Lecture3 Customers

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Understanding the

Customers

An audience is never wrong. An individual member of it may be animbecile but a thousand imbeciles to ether in the dark -- that iscritical genius.

-- Billy Wilder, U.S. film director

Mgmt. 411A Fall 2009

Customer Analysis

What are the customers needs and wants?

o ves, pro ems, cons ra n s

What are the sources of value for the customer fromour product?

Functional, financial, and psychological value

How do they make decisions and shop?

Consumer behavior, decision making processes

What consumer research do we have that informs usabout our customers?

Behavior vs opinion, research techniques


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Customer Analysis

What are the customers needs and wants?

Value Motives: the goals consumers are trying toachieve

Is the customer trying to

solve a problem?

avoid perceived risks or threats?

constraints?

achieve social belonging, status, or self-fulfillment?

Issues in Identifying Value

Motives

Customers cant (or wont) always tell you which valuemotives the are tr in to fulfill.

Manifest motives: Latent motives:

It will demonstratethat I am successful

It will be large &

comfortable

wealthy

It will help me lookpowerful

It will keep me safe

It performs well, ishigh in quality


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Ads Without Products

Consumers do not buy

products.they buy motive

satisfaction, or problem

solutions they buy

5

, ,

pleasure, sophistication

Customer Analysis

What are the sources of value for thecustomer from our product?


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Levels of product benefits

What is your products primary source

Self-Expressive

Benefits

EmotionalBenefits

What does your iPhone say about you?Based on intangible, psychosocial attributes: the

augmented product

How does the iPhone make you feel?Based on intangible or aesthetic attributes

Financial Benefits

Functional Benefits

How does the iPhone save you money?Price often most important attribute; may also

be based on cost reduction

What needs does the iPhone meet?Tangible attributes: what it does

Product Components for

Functional Value

Components of a product

ang e pro uc : ys ca a r u es

Core product: Functional benefit offered


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Determining Economic Value

Level 1 analysis: product price

Level 2 analysis: economic valueanalysis

Also called value in use analysis

Price plus other sources of value

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Example: energy efficient appliances

Note: this is an important source of valuefor business customers (B2B)

Psychological Value and the

Extended Self Do possessions ever become not only a manifestation of

the self-concept, but an integral part of self-identity?

Extended self = Self + possessions

Augmented product: intangible, psychosocial attributes


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Customer Analysis

How do they make decisions and shop?

Rational versus Real consumers

Three broad types of Decision Modes

Consumer Decision Making Process

Consumer Decision Making:

The Rational Consumer

Perfectly defines his/her problem

Knows all relevant alternatives

Identifies all relevant criteria

Accurately weighs all the criteria according to their goals

Accurately assesses each alternative on each criterion

Accurately calculates and chooses the alternative with the

highest value

In other words, consumers are efficient utility maximizers . . .


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Consumer Decision Making:

The Real Consumer

Is emotional as well as rational

Forgets

Takes shortcuts

Is not motivated

Is sensitive to framing effects

How do customers simplify decisions?

Three Broad Types of Decision

Modes

One way to simplify decisions is to use choiceheuristics, which reduce the decision to a limited setof factors

We can categorize these into three broad decisionmodes:

Utilitarian

Price/performance driven, most rational

Mundane

Low involvement, habitual

Self-Expressive

Emotional


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UtilitarianRational Evaluation of AlternativesPrice as trade-off factorChoice heuristic: Bu the Best Value

Variations in Consumer Choice Behavior:The Effect of Price

Mundane Self-Expressive

Limited/No Evaluation of AlternativesPrice as deciding factorChoice heuristic: Buy the Cheapest/Familiar

Rationalizing Evaluation of AlternativesPrice as secondary factorChoice heuristic: Buy What I Like

Utilitarian

Keys to Continuity: Product PerformanceDeliver Information

Central Threats: Better performing alternative

Variations in Consumer Choice Behavior:

The Effect of Brand

Brand Loyalty: Cont ingent on performance

Mundane Self-Expressive

Keys to Continuity: Saliency of Brand

Central Threat: Availability

Brand Loyalty: Fleeting, habitual

Keys to Continuity: Relevant Brand Image

Central Threat: Change in self or brand image

Brand Loyalty: Affective commitment


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Decision Mode Also Varies by

Person

Within the same product category, customers

Examples:

A refrigerator is utilitarian for most buyers, butSub-Zero is self-expressive

Toothpaste is mundane for most, but Toms could

For some wealthy individuals, a Mercedes-Benz

may be mundane

Consumer Decision Making

Search

Evaluation of Alternatives

Memory or

Stimuli

Weighing

ofAttributes/

Motivations& needs

Choice

Outcomes

Benefits

Heuristic orSystematicEvaluation


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Customer Analysis

What consumer research do we havethat informs us about our customers?

Using Research to Discover What

Consumers Want

Can consumers tell you directly?

Will consumers tell you directly?

Need to design research accordingly


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Some Types of Research Data

Behavior Opinion

Primary

(Custom)

Test markets

Clickstreams

Purchase History

Focus Groups

Projective Techniques

Customer Surveys

Secondar IRI/AC Nielsen Data National surveys

(Standard)Census Data Previous surveys

Behavior vs. Opinion

consumers real-time reactions in the marketplace No data collection biases

Asks the real question: Will the customer pay for this?

Stated opinions are the responses elicited by asking

people what they think Excellent for new product development

Good for learning what people think about existing products


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Many Different Methods of

Listening to Customers

Qualitative: Observation:

Focus groups

Interviewing, projectivetechniques

Quantitative:

Attitude and Usagesurve s

Ethnographic studies

Clickstream data

Web chat rooms

Scanner data

Perceptual Mapping

Experimentation

Conjoint Analysis

Customer databases

Creative Qualitative Research

Techniques


Twists on Focus Groups


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deeper level by having them imagine differentscenarios:

If Mountain Dew were throwing a party, whatwould you see there?

Gotmilk? Focus Groups

First round:

Milk is boring, not much to say

Milk is good with certain foods

Second round:

Force consumers to live without milk

Deprivation strategy emerges


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Summary

Consumers

re mo va e y eren nee s an goa s

Look for products to provide value that is consistentwith their underlying motives

Can vary in decision mode, and dont always deciderationally

Marketers need to use a variet of researchmethods to understand consumer behavior

Qualitative methods and quantitative methods

Next: Land Rover N.A.

How should LRNA position the Discovery in

Lecture3 Customers

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