It never ceases to amaze how many times I discover sellers within client companies, who misunderstand the signals they get from their customers and – as a consequence – over-estimate the number of price-buying customers they have. My most famous case occurred ten years ago. I kicked off the first day of a three-day marketing workshop to be confronted by one seller: “Before we waste three days of our valuable time, could you just explain why I should spend three days in this workshop when 80% of my customers are Price Buyers?” – A not atypical challenge.

I was very interested by this claim, as I had personally never come across any market situation where there were so many Price Buyers and I had worked in a number of undifferentiated (some would say “commodity”) product-markets.

On that occasion ten years ago, I managed to convince my challenger to stay with the workshop. By the end of the three days he acknowledged and agreed fully that less than 30% of his customers were actually Price Buyers. The end result put several millions of Euros on to client’s bottom line that same year and sustained into the subsequent years.

This case highlights a very common issue and challenge for companies in many B2B markets and especially in the chemicals and plastics industry. Just imagine what that means to margins if we can misinterpret the needs of up to 50% of our customers!

So what are the causes of this widespread phenomenon and what can we do about it?

1. Buyers defences are high

Situation: Buyers are often between the rock and the hard place, under pressure to reduce raw material costs, whilst at the same time ensuring a continuous and timely supply of good quality products to the plant. That pressure is often manifested in a demand for better prices.

Remedy: Sellers need to understand how difficult it is for a buyer to be a GENUINE Price Buyer – it is not easy. To be a Price Buyer the customer must have the following conditions in place:

• A real choice of qualified products from at least three and preferably more suppliers
• The ability to switch suppliers easily at any time and at no significant cost
• Independence from suppliers in terms of technical know-how and application knowledge – meaning no need for technical support

If the customer cannot demonstrate these conditions, they cannot be a Price Buyer…..and, by the way, any customer that comes back to the seller with the offer to win or keep the business if they match the price of an alternative supplier is NOT a Price Buyer. This behaviour is a clear indication of a preference to do business with you – you must discover the basis of that preference.

2. Sellers think they are selling commodities

Situation: The word commodity carries with it many connotations, not least that there is no value in marketing or customer segmentation; it’s all about getting the price right, as customers do not value anything else.

Remedy: Sellers should think of these as UNDIFFERENTIATED PRODUCTS, which are just one part of the TOTAL OFFERING; this means that there may be still real possibilities to differentiate the offering on service levels (e.g. reliability or responsiveness) or on intangibles (e.g. reputation or relationship).

3. There is no meaningful and differentiating customer segmentation in place

Situation: Sellers have no reference points or supporting models to help them to distinguish different buying behaviours and different customer needs.

Remedy: Sellers need to be able to recognize the differences in need and behaviour of their customers. It can help to provide them with a customer segmentation model based on needs and values of different customer groups, encouraging them to seek out and recognize the differences and to gear the offering to fulfil the specific customer needs; for example:

• Innovators: value first and early access to new products;
• Growers: value reliable delivery of needed quantities of tried and tested solutions;
• Optimizers: value solutions that reduce costs or improve efficiencies;
• Easy to do Business: value quality products from reputable suppliers with no hassle;
• Security of Supply: value secure supply at all times from a committed supplier;
• Strategic Partner: value a long-term relationship from a strategic partner they can trust;
• Price Buyers: select the lowest price offered from at least three pre-qualified suppliers

4. There are no clearly defined customer value propositions

Situation: The seller has no clearly defined value propositions to offer to the customer, based on the segment to which they belong.

Remedy: Marketing needs to provide sellers with well-defined and clearly differentiated value propositions, providing them with the ammunition to beat the competition. Sellers fire the guns, marketers provide the bullets.

Each of the above segments demands a clearly different and differentiated value proposition with Product – Service – Intangibles and the 4R’s of sustainable differentiation

• Innovators: innovation led offering from a flexible and responsive creative supplier
• Growers: proven solutions from a responsive global player with advanced supply chain
• Optimizers: projects to reduce cost and improve efficiency from a loyal supplier
• Easy to do Business: high quality products delivered reliably from a reputable supplier
• Security of Supply: guaranteed continuous production from a highly reliable supplier
• Strategic Partner: strategic support from a long-term supplier they can trust
• Price Buyers: lowest price and available product

5. Sellers typically approach a customer with one offer rather than offering choice

Situation: Sellers are ill-equipped to offer choices to the customer, either because the marketers have given them no alternatives or they are not empowered nor authorised to develop their own alternatives and therefore make a single offer (“take it or leave it”).

