Befood Slides Week1 Opt

MANAGING
FOOD & BEVERAGE COMPANIES

Module 1
Product and Market
1
KEY
Important concept
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AGENDA
The Organizational Culture
The Concept of Quality
The Customer Value
The Value Propostion
F&B Products as Experience Products
The Fundamental Role of Experts and Critics
The Consumer Buying Decision Process
The Customer Experience
The Market Choice: Segmentation and Targeting
Positioning Your Value Proposition

3
ORGANIZATIONAL CULTURE
Organizational culture is a set of values and beliefs that
translates into management philosophies, which in turn give
individuals a sense of membership in the organization and help
guide their behaviors.
Each company has its own specic and peculiar organizational culture.
There are two main management philosophies:
Product
Orientation
Market
Orientation
4
PRODUCT ORIENTATION
Product orientation is the management philosophy that states
that the primary goal of the organization is to make products and
services with excellent intrinsic quality, which can be measured
against standards set by a community of experts.
Companies that are product-oriented give a huge emphasis on
Innovation.
Their aim is to keep innovating in order to keep producing the most
excellent products overtime.
MARKET ORIENTATION
Market orientation is a management philosophy based on the
belief that the main goal of the organization must be customer
satisfaction with respect to the organizations performance
targets.
Market orientation is anchored by the assumption that whatever
performance targets there be, if an organization obtains resources from
exchanges in a market context, it is fundamental for it to establish and
reinforce relationships with the main actors in that market: Customers.
Satisfying their needs is the proper way to reinforce these relations.
6
SHORTCOMINGS
PRODUCT ORIENTATION
The fundamental belief here is that
the value oered to customers is
essentially equivalent to intrinsic
product quality.
MARKET ORIENTATION
The main focus is to satisfy the
needs of the market segments.
RISK
RISK
1. It is not necessarily true that

consumers will recognize the intrinsic
quality, so they will buy it.
2. It is not necessarily true that
consumers buy products for their
intrinsic quality, rather their motivation
to buy may be more inuenced by
symbolic values.
1. Consumers are inertial: once they

found a product they like, they tend to
repeat purchase it.
2. A company that is too aligned with
the market runs the risk of losing its
innovativeness.
ORGANIZATIONAL CULTURE
In the food and beverage industry, companies tend to have one of these
two orientations, considering them as two extremes.
However, Product and Market orientations can be integrated exploiting
the positive sides of both.
Innovation, typical of
product oriented
companies, should be
strictly linked to the
market segments.
The satisfaction of
these segments
should be
accompanied by
customer education.
AGENDA
The Customer Value

9
QUALITY
Quality is conformance to requirements. - Crosby
Quality is tness for use. - Juran
Good quality means a predictable degree of uniformity and dependability with a
quality standard suited to the customer. - Deming
Quality is the degree to which performance meets expectations.
Quality denotes an excellence in goods and services, especially to the
degree they conform to requirements and satisfy customers. - A.S.Q.
10
QUALITY
Quality is a fundamental concept in the food and beverage business.
All companies talk about quality.
What really is quality?

Quality is a very ambiguous concept.
There is a big dierence between:
INTRINSIC
QUALITY
&
PERCEIVED
QUALITY
11
QUALITY
INTRINSIC QUALITY Refers to
the intrinsic quality of product.
It is the outcome of the
companys competences in
combining dierent raw materials
and in making good products.
Its determinants are linked to the
upstream process:
Suppliers
Procurement
Raw materials
PERCEIVED QUALITY Refers

to the quality perceived by
consumers when they buy or
consume a product.
Its determinants regard consumers
means to evaluate the product:
Information
Knowledge
Competences
Having limited access to
information, therefore having little
knowledge of a product could change
the quality evaluation completely.
12
QUALITY
Consumers are not always able
to recognize and distinguish
product quality.
For this reason, companies should:

Know what the determinants of the perceived quality
are;
And keep the intrinsic quality aligned with the
perceived quality.
13
e.g.
QUALITY
WINE INDUSTRY
Okanagan Wineries approach taste dierently
How dierent wineries are

approaching the concept of taste
and wine palette evolution.
Annamma Joy, professor at British
Columbia University, expert in this
eld, speaks about it.
14
AGENDA
The Customer Value

