Transcript IM Revision Chapter 2

Identify Unmet or Underserved Needs
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What customer needs will the new business meet?
Are these being met by other companies?
Why will customers choose the new business over others?
Mapping the Customer Decision Process can help generate new ideas
about Unmet or Underserved Needs
– Ex. Jeff Bezos of amazon.com determined that book buyers often rely
on recommendations by others (word-of-mouth)
– What popular on-line mechanism did Bezos create to exploit this
behaviour?
Supporting Slide 2–C:
Customer Decision Process
A framework to help managers look systematically for unmet or underserved needs
Prepurchase
Origination
What prompts the customer to action?
Information
Gathering
What factors influence the customer’s decision?
Evaluation
What attributes of the product
does the customer consider?
Purchase
Purchase
Decision
What options does the customer identify?
What decision(s) does he make?
Postpurchase
Postpurchase
Evaluation and
Behavior
What does the customer do about his decision?
Because value
creation is based
on understanding
and meeting
customer needs.
Customer Decision Map for Purchasing a Camera
Origination
Prepurchase
Professional/Business Use
Personal use
Gift
Type
(digital/film)
Features
Information
gathering
Brand/
manufacturer
Cost
And
Evaluation
Purchase
Complexity
Usage
occasions
Reviews
Past
experiences
Budget
constraints
Film
Digital
Instant
Body type
Lens
Purchase
decision
35mm
Postpurchase
Postpurchase
evaluation and
behavior
APS
Print quality
Basic
Throwaway
Fully
loaded
Reliability
Standard
SLR
Learning
curve/
ease of use
Likelihood of repeat
purchase or
recommendation
Point &
shoot
Zoom
Range of
accessories
Fixed
Using the Customer Decision Map
Some questions to consider
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What is the nature of the customer’s ideal experience?
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How does it vary through the stages of decision-making?
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What are the key frustration points?
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What might help the customer achieve better results?
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Does the desired customer experience vary?
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What barriers block participation by potential customers?
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What technological, communication or online opportunities might enhance
the customer experience?
Customer Decision Map for Purchasing a Computer (Best Buy, Future Shop, Dell, Apple, HP, Toshiba, Lenovo…)
-work with a partner or two to change the information below to that for a computer
-where might there be frustration/unmet need and what on-line mechanisms (content/functionality) could reduce it?
Origination
Prepurchase
Professional/Business Use
Personal use
Gift
Type
(digital/film)
Features
Information
gathering
Brand/
manufacturer
Cost
And
Evaluation
Purchase
Complexity
Usage
occasions
Reviews
Past
experiences
Budget
constraints
Film
Digital
Instant
Body type
Lens
Purchase
decision
35mm
Postpurchase
Postpurchase
evaluation and
behavior
APS
Print quality
Basic
Throwaway
Fully
loaded
Reliability
Standard
SLR
Learning
curve/
ease of use
Likelihood of repeat
purchase or
recommendation
Point &
shoot
Zoom
Range of
accessories
Fixed
Step Three: Determine Target Customer Segments
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Identify priority customers
What makes them attractive to pursue?
What experiences do they seek?
What do they need to be offered?
What barriers are there to their participating in an offer?
