Marketing: Session 2

1
Marketing Session 2

• Understanding Customers Individuals
  Organizations

2
Agenda

• Finish off last day
• Key Customer Behaviour Concepts
• Market Segmentation, Targeting Positioning
• Case Rebel Creek
• StratSim
• Summary
• Next Day

3
Last Day

• Market Orientation value, requirements
• Market Opportunity Identification Assessment
• 6 Cs particularly Customer, Company,
  Competitor
• Market Research Coors
• StratSim, Business

4
Research Techniques

• Market Mapping
• Concept Testing products/services, ads
• Customer Decision Making Preferences
• Media usage
• Performance Modeling
• Forecasting Propensity models
• Behavioural data - transaction capture, loyalty
  programs - need to complement with
  cognitive/attitudinal
• Surveysite.com

5
Competitive Intelligence

• Strategic perspective - offensive vs defensive
• Direct indirect competition
• Diversity of needs within organization
• Diversity of sources - reports, speeches, net,
  customers, partners, etc.
• Ongoing, captured communicated - used
• Leakage - what you are telling competitors
• Specialized skills resources

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Summary - Research Market Intelligence

• Uncertainty reduction - effective decision making
  
• Abundance of data - not intelligence
• Behavioural cognitive/attitudinal
• System - technology people, ongoing
• Learning organization
• Utilization - capture, communicate/share

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Framework for Diagnosing Market Opportunity

• How can a firm generate new business ideas?
• What value can a company unlock or introduce?

Seed Opportunity in Existing or New Value System

• Can the new business fulfill an unmet or
  underserved customer need?

Uncover Opportunity Nucleus Identify Unmet and
Underserved Needs
Investigative Stages

• Which segments of the market are most attractive
  to serve?
• What is their profile?

Identify Target Segments

• Does the firm have the resources and
  capabilities to support the new business and
  serve the customer needs?

Declare Companys Resource-Based Opportunity for
Advantage

• Is the new opportunity attractive from a
  financial, competitive and technology standpoint?

Assess Competitive, Technological and Financial
Opportunity Attractiveness

• Based on the overall analysis, should the firm
  launch the new business?

Make Go / No-Go Assessment
Final Decision
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Evaluate Capabilities to Deliver Value
Resources and Assets Needed
Provided by the Company
Provided Through Partnerships

• Categories of Partners
• Complementor partners
• Capability partners

• Types of Capabilities
• Customer-facing
• Internal
• Upstream

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Factors to Assess the Opportunity
Competitive Intensity
Customer Dynamics

• Number of competitors
• Competitors strengths and weaknesses

• Unconstrained opportunity
• Segment interaction
• Rate of growth

Opportunity Assessment
Technology Vulnerability
Microeconomics

• Technology adoption
• Impact of new technologies

• Market size
• Profitability

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Overall Opportunity Assessment
11
Business Attractiveness Assessment
Selective Short-Term
High
Priority
Realization Ease
Selective Long-Term
Avoid
Low
Low
High
Magnitude of the Opportunity
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Summary Assessing Market Opportunities

• A market opportunity analysis framework helps
  structure your analyses thinking
• Opportunities linked to value provision
• Customers determine value need to understand
  customer decision process
• Involves identifying pursuing most attractive
  customers
• Need to source the required resources to deliver
  value to customers
• Assessing the attractiveness involves looking at
  a number of factors 6 Cs
• Culminates in a go/no-go assessment

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Understanding The Customer

• Importance market oriented, drives decisions,
  relevance value
• Key Elements process, decision context,
  decision-making criteria, perceived risk
  handling behaviour, experience cycle, metamarket,
  dissonance
• Disciplines/Perspectives for Understanding
• Organizational vs. Individual Behaviour
• Online vs. Offline

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Process

• Who is involved? When? What role/concerns?
• Search process? Where?
• Considered Set of Options? How?
• Decision Criteria? Why?
• Timing? When?
• Varies by decision type/context, risk

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Decision Criteria
Determinant Factors
Important Options Differ Swing the Business!!
Bar or Table Stakes Lose if we dont Offer
Important
Salient Factors
Possible Factors
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Value Drivers

