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Consumer Buying Behavior

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Analyzing Consumer Markets and Buying

BehaviorInterest in examining aggregate market response to firm

specific decision variables

understanding

explaining

predicting

Method Analyze individual level behavior

Analyze aggregate market behavior

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Analyzing Consumer Markets and

Buying BehaviorTranslation of individual level behavioral analysis to

aggregate level market response is faced with the issues of

aggregation bias and consumer heterogeneity

A prime characteristic of consumers is their variation in

preferences, tastes, likes, dislikes, purchase behavior

patterns. Meaning thereby that markets are heterogenous

and consumers exhibit heterogeneity

Object of consumer behavior analysis - buyer or user ?

answer - both with emphasis on decision maker

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Behavioral processes of consumers

An integrative conceptual framework

Communicationsensitivity

Accultured

individuality

Rational and

Economic

Decision making

Society and

MarketEnvironment

( )Behavioral

Process of

Consumers

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Behavioral Processes of Consumers-

Communication Sensitivity

Within

Market

Communication sensitivity

Firm To

Market

Within Market

Word of Mouth

Dif

fusion Processes

Firm to Market

-Consumer Behaviour Concepts-One way/Two way.

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Communication sensitivity

Consumer Behaviour Concepts EndogenousFactors

Selectivity

Involvement

Persuasion

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Selectivity

Selective attentionMarketers have to work hard to get consumers notice consumers are more likely to notice stimuli of current need, stimuli

they anticipate, stimuli whose deviations are large e.g. $25 off $100

rather than $5

Selective distortiontendency to twist information into personal meanings thatwill fit our preconceptions e.g. A customer of LG may interpret an

advertisement saying that they are No. 1 company in Microelectronics to

be No.1 company in all of consumer durables

Selective Retentionconsumers likely to remember good points of products theylike and forget good points of competing products e.g. a user may

remember that Pears soap is the only soap good for dry skin though

in the market Dove and Mysore Sandal Gold is also good for dry skin

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Involvement

Krugman proposed the concept of level of involvement influencing

buyer behavior. Products purchased are either low involvement

Or high involvement. Assael has classified types of buying behavior

based on involvementSee slide next

Persuasion

Low Involvement products use the peripheral route to persuasion

e.g. celebrity endorsements

High Involvement products use both the central route (cognitive reason)

to persuasion and the peripheral route to persuasion.

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Assaels Classification of types of

Buying Behaviour

Complex BuyingBehaviour

Variety-Seeking

Buying

Behaviour

Dissonance

Reducing

Behaviour

Habitual

Buying

Behaviour

Significant

DifferenceBetween

Brands

FewDifference

Between

Brands

High Involvement Low Involvement

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Assaels Classification of types of

Buying BehaviourComplex: First develop beliefs about product.Then develop attitudes and then make achoice

Dissonance: First Act, then develop beliefs.Then end up with attitudes

Habitual: salt- out of habit, beliefs frompassive learning-choice- evaluation/attitudes

Variety seeking- lot of brand switching-chocolates (Low involvement)-Beliefs-Choice-

Attitudes.

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Accultured Individuality

Accultured

Individuality

Culture

Sub CultureSocial Class

Personal- Age and Life cycle

- Occupation

- Economic

Circumstances

Social

-Reference groups

-Family

-Roles and Status

Consumer Behaviour

Concepts

Personality and Self

concept

Life style

Motivation

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Independent Factors

1. Culture

a) Cultural factors exert the deepest and broadest influence onbuyer behavior. Culture is fundamental determinant of a persons wants

and behavior

b) Subculturecountries, regions, races, religions

c) Social class

2. Social factors

a. Reference groupsprimary (family, coworkers), secondary

(religious groups)

b. Reference groupsaspirational groups and disassociative groups

c. Three influences of reference groups

1. individual exposed to new behaviors, lifestyle

2. create pressures for conformity (affects choice thereby)

3. influence attitudes and self concept

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2. Social Factors

- Family

- Family of orientationinfluences beliefs, values, attitudes- Family of procreationinfluences day-to-day living and

purchases

3. People buy products that communicate their role and status in society

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Endogenous FactorsAccultured Individuality

Lifestyle

A lifestyle is a persons pattern of living in the world as expressed in

activities, interests, opinions. Lifestyle portrays the whole person.

