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  • MANAGING FOOD & BEVERAGE COMPANIES

    Module 1 Product and Market

    1

  • AGENDA The Organizational Culture The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition3

  • 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:

    4

    Product Orientation

    Market Orientation

  • 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 organizations 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.

    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 thatconsumers buy products for their

    intrinsic quality, rather their motivation to buy may be more influenced by

    symbolic values.

    7

    MARKET ORIENTATION The main focus is to satisfy the needs of the market segments.

    RISK 1. Consumers are inertial: once they

    found a product they like, they tend to repeat purchase it.

    2. A company that is too aligned withthe market runs the risk of losing its

    innovativeness.

  • 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.

    8

    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.

  • AGENDA The Organizational Culture

    The Concept of Quality The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition9

  • QUALITY

    10

    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.

  • Quality is a fundamental concept in the food and beverage business. All companies talk about quality.

    Quality is a very ambiguous concept. There is a big difference between:

    QUALITY

    11

    INTRINSIC QUALITY

    PERCEIVED QUALITY

    What really is quality?

    &

  • INTRINSIC QUALITY Refers to the intrinsic quality of product. It is the outcome of the companys competences in combining different raw materials and in making good products.

    12

    PERCEIVED QUALITY Refers to the quality perceived by consumers when they buy or consume a product.

    H a v i n g l i m i t e d a c c e s s t o information, therefore having little knowledge of a product could change the quality evaluation completely.

    QUALITY

    Its determinants regard consumers means to evaluate the product: Information Knowledge Competences

    Its determinants are linked to the upstream process: Suppliers Procurement Raw materials

  • QUALITY

    13

    For this reason, companies should: Know what the determinants of the perceived quality

    are; And keep the intrinsic quality aligned with the

    perceived quality.

    Consumers are not always able to recognize and distinguish

    product quality.

  • 14

    QUALITY e.g. 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.

    https://www.youtube.com/watch?v=3uYm3EBUQIQ
  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition15

  • CUSTOMER VALUE The customer value is composed of

    a set of benefits that the organizations offering can provide and the set of sacrifices that the customer has to make in order to enjoy the

    benefits provided by the organizations offering.

    16

    What are typical benefits and sacrifices?

  • FUNCTIONAL BENEFITS Functional benefitsare the benefits that are linked to aproducts 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.

    18 Source: hBp://www.zoo4you.co.uk/wp-content/uploads/2012/11/bio-yogurt.jpg

  • NON-FUNCTIONAL BENEFITS

    Non-functional benefits are linked to consumers more intimate sphere. They include different types of benefits such as:

    19

    Psychological Sensorial

    Symbolical

    Self-IdenLfying

    Social

  • BENEFITS

    EVIAN: Live Young

    It leverages on functional benefits, promising endless youth.

    21

    SAN PELLEGRINO: Live Italian

    It leverages on symbolical benefits, offering the opportunity to join the

    Italian lifestyle.

    e.g.

    Mineral Water Industry

    Source: http://www.leskeupines.com/culture/evian-vous-rajeunit/ Source https://billoberlander.wordpress.com/2010/07/12/san-pellegrino/

    https://www.youtube.com/watch?v=Yy8hlBra9fQhttps://vimeo.com/64989343https://vimeo.com/80793193https://www.youtube.com/watch?v=t-j9C4xWXHM
  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition24

  • 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.

    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

    Companies do not compete with products or services, but rather with the enAre value proposAon.

  • 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.

    26

    EXPECTED VALUE

    PERCEIVED VALUE

    (DIS)SATISFACTION

    In order to guarantee customer satisfaction, companies have to take both of them into consideration.

  • EXPECTED VALUE What are the determinants of the expected values? By what are consumers influenced in their choice?

    Two big categories of drivers:

    27

    WHY WE BUY Motivations

    WHAT WE KNOW Knowledge

    Companies tend to overestimate consumers

    knowledge.

