McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. C H A P T E R Customer Analysis 5 Meaning of a Customer: - Current and Potential - Immediate and Final

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Major Topics 1.Review of Major Issues from BA390* 2.An Approach for Customer Analysis* 3.Long-term Value of a Customer 4.Market Segmentation

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Major Topics for Consumer Behavior 1.Consumer Decision Process 2.Types of Buying Decisions 3.Influences on the Rate of New Product Adoption (RCCDC)

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. What We Need to Know about Current and Potential Customers Who buys and uses the product? What customers buy and how they use it? Where customers buy? When customers buy? How customers choose? Why they prefer a product over others? How they respond to marketing programs? Will they buy it (again)?

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 1. Who Buys and Uses the Product 1.Buyer versus Influencer and User 2.Describing Consumers Demographic Socioeconomic Personality Psychographics and values

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Buying Roles and Needs/Benefits Sought

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Who Buys and Uses the Product (Cont’d) 3. Describing Business Markets Demographic Operating variables Purchasing approaches Situational factors Personal characteristics

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 2. What Customers Buy and How they Use it People buy Benefits, not Products Product Assortment (RFM): Grocery Products Recency Frequency Monetary Value Product Use

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 3. Where and When Customers Buy Where issue  Desired Service Output in Shopping When issue  Seasonality

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 4. How Customers Choose Multiattribute Model Questions 1.Which attributes do customers use to define a product? 2.What are the perceptions of the products on the attributes?* 3.What are the importance weights? 4.What decision rule is used to combine the information? 1.Compensatory 2.Noncompensatory

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Bank Perceptual Map Courteous personnel Convenient ATM locations A D B C E

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. 5. Why they prefer a product/brand 1. Three elements of a customer value of a brand Importance of the usage situation Effectiveness of the product category in the situation Relative effectiveness of the brand in the situation 2. Sources of Customer Value Economic Functional Psychological: Brand Equity

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Measuring Brand Equity 1.Awareness. 2.Associations. 3.Attitude. 4.Attachment..

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. [Manifestations of] Customer Value Price. Price sensitivity. Level of Satisfaction. Complaints and compliments. Word-of-mouth.*

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. [Manifestations of] Customer Value (cont’d). Margin/profit contribution. Dollar sales. Repeat purchase rate.

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Assessing the Value of the Product Category 1. Determine the uses of the product 2. Estimate the importance of the uses 3. List competing products for the uses 4. Determine the relative effectiveness of the product category in each usage situation

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Personal Computer Product Category Value

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Assessing the Value of the Brand/Product Direct Ratings Constant Sum Ratings Graded Pair Comparison* Conjoint Analysis

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Paired Comparison Example: Soft Drink Preference

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Will they buy it (again)? Satisfaction Intention Behavior Loyalty: ex) Casino Study

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Methods for market segmentation Descriptive Purpose Cluster Analysis Tabular Analysis* Prescriptive Purpose Regression Analysis: Individual-based Latent Class Analysis: Segment-based

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Cluster Analysis Illustration

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Raw Data: Cranberry Sauce Usage Heavy Users Medium users Light users Total (row marginal) Convenience oriented Enthusiastic cook Disinterested Decorator Column total (marginal) Cooking Attitude

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Cranberry Sauce Usage Percentages Cooking Attitude Heavy UsersMedium UsersLight Users Convenience oriented Row % Column % 27% 31 48% 31 25% 26 Enthusiastic cook Row % Column % Disinterested Row % Column % Decorator Row % Column %

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Analysis Illustration: Energy Bars Who the Customers are: 63.7 percent of volume is from households with greater than $40,000 income 32.4 percent of volume is from households with greater than $60,000 income 72.8 percent of volume is from households with no kids 65.8 percent of volume is from households where the Head has some college education 39.4 percent of volume is from households with the Head under 35 years old

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Percent Who Have Eaten Energy Bars in the Last Six Months Female20% Male18% 65 and over12% % % % % %

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Analysis Illustration: Energy Bars (cont) What They Buy: Convenience Taste Texture Health Benefits Performance/Energy Hunger Satisfaction Price (expect to pay $1.00 to $1.50 per bar) Packaging/Buy In Bulk Availability

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Analysis Illustration: Energy Bars (cont) What Use For: Meal Replacements Snacks Athletic Energy Booster

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Analysis Illustration: Energy Bars (cont) Where They Buy: Health Food Stores Outdoor Retailers (e.g., REI) Grocery Stores Drug Stores Convenience Stores Mass Merchandisers Club Stores

McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved. Customer Analysis Illustration: Energy Bars Customer Segments: “Hard-core Athletes” “Musclemen” “Dieters” “Health Purists” “Health Conscious and On-the-Go” “Sports Enthusiasts” “Specialty Segments” “Nutrition-seeking Families”