4 Understanding the Consumer

Organizations exist for one purpose—to meet human needs. Thriving organizations do that exceedingly well. Venerated organizations have managed to meet evolving human needs over a long period of time. All of an organization’s revenues and profits result from one thing—customers who are willing to pay money for products and services that meet their needs. Therefore, any brand management initiative, any marketing initiative, and indeed any business or organizational initiative must start with a solid understanding of the customer.

Defining the Target Customer

Focus is an important part of a brand’s success. Brands focus on a target customer and often narrow their focus to a particular customer need segment. As mentioned in Chapter 3, customer targeting is the first step in brand design. Everything else emanates from that. So let us start with how to identify your brand’s target customers.

• They have the potential to provide your organization with ample revenues and profits over the long run.

• Your organization can grow by building a long-term relationship with and increasingly fulfilling the evolving needs of these customers.

At a minimum, you should identify and understand the following target customer attributes:

BASIC HUMAN NEEDS

As branders, it is useful to understand the basic needs that drive human emotions and behaviors. Abraham Maslow’s hierarchy of needs addresses this requirement, as does Artur Manfred Max Neef’s classification of fundamental human needs. Albert T. Poffenberger, Ph.D., devotes an entire chapter to “An Inventory of Human Desires” in his book Psychology in Advertising, published in 1925.

Here is my list of basic human needs, going from survival needs to such higher-order needs as self-actualization and enlightenment (compiled and revised over time from numerous sources):

As marketers and crafters of brand strategy and messaging, we should be cognizant of the underlying needs that drive human behaviors, including brand purchase and usage behaviors. The next time you craft strategy for your brand, think about which of these fundamental human needs your brand fulfills and then make sure you are reinforcing that need fulfillment with the brand and its messaging.

FEAR MOTIVATES

Unfortunately, fear is still the primary motivator among humans. I say unfortunately because I would hope that one day we would transcend our fears and be motivated primarily by our highest dreams and visions. It would lead to a much more utopian world.

Nevertheless, here is a partial list of some of our most common fears (in no particular order):

And marketing messages certainly play off fear. Consider the opposite of each of these marketing claims. With our brand, you will feel:

So what underlies this ability to appeal to people through their fears and insecurities at a deep emotional level? People do not feel completely at ease in their own skins or in this world of ours. They feel insignificant, inferior, unlovable, inconsequential. It all relates to their self-esteem and their belief in the benevolence or cruelty or indifference of the universe. Does my life have any meaning at all? Do I matter? Does anyone really care about me? It also relates to the notion of judgment. Will I be judged to be worthy or not? Am I a good person or a bad person? Do I deserve to be loved? Do I deserve anything good in my life?

I could get metaphysical at this point and say that the solution is nonjudgment and nonattachment and transcending the sense of self and feeling connected to everyone and everything and being loving in all that you do. I guess I did just say that. However, my point is, until people wake up to a new way of seeing the world, fear is the primary motivator on which many a successful marketing campaign has been built. Just observe successful salespeople, ministers, politicians, lobbyists, or advertising campaigns. The importance of fear as a motivator will become crystal clear.

BEHAVIORAL ECONOMICS

Behavioral economics is a relatviely new branch of economics. It explores how and why people behave in seemingly irrational ways. The discipline is at the intersection of psychology and economics. Several very interesting books have been written on this subject in the past few years. One of the findings is that people are often motivated more by what is “right” than by what is in their own self-interest. That is, morals and values often override self-interest. This is why Liberal Democrats and Conservative Republicans sometimes support policies that do not seem to be in their own self-interests. This is an important insight for marketers that are trying to create compelling brands and persuasive messages.

PEER PRESSURE

In 1951, psychologist Solomon Asch conducted conformity experiments at Swarthmore College. He found that within peer groups, there is great pressure to conform to group norms and follow others in the group. This is especially true among younger people and people who have lower self-esteem.¹ If marketers can establish brand usage as a group norm, it can create increased brand usage and loyalty within that group. In the late 1990s, Hallmark ran an advertising campaign that encouraged people to turn over greeting cards to make sure the Hallmark name was on the back. Not all people cared if the card was Hallmark branded, but they worried that the recipient might.

THE POWER OF FOCUS

The power of brands lies in focus. Very few, if any, brands can be all things to all people within a product or service category. That is why segmentation is important. Ideally, a brand or subbrand focuses only on the customer segment that it can best serve. It becomes an expert provider of products and services to that segment. I am a firm believer that in today’s business environment, the most robust brands will be those that:

Although we most often think of brands as targeting specific customer groups, different brands can also target different needs for the same people. For instance, different needs are driving your purchase decision at different times, and you are very likely to consider a different set of restaurants (or brand) for each of the following situations:

Techniques to Better Understand the Customer

Understanding your customer is a never-ending process. Here are some simple ways to do so:

• Conduct ongoing customer research, from focus groups and depth interviews to anthropological and quantitative research techniques (see Chapter 17 on brand research).

• Maintain and monitor customer service/support mechanisms (e.g., help lines, e-mail support).

• Establish and monitor social media devoted to different customer groups/segments.

