Understanding customers second edition by chris rice

Understanding Customers
The Marketing Series is one of the most comprehensive collections of books in
marketing and sales available from the UK today.
Published by Butterworth-Heinemann on behalf of The Chartered Institute of
Marketing, the series is divided into three distinct groups: Student (fulfilling the
needs of those taking the Institute’s certificate and diploma qualifications;
Professional Development (for those on formal or self-study vocational training
programmes); and Practitioner (presented in a more informal, motivating and
highly practical manner for the busy marketer).
B
H

B
H

B
H

THE

THE

THE

MARKETING SERIES

MARKETING SERIES

MARKETING SERIES

STUDENT

PROFESSIONAL
DEVELOPMENT

PRACTITIONER

Formed in 1911, The Chartered Institute of Marketing is now the largest professional marketing management body in Europe with over 60,000 members located
worldwide. Its primary objectives are focused on the development of awareness
and understanding of marketing throughout UK industry and commerce and in
the raising of standards of professionalism in the education, training and practice
of this key business discipline.


Titles in the series
Behavioural Aspects of Marketing
K. C. Williams
Cases in Marketing Financial Services
Edited by Chris Ennew, Trevor Watkins and Mike Wright
The CIM Piploma Case Study Book 1995–96
David Pearson and Paul Fifield
Economic Theory and Marketing Practice
Angela Hatton and Mike Oldroyd
Effective Sales Management
John Strafford and Colin Grant
Financial Aspects of Marketing
Keith Ward
The Fundamentals of Advertising
John Wilmshurst
The Fundamentals and Practice of Marketing

John Wilmshurst
International Marketing
Stanley J. Paliwoda
Marketing Financial Services
Edited by Chris Ennew, Trevor Watkins and Mike Wright
Strategic Marketing Management
R. M. S. Wilson and C. T. Gilligan


Understanding Customers
Second edition

Chris Rice
Published on behalf of
The Chartered Institute of Marketing


Butterworth-Heinemann
Linacre House, Jordan Hill, Oxford OX2 8DP
A division of Reed Educational and Professional Publishing Ltd
A member of the Reed Elsevier plc group
OXFORD BOSTON JOHANNESBURG
MELBOURNE NEW DELHI SINGAPORE

First published as Consumer Behaviour 1993
Reprinted 1994
Second edition 1997
© Chris Rice 1993, 1997
All rights reserved. No part of this publication may be reproduced in
any material form (including photocopying or storing in any medium by

electronic means and whether or not transiently or incidentally to some
other use of this publication) without the written permission of the
copyright holder except in accordance with the provisions of the Copyright,
Designs and Patents Act 1988 or under the terms of a licence issued by the
Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London,
England W1P 9HE. Applications for the copyright holder’s written
permission to reproduce any part of this publication should be addressed
to the publishers

British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library

ISBN 0 7506 2322 5

Typeset by Avocet Typeset, Brill, Aylesbury, Bucks
Printed and bound in Great Britain


Contents
Foreword

vii

Preface

viii

Part One Identifying the Customer
1 ‘Marketing, management, customers, competitive advantage and the
meaning of life!’

A historical perspective
2 ‘There’s more to this than meets the eye…!’
Perception
Part Two Understanding Customer Behaviour
3 ‘What I need is a one-armed economist…’
Ideas from economics
4 ‘So you want to be a social climber?’
Marketing aspects of sociology
5 ‘Here we go, here we go, here we go…’
People in groups
6 ‘That’s all I need – a customer with attitude…’
Attitudes and social behaviour
Part Three Investigating Customers
7 ‘There’s nowt so strange as folk…’
The behavioural sciences – problems and methods
8 ‘Excuse me, could I ask you a few questions…?’
An introductory look at marketing research
9 ‘What do you mean – I’m about average…?’
The presentation and interpretation of data
Part Four Predicting and Influencing Customer Behaviour
10 ‘Whatever made you buy that?’
Consumer decision making and modelling
11 ‘Teach me tonight…’
Learning
12 ‘Segments? – I don’t even like grapefruit!’
Segmentation
13 ‘So how can we make it work…?’
Attitude change
14 ‘Pass me my crystal ball…’
Forecasting, change and the future

