Transcript 2016-lecture-7

Module 3
Market Analysis
FRE 302 Fall 2016
Lecture 7
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Content

Knowing your customer
 Consumer Behaviour & Involvement
 Consumer Buying Process
 Product Life Cycle
 Product Adoption Process

Segmentation
 Ideal Customer
 Mass versus Segments
 variables of Segmentation
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Custom Textbook
Factsheets
 Market Analysis p117
Readings
 Consumer Decision‐Making Process ..p169
 Market Segmentation .. p177
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Consumer behaviour
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Consumer Behaviour

Processes a consumer uses to make purchase decisions, as well as to
use and dispose of purchased goods or services; also includes
factors that influence purchase decisions and the product use.
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Consumer Buying Decisions and Consumer
Involvement

Three types of decision making
Routine
Response
Behavior
Less
Involvement
Limited
Decision
Making
Extensive
Decision
Making
More
Involvement
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Consumer Buying Decisions and Consumer
Involvement
Routine response behavior: Frequently purchased, low-cost goods and
services, with low involvement on search and decisions by consumers before
making the purchase. Consumers buy first and evaluate later.
Limited decision making: Consumer has previous product experience but is
unfamiliar with the current brands available. A moderate effort is spent
searching for information or in considering alternatives.
Extensive decision making: Applies to unfamiliar, expensive products, or an
infrequently bought item. The most complex type of consumer buying
decisions, and is associated with high involvement on the part of the
consumer.

Consider food products and the unique considerations of these products!
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Factors Influencing Buying Decisions
Cultural
Factors
Individual
Factors
Social
Factors
Psychological
Factors
CONSUMER
DECISIONMAKING
PROCESS
BUY /
DON’T BUY
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Factors Influencing Buying Decisions- Components of
Culture
Values
Language
Myths
Customs
Rituals
Laws
Material artifacts
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Factors Influencing Buying Decisions - Individual
Influences
Physiological
Age
Life Cycle
Consumer tastes in clothes, food, cars,
and recreation are often age related.
Life cycle, an orderly series of stages
through which consumers’ attitudes and
behavior evolve through maturity,
experience, and changing income and
status.
Personality
Self-Concept
Lifestyle
Psychological makeup and
environmental forces.
Self-concept combines the
ideal self-image and the real
self-image.
Consumers seldom buy
products that jeopardize their
self-image.
Lifestyle is a mode of living
as identified by a person’s
activities, interests, and
opinions.
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Example family life cycle
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Factors Influencing Buying Decisions - Psychological
Influences

factors consumers use to interact with their world. They are the
tools used to recognize feelings, gather and analyze information,
formulate thoughts and opinions, and take action.
Perception
How people select, organize, & interpret
stimuli into a meaningful picture.
Motivation
Maslow’s Hierarchy of Needs in ascending
order of importance.
Learning
Beliefs & Attitudes
Behavioral Learning
Cognitive Learning
Brand Loyalty
Attitude Formation & Change
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Factors Influencing Buying Decisions - Psychological
Influences
Maslow’s Hierarchy of Needs - arranges needs in ascending order of
importance.
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Factors Influencing Buying Decisions - Social Influences

Consumers interact socially with reference groups, opinion leaders,
and family members to obtain product information and decision
approval.
Reference
Groups
Opinion
Leaders
People You Know
Celebrities
Family
Members
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Consumer Buying Process
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Consumer Buying Process

Five-stage decision-making process consumer move through when
purchasing a product.

Level of Involvement Important to Process
 An individual’s intensity of interest in a product and the
importance of the product for that person.
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Stages of Process
Five-stage decision-making process
to purchase a product
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Stage 1 Need Recognition
 The buying process starts with need recognition.
 At this stage, the buyer recognizes a problem or need
 e.g. I am hungry or responds to a marketing stimulus (e.g. you
pass Starbucks and are attracted by the aroma of coffee).
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Stage 2 Information Search
 Internal search: Buyers search their memories for information
about products that might solve their problem
 External search: Buyers seek information from outside sources
 Decide how much information (if any) is required.
 Cost benefit or economics of information
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Information Sources include:
 Personal sources: family, friends, neighbours etc
 Commercial sources: advertising; salespeople; retailers; dealers;
packaging; point-of-sale displays
 Public sources: newspapers, radio, television, consumer
organizations; specialist magazines
 Experiential sources: handling, examining, using the product
 Marketers need to identify which information sources are most
influential in their target markets.
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Stage 3: Evaluation of Alternatives
 Evaluation stage where customer must choose between the
alternative brands, products and services.
 Evaluative criteria
 Objective and subjective characteristics that are important to a
buyer
 Framing the alternatives
 Describing the alternatives and their attributes in a certain
manner to make a particular characteristic appear more
important especially to the inexperienced buyer

