Escaping the commodity trap: Construction Industry

Traditionally, markets in the building and construction industry are segmented by demographic criteria like company size, customer industry, or application area. So did Liebherr, a producer for wheel loaders, segment its product portfolio into four categories in line with the industry standard: building construction, underground construction, road building, and landscape construction.

But after conducting a Job-to-be-Done market analysis and asking more than 250 wheel loader drivers about the outcomes they want to reach when using a wheel loader, Liebherr realized that there were groups of customers with similar needs in every segment category. In other words, the existing descriptive segmentation criteria failed to unite customers with similar needs!
As a consequence, Liebherr segmented the market around the identified over- and unsatisfied customer needs and identified four segments with totally different requirement profiles. The new segment structure was the starting point for several measures that had an immense effect on the company’s profitability and growth.

First, Liebherr found out that the existing products already perfectly served the needs of one of the most relevant segments, but the company did not communicate this. As a consequence, Liebherr repositioned the existing wheel loaders and changed its communication message by emphasizing the outcomes that were found to be relevant for this segment.

The results of the Job-to-be-Done market analysis also showed that the needs of two other segments could not be optimally met by the existing product portfolio. Consequently, Liebherr developed two completely new wheel loader models by using the results of the Job-to-be-Done market analysis as input for the technical specification. The new wheel loaders had significant lower production cost, while at the same time offering better functionalities and higher security. They won several international innovation and design awards and their sales rates are 30% higher than the previous product line.

Job-to-be-Done thinking is the vehicle to identify the true customer needs. If segments are built around customer needs rather than descriptive criteria, positioning and product development can focus on delivering real customer value and the price will no longer be the main purchasing criterion.

Read Part 1 and Part 2 of our commodity trap series.