3
29

49
69
88
107

133
153
182

199
218
236
257
282


vi

Contents

References, bibliography and further reading

307

Index

309


Foreword
If there were prizes for writing textbooks which combine up-to-date information
with reader-friendliness and even a soupcon of style and wit, then Chris Rice
would walk away with an armful of them. We all know that students find
preparing for examinations to be work of a peculiarly unforgiving, implacable
and unpleasant kind, especially as so many textbooks seem to be written as if
their authors were trying to emulate the tedium of Kennedy’s Latin Primer. Anyone approaching Understanding Customers with such depressing expectations
cannot fail to be jolted with warm shocks and pleasant surprises as they read
about (for example) the wonders of cat-food preparation and the elegant delicacy
of the Rice PV/PPS model of consumer decision making.
This new edition has been revised, partly because of recent developments in
the investigation of consumer behaviour, and partly because of new syllabus
requirements initiated by The Chartered Institute of Marketing. It is even more
comprehensive than before, yet remains firmly focused on the instrumental
demands of students. It can be picked up voluntarily and read for pleasure. Few
technical publications justify such an accolade (apart from sex manuals), yet in
Rice’s case it is well deserved.
Dr Ted Johns
CIM Senior Examiner, Understanding Customers


Preface
Four years ago, when writing Consumer Behaviour, I put forward some ideas
about control and its problems. In the process I discussed ‘Sod’s Law’ – the idea
that if something can go wrong, it will. As the book was published, The Chartered
Institute of Marketing announced a change of syllabus to the new ‘Understanding
Customers’ programme at Certificate level. So Sod’s Law had struck.

This new edition has some six new chapters and much material which reflects
the new syllabus.
The subject remains as fascinating as ever and we have seen a continued
growth in the use of influencing techniques well beyond the area of ‘shopping’.
Vast efforts are now expended to convince us of the need to vote in favour of
particular political parties, to conserve the environment, to support charities and
other, similar, ‘non-commercial’ ideals. The basic element of influencing other
people remains at the core, however, and it is this process which forms the main
thread of the ideas within this text.
The book has been designed to meet the requirements of The Chartered
Institute of Marketing professional education scheme, but will also be of
immediate relevance to undergraduate and Higher National business studies
courses. In a field which has such a rapid rate of change it was decided, as a
matter of policy, to encourage the reader to look around to find current examples.
This has the advantage that reading newspapers and watching television may now
be counted as ‘coursework’!
My objective in writing this book has been to produce something which is
‘user-friendly’. The aim was to attempt to reproduce the processes which make a
‘good’ class when teaching – involvement of teacher and students, exchange of
ideas, activity, thought and, above all, fun.
My thanks to all those who wrote giving such positive feedback on Consumer
Behaviour and the style in which it was produced. In other places, I have referred
to ‘the loneliness of the long-distance learner’ – the problems experienced by the
solitary student (whether as a long-term experience or because of missing a
session at college). It is hoped that, by emphasizing some of the discussion points
in this way, some of the difficulties may be reduced. For those who are studying in a group, the ‘Think’ exercises have no ‘right’ answers, so comparisons
of opinions and subsequent arguments are not only common, but are to be
welcomed.
A special note of thanks to Ted Johns for his encouragement at the start of the
project and his insights at the end. Lastly, my thanks to all the students who have

been the experimental proving ground for so much of my work and enjoyment.
Chris Rice
Nottingham


Part One Identifying the
Customer
Introduction
This section introduces ideas and concepts which can be used throughout the programme
of study. It attempts to review different stages in marketing development, and looks at
some contributions from wider organization/management studies to set a context for the
more specific study of aspects of consumer behaviour. Thus many of the ideas in this first
section should continue to be considered as part of the background to most of the
remainder of the book.
At the end of this section the reader should be familiar with the following concepts (and
the associated language) and should be able to relate them to marketing situations and
activities:
●
●
●
●
●
●
●
●
●
●
●
●

●

Historical perspective – differing marketing orientations
Customers and users
Decision Making Units (DMUs)
Segmentation
Dependency theory
Stakeholders in the business/enterprise
Demographic changes
Competition
Ethical issues
– Deontological/transcendental and utilitarian perspectives
Total Quality Management
Customer care
Organizations as customers
– Similarities and differences between individual, family and organization buying
situations
– Roles in the organizational buying process
– Different levels of complexity of buying decisions
– Decision Making Units (DMUs) and the associated roles (again)
– American Marketing Association 4-cell model
Perception as a crucial concept which runs throughout the whole book:
– The senses, sensation, awareness thresholds
– Weber’s Law
– Selectivity of perception – external and internal factors affecting perception
– Habituation
– Awareness sets
– Communication

