MANAGING FOOD & BEVERAGE COMPANIES Product and Market 1 KEY Important concept Click on the icon to watch the video Click on the icon to get extra content Click on the icon to watch the video Click on the icon to go to the Pinterest board Interview included in the video lectures Example included in the video lectures Extra content not included in the video lectures 2 AGENDA ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ 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 specific 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. 5 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 organization’s 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 offered 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 influenced 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. 7 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. 8 AGENDA ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 9 QUALITY “Quality is conformance to requirements.” - Crosby “Quality is fitness 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 difference between: INTRINSIC QUALITY & PERCEIVED QUALITY 11 QUALITY INTRINSIC QUALITY à Refers to the intrinsic quality of product. It is the outcome of the company’s competences in combining different raw materials and in making good products. Its determinants are linked to the upstream process: ü Suppliers ü Procurement ü Raw materials PERCEIVED QUALITY à Refers to the quality perceived by consumers when they buy or consume a product. Its determinants regard consumers means to evaluate the product: ü Information ü Knowledge ü 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: à Know what the determinants of the perceived quality are; à And keep the intrinsic quality aligned with the perceived quality. 13 e.g. QUALITY WINE INDUSTRY ‘Okanagan Wineries’ approach taste differently How different wineries are approaching the concept of taste and wine palette evolution. Annamma Joy, professor at British Columbia University, expert in this field, speaks about it. 14 AGENDA ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 15 CUSTOMER VALUE The customer value is composed of a set of benefits that the organization’s offering can provide and the set of sacrifices that the customer has to make in order to enjoy the benefits provided by the organization’s offering. What are typical benefits and sacrifices? 16 BENEFITS Benefits represent the positive side of what consumers get from consuming a specific product and/or service. Benefits can be considered drivers that prompt customers to prefer a product over the other ones. Benefits can be classified into two big macro-areas: FUNCTIONAL BENEFITS NON FUNCTIONAL BENEFITS 17 FUNCTIONAL BENEFITS Functional benefits are the benefits that are linked to a product’s 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 benefits are linked to consumers’ more intimate sphere. They include different types of benefits such as: Psychological Symbolical Self-­‐ IdenLfying Sensorial Social 19 NON FUNCTIONAL BENEFITS • Sensorial: They are mainly linked to the five senses. • Symbolical: They represent something for a specific 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 specific group or culture. 20 e.g. BENEFITS Mineral Water Industry EVIAN: Live Young SAN PELLEGRINO: Live Italian It leverages on functional benefits, promising endless youth. It leverages on symbolical benefits, offering 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 Sacrifices have to do with all the resources available to the consumer that can be invested in that specific product rather than in alternative products and activities. Consumers have to make sacrifices to get benefits. Sacrifices are linked to the consumer’s 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.sarongcapsulecaffe.it/news/wp-content/uploads/capsule-compatibili-nespresso-sarong-capsule-caffe.jpg | http://adsoftheworld.com/ sites/default/files/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 effort spent on gathering information Temporal, cognitive and emotional Search Time and effort 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, effort, and costs associated with converting other products or activities to use the purchased product Economic Monetary Purchase price Temporal, cognitive and emotional Shopping Time and effort spent on buying the product Economic Monetary Costs associated with using the product Temporal, cognitive and emotional Learning Time, effort spent on learning how to extract value from the product Economic, temporal, cognitive and emotional Maintenance Time, effort, and costs spent in order to enjoy the value of the product over time Economic, temporal, cognitive and emotional Disposal Time, effort, and cost of disposing of the 23 product AGENDA ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 24 VALUE PROPOSITION It is the specific combination of benefits and sacrifices that the company wants to offer its customers. By definition, every product category is able to provide consumers with all types of benefits. The value proposition should be different 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 benefits, but not all benefits are provided by the product. 25 VALUE PROPOSITION Consumers deal with two different 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 influenced 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 consumer’s 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 sacrifices. 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 satisfied. If the perceived value is lower than the expected value, consumers will be dissatisfied. Companies should know all the determinants well in order to anticipate first and then manage the (dis)satisfaction of its customers. 34 AGENDA ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 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 first-hand experience. Search Products: Are goods with characteristics that can be easily computed before purchase. A consumer can get some idea of 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 classification 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 offer 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 off? 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 defined indicators that consumers use to make their buying decisions. When consumers use quality clues, this further reinforces the chance for horizontal differentiation by producers, since various clues are subjectively defined, they themselves can be representative of a differentiation 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: ü Familiarity: The number of interactions that the consumer has with the product ü 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 product’s quality. 