  • PERCEIVED VALUE The perceived value is the result of the consumption experience.

    32

    PURCHASE EXPERIENCE

    PERCEIVED VALUE

    EXPECTED VALUE

    CONSUMPTION EXPERIENCE

    PRE- CONSUMPTION EXPERIENCE

    POST- CONSUMPTION EXPERIENCE

  • PERCEIVED VALUE

    33

    Knowledge: It is linked to the previous experience stages and regards having the appropriate knowledge to

    consume the product or the service correctly.

    The experience itself: The real consumption of the product or service.

    What are the determinants of the perceived value?

    The perceived value is the value that consumers get out of consumption.

  • (DIS)SATISFACTION

    If perceptions are aligned with or above expectations, consumers will be satisfied.

    If the perceived value is higher 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

    EXPECTED VALUE

    PERCEIVED VALUE

    (DIS)SATISFACTION

  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition35

  • 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.

    38

    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.

  • QUALITY CLUESConsumers 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.

    39

    5 $ 25 $

    Often consumers tend

    to associate high price with high quality (i.e.

    price signal).

  • QUALITY CLUES

    Consumers try to anticipate the experience not assessing the technical characteristics, but other characteristics which they correlate to quality

    (i.e. quality clues). 40

    What are the most relevant quality clues in

    the Food and Beverage business?

    PRICE

    REPUTATION OF THE ACTORS: It includes everything that is linked to the brand such as company, products, and points of sales.

    AWARDS

    REVIEWS of the critics /consumers

  • 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:

    Familiarity: The number of interactions that the consumer has with the product

    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

    products quality.

    42

  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition44

  • EXPERTS

    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

    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.

  • EXPERTS Per Se, 10 Columbus Circle New York, NY 10019 Michelin *** Cuisine :Contemporary

    The inspectors 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 calmthe kind that only money can buyinstantly 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 breasten 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 la carte.

    46

    e.g.

  • 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

    48

    CATEGORIZATION Indicating the type of cuisine helps consumers reduce the information costs.

    PRE-SELECTION A list of details lets consumers reduce sacrifices connected to information gathering and comparing alternative, in terms of cognitive effort and time.

    INTERPRETATION Details about the menu and atmosphere help consumers anticipate the experience and the benefits consumers can get, reducing the cognitive and emotional efforts.

    How can these three acLviLes enhance this raAo?

  • 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

    https://www.pinterest.com/beta1110/befood-foodbeverage-management-m1/
  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition50

  • 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 companys first objective should be to enter into consumers memories.

    Choosing means comparing alternatives, no matter how many they are.

    51

    How do consumers compare alternaLves?

    How do consumers choose?

    https://www.pinterest.com/beta1110/befood-foodbeverage-management-m1/
  • CONSUMER BUYING DECISION PROCESS

    The comparison process consists of three components:

    Establishing the Evaluation Criteria: which are the features relevant for a consumers choice (i.e. means-end theory)

    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.

    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

    53

    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.

  • 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:

    The Degree of Planning:

    The Level of Involvement The higher the involvement is, the higher the complexity of the process is.

    54

    FULLY PLANNED PURCHASES

    PARTIALLY PLANNED PURCHASES

    UNPLANNED PURCHASES

    IMPULSE PURCHASES

  • The Perceived Risks Risks can be performance, financial, psychological, and socially based. The higher the risk is, the higher the complexity of the process is.

    The Consumer Expertise Consumers that consider themselves as

    experts, will mainly base their decisions on their past-experiences. Those who dont, will search for information.

    The Availability of the Product The easier it is to get the product,

    the less the effort required by the consumer there is.

    55

    FACTORS AFFECTING THE CHOICE

    https://www.pinterest.com/beta1110/befood-foodbeverage-management-m1/
  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition56

  • 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.

    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

    How can a company offer a valuable customer experience?

