Understanding Customers Shantanu Dutta

1
Understanding CustomersShantanu Dutta

• Objectives
• Customer Orientation
• Use differences in desired benefits by customers
  to segment markets
• The example of Levis in the mens wear market
• Was Levis customer oriented in this example

2
Customer Orientation Perceived Benefits

• Customers buy products for the perceived benefits
  that the product offers
• Perception Process by which an individual
  selects, organizes and interprets stimuli into a
  meaningful picture of the world.

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Customer Orientation Perceived Benefits contd.

• Perception is a function of
• The key salient dimensions that exist in the mind
  of the consumer when they are making decisions
  about products/services
• Examples of stimuli that affect perceptions
• physical attributes (e.g, 6.5 pounds for lap top)
• intangible attributes like brand image (e.g,
  Calvin Klein)
• store image (e.g, Neiman Marcus versus T. J.
  Maxx)

4
Customer Orientation

• In order to understand customer benefits, it is
  important to allow customers to describe the
  benefits they seek in their own words
• Example Portable P.C.

Customer Benefits In Their Own Words Not heavy
to carry in my briefcase Easily usable on
airplanes Can use coast to coast Easily carry
running through airports
Engineering Characteristics/ or Solutions 6.5
pounds 8 by 11.5 5.5 hour battery life Has a
handle
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Customer Orientation

• For new technologies it is not possible for
  customers to be able to express what they want to
  see in the products
• Customers can express their feelings in terms of
  benefits
• e.g., customers never did ask for cellular phones
• However, if you ask them whether they would like
  to be able to call their children at home from
  their cars when stuck in traffic
• When you get input from customers, ask them to
  articulate benefits they seek for typical
  situations and allow customers to describe their
  needs in their own words. Do not try to impose
  your technical terms/engineering attributes on to
  customers

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Customer Orientation

• When you get input from customers also encourage
  them to articulate benefits for edges of the
  performance envelope i.e., what additional
  benefits would they ideally like to have if there
  were no technological or cost constraints
• What is critical is not only what question is
  asked but also how the question is asked
• New Coke failed not because people lied about how
  much the liked it, but because Cokes marketing
  research did not place people in the context of
  having the New Coke with the original Coke pulled
  from the market.

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Is A Marketing/Customer Orientation Important ?

• Ignore your customers ?
• Basic research such as microprocessor developed
  at the Bell Lab or a better understanding of DNA
  pattern will be researched often without concern
  about whether customers see benefits or not
• Sales and Technology Driven Firms often
• Focus is on the next product/technology
• RD develops and given to sales to sell
• Marketing and sales are the same
• Feel that customers do not understand products/
  technologies

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Is A Marketing/Customer Orientation Important ?

• However to develop the initial concept into
  actual products that customers will buy is not
  possible without a marketing orientation
• My research findings from the semiconductor
  industry
• Firms that have a strong interaction between
  marketing and RD tend to have higher
  profitability
• A strong marketing capability enhances the firms
  RD capability to come up with innovative
  technologies
• Firms with strong RD get the biggest bang for
  the buck from a strong marketing orientation

9
Levis Segmentation

• Definition Segmentation is the process of
  dividing potential customer into distinct subsets
  of customers. Each segment consists of people
  who desire similar benefits that lead them to
  respond in a similar way to a particular
  product/service offering.
• Levis interviewed 2000 men to arrive at a
  segmentation scheme in the mens wear market.
  This segmentation is based on their perceived
  benefits.
• This perceived benefit is influenced by the
  physical attributes they would like in the
  product, the image they want to convey, where
  they like to shop, their preference for brand
  name, price sensitivity etc.

10
Levis Focus on the Classic Independents In The
Mens Wear Market

• Levis has an initial hypothesis that the classic
  independents are more likely to respond to their
  new concept and thus commission a focus group
  study to understand these buyers
• The objective of the focus group in the Levi
  study
• Understand the response of the classics
  independent segment to the idea of Levis
  introducing separates

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Levis Segmentation of the Mens Wear Market

• Utilitarian jeans customers
• they do not care much about clothes
• wear jeans for work and play
• loyal jeans customers
• they constitute 26 of the market
• Trendy casual
• buys high fashion brands
• loves to be noticed
• comes to life after dark
• they constitute 19 of the market
• Price shoppers
• buy primarily on price, look for bargains
• shop in department stores or discount stores
• constitute 6 of the market

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Levis Segmentation of the Mens Wear Market

• Mainstream traditionalists
• love polyester
• over 45
• conservative politically and in their tastes
• love to shop with their wives and value their
  opinions
• shop in department stores
• constitute 28 of the market
• Classic Independent
• they like the freedom to be able adjust clothes
  during purchase to get a better fit, looking
  right is really important to them
• less price sensitive
• do not like the association of Levis name with
  suits
• though they constitute only 21 of this market
  they buy 46 of wool and wool blended clothing
• shop at specialty stores

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The Tailored ClassicPerceptual Map And Ideal
Benefit Desired By Segments
Segment Description Q1 Mainstream traditional
Q2 Classic independent Q3 Utilitarian Q4 Trendy
casual Q5 Price shopper
Specialty stores
Q2 ideal point
Q4 ideal point
Q1 ideal point
Rack Polyester (low price)
Tailored Wool (hi price)
Q3 ideal point
Q5 ideal point
Discount stores
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Customer OrientationUnderstanding And Listening
to Customers

• Was Levis customer focused in this example
• Important to incorporate customer input in the
  product development decisions, not allow the
  company tastes and biases to influence the
  decision

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• Dockers slacks
• - Market segment 25-35 yr. old yuppie, classic,
  traditional
• Loose jeans
• - Market segment (1) 30 yr. olds (gaining
  weight)
• (2) 15 yr. olds (prefer baggy style)
• Slates suits
• - Market segment 30-40 yr. old upper scale,
  like quality