How to Discover Customer Value? Out-of-frame customers - Part 3.2

This article is in continuation of a series of articles on "How to Discover Customer Value?" The reader is advised to read the earlier parts before proceeding with this article. This article introduces the reader to "in-frame" and "out-of-frame" customers.

How to Discover Customer Value? Ideas Simplified - Part 1

How to Discover Customer Value? Role of Contexts - Part 2

How to Discover Customer Value? Proxy Customers - Part 3.1

Getting to know the customer revolves around three variables –

A.   Demographics

·  Attributes such as age, gender, income, education, location, web footprint, etc.

B.    Behaviour

·       Lifestyle, skills, action, online behaviour, usage habits, etc.

C.    Beliefs/Values

·       Psychographic profiling, culture, knowledge, attitude, environment, media, identity, meaning, etc.

A customer is made up of the required combination of these three variables. This combination helps the marketer define a frame around the customer that helps in profiling the customer. Diagrammatically, one can represent the idea as shown in the Venn diagram in Fig. 1.

Figure 1: Customer Frames and ABC relationships

This relationship can be represented as follows -

CP = f (A,B,C)

CP is the customer profile; A,B and C are the required Demographics, Behaviour and Beliefs/Values variables that define the customer.

The customers with the required profile are represented by the region CR (customer region) A?B?C in the Venn diagram. The shaded area is also called the “in-frame”. The marketer is constantly looking at expanding the in-frame customer base. Potential customers with the highest probability of conversion into a customer reside just outside the CR region. These customers belong to the shaded areas R1, R2 and R3 and constitute the “out-of-frame” customers. These out-of-frame customers have distinctive characteristics and can be referred to as being sceptical, fuzzy and inactive customers.

Inactive Customers

The “inactive” out-of-frame customers are those who are identifiable and have the belief that the tool will help them meet their needs. This is represented by the shaded area R1: (A?C)-B. However, they do not exhibit the behaviour necessary to use or purchase the tool. Even when the tool is affordable and accessible, the customer would still refuse to use the tool. This is due to lack of capabilities or a perception about the lack of skills. This dilemma is shown in the table below.

The problem faced by the out-of-frame customers can be related to a lack of skills (capability deficiency) or perception about lack of capabilities (related to beliefs). The strategies adopted to convert an out-of-frame into an in-frame customer are shown in the table above.

Harley-Davidson, the iconic motorcycle company based in the US, realized the importance of skill building a long time ago. The average age of a Harley-Davidson customer is around 47 years and the average weight of a motorcycle is between 350 and 450 pounds (155 to 205 kgs). It may not be easy to balance, apply the stand and ride a Harley-Davidson for a first-time rider.

The Harley-Davidson Riding Academy New Rider Course is designed to get a potential customer comfortable on a bike and teach the skills necessary to ride with the motorcycle with confidence. There are numerous learning opportunities based on the skill level and the Harley Owners Group webpage offers courses such as a new rider course, skilled rider course, motorcycle boot camp, garage party and jump start tabs.

H-D successfully converted inactive potential customers who believed in the product but were reluctant to purchase it because of the lack of adequate skills into paying customers.

Learning dance at one’s pace and time can be a challenge. And having a choice of different genres and access to some of the best dancers can be an expensive affair. People interested in learning dance often find the complex moves overwhelming and are left with the thought – “I can’t do this. This is beyond me.” However, TheVerb Studio, a startup incubated at NSRCEL, the incubation centre at IIM Bangalore, was keen on breaking such beliefs and developed online solutions for learning various genres of dance from renowned experts that chunked down dance moves into easily learnable steps. This helped convert out-of-frame inactive customers into in-frame customers.

The online dance studio offers classes on a subscription basis and has curated lessons from the best dancers in the country. The dancers teach via pre-recorded structured classes and the class production is done by TheVerb.

Andela, a software developer training and outsourcing company launched operations in Lagos, Nigeria in 2014 to primarily cater to entry-level programmers for the global software market by training local youth and placing them on a four-year contract. The founders are based out of New York. To find good students, Andela gives people an online aptitude test that gauges their reasoning and logic skills followed by interviews to assess their soft skills. The acceptance rate is about 0.8% and the selected candidates undergo several months training during which time they get paid. They go through a training period that provides them access to resources that they seldom encounter in the universities in Nigeria. Students who finish at least 1,000 hours of training are then eligible to work as web developers for Andela's clients, and they continue to learn new skills. This is a classic outsourcing model that was mastered by Indian software training companies decades ago that leverages on labour costs!

As of 2019, Andela is ending the developer training program as they realized that the global market has got saturated for junior-level programmers and are in the process of downsizing their headcount by 250 people spread across Nigeria, Kenya and Uganda. They are overhauling their business model to focus on senior-level programming skills.

