Buyer orientation -
understanding and satisfying your customers - is essential for commercial
success. This guide explains how small companies can profit from understanding
their customers.
Understanding one's
customers is so important that large corporations spend hundreds of millions
annually on market research. Although such formal research is important, a
small firm can usually avoid this expense. Typically, the owner or manager of a
small concern knows the customers personally. From this foundation,
understanding of your customers can be built by a systematic effort. A
comprehensive system for understanding is what Rudyard Kipling called his six
honest serving men. "Their names are What and Why
and When and How and Where and Who."
What
A seller characterizes what
customers are buying as goods and services - toothpaste, drills, video games. cars. . . But
understanding of buyers starts with the realization that they purchase benefits
as well as products. Consumers don't select toothpaste. Instead.
some will pay for a decay preventive. Some seek
pleasant taste. Others want bright teeth. Or perhaps any formula at a bargain
price will do.
Similarly, industrial
purchasing agents are not really interested in drills. They want holes. They
insist on quality appropriate for their purposes,
reliable delivery when needed, safe operation, and reasonable prices.
Video games are fun. They
are bought for home entertainment, family togetherness, development of personal
dexterity, introduction to computers, among other satisfactions. Commercial
customers include arcades, pizza parlors, and assorted enterprises. They
benefit from a potential source of income, a means of attracting buyers to
their premises, or perhaps a competitive move.
Similarly, cars are visible
evidence of a person's wealth, reflection of life style, a private cabin for
romance. Or they represent receipts from leases, means to pursue an occupation.
. . Some people even buy cars for transportation.
You must find out, from their
point of view, what customers are buying. The common names of
products mean as little to them as the chemical names on the label of a
proprietary drug. (A sick person's real need is safe. speedy relief.)
Understanding your customers enables you to profit by providing what buyers seeks - satisfaction.
Products change, but basic
benefits like personal hygiene, attractiveness, safety, entertainment, and
privacy endure. So do commercial purposes such as quests for competitive
superiority or profitability.
Successful manufacturers
and service establishments produce benefits for which customers are willing to
pay. Successful wholesalers and retailers select offerings of such demanded
benefits that they can resell at a profit. Successful
businesspeople, in other words. understand the
reason for their customers' buying decisions.
Why
The reason that customers
buy is logical from their point of view. Understanding customers derives from
this fundamental premise. Don't argue with taste.
Everybody is unique. Each person
has individual pressures and criteria. Moreover, perceptions differ. The astute
businessperson deduces and accepts the buying logic of customers and serves
them accordingly.
To learn why customers buy
can be quite difficult.
Some buyers hide their true
motivations. In many cases the reasons are obscure to the buyers themselves.
Most purchase decisions are multi-causal. Often, conflicts abound. A car buyer
may want the roominess of a large vehicle and the fuel economy of a subcompact.
The resolution of such mutually exclusive desires is usually indeterminate.
Sometimes the reasons why
customers buy are trivial. If customers feel indifferent toward a product or
store, the selection is apt to be happenstance. Perhaps several rival offerings
meet all the conditions that a purchaser deems important. Consequently, minor
factors govern. This explains the rationale of the consumer who chose a $
22,000 car because its upholstery was most attractive. The point: Pay attention
to details. They may be crucial to customers.
Often the best clues are
the customers' actions. Shrewd businesspeople respect what people say, but pay
special attention to what people do. More important than why customers buy is
why former customers have taken their patronage elsewhere and why qualified
buyers are not buying. What is now keeping them from buying?
Can this obstacle be
surmounted? Businesspeople monitor competitive offerings and buyers' reactions
to infer clues. Informal conversations may also reveal some reasons. Special
offers may overcome resistance and boost profits.
All the time the manager
must be careful to retain the company's regular customers. For instance, a
specialty dress shop may try to widen its patronage through a new line at
bargain prices. This move could disturb the store's usual patrons. They may
take their trade to another store that caters exclusively to their social
class.
Many of the dresses were
bought for special occasions when projection of a genteel image was important
to the customer. Understanding of customers includes awareness of the time of
the purchase and use of the merchandise.
