STP and consumer behaviour

Market Segmentation, Targeting and Positioning

&Consumer Behaviour

Tatwamasi

Rachel Mathew

Durgesh

Shabaz

PGDM AIMA 2013-15

Market segmentation

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Introduction

• Market segmentation – extension of marketing concept in the latter part of 1950’s.

• All existing and potential consumers are not alike. – needs, wants, tastes, background, income, education and experience etc.

• Heterogeneous market

• Companies divide such markets into groups of consumers or segments it can serve effectively.

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Definition

• According to Philip Kotler , “ Market segmentation is sub-dividing a market into distinct and homogeneous subgroups of customers, where any group can conceivably be selected as a target market to be met with distinct marketing mix.”

• Market segment is a portion of a larger market in which the individuals, groups or organizations share one or more characteristics that cause them to have relatively similar product needs.

• Three decision process comprising market segmentation, target marketing, and positioning are closely related and have strong interdependence.

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HO

RLI

CK

S(G

SK)

JUNIOR HORLICKS

NEW HORLICKS LITE

WOMEN’S HORLICKS

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EFFECTIVE SEGMENTATION CRITERIA

5 CONDITIONS:

A marketer must determine whether the market is heterogeneous.

Some logical basis to identify and divide the population into relatively distinct homogeneous groups. Difference in one market segment should be small compared to differences across various segments.

The total market should be divided in such a manner that comparison of estimated sales potential, costs, and profits of each segment can be done.

One or more segments must have enough profit potential that would justify developing and maintaining a marketing programme.

It must be possible to reach the target segment effectively.

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Niche market

• A market niche is composed of amore narrowly defined group of consumers who have a distinct and somewhat complex set of needs.

• A niche market is smaller in size but may prove to be quite profitable if served properly.

• Consumers in a niche are ready to pay a premium to the marketer who best satisfies their needs.

• PC- large market segment ; Apple- Niche market.

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BASIS FOR SEGMENTATION

• A segmentation variable is a characteristic of individuals ,groups or

organizations that marketer use to divide and create segments of the

total market.

• Segmentation descriptors fall under 4 major categories and includes:

geographic variables focuses on where the customers are located.

demographic variables identify who the target customers are.

psychographic variables refer to lifestyle and values.

behavioristic variables identify benefits customer seek, and product

usage rates.

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SEGMENTATION VARIABLES

GEOGRAPHIC VARIABLES

• Region Nation

• Urban, Rural State

• City Size Climate

• Terrain Market density

DEMOGRAPHIC VARIABLES

• Gender Family size • Age

Occupation• Race Family life

cycle• Religion Income• Social class Education

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Contd.…

PSYCHOGRAPHIC VARIABLES

• Personality attributes

• Motives

• Lifestyle

BEHAVIOURISTIC VARIABLES

• Usage volume, Occasion

• End use

• Benefits sought

• Brand Loyalty

• Price sensitivity

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GEOGRAPHIC SEGMENTATION Geographic segmentation focuses on dividing markets into different

geographic units such as regions, nations, states, urban , rural etc.

The company can operate in one or few areas.

Grassroots marketing – concentrate on getting as close and personally relevant to individual customers as possible.

It is used both in consumer and organizational markets , particularly where customers are not willing to travel far to acquire goods and services.

It is important for designing physical distribution and logistics operations.

For Example : Jeeps are more popular in rural areas in India than in urban areas.

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DEMOGRAPHIC SEGMENTATION

• In Demographic segmentation we divide the market on variables such as age, gender, income, education, occupation, family size etc.

• Demographic factors are often associated with consumer needs and wants.

• They are easy to measure.

• For Example:

Toy manufacturers such as Funskool and Mattle toys segment the market on the basis of age of the children.

Auto manufacturers segment the market by considering income as an important variable.

Shaving Products for women are based on demographic value of gender.

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• AGE AND LIFE CYCLE STAGE –Consumer needs and abilities change with age.

Toys, books, magazines, digital games, candies, chocolates, biscuits, fruit juices, and packaged goods – children and younger people.

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• LIFE STAGE –LIFE STAGE DEFINES A PERSON’S MAJOR CONCERN.

FURNITURE, KITCHEN APPLIANCES, SAVINGS-CUM-INSURANCE SCHEMES,

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• GENDER –Men and women behave differently and have different attitudes, based

partly on genetic makeup and partly on socialization.

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• INCOME-Income determines the ability of consumers to participate in the market

exchange.

Income does not always predict the best consumers for a given product.

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• SOCIO-ECONOMIC CLASSIFICATION – to classify urban households in India. Based on – education level and occupation of head of household.