This is an example of an organization that realized that they had to invest in skilling resources and incentivize them to make them ready for junior-level software coding jobs that more than compensated for the amounts spent on training. They focused on the out-of-frame “inactive” customers, energized them by incentivization and training, and converted them into billable customer-ready resources.

Sceptical Customers

The “sceptical” customers constitute customers who are identifiable and have the necessary skills to exhibit the required behaviour but are not convinced that the solution will meet their needs or solve their problem. This could be due to a lack of trust or mismatch of values. By changing the way these customers think, the marketer can move customers from an out-of-frame to an in-frame. This is represented by the shaded area R2: (A?B)-C.

Blake Mycoskie, the founder of TOMS Shoes based in the US, created a unique business model that had a double bottom-line effect. He combined the for-profit and not-for-profit philosophies into a successful venture that created social impact. During his trip to Argentina in 2006, he noticed poor children without shoes facing a lot of hardship and was deeply moved by their plight. He founded TOMS shoes wherein the company donated one pair of shoes to poor children in different parts of the world for every pair purchased. The cost of the free shoe was built into the price of the one that was sold and ensured profitability. The company managed to provide 35 million pairs of shoes to children in 70 countries. The same principle was adopted when the company introduced eyewear in 2011. Instead of donating a free pair of glasses for every pair sold, TOMS used part of the sale proceeds to restore the eyesight of a person in a developing country. This initiative helped restore sight to more than 275,000 people. This principle was extended to sell Mycoskie to sell his book.

TOMS also received free publicity when celebrities such as Keira Knightley, Scarlett Johansson, Liv Tyler, Anne Hathaway, Tom Felton, and Julia Roberts became TOMS storytellers by adopting the brand and spreading the story. This also helped in increasing awareness on social media.

TOMS was able to convert out-of-frame customers into customers by appealing to their value systems. Purchase of TOMS shoes met the customer's need to contribute to worthy causes and feel satisfied with the belief that they helped poor children across the world. Had TOMS priced their products high without the worthy cause attached to it, the customers would have been sceptical about buying the product. TOMS was able to influence the beliefs of potentially sceptical customers about pricey products and combine it successfully with their need to contribute to a better world.

Another classic case of converting “out-of-frame” sceptical customers to the “in-frame” happened in the case of Maggi noodles, a major brand of Nestle. Nestle India destroyed over 35,000 tonnes of Maggi noodles in 2015 over charges that their product contained more than permissible levels of lead and monosodium glutamate (MSG). This was one of the largest recalls in the history of the food industry in India. MSG, a taste enhancer, is often added to packaged foods, but Nestle India did not mention it in the list of ingredients. MSG can be harmful to small children and pregnant women and as per the Food Safety and Standards Rules is not permitted in over 50 items including noodles and pasta. In June 2014, Maggi samples were sent to the Central Food Laboratory, Kolkata and were found to contain a very high quantity of lead of 17.2 ppm whereas the permissible level of lead was 2 ppm. Many other state research labs confirmed lead presence in the range of 2.8 to 5 ppm that was higher than permissible levels.

By mid-2015, many states such as Kerala, Delhi, Gujarat, Tamil Nadu, Gujarat, Uttarakhand, Jammu & Kashmir, etc., also banned sales of Maggi. Nestle India reported a decline of 17.2% in its net sales for the year ended December 2015 and the Net profit fell to Rs 563 crore, from Rs 1,185 crore in the previous year (Jan-Dec cycle). Maggi had a market share of over 70% before this controversy and it took more than three years for Maggi to regain a market share of 60%.

A huge trust deficit developed and customers no longer believed Maggi and its claims. Consumer trust fell from 90% to 3% before recovering to 90% after concerted efforts by the management to rebuild the trust. It took three years to recover. Suresh Narayanan, CMD, Nestle India, spent 60% of his time talking to his employees, customers and various stakeholders. Nestle directly reached out to consumers to regain consumer confidence regarding the safety of their product. The product was re-launched by running a print ad with the tag line - ‘Your Maggi is safe, has always been’. The company provided data on the rigorous testing done on the product across countries to re-establish the trust in the brand.

The customers who were part of the "in-frame" moved out to become "sceptical" out-of-frame customers. The company had to focus on re-establishing trust to move them back to the in-frame. However, this exercise was very expensive for the company because it had to work very hard on changing perceptions!

Another example of focusing on out-of-frame customers can be observed in the mental health support space in India. The National Mental Health Survey (NMHS) released in 2016 states that nearly 150-million Indians suffer from some form of mental health issue and that only about 30 million seek help. According to the World Health Organization (WHO), 76-85% of people in low-and-middle-income countries receive no treatment for their mental health disorders. One of the major reasons cited is the stigma attached to visiting mental health professionals, an acute lack of awareness and acceptance of mental health issues. Stereotyping and beliefs based on culture, gender, religion, etc., also dissuade people from availing counselling services. People handling mental issues do not wish to be seen visiting therapists.