When
A seller must be ready when
the buyer is, lest an opportunity be irretrievably lost. Customers buy when
they want an offering and have the time and money to purchase it. Buying
patterns can often be discerned from an analysis of customers and their
purchases. For example, wants for many consumer goods and services are tied to
customers' rites of passage. The following purchase occasions in the adult life
cycle are typical:
1. Marriage, separation,
divorce
2. Acquisition of a home
3. Change in employment or
career
4. Graduate study; running
for office
5. Health care, injury,
illness
6. Pregnancy, nurture of
children
7. Children enter school;
graduate
8. Children leave home (for
college or permanently)
9. Move to another area
10. Vacations; major social
activities
11. Permanent retirement
from work
12. Death of a family
member.
Shrewd retailers keep track
of such key buying events and gain a head start on making sales. Logs of
birthdays and anniversaries are a case in point. Additional purchase occasions
are impersonal. Seasonal factors include recurring holidays and weather
changes. Among other favorable influences on purchases are start of the school
year, semi-annual white sales, introduction of new models and clearance of old
ones, special price concessions, and improvement in economic conditions or
buyer's confidence.
Some of the latter factors
also apply to manufacturers. Small plants work closely with their buyers' inventory
managers and replenish stock at their reorder point. A current vogue is
just-in-time delivery. Interactive computers make replenishment notices
routine.
Many consumers have time
for shopping only during offhours. in
the evenings, and on weekends. The trend from a single breadwinner per family
toward having all adults of a household engage in commercial employment has
intensified this time peculiarity. Astute retailers adjust their hours,
staffing, and availability of merchandise to customers' shopping convenience.
Bartenders know that business booms on payday. Manufacturers profit from timing
their offers to their customers' budgetary cycles. Thus, knowing when products
are bought and used is a valuable facet of understanding customers.
Although a transaction may
be concluded in a moment, most purchases actually entail a drawn-out process.
This process will be
described in the next section which analyzes how customers buy.
How
Knowledge of how customers
buy pays off in several ways. (1) Sellers can design their offerings to meet
the exact needs of their buyers. (2) Sellers can influence decision makers at
crucial steps of the buying process. (3) Sellers can lay the groundwork for
repeat business.
Buying methods are best
visualized as processes. Household purchases usually start when a consumer has
a desire or a problem that an acquisition might satisfy or solve. Industrial
purchases usually start when a user or a routine sets off a signal
(requisition) for approval of a procurement.
People are diverse. Every
consumer, every firm pursues a buying process of its own. Buying processes also
depend on the significance of the product to the buyer and on other
circumstances. Although buying processes are not uniform. some
steps are common to most of them. The seller needs to know only these critical
steps when he or she can affect the outcome of the buying decision.
Shrewd sellers delve into
the behavioral milestones of purchasers. But for each very important customer
the buying process should be diagrammed individually, showing names of
influencers at each decision stage, elapsed time between stages, and any other
pertinent information.
Perhaps a change in life
style or a demonstration at a friend's house has caused this consumer to
recognize the need for a personal computer. But lack of knowledge and the fear
of a wrong decision may counteract this desire. The process continues, however,
if advertisements and expected benefits persuade the consumer to act. Despite
budgetary constraints and uncertainty about future needs, the consumer proceeds
to compare stores and brands.
At this search and
evaluation stage advice from present satisfied customers is especially
influential. Make sure your customers are satisfied and favorably recommend
your merchandise or service. To the contrary, poor shopping facilities or
irritating personnel can sway the potential customer against making the
purchase from you.
Sooner or later, further
search does not seem worthwhile. If the positives still outweigh the negatives,
the consumer picks a store and brand. The transaction itself is consummated
quickly, assuming the wanted item is available. The satisfied customer makes
recommendations to others and gives you his or her repeated, regular business.
Businesspeople can create
sales by predisposing potential buyers to their product or store. Manufacturers
can offer exclusive benefits in their goods, such as friendly relations,
efficient operations, and easy manuals. Enticing advertisements help persuade
prospects to visit a retail outlet and ask about a particular brand. Creative
salespeople overcome the customer's objections and doubts and close the sale.
