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MARK2316

Customer Insight

Lecture 7: Critical Features,

Communication Messages & Price Sensitivity

UNLOCKING THE MIND

Learning Outcomes

  • Explain why the most successful products only include critical features.

  • Understand why effective marcomms must address an emotional need.

  • Learn the science and art of effective pricing strategies.

Learning recap

Perception & Differentiation

INSIGHT 5:

Succesful

create

of

in the

that

their

on a

CRITICAL FEATURES

Overview

Insight #6: The most successful product offerings are those that focus on delivering only those features that have the most impact on customer purchase decisions.

Creating Better Products

Unlocking The Mind

  • Discover and synthesize what customers really want

- Which key features drive customer decisions?

- Which are 'nice to have' features?

  • Customer needs vs. organizational capabilities

  • Kotler proposes 3 ways a company can deliver more value than its competitors:

- charge a lower price

- help customers reduce other costs

- add benefits that make the offer more attractive

  • Third option = delivering the optimal feature and benefit package

Customer Insight Pyramid (Shieffer, 2005)

Communication Messages

The integration of marketing research into new product development and marketing is part of our hybrid culture at Nokia. the role of marketing research is to deliver foresight that is actionable.

John Markham, Director of Global Marketing Research, Nokia

Total Product Concept

Insight #7: The most effective marketing communications combine a rational benefit with an emotional need.

Importance of Advertising

Product Developer's Dilemma

Identifying Critical Features

Few features

All features

Few customers will want to buy

Few customers can afford to buy

  • In deciding which features to include in a product, product developers face a challenge

  • Identify features with strongest relationships to target customer purchase interest

The Kano Model

Three types...

Professor Noriaki Kano

Kano Model...

  • In 1984 from Tokyo Rika University
  • Help product developers understand the impact of different features on customer satisfaction
  • One of three mutually exclusive types
  • One dimensional: For some customer requirements, customer satisfaction is proportional to how fully functional the product is.

  • The “Must-be” curve indicates aspects where the customer is more dissatisfied when the product, service or process is less functional, but where the customer’s satisfaction never rises above neutral no matter how functional the product, service or process becomes.

  • The “Attractive” curve indicates areas in which the customer is more satisfied when the product, service or process is more functional but is not dissatisfied when the product, service or process is less functional.

Attribute life cycle...

1. Latent - the need for the attribute is not yet apparent

2. Desired - the need for the attribute is known but not yet supplied

3. Unique - only one pioneer delivers the attribute well

4. Pacing - one provider is the clear leader on delivering the attribute but others chase

5. Key - differences in performance on the attribute determine competitiveness

6. Fading - all suppliers start to catch up

7. Basic - attribute is a minimum requirement

Conjoint Analysis

Usability Testing

How is it used...

Usability testing...

What is it?

  • Usability testing is a black-box testing technique.

  • The aim is to observe people using the product to discover errors and areas of improvement.

  • Usability testing generally involves measuring how well test subjects respond in four areas: efficiency, accuracy, recall, and emotional response.

  • The results of the first test can be treated as a baseline or control measurement; all subsequent tests can then be compared to the baseline to indicate improvement.
  • Usability testing is a technique used in user-centered interaction design to evaluate a product by testing it on users.

  • Usability testing focuses on measuring a product's capacity to meet its intended purpose.

  • Examples of products that commonly benefit from usability testing are foods, consumer products, web sites or web applications, computer interfaces, documents, and devices.

Response to four key areas...

  • Efficiency -- How much time, and how many steps, are required for people to complete basic tasks? (For example, find something to buy, create a new account, and order the item.)

  • Accuracy -- How many mistakes did people make? (And were they fatal or recoverable with the right information?)

  • Recall -- How much does the person remember afterwards or after periods of non-use?

  • Emotional response -- How does the person feel about the tasks completed? Is the person confident, stressed? Would the user recommend this system to a friend?

1.Customers

- Awareness, Interest, Desire, Action, Retention (AIDAR)

2.Companies

- Helps increasing sales

- Helps understand their competitors

- Helps to introduce or launch a new product

- Helps create goodwill and customer loyalty

- Helps maintain demand for the product

3.Society

- Advertising helps educating people

- Social issues (like child labour, liquor consumption, smoking, family planning, obesity education, etc)

Can Advertising Break through the clutter?

Unlocking The Mind

  • Learning outcomes
  • Critical Features
  • Communication Messages
  • Price Sensitivity
  • Assessment feedback
  • Bombarded with messages

  • Selective perception

  • Impact on the unconscious mind

  • Connecting with needs and dreams of the target customer can break through the clutter

  • Understanding the target market before you attempt to communicate with them

  • Advertising needs to work on both the rational and emotional levels

Customer Insight Pyramid (Shieffer, 2005)

The aim of advertising is not to state the facts about a product, but to sell a solution or a dream

Role of Advertising

Philip Kotler

Informative

Affective

  • Car insurance
  • Digital camera
  • Disposable

razor

Satisfaction

Habitual

Sales

Effect

Communication

Effect

Teaser ads

  • A constantly reoccurring advertisement in which the attention of the consumer is fixed by posing irritating questions.