15
CUSTOMER VALUE
The customer value is composed of
a set of benets that the organizations oering can provide and
the set of sacrices that the customer has to make in order to enjoy the
benets provided by the organizations oering.
What are typical

benets and sacrices?
16
BENEFITS
Benets represent the positive side of what consumers get from
consuming a specic product and/or service.
Benets can be considered drivers that prompt customers to prefer a
product over the other ones.
Benets can be classied into two big macro-areas:
FUNCTIONAL
BENEFITS
NON FUNCTIONAL
BENEFITS
17
FUNCTIONAL BENEFITS
Functional benetsare the benets
that are linked to aproducts attribute
that provides a customer with functional
utility.
Consumers consider them as solutions
for their issues.
They can either refer to intrinsic
attributes such as healthiness - and to
extrinsic aspects such as convenience.
Source: hBp://www.zoo4you.co.uk/wp-content/uploads/2012/11/bio-yogurt.jpg
18
NON-FUNCTIONAL BENEFITS
Non-functional benets are linked to consumers more intimate sphere.
They include dierent types of benets such as:
Psychological
Symbolical
Self-
IdenLfying
Sensorial
Social
19
NON FUNCTIONAL BENEFITS

Sensorial: They are mainly linked to the ve senses.
Symbolical: They represent something for a specic target of
consumers. E.g.: prestige, national identity, nostalgia.
Self-identity/ Self-image: They contribute to build and strenghten the

self identity/image of the consumers (e.g. a high quality wine for those
that consider themselves as wine experts).
Psychological: They refer to the psychological sphere of the consumers.
Social: They refer to the need of communicating to peers the belonging
(or not) to a specic group or culture.
20
e.g.
BENEFITS
Mineral Water Industry
EVIAN: Live Young
SAN PELLEGRINO: Live Italian
It leverages on functional benets,

promising endless youth.
It leverages on symbolical benets,

oering the opportunity to join the
Italian lifestyle.
Source: http://www.leskeupines.com/culture/evian-vous-rajeunit/
Source https://billoberlander.wordpress.com/2010/07/12/san-pellegrino/
21
SACRIFICES
Sacrices have to do with all the resources available to the consumer
that can be invested in that specic product rather than in alternative
products and activities.
Consumers have to make sacrices to get benets.
Sacrices are linked to the consumers decision making process and
change along the customer experience.
Nespresso capsules
and Pizza Hut delivery
let consumers save
cognitive and
temporal resources.
Source:http://www.sarongcapsulecae.it/news/wp-content/uploads/capsule-compatibili-nespresso-sarong-capsule-cae.jpg | http://adsoftheworld.com/
sites/default/les/styles/thumb_retina/public/images/pzpasta3.jpg?itok=ZDsVtoZI
22
SACRIFICES
STAGE OF THE EXPERIENCE
Pre-consumption
Purchase
Consumption
Post-consumption
RESOURCES UTILIZED
TYPE
DESCRIPTION
Temporal, cognitive and emotional
Information
Time and eort spent on gathering

information
Search
Time and eort spent on searching for the

product
Economic, cognitive and emotional
Opportunity costs
Value lost by not buying and/or using an

alternative product
Cognitive and emotional
Risks
Risks associated with buying and using the

product
Economic, temporal, cognitive and

emotional
Switching costs
Time, eort, and costs associated with

converting other products or activities to use
the purchased product
Economic
Monetary
Purchase price
Shopping
Time and eort spent on buying the product
Economic
Monetary
Costs associated with using the product
Learning
Time, eort spent on learning how to extract

value from the product

emotional
Maintenance
Time, eort, and costs spent in order to enjoy

the value of the product over time

emotional
Disposal
Time, eort, and cost of disposing of the

23
product
AGENDA
The Customer Value

24
VALUE PROPOSITION
It is the specic combination of benets and sacrices that the company
wants to oer its customers.
By denition, every product category is able to provide consumers with all
types of benets.
The value proposition should be dierent from competitor companies
ones in order to create a competitive advantage.
Companies do not compete with products or services, but rather with

