consumer behavior report 1.doc

8/9/2019 Consumer Behavior report 1.doc

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Consumer Behavior:

Introduction:

Consumer behavioris the study of when, why, how, and where people do or do not buy aproduct. It

blends elements frompsychology, sociology,social anthropology and economics. It attempts to

understand the buyer decision making process, both individually and in groups. It studies

characteristics of individual consumers such asdemographicsand behavioral variables in an attempt

to understand people's wants. It also tries to assess influences on the consumerfrom groups such asfamily, friends, reference groups, and society in general.

Customer behavior study is based on consumer buying behavior, with the customer playing the three

distinct roles of user, payer and buyer. Relationship marketingis an influential asset for customer

behavior analysis as it has a keen interest in the re-discovery of the true meaning of marketing

through the re-affirmation of the importance of the customer or buyer. A greater importance is also

placed on consumer retention, customer relationship management, personaliation, customiation

and one-to-one marketing. !ocial functions can be categoried into social choice and welfare

functions.

"he study of consumers helps firms and organiations improve their marketing strategies by

understanding issues such as how

# "he psychology of how consumers think, feel, reason, and select between different

alternatives $e.g., brands, products, and retailers%&

# "he psychology of how the consumer is influenced by his or her environment $e.g., culture,

family, signs, media%&

# "he behavior of consumers while shopping or making other marketing decisions&

# imitations in consumer knowledge or information processing abilities influence decisions

and marketing outcome&

# (ow consumer motivation and decision strategies differ between products that differ in their

level of importance or interest that they entail for the consumer& and

# (ow marketers can adapt and improve their marketing campaigns and marketing strategies to

more effectively reach the consumer.

)ne *official* definition of consumer behavior is *"he study of individuals, groups, or organiations

and the processes they use to select, secure, use, and dispose of products, services, e+periences, orideas to satisfy needs and the impacts that these processes have on the consumer and society.*

Although it is not necessary to memorie this definition, it brings up some useful points

# ehavior occurs either for the individual, or in the conte+t of a group $e.g., friends influence

what kinds of clothes a person wears% or an organiation $people on the ob make decisions as to

which products the firm should use%.

# Consumer behavior involves the use and disposal of products as well as the study of how they

are purchased. /roduct use is often of great interest to the marketer, because this may influence how

a product is best positioned or how we can encourage increased consumption. !ince manyenvironmental problems result from product disposal $e.g., motor oil being sent into sewage systems

to save the recycling fee, or garbage piling up at landfills% this is also an area of interest.

# Consumer behavior involves services and ideas as well as tangible products.
http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Social_Anthropologyhttp://en.wikipedia.org/wiki/Anthropologyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Demographichttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Relationship_marketinghttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Psychologyhttp://en.wikipedia.org/wiki/Sociologyhttp://en.wikipedia.org/wiki/Social_Anthropologyhttp://en.wikipedia.org/wiki/Anthropologyhttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Demographichttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Relationship_marketing


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# "he impact of consumer behavior on society is also of relevance. 0or e+ample, aggressive

marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions

for the national health and economy.

Black Box Model:

"he black bo+ model shows the interaction of stimuli, consumer characteristics, decision process and

consumer responses. It can be distinguished between interpersonal stimuli$between people% or

intrapersonal stimuli $within people%. "he black bo+ model is related to theblack bo+ theory ofbehaviorism,where the focus is not .set on the processes insidea consumer, but the relationbetween

the stimuli and the response of the consumer. "he marketingstimuli are planned and processed by

the companies, whereas the environmental stimulus is given by social factors, based on the

economical, political and cultural circumstances of a society. "he buyers1 black bo+ contains the

buyer characteristics and the decision process, which determines the buyers response.

Problem recognition:

"he black bo+ model considers the buyers response as a result of a conscious, rational decision

process, in which it is assumed that the buyer has recognied the problem. (owever, in reality many

decisions are not made in awareness of a determined problem by the consumer.

Consumer Behavior Black Box Model:
http://en.wikipedia.org/wiki/Stimulus_(psychology)http://en.wikipedia.org/wiki/Black_box_theoryhttp://en.wikipedia.org/wiki/Behaviorismhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Stimulus_(psychology)http://en.wikipedia.org/wiki/Black_box_theoryhttp://en.wikipedia.org/wiki/Behaviorismhttp://en.wikipedia.org/wiki/Marketing


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ENVIRONMENTALFACTORS

BUYER'S BLACK BOX BUYER'S RESPONSE

MarketingStimui

En!ir"nmentaStimui

Bu#erC$ara%teri&ti%&

e%i&i"nPr"%e&&

Product choice

Product Economic Attitudes Problemrecognition

Brand choice

Price Technological

Motivation Informationsearch

Dealer choice

Place Political Perceptions Alternativeevaluation

Purchase timing

Promotion Demographic

Lifestyle Post-purchasebehavior

Purchase amount

atural !no"ledge

Information search:

)nce the consumer has recognied a problem, they search for information on products and services

that can solve that problem. elch and elch $2334% e+plain that consumers undertake both an

internal $memory% and an e+ternal search.

!ources of information include

Personal sources# $ommercial sources

Public sources

Personal e%perience

"he relevant internal psychological process that is associated with information search is perception.

/erception is defined as *the process by which an individual receives, selects, organies, and

interprets information to create a meaningful picture of the world*.

The selective perception process

!tage 5escription

&elective e%posure consumers select "hich promotional messages they "ille%pose themselves to#

&elective attention consumers select "hich promotional messages they "ill payattention to#

&elective comprehension consumers interpret messages in line "ith their beliefs'attitudes' motives and e%periences#

&elective retention consumers remember messages that are more meaningful orimportant to them#

"he implications of this process help develop an effective promotional strategy, and select which

sources of information are more effective for the brand.


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iterally thousand o3f firms are spending millions of dollars to influencer you, your family and your

friends. "hese influence attempts occur in ads, packages, product features, sales pitches and store

environments. (owever, they also occur in the content of many television shows, in the product that

are used in movies, and in the materials presented to children in school. ?iven the magnitude of

these direct and indirect influence attempts , it is important that consumers accurately understand the

strategies and tactics being used it is e7ually important that all of us, as citiens understand the

consumer behavior bases of these strategies so that we can said appropriate limits on them when

re7uired.

ocial Marketing:

!ocial marketing is the application of marketing strategies and tactics to alter or create behaviors that

have a positive effect on the targeted individuals or society as a whole.

@ust as for commercial marketing strategy, successful social marketing strategy re7uires a sound

understanding of consumer behavior.

"egulator! Marketing:

arious bodies e+ist to develops, interpret andBor implement policies deigned to protect and aid

consumers. Clearly, effective regulation of many marketing practices re7uires an e+tensiveknowledge of consumer behavior.

>arketing practices are sometimes controversial. >arketing is a highly visible, important activity. It

affects the lives of individuals, the success of nonprofit group and the profits of businesses. "here are

many issues where the appropriate ethical action for marketers is not clear cut. As a marketing

manager, one will face many such situations in one1s career. (owever, society has declared that some

marketing actions are clearly inappropriate. It has done as by enacting laws and regulations that

prohibits or re7uire specific marketing actions. Regulating marketing activities re7uires the same

level of understanding of consumer behavior as does managing marketing programs.

Better Consumers:

As a final benefit, studying consumer behavior should make us better consumers. Common sense

suggests, for e+ample, that if you buy a D li7uid ounce bottle of laundry detergent, you should pay

less per ounce than if you bought two


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Article

Understanding Consumer Behavior in Markets

By Jaya Sinha

The understanding of consumer behavior helps in identifying the weak points and also reflects thepositive aspect of any business. The article has been written with this objective in mind and highlights

the benefits.