Involvement & Frequency of Purchase important here
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Stage 4 Purchase
 Purchase the product or service based upon evaluation
 The choice of seller may affect the final product selection.
 Factors such as terms of sale, price, delivery, and warranties may
affect the sale.
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Stage 5 Post Purchase Evaluation
 Post-purchase evaluation – feel good about the
purchase
 Cognitive dissonance
 A buyer’s doubts shortly after a purchase
about whether the decision was the right
one
 Buyers are mostly likely to seek reassurance
after the purchase of an expensive, highinvolvement product
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Product Adoption Process
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Product Adoption or Diffusion Process Theory

Describes the behavior of consumers in terms of how quickly
product work their way into markets or acceptance of new product
by various segments

Threshold model in consumer demand: when one buys depends on
the number of previous buyers

Categories include: innovator, early adopter, early majority, late
majority and laggards.
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Time and the Adopter Categories
“Average consumer” is right in the middle
Innovators
Adopter Categories Based on Innovativeness
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Product Adoption or Diffusion Process Theory
Innovators: 2.5%
 Trendsetters who first try a new product and willing to take risks
 They show the others the product is viable but sometimes
 Often not taken seriously by their peers.
 Characteristics:

Have higher incomes

Better educated than non innovators
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Product Adoption or Diffusion Process Theory




Early Adopters: 13.5%
Key opinion leaders with their neighbors and friends
Want the newest but not willing to take risks and like others to test
the product first
Characteristics:
 Much more reliant on group norms
 Oriented to the local community
 Tend to be opinion leaders
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Product Adoption or Diffusion Process Theory
Early Majority 34%
 Waits to see if a new product or idea works
 Responsible for mass purchase and increase of sales
 Characteristics:
 Collect more information
 Evaluate more brands than early adopters.
 Rely on friends, neighbors, and opinion leaders for information
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Product Adoption or Diffusion Process Theory
Late Majority 34%
 These are called majority because they bring in the majority of the
target market.
 Purchase later than the average.
 Characteristics:

Adopt because most of their friends have already done so

Adoption is the result of pressure to conform.

Tend to be below average in income and education
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Product Adoption or Diffusion Process Theory
Laggards 13%
 Characteristics:
 Do not rely on the norms of the group.
 Independent because they are tradition-bound
 Have the lowest socioeconomic status
 Are suspicious of new products
 Alienated from an advancing society

Not much quantity or sales achieved from this group
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5 critical factors influencing innovation
diffusion
RANKING MUNDIAL DE USUÁRIOS
INTERNETgrows if innovation has clear
AdoptionDE
probability
Relative advantage
advantages for product, service or current behavior
1º 2º 3º
Compatibility
Complexity of transition
Possibility of testing
Visibility of benefits
4º 5º
6º
The more innovation is consistent with pre-existing
higher the adoption probability
Complex changes involved in innovation, reduce
adoption likelihood
A chance to try an innovation before making a final
decision increase adoption likelihood
The more obvious innovation benefits the greater
adoption likelihood
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Segmentation and the ideal
customer
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TARGET MARKET & SEGMENTATION

Target Marketing

Identifies the target/s within the total industry which has the
greatest potential to purchase the product or service.

Determined from information gained through the industry and
competitive analysis.

Target market may include one or more of the following:
consumers, other businesses, manufacturers, dealers,
distributors, government departments, or educational
institutions.
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Mass Marketing

Firm decides to ignore market segment differences and views the
whole market with one product line

Undifferentiated marketing

Sell to everyone the same way and use the same 4 P’s & logical if all
consumers had the same needs, wants, attitudes and demographics

Common example: milk, flour, soda, toothpaste, bread and
household cleaners.
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
Mass Marketing?
 Pasta
 Flour
 Cheese in Canada
 Breakfast Cereal
 Coffee
 Cookies
 Eggs
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Segmentation

Market segmentation is the process of dividing a market into distinct
subsets of customers called segments

Segments based upon common needs and characteristics

Marketers select one or more segments to target with the market
mix ( 4 P’s)

Same market can be segmented and viewed in many different ways.
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Comparing mass versus segmentation
Mass Marketing
 Offer the same product and
marketing mix to all customers
 Logical if all consumers had the
same needs, wants, attitudes and
demographics
 One advertising campaign and
one standard product
 Ex: agriculture products, fruit,
milk, eggs, vegetables
Segmentation
 Market segmentation is the
process of dividing a market into
distinct subsets of customers
called segments

Segments based upon common
needs and characteristics

Members are different between
segments but similar within.

Marketers select one or more
segments to target with the
market mix ( 4 P’s)
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Mass Marketing: Advantage & Disadvantage
Advantage:
 Less cost and effort
 Easier to conduct
 Economies of scale in cost as produce one standard product
Disadvantage:
 Lack of appeal to anyone as too standard
 Puts all eggs in one basket.
 Small shift in the population or consumer tastes can greatly effect
the firm.
 May have trouble expanding into new markets
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Segmentation: Advantage & Disadvantage
Advantage:
 Better use of limited resources
 Better understanding of customer needs
 Understand competition
 Accurate measurement of goals
Disadvantage:
 More costly
 More effort
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Segmentation – Why use it?