This page intentionally left blank


1 ‘Marketing, management,
customers, competitive
advantage and the meaning
of life!’
A historical perspective

Introduction
The American Marketing Association in 1985 defined marketing as:
The process of planning and executing the conception, pricing, promotion
and distribution of ideas, goods and services to create exchange and satisfy
individual and organizational objectives
In the UK The Chartered Institute of Marketing defines it as:
the management process responsible for identifying, anticipating and satisfying customer requirements profitably
Some of the key words in both definitions identify the concern with satisfying
the individual customer, and this is commonly tackled by the idea of the ‘marketing mix’ – one of the most common formulations of which is that of the 4 Ps:
●
●
●
●

Product
Pricing
Place
Promotion.

This has been the basis of most thinking about marketing over the last thirty years.
Kotler has suggested adding

●
●

Politics
Public relations

to make the 6 Ps


4

Understanding Customers

whereas Cowell has suggested adding:
●
●
●

People
Physical evidence
Process

when considering the marketing of services, creating an alternative 7 Ps model.
But central to the whole function is the concept of the customer, and the aim is
his or her satisfaction.
Marketing is an integral part of the process of managing a business enterprise.
Within that context its significance has changed over time. In the early years
following the Industrial Revolution, the shortage of products and the demand
generated by a population earning cash as the means of exchange led to a
situation where many products ‘sold themselves’. The development of the

assembly line led to a standardization of product – but given a high level of
demand, the customer was not necessarily a critical part of the process, as is
witnessed by Henry Ford’s well-known assertion that ‘… they can have any colour
they like – as long as it is black’.
The growth of the mass communication systems in the middle part of the
century led to a growing move towards ‘selling’ the product to the population via
an emphasis on advertising. The latter part of the century saw an increasing
awareness of the need to satisfy the customer’s needs – once again changing the
focus of marketing efforts.
The current situation is one which is influenced by the convergence of a
number of trends:
●
●
●
●

Growing international competition
Very rapid and comprehensive channels of communication
Technological improvements leading to very reliable products
The growth of the ‘quality’ movement, further enhancing reliability.

The logic of such a situation is that there is likely to be little significant difference between many competing products within a market. It seems likely that
future marketing efforts will focus increasingly on aspects of customer care as a
way of creating a differential between products, as suggested by Johns (1994). It
also seems likely that ever more effort will go into the process of creating
‘emotional value’ as a way of distinguishing an organization’s product from those
of its competitors. As writers such as Tom Peters have argued, the growing
competition means that we may need to move beyond consumer satisfaction and
aim to ‘delight’ the customer.
Another possibility is that some markets may move even further towards

satisfying the customer by aiming to satisfy needs specifically and directly. It has
been asserted that ‘Customers do not want choice – they want exactly what they
want’. This approach has given rise to a movement which some have called ‘mass
customization’ – a process whereby the organization does not manufacture a
product until it has been ordered. In these early stages this would appear to be
operating within markets which have an expert customer base and who are
prepared to specify exactly what it is that they wish to purchase. Examples of this


A historical perspective 5

include Dell Computers, who manufacture to order – but with a very short
timelag to delivery. Another example is Raleigh Bicycles, where, if you wish to
buy a specialist bike, you can discuss the precise specification with the factory
and it will then build your special machine to order (but normally using standard
parts). Clearly, this may not be applicable to many markets which will continue
to sell and advertise, but such initiatives may well point the way to the future of
marketing.
We are also currently seeing the early stages of a new approach which is
sometimes called ‘relationship marketing’. Here the organization attempts to get
close to the customer, developing the relationship so that the customer’s
behaviours and needs are fully understood. In some cases this can be seen as a
further step on from the TQM idea; in others the main driver appears to be the
emergence of electronic methods for recording purchasing patterns which can
then be used to ‘understand the customer’ and personalize the marketing effort.
Another prediction is that we will see a continuing growth in the area of ‘social
marketing’ as described by both Kotler and Roberto (1989) and Foxall (1990).
Here the emphasis lies on changing social behaviour and is commonly initiated
by governments, political parties or other pressure groups wishing to change the
awareness, values and behaviour of the population. This is likely to raise

significant ethical issues for marketing professionals, as discussed by authors
such as Bowie and Duska (1990) and Cannon (1994).
So an important point to remember throughout the course of study is that:
●
●
●
●

