2. Consumer BehaviourSilvia Cacho-Elizondo1 Session 5 Consumer Behaviour & Marketing Strategy November 21, 2005

3. Consumer BehaviourSilvia Cacho-Elizondo2 Agenda Review Consumer Behaviour & Marketing Strategy Terry’s Case Study

4. Consumer BehaviourSilvia Cacho-Elizondo3 Learning Objectif Analyze the interaction between marketing strategy and the insights provided by consumer behaviour research

5. Review Culture & Lyfestyles Team conclusion

6. Consumer BehaviourSilvia Cacho-Elizondo5 Psychographic Segmentation Schemes AIO (activities, interests & opinions) Cohort Analysis (age groups) PRIZM (regional lifestyles) Value-based approach (VALS)

7. Consumer BehaviourSilvia Cacho-Elizondo6  A research and consulting tool  Built by consumer futurist Arnold Mitchell in the 1970s  It was developed from the works of Riesman and Maslow for whom the strongest motivations are first linked to fundamental needs  In 1989, VALS was redefined to maximize its ability to pre dict consumer behaviour. A team of experts from SRI International, Stanford University and Berkeley University determined that consumers should be segmented on the basis of enduring personality traits rather than social values that change overtime VALS Framework

8. Consumer BehaviourSilvia Cacho-Elizondo7 SegmentsFeatures Innovators Successful, sophisticated, take charge people with high self- esteem. Very active consumers, seek challenges. characterized by variety. their purchases reflect cultivated tastes for upscale and niche market. Thinkers Mature,satisfied,comfortable, reflective and well educated people. Actively seek out information. Conservative,practical consumers. Look for durability, functionality and value in the products. Achievers Goal-oriented lifestyles and a deep commitment to career and family. Consensus, predictability, stability over risk,intimacy and self-discovery. Active consumer.Interested in time saving devices Experiencers Young,enthusiastic and impulsive consumers. Seek variety,excitement, savoring the new and the risky. Spend high proportion of their income on fashion, entertainment and socializing. The VALS Segments

9. Consumer BehaviourSilvia Cacho-Elizondo8 SegmentFeatures Believers Conservative, conventional people with concrete beliefs based on traditional, established codes such as moral codes. Predictable consumers. Choose familiar products and established brands. Strivers Motivated by achievement. Concerned about the opinions and approval of others. Active and impulsive consumers. Like stylish product. Makers Motivated by self-expression. Practical people who have constructive skills and value self-sufficiency. Have a Suspicious of new ideas and large institutions such as big business. Survivors Do not show a strong primary motivation. Cautious consumers.focus on meeting needs rather than fullfilling desires. Loyalty to favorite brands, Especially, if they can purchase them at a discount. The VALS Segments

10. Consumer BehaviourSilvia Cacho-Elizondo9 Lifestyles Research Forces Identification of consumer segments More comprehensive than demographics, behavioral and socioeconomic measures alone Weaknesses It does not consider segment membership mobility over time Weak predictive power of new patterns Limited reliability and transparence of measurement methods

11. The link between consumer research and marketing strategy

12. Consumer BehaviourSilvia Cacho-Elizondo11 Strategy The choices a company has to do in order to attain its goals

13. Consumer BehaviourSilvia Cacho-Elizondo12 What constitutes a winning marketing strategy ? Prof Michael Porter of Harvard argues that “a company doesn’t really have a strategy if it performs the same activities as its competitors, only a little better. It is just operationally more effective” Being operationally excellent is not the same as having a robust strategy

14. Consumer BehaviourSilvia Cacho-Elizondo13 Types of strategies  Cost  Differentiation (specialization or niche)  Volume  Prix  Technology  Human Resources  Relational

15. The main objectif of these strategies is to build “demand” and therefore, “profits” for the company

16. Consumer BehaviourSilvia Cacho-Elizondo15 Nine ways to build demand Products MARKETS ExistingModifiedNew Existing customer Market penetration Product Modification New product development New geographical areas Geographical Expansion Offer and sell modify products to new geographical markets Design new products to prospects in new geographic areas New type of customers Segment invasion Offer and sell modified products to new types of customers Diversification

