Who is My Customer

THE STORY
Pity the poor woman who just took a marketing management job at a medical device company. She had never worked in the industry before. She was given the project of working with their latest product—a device that used an entirely new way to cure a disease. After a meeting to demonstrate the device to her, the closing words of her boss to her was “Now go out and market this thing.”

At first, she walked away from the meeting rather confident, since she had been in marketing for some time. But then she started the think, “Go out and market this to whom? Who is my customer?”

Her first thought was that the customer is the patient using the device. Therefore, her marketing should focus on how painless and how quickly the device works.

Then she thought that perhaps the customer is the doctor who prescribes the procedure. If the doctor doesn’t want to prescribe it, then in many ways it really doesn’t matter what the customer wants. If the doctor is the primary customer, then the marketing focus would have to also address issues such as whether insurance companies will readily pay for the procedure and whether it increases the risk of malpractice.

Most of these devices will end up in hospitals, so maybe the focus should be on hospital procurement executives. They will want a marketing presentation that looks at the financial cash flows and revenue streams.

Then she considered whether the insurance company is the primary customer. After all, they are the ones paying the money once the device is used. If they don’t want to pay, the device won’t get used. If they are the primary customer, then the key marketing issue must focus on cost effectiveness relative to other treatment options.

And what about the government? They get to approve the diseases for which this device can be used as treatment. They impact how Medicare will treat this device. There are powerful political lobbies from the companies who sell the products currently used to treat this disease who will use the government to help protect their status quo. Therefore, perhaps the marketing needs to focus on lobbying.

At this point, the marketing executive was very confused and wondering if she could still get her old job back.

THE ANALOGY
There are many different types of decisions that go into getting a product sold. As we saw in the story above, the decision-makers who affected sales of the device included:

· Product Users (Patient)
· Product Prescribers/Advisors (Doctors)
· Product Investors/Determine Access (Hospitals)
· Product Usage Payers (Insurance Companies)
· Product Regulators/Inluencers (Government)

For some products, those decisions are made by a small handful of people who are in charge of multiple roles. Sometimes, as in the story above, there are a great number of constituents who all play separate roles in the decision-making.

This complexity provides opportunities to create strategic advantage via the types of strategic approaches one takes to these various constituents or the type of decisions you want constituents to make.

THE PRINCIPLE
There are two basic ways to gain strategic advantage in the complexities associated with how a product is purchased:

1) Focus on a different aspect of the complexity than the competition; or
2) Redefine the roles of the players in the decision-making process.

Allow me to give a simple example of how this works. Let’s say you sell children’s breakfast cereal. The child is the user and an influencer in the purchase, but the parent is the advisor/prescriber and the person who pays for it. Principle #1—focus on a different aspect of the complexity—would work something like this: If all of the competition is focusing their efforts on getting the child to demand the product from the parent, perhaps you can create a strategic advantage by focusing on getting the parent to override the child’s demands and buy the product for reasons that please the parent, such as nutrition. A third approach could be that instead of spending most of the marketing money on the child or the parent, the money is spent on buying better shelf space and pricing promotions with the supermarket company (who influence access and pricing).

The second principle—redefine the roles—could work something like this: You repackage the cereal into individual snack sizes and put them into vending machines where the children hang out. Now, the parent is no longer defined as the purchaser, but the child is, who buys the snacks on his or her own out of the vending machine. The access is no longer defined as the store, but as a machine.

You can also see this taking place in the world of broadcast entertainment. Looking at principle #1, you can focus on either trying to get content pleasing to the audience (the users) or content pleasing to the advertisers (the payers). In many cases, the same strategic move can please both: if you draw a large audience (such as the Superbowl) you can have many willing to pay large sums for the right to advertise.

This, however, is not always the case. Sometimes one can draw a large audience with controversy, and many advertisers do not want to be connected with controversy. Take, for example, Fox television’s attempt in November to broadcast the OJ Simpson story “If I did it, Here’s How it Happened.” No matter how popular, no advertiser wanted to be associated with the story, so the network did not air it.

Other times, advertisers can demand that they not only get advertising via commercials, but product placements into the show’s content. Take, for example, the ever-present coke beverages located by the judges of American Idol. This is all about pleasing the advertising customer rather than the viewing customer. So depending on which customer you want to focus on, one can come up with different strategic approaches for the types of entertainment one broadcasts.

Looking at principle #2, broadcast entertainers can also redefine the roles. For example, many entertainment programs now ask the audience to vote with their cell phone. This is a huge money-making opportunity, which now makes the viewer also a payer. A new trend is to make the audience also the creator of some of the content, such as with YouTube, or some of the commercials on Superbowl XLI. In the case of controversy, if the audience demand is large enough, one can use pay-per-view to get the audience to pay for things that advertisers shy away from.

In the new digital economy, business models are starting to look more like the broadcast entertainment model, where users get content for free and advertisers pay for space on the screen. But again, there may be opportunities for a strategic advantage based on how one focuses on the complexities of the business model. One can take limited resources and focus on getting the absolute best content or one can take limited resources and focus on building the most efficient online advertising model. One can redefine roles and get the users to pay for the content. And I’m sure that there will be many new models to evolve that we haven’t seen yet.

In retailing, some firms are redefining their role from being influencers and access points to becoming the manufacturer of the products they sell. Similarly, manufacturers are starting to go direct to the user with their own stores. In other words, instead of focusing on the store as their customer, the manufacturer is going direct to the user as their customer.

The beauty is that because there is no one single best way to go to market, there are opportunities to gain an advantage by taking a new strategic approach. The problem is that if you do not think more open-mindedly about different ways to define customers and the other stakeholders, you will always be left behind and copying others.

SUMMARY
Answering the question “Who is my customer?” is not as obvious as it first appears. Often, there are many stakeholders involved in completing a purchase, including users, influencers, access points, payers, regulators, etc. In a sense, they are all your customer. Yet given one’s constraints of money and time, one cannot always give high attention to all of them. By thinking outside the conventional box, one can redesign the business model amongst these players, either by:

1) Altering who gets focused on (i.e, who becomes the primary customer)
2) Altering the roles played by the various stakeholders, which might even lead to adding new players or eliminating some of the former players from the decision-making process.

How you manage these decisions can have a major influence on how you design your business model and how you design your marketing program.

FINAL THOUGHTS
Another stakeholder or constituent whom we did not address is the firm that you may eventually intend to sell your company to. That’s the big cash buyer. A little focus on them as your customer could go a long way to getting the deal to happen. But this topic will be covered in more depth in another blog.