BE201: Understanding Customers

• E-Book from Erik Modig (2025) covering multi-choice questions in BE201

Understanding Customers

• A customer is an individual or organization purchasing goods or services from a business to fulfill a need, desire, or requirement.
• Customers are the cornerstone of any business's operations, impacting revenue and sustainability.
• Key characteristics of a customer include exchange of value, fulfilling needs and desires, and decision-making based on factors like price, quality, convenience, and brand reputation.
• Types of customers are broadly categorized into consumers and business-to-business (B2B) customers

Consumers

• Consumers buy goods or services for personal use rather than for resale or production.
• Consumer purchasing decisions driven by emotional, psychological, and social factors
• Consumers rely on marketing cues like advertisements and product reviews
• Consumer behavior is influenced by income levels, cultural background, personal preferences, and peer influence.
• Example: a mother buying groceries, a teenager buying a smartphone, or an individual investing in a fitness subscription.

Business-to-Business (B2B) Customers

• B2B customers are businesses that purchase goods or services for operational, production, or resale purposes.
• B2B transactions characteristically have larger order volumes, longer decision-making processes, and formal contracts.
• B2B customer decisions driven by cost efficiency, supplier reliability, and long-term partnerships
• Business example: a manufacturing company buying raw materials, a retail chain sourcing products, or a firm acquiring software solutions.

Role in the Economic Ecosystem

• Both consumers and B2B clients play a pivotal role in the economic ecosystem.
• Businesses need to recognize the differences in motivations, decision-making processes, and expectations.
• Companies can satisfy customer needs, foster loyalty, and ensure long-term success by aligning with their audience

Customer Focus Leads to Success

• Prioritizing needs creates solutions aligned with real needs and leads to customer-centric innovation.
• Apple’s focus on intuitive design and seamless user experiences has set the standard for customer-centric innovation
• Emotional bonds with customers drive stronger brand loyalty than transactional benefits alone
• Companies manage to build a relationship with their customers that goes beyond the functional value of the product by excellence in creating emotional connections
• Trust is a critical determinant of customer loyalty; 81% of consumers stated that trust is a deciding factor in purchasing decisions.
• Companies foster trust by actively listening to consumer feedback and consistently meeting expectations.
• Amazon has solidified its reputation for reliability and convenience, thereby sustaining customer loyalty in fiercely competitive markets.

Marketing Defined

• Marketing is a process of identifying, anticipating, and satisfying customer needs profitably
• Designed to communicate value and build relationships with potential and existing customers.
• Drives awareness, brand loyalty, and customer engagement

What Marketing Involves

• Learning about customers, researching what people like, need, and expect.
• Reaching the right people: Grouping customers into categories like age, interests, or buying habits.
• Creating a clear message and spreading the word using ads and media
• Building relationships and checking progress.

Important Goals of Marketing

• Increased awareness of the products or services
• Maintaining customer interest
• Attracting buyers
• Building a solid and lasting reputation

Sales Defined

• Sales is the process of directly interaction with customers to encourage them to purchase a product or service.
• Sales teams convert leads into paying customers & ensure a smooth transaction process.
• The sales department focuses on short-term revenue goals and aims to build trust and foster repeat business.

What Sales Involves

• Finding buyers and talking to customers
• Showing/explaining the product and negotiating the sale
• Closing the sale and following up

Important Sales Goals

• Turn Interested Customers Into Buyers
• Hit Revenue Targets
• Build Strong, Long-Lasting Customer Relationships

Intersection of Marketing and Sales

• Effective collaboration between departments helps customer learning about products, and sales activities focus on guiding those customers to make a purchase.
• The connection strengthened via CRM software and e-commerce.

Frequent sources of conflict

• Marketing teams focusing on high lead volume vs. sales wanting quality
• The long-term brand initiatives vs. sales short term targets
• Communication & Alignment.

Resolution of conflict

• Open communication
• Shared goals and strategies

Table of Marketing vs. Sales

• Marketing prioritizes identifying and satisfying customer values
• Marketing focuses on spreading awareness
• Sales targets persuading customers to purchase

The Future of Marketing

• Do no just focus on customers but, consider that you cannot completely trust consumer reports.
• There must be room for creativity, innovation, differentiation and building emotional connections with the customer

Algorithmic Homogenization

• One of AI's primary advantages is its ability to optimize for efficiency and scale.
• This same capability can lead to homogenized marketing efforts