Different societies may be at different points of marketing development
Different cultures may have different beliefs, values, economic systems and
ethics
Different markets may have reached different levels of sophistication
Different organizations may have reached different levels of marketing
orientation
Think – At what phase of marketing development/orientation is
the market in which you operate?
– At what phase of marketing development/orientation is
your organization?
– At what phase of marketing development/orientation is
your society?

However, in all foreseeable scenarios the understanding of consumer
behaviour would appear to be of ever growing importance.


6

Understanding Customers

Customers and users

In his book Perfect Customer Care (1994), Ted Johns raises the issue of customers and users as a powerful distinction for marketers to make when developing marketing strategy. The case that is made is so relevant that it is well
worth examining at the very beginning of a book called Understanding
Customers.

Definitions
Customers are people who use our services and pay for them, while,
Users are individuals who are affected by or who affect the product that we
supply. Users are often people who use the product but do not pay for it.

Implications
Examples abound of situations where there is a clear distinction between the two
sets of individuals. Children do not buy toys; parents, relatives and friends of the
family do. Similarly, in the petfood market, it is rare to see a cat or dog paying at
the checkout!!
Where this is the case, we have to realize that the people we are trying to satisfy
and delight are the parents, relatives and friends who part with their money. Thus
it may be valuable to focus our attention on the interests, motivations and emotional values attached to toys (or catfood) by these groups.
When purchasing our products, these groups may be thought to be attempting
to purchase love or peace! Granny buying a teddy bear for a grandchild is
wanting the child to fall in love with the bear and to express delight and love in
return. This is likely to be a major motivation for many ‘givers’.
An alternative scenario is where a child has pestered a parent mercilessly to get
a skateboard. The parent, driven to distraction, finally gives in. In this case the
payoff is peace and an absence of demands. In this second set-up we will be
concerned with satisfying the child – but only as a means of satisfying the real,
paying customer.
If we stick with the child/adult situation there may be a number of alternatives:
●

●

Some presents may be purchased by customers who never had one as a child
and can now fulfil the dream – we have all heard of the stereotypical train set
for the child which is played with by the father, the mother who buys the child
ballet lessons or a pony as a vicarious fulfilment of her own dream.
Another possibility is where the child demands a computer on which to play
games, but which the parent finds interesting and starts using as an aid to
domestic administration.

The clear comparison for marketing purposes is with the Decision Making Unit
(DMU) favoured in organizational buying. The children are likely to be the key
influencers, with the added factor of the emotional influence that a child can wield


A historical perspective 7

over the significant adults (our customers).
Some criticisms of the customer/user model have been made, but these have
focused mainly on situations where the users were not very influential – one of
the quoted examples being the prison service, where it may not be sensible to
view the inmates as important influencing users who will directly affect the real
customer (i.e. the government which ultimately and directly pays for the service).
Even in that extreme case, conditions and facilities have been improved
following prison riots.
In the context of the toy industry the distinction between customer and user
seems well made. The child will still remain a significant target for marketing
messages as the key influencer in the social DMU – so advertising can continue
to be directed at the children. However, the major insight of the analysis is the
need to centre attention on the paying customer. It may therefore be necessary to
undertake market research to explore the motivation and emotional values which

adults attach to the process of giving presents to children. This insight could give
us a significant competitive edge over the organization that thinks that its
customer is the child.
A similar analysis can be applied to the catfood example where, the customer
is the cat or dog owner. Petfood manufacturers go to considerable lengths to
ensure that the product is acceptable to humans – hence an emphasis on making
the smells acceptable, and also ensuring that the fatty jelly is not immediately
evident when the tin is opened. Try opening a tin from the bottom and discover
how unattractive it can be if you see brownish jelly/gunge rather than the more
acceptable ‘meaty chunks’.
Think – Who are the customers and users for perfumes?
expensive lingerie?
cut flowers?
charities such as Oxfam, etc?
– What other examples can you identify where customers
and users may be different?
This idea of targeting the marketing message at the ‘right’ person leads quite
neatly into another idea which may help develop our framework for analysing
purchasing decisions.