• Establish customer membership organizations. Participate in and monitor their events. Harley-Davidson executives are masters at this technique. They attend—and ride in—HOG (Harley Owners Group) rallies, talk with their customers at those rallies, observe new product accessories, and after every HOG rally, debrief back at the office for new product ideas and other action items.

• Have key executives/managers occasionally rotate through frontline customer service positions.

• Hire employees who are also passionate customers. (There is one danger with this approach. Even if you are a passionate brand customer, don’t assume that all other customers are just like you.)

Because of their extensive market research, people who develop new products (marketers and marketing researchers) often understand the market (including deep customer insights) better than anyone else in the organization. Seek them out to gain a better understanding of your brand’s customers and their needs.

ENVIRONMENTAL SCANNING

For most businesses, environmental scanning can also be very helpful in staying abreast of the latest customer, industry, and societal trends. “Environmental scanning” is a fancy term for the following process:

• Reading a broad cross section of books and publications of relevance to your business

• Keeping very close track of the emerging trends by counting the number of times certain ideas, needs, or concepts are referenced

• Seeking to better understand emerging ideas, needs, or concepts—those that are steadily increasing in frequency and intensity

Market Segmentation

Market segmentation is often necessary to effectively meet the needs of different customer groups. Different segments will value different aspects of your products, services, and brands differently. You should have a good understanding of the following dimensions of each market segment:

• Product Usage Segmentation. For instance, some people use baking soda to deodorize their refrigerators, while others use it as a surface soft scrub, to treat insect bites or itchy skin, or as a toothpaste.

• Purchase Behavior Segmentation. In many industries, four groups that often emerge to one degree or another are:

• Benefit Segmentation. People might buy a sailboat to race, for a day sail, to cruise on a vacation, to live aboard, to entertain friends, or as a second home.

• Price Segmentation. Price segmentation will yield higher overall revenues and profits if designed properly. Airlines have made a science out of price segmentation. First-class travelers pay more. Business travelers with tight schedules will be less price sensitive. Tourists with fixed budgets, flexible schedules, and a long planning horizon will look for lower fares. Some people will only travel taking advantage of last-minute seat-filling bargain prices. Other last-minute travelers have no choice and behaviorally (but probably not attitudinally) are virtually price insensitive. Seats are less expensive on slower days (Saturdays, December 25, etc.).

• Cohort Group Segmentation. Refers to people who were born at approximately the same time and who have experienced the same events at the same lifestages.

• Psychographic Segmentation. Refers to segmenting people based on their values, attitudes, and lifestyles.

• Geographic Segmentation. Segmenting people according to their geographic location can help target people in the same socioeconomic bracket who may share interests or concerns.

• Geodemographic Segmentation. Refers to segmenting people based on their location—typically zip or postal code—and demographics, such as age and income. Consult: Nielsen PRIZM and Nielsen’s other segmentation tools (www.claritas.com/MyBestSegments/Default.jsp) and CACI’s ACORN (acorn.caci.co.uk).

As the previous list illustrates, consumers can be segmented on many dimensions. The trick is to arrive at a segmentation scheme that relates to differences in purchase motivations and behaviors. Different brands are designed to appeal to different needs with unique points of difference. It is important to understand the consumers for whom your brand will mean the most and who will have the highest likelihood of responding to your brand messages.

Business-to-Business Customers

For B2B (business-to-business) organizations, understanding the purchase decision-making process is usually more complicated. Decisions are often made by teams or committees comprising people from different functions. Some people initiate the purchase order or request for proposal (RFP). Others are gatekeepers, influencers, decision makers, purchasers, and users. Each has a different role in the process at a different point in the process. They often focus on different product, service, and brand attributes, and they respond to different types of appeals. Also, they usually rely on different sources for their information. An astute B2B marketer should understand how best to get to each of these individuals, what angle to emphasize in the communication, and in what verbal style to communicate (see Figure 4–1).

Figure 4–1. B2B purchaser motivations.

These purchaser motivations are usually present In B2B buying situations:

• Price

• Perceived quality

• Technical specifications

• Warranties

• Other service or postsale support

• Financial stability of the seller

• Buyer’s past experience

• Organizational policies

• Fear of making a mistake Friendship

• Seller’s interest in buyer’s business Persuasiveness of seller

Source: Gabriel M. Gelb, Gelb Consulting Group, Inc. (now Endeavor Management Company — http://endeavormgmt.com/gelb-consulting), “The Nuts and Bolts of Business-to-Business Marketing Research.”

For instance, in a corporation considering e-learning (online learning) solutions, the chief learning officer (CLO) may be the primary decision maker for enterprisewide solutions; however, many others are typically a part of the process, too:

• The chief financial officer (CFO) may have suggested that e-learning be investigated as a cost-saving measure and may have final approval of the purchase.

• General managers whose employees will be beneficiaries of the training will have their own point of view.

• The chief information officer (CIO) may have an opinion regarding the technology training components of the solution.

• The HR vice president may want to know how e-learning fits into the organization’s overall approach to human capital management.

