Sunday, April 28, 2013

Four User Factors (4U’s) as the Market Definer in the New Age

Classical marketing hypothesized the importance of 4P’s in how marketing is positioned and made successful in the marketplace. These 4P’s are Product (or Service), Place, Price, and Promotion. Together, these are called marketing mix that influence the success of marketing. Many of the successes of marketing (as also failures) are related to the manner in which a company manages (or mismanages) its marketing mix. That said, not all the 4P’s are equally important for all types of products and services. For example, for a product like cake, the taste, variety and freshness of cakes and the location which favors instant cake purchase are far more important than price or promotion. However, in the case of a restaurant the culinary offerings, the location of the restaurant including the parking space, the pricing of the dishes over a spectrum, and the novelty as well as the intensity with which the restaurant is promoted are all equally important.

Classic marketing, therefore, proposed a three phase approach to successful marketing comprising market research to define the 4P’s, a product and service development plan and a marketing strategy that designs and executes the marketing mix. The issue with this approach is that it has been developed in the pre-Internet and pre-globalization era wherein the 4P’s offered considerable leverage for differentiation. The Internet and globalization have completely altered how the products are designed, developed and used. The 4P’s while continuing to be relevant at a product level are overtaken by another set of user related factors. These are user expectations, user experience, user loyalty and user prosperity. The contemporary marketing mix moves the centre of gravity towards this set of factors internal to the user, from factors that are external to the user. These contemporary factors are discussed as the 4U’s of marketing in the Internet era.   
User expectations
The earlier era required companies to deploy a posse of market researchers to approach potential customers with sets of questions and hypotheses and develop a required product or service profile based on the research. Today’s user, however, is much more well informed of what is likely to emerge out of technological trends and even has a better awareness of his or her own expectations. A plethora of industry exhibitions and events as well as company announcements and indications build up user expectations. Today’s product development leads any latent consumer needs. User expectations are set ahead of product launches than as a result of product launch. As companies outline their emerging technologies and future products far ahead of launch, user expectations also build up exponentially. There are several examples of such lead times.
Ford India has announced its compact SUV, Ecosport more than a year ago, even as car magazines are full of similar new automobile features, months ahead of the likely launch dates. Movie houses are no longer secretive about their new productions. Launch and audio events are held months ahead, with openness. Futuristic generations of smart phones are announced even as the latest ones are launched.  Even infrastructure projects highlight the upcoming architectural features proudly, for example Mori Tower in Tokyo or Burj Tower in Dubai. Product definitions, ahead of launches, set user expectations. There is now a new responsibility on corporations to define what they can deliver in future, by accelerated design rather than by accidental default. The free availability of information on the Internet has immeasurably helped this process of setting user expectations, universally without any distinction of rural or urban, or even the poor and the rich.
User experience
Products or services are governed by features and specifications which provide functionality and performance. In the Internet era, a whole new concept of user experience has emerged. Whether it is improvement of hardware or software, user experience has a whole new definition for users. There are expectations out of not only the product as a whole but out of each of the components. The expectations of an automobile user today are manifold, from the starting and gliding ease to power and fuel economy, from strength and safety to style and elegance, and from comfort and convenience to capacity and connectivity.  Products of new generation technologies have even more exacting expectations; the scrolling and swiping smoothness of a smart phone must be matched by processing and multi-tasking capability, the connectivity capability by the imaging competence and the hardware strength by application count.
User experience, however, is much beyond features and specifications. The ultimate user experience is achieved when a product design enables the most complex operations to be performed in the most simplistic fashion. This, in turn, is achieved when innovative features of a product are capable of being handled by the user in an intuitive manner. The first use of an equipment or device must, by itself, act as a guidance manual for the user. Apple products score impressively on this nature of user experience dimension. The look and feel, and the overall user experience of any Apple device clearly set it apart from any other device. User experience is based on the designers imagining the way users are likely to use a product and converting the user functionality into user experience. This is a higher level challenge than just designing a product. User experience, being a design factor rather than a marketing factor, it is likely that future battles in intellectual property domain are fought on the platform of user experience.
