Customer Analysis: How to Effectively Target the Market

Customer Analysis: How to Effectively Target the Market

A customer analysis is also known as a customer profile or target market.Analysis and it is an essential element of your company business plan. 

                 This analysis will determine your marketing strategy by identifying your customer base and ascertaining their needs, something which helps you develops your product or service in a way that specifically meets or exceeds those needs.  You can use a customer analysis not only to better understand your current customer base, but also to draw in new customers.  You do this by studying why people buy certain products, the method by which they make their purchase, how often they buy those products, and under what conditions they make their purchasing decisions.

A customer analysis profile helps you not only to develop your product, but also tells you how to best position and sell yourself in the market. In order to properly position yourself, you have to know both your customer demographics, such as age, geographic location, gender, and income, and their purchasing patterns.  Your customer analysis will be informed by the stages in the buyer decision-making process.  Buyer decision-making can be seen as an underlying psychological process, meaning that the stages a customer goes through when making a decision to purchase are not necessarily consciously undertaken in the mind of the buyer.

The Buyer Decision Process

This process reflects the stages that a buyer goes through before making a purchase.  The general stages assume that the purchase is already of a general value to the buyer and that the buyer has time to make an informed decision before he or she actually makes the purchase.  Economic decisions are not always rationally motivated. For example, you may have two products on the market with exactly the same ingredients, but with drastically different prices, such as the brand name headache medicine, Excedrin and the no-name brand, Headache Relief typically offered at a discount store.  For some customers, the name brand is more important than the specific ingredients – so much so that they will pay more than double the price just to have it.  Why is this so?  What are the prime motivators for that customer?  In a competitive market, knowing the answers to these kinds of questions is what makes an in-depth customer analysis so valuable to a business.

The Stages in the Buyer Decision-Making Process

Recognition of the Problem

This is often considered the most important step in the buying process:  a potential buyer recognizes either a desire that needs fulfilling or a problem that needs solving. That need or problem can be internally motivated, such as a need to eat or to remedy a headache, or, it can be externally motivated through strategic advertising, that is, advertising which constellates a need that a customer was previously unaware of.

The Search for Information

After a buyer has recognized the problem, he or she will begin to search for a solution.  This is the stage at which the buyer starts to look for information to find out more about what products and services are currently in the market. Having your information strategically placed can make the difference in whether or not a potential buyer sees your product or service.

An Evaluation of Alternatives

This is the stage at which the buyer measures his or her needs and desires against what is available and how much it costs. At this stage, a buyer will determine a set of criteria by which to assess the alternatives. You need to know these criteria in order to position yourself against your competition.

Post-Purchase Evaluation

This is the stage at which the customer assesses the product or service in terms of its value.  Did the product meet his or her needs?  Did it exceed expectations?  Was the benefit worth the cost? Would they buy the product again?  This information is crucial in establishing customer loyalty and getting word-of-mouth advertising.

Your Customer Analysis

Determining Your Customers Needs and Desires

In order to establish your customer base, you need to determine your customer’s needs and desires.  In other words, you have to know what the prime motivators for making the purchase are. What exactly are they looking for in the product or service?  Are they making a purchase that solves a problem or are they making a purchase that fulfills a desire. The answer to these questions will lend insight into the underlying psychological motivations for the intended purchase. This information helps you determine a plan of action to encourage the customer to come to you instead of your competitors.

You must also determine if your customers are willing to wait for delivery of your product or if they need it on demand. This helps you determine not only your production strategy, but also your market placement strategy.  Other factors to consider are whether your customer has a preference for quality versus quantity; what their general price-point is; and whether or not they demand a warranty.

Customer Demographics

Are you positioning yourself in the right retail or market outlets?  Your customer demographic describes the specific segment of the market to which your product or service appeals. This information is based on factors such as age, social class, geography, and gender.  This helps determine both your market advertising and placement.  For example, you probably do not want to place an advertisement for denture cream or bladder control products on MTV.  The same would be true for advertising a high grade power saw during daytime television.