Marketers search for relationships between their products and lifestyle

groups. If it is found that most computer buyers for home purpose areachievement oriented, then the marketer may aim his brand at

achiever lifestyle

Psychographics is a way of using psychology and demographics for

understanding consumers. VALS of SRI consulting is a useful framework

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Accultured IndividualityEndogenous factors

Personality and Self Concept

Personality is a set of distinguishing human psychological traits that lead to

Consistent responses to environmental stimuli. E.g. Self Confidence, dominance

Autonomy, sociability, defensiveness

Brand Personality is a specific mix of human traits attributable to a particular brand

Consumers choose brands which have a personality similar to that of their own.

Self Concept

- Actual self concepthow he/she views him/herself- ideal self-concepthow she/he likes to view her/himself

- others self concepthow he/she thinks others see him/her

A marketer has to judge the form of self concept from the above to market his brand

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Endogenous FactorsAccultured Individuality

Motivation

A person has many needs (biogenic, psychogenic). A need becomes a motive

When it is aroused to a sufficient level of intensity. In other words a motive

is a need that is sufficiently pressing to drive the person to act.

Motivation Theories

Freuds Theory

Maslows Theory

Herzberg Theory

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Freuds Theory

Consumers behavior is shaped largely by unconscious psychological forces.

A technique called LADDERING is used to trace the persons motivation

From the stated ones to the terminal ones. The marketer can then decide to

Target his appeal to the most appropriate level.

Motivation researchers also use projective techniques such as word association

Sentence completion, picture interpretation etc.

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Maslows Theory

Physiological Needs

Safety Needs

S

o

c

i

a

l

Social Needs

Esteem Needs

Self Actualization Needs

This helps how various products fit into lives, goals and plans of consumers.

Consumers fill their needs starting from lowest to highest. So it is not of much use

to target a high end need product to a person who is still satisfying his lower

end need.

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Endogenous FactorsAccultured IndividualityMotivation

Herzberg Theory

Factors for buyer motivation are of two typeshygiene factors (or

Dissatisfier removers) and motivators (satisfiers). It is not enough if hygiene

Factors are present. Motivators must be present for a purchase.

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Behavioral Processes of Consumers- Beliefs

and Attitudes

Society & Mkt. Environment

Beliefs/Values Experience & usageIn Decision making

For consumption

Attitudes

Inputs from rational and Economic

Decision Making

Communicati

on

sensitivity

Accultured

Individuality

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Beliefs / Values and Attitudes

A Belief is a descriptive thought that a person holds about something. On Blind

Test Diet Coke and Diet Pepsi are equally preferred. But on revealing brand

Names Diet Coke was preferred by 65% of consumers and Diet Pepsi by 35%.

This is an illustration of role of beliefs.

An attitude is a persons enduring favorable or unfavorable evaluations,

emotional feelings and action tendencies toward some object or idea.

A marketer is well advised to fit his product into existing attitudes rather than try

To change attitudes, which take a long time. Sometimes it pays to change

Attitudes1. Buying New in exchange for oldpays to change attitude as market

is going to be large

2. These days food brands should have a diet variety as there is

health consciousness in the marketpays to fit product

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Rational and Economic Decision making

Decision making process

- Need Recognition

- Information Search

- Evaluation (perception)

- Purchase (Preference)

- Post-Purchase

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Rational and Economic Decision Making

Consumer Behaviour

Processes/Concepts

Individual constraints

Budget constraints

Situational factors

Beliefs and values

Attitudes

Market environment

Store Environment

Firm decision variable

Competitor decision variable

Rational and

Economic

Decision making

Post Purchase

Feelings

-CognitiveDissonance

-Contrast Theory

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Behavioral Outcomes of Rational and

Economic Decision making Process

Rational and

Economic

Decision making

Post purchase feelings

Evoked set

Consideration set

Purchase intentionPurchase preference

Purchase Behaviour

Purchase behaviour decisions

What to Buy (Basket of goods decision)

Where to Buy (Store choice)

Which brands to buy (Brand choice)

How much to Buy (purchase quantity)

How often to Buy (Purchase timing)

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Analysing Consumer Markets and

Buying Behavior

Buying Roles

Initiator, Influencer, Decider, Buyer, User

Stages of the Buying Decision Process

Problem Recognition

Information Search

Evaluation of alternatives Purchase decision

Post Purchase behavior

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Industrial Buying Behavior

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Issues in Industrial Markets

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Organizationalmarkets

Institutionalmarkets

Smallbusinessmarket

Largeorganizationalmarkets

Government markets

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1. Fewer, Larger BuyersTire manufacturers have OEM contracts with few

automobile manufacturers.