Remedy: Customers need and value CHOICE. If you do not offer choice, they must seek alternatives from other suppliers in order to be able to run the trade-off process, which is typically the core of any buying decision-making process. Marketers must provide the sellers with a palette of offerings tailored to the needs of customers in specific segments and reflecting the importance and value of the customer to the supplier, so that sellers can offer their customer a genuine choice (“which of these offers best meets your needs at the price you are willing to pay?”).

Phil Allen is CEO and Value Creator at Marketing and Sales Excellence Practice, GEMS International GmbH.

For more information on how B2B International can help your business segment their customer base and more closely satisfy their needs and make a profit along the way then visit – Segmentation Research

A light-hearted discussion about cats and dogs this week led Simi Dhawan to question what drives behaviour and to what extent we should believe the statistics we are told.

Would you say that you are a dog person or a cat person? Common belief has it (or what I’m possibly more inclined to refer to as “semi-pseudo social philosophy”) that an individual either prefers one or the other – rarely both, as reflected in their personality.

It was a recent conversation with work colleagues over the weekend that led to this issue being raised wherein it was concluded that I was the latter following my inarguable mini-obsession with a colleague’s pet cats…….or rather, giant cats of the Maine Coon kind. For those of you unfamiliar with this breed, a short synopsis is that they originated in Maine, North America and are renowned for growing larger in size than your average domestic cat, characterised also by longer coats and a bushier tail. I include an exemplary picture below:
 

 
I have to say that whilst I do rather like oversized furry felines, I was reluctant to dismiss my love of dogs based on this very factorial – I happen to like a range of dogs – varying from those which are furry and oversized (think Samoid as pictured on the left below), to the downright so-awkward-they’re-cute “Sausage Dog” types (as pictured on the right)!
 

 
But questions which ransacked my brain did leave me wondering where these facts, beliefs or indeed myths really stem from. Are they actually rooted in any truth?

In a frenzied quest to curb my curiosity, I ran a quick internet search to see if I could find out whether my colleagues were right about my social disposition, carrying out a short “Pet Personality” quiz online at the following location: http://quiz.ivillage.com/home/tests/catdog.htm. After some rather banal questioning which commenced by asking me about my preference for a “Perfect Friday Night” (of which the possible tick box choices differentiated the socialites who enjoy “a wild night out” from the less extreme independent impartial persons who “prefer a quiet night in with a book” (original, eh?), the quiz concluded that I was indeed, a “Cat Person”, with the following personality traits:

 
“As a cat person, you approach life with thoughtfulness. You are self-aware and have close friends who will be there for life. The subtleties and mysteries of the world intrigue you. Your ideal Friday night is good conversation or a movie you can’t figure out the ending to. Your take-charge attitude sometimes meets with conflict, but you always surpass expectations when it comes to your work. You value intelligence, grace and independence, which is why a feline friend is best for you”.
 

Crumbs. My colleagues were right. However, having the typical Cat Personality trait of being intrigued by world mysteries (I would argue true in specific cases!), I decided that I wanted to dig deeper into how public opinions are formulated.

As a starting point (and whilst continuing on with this captivating “Cat” theme), I recall a colleague at the aforementioned gathering discussing the popular TV series “8 Out Of 10 Cats”. A majority will have probably heard of this, but for those who haven’t, the programme is centred on quizzing teams of celebrity respondents about various opinion poll findings and statistics. The title of the show was famously derived from a Whiskas Cat Food campaign which claimed that 8 Out Of 10 Cats prefer Whiskas. Whilst this campaign was one of the first to adopt this style – triggering others to do the same, the inevitable question “overlooked” is ‘What on Earth are these cats / cat owners comparing Whiskas to and saying they prefer it over?’ Is it another cat food product? Is it a multitude of cat food products? Is it something other than cat food such as Heinz Baked Beans (in which case, no contest really!)? What exactly is it?

