Market
CONSULTANCY

Market Segmentation and Product Planning

BY MODULAR MANAGEMENT
JOURNEY, CREATE PHASE

Will Your Products Deliver?

Market segmentation enables you to build customer needs into your products in five steps: market segmentation, market specification, product family definitions, product family roadmap and product specifications.

From Customer Needs to Product Benefits

Will Your Products Deliver?

Market segmentation enables you to uncover market insights and deploy products accordingly. You capture the voice of the customer and apply it directly to new product development, thereby defining the actions necessary to achieve market strategy. 

The end of silo thinking is close, since market segmentation connects product management with product development. The results include reduced complexity, thoughtful trade-offs and a structured way to discuss market requirements. Instead of who shouts loudest, let your team focus on which products should deliver which benefits to which customers.

Start Outside-in

Which Customers Benefit from the Product Experience?

Customers purchase products to perform certain tasks. Each customer has expectations for what a product should do and what they will gain from the experience. A customer benefit is a short statement that describes what customers gain, and the set of benefits for the whole experience is the basis of market segmentation.

Customer benefits give you a lens to better see the market, with categories related to:

  • money 
  • time 
  • health 
  • security 
  • physical effort 
  • mental effort 
  • comfort 
  • recognition 
  • prestige.

Products deliver benefits in one – or all – of these categories. The overall scope of market segmentation is determined by the list of customer benefits and the associated product experience.

Needs-based Market Segments

Customer benefits are a valuable way to describe differences between customers, and markets can then be segmented into groups that rate the importance of the benefits in a similar way. Customers within each needs-based segment seek similar products and can exist all around the world. They have the same kinds of problems, pain points and expectations for what a product should do.

Varying levels of importance for each customer benefit across market segments establishes ideal levels of benefit for products targeted at each segment. Irrespective of whether your company targets one or all market segments, the ultimate goals for products are established by the customers. These are the benchmarks for measuring the performance of your and your competitors’ products.

The method for generating needs-based market segments starts with a hypothesis of the segments using the knowledge of the company’s market and product experts. The hypothesis is validated and refined with customer interviews per segment, and the process works equally well for experienced marketeers and companies without any type of market segmentation experience.

Customer Canvas

The levels of importance for each market segment and customer benefit combine to form the customer canvas. The canvas shows the total range of benefits needed within the market, and how each segment is looking for a unique combination of benefits. The canvas enables you to measure and analyze the performance of different products and providers/brands.

Market strategy is put into action with the customer canvas. It shows how to gain competitive advantage and tell the story of what your company wants to accomplish in the market. By connecting this market story to a product story, you can describe how products are developed and changed to support strategy.

Each of the customer benefits are linked to measurable product properties that quantify the delivery of the benefit. Goal values are specified for product properties in order to realize the planned levels of customer benefit to specific market segments. Through this cascade and linkage, levels of benefit in the market story are connected to product strategy and product requirements. 

Key Activities

Find Opportunities to Create Value with New Products

Customer canvas is the basis for analyzing products and determining how well they fulfill the expectations of customers. The comparison of customer benefit performance among segments, the company’s products and competitor’s products identifies the potential for new products. Gaps to customer expectations are opportunities for improvement, and where you exceed customer expectations you’ll find opportunities for cost reduction, and similarities with competitor’s products are opportunities for differentiation.

Benchmarking competitive products can now focus on objective metrics including the product properties that are linked to the value delivered by the product. The overall summary of the competitive product performance is expressed in terms of customer benefit delivery. 

New product concepts are presented using the market story, describing how the concept will impact the benefit delivery and the ability to compete within specific segments. Future market trends are also described in terms of how they will impact the customer canvas. If customer expectations increase over time, gaps increase or open up with the current family of products.

Manage a Product Family Portfolio

Product families are also managed with the help of the customer canvas. Each product in a family is targeted at one or more market segments, and the strength of the match-up is evaluated by gaps and competitive differentiation. Products in the family should also be differentiated from one another to support differences in cost, price and brand. Alternatively, all products within a brand should deliver similar levels of benefit, distinctly different from other brands within the same product family.

When all market segments rate the importance of a customer benefit at a similar level, products within the family should not differentiate on the level of this benefit. This is an opportunity to maintain commonalities between products in the family.

The total benefit delivered by a product is the sum of the performance within each customer benefit, or the area under the curve. Relative price differences between products in the family are matched to the differences in the amount of benefit delivered.

Focus on the Voice of the Customer

Customer benefits are the primary categories for focusing market research efforts and collecting customer feedback. The mark architecture is the company’s perception of the levels of benefit customer seek from the products and is examined and refined over time. Voice of customer is collected and analyzed within the categories of customer benefit to answer key questions about how the products are performing in the market:

  • Are customers receiving the benefit they expect?
  • Do they get more benefit from competitive products?
  • How do the levels of benefit vary across brands or product price points?
  • What are the specific product experiences that are critical to deliver the benefit?
  • Which future levels of benefit are needed?