2. Close supplier customer relationshipas there are fewer customers, suppliers

tend to develop a closer customer relationship. WIPROs close relationship

with IIMB, for the sale of computers

3. Professional purchasinguse of buying instruments such as quotations,proposals and purchasing contracts; buyers guided by firms purchasing

policies, constraints and requirements

4. Several buying influencesthe buying committee may consist of technical

experts, senior management, gatekeepers from consultancies etc. Thus the sellershould send trained sales people.

5. Multiple sales callssales cycles extends from few days to few years; thus seller

needs to make multiple sales calls to win orders.

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6. Derived demandThe demand for industrial goods is driven by the

demand for consumer goods. The boom in the construction industry is

driving the demand for cement and steel.

7. Inelastic demandDemand for many business goods and services is inelastic

- that is not much affected by price changes. For example the demand for

batteries is not going to change much with price as the demand of batteries

is driven by the demand for automobiles.

8. Fluctuating demandA small increase in the consumer demand can give rise

to a significantly large increase in industrial demandthis effect is called the

acceleration effect. Similarly a 10% fall in consumer demand can cause a

significant decrease of the industrial demand.

9. Geographically concentrated buyersthere is clustering to rationalizeproductionsoftware in Bangalore; hosiery in Coimbatore; auto-ancillaries

in Pune and Nasik etc.

10. Direct PurchasingFirms buy direct mostly rather than thru intermediaries

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Key Elements of Industrial Buying Behavior

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Buying Process

Buy Situations Straight Re-buyroutine order

consumables, office supplies; outside

Suppliers tend to get in on dissatisfac

tion of existing supplier

Modified RebuyModify specs,

Prices, delivery requirements. In-

Suppliers have to protect an account;Out-suppliers try for an opportunity

e.g. computers

New TaskBuy for first time; greater the cost / risklonger it takes to decide

Pass through stagesawareness, interest, evaluation, trial, adoption.

Includes setting specs, price limits, delivery terms, order qty, acceptable

Suppliers and selected supplier(s). Because of complex selling use of

Dedicated missionary sales force.

Systems Buying and Sellingalso called turnkey solutionskey industrial

Marketing strategy in bidding large projectsdams, steel factories etc.

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Buying Centre - Includes all members of the organization who play any of seven

roles in the purchase decision process (UIIBADGU, I Bad ji)

1. Initiatorsthose who put up the request

2. Users - Those who use the product; many times the user is

the initiator

3. Influencershelp define specs, provide info for evaluating

alternatives, technical people are good influencers

4. Decidersthose who decide on requirements.

5. Approversthose who authorize deciders and buyers

6. Buyersmembers authorized to select supplier and decide terms

7. GatekeepersMembers who are info conduits to other

members of buy center e.g. receptionists , agents

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Several individuals can occupy a given role (e.g. many users / influencers) and

one individual can occupy multiple roles.

The buying center may include people outside the organization such as

government officials, consultants, technical advisors and other members of the

marketing channel.

Different members of the buy centre have different influences, for e.g. the

engineering department may be concerned with actual performance of the

product, whereas production may be more interested in ease of use and reliability

of supply.

Members of buy centredifferent personal motivations, perceptions and

Preferences which in turn are dependent on - age, income, education, job position,

personality, attitudes towards risk and culture

Characteristics of BUY CENTER

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Characteristics of BUY CENTER .. Cont.

Small sellers are advised to concentrate on key buying influencers. Large sellersGo for multilevel in-depth selling

Sellers are advised to periodically question or revise their assumptions about the

Buy center to adapt to organizational changes

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Purchasing / Buying Orientations

1. Buying OrientationBuy at lowest price given a quality level . Use two

Techniques (a) commoditizationregard the product is only a commodity and

care only about price (b) multi-sourcing to bring in competition among vendors

2. Procurement Orientationlook for collaborative relationships and seeksavings through better managementsuch as material requirements

planning, just-in-time management and even product design.

