Lect3 Slides Ab

7/30/2019 Lect3 Slides Ab

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Lecture 3: Introduction to Market Segmentation

BASIC MARKETING FEEDBACK LOOP

3.1 Market

Definitions andTypes of Goods

3.2Segmentation

Analysis

3.3 Demographic

SegmentationApplication

Segmentation[Lecture 3]

Firm Behaviour

Days 6,7,8,9

Promotion

BrandingEthics

Days 4.5 10,11,12Pricing

Distribution

ConsumerBehaviour[Lecture 2]


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Lecture 3: Introduction to Market Segmentation

3.1 What is a market?

3.2 The link between consumer needs and market definitions?

3.3 What is the difference between a search and experience

good?3.4 A reformulated buyer behaviour model.

3.5 What is a market segment?

3.6 What is segmentation analysis?


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3.1 What is a Market?

A product market: specific customer (who), seekingspecific solution/function (what), based on a single

technology(how).

A solution market (The Single Best): specific customer(who), seeking a specific solution (what), based on all

the possible technologies to perform those functions

(how).

An industrial market : several customergroups, several

functions, based on a single technology


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3.2 Consumer Needs and Market Definition

Social InteractionGeneric Need

Inter-Personal

LocalPub

SocialClub

OrganisedSport

Electronic

Internet ChatRooms

A Multi-Attribute GoodReal + Perceived

Observable AttributesPub/Club Location and

Facilities

Unobservable AttributesSocial Atmosphere

Assumption1

Assumption2

Assumption3

Possible SolutionsDerived Needs

Solution Market


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3.3 The difference between search and

experience goodsFigure 1: Continuum of Search and Experience Characteristics.

Low Moderate High

Difficulty in Observing Product or Service Attributes

Most Goods Most Services

Shoes AutoRepair

Frequency


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3.4 A reformulated buyer behaviour model

The decision to purchase a certain good or service

can be seen as a cost-benefit calculation.

V = R CV = Net benefit from product consumption.

R = Gross benefit.

= Evaluation of quality level. A value between 0and 1. Inverse measure of risk (1- ) = Risk

C = Cost of good (includes price and opportunity

cost).

Buyer Decision Rule: A consumer purchases the

good when V > 0.*


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The Fundamental Equation gives us a lot ofinformation aboutthe techniques firms must

use to market their products:

* = CR

Examples:

1. A new product to the market* ?

2. A firm that has to raise priceC ?

3. A new improved product R ?


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Two Implications and Questions:

1. What happens after you purchase a particular

product which is an experience good?

-Answer: You develop a switching cost:

V = R C + S

- Implication: R < C; R + S > CV > 0


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2. What happens to the original (before purchase)cost-benefit calculation if you have forwardlooking consumers and experience goods?

V = R C SV < 0 even if R > C R < C S

Option a): You delay purchase and/or follow others.

Option b): You seek out more information.

Reason: To lower risk you want to increase


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3. What happens to and S when the good is asearch good?

- Answer: = 1

- Answer:S

= 04. Firms want to lower uncertainty (e.g.,). How?5. Firms want to S before purchase and S after

purchase.How?

These kinds of questions may appear on the exam!


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3.5 What is a Market Segment?

A schematic representation

Mass Market

Target Market


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3.5 What is a Market Segment?

Definition of target market segment:

A target segment is an internally homogeneous

group of consumers which is heterogeneous with

respect to the mass market. Example: Probability that teens (13-19 year olds) will

consume a fizzy drink in a given week is 0.56. For

all consumers (13-65) it is 0.25.

Teens are two-times more likely to consume a fizzy

drinks like coca-cola than the mass market.


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3.6 What is Segmentation Analysis?

General Techniques Socio-demographic (age structure profiles)

part c of the lecture.

Benefit (economy segment (price);durability(quality); symbolic (Veblen)).

Lifestyle (Vanilla Sky; Yann Tiersen)

Behavioural (Cigarette smokers & BungieJumpers)


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3.6 What is Segmentation Analysis?

Segmentation TechniquesBased on Usefulness and Measurability

Low

Usefulness

High

Low Measurable High

Attitudes

Lifestyle

Ethnicity

Age

Generic

need

sought

Income

Gender

socio-demographic

segmentation


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Lecture 2: Consumer Behaviour

Quasi-Rationality

Why do signs

make us buymore?

Wansink (1999)*

See Experiment
http://www.consumerpsychology.net/brandlab/videos/soupsigns.ramhttp://www.consumerpsychology.net/brandlab/videos/soupsigns.ram

Documents

Lect3 Slides Ab