Quantify Market Changes

Changes in customer needs, competition and technology are characterized by their impact to the delivered and desired levels of customer benefit. Customer needs determine the desired levels, and the changes are directly captured on the canvas. New competition and new technology are quantified based on their impact to objective product metrics. The evaluation is clear to all stakeholders when the new performance levels of the metrics are linked to new levels of benefit delivery.

Improve Your Marketing

Go-to-market activities are organized around market segments. Marketing material communicates why a product is well suited for the target market segment and within a family of products, differences are communicated so that a customer can choose exactly the right product. This material also helps customers translate product specifications into what it means for their product experience and what level of benefit they will gain from the product.

Needs-based market segments are also mapped to other types of segmentation, including demographics, behaviors and attitudes. This mapping enables direct marketing campaigns to target specific groups in specific locations linked to specific products and customer benefit levels.

CASE, JOHNSON CONTROLS HITACHI

From Market Segments to Product Planning

A modular product architecture identifies and strategically assigns product functions to building blocks which are combined to form the complete product. These building blocks are modules when the interfaces between them are standardized. With stable and standardized interfaces, market-driven variants of modules can be developed and freely exchanged to provide a vast range of products using far fewer unique part numbers. The resulting product architecture enables economies of scope, with a large family of products, and economies of scale, reduced business complexity.  

A market segmentation model clearly defines the range of products that are included in the product family. Upstream marketing activities tell the market story in terms of products that deliver specific levels of customer benefit. This information is critical to decide which modules have many variants and which modules are common. The product story then specifies the complete range of performance that must be provided within family.

Market segmentation enables you to understand why, where and how much variance is needed in the product family. Developing the model before designing products reduces the time it takes to decide the scope of modular design and supports what you and your company want to achieve in the market. With market segmentation you can build customer needs into product planning and accelerate value creation.

AUTHOR,

With market segmentation, clients can develop insights they've never had before.

Scott Jiran, Senior Consultant
CASE

Johnson Controls Hitachi

PALMA® Software

This is the world-class solution for product management.

Standing for Product Architecture Lifecycle Management, PALMA is cloud-based strategic software for you to create, document and govern modular product architectures. With this unique structured approach, you can design, document and configure products. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

CONSULTANCY AND TECHNOLOGY

Journey

BY MODULAR MANAGEMENT
CONSULTANCY AND TECHNOLOGY

Your Path to Success

Modular Management has been the global leader in product architecture consulting for more than 20 years. We have the consultancy and technology solutions needed to support your entire business transformation.

This journey enables you to reduce complexity in your business and accelerate value creation. With a global team of specialists, we’re able to support you on each and every step, and it’s not just about people and methods, since this structured approach builds an information data model that can be governed by PALMA® technology.

Welcome to the Journey. Welcome to The How Company.

JOURNEY

Create a Competitive Advantage

Consultancy and Technology

The Journey is a tried and tested path to create a competitive advantage. It's a way to solve the executive dilemma - how to optimize operational excellence, customer intimacy and product leadership all at the same time.

Through four main phases – Formulate, Create, Implement and Govern – you can connect strategic direction to the delivery of business value. Through this structured approach, Modular Management delivers clarity, performance and customer centricity, so you can reduce complexity and accelerate value creation. 

The journey enables you to:

  • Formulate company strategy and market objectives into a business case and actionable program plan
  • Create a modular product architecture with design specifications across product families
  • Implement an information model for configurable designs throughout your entire supply chain
  • Govern configurable designs to realize the competitive benefits of a long-lasting product architecture.

Tried and Tested

After more than 20 years and 100 client programs, Modular Management combines consultancy and technology so you can deliver business value. 

Modular Function Deployment® is the foundation method, and synchronizes with a range of methods and tools to help you reduce complexity in an increasingly complex world.

PALMA® strategic software is the tool to build and govern product architectures and the information model that connects customers, products and people. The information model is integrated with CPQ, ERP and PLM solutions, and enables true enterprise digitalization.

The unique consultancy and technology solutions integrated in the journey enable you to solve the executive performance dilemma. CXOs have to optimize operational excellence, customer intimacy and product leadership all at the same time. And this dilemma can be solved. Welcome to The Journey. Welcome to Modular Management, The How Company.

How to Solve the Executive Dilemma?

executive dashboard

SUMMARY

The Journey is a tried and tested path to business success in four phases:

  • Formulate
  • Create
  • Implement
  • Govern

Due to this structured approach, Modular Management is able to deliver clarity, performance and customer centricity, so you can accelerate value creation.