3. Supply Chain Management Orientationpurchasing is a strategic value

adding operation and purchase department betters its role as a part of the value

chain from raw materials to finished goods

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BUYGRID FRAMEWORK

BUY

PHASES

BUYCLASSES

New Modified Straight

Task Rebuy Rebuy

1. Problem recognition2. General need description

3. Product specification

4. Supplier Search

5. Proposal Solicitation

6. Supplier selection7. Order-routine specification

8. Performance review

Yes Maybe NoYes Maybe No

Yes Yes Yes

Yes Maybe No

Yes Maybe No

Yes Maybe No

Yes Maybe No

Yes Yes Yes

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Problem recognition

Marketer stimulates problem recognition by

Direct mail, telemarketing, calling on prospects

Internal stimulinew product development

for which parts are needed, breakdown of

equipment, existing suppliers unsatisfactory

Buyer attends a trade show

Purchase Manager senses an opportunity to

get lower prices or better quality

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General need descriptionand product specification

Standard itemsgo as per internal records or

as per specs laid out in ISI documents

Complex itemscollaborate with engineers,

users; else sit with marketers application

engineers who do consultative selling and

work out specs and likely price

Certain buying organizations attach a PVA or

product value analysis team to the project

who will conduct extensive analysis to arriveat specs that will lead to minimum cost

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Supplier Search

Identify suppliers

- trade directories, hunt online catalogs for suppliers

- trade shows- trade advertisements

- Internet searchWebsites have two types of e-hubs

Vertical hubs centered on industries

-plastics, steel, paper

Functional hubs centered on logistics

media buying, advertising

-Direct extranet links to major suppliers

(WalMartP&G)

-Buying alliances to get best price.

Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette

P&G, have joined to form allianceTransora-Company buying sitesFirms like GE have their

own site where it places Requests for Proposal,

negotiate terms, place orders

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Proposal Solicitation

Invite suppliers to make detailed proposals

Set up quality standards if any e.g ISO 9000 or

ISI etc.

Large technology systems need a detailed

Techno-Commercial proposal. The technicalquote will be cleared first and after that only

qualified technical bidders will be called for

commercial negotiation

Buyers can invite suppliers to make presentations.

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Supplier Selection

A supplier rating list is made by some companies

based on relative importance given to a select set

of attributes.

For routine order products the factors are : price,

supplier reputation, delivery .

For procedural problem products such as copiers the

important attributes are : technical service, supplier

flexibility, reliability and price

For political problem products such as choice of a

set of computers the factors are price, reputation,

reliability and flexibility

One way to encounter price factor from supplier side

is to talk of total cost of product or life cycle cost.

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Order routinespecification

Buyers negotiate the final order with the selected

suppliers, and details the tech. specs., the quantity

the delivery time, return policies, warranties etc.

For maintenance and repair items , firms are moving

towards a blanket contract that establishes a long run

relation. Such contracts are called stockless

purchase plans as the stock is held by the supplier

Long run contracts are also agreed upon in case of

shortage raw materials / inputs so that there is a

steady flow of material. In many cases the supplier

locates his factory near the buyer for bringing down

inventory and transport costs.

Vendor managed inventory is when the responsibility

rests with the vendor for maintaining inventory

Important parameters to see are OTdeliver on time

IFin full, NENo error

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Performance Review

Three methods of review

1 Ask for evaluation from buyers2 Buyer rates supplier on weighted score

method

3. Based on drawbacks of performance the

buyer may come up with adjusted cost

of purchase including price

4. Managers are rewarded for good buying

performance

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Institutional and Government Markets

1. Institutional Markets areschools, colleges, universities, hospitals,nursing homes.

2. Institutions normally ask for lowest price given a minimum quality

3. In government organizations the normal process is bidding with the

order going to the lowest bidder(s)

4. Negotiated contracts are applicable where the project is complex andrisky.

5. Governments tend to favor domestic suppliers

6. Government decisions are subject to review, so there is lot of paperwork

in contracting

7. Director General of Supplies and Disposals is the central purchasing unit ofIndian Government.

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Segmentation, Targeting, Positioning

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Identifying Market Segments and

Selecting Target Markets

Segmentation is the process of placing togetherconsumers into groups such that consumerheterogeneity on specified characteristics is

minimized within groups and maximized acrossgroups e.g. value for money buyers as distinctfrom economy buyers.