It is a common underpin of opinion polls used in advertising to state a loose statistic completely out of context, which excludes the comparative element that would allow it to make logical sense! We shouldn’t have to wait too long in an evening before any such campaign graces (or plagues!) our television screens. Yesterday evening, for example, I was informed that 9 out of 10 people with sensitive teeth do nothing about it (thanks Sensodyne Toothpaste) and that 9 out of 10 women would recommend the new “falsies” mascara range to a friend (thanks Maybelline). But in what context has this data been derived? Is this plausible data which has virtuously reached a conclusion from a fair and objective series of questions whereby respondents were introduced to a number of competitor products, or are we, the consumer, being led into a false sense of security by a set of makeshift claims? In other words, are these findings drawn from designing a study that is biased from the start, intending to flog us a “credible” product backed up by statistics?

In the case of our dog or cat person phenomenon, we could use our logic and life experience to assume that this has been clearly born as a by-product of social situations, based on the following premises:

• Dogs and cats are the most commonly owned domestic pets in most Western countries;
• Most animal lovers will lean towards a preference of one or the other;
• This has led to conversations where people have discussed and justified their decisions to keep either dogs or cats;
• The reasons stated are seldom aesthetically focused i.e. about size, fluffiness etc, but rather, behaviours and personalities i.e. dogs are more loyal, gentle, friendly, less temperamental, obedient and tolerant, whilst cats are not as reliant on their owners for walks, do not slobber, take up too much space, are quieter and do not require as much fuss and attention.

Statistics and previous studies tell us that the majority of people are dog persons and not cat persons. I have to say that following a quick chat amongst my colleagues, this point was supported when only 2 out of 6 of us preferred our feline friends over our canine comrades. For more “concrete” evidence, I decided to review an epidemiological study conducted by the Department Of Veterinary Clinical Science in the University Of Liverpool (2007), which looked at 1,278 households in Cheshire (my local area!) to examine the different profiles of households who own dogs compared to those who don’t. The study indeed supported that dogs are the most popular household pet where 24% of those approached were confirmed as dog-owning out of a total of 52% who owned any type of pet (whilst cats came in at a close second with 22%). But did this yet tell me anything about their choices to own either one or the other? Could I yet attribute any of this to a particular personality trait?

Helping to answer this question, the study continued by asking these households what their main reason was for owning a dog, whereby 68% reported that it was for companionship (makes sense – dogs love to remain in the company of their owners versus the ever-wandering cat), whilst 42% reported that they’d always had a dog. The latter statistic brought into question then whether it is actually environmental factors which shape our decisions i.e. nurture, versus an inherent personality disposition i.e. nature. At this stage, my mind boggled more than before and so I eagerly read on……

The report then revealed a staggering statistic; 62% of households who did not own a dog when interviewed had actually owned one at some point previously in their lives! So does being raised with a dog make you less likely to own one? Actually, no. It would appear that social situations change over the lifespan, which is why certain households are more likely to own a dog. To back this up, some of the reasons people stated for not owning a dog included “working or being out all day” (26%) or “not having enough time for a dog” (15%), where evidently a large factor is lifestyle and the practicalities of looking after a pet which demands time rather than a dislike for dogs per se (which incidentally, was the reason reported by only a small 10% of households!)

By my reckoning, public opinions do appear to be rooted in everyday observations and conversations – very much like the one which instigated my Thursday Night Insight this week. However, I would argue that we should always be cautious about over-inflating the value we might attach to a standalone statistic without also taking into account some surrounding facts about the topic or area of interest itself. In today’s example, whilst labelling a person as a “Cat Personality” or a “Dog Personality” helps us to more easily (and mentally) pigeon-hole otherwise complex individuals into a certain segment of character traits, we should be able to accept that it is situations and environmental influences which play a significant part in driving behaviours…and that these can potentially change over time. This philosophy, of course, is one which stands true in all B2B markets where, similarly, you are certainly always better placed to make decisions after asking a sample of your target market the right questions, rather than simply second-guessing their thoughts, feelings and opinions based on secondary, or even dated research statistics.

In short, a poll conducted today, will not always stand true tomorrow……..and as for The Truth About Cats and Dogs……..I’d argue that your best bet is to ask the owners (the most complex breed of all!) themselves.

Taking us on a tour of his opulent Beijing hotel, Matthew Harrison this week explains why segmentation of a target market remains crucial.

I am writing this latest installment to Thursday Night Insight from my hotel in Beijing.  Beijing is a city I know well and I have become accustomed to its hospitality – the faultless service in restaurants, the branch of Subway that delivers my foot-long sandwich for free, and the animated army of traffic lieutenants who bark at passers-by if they so much as lean over the road when the pedestrian light is on red.  Sadly they don’t afford the same courtesy to the smoke-belching construction trucks that make it their business to run over pedestrians when the lights eventually change.

