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Understanding our
ch
Customers
When a product is analyzed, we consider the tasks the product can complete;
when customers are analyzed, we consider the tasks customers want the
products to complete for them, that is, we consider customer needs. Customer
needs are either functional or psychogenic. For example, a customer might
buy a Mercedes to get to and from work (a functional need) and/or because
s/he wants people to believe s/he is successful (a psychogenic need).
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of people who commute to and from work. But measurement is more
difficult for psychogenic needs as these needs are generally more subjec-
tive and, therefore, researchers may not ask the right questions or use an
appropriate research method to illicit responses. In addition, customers
may not accurately recall or even be able to describe their needs.
In Chapter 6, I will show how to align the functional and psychogenic tasks
the product is intended to perform with the functional and psychogenic
needs of customers.
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What types of relationships do customers have with the organization?
What types of relationships do they expect from the organization?
What, if anything, makes the customer experience unique?
Does the organization refer to its customers as belonging to a particular
group, for example, “we target students”, “our students come from
Southern California”, “we target people with high blood pressure”, “we
target women household shoppers”, etc.
Does the organization have more sophisticated segmentation
schemes? The American consumer electronics corporation Best Buy, for
example, identified a number of market segments and developed rich
descriptions of each: Barry is an affluent tech enthusiast; Jill, a busy
suburban mom; Buzz, a young gadget fiend; Ray, a price-conscious
family guy; and Mr Storefront owns a small business (Boyle, 2006).
If the organization’s customers were asked to list three noteworthy
things about the business, what would they say? [List three positive,
then three negative attributes.]
Now, list other stakeholders: employees, investors, donors, industry
analysts, suppliers, government, regulatory bodies, trade associations
and other professional groups. For each stakeholder, identify three
positive and three negative comments they would make about the
organization.
One of the questions in the section above asked whether the organization
refers to its customers as belonging to a particular group, for example,
students, students from Southern California, people with high blood pres-
sure, women household shoppers, etc. Another question asked whether
the organization has a more sophisticated segmentation scheme (such as
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Why Marketing to Women Doesn’t Work
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the one Best Buy developed in 2006). What I was trying to uncover were
the variables used by the organization to segment markets.
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Unfortunately, subjective data is time consuming and costly
ns st a d ata
r
er din epe
co der es e d
to collect and its precision is often questionable. That is
of
e
un ovid ctiv
g
why organizations opt for measurable objective data in
pr bj e
preference to rich subjective data. But, in order to do
um an
Su
s
segmentation properly, I suggest that both objective
and subjective are essential – it is not an either/or choice.
Let me explain by way of illustration. If I use only demographic
and geographic variables to segment a market, then I might place all women
aged 30-59 living in Los Angeles into one market segment. I could then
offer these women the same product, at the same price, at the same place
and communicate with them in exactly the same way. But chances are high
that the women in this segment will respond differently. For example, if
I sold a punnet of organic raspberries for $4.99 in a local supermarket and
advertised the raspberries in the local newspaper, some women might buy
the organic raspberries and some would not. The question we should ask
is why are we getting different responses?
One explanation is that there is still too much variation within the market
segment. I could, therefore, use additional variables to place customers
into market segments. I could identify behavior, for example, her past rela-
tionship with organic food, or I could identify her attitudes and opinions
toward organic food.
I have put together a number of tables (see Tables 5.1-5.5) to show the
range of variables that could be used to segment a market. The variables
are broken down into a number of categories: the customer (Table 5.1),
the customer’s buyer-readiness stage (Table 5.2), the customer’s relation-
ship with the product (Tables 5.3 and 5.4), the way in which the customer
responds to the marketing mix (Table 5.5) and the overarching needs of
the customer (Figures 5.1 and 5.2). Within each category, I show both
objective and/or subjective variables.
In Table 5.1, I begin with a broad overview of the customer by identifying
his/her demographic and geographic characteristics. I then cover more
subjective attributes within lifestyle/psychographics analysis, such as
attitudes, interests, opinions, personality and values.
Table 5.2 outlines the buyer-readiness stage. People are either customers
or non-customers. Non-customers are further classified as those who have
2
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Table 5.1 Characteristics of the Customer
The person
Segmentation Goal: To provide a rich narrative of a person that represents the
market segment
Objective Measures
Demographics For people: age, generation, gender, ethnicity, religion,
income, occupation, education, family size, life stage, etc.
For organizations: age, size (sales, profit, employees, number
of locations), public vs. privately held.
Geographics For people: where you live, the size of the city or town you
live in, urban vs. rural, the climate, etc.
For organizations: location of head office, location of
branches, etc.
Subjective Measures
Lifestyle/psychographics Lifestyle (which includes attitudes, interests, opinions),
personality and core values.
Note: The organization of tables 5.1-5.5 is influenced by Kotler and Keller (2012); Myers (1996); Raaij
and Verhallen (1994).
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never bought from the organization or those who have lapsed. Customers
are classified according to the volume purchased (light vs. medium vs.
heavy). A typical behavioral goal is to encourage non-customers to buy the
organization’s products and existing customers to buy more of the product.
We now move onto the customer’s relationship with the product and
include both objective measures (for example, product use) and subjective
measures (for example, attitudes toward the product and/or brand) (see
Tables 5.3 and 5.4). The subjective measures culminate in a set of ques-
tions about the most important product features and the most preferred
brand. The subjective measures are also helpful because they identify the
characteristics that both facilitate and act as barriers to product adoption.
