CONSUMPTION CHAIN ANALYSIS

Consumption chain analysis is a tool that helps businesses differentiate their offerings within a market. This tool works on the premise that opportunities for differentiation lurk at every step of the way your customers take, from the time they first become aware of their need for your product to the time they finally dispose of the remnants of the used-up product. The steps are called the customers consumption chain. Any link in the consumption chain has the potential to provide your business a unique edge over the competition. Your job is to find out which links are the most promising for your organization and why. The first step in doing this is to understand how the chain works. To effectively use the consumption chain tool you step through your chain and ask the question, "Is there a unique way for us to deliver value to the customers at this stage of the consumption process?" The following sections discuss what questions you need to address at each link in the chain. Examples are also provided that illustrate how companies have successfully used the consumption chain to create a unique product offering. Awareness of need Search Selection Order and Purchase Delivery Payment Financing Receipt Installation

 Storage & Transport Use Service Repairs &Returns Final Disposal Awareness of Need How do customers become aware of their need for something you can provide or a problem you can solve? For instance, Oral B incorporated a patented indicator line into their toothbrush to tell you when its time to buy a new one. Energizer pioneered the first on-battery tester that allows consumers to test battery power on the spot. The Search How do customers identify alternative solutions? The key objective here is to increase product visibility. Many insurance companies will now give you not only quotes on their premium prices but also the prices for their closest competitors stating that they just want to see you save money. With one phone call, instead of four, you can see who has the best price for you, but the key is that you give your company gets the first shot at creating a customer relationship and a positive one at that. Selection Why does a customer pick one solution over another? The key objective here is to shorten the decision cycle for the customer. This link in the consumption chain is the precise reason why most car buyers start with the internet firstto compare models, reviews, features, and prices.

Order and Purchase What must a customer do to buy from you? Many companies are successful at interesting the customer and persuading them to select their product only to lose the game at the point of sale. Other firms have tackled this link with more imagination. Amazon.com, for instance, created a single one-click system in which repeat customers can simply press a single button and order from prestored information with no further effort. Delivery How does an offering get from you to the customer? Needless to say, the delivery pizza business disrupted the sit-down pizzeria by delivering pizzas within 30 minutes to most locations. Dominos Pizza even uses Caller ID linked to a GIS database to know exactly where you are calling from so they can merely confirm your address rather than collect it. The system also produces driver maps to ensure the quickest delivery route even taking to account traffic patterns. payment How does a customer pay? Optimizing the payment link can improve business in multiple ways. Obviously, if payment is more convenient, that helps to differentiate your product. Second, the substantial benefit your organization should enjoy in terms of reduced costs to process payments, more rapid cash flows, or both. Consider Mobils Speedpass. Customers enrolled in the program use a miniature radio transmitter to

send a special code that is recognized by a receiver in the pump providing instant payment from the customers credit card. Company studies show that customers using Speedpass purchase gas an average of one time more per month than those not using the system. Receipt Once customers have it, what do they do with it? Questions to consider are whether the process can be made more convenient, more efficient, or more enjoyable. Progressive Auto Insurance puts its adjusters in mobile vans which settles claims right at the scene of the accident. Serving customer this way has also had an unexpected benefit. Progressive boasts some of the lowest levels of nuisance lawsuits in the country. It appears that service is received so quickly that there is simply no time for fraud mongers to get involved. Installation and Assembly How does your customer put the product to work? IKEA Furniture mills many of its furniture components with different shaped joints so the furniture can only be assembled one waythe right one. Compaq was one of the first computer companies to color code large number of wires that plug into the central processing unit. Metal paint cans are impossible to use without making a mess, so Dutch Boy took a cue from laundry detergent. The 1gallon plastic Twist & Pour that includes a similar twist-off lid and a nodrip spout. Sherwin Williams has spent millions converting Dutch Boy to the new container, with stores getting special shakers. Storage and Transport What bothers or worries the customer about storing the product? Most companies believe that

storing or transporting their product is the customers problem not theirs. But this creates a wonderful opportunity for you if you think about and design your product or service around these customer needs. Many frozen foods companies woke up to these facts when they started putting resealable zip-lock tops on their plastic bag packaging so unused food portions could be easily restored with out the need for additional storage bags or containers. Service What happens when the offering needs service? Otis Elevator uses wireless modems in all of its elevators to monitor operational problems before they affect the service of the elevator itself. Otis repairmen show up at your door because the elevator calls them for you based on a complex set of diagnostics. Repairs and Maintenance What happens when the offering needs repair or is returned or canceled? Retailers are finding that differentiating on the basis of ease of repairs and returns is one way to combat the incursions of internet commerce. Target stores allow customers to return any item purchased online at any one of its 800+ stores. Final Disposal What does the customer do with the offering once its no longer of any use? Cannon has developed a system that allows customers to return usedup copier cartridges which are then recycled. This creates a positive feeling of being environmentally responsible for the customer,

while at the same time enhancing the image of Cannon. It also reduces costs for Cannon since it is much less expensive to rehabilitate a used cartridge than to manufacture a new one. Can you be distinctive on this link in the chain? If so, how

SMART objectives=Strategic objectives

A broadly defined objective that an organization must achieve to make its strategy succeed. Strategic objectives are, in general, externally focused and (according to the management guru Peter Drucker) fall into eight major classifications: (1) Market standing: desired share of the present and new markets; (2) Innovation: development of new goods and services, and ofskills and methods required to supply them; (3) Human resources: selection and development of employees; (4) Financial resources: identification of the sources of capital and their use; (5) Physical resources: equipment and facilities and their use; (6) Productivity: efficient use of the resources relative to the output;

(7) Social responsibility: awareness and responsiveness to the effects on the wider community of the stakeholders; (8) Profit requirements: achievement of measurable financial well-being and growth.