Developed under the initiative of MRSI- Market Research Society of India

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Illiterate

School up to 4 years School 5–9 years SSC/HSC Some college but

not graduateGraduate/Postgrad

uate general

Graduate/Post Graduate

professional

Unskilled E2 E2 E1 D D D D

Skilled Workers E2 E1 D C C B2 B2

Petty traders E2 D D C C B2 B2

Shop Owners D D C B2 B1 A2 A2

Businessmen with No employees D C B2 B1 A2 A2 A1

Businessmen with 1-9 employees C B2 B2 B1 A2 A1 A1

Businessmen with 10+ employees B1 B1 A2 A2 A1 A1 A1

Self Employed professional D D D B2 B1 A2 A1

Clerical/Salesman D D D C B2 B1 B1

Supervisory Level D D C C B2 B1 A2

Officers/Executives-Junior C C C B2 B1 A2 A2

Officers/Executives-Mid/Senior B1 B1 B1 B1 A2 A1 A112/6/2014 18


• GENERATION –Each generation is profoundly influenced by the times in which it grows up.

The younger generation plays an important role not only as consumers but also as initiators and influencers of buying decisions.

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Geo – demographic segmentation

• Both geographic and demographic descriptors.

• Based on the premise that people who live close to one another are likely to have similar economic status, tastes, preferences, lifestyle and consumption behaviour.

• For example – retailers who propose to open new stores are interested in knowing something about the people who live within a defined area whom they aim to target.

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PSYCHOGRAPHICS SEGMENTATION

• When segmentation is based on personality , lifestyle or values characteristic is called psychographic segmentation.

• For Example :

Some motorcycle manufacturers segment the market on the basis of personality variables such as macho image , independent, and impulsive.

Some producers of liquor, cigarettes, apparel, etc. segment the market on the basis of personality and self-image.

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Lifestyle

• It is the indicator of how people live and spend their time and money. What people do in their spare time is often a good indicator of their lifestyle.

• Consumers in different countries have different lifestyles.

• In a study by Rebecca Piirto of fashion consumers found 6 major groups: yesteryears(older customers), power purchasers(married households with college degrees), fashion foregoers, social strivers, dutifuls (highly practical) and progressive patrons(high income/quality buyers).

For Example:

Indian women are home focused, less likely to visit restaurants , more price sensitive , spend time preparing meals, fond of movies.

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Lifestyle

• Psychographics or lifestyle studies generally include the following:

Attitudes include evaluative statements about people, products, ideas, places, etc.

Values refer to widely held beliefs about what is right/acceptable/desirable, etc.

Activities and interests cover behaviours with respect to activities other than occupation to which consumers devote time and effort.

Demographics cover gender, age, education, occupation. Income, family size. Etc

Media preferences describe which specific media the consumer prefer and use.

Usage rate focuses on measurements of consumption level within a particular product category and is generally recorded as heavy,

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• General lifestyle studies can be used to spot new product opportunities while product specific lifestyle analysis may help repositioning decisions regarding existing brands.

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VALS (Values and lifestyle)

• Stanford Research Institute (SRI) developed a popular approach to psychographics segmentation called VALS.

• Researchers faced some problems with this method and SRI developed the VALS 2 programme in 1978.

• VALS 2 puts emphasis on psychological base to tap relatively enduring attitudes and values.

• 42 statements are given with which they are required to state a degree of agreement or disagreement.

• VALS2 has two dimensions. They are-

1. Self orientation – determines the type of goals and behaviours that individuals will pursue and refers to pattern of attitudes and activities which helps individuals reinforce, sustain, or modify their social self image.

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2. Resources - reflects the ability of individual to pursue their dominant self –orientation that include the full range of physical , psychological , demographic and material means such as self-confidence , interpersonal skills , intelligence, eagerness to buy etc.

• SRI has identified 3 basic self-orientation:• Principle oriented individuals are guided in their choice by their beliefs

and principles and not by feelings, desires and events. • Status-oriented individuals are heavily influenced by actions, approval

and opinions of others.• Action-oriented individuals desire physical and social activity, variety

and risk taking.

VALS2 divides the consumers into 8 groups.

It suggests that a consumers purchases certain products and services because the individual is a specific type of person

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• ACTUALISERS-

established or getting established leaders.

Sophisticated and active with high self esteem.

Image is important.

Interested in growth and seek to develop, explore, express.

Open to social change

Guided by principles and desire.

