“Do You Really Want To Understand Your Customer?”*

1. “Do You Really Want To Understand Your Customer?”* Presented by Peter Hayashida & Lynn Maikke *Alan S. Mitchell, Journal of Consumer Behavior, September 2002

2. Abstract “Our whole approach to consumer understanding – how we go about achieving it, for what purposes – makes a seller-centric, command and control ideology of marketing. Successful companies are breaking free of this ideology, and reinventing market research in the process.”

3. Rethinking Our Approach • Our current approach to consumer understanding is a hangover from the past • Our rethink needs to embrace: • the place of market research in modern business • its purpose • the type of understanding it seeks • its approach to the consumer

4. Place and Purpose • Marketing lives and breathes two core functions: • matching supply and demand • connecting buyers and sellers efficiently and effectively • Both functions are critically dependent on consumer understanding

5. The Wealth-Creating Process Market Research Product Design Making Marketing Consumer Purchase

6. A Closer Look Market Research Product Design Making Marketing Consumer Purchase Matching Connecting

7. Purpose of Marketing • In theory: • the purpose of marketing is to understand consumer needs and meet them • In practice: • the real role of marketing is to reduce corporate risk and protect investments

8. Steering the Supertanker Market Research Product Design Making Marketing Consumer Purchase Matching Connecting

9. A ‘God Quest’ Approach • The quest for ever more perfect information in the hope that perfect information will lead to perfect decision-making • paralysis by analysis • more information is not the same as better information

10. Push vs. Pull • When marketer push takes over consumer pull, the driving purpose of consumer understanding shifts: From • identifying and meeting consumer needs To • control and predictability • persuading, influencing, or manipulating • It shifts the real focus of market research from customer to company • brand narcissism

11. Type of knowledge and understanding knowing ‘that’ knowing ‘about’ knowing ‘how’ Knowing ‘that’ and knowing ‘about’ are a scientific type of understanding Approach to market research the researcher is an active subject the researched is a passive object Divided relationship is the same whether the researched is a rock, a rat, or a consumer Type and Approach

12. Stimulus-Response Methodology Stimuli Rat A Response 1 Data Scientist Rat B Response 2 Data Theory Practice Rat C Response 3 Data

13. The Consumer as a Rat Stimuli Consumer A Response 1 Data Marketer Consumer B Response 2 Data Theory Practice Consumer C Response 3 Data

14. Is consumer understanding a universally good thing? • Marketers turn to market research and consumer understanding to achieve matching and connecting • Supertanker characteristics of traditional marketing processes means marketers often miss their target • The ‘God’ Quest has many flaws • Scientific method misses other forms and dimensions of knowledge • Brand narcissism and the push side of marketing is often counterproductive • Unlike rats, consumers have minds of their own and are aware of marketer manipulation, which undermines TRUST

15. Sisyphian Marketing

16. The Emerging Alternative • Essence of good marketing: finding out what your customer wants and providing it for them • In early days of industry, there was no cost-effective way of letting mass consumers talk to companies • Brands invented as surrogates for trust • Advertising designed to tell consumers what they want

17. The Emerging Alternative • “Clean slate” approach • Tackle the problem at its source by actually seeking consumer needs; change: • The place of consumer understanding • Its purpose • The type of understanding sought • The way firms approach consumers

18. Cats and Supertankers • Marketers need to act more like a cat chasing a mouse and less like a supertanker • Don’t try to “understand” the mouse in an intellectual way • Focus on one signal that matters (movement) • React in real time • Rely on nervous system, instincts and reflexes • Abandon “God-quest” approach of theorizing, understanding, predicting, planning and executing

19. How To Do That? • Bar code scanning at the checkout • Collate data • Electronically send to suppliers • Move from push to pull • Consumer needs drive production instead of trying to predict what consumers might want • …and then trying to persuade them to buy • Instantaneous knowledge and reaction

20. Benefits Of This Approach • Reduced forecasting errors • Higher sales • Fewer markdowns • Less need for stockholding • Better, faster new product development • Increased customer retention

21. Similar Approaches • Mass customization • Embed specific customer preferences and specs in the actual manufacturing process • Just-in-time logistics • Parts arrive when needed; minimize inventory • Reverse Marketing • Supplying information about products and services in response to consumer expressions of interests, instead of via predetermined, supplier pushed “campaigns”

22. Examples

23. “Join Me,” not “Buy Me” • From implicit to explicit • When a customer tells Dell “that’s how I want it,” the customer’s input is up front (as opposed to bar code data) • From mass, anonymous, aggregated and sample data to named, individual and specific • Loyalty cards

24. Power of “Join Me” • From solicited information to volunteered • Create a relationship where the customer volunteers thoughts, suggestions, requests, etc. • True test of the relationship • Different than asking someone to provide information about themselves or to gain permission to gather information

25. Sample Initiatives • Loyalty schemes • Beta-testing • User groups • Brand advisory groups (P&G) • Customer satisfaction feedback • Complaint solicitation programs

26. Initiative Characteristics • Overcome the subject-object divide that characterizes old-style market research • Reverse the flow of information, replacing one-way messaging with two-way communication • Depend on customer input – customers “opting in” rather than acting as passive targets

27. Agency Mindset • Because time, attention and patience are such a precious resource we will invest them only when and where we believe this investment will generate a good return • Unlike other resources (e.g., oil during the industrial age), the consumer is the owner of information capital • If companies want access to this capital, they must be prepared to pay for it.

28. Pay For It How? • Using information to create a better, cheaper product or service • Pay up front for information and input • Add value • P&G: encourage consumers to talk about problem stains and cleaning problems and get its R&D team to offer advice • Also provides firm with valuable market research

29. NEW CONCEPT • Market research as a service to the consumer • Requires company to embrace a new role as consumer agent • From “brand-building” to “customer relationship management” • Embed consumer understanding into “making” of the product or service

30. Also Changes Approach • Old • Subject-object • Marketing to and at • New • More collaborative • Marketing for and with • Recruiting customer as partner, or even “investor”

31. Fit with General Topic • Indicates that consumers can care about brands • Companies have to care about consumers in different ways • Relationship building as a means to a better bottom line

32. Fit with General Topic • Use interactivity to build loyalty and trust between companies and their customers • And to get better data on which to base production and marketing decisions • Retain Steadfasts • Maximize Loyalty Minimizers (home-base or dual) • Find buttons for Category Contingents • Appeal to Image Rejectors

33. Fit with General Topic • Brand “clubs” (loyalty schemes) build trust, product enthusiasm, and feed back important product preferences • Swatch club • Saturn family-style meetings

34. Fit with General Topic • Exploit consumer connects and pinpoint disconnects before they happen • Anheuser Busch beer in St. Louis • Customer service at Sony • Peanut butter – more oil and less peanuts, terrible taste discouraged former Steadfast and made him brand-switch

35. Fit with General Topic • Brand hierarchies • Engaging in conversations reveal findings that are not intuitive • Aspirational brands can be the same as current brands for some consumers • Pinnacle brands may not be everything to all consumers • Connecting through “brand clubs” – feeds back important information to the firm

36. Questions &Discussion