42 BeFood Interviews: Kitchen Confidential: 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 ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 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 different market offerings. “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 find 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 inspector’s 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 calm—the kind that only money can buy—instantly 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 truffles twirled with hand-cut pasta. Summery flavors reach their peak in the beautiful roulade of veal breast en 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 à 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 infinite 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 different offerings available on the market. Specifically, 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 à A list of details lets consumers reduce sacrifices connected to information gathering and comparing alternative, in terms of cognitive effort and time. CATEGORIZATION à Indicating the type of cuisine helps consumers reduce the information costs. INTERPRETATION à Details about the menu and atmosphere help consumers anticipate the experience and the benefits consumers can get, reducing the cognitive and emotional efforts. 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 ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 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 company’s first 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: ① Establishing the Evaluation Criteria: which are the features relevant for a consumer’s choice (i.e. means-end theory) ② Defining 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. ③ 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 affective 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. Affective 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 influence this complexity so as to make effective decisions. The most typical factors are: ü The Degree of Planning: FULLY PLANNED PURCHASES PARTIALLY PLANNED PURCHASES UNPLANNED PURCHASES IMPULSE PURCHASES ü The Level of Involvement The higher the involvement is, the higher the complexity of the process is. 54 FACTORS AFFECTING THE CHOICE ü The Perceived Risks à Risks can be performance, financial, psychological, and socially based. The higher the risk is, the higher the complexity of the process is. ü The Consumer Expertise à Consumers that consider themselves as experts, will mainly base their decisions on their past-experiences. Those who don’t, will search for information. ü The Availability of the Product à The easier it is to get the product, the less the effort required by the consumer there is. 55 AGENDA ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 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 offer 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 (sacrifices 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-defined 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 offline can be very different. The first is connected to online flow while the second one to environmental psychology. However, both require consumers to take a series of decisions. Two main roles can be identified: the first 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 offers. e.g. PURCHASE EXPERIENCE Offline Experience Online Experience SOURCE:http://static1.squarespace.com/static/529fc0c0e4b088b079c3fb6d/ 52ffb778e4b04a482541c1aa/52ffb779e4b04a482541c1c6/1392490801294/ 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 classified 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.cloudfiles.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 satisfied or dissatisfied, 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 ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 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 influence. Mapping the borders of a market is a critical task. In every market, customers are different because they expect different things. How can companies deal with this issue? 70 MARKET SEGMENTATION MARKET SEGMENTATION Segmentation is based on the realization that as different 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 defined by a preference for a different combination of benefits that customers expect to obtain and sacrifices 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 different ways. Segmentation is a process made up of three stages: 1- Identifying Segmentation Criteria 2- Building and Profiling 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 they’re also known as segmentation bases) and assigning individual customers to the most appropriate one. There are two main types of segmentation criteria: - Benefits Segmentation: With this type of segmentation, the direct question the organization has to ask is, “What are the benefits and sacrifices 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/financial 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 different 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, different from the segmentation bases, are involved in order to understand who the customers belonging to specific segments are. They play a key managerial role in rendering segmentation actionable. 75 SEGMENTANTION EFFECTIVENESS For segmentation to be effective, segments must be: Ø Measureble Ø Significant in size Ø Stable Ø Diverse in customers preferences Ø 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 finance. 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 ① The Organizational Culture ② The Concept of Quality ③ The Customer Value ④ The Value Propostion ⑤ F&B Products as Experience Products ⑥ The Fundamental Role of Experts and Critics ⑦ The Consumer Buying Decision Process ⑧ The Customer Experience ⑨ The Market Choice: Segmentation and Targeting ⑩ Positioning Your Value Proposition 78 VALUE PROPOSITION Once the company had decided what the segments it is going serve are, it has to decide what value propositions to offer 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 benefits and the sacrifices expected by the customers. Value propositions are made by different 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 specific 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 different 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 offering 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 different 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 Difference (PoDs) Factors representing the basis for the differentiation of the current value proposition. They can be defined as the reason given to consumers to choose a company offering. 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. certificate (PoP) in order to differentiate 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 Official Page Pinterest Board 84
