Consumer Behavior and Segmentation

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Consumer Behavior and Segmentation

  1. 1. UNDERSTANDING MARKET ‘ Consumer Behavior’ Session 3 Chapter 5&6
  2. 2. The Gaps Model Word-of-mouth Personal Needs Past Experience Expected Product Perceived Product Product Delivery Translation of perceptions into product-quality specifications Management perceptions of consumer expectations External communications to consumers Gap 5 Gap 4 Gap 3 Gap 2 Gap 1 Consumer Marketer
  3. 3. The Gaps <ul><li>Customer’s Gap </li></ul><ul><ul><li>Customer’s expectation not matching with customer’s perception (Gap 5) </li></ul></ul><ul><li>Provider’s Gaps </li></ul><ul><ul><li>Not Knowing what Customers Expect (Gap 1) </li></ul></ul><ul><ul><li>Not Selecting Right Product Designs & Standards (Gap 2) </li></ul></ul><ul><ul><li>Not Delivering to Product Standards (Gap 3) </li></ul></ul><ul><ul><li>Not Matching Performance to Promises (Gap 4) </li></ul></ul>
  4. 4. Consumer Behavior <ul><li>Role of Marketing is: </li></ul><ul><li>To Understand the ‘ INTERVENING PROCESS’ </li></ul><ul><li>that Influences Buying Decision. </li></ul><ul><li>Think on: </li></ul><ul><li>Who buys? How do they buy? When do they buy? Where do they buy? Why do they buy? … … … … </li></ul>
  5. 5. <ul><li>Consumer Buying Behavior </li></ul><ul><ul><li>Buying behavior of individuals and households that buy products for personal consumption. </li></ul></ul><ul><li>Stimulus Response Model </li></ul><ul><ul><li>Marketing and other stimuli enter the buyer’s “black box” and produce certain choice/purchase responses. </li></ul></ul><ul><ul><li>Marketers must figure out what is inside of the buyer’s “black box” and how stimuli are changed to responses. </li></ul></ul>Consumer Behavior Model Marketing & Other Stimuli Marketing Product Price Place Promotion Other Economic Technological Political Cultural Buyer’s Black box Buyer Charac- teristics Buyer Decision Process Buyer Responses Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount Figure: Model of Buyer Behavior
  6. 6. Characteristics Affecting Consumer Behavior <ul><li>Cultural </li></ul><ul><li>Social </li></ul><ul><li>Personal </li></ul><ul><li>Psychological </li></ul><ul><li>Culture </li></ul><ul><li>Subculture </li></ul><ul><li>Social Class </li></ul><ul><ul><li>Upper class </li></ul></ul><ul><ul><li>Middle Class </li></ul></ul><ul><ul><li>Working Class </li></ul></ul><ul><ul><li>Lower Class </li></ul></ul>Key Factors
  7. 7. Characteristics Affecting Consumer Behavior <ul><li>Cultural </li></ul><ul><li>Social </li></ul><ul><li>Personal </li></ul><ul><li>Psychological </li></ul><ul><li>Groups </li></ul><ul><ul><li>Membership </li></ul></ul><ul><ul><li>Reference </li></ul></ul><ul><ul><ul><li>Aspirational groups </li></ul></ul></ul><ul><ul><li>Opinion leaders </li></ul></ul><ul><ul><ul><li>Buzz marketing </li></ul></ul></ul><ul><li>Family </li></ul><ul><ul><li>Children can influence </li></ul></ul><ul><li>Roles and Status </li></ul>Key Factors
  8. 8. Characteristics Affecting Consumer Behavior <ul><li>Cultural </li></ul><ul><li>Social </li></ul><ul><li>Personal </li></ul><ul><li>Psychological </li></ul><ul><li>Age and life cycle </li></ul><ul><li>Occupation </li></ul><ul><li>Economic situation </li></ul><ul><li>Lifestyle </li></ul><ul><ul><li>Lifestyle segmentation </li></ul></ul><ul><li>Personality and self-concept </li></ul><ul><ul><li>Brand personality </li></ul></ul>Key Factors
  9. 9. Family Life Cycle & Banking Needs An Example Stage Banking Needs Financial Situation Young Single People Few Financial Burdens; recreation oriented Low-cost checking; auto loan; credit card Full Nest I: Youngest child under 6 Home purchasing peak; Liquid assets low; Many working mothers Mortgage; Credit card; Revolving Credit Line; Bill Consolidation Loan Full Nest II: Older couples with Dependent Children Good Financial Position; Many Working Mothers Home Improvement Loans; Equity Credit Lines; Money Mkt Deposit accounts Investment services Empty Nest: Older Couples; No child at home; One/ both Retired Significantly reduced Income Monthly Income Checks on CDs; Direct Deposit of Social Security