the enAre value proposAon.
Indeed the product is only one component of the value proposition: it can
provide some benets, but not all benets are provided by the product.
25
VALUE PROPOSITION
Consumers deal with two dierent concept of values:
o Expected value: How the consumption experience is supposed to be.
o Perceived value: How the consumption experience will actually be.
EXPECTED
VALUE
PERCEIVED
VALUE
(DIS)SATISFACTION
In order to guarantee customer satisfaction,

companies have to take both of them into consideration.
26
EXPECTED VALUE
What are the determinants of the expected values?
By what are consumers inuenced in their choice?
Two big categories of drivers:
WHY WE BUY
Motivations
WHAT WE KNOW
Knowledge
Companies tend to
overestimate consumers
knowledge.
27
EXPECTED VALUE
Situation
Needs
Market actions
by
organizations
Motivations
Desires
Individual
characteristics
Expected
value
Previous
consumption
experience
Information
Preconsumption
experience
Beliefs
Knowledge
28
EXPECTED VALUE
MOTIVATIONS: Are the inner drives to achieve an objective, a state of
arousal that prompts individuals to act.
NEEDS: Are the discrepancies
between a consumers current
state and his or her desired state,
which are rationally perceived
and dealt with as problems to
solve.
DESIRES: Are mechanisms, closer

to instinctive impulses, that
center on the search for pleasure
and immediate satisfaction.
INDIVIDUAL CHARACTERISTICS: Include demographics, resocurces, values,

lifestyle, involvement, and psychological factors.
SITUATION: Can relate either to the environment where consumers live, or the
micro-context where purchase and consumption experiences take place.
MARKET ACTIONS: In an attempt to win customers over, organizations that
operate in F&B industries implement market actions (such as launching new
products, creating communications with the aim of shaping consumer needs and
29
desires.)
EXPECTED VALUE
KNOWLEDGE: Consists of the set of information consumers have and
the beliefs they apply when interpreting this information and making
their consumption choices.
INFORMATION: The relevant
information for creating value
expectations concerns product
categories and the single
products and brands that fall
within those categories.
Consumers build categorization
systems based on stimuli from the
environment to which they assign
meaning.
BELIEFS: Are the associations

linking this information together,
and the associations connecting
information to attitudes or
judgments.
30
EXPECTED VALUE
KNOWLEDGE: Consists of the set of information consumers have and
the beliefs they apply when interpreting this information and making
their consumption choices.
INDIVIDUAL CHARACTERISTICS: Expertise (ordinary consumers, connoisseurs,

consumers-producers).
PERSONAL EXPERIENCE: Consumption practices involve a series of activities aimed
at extracting value from the product.
PRE-CONSUMPTION EXPERIENCE: A process involving information search from
external sources which calls for investments in temporal, cognitive, and emotional
resources, and represents an abundant source of sacrices.
31
PERCEIVED VALUE
The perceived value is the result of the consumption experience.
PURCHASE
EXPERIENCE
EXPECTED
VALUE
CONSUMPTION
EXPERIENCE
PERCEIVED
VALUE
PRE- CONSUMPTION
EXPERIENCE
POST- CONSUMPTION
EXPERIENCE
32
PERCEIVED VALUE
The perceived value is the value that
consumers get out of consumption.
What are the determinants of the

perceived value?
The experience itself: The real consumption of
the product or service.
Knowledge: It is linked to the previous experience stages
and regards having the appropriate knowledge to
consume the product or the service correctly.
33
(DIS)SATISFACTION
EXPECTED
VALUE
PERCEIVED
VALUE
(DIS)SATISFACTION
If perceptions are aligned with or above expectations, consumers will be

satised.
If the perceived value is lower than the expected value, consumers will be
dissatised.
Companies should know all the determinants well in order to anticipate
rst and then manage the (dis)satisfaction of its customers.
34
AGENDA
The Customer Value