The failure or success in any business is dependable upon the behavior of the end-user or consumerwho finally uses the product or any services. This is again vital not only to the producer of the finalgoods but also the intermediaries who play a major role in carrying the product from initial level to thefinal level i.e. from the manufacturer to the consumer. Of course the final player in the channel isimportant to a consumer but the business of all the intermediaries gets affected. The understanding ofconsumer behavior helps in identifying the weak points and also reflects the positive aspect of anybusiness.It is the behavior of the consumer which impacts their decision to purchase or not purchase theproduct. Depending on their decision and their usage, an organiation decides which products tomanufacture and to continue. The positioning of the product is defendant on the consumption of theproduct and this behavior of consumers may be related to any kind of products or services. Theconsumer behavior also reflects the trends in the national growth and economy.

The study by !ngel has revealed certain basic facts based on which he designed four models toascertain consumer behavior.

It was found out in the study that the purchases made by consumers are mainly to satiate theirdemands and to solve the underlying problem. If a consumer purchases a product in order to fulfill hisbasic need, it can be said the purchase was necessity-driven and it can be analyed from this aspectas to what motivates or drives a consumer to purchase a product. If a consumer does an impulsepurchase, he does it without any preconceived notion or well-thought over buying of a product. Theproduct in this case seems to be so attractive or beneficial to a consumer that he immediately buys theproduct. "o, this makes us understand that a product should have certain uni#ue attributes to lure thecustomer. In some of the product categories, there are a number of options to choose from and itbecomes difficult for the customer to reach a certain decision. $lso it is difficult for the seller to sell his

product as he needs to convince a lot by paying thrust on his product as against his competitors.

%ow, let us understand how the behavior of consumer affects a marketer or what the benefits ofunderstanding consumer behavior are. , I also

It helps the marketer to take vital decisions with respect to designing of future marketing strategies.&hat kind of promotional offers or marketing campaigns need to be undertaken.

&hether the marketer should stick to the same product, e'tend the product portfolio, or probablylaunch a new product. If consumers prefer a particular brand and make the purchase and theconsumption of the same their regular habit, it is time that the marketer should think of improvingupon a brand or come out with a different product. (any times, the need calls for a niche marketing.

It also helps an organiation to reinstate the corporate policies or take action to re frame the corporatemission statement.

The consumer behavior also has effects on the entire social network which again helps an organiationto target a specific audience or set of customers.

The behavior of consumers gives the nation a different face, either good or bad.

$lso helps in scheduling of events, for e'ample, any product launch or any advertising campaign.

The consumer behavior also is related to cultural attributes. If a product suits a particular cross-

section of culture, the marketer can think of e'tending his products to international arena and acrossdifferent cultures.

$bove all, the study of consumer behavior helps a marketer to identify or define the basic )*s ofmarketing and the marketing mi'.
http://www.buzzle.com/authors.asp?author=16778http://www.buzzle.com/authors.asp?author=16778


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MA(!ET

&E)METATI*


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Market Segmentation, Targeting and Positioning:

!egmentation, targeting, and positioning together comprise three stage process. Ee first

(1) Determine which kinds of customers exist, then

() !elect which ones we are "est off tr#ing to serve and, finall#,

($) %m&lement our segmentation "# o&timi'ing our &roductsservices for that segment andcommunicating that we have made the choice to distinguish ourselves that wa#

Market Segmentation: is the process by which a market is divided into distinct customer subset ofpeople with similar needs need characteristics that lead them to respond in similar ways to a

particular product offering and strategic marketing program.

Targeting: if any firmcould hope to satisfy the needs of all segments, each firm would have to decidewhich segment $s% to target ."o do so would re7uire evaluating the relative attractiveness of each segment

$sie, revenues potential, and growth rate%, the benefits sought and the firm1s relative business strengths. Its

process is called target marketing.

Product Positioning: that is designing product offerings developing strategic marketingprograms that collectively create an enduring competitive advantage in the target market-

would need

What is market segmentation?

>arket segmentation is the process of dividing the total market for a product into groups based on

similar needs, characteristics, or behaviors. !ummers et al. $233;, p. :arket segmentation is a superb concept in economics and marketing. A market segment is a sub-set

of a market made up of people or organiations with one or more characteristics that cause them to

demand similar product andBor services based on 7ualities of those products such as price or

function. A true market segment meets all of the following criteria it is distinct from other segments

$different segments have different needs%, it is homogeneous within the segment $e+hibits common

needs%& it responds similarly to a market stimulus, and it can be reached by a market intervention.

"he term is also used when consumers with identical product andBor service needs are divided up

into groups so they can be charged different amounts. "he people in a given segment are supposed to

be similar in terms of criteria by which they are segmented and different from other segments in

terms of these criteria. "hese can broadly be viewed as 'positive' and 'negative' applications of the

same idea, splitting up the market into smaller groups.

8+amples

# ?ender

# /rice

# Interests


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Ehile there may be theoretically 'ideal' market segments, in reality every organiation engaged in a

market will develop different ways of imagining market segments, and create /roduct differentiation

strategies to e+ploit these segments. "he market segmentation and corresponding product

differentiation strategy can give a firm a temporary commercial advantage.

#Positive# market segmentation:

>arket segmenting is dividing the market into groups of individual markets with similar wants or

needs that a company divides into distinct groups which have distinct needs, wants, behavior orwhich might want different products H services. roadly, markets can be divided according to a

number of general criteria, such as by industry or public versus private. Although industrial market

segmentationis 7uite different from consumer market segmentation, both have similar obectives. All

of these methods of segmentation are merely pro+ies for true segments, which don't always fit into

convenient demographic boundaries.

Consumer-based market segmentation can be performed on aproduct specificbasis, to provide a

close match between specific products and individuals. (owever, a number of generic market

segment systems also e+ist, e.g. the system provides a broad segmentation of the population of the

nited !tates based on the statistical analysis of household and geodemographic data.

"he process of segmentation is distinct frompositioning$designing an appropriate marketing mi+ for

each segment%. "he overall intent is to identify groups of similar customers and potential customers&

to prioritie the groups to address& to understand their behavior& and to respond with appropriate

marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus

improved.

Improved segmentation can lead to significantly improved marketing effectiveness. 5istinct

segments can have different industry structures and thus have higher or lower attractiveness

Positioning:

)nce a market segment has been identified $via segmentation%, and targeted $in which the viability of

servicing the market intended%, the segment is then subect to positioning. /ositioning involves

ascertaining how a product or a company is perceived in the minds of consumers.

"his part of the segmentation process consists of drawing up a perceptual map, which highlights rival

goods within one's industry according to perceived 7uality and price. After the perceptual map has

been devised, a firm would consider the marketing communications mi+ best suited to the product in

7uestion.

$sing egmentation in Customer "etention:

"he basic approach to retention-based segmentation is that a company tags each of its active

customers with < values

Tag %&: Is this customer at high risk of canceling the compan!'s service( )ne of the most

common indicators of high-risk customers is a drop off in usage of the company's service. 0or

e+ample, in the credit card industry this could be signaled through a customer's decline in spending

on his or her card.

Tag %): Is this customer *orth retaining("his determination boils down to whether the post-

retention profit generated from the customer is predicted to be greater than the cost incurred to retain

the customer. >anaging Customers as Investments.

Tag %+: ,hat retention tactics should be used to retain this customer(0or customers who are

deemed Fsave-worthyG, it1s essential for the company to know which save tactics are most likely to
http://en.wikipedia.org/wiki/Industrial_market_segmentationhttp://en.wikipedia.org/wiki/Industrial_market_segmentationhttp://en.wikipedia.org/wiki/Positioning_(marketing)http://en.wikipedia.org/wiki/Positioning_(marketing)http://en.wikipedia.org/wiki/Industrial_market_segmentationhttp://en.wikipedia.org/wiki/Industrial_market_segmentationhttp://en.wikipedia.org/wiki/Positioning_(marketing)


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be successful. "actics commonly used range from providing FspecialG customer discounts to sending

customers communications that reinforce the value proposition of the given service.

