’ parent company explains the chain’s new formats by saying: “This allows us to open doors and go into places we really don’t fit — upper-scale malls and downtown locations.“

So it seems these new retail formats hold a lot of potential for their parent brands.  It will be interesting to see how well they do — and who else jumps on the new retail format bandwagon.

There’s a healthy debate going on over at AdAge.com this week — a POV by Michael Fassnacht, Chief Customer Intelligence Officer at DRAFTFCB entitled “The Death of Consumer Segmentation?” has prompted a lot of comments.  While the traditional consumer segmentation vs. “self-segmentation” discussion is interesting, I found myself wanting to return to the basics of segmentation.  It seems that, before we debate the merits of any segmentation approach, we should revisit why segment at all.

Broadly speaking, segmentation is a tool intended to guide strategy — but which strategy?  Different segmentation approaches are appropriate for different strategies.

The most common strategy is brand positioning — that is, segmentation is used to help determine how you want people to think of your brand.  You need to determine a prevailing attitude about your category (or frame of reference) which is held by a group of customers that spend enough to make them an appealing target, and then position your brand to appeal to that target mindset.  As such, an attitudinal or mindset-based segmentation is the appropriate approach to use in brand positioning strategy.

It’s important to note, though, that such an approach is limiting when it comes to the development of other strategies.  Media planning relies on primarily on demographic/firmographic and media usage variables, so a segmentation based on those factors is what is needed for media strategy.  In the same vein, customer relationship management relies on primarily on purchase data, so a segmentation based on current purchase behaviors and projected lifetime value is appropriate for CRM strategy.  Segmentation by technology adoption (e.g., pioneers vs. early adopters vs. early majority, etc.) is a useful framework when planning product introductions and product development/life cycle strategies.  And so on, and so on.

So when it comes to segmentation, one size does not fit all.  As such, a debate of the merits of traditional consumer segmentation (that is, in Fassnacht’s words, “brand-controlled segmentation” — i.e., marketers decide which customers they want to engage with) should consider what the segmentation is used for.

Despite the emergence of new ways to engage consumers and the rapid rate of change in today’s business environment, most segmentation approaches still serve the valuable purposes outlined above.