USING CONSUMER BEHAVIOR FOR MARKETING STRATEGY

 

OK, in marketing the customer is king.  We all know that.  If marketing is not customer-centric it probably is NOT really marketing.  We all know that.

Or do we?

Why such a focus on competitive behavior?  I know John Nash just died and A Beautiful Mind was a great book (and a less than great movie) and Game Theory is very cool–but is it talked about in board rooms?  No.  I have never heard a CEO lean toward his CMO and ask, “Do you think our competition is doing prisoner’s dilemma?”  But a lot of attention is about competition to the distraction of focusing on consumer behavior.

I have set through many seminars and presentations on Game Theory and even been asked to teach a class on Game Theory.  While it seems important, and is certainty mathematically rigorous, what does it get us?  To me it functions more as an academic construct than an actionable insight.  Much like Michael Porter’s competitive intensity: have you ever used, or seen quantified, competitive rivalry?   Has there been a model quantifying the bargaining power of suppliers and buyers, the threat of substitutes and new entrants?  It functions as an abstract talking point, like debating the number of angels dancing on the head of a pin.

That’s why I posit a knowledge of customer behavior over a knowledge of Game Theory.  Indeed, I suggest that a knowledge of the analytics around customer behavior is a substitute for Game Theory.  I can hear the gasps.

Stephan Sorger’s excellent Marketing Analytics has a brief description of competitive moves, both offensive and defensive. Below are summaries of each move but applied via consumer behavior.  This can serve as a thumbnail sketch of what I have in mind

Defensive Reactions to Competitor Moves:

Bypass Attack (the attacking firm expands into one of our product areas) and the correct counter is for us to constantly explore new areas.  Remember Theodore Levitt’s Marketing Myopia? If not, re-read it, you know you had to in school.

 Encirclement Attack (the attacking firm tries to overpower us with larger forces) and the correct counter is to message how our products are superior / unique and of more value. This requires a constant monitoring of message effectiveness.

 Flank Attack (the attacking firm tries to exploit our weaknesses) and the correct counter is to not have any weaknesses. This again requires monitoring and messaging the uniqueness / value of our products.

Frontal Attack (the attacking firm aims at our strength) and the correct counter is to attack back in the firm’s territory. Obviously this is a rarely used technique.

Offensive Actions:

New Market Segments: this uses behavioral segmentation (see the latter chapters on segmentation) and incents consumer behavior for a win-win relationship.

Go-to-Market Approaches: this learns about consumer’s preferences in terms of bundling, channels, buying plans, etc.

Differentiating functionality: this approach extends consumer’s needs by offering product and purchase combinations most compelling to potential customers.

My book, Marketing Analytics (Kogan Page, 2015) offers additional analytic techniques to quantify the causality of customer behavior.