Segmentation
The advent of the mass market posed problems about whether universal
messages and products were appropriate. The idea developed of segmenting the
market. Market segmentation involves the breakdown of the total broad and
varied market into groups. The aim of the process is to identify groups whose
constituent members have characteristics in common – in this way messages and
products can be tailored specifically to address the needs and wants of the group.
Successful segmentation also produces groups (segments) which are significantly

8

Understanding Customers

different from one another in their requirements. It also hopes to identify
segments which are:
●
●
●

accessible
stable
large enough to make marketing worthwhile and profitable.
We shall look at segmentation in more detail in later sections of the book.

Dependency Theory

Degree of authority possible

Yet another notion which may be of use in making suitably sceptical sense of our
world is that of dependency theory. This was proposed by Douglas McGregor
(1960), who suggested that there is a relationship between the amount of
authority or power which you can exert over a person or an organization and the
degree to which that person or organization is dependent upon you. He illustrates
the relationship diagrammatically (see Figure 1.1).
One interesting offshoot of this idea is that it can be applied globally, nationally
or individually.
McGregor used the notion to explain how authoritarian organizations had
come to be accepted as standard (and were effective) by considering the social
conditions at the time at which they were being created.

100%

0%
100%

0%
Degree of dependence of
subordinate on superior

Figure 1.1
In the latter part of the nineteenth century unions were very weak, there was
virtually no legislation for the protection of workers, unemployment levels were
high and there was no Welfare State – a potent mix for the employee to
experience high levels of dependency upon the employing organization or
individual. McGregor argues that this allowed high levels of autocracy to be both
accepted and appropriate. This may be contrasted with the position in the 1960s,
when we had a Welfare State system, legislation to protect employees, strong and
powerful trade unions and what, in retrospect, was ‘over-full’ employment. Here


A historical perspective 9

the response of managements was to move sharply towards consultative and
participative styles of management. At the time this was regarded as being
‘enlightened’, but realistically they may well have had little option but to ‘be nice
to staff’. The 1990s have seen an erosion of employees’ rights, a reduction in
welfare benefits and high levels of unemployment – managements have also
become more ‘authoritarian’.
A similar analysis may be applied to changes in power/authority relationships at
an individual level. New-born children are highly dependent, and hence high

levels of authority may be used. As the child begins to learn to move it becomes
less dependent on the parents – as a result, furniture and ornaments are
repositioned to ensure that they are out of reach. However, until the little one
learns to master the door handle it is prone to being left in one (relatively safe)
location. The next move towards independence comes with the ability to open a
closed door. This poses a major problem for the parent as the child may begin
experiments with climbing (and falling down) stairs – so the parent erects gates to
stop such adventuring. The following years are characterized by the child being
dependent on the parents for cash. While shopping it is not uncommon to hear
small children asking loudly for things to be bought. While the parent holds the
purse strings control can be exercised over purchases, clothing, appearance, etc.
However, once the child (perhaps now a teenager) obtains an independent source
of income via a paper round or a Saturday job, the parent may well have lost the
ability to control things such as the purchase of clothes or CDs.
In terms of this introductory stage we can allow that dependency may be:
●
●
●

physical
financial, or
emotional

and, additionally, that it can have ‘knock-on’ benefits for others – an example
might be someone hoping to impress a loved one (and hence dependent on their
goodwill) who does some voluntary social service in order to get into his or her
good books. The action may benefit the recipient of the social service as a byproduct of another dependency.
Let us move on to look at some of the Parties with an interest in the business
or enterprise.
Any organization has a number of significant stakeholders. Usually these will

be groups such as:
●
●
●
●
●
●

the shareholders/owners/banks
employees
other businesses
the environment (or, more accurately, environmental pressure groups)
the government
customers.

The process of managing an enterprise can be seen as one of balancing the
competing demands of the different stakeholder groups. This idea is sometimes
shown in the form of a Stakeholder map (Figure 1.2).


