Marketing Research, Segmentation, & Consumer Behavior What more do you need??

MARKETING RESEARCH  Definition:  Used to implement the ____________

Research is used to:  Identify problems/opportunities Customer complaints New product ideas Identify high profit customers Understand competitors  Generate, refine and evaluate marketing actions

Research used to:  Monitor marketing performance  sales  market share  profit  satisfaction  return on quality

Research is NOT a Cure!  Classic Blunders 

Why do I need to know this?  You will use research for decisions  Research can easily be biased  Studies may mislead

Primary Data: Information Sought  Facts  Opinions  Motives

Primary Data -- Collection Methods QUALITATIVE:  OBSERVATION  FOCUS GROUPS QUANTITATIVE:  SURVEYS

Target Markets and Consumer Behavior

Homework Discussion  Product:  Describe the person who buys this product:  What is the Marketing Mix for the product?  Product  Price  Place  Promotion

More Homework Talk  Other Product:  Describe the person who buys this product:  What is the Marketing Mix for the product?  Product  Price  Place  Promotion

Why do marketing mixes differ between products?  _____________

So, what do we know about consumers?  Consumer behavior:

WHY STUDY CONSUMER BEHAVIOR  Influence  Satisfy  Protect

Haire’s Shopping List 1 1/2 lbs hamburger 2 loaves Wonder Bread 1 bunch of carrots 1 Rumfords Baking Powder Nescafe Instant coffee 2 cans Del Monte peaches 5 lbs potatoes 1 1/2 lbs hamburger 2 loaves Wonder Bread 1 bunch of carrots 1 Rumfords Baking Powder Maxwell House coffee (drip ground) 2 cans Del Monte peaches 5 lbs potatoes

Do consumers stay the same? Y N  (More or less) diversity  Non-traditional methods of buying and selling (increasing/decreasing)  Move from conspicuous consumption to rational consumption.  US consumers age shifting  Therefore, strategies must __________

Adapted from 1997 Irwin/McGraw-Hill Influences on Consumer Decision Making Individual Differences Consumer Decision Process Situational Factors Cultural/Social Environment Behavioral

BUYER DECISION PROCESS Problem Recognition Information Search Alternative Evaluation Purchase Decision Post- purchase behavior

Types of consumer decisions  High-involvement decisions  high importance to the individual  lots of information processing  extensive problem solving  Low-involvement decisions  low importance to the individual  little information processing  routinized response behavior

Break out Hi Involvement Lo Involvement Recognize need or problem (how) Search for information (where, what info, how much) Evaluate alternatives (how many) Purchase (easy/hard)

STAGE 1: PROBLEM RECOGNITION  Discrepancy between the current state and desired state  Incentives  Drives

STAGE 2: INFORMATION SEARCH  Internal then external  Extent of Search = Cost vs Benefits

Information may not exist because:  Firm  Natural asymmetry = inefficient markets  Product characteristics: 1. Search 2. Experience 3. Credence

STAGES 3 & 4: Evaluation and Choice  COMPENSATORY PROCESSING  NON- COMPENSATORY PROCESSING  MARKETING IMPLICATIONS:

A CAVEAT  Expectations:  EXPECTANCY EFFECTS:  Examples:  Rosenthal’s - smart/stupid rats  Deighton - Ford Campaign

POST-PURCHASE BEHAVIOR  Satisfaction vs Dissatisfaction  A function of ____________  SO-- UNDER ______ and OVER ________  Above average satisfaction leads to:

IMPACT OF CUSTOMER SATISFACTION PIMS STUDY: ABOVE AVERAGE CUSTOMER SATISFACTION LEADS TO: ________________

Responses to Dissatisfaction   Which is most likely?

Post Purchase Behavior  Dissonance  Most likely to occur when:  Dissonance vs Satisfaction/Dissatisfaction

IMPLICATIONS: Methods to -- Increase Satisfaction Lower Expectations Meet Expectations Reduce Dissonance Follow-ups Warranties Money-back Liberal Return policies...

Break-out Discussion You own a small bank. 1. Do you want consumers to express their dissatisfaction to you? 2. How can you increase the chances that customers will do what you want in #1 above? 3. Is this a situation where dissonance is likely? If yes, what should you do?

