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vtheohar@alba.edu.gr

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Customers are Your Business

• Organizations should not view themselves as producing products, services, or marketing brands, they should view themselves as buying customers, giving customers a reason to want to do business with the company, at the expense of competition

(Paraphrased from Theodore Levitt)

Key QuestionsCustomer Questions:• Who are my customers and what are there

needs/wants?• What does their decision process look like?• How valuable are they to me?

• How many are there; will there be in the future?Company/Competition Questions:• Why should customers buy from me?• What are the impediments to their purchase?

Implementation Questions:• How do I make them mine?• Can we eliminate the impediments?

Who is the customer?• Consider an adult who buys the

following as a gift. Who is the customer?

Accounting/Finance:

Development:

Marketing:

whoever pays

whoever uses

whoever derives value from it -child who plays -parent who gets babysitter, -purchaser getting social capital

The Managerial Decision Making Process

Needrecognition

Informationsearch

Evaluation ofalternatives

Purchasedecision

Postpurchasebehavior

A Model of Consumer Behavior

SOCIAL AND GROUP FORCES

CultureSubcultureSocial classReference groupsFamily and households

PSYCHOLOGICAL FORCES

MotivationPerceptionLearningPersonalityAttitude

INFORMATION

Commercialsources

Social sources

BUYING-DECISION PROCESS

Need recognition

Choice of involvement level

Identification of alternatives

Evaluation of alternatives

Purchase and related decisions

Postpurchase behavior

SITUATIONAL FACTORS

Whenconsumers buy

Whereconsumers buy

Whyconsumers buy

Conditions under which consumers buy

More on the Fickle Customer

• Perceptions are reality.

• Is the customer always right?

• Accuracy of consumer knowledge is often immaterial

• Wants change. Do needs change?

Social Factors

• Cultures/subcultures• Reference groups

– people that an individual refers to for comparison when making judgements about his or her own circumstances, attitudes and behavior.

– Aspirational/Dissociative– Opinion leaders

• Family• Role

SOURCE: From Peter M. Chisnall, Marketing: A Behavioural Analysis (Berkshire, England: McGraw-Hill Publishing Co. Ltd, 1976), pp. 114-115. Reprinted by permission.

SOCIAL GRADE SOCIAL STATUS

HEAD OF HOUSEHOLD’S OCCUPATION

APPROXIMATE PERCENTAGE OF

FAMILIES

A Upper middle class

Middle class

Lower middle class

Skilled working class

Working class

Those at lowest levels of subsistence

Higher managerial, administrative or professional

Intermediate managerial, administrative or professional

Supervisory or clerical and junior managerial, administrative or professional

Skilled manual workers

Semi and unskilled manual workers

State pensioners or widows (no other earner), casual or lowest grade workers

3

B 10

C1 24

C2

D

30

25

E 8

Socio-economic classification

The Household Influences Most Consumption Decisions

The Household Influences Most Consumption Decisions

6-1

Household purchases

and consumption

behavior

Marketing strategy

Structure of

household unit

Stage of the

household life cycle

Household decision process

Personal Factors

• Age and Stage in the Lifecycle• Occupation• Lifestyle• Personality

– psychological characteristics that lead to relatively consistent and enduring responses

– Self-concept vs. ideal self-concept vs. others self-concept

Psychological Factors• Motivation

– psychogenic and biogenic

• Perception– how a person organizes and interprets information– selective attention/distortion/retention

• Learning– changes in an individual’s behavior that arise from

experience

• Beliefs and Attitudes

Safety Needs (Protection, Security)

Social Needs (Companionship, Friendship, Love)

(Accomplishment, Self-Respect, Prestige)

Self-Actualization

Needs

Physiological Needs (Food, Water, Sleep)

(Self-fulfillment, Enriching Experiences)