Process for tagging customers:

"he basic approach to tagging customers is to utilie historical retention data to make predictions

about active customers regarding

Ehether they are at high risk of canceling their service Ehether they are profitable to retain

Ehat retention tactics are likely to be most effective

"he idea is to match up active customers with customers from historic retention data who share

similar attributes. sing the theory that Fbirds of a feather flock togetherG, the approach is based on

the assumption that active customers will have similar retention outcomes as those of their

comparable predecessor.


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Article

*h# Market !egmentation is Critical+

ByMike Khatib

In the development of any marketing campaign, market segmentation is critical. Market segmentation

is the process of targeting a product, service or specific campaign at a particular group or subset of a

market that is likely to be more receptive to your marketing message than the entirety of the market.The need for market segmentation stems from the knowledge that customers are not all alike and

have different needs and desires. Segmentation recognies this fact and tailors a marketing message

to a particular group to ma!imie the effectiveness of the campaign.

There are hundreds of potential market segments that can be classified geographically,

demographically, on the basis of behavior or in numerous other ways. "oung people, baby boomers,

tech#savvy customers, seekers of lu!ury, low#income, elderly, car lovers, , sophisticated, highly

educated and conservative are $ust a few e!amples of the many potential segments in a given market.

In order for any business to determine the most profitable segment for it to pursue, it has to conduct

some research. Segments don%t tell you when they want your product& you have to figure out which

segments would be receptive to your product. "ou can do this by commissioning an internal research

pro$ect or outsourcing the research to specialists that do this work regularly. If you are a small

business and do not have the financial resources for such a venture, you need to put in some e!tra

work yourself. Talk to your clients and get feedback from them about what they like and don%t like

about your company. 'se the various public resources at your disposal that contain information

about your industry and the big players in it. (on%t be afraid to copy a successful idea of a larger

competitor. Make sure you don%t infringe on any copyrights or trademarks. )emember, if you%re a

small business, you%re not going to put a large competitor out of business but you may be able to win

over a chunk of their business.

*ne industry where you can see market segmentation at work is in politics. +olitical campaigns, to

the chagrin of some, are heavy on marketing, spin and segmentation. or e!ample, in +residential

politics, candidates first run in a primary to earn their party%s nomination before transitioning to a

general election against an opponent from the other party. In the primary, politicians tend to

articulate a message that is going to appeal to the bases of their respective parties. (emocrats will

appeal to environmentalists, peace activists, secular groups, abortion rights groups and consumer

advocacy groups, amongst others. )epublicans will appeal to evangelical -hristians, low#ta! interest

groups, pro#business constituencies, and more hawkish think tanks. *nce the candidates earn the

nomination, they significantly alter their respective messages to try to appeal more to folks in the

political middle. +oliticians alter their target segment depending on the electorate whose vote they

are seeking.

Segmentation is crucial to the success of any business. 'nderstanding your customers and their

desires will make you a more efficient and profitable entity. That%s why )olls )oyce does not market

to low income individuals, and Mc(onalds does not target connoisseurs of #star restaurants& it

would be a waste of money. / smart business will allocate their marketing budget wisely and that

starts with market segmentation.
http://ezinearticles.com/?expert=Mike_Khatibhttp://ezinearticles.com/?expert=Mike_Khatib


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,h! do firms segment their market(

"he reason that firms segment the market for their products is that most firms cannot ade7uately

satisfy all the various needs of the market for their product. "herefore, they select one or more

segments, called target markets that they believe they can serve most efficiently and effectively. If

the firm selects the 'right' target markets and develops offerings that closely match the needs of those

markets, target marketing will provide the firm with a competitive advantage and is a very profitable

strategy. 0or e+ample, the @aguar motor company has successfully focused on the lu+ury car

segment.

Why Segment Your Market?

Jow the 7uestion that surely arises is what is the purpose of market segmentation analysis, and why

must it be performed. "he following are the primary reasons for carrying out market segmentation

for market trend analysis.

o avoid wastage of &recious com&an# resources

o divide the market into various segments, or target grou&s o target each &rofita"le segment in a uni-ue wa# that suits that &articular

segment, and &rovides ade-uate returns

o avoid overla&&ing and redundant information to one &articular segment

o get maximum res&onse and sales from each segment

o minimi'e the chance of failure

o get on right track and ideas of &otential market

o minimi'e the risk

o identif# the target market

ffective segmentation !riteria:efore an organiation can target a specific segment accurately it must ask itself a number of

7uestions. It is important to evaluate the effectiveness of a targeting strategy and the viability of the

segment, if this is not done then money will be wasted.

"o be useful, market segmentation must rate favorably on five criteria

Measureable: the sie, purchasing power, and characteristics of the segments can be

measured.

.xam&le

Can #ou measure the si'e and growth of the segment %s the segment growing+ %n the

U/ the D0D market is growing at an extremel# fast &ace rom 2anuar# 33 4 2une33 533,333 D0D6s were sold he fast growth rate is attracting man# &la#ers within

the market

ubstantial: the segments are large and profitable to serve. A segment should be the

largest possible homogeneous group worth going after with tailored marketing program.

.xam&le

%s there enough s&ending &ower within the segment for the com&an# to sustain itself+

*ill s&ending within the D0D marketing continue+

Accessible: the segments can be effectively reached and served.

.xam&le

%s it eas# for #ou to target and reach #our segment+ Can the# "e reached with "asiccommunication tools such as radio and 0 advertising+ %f #ou cannot target #our

segment effectivel# with marketing communication then it is not via"le

-ifferentiable:the segments are conceptually distinguishable and respond differently to

different marketing mi+ elements and programs.


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.xam&le

*hat is com&letive advantage of a com&an# that distinguishes the com&an# from its

com&etitors+ %f #ou are a food manufacturing com&an# which target the children and

if the &ackaging is colorful and attractive than #our sales level will rise as com&are to

#our com&etitors+

Actionable: effectives programs can be formulated for attracting and serving the

segments.

.xam&leDoes the organi'ation have enough resources to reach their segments+ %t is no &oint in

targeting segments #ou do not have the resources to cater for %f #ou were a car

manufacturer the organi'ation would not concentrate on the affluent and &rice

sensitive market if the# did not have the resources to do so

"mportance of Market Segmentation:

>arket segmentation has become increasingly important in the development of marketing strategies

for several reasons. 0irst, population growth has allowed and more products K markets are maturing

for. "his, in turn, sparks more intense completion as firms seek growth via gains in market share

$the situation in the automobile industry% as well as in brand e+tensions$Colgate toothbrushes etc.%.

!econd, such social and economic forces as e+panding disposable incomes, higher educational

levels and more awareness of the world have produced customers with more K varied and

sophisticated need s, rates and lifestyles than ever. "his has led to an outpouring of goods and

services that compete with one another far the opportunity of satisfying some group of consumers.

"hird, there is important trend toward micro segmentation. "his trend has been accelerated in some

industries by new technology such as computer K aided design, which has been an enabled firm to

mass customie many product as diverse as eans and cars.

0inally, many marketing organiations have facilitated the implementation of specialies marketing

programs by broadening and segmenting their own services. 0or e+ample, new advertising media

have sprung up to appeal to narrow interest groups. "hese include special interest magaines, radio

programs, and cable ". Also, more and more broad based magaines $Times, South 0iving% offers

advertisers the opportunity to target specific groups of people within subscription form base. "his

approach relies heavily on ip codes and permits business to target not specific regions and cities for

their advertising but related, but selected income groups as well.