User loyalty
User loyalty is the third of the U factors. Promotion, the fourth P of the marketing mix, is the factor that develops a brand around a product or service, creating perceptions around it. However, sustainable user loyalty is a function of the user experience and the corporation’s marketing mix, especially price in respect of products and price as well as location in respect of services. In general, promotion helps a firm more to switch customer loyalty than retain customer loyalty.  However, promotion also can reinforce user loyalty as long as it is able to skillfully weave perceptions around user experience.  Promotion is more than advertising. It is simulating user experience, and connecting products and services through user experience. The emphasis of the automobile industry in advanced countries on display of vehicles, and test drives shows how user experience can make a difference to user loyalty, ahead and independent of purchase.
There are two concepts that are at the core of user loyalty as new products get launched by the firm and its competitors. The first is the loyalty retaining user experience. The second is the loyalty retaining user price. Tata Motors has recently launched a plan to retain customer loyalty on these two dimensions. First, it has substantially upgraded its Manza sedan integrating several luxury features into the car. Second, the company provided an assured buyback of Manza at sixty percent of the price after three years (potentially in exchange for another Tata car). In certain product categories, a third dimension of operating assurance would be required. Automobiles, white goods and other equipment subject to wear and tear over time are particularly supported by continued after-sales service.  As opposed to product-specific user experience, after sales service tends to be a firm level capability; Toyota, for example, scores over most competitors in terms of after sales service.
User prosperity 
User prosperity is the foundation on which marketing segmentation and market skimming strategies have been based ever since marketing evolved as a management discipline, decades ago. The real definition of user prosperity, however, must be in universalizing of prosperity, rather than its isolation. In emerging markets, especially, the concept of user prosperity has become opportunistic and in some cases even exploitative. Burgeoning prices of luxury products is a clear example of this unhealthy trend. One may say that there is nothing wrong in inherited rich and nouveau rich buying an imported luxury car at a million dollar price. One may even argue, rather speciously, that the price of an imported car which bears over 200 percent of duties and taxes helps the buyer add revenue to the government exchequer! The argument is intrinsically flawed because not only such purchases increase conspicuous extravagance but also reduce employment generation. The purchase of one such large car takes away from the hands of the purchaser the power to purchase as many as three to five cars or use the money thus released for other productive purposes and generate additional employment.
This trend of extravagance is becoming rampant across ages and generations, unfortunately. A sum of Rs 40,000 represents one equated monthly installment (EMI) on a home loan of a young person. In this age, the typical young person of Young India is willing to sacrifice one EMI every year on a smart phone! And so is a gadget-enslaved older generation that is following such a trend.  Unfortunately, neither generation uses even a fractional amount of the ‘smartness’ that a smart phone possesses. Real user prosperity occurs when each product or service helps the user become more productive and thus generate more national wealth. The key for firms here is a focus on the productive aspects of technology rather than the cosmetic aspects of technology. User prosperity that gets generated out of productive technology is far more enduring than that is generated wholly out of cosmetic technology. It is important that firms and users focus on productive leaps in technology than incremental cosmetics to support the market skimming strategies. It is also equally important that such productive technology is diffused into the lower end products as well so that productivity driven prosperity is facilitated across income and demographic levels.
4U’s, with 4P’s   
Classic thinking positions the product or the service as the focus, with the 4P’s as the core of marketing mix. Neo thinking must position the user as the focus of the marketing mix, with 4U’s as the enablers. It is important that we realize the continued importance of 4P’s of product, price, place and promotion even as we shift the paradigm around the user with the 4U’s of user expectations, user experience, user loyalty and user prosperity. The result would be an enhancement of user productivity, universally enabled alongside generation of national wealth, equitably distributed.
Posted by Dr CB Rao on April 28, 2013               


1 comment:

Unknown said...

It seems like you have a lot of knowledge about this. I appreciate you and thanks for sharing with us. . .
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