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Adapt your organization to economic behaviour. You will achieve massive improvements in marketing and sales performance.
Are you serious? Did you just suggest customer behaviour is predictable? Not a common thought, I admit. But wouldnt it be nice if we would know how our customers make decisions? If we could create a movie script up-front that describes customer behaviour, not only what but also why? Ever since the fifties, when the field of marketing shifted from a logistical nature to a commercial one, scientists and managers have tried to catch the secrets behind economic Behavior. Today's trend suggests that the loyalty of clients has reached an all time low and their Behavior has become less and less predictable. But this article turns the tide. This research article shows that economic Behavior consists of recurring psychological and social principles that significantly improve our ability to predict economic Behavior. In my business career in marketing and sales management, I have not been able to get much support from the existing knowledge of economic Behavior. Models such as AIDA gave me an adequate description of the chronology of 'how things went. These models look back in history to explain what happened. But at the same time these models offered hardly any tools for me to design my companies interaction with customers, to design our actions based on expectations of the future. It was difficult or maybe even impossible to adapt the Behavior of my company to the economic Behavior of my customer. Like me, many marketers have chosen to focus their strategies on customer value and hence our influence on company performance has grown considerably. The entire organization has become a field of play for the marketer. Products and services nowadays undergo a detailed analysis of their significance for the customer.
This paper summarizes the Dutch master thesis De Voorspelbare Klant, published at AOG School of Management, Rijksuniversiteit Groningen in 2003. Publications in the Dutch NIMA Tijdschrift voor Marketing and Sales Management Magazine.
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The internal organization and enterprise culture have become victim of rigorous customer focus programs. And ICT managers working on CRM systems and all sorts of web development projects have become regular representatives in the meetings of the marketing department. So, customer orientation is a choice and marketing management has become business management. Still, it is curious that the marketer focuses all activities of the company on its customer, while leaving the sales and services processes untouched. We all agree that the customer engagement moments in the sales and services processes are the moments of truth. We know that not the product features should get sales focus, but customer needs and the customers desire make the right decision. It is time for the marketers to bring more customer focus in this 'final Frontier' in the value chain: the sales process or rather, the customers acquisition process. This research focuses on the Behavior of a customer within a single purchase. How do customers learn about a product what they want to know? How do they behave when they make a major purchase? And what is it that makes the customer choose for that one offer but not for the others?
Many current publications on improving commercial success concentrate on client value, strategy and related subjects such as customer relationship management and multi-channel management. This sort of article generally begins with the client, but then soon switches to everything that has to happen to increase the value for the client. In practice, however, the translation of the concepts and models presented towards sales and marketing communications proves tricky. The theoretical, perhaps good ten rules for a superior relationship with your client, are not always up to it when it comes to the unruly reality. In many companies, tactics, steering and implementation of sales and marketing communications activities are a question of feeling. They seem to be areas that everyone understands. This is understandable, because the results of sales and marketing communications activities are generally readily measurable. By simply trying something (start then think) management gets a reasonable picture of
what is going well and what is not. Common sense delivers the rest. Slowly but surely, there is a ruling feeling nowadays that commercial strategy is an intangible profession, in which intuition and social sensitivity have the greatest impact on success. The results are readily measurable, but we have started to accept that the causes for these results are less clear (successful sales managers often gain a heros status, but helping or correcting less successful colleagues is less successful). This leads to actual lack of steering in marketing communications and sales activities, which hurts the company. With an understanding of client Behavior, companies would be more capable of anticipating their clients Behavior. Steering the commercial organization could also be improved by basing it on reasoned knowledge instead of felt knowledge. In the end, the client will benefit from the improved communications.
Decisions by the Board to enhance the commercial decisiveness of marketing and sales departments regularly end by increasing the pressure on the commercial staff. Sales staff is more expressly managed with respect to their tasks instead of on their results. The number of visits or phone discussions is measured, and if the cards are really against you, management will even set targets for performing tasks. Every salesperson that completes ten sales visits per week gets a cinema ticket and those who one week complete less than five are out of here. That this sort of high pressure activities dampen sales motivation should be clear. Yet the end justifies the means. Unfortunately the whole sector is down at the moment, so the competition has probably used similar methods. In this way, everyone is lining up one behind the other for a place at the clients conference table, as if youve drawn a number at the butchers. Generally speaking, competing salespersons have the same contact person. Whats forgotten in the planning is that the sales pitches presented in this way eventually end up irritating the clients too. In war-room meetings estimates are currently being made as to which products and services are most promising for business in the short term. And this is not just about sales; marketing is in the spotlight too. Mailings and price policy are being strictly monitored. How cheap are our competitors doing it all? What was the response to that mailing? You can do better! In no time, within the management team, the marketing and sales directors are at each others throats. There are accusations about inadequate effort and poor leads from marketing. The competitions prices are always just that little better and marketing knows everything just that moment too late. On the other side, sales never provides win/loss reviews and doesnt follow up on anything, so how can marketing possibly ever get to know anything? With all these things going on, a lot of internal energy is lost while the only one who can actually have an impact is not even at the directors table. Thats the client. Only clients can help their supplier turn the
commercial tide. Clients have their own reasons for purchasing or not purchasing the services in question. Intensifying the existing marketing and sales activities means no more than pushing harder against the clients reasons for not buying. In 1992, Peter Senge in his 5th Discipline indicated that pushing against this system makes little sense in the long term as the system will simply push back harder and nothing will change. To improve commercial decisiveness, companies have to learn to better capitalise on the ever-changing reasons clients have for making purchasing decisions.
