INTRO TO CONSUMER BEHAVIOR

1. INTRO TO CONSUMER BEHAVIOR

2. Marketing Concept A consumer-oriented philosophy that suggests that satisfaction of consumer needs provides the focus for product development and marketing strategy to enable the firm to meet its own organizational goals.

3. Consumer Behavior The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products, services, and ideas.

4. Specific Questions • Acquisition / use / disposal of products, services, time, ideas • Whether? • What? • Why? • How? • When? • Where? • How much? • How often?

5. Net Takeaway • 3 types of decisions • acquisition, usage, disposal • 8 specific questions • whether, what, why, how, when, where, how much, how often • 2 types of explanations • psychological, cultural

6. “Black Box” • The marketing mix • Competing marketing mixes • Social influences (culture, social class, reference groups & family) • Exchange • No exchange • More information sought Stimuli Responses

7. Firm’s Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture Input External Influence Need Recognition Prepurchase Search Evaluation of Alternatives Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Process Consumer Decision Making Experience Purchase 1. Trial 2. Repeat purchase Figure 1-1 A Simple Model of Consumer Decision Making Postdecision Behavior Output Postpurchase Evaluation

8. Net Takeaway • KEY TERMS • Consumer behavior • Consumer Research • Deontology • Market segmentation • Marketing concept • Marketing ethics • Organizational consumer • Personal consumer • Societal marketing concept • Teleology • Utilitarianism

9. CONSUMER RESERCH

10. STEP1: Defining the Problem and Research Objectives STEP 2: Developing the Research Plan The Research Process STEP 3: Implementing the Research Plan STEP 4: Interpreting and Reporting the Findings

11. Marketing Research ProcessStep 1. Defining the Problem & Research Objectives Types & Levels of Information Needed Exploratory Research • Gathers preliminary information • that will help define the problem • and suggest hypotheses. • preliminary information: identify issues • problem definition • first stage of descriptive or causal research • Describes such things as market • potential for a product or attitudes • and demographics of consumers • who buy the product. • expand understanding of factors • describe phenomenon • representative sample Descriptive Research • Test hypotheses about cause- • and-effect relationships. Causal Research • test cause and effect hypothesis • experimentation

12. Secondary Data Data that has been collected for reasons other than the specific research project at hand.

13. Primary Research Original research undertaken by individual researchers or organizations to meet specific objectives.

14. 2 High Level Research Methods • Quantitative Research • Survey • Observation • Experimental • Qualitative Research • Focus Group • Projective • In-Depth Interview

15. Designing Primary Research Quanti Research • Quantitative studies more likely for collecting descriptive information. Quali Research • Qualitative studies may be used to get new ideas.

16. Data Collection Methods Observation Experimentation Surveys

17. Validity The degree to which a measurement instrument accurately reflects what it is designed to measure.

18. Reliability The degree to which a measurement instrument is consistent in what it measures.

19. Attitude Scales • The three most frequently used scales are: • Likert scales: easy for researchers to prepare and interpret, and simple for consumers to answer. • Likert scales ask the respondent to check or write the number corresponding to their level of "agreement" or "disagreement" to statements.

20. Marketing Research Data Secondary Data Primary Data Qualitative Data Quantitative Data Descriptive Experimental Observational & Other Data Experimental Data Survey Data A Classification of Marketing Research Data

21. SEGMENTATION, TARGETING, AND POSITIONING Consumer Behavior

22. STPSegmentation Targeting & Positioning Market Segmentation Market Targeting Market Positioning

23. Measurable Market SegmentationRequirements for Effective Segmentation Accessible Substantial • Size, purchasing power, profiles • of segments can be measured. Differential • Segments can be effectively • reached and served. Actionable • Segments are large or profitable enough to serve. • Segments must respond differently to different marketing mix elements & programs. • Effective programs can be designed to attract and serve the segments.

24. Bases for Segmentation • Geographic Segmentation • Demographic Segmentation • Psychological Segmentation • Psychographic Segmentation • Sociocultural Segmentation • Use-Related Segmentation • Usage-Situation Segmentation • Benefit Segmentation • Hybrid Segmentation Approaches

25. Sequential Segmentation Heavy Users 48.7% 9.1% • Percentages in branches represent size of the segment Total Sample 16.5% North Central 40.3% Medium & Light Users 20.0% 12.8% 3.7% Females 24.3% 54 and Under 21.4% 34.6% 43.0% 55.8% Rest of U.S. 19.5% Over 54 6.5% 8.4% More Than High School 10.2% 28.6% 44.2 % • Percentages in boxes represent market share Males 6.7% High School or Less 3.8% 15.6%

26. AIOs Psychographic variables that focus on activities, interests, and opinions. Also referred to as Lifestyle.

27. The VALS TM 2 Framework Actualizers High resources Action Experiencers Oriented Fulfilleds Achievers Status Oriented Principle Oriented Makers Believers Strivers Strugglers Low resources Segmentation Strategies

28. Usage-Situation Segmentation • Segmenting on the basis of special occasions or situations

29. Use-Related Segmentation • Rate of Usage • Heavy vs. Light • Awareness Status • Aware vs. Unaware • Brand Loyalty • Brand Loyal vs. Brand Switchers