Esteem Needs

Maslow’s Hierarchy of Needs

Involvement and Types ofDecision Making

Involvement and Types ofDecision Making

Low-purchase involvement High-purchase involvement

Nominal decision making Limited decision making Extended decision making

Problem recognitionSelective

Problem recognitionGeneric

Problem recognitionGeneric

Information searchInternal

Limited external

Information searchLimited internal

Information searchInternalExternal

Alternative evaluationFew attributes

Simple decision rulesFew alternatives

Alternative evaluationMany attributes

Complex decision rulesMany alternatives

Purchase Purchase Purchase

PostpurchaseNo dissonance

Limited evaluation

PostpurchaseNo dissonance

Very limited evaluation

PostpurchaseDissonance

Complex evaluation

What a Product is Not

• It is not features, but benefits.

• Why should someone buy your product or service?

• The Product Offering- Core : The Benefit

What is a Product?

CoreBenefit

• The Product Offering- Core : The Benefit- Tangible: The Packaging, Features,

Styling, Quality, Brand Name

What is a Product?

CoreBenefit

Tangible

What is a Product?

CoreBenefit

Tangible

Augmented

• The Product Offering- Core : The Benefit- Tangible: The Packaging, Features,

Styling, Quality, Brand Name- Augmented: Installation, Warranty,

After Sale Service, Delivery andCredit

Eu

ros

The Importance of New The Importance of New ProductsProducts

+

0–

Eu

ros

Time

Profits

New product 1New product 2

Sales volume

Profits

Sales volume

THE IMPORTANCE OF NEW THE IMPORTANCE OF NEW PRODUCTSPRODUCTS

• Sustain corporate growth and profits

• Replace obsolete items

• Improve quality of life

• Take advantage of new technology

• Better satisfy the needs of current and future consumers

• Brand extensions

Customer Satisfaction Opportunities

Customer satisfaction gap

Actual product performance

Customer expectations

Opportunities

1. New products

2. Improvements

How Many How Many Ideas Are Ideas Are Required for Required for One One Successful Successful New New Product?Product?

Lead User AnalysisLead User AnalysisMethod for Creating Breakthrough InnovationMethod for Creating Breakthrough Innovation

How do you develop breakthrough innovation to grow organizational performance?

What Affects the Rate What Affects the Rate of Adoption?of Adoption?

Trialability

Observability

Relative Advantage

Compatibility

Complexity

CharacteristicsAffecting

New ProductDiffusion

CharacteristicsAffecting

New ProductDiffusion

The Diffusion The Diffusion ProcessProcess

Innovators

Early adopters

Early majority

Late majority

Laggards

Productlife cyclecurve

Diffusioncurve

Cu

mu

lati

ve P

erce

nta

ge

of

Ad

op

tio

n 100

90

80

70

60

50

40

30

20

10

0

Relationship of the Diffusion Process to theProduct Life Cycle

Introduction Growth Maturity Decline

Time of Adoption of Innovations

Companies that do succeed often Companies that do succeed often share the following share the following characteristicscharacteristics

• A history of carefully listening to customers• An obsession with producing the best

product possible• A vision of what the market will like in the

future• Strong leadership• A commitment to new-product development• A team approach to new-product

development

A n tipe rsp ira n ts D e od o ra n ts

B a b y C a re C o log ne

C o sm e tics D ish C a re

F e m in in e P ro tec tion F o od & B evera ge

H a ir C a re H e a lth C a re

H o u se h o ld C lea n e rs L a un d ry

O ra l C a re P a p er P rod u c ts

P e rso n a l C le an s ing P e t H e a lth

P re sc rip tio n D ru gs P re s tig e Fra g ran ces

S k in C a re S p e c ia l F a b ric C a re

T yp e n am e h e reT yp e tit le h e re

Tide Liquid

Tide Powder

Tide with Bleach

Tide with Bleach Alternative

Tide Kick

Tide HE (High Efficiency)

Tide Rapid Action Tabs

PRODUCT MIX CHARACTERISTICS

• WIDTH• Number of different product lines

• LENGTH• # of items in the product line/mix

• DEPTH• Number of variants in line/mix Crest 2 flavors and 3 sizes

• CONSISTENCY• How closely are the lines related

If you were given 0.1% of all stock, which company would you pick?