Fond of reading but not of TV

Skeptical of advertising

• PRINCIPLE – ORIENTED –

• EXHIBIT BEHAVIOUR ACCORDING TO THE VIEWS OF HOW THE WORLD IS OR SHOULD BE.

FULFILLEDS –

Mature in their outlook.

Well-educated, reflective people. Value knowledge , order and responsibility.

Like their home and family.

satisfied with their careers and enjoy their leisure activities.

nearly 50 % fulfilleds are in their 50’s.

Open-minded

As consumers- conservative and practitcal

Purchase products for durability , functionality and value.

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BELIEVERS –

largest segment

Not well-educated.

Moral code of conduct deeply rooted in their psyche and is inflexible.

Routines are established and largely influenced by home, family, religion and social organization.

As consumers- predictable and conservative.

Income is modest.

Fond of TV and less reading.

• STATUS ORIENTED-• VALUE A SECURE PLACE IN THE

SOCIETY.

ACHIEVERS –

Choices based on desire to enhance their position or facilitate their move to another group’s membership for which they aspire.

more resourceful and active.

Seek recognition and self-identity

High economic and social status.

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STRIVERS –

Dependent on others to indicate what they should be and do.

Blue-collar workers.

Self definition is based on approval and opinion of others.

Impulsive, get bored easily, unsure of themselves

Low on economic, social and psychological resources

Attempt to appear stylish.

Read less; prefer TV

• ACTION ORIENTED –

EXPERIENCERS

young ; full of vitality; enthusiastic; impulsive ; rebellious.

college educated

most of income is disposable

disregard for conformity and authority

amazed at and impressed with others wealth, prestige and power.

seek excitement and variety ; risk taking

Values and behaviour is under process.

fond of outdoor recreation , sports and social activities.

Heavily spend on clothing, music and fast food.

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• STRUGGLERS –Second largest groupIncludes households with low

incomeNarrow interestLow level of resourcesIll-educated ; strong special bonds;

low skilled ; chronically poor and concerned of declining healthFeel powerless and unable to

make an impactStrongest brand loyalties ;

cautious ; represent only a modest marketA lot of TVWomen’s magazines and tabloids.

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Behaviouristic Segmentation

• Dividing the market on the basis of such variables as use occasion, benefits sought, user status, usage rate, loyalty status, buyer readiness stage and attitude is termed as behaviouristic segmentation.

• Buyers can be identified according to the use occasion when they develop a need and purchase or use a product.

• User status, brand loyalty, level of product awareness and attitude.

For Example:

Archies greeting cards are used on many different occasion.

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BENEFIT segmentation

• Identifying consumer groups looking for specific benefits from the use of a product or service is known as benefit segmentation.

• Benefit segmentation has the potential to divide markets according to why consumers buy a product.

• Benefits sought by consumers are more likely to determine purchase behaviour than are descriptive characteristics.

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Principal Benefit Sought PsychographicCharacteristics

BehaviouralCharacteristics

Demographic Characteristics

Brands Much Favoured

Brightness of teeth(cosmic) Outgoing, active fun –loving, high sociability

Smokers Teenagers,youngsters

Close-up, Promise,Aquafresh

Decay prevention(medicinal) Health conscious Heavy users Large families Pepsodent,Colgate Total

Taste(good taste, flavour) Self –indulgent , hedonistic

Mint lovers Children Aquafresh,Colgate

Low Price(economy) Price-conscious,independent

Heavy users, deal prone

Men, traditional Neem, Babool,ViccoVajradanti

Benefit Segmentation of Toothpaste Market

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Demographic-psychographics segmentation (hybrid approach)• Combined characteristics reveal very important information about

target markets.

• Useful in creating consumer profiles and audience profiles.

• Reveal important information for segmenting mass markets; type of promotional appeal; right kind of advertising media.

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Segmentation variable for organizational markets• Geographic location – customers location

• Customer size – based on number of production facilities, sales volume, no. of sales offices, no. of employees.

• Product use – on the basis of type of use.

• Type of organization – segment market based on industry

• Buying behavior and situation – degree to which buying activity is centralized.

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Targeting Market Segments

• Establish criteria to measure market attractiveness and business strength position.

• Evaluate market attractiveness and business strength factors to ascertain their relative importance.

• Assess the current position of each potential segment on each factor• Project the future position of each segment based on expected

environmental, customer, and competitive trends• Evaluate Segment Profitability.• Evaluate implications of possible future changes with respect to

strategies and requirement of resources.

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Segment attractiveness and business strength factors• Attractiveness evaluated on the company’s current strength and

market potential assessment.

• Determining the segment attractiveness requires the degree of unmet or partially met customer needs.

