Analyzing Consumer Behavior Chapter Four

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-2 Key Learning Points Concept and activity of market segmentation Segmentation implementation issues Understanding consumer motives for buying behavior Understanding how consumers make purchase decisions Importance of understanding where and when consumers purchase Implications for global and technology-based markets

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-3 Customer Analysis Customer analysis addresses five questions: Who are the current and potential customers for the product or service? Why do they buy? How do they make purchasing decisions? Where do they buy the product or service (what channels of distribution are used)? When do they buy?

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-4 Customer Analysis Customer analysis should ALSO study: Competitors’ customers. Former customers. Nonusers.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-5 Who Are the Customers? Market segmentation is the key. Segmentation breaks mass markets into groups with different buying habits. Segmentation schemes are critical in certain situations. The segmentation process makes use of both primary and secondary data.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-6 Who Are the Customers? Benefits of market segmentation: More efficient than mass marketing Cost Cost More effective than mass marketing Customization Customization

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-7 Who Are the Customers? Single-customer segments make sense in certain circumstances: Small number of customers One-to-one marketing and mass customization

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-8 Discussion Question Using one-to-one marketing effectively requires that marketers have access to extensive databases. 1.What particular database fields might Club Med’s marketers use in developing one-to-one marketing appeals for their new line of luxury hotels? 2.Can you think of an example of a product or service that offers consumers mass customization opportunities? Explain.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-9 Table 4.1 Geographic & Psychographic Segmentation Variables

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-10 Table 4.1 Demographic Segmentation Variables

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-11 Table 4.2 Behavioral Variables

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-12 Table 4.3 Consumption Index: Dental Accessories

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-13 Table 4.4 Product Preferences by Stage in the Family Life Cycle

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-14 Figure 4.1 Generational Cohorts

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-15 Table 4.5 Ethnic Differences in Consumption

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-16 Who Are the Customers? Psychographics: VALS is the most popular system. VALS segments individuals into eight groups based on: Primary motivation, and Resources.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-17 Who Are the Customers? VALS Psychographic Groups InnovatorsThinkersExperiencersAchieversBelieversStriversMakersSurvivors

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-18 Figure 4.2 Sample VALS Questions See all the items...Take the VALS Survey! VALS SurveyVALS Survey

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-19 Figure 4.3 How Tech Customers Stack Up

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-20 Discussion Question Media Junkies are entertainment oriented, have high resources, but are pessimistic toward new technology. If you worked for a TV network website or for Hulu.com or a TV network website, would you target this group? Why or why not?

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-21 Who Are the Customers? More on segmentation: Occasion segmentation can be profitable. Geographic, demographic, and usage are typically used. More businesses are adding psychographics.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-22 Who Are the Customers? Segmenting in Technology-Based Markets: Not all consumers are equally likely to adopt new innovations. The diffusion of innovations model describes how innovations are adopted throughout the marketplace. Positive word-of-mouth is often a key characteristic in new product adoption.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-23 Figure 4.4 Diffusion of Innovations

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-24 Who Are the Customers? Marketing Research Implications: Data Collection Primary data collected via a survey is often used to understand customers. Primary data collected via a survey is often used to understand customers. Secondary data should also be explored: Government: Trade / professional publications Syndicated data

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-25 Table 4.6 MRI Travel Data

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-26 Activity Review Table 4.6 in your textbook and develop a profile of individuals who scuba dive. As you do so, pay particular attention to index numbers. Review Table 4.6 in your textbook and develop a profile of individuals who scuba dive. As you do so, pay particular attention to index numbers. What differences do you note between this profile and that of the person who goes to the beach for vacation?

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-27 Figure 4.5 Sample PRIZM Segment PRIZM Multi-media Presentation PRIZM Multi-media Presentation

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-28 Activity Visit the “You Are Where You Live” zip code look-up to learn about the PRIZM groups that characterize YOUR zip code!“You Are Where You Live” Compare your zip code results to the groups that characterize zip code

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-29 Who Are the Customers? Marketing Research Implications: Developing Target Markets Parsimony must be considered. Selected segmentation scheme must statistically explain differences in purchasing behavior or other key variables. Behavior = f (segmentation variables).

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-30 Who Are the Customers? Marketing Research Implications: Developing Target Markets Other considerations when selecting one or more segments to target: Segment size Segment growth rate Environmental factors associated with the segment Potential competitive position

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-31 Illustration Table 4.7 Harley-Davidson Segmentation Study/Lifestyle Factors

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-32 Illustration Tables 4.8 and 4.9 Harley-Davidson Segmentation Scheme

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-33 Figure 4.6 Simplified Customer Behavior Model

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-34 Why Do Consumers Buy? The purchase decision process begins with need recognition. Maslow’s Hierarchy of Needs: Five ordered levels of needs Most relevant for understanding consumer needs BENEFITS not attributes are key factor in motivating consumers to purchase.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-35 How Do Consumers Make Purchase Decisions? Search For Alternatives follows Need Recognition. Sources of information may be: Internal, or External. The amount of information search undertaken is difficult to predict.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-36 How Do Consumers Make Purchase Decisions? Search For Alternatives Results in the creation of three sets of options: Evoked or consideration set Inert set Purchase set Primary research can determine in which set consumers place the brand.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-37 How Do Consumers Make Purchase Decisions? Evaluating Options in the Consideration Set: Product is decomposed into attributes. Multi-attribute model is used to make choice. Four key questions are raised by the multi-attribute model.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-38 Key Questions Raised by the Multi-Attribute Model Which attributes do customers use to define a product? How do we determine how much of each attribute a brand possesses? How are the importance weights determined? How do customers combine prior information to make choices?

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-39 Table 4.10 Simplified Customer Behavior Model

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-40 How Do Consumers Make Purchase Decisions? Post purchase Behavior: Consumers form expectations about the product prior to usage. Consumers evaluate product during and after consumption. Future purchases are highly dependent on post purchase evaluation.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-41 How Do Consumers Make Purchase Decisions? External influences help to shape the way consumers make purchase decisions. Key external influences include: Group influences. Product class influences. Situational influences.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-42 How Do Consumers Make Purchase Decisions? Family and Friends: Example: Family life cycle Social class: Upper, middle, working, and lower classes Culture: Extremely important in global marketing See Figure 4.8.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-43 Figure 4.8 Analysis for Marketing Decisions

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-44 How Do Consumers Make Purchase Decisions? Main Elements of Culture LanguageReligion Values and attitudes Education Social organization Technology and material culture

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-45 “ Cultural differences are particularly important in a global marketing context. The biggest issue facing companies wanting to market products in other countries is the fact that significant differences in culture can affect the way customers respond to the product and the market strategy.” - Russell S. Winer

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-46 How Do Consumers Make Purchase Decisions? Product class influences affecting technology: Rogers’ study – five factors identified Potential for network externalities Perceived risk Many factors influence adoption for this pen-based video camera.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-47 How Do Consumers Make Purchase Decisions? Several situational influences exist: Physical surroundings Social surroundings Temporal factors Task definitional factors Antecedent states

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-48 How Do Consumers Make Purchase Decisions? Buying Roles in Group Buying Decisions InitiatorInfluencerDecider PurchaserUser

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-49 Where and When Do Customers Buy? Where do customers buy? When do customers buy? Understand purchase timing. Timing issues influence both marketing and operations.

Copyright ©2011 Pearson Education, Inc., Publishing as Prentice Hall 4-50 Executive Summary Understanding consumers is critical. Descriptive information is needed. Learn the benefits consumers seek. The buying process is complex. Understand where consumers buy. Know when consumers buy.