This brings us straight to the third focus of the research; we have to look at the way in which the client experiences his relationship with the potential supplier. Topics two and three relate expressly to interpersonal communications and are therefore addressed from a social-psychological perspective.
Communication
There is a predictable way in which people acquire the information they need when planning a future purchase Elaboration Likelihood Model: information is processed passively first, and then actively. The higher the involvement with the topic, the more likely the client is to put effort into processing information Petty & Cacioppo described the way people are processing information via two different routes. They described the two routes in the Elaboration-Likelihood Model: as soon as a client is offered information, he or she will process it via either a central processing route or a peripheral route. The peripheral route uses little or none of the clients cognitive baggage, but ensures that a series of automatic mechanisms are activated as a result of which the clients attitude is influenced. The central route uses the clients cognitive baggage to elaborate on the information presented (elaboration) and to understand it. In their research, Petty and Cacioppo showed that people more often than not tend to process information via the central route than via the peripheral route when they are motivated to process the information and to the extent they have the capacity to interpret the information based on their cognitive baggage. This motivation to start processing information, present by definition in high-involvement purchases, is a function of the personal relevance of the information. The capacity to interpret on the other hand depends mainly on the available cognitive baggage and the comprehensibility of the information presented. If these factors are present, the client tends is more likely (likelihood) to process the information presented via the central route.
According to Kahneman and Tverskys Prospect Theory, high-involvement purchasing decisions are driven by conflicting prejudices. On the one hand theres the overestimated self-confidence by the client, while on the other theres the fear of taking a risk. According to Kahneman and Tversky, the probability perceived by a client that a high-involvement purchase goes wrong will have an impact on the clients choice process. The application of this theory on high-involvement purchases supports and strengthens the previously-addressed Approach & Avoidance Conflict. Both theories subscribe to the importance of emotions in this area of application.
positive feelings (the tension and the kick of the jump) still dominate. But as the parachutist approaches the moment of jumping (arrival at the airport, boarding, waiting for the jump signal) the avoidance impulses increase strongly. At the moment of the jump, the avoidance impulses are many times stronger than the approach impulses. If there were no associated conflicts, such as shame, the parachutist would divert from his or her plan to jump. If the avoidance feelings had been this strong a week earlier, the parachutist would probably not have placed himself or herself in such a powerful conflict situation.
Phase 1: desire & need search From the moment that he is financially capable of realising his dream wish, Paul feels an explicit need to purchase a large yacht. Yet, his problem definition is not yet complete. Motives such as freedom, sports, speed safety and status are not yet clear to Paul. Paul goes to a boat exhibition, where he goes and looks at a number of vessels. Although externally Paul does not seem to have the profile of a client with sufficient financial means to be in the position to purchase such a large yacht, a number of salesmen notice Pauls genuine desire and the genuine nature of his questions. Based on discussions on sailing on larger boats, Paul makes a first analysis of his wishes. His doubts as to whether or not he should invest the money in another cause pension or house lose to his desire to be able to make longer trips by boat. Phase 2: excitement & solution search Paul goes home filled with impressions of yachts that are within his reach. He has a bag full of brochures that he reads avidly and discusses with his partner. Slowly but surely, Paul experiences a process whereby some of the yachts start surfacing as favourites. His enthusiasm grows and he starts daydreaming about them. Phase 3: mistrust & evidence search In the follow-up process, in which Paul continues his decisionmaking process, he contacts the national Touring Club and reads test reports by renowned sailing magazines to test the promises made by the yacht dealers. Questions such as is that boat really safer, how luxurious will be cabin be after a few years, what do others think of the sailing characteristics turn out to be important to Paul. He seeks evidence as substantiation. A small deviation between the evidence he finds and the suppliers promises scare the living daylights out of him. He dreads the thought of this major expenditure not being perfect immediately. While a few of his original favourites fall by the wayside, Paul also discovers new possible boats that he had not seen before. Because he is continually gaining knowledge about the shortcomings of his favourite boats, he can now look for others with greater focus. Phase 4: insecurity & risk search Not until he has to choose between 2 yachts, both equally valuable for Paul, does he take the boats out for a test. One of the yachts is 14 meters in length and extremely fast. The other is less long just ten meters but greater focus has been laid on safety and luxury in the cabin. The choice is soon made, however. Paul steps on a 14-meter yacht for the first time, about 2.5 times larger than his own boat, and feels extremely uncomfortable because of its size and seeming uncontrollability. His selfconfidence that he can handle this boat is apparently inadequate, despite the fact that he has been preceded by many other sailors. But the comforting words of the broker dont help and Paul has already chosen the 10meter yacht.
make a list of action items to support the customer decision making process where you have blanks in your as-is analysis. Plan 20 win/loss reviews Interview successful and failed bids of a specific service/product: Mr. Customer how did your decision process go Thorough team review of the interview questions Review the to-be planning Set up integrated marketing and sales campaign: multichannel communication including sales moments of truth Execute, report, feedback
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