Create a Competitive Advantage

Power of Modular Design

PALMA® Software

This is the world-class solution for product management.

Standing for Product Architecture Lifecycle Management, PALMA is cloud-based strategic software for you to create, document and govern modular product architectures. With this unique structured approach, you can design, document and configure products. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

CASE

MTS Journey

MTS Systems Corporation is a global supplier of test systems and industrial position sensors.

The engagement with Modular Management began with Modular Strategy and Potential Analysis (MSAP™). A modularization program was formulated that would accomplish MTS strategic goals and provide a business case to support the investment. Complexity costs were evaluated using ValueMap™ quantifying the bottom-line benefits of modularity within the MTS value stream. A program plan addressed the creation, implementation and governance of the various product offerings within consecutive waves.

An optimized Modular Product Architecture was created using Modular Function Deployment (MFD®), and this architecture was populated with the Module Variants and rules needed to configure the full range of products. Module Finance™ supplied a model that balanced the direct and indirect cost implications of each architecture decision and the tools to analyze the profitability of the modular system. To make the modular architecture actionable, MTS inbound, outbound and production value streams were newly envisioned using Module Supply Chain Study. Plans were established for each module along with the system requirements to deliver them.

Module Design™ was used to implement standardized interfaces while managing development streams, priorities and module requirements. With these enabling concepts, the MTS approach to documentation was reimagined with process and tools and applied to the existing CAD/PDM systems. A new end-to-end, integrated Configure-to-Order system was also implemented and production was transformed from time-station assembly to a production line. MTS began to manufacture and maintain a product families with dramatically fewer unique part numbers while greatly decreasing lead times and inventory.

Modular Transformation™ established needed changes for a new way of working to ensure the benefits of modularity would be a lasting and profitable foundation for MTS. Processes in and around the value stream were enhanced with decision metrics and tools to sustain the improved business performance. New roles, such as Chief Architect and Module System Product Manager, were created with the mandate to sustain and leverage the architecture.

CASE

MTS Case Story

MSAP
CONSULTANCY

MSAP

JOURNEY, FORMULATE PHASE

Modular Strategy and Potential

The decision to move forward with modularity comes from aligning strategy with a business case that scrutinizes the costs, benefits, risks and timing. Modular Strategy and Potential (MSAP™) defines a market-driven modular strategy, sets targets and calculates the financial potential of implementing modular design and determines the expected return on investment. With this business case in hand you can set the strategic direction for your company.
JOURNEY, FORMULATE PHASE

Explore Your Potential

MSAP

The decision to go forward with modularity comes by aligning strategy and making a business case that scrutinizes the costs, benefits, risks and timing.

Modular Strategy and Potential™ (MSAP) defines a market-driven modular strategy, sets targets and calculates the financial potential of implementing modular design, plans the implementation program, and determines the expected return on investment.

Modularity is a transformative business improvement process that impacts all of the functions of your organization. It will cause you to rethink the way you approach your supply chain, production lines, marketing, IT systems, organization, and decision criteria for cost and profitability.

In conducting MSAP, Modular Management engages resources from across your organization to explore the potential of modularity. We lead management workshops to share our key findings, gain alignment on the strategy, agree on the results, and formulate a way forward. The MSAP analysis takes from eight to sixteen weeks depending upon the breadth and scope of analysis and the resource availability.

MSAP is a five-step process: 1. Establish Baseline, 2. Clarify Strategy and Objectives, 3. Establish Targets, 4. Quantify Benefits and 5. Plan Path. Make contact to find out more.

SUMMARY

YOUR POTENTIAL

Modular Strategy and Potential (MSAP) analysis defines a market-driven modular strategy, sets targets and calculates the financial potential of implementing modular design, plan the implementation program, and determines the expected return on investment.

HOW?

A five-step process:

  1. Establish Baseline
  2. Clarify Strategy and Objectives
  3. Establish Targets
  4. Quantify Benefits
  5. Plan Path
CONSULTANCY

MSAP Methodology

The first step in the analysis is to establish the baseline of the business and identify the current sources and impacts of operational and product structure complexity. The analysis begins by collecting data, including financial performance, process maps such as Order-to-Delivery and Product Development, organizational structure and roles as well as the current IT infrastructure.

In addition to collecting data, we interview stakeholders across key functions at multiple levels to understand the current state, guiding principles, activities and costs. We also conduct workshops to understand the existing product architecture and market opportunity. The findings are analyzed to determine the baseline for the benefits of modularity. Some gaps will suggest an approach for further study to identify what is needed to fully transform the company and capitalize on all the benefits.