#enefits of Market Segmentation:

In addition to forcing firms to face the realties of the marketplace, segmentation offers the followingbenefits

It identifies opportunities for new product development. )ften, a careful analysisof various

segments of potential reveals one or more groups whose specific needs and concerns are not

being well- satisfied by e+isting completive offerings. !uch uncovered segmentation may

represent opportunities for development o new products innovative marketing approaches for

e+ample, the laptop computer.

Segmentation helps in the design of marketing programs that are moat effective for reaching

homogenous groups of consumers.

It improves the strategic allocation of marketing resources. "he strategic benefits of segments

are sometimes overlooked. Eell- defined segments, hen coupled with specific products serve

as potential investment centers for a business. >ost successful business strategies are based

on market segmentation and a concentration of resources in the more attractive segments.

!egmentation should focus on subdividing markets into areas in which investment can gain a

long term competitive advantage.


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Rationale for market segmentation

ecause markets are rarely homogeneous in benefits wanted, purchase rates, and price and

promotion elasticities, their response rates to products and marketing programs differ. ariations

among markets in product preferences, sie and growth in demand, media habits and competitivestructures further affect the differences and response rates. "hus, markets are comple+ entities that

can be defined $segmented% in a variety of ways. "he critical issue is to find an appropriate

segmentation scheme that will facilitate market targeting, product positioning and the formulation of

successful marketing strategies and programs.

A firm has the option of adopting a market aggregation strategy is appropriate where the total

market has few differences in customer needs or desires, especially when the product can be

standardied. It is also appropriate where it is operationally difficult to develop distinct products or

marketing programs to reach different customer segments& that is, not all segmentation schemes are

actionable. ecause customer and their needs are diverse, relatively few product-markets meet these

conditions.

Identification of >arket !egments

"here are many ways of dividing a market into segments. "he obective of the segmentation process

is to divide the market into relatively homogeneous groups of prospective buyers of a product or

service with regard to their demands. Ideally, the variances within these individual groups would be

relatively small versus the differences between groups. "he process must also describe these groups

so that members can be readily identified, must determine the sieBvalue of each group, and must

describe the differences in customer needs. "he segmentation criteria $descriptors% should facilitate

these obectives.

>arketers divide segmentation descriptors into four maor categories for both consumers1 and

industrial markets-physical descriptors, person -or firm -related behavioral descriptors, product-

related behavioral descriptors and customer needs descriptors. >ore and more, segments are defined

using a combination of descriptors from four categories even though this often re7uires the

collection of marketing researching data and the use of sophisticated statistical methods.

Market Segmentation $nalysis:

"he act of dividing target markets into various segments based on a number of factors, and then

devising individual market strategies for each segment is a commonly carried out practice. "he task

of market segmentation analysis is imperative for the success of the marketing activities of every

company.

Ehen the producer of a specific commodity decides to undertake the marketing and promotional

activities for that commodity, what makes him decide how to approach his potential customers6 "he

base of his customers is obviously vast and varied and contains people from all walks of life and

belonging to different income groups. 8ach of these different groups of customers re7uires an altered

and uni7ue approach. "he basis for this approach is arrived at by carrying out market segmentation

analysis.

)ne of the most widely used concepts in marketing management is that of !"/, that is,

!egmentation, "argeting and /ositioning. Ehat this implies is that the potential customer base is

studied by the marketer by carrying out market segmentation analysis, the most approachable and

profitable segment is chosen and targeted, and the necessary marketing and promotion steps are

taken. 0or a marketer his resources are absolutely vital and he cannot afford to waste these resources


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on useless purposes. (e has to have a specific target audience in mind $for any form of promotion%,

and then take steps accordingly. "he first step of this entire process is market segmentation analysis

9nowing how to do a market segment analysis provides a marketer with a range of information

about the possible reactions of the customer, and can also help in devising accurate sales proection

charts. "he main obective of marketing is to have the customers purchase the products, and there

has to be a means of predicting the sales figures. "his information will provide the marketer with

very useful information about which could be the most profitable segment, and he can thus focus his

ma+imum resources on that particular segment. >arket segments that are less profitable can eitherbe completely scrapped, or if their potential value is high they can be targeted with more intensity.

"hus, there are plenty of advantages of market segmentation analysis, and it is a necessary

marketing tool for the promotional activities undertaken by any company.

%evels of Market Segmentation:

# >ass >arketing

# >icro >arketing

Mass Marketing :!egmentation is mass marketing. In mass marketing, the seller engages in the mass production, mass

distribution and mass promotion of one product for all buyers.

"he argument for mass marketing is that it creates that largest potential market, which leads to the

lower costs, which in turn can lead to lower prices or higher margins. (owever, many critics point to

the increase splintering of the market and proliferation of advertising, media and distribution.

Micro Marketing:

!ome claim that mass marketing is dying .most companies are turning to micromarketing at four

levels

Segment Marketing:

A market segment consists to group customers who share a similar set of needs and wants. Rather

than creating the segments, the marketer1s task is to identify them and decide which one to target.

!egment marketing offers key benefits over mass marketing. "he company can often better design,

price, disclose and deliver the product or service and also can fine K tune the marketing program and

activities to better reflect competitors1 marketing.

(owever, even a segment is partly a fiction, in that not everyone wants e+actly the same thing.

usiness Kto Kbusiness marketing e+perts Anderson and Jarus have urged, marketers to presentfle+ible market offerings to all members of a segment.

.lexible Market /fferings:

A fle+ible market offering consists of two parts

# A naked solutioncontaining the product and service elements that all segment members

value

# (iscretionary solutionthat some segment members1 value.

Preference egments:

>arket segment can be characteried in different ways. )ne way is to identify preference segments.

# 7omogeneous 8referencese+ist when all consumer have roughly the same preference

the market a shows no market segments.


17/35

# At the other e+treme, consumers indiffused &referencesvary greatly in their preferences.

If several brands are in the market, they are likely to position themselves through the

space and show real differences to match differences in consumer preference.

# 0inally, clustered &referencesresult when natural market segments emerge from groups

of consumers with shared preferences.

Niche Marketing:

A niche is amore narrowly defined customers group seeking a distinctive mi+ of benefits. >arketers

usually identify niche by dividing a segment into sub segment.

Ehat does an attractive niche look like6 "he customers have a distinct set of needs they will pay a

premium to the firm that best satisfies them the niche is fairly small but has sie, profit, and growth

potential and is unlikely to attract many other competitors& and the nicher gains certain economies

through specialiation.

!ome large companies have even turned to niche marketing .niche marketers aim to understand

their customers1 needs so well that the customers willingly pay a premium.

As marketing efficiency increases, niches that were seemingly too small may become more

profitable.

"he low cost of starting up shop on the internet has led to many small business start- ups aimed at

niches.

Local Marketing:

"arget marketing is leading to marketing programs tailored to the needs and wants of local customer

group in trading areas, neighbored, even individuals stores. ocal marketing reflects a growing

trend calledgrassroots marketing.>arketing activities concentrate on getting as close and

personally relevant to individual customers as possible.

"hose who favor localied, marketing see national advertising as wasteful because it is too Farm1s

lengthG and fails to address local needs. "hose against local marketing argue that it drives up

manufacturing and marketing costs by reducing economies of scale and magnifying logistical

problems. A brand1s overall image might be diluted if the product and message are different in

different localities.

Individual Marketing:

"he ultimate level of segmentation leads to Fsegments of oneG, Fcustomied marketing For Fone -to

--one marketing F. "oday customers are taking more individual initiative in determining what and

how to buy. "hey log onto the internet& look up information and evaluations of product or service

offers& conduct dialogues with suppliers, users and product critics& and in many cases, design the

product they want.