Algorithm-Driven Limitations

• Al driven strategies often prioritize what has worked in the past, reinforcing existing patterns rather than challenging them.
• Human marketers bring creativity, imagination, and boldness to market
• Humans ensure marketing strategies align with ethical standards

Traits of a Successful Marketer in an AI World

• Emotional Intelligence
• Cultural and Social Sensitivity
• Strategic Vision
• Human-Centric Innovation
• Creative Thinking
• Ethical Judgment

Key Marketing Skills

• Deep Empathy for Customers
• A Proactive Approach to Anticipating Needs
• Emotional Intelligence in Building Relationships
• Data-Driven Decision-Making
• Agility and Adaptability
• Long-Term Relationship Orientation
• Holistic View of the Customer Journey
• Deep Understanding of Human Behavior

Customers at risk

• Especially vulnerable groups (children, the ederly and those with low financial literacy) need protection
• Must prevent targeting with misleading and harmful offers

Understanding Customer Behavior

• It is essential to study it systematically and combine qualitative insights, quantitative analyses, and real-time data.
• Research methodologies must capture real time feedback.

Data Capture Methodologies

• Observational Research
• Qualitative Interviews and Focus Groups
• Surveys and Questionnaires
• Experimental Research
• Social Listening and Sentiment Analysis
• Eye Tracking and Neuromarketing

Data Capture: Strengths and Limitations Summary

Observational Research

• Strengths: authentic, unfiltered behaviors.
• Limitations: Does not provide direct access.

Qualitative Interviews and Focus Groups

• Strengths: Uncovers "why".
• Limitations: Findings may not be readily generalizable.

Surveys and Questionnaires

• Strengths: Efficient for large data samples.
• Limitations: Can be biased.

Experimental Research

• Strengths: Strong evidence.
• Limitations: May not replicate real world.

Multi-Modal Data Capture

• Each method presents strengths and weaknesses,
• The solution lies in multi-modal capture for a comprehensive multi-faceted view of consumer behavior.

Customer Journey Perspective

Early Transactional

• Frameworks: linear and transactional. -Model: AIDA -Focus: sales funnel approach.
• Limitations: treated customers as passive participants and failed to account for post-purchase behavior or feedback loops

Consumer Decision Model

• (1960s): expanded transactional frameworks by introducing the five-stage buying process. -Model: Engel, Kollat, and Blackwell -Significant Insight: the significance of post-purchase satisfaction and cognitive dissonance. Limitations: it did not fully account for the emotional and contextual aspects of the journey

Relationship Marketing and the Lifecycle Perspective

During the 1980s and 1990s, relationship marketing gained prominence, shifting focus from single transactions to long-term customer engagement.

• Model: acquisition, retention, and expansion -Advantage: acknowledged the cyclical nature of the customer journey and underscored the necessity of ongoing engagement

Emergence of experience management

• customer journey was reframed as an emotional arc, with touchpoints designed to evoke positive emotions and minimize pain points -Tools like: journey mapping

digital revolution and omnichannel journeys

(2010s) transformation of the customer journey with channels. -McKinsey's Consumer Decision Journey (Court et al., 2009) challenged traditional linear models, proposing a circular journey. -Stages model: emphasizes active evaluation and the loyalty loop

Modern perspectives

• 2020s has evolved further with advancements in Al, big data, and personalization, personalized customer interaction.

Steps of the customer journey

• Five stage customer journey from the development of needs, entering the category, forming preferences, the point of purchase and the post purchase behavior

1: Development of Needs

• The initial recognition of a need or desire that ignites the customer journey -The stage corresponds to information search

2: Entering Category

• Customers begin to explore categories of products or services that can satisfy -Consumers rely on personal knowledge, online resources, or word-of-mouth

Marketing Actions to Optimize Customer Journey.

• Identifying triggers
• Align offerings
• Position and messaging.

3: Forming Preferences

Customers compare features, benefits, and trade-offs to narrow down their choices -Research: highlighting the influence of framing and biases in shaping preferences

4-Point of Purchase

• Customers make their final decision and completes the purchase -Research: mental accounting shows that customers' perception of value influences purchase behavior

5 Post-Purchase Behavior

How the customer reflects on their experiences which influence loyalty, satisfactory metrics (NPS)

Distinctions between B2C and B2B Customers

• Larger and Complex Transactions
• Decision-Making Complexity
• Purchase Cycle Length
• Motivations and Goals
• Relationship Dynamics