35
GOODS CLASSIFICATION
Experience Products:
Are goods whose characteristics, such as quality, cannot be assessed in

advance, but only ascertained upon consumption. The only way a
consumer can get an idea of quality is through rst-hand experience.
Search Products:
Are goods with characteristics that can be easily computed before purchase.
A consumer can get some ideaof its quality before he or she uses it by
simply searching for information on relative product features (hence the
name).
Credence Products:
Are goods whose utility impact is hard to assess for the consumer even after
the consumption. (e.g. medical treatment, education)
36
EXPERIENCE GOODS
Food and Beverage products and services are experience goods.
This classication has two main implications:
1- Trial is very important: by trying out the product consumers get a clue
for the quality they can expect from buying and consuming it.
Companies have to oer the opportunity of testing the product or the
service.
2- The reputation of the actors is very important: an alternative to actually
trying out the product is to rely on the reputation of the players involved
the producer, the distributor, the brand, and the critic.
37
EXPERIENCE GOODS
Quality cannot be assessed basing on objective criteria.
Features are hard to compute.
How many kilos of garments
does it wash at the same
time?
What taste and atmosphere

it will give o?
In the
pre-consumpAon stage,
consumers cannot
anLcipate the
experience or rely on
anLcipated
characterisLcs related to
quality.
38
QUALITY CLUES
Consumers have to rely on quality clues.
Quality clues are subjectively dened indicators that consumers use to
make their buying decisions.
When consumers use quality clues, this further reinforces the chance for
horizontal dierentiation by producers, since various clues are
subjectively dened, they themselves can be representative of a
dierentiation factor.
5$
Often
consumers tend
to associate
high price with
high quality (i.e.
price signal).
25 $
39
QUALITY CLUES
What are the most relevant quality clues in
the Food and Beverage business?

PRICE
AWARDS
REPUTATION OF THE ACTORS: It includes everything that is linked to

the brand such as company, products, and points of sales.
REVIEWS of the critics /
consumers
Consumers try to anticipate the experience not assessing the technical
characteristics, but other characteristics which they correlate to quality
(i.e. quality clues).
40
CONSUMER EXPERTISE
Companies tend to overestimate consumers expertise.
In order to distinguish consumers in terms of relation with the
product, it is necessary to introduce two important concepts:
Familiarity: The number of interactions that the consumer
has with the product
Expertise: Detailed knowledge the consumer has
41
CONSUMER EXPERTISE
Buying a product often does not necessarily mean knowing it well,
but simply being familiar with it.
Being an expert means having proper knowledge of the all product
features.
(e.g. for a wine: producer, type of grapes, method of production, etc.)
Companies need to understand what are the quality clues which their
consumers rely on, in order to enhance them for communicating the
products quality.
42
BeFood Interviews:
Kitchen Condential: When F&B Becomes High-Value Content

The fact that the audience cannot taste the dishes makes the cooks the
absolute rock stars.
Nils Hartmann
Head of Movie Channels at Sky Italia
Masterchef Italia Sky
43
AGENDA
The Customer Value

44
EXPERTS
Experts are those people recognized by consumers for their
expertise, competence, and/or access to useful information that
can be applied when selecting among dierent market oerings.
Jazz is like wine. When it is new, it is only for the experts, but when it gets older,
everybody wants it. - Steve Lacy
Experts can provide information and help consumers minimize the

uncertainties associated with product choices.
Consumers read reviews in order to nd quality clues.
Experts and critics are SENSE MAKERS.
45
e.g.
EXPERTS
Per Se, 10 Columbus Circle New York, NY 10019