Customeri0ation:

Customeriation combines operationally driven mass customiation with customied marketing in

away that empowers consumers to design the product and service offering of their choice. "he firm

no longer re7uires prior information about the customers, nor does the firm need to ownmanufacturing. "he firm provides a platform and tools and FrentsG out to customers the means to

design their own product. A company is customeried when it is able to respond individual customers

by customiing its products, services and messages on one to on basis.


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Customiation is certainly not for every company. It may be very difficult to implement for comple+

products such as automobiles. Customiation can also raise the cost of goods by more than the

customer is willing to pay.

Galleria Picture Card

1alleria credit card from 'nited Bank 0imited is +akistan2s first that gives freedom of choice and

e!pression to the customers. -ustomers can customie their credit card by adding their favorite

image, and make their credit cards uni3ue. 'nited Bank 0imited allows its customers different modesto submit images to be incorporated in their credit cards. They can submit a hard copy of the

photograph along with the application, they can walk into any of the designated Kodak studios after

sub #mission of their application and get a picture taken free of cost, or they can simply upload the

photograph through the internet. -ustomers can also design and preview their customied credit

cards through the internet. In case the customers do not want any personal photographs on the card,

they have an option of choosing pictures from databases of photographs. / customied credit card

allows the customers to e!press their individually by adding a personal touch to the cards, and thus,

make a style statement. The process, by offering value addition to the customers, helps differentiate

'B0 -ards from the competitors.

Market segmentation Process:

!egmenting the market involves a si+ step process

tep -escription

: !electing a market or product category for study

2 Choose a basis or bases for segmenting the market

< !elect segmentation descriptors

D /rofile and analye segments

= !elect target markets

5esign, implement and maintain appropriatepositioning strategyand

marketing mi+

(A)a*te) +r"m, Summer&- .- /ar)iner- M- Lam0- C1- 2air- .F 3 M%anie- C 4556 E&&entia& "+

Marketing- 3rd Edition, T$"m&"n- Vi%t"ria- *7 899:

!tep : !electing a market or product category for study

"his first step involves defining the market or product category to be studied. A product category is

narrower than product class and broader than a brand. 0or e+ample, if we were considering the

>ada RL-M
http://www.usq.edu.au/course/material/mkt1001/summersms/select_product_category.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/segmentationbases.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/selecting_descriptors.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/develop_profiles.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/positioning.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/developing_marketing_mix.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_product_category.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/segmentationbases.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/selecting_descriptors.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/develop_profiles.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/positioning.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/developing_marketing_mix.htm


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Ehen consumers search e+tensively for a particular item and

are very reluctant to accept substitutes, then that item $as is the

case when considering a high-priced car% is known as a specialty product $!ummers et al. 233;, p.

2::%.

A product category includes all brands that satisfy a particular need $!ummers et al. 233;, p. 2


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In Australia, firms may serve the national market, various states, or a region. Conversely, larger

firms such as Coca-Colaand >c5onaldsoperate on a global scale.

Cit! si0e:

!ome firms prefer to establish outlets in larger cities.

.xam&le9

5epartment stores such as>yers or 5avid @ones would only establish retail outlets in larger cities.

Ehereas, other companies operate in smaller communities such as I?A food stores.

-ensit!

In selecting a retail location, many firms are interested in establishing in areas with denser

populations.

.xam&le9

0or e+ample, >c5onalds only established outlets in areas that represent significant demand for fast-food. !ome products may be more popular in rural regions, such as androver DE5 vehicles or

5riabone clothing, whereas other products may only suit city dwellers, such asbooks of movie

tickets.

Climate:

!ome products have higher demand in cooler regions.

.xam&le9

0or e+ample, skiing e7uipment, woolen blankets, etc. Conversely, other

products are more suited to warmer climates, for e+ample air-conditioning,

swimwear, froen treats etc.

5emographic !egmentation :

5emographic segmentation divides the market into groups based on variables such as age, gender,

family sie, family life cycle, income, occupation, education, religion, race, and nationality.

5emographic factors are the most popular bases for segmentingcustomergroups. )ne reason is that

consumer needs, wants, and usage rates often vary closely withdemographic variables. Another is

that demographicvariables are easier to measure than most other types of variables. 8ven whenmarket segments are first defined using other bases, such as benefits sought or behavior, their

demographiccharacteristics must be known in order to assess the sie of the target market and to

reach it efficiently. 5emographic variables are easier to measure than most other types of variables.

Age and 2ife3C!cle tage Age and lifecycle segmentation consists of offering different products or

using different marketing approaches for different age and life-cycle groups. >arketers must guard

against stereotypes when using this form ofsegmentation. Ehile certain age and life cycle groups do

behave similarly, age is often a poor predictor of a person1s lifecycle, health, work or family status,

needs, and buying power. Consumer needs and wants change with age. !ome companies use age and

lifecycle segmentation,offering different products or using different marketing approaches for

different age and life-cycle groups.

1endersegmentationcalls for dividing a market into different groups based on se+. "his

segmentationform has long been used for clothing, cosmetics, toiletries, and magaines. Jew

opportunities in this area are emerging such as automobiles, deodorants, and financial services. "here

is an increased emphasis on marketing and advertising to women. !pecialied Eeb sites are

becoming very popular with this group.
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21/35

Income segmentationIt consists of dividing a market into different income groups. >arketers for

automobiles, boats, clothing, cosmetics, financial services, and travel have long used this form of

segmentation. sing this form, marketers must remember that they do not always have to target the

affluent. )ther income groups are also viable and profitable market segments.

1eneration:

each generation is profoundly influenced by the times in which it grow up- the music , movies ,

politics and defining events of that period. 5emographers call these generational group cohorts.

>embers share the same maor cultural, political and economic e+perience and have similar outlooksand values.

Education:

If the people are more aware and educated than the company has easy margin to convince these

educated people.

Marital tatus:

(ow many are married and unmarried6 oth have different preferences.

/ccupation:

A person1s occupation affects the goods and services bought. lue collars workers tend to buy morrugged work clothes, whereas e+ecutives bur more business suits. >arketers tend to identify the

occupational groups that have an above- average interest in their products and services. a company

can even specialie in making product needed by a given occupational group.

ocial Class:

!ocial class has a strong influence on preferences in cars, clothing, home furnishings, leisure

activities, reading habits and retailers and many companies design products and services for specific

social classes.

Earning demographic segmentation can be misleading

sing a single demographic descriptor, such as age andBor gender is isolation can be misleading. 0or

e+ample, a 2: year old female could be a full-time student, a professional career woman, a skilled

labourer, unemployed, or a mother with small children, etc. 5epending upon their circumstance,

they would have 7uite different needs and wants. "herefore, a multivariate segmentation approach

based on a mi+ture of descriptors such as gender, age and family life-cycle $age and lifecycle

segmentation% would be far more useful for segmenting the market for most products.

Example:

!ome products that were traditionally targeted at the female market, such as perfume and skincareproducts are now making inroads into the male market. !kincare for men is a rapidly growing

market

/sychographic !egmentation

/sychographic is the science of using psychology and demographics to better understand consumers.

?eographic and demographic variables traditionally have been the maor variables for segmenting

markets. Jevertheless, there may be considerable psychographic $0ashion,!elf concept ,lifestyle%

differences among the people within a given geographic or demographic group. >arkets consist of

buyers, and it is common sense that those buyers differ in one or more respects. "hey may differ in

how they want a product delivered, where they want to buy it, their available resources, their buyingneeds, or their location. Any of these variables can be used to segment a market.

/sychographic variables have been a popular segmentation variable, particularly in consumer

marketing of fast moving goods.
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2ifest!les segmentation:

"he )+ford 8nglish dictionary defines a lifestyle Oas a way of life1 and lifestyle segmentation aims to

e+amine the way people live. In other words it is the reflection of the thought. ife style is closely

related to the likeliness of any particular customer, or customer groups.