• It also involves the marketer estimate of the segment size, growth rate, and the influence of various macro environmental factors that influence the demand in the market segment.

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Continued…• Assess Each Factor to identify Segment Attractiveness - Each of the

factors should be assigned a numerical weight to denote the factor’s relative importance in overall assessment.

• Rate market segments on each factor – requires quantitative and qualitative data; detailed analysis of major competitors ; evidence of success

• Assess segment profitability – enter a smaller segment if the customers are prepared to pay a price premium for a product or service.

• Plot future position for each segment – 3 to 5 yrs.

• Choose target segments and allocate resources – segment is atleast strongly positive on one of the two dimensions of market attractiveness.12/6/2014 40

Targeting Strategies

• Undifferentiated Mass Marketing- ignoring any differences among consumers and offer one product or service to the entire market• Focuses on what is common in the needs of the consumers. • Provides cost economies ; appropriate for uniform products• Coco – cola ; Rooh afza

• Differentiated multiple segment marketing - enter several market segments and develops separate offers for each.• Expect higher sales and stronger market position ; increases cost• Products vary in design• Maruti ; pepsi ; coco-cola

• Single segment specialization or Niche marketing – appeals to firms with limited resources.• Small market – large share• More than normal risks ; meet specialized, unique and somewhat complex sets

of need• Recycled paper producers ; Oshkosh Truck

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Why product positioning?

• Numerous options in almost all product categories.

• Numerous marketing related messages

• Create a distinct and persuasive product or service image

• Guides marketing strategy by • Clarifying brand’s essence

• Identifying the goals

• Showing how it achieves these goals

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Product positioning• According to Smith and Lusch, product position refers to the objective

attributes in relation to other products. • Brand positioning and product positioning usually mean the same

thing. • Brand position refers to subjective attributes in relation to competing

brands and this perceived image of the brand does not belong to the product but is the property of the consumers’ perceptions of the brand.

• Decision reached by a marketer to try to achieve a defined brand image relative to competition within a market segment.

• Strategic decisions and have long term impact. – customer focused value proposition

• The perception is governed by the individual’s need, values, beliefs, experience and environment.

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Examples of Value Proposition

Brand, company, product

Target customers Benefits Value proposition

Mahindra Scorpio(SUV) Consumers interested in lifestyle products

Ruggedness, luxury and comfort

A vehicle that provides the luxury and comfort of a car and the adventure and thrill of an SUV

Hidesign( Leather nags and other fashion accessories)

Fashion-conscious consumers

Durability, style and aesthetic appeal

Fashion accessories thatcommunicate luxury and style

Domino’s (pizza) Convenience-minded pizza lovers

Delivery speed and good quality

A good hot pizza delivered to your door within 30 minutes of odering

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Product positioning

• Positioning is the perception of a brand or product in terms of its functional and non-functional benefits as judged by the consumer.

• HLL’s soap, Lux, is hypothetically positioned as “beauty soap” of female film stars.

• Right positioning more important than a product’s actual attributes.

• Concept of ‘distance’ and ‘dissimilarity’ in the ‘perceptual space’ of the consumers.

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Bases used for positioning• According to C.Merle Crawford:

• Features refer to objective or performance characteristics and are often used to differentiate products. This positioning is more common with industrial products.

• Benefits are directly related to the product.

• Usage includes end use, demographic, psychographic or behavioral segments for whom the product is meant. It also includes product popularity.

• Parentage means the lineage denoting who makes the product.

• Manufacturing process.

• Ingredients are highlighted.

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Bases used for positioning• Endorsements are made either by experts or a common person

with whom the target customers are likely to identify.

• Comparison with a competitor’s product.

• Pro-environment approach aims to show that the company is a good citizen.

• Product class .

• Country or geographic area.

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Difference will be stronger• According to Kotler, a difference will be stronger if it measures up

to the following criteria:

• Important

• Distinctive

• Superior

• Pre-emptive

• Affordable

• Profitable

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Process of Determining the Positioning Strategy• Difficult and complex

• Points-of-parity – Those associations that are not necessarily unique to the brand in some way but may in fact be shared with other brands. These may be of 2 types:• Category points-of parity – those associations that the consumer consider

as being necessary within a certain product or category to make it legitimate and credible offering. (bank)

• Competitive points-of- parity – Those associations that attempt to discard or weaken competitor’s points-of-difference associations, or other such type of benefit.

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Process of Determining the Positioning Strategy• Points- of-Difference – refer to strong, favorable and unique

associations for a brand in consumers’ perceptions. These may be related to virtually any type of attributes and benefits with a brand, positively evaluate, and have a firm belief that they could not find these to the same extent in other competing brands.