Michelin ***
Cuisine :Contemporary
The inspectors view:
There is no more dramatic departure from the soulless Time Warner Center mall than entering
through the iconic blue doors to Per Se. An upscale sense of calmthe kind that only money can
buyinstantly soaks the atmosphere. The words posh and exclusive come to mind when
admiring the spacious tables, corner banquettes, and stunning views. The crowd is impossibly
elegant, moneyed, and could probably take it down a notch. Service is professional and intuitively
understands the needs and personality of each table. Chef Thomas Keller continues to raise the
bar with meals that express artistry and seasonality right down to the moment. A classic since
day one, the "oysters and pearls" still swim in that bath of luxurious caviar. Supplemental
charges are worth every penny once you taste the generous pile of shaved Australian black
trues twirled with hand-cut pasta. Summery avors reach their peak in the beautiful roulade of
veal breasten persillade. It may seem that dessert is missing from the parade of courses, but at
least you'll have room for the buttery salted caramels. Those without reservations can stop at the
opulent Salon, where much of the menu is available to order la carte.
46
EXPERTS ACTIVITIES
Experts and critics carry out three main roles to provide consumers with
value:
1- PRE-SELECTION:
Experts create value by paring down the innite variety of products and focusing consumer
attention only on the items that they believe are worthy of notice (either in a positive or negative
way). Essentially, experts pre-select the options available for consumers.
E.g. A restaurant being listed in a review guide
2- CATEGORIZATION:
Providing consumers with a product ranking system makes it possible to distinguish between the
dierent oerings available on the market. Specically, by framing a product, experts give
consumers a tool for comparing and evaluating products.
E.g. Categorizing a cuisine as contemporary
3- INTERPRETATION:
Through interpretation experts give consumers a preview of the experience they can expect from
the product.
E.g. Describing of the atmosphere and the menu
47
EXPERTS ROLES
How can these three acLviLes
enhance this raAo?

PRE-SELECTION A list of details lets consumers reduce sacrices connected
to information gathering and comparing alternative, in terms of cognitive
eort and time.
CATEGORIZATION Indicating the type of cuisine helps consumers reduce
the information costs.
INTERPRETATION Details about the menu and atmosphere help
consumers anticipate the experience and the benets consumers can get,
reducing the cognitive and emotional eorts.
48
EXPERTS
In light of experts role importance, companies should know:
1 - Who the critics are:
Who they are, what they do and what their reputation is. In this way companies can
provide them with the information they would like to be shared with consumers.
2 - What is the content of the reviews:

Whether it is positive or negative, what the focus is and whether the details are the
ones that companies consider to be the most relevant for its value proposition.
49
AGENDA
The Customer Value

50
HOW DO CONSUMERS CHOOSE

Nowadays there is a myriad of products sold in the market.
Websites and globalization are increasing the number of alternatives
that a consumer has. How many beers and/or wines can consumers
choose to buy?
However, consumers tend to choose among the alternatives that they are
able to remember. For this reason a companys rst objective should be to
enter into consumers memories.
Choosing means comparing alternatives, no matter how many they are.
How do consumers compare alternaLves?

How do consumers choose?

51
CONSUMER BUYING DECISION

PROCESS
The comparison process consists of three components:
Establishing the Evaluation Criteria: which are the features relevant for
a consumers choice (i.e. means-end theory)
Dening the Evoked Set: The group of products, brands, and points of
sale (physical or virtual) that they consider capable of satisfying their
needs and desires.
Judging the Individual Options: The choice process involves taking into
account the assessments of every single attribute to come to a
preference for one product option, which is the basis for choice. This
process combines both cognitive and aective aspects.
52
CONSUMER BUYING DECISION

PROCESS
COGNITIVE PROCESSES
Serve to assess tangible
attributes, and lead to the
application of decision-making
rules that utilize detailed
information.
Cognitive aspects are activated
primarily when motivations are
driven by needs
EMOTIONAL PROCESSES
Apply to intangibles, and,
being more holistic, lead to
more immediate overviews of
product value.
Aective aspects are more
evident when desires
underpin motivations.
53
FACTORS AFFECTING THE CHOICE

The complexity of the experience consists in a number of activities that a
consumer performs, along with the temporal, cognitive, and emotional
resources invested in these activities, and the number of parties involved,
hence an organization should identify the factors that can inuence this
complexity so as to make eective decisions.
The most typical factors are:
The Degree of Planning:
FULLY PLANNED
PURCHASES
PARTIALLY PLANNED
PURCHASES
UNPLANNED
PURCHASES
IMPULSE
PURCHASES
The Level of Involvement

The higher the involvement is, the higher the complexity of the process is.
54
FACTORS AFFECTING THE CHOICE

The Perceived Risks Risks can be performance, nancial,
psychological, and socially based. The higher the risk is, the higher the
complexity of the process is.
The Consumer Expertise Consumers that consider themselves as
experts, will mainly base their decisions on their past-experiences.
Those who dont, will search for information.
The Availability of the Product The easier it is to get the product,
the less the eort required by the consumer there is.
55
AGENDA
The Customer Value

56
CUSTOMER EXPERIENCE
The customer experience is a combination of emotional, sensorial, and
cognitive experiences that encompasses all the phases connected to the
purchase of a new product and/or service.
How can a company oer

a valuable customer experience?