)ur lifestyle, our every day1s activities, our interest, opinions and beliefs on certain issues dictates

who we are. >arketers refer to these as AI)1s $Activities, Interest and )pinions%, and our AI)1s

dictate our everyday behavior from where we shop to what we buy

/eople with a healthy lifestyle may purchase more organic food products and gym memberships.

Ehereas, adventurous out-door types may purchase more recreational and sporting products. A

person's lifestyle comprises what a person does $activities%, what they are interested in $interests%,

and what they think $opinions%. !ummers et al. $233;, p. :any marketers use a concept related o personality- a person1s selfconcept$also calledself image%.

"he basic self concept premise is that people1s possessions contribute to an reflect their identities

that is , Fwe are what we haveG. "hus in order to understand consumer behavior, the, marketer must

first understand the relationship between consumer self K concept and possessions.

4A2TM .rame*ork:

)ne of the most popular commercially available classification systems based on psychographics

measurements is !RI Consulting usiness IntelligenceOs $!CRI- I% A!">framework. A!,

signifying values and lifestyles, classifies adults into eight primary groups based on responses to

7uestionnaires featuring D demographic and


23/35

"he four groups with higher resource are

&5 Innovators:!uccessful, sophisticated, active, Ftake Kcharge Fpeople wit high self K esteem.

/urchases often reflect cultivated tastes for relatively upscale, niche- oriented products and

services.

)5 Thinkers:>ature, satisfied, and reflective people who are motivated by ides and who value

order, knowledge and responsibility. "hey seek durability, functionality and value in products.

+5 Achievers:!uccessful, goal oriented people who focus on career and 7uality.

65 Experiences: Poung, enthusiastic, impulsivepeople who seek variety and e+citement.

"he four groups with lower resources are

&5 Believers conservative, conventional, and traditional people with concrete beliefs.

)5 trivers:trendy and fun K loving people who are resource constrained.

+5 Makers:practical, down Kto- earth, self sufficient people who like to work with their hands.

65 urvivors:elderly, passively people who are concerned about change. "hey are loyal to their

favorite brands.

ehavioral !egmentation

ehavioral segmentation divides customers into groups based on the way they respond to, use orknow of a product. (ere the marketer takes into account the general behavioral patterns of the

customers and tries to forecast what reactions they would possibly have to the adopted marketing

strategies.

# he "enefits that the customers are looking for and the value the# seek and derive

: he degree of "rand lo#alt# and "rand satisfaction

: he willingness to "u# a &roduct, and also the rate of its usage

: he &rofita"ilit# of marketing there and also the income level of the targeted customer

"ase

ehavioral segments can group consumers in terms of

2o!alt!:

oyal consumers - those who buy one brand all or most of the time - are valuable customers. >any

companies try to segment their markets into those where loyal customers can be found and retained

compared with segments where customers rarely display any product loyalty.

Benefits ought:

An important form of behavioral segmentation. enefit segmentation re7uires >arketers to

understand and find the main benefits customers look for in a product. An e+cellent e+ample is thetoothpaste market where research has found four main *benefit segments* - economic& medicinal,

cosmetic and taste.

$sage:

!ome markets can be segmented into light, medium and heavy user groups. (eavy users are often a

small percentage of the market but account for a high percentage of total consumption. >arketers

Stage Issues

$wareness"s the consumer aware that the product e*ists? +o they know aout yourcompany and your rand?

nowledgeWhat does the consumer need to know aout the product? +o they know whatenefits the product provides? +o they know what attriutes.features the

product has? +o they know how much the product costs and where to uy it?

%iking+oes the consumer like the product? What is their attitude towards theproduct? +o they feel that it would provide useful enefits?

Preference+oes the consumer prefer your rand? +o they elieve that your randprovides the right mi* of attriutes to deliver desired enefits?

!onviction"s the consumer convinced that they should uy your rand? $re theyconvinced that your rand would meet their needs and is value for money?

Purchase /ave they moved from purchase intention to actually purchasing the product?


24/35

would rather attract one heavy user than several light users. A potential problem, however, is that

heavy users are often rather e+tremely loyal to one brand or never loyal to any brand and always

looking for the lowest price.

Bu!er "eadiness tage:

!ome people are unaware of the product, some are aware, some are informed, some desire the

product, and some intend to buy. "o help characterie how many people are at different stages and

how well they have converted people from one stage to another, some marketers employ a marketing

funnel.

Physiological Segmentation:

It is the part of psychographic segmentation which is related to the human physical behavior and

needs. It includes.

Attitude:

Attitudes describe a person1s relatively consistent evaluations, feelings and tendencies toward an

obect and ideas

2earning involvement:

It describes changes in an individual1s behavior arising from e+periences. earning theorists say thatmost human behaviors are learned

Perception:

"he process by which people select, organie and interpret information to forma meaningful

picture of the world.

7eed and Motivation:

Jeed is defined as state of deprivation and a need becomes motive when it is aroused to

sufficient level of intensity. A motive or drive is a need that is sufficiently pressing to direct the

person to seek satisfaction.

Personalit!:/ersonality refers to the uni7ue psychological characteristics that lead to relatively consistent and

lasting responses to one1s own environment. A brand personalit! is the specific mi+ of human

traits that may be attributed to the particular brand.Socio Cultural Segmentation:

!ocio -cultural segmentation combines social $relatedto groups% and cultural variables $relatedto the

shared values, beliefs, and attitudes of people% that provide furtherbasis for segmentation.

1roups:

?roupmay be defined as two or more people who interact with each other to accomplish either

individual or mutual goals.

.amil! 2ifec!cle:

>any families pass through similar phases in their formation, growth and final dissolution. At each

stagethe family unit needs different products and services.

.amil! life c!cle stages include:

young single young married without children

young married with children

middle-aged married with children
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middle-aged married without children

older married

older unmarried

ocial Class:

It is defined as relatively permanent and ordered division in a society whose members share similarvalues, interests and behaviors.

Culture:

Culturerefers to relatively specialied lifestyle of a group consisting of their beliefs, values, artifacts,

ways of behaving, ways of communicating K that is passed on from one generation to the ne+t.

"eligion:

Eithin different regions and cities or societies, there many different religion such as (induism,

Christianity, @udaism and Islam etc.

ub cultural 1roup:

A group of people with shared value systems based on common life e+periences and situations

"ace: segmentation on the basis of the biological characteristics.

Ethnicit! segmentation on the basis of the national, cultural and lingual basis.

!ene"it Segmentation:An approach to market segmentation, whereby it is possible to identify market segments by causal

factors rather than descriptive factors, might be called *benefit segmentation, F"he belief underlying

this segmentation strategy is that the benefits which people are seeking in consuming a given product

are the basic reasons for the e+istence of true market segments. 8+perience with this approach has

shown that benefits sought by consumers determine their behavior much more accurately than do

demographic characteristics or volume of consumption. "his does not mean that the kinds of data

gathered in more traditional types of segmentation are not useful. )nce people have been classified

into segments in accordance with the benefits they are seeking, each segment is contrasted with all of

the other segments in terms of its demography, its volume of consumption, its brand perceptions, its

media habits, its personality and lifestyle, and so forth.

Convenience:(ow much it is easy to use the product6

ocial acceptance: Is product socially acceptable in the targeted society6

2ong lasting: (ow long will be the product durable6

4alue for the mone!: Ehat is and what will be the value and level of satisfaction provided

by the product or service after paying the re7uired amount in monetary terms6

Econom!: Is the product economical to the customers6

Eide Range of Applicationsut is benefit segmentation practical6 And is it truly operational6 "he answer is yes. In effect, the

cru+ of the problem of choosing the best segmentation system is to determine which has the

greatest number of practical marketing implications."he benefit segmentation approach is of particular interest because it never fails to provide fresh

insight into markets. "he marketing implications of this analytical research tool limited only by

the imagination of the person using the information a segmentation study provides.

