5: Identifying Customer Needs, Wants, and Desires
Because marketing carries a cost, the marketer must focus communications on specific markets: determining the groups to reach, the message to convey, and the media/frequency that will reach those groups whose response to the effort will, over time, provide the greatest return.
ULTIMATE CUSTOMER MARKET
The ultimate customer market for most products is vast, and companies generally must further segment it to identify one or more profitable target markets, each of which may have different communication needs and preferences.
The author notes the difference between segmentation and aggregation, the latter being an action of the consumer: people of similar interests "come together" to form groups, which is different from a marketer's decision of how to divide the market into groupings that may not correspond to existing groups from the participants' perspectives.
A common approach to segmentation is benefit-based, which separates the individuals according to their intended use of a product. Other segmentation is done based on the characteristics of the individuals (age, gender, marital status, location, education level, etc.) The author also suggests that effective segmentation must be based on behavior related to the brand rather than arbitrary demographic characteristics.
There are four traditional strategies to customer markets: acquisition, retention, growth, and migration. Acquisition deals with attracting new customers to the brand, whether they are currently using a competing brand (switching) are or not involved in the product category (development), each of which have separate tactics. Retention involves defending against competing brands as well as keeping existing customers interested in the product itself. Growth involves getting existing customers to use more of the product, or more often. Migration seeks to get existing customers to switch to another product offered under the same brand.
Each of those strategies is based on behavior, independent on other demographic, geographic, socioeconomic, and psychographic details. The author does not disclaim these traditional description as invalid (and suggests that behavior of people who belong to similar groups is, in fact, often quite similar) but he considers them to be subordinate to behavior-based descriptions of customers.
The author then names some of the sources for descriptive information about consumers: ESRI, Simmons, MRI, and the US Census Bureau. He provides an example of how this is used to identify markets (how data shows that clumps of users have different usage patterns, hence a product may find that its largest market is "middle-aged Hispanic females in the northeastern united states with two or more children") and, but further studying their attitudes and behaviors, developing effective marketing messages.
This technique can be applied to existing products, competitors products, etc. to identify markets for a given product, based on the assumption of similar habits, attitudes, and needs - but ultimately, the behavior is what marketers should seek to understand.
INTERMEDIARY MARKET
While the Internet has facilitated direct-to-consumer marketing, the majority of products are still sold through a distribution channel that includes intermediaries such as retailers, distributers, wholesalers, resellers, and brokers. Each of these intermediaries is primarily concerned with its own business (profits, operational costs, brand, etc.), which can be in conflict with the desires of the manufacturer.
Communication is of the utmost importance, as information about your brand flows through intermediaries. "Intermediaries should never learn important brand information third-hand." As other sources (chiefly, competitors working through the same intermediary) may provide information that does not support, and may undermine, your desired brand's position.
Historically, companies provided standardized information to intermediaries (newsletters, fact sheets, even training), but this approach has shifted to become more account-specific, in which the manufacturer provides information that is customized to the needs of the retailer or distributor, and the manufacturer may reach further down the supply chain (communicating to retailers, rather than counting on wholesalers to pass along information).
Behavioral segmentation has often been used for intermediary markets, though it's generally been limited to sorting out customers by frequency and volume of orders and offering perhs and price breaks to the "best" customers. However, the author suggests that there are other criteria to consider, depending on circumstances - e.g., a manufacturer might provide more attention to retailers rather than wholesalers, who in spite of lower volume have greater influence over customers.
A few "complicating" factors are mentioned: notably objections about price discrimination and firms that are both customers and competitors (the example being supermarkets, who stock store-brand merchandise to compete with manufacturers, even though they still sell other products). Another problem is competing with channels (the example of Coca-Cola selling to Wal-Mart directly, undermining the ability of licensed bottlers to sell to local stores).
The author strays a bit at the mention of Wal-Mart, indicating big-box retailers have tremendous channel power for consumer goods. A nice bit: "Imagine trying to sell an office supply product without distribution in Staples, OfficeMax, and Office Depot" - regardless of the strength of its brand, most manufacturers are at the mercy of large national retail chains due to the power they have in getting the product to market.
The author mentions trade shows and industry publications as the primary channels for marketing to intermediaries.
Strategies for reaching intermediates are the same (acquisition, retention, growth, and migration), though in the intermediary market, demand is derived, and intermediates are keenly interested in the buying habits of their own competitors (a store will stock a product because others in the area stock it, or they may wish to be exclusive for certain ones).
Manufacturers may also wish to control distribution (when they have the power to do so), to take advantage of as many channels as possible, or restrict the channels of distribution to those that are either manageable or are best suited to support the brand. Not every brand wishes to become ubiquitous.
It's also noted that the manufacturer's goal with an intermediary is not merely to sell wholesale, but to push the product to the retail consumer, hence a there is emphasis on negotiating for in-store presence (shelf space and in-store displays, co-op advertising, etc.)
Also, migration is a far more common strategy with this market: a manufacturer may not seek to move customers to a "lite" version of its product, but it will seek to have intermediaries who stock their main product to also carry the "lite" version.
SUPPLIER MARKET
The author acknowledges that suppliers are seldom considered as important in the marketing area, as they are regarded as vendors managed by operations departments - but the author contends that the suppliers are an important consideration for brand marketers.
Even when a manufacturer is invisible to the customer, the inputs it provides to the product have an impact on the brand experience. The example is given of a packaging company for a food manufacturer - if the package is bad, the product is affected, and the customer's brand experience is negatively impacted.
It is also increasingly common to cobrand: you may buy an IBM computer with an Intel processor, a food product "sweetened with Splenda," or a Ford vehicle with Firestone tires. The author uses the latter as an example of where things go wrong - in that the incident in 2000 where Firestone and Ford had a public spat over which company was responsible for tire failures on automobiles, which the author suggests was damaging to both brands.
