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The segmentation mincer (Koch)

How can the segmentation mincer (koch) support strategic choice or positioning?

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Contents

Fortunately, when facing the dilemma of when a segment is not a segment, a tool stands ready to assist – the Segmentation Mincer.

The Segmentation Mincer provides a structured test for deciding whether two proposed product-market segments are strategically distinct or should be analysed as one.

When to use it

Use it when segment boundaries feel arbitrary or when a more disciplined comparison would improve strategy development.

Origins

Richard Koch and former L.E.K. colleagues developed the tool in the nineteen-eighties. It converts the logic of cluster analysis into a managerial questionnaire: compare competitors, customers, economics and barriers, then use the combined evidence to judge whether separation is meaningful.

What it is

A segment is strategically useful when the competitors, customer needs, economics or capabilities required to win differ enough to justify separate analysis and action. Superficial differences in product name or geography do not automatically meet that test.

The Mincer asks the same questions of every pair and applies weights to their answers. Similarity receives a negative score; difference receives a positive one. A positive total supports separation, while a negative total supports combining the areas.

How to use it

Define the two candidate segments precisely and answer each question from evidence. Use comparable market-share definitions, customer research and cost allocation. Where the answer is uncertain, record a range and test whether it changes the result.

The Segmentation Mincer

	Yes	No
1. Are the competitors the same?	–30	30
2. Is market share relative to the leader roughly the same?	–50	50
3. Are the customers the same?	–20	20
4. Are customer purchasing criteria and their importance roughly the same?	–30	30
5. Are they substitutes for each other?	–10	10
6. Are prices roughly the same?	–20	20
7. Is profitability roughly the same?	–40	40
8. Do they have similar capital needs?	–10	10
9. Do they have similar cost structures?	–10	10
10. Do they share at least half of their costs?	–30	30
11. Are there barriers to competing in both areas?	–20	20
12. Can a cost advantage be gained by competing in just one area?	–30	30
Total

Investigate the drivers of the total rather than accepting the sign mechanically. A heavily weighted difference in competitors or share may matter more than several weak similarities. Re-run the comparison when customer criteria, technology or cost structure changes.

Use the conclusion to decide whether forecasts, competitive analysis, strategy and accountability should be separate. Excessive splitting creates noise and false precision; excessive aggregation hides valuable differences.

Top practical tip

Compare candidate segments pairwise with evidence, then explain which differences—not just the total score—justify separate strategic treatment.

Top pitfall

Some inputs, especially purchasing criteria and cost economics, may only become clear later. Mark uncertainty and revisit the boundary rather than inventing precision.