To cater to this out-of-frame segment of patients who exhibit behaviour that requires mental health counselling but are unwilling to visit counselling centres, many startups in India have cropped up that are catering to this segment of people who prefer anonymity. Although it has its downsides with respect to the intervention tools available to a counsellor or therapist, it caters to the needs of the out-of-frame customers. By offering online services that ensure anonymity, startups have been able to effectively address the beliefs that people have about visiting counselling centres. This has helped shift beliefs from "What will someone think of me?" to "How does it matter because no one would know". This shift in thinking has helped convert out-of-frame customers into paying customers.

Fuzzy Customers

The “fuzzy” out-of-frame customers are those who have the necessary skills to use the tool and believe that the tool will help them meet their needs. However, the problem is that these customers are not on the marketer’s radar. They are blurred because they are out of focus for the marketer! This is represented by the shaded area R3: (B?C)-A. The region R consisting of existing customers could provide a clue on the demographics of the fuzzy customers. There is a high likelihood that R3 may consist of more potential customers than the existing customer base. It is similar to a high-resolution image with a blurred background where the object of interest is in the foreground. The photographer is focused on the object oblivious to the exciting images in the background!

When Idea Cellular, a large mobile network operator based in India, launched 3G services in 2011. While competitors like Bharti Airtel, Vodafone and Reliance Communications launched their services in metros before going to smaller towns, Idea is doing exactly the opposite. They focused on semi-urban and rural subscribers first. Idea Cellular had the highest share of rural subscribers as a percentage of total subscribers, amongst GSM operators. Idea enjoyed a first-mover advantage in these markets and soon had their presence in more than 300,000 lakh villages. By end 2017, Idea Cellular had a total customer base of over 196 million. Idea’s strategy of moving into the Hindi-speaking belts of north and central India, which comprised of around a third of the country’s population, helped it significantly increase the subscriber base.

By avoiding the temptation of going after existing customers in metros, Idea Cellular soon discovered that the out-of-frame customers in semi-urban and rural areas constituted a large and growing market that was largely avoided by the competitors.

Another case in point is the arrival of Studio apartments in India. A studio apartment is comprised of a single large room that doubles up as living room-cum-dining area-cum-bedroom and a kitchenette, and a separate bathroom. These are 300-600 sq ft apartments are smaller than a 1BHK house and are targetted at Millennials, bachelors or young couples and are priced in the range of Rs. 30-40 lakhs. The success of this new category can be attributed to a sophisticated positioning of these units as an upmarket, lifestyle solution. Also, these units are usually located in prime locations and people prefer to buy smaller units instead of larger units in the suburbs. The builders adopt innovative designs that are highly functional that maximised the use of space by using sliding doors, folding beds, mirrors, etc., that create a sense of space. Many large developers such as Lodha, Hiranandani, Brigade, and Supertech have entered this segment. In many of their projects, a percentage of apartments are designed and sold as studio apartments.

This is a case of developing unique solutions for an out-of-frame segment of customers such as Millennials by tweaking existing solutions. This segment was not on the radar of the marketer because of their lower-spend capacity. By focusing on the needs of Millennials, the builders were able to convert them into in-frame customers through smart design and marketing solutions.

The luxury cars market has shown remarkable promise for growth in tier 2 and tier 3 cities in India. The sales of Mercedez Benz, Audi, BMW and Volvo cars have seen double-digit growth for consecutive five years ending 2019. A luxury car is priced at Rs. 25 lakhs and above. Smaller towns such as Ludhiana, Vadodara, Guwahati, Raipur, Indore, Cochin, Visakhapatnam, and Calicut have seen a rise in sales of luxury cars. This is largely driven by strong aspirations to display wealth, status, and high affordability by local businessmen. A Kotak Wealth Management report of 2017-18 said that ultra-high net worth households (those with a minimum net worth of over ? 25 crores) are expected to double to 330,400 by 2022. Indians are getting wealthier at a younger age as about 60% of individuals surveyed were below 40 years as against 47% interviewed a year earlier, Kotak said in the report.

By shifting focus to the out-of-frame customers in smaller towns, luxury car makers discovered an untapped segment that was not on the radar. In fact, this segment is rapidly expanding and marketers are opening dealerships in cities Bhubaneshwar, Jamshedpur, Mysore, Jodhpur, Rajkot, Ranchi, etc. Almost every tier 2 and tier 3 city is in focus now!

"Proxy customers", as introduced in Part 3.1 is a variant of the "out-of-frame" customer.

Note: The article contents are personal views of the author. Comments are most welcome.