10

Understanding Customers
Shareholders/Owners

Customers

Other businesses (suppliers)

ENTERPRISE

Government

Environmental pressure groups

Employees

Figure 1.2
The implication of this view is that at various times management may become
very concerned with satisfying the demands of the different groups – government
when tax demands fall due, the environmental lobby when protesters are picketing
their offices, shareholders when the Annual General Meeting is due, employees
when there is an industrial dispute, etc.
In this way management can be seen as somewhat reactive – the image of
managers as jugglers springs to mind. The different groups are likely to have
different interests and to place different demands on the organization:
●

●

●
●
●

●

Owners/shareholders are likely to demand profit, income, interest and return
on capital from the enterprise. In the case of the public sector it may be
expressed the other way round, in that we may be asked to produce the
maximum levels of service from a limited budget.

Other businesses and suppliers have an interest and expectation that the
enterprise will honour its contracts, pay its bills and deliver the promised
products or services according to the agreements made.
The environment has become increasingly significant over the last few years as
the public has become ever more aware of pollution in all its various forms.
Employees seek a fair wage, security, a safe place of work and a degree of
confidentiality from the organization.
The government is concerned that enterprises obey the laws of the land, pay
their taxes and conform to charters and codes of practice which may have been
applied.
Finally, customers are interested in honesty in advertising, value for money,
product/service quality and safety.

It is clearly desirable for management to become proactive in running the
business.


A historical perspective 11

So we could restate our stakeholder map emphasizing the wants/needs/
interests/demands of the various groups, as in Figure 1.3.
(profit, return on capital invested)
Shareholders/Owners

(quality, safety,
honesty in advertising)
Customers

(fair trading, honouring
agreements, paying on time)

Other businesses (suppliers)

ENTERPRISE

Government
(obeying laws, charters, paying taxes)

Environmental pressure groups
(pollution, health)

Employees
(fair wage, security,
confidentiality)

Figure 1.3
Using our ideas from Dependency Theory (above) we could predict that the
influence of the different groups at any point in time will be a direct function of
the degree to which the organization (or the management/decision makers) are
dependent on that particular group. As we observed earlier, we can sometimes
respond to one dependency to satisfy others. Examples could be organizations
adopting ‘green’ policies and products due to a dependency on the environmental
groups and (perhaps) the government – thus retaining their market share, producing profit and satisfying another primary stakeholder, the owners/shareholders.
Similarly, our earlier example of government and prison inmates could be
explained using such a model – if the government is approaching an election, or
has a very slender majority, it may be highly dependent on the goodwill of the
general public. In such a case the behaviour of prison inmates could well
influence policy decisions as a means of satisfying both the electorate and/or the
government’s own backbenchers/supporters.

The Competitive Environment

Marketing is essentially a competitive process which aims to deliver needed
goods and services for consumption at a profit. The type of economy in which the
business is attempting to operate will be an important factor in determining
marketing activities. The UK operates an economic system which aims to be


12

Understanding Customers

competitive. Indeed, the governmental policies of the 1980s and 1990s have been
directed specifically and openly towards making the UK economy more
competitive. We may identify three broad categories which typify different types
of market:
1 Free enterprise (private sector) markets, where economic decisions are taken
through the mechanism of the market place. The forces of supply and demand
are key concepts, and the important feature for marketers is that a dissatisfied
customer can switch to another supplier in order to gain satisfaction. In terms
of our earlier analysis, the business becomes very dependent on the customer
and therefore ‘the customer is king’. The USA is probably the clearest example
we have of this type of economy.
2 Collectivist (public sector) economies, where all business activity is stateowned or controlled. Decisions are taken centrally by the government or its
agencies. These were seen in the old Communist bloc dominated by the USSR
during the post-war period. Currently China and Cuba are the closest
examples, although some developing countries with authoritarian (but not
necessarily Communist) governments may tend to follow policies of this type
due to the difficulties of shortage of resources.
3 Mixed economies exist in a wide variety of countries. While government may
play a key role in some sectors, such as power, welfare, health, transport or
defence, the activity may well be split between the public and private sectors.

This phenomenon has been seen in the UK, with the creation of ‘market forces’
in the heath service being a good example.
It can be argued that society itself is an economic organization – the type of
economy which is operated will directly affect the business and the practice of
marketing. The notion of competition has a number of elements which may be
worth developing at this point:
●

The degree of captivity of the market – this refers to the extent to which
consumers have to buy from suppliers or the extent to which the market is
totally fluid – where anyone can supply and consumers are free to go to
whomsoever they choose for their products or services. Clearly this will vary
from market to market – we can think of examples where the market is fluid
and others where the customers are captive.
Think – Where on the fluid–captive continuum would you
place the market for:
● Dental treatment
● Butter
● Water
● Sports clothes
● Electricity
● Professional marketing education
● Your own industry or product/service sector?


