customer insight and customer-focused mindset
the principles of marketing
The learning outcome from the first part of the marketing essay would be that marketing is not only about selling and advertising, but it is the process of companies engaging customers, building strong customer relationships, and creating customer value. As The Principles of Marketing repeated, the focus is on customers: what they want and need and how marketers can deliver value for them based on that. This essay aims to reflect on the importance of customer insight, learn about how to have a customer-focused mindset, and also market segmentation.
During the sprint innovation festival, Mika Yrjölä gave a presentation about the importance of customer insight and empathy, and how to create them. Again, Yrjölä highlights customer insight is a key for companies to success.
To begin with, what is customer insight? Customer insight is the understanding and interpretation of customer data such as behaviors and feedback that were provided by customers to be used for improving product development and customer support. (Sach) It is easy to think of customer insight as data, but data itself is not insight. Insight is created FROM data and observation. If a company observes and interprets its customer insight well, that means that they are highly likely to be good at making its choices based on facts, predicting its competitor’s moves, and building meaningful relationships with customers. (Yrjölä 2022)
Despite the importance and advantages that can be generated from customer insight, it seems many companies tend to focus on and prioritize internal considerations instead of emphasizing their customers, which is called inside-out decision-making. (Hooley et al., 2001) Companies taking an inside-out approach can be dangerous as they get blind-sighted by the market, customers, and other stakeholders.
But what would be the reasons companies reduce the emphasis on customers even if they are aware of the importance of customer insight? At Sprint innovation festival Yrjölä highlights that creating insight is in fact hard, and many companies struggle to grasp market trends and use them. (Day & Moorman 2010; Ofek & Wathieu, 2010) And Yrjölä explains why such drawbacks like an inside-out way happen in his article “Eye on the customer: breaking away from the inside-out mindset.” (Yrjölä 2020)
First, people ignore the critical changes, because they consider them as the ones happening outside of their market. Or they notice the changes but do not take them seriously because of their overconfidence. (Yrjölä 2022) Secondly, managers fail to put themselves into customers’ shoes, as they use their own preferences instead of customers’. (Hattula et al., 2015)
So how do we change orientation from inside-out to outside-in? Figure 1 indicates 4 significant questions related to competition, products, insights, and metrics. Starting from the competitor’s perspective, marketers who have a product-centric mindset consider competitors as a threat, who can affect their current revenue and market share. So, they take a “defensive” mode toward competitors and end up focusing little effort on understanding customers’ value. Consequently, if the organization takes this defensive attitude, it will struggle to make new customer values or enter a new market segment. (Yrjölä 2020) Instead of being a defender against competitors,
the organization and marketers should think of themselves as a challenger to be able to create new customer values for the market. It is important to view the competitor’s offer from a consumer perspective.
How to think of our products?
Market Cannibalization means a sales loss with the introduction of a competitor’s new product launch, and it occurs when a new product is like the existing product which shares the same customer group. (Kenton 2021) If an organization has an inside-out approach, it might think that existing products should not be cannibalized by new products while keeping current cash flows. This product-centric mindset can lead to missing customer values in the future. (Yrjölä 2020)
FIGURE 1. Primary strategic principle and essential questions related to the contrast between product-centric and customer-focused mind-sets (Yrjölä 2022)
In the 2nd Paja of marketing, we focused on how to do market segmentation to the way to customer-orientated marketing. What is market segmentation?
Market segmentation is the process of collecting potential customers into groups or segment that shares common needs. Since buyers have different wants, resources, locations, buying attitudes, and buying practices, companies can make small segments to reach them efficiently and effectively through market segmentation. (Kotler, Philip et al. 2020, 200)
Market segmentation can be done in several ways such as Geographical way, Demographical way, Psychographical way, and Behavioral way. For example, Geographic segmentation groups customers by their physical location such as nation, city, and region. It is useful when large companies are trying to expand into other locations or big retailers are opening small-format stores. (Tarver 2022)
Demographic segmentation groups customers by age, gender, income, race, education, religion, generation, or occupation. It is considered one of the simplest methods of market segmentation as demographic variables are easier to measure than other variables. (Kotler, Philip et al. 2020, 200)
Psychographic segmentation classifies the market into segments based on lifestyle or personality. In comparison with demographic segmentation, psychographic segmentation is considered the most difficult one as its variables of it can be changed easily. (Tarver 2022)
Lastly, behavior segmentation groups customers by their knowledge, attitudes, use of, or responses to a product. Therefore, the data and customer actions, and habits are crucial in this segmentation. (Tarver 2022) Market segmentation enables marketers to answer the question: What customer will we serve?
|Geographic||Nations, Regions, States, Countries, Cities, Neighborhoods, population density, climate|
|Demographic||Age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, generation|
|Behavioural||Occasions, benefits, user status, usage rate, loyalty status|
Table 1. Major segmentation variables (Kotler, Philip et al. 2020, 200)
In conclusion, learning about customer insight made me realize its importance of it, as well as the common mistakes made by ignoring customer insights due to several reasons. Through market segmentation, I learned how to make the big market group into smaller segments to serve them efficiently and how to have a customer-focused mindset. Still, there are many things to learn about Marketing, but I guess this is a great way to start.
Day, G., & Moorman, C. (2013). Regaining customer relevance: the outside-in turnaround. Strategy & Leadership, 41(4), 17–23.
Evan Tarver 25.07.2022. Market Segmentation: Definition, Example, Types, Benefits. Read on 26.11.2022
Hattula, J.D., Herzog, W., Dahl, D.W. and Reinecke, S. (2015), “Managerial empathy facilitates egocentric predictions of consumer preferences”, Journal of Marketing Research, Vol. 52 No. 2, pp. 235-252.
Hooley, G., Greenley, G., Fahy, J. and Cadogan, J. (2001), “Market-focused resources, competitive positioning and firm performance”, Journal of Marketing Management, Vol. 17 No. 5-6, pp. 503-520.
Mika Yrjölä 2020. Eye on the customer: breaking away from the inside-out mindset
Mika Yrjölä 2022 Customer insight and empathy @sprint innovation festival
Will Kenton 17.07.2021. What is Market Cannibalization? Types and How to prevent it. Read on 26.11.2022 https://www.investopedia.com/terms/m/marketcannibilization.asp