Marketing Customers Stage 2 Marketing Customers Overview Slide

Marketing & Customers Stage 2

Marketing & Customers • • • Overview Slide Product /Services Differences Service - the Customers Perspective Service Management Within Marketing & Price Setting Strategies Consultative Selling - Where the rubber meets the linoleum

Service / Product Differences What is a Service? “ Any act or performance that one party can offer another, is essentially intangible, does not result in the ownership of anything. Its production may or may not be tied to a physical product” “. . Economic activities that provide time, place and form utility, while bringing about a change in or for the receiver of the service” or perhaps “something that may be bought & sold, but cannot be dropped on your foot. ”

Service /Product Differences 4 broad areas of difference • • Intangibility Variability Perishability of output Inseparability between production and consumption

Service / Product Differences • • Services as intangibles Greater involvement of customers in the production process People as part of the product Difficulties in maintaining quality control standards Harder for consumers to evaluate Absence of inventories Relative importance of the time factor Structure and nature of distribution channels

Product Life Cycle

BCG Growth – Share Matrix Product-market growth (percentage) 20% STRONG STAR PROBLEM CHILD CASH COW DOG 10% WEAK HIGH Objective: Create Balance 1. 0 LOW Compare to nearest competitor Relative Market Share 0. 1

Market Attractiveness/Business Position Matrix High Medium Low Strong Medium Business Strength The area of each circle represents the relative dollar sales on the matrix Weak High overall attractiveness Medium overall attractiveness Low overall attractiveness

ANSOFF (Growth) Matrix Products/ Services Same New Same Market Penetration Product Development New Market Development Diversification Markets/ Clients

Service - the Customers Perspective Understanding Customer Priorities Customer Value Broad definition of Value “The v alue of a product/service is its ability to meet a customer’s priorities. ” Customer priorities are things so important that customers will pay a premium for them – or when they can’t get them will switch suppliers

Key Drivers of Value • • • The SERVQUAL Model Assurance Empathy Tangibles Reliability Responsiveness

The Customer Value Pyramid PRICE SERVICE QUALITY

Integrated Value Understanding how customers really feel allows you to anticipate changing priorities • Don’t ask customers what they want • Look at how their priorities have changed over time • Identify latent needs or values not being provided

Integrated Value Integrating complex customer values requires you to be truly customer: The traditional value chain: Internal Focus Assets /Core competencies Inputs, Raw Materials Product Offerings Customers

Integrated Value Modern Value Chain Customer Priorities Channels Offerings Inputs Assets Core Competencies

Integrated Value Organisation Internal Marketing Traditional Marketing Satisfaction, Quality, Brand loyalty Employees Relationship Management Customers

Doing some market research The Problem or area of interest Hypothesis or research question Plan for doing the research Data gathering Analyse and explain the result Make recommendations

Steps in Market Research Purpose: To find out what the customer really wants Being more rigorous than just using your gut 1. Describe the problem What problem have you identified and what part of it are you going to research? Look for answers that will be useful in solving the problem, not just interesting to know (think about specifics for Labs, survey etc)

Make an Hypothesis • Start with a statement about the problem that frames a particular solution in a positive way. Eg. “ Small companies wanting to use lab services are more likely to want to access their services after hours and weekends because of time constraints during normal business hours. ” Now develop a research project tp prove or disprove that hypothesis. • Check indirect sources of information – eg customer data base info

Choose a Research Technique • Indirect Sources of Information (Stalking in the wild): • Check internal sources – eg sales, purchase requests, monthly report information, promotional plans etc. • External information sources: – Government census info (ABS) – Industry and trade journals – The media – Financial institutions • Problem with only indirect sources – most of it is out of date by the time you get hold of it.