  • CUSTOMER EXPERIENCE The four stages of customer experience are:

    58

    PRE-CONSUMPTION

    PURCHASE

    CONSUMPTION

    POST-CONSUMPTION

  • 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.

    59

    Hedonic Value

    Anticipation of consumption experience (emotions and feelings)

    Utilitarian Value

    Building Knowledge (sacrifices and risks)

    https://www.pinterest.com/beta1110/befood-foodbeverage-management-m1/
  • PRE-CONSUMPTION EXPERIENCE

    The experience changes based on the type of the environment that consumers use to gather information.

    60

    e.g.

  • Purchasing a product completes the pre-consumption experience and it itself is composed of two sub-stages:

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    Choice Shopping

    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 e m o t i o n a l a p p r o a c h ( s e e : Consumer buying decision process).

    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 offers.

    PURCHASE EXPERIENCE

  • 62

    PURCHASE EXPERIENCE

    Online Experience

    Offline Experience

    e.g.

    SOURCE:http://static1.squarespace.com/static/529fc0c0e4b088b079c3fb6d/52ffb778e4b04a482541c1aa/52ffb779e4b04a482541c1c6/1392490801294/

  • CONSUMPTION EXPERIENCE

    63

    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 macro-

    groups:

    SENSE-MAKING INTEGRATING SHARING

    https://www.pinterest.com/beta1110/befood-foodbeverage-management-m1/
  • CONSUMPTION EXPERIENCE

    64

    SENSEMAKING

    Categorizing

    Associating

    Evaluating

    Appreciating

    INTEGRATING

    Assimilating

    Producing

    Personalizing

    SHARING

    Communing

    Socializing

    Communicating

  • CONSUMPTION EXPERIENCE

    65

    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

  • 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.

    66

    e.g.

    Starbucks

    Source: http://www.centralillustration.com/cms-data/blog/blog-juleneharrison-nutella%202.jpg 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

  • 68

    BeFood Interviews:

    We sell what we cook, and we cook what we sell. Paolo Bongiovanni

    Marketing Director Italia Eataly

    Building Customer Experience

    http://www.eataly.net/it_en
  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting 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.

    70

    How can companies deal with this issue?

  • 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:

    72

    1- Identifying Segmentation

    Criteria

    2- Building and Profiling the

    Segments 3- Targeting

  • IDENTIFYING CRITERIA IDENTIFYING SEGMENTATION CRITERIA Segmentation criteria are variables that form the basis for distinguishing various segments (which is why theyre 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

    74

    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

  • 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:

    Measureble

    Significant in size

    Stable

    Diverse in customers preferences

    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 ofgrowth, the potential of the market

    2. COMPETITIVE ATTRACTIVENESS: Considering parameters such ascompetition intensity, possibility of building a competitive advantage

    3. NON-FINANCIAL RETURNS: Concerning image and reputation77

  • AGENDA The Organizational Culture

    The Concept of Quality

    The Customer Value

    The Value Propostion

    F&B Products as Experience Products

    The Fundamental Role of Experts and Critics

    The Consumer Buying Decision Process

    The Customer Experience

    The Market Choice: Segmentation and Targeting

    Positioning Your Value Proposition78

  • 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 proposition2. Positioning the value proposition

    1. Bulding the value propositionChoosing 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

  • 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:

    80

    e.g.

    High Price Certain Brand Reputation

    Brand Exclusivity

  • POSITIONING 2. Positioning the value propositionHow 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.

    81

    To Build a strong positioning, companies need to select the characteristics that are

    relevant for the customers and different from competitors.

  • POSITIONING NOT ALL the features of the value proposition can be used.

    An important step is to distinguish features in:

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    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.

  • POSITIONING A value proposiLon without PoDs is very weak and hard to be defensible,

    because WITHOUT A DIFFERENCE THERE IS NO PREFERENCE

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    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?

    e.g.

    Source: http://www.montanari-gruzza.it/it/contents/images/pr_prodotti/fullscreen/65.jpg

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