Strategy sets the course for how your company will realize its vision and mission as it competes in its chosen markets with products produced by its resources. Objectives should guide the functions of your company to achieve this strategy.

Modular Management characterizes strategy within a three dimensional framework defined by Operational Excellence, Product Leadership, and Customer Intimacy. We take a holistic view of your operational, product, market and financial situation, and, together, we decide how modularity can best support and fulfill your strategic objectives.

These decisions drive the modular design of your product families to achieve strategic objectives, focusing on all three dimensions simultaneously. This will establish the product foundation to drive increases in sales, profitability and ultimately sustainable value creation.

The benefits of modularity come from both eliminating the costs driven by non-value added complexity and by capitalizing on the opportunities resulting from a less complex operation and more flexible product architecture.

A key element of the MSAP is estimating the Cost of Complexity. This concept is widely known and accepted, but its quantification and application in making business decisions are not broadly understood. Modular Management applies our methodology and extensive experience to examine your total costs: labor, materials, capital, SG&A, etc. We identify the proportion of those costs that are driven by the existing product architectures. Product families based upon modular design are inherently less complex so the benefit is proportional to the difference between the two.

Modularity also yields top-line benefits. The MSAP explores opportunities for revenue growth with faster time to market, reduced lead times and a broader range of differentiated products offered to the market.

We will work with you to set leading targets to achieve the right level of complexity and capitalize on the available market opportunities. These targets will drive your modularization program and calibrate the financial potential of modularity. Together with your team we will plan the program and identify the required resources.

The MSAP analysis of your company’s potential with modularity and the corresponding benefits is only the first step. Beyond Formulate, a full modularity program includes the phases of Create, Implement and Govern.

THE MODULAR JOURNEY

Modular Strategy and Potential is part of the Formulate Phase of this tried and tested path to success.

TECHNOLOGY

PALMA®

This is the world-class solution for product management.

Standing for Product Assortment Lifecycle Management, PALMA is cloud-based strategic software for how to create, document and govern modular product architectures. With this unique structured approach and strategic software you can design, document and configure products. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.

MFD by Modular Management
CONSULTANCY

MFD

BY MODULAR MANAGEMENT

Modular Function Deployment

Apply Modular Function Deployment (MFD) to create product architectures that meet customer needs, strategic targets and functional requirements.

MFD enables you to balance stakeholder perspectives and create a product architecture that reduces complexity and accelerates value creation. With MFD and the accompanying information model, end customers can configure their own solutions and you can build a competitive advantage.

And that’s when the fun really starts.

JOURNEY, CREATE PHASE

How to Balance Stakeholder Perspectives?

The objective of Modular Function Deployment® (MFD) is to create a modular product architecture that integrates and balances stakeholder perspectives. With this architecture in place you can enable the mass customization of products and services, reduce complexity and accelerate value creation.

With MFD, stakeholders are represented by one of the following voices: 

  • Voice of Customer
  • Voice of Engineering
  • Voice of Business
  • Voice of Modularity.

Voice of Customer represents the marketing, sales and service functions of the organization as they strive to satisfy customer needs. 

Voice of Engineering represents the engineering and design functions as they strive to develop and choose technical solutions that are combined into products and services.

Voice of Business represents company strategy, operations and finance. These functions work together to guide decision making and make and supply products as specified in the product development process.

The power of the modular product architecture itself is integrated as an additional voice, the Voice of Modularity.

MFD by Modular Management

MFD has five steps to discover, capture, quantify and document the unique perspective of each stakeholder voice. Activities are supported by established methods and tools. The method is iterative and progresses through each step so the modular product architecture can be built and refined. Analysis and a clear governance model balances all stakeholder perspectives to connect your customers, products, services and people.

SUMMARY

MFD

Modular Function Deployment® (MFD) is a method to create product architectures. Combined with PALMA® Strategic Software you can link the architecture to a universal information model that enables the mass customization of products and services and connects your organization.

Why?

  • Reduce complexity
  • Accelerate value creation

How?

Five-step process:

  1. Clarify Customer Needs
  2. Identify Functions and Solutions
  3. Propose Modules and Interfaces
  4. Define Variants and Configurations
  5. Confirm Architecture Feasibility

Tried and Tested

Modular Management has 20 years of experience creating product architectures. We provide technology and consulting so you can reduce complexity and accelerate value creation.

TECHNOLOGY

PALMA®

This is the world-class solution for product management.

Standing for Product Architecture Lifecycle Management, PALMA is cloud-based strategic software for how to create, document and govern modular product architectures. With this unique structured approach and strategic software you can design, document and configure products. You can also connect enterprise systems and secure business goals.

Built on an in-memory database platform, PALMA is faster and more capable than anything else on the market, so you can create configuration rules without coding, govern product architecture life cycles and create a business advantage.