Understanding Customer

CUSTOMERUNDERSTANDING : 

CUSTOMERUNDERSTANDING

Customer Understanding- Why? : 

Customer Understanding- Why? The profitability and growth in business only comes if the supplier is able to understand the needs and behaviors of the customer and is able to satisfy them. It is not the product but the customer that gives the profit. Profitability is directly related to the value assigned by the customer to the company and its product. In order to enhance this value, it is necessary to understand the customer- his requirements, his priorities- his likes and dislikes- his buying behaviors and factors that satisfy him.

Consumer Sector and Core Sector : 

Consumer Sector and Core Sector Consumer Sector: The number of customers are large and their behavior can be classified in manageable segments. Core Sector: The number of customers are small and their importance to a supplier may vary on account of the quantum of business they may generating.

CONSUMER SECTOR: CUSTOMER BEHAVIOR : 

CONSUMER SECTOR: CUSTOMER BEHAVIOR It is difficult to target individual customers as number customers are large- and rarely a supplier comes in direct contact with them. The customer can be classified in different segments based on some commonality. The change in customer behavior within these segments is found to be within the acceptable limits of tolerance. It helps the supplier to develop common strategy for each segment.

Consumer Sector- A Model Segmentation : 

Consumer Sector- A Model Segmentation Consumer Behavior Social Class Urban/ Rural Culture Region Economic Status Religion

Culture : 

Culture A set of values, thinking, living habits, behavior and philosophy of life that makes a unique distinction for a group of people. Culture mostly shapes the basic needs of an individual – how he lives- how he thinks- what he eats- what he aspires to become. The basic factor shape the demand.

Rural/ Urban Segment : 

Rural/ Urban Segment People living in urban and rural areas have certain marked difference in habits.

Characteristics of Urban/ Rural segments : 

Characteristics of Urban/ Rural segments

Characteristics of Urban/ Rural segments : 

Characteristics of Urban/ Rural segments

Characteristics of Urban/ Rural segments : 

Characteristics of Urban/ Rural segments

Characteristics of Urban/ Rural segments : 

Characteristics of Urban/ Rural segments

Social Class : 

Social Class The consumers can be classified based on their thinking, their value system, income and spending pattern.

Social Class : 

Social Class Social Classes Upper Class Middle Class Lower class Upper Middle Lower Upper Lower

Characteristics of Different Social Classes : 

Characteristics of Different Social Classes

Characteristics of Different Social Classes : 

Characteristics of Different Social Classes

Characteristics of Different Social Classes : 

Characteristics of Different Social Classes

Characteristics of Different Social Classes : 

Characteristics of Different Social Classes

Sex : 

Sex Males and females, irrespective social segment, culture or religion exhibit certain specific characteristics, which have marked influence on buying behaviour and satisfaction. Example: - Female like to negotiate. Market value or quality or technology are not much relevance to them but they are the ones who prefer customer friendly features in the product and they are willing to consider premium, in spite cost. Male exhibit more brand loyalty. Male are mostly value buyers and they won’t go for blind negotiation.

Economic Status : 

Economic Status Normally it is believed that economic status determines the social class of the consumer. The high income group segment generally prefers premium or value goods and is quality conscious. Very high income segment wants to do purchases that can become symbolic of their status. Lower the income level, more the customer starts becoming cost driven.

Region : 

Region Habits, behaviour and preferences of the consumers vary with geographical locations. The product that may be preferred in one region may entirely be disliked in other region. Examples: - Maggi Noodles- Flavour- North Vs South - Cooking oil- Mustard oil- North& East Groundnut oil- South India - Pooja Room- South India a must - Sweater- Hilly Region

Family Size : 

Family Size Consumer needs vary according to family size and working status of parents. Example: Refrigerator- different models with different capacity. - packaged foods for small family- ready to cook

Time : 

Time Human behavior is difficult to predict. It is seen that its choice and need follows a cyclic pattern. The suppliers has to keep track of the changing needs of the consumer so that he can adopt to it. Example: - Flooring- stones- mosaic- stones. - Furniture-cane- wooden- cane

Dissatisfaction of customers with some products (1) : 

Dissatisfaction of customers with some products (1) The supplier does not come into direct contact with the customer and fails to understand his needs or appreciate his requirements. Many suppliers follow either convention or experience of collaborators, which not necessarily be the demand of the local customers. Example: Deep freezer in the refrigerator is NOT required for a vegetarian family. Keeping plates for continental food- left side for bread is European Culture; Indians eat roti/ chapatti it needs plate on the right hand side.

Dissatisfaction of customers with some products (2) : 

Dissatisfaction of customers with some products (2) Maruti Omni- Successful in Japan- failure in India. Vacuum Cleaner- Europe- environment is low temperature and free from dust. Dish washers- to clean European utensils with their habits- Indian’s their food in thalis with much oil- lot of heavy duty work. Mc Donald’s chain restaurant – standard dishes- served not accepted.

Prioritizing Needs : 

Prioritizing Needs In addition to understanding the needs of the customers, it is equally necessary to understand their prioritizing, i.e., which need is more important than the others. Example: Rural Development Project- Construction of two rooms pucca house- relieve/ rest room. Utilized by the farmers for storing grains- Storing grains is their priority than the usage of reliving room.

Purchasing Process : 

Purchasing Process It is necessary to understand the whole purchasing process and the process points where the CRM comes into action.