It has to improve the experientiality of all the four stages because

the more experiential it is, the more the value of the company
proposition raises.
57
CUSTOMER EXPERIENCE
The four stages of customer experience are:

PRE-CONSUMPTION
PURCHASE
CONSUMPTION
POST-CONSUMPTION
58
PRE-CONSUMPTION
EXPERIENCE
In this stage, consumers gather the information they need to guide their
purchase and consumption choices.
It is a matter of information gathering and interpretation.
Utilitarian
Value
Building Knowledge
(sacrices and risks)
Hedonic
Value
Anticipation of
consumption experience
(emotions and feelings)
59
e.g.
PRE-CONSUMPTION
EXPERIENCE
The experience changes based on the type of the environment that

consumers use to gather information.
60
PURCHASE EXPERIENCE
Purchasing a product completes the pre-consumption experience and it
itself is composed of two sub-stages:
Choice
Analyzing the choices through a
pre-dened set of evaluation
criteria, let consumers obtain a
narrow evoked set of products
within which they can choose.
The product judgment could be
based on a cognitive or an
emotional approach (see:
Consumer buying decision process).
Shopping
Purchasing online and oine can be
very dierent. The rst is connected to
online ow while the second one to
environmental psychology. However,
both require consumers to take a series
of decisions. Two main roles can be
identied: the rst is goal-directed and
utilitarian, that is, instrumental in
making the purchase in question. The
second is experiential, providing hedonic,
symbolic, and communicative value
beyond what the product in question
61
oers.
e.g.
PURCHASE EXPERIENCE
Oine Experience
Online Experience
SOURCE:http://static1.squarespace.com/static/529fc0c0e4b088b079c3fb6d/
52b778e4b04a482541c1aa/52b779e4b04a482541c1c6/1392490801294/
62
CONSUMPTION
EXPERIENCE
Every consumption experience engages the consumer on a
sensorial, cognitive, emotional, and behavioral level,
translating into a series of interactions with the product and the
consumption context where various competences come into play.
In order to extract the product value, consumers adopt several

consumption practices that can be classied into three macrogroups:
SENSE-MAKING
INTEGRATING
SHARING
63
CONSUMPTION
EXPERIENCE
SENSEMAKING
INTEGRATING
SHARING
Categorizing
Assimilating
Communing
Producing
Socializing
Personalizing
Communicating
Associating
Evaluating
Appreciating
64
CONSUMPTION
EXPERIENCE
Consumption practices are often behaviors that follow pre-set
institutionalized patterns that are sometimes collectively shared.
In these cases, experience takes the form of
a consumption ritual:
Individual
Meaningful for the

individual alone
Ritual
Shared value
Brand communi,es
65
e.g.
CONSUMPTION
EXPERIENCE
Companies have to understand what the rituals that consumers undertake

are and how they consume products for designing a strategy in a more
appropriate way.
Starbucks
Source: http://www.centralillustration.com/cms-data/blog/blog-juleneharrison-nutella%202.jpg
66
http://c0248141.cdn.cloudles.rackspacecloud.com/WIEK_05551_6695165A.JPG
POST-CONSUMPTION
EXPERIENCE
The post-consumption stage refers to the set of activities that are done
after the consumption experience along with the comparison between the
expected and perceived value.
Depending on whether the consumers are satised or dissatised, they

are more or less likely to adopt certain behaviors such as:
Spreading by word of mouth, product sharing, complaining, repeat
purchases, and product disposal.
67
BeFood Interviews:
Building Customer Experience

We sell what we cook, and we cook what we sell.
Paolo Bongiovanni
Marketing Director Italia
Eataly
68
AGENDA
The Customer Value

69
MARKET SEGMENTATION
A market consists of:
a) a set of actors who interact to exchange goods, services, reputation,
and information
b) the activities that form the basis for this interaction, and
c) additional actors who exert their inuence.
Mapping the borders of a market is a critical task.
In every market, customers are dierent because they expect dierent
things.
How can companies deal with this issue?