Variety being the spice of life and ‘adventurous’ being my middle name, I decided to sample a new hotel for this latest visit to our Chinese office.  The Japanese-run Jinglun has served me well over the years, but having been charged the equivalent of $10 for half a pint of warm Tsingtao during my last visit, I decided to venture further afield to the Jianguo Hotel – a lengthy 1-minute hike away and self-proclaimed Garden Hotel of Beijing – which for some reason was offering luxurious rooms at knock-down rates.

Upon my arrival I was immediately impressed, as I always am when Chinese hospitality is involved.  The politest man in the world took my case from the cab without asking.  I never saw him again, but by the time I arrived at room 739, my luggage would be waiting for me.  The garden theme was plain to see, the labyrinthine corridors snaking round a series of open-air ponds and trellised courtyards.  The sight of a French restaurant adjacent to an English pub at the corner of the foyer meant that I immediately assumed I was in heaven, even if the 3 photocopies of my visa, passport and credit card seemed an excessive way of granting me entry.

One of the five-strong gaggle of receptionists eventually gave me my room card, contained in a small cardboard booklet advertising the English pub, French restaurant and 3 other onsite establishments, including Shang Court Chinese Imperial Cuisine – or, as its catchy tagline reminded me, ‘The only luxurious restaurant with the imperial palace and feudal official mansion cuisine of the Shang Dynasty in Beijing’.  I made a mental note to return later and find out whether the food was as stodgy as the advertising.

I headed down 3 corridors, around 4 gardens, under 2 pagodas, through a pond, over a crocodile infested ravine, up 6 floors, down another corridor and into my room.  It was a sight to behold.  A huge plasma screen looked down on me imposingly.  A green velvet sedan-chair lazed seductively in front of the window.  Beneath 2 glass shelves stocked with Dragonseal 2008 vintage, the mini-bar hummed its sensuous hum, pouting its lips and beckoning me towards it with come-hither eyes and lovestrewn promises of Heineken straight from the can.

The room was as confusing as the hotel itself.  As if the boastful attention seeking of the plasma screen wasn’t bad enough, its brash identical twin was suspended just feet away.  I counted at least 4 waste paper baskets – why?  The bath had 3 taps, one less than the number of telephones dotted around the room.  5 mirrors vied for space with 6 cabinets, a desk, and a mysterious contraption that looked like a zimmer frame for a man with 3 legs.

20 hours after leaving home, I threw the 17 decorative cushions onto the floor and collapsed onto the king-sized bed, determined to let fatigue take its toll.  The minibar hummed with dejection whilst the Dragonseal glared its hateful blood-red disapproval.

But this room would not let me sleep.  It was just too much.  Too much attention, too much fuss for a half-asleep Englishman.  This beautiful hotel, this monument to sino-european chic, was not for me.  I began to long for the wide wildlife-free corridors and blanched, single-screen rooms of the Jinglun hotel.  The Jianguo was wasted on me. 

This hotel was forgetting the basics of segmentation, which divides a target market into groups with distinct needs, the supplier charging each segment a price aligned with the benefits received.  In selling me this room, the Jianguo made a crucial mistake – it provided me with a luxury offering at a bargain basement price.  The effective segmenter would have dealt with me in one of 3 ways:

• Provided me with a more basic room, in line with my requirements and the price I was willing to pay.
• Sought to upsell the luxurious room, highlighting its benefits and charging me extra for them.
• Not done business with me at all.  Crucial to effective segmentation is to know who your customers are, and who your customers are not.  The only customers in a properly segmented market are those whose needs and budgets are aligned with the benefits they receive.  Resources and time are only spent on the segments that the supplier chooses to serve.

Segmentation should be regarded as a strategy, not a tactic.  Whilst it is tempting in the short term to ‘leave value on the table’ in order to ensure a sale and increase cashflow, in the long term this is just as self-defeating as raising costs too high.  High costs will eventually erode margins and alienate the target audience that is prepared to pay for the benefits you offer.

