How to Discover Customer Value? Proxy Customers - Part 3.1

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 customer identification based on elements of the customer-action cycle and to the idea of “proxy” customers.

How to Discover Customer Value? Ideas Simplified - Part 1

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

Creating value for the customer presupposes that one knows the customer! The challenge is to identify potential customers who are likely to derive value from the offering. Often, one ends up barking up the wrong tree! Customer discovery is an iterative process and seldom do people get it right the first time.

The Customer

Understanding the customer requires the marketer to be able to locate the customer, study customer behaviour and beliefs based on some criteria. Locating the customer helps the sales and distribution personnel chart out the most effective route to the customer. Study of customer behaviour and beliefs helps the marketer in discovering value, developing solutions, and brand positioning. Most marketers are familiar with segmentation based on demographics, psychographics and online behaviour. In the online space, the marketer deals with digital footprints and online behaviour that can provide insights into customer thinking. These insights can help build predictive behavioural models. For example, eCommerce websites display the list of complementary products that are associated with a specific purchase based on the study of the behaviour of customers who have purchased similar products in the past.

Any behaviour requires a context, an action, skills to execute the action and a mindset that helps the doer move into action. After the marketer has segmented the customers based on demographic variables, a deeper insight can be obtained by studying customer behaviour. When viewed through the lens of the customer-action cycle, customers can be identified based on the different aspects of behaviour that can be perceived using our senses. Fig.1 displays these variables on a scale ranging from a high degree of perception (visible) to a low degree of perception (invisible).

Fig 1: Identifying customers using elements of the customer-action cycle

If you are a marketer of sports items, you are likely to look for customers who are members of sports clubs (context); and/or actively playing sports (action); and/or exhibiting different levels of sporting skills (skills); and/or at people who may not be active in sports, for example, sports administrators, but who think sports is very important for a healthy mind and body (beliefs).

This model of targetting and change was evident when the government of India launched the Beti Bachao, Beti Padhao (Save the Daughter, Educate the Daughter) campaign in Jan 2015 that aimed at addressing the declining child sex ratio in India through prevention of gender-based sex-selective elimination (female foeticide and infanticide). The scheme also aimed to “change mindsets regarding the girl child”, and empower women by focussing on the education of girl children. The government spent well over Rs 364 crores ($50 million) between 2015 and 2018 on this campaign.

Three films from India’s Ministry of Women & Child Development, each aimed at a different class of Indian society, depicted terminating a pregnancy on the grounds that the unborn child is female, as murder. That apart, the government launched a sustained social mobilization and communication campaign to create equal value for the girl child and promote her education.

There was a specific focus on gender critical districts and cities in Uttar Pradesh, Haryana, Uttarakhand, Punjab, Bihar and Delhi, a sustained effort in changing behaviour, focus on imparting skills and education to girl children and changing deeply entrenched beliefs about girls.

Getting your customer right

The importance of identifying and profiling the customer is one of the first steps undertaken by a marketer and its role cannot be underestimated.

C K Ranganathan, chairman and managing director of CavinKare, a manufacturer of pharmaceutical products and cosmetics, located in Chennai, India, pioneered the concept of selling shampoos in sachets. He started Chik Shampoo in 1989 with very little financial means. By adopting creative promotional techniques along with an astute understanding of customers, he targetted the unserved rural market and made Chik Shampoo the #1 brand in South India.

Well established corporates sold products in big bottles that were distributed through departmental stores. They did not have Sachets nor did not sell their products through smaller Kirana stores nor did they look at the rural market. Chik Shampoo went to the rural areas of South India where people hardly used shampoo. They did extensive roadshows demonstrating the use and benefits of using the product. They let users experience the after usage feel and smell of the product.

A combination of identifying an unserved customer segment, product usage and packaging, and creative promotional activity ensured success. The customers were found in the rural context, had to be taught the basic skills of using shampoo, and encouraged to change their beliefs about shampoos by demonstrating the benefits of using the product. Most of these customers had never used shampoo to wash their hair and were provided basic instructions on how to use the product. To summarize, this involved identifying customer usage and affordability contexts, promoting appropriate action and skills, and changing entrenched beliefs.

redBus, a bus ticketing service from India, that was sold to Ibibo for around $138 million in 2014, is a classic case of redefining their primary customer. They started with the idea of selling bus booking software to operators and there was very little momentum. The bus operators were not using any software for selling bus tickets and could not see value in the offering. The company changed track and quickly realized that the bus traveller is likely to find huge value because it addressed the critical pain points of booking a bus ticket. After seeing the demand from travellers, there was pressure on the bus operators to quickly adapt to the new booking system or be left out. 

