ELI5, why do phone services like T-Mobile have offshoots like Mint and Metro even though it’s basically the same service?
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Let’s say two bakeries, A and B dominate the baked goods market in a town. They both roughly cater to half they customers. They both sell similar goods like bagels, cinnamon rolls and donuts.
Now the guys at A get a clever idea one day, they will start a new pretend bakery C, using the same equipment, the same employees and the same cheap ingredients as their original A brand, the only difference is packaging, prices and maybe some changes in the assortment.
If they choose the branding carefully, bakery C will now attract only some of the original A’s customers, many of B’s customers and hopefully many new customers that normally would not consider A or B at all. If done correctly, suddenly the geniuses at Bakery A/C will have increased their market share from half to maybe two thirds without much extra cost. Also they have diversified their offering so it will be more robust when customers change their preferences in the future.
This is called segmentation, when you identify a group of customers and create an offering directly to that group. A typical example is labeling shampoo as “for men”. As men would not buy the pink shampoo bottle with rosy smell and “silky smooth skin” on the label, by simply pouring the same product into a black container with a new label and scent, suddenly the shampoo manufacturer can unlock a lot more sales for a low price.
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