Segmentation can also be thought of as taking a

market and dividing them into groups based onsome common characteristic e.g. diet-colas,regular colas.

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Levels of Market

Segmentation

Mass Marketing or Undifferentiated Marketing

e.g. Ruf & Tuf Jeans, Model T Henry Ford

Segment Marketing - Cars

Niche Marketingspecialize to a narrowly defined

customer groupTemple jewellery for South Indian

women wanting to take part in cultural programmes

Local MarketingAthica for IIMB and around

Individual Marketing

One to One Marketing

Mass customization

ability to prepare on a

mass basis individually

designed products

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Segment Marketing

Flexible market offeringnaked solution containing the

No frills product and discretionary options that are

Priced extra such as A/C, power windows, moon roof

Homogenous preferences e.g. bite size candies, eclairs

(Patterns of Segment

Markets)

Diffused PreferencesHouse Buildings

Clustered Preferencesdistinct clusters in the

Market also called natural market segments

e.g. car market

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Why is segmentation useful ?

Segmentation helps firm tailor their marketing programs

focuses an actionable and accessible set of the market.

cuts of wasteful expenditures on unwanted consumers

matches needs and wants of specific groups of buyers to firms offerings

stimulates demands through multi-products for multi-segments

resource allocation to segment specific marketing mix activities will be made

more efficient

Segmentation is a way to plan rather than explain

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Criteria for Segmentation

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1. Measurablesize, purchasing power etcfinding the size of

market for refurbished home appliances is not that easy.

2. Substantiallarge enough for the firm to find it as a marketingopportunityPremium car market in India may

not be substantial to warrant local manufacture

3. Accessiblesegments can be effectively reached and served

in communication, serving last mile is not easy

4. Differentiablesegments should be differentiable from one another

if rural consumers and urban consumers show

no difference in features of mobile handsets

5. ActionableIt should be possible for formulating marketing programs for

serving the segment (it cannot add segment descriptors

so easily) how to sell money for value products such as

expensive watches and pensnot only the monetarily rich

buy it, the mentally rich also buyhow to identify

ADAMS

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Bases for Consumer Market Segmentation

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Bases

Geographic - Rural / Urban; metropolis/city/town/village;

modern retail stores/kirana stores / mandis/ haats

DemographicAge, Family Size (nuclear or joint ), gender,

Income, Occupation, Education, SEC, religion, race,

Nationality, social class

PsychographicUse of Psychology and demographics

* Lifestyle (AIO)Nike, Benetton, Gatorade

* PersonalityFeminawoman of substance

* ValuesHiDesign leather accessoriesconsumers

who hold the value style and elegance in a classical sense

Behavioral Segmentationnext slide

GDPB

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Behavioral Segmentation -based on buyers knowledge of, attitude towards,

use of, or response to a product

OccasionsMarriage, BirthArchies and Hallmark cards

BenefitsIn soaps - Dettolantiseptic, LuxBeauty

User StatusNon users, first time users, potential users, regular user

Usage rateLight users, medium users, heavy users

Buyer Readiness StateCold Prospect, Hot Prospect

Loyalty statusHard Core Loyals, Split Loyals, Shifting Loyals, Switchers

Attitudeenthusiastic, positive, indifferent, negative, hostile

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Bases of Industrial Market Segmentation

Nested Basis

Nested Approach

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Nested Approach

DemographicOperating variables

Purchasing

approachesSituational factorsPersonal Characteristics

l ifi i f

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Classification of Nests

Personal

characteristics Purchase processPurchase

decision

Situational factors

Company variables

Demographics

Purchasing approaches

Operating

variables

Inner middle nest

Innermost nest

Outer nests

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Demographic Variables

Industry, Company Size (Large, SMEs) , Location

Operating Variables

Technology, User or Nonuser status (light, medium, heavy users)

Customer requirements (few services or extended requirements)

Purchasing Variables

Purchasing function approach (centralized or decentralized), Power

structure( technology top, finance top, marketing top), Nature ofexisting relationships( old firms or new firms), general purchasing

policies ( leasing, service contracts, sealed bidding ) , purchasing

criteria (quality, service, price)

Situational FactorsUrgency of requirement, size of order

Personal Characteristics

Loyalty, attitude toward risk, some similarities between buyer-seller

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Segment based on existing relationship

