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Chapter
2
Understanding Customers and
the Marketplace
Chapter 2
UNDERSTANDING
CUSTOMERS AND THE
MARKETPLACE
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McGraw-Hill/Irwin
© 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.
Chapter
2
Understanding Customers and
the Marketplace
LEARNING OBJECTIVES
• Introduce the importance of understanding customer needs.
• Define market segmentation.
• Present a variety of market segmentation approaches.
• Describe methods of collecting information about customers.
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.1
THE SERVICE PACKAGE
• Supporting facility
• Examples: Taxi, hair salon, trading room
• Facilitating goods
• Examples: Food in restaurant, x-ray film in a hospital,
books in a school
• Explicit services
• Examples: The flight on an airplane, the repair of a
broken arm, the cut and styled hair
• Implicit services
• Examples: The feeling of security after an auto checkup, the feeling of relief after a healthy physical
examination
Source: Fitzsimmons, James A and Fitzsimmons, Mona J., Service Management for Competitive Advantage, McGraw-Hill, New York, 1994.
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.2
ELEMENTS OF CULTURE
• Language
• Values and Attitudes
• Manners and Customs
• Material Culture
• Aesthetics
• Educational and Social Institutions
Source: Czinkota, Michael R. and Ronkainen, Ilkka A., International Marketing, (Hinsdale, IL: The Dryden Press, 1988.
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Chapter
2
Understanding Customers and
the Marketplace
EXAMPLES OF MARKET SEGMENTATION
• Demographic
• Geographic and Geopolitical
• Psychographic
• Lifestyle
• Life Stage
• Product Use
• Communication Channel
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.3
DISTRIBUTION OF HOUSEHOLD INCOME IN
THE U.S. IN 2000
13%
27%
6%
under 20,000
20,001 to 40,000
40,001 to 60,000
12%
60,001 to 80,000
80,001 to 100,000
>100,000
18%
24%
Source: U.S. Census Bureau, Last revised: December 10, 2001
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.4
POPULATION OF US BY GENDER, 2002
MALE
14
12
10
8
6
4
2
85+
80-84
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
0
0
FEMALE
2
4
6
8
10
12
14
Population in Millions
Source: US Census Bureau International Database, 2000.
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.5
COMMON WAYS TO SEGMENT SERVICE MARKETS
Basis of Segmentation
Groups Customers By
Example
Demographic
Gender, age, income, religion
Male/Female; preteen/30-something;
upper middle class; high income;
Catholic/Jewish
Geographic/Geopolitical
Geographic region or nationality
Midwesterner/New Englander;
American/French
Psychographic
Personality characteristics
Extrovert/introvert; risk-taker/riskavoider
Lifestyle
Choice of hobbies, recreation,
entertainment
Golfer/hiker; movie-goer/symphony
goer
Life Stage
Life concerns
New parents/empty nesters;
undergraduate student/ graduate
student
Product Use
Patterns of use of services
Frequent flier/infrequent flier; high/low
cell phone use
Communication Channel
Ways services can communicate with
them
Internet/fax/phone/voicemail
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.6
FORECASTED RESTAURANT SALES BY SEGMENT FOR 2002
5.0%
4.5%
Full service restaurants
1.3%
Fast-food restaurants
0.7%
49.5%
Commercial cafeterias
Social caterers
38.9%
Snack and nonalcoholic
beverage bars
Bars and taverns
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Source: www.restaurant.org/research/forecast_sales.cfm, April 19, 2002
Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.7
TRADE-OFF BETWEEN MARKET SIZE AND
PROFIT POTENTIAL
Profitability of Segment
Breadth of Segment
Narrow
Broad
High
Moderate profit potential;
Likely to be competitive
Most profit potential;
Likely to be very competitive
Low
Least profit potential;
May have few competitors
Moderate profit potential;
Likely to be competitive
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.8
METHODS OF COLLECTING INFORMATION
ABOUT CUSTOMERS
Method
Information Collected
Focus Group
Rich, detailed information from small number of
customers
Critical incident technique
Rich, detailed information about specific service
elements
Surveys
Structured information about potentially large
groups of customers. If well designed, can be
generalized to broader groups of customers.
Direct observation
Rich, detailed information about actual customer
encounters.
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Chapter
2
Understanding Customers and
the Marketplace
Exhibit 2.8
METHODS OF COLLECTING INFORMATION
ABOUT CUSTOMERS (p.2)
Method
Information Collected
Mystery shoppers
Objective information from trained third-party
data collector.
Employee feedback
Rich, detailed information from employee’s
perspective.
Customer panels
Longitudinal information from committed
customers.
Lost customer research
Information about why customers discontinue
use of service
Data mining
Large amounts of data that can be analyzed for
patterns.
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Chapter
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Understanding Customers and
the Marketplace
KEY TERMS
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•
•
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•
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Culture
Data Mining
Explicit Service
Facilitating Goods
Implicit Services
Lost Customer Research
Focus Group
Market
Market Segmentation
Mystery Shoppers
Supporting Facility
Target Marketing
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