DesignEase-of-useIrreverent attitude

PerformanceInnovative technologyWinning

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Process of Determining the Positioning Strategy• Seven Steps:

• Identify Competitors

• Assessment of Consumers’ Perceptions of Competition – Kelly repertory grid

• Determining competitor’s position – marketing research – two-dimensional and multidimensional scaling techniques

• Analyzing the consumers’ preferences.

• Making the positioning decision

• Writing a positioning statement or a value proposition

• Monitoring the position

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Unique Selling Proposition

• Rosser Reeves

• A brand attribute, not being used by competitors, and tout it as “number one” on that attribute.

• Outstanding advantage and the best strategy to create a product’s position, provided it is not only persuasive for the consumers but also sustainable.

• Emotional Selling Proposition (ESP)/ Unique emotional proposition (UEP)

"You get fresh, hot pizza delivered to your door in 30

minutes or less—or it's free."

"You get rid of dandruff"

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Positioning Errors

• Suggested by Philip Kotler:• Under positioning – This refers to a state of buyers having only a vague idea of

the brand and considering it just another “me too” brand in a crowded product category. The brand is not seen to have any distinctive advantage.

• Over positioning – In this situation, buyers have too narrow an image of the brand. Thus, buyers might think that Apple makes only very expensive computers when, in fact, Apple offers several models at affordable prices.

• Confused positioning – Sometimes attempts to create too many associations or to frequently reposition the brand only serves to confuse buyers.

• Doubtful positioning – This situation may rise when customers find brand claims unbelievable keeping in view the product features, price or the manufacturer

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Positioning approaches• Positioning by corporate identity –

• Tried and trusted household names – TaTa, Sony, Godrej and Seiko – line extensions or brand extensions

• Positioning by brand endorsement –• Names of company’s powerful brands for line extensions or while

entering another product category – Lux, Surf, Titan and Dettol. • Merle Crawford refers to this positioning as ‘parentage’ – Brand ,

Company & Person

• Positioning by Product Attributes and/or Benefits -• Most common ; involves setting the brand apart from the competitiors

based on specific brand attributes or the benefits offered. • Tata Indica – More car per car ( economy, safety or reliability)• Single (Promise – gum care) ; Dual (Close-up – fresh breath and cosmetic

benefit) ; Triple (fresh breath, decay prevention and taste) positioning.• Benefit Positioning ; UEV(Unique Emotional Value ) – ego – intensive or

feel – category products12/6/2014 55

Positioning approaches• Positioning by Use Occasion and Time –

• To find an occasion or time of use and sit on it – Vicks Vapo Rub (Child’s cold at night); Iodex (sprains and muscle pains)

• Positioning by Price- Quality -• Nirma vs. Surf - Quality product and the price was nearly one – third that

of Surf.• Timex in USA• High price – high quality – Rolex, Rolls-Royce, Chanel No.5

• Positioning by Product Category –• Used so that the brand is perceived as belonging to another product

category.; existing product category is crowded.• Dan Sarel – ‘inter-set positioning’ or ‘macro-positioning’ • Maruti Omni ; 7-up ; Dove ;

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Positioning approaches

• Positioning by Product User –• Determine a target segment for which the product will be positioned.

• Dabur’s Chyavanprash ; Zandu Special Chyavanprash

• Positioned according to psychographics ( beauty 7 fashion, soft drinks) or behavioural aspects( Jhonson & jhonson – baby shampoo)

• Positioning by Competitor• Avis (USA)

• offensive positioning strategy; cases of comparative advertising.

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Repositioning• In response to new opportunities or threats.

• Product may be provided with some new features or it may be associated with some new uses and offered to the existing or new markets.

• Nestle’s Milkmaid – convenient form of milk – sweets and deserts.

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Consumer Behavior-Personal & Organizational

Contents:• Introduction to Consumer Behavior

• Factors Influencing Consumer BehaviorSocial FactorsPsychological FactorsPersonal FactorsDemographic FactorsSituational Factors

• Consumer Decision Making Process

• Organizational ConsumerCharacteristics, Decision Approach & Purchase patternsTypes of Decision SituationsOrganizational Buyer Decision Process

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Consumer Behavior

• “Consumer behavior refers to the mental and emotional processes and the observable behavior of consumers during searching, purchasing and post consumption of a product or service.”

-Satish K Batra & S H H Kazmi

• Kotler – Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas or experiences to satisfy their needs and wants.