First time prospects, novices, sophisticates

Segment based on purchasing criteria

price oriented customers, solution oriented customersstrategic value customers (enterprise selling or partners)

Super Segments

A set of segments sharing some exploitable similarity

Perfume manufacturers target to modern women rather

only to working women or rich women. Both segments have

a similarity of attempting to obtainindependent identity

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Methods to Segmentation

Self Selection

Profiling

Competitive Market Structuring

Attitudinal Segmentation - Survey Method

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Self Selection

One of the powerful means of segmenting markets is to allow consumers to

Self select by mass-customizing the marketing offer

American Express works on self selection of customers on dimension ofextent of spending by offering different categories of rewards for light and

heavy users ; Heavy users2 airline round trip tickets to extra-spending

within six months; Light usersmoney towards purchase of car by saving

in five years.

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Profiling

Method of describing a set of consumers on market

Characteristics and attaching a tag description to it.

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Basic profiling of customers in toothpaste

market

Segment 1 Segment 2

Demographic

Age 15-40 years 3-60 years

Family size Small (

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Segment Profiling Based on Cluster Analysis

The severe sufferers

The severe suffers are the extreme group on the potency side of the

Market. They tend to be young, have children, and be well educated.

They are irritable and anxious people, and believe that they suffer more severely

than others. They take the ailment seriously, fuss about it, pamper themselves, andkeep trying new and different products in search of greater potency. A most

advanced product with new ingredients best satisfies their need for potency and fast

relief, and ties in with their psychosomatic beliefs.

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The Active Medicators:

The Active Medicators are on the same side of the motivational spectrum.

They are typically modern suburbanites with average income and education.

They are emotionally well adjusted to the demands of their active lives.

They have learned to cope by adopting the contemporary beliefs of seeking

help for every ill, and use remedies to relieve even minor signs of ailments

and every ache and pain. In a modern product they seek restoration of their

condition and energy, mental recovery, and a lift for their active lives.

They tend to develop strong brand loyalties.

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The Hypochondriacs

The hypochondriacs are on the opposite side of the motivational spectrum.

They tend to be older, not as well educated, and women. They have

conservative attitudes toward medication and a deep concern over health.

They see possible dangers in frequent use of remedies, are concerned over

side effects, and afraid of remedies with new ingredients and extra potency.

To cope with these concerns they are strongly oriented toward medical

authority, seeking guidance in treatment and what products they should use.

They hold rigid beliefs about the ailment and are disciplined in the products

they use and how frequently they use them. They want a simple, single-

purpose remedy that is safe and free from side effects and backed by doctorsor a reputable company.

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The Practicalist:

The practicalists are in the extreme position on this side of themotivational spectrum. They tend to be older, well educated,

emotionally the most stable, and least concerned over their

ailment or the dangers of remedies. They accept the ailment and

its discomforts as part of life, without fuss and pampering. They

use a remedy as a last resort, and just to relieve the particularsymptom. They seek simple products whose efficacy is well

proved, and are skeptical of complicated modern remedies with

new ingredients and multiple functions.

(Wells 1975, p.203; Journal of marketing research published by

the AMA)

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Competitive Market Structuring

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C CF C CF C CF C CF

BRANDS

Cola

DietRegular

Diet

Regular

Non-cola

Market Structure of Soft drinks

Caffeine

Caffeine-Free

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DecaffeinatedCaffeinated

Hierarchical definition of the coffee market with perceptual maps in each submarket (Urban

Johnson and Brudnick 1981)

CoffeeGround Instant

Mildness

Brimsanka

TasteMaxwell

HillsBrosFolgers

Chuck Full o Nuts

Regular FreezeDried Regular Freezedried

Store brands

Mildness Mildness Mildness Mildness

Taste Taste Taste Taste

Nescafe

Folgers

Maxwell house

Tasters Choice

Maxium

High Point

Sanka Nescafe

SankaTasters

ChoiceBrim

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Competitive Market structuring can also be obtained, by putting brands

Together in groups based on choice probabilities. In this way, market segments

Are a group of consumers who are homogenous in terms of probabilities ofChoosing different brands in a product class

Coke, Pepsiconsideration set

Segment 1 Segment 2 Segment 3

Coke 0.50 0.30 0.70

Pepsi 0.5 0.70 0.30

Descriptor Hedonist or Next Generation Seekers ofVariety Seeker Protagonist Real Thing

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Attitudinal SegmentationSurvey Method

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1. Whom to Interview.

