3 Changing Consumer Behaviour

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SMM14Service Industry Marketing

Workshop 3

Changing Consumer Behaviour

What Is The Problem With Segmentation

1


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Outline

Customers as assets

Segmentation

Changing consumer trends

Impacts upon buyer behaviour


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Customers As Assets

Customer Turnover (Churn)

What is the customer turnover

What is the life of a customer

What is the growth in the customer base

Customer Status

New customers

Loyal stable customers Disillusioned customers

Lost customers


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Customers As Assets

* Process

customer database

- transaction history of each customer

- socio economic profile if possible- media habits

segmentation

marketing mix appropriate to targeted segment

* Barriers

assembling the information

* Tactical

sales promotions

* Strategic

new product developmentcustomer retention

cross selling

lapsed customer reactivation


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Customers As Assets

Regular customers

- Become aware of the breadth of products

- Familiar with performance characteristics- Know the systems and procedures of the company

- Believe they have made the right choice

- the organisations

- the product / service

Focus on loyal customers

- Stop the shopping around concept

- Less likely to buy on price

- More efficient and effective for company

- Highly target communication

- Identify profitable lost customers quickly- More focused new product development

- Cross selling

- Competitive advantage


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Segmentation - broad definitions

The process of dividing a total market into groupsof people with relatively similar product needs, forthe purpose of designing a marketing mix thatmatches precisely the needs of individuals in asegment (Dibb et al, 1994)

The identification of the ultimate market segment

.. the individual (Gordon, 1998)


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Factors For An Effective Segment

1. Identification - can you identify a distinct group of customers withthe same needs

2. Measurability - target segment must be capable of some form ofmeasurement, or at least a best guess

3. Adequate Size - the target segment has to be large enough to makethe marketing effort financially worthwhile

4. Accessibility - targeting is useless unless this group can be accessedby promotion and distribution. Can you access the decision makers?

5. Responsiveness - the target group should react to any change in the

marketing mix elements.

Unique / Appropriate / Stable ??


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Hooley, Piercy and Saunders

FOUR basic questions need to be answered:

How do we define the market what is the scope andconstitution?

How is the market segmented into different customergroups?

How attractive are the alternative market segments?

How strong a competitive position could we take where doour current or potential strengths lie?


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Target market selection

(Curre n

t&po

tentialc

omp

any

strength

sins

erving s

egment)

Weak

Average

Strong

Market segment attractiveness

Unattractive Average Attractive

Strongly Avoid Possibilitiesavoid

Avoid Possibilities Secondary

targets

Possibilities Secondary Primetargets targets

St

reng

th

s


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Behavioural differencesin buyer behaviour :

Brand Seekers

Low Price Ferrets

Promotion Junkies

Stock Pilers

Budget Bound

Promotion Opportunists

Promotional Oblivious

lifestyle is one of thekey profiling tools to

determine possiblelikes and dislikes

Sport

Theatre and Cinema

Arts and Culture Keep fit

Music

Outdoor

Towards A Better Understanding

Psychographic / Behaviourist (What and Why)

e.g. lifestyles, personality, benefits sought, product features,price, delivery, loyalty, usage rate, innovation, readiness


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Value Based Segmentation

Define value

profitability to date. Favours older customers as they arelikely to have generated more profit over a lifetime butmay not necessarily be the most profitable

recently, frequency, monetary popular in mail order

recent profitability if you have limited historical data

average profitability over a 12 month period and doesnot discriminate against new customers

potential profitability life time value

connected profitability e.g. a student who costs you buttheir parents can make you

Richard Clarke (2004)


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Benefits of Segmentation

Maximising customer needs

Mass markets vs customisation

Competitive advantage

Resource allocation

Dangers of Segmentation

Descriptive not predictive

Assumes competition free

May define wrong segment

Alienates consumer groups


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Changing Consumer Trends

Self segmentation

Media habits and consumption

Use of technology

Opinion formers / influencers

Choice

Consumer power / knowledge

Lobbying / boycotts

Feedback / reviews

Values & lifestyles

Ethical /Green / Fair Trade

Cause relatedmarketing


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Changing Consumer Trends

Healthy lifestyles

Fashions & fads

Motivations & Aspirations

Bargaining

LegalMore aware of rights

Protectionism

Demographic trends

Singles, aging, ethnicity, religion

Permission

Trust

Volunteer


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Bennett, 2006

The Impact On Buyer Behaviour And Problem Solving

Levels ofInvolvement & Risk


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Consumer Risk

Performance risk

Financial risk

Physical risk

Social risk

Ego risk


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Choice criteria

Technical e.g. reliability, comfort

Economic - e.g. price, value for money

Social - e.g. status, fashion

Personal e.g. self image, ethics

About understanding the key criteria / benefits to thecustomer of the purchase. What is it you areoffering them (what they think not you!)


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C Social

Personal

Psycho-logical

Situa- tional

Cultural

ValuesSystems

Beliefs

Cross-cultural

Social class

Social

Friendship

groups

Work groups

Family

Roles

Status

Personal

Age / life stage

Occupation

Economic

status

Lifestyle

Personality

Psychological

Motivation

Perception

Learning

Beliefs

Attitudes

Situational

Occasion

Environment

Marketing

influences

Selling

influences

Factors Influencing Consumer Buying Behaviour


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Organisational

Inter- personal

Individual

Situa- tional

Environmental

Level of demand

Economic outlook

Interest rates

Technological change

Political / regulatory

Competitive

environment

Social responsibility /

ethical concerns

Organisational

Objectives

Policies

Procedures

Structures

Systems

Culture

Personal

Interests

Authority

Status

Empathy

Persuasiveness

Individual

Age

Income

Education

Job position

Personality

Risk attitude

Situational

OccasionEnvironment

Marketing

influences

Selling

influences

Factors Influencing Organisational Buying Behaviour


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Who is important in the decision making unit(DMU)

B2C B2B

Initiator Initiator

Influencer Gatekeeper

Decider Influencer

Buyer Decider

User Buyer

User


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Customer Perception vs Motivation

100%

High Motivation Low

Low

Pe

rception

H

igh

50%

50% 0%


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Sources of Segmentation Data

National Statistics Online - http://www.statistics.gov.uk/

Acorn Classifications Data

Mori and/or Mintel

Quality Press (e.g. Guardian, Independent) - every now and then turn up with moremodern classifications

Institute of Direct Marketing

Chartered Institute of Marketing

WARC Marketing Pocket Book (World Advertising Research Centre)

Documents

3 Changing Consumer Behaviour