A historical perspective 13
●

●

●

Another dimension of the competitive market is the idea that markets can be
static, expanding, declining or stagnant. Such judgements can be made on a
number of criteria, such as in terms of sales turnover, range of product offered,
demand, or even reputation.
Competition also occurs within the society as a whole and, as such, is bound
and limited by its rules and norms of behaviour. This may include ethical
considerations which may be determined by religious, political and legal
frameworks.
Market competition will be influenced by the difficulty of entering the market.
If factors such as the level of capital investment or technology are very high,
the result will be that it becomes very difficult for new enterprises to enter a
market. This can result in what is sometimes called an ‘oligopoly’, where a
whole market is dominated by a handful of players, such as we have in the
petroleum-refining industry in the UK. Here we see a situation where half a
dozen companies control the supply of petrol via outlets, and there are
sometimes suspicions that the industry could become something of a ‘cosy
club’ in which the best interests of the consumers may not be sought. In the
UK, bodies such as the Monopolies Commission exist to review such
situations and report on the public interests involved.

In this market economy context the objectives of the business are to make a
profit and survive.

Control
Most management activity may be viewed as being concerned with coping with,
and controlling, an uncertain environment.
The basic ideas of control theory come from engineering, and centre on the
concept known as feedback. This may best be described by reference to

Figure 1.4.
This cycle is perhaps most easily explained by using an example such as a
refrigerator. Here the situation to be controlled is the temperature of the container.
The output is temperature, and the machine must be able to detect this output. We
Reactor
Measure

Causal factors

Standard

Predictable
Unpredictable

Detector
Situation to be controlled

Unexpected

Figure 1.4 The control cycle

Output


14

Understanding Customers

will also need to measure the level of the temperature, and this can then be
compared with the standard that we have set via the ‘warmest/coldest’ dial. This

comparison tells us whether we are on target or whether it is necessary for the
system to react in some way in order to achieve the standard desired. Reaction
will be through what we are calling ‘causal factors’. In the fridge the motor is
triggered when the temperature rises above the desired limit so that the
temperature is reduced. When the lower level is reached, the system reacts by
switching off so that the container slowly warms up. In this way we control the
temperature inside the machine within the limits set.
Causal factors are any factors which affect the situation to be controlled, and
fall into the three categories set out below.
Predictable factors are those which affect the situation and whose effects can
be accurately and consistently predicted. Many of the physical laws fall into this
category, e.g. materials expand by predictable amounts with rises in temperature
and water boils at 100°C.
Unpredictable factors are those things that we know have an effect on the
situation, but these effects cannot be accurately or consistently predicted. Having
a puncture will affect the performance of my bicycle, but the detailed effect is
likely to be a function of many other things, such as whether it is in the front or
back tyre, whether I am moving fast, moving slowly, whether it is a slow puncture
overnight and the road conditions obtaining at the particular point in time.
Unexpected factors are those factors that you have not thought of. Generally
these are occurrences which have not yet happened. Once they have happened
they will no longer be unexpected and will therefore be reclassified as predictable
or unpredictable.
At the risk of appearing sexist, the traditional view of management is that it is
the manipulation of the five ‘Ms’ in the interests of the objectives of the
organization – the five ‘Ms’ being money, materials, machines, men and markets.
If these are the basic elements of the managerial situation, it follows that we
could examine them as causal factors to the situation to be controlled (the
enterprise).
Money is not predictable – future interest rates, exchange rates, creditworthiness, etc. are all clearly open to question – so we must consider it to be an

unpredictable factor.
Materials run into similar problems – is quality what we require?, will they
arrive on schedule?, will they arrive at all? So again, it looks as if materials will
have to be considered as an unpredictable factor.
Machines look rather better at first sight – but then we look at breakdowns.
They do happen, usually at the worst possible time – so once again it looks like
an unpredictable factor.
Men (and women) are perhaps the most erratic resource of all. They are the
ones with minds of their own – the resource that can vote with its feet, work to
rule, come up with productivity-enhancing suggestions, buy competitors’ products. At best, they are unpredictable; at worst, unexpected!!
Markets are also made up of people, so they share all of the problems identified
above – but in addition they are prone to interference from external factors such
as the level of unemployment, interest rates, wars and the like.
At first it may appear that we have shown that management is impossible! The


