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7 November 2016

Marketing and Sales Processes. A Modern Approach to Customer Behavior. Part 2

In the first article about marketing and sales processes, we talked about orienting the company on the market and examined the product’s customer value. However, knowing the value of your product is not enough. What you have to do is make the best offer in your market segment: provide a higher value than your competitors and make it evident to the customer.

1. Value Proposition. Three product types.

For a better understanding of how to show your product’s value to the customers, let’s first consider three main product types and corresponding decision-making patterns of the customer. This way we can base our interaction with the customers on their perception of the value.
There are three types of products: well-specified products, experience-based products, and products based on trust.

Formula

Examples of well-specified products are electric appliances and expensive electrical equipment that we mentioned in the first part of the article. The customer can make a decision about purchasing this kind of product by simply reading its technical description.

Experience-based products are, for example, food products. After trying the product, the consumer can decide whether to buy it in the future or not. Another example is banking services. When a client is happy with the services provided by the bank, he or she stays loyal to this bank.

The most complicated type is the one based on trust. In this case, the customer cannot evaluate the product’s quality even after having consumed it. Consider someone going on vacation abroad for the first time ever. The journey seemed pretty nice, but the customer has nothing to compare this experience to. His or her friends might say that the hotel selected by the travel agency was a really good one; but how can the customer know since this is the only hotel he or she has ever been to.

Taking the product type in consideration and basing on the customer value analysis (that is, the proportion of the customer’s benefits and sacrifices), you can build a successful strategy for offering the value on each step of the customer journey.

2. Consumption process

The entire consumption process can be divided into 4 stages: pre-consumption experience, purchase experience, consumption experience and post-consumption experience.

Formula

Pre-consumption experience. Customer journey.

Customers make their purchasing decisions gradually. Every company’s objective is to highlight the value of their product and make it evident to the customer at the right time and the right place.

Companies base their content strategies on the product’s type and customer value. Depending on these factors, in some cases it is best to describe successful usage experience, organize conferences and carry out test-drives, while in other cases, it is much better to focus on technical descriptions or reviews and comparisons.
There are two ways to focus your content strategy: to involve new customers or to nurture them:

Formula

The involving strategy is about informing as many people as possible about your product. In this case, emotional content works best. For example, viral ads, marketing activities and so on.
Meanwhile, nurturing is more focused on working with a limited number of target customers. Here, the content is tailored to the target audience and is provided constantly. This strategy is rather personal; the company can interact with the customers through e-mails and subscriptions.

Purchase experience

The purchase experience consists of two processes: sales (product selection) and order processing (purchase).
The sales process is very complex in some companies while very simple in others. In either case, the company has to identify all the stages of product selection for each target segment, and then work on raising the customer value on each of these stages. For example, by providing demo versions, use cases, etc.
Once the customer makes his or her choice, the order processing starts. This process must be well coordinated. All the participants, timelines, and tasks must be specified so that each order is processed flawlessly.

Consumption experience

At this stage of the consumption process, the customer consumes the product. This is when companies must collect data about consumption and learn about the actual and desired ways to use the product. It is also important to adjust communication processes with the customers, for example, by organizing warranty and post-warranty service.

Post-consumption experience

The company’s objective at this stage is to analyze the consumption experience and apply it to repeat sales and marketing.
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By now, you have learned how interaction with the customer is build according to the product type and value. So what comes next?
Even if you understand the customer value and offer it to the customers, your competitors are doing exactly the same thing. What can you do to gain a competitive advantage?

3. Creating a competitive advantage

Having a competitive advantage means that you offer a customer value higher than that of your competitors, and higher than the customer expects.

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Yet it might be difficult to figure out how to raise the customer value. Increasing customers’ benefits and lowering their sacrifices simultaneously is an ideal solution, but only a company with unlimited resources can afford to do that.
In most cases, to decide on this matter, you have to ask yourself what makes the customer say “Yes”. Is it the price, the product’s features or the fact that the product totally meets the customer’s needs?

To be competitive, you have to lower or raise one of these three factors and at the same time keep the two others at the average market level. It is important to understand that all the three factors are equal. That means that you do not have to work on the price if you are increasing customer intimacy (that is, the ability of your product to meet the customer’s needs). On the other hand, if you increase customer intimacy, but the price also increases, you will not gain much: improving one factor but worsening the other does not work.

Consider the following example:
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The red dot on the graph is your company’s current position. You can see that all the three factors are below the market average.

The short-term strategy is aimed at improving one of the factors – the product’s price. Yet, the company also works on bringing the other two factors to market average. Since resources are limited, the company manages to almost reach the market average in customer intimacy yet the product’s features stay on the same level as before.

The long-term strategy implies that the company keeps on improving the price factor and continues to work on improving the other two factors.

Summing up what has been said, effective marketing and sales processes require you to:

  1. Analyze the customer value: study the benefits and sacrifices of your audience.
  2. Select the communication form and channels for translating the customer value: determine the type of your product and the decision-making pattern of your customer.
  3. Streamline value proposition processes on all the consumption stages: interact with the customer during the pre-consumption, purchase and consumption stages, and apply the customer’s experience to the post-consumption stage.
  4. Select a competitive strategy. Determine whether your customer is driven to say yes by the price of the product. Define the product’s features or its ability to meet the customer’s needs. Concentrate on offering maximum value in this segment, while maintaining the other two factors on market average.

This article is inspired by the work of Gabriele Troilo, Bocconi University.

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Aleksey Trefilov
Aleksey
Trefilov
CEO