70
MARKET SEGMENTATION
MARKET SEGMENTATION
Segmentation is based on the realization that as dierent as customers
are, they can be grouped together by similar value expectations.
This equates to subdividing the market into groups of customers who are
homogeneous within the group, but who are heterogeneous with
respect to customers who belong to other groups.
Each group is a market segment, and every segment is dened by a
preference for a dierent combination of benets that customers
expect to obtain and sacrices that they expect to make.
71
MARKET SEGMENTATION
Segmentation is a way to see a market as if it were made up of smaller
submarkets. Various organizations operating on the same market see
the market from diverging point of views, because they segment it in
dierent ways.
Segmentation is a process made up of three stages:
1- Identifying
Segmentation
Criteria
2- Building and
Proling the
Segments
3- Targeting
72
IDENTIFYING CRITERIA
IDENTIFYING SEGMENTATION CRITERIA
Segmentation criteria are variables that form the basis for distinguishing
various segments (which is why theyre also known as segmentation bases)
and assigning individual customers to the most appropriate one.
There are two main types of segmentation criteria:
- Benets Segmentation: With this type of segmentation, the direct
question the organization has to ask is, What are the benets and
sacrices that customers are looking for?
- Segmentation by Individual Characteristics: This segmentation is
based on the characteristics that qualify either individuals in general or
their relationships with the product categories that constitute the market.
(see the chart in the next slide)
73
IDENTIFYING CRITERIA
CHARACTERISTICS
CONSUMER
BUSINESS
DEMOGRAPHIC
Age
Gender
Residence
Marital status
Stage of family lifecycle
Years in business
Size (turnover, employees, factories,
subsidiaries, and so on) Location of
headquarters / subsidiaries
RESOURCE-BASED
Disposable income
Profession
Membership in social groups
Status
Reputation
Aesthetic tastes
Education
Consumption of cultural products
Financial performance
Growth rate
Type of business
Membership in trade associations/nancial
groups
Prestige
Type and quality of managerial competences
VALUE-RELATED
Terminal values
Instrumental values
Lifestyle
Level of involvement
Organizational
Competitive style
Dominant managerial style
Level of involvement
PSYCHOLOGICAL
Self-image
Personality traits
Self-image and personality traits of key

decision-makers
BEHAVIORAL
Frequency of purchase/consumption
Quantities of products purchased
Variety of products purchased
Purchase habits
Consumption habits
Brand loyalty
Store loyalty
Media habits
Preferred information sources
Frequency of purchase/investment
Average investment
Variety of products purchased
Investment habits
Supplier loyalty
Preferred information sources
74
BUILDING AND PROFILING

BUILDING THE SEGMENT
This involves grouping customers together into dierent segments according to
the criteria established in the previous step. To assign each customer to the
proper segment, the principle of exclusivity applies: each customer belongs to
one, and only one, segment.
Organizations can use two approaches: an a priori segmentation or a posteriori
segmentation.
CUSTOMER PROFILING
It refers to describing the customers in each segment based on their most
distinctive individual characteristics. Other variables, dierent from the
segmentation bases, are involved in order to understand who the customers
belonging to specic segments are. They play a key managerial role in
rendering segmentation actionable.
75
SEGMENTANTION
EFFECTIVENESS
For segmentation to be eective, segments must be:
Measureble
Signicant in size
Stable
Diverse in customers preferences
Accessible
76
TARGETING
TARGETING means deciding which segments to serve through ad hoc value
propositions.
The point here is to verify whether designing and realizing an ad hoc value
proposition for the segment in question is sustainable for the organization in
terms of productivity and nance.
In order to assess segmentation attractiveness, organizations should consider
three main indicators:
1. FINANCIAL RETURN: Considering parameters such as the size, the rate of
growth, the potential of the market
2. COMPETITIVE ATTRACTIVENESS: Considering parameters such as
competition intensity, possibility of building a competitive advantage
3. NON-FINANCIAL RETURNS: Concerning image and reputation
77
AGENDA
The Customer Value