  10. 10. Characteristics Affecting Consumer Behavior <ul><li>Cultural </li></ul><ul><li>Social </li></ul><ul><li>Personal </li></ul><ul><li>Psychological </li></ul><ul><li>Motivation </li></ul><ul><ul><li>Needs provide motives for consumer behavior </li></ul></ul><ul><ul><li>Motivation research </li></ul></ul><ul><ul><ul><li>Maslow’s hierarchy of needs </li></ul></ul></ul><ul><li>Perception </li></ul><ul><ul><li>Selective attention, selective distortion, selective retention </li></ul></ul><ul><li>Learning </li></ul><ul><ul><li>Drives, stimuli, cues, responses and reinforcement </li></ul></ul><ul><li>Beliefs and attitudes </li></ul>Key Factors
  11. 11. Maslow’s Hierarchy of Needs Once a Lower-level need is Satisfied, a Higher-level need Emerges, and Demands Satisfaction Physiological Needs Hunger, thirst Self actualization Needs Esteem Needs Self-esteem Belongingness & Love Needs Friendship Security & Safety Needs Protection from physical harm
  12. 12. Types of Buying Decision Behavior Difference between brands Significant Complex buying behavior Low Few Dissonance-reducing buying behavior Habitual buying behavior Variety-seeking buying behavior High Involvement Level
  13. 13. Five Stages Buyer Decision Process <ul><li>Need recognition </li></ul><ul><li>Information search </li></ul><ul><li>Evaluation of alternatives </li></ul><ul><li>Purchase decision </li></ul><ul><li>Postpurchase behavior </li></ul><ul><li>Needs can be triggered by: </li></ul><ul><ul><li>Internal stimuli </li></ul></ul><ul><ul><ul><li>Normal needs become strong enough to drive behavior </li></ul></ul></ul><ul><ul><li>External stimuli </li></ul></ul><ul><ul><ul><li>Advertisements </li></ul></ul></ul><ul><ul><ul><li>Friends of friends </li></ul></ul></ul>Process Stages
  14. 14. <ul><li>Need recognition </li></ul><ul><li>Information search </li></ul><ul><li>Evaluation of alternatives </li></ul><ul><li>Purchase decision </li></ul><ul><li>Postpurchase behavior </li></ul><ul><li>Consumers exhibit heightened attention or actively search for information. </li></ul><ul><li>Sources of information: </li></ul><ul><ul><li>Personal </li></ul></ul><ul><ul><li>Commercial </li></ul></ul><ul><ul><li>Public </li></ul></ul><ul><ul><li>Experiential </li></ul></ul><ul><li>Word-of-mouth </li></ul>Process Stages Five Stages Buyer Decision Process
  15. 15. <ul><li>Need recognition </li></ul><ul><li>Information search </li></ul><ul><li>Evaluation of alternatives </li></ul><ul><li>Purchase decision </li></ul><ul><li>Postpurchase behavior </li></ul><ul><li>Evaluation procedure depends on the consumer and the buying situation. </li></ul><ul><li>Most buyers evaluate multiple attributes, each of which is weighted differently. </li></ul><ul><li>At the end of the evaluation stage, purchase intentions are formed. </li></ul>Process Stages Five Stages Buyer Decision Process
  16. 16. <ul><li>Need recognition </li></ul><ul><li>Information search </li></ul><ul><li>Evaluation of alternatives </li></ul><ul><li>Purchase decision </li></ul><ul><li>Postpurchase behavior </li></ul><ul><li>Two factors intercede between purchase intentions and the actual decision: </li></ul><ul><ul><li>Attitudes of others </li></ul></ul><ul><ul><li>Unexpected situational factors </li></ul></ul>Process Stages Five Stages Buyer Decision Process
  17. 17. <ul><li>Need recognition </li></ul><ul><li>Information search </li></ul><ul><li>Evaluation of alternatives </li></ul><ul><li>Purchase decision </li></ul><ul><li>Post-purchase behavior </li></ul><ul><li>Satisfaction is important: </li></ul><ul><ul><li>Delighted consumers engage in positive word-of-mouth. </li></ul></ul><ul><ul><li>Unhappy customers tell on average 11 other people. </li></ul></ul><ul><ul><li>It costs more to attract a new customer than it does to retain an existing customer. </li></ul></ul><ul><li>Cognitive dissonance is common! </li></ul>Process Stages Five Stages Buyer Decision Process
