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6.9.4: Step 2- Customer Analysis

  • Page ID
    59290
    • Anonymous
    • LibreTexts
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    Recall from Chapter 4 that the underlying factor behind a successful competitive strategy is superior understanding of what drives the value being sought by customers. We can wander back through the chapters and see this in many examples: DuPont’s success with Teflon came only after its management team understood the important values behind consumers value placed on time savings (as opposed to healthy eating); Ultimate Ears’ phenomenal success was due to the enormous value placed by musicians on superior performance and safety, values less known before in-ear monitors were invented simply because on-stage monitors were taken as a “given”; Accor was successful with the spartan Formule 1 hotel design because they understood that a large segment of customers simply sought rest and safety in a clean, quiet place to sleep; providing for this specific experience at a bargain price made Formule 1 very successful.

    Yet we need a systematic way to think about value. Step 2 involves uncovering the dimensions of value—first to understand executives’ best guesses as to customer value (Step 2a) and then to obtain customers’ actual perceived value (Step 2b). Recall from Chapter 4 that value can be broken down in a simple way:

    \[Value\,=\sum_{i=1}^j n*I_i\]

    This equation simply implies that a customer’s assessment of the overall value of brand j can be broken down to be a function of what the customer believes about brand j on each of up to n attributes, each weighted by their importance. There is a long line of research in psychology and marketing that uses this formulation to determine overall brand assessments by taking individual consumer beliefs about the brand—for example, Bij —the consumer’s belief about brand j on attribute i—each weighted by Ii, the importance of attribute i to the consumer. This, again, is a straightforward way to think about overall value—there are some critical pieces of information that come out of this model that help us dig more deeply into customer value:

    • There are attributes or benefits on which customers base their evaluations.
    • These attributes/benefits vary in their importance.
    • Customers have varying beliefs about the competitive brands on these attributes.

    It turns out that this is enough information to make some significant strides in understanding customer value and growth opportunities.

    In the case of our pharmaceuticals example, assume that Annie and her executive team initially identified the following six key attributes and benefits as key reasons why doctors in this category would choose one brand over another (again, this was before speaking to the doctors):

    • Dosing options (variety of strength levels)
    • Drug efficacy
    • Familiarity with or trust in brand
    • Adequacy of managed care coverage
    • Drug tolerability
    • Drug half-life

    The executive team made their estimates of customer value before any doctors were interviewed. This exercise required the executives to estimate both how important they believe the previous attributes are to the doctors and how the doctors are likely to rate both their brand OptiMod and the competitive brand Vivatrol on each attribute. Subsequently, Annie interviewed a sample of specialist doctors, asking them to provide ratings in a format similar to those provided by the MedFactor team. In addition, open-ended questions were asked about other attributes or benefits the doctors believe influence their prescription decisions and the important values behind the key reasons. These questions proved insightful, as they revealed two other attributes that were important to doctors in evaluating competitive drugs: the availability of clinical evidence and sales-force experience.


    This page titled 6.9.4: Step 2- Customer Analysis is shared under a CC BY-NC-SA license and was authored, remixed, and/or curated by Anonymous.

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