30. Hybrid Segmentation Approaches • Psychographic-Demographic Profiles • Geodemographic Segmentation • SRI Consulting’s Values and Lifestyle System (VALSTM)

31. Maslow’s Hierarchy of Needs 5 Self-Actualization (Self-fulfillment, personal enrichment) Ego Needs (Prestige, status, self esteem) 4 Social Needs (affection, friendship, belonging) 3 Safety and Security Needs (Protection, order, stability) 2 Physiological Needs (Food, water, air, shelter, sex) 1

32. Toothpaste: Example of Market Segments Segment Name The Sensory Segment The Sociables The Worriers The Independent Segment Flavor, product appearance Brightness of teeth Decay prevention Price Principal Benefit Sought Children Teens, young people Large families Men Demographic Strengths Users of spearmint flavored toothpaste Smokers Heavy users Heavy users Special Behavior Characteristics Colgate, Stripe Macleans, Plus White, Ultra Brite Crest Brands on sale Brands disprop- ortionately Favored High self- involvement High sociability High hypo- chondriasis High autonomy Personality Characteristics Life-style Characteristics Hedonistic Active Conservative Value oriented

33. Determining the SEGMENT DIMENSIONS is not EASY

34. All Potential Dimensions Qualifying Dimensions Determining Dimensions (product type) Determining Dimensions (brand type) Snack Food Market Health = nutrition Dieters = calories Families = fill up

35. THINGS TO REMEMBER ABOUT SEGMENTATION • Segments must exist in the marketplace • More than one segmentation pattern may exist • Segments can shift over time • Targeting one or more segments is more profitable than targeting the entire market • Segmentation is at the core of a successful marketing strategy

36. Step 2. Market TargetingEvaluating Market Segments • Segment Size and Growth • Analyze current sales, growth rates and expected profitability for various segments. • Segment Structural Attractiveness • Consider effects of: competitors, availability of substitute products and, the power of buyers & suppliers. • Company Objectives and Resources • Company skills & resources needed to succeed in that segment(s). • Look for Competitive Advantages.

37. TARGETING STRATEGIES • Undifferentiated marketing • Differentiated marketing • Concentrated marketing • + Countersegmentation

38. Marketing Differentiation Strategy A Undifferentiated Marketing Concentrated Marketing B Target Segment 1 Target Segment 2 Differentiated Marketing C Target Segment 3 Company Marketing Mix 1 Target Segment 1 Company Marketing Mix 2 Target Segment 2 Company Marketing Mix 3 Target Segment3 Company Marketing Mix All Market Company Marketing Mix Marketing strategies

39. Counter segmentation Strategy A strategy in which a company combines two or more segments into a single segment to be targeted with an individually tailored product or promotion campaign.

40. Step 2. Market TargetingChoosing a Market-Coverage Strategy Company Resources Product Variability Product’s Stage in the Life Cycle Market Variability Competitor’s Marketing Strategies

41. STEP 3: POSITIONING Market Positioning: arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. i.e. Chevy Blazer is “like a rock.” • Part of the marketing strategy which allows to give the product/service its own identity • Positioning is a competitive tool • Positioning can be operated at the physical level or at the perceptual level • A strong position in buyers’ minds gives the product a competitive advantage

42. Step 3. Choosing a Positioning Strategy Step 1. Identifying Possible Competitive Advantages Step 2. Selecting the Right Competitive Advantage Step 3. Communicating and Delivering the Chosen Position

43. Step 3. Choosing a Positioning Strategy • Product’s Position - the way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products. • Marketers must: • Plan positions to give their products the greatest advantage in selected target markets, • Design marketing mixes to create these planned positions.

44. Examples of Perceptions • Coca-Cola = cool, all-American, and real • Pepsi = young, exciting, and hip • Dr Pepper = nonconforming, unique, and fun • Virginia Slims = feminine • Marlboro = masculine • Apple = young • IBM = older

45. Identifying Possible Competitive Advantages • Key to winning and keeping customers is to understand their needs and buying processes better than competitors do and deliver more value. • Competitive advantage is an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits, that justify competitive advantage,

46. Identifying Possible Competitive Advantages Product Differentiation i.e. Features, Performance, Style & Design, or Attributes Services Differentiation i.e. Delivery, Installation, Repair Services, Customer Training Services Image Differentiation i.e. Symbols, Atmospheres, Events Personnel Differentiation i.e. Hiring, Training Better People Than Competitors Do

47. Choosing the Right CompetitiveAdvantages Important Profitable Distinctive Criteria For Determining Which Competitive Advantage Superior Affordable Communicable Unique Selling Proposition Preemptive

48. Selecting an Overall Positioning StrategyRalphs: “Pay less for Higher Standards” Price More The same Less More The Same Less More for Less More for More More for the same Benefits The same for less Less for much less

49. Repositioning Changing the way a product is perceived by consumers in relation to other brands or product uses. GTE

50. PERCEPTUAL MAPS • Indicate where a product stands in buyers’ minds relative to its direct and indirect competitors • Horizontal and vertical axes are perceived relevant dimensions of the product category • Distances between two brands are perceived competitive distances • Ideal tool for positioning strategies