Choose a Research Technique • Direct Sources (Grow your own): • Go direct to the target population (ie your current and intended customers –prospects) • Qualitative vs Quantitative:

Choose a Research Technique • Quantitative: measurable data gathered for statistical analysis. Usually surveys/questionairres/structured interviews with response codes etc. • Qualitative: anecdotal, open ended, usually derived from direct quotes from customers etc, has high personal relevance and validity from the customers perspective. Often high “feeling” component to the information. Types include surveys, depth interviews (may be face to face, phone) , group interviews or focus groups (useful for seeking confirming and disconfirming information in situ from a number of prospective clients or customers.

Select the Sample • Is it possible to select the entire target population? If yes do so! If No, you must select a sample for the research. Types of Sample: • Random Sample • Representative Sample • Skewed Sample

Sampling (Cont. ) • Random assumes that every sample equates to every other – usually false to assume this with target populations. • Representative: develop a process to select a number (the more the better, but this is a choice and time is a factor) of participants who represent the diversity in the target population. Eg if I’ve identified that in the target group there are 80 people and they represent 5 different departments, I might :

Sampling (cont. ) • Work out the risk associated with leaving which people out • Because I know that one group has 40 people in it – I want to get more from that group • I need to include the financial manager – he makes buying decisions • I need to include the Accounts Manager – he’s a supporter of our services and an advocate to the CEO, etc

Sampling (Cont. ) • Etc : to come up with a sample of 30 people in which I’ll: • Do two focus groups of 10 people each (mixed levels in each focus group) • Do ten individual interviews • On the basis of the information from the focus groups send a brief survey to all 80 people as a follow up

Collect & Analyse Data • Determine the questions you’ll ask in the focus groups and interviews • Design your interview questions – look at sequence and wording and the way people can respond (ie scales etc if using quantitative questions) • Conduct the research techniques (If doing direct data gathering you’ll need to contract about entry into the clients system – ie permission to conduct the research, confidentiality issues , purpose of the information, who’ll have access and its use need to be discussed with the client/s)

Collect & Analyse Data (cont. ) • Collect the data • Converting data into information into understanding • ( This means tabulating, and grouping the information into meaningful categories which then enables you to ask why this is the case !!) • Establishing categories can be done through association, natural themes, predetermined criteria, or if using inferential statistics through correlation measures

Making Recommendations • From the information and new understanding you have about the problem, decide how this affects your working with your market (existing and potential customers) • What new/different/changed offerings can you make? • How can you test this with the customer?

Service Management Within • • Building a customer culture Don’t try – do, but how? Conduct internal service audits re all employee to employee and departmental interactions Ask: Who are my customers? Who relies on me to get their job done? – Interdependencies? How do I respond to their needs? What service does my dept provide to other depts? What contribution does my dept make to improve the quality of service to paying customers?

What the Customer Sees Stategy Customer Systems People

Service Management • • • How to turn people on to their customer? Make sure you’re selling what the customer wants to buy Visible Management Take it to the front Management support the front Devolve decision making to the front Moments of truth What service management is not Motivation Smile training Advertising campaign

Customers as the base for what you do • Customers define the links • What are they trying to buy (motivation) /refer back to customer priorities • What are they willing to pay for ? • Strategy for differentiation – perceived as valuable by them • People need clearly defined strategy (Look at tangibility and services, eg when buying management consulting services – internal referral highest, capability statement less) • Leaders need to keep the service message alive

Customers See • • Systems need to be user friendly Designed to help people who serve the customer Designed for customer convenience Design = unique strategy for service (luxury, economy, speed etc) • Inventory of moments of truth

The Service Cycle • “A series of interconnected events that starts with the first point of contact with the organisation and ends when the customer considers is complete and decides to come back for more” Each moment is a test • Manage moments indirectly • Service only a competitive weapon when it is outstanding (delight factors) • If you’re not serving a customer directly, you’re serving someone who is.

