Course Notes on Customers and Markets

7.1 Customers and Markets

Learning Objective 7.1: Define Customers and Markets

  • Definition of Customers and Markets:

    • Businesses do not exist without customers.

    • New ventures fail by misunderstanding their customer base, assuming that innovative products alone will attract customers.

    • Previous chapters have stressed solving customer problems, emphasizing the need for further understanding of customer identity and potential market size.

  • Key Points:

    • Definition of a Customer: A person who pays for a product/service.

    • Definition of a Consumer: A person who actually uses the product/service.

  • Misconception: Distinction between customer (buyer) and consumer (user) is important in marketing.

Definition of Market

  • Common Misunderstanding:

    • Some equate 'market' to mean customers or customer demand, which is only a part of its meaning.

  • Market Defined:

    • A venue where sellers (supply) offer goods/services to those who desire (demand) them.

    • Supply: Refers to sellers who compete for customers.

    • Demand: Refers to potential customers' desire for goods/services.

    • Types of Markets:

    • Physical (e.g., farmer’s market)

    • Virtual (e.g., the internet)

    • Abstract (e.g., specific customer demographics like "the market for women’s jeans").

  • Markets facilitate millions of transactions whenever supply meets demand.

  • Successful Brand Example:

    • MUD Jeans:

    • Sustainable denim brand with environmentally friendly production techniques and recycling options.

    • Targets environmentally conscious consumers.

Market Opportunity

  • Market Opportunity:

    • Defined as the potential for a product or service that meets specific customer demand.

    • Builds on the general definition of opportunity as something unique and novel that is yet to be exploited.

    • Critical to assess customer demand:

    • Is there a sufficient customer base willing to purchase?

  • Product application: Goods/services meeting customer needs.

  • Differences in focus:

    • Novice entrepreneurs focus on novelty; experienced entrepreneurs prioritize customer viability.

    • Successful ideas must address genuine customer problems or needs.

  • Comparison Table (7.1): Novice vs. Experienced Entrepreneurs:

    • Novices focus on the excitement of ideas.

    • Experienced entrepreneurs emphasize problem-solving and cash flow viability.

    • Emphasis on networking and risk realism among experienced entrepreneurs.

Challenges in Identifying Market Opportunities:

  • Important to verify a market exists and has enough customers willing to pay for products/services.

  • Real-World Example:

    • Ashley and Jerry Taylor:

    • Lab-grown diamond business attracting customers through sustainability awareness of traditional diamond mining impacts.

7.2 Customer Psychology

Learning Objective 7.2: Differentiate Customer Types

  • Definition of Customer Psychology:

    • Study of decision-making processes affecting customer purchases.

    • Includes emotions, external influences (friends, media), and subconscious decision-making (95% subconscious as per Gerald Zaltman).

Actors in the Buying Process

  • Important to recognize different customer roles within buying processes:

Customer Roles:

  1. End User:

    • Actual product users (e.g., a teenager playing a video game).

  2. Influencer:

    • Individuals influencing purchases (e.g., celebrity endorsements).

  3. Recommender:

    • Those reviewing products online and affecting public perception (e.g., bloggers).

  4. Economic Buyer:

    • Approval figures for larger purchases (e.g., retailers).

  5. Decision Maker:

    • Ultimately decides on purchases (e.g., CEOs, parents).

  6. Saboteur:

    • Those who may slow down or harm purchasing decisions through social media or personal discourse.

Understanding Different Actors Using a Video Game Example

  • Typical Role Examples in Video Game Sales:

    • End User: Teen playing the game.

    • Influencer: Celebrity promoting the game.

    • Recommender: An Instagram influencer posting positive reviews.

    • Economic Buyer: Buyers for large retail chains.

    • Decision Maker: CEOs selecting which games to license.

    • Saboteur: Critics emphasizing the negative impacts of gaming.

Customer Personas

  • Definition:

    • Profiles of ideal customers built from market research data.

    • Help strategize targeted messaging and product promotion.

  • Importance:

    • Personas allow better insights into customer behavior than simplistic demographic or psychographic data alone.

  • Components of a Customer Persona:

  1. Demographics: Basic data (age, location, income).

  2. Psychographics: Attitudes, values, motivations.

  3. Proxy Products: Previous purchases informing potential behavior.

  4. Day-in-the-Life: Real-world behavior observation of end users.

  5. Biggest Fears & Motivators: Consumer pain points and what drives them.

  6. Challenges & Pain Points: Solution needs for each potential customer.

  • Example Illustrated:

    • Tanishq Jewelry's marketing backlash over an ad depicted interfaith marriage leading to consumer saboteurs online.

Customer Journey Maps

Definition:

  • Visual representation of customer experiences from awareness to post-purchase.

Importance:

  • Identifies customer emotions, pain points, and experiences during the buying process.

  • Enhances customer empathy and improves customer experience.

Elements of a Journey Map

  • Key touchpoints to consider:

    1. Discovery: Customers identify needs.

    2. Research: Customers evaluate their options.

    3. Purchase: Decision made to buy.

    4. Delivery: Receiving product or service.

    5. After Sales: Feedback and follow-up communications.