• Give Get Factors
• Get - Product Service Quality Dimensions
• Give - , time, effort, hassle
• Value types - acquisition, transaction, in-use,
  redemption
• Best, Lowest Cost, Easiest, Fastest

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Customer Experience Cycle - Opportunity Horizon

• Requirement - Need it?
• Specification - Thats the one!
• Distribution - Who stocks it?
• Availability - Whos got it?
• Payment - Credit OK?
• Delivery - Want it Now?
• Acceptance - All there?
• Installation - All Mine
• Performance - Hows it going?
• Upgrade - Need some more?
• Repair - Time For service?
• Return - Finished
• Evaluation - Was it worth it?

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Customer Utility Map
Customer Experience Cycle
Productivity
Purchase
Delivery
Use
Supplements
Maintenance
Disposal
Utilit y L evers
Simplicity
Convenience
Risk
Fun Image
Environmental
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Customer Utility MapSchwab
Customer Experience Cycle
Productivity
Purchase
Delivery
Use
Supplements
Maintenance
Disposal
Utilit y L evers
One Source
Simplicity
Convenience
24/7
Secure Transactions
Risk
Fun Image
Environmental
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Metamarkets

• Metamarkets - clusters of cognitively related
  activities that customers engage in to satisfy a
  distinct set of needs
• Major life events - weddings, childbirth,
  education, career changes, retirement
• Major assets - home ownership, automobile,
  financial
• Conditions - importance (time, economic), diverse
  set of providers, mind share (time,)

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(No Transcript)
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What is Cognitive Dissonance? Why should
marketers be concerned?

• Post-purchase tension
• Dissonance creation reduction
• Marketers role reinforcement strategy
• Word of mouth impact

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Disciplines

• Sociology, Anthropology, Psychology
• Example from behavioural psychology cognitive
  psychology sequence effects, duration effects,
  rationalization effects
• Finish Strong
• Get the Bad Experiences out of the way early.
• Segment the pleasure, combine the pain
• Build commitment through choice
• Give people rituals and stick to them
• Want to Perfect Your Service? HBR June2001

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Organizational vs. Individual

• Similar concepts at play but some differences as
  well
• Buying Centre Purchasing Role professional,
  protocol/policy
• Types of Decisions Rebuy New Task
• Specifications, Supplier Qualification, Bids
• Decision Criteria rational emotional
• Supplier-Buyer relationship more important,
  long term, functionally integrated

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The Buy-grid Framework for Organizational Buying
Situations
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Segmenting Purchase Categories
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Buying Centre Concept Who, When, How, Why, What
..

• The buying center -
• All organizational members that influence the
  purchase decision
• Composition changes from one purchase to the
  next
• Isolating the buying situation
• Rebuy fewer members
• New task large and complex
• Composition - can be predicted by analyzing the
  impact of the purchase decision on different
  functional areas
• Buying center influence
• a. Users are the personnel who will be using
  the product
• b. Gatekeepers control information
• c. Influencers supply information during the
  product specification and evaluation stages
• d. Deciders actually make the buying decision
• Influence appears to increase with
  environmental uncertainty
• Individuals can change roles depending on the
  purchase one individual may play multiple roles
  many individuals could assume one role

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Questions for the Industrial Marketer

• Which member takes part in the buying process?
• What is each members relative influence in the
  decision?
• What criteria is important to members in the
  evaluation process?

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Clues for Identifying Powerful Buying Center.
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Example Article on Changing Role of IT in
Companies

• Changing role
• Implications for purchase behaviour who is
  involved, solutions considered, purchase
  criteria, etc.

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Why Do Customers Shop On-line?

• Convenience
• Cost
• Choice
• Customization
• Communication
• Control

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CarPoint Case

• Automobile decision Customers Perspective?
• Dealers perspective?
• Value proposition for customers?
• Value proposition for dealers?
• Business model now? Future?
• Lessons?