Tata Nano Car – A New approach to product development 

The dream project of Mr. Ratan Tata to develop 1 lakh car got the shape when Tata Motors launched Tata Nano car in January 2008. Mr. Tata wanted to develop a local transport for middle class families who use two wheelers for commuting individual as also with family. The two wheeler mode is relatively an unsafe mode of transportation. Tata Motor engineers decided to go beyond the conventional cost reduction exercise. As Mr. Tata said only countries like India and Pakistan can make such a low cost vehicle primarily because of the ingenuity of the people and the facts that India is one the largest two wheeler markets. The engineers worked to redesign the car engine as also the very design and the style   of the car. Institute of Development in Automotive Engineering (I.D.E.A) was mandated with the styling I.D.E.A is a design house that had earlier designed Tata Motor’s Indica.

After several promotions the engineers finally built a 624 cc engine with a bhp of 34 as this was the optimal design. For the first time the high pressure die cast engine was made in India.

Compared to Maruti 800 which delivered 37 bhp, Nano’s engine was more optimal with a multi-point fuel injection system developed by Bosch.

To meet the final price of 1 lakh, Tata also had to pair their margins and produce at sub-stantially low cost. They also got prepared for a longer breakeven. All components manufactures redesigned their components to meet the Tata Nano requirement. For example the steering shaft was made hallow thereby reducing the cost and weight. MRF redesigned the tyre to bear extra weight on the rare wheels

Tata Nano car also conforms to the stiffest pollution control norms and passed through all crash test.It has a four-speed manual gearbox and high on fuel efficiency.

The car was launched internationally as a new paradigm in affordable or frugal innovation and one that herald a new era in small car manufacturing in India. It put the Third World on Wheels and had far reaching implications for the whole world. Commenting on this development, Chief Designer of the ford motor Company J.Mays said, For the first time in the world history of auto industry there is a generation that is connected globally. They see an iPod or a Nokia Phone or a 1200 dollar women’s hand bag and think just because it is small does not mean that it can’t be fantastic”. And very belief will now guide them to buy low cost small like Nano.

Details of Nano

Specs:

Engine: 624 cc / 33 bhp4 door, 5 seater (and yes 4 Wheeled too) Rear Engine Weight: 600 kgsMileage - 22-23 km/liter

Variants:

Standard Deluxe (with AC)

Future:

 Diesel Variant Exports outside India or assembly plants outside

Comparison

8% less in length (bumper to bumper) with respect to Maruti 800 21% more in inner space with respect to Maruti 800

Looks:

Front side looks more like Matiz (or Spark as we now call it)Back side looks more like India with those long tail lights.

Insight:

People often criticize something that is making waves everywhere. This has also been the case with Tata Nano. Competitors, safety regulators, environmentalists and most others conceived the problems that India will face, when such a car is available, much before the actual launch of the car.

Strategies to Attract and Retain Price Sensitive Customer

Strategies to Attract and Retain Price Sensitive Customer:

Indian economy is an example of contradictions while it has continued to grow in the last two decades, albeit at a moderate rate of 6.7% and there are large numbers of consumers who are moving up the socioeconomic pyramid. Still India continues to remain a price sensitive market. This example the introduction of small unit packaging most often priced at less than Rs 10. Be it a chocolate bar, Shampoo, Soup or toilet soap or toothpaste. Whenever a price rise in a commodity is expected, there is a tendency of the consumer to buy it in a large quantity, so that impact of the price hike could be felt at a later date. Nobody understand it better than Big Bazaar Wednesday of each week, Big Bazaar run a special price promotion offering a flat discount of 5% on all its products. Wednesday sees the largest number of footfalls of housewives in Big Bazaar across all its stores in the country. To further soften the impact of high prices, Big Bazaar has launched its own brands to offer customer an opportunity to buy unpackaged and unbranded staple foods like wheat, rice, sugar and pulses.

Price sensitivity is not unique to India. Consumer all over the world exhibit price sensitivity for different products and brands. Also the price sensitivity differs based on the time of consumption. For example airlines have responded to price sensitive buyers by offerings to them lower fares. In order to keep themselves afloat the airlines in India had to cut down on the freebees including the free baggage allowance, meals, in-flight entertainment and even the newspaper. Today all airlines ask customer to pay for the meal on board and for self-selection of the seat, especially those that are considered to be the premium namely the front rows and the isle and the window seats. Though initially low cost airlines like GoAir, Indigo and Spice Jet offered no frill flights, today even the full service flights like those of Jet Airways and Air India also had to adopt no frill strategy as they did not want to lose the price sensitivity customers. Same is true with Tata which designed the water purifier ‘Swatch’ for the price sensitive Indian market.