+enefit "egmentation
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/ccording to 4aley 56789:, the benefits that people are seeking in consuming a given product are the

basic reasons for the e!istence of true market segments. /s an illustration, Ms Smith is a healthy, 8;#

year#old lady and a pensioner, who cycles, rather than drives, to keep fit, and buys organic foods for

their perceived health benefits. She is not an environmentalist and her main reason for not driving

was not because she wants to avoid polluting the environment with , but to be fit and

healthy. The benefits that she seeks from her shopping are likely to be a wide choice of %healthy

foods% and advice on fitness training. /n ample parking space and free home delivery will not be of

benefit to her. Benefits sought are manifestations of both consumer re3uirements 5needs and?or

wants: and the value that consumers such as Ms Smith are willing to pay in return for the sacrificesthat they are willing to make.

Benefit segmentation is a techni3ue that segments customers on the basis of desired or sought

benefits. These benefits, when they are present as attributes of a product, service or market offering,

cause consumers to purchase those products, rather than merely describe who they are as consumers

in terms of socio#economic, demographical or psycho graphical data. Benefit segmentation offers

more utility than the traditional methods because it e!plains the reasons why consumers choose to

buy or prefer particular products, or patronie particular suppliers or providers of services.

Segments of consumers, in terms of benefits they seek, are established as an e!#post rather than an a

priori theory of consumption and?or buying behaviour. / marketer no longer has to guess which

stimulus might induce consumers to try or buy a particular product. If a grocer knows older

customers seek worry#free shopping for healthy produce, that grocer can e!pect older customers to

visit the grocery when the factors that worry them have been removed, and the presence of desired

benefits has been communicated to them. / grocer that offers %worry#free shopping for healthy

produce%, among other benefits, will attract consumers who seek healthy produce regardless of its

country of origin and high price, as long as the 3uality of that produce is credible and guaranteed.

4ealthy food shoppers may not necessarily be those who belong to social grade %/%, %empty nest% life

stage, or a particular age bracket.

In re#e!amining the utility offered by benefit segmentation method, 4aley 5679@: considered it as a

useful approach in running two models of advertising process. The first model is about convincing

people that a particular brand is superior by delivering or communicating its cognitive benefits. The

second model is about making a brand more salient and therefore more likely to be purchased by

emphasiing its cognitive benefits. In the travel industry, a no#frills airline could convince

consumers of the superiority of its brand by communicating the benefits of much lower fares when

tickets are purchased in advance, a higher level of safety as a result of using newer aircraft of less

than five years old, and the benefit of its punctuality in departures, if it has a good record to show. In

making the brand more salient the airline could point out the overriding benefit that its fares, on

similar routes, are half the price charged by scheduled airlines.

/lthough the usefulness of benefit segmentation is well established in the literature 5among others

see 4aley 679@& Tynan A (rayton 679& 0oker A +erdue 677=:, the use of benefit segmentation to

segment older consumers in any particular product markets has not been reported. In the ne!t

sections we illustrate how benefit segmentation may be used to segment older consumers in the

conte!t of shopping for groceries and in purchasing vacations or holiday breaks.

Chy grocery retailing and vacationsD

1roceries form part of the basic daily needs of everyone. In the 'K, household e!penditure on food

and non#alcoholic drinks among households where the head of the household is aged between ;

and 8@ accounts for their largest weekly e!penditure at an average 8.; 5*ffice

for Eational Statistics =;;=b, p.@@:. 1rocery retailing has also been the sub$ect of many studies and

its significance to older people has been debated 5among others see 1oodwin A McFlwee 6777&

4are et al. 6777& 4are et al. =;;6:. F!tending the knowledge of the benefits that the 'K%s olderpeople seek from shopping for groceries would be useful in order to provide a deeper understanding

on the determinants of older consumers buying behavior. Such knowledge would provide marketing

ideas for managers of grocery shops, including supermarkets.

!tep


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It is important only to use relevant descriptors in order to arrive at meaningful or useful segments.

A meaningful segment is one that can be clearly distinguished from other segments, in terms of the

needs, characteristics andBor behaviors for that segment, and therefore the segments' need for a

particular product. In other words, each market segment must have some uni7ue need,

characteristic or behavior that would make it respond differently to a given marketing mi+.

Physical #escri$tors:

"hese are used mainly to describe consumers $in contrast to organiations% largely on the basis of

such demographics which are as follows

1ender recently ?eneral >otor's Chevrolet division spent considerable funds on advertising and

events to convince women that its cars are made with them in mind.

8ousehold life c!cle formerly known as family life cycle, this concept has been *moderniedG by

incorporating nontraditional households such as single parent households. 8ssentially it describes the

stages in the formation, growth and decline in a house hold unit. 8ach stage differs in its e+penditure.

Income:higher-income households purchase a disproportionate number cellular phones, e+pensive

cars and theater. )ccupation the sales of certain kinds of products $e.g., work shoes, automobiles,

uniforms, and trade magaines% are tied closely to occupation type.

Education:there is a strong positive correlation between the level of education and the purchase of

travel books, magaines, insurance, theater tickets and photographic e7uipment.

1eograph! different locations vary in their sales potential, growth rates, customer needs, cultures,

climates ,service needs and competitive structures, as well as purchase rates for a variety of goods.

;eo


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?eographic descriptors for segmenting the market include

Region or area servedNglobal, national, state, district, suburb etc.

City sieNmaor, regional, town etc.

5ensityK geographic concentrationNurban, rural, suburban, etc.

ClimateK hot, cold, tropical etc.

!tep D/rofile and analye segments

)nce the market for a product has been segmented using relevant variables, then the ne+t step is to

develop rich profiles of the resultant segments. 8ach segment must be evaluated to determine

whether it is a viable market segment. !ummers et al. $233;% point out that in addition to a

description on relevant segmentation variables, the profile should include a statement about

!egment sie - how many people are in that segment&

8+pected growth rate of the segment&

(ow often the product is purchased&

Current brand usage and brand loyalty& and

ong-term sales and profit potential.

Information on the sie of the segment is easy to obtain if the market is segmented using basic

demographic descriptors, such as age, gender and income.

Example:

Information for the Australian market on these descriptors can be obtained from the AustralianBureau of tatistics5 (owever, if you have used other bases for segmentation, information on

the sie and growth rate of the segment could only be obtained by conducting some market

research or purchasing some pre-collected data on this market. )ccasionally, articles on some

product categories can be found on the Internet or in publications, such as "etail ,orld5 As a

student, you are e+pected to determine the sie of the segment based on the demographic

descriptors, and then if unable to access further information on other descriptors, make

assumptions about what percentage of that segment may have a certain lifestyle, be seeking

certain benefits or have a certain usage rate etc.

!tep = 8valuating and !electing the >arket !egments $target marketing segments%

efore selecting target markets, the firm must decide on their targeting strategy. "here are three

main strategies for selecting target markets.

ndifferentiated targeting - mass market approach - one marketing mi+ for the whole

market

>ulti-segment targeting- separate marketing mi+es for each distinct segment to be

targeted

Concentrated targeting- niche marketing - one marketing mi+ tailored to the needs of one

or a few market segments

&ndi""erentiated targeting:

(aving segmented the market, the firm may decide that an undifferentiated or mass- marketing

approach is relevant. "his would infer that the needs and wants of various market segment do not

differ enough to warrant the development of a uni7ue marketing mi+ for each segment. "herefore,
http://www.usq.edu.au/course/material/mkt1001/summersms/develop_profiles.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/selecting_descriptors.htmhttp://www.abs.gov.au/http://www.abs.gov.au/http://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htm#undiffhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htm#diffhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htm#conchttp://www.usq.edu.au/course/material/mkt1001/summersms/develop_profiles.htmhttp://www.usq.edu.au/course/material/mkt1001/summersms/selecting_descriptors.htmhttp://www.abs.gov.au/http://www.abs.gov.au/http://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htm#undiffhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htm#diffhttp://www.usq.edu.au/course/material/mkt1001/summersms/select_target_markets.htm#conc


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the firm focuses on developing a marketing mi+ that caters for the common needs and wants of the

market. "his approach relies on mass production, advertising and distribution. /rovided the needs

of the market are not differentiated, this strategy can be 7uite cost-effective.