• It has two aspects:The Final Purchase activity

The detailed or Short decision process

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A: Social Factors • Reference

Group• Family• Role & status

B: Cultural Factor• Culture• Sub-culture• Social Culture

D: Personal Factors• Age & life cycle• Occupation &

lifestyle• Personality & self

Concept

E: Psychological Factors

• Motivation • Perception• Learning• Attitude

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Social Values

• Nationality Group• Religious group • Racial group

• Beliefs & Morals • Faith & tradition

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• Culture is the fundamental determinant of a person’s want’s and behaviors.

• The impact is automatic and invisible.

• Culture operates primarily by setting somewhat loose boundaries for individual behavior within a society and by influencing the functioning of different institutions such as family and mass media.

• Culture reflects consumer behavior.

• Marketing strategies are unlikely to change cultural values, but marketing does influence culture.

• For eg – advertising agencies, fashion design houses, music companies.

• Culture has broad influence on their buying behavior of products and services and the extent of their satisfaction with them – eating behaviour – wash clothes with hands

• Culture change rapidly or slowly in different societies. – role of women.


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• Sub cultures – exists within a given dominant culture and gives more specific identification and socialization for their members.

• Nationalities , religions, racial groups and geographic regions.

• Only some sub-cultures in India are important from the marketer’s point of view.

• McD – policy of adopting uniformity across global markets. Now adopted products appropriate for particular cultures.

• Big Mac -> Big Maharaja

• Vegetable burgers

• Climatic conditions, natural environment and available resources, language and significant social and cultural events. -> food , dress

• Age sub-culture - > unique set of shared values and behaviors in a given society.


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• Social Class – relatively homogeneous and enduring divisions in a society, hierarchically ordered and with members who share similar values, interests and behavior.

• Societal rank, which is one’s position relative to others on one or more dimensions valued by society.

• SEC


Soci

o-e

con

om

ic f

acto

rs Education

Occupation

Income Level

Ownership

Heritage

Soci

al C

lass Upper class

Middle class

Lower-middle class

Lower class

Un

iqu

e b

ehav

iors Preferences

Purchases

Consumption

Social Class Results from Socio-economic factors.12/6/2014 67

A: Social Factors • Reference

Group• Family• Role & status

• Aspirational Group

• Dissociative Group

• Love• Respect• Personal

ambition

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• Roles & Family –• A role refers to a set of functions and activities that an individual in a particular position is supposed

to perform, based on one’s own and other’s expectations

• An individual may have several roles and set of expectations placed on his/her behavior.

Initiator (Need Recognition)

Gatekeeper (Information

Search)

Influence (Evaluation of alternatives)

Decision-Maker (decision to

buy)

Buyer (Purchase)

User (Consumption)

& Evaluation

Joint Decision-Making Process

• A Person’s changing roles in family lifestyle very significantly influence types of purchases and buying behavior.

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• Reference Groups- A person’s reference groups are all the groups that have a direct or indirect influence on their attitudes or behavior.

• Groups having a direct influence are called membership groups

• Primary groups – person interacts fairly continuously and informally -> family, friends, neighbors and co-workers

• Secondary group – religious, professional ,trade union groups – tend to be more formal and require less continuous interaction.

• Reference groups influence in 3 ways –• Exposure to new behaviors and lifestyle• Influence attitudes and self-concept• Create pressure for conformity that may affect product and brand choices.

• Influenced by groups to which they don’t belong – Associative groups-person hopes to be a part of.; dissociative groups - whose values or behavior an individual rejects.

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• When reference group influence is strong -> marketer reaches to the opinion leader

• Opinion leader – person who offers informal advice or information about a specific product otproduct category.

• Highly confident; socially active; frequent users of the category

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Psychological Factors:

• Motivation

• Perception

• Learning

• Attitudes

• Personality

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Motivation

• Refers to driving forces within an individual produced by a state of tension caused by unfulfilled needs, wants, and desires.

• Influenced by a set of motives than just one.

• Motives can be – utilitarian or hedonic.

• Utilitarian – focuses on some practical benefits and are identified with product attributes that define product performance such as economy or durability

• Hedonic – relate to achieving pleasure from the consumption of a product or service and are often associated with emotions or fantasies.

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Motivation Process

Unfulfilled needs,

Wants & Desires

Felt Tension

DriveAppropriate

Behavior

Goals or Needs

Fulfillment

Learning

Cognitive Process

Tension Reduction

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Abraham Maslow’s Hierarchy of Needs Theory of Human Motivation:

Self-

actualization

needs

Self-development and

realization

Esteem needs

Self-esteem, recognition, status

Social needs

Sense of belonging, love

Safety needs

Security, protection

Physiological needs

Hunger, thirst12/6/2014 75

Motivation research

• Psychoanalytic theory – consumer’s motivation for purchasing products or services is often complex, and is often undecipherable not only to the casual observers but also the consumers themselves.