• There may even be a group of end users set up to evaluate each of the alternatives considered.

• And, depending on the organization, the list of stakeholders in the decision-making process may be extensive.

A marketer will have to decide which audiences are the most important, how many different types of communications are necessary, and how much the brand needs to be built with each stakeholder. As resources are always finite, decisions on reach vs. frequency for each audience will be necessary.

In B2B situations, once one decision maker has been identified through research, it is very useful to ask that person, “Who else in your organization is involved in the decision-making process?”

Business markets can often be segmented by Standard Industrial Classification (SIC) code. Various publications and other sources provide information by SIC code, including U.S. Industrial Outlook, the U.S. Census of Manufacturers, the D&B Business Information Report, and mailhouses.

In organizations with a wide variety of products and services serving multiple markets, business units are often formed around different customer groups. Another approach to serving different markets is to create the role of segment marketing manager. Segment marketing managers become experts in their assigned markets through primary and secondary research and develop (and execute) integrated marketing plans (including product requirements) for their assigned markets. These people often interact in a matrix fashion with the product managers.

Techniques to Retain Customers

The “lifetime value of the consumer” concept is based on the fact that it is much more cost-effective to keep a good consumer than to attract a new one. For large-ticket items (e.g., automobiles) or items that require frequent purchase over time (e.g., breakfast cereals), the lifetime value of a consumer can be very high. So, encouraging young customers to buy your products and services will help your business to remain healthy over time and to create a longer lifetime value of the customer.

• Communication that reinforces previously made purchases (especially to overcome post-purchase anxiety or doubts over large-ticket items)

Use the checklist in Figure 4–2 to assess the efficacy of your brand management practices in the area covered by this chapter. The more questions to which you can answer “yes,” the better you are doing. The checklist also serves as a brief summary of the material covered in the chapter.

Figure 4–2. Checklist: Understanding the consumer.

	YES / NO
Do you conduct customer research frequently?	—	—
Do you use in-depth, qualitative consumer research techniques (such as laddering, hidden-issue questioning, and symbolic analysis) to better understand your consumer’s needs and motivations as they relate to your brand?	—	—
Do you know who your customers most frequently rely on to gather information about your products and services? Do you know which of these sources “carry the most weight” with them?	—	—
Do you know the process customers use to select and purchase products and services in the product/service categories your brand serves?	—	—
Do you know how people are using your products and services?	—	—
Do you fully understand how consumers experience your product or service when using it? Do you know what emotions it evokes? Do you know how it makes them feel? Are you aware of all the sensory components of its use? Does it stimulate their thinking? Do you know what comes to their minds when using it?	—	—
Do you know what problems people encounter when they use your products and services?	—	—
Have you experienced your brand side by side with your consumers?	—	—
Do you keep track of household participation, units per household, and average price (as components of category dollar sale growth)?	—	—
Do you know what drives brand preference and insistence within your categories?	—	—
Do you know what other brands your customers considered before they bought your brand? Do you know what it was about your brand that caused them to choose it?	—	—
Do you know all the reasons why customers switch from your brand to other brands?	—	—
When your product or service is not available in a certain store (out of stock or not carried), do you know what portion of your brand’s consumers switch brands, switch stores, or postpone their purchases?	—	—
Do you know how involved consumers are with your brand? Do consumers have an opinion about your brand?	—	—
Do you have a thorough understanding of how the market for your brand’s product and services is segmented? Do you know which segments your brand best serves? Do you know which segments are likely to provide the most long-term business potential for your brand?	—	—
Do you know which customers are the most valuable to your organization?	—	—
For business-to-business organizations: Do you understand the customer organization’s decision-making process? Do you know how to reach the decision makers?	—	—
Have you calculated the “lifetime value” of your customers? Have you done the same by consumer segment?	—	—
Have you identified a specific set of simple questions that separates your customers into different customer need segments?	—	—
Is your brand attractive to younger consumers? Does the average age of your brand’s consumer remain constant instead of creeping up over time?	—	—
Do you frequently monitor what people are saying about your brand in social media and other online forums?	—	—
Do you know how people talk about your products and services when they recommend them to others?	—	—
Do you invite customers and potential customers to provide input to new product development?	—	—
Do your organization’s systems and databases have a unified view of who your customers are?	—	—
Does your organization have a CRM (customer relationship management) system? Is everything driven off of one relational database?	—	—
Does your organization capture, learn from, and evolve based on consumer complaints? Are there mechanisms in place to ensure that happens?	—	—
Do you share customer information broadly throughout the organization? Do you post customer research and insights on an intranet or extranet site for employees?	—	—

Table of Contents for
4 Understanding the Consumer

4

understanding the consumer

Defining the Target Customer

BASIC HUMAN NEEDS

FEAR MOTIVATES

BEHAVIORAL ECONOMICS

PEER PRESSURE

THE POWER OF FOCUS

Techniques to Better Understand the Customer

ENVIRONMENTAL SCANNING

Market Segmentation

Business-to-Business Customers

Techniques to Retain Customers

Table of Contents for 4 Understanding the Consumer

Create new playlist

Sign In

Sign Up

4