In a survey of finding segments of customers who are travelers / tourists

to Europe, it is not appropriate to count only those who have been to

Europe, because that accounts for a small percentage. You have totalk to potential travelers

2. Frame of reference for questioning

When you are questioning customers on vacations do you take (a) overall

experience of vacations (b) last vacation

3. Find different ways of segmentation

For example : Vacation to Europe, segment on (a) Favourability towards

Europe (b) Segmenting on Income brackets segmenting customers

based on desires sought on their last vacation

In a study on 1750 interviews for vacationing the following segments were

Uncovered(1) visit friends and relatives segments (2) good for family sight-

Seeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer

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Shells Customer Segmentation study

Methodology

Surveyed 5000

respondents in 6

markets.Questions included

* Behavior patterns* Desired Features

* Frustrations

* Brand Ratings* Psychographics

* Demographics

* Statistically

identified 10

distinctClusters of

customers

with different

needs/

attitudes

Studied

Survey

resultsfrom each

cluster

Developed

name and

personalityfor each

cluster

Source: Wharton School

Shell Customers Target

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Shell Customers Target

Segments and Characteristics

Premium speedsters

13%

Struggling survivors 9%

Value minded Planners 6%

Safety firsters 6%

Sentimentalist13%

Comfort Zoners 15%Relationship shoppers 13%

Low octane communicators

7%

Hands-on individualists

12%

Simplicity seekers

11%


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Segments selectedPremium speedsters

Simplicity SeekersPersonality: Overburdened, Frustrated, Loyal to

others, caring, sensitive. Hard to motivate.

Gas Purchasing:

Reactive. Want things that make buying gas easy.

Major brand= product reassurance.

In a WordOverwhelmed

Safety Firsters

Personality: Confident, Self-

assured, ResponsibleControl oriented, well prepared.

Gas purchasing: want cleanliness,

comfort, Efficiency, safety

In a word.Safety MindedSource: Wharton School

Personality : Internally driven, CompetitiveMentality

Gas Purchasing : Fast pumps, quick access

In a word: Power minded

Brand Identities Considered

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Brand Identities Considered

One stop convenience

(Value minded planners,struggling survivors)

Friendliest Service

(Relationship Shoppers,Comfort Zoners)

Community support

(Comfort Zoners)

Lowest Price

(Low octane commuters,

Sentimentalists)

Best Gasoline

performance(Hands on individuals,

premium speedsters)

Quick & Easy

(Premium speedsters, simplicityseekers, safety firsters)


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Market Targeting

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Market Targeting

Single Segment Concentration

Zodiac concentrating on executive and professionals

Selective Specializationmay be or may not be

Synergy among the segments selected

HLL in Soaps

Product specialization - Specialized product toseveral segmentsTVS makes scooters of all

ranges to several socio-economic classes

Market specializationServing many needs of

a single customer group. Financial services toNRIs

Full Market Coverage - General Motors,

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What is Positioning

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To some it means the segmentation decision (economy and premium segments).

To others it is an image question (Casual, sporty wearBenetton)

To still others it means selecting which product features to emphasize(flavor

or foaminess of toothpastes)

Positioning a brand is obtaining mind-space of the consumer for the brand with

Respect to competition

Positioning is the act of designing the companys offering and image to occupya distinctive place in the mind of the target market so as to maximize the

Potential benefit to the firm. The result of positioning is the successful creation

Of a customer focused value proposition

e.g.Colgate TotalMulti-benefit toothpaste as a one product solution forpeople with tooth problems

As against Colgate Dental CreamCore Identity for strong, white teeth meaning

a toothpaste to maintain healthy teeth.