• Ernest ditcher & Vicary

• Some of the techniques include:• In-depth interviews

• Projective techniques

• Association test

• Focus group

• Arousal of any particular set of needs at any particular set of needs given point in time gets triggered by an individuals physiological condition, emotional or thinking processes or to situational factors.

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• Physiological arousal – involuntary; arouse related needs

• Emotional arousal – latent needs are stimulated because a person keep thinking or daydreaming of it.

• Cognitive arousal – random thoughts

• Situational arousal – situation confronting a consumer.

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• Perception• Process by which an individual selects, organizes, and interprets stimuli into a meaningful

and coherent picture of the world.

Selective perception, selective comprehension, selective retention. Includes three distinct processes:

Sensation

• Immediate, direct response of the sense organs to a stimulus

Information Selection

• Paying attention to particular stimuli

Interpreting the Information

• Requires people to organize, categorize, and interpret the information registered by the senses.

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Subliminal perception

• Marketers embed covert, subliminal messages in ads or packaging.

• Not consciously aware but affect behavior.

• Not enough to change moderately held or strongly held beliefs.

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• Learning:• incidental• Interplay of Drives, stimuli, cues, responses, and reinforcement• Classical conditioning and operant conditioning • Drive is strong internal stimulus impelling action• Cues are minor stimuli that determine when, where and how a person responds• HP• Generalize response to similar stimuli.• Discrimination- to recognize the difference in sets of similar stimuli and can adjust

our responses accordingly.• Need produce motivation, which leads to goal directed behavior resulting in need

satisfaction.• Marketers can build up demand for a product by associating it with strong drives,

using motivating cues, and providing positive reinforcement.

• Attitudes:• “A learned predisposition to behave in a consistently favorable or unfavorable way

with respect to a given object.”• Relevant to products, brands, companies, celebrities, advertisements etc.• Attitude important -> object evaluation process, products or companies; favourable

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Personality

• Describes growth and development of an individual’s whole physiological system, which looks at some aggregate whole that is greater than the sum of the parts.

• A set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli.

• Self-confidence, dominance, autonomy, deference, sociability, defensiveness and adaptability.

• Brand’s personality=consumer’s personality.

• Brand personality – specific mix of human traits that we can attribute to a particular brand.

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• Stanford’s Jennifer Aaker researched brand personalities and identified the following traits:• Sincerity

• Excitement

• Competence

• Sophistication

• Ruggedness

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Four main theories of personality• Self-concept theory – focuses on how the self-image or self-concept of

individuals influences their purchase behavior.• Individuals develop and alter their self-concept based on interaction of

psychological and social dimensions.• Psychoanlaytic theory –personality is the result of childhood conflicts

between 3 fundamental components of personality – ID, Ego and Superego;Freud

• Id – ‘pleasure principle’; ego – reality principle; superego – ideal than real.• Social-cultural theory – social and cultural variables are more important

than biological drives in the development of individual personality; Carl Jung

• Trait Theory – personality is composed of a set of traits that are relatively stable and describe a general pattern of behavior.

• Single-trait personality tests

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Personal Factors

• Consumers with common demographic characteristics behave in relatively similar manner.

Demographic Factors

• Strong effect on many aspects of consumer purchase decisions, including product needs, brand preference, media habits & how and what type of shopping outlets they choose.

Lifestyle

• The situation in which the product is brought or used can generate emotional involvement.

Situational Factors

• Explains how consumers process the information & how this information influence their purchase or consumption related behavior.

Involvement Level

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Situational factors

• Consumption situation – basis for developing ad positioning new products for specific consumer segments. Timex- Ironman Triathlon.

• Purchase situation – affect consumer decision about product selection -> in-store environment; store atmosphere; service atmosphere

• Gift-giving situation – whether the product is purchased for personal consumption or for giving a gift also influences purchases.

• Unanticipated purchase situations – which are not anticipated.

• Usage or consumption situation-refers to the occasion of consumers’ product use.

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Involvement level

• Explain how consumers process the information might influence their purchase or consumption related behavior.

• Judith L. Zaichokowsky – there is no single precise definition of involvement; an underlying theme focusing on personal relevance.