Though competitors should drive price down, in such cases they join hands to fix the price and in turn assured profits.

Pricing is one of the most important elements of the marketing mix, but lately it has come to occupy center stage In marketing wars. The reasons for this are:

a)Diminishing Products Differentiation : 

As technologies get standardized , differentiation among firms on the basis of the products is diminishing. More products and brands will transcend to a commodity situation. Knowledge of what constitutes price and its meaning to the customers can make pricing decisions more meaningful and help firms fight the price war.

b) Inter-firm Rivalry: 

The intensity of inter firm rivalry increase as entry and exit barriers in the industry are lowered. With an increase in the rivalry we find that a firm cost of operation also increases as it now has to spend more money to lure customer and middlemen.

c) Mature Products and Markets:

 When products and markets enter the maturity stage, the only way to differentiate various offers is on the basis of augmented service or price cuts. Many firms opt for the latter and then find their bottom lines getting eroded. Once again, pricing decisions relevant as leverage with firm is low unless it embarks upon non-price strategies.

d) Customers value perception:

 Another factor contribution to the importance of pricing decisions is the customer’s perception of the products current and potential value.

e) Inflation In the Economy: 

Pricing decisions become important in an inflationary economy. Inflation affects pricing in two ways- one it lowers the purchasing power of the customer and hence a search for low priced substitutes and two it increases a firm cost because of inputs costing more. This forces the price of products upwards. The firm now finds itself in a dilemma; if it passes the increases in input cost to the customer in the form of a price increases and there are equally attractive alternatives available at lower prices, the firm may lose the customer. And if it does not increases the price it may incur losses or find a reduction in profit margins.

Pricing Strategy & Pricing Tactics to Be Used for Your Product

Pricing Strategy & Pricing Tactics to Be Used for Your Product

The pricing strategy your company adopts, whether it is to sell a high volume at a low price, to sell a low volume at a high price or to fall somewhere in the middle, will likely employ certain pricing tactics. Using pricing tactics can make your product seem less expensive and therefore a greater value or can establish your company’s products as a luxury item.

Charm Pricing

One of the most common pricing tactics that companies use is to price their products just a few pennies lower so that the first number of the price is lower. For example, if you were using charm pricing, you would sell your products for $19.99 instead of $20 because $19.99 seems like it is less. It pushes your product into the $10-$19.99 price bracket so it appears to cost much less than $20.

Bumps

In the example above, setting the price to $19.99 made it seem lower for two reasons. For one, it did not end with “.00” so it seems smaller. However, there is a larger reason – price bumps. In this example, $20 can be a price bump. The concept of price bumps is commonly applied to real estate and vehicles; the price you set puts your product in a different category, just like when someone shops for a home and limits his search to homes within the $150,000 to $175,000 price range. However, with price bumps come certain expectations that you have to manage. You would expect a vehicle priced at more than $20,000 to have certain features; if you fail to provide those expected features, it could make your product less desirable. Of course, providing features that you would not expect at a certain price bump, such as paying less than $20,000 for a new four-wheel-drive vehicle, can demonstrate value.

Anchoring

Price bumps may also serve as “anchors,” that is, prices that set a benchmark. For instance, when Apple set the price for its iPod Shuffle at under $50, it opened up the market to a whole range of people who would not think that something priced under $50 was expensive, making them more likely to purchase the Shuffle, be it as a first MP3 player or as an extra one. Conversely, a company may opt to price an item over a threshold to develop its stance as a luxury brand, such as when a restaurant charges more than $5 for a drink.

Considerations

No matter which pricing tactic you use or purposely do not use, you are establishing your basis or competition to your customer. She has to see the relative value of your product, and the price has to match her expectations for that value. Within this, you still have to make sure that you are charging enough for your company to operate. For example, a small retailer will never be able to compete with a big-box discounter on price, so it has to establish value: either prestige value, the mechanism by which a retailer like Rolex can charge as much for a watch as some cars cost, or relative value, establishing that a consumer should come to your store for his widgets because even though they cost a bit more than those at Target, yours come with a lifetime warranty or are offered in a greater range of sizes and colors.

How E-commerce Marketing Dynamics are Changing with Online Coupons?