Purchasing Process for Washing machine : 

Purchasing Process for Washing machine Decising factor Shortlisting and demonstration Final assessment- postpone or buy Should I buy a Washing machine No Yes Features required- Depends on -Social segment -Economic status -Parents work status -Water availability CRM Market scan to identify washing machines- type – make etc meeting requirements CRM Deciding factors and evaluation -Cost-Features& customer beneficial features- Image- -Past exp. With the supplier- service& maintenance facility- Life expectancy-Complaint redressal-paying capacity- financing CRM Short listing & Demo Final Assessment Postpone Buy

CORE SECTOR : 

CORE SECTOR CUSTOMER UNDERSTANDING

Core Sector : 

Core Sector In core sector, customer understanding is - individual based. It is therefore, the strategy is to find out needs, likes and dislikes of individual customer, his buying behavior and to develop a focused approach.

Slide 30: 

Consumer Behavior Understanding Customer- Core Sector Attitude Orientation Decision making process Price sensitivity Bargaining Power Financial Ability Image Customer Type

Type of Customer : 

Type of Customer Types of customer- - an entrepreneur - a professional - an orthodox- (khandani )

Behavior of an Entrepreneur : 

Behavior of an Entrepreneur Prone to taking more risks. Try new technology. Ready to take calculated risk. Will be a visionary and a business leader. Will not tolerate inefficiency and lack of performance. - Strategy to deal with - Ensure performance and have positive attitude towards work. - Suppliers of professional approach prefer such customer.

Behavior of Professional Customers : 

Behavior of Professional Customers Will go in a systematic and methodical way. Cleary lay down his requirements – evaluation criteria and follow scientific approach. Less prone to take risk Decision will be taken on logically. May NOT have ability to take quick decisions compared to entrepreneur type. May NOT have much courage overrule advice of his subordinates Value seekers

Behavior of an orthodox- ‘Khandani’ : 

Behavior of an orthodox- ‘Khandani’ Lay more emphasis on past performance of the vendor/ supplier. Will Not assign any weightage to future potential. Give consideration to the past relationship

Purpose/ Attitude : 

Purpose/ Attitude Customer’s attitude - Research oriented - Amateur - Freelancer

The Orientation : 

The Orientation Customer can be - Cost oriented - Value oriented - Technology Conscious - Cost oriented- aims low cost and compromise on quality, efficiency and performance. Get service from locally@ cheaper- blame the supplier for failures. - Value Oriented- look for better efficiency& high performance- willing to pay higher initial capital. - Technology Conscious- look out to get the best technology and do NOT mind in paying higher price.

Decision Making Process : 

Decision Making Process Deciding Authority - In Professional Organization- Groundwork by middle level and the final decision s by top management guided by middle level officials. - Customer prefers frank discussion - Older Concept customers- decision making process by the owner. (Follow the advisors recommendations)

Market Image and Financial Management Ability : 

Market Image and Financial Management Ability Customer’s image in executing projects Customer’s financial position/ tie up arrangement with the financial institutions

Bargaining Power : 

Bargaining Power Bargaining areas: Technical scope Performance and efficiency Quality checks- conformation to environmental norms Service – during contract execution and post contract execution Continuous up gradation of changing technology. Price Completion schedule

Buyer’s Bargaining Power : 

Buyer’s Bargaining Power Bargaining Power Flexibility Knowledge Business Volume Ability to create competition Market Image Paying Power

Price Sensitivity of Customer : 

Price Sensitivity of Customer Capability to pass on the cost to the next customer. - Fertilizer sector and Oil sector- Administrative Price Mechanism - Monopolistic and subsidized industry - Bargaining – concentrate on technology and engineering aspects rather than price- Price sensitivity is low. Customer operating highly competitive sector. - Highly sensitive to cost of input - bargain on price and curtail heavily on state of art technology, if the cost is NOT affordable.

Buyer’s Perception on Cost : 

Buyer’s Perception on Cost Customer consider “Cost” in different ways. First Type: Consider the cost as the amount they are paying at the TIME of purchase. Second Type: Consider the cost as Initial Purchase Cost + Cost of operation over a period- adjusted to NPV Third Type: Consider the LIFE TIME cost- (initial cost+ life time operation cost+ cost of maintenance)

Develop Customer Understanding? : 

Develop Customer Understanding? Factors to be studied about the customer in order to develop them as the “Prospective Customer”: History Culture Habits Beliefs and factors affecting them Attitude Perception Personal approach Analysis of past Motivating factors Service

Customer Selection : 

Customer Selection Ensure Convergence of business philosophy, attitude, approach and orientation between customer and supplier. CRM strategy – differentiation of product and service. Big corporate operates on SYSTEM and not on individual but small customers do not believe on system.

Sensors for customer Understanding : 

Sensors for customer Understanding Sensors that provide authentic information about the customer- needs, behavour, and dynamics. Classified as - Internal and - External. Internal agencies: all arms of the supplier which come into direct contact with customers- marketing, project management, contract department, engineering and services. External: Professional services, distributors, retailers, agents etc.

Importance of Customer Understanding in CRM : 

Importance of Customer Understanding in CRM Customer needs. Customer’s business potential Customer’s value to supplier depends on the customer’s paying capacity, attitude, orientation and preference. The supplier can develop his strategy to address customer requirement- - to enhance the and benefits to the customer and - to attain business growth and higher returns for his business.