  18. 18. Marketing Research <ul><li>The process of planning, collecting and analyzing data relevant to a marketing decision. </li></ul><ul><ul><li>Much can be learned about consumers through marketing research by </li></ul></ul><ul><ul><ul><li>Collecting, recording, and analyzing data important in marketing products </li></ul></ul></ul><ul><ul><ul><li>Communicating results to management </li></ul></ul></ul><ul><ul><li>Must be done prior and after the sale </li></ul></ul><ul><ul><li>Marketing Research Process </li></ul></ul><ul><li>Define the Marketing Problem </li></ul><ul><li>Choose a Method of Research </li></ul><ul><li>Collect the Data </li></ul><ul><li>Analyze the Data </li></ul><ul><li>Make Recommendations to Management </li></ul>
  19. 19. Buyer Decision Process for New Products <ul><li>New Products are goods, services or ideas that are perceived by customers as new. </li></ul><ul><li>Marketers should help consumers move through these stages: </li></ul><ul><ul><ul><li>Awareness </li></ul></ul></ul><ul><ul><ul><li>Interest </li></ul></ul></ul><ul><ul><ul><li>Evaluation </li></ul></ul></ul><ul><ul><ul><li>Trial </li></ul></ul></ul><ul><ul><ul><li>Adoption </li></ul></ul></ul>
  20. 20. <ul><li>Individual Differences in Innovativeness </li></ul><ul><ul><li>Consumers can be classified into five adopter categories </li></ul></ul><ul><ul><ul><li>Innovators </li></ul></ul></ul><ul><ul><ul><li>Early Adopters </li></ul></ul></ul><ul><ul><ul><li>Early Majority </li></ul></ul></ul><ul><ul><ul><li>Late Majority </li></ul></ul></ul><ul><ul><ul><li>Laggards </li></ul></ul></ul>Buyer Decision Process for New Products <ul><li>Product Characteristics and Adoption </li></ul><ul><ul><li>Five product characteristics influence the adoption rate </li></ul></ul><ul><ul><ul><li>Relative Advantage </li></ul></ul></ul><ul><ul><ul><li>Compatibility </li></ul></ul></ul><ul><ul><ul><li>Complexity </li></ul></ul></ul><ul><ul><ul><li>Divisibility </li></ul></ul></ul><ul><ul><ul><li>Communicability </li></ul></ul></ul>
  21. 21. Business Markets: Buyer Behavior <ul><li>Marketing Structure and Demand </li></ul><ul><li>Nature of the Buying Unit </li></ul><ul><li>Types of Decisions and the Decision Process </li></ul><ul><li>Compared to consumer market </li></ul><ul><ul><li>Business markets </li></ul></ul><ul><ul><ul><li>have fewer but larger customers </li></ul></ul></ul><ul><ul><li>Business customers </li></ul></ul><ul><ul><ul><li>are more geographically concentrated </li></ul></ul></ul><ul><ul><li>Demand is different </li></ul></ul><ul><ul><ul><li>Demand is derived </li></ul></ul></ul><ul><ul><ul><li>Demand is price inelastic </li></ul></ul></ul><ul><ul><ul><li>Demand fluctuates more, and changes more quickly </li></ul></ul></ul>Characteristics <ul><ul><li>The buying behavior of organizations that buy goods/services for use in the production of other products and services or for the purpose of reselling or renting them to others at a profit. </li></ul></ul>
  22. 22. <ul><li>Marketing Structure and Demand </li></ul><ul><li>Nature of the Buying Unit </li></ul><ul><li>Types of Decisions and the Decision Process </li></ul><ul><li>Compared to consumer purchases </li></ul><ul><ul><li>Business purchases involve more buyers in the decision process . </li></ul></ul><ul><ul><li>Purchasing efforts are undertaken by professional buyers . </li></ul></ul>Characteristics Business Markets: Buyer Behavior