• Involvement variables – precede involvement and influence its nature and extent

• Stimulus/object variables – products/stimuli that consumer perceives to be closely related to his/her values, experience and interests and will stimulate higher degree of involvement.

• Involvement intensity – severity of involvement as experienced by the consumer. High or Low.

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• Response factors – how a consumer behaves under involvement conditions of different intensity.

• Purchase involvement – level of concern for, or interest in, the purchase process stimulated by the need to consider a certain purchase. -> cognitive; emotional

• Types of Involvement->• Product involvement-consumer’s level of interest in a product.

• Advertising involvement – consumer’s interest in processing the ad messages.

• Purchase situation involvement – while buying same item in different contexts.

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Consumer decision process

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• Consumer facing recognized problem – evaluating attributes – deliberately and rationally choosing – maximum satisfaction + lowest cost

• Constructive processing – consumers adjust their degree of cognitive “effort” to the task at hand.

• Types of Consumer decision process• Nominal decision-making -> nominal problem solving/habitual decision-

making/routine problem solving. Low-involvement with most low-priced andfrequently purchased products which are consumed on an ongoing basis ; outcomeof continued satisfaction with a brand.

• Limited decision-making -> internal and limited external search, consideration of justfew alternatives, simple decision rules on a few attributes and little post purchaseevaluation. Emotional factors may influence limited decision-making.

• Extended decision-making -> extensive external and internal information search –rigorous evaluation of several alternatives ( no particular information)

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Low-involvement purchase High-involvement purchase

Normal Decision-making

Problem recognition(selective)

Information search (Ltd external, internal)

Product choice &purchase

Post purchase action, no dissonance, very ltd

evaluation

Ltd DM

Problem recognition(generic)

Information search (Ltd, internal)

evaluation of alternatives


Post purchase action, no dissonance, ltd evaluation

Extended DM

Problem recognition(generic)

Information search (external, internal)

evaluation of alternatives


Post purchase action, dissonance, complex

evaluation

Involvem-ent level and types of Decision-making

Involvement Level

LEV

EL O

F IN

VO

LVEM

ENT

TYPES OF DECISION MAKING

Involvement level and types of Decision Making

Nominal Limited Extended

High

Low

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Need Recognition

Information Search

Alternatives’ Evaluation

Store Selection

And Purchase

Post Purchase

Action

Consumer Decision Making Process:

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ORGANIZATIONAL CONSUMER

• Organizational Buyer Characteristics:

Group-based Decision-MakingInvolve a group a personnel from engineering, production, finance, purchasing & even top management in making a purchase decision.

Technical KnowledgeProfessional buyers

Rational Motives DominateDirected by rational motivations because of the technical nature of purchases involved.

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Types of Decision Situations:• Straight Rebuy

Occurs when the purchase is of minor importance and is not complex—no consideration is given to strategic issues.

• Modified Rebuy

Used when the purchase is moderately important to the firm and/or the choice is more complex. Strategic issues begin to play a role.

• New Task

Tends to occur when the buying decision is very important and the choice is quite complex. Strategic issues will be of prime importance.

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Organizational Buyer Decision Process

• Problem Recognition

• Product Specification

• Product and Vendor Search

• Product and Vendor Evaluation

• Product and Vendor Selection

• Performance Evaluation

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Organizational Purchase ProcessProblem Recognition:• Group Involvement in High-Tech Organizations

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Organizational Purchase ProcessProduct Specification:

The formal information

search process can include

- site visits to evaluate a

potential vendor

- lab tests of a new product

or prototype, and

- investigation of possible

product specification

The informal information

search process can include

- discuss with sales

representatives

- attend trade shows

- read industry-specific

journals

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Organizational Purchase ProcessEvaluation and Selection:

• The evaluation of possible vendors and selection of a given vendor often follow a two-stage decision process as follows:

1. Creating an approved vendor list

• Using conjunctive decision rule

2. Selecting the vendor(s)

• Using disjunctive, lexicographic, compensatory, or

elimination-by-aspects decision rules

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Organizational Purchase ProcessEvaluation and Selection:

• Evaluative Criteria as a Function of Organizational Role

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Organizational Purchase ProcessPerformance Evaluation:• Once the decision to buy from a particular organization has been made,

the method of purchase must be determined.

• The terms and conditions--the payment, warranties, delivery dates ,etc.--are both complex and critical in business-to-business markets.

• After-purchase evaluations of products are typically more formal for organizational purchases than are household evaluations of purchases.

• A major component of post purchase evaluation is the service the seller provides during and after the sale.

• Relationship marketing is at least as important in industrial marketing as it is in consumer marketing.

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THANK YOU!

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