Example:

0or e+ample, your local service station would probably take this approach. It is becoming

increasingly harder for me to think of e+amples of mass marketing. I used to use things like energy

and postal services. (owever, while 8rgon 8nergyuses a mass marketing approach with itsconsumer market, it uses a differentiated strategy for rural, business and large commercial clients.

ikewise, Australia /ostnow serves a variety of market segments, including the market for

personalied stampsQ

Multisegment targeting:

A multi-segment targeting approach acknowledges that different target markets re7uire a different

marketing mi+. "his approach involves selecting a few key target markets and developing separate

marketing mi+es to cater for those needs of those distinct market segments. /rovided the segments

are meaningful and distinct, this can be a very profitable strategy.

Role+ watches take this approach by catering 7uite specifically to the needs of their various markets.

Ehich Role+ watch would best suit you - click on About Pou6 /epsi-Colaalso takes this approach

with a wide range of products to meet the various needs of its target markets.

Concentrated targeting:

Concentrated or niche targeting involves selecting one or a very few segments and developing a

uni7ue marketing mi+ that really caters to the specific needs of that market.

Example:

@aguar motor company takes this approach as it focuses on the prestige segment. Can you think of

some other e+amples6

'ther strategies:

Selective S$eciali(ation:

A firm selects a numbers of segments, each obectively attractively and appropriate. "here may be

little or no synergy among the segment, but each promises to be a moneymaker. "his multi segmentstrategy has the advantage of diversifying the firm1s risk.

Product S$eciali(ation:

"he makes a certain product that it sells to several different market segments. "he firm makes

different product for the different customer groups and builds a strong reputation in the specific

product areas. "he downside risk that the product may be supplanted by an entirely new technology.

Market S$eciali(ation:

"he firm concentrates on serving many needs of a particular customer groups. "he firm gains a

strong reputation in serving this customer group and becomes a channel for additional product the

customer group can use. "he downside risk is that the customer group may suffer budget cuts or

shrink in sie.

!tep 5esign, implement and maintain appropriate positioning strategy and

marketing mi+
http://www.ergon.com.au/Default.asp?yf=true&platform=PChttp://www.auspost.com.au/http://www.rolex.com/http://www.pepsiworld.com/home.phphttp://www.jaguar.com.au/au/en/home.htmhttp://www.ergon.com.au/Default.asp?yf=true&platform=PChttp://www.auspost.com.au/http://www.rolex.com/http://www.pepsiworld.com/home.phphttp://www.jaguar.com.au/au/en/home.htm


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P"&iti"ning (marketing:,

In marketing, positioninghas come to mean the process by which marketers try to create an image

or identity in the minds of their target market for itsproduct,brand, or organiation. /ositioning is a

concept in marketing which was first introduced by @ack "rout $ *Industrial >arketing* >againe-

@uneB:;;% and then popularied by Al Ries and @ack "rout in their bestseller book */ositioning -

"he attle for Pour >ind.* $>c?raw-(ill :;M:%

"his differs slightly from the conte+t in which the term was first published in :;; by @ack "routinthe paper G+ositioningG is a game people play in today2s me#too market placeGin the publication

Industrial Marketing,in which the case is made that the typical consumer is overwhelmed with

unwanted advertising, and has a natural tendency to discard all information that does not

immediately find a comfortable $and empty% slot in the consumers mind

Example of positioning:

I like to buy chocolate that is good 7uality at a reasonable price. I can think of a few brands off the

top of my head including indt, Jestle, Cadbury, and a generic brand. If I consider these four brands

on these two important attributes $7uality and price%, then my positioning or perceptual map for

chocolate looks like this.

"e3positioning:

"e3positioninginvolves changing the identity of a product, relative to the identity of competing

products, in the collective minds of the target market.Repositioning may be re7uired to change

consumer's perception of a brand relative to competing brands.

F!ampleH

If you consider that a certain product to be high in fat and sugar, then the manufacturer may seek toreposition the product by modifying the product to be lower in fat and sugar, and thencommunicating the lower fat and sugar content to consumers. !ometimes consumers have

misperceptions about the brand or do not ade7uately value a particular product attribute. "he firm

can seek to change consumer's attitudes through promotional activities that educate the consumer on

the product's attributes and benefits. 0or e+ample, a campaign in @une 233 by >c5onald'ssought

to overcome some consumer misperceptions about the nutritional value of >c5onald's 9ids >eals.

-e3positioning:

-e3positioninginvolves attempting to change the identity of competing products, relative to the

identity of your own product, in the collective minds of the target market.

"he original work on /ositioning was consumer marketing oriented, and was not as much focused on

the 7uestion relative to competitive products as much as it was focused on cutting through the

ambient *noise* and establishing a moment of real contact with the intended recipient.

Positioning and 8igh tech Marketing:

"he growth of high-tech marketing may have had much to do with the shift in definition towards

competitive positioning. An important component of hi-tech marketing in the age of the world wide

webis positioning in maor search engines such as ?oogle, Pahoo and ing, which can be

accomplished through !earch 8ngine )ptimiation, also known as !8). "his is an especiallyimportant component when attempting to improve competitive positioning among a younger

demographic, which tends to be web oriented in their shopping and purchasing habits as a result of

being highly connected and involved in social media in general.
http://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Jack_Trouthttp://www.mcdonalds.com.au/PDF/MediaRelease/NewHappyMeal2.pdfhttp://en.wikipedia.org/wiki/World_wide_webhttp://en.wikipedia.org/wiki/World_wide_webhttp://en.wikipedia.org/wiki/Search_Engine_Optimizationhttp://en.wikipedia.org/wiki/Search_Engine_Optimizationhttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Jack_Trouthttp://www.mcdonalds.com.au/PDF/MediaRelease/NewHappyMeal2.pdfhttp://en.wikipedia.org/wiki/World_wide_webhttp://en.wikipedia.org/wiki/World_wide_webhttp://en.wikipedia.org/wiki/Search_Engine_Optimization


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Positioning strategies:

In positioning their product in the market, a variety of positioning strategies could be used by the

marketing organiation including

I5 /roduct attributes

II5 /rice and 7uality

III5 se or application

I45 /roduct user

45 /roduct class

4I5 Competitor.

Product attri)utes:In this case the firm uses one or more product attributes or features as thebasis for positioning its product.

.xam&le9

0or e+ample, while the 5airy Australia focuses on the nutritional attributes of milk as a key selling

point, 9leene+ tissuesfocus on softness, strength and absorbency. "he firm may also use a key

benefit that the market is seeking as the basis of positioning their product.

Price and *uality:"wo of the key dimensions used by consumers in evaluating alternative brandsis price and 7uality.

.xam&le9

!ome firms use a high price $premium pricing% strategy to indicate that their product is high or

superior 7uality, for e+ample?odivachocolates. )ther firms use a lower price, good 7uality

strategy, such as ig Ewith its everyday low pricing strategy0

&se or a$$lication: /roducts can be positioned as the right product to use for a particularoccasion or purpose.

.xam&le9

0or e+ample, meat pies may be targeted for consumption at the football, or a C ictorian ittermay be a reward for a hard days work.

&ser: "his strategy is based on certain products being suited for certain users.

.xam&le9

0or e+ample, !ome of the classical e+amples of positioning strategies that have been aime

consumer behavior report 1.doc

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