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On-line vs Off-line

• Search - scope, agents
• Evaluation - self, comparative sites, WoM -
  communities
• Purchase - regular, bid, barter
• Possession - wait unless bit based
• Use - similar, support
• Disposition - scope, pricing format
• Cycle compression, control, learning

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Transparency

• Price Cost
• Availability
• Supplier
• Product

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Increased Power of Customers

• Knowledge - increased transparency
  products/services, prices, suppliers access to
  other customers
• - they have the money,they pay our bills
  increased affluence
• Conditioning we are able continue to give
  them more recognition attention
• Armed, knowledgeable, comfortable, and expect to
  be in control, yet they are human and therefore
  complex

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StratSim Insights Questions?
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Summary

• Begin end with the Customer!!!
• Complex dynamic but critical that we understand
  and respond to them
• Organizational network commitment
• Competency that can yield competitive advantage

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Analytical Process Questions to Answer

• Where are the business opportunities?
• What do they look like?
• What will it take to capture the business?
• What opportunities should we pursue?
• What business do we already have?
• How should we position ourselves to go after the
  desired opportunities?
• Could substitute threats
• Understanding markets, choices, commitments

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Current Examples Whats going on?

• Auto Mercedes C Class, Jaguar - X Type, Volvo,
  Porsche Cayenne SUV, Bentley, BMW - Mini, Harley
  Davidson V-Rod
• Food Beverage - Pepsis Lemon Twist, Heinz EZ
  Squirt Purple Ketchup, Chicken McGrill, Trident
  Advantage
• Retail - Nike Goddess, Nike Weather, Roots
  Vitamins Roots Water, Columbia Sportswear -
  Watches
• Airlines Westjet, Canjet, Jetsgo
• Others????

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Segmentation

• Grouping of potential customers who have similar
  buying, usage, evaluation patterns
• Number of different ways - maximize learning
  understanding of different types of business
• Research, analysis, creativity
• Criteria - profitable, different, separate
  strategy, operational

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Segmenting by Behaviour

• Divides consumers into segments on the basis of
  how they act toward, feel about, or use a product
  or service.
• Users vs. non-users of a product or service
• heavy users,
• moderate users,
• light users
• Usage occasions or when consumers use the product
  the most, i.e. seasonal, holidays.

Segmenting by behaviour
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Dimensions for Segmenting Industrial Markets

• Segmentation variables that marketers
• use to divide up industrial markets

Segmenting Industrial Markets
Company-Specific Characteristics
Organizational Demographics
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Developing Segment Profiles

• Segment profile is a description of the typical
  customer in a segment including
• customer demographics, location and lifestyle
  information, and
• customer usage rates.
• Next, the firm tries to forecast each segments
  market potential, the maximum demand expected
  among consumers in a segment for a product.

Segment Profile
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Customer Segmentation - Example
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Targeting

• Targeting
• marketers evaluate the attractiveness of each
  potential segment, and
• decide which of these groups they will try to
  turn into customers.
• Target market
• group or groups selected by a firm to be turned
  into customers as a result of segmentation and
  targeting.

Targeting
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Targeting

• Follows from segmentation
• Choice of which business opportunities to pursue
• Fit - company, climate, customer, competitor,
  channels, cash
• Proactive vs reactive
• Multi-segments
• One-to-one customization

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Example The Womens Market?

• Importance?
• Difference?
• Implications for marketers?
• For your company?

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Women on a roll
Rising control of wealth
Today Dominate consumer buying and
corporate purchasing
Future Dominate financial decisions
Rising academic dominance
Rising business decision role
Requiring business response
Organizations more female
Society older and more female
...we are reaching a breakpoint in business?
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The lump in the snakeis female
2001
2021
Male
Female
Male
Female
Total
Total
13
12
10
10
0-20
20
25
11
10
10
9
20-34
19
21
16
39
20
19
46
23
22
48
12
12
10
10
35-50
20
25
32
10
10
13
14
50-69
27
20
36
35
16
19
26
12
14
49
2
4
3
5
70
8
6
13
Prime Market 48
Prime Market 54
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Womens market Facts

• Women instigate or complete over 80 of all
  purchases
• All consumer purchases 83
• home furnishings 94
• vacations 92
• new homes 91
• DIY projects 80
• Consumer electronics 51
• Cars 60 plus 30
• New bank accounts 89
• Health care 80
• write 80 of cheques
• pay 61 of bills
• own 53 of all stocks

