Question : Read the case study and answer the questions.

Title: Putting sagmentation to use.

It is not enough to think of customers as belonging to different segments. Having identified segments, companies must go about serving those customers. A deeper understanding of customers is required. Instead of merely creating advertisements that show the targeted segment, companies have to understand the deeper context in which products are purchased and used. This case study shows how a company reap benefits by understanding how the products were being used by the targeted customer segment. Seybold (2001) writes that over the years, companies have collected huge amounts of data and divided buyers into very fine segments but have missed out on the big picture: The context in which customers select, buy, and use products and services. To understand consumer behavior, she writes that they should see how those products and services fit into the real lives of customers. She calls this customer scenario, the broad context in which a customer uses products. To explain this, she gives the examples of two customers, having the same characteristics as age, income, education and therefore belonging to the same segment, who are buying refrigerators. The first wants a quick replacement for an old one that stopped working, the second customer wants one for his new home. Though they belong to the same market segment, the scenarios of both customers are different, and when the company or the salesperson treats both customers the same, they lose out on big opportunities. By understanding their scenarios, companies can deal with them for their benefit. To the first customer, the company can offer expedited delivery and charge for it. To the second customer, the company can offer a plan to sell customized appliances for his new home and also offer a cross-selling plan that helps him buy other products that he needs. It is by understanding customer scenarios that the company finds creative ways to expand its reach into the lives of buyers, helping them save time, use products and services more effectively, and fulfil supplementary needs that may not involve the companys offerings at all. This thinking was applied by National (Semiconductor producer), the leading supplier of analogue and digital micro- chips, to deepen relationships and get increased business from its clients. It realized that a critical customer segment of its products was that of design engineers. When they designed products, they chose components at the beginning of the product development cycle, which resulted in large, multimillion dollar sales. The logical step was to provide information to them, and the company designed a website that gave all the information about company products, which the design engineers worked, the company could ensure that they use National parts for development of their products. National went about understanding the needs of its market segment deeply, finding out the scenarios in which the engineers worked. It found that the design engineers needed information on parts, no doubt, but could the company become part of design process itself? Understanding the design scenario, National developed a set of online easy- to-use tools which provided the engineers a platform to design products. The system, called Webench, generated designs, prices, cost-benefit analysis and a bill of materials to develop a prototype. The software let the engineers to refine the design, run real-time simulations, save all the iterations and share them with colleagues. Once the design was finalized, the system generated a bill of materials listing all the parts required, including those manufactured by National. The site linked to distributors and carried current prices so that parts could be ordered easily. As it went along, National realized another aspect of consumer behavior. Thought the design engineers liked the software, they were hesitant to pay for using it. So the company decided to make the simulation available for free. As Seybold writes, instead of nickel- and-diming customers...the company could reap bigger rewards down the line: large orders for Nationals part. Understanding its segment carefully helped not only the customers but also generated large orders for National. Design engineers used Webencch to design 20,000 units of power supplied in the first year of operation alone. By the year 2005, there were 31000 users on the site, which was generating 3000 orders or referrals to distributors every day. New opportunities emerged. The engineers wanted thermal simulations, so the company created WebTHERM, again allowing the engineers to use it for free. The software allowed users to see the thermal behavior of an electronic printed circuit board. Today, the Webench website lists architect tools, circuit simulation, designer tools, and various other tools that engineers can use for free and generate large orders for the company. Understanding the customer scenarios, the company provides one-stop design center with links to supply chain partners. This case shows that identifying customer segment is not enough. A company has to go further and develop deep understanding as to how the segment is using its products and anticipate its needs. Only then can any company hope to reap benefit from its identified segments. Case Questions: (20 marks) Answer the following questions. 1. Write down what you learnt from this case. What steps must a company take after identifying customer segment? (4 marks) 2. What do you understand by the term customer scenario? how could National use this for serving its customer segments? (4 marks) 3. National Semiconductors could work closely with its segment as it knew what the design engineers wanted. What aspects of consumer behavior was it able to discover and use effectively? (4 marks) 4. Comments on how other companies can develop deep understanding of their segments and reap greater benefits and loyalty in return. Give one example. (8 marks)