By shifting focus to B2C customers from B2B, redBus was able to create huge value to a different set of customers.

When South West Airlines introduced low-cost Air travel for Americans in 1967, it focused on connecting cities that did not take more than one hour of air travel. Their aim was to have frequent air trips between cities and the aim was to make the travel cost less than travel by road. The focus on short-duration flights between cities opened up a new market for low-cost air travel that catered to a segment of people who were first-time travellers and also to business travellers who could take flights departing every hour to a destination. Value was created by focusing on the first time and business travellers.

Proxy Customers

Customers exhibit a diverse set of actions using different tools to solve different problems that meet the same needs. People using tools and actions to solve unrelated problems that meet similar needs constitute an unserved market and I refer to them as “proxy customers”.

Proxy customers try to solve problems which, at the surface, do not appear to be similar to the problem that an existing customer is trying to solve. However, by digging deeper, the marketer will realize that these disparate actions meet the same needs. They may be using other tools or solutions to meet the same needs. Needs are like a choices generator for multiple actions as shown in the Fig.2 below. The set of “proxy customers” C2 and C3 can potentially be converted into customers.

Figure 2: Needs as a choices generator

To discover proxy customers, it is important to identify the needs that are being met for your existing customers. For example, an organization providing adventure sports activities is meeting the needs for having fun, meeting challenges, exploring limits, and strengthening family connections. Are there other ways to strengthen family connections? For example, going for movie or theatre as a family, making Ganesha idols during festivals with family, meeting friends with families on social occasions, having family dinner at a restaurant on birthdays, etc., are actions that meet the same need for a strong family connection.

The marketer may have defined the potential customer as someone having an interest in sports. However, proxy customers may not be interested in sports but may be interested in activities that help in strengthening family connections. With this understanding, the marketer is likely to design appropriate activities are perhaps not only about sports but also about family bonding and connection. Or in other words, sports as an activity is a vehicle to meet the need for family bonding. Proxy customers who visit restaurants as a family could be potential customers for an adventure sports company. The idea that connects these different problems, actions and tools are the common needs.

Figure 3: Proxy Customers Matrix

The idea of proxy customers is illustrated using the Proxy Customers Matrix as shown in Fig. 3. Proxy customers could potentially open up new markets provided the marketer is open to providing tools to solve an unrelated problem or could be converted into customers who can use the marketer’s existing tools to solve another problem that will meet the same need.

For example, a marketer of luxury cars is likely to search for proxy customers attending various events such as horse racing, buying expensive artwork, owning yachts, purchasing expensive jewellery, etc. These proxy customers exhibit actions that appear to solve problems unrelated to driving cars but there is a common thread of underlying needs such as - to be seen, recognized and stand out in a crowd. The marketer has two options – provide a new set of tools (products or services) that will help the proxy customer meet his/her needs (Q3 --->  Q2) or sell the existing tools to proxy customers to solve a different problem (Q3 --->    Q1). In the example provided, the marketer can choose to enter a new business by selling yachts or sell luxury cars to customers buying yachts.

This is exactly what BMW decided to do. The German automobiles MNC realized that they needed to tap genNext for their new range of automobiles. They wanted to tap into the student population that was likely to purchase their first or second cars. After identifying their customer, they decided to go where genNext were likely to congregate and be a part of their culture. The Coachella Valley Music and Arts Festival, held in the California desert town of Indio, is an annual festival that attracts a lot of young people in the age bracket of 18-26. The event is known for its creativity, enthusiastic audience, innovation culture and exuberance.

BMW took its fully electric "i vehicle" to the fest and became an official partner. They adopted a creative hashtag (#roadtocoachella). Khalid, one of the most exciting artists of contemporary soul music and a passionate BMW driver was the face of the campaign for 2019. The young crowd constituted proxy customers who attended the music festival to meet their needs for fun, creative expression and standing out. The same needs can also be met by purchasing the BMW i vehicle!

Part 3.2 will introduce the idea of "Out-of-Frame Customers".

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