Post-transaction service keeps the customer satisfied. Referrals usually
follow.
Specific details are needed
to track acquisition of something complex, say a computer. On the other hand,
less detail is needed if the purchase is laundry detergent or some other staple
with which the customer is less involved. In the latter case, depletion of the
home inventory triggers a routine, leading directly to choice: the usually
purchased brand. If the usual brand is out-of-stock or another brand is on
sale. a substitute may be bought quickly. Brand
comparisons follow or may be omitted.
Some products are bought
when an emergency need for them arises. A physical examination and the filling
of a prescription are urgent when sickness strikes. Arrangements for funerals
follow immediately after the death of a family member. Umbrellas are in demand
when it rains. An unexpected snow storm generates extra calls for tire chains,
towing services, and car batteries. Often, convenient availability determines
when these goods and services are purchased. And even if customers do have
ample time to select merchandise, sellers who stand ready to supply wanted or
expected brands are apt to gain preference and profit when shoppers decide
where to buy.
People want options.
Although convenient availability is the main buying criterion for many routine
household products, savvy merchants stock a selection conforming to the diverse
preferences of their patrons. Some people demand manufacturers' advertised
brands. Resellers' brands are favored by others. On some classes of goods,
generic brands have become popular in recent years. Moreover, many consumers
seek occasional variety. Clearly the decision of which products to stock is
important.
It is more important yet on
shopping goods because buyers compare them before purchase. And it is most
important on specialty goods, those preselected by
brand name. If a store does not stock these uniquely wanted brands, a prospect
will leave without buying. Whoever offers them on acceptable terms gains the
sale.
Where
From a multitude of studies
emerge different criteria for deciding where to shop. Most research on the
subject agrees that store location is a major consideration,
Stores usually draw most of their patronage from their surrounding
neighborhood.
Savvy store managers make a
special effort to understand the shopping-related motivations and preferences
of local residents. New managers of fast-food units, for example, canvass
nearby dwellings and introduce themselves to the households. Some supermarkets
maintain consumer advisory boards to elicit suggestions and reactions. Other
means of communication with customers include informal conversations at the
store and suggestion boxes with interviews and awards.
Incidentally, complaints
are an excellent guide for making store policies more amenable to customers.
Personnel should be instructed to thank patrons for their comments. Prompt
consideration, followed by a personal letter from the store manager, is highly
desirable.
Location is extremely
important to "captive" buyers. Exclusively
franchised utilities, shops in isolated hotels. and
cafeterias or automatic vending machines in factories are examples. At the
opposite extreme, shoppers escape spatial restrictions by buying from
mail-order firms or telephone solicitors.
Other patronage influences
vary. They depend on the type of product. type of
store, and the characteristics of the consumer. The offered assortment's
perceived quality. depth, and breadth certainly are
very important. along with price, This does not imply
that all goods have to be top quality or all prices the lowest. Perceptions are
decisive.
If quality seems high, some
customers infer that prices are high too regardless of the facts. The important
point is to understand customers and to provide what causes them to buy. For
example, assurance of repair service weighs heavily with the worrier type of
customer. A convenience-minded buyer is concerned with parking space or
delivery service.
Of course, shoppers must be
told that wanted goods and services are available. Advertising helps
disseminate this information. So does a store's reputation for consistent
policies of satisfying its customers.
Occasional promotions
inject some excitement into the tedium of shopping. Some clients like to
socialize, which can absorb much of an employee's time and may even annoy other
buyers. Nevertheless, personnel should be friendly and helpful. Also
influential, for some customers, is the apparent socio-economic level of other
shoppers.
Personal affinity for other
customers or for salespeople is a decisive factor in the success of
party-selling, e.g., household goods and in-home selling (cosmetics). The
choice of where to buy items requiring major outlays (securities, and
insurance) often revolves around from whom to buy.
In selecting a retail
store, many customers consider physical features. Layouts can invite or repel
patronage. Motorists who are in a hurry, for instance, are apt to use a
gasoline station at which business can be transacted quickly. Altogether,
buyers perceive a mix of tangible and intangible factors that comprise a
store's atmosphere. Accordingly, they either do or don't feel comfortable about
shopping there.
