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2.2 Customer Analysis

Reading time: 10 Minutes

Customer Analysis          Item-by-use          Direct Competition          Demand Market          Abell Model

You can choose different ways to define your market. An important distinction is the market definition from the supply or demand side. This can be illustrated with the following example.

One example of market definition from the supply side:

My market consists of companies that need software for assessing employee satisfaction.

One example of market definition from the demand side:

My market consists of companies that strive to improve their employee satisfaction and HRM.

Which definition is smarter to use for you as a marketer? In most cases, it is the market definition from the demand side. This definition was formulated from the field of view of the customer.

Level of competition and market definition

To define the market, we can use different competitive levels. These levels answer when we can call someone a competitor and at what level they operate. Let’s go through the different levels based on the famous “beer example”:

Product Form

In the example of beer, competition (or market definition) on product form could be called “non-alcoholic beer. The product in this case is “beer”. Non-alcoholic beer is a product form of beer.

Product Category

The product category is “beer”. Competition at product level would cover all beer producers in this example regardless if it is alcoholic beer, abbey beer or supermarket beer.

Generic competition level

The generic competition level is – as the name suggests – a higher level. In our example, beer would fall under ‘drinks’.

Budget Competition

A fourth level is that of budget competition. This involves competition at a budgetary level. The beverage competition operates on the level of substitutes stimulants and diet.

This is obviously a very “broad” way to describe the competition. Even the situation wherein the recipient finds himself affects this type of competition. For example, a plate of nachos that is being ordered in the pub is a direct competitor of beverages. But in the supermarket it is the big family bag of chips that is the fiscal competitor. This is where the item-by-use analysis offers a solution.

Item-by-use analysis

Item-by-use analysis allows the researcher to create a source of information where you see the link between events (uses), products (items) and alternative products (substitutes).

1. The respondent is shown a product (item)
2. The respondent is asked in what situation he / she has used the product (uses)
3. The respondent is asked what alternatives he / she sees for this particular product (substitutes)

When the study population (respondents) is large enough, the researcher can demonstrate statistically if alcohol-free beer competes with nachos, abbey beer, family bag of chips or soda and in what situations. This is very valuable information!

Direct competition and overall competition

For you as a marketing researcher, it is important to be aware of the different competition levels and your product within those levels. Questions that should be asked about this topic are:

1. What products compete on product form? What brands are they?
2. What products compete on product category? Which or what brands are they? *
3. What products compete on generic competition level? Who or what brands are they? *
4. What products compete on budget level? Who or what brands are they?
5. What is my definition of the market using the above mentioned questions?

* Also think of cannibalism within your own product

Demand-oriented market definition

The first part of the customer analysis aims to define the market as an appropriate market definition. It’s up to you as a researcher to find the right balance between supply-oriented and demand-oriented.

A good example was shown during the advent of central heating in the market of fireplaces. The market for stoves has been redefined on the basis of market demand. After the arrival of the CV, the market was no longer about making houses warmer but about having a cozy home.

Too much supply-oriented

A common mistake is a too strong approach toward a demand-oriented market. Also known as ‘marketing myopia’. Marketing myopia happens when you stare yourself blindly on your own product.

Excess demand oriented

Obviously there should be a proper balance between supply and demand orientation. A too strong demand-oriented programming has a disadvantage that the competition in need is broad and may be too generally understood. Feeling cozy’ness at home (along the lines of the market in fireplaces) can be completed in many ways. It is the talent of the marketer to manage this job succesfully.

Abell model for domain determination

The Abell model for domain determination – also called business domain – has been developed by Derek Abell for defining and analyzing the market from the supply and demand perspective. The market is analyzed on the basis of three dimensions.

• groups of customers – who are the customers?
• needs – what do the customers want?
• alternative technologies – how are needs met?

Business domain

Below the Abell model is shown for a hotdog stand. The gray cube in the middle will be referred to as the business scope. This represents the part of the market that operates the organisation.


The entire diagram represented the business domain.

General market analysis

Your customer analysis is not complete without an overall market analysis. Now that the market is defined according to your market definition, you can start analyzing it. Try doing that on the basis of quantitative and qualitative analysis.

Quantitative analysis

Determine how large the market is in volume and revenue. Look at the percentage of the growth rates in order to map the development of the market. Yields in your market and segments of your market give insight into profitability.

