CHAPTER 2: TARGETING MARKETS AND STAKEHOLDERS
This chapter is focused on step 1 of the customer journey: explore.
The topics include:
The characteristics of markets;
Marketing activities and techniques;
How to describe customer needs;
The internal and external factors that affect customer needs; and
How to identify service providers and explain their value propositions.
Service providers need to understand their consumer's requirements to co-create value. When they do not have this understanding, they may make assumptions based on:
Technology focus;
Overconfidence;
Acting before checking;
Lack of time and resources; and
Poor or no understanding of costs and risks.
Understanding markets
A market contains sub-groups of service consumers and potential consumers. The consumers in a market have common characteristics that translate into similar product and service needs. Service providers will carry out market analysis to help them:
Identify emerging opportunities and threats.
Understand competitive advantage.
Communicate with customers and markets.
Allocate resources efficiently and effectively.
Market analysis is quantitative and qualitative and looks at market size and opportunities based on volume and value. This includes:
"Consumer segments
Customer expectations and buying patterns
Trends and dynamics
Competition
Key players
Economic factors"
Market segmentation
Service providers target market segments based on customer needs and expectations. Each market segment will be unique. Service providers can use market segments to understand how customers make decisions, allowing them to group customers and target products and services to them.
There are three factors that can help to identify market segments:
1. Homogeneity is a way of describing common needs;
2. Distinction and uniqueness show how the segment differs from others; and
3. Reaction or response to the market can also be studied.
Characteristic-based market segmentation
Figure 7 shows how characteristic-based market segmentation can be applied. Once characteristics are identified, the target group can be further analysed.
Figure 7: Four bases for market segmentation7
Needs-based market segmentation
Needs-based market segmentation supports better communication with consumers. This process includes:
Analysing existing consumers to identify where sales and demand originate;
Exploring customer satisfaction and the drivers for purchasing decisions;
Performing a SWOT* analysis;
Categorising consumers; and
Prioritising consumer segments.
The service provider can then target their services and messaging in areas where they are most likely to be successful.
* SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses are internal to a company. Opportunities and threats are external.
Targeting markets
Marketing promotes products and services to consumers and market segments. Marketing is a profession in its own right; the areas that are relevant for us here are:
Value propositions;
Marketplace and marketspace;
Personalising and profiling;
Targeted marketing;
Sustainability and the triple bottom line; and
Existing customers.
Value propositions
A value proposition is "an explicit promise made by a service provider to its customers that it will deliver a particular bundle of benefits".
Value propositions should explain how the product or service solves problems, what consumers can expect, and why they should choose a particular organisation instead of its competitors.
Banking is a challenging market to compete in, as many service providers are offering similar services and legislation and regulation can limit their ability to innovate. Think about some examples of value propositions that Lucy could use to help differentiate the Mibank service. What is being promised? Is there anything unique?
Marketplace and marketspace
The marketplace is the physical world; a marketspace is defined by online channels.
Real-world marketing activities (marketplace) include:
Seminars
Sales meetings
Conferences
Printed advertising
Networking events (face to face)
Online marketing activities (marketspace) include:
Social media
Articles
Online advertising
Websites
Webinars and podcasts
Blogs
The COVID-19 pandemic blurred the lines between marketplace and marketspace as typical 'real world' activities like conferences, face-to-face meetings and networking events shifted to cyberspace. Even the ability to use printed materials was affected due to hygiene concerns.
From the service management perspective, it was fascinating to watch how quickly technology evolved to meet the new requirements. In 2021, my organisation ran a virtual event for 300 people that included recorded content, live sessions, virtual networking tables, sponsor booths, etc. In fact, everything that you would expect from a live event (except for lunch). We received excellent feedback about how we had been able to create a 'community' feeling in a virtual space, but many delegates still expressed a desire to go back to face-to-face events as soon as possible.
Think about your own experiences and the changes in marketplace and marketspace since 2020. How do you think technology has adapted? Do you expect permanent behaviour changes from your customers, or do they see this as a temporary situation?
Personalising and profiling
Profiling tracks consumer behaviour to better understand their needs and support targeted marketing activities. For example, cookies on a website track which pages you visit, so that relevant products and adverts can be shown to you. Personalisation then targets specific content and offers to consumers. Organisations need to respect applicable legislation and obtain consent.
Targeted marketing
Figure 8 shows the AIDA model, which expresses how personas are targeted using a staged 'funnel' approach. Service providers need to build complete funnels - awareness doesn't deliver any benefit if it doesn't convert into action.
Figure 8: The AIDA model8
Brand and reputation
Brand defines how consumers perceive an organisation and its products and services. A service provider will try to create a strong brand, but ultimately the consumer decides how they respond to the brand. One-off events can affect an organisation's brand and reputation, in both positive and negative ways.
Can you think of any events that have made you look at a brand in a new way? This could be something negative (for example, a data breach, or an ethical issue), or something positive (a brand that is supporting its community, or taking positive environmental action). Do these events affect your behaviour as a customer?
Sustainability and the triple bottom line
Many organisations now seek to balance economic targets with sustainability goals. Figure 9 shows the sustainability and the triple bottom line approach.
Figure 9: Sustainability and the triple bottom line9
Corporate social responsibility (CSR) has gained momentum in recent years as organisations try to demonstrate how they are contributing to society and the environment as well as meeting their financial goals. For organisations that take this seriously, there can be real benefits in terms of employee experience and morale, better perception from shareholders (in fact, some funds only invest in ethical brands), and new customers who feel an emotional connection with the organisation.
CSR initiatives without integrity, however, can backfire on an organisation. For example, some companies have been accused of 'greenwashing' or 'green sheen' - supplying misleading information to make their products seem more environmentally friendly than they are. This can have a negative impact on the organisation and its brand.
Existing customers
Existing customers are an important source of repeat business and can also help to attract new customers, for example through 'word of mouth' marketing. Organisations nurture existing customers for these reasons:
Cost - existing customers are cheaper...
