Assessing customer purchasing criteria

The central question is simple: why does a particular customer choose one company rather than another?

When to use it

Whenever a strategy, proposition or competitive assessment must begin with evidence about what customers value.

Origins

Tom Peters argued that every business success ultimately depends on a sale—the moment at which customer and company come together.

Understanding the reasons behind that choice is the first of three connected analyses used to assess a firm’s position in each important product–market segment.

What it is

Customer purchasing criteria translate the buying decision into a structured set of needs. They provide the demand-side foundation for determining what a company must do well and how it compares with rivals.

The complete sequence is:

1. Identify and weight customer purchasing criteria (CPCs): what buyers in each segment require from every potential supplier, including your firm and its competitors.
2. Derive and weight key success factors (KSFs): what a supplier must do well to meet those needs and operate successfully.
3. Assess competitive position: compare the firm with its competitors against the weighted success factors, using Rating competitive position.

The analysis therefore begins where strategy should begin: with the customer.

How to use it

Start by asking what buyers in the company’s main segments need from any supplier. Do they want the lowest price that delivers an acceptable product or service? Are they seeking the highest possible quality regardless of price? Or does the desired trade-off sit somewhere between those extremes?

Compare segments rather than assuming all customers value the same things. One group may attach far greater importance to a criterion that another regards as secondary.

Make each need concrete. Is the deciding factor technical specification, delivery speed, reliability, technical support or empathetic customer service?

These supplier-related needs are customer purchasing criteria. In business-to-business (B2B) markets, common CPCs include product quality—features, performance and reliability—alongside range, on-time delivery, technical support, service, relationship quality, reputation, financial stability and price.

Business-to-consumer (B2C) criteria are often similar, though product range and the supplier’s financial stability may carry less weight. The relative importance of quality, service and price changes with the category and consumer group.

CPCs can be organised into six categories describing needs related to: