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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 Questions
Customer 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:
whoever pays

Development:
whoever uses

Marketing:
whoever derives value from it
-child who plays
-parent who gets babysitter,
-purchaser getting social capital
The Managerial Decision Making Process
Need
recognition
Information
search
Evaluation of
alternatives
Purchase
decision
Postpurchase
behavior
A Model of Consumer Behavior
INFORMATION
Commercial
sources
SOCIAL AND GROUP
FORCES
PSYCHOLOGICAL
FORCES
Culture
Subculture
Social class
Reference groups
Family and households
Motivation
Perception
Learning
Personality
Attitude
BUYING-DECISION PROCESS
Need recognition
Choice of involvement level
SITUATIONAL
FACTORS
When
consumers buy
Where
consumers buy
Identification of alternatives
Evaluation of alternatives
Social sources
Purchase and related decisions
Postpurchase behavior
Why
consumers 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
Socio-economic classification
SOCIAL
GRADE
SOCIAL STATUS
A
Upper middle class
B
Middle class
C1
HEAD OF HOUSEHOLD’S
OCCUPATION
APPROXIMATE
PERCENTAGE OF
FAMILIES
Higher managerial, administrative or
professional
3
Intermediate managerial,
administrative or professional
10
Lower middle class
Supervisory or clerical and junior
managerial, administrative or
professional
24
C2
Skilled working class
Skilled manual workers
30
D
Working class
Semi and unskilled manual workers
25
E
Those at lowest levels of
subsistence
State pensioners or widows (no
other earner), casual or lowest
grade workers
SOURCE: From Peter M. Chisnall, Marketing: A Behavioural Analysis (Berkshire, England:
McGraw-Hill Publishing Co. Ltd, 1976), pp. 114-115. Reprinted by permission.
8
The Household Influences Most
Consumption Decisions
6-1
Structure
of
household
unit
Household
purchases
and
consumption
behavior
Stage of
the
household
life cycle
Household
decision
process
Marketing
strategy
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
Maslow’s
Hierarchy of
Needs
SelfActualization
Needs
(Self-fulfillment,
Enriching Experiences)
Esteem Needs
(Accomplishment, Self-Respect, Prestige)
Social Needs (Companionship,
Friendship, Love)
Safety Needs (Protection, Security)
Physiological Needs (Food, Water, Sleep)
Involvement and Types of
Decision Making
Low-purchase involvement
Nominal decision making
High-purchase involvement
Limited decision making
Extended decision making
Problem recognition
Selective
Problem recognition
Generic
Problem recognition
Generic
Information search
Limited internal
Information search
Internal
Limited external
Information search
Internal
External
Alternative evaluation
Few attributes
Simple decision rules
Few alternatives
Alternative evaluation
Many attributes
Complex decision rules
Many alternatives
Purchase
Purchase
Purchase
Postpurchase
No dissonance
Very limited evaluation
Postpurchase
No dissonance
Limited evaluation
Postpurchase
Dissonance
Complex evaluation
What a Product is Not
• It is not features, but benefits.
• Why should someone buy your
product or service?
What is a Product?
• The Product Offering
- Core : The Benefit
Core
Benefit
What is a Product?
• The Product Offering
- Core : The Benefit
- Tangible: The Packaging, Features,
Styling, Quality, Brand Name
Core
Benefit
Tangible
What is a Product?
• The Product Offering
- Core : The Benefit
- Tangible: The Packaging, Features,
Styling, Quality, Brand Name
- Augmented: Installation, Warranty,
After Sale Service, Delivery and
Credit
Core
Benefit
Tangible
Augmented
Euros
The Importance of New Products
New product 1
New product 2
Sales volume
Euros
Sales volume
Profits
+
0
–
Time
Profits
THE IMPORTANCE OF NEW PRODUCTS
• 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
expectations
Customer
satisfaction
gap
Opportunities
1. New products
2. Improvements
Actual
product
performance
How Many
Ideas Are
Required for
One
Successful
New Product?
Lead User Analysis
Method for Creating Breakthrough Innovation
How do you
develop
breakthrough
innovation to
grow
organizational
performance?
What Affects the Rate of Adoption?
Complexity
Compatibility
Characteristics
Affecting
New Product
Diffusion
Relative Advantage
Observability
Trialability
The Diffusion Process
Relationship of the Diffusion Process to the
Product Life Cycle
Cumulative Percentage of Adoption
Introduction
Growth
Decline
Maturity
100
Product
life cycle
curve
90
80
70
Early majority
60
Late majority
50
40
30
Early adopters
Innovators
Laggards
20
Diffusion
curve
10
0
Time of Adoption of Innovations
Companies that do succeed often share the
following characteristics
• 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
Type name here
Type title here
Antiperspirants
Deodorants
Baby Care
Cologne
Cosmetics
Dish Care
Feminine Protection
Food & Beverage
Hair Care
Health Care
Household Cleaners
Laundry
Oral Care
Paper Products
Personal Cleansing
Pet Health
Prescription Drugs
Prestige Fragrances
Skin Care
Special Fabric Care
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
19B
17B
$7B
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:
To the Firm:
• Enhances interpretation or
processing of information
• Increases confidence in
purchase decision
• Increases use satisfaction
• Increases effectiveness of
marketing programs
• Increases brand loyalty
• Allows for better margins
• Allows brand extensions
• Provides trade leverage
• Increases competitive advantage
Brand Asset Dimensions
Brand
Equity
Brand
Awareness
Perceived
Quality
Brand
Associations
Brand
Loyalty
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 stored
 Not protected by patents
 Not easily displayed or communicated
 Pricing is difficult
 Heterogeneity
 Standardization and quality control are difficult to
achieve
FUNDAMENTAL DIFFERENCES BETWEEN
GOODS AND SERVICES
• INSEPARABILITY ASSOCIATED PROBLEMS:
 Service provider is involved in the production process
 Other customers are involved in the production process
(shared experience)
 The mass production of services presents special challenges
 Customer is involved in the production process:
 impact on the type of service desired
 length of the delivery process
 cycle of service demand
 service factory must be built with the customer’s presence in mind
FUNDAMENTAL DIFFERENCES
BETWEEN GOODS AND SERVICES
PERISHABILITY ASSOCIATED PROBLEMS:
Services cannot be inventoried
Production and consumption cannot be
separated by time and space
Statistical sampling techniques cannot be used
Marketing and production must work together
Gaps Model of Service Quality
Expected
Service
CUSTOMER
Customer
Gap
Service Delivery
COMPANY
GAP 1
Perceived
Service
GAP 4
GAP 3
Customer-Driven Service
Designs and Standards
GAP 2
Company Perceptions of
Consumer Expectations
External
Communications
to Customers
Service Quality Spells Profits
Costs
Defensive
Marketing
Volume of
Purchases
Margins
Price
Premium
Service
Quality
Customer
Retention
Word of
Mouth
Profits
Market
Share
Offensive
Marketing
Sales
Reputation
Price
Premium
KEYS TO SUCCESSFUL SERVICE FIRMS
Ability to master technological change
Excel at niche marketing
Excel at customer service
Excel at customer retention strategies
COST
CONSIDERATIONS
• 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
CUSTOMER
CONSIDERATIONS
• 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