Online shopping has boomed the Indian economy in many ways. From shopping trends to varying consumer behavior and rising of new shopping platforms to varying consumer behavior, India is projected to bloom like no other nation. There was a time, a few years back when customers were cynic about online shopping but now the story changed as e-commerce trade has made a sensational and startling entry. The ubiquitous e-commerce sites like Snapdeal have defined that no one can underrate the power of online buying. Thus, along with the cumulative appeal of internet shopping, another cult that has engrossed all buyers is online coupons.

Coupons Deals: No Need to Bargain

The archetypical consumer in present days is short of time and thus, prefers to spend more on his Smartphone searching for deals and discount coupons rather than inferior his self-worth by bargaining for a low price at the shop. Now when the consumer is a king, various brands are offering discounts and coupons for everything and anything from kitchenware to apparels, spas to movies, there is nothing you can’t buy at a lower price.

According to 2016 stats, a rise of a number of visitors opting for coupons proceeding to any purchase is 200%. It is not a fluke, but definitely, an awareness that the customer knows very well about the place where he can garner maximum discounts offers. He or she is ready to spend the time in searching for same products on various sites with a manual price comparison. Once they find an appealing deal, they pay for it at maximum lower costs than ever.

Therefore, by looking at this rat race, brands have come to know about the craze for discount coupons and are utilizing it as a marketing strategy.

How Online Coupons have Skyrocketed the Spending Habits?

If look towards the outlook of a typical Indian consumer, it might be observed that no matter, how much the income is, aspirations have reached so high leading to increasing in spending habits. These cashback coupons are a relief to one’s budget assuring them to shop more. The fad for utilizing online coupons has become an opportunity and so, online shopping portals are investing in it to attract more customers.

The latest polls have shown that Indian shoppers prefer to pay less than MRP and mostly prefer to the minimum price. They are even ready to go for best cashback deals over car insurance, phone recharges, etc. in order to get more deals and in return, it enhances the sales for shopping portals. Well, India is a country where lots of festivals come with shopping gifts, coupons, and deals making a customer spend in that particular festive season.

Online Shopping: A Trend to Avail Best Cashback Deals

Yes, until you don’t shop anything, there is no use of these coupons. With the great utilization of technology, shopping online is an easy chase these days. Through Smartphone, one can simply add their favorite products to the cart and buy them anytime. With this, it can be said that online buying is still the embryonic stage in India and can keep on going high.

Digital coupons have not only boosted online sales but also enhance innovative advertising strategies like those that Flipkart & Snapdeal do. Though lucrative deals and amazing discounts are highlighting more, the winner is always a "buyer".

Also, India has the fastest growing market for online coupons and international shopping portals providing a new venture to e-commerce businesses.

Designing and Managing Services

Designing and Managing Services

The art of brand building is through creating strong brand image and brand awareness with customer. However, the brand building process continues even after the product is sold to the customer. Company can come out to be a winner by showcasing differentiation in services at the point of sell and after sell customer service. Furthermore, research has shown that average customers are not happy with after sell services in airlines, bank and hotel industry. It has been observed that companies with help of modern technology are maintaining a database of customer profile. Companies perform analysis on database and choose offer discounts, coupons and charge low services who give maximum business. Companies are not welcoming casual users. This sort of differential service creates a bad impression in mind of customer, resulting in abandoning and bad mouthing of the company. There are various ways to deliver superior quality to all customers, but is up-to the company, whether to service just profitable customer.

It is general trend in developed economies like USA that services sector is showing highest growth in job creation. Here services include any intangible act from one party to another without any underlying ownership transfer. Services are offered by the airlines, banks, technology firms, armed service, hospital, etc. Basically services can be divided into government backed services, business services, not for profit services and manufacturing services.

To design marketing strategies around services, it is essential to understand characteristics of services. Services are intangible, thereby creating uncertainty in consumer about the end product. For example, if the customer is looking for a hair-cut and visits a salon, there is going to be a considerable amount of doubt about her final look. Challenge is building confidence in customer through people, price, environment and right equipment. Unlike physical goods which are manufactured and supplied to customer through the distribution channel, services are consumed at same time it is produced. Services have element of inseparability and therefore, time allocated to customer is important. So if the customer has the service giver penchant than price could be increased or time allocated is reduced to take m customers. As the services have the human element involved, there is variability, not all hair cut specialists are patient in listening to what customer has to say. To overcome companies can implement stringent norms during hiring, push for standardization and constantly record customer satisfaction.