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Jack Trout issues on Positioning

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1. Embrace the obvious position possible in the market or granted by the

market. Positioning should be in line with the perception of consumers

mind not against it

Coke: The Real Thing is fine; it is the original cola

Coke: Always Coca-Cola may not be fine as half the market is Pepsi

2. Many positioning ideas are founded on how company estimates the future

SamsungChallenging LimitsLooks alright

Avis: We are No.2. We try harder

3. Be Simple: VolvoDrive Safely

4. Positioning is long term. Do not be driven by the stock market

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Kotler et.al on Positioning

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Steps to a Positioning Strategy

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1. Determine Target Market

Laptop for the business professional

2. Determine category membership of the brand under consideration

Hewlett Packard dv1000 is a sophisticated business laptop

3. Identify the competition

Sony, Toshiba

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4. Establish the Category Points of Parity to fulfill the necessary conditions

of category membership

there are three main ways to convey a brands category membership

- announcing category benefits

centrino mobile technology

- comparing to exemplarson par with HPs excellence in instrumentation

- relying on the product descriptor

HP Pavillion dv1000 is an entry level business

laptop

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5. Establish the Competitive Points of Parity to establish the equivalence ofProduct benefits, attributes, values with respect to competition

HPs manufacturing quality is no way behind Sony or Toshiba. It is

backed by decades of manufacturing electronic systems

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6. Establish the Points of Difference if any to take a differentiated position

If no POD exists then the brand takes a head on position or a me-too

position

HP has an excellent service network in India as compared to Toshiba.

HP is not as expensive as Sony

7. Write out the Positioning Statement

To the young urban professional (target market) our productHP

Pavilion dv 1000 is a rugged system with all the necessary features of a state-Of-art business computer and is offered as a value for money laptop with

Excellent service backup.

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Important considerations in choosing Points of Difference (PODs)

(1) PODs are desirable by the customer

- Relevant and important to the customere.g. price of HP

Laptop

- DistinctivenessService backup is not a common featureof all foreign made laptops in India

- BelievableHP has been in the electronic business for

decades

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(2) PODs are deliverable to the customer

- FeasibilityHP has the required organization to make theservice deliverable and the required technology

to offer a value for money product

- Communicability

- HPs products are not known as very expensive

- Sustainable

- HP has the required R&D to continue making

state-ofart upgrades

In this case PODs are anchored at the benefit level, sometimes they could be

Anchored at the attribute or value level

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Handling Conflicting POPs and PODs

Sometimes attributes and benefits are negatively correlated or move in the oppositeDirection. Ideally consumers want to maximize their benefit package.

Examples of such cases are

(1) Low Price vs High Quality

(2) Taste vs Low Calories

(3) Nutritious vs Good Tasting.

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Methods to overcome such situations

- Go for straddle positioningdo both simultaneously. BMW designedits car for both luxury and performance

- Present the communication messages for each attribute / benefit

separately

- Leverage equity of another entity e.g. Intel Inside

- Redefine the relationshipTeach customers that the relation between

attributes is redefined and now stands positive e.g. Apple is user friendly

and not regarded as powerful. Apple came up with an ad campaign thathad the tagPower to be your best, teaching customers that they used it

because it was user friendly and having used it successfully it was powerful.

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Differentiation

It is the process of adding a set of meaningful and valued differences toDistinguish a companys offering from competitor offerings

A difference will be stronger if it satisfies one or more of the following criteria

1. Important - Infrastructure investment of business school

2. Distinctive , but not necessarily superior - Bajaj scooter

3. Superior - Product superiority of Gillette

4. Preemptive - cannot be easily copied - Zilog Processor

5. Affordable - Personal Computer of Acer

6. Profitable - MTRs food products

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Dimensions on which differentiation can be achieved by firms

1. Product / Services

2. Personnel

3. Channel

4. Image

Product / Services

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Product / Services

- Product / Service Quality

performance basedBMWconformance qualityCMM in software

physical signs and cuesTata Indica

- Form - Satchets

- FeaturesCameras

- DurabilityVolvo

- ReliabilityMaytag

- RepairabilityMaruti

- StyleBenetton

- DesignDesigner wear

Services

- Ordering easehome delivery pizzas- InstallationMobile

- Customer TrainingGE Medical Systems

- Customer Consulting - Saree selling

- Maintenance and repairPremium apartments in the city.

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Personnel

- Trained personnel should exhibit the following

- CompetenceRepair engineers of process plants

- Courtesy - Front line staff in premium hotels

- CredibilityPremium hospital doctors

- ReliabilityParallel computers

- Responsiveness and CommunicationBeauty Consultants

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Channel

- CoverageHLL

- ExpertiseAvon

- Performance - Caterpillar

Image

- Differentiate IdentityMysore Sandal Gold vs Dove

- Differentiate Logo, colors, slogans, events and sponsorshipsCoca-Cola

mk tp gp 2007 class 45678

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