78
VALUE PROPOSITION
Once the company had decided what the segments it is going serve are, it
has to decide what value propositions to oer those segments.
This decision is made of:
1. Bulding the value proposition
2. Positioning the value proposition
1. Bulding the value proposition
Choosing the features that are relevant for the customers that the
company wants to serve. Features are relevant as long as they are linked
to the benets and the sacrices expected by the customers. Value
propositions are made by dierent components such as the product
itself, the price, the service, the brand reputation, and the distribution.
79
e.g.
VALUE PROPOSITION
WINE INDUSTRY
Assume that a company decides to serve a specic customer segment that
expects to have a high quality wine.
This entails that customers expectations refer to status, image, and prestige.
The company has to understand
what are the features of the value proposition that the company has to build?
Taking into consideration what the expectations are, and features that can be
easily associated are:
High Price
Certain Brand
Reputation
Brand Exclusivity
80
POSITIONING
2. Positioning the value proposition
How the value proposition is perceived by the customers, so which are
the characteristics that are perceived as dierent and which are the ones
that are perceived as similar in comparison with competitors.
Basically positioning refers to where your product stands in respect to
others oering similar products in the mind of consumers.
To Build a strong positioning,
companies need to select the characteristics that are
relevant for the customers and dierent from

competitors.
81
POSITIONING
NOT ALL the features of the value proposition can be used.
An important step is to distinguish features in:
Point of Parity (PoPs)
Factors that are shared

across competitors (often
because they belong to the
same product category).
Territory and heritage are
often considered as PoP as
they are often shared by
F&B competitors
Point of Dierence (PoDs)

Factors representing the basis
for the dierentiation of the
current value proposition.
They can be dened as the
reason given to consumers to
choose a company oering.
82
e.g.
POSITIONING
A value proposiLon without PoDs is very weak and hard to be defensible,

because
WITHOUT A DIFFERENCE THERE IS NO PREFERENCE
Parmigiano Reggiano producers have to communicate
more than just the D.O.C. certicate (PoP) in order to
dierentiate from competitors.
Which one is
the best?
Source: http://www.montanari-gruzza.it/it/contents/images/pr_prodotti/fullscreen/65.jpg
83
LINKS
Okanagan Wineries
Evian - Live young
Evian - live young (vimeo)
San Pellegrino
San Pellegrino (vimeo)
Per se
Eataly
Masterchef Italia
Masterchef Italia FB Ocial Page
Pinterest Board
84

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MANAGING

FOOD & BEVERAGE COMPANIES

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The Concept of Quality

The Customer Value

The Value Propostion

F&B Products as Experience Products

The Fundamental Role of Experts and Critics

The Consumer Buying Decision Process

The Customer Experience

The Market Choice: Segmentation and Targeting

Positioning Your Value Proposition

1. It is not necessarily true that

1. Consumers are inertial: once they

The Organizational Culture

The Concept of Quality

The Customer Value

The Value Propostion

F&B Products as Experience Products

The Fundamental Role of Experts and Critics

The Consumer Buying Decision Process

The Customer Experience

The Market Choice: Segmentation and Targeting

Positioning Your Value Proposition

What really is quality?

PERCEIVED QUALITY Refers

For this reason, companies should:

How dierent wineries are

The Organizational Culture

The Concept of Quality

The Customer Value

The Value Propostion

F&B Products as Experience Products

The Fundamental Role of Experts and Critics

The Consumer Buying Decision Process

The Customer Experience

The Market Choice: Segmentation and Targeting

Positioning Your Value Proposition

What are typical

NON FUNCTIONAL BENEFITS

Self-identity/ Self-image: They contribute to build and strenghten the

SAN PELLEGRINO: Live Italian

It leverages on functional benets,

It leverages on symbolical benets,

Temporal, cognitive and emotional

Time and eort spent on gathering

Temporal, cognitive and emotional

Time and eort spent on searching for the

Economic, cognitive and emotional

Value lost by not buying and/or using an

Cognitive and emotional

Risks associated with buying and using the

Economic, temporal, cognitive and

Time, eort, and costs associated with

Temporal, cognitive and emotional

Time and eort spent on buying the product

Costs associated with using the product

Temporal, cognitive and emotional