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Womens market Facts (contd)

• 2/3rds of working women and 50 of working wives
  earn over 50 of family income
• Constitute 43 of those with net worth over 1/2
  million dollars
• Influence 75 of financial decisions
• Take at least 29 of financial decisions alone
• Between 1970 and 1998 female median income rose
  63 male 0.6
• By 2000 more women used the web than men, and 6
  out of 10 new web users are women
• Among wired women 83 are primary financial
  decision makers
• Women constitute over 50 of all corporate
  purchasing officers, are in a majority in HR and
  commercial admin officers with attendant
  purchasing power

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Womens market Facts (contd)

• Women directly control 51 of the wealth in the
  USA, and this will rise dramatically as the baby
  boom ages. The baby boomers control 70 of all
  assets
• On average, these women will be widowed at 67,
  and will most likely survive their husbands by at
  least 6 and as much as 15-18 years. During this
  time they have sole control of the households
  assets.
• What no-one knows yet is what kinds of spending
  patterns we will see from what is undoubtedly the
  youngest, healthiest, wealthiest, best-educated,
  most ambitious group of retirees ever

Dr. Nancy Dailey, When Baby Boom Women Retire,
1998, p.39.
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How they buy I Women and men are different!
Men
Women

• Vision focused
• hearing
• Smell relatively insensitive
• Touch the most sensitive man is less sensitive
  than the least sensitive woman
• Are all the way on or in a resting state of 30
• Info processing men eliminate

• Vision peripheral
• hearing discomfort level half that of men
• Smell more sensitive
• People orientation by age 3 days baby girls
  exhibit 2x the eye contact of boys
• Are never off, their resting state is 90
• Info processing women integrate (women notice
  the little things brain differencethe details
  not right or wrong, just is)

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How women buy II Women and men are different!
Men
Women

• Want to get away from authority and family
• self-oriented
• rights-oriented
• individual perspective
• pride in self-reliance
• hear a language of status and independence
• communicate to obtain info
• write scripts that are direct and linear
• buy and move on, limited research

• Women want to connect
• other-oriented
• responsibility-oriented
• group perspective
• pride in team accomplishment
• hear a language of connection and intimacy
• communicate to create relationships, encourage
  interaction and exchange feelings
• write scripts that have many conflicts, many
  climaxes and many endings
• research facts and opinions (personal network)

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How Women buy Some implications

• Women are demanding in making the initial
  purchase in a category, they recoup their time
  investment by staying more loyal to the brand
  theyve chosen in subsequent purchase cycles
  increasing retention rates
• Word-of-mouth recommendation is more prevalent
  among women, they are more likely to recommend to
  others those brands or salespeople that impress
  them favorably -- in essence, free marketing of
  the most powerful kind.
• The big risk Companies as have found that
  marketing and service improvements designed to
  enhance brand appeal among women have resulted in
  greater customer satisfaction among men as well.
  The reason? In many respects, women want all the
  same things as men - and then some. Accordingly,
  when you meet the higher expectations of women,
  you are more than fulfilling the demands of men.
  Experience indicates that men do not abandon
• While in many categories, the traditional male
  targets are saturated, the corresponding womens
  segments are untapped and virtually uncontested
  by competition.

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Then add the Boomers The boomers have the
money...

• 70 of all wealth plus multi-trillion dollar
  wealth transfer by inheritance to come
• over 50 of discretionary income
• 79 own homes
• 41 of new cars and 50 of luxury cars
• women over 65 spend as much as 25-34 year-olds on
  apparel with 12 growth rate versus 0.1
• aging, female boomers will control most of the
  money or live in dependent poverty

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Partial Research List

• Martha Barletta Marketing to women How to
  understand, reach, and increase your share of the
  worlds largest market segment
• Joanne Thomas Yaccato The 80 Minority (Canada)
• Deborah Tannen You just dont understand men
  and women in conversation
• Faith Popcorn Evolution the eight truths of
  marketing to women
• Tom Peters Re-imagine
• Andrea Learned ReachWomen
• Mary Lou Quinlan Just ask a woman cracking the
  code of what women want and how they buy
• Judy Hoyt Pettigrew Women mean business the
  secret of selling to women
• Allan Barbara Pease Why men dont listen and
  women dont read maps
• Dr. Nancy Dailey, When Baby Boom Women Retire,
  1998
• Other companies in Canada
• LCBO, BMO, RBC, Air Canada, Calvin Klein,
  Mountain Equipment, Looneyspoons, Nike etc
• StatsCan Population projections, plus women and
  income reports

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Example the 18-24 year olds

• Information seeking utilization behaviour?
• Purchase behaviour?
• Implications for marketers?