The Five Steps of Differences

1. The Development of Needs
2. Entering a Category
3. Forming Preferences
4. Point of Purchase
5. Post-Purchase Behavior

Multi-Faceted View Points

• Holistic View of the Customer Experience
• Customer-Centric Perspective
• Actionable Insights for Optimization
• Adaptability Across Industries
• Supports Data-Driven Decision Making
• Focus on the Loyalty Loop

Disadvantages to customer journeys

• Complexity and Resource Requirements
• Dependence on Accurate Data
• Risk of Over-Engineering
• Focus on Existing Customers
• Potential for Siloed Implementation

Deep Empathy for Customers

Empathy is the ability to see the world from the customer's perspective

Proactive Approach

The customer centric mindset

Understanding how buyers make decsions

• Human brain from an evolutionary perspective -System 1 Fast and Emotional -System 2 Slow and Rational

SYSTEM 1

Fast Emotional

• Works automatically and quickly (no effort)
• Fast, intuitive, and emotional thinking that relies on heuristics

Why System 1 Dominates

• Saves Power: for quick reaction. Helps overcome short term information. Saves resources that leads to consumer retention.

How to increase System 1

Emotional Responses:

• create an increase of System 1 through association. The most frequent response at tracking data is through customer response by System 1
• Use short forms for efficiency. Be aware that consumers are ready for new things. By doing so you can gain more in depth

System 2

Slower and more deliberate conscious effort logical reasoning complex problem solving

• Calculating
• Cost effectiveness
• Long term financial plans

Overriding the Impulsive Responses of System 1

requires:

• Requires cognitive effort
• Easily fatigued
• Result consumer often default to System 1

Combination of the Systems

• Used to help reinforce decisions to create better design

Table

• B2C: Brand Perception. I like Nike so I should buy Nike -B2B: Relationship: Trusted partner

Influence of B2B Decisions/B2B

The goal for system 2

1- logical evaluation 2- Risk Assessment 3- conensus building

• Create innovation and differentation

The Need from Customer Behavior

• Identify Market Opportunities is done through Innovative Solutions
• Segmentation and Targeting
• Understanding Customer Behaviour in a number of ways. The goal is that marketers understanding

Market categories factors

• Competitive Advantage and understanding customers (what matters in customers minds)
• Creating effective communication and loyalty

Ways to classify Human Needs

Maslow's -Hirshy Archy Needs

• Physiological Needs
• Safety Needs
• Love Belongings
• Esteem Needs

Categories.

• Esteemed ( people recognition)
• Self Actualization( Achieve one's potential)

Basic needs for survival =

Food water shelter

Lacking emotional and cultural context

Al excels at but struuglesto grasp deeper emotional and cultural context. It cant recognise fristration.

Nuance AI

cannot detemine causation AIis powerful at surfacing correlations but ofen cannot detemine causation. AI cannot detemine why behind Customer behaviour.

Al alone requires homogenization

One of Al primary advantages is its abiltty to otimize for efficeny and scale. Creates risk creates homogenizal marketing efforts and

AI has limitations

• Does not easily determine "why"
• Lacks ethical judgment

Constructed needs

are shaped by external influences, culture identity. Self expression.

Constructed need characteritcs

Highly dynamic and evolving over time.

B2B marketing =Basic vs Constructed Needs

the duality of basic and constructed

Basic needs are largely transactic

emphasize

• Reliability
• Efficiency- cost effectiveness.

Constructive needs =

• Innovation and differentation

Basic &Constructed B2C & B2B Marketing

B2C

are driven by operational challenges .

B2B

Customers at Risk

needs that to support a responsibility protect by more vulnerable = Children, Elderly protect the these At -Risk Customers From Manipulative Tactics

Types of marketing

• Personal desires to life changes. Customer needs B2C

Industry factors- economic

• Financial stability . The customer in high volume is an example

Lifecycle-mergers

• Mergers in the marketplace helps the customer to manage

Habits

• Routining -Trigger -Result -To be repetitive

B2B HABITS

more organized and standardized

New habits or old

Be aware of both as a marketr

The need and motivation

• Basic ( physiological ) fast
• Conplex higher order need more effort

3 Levels Needs ( framework )

• Framework , low , model

Constrantes.

Reduce to eliminate . increase conversion rate and enhanced satisfaction

Financial constranes

insufficient resources.

• Time lack of opportunity
• Knowledge = no info.

Accesses

( hard to get to the product) Psychological = fear that prevent

Organisational

= internal barriers that prevent implementation.

Internal factors

What I want and What I feel External factors What people want and what I see

Categories and Needs

1 Develop needs in their search 2 Enterning into the system 3 Forming preferences 4 Points for purchase. 5 Post purchase

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