So far, I have focused on variables that are commonly used to place people or
organizations into segments, and I have shown how to identify likely drivers
and barriers to adoption and/or further use of the product (Table 5.4). Recall
that the goal of market segmentation is not only concerned with what
binds customers together into a segment, but also it allows the organization
to focus its marketing efforts so that all members of one market segment
are likely to respond in the same way to these marketing efforts.
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Table 5.5 Response to the Marketing Mix
The person or organization’s response to the marketing mix
Segmentation Goal: To expand the narrative to include responses to the
marketing mix
Product Preference for different combinations of product features; reactions to
new product concepts; reactions to different brand options.
Price Willingness to pay, price sensitivity, deal proneness.
Place Where the market looks for the product.
Promotion Media habits – what media the market is exposed to, how often, what for.
marketing efforts. The measures outlined in Table 5.5 are either subjective
or objective, depending on the data used.
So far, I have identified a number of categories of variables: the person;
the person’s relationship with the product; and the ways in which the
person responds to the marketing mix. I now want to consider overarching
customer needs.
In the previous chapter on product, I introduced three concentric product
circles (Figure 4.1); the first product circle focused on the core benefit of
the product, which I also called the point of the product or the task the
product is intended to complete. From here I laddered up from core benefits
to product attributes, and then to first and second order product benefits.
In Chapter 4, I suggested that product ladders should first be completed by
employees and then by customers. In this chapter, I recommend customer
ladders be completed first by customers and then by employees. As always,
the ladders should be compared so that differences are identified. The hope
is that opportunities for the organization become evident as a result.
Just as products offer customers first and second order benefits, so too do
customers seek first and second order benefits from products. There are
three layers of interest in customer ladders:
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• I spend less money on dental bills.
• My teeth are whiter.
• My breath is fresher.
• I’m germ free.
3. What are the second order benefits? Second order benefits flow
from the first order benefits and often occur after consuming/using
the product. These are also called psychogenic benefits. For example,
“How do you feel when you have white teeth?” “I feel successful.”
I have summarized this in Figures 5.1 and 5.2.
First Second
Core Market
Order Order
Benefit Segment
Benefits Benefits
The point of the What are the first What are the
product or the order benefits of second order
main solving the benefits (of the
problem(s) problem/completing first order benefit)?
customers are the job? “How do you feel
trying to solve “What are the when you [first
for which the benefits of [core order benefit]?”
product is a benefit]?” Recall, this usually
solution. Recall this is occurs after
usually at the time consumption.
of consumption.
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Understanding our Customers
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Figure 5.2 Customer Needs Example
First Second
Core Market
Order Order
Benefit Segment
Benefits Benefits
“I believe
I will live Market
longer.” Segment
“I can trust the
#2
quality of the
food I eat.” “How do you feel
when you can trust
the quality of the
food you eat?” “I believe
Market
I will live Segment
“How do you feel longer.” #3
when you can trust
the quality of the
food you eat?”
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market segments if I had identified more features and first and second order
benefits and laddered up the additional needs shown in the second column.
Within each market segment are separate cells. For example, within Market
Segment #1 is a cell of men and women who have had health scares and are
trying to minimize the amount of toxins entering their bodies, and another
cell of women aged 40-59 who put a high value on diet and exercise, and
another cell of women aged 30-59 who want to teach their children to
make healthy food choices… up to cell n. I recommend using any of the
variables from Tables 5.1–5.5 to describe each cell: the customer (Table 5.1),
the customer’s buyer-readiness stage (Table 5.2), the customer’s relation-
ship with the product (Tables 5.3 and 5.4), the ways in which the customer
responds to the marketing mix (Table 5.5).
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computer hardware and software developments facilitated the process-
ing of long and complex psychographic questionnaires that required:
(1) willing participants to answer lengthy questions; and (2) statistical
techniques, such as cluster analysis, to place respondents into one of a
number of market segments that emerged from the data. This is one of
the reasons why psychographic segmentation became popular – because
researchers were finally able to work with the complex datasets that were
produced from a 45-90 minute survey.
There are two trends that I see influencing current market segmentation
practice. One is the availability of big data, much of which is unstructured
(for example, conversations with call center operators or feedback on
websites). Big data is biased toward demographic, geographic and behav-
ioral data, that is, away from the harder to collect psychographic data.
Used well, big data enhances predictive modeling and determines how
customers respond to an organization’s marketing efforts (yes, we have
come a full circle back to marketing mix variables).
su ate l is
vio on ur oa
As marketing becomes more accountable, managers are forced
m ly
ha t c cc g
be edic re a ate
to provide concrete evidence of the size, profitability and
er
pr mo ltim
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researchers hunt for the “best” approach to market segmentation. The
ultimate goal is to more accurately predict consumer behavior.
So, what we are left with is a long laundry list of variables (see Tables
5.1-5.5) organized into various categories as they relate to customers, the
relationship the customer has with the product, the overarching customer
need and how customers respond to the marketing mix. Each category of
data includes both objective and subjective measures. Subjective measures
are more likely to come from survey research whereas objective measures
might come from census data, customer databases, purchase behavior
tracking data, etc.
CONCLUSIONS
This chapter outlined diagnostic tools for analyzing the customer by intro-
ducing a range of questions to help identify the most and least important
customers to the organization.