Better use of limited resources
Better understanding of customer needs
Understand competition
Accurate measurement of goals
Overall – More satisfying market results by analyzing market &
reviewing natural divisions
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Example : McDonalds
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Example : McDonalds
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Example : McDonalds
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Example : McDonalds
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Examples

TWEENS

HIPSTERS

iSegment

Baby Boomers
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Three Step Process for Segmentation
1.
2.
3.
Identify Segmentation Variables – 4 variables
Identify Risks – Consider the competitive, PESTLE & Industry
analysis (Readings p 189 for details)
Identify Segment to Target – Meaningful & Segmentation Matrix
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1 Identify Segmentation Variables

The segmentation variables are factors that vary among groups
within a market, but that are consistent within groups.

Segmentation is generally not limited to single variables but
considers multiple dimensions
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1 Identify Segmentation Variables:




Geographic.
 Area, population density, climate etc.
Demographic.
 Age, sex, lifecycle, income, job, etc
Psychographic.
 Lifestyle, personality.
Behavioural (Benefit & Usage)
 Benefits sought, status
 Usage rate, frequency
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1 Identify Segmentation Variables: Geographic




Based on regional variables such as region, climate, population
density, and population growth rate.
Based on idea that people who live in similar areas have similar
needs
Useful for marketers as easy to conduct campaigns using direct mail,
and local media
Internet access has blurred geographics
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Example: - Geographic

McDonalds - sell burgers aimed at local markets
 India - burgers are made from lamb in India rather then beef
because of religious issues
 Mexico - more chili sauce is added
 Japan – Kobe Beef
 Malaysia – Spicy chicken burgers
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1 Identify Segmentation Variables- Demographic

Age, gender, family size, life cycle, income, social class, occupation, etc.

The most popular variables for segmenting customer groups. Why?
 Very accessible, cost effective and easy to measure

Base helps to locate the market – used with other variables that describe
the attitudes and needs of the consumers

Obtained through secondary research

Reveals trends as well – example: food purchases of organic food
increasing as a proportion of total food expenses may indicate this is a
good market for food processors

Based on concept that needs and interest change with age income etc.
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Example - Demographic





Wal-Mart versus Holts
Price Smart vs. Save on Foods
Gender and clothing, hairdressing, magazines and toiletries and
cosmetics.
Club Med for Kids and families
Toothpaste for kids
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1 Identify Segmentation Variables- Psychographic

Grouping customers together based on social class, lifestyles and
psychological characteristics (attitudes, interests and opinions)

Details obtained through primary research

Assumption that the types of products and brands an individual
purchases will reflect that individual characteristics and patterns of
living.

Influences both consumption patterns and the processing of
different forms of marketing communication

The "why" component of consumer buying patterns.
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Example Prius effect

:
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Example: Psychographic
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Example: Green Consumers

LOHAS (Lifestyles of Health and Sustainability) segments consumers
into five separate buckets, based on their attitudes - See more at:
http://www.a-g.com/thinking/2009/11/how-green-are-yourcustomers/#sthash.v7qjkbYw.dpuf
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1 Identify Segmentation Variables– Behavioral (Benefit
& Usage)

Usage rate and patterns and benefits sought:
 product usage rate - heavy lite nonusers
 brand loyalty – none some strong
 product end use
 benefit wanted

Marketers target heavy user or non brand loyalty used

Behavioral segmentation has the advantage of using variables that
are closely related to the product itself.
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1 Identify Segmentation Variables– Behavioral (Benefit
& Usage)

Occasions.
 Special promotions for holidays.
 (e.g., Halloween, Hershey Kisses).
 Special products for special occasions.

Benefits sought.
 Different segments desire different benefits from products.
 e.g., P&G’s multiple brands of laundry detergents to satisfy
different needs in the product category.
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2. Identify Risks

Consider the competitive, PESTLE & Industry analysis (Readings p
189 for details) that affect your potential segment
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3.Identify Segment to Target
Meaningful Market Segment
 measurable
 identifiable
 accessible by communication and distribution channels
 sufficient in profitability and number of people
 stable or durable (not changing too quickly)
 homogeneity within the segment
 heterogeneity between segments
 different in response to a marketing mix
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3.Identify Segment to Target – Meaningful &
Segmentation Matrix

Market Segmentation Matrix: Application of more than one matrix –
see readings
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Problems with Segmentation

Does not meet the meaningful criteria
 Inadequate Market Size
 Availability of Information
 Limited Access
 Changes to segments are large
 Segments merge
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Ideal Customer

Where does the ideal customer fit??
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Bandit Wine
 http://www.youtube.com/watch?v=Ac0ZSsBsSmc
 http://banditwines.com/
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Example: ideal? segment markets
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
End of slides
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Questions
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

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


What are the variables used to segment the consumer market?
What are the advantages & disadvantages of using segmented
versus mass marketing?
Explain the relationship between segmentation and the marketing
mix.
What are the steps to the market segmentation process?
How is a market segmentation matrix used to define a target
market??
Can you have more than one segment?
Why does a segment have to be meaningful?
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
End of slides
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