Segmentation is the process of grouping customers based on similarities
Goal is to identify marketplace variables that are both actionable and
meaningful
Segmentation Approaches
Grouping customers into useful categories
Segmentation Type
Description
Examples of variables
Geographics
Divides market into geographic units
Country, region, city
Demographics
Divides market based on demographic
values
Age, gender, income, education
Firmographics
Divides market based on companyspecific va riables
Number of employees, company siz e
Behavioral
Divides market based on ho w
customers buy and use the product
Website loyalty, prior purchases
Occasion (situational)
Divides market based on the situation
that leads to a product need, purchase,
or use
Routine occasion, special occasion,
part of day
Psychographics
Divides market based on lifestyle
and/or personality
Personality (laid-back, type A), lifestyle
Benefits
Divides market based on benefits or
qualities sought from the product
Convenience, economy, quality
Supporting Slide 2–I:
Demographic Segmentation
Description
B2C:
Demographic
B2B:
Firmographic
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Market division into groups based on customer
demographic variables
Most popular method for distinguishing customer
groups, highly actionable
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Market division into groups based on business
demographic variables
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Highly actionable, since business demographic data
is readily available
Source: Philip Kotler, Marketing Management (1997), p. 258
Segmentation
Examples
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Age
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Income
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Occupation
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Nationality
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Industry
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Company size
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Location
Step Three: Determine Target Customer Segments
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Segmentation example: eBay
– Segmentation that is both meaningful and actionable
– Looked at core auction market: individuals and small businesses selling
collectibles and odds and ends
– Thought there could be more segments with higher returns
– Used a number of categories to segment the market:
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Income (affluent)
Lifestyle (luxury)
Trigger (need to have)
Behavioural (regular online usage)
Benefits (convenience)
– Partnered with Sotheby’s to create a high-end version of eBay
– Similar segmentation was used to launch eBay motors and eBay travel
Requirements of an Effective Segmentation
In order for a customer segmentation to be effective, it must be meaningful, actionable,
substantial and measurable
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Customers must demonstrate needs, aspirations or behavioral patterns that are similar
within a segment and different across segments
– A distinction between a price-sensitive and a quality-seeking segment is meaningful,
since the two segments demonstrate distinguishable sets of needs
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A company must be able to reach customers within each segment through effective and
targeted marketing programs
– A customer segment consisting of customers with blue eyes is not actionable, since
it is very hard to identify and reach only customers with blue eyes
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Segments must be large and profitable enough to make the investment in serving them
worthwhile
– MyCFO.com is targeted toward high-net-worth individuals, helping them manage
their portfolios; even though the number of those individuals is small, the dollar
amount managed is sizeable, thus constituting a substantial segment
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Key characteristics of the segments (e.g., size and spending patterns) must be easy to
measure
Meaningful
Actionable
Substantial
Measurable
Source: Philip Kotler, Marketing Management (1997), p. 269
Step Three: Determine Target Customer Segments
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Clickographics
– Often easier to determine actionable and meaningful segmentation
variables online
– Registration forms provide demographic info
– Search data and purchase behaviour can be determined through realtime tracking of customer click-streams
– Clickographics is the observation of an online customer’s behaviour
using click-stream data
– Analyzing this data allows a company to identify and communicate with
target customers
– Ex. Amazon.com compares the data of customers who purchase the
same book
– Created a mechanism whereby other suggested books are offered to
customers with similar tastes
Market Mapping and Target Customers
Travel Frequency
Internet
Usage
Age
Rarely
( < 1 trip/year)
Sometimes
( 1-3
trips/year)
Frequently
( 3-9
trips/year)
Very
Frequently
( >9
trips/year)
40+
Frequent
(>10
hours/week)
22-39
 21
40+
Sometimes
(3-9
hours/week)
22-39
No
significant
market
 21
40+
Seldom
(<3
hours/week)
22-39
No
significant
market
 21
No significant market
Primary
Target
Group
Secondary
Target Group
Tertiary
Target Group
Supporting Slide 2–M:
Choice of Focal Customer Benefits
Selecting a relevant, important and parsimonious benefit
Three classes of considerations for assessing the value proposition
Customer Criteria
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Do target customers
understand the value
proposition?
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Is the value relevant to
the target customers’
needs?
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Do target customers
believe the value
proposition?
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Will the value proposition
provoke customer action?
Company Criteria
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Will the company support
the proposition?
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Does the company have
the resources and
capabilities to “own” the
proposition?
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Does selection of the
proposition limit future
growth into other
markets?
Competitor Criteria
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Are competitors trying to
provide a similar value
proposition?
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Do current competitors
have the resources and
capabilities to copy the
proposition?
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How easy is it for the
required resources and
capabilities to be
developed?
Caution: Compromising two benefits is less valuable than fully delivering one.
What is the value proposition for:
Volvo
SouthWest Airlines
Four Seasons Hotels