By giving us an insight into the creative and sometimes surreal world of advertising, Simi Dhawan rightly reminds us that it’s better to risk knowing about a failed plan than to risk implementing a plan which will fail…

As is routine within our so-called “modern world”, no week would follow the norm if a plurality of “forwarded emails” did not make their merry way into my personal inbox. Whilst I can appreciate the heartfelt sentiments that might go into a friendship chain mail, I’ve seldom the patience to pass these on and, frankly, I find them more than mildly irritating. (Having to manually delete each one wastes at least a few seconds of my life – possibly several hours spread over a lifetime!) However, one which didn’t follow this same ill-fate by instantly grabbing my attention included the artwork of a Mr. Julian Beever – a British artist now famous for his ability to create 3-D illusions using just chalk (and an eye for detail) on pavements all over the globe. By some, he has been bestowed the respectable title “Pavement Picasso”. I include one such example of his ingenious work below:
 

 
At first glance, it’s difficult to comprehend how a sketch could be made to look so real and far removed from a standard 2-D drawing. The answer can be found in the angle at which the photo is taken and only one perspective allows for the 3-D effect we are seeing, as the photographs below demonstrate:
 

 
Whilst this startlingly clever trick-of-the-eye might be considered no more than “art for art’s sake” by some – merely a momentary distraction from whatever we were doing before we caught sight of these images – I beg to differ. The talented efforts of our aforementioned “Pavement Picasso” are, in fact, modern-day examples of some very creative advertising, and it is certainly no accident that these have landed in my inbox – or that I now share them with you! To prove that this 3-D image technique has been used in practice more explicitly as an advertising medium, see the following example, courtesy of the German-owned company Bionade:
 

 
At the core of any project we are assigned, in one form or another, every client ultimately seeks to strengthen their brand. From market segmentation and product testing, through to customer satisfaction and value propositions, all of these research agendas allow an opportunity to communicate with customers/potential customers and raise awareness. Even if we do not explicitly ask questions about the brand itself, it’s part of our professional DNA as researchers to ensure that we meet our responsibility to positively represent our client when communicating with these respondents – so as to (at the very least) protect the reputation of our client’s brand.

An array of marketing mediums ensure that we meet the goals we set ourselves in getting our message across and reaching our target audience – ranging from branded products, literature and POS materials, through to posters, banners, newspapers, trade magazines, television adverts and internet websites (to further examine some creative design ideas, you can view images of multitudinous campaigns at www.toxel.com).

This week alone has seen my involvement in several projects centred on this ever-present theme of advertising and, whilst I’d like to conclude that research outcomes have offered me a foolproof insight into surefire campaign approaches, I’m afraid I can’t quite claim that to be the case. In practice, every company needs to assess their (often inter-related) unique target markets and end-goals thoroughly, to create a powerful and effective bespoke solution to the continual challenge of raising both brand awareness and perception. Unfortunately, ad-hoc choices based around a “gut feeling” of what might work, in short, might work – and that’s the point. It’s a time-consuming and expensive process to invest in any such campaign and, to avoid unnecessary risk-taking, we shouldn’t launch into these blindly – careful planning is imperative.

Led from research experiences thus far, as a starting point, my advice is to seek thorough answers to the following 3 questions (although possibly not at the same time):

• Who is my target market?
• How do I reach them?
• What do they want?

Most interestingly, it is the first question which is most understated in practice and actually, it is the pre-cursor to the others. Only too often, we see that it is sometimes a pre-agreed business plan or budget allocation which sets our creative minds spinning – and very like the 3-D drawings we saw earlier, our own preconceptions offer a sometimes misleading perspective. As a result, possibly in our understandable eagerness to reach our customers, our focus naturally tends to shift to the latter two questions which effectively cover off questions we want to know to set the ball in motion. Questions such as “What do they want?” “Which are their preferred advertising mediums?” “How can we improve these or better our competition?”

Whilst these are crucial questions, a fundamental backdrop to bettering our understanding is “Who is our audience?” “Do their needs differ based on different parts of this market or are they similar?” “Do we need to consider multiple avenues of communication to suitably engage with different parts of our market?”…and so forth.

Collectively, all questions we ask should strike the correct balance between what we would like to ask in relation to our preconceptions and what we need to know to make suitably informed decisions – even if the outcome directs us to completely review our current strategies and plans (better to risk knowing about a failed plan than to risk implementing a plan which will fail!).

In short, as our “Pavement Picasso” might commend – our chalk is any problem drawn-out or created by a business; the pavement is our canvas or research design to lay out the problem; the passers-by are our audience feeding us their thoughts and opinions……whilst we, the researchers, seek to ensure that our perspectives are not skewed by any illusions…so that we can help reveal the real picture.