Sales

Assets

Profits

$166B

$229B

$7B

19B 17B 4B

(1998 data)

Brand Equity

• Definition (Aaker 1991):–A set of brand assets and liabilities linked to a brand, its name and symbol, that + to or - from the value provided by a product or service to a firm and/or to that firm’s customers.

• Brands are assets -- only if:

– they have sustainable differential advantage

• Brands improve firm value through goodwill

How Brand Equity Provides Value

To the Customer:• Enhances

interpretation or processing of information

• Increases confidence in purchase decision

• Increases use satisfaction

To the Firm:• Increases effectiveness of

marketing programs• Increases brand loyalty• Allows for better margins• Allows brand extensions• Provides trade leverage• Increases competitive

advantage

Brand Asset Dimensions

BrandEquity

BrandAssociations

PerceivedQuality

BrandLoyalty

BrandAwareness

Brand Identity: associations that imply a promise• Should help in establishing a

relationship between the brand and the customer– Value proposition

• Functional, emotional or self-expressive

– Credibility• Endorser’s role

– Brand essence• Product (scope, quality, uses, users, country of

origin)• Organization (innovation, trustworthy,

local/global)• Personality (genuine, energetic)• Symbol (visual image, heritage)

FUNDAMENTAL DIFFERENCES BETWEEN GOODS AND SERVICES

INTANGIBILITY ASSOCIATED PROBLEMS:Lack the ability to be storedNot protected by patentsNot easily displayed or communicatedPricing is difficult

HeterogeneityStandardization and quality control are

difficult to achieve

FUNDAMENTAL DIFFERENCES BETWEEN GOODS AND SERVICES

• INSEPARABILITY ASSOCIATED PROBLEMS:Service provider is involved in the production

processOther customers are involved in the production

process (shared experience)The mass production of services presents

special challengesCustomer is involved in the production process:

impact on the type of service desired length of the delivery processcycle of service demandservice factory must be built with the customer’s

presence in mind

FUNDAMENTAL DIFFERENCES BETWEEN GOODS AND SERVICES

Services cannot be inventoriedProduction and consumption cannot

be separated by time and spaceStatistical sampling techniques

cannot be usedMarketing and production must work

together

PERISHABILITY ASSOCIATED PROBLEMS:

PerceivedService

Expected Service

CUSTOMER

COMPANY

CustomerGap

GAP 1

GAP 2

Gaps Model of Service Quality

GAP 3

External Communications

to CustomersGAP 4Service Delivery

Customer-Driven Service Designs and Standards

Company Perceptions of Consumer Expectations

Service Quality Spells Profits

ServiceQuality

CustomerRetention

Costs

PricePremium

Word ofMouth

Margins

Profits

Defensive Marketing

Volume ofPurchases

MarketShare

Reputation

Sales

PricePremium

Offensive Marketing

KEYS TO SUCCESSFUL SERVICE FIRMS

Ability to master technological change

Excel at niche marketingExcel at customer serviceExcel at customer retention

strategies

COSTCONSIDERATIONS

• Price is sometimes not know until after the service has been produced

• Cost-oriented pricing is more difficult

• High fixed cost to variable cost ratio• Economies of scale tend to be

limited

CUSTOMERCONSIDERATIONS

• More likely to use price as a quality cue– Nonetheless, comparing prices is

more difficult

• Consumers are less certain about reservation prices

• Self-service is a viable alternative

GENERAL GUIDELINES FOR DEVELOPING SERVICE COMMUNICATIONS

• Develop a word-of-mouth communications network

• Promise what is possible• Tangibilize the Intangible• Feature Working

Relationships between Customer and Provider

GENERAL GUIDELINES FOR DEVELOPING SERVICE COMMUNICATIONS

• Reduce consumer fears about variation in performance

• Determine and focus on service quality dimensions

• Differentiate the service product from service delivery

• Make the service more easily understood