  23. 23. <ul><li>Marketing Structure and Demand </li></ul><ul><li>Nature of the Buying Unit </li></ul><ul><li>Types of Decisions and the Decision Process </li></ul><ul><li>Compared to consumer purchases </li></ul><ul><ul><li>Business buyers face more complex buying decisions . </li></ul></ul><ul><ul><li>Buying process is more formalized , more participants in the process: </li></ul></ul><ul><ul><ul><li>Users </li></ul></ul></ul><ul><ul><ul><li>Influencers </li></ul></ul></ul><ul><ul><ul><li>Deciders </li></ul></ul></ul><ul><ul><ul><li>Buyers </li></ul></ul></ul><ul><ul><ul><li>Gatekeepers </li></ul></ul></ul><ul><ul><li>Buyers and sellers work more closely together and build long-term relationships . </li></ul></ul>Characteristics Business Markets: Buyer Behavior
  24. 24. <ul><li>Stage 1 : Problem Recognition </li></ul><ul><li>Stage 2 : General Need Description </li></ul><ul><li>Stage 3 : Product Specification </li></ul><ul><ul><li>Value analysis helps to reduce costs </li></ul></ul><ul><li>Stage 4 : Supplier Search </li></ul><ul><ul><li>Supplier development </li></ul></ul><ul><li>Stage 5 : Proposal Solicitation </li></ul><ul><li>Stage 6 : Supplier Selection </li></ul><ul><li>Stage 7 : Order-Routine Specification </li></ul><ul><ul><li>Blanket contracts are often used for maintenance, repair and operating items. </li></ul></ul><ul><li>Stage 8 : Performance Review </li></ul>Eight Stages Business Buying Process
  25. 25. Major Influences on Business Buyers <ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul><ul><li>Economic trends </li></ul><ul><li>Supply conditions </li></ul><ul><li>Technological change </li></ul><ul><li>Regulatory and political environments </li></ul><ul><li>Competitive developments </li></ul><ul><li>Culture and customs </li></ul>Key Factors
  26. 26. Major Influences on Business Buyers <ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul><ul><li>Objectives </li></ul><ul><li>Policies </li></ul><ul><li>Procedures </li></ul><ul><li>Organizational structure </li></ul><ul><li>Systems </li></ul>Key Factors
  27. 27. Major Influences on Business Buyers <ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul><ul><li>Authority </li></ul><ul><li>Status </li></ul><ul><li>Empathy </li></ul><ul><li>Persuasiveness </li></ul>Key Factors
  28. 28. Major Influences on Business Buyers <ul><li>Environmental </li></ul><ul><li>Organizational </li></ul><ul><li>Interpersonal </li></ul><ul><li>Individual </li></ul><ul><li>Authority </li></ul><ul><li>Age </li></ul><ul><li>Education </li></ul><ul><li>Job position </li></ul><ul><li>Personality </li></ul><ul><li>Risk attitudes </li></ul>Key Factors
  29. 29. <ul><li>E-procurement is growing rapidly. </li></ul><ul><li>E-procurement offers many benefits: </li></ul><ul><ul><ul><li>Access to new suppliers </li></ul></ul></ul><ul><ul><ul><li>Lower purchasing costs </li></ul></ul></ul><ul><ul><ul><li>Quicker order processing and delivery </li></ul></ul></ul>Business Buying on the Internet Strategies Influencing Customer Perception <ul><li>Measure & manage Customer Satisfaction and Service Quality </li></ul><ul><li>Aim for Service Quality & Satisfaction in every encounter </li></ul><ul><li>Facilitate Adaptability & Flexibility </li></ul><ul><li>Encourage Spontaneity </li></ul><ul><li>Help Employees cope with problem customer </li></ul><ul><li>Manage Dimensions of Quality at encounters </li></ul>
  30. 30. <ul><li>Ensure the Quality of Service </li></ul><ul><li>Sound Distribution to the End Customer </li></ul><ul><li>Ensure a Composite Promotional Effort </li></ul><ul><ul><li>Advertising </li></ul></ul><ul><ul><li>Sales Promotion </li></ul></ul><ul><ul><li>Personal Sales </li></ul></ul><ul><ul><li>Public Relation </li></ul></ul><ul><li>Make Right Prices </li></ul>Tips for Marketers <ul><li>Have Satisfied People who have (PAI) </li></ul><ul><ul><li>P = (right) Personality </li></ul></ul><ul><ul><li>A = (right) Attitude </li></ul></ul><ul><ul><li>I = Interest / Initiative </li></ul></ul><ul><li>Simplified Procedure </li></ul><ul><li>Proper Show-off </li></ul><ul><li>Keep good Relationship </li></ul><ul><li>Ensure cross-sell & repeat sell </li></ul>Know your Organization Know your Product Know your Customers Know your Competitors Know your Process of Selling Know Yourself

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