Quantitative market information is not always easy to get and are often costly. The information is not always complete or accurate. To this my answer is the following:

A good marketer has the ability to get close to the truth in order to optimize the overall market #marketing

Consider what paid or free resources can help you to be a good marketer.

• Chamber of Commerce
• Ministry of Economic Affairs
• Economic Institute for Small and Medium Business
• Paid databases
• Magazines in your industry

Qualitative analysis

At this point in your research, you are probably limited to simple analyzes based on the figures that you have. Besides making this list of numbers by placing them in tables, you can also get to work with qualitative descriptions of the market.

How homogeneous or heterogeneous’s is your market? Which means; Is your market the same everywhere with the same composition or is it a market that has many differences? When we look at the example of ‘beer’ we notice that it is a heterogeneous market. In this market there are students, construction workers, couch potatoes and partygoers. Pretty much heterogeneous.

Are there sales people in the organization who work with customers on a daily basis? Ask them what segments they see within the market. What trends can distinguish them?

Think about what you can do to describe your customers. Think beyond your customers, but also think about the customers of your customers.

Buyers Groups

We have just talked about homogeneous markets and heterogeneous markets. In the qualitative analysis, we found that our “beer-sample ‘has a very heterogeneous market.

Yoga for mountaineers

Let’s us now take an example with a very homogeneous market. Namely the market for yoga videos for mountaineers. No joke, this is an existing market from a US businesswoman. A great example of a homogeneous market.
When we place markets of our beer and our yoga side by side, one thing becomes clear. The mutual diversity among the buyers of beer is many times greater than that of the customers of yoga-for-mountaineers video’s.

Homogeneous segments

Because all these groups are so different from each other, we divide the market in segments (market-segments) so we can edit them with our marketing tools. Beer drinking students will need a different approach than for example beer-drinking construction workers, both consumers of beer.

A market-segment is appropriate when;

• it is identifiable,
• it is measurable and adequate in size,
• it is reachable,
• it is homogeneous in their response towards our marketing efforts,
• it is stable.

Segmentation criteria

Which details do we see exactly? It is obvious that we do not look at the length of ones nose or the color of their hair when we talk about diversity in marketing terms. You first have to ask yourself as a marketer which segments are important. Here are some examples of segmentation criteria.

Consumer macroeconomic criteria

Macro segmentation criteria are general. These are some examples for the consumer market.

• geographically
• demographic
• sex
• age
• household composition
• Income
• appeal
• Ethnicity
• Training

Consumer micro-criteria

Micro-segmentation criteria are all about criteria that are very specific. See the following examples.

• psychosocial
• social class
• lifestyle
• personality
• knowledge (cognition)
• posture (affection)
• behavior (conatie)

Business market macro criteria

The business market has their own set of macro criteria. Below are some macro-criteria examples.

• macro (general)
• sector
• size
• geographical location
• Production and manufacturing technology
• Product use

Micro-enterprise market criteria

And some examples of specific (micro) segmentation criteria for the business market.

• micro (specific)
• composition Decision Making Unit (DMU)
• purchasing criteria
• corporate culture
• strategy

You are the marketer who is leading this investigation. It is your job to find the right segmentation criteria!

Describe market segments

Now that you have decided upon your segmentation criteria, you can describe the market segmentation criteria. We can describe these segments quantitatively and qualitatively.

Quantitative description


• size of the market segment
• growth of the market segment
• realized margins in this segment
• customer satisfaction
• loyalty in figures

Qualitative description


• characteristics of customers
• customers needs
• developments in this segment
• Identification of decision-makers
• purchasing criteria and motives
• buying behavior and purchasing process
• information-seeking behavior
• specific preferences

World view of your customers

What is the conclusion of your customers analysis? You have defined your market. Then you have done an overall market analysis and with that information you zoomed in on the different market segments.

Eventually you reached your market definition on the basis of the balance between the supply and demand perspective. In this market you have identified interesting market segments. You have studied these segments and can accurately describe the people in these segments.

Seth Godin describes in his book “All Marketers are Liars” how each segment has its own worldview. That worldview is their truth. Once a story – whether or not originating from a company – resonates with their worldview, it becomes their truth.

Now that we have formulated the ‘world’ we can start defining the ‘story’.

Jerome Knoot

Jerome Knoot


Since 2012 I'm working on the development of the 7 step Marketing Method. " Marketing accessible to everyone" that's my goal as an entrepreneur and marketer.

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