All 2 entries tagged Coffee

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February 13, 2013

Segmentation, targeting and positioning

Following on from the buyer behaviour post, let's look at understanding the customer.

The 4Ps - Product, Price, Place and Promotion - will help us understand how to take the product to market. For now, we need to understand which type of person, organisation or entity we consider to be a customer (or potential customer).

In the coffee example, the first thing to consider is which type of coffee we are offering. Let's try instant caffeinated coffee granules sold in a tin.

Who would buy this? I'll assume a range of individuals of varying ages. Are some age groups more likely to buy? Would we target students? Can they afford our product? Can they afford it regularly? What about professionals? Would they prefer filter coffee, or freshly ground coffee? Do the preferences differ based on their income? Does the type of job make a difference? What about their nationality, or the city, suburb or country they live in?

All sorts of questions could be asked, and should be asked, in order to understand who the target customer is. This process is called Segmentation. Selecting a segment of the population that fits the profile of customers we would like to sell to, or that we believe to be likely buyers of our product. For some products you may do segmentation as a responsive activity, once you have observed who purchased and consumed your product. This helps you to target similar people in the next sales cycle. In other cases you may have a new product being introduced and wish to carefully profile and advertise to a target customer base. An example is a premium coffee blend, high-end coffee machines, or even exclusive jewellery, watches or cars.

Segmentation could be based on demographics (age, gender, income, household size, nationality, etc), location (city, country, etc), behaviour, lifestyle, attitudes, beliefs or a combination of these. When conducting field market research for a leading South African research company, I quite often had to search for individuals of a certain age, within an income band, living in specific suburbs, with a certain number of household members. In the coffee example we also have to consider that organisations may also purchase our product for use in their staff kitchens, canteens and meeting rooms. These potential customers would have additional characteristics we could use in the segmentation process.

Targeting refers to the way in which we rank the different segments, choose which ones to focus on, consider which resources we provide for each target segment and the approach we intend to use to target that segment. We may be constrained financially or may not have enough people to carry out advertising campaigns and other activities, so we only focus on one segment initially. We may realise that different promotion campaigns, pricing, or even product variants (labels, sizes, packaging, etc) may be required for the different segments.

A positioning strategy will uncover why the customer should choose our product. We need to identify our unique selling point, if one exists, or establish if we offer the customer more for their money, less for their money, or if it's the same as competing products. If we understand where we fit in the current market (how our coffee product compares to others that are available) then we can look at unique ways to promote the brand, and start to create areas of differentiation that make our product stand out.

While the customer should be at the centre or every aspect here, the positioning is critical to get right. If we understand how we differ from the rest it gives us the foundation to choose the right words, images, symbols, celebrities, etc in any customer-facing collateral. We could have the best product in the world but if the messaging is not right nobody will ever find out because they won't buy it.

February 11, 2013

Buying behaviour and the hunt for coffee

Day 3 with Prof Lloyd Harris in Rome and this morning we covered buying buyer. Although the concept applies to both B2C and B2B scenarios, it’s much easier to relate to the consumer thought process as we’ve all been consumers of products and services at various times in our lives.

Let’s take a highly consumed product, coffee. The first thing to consider is which type of coffee a business is offering. Are we the coffee producer? Do we make instant coffee, or another type? Who drinks our coffee? How do we attract them? This line of thinking is covered in the concept of segmentation, targeting and positioning (which you can read about shortly).

Let’s assume the role of the consumer. We like coffee, or we like to have coffee in our houses to give to guests when they visit. Coffee is a social drink, so we are likely to associate it with good times, positive experiences, and happy memories. We think of friends or colleagues, and also consider their feedback on whether they enjoyed it, despised it or were impartial to the different types of coffee they have consumed. Our buying behaviour is immediately affected by experiences and the thoughts of various influencers in our social circle.

Apart from social influences, the buyer is also affected by a range of cultural influences (is coffee drinking a norm, or do we usually drink tea?), personal influences (do I prefer instant or pod coffee?) and psychological influences (perhaps a belief that caffeine is not good for you).

These factors then affect every stage in the buying decision making process. Usually, this decision making process starts with identifying a need. We have run out of coffee. We need to get some. An information search may be required in some scenarios where high (or low) value items are being purchased but this may not always be required. We may be so accustomed to buying a regular brand or product that we don’t need to search for information about the various options available. Then again, a promotional advert in the local newspaper may surprise you with a 50% discount promotion, which completely affects your loyalty to your preferred brand.

Once the alternatives have been considered we may already be in-store and standing in the coffee aisle. The purchase decision (which should at this stage be easy) could be further affected by stock availability, price, shelf attractiveness, product (or label) attractiveness, new products, in-store promoters (humans trying to get you to taste a sample), combination promotions where competitions could be entered or other goodies could be obtained for free, or some random occurrence that sways our confidence. Hopefully, you end up buying something and, ideally, it's a jar of instant coffee as you initially intended!

This may seem like a common sense or simple process, but it's actually a very complex thought process that we digest very rapidly, often subconciously. The interesting concept is that this same purchase could consist of a fresh set of steps and decisions the next time you need to buy it.

The level of complexity involved in buying could then be expanded to scenarios where the decision making process and factors are much more evident, such as buying houses, cars, airline travel, holidays and other more high cost items.

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