Market Segmentation--based on consumer behavior  Def:  Look for those people most likely to want your product/service to target

Bases for segmentation  Individual Differences  Demographics (gender, age income …)  Personality  Lifestyles and Psychographics  AIO  VALS2

 Personality Risk Perception Financial Social Psychological Performance Physical

Methods to Reduce Risk Perceptions Better warrantees Money-back guarantees Liberal return policies Low-priced alternative Small package size Free samples Endorsements Government/Private tests Complete performance information Complete ingredient information

PsychographicsPsychographics  Activities-- work hobbies, social events, entertainment, shopping, memberships, sports  Interests-- family, home, job, recreation fashion, food, media, achievements  Opinions-- self, social issues, politics, business, education products, future culture  Add to: Demographics--age, education, income, gender, occupation, family size, city size, stage in lifecycle

Bases for segmentation  Cultural/Social  Values/norms  Subculture  religion  race/ethnic background  Reference group  family  social class

More Segmentation Bases  Situational Factors  Geographic  Usage (Occasion of Use)  Behavioral  Benefit  Usage (heavy half)

Develop two ads for cat food using two different segmentation bases.

How many bases of segmentation should a firm use?  Example: Prizm

Target markets  The market segment that the firm tailors its products and strategies to  The group whose wants & needs the firm attempts to meet  Product differentiation -- the firm’s offerings differ from other offerings in the marketplace  Distinctive Competence

Criteria for effective segmentation / target markets            

Break-outBreak-out  Evaluate the US Hispanic market on the following criteria.  Measurability Hi Mod Lo  Accessibility Hi Mod Lo  Substantial Hi Mod Lo  Durability Hi Mod Lo  Differential Responsiveness Hi Mod Lo

The Hispanic Market Hispanic households tend to be larger (3.5 persons per household as opposed to the 2.7 persons per non-Hispanic household) and Hispanics tend to be younger (median age of 23.6 vs. US average of 32) than non-Hispanics About 3/4 of Hispanics speak Spanish at home. Many view Spanish -language TV and listen to Spanish- language radio. Hispanics tend to be Roman Catholic; however, many (about 1/5) are leaving the Catholic Church and practicing evangelical Protestantism. Hispanic populations are concentrated in Florida (Cuban- Americans), the Southwest (Mexican- Americans) and in New York City (Puertorican-Americans). The size of the Hispanic population is increasing (about 12% of the US population). Additionally, income levels are increasing. Some Hispanics want to assimilate into the US’s overall culture and do not identify with their Hispanic heritage. Others wish to maintain their heritage and reconnect with their Hispanic roots. NOTE: Much of this information is drawn from Solomon’s Consumer Behavior text (p , 3rd edition and Peter and Olson’s Essentials of Consumer behavior text, 1st edition (1994)

Targeting Strategies 1. Undifferentiated strategy _________ offering ____________ mix(s) 2. Differentiated strategy _________ offerings __________ mix(s)  Counter-segmentation strategy P.S.--what’s a mix?????

PositioningPositioning  Definition:  How the target market perceives/views your product. Your image in the target market’s mind

Segmentation and Ethics  Children as special populations  Gender/ethnic role stereotyping  Harmful products/non-harmful products  Privacy

Service Exercise Services are defined as “products, such as a bank loan or home security, that are intangible, or at least substantially so.” (AMA definition) These are offerings that cannot be stored, are often inseparable form the producer, and are not standardized. Here are some examples of services: Health care, insurance, haircuts, accounting, banking, consulting for information systems, Internet, sports events, robotics, lawyers, university curriculums, concerts, dentists, information providers, hotels, golfing green fees, taxies, clothing alterations, massages, training, air transportation, lawn care, security guards, janitorial services, restaurants, movie rentals, computer repair, plumbing repair, executive recruiting, catering, doctors. (Is that enough examples????) On a sheet of paper, you are to describe a two actual service encounter that you have had. Please think about a really HORRIBLE service encounter and a really GREAT experience. Describe this experience without naming the service provider. We’ll talk about this in the next class.