vtheohar@alba.edu.

gr

www.alba.edu.gr

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
Identification of alternatives

SITUATIONAL
FACTORS
When
consumers buy
Where
consumers buy

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

Upper middle class

Middle class

C1

HEAD OF HOUSEHOLDS
OCCUPATION

APPROXIMATE
PERCENTAGE OF
FAMILIES

Higher managerial, administrative or

professional

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

Working class

Semi and unskilled manual workers

25

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.

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 individuals behavior that arise from
experience

Beliefs and Attitudes

Maslows
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
Core
- Tangible: The Packaging, Features,
Benefit
Styling, Quality, Brand Name
Tangible

What is a Product?

The Product Offering

Core
Benefit

- Core : The Benefit

Tangible
- Tangible: The Packaging, Features,
Styling, Quality, Brand Name
Augmented
- Augmented: Installation, Warranty,
After Sale Service, Delivery and
Credit

Euros

The Importance of New

Products
New product 1
New product 2

Euros

Sales volume

Profits
+
0

Time

Sales volume

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
expectatio
ns
Custome
r
satisfacti
on gap
Actual
product
performan
ce

Opportunities
1. New
products
2.
Improvements

How Many
Ideas Are
Required for
One
Successful
New
Product?

Lead User Analysis

Method for Creating Breakthrough Innovation
How do you
develop
breakthrou
gh
innovation
to grow
organizationa
l
performance
?

What Affects the Rate

of Adoption?

Complexity

Compatibility

Characteristics
Characteristics
Affecting
Affecting
New
New Product
Product
Diffusion
Diffusion

Relative Advantage

Observability

Trialability

The Diffusion
Relationship of the Diffusion Process to the
Process
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

20

Laggards

10

Diffusion
curve

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

T y p e n a m e h e re
T y p e t it le h e re
A n t ip e r s p ir a n ts

D e o d o ra n ts

B a b y C a re

C o lo g n e

C o s m e t ic s

D is h C a re

F e m in i n e P r o t e c t i o n

F o o d & B e v e ra g e

H a ir C a r e

H e a lt h C a re

H o u s e h o ld C le a n e rs

L a u n d ry

O ra l C a re

P a p e r P r o d u c ts

P e r s o n a l C le a n s in g

P e t H e a lth

P r e s c r ip tio n D r u g s

P r e s tig e F r a g r a n c e s

S k in C a re

S p e c ia l F a b ric C a 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?
Sale Asse Profi
s
ts
ts
$166 $229
B
B
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 firms 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
Endorsers 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 customers
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 3
Customer-Driven Service
Designs and Standards

GAP 2
Company Perceptions of
Consumer Expectations

GAP 4

External
Communications
to Customers

Service Quality Spells Profits

Costs

Defensive
Marketing

Service
Quality

Volume of
Purchases

Margins

Price
Premium

Customer
Retention

Word of
Mouth
Market
Share

Offensive
Marketing

Reputation

Price
Premium

Profits
Sales

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