Kellogg school corner: Five ways to know your customer better

Kellogg school corner: Five ways to know your customer better
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First Published: Mon, May 07 2007. 06 39 AM IST

Marketing is about a clear lan for creating value. (Malay Karmakar/Mint)
Marketing is about a clear lan for creating value. (Malay Karmakar/Mint)
Updated: Wed, May 16 2007. 12 05 PM IST
What’s the challenge of marketing strategy? It’s not really, at its core, about advertising, though successful communication requires a good marketing strategy. Likewise, marketing strategy isn’t just about how to price, what features to build into your product or how to get it to the consumer, though these are important, too.
Marketing strategy is about identifying a positioning, a clear plan for creating value for a specific and well-defined customer group. It’s about delineating a way that you will create more value for the customer you’ve chosen to serve than your competition does, because that’s how you win. Finally, and importantly, it’s about creating that value for the customer in a way that creates superior value for the firm. Points of execution—communication pieces, revenue capture mechanisms, distribution partner’s incentive structures, product- and service- design specifications—are all both interesting and important to the successful execution of a well-founded strategy. However, the best execution in the world rarely helps a firm win a battle where it has no strategic advantage.
Marketing is about a clear lan for creating value. (Malay Karmakar/Mint)
If marketing strategy is about locating the intersection between what customers want and where an individual firm can create value better than its competition, then superior understanding of customers is crucial. Having a better sense than your competitor for what would create customer value is a huge advantage. In fact, the goal is to have a better sense of what could create value for your chosen customer than even the customer.
So, if superior customer insight is the goal, how do we get it? Below are steps to help get closer to that customer. These are simple things to do, so your first reaction may be that it can’t be this easy to gain market advantage. On the contrary, think of these steps as juicy, low-hanging fruit. The truth is that almost any manager in any firm can take each of the steps listed below and gain an “insight” advantage. However, most managers in your firm don’t do these things, and your competitors don’t either. Since most won’t take these steps, the advantage is richer for those who do.
Step 1: Spend time talking to the end user
Most businesses don’t sell to the end users of their product. By definition, the vast majority of enterprises classify themselves as “business-to-business” operations. This isn’t surprising because every business that sells directly to an end-consumer is itself backed up by a chain of suppliers. Your local dry-cleaner buys hangers and cleaning solvents, cash registers and direct mail flyers. Each of those suppliers to the dry-cleaner might benefit from taking a jaunt into the home of the dry-cleaner’s customer.
Let’s take a couple of examples. Nokia is an interesting one. Back in the mid-1990s, Motorola and Nokia competed head to head in the cellphone market. Motorola focused on the needs and desires of its direct customers, distributors such as Cellular One. Nokia gained a different insight by focusing on the experience of cellphone users themselves. From this effort came market innovations that gave Nokia a nearly 10-year run at market dominance. Instead of focusing on signal reception and decreasing price points to distributors at the request of its direct customers, it innovated by giving consumers superior aesthetics and the opportunity for personalization. Out came a line of distinctive designs, and high-margin face plates for the customization of consumers’ cellphones. Would distributors have asked for these innovations? Not likely: They made their profits by playing hardball on price with suppliers—playing suppliers with similar products off each other to get the best prices to expand their own margins. A supplier with a differentiated product that was a consumer hit had new negotiating power with these distributors.
However, this step isn’t only for the business-to-business player. Many companies which consider themselves consumer marketers don’t sell to their end-users. They sell men’s clothing to wives, kid’s shoes to a parent, or assisted living housing to a senior citizen’s child. For both business-to-business and business-to-consumer marketers, the recommendation is the same. Go spend time with your end-user.
Companies that sell products for kids’ school lunches spend most of their research dollars asking moms about what they like to pack. They would get different insights from asking kids what they want to eat. Even better would be the learning that might come from spending a week sitting in school lunch rooms and cafeterias. Here you’ll find your clearest picture of what kids bring, what they actually eat, what they trade with others and what they throw away. Who would have thought that inventorying lunch-room trash could be so instructive?
Step 2: Spend more time with the customer than your competition
Several years ago, the press about families and raising children was full of talk about “quality time”, no doubt a reaction to dual- income parents’ feelings of guilt and busy lives. However, most parents have realized that while the “quality” of time spent with kids is important, quality is no substitute for quantity. The same can be said about the time you spend with your customers.
Spending significant and consistent time with your customers generates different learning than the “once a year visit” approach. Decision makers who spend enough time to see the day-to-day life and challenges of their customers have a depth of understanding that staged drop-ins cannot provide. In addition, they get the “credit” with their customers that comes from being the supplier that spends “quantity” time. Surprisingly, willingness to really “walk in customer’s shoes” is pretty rare.
Medical-device firms such as Guidant do a good job of this. Before a marketer can take a position in product management, he or she will spend serious time with the firm’s clinical customers—time in the hospital, time with the doctors, time in the operating room. He or she will understand how customers at several levels —hospitals, doctors, insurers and patients— think about, and work with, Guidant’s products and use their ancillary services. However, most firms don’t take this approach.
Even in consumer- product firms that pride themselves on understanding their customer, marketers spend no more than a few days a year face-to-face with those who buy their products. Typical brand managers might spend a day or two a year in retail stores, and less than that at the account headquarters where their products are actually sold to their retail partners. They spend a few more days talking to their consumers in sterile focus groups, but rarely venture into their kitchens and living rooms and bathrooms, where their products are used. Engineers and product developers, people in the Research and Development part of these organizations, get even less exposure to their actual customers.
In addition, executives who make decisions for their firms often suffer from an additional disadvantage, since their status and positions make them so different from their typical customers. A small study at a leading food company was revealing. The US Bureau of Labor’s statistics on average consumer household expenditures indicate that the typical household unit of 2.5 people spends approximately $60 (about Rs 2,460) per week on groceries and another $43 on food eaten away from home. The executives of this firm were embarrassed and humbled to admit that many of them spent more than $40 per week on Starbucks alone. They took on the challenge of trying to feed their families for a full week on $103 per week, and found that it gave them a whole new perspective on their consumer’s challenges.
(This is the first part of a two-part article)
Julie Hennery is clinical professor, marketing, marketing at Kellogg’s Business School
Send your comments to kelloggscorner @livemint.com
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First Published: Mon, May 07 2007. 06 39 AM IST
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