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Segmentation in Your Companies?
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Customer Account Analyses The Business We Have
Attracted

• Value current, future
• Efficiency Effectiveness of efforts, resources
  80/20 rule
• Profitability costing systems
• Vulnerability
• Relationship management
• Multi-channel systems

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Example - Dimensions of Loyalty - McKinsey
Quarterly - 2002, 2
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Migration vs. Defection
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Customer Retention is Not Enough
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Strategic Positioning

• Customers mind
• Sustainable competitive advantage
• Unique, important-meaningful, superior, credible,
  affordable, sustainable, profitable deliver
• Reflected in all business activities processes

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Perceptual Map
Perceptual Map
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Positioning Dimensions
Quality
Lifestyle Image
Price Leadership
Users
Occasions
Product Attributes
Positioning
Competitors
Product Class
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Example Value Positions

• Economy pay less, get less
• Premium pay more, get more
• Better Value more for the same price
• Average Value average quality price
• Worse Value pay more, get less

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Developing A Positioning Statement

• Specify Target Market
• Develop a Value Proposition - your distinctive
  and compelling offer - why this customer segment
  should do business with you
• Supporting Elements - how you will deliver your
  value proposition /execute and support your offer
• What is your companys positioning statement?

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3 Paths to Market Leadership

• Operational Excellence Best total cost
• Product Leadership Best product
• Customer Intimacy Best total solution
• Examples?
• Requirements to win?
• Minimum requirements to stay?

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Why is Value Important?
SHAREHOLDER VALUE
RELATIONSHIP
PROFITABILITY
LOYALTY
RETENTION
SATISFACTION
VALUE
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Alternatively If we MUCK UP
MISREAD CUSTOMERS COMPETITORS
UNFOCUSED COMPETITIVE POSITION
PRESSURE FOR SHORT RUN RESULTS
ME-TOO CUSTOMER VALUE
STAGNANT SHAREHOLDER VALUE
CUSTOMER TURNOVER
SPORADIC PROFITS
MARKET SHARE INSTABILITY
HIGH COST OF CUSTOMER RETENTION ACQUISITION
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Customer Value Creation Your Opportunity to
Differentiate
ADD
REDUCE

• Confusion
• Frustration
• Disappointment
• Neglect

• Respect
• Appreciation
• Recognition
• Valued

Emotional Elements

• Friendliness
• Helpfulness
• Courtesy

Organization Interaction

• Rudeness
• Lack of caring
• Mistreatment

• Delays
• Stockouts
• Waiting
• System Failures

• On time
• Accuracy
• Service guarantees

Technical Performance

• Inflexibility
• Complexity
• Red tape
• Stupid rules

Process Support

• Warranties
• Payment options

Core Product or Service

• Features
• Quality
• Options

• Price

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Article - Value Players

• Competitive platform success of value players?
• Challenges for non value players?
• Your industry company?

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Positioning Contexts

• Customers
• Suppliers/Partners
• Distributors
• Shareholders
• Employees
• Society
• Corporate Family
• Financial Institutions
• Government

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Case Rebel Creek

• Segmentation approach?
• Target market selection?
• Positioning?
• Key implementation issues?

76

Summary

• Understand the three steps of developing a target
  marketing strategy.
• Understand the need for market segmentation in
  todays business environment.
• Know the different dimensions used for segmenting
  consumer markets.
• Understand the bases for segmentation in
  business-to-business markets.
• Explain how marketers evaluate and select
  potential market segments.
• Explain how a targeting strategy is developed.
• Understand how a firm develops and implements a
  positioning strategy.

Summary