17. Consumer BehaviourSilvia Cacho-Elizondo16 Marketing strategy is too frequently associated or stereotyped as the outcome of mechanical application of traditional analytic frameworks and techniques (SWOT, portfolio analysis, scenario analysis etc.) to highly standardized situations (growth market, mature markets, etc)

18. Consumer BehaviourSilvia Cacho-Elizondo17 Swot Analysis Strengths Weaknesses Opportunities Threats

19. Consumer BehaviourSilvia Cacho-Elizondo18 Portfolio Analysis & Strategic Business Units The boston consulting group box (BCG box) Stars : high-growth, high-share produts Cash cow: low-growth,high-share established products Question marks: low-share products in high- growth markets Dogs: low-growth, low-share products

20. Consumer BehaviourSilvia Cacho-Elizondo19 Strategic Alliances & Relationships Firms Relationships Client / Suppliers Competitors Market Relationships TransactionsCompetition M & AVertical Integration Concentration CooperationVertical Partnership Strategic Alliance

21. Consumer BehaviourSilvia Cacho-Elizondo20 Consumer Research & Strategy A choice implies a decision … A decision implies an action Consumer research collect and analyse information that help managers make better decisions

22. Consumer BehaviourSilvia Cacho-Elizondo21 Questions to guide the information gathering needs What type of information do you regularly get? What types of special studies do you request? What information would you want daily, weekly, monthly, yearly… What presse support would you like to see regularly? What types of data-analysis programs would you like to use? What would be the most helpful improvements in the company’s marketing information system?

23. Consumer BehaviourSilvia Cacho-Elizondo22 Types of Information needed Demographic, Economic Lifestyles, Technological Political/regulatory Sales and market share Orders and back orders Costs Customer profitability by customer, product, segment, channel, order size and geography Other infomation Consumer Information Collaborator Information Competitor Information Macro-environment Company Environment Task environment

24. Consumer BehaviourSilvia Cacho-Elizondo23 Consumer Research & Strategy Marketing Strategies

25. Consumer BehaviourSilvia Cacho-Elizondo24 Marketing Strategy: a quick outlook It specifies a target market and a related marketing mix  and also a relational approach

26. Consumer BehaviourSilvia Cacho-Elizondo25 Economy Target Product Promotion Price Place Technology Economy Society Competition Regulation

27. Consumer BehaviourSilvia Cacho-Elizondo26 Economy Target Product (customer needs & wants) Promotion (communication) Price (cost to the consumer) Place (convenience) Planning Analysis Implementation Control

28. Consumer BehaviourSilvia Cacho-Elizondo27 Marketing Management Analysis The company analyze its markets and marketing environment. SWOT Planning Through strategic planning the company decides what it wants to do with each business unit Implementation The company turns strategic and marketing plans into actions. Control The company measures and evaluates the results of marketing plans.

29. Consumer BehaviourSilvia Cacho-Elizondo28 The core of Marketing Strategy Market Segmentation Targeting Product Positioning Communication model

30. “Competence in strategy is the sine qua non of the marketing manager. Yet even among well-schooled and experienced managers, strategy failure rates remain uncomfortable high” Dale Fodness, Journal of Business Strategy, 2005

31. Consumer BehaviourSilvia Cacho-Elizondo30

32. Consumer BehaviourSilvia Cacho-Elizondo31 Thinking strategically about Marketing Thinking strategies : The use of critical thinking techniques to improve creative problem-solving skills Strategic Decision-making : Principles and techniques to ensure production and implementation of the best quality strategy Strategic Competences : The skills that make up strategic thinking Communication strategy : The techniques to reveal and share the substance rather than the process of marketing strategy

33. Consumer BehaviourSilvia Cacho-Elizondo32 Components of Marketing ROI Market performance Operational Performance Profit performance Product awareness Market share Customer satisfaction Customer retention Service quality Margin Inventory turnover Capacity utilization Returns on assets Earnings per share Price-Earnings ratio

34. Consumer BehaviourSilvia Cacho-Elizondo33 Product development process

35. Consumer BehaviourSilvia Cacho-Elizondo34 Case Study Presentation Terry’s Group Designing novelty chocolates