(EN: other sources have painted the Ford/Firestone debacle as being beneficial to Ford, which suffered less damage to their brand in spite of the public bickering - customers still demanded Ford vehicles, but wanted another brand of tire. Were the tires not separately branded, it may have done far more damage to Ford's reputation. Granted, the latter is speculation, but the former was backed by customer research.)
Automated systems (ERP, SCM) have replaced much of the person-to-person contact between supplier and company, enabling routine ordering and demand forecasting to be fully automated rather than having a need for human buyers. The author contends that there are "many" instances in which ERP has been found to be insufficient, and notes that the human element is still critical.
(EN: I've tried to give the author the benefit of the doubt, but he's stretching things a bit thin to declare that suppliers are a "market" for a company. Vendor management has traditionally been an operations matter - it cannot be said that suppliers are a market: a company does not deliver a brand experience to its suppliers, but the suppliers help the company deliver a brand experience to its own customers. While his points about ensuring quality and managing relationships are valid, it's not a matter of brand experience. The only point that's germane to brand relationship is cobranding.)
REFERRAL MARKET
A better definition of referrer: a customer that has already purchased a product and may relate their brand experience to potential customers. It's also noted that, in addition to "promoters," a company will have a number of "detractors" who relate negative experiences to dissuade others from doing business with a firm.
Management of referrals has long been considered important, as word-of-mouth has long been cited as having the highest level of credibility among sources of product information, and has become even more critical because the Internet has empowered individuals to share their opinions with a large audience and with greater frequency than before.
The author notes that savvy companies have provided incentives for customers to "refer a friend" which have been effective in both the consumer and business markets. (EN: this has changed. In some cases, the law has stepped in to discourage this, and people are more savvy to and distrustful of individuals who promote products because they are seeking a personal benefit. Companies must be very cautious when asking customers to promote for them.)
The author cites an informal study that demonstrates that companies with high levels of positive buzz tend to be leaders in their product categories (EN: this implies a cause-and-effect relationship, but it may be the other way around - people talk the most about brands that are already popular rather than the talk creating popularity. Or at best, it's a loop - popularity creates buzz creates more popularity creates more buzz, and so on.)
The author suggests four metrics for reputation monitoring: (1) the number of referrals made by a satisfied customer, (2) the degree to which opinions and perceptions affect the company, (3) the proportion of people who act based on the referral, and (4) the percentage of new customers attracted. (EN: these seem a bit ill-defined and hard to measure - as such, they're good notions, but I doubt they're practical metrics.)
The author notes that "the best way to get referrals ... is to provide an outstanding product and excellent service." There are various tactics and techniques to enable people to communicate about your brand (EN: blogger "press kits" come to mind), but these are not effective unless the core motivation is there.
The author also provides a few examples of user groups (such as a vehicle owners' club) and events (a "festival" for customers) that can be used to reward customers, heighten their sense of attachment to a brand, and increase their interest in referring others.
INFLUENCER MARKET
The describes an "influence," as a person who is influential has a much higher degree of esteem than the average consumer, such that others are more likely to be affected by their opinions and seek their advice. Because of their ability to sway the opinions and affect the behaviors of others, marketers seek to court influencers.
(EN: The distinction between "referrer" and "influencer" is vague, and seems to be a matter of degrees - an influencer is simply an effective referrer.)
Of particular importance to marketers is reaching "opinion leaders," who are individuals who are regarded as authorities by others due to their experience and knowledge in a specific area and are therefore consulted by others who defer to their expertise. However, such individuals can be difficult to identify and even harder to influence. The emergence of online social networks has made patterns in communities more evident, though research into this area remains limited.
The traditional method for gaining the attention of influencers is publications - those who are knowledgeable generally subscribe to a number of magazines, newsletters, and other sources that serve to keep them informed. These include both trade publications as well as certain consumer publications.
INTERNAL MARKET
The "internal market" is composed of the company's employees. While this group has traditionally been ignored by marketing, it has been found that their support is critical to the success of a brand, as they directly or indirectly interact with the customers and the product lines, and must be "on board" with the strategy and the message: the employees with whom the customer interacts are the embodiment of the company, and the rank-and-file are seen as being more credible than executives and paid spokespersons.
Of importance, keep employees well informed, and in a timely manner. A few mistakes mentioned are sending information to employees after they have heard about it from another source, restricting information to what they company feels employees "need to know," or skewing information to spin employee opinion. Especially in the present age, a company cannot control knowledge, and loses credibility with its own employees if the communication is not timely, comprehensive, and honest.
The author asserts that "many large firms" have employee relations departments that specialize in internal communications, and goes on to list some of the various benefits of carefully managing the relationship between company and employees (low turnover, low absenteeism, better productivity, etc.)
(EN: My sense is that employees, like suppliers, are parties who help to deliver the brand experience and need varying levels of information in order to fulfill this role.)
MANAGING COMMUNICATION AMONG THE SIX MARKETS
Because of resource limitations, the author suggests that service all markets effectively is unrealistic, and presents another "spider chart" that lists each audience on a spoke, each spoke showing an arbitrary rating (1 to 10) of the importance of the audience and the level of effort made to communicate to the audience.
An alternate approach is to identify parties as "key audience leaders," who will communicate information to others in their group either proactively (making announcements) or reactively (answering inbound questions). This is of particular importance to social media, where information passes between individuals, and reaching a key person could result in more widespread publication through people who re-post or link to the original article.
The author also mentions "scorecards" (from the Six Sigma methodology) that can be compiled for each audience to monitor communication efforts and identify needs for improvement, with a goal of having a "balanced scorecard" that gives all elements equal weight (EN: This seems arbitrary and a bit flawed - some audiences being more important than others.)