Traditional marketing was developed looking at physical goods, for service marketing focus is people, process and physical evidence. Customers generally tend to give preference price rather than quality of service. In that circumstance companies can create differentiation not through price war but focusing on providing a wider range of services. Companies are looking at internet to accomplish this task, but as with products, competition can easily copy and remove differentiation. However, the temporary differentiation will serve the company well.

Customer satisfaction is tested every time service is delivered, making it essential to manage service quality. Quality service management requires a strategic concept to the start with wherein companies need to make customer satisfaction their motto. Top management should show commitment towards this strategic concept and create an atmosphere to facilitate customer satisfaction. Companies need to implement best practices associated customer satisfaction. Companies can introduce technology where ever relevant to reduce human element, for example, kiosks and ATM. Companies need to develop a system where they can monitor as well as audit customer satisfaction system for its robustness and performance. Companies need to develop a habit in looking into customer grievance and resolve them at the earliest. Employees serve as internal customers, and it is very essential they are satisfied with the company. A satisfied and motivated employee is going to carry that attitude in dealing with customer and h in increasing productivity.

Customer is the king and service is the name of the game. It is essential for companies to incorporate services purchase or post purchase as an element of the marketing strategy. Today’s customer has more options available and will move on to another company for the sake of better service.

Business Models & Strategy

Business Models & Strategy

The Business Models & Strategy blog is an online resource center for entrepreneurs, small business owners, business and marketing professionals. Our goal is to provide relevant information, educate and engage with all the professional that are interested in business and strategy.

Models to Analyze your Product Portfolio 2

Following my previous blog about Boston Matrix, today I will provide basic guidelines to analyze your product portfolio by employing the Directional Policy Matrix (DPM). Compare to Boston Matrix, DPM allows for a number of factors such as market attractiveness & relative strength.

This matrix measures the health of the market and your strength to pursue it. The results indicate the direction for future investment. The recommendation may be to invest, grow, harvest or divest

Brief description of the model dimensions:

·  Invest in growth: high market attractiveness which relate to high business strengths. This position is ideal and you should invest your best business resources here.

·  Invest in capabilities: high market attractiveness but low relative business strengths. The market potential is attractive but you do not have the business strengths necessary for being really successful. The options facing you are either to take what you can while it is still possible or to invest in building a better competitive position. You must be selective in your efforts here, as this segment will cost you to invest in every aspect of the business.

·  Manage for Cash: Low Market Attractiveness but High Business Strengths. In this quadrant you have high strengths in a market that has lost its attractiveness in terms of future potential. It is still good for near term profits, so maintain the position for as long as possible.

·  Divest: Low Market Attractiveness but Low Business Strengths. Think carefully about what you are doing to be in this quadrant. The market is not particularly attractive and your business strengths are below average here. Keep in this segment only if it supports a more profitable part of your business (for instance, if this segment completes a product line range) or if it absorbs some of the overhead costs of a more profitable segment.

Take into consideration the following examples of Attractiveness Factors to your business when analyzing your product portfolio:

·  Volume of sales

·  value of sales

·  profitability of sales

·  future growth potential

·  stage in Product Life Cycle

·  Portfolio fit (does it fit with others)

·  Is it valued to customers?

·  Any competitive advantage?

·  degree of competition (high, low)

·  is any investment required?

·  any specific customer demands?

I also provide some examples of Relative factors, that is, how customers perceive the products?

·  Brand name and awareness

·  innovation

·  price

·  costs in using the product

·   service levels

·   quality

·   value in use

·    long term sustainability

To measure the Attractiveness Factors use the following template. Here are the instructions:

1. Enter your products across the top of the grid

2. We advice until and 6 factors to focus the analysis

3. Enter a SCORE from 1 to 10 for each product against each attractiveness factror.  The HIGHER the score, the better the FIT of the product

4.Calculate the average score.  This will be used to place the product on the DPM Matrix, higher or lower than the average

Now, do the same to calculate the Relevant Strength. Instructions:

1.For EACH PRODUCT fill in a form

2.For each product identify 6 relative strength factors that represent the customer's criteria for choosing a product (determine success against competition)

3.Enter a SCORE from 1 to 10 for each company against each factor.

4.REMEMBER!! The score reflects the market perception and not yours