  • A teaser ad can be followed by a 'reasons why' ad in the same medium (providing answer to teaser ad)
  • The company can hold surveys and product recognition tests.

  • Questionnaire or feedback flyers can be distributed and customers could be asked to fill it up.

  • Toll free number can be highlighted on the ads so that customers can call up.

  • The response rates can be increased by telling customers what to do. For e.g. some ads have lines in flashy colour like “Hurry Up” or “No one can eat just one” or “be the first” etc.
  • Direct Rating Method - here, customers are directly asked to rate the advertisement and then these ratings are calculated.

  • Portfolio Tests - here, the customers see the ads and listen carefully to the ads and all the contents of the ads and then they are asked to recall the ad and the contents. Then the calculations are done with help of this data.

  • Laboratory tests - here, the apparatus to measure the heart rates, blood pressure, perspiration, etc are used on the customer after he watches the ad, to know the physiological reactions of the body.

  • Measures of effectiveness: Recall, recognition persuasion, purchase intent & behaviour, likeability of ad

Reasons why

Slice of life

  • Show an everyday situation centrally depicting the use of a branded article.
  • Central theme: most important purchasing argument

  • Arguments are communicated by enacting a recognisable problem and providing a brand as a solution (Cilit Bang)

  • The advantages can also be emphasised by use of implicit comparative advertising.

Internet Effect

Forms of Informational Advertising

  • Internet is the modern tool for measuring the effectiveness of an advertisement

  • Integrated direct marketing - This is an internet based tool where they have a response corner designed on the websites.

  • Analysis tool - the advertiser will know how many customers are visiting the site, who is shopping online, how many pages are viewed, etc. which in turn will help advertiser to measure the effectiveness.

Measuring the effects of Advertising

Testimonials

Presenter style

  • Consumers or famous people testify to the use and advantages of the branded article.

  • When consumers do the persuading the commercial intention is less manifest than presenter-style
  • A well known presenter explains to the consumer what the most important product advantages are

  • The presenter is obviously a spokesperson for the company

I'M HERE FOR YOU....

Please drop me an email anytime - nthomas@dmu.ac.uk

I would love to see you during surgery hours -

sign form outside my room 5.85 to secure a spot on Tuesdays 9.30 to 10.30 am or drop by between 10.30 to 11.30 am

Price Sensitivity

Insight #8: Your customers will be more willing to pay a premium price when you help them understand the value of the benefits of your product offering.

Preparation

  • Read this lecture's three chapters, scanned and uploaded, to BlackBoard.
  • Please upload your assessment netnography tables to BlackBoard.

Price Sensitivity

Pricing Strategy - High Impact

Immediate impact on bottom-line

Insight into price sensitivity in relation to value perception

Three pricing decisions

Wrong Set above the value perceived by customers

Wrong Set below the value perceived by customers

Right Set at the value perceived by customers

The 3C's of price determination

1. Cost

2. Competitors

3. Customer value

"But a psychological advantage, properly nurtured, can live on for a long time. It is brand equity that make cross-price elasticities asymmetric and favourable to you. The smart marketer builds in differentiation, real or perceived, to try to make comparisons across products more difficult. The smart marketer also finds the market segment that will value these differentiating features."

Smith and Nagel (2002), Marketing Research

Unlocking The Mind

Understanding Customer Value

  • Value is the objective worth to a customer of satisfying the benefits they seek from a product or service

  • It's the potential level to which willingness-to-pay can be raised, and revenue captured, with an effective strategy for managing value perception, and the prices charged

  • Willingness-to-pay will fall short of value if customers don't understand the benefits of the product

- communicate this value proposition

- do not assume customers will know

- measure its effectiveness

  • Price promotion strategy

- decision 1: everyday price

- decision 2: frequency of price promotions

  • Pricing for lifetime revenue

- give away the razor and sell the blades

Pricing Issues

Customer Insight Pyramid (Shieffer, 2005)

Pricing is both a science and an art. Theory will get you some way in understanding the science; but only by practice will you learn the art.

  • Should reflect strategic objectives (profits or market share)
  • Should reflect the customer target
  • Should reflect product positioning
  • Should reflect competitive position
  • Should take costs into account
  • Should take channel considerations into account
  • Should understand the product life cycle (new, growing brands, mature or in decline brands?

Lakshman Krishnamurthi, Kellogg School of Management

Benchmarking

Use of

Analogous

Tests

Analysis of

Historical

Data

Managerial Judgement

Methods for Testing Pricing

Experimentation

Economic

Value

Surveys using Monadic

Test

Conjoint

Analysis

Focus

Groups

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