To the casual observer, all
supermarkets seem more or Hess alike, But. in fact,
store managers can regulate many of the above-mentioned variables and thereby
affect where shoppers buy. According to recent studies in several American
cities, household buyers perceive supermarkets in their neighborhood as
sufficiently different to determine their patronage preference. The four main
types of supermarkets offer: (1) High quality at commensurate prices, (2)
Lowest price level in the area, (3) Swift completion, (4)
Friendly atmosphere. Each can profit by appealing to a different segment
of buyers. the topic of the next section.
Who
Identification of customers
and prospects makes effective targeting possible. Small business owners pride themselves
on knowing their customers personally. In the industrial field, understanding
of each major customer and buying influence is essential. When dealing with a
large number of customers, however, individual familiarity is not feasible.
Hence mass merchandisers and others in this situation group their customers,
whose reactions to offerings are similar, into segments. Then they design a
separate appropriate marketing program for each segment.
Strategies vary, A small firm might prosper by concentrating its
resources on one segment. Because customers are volatile, the specializing firm
is vulnerable to sudden change in its target segment's patronage. Hence some
companies address several segments simultaneously. Although expensive, a
strategy of employing different tactics for different segments can be quite
profitable. Other firms scatter offers to just anybody. They hope that segments
will select themselves.
One basis for segmentation
is geographic. Retail customers are apt to live or work in the store's
vicinity. Industrial buyers tend to concentrate regionally. So do users of
services. Intensive cultivation of local potential customers can be efficient
and lucrative. Personal knowledge of local buyers and a shared community spirit
help cement relations with these customers.
Segmentation is an art. All
"honest serving men" - what, why, when, how, where, as well as who -
can be the key to segmentation. Whatever the basis, each identified segment
should have sufficient purchasing power to make a special effort commercially
worthwhile. Accessibility is vital. How can the segment be reached? Are
advertisements, telephone solicitations, or personal visits efficient? How
about trade shows or personal contacts? The ideal segment is stable in purchase
needs and loyalty, helping you fend off competition.
Besides segmentation,
understanding of customers also requires insight into their buying roles. The
buyer for a one-person household or one-person business is the initiator of the
order, the decider, and the user. Even in this case, however, some outsiders
are influential.
In larger households or
businesses, these buying roles are usually played by separate individuals. It
helps you to know who activates (requisitions) purchases, who exerts influence,
who decides what and where to buy, who uses the product-and what their criteria
are. Then you tailor and target your offerings to satisfy each major
participant in the buying process.
As has been shown,
understanding of customers enables a seller to increase sales. This same
understanding can equally serve to reduce costs. Higher sales at lower costs
inevitably boost profits.
A small firm that
understands its customers can buy or produce exactly what they want-and nothing
else. The firm's sales effort is efficient because it builds on why its
customers want to buy not on why others buy, or why the vendor wants to sell.
Merchandise can be ready
when customers need it. Thus a knowledgeable seller avoids unnecessary
inventory costs or penalties for late delivery. Understanding how customers buy
lets a seller employ promotional media, appeals, and timing for maximum
effectiveness. Transportation costs are lowered by shipping merchandise to
where it is needed. Knowledge of who comprises suitable segments and the
separate buying roles can reduce the waste of soliciting unqualified or
uninterested people.
Customers Are Dynamic
The best source for you to
learn about customers is your personal interaction with them. At work, social
and civic activities, and chance encounters, people talk and reveal their
attitudes and motivation. Listen to your customers. You can also keep abreast
of purchasing patterns by observing competitors' practices and by asking sales
personnel who is buying what, where.
Articles in business and
trade newspapers and magazines give information on products, trends, marketing,
finance, the economy. Trade directories, Yellow Pages, and brokers' direct-mail
lists identify who buyers are, and most industries have associations and
specialized marketing research that provide insights for understanding
customers.
Ken Roys, CEO
BTF Management Consultants Inc
866-385-1900 Toll Free 713-983-7904 Fax
Ken.Roys@btfmanagement.com
www.btfmanagement.com