A historical perspective 15

reality is that management is about coping with unpredictable factors in an
uncertain world. It is difficult – this is what makes it rewarding and well paid. If
the factors were not unpredictable we would not need managers, only planners
and doers – i.e. in a ‘better’ world my cat could manage ICI!
Rather than prove that management is impossible, I think we have explained
the phenomenon sometimes known as Sod’s Law (also attributed to Murphy on
occasion). This is not a true law, but a joke which has enough truth in it to make
it funny. Sod’s Law comes in many forms, but at its most general it claims that:
if something can go wrong, it will – but only at the most inconvenient and
unexpected times.
Thus it is often used to explain why buttered bread falls butter side down
(except when we are conducting an experiment to prove Sod’s Law!). Another

formulation of the same idea emerges as:
when you have found the answer, they change the question.
Its applicability comes from the fact that we tend to notice things that go wrong
more than we recognize that something has gone according to plan.
It is quite possible to perceive management as activities designed to minimize
the effect of Sod’s Law – in fact, much managerial activity is devoted to making
the various factors more predictable.
Money is made more predictable by establishing borrowing capacity in
advance of need, borrowing at fixed rates of interest and, above all, by budgeting
for income and expenditure.
Materials are subjected to goods inwards inspection to ensure that substandard
materials are not allowed into the system, which can lead to enormous expense if
work is carried out only to be subsequently scrapped. Carrying adequate stocks
of necessary materials is one way of minimizing the risks associated with running
short of crucial inputs to the organization.
Machines are made more predictable through maintenance. This extends the
time during which they work effectively, but may still leave us with a problem of
sudden breakdown. This can be minimized by preventative maintenance, where
items are replaced before they are able to affect the whole machine. Predictability
of machine systems may also be improved by avoiding dependence on single
units.
The human factor is made more predictable by a series of devices associated
with the personnel function – manpower planning, recruitment and selection,
reward systems, training, rules, appraisal, job descriptions.
Markets are made more predictable through the activity of advertising after
suitable market research – the aim being to create and control demand for our
product.
This view is therefore a useful focus for our study of customers and our attempt
to understand them: i.e. how does what we are doing illuminate or assist us in this
central problem of controlling that prime aspect of the organization – its market,

both existing and potential?


16

Understanding Customers

Think – How do you feel regarding the manipulation of the
behaviour of staff, colleagues and the public?
These ideas of controlling others, managing the conflicting demands of the
stakeholders and generally viewing business as a balancing or juggling act
implies that life may be full of dilemmas. These quandaries, which characterize
many management decisions, may have ethical implications. Let us try some
examples.
Think – You discover an addictive (but not banned) substance
which is tasteless and appears to have no sideeffects. You manufacture instant coffee, and realize
that adding a little of ingredient X could ensure
product loyalty:
a) Is it ethical to do it?
b) If you manufactured pet food, would it be any more
acceptable/less acceptable/different?
There are two contrasting perspectives on ethical thinking:
1 Deontological or Transcendental ethics are based on clear and absolute beliefs
about what is right and wrong, and on universal standards of goodness and
justice. Consequences of actions are not the primary considerations in deciding
what ought to be done. Obligations, responsibilities and considerations of
justice and fairness take precedence. This can be a relatively clear-cut
framework, although it is not always comfortable as people of this value
system will do things because they are right rather than because they are
comfortable. Deontologists will claim that ‘the ends do not justify the means’.

This viewpoint is often associated with firm religious or political convictions.
2 Utilitarian ethics, where the consequences of an action are the prime
determinant of whether an action is right or not. Utilitarians will argue strongly
that ‘the ends do justify the means’. Perhaps the key issue for the utilitarians is
the question of whose ends we are talking about. At the wider level, seeking
‘good’ outcomes for the mass of the population is laudable, but seeking ‘good’
outcomes for the individual may be perceived as being selfish.
It is also clear that different societies will develop different rules and ethical
systems depending on their beliefs and history. This leads us to problems as to
whether what is ‘right’ in one society may not be viewed as ‘right’ in another.
Other marketing issues can be problematic.