Measuring Service Quality • Approach each cycle of service with the needs of the customer in mind – ie regardless of who the customer is. The report Card • What is good service to you? • What aspects of service are important to you (delight, basics) • What do the other depts you serve think customer service is? • Relate to performance appraisal • Quantitative and qualitative measures • Encourage ownership of the service factor (Do Well, Do Better) • “…shared values, beliefs and policies need to speak to a customer orientation…”

• • • Marketing & Price Setting Understanding Cost Structure Fixed, Semi Variable, variable Contribution Margin Break - even analysis Understanding Value: The marketer can reduce customer cost in: - time in service purchase - mental effort in getting service - pruning customer effort - minimising unpleasant sensory experience

Marketing & Price setting Target Return Profit Oriented Pricing Objective Sales Oriented Maximise profits Dollar or Unit Sales Growth in Market Share Status Quo Meeting Competition Non-price Competition

Pricing Objectives Marketing & Price Setting Demand Price Flexibility Costs Competition Price of Other Products in line Price Setting Mark-up Chain in Channels Discounts and Allowances Legal Environment Geographic Pricing Terms

Formulating Price Strategy • • Some Pricing Issues How much to Charge ? What’s the basis for Pricing ? Who should collect payment ? Where should payment be made ? When should payment be made ? How should prices be communicated to the target market ?

Marketing & Revenue Asset Use & Yield management Capacity measures - eg billable hours, productivity measures not enough by themselves Asset Revenue -generating Efficiency • capacity X yield percentage = ARGE

Marketing Role - summary • Identify the principle market segments matched to service facility’s capability & mission • Forecasting volumes of business / per segment /at price • Recommending ideal business mix (re maximising net revenues at a point in time) • Providing sales force with specific sales targets /dates /per segment • Providing price guidelines • Monitoring performance over time - ARGE

Consultative selling Customers recognise insincerity ! Needs for Consultative selling • Genuine concern for the customer • Desire to solve their problems with them • Expert advice • Partnership • Listening skills

Talk Less, sell more Myth – good talking =good selling • Selling is a balance between asking and telling (inquiry and advocacy) Questioning • Uncovers needs • Keep control • Make you listen • Shows you are interested

Purpose for Questions Qualify prospects and existing customers • M = money • A = authority • N = need What are their needs? Relate back to the 5 needs re customer satisfaction – listen for words which point to unmet need. When do they buy? Intentional, cyclical, future purchases.

Purpose for Questions • How much do they intend to spend? • Find out this information partly in advance – Known budgets, allocations, RIP works, other customers they are working with. How to ask questions • Problem with determining the decision maker • First question • “Can I ask some questions? ”

Purpose for Questions Determining/confirming needs • “What are you using at present? ” • “What else have you seen/considered? ” • “What have you liked about what you’ve seen? ” – the problem =the need • “What don’t you like about you’re current situation? ” Determining buying time frame • Make an assumption on what you know • “Who else is involved in the decision? ”

Purpose for Questions Determining budget • What does the industry/market suggest? How to work your costing. • Being able to show comparisons with ‘cheaper prices/quotes’ • Relate your cost structure to the job • Show you’re understanding of how cheaper competitors offer their prices • Relate the costing to your understanding of value customer is after

Creating Interest, needs > buy • What makes customer buy? • Perceived benefits must outweigh costs • Roles of the customer when approaching the buying decision • Major vs minor needs • Major = problem • Soln – match major needs with specific benefits (product descriptors include features, advantages, benefits) • Benefits = opportunity for joint problem solving

Handling Objections More objections = less likely to sell (only partly true) objections also indicate interest ! • Objections = arguments you may need to disagree with customer, but how? • Making the objection less harsh or less important – soften the blow • Feel, felt, found • Advantage statements can increase objections • Frame benefits as joint solutions

Customer Roles Customers during transactions and negotiations display many roles. Some of the major roles include: • The Initiator • The Influencer • The Decider • The Buyer • The Consumer • The Evaluator

Completion Old approach – must close at least 5 times • The sale is not the end but a continuation of a relationship, therefore the way in which the sale is made will determine future repeat work • Comments on pressure -Higher cost of goods/service re close • Defining closing “agree on what needs to happen next” (several stages) • joint commitment to follow up to the next stage (increment) • summary close “ Have I answered all your questions? “ Summarised benefits” “ Proposed and accepted moving to the next stage.