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Consumer Buying Behavior
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Analyzing Consumer Markets and Buying
BehaviorInterest in examining aggregate market response to firm
specific decision variables
understanding
explaining
predicting
Method Analyze individual level behavior
Analyze aggregate market behavior
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Analyzing Consumer Markets and
Buying BehaviorTranslation of individual level behavioral analysis to
aggregate level market response is faced with the issues of
aggregation bias and consumer heterogeneity
A prime characteristic of consumers is their variation in
preferences, tastes, likes, dislikes, purchase behavior
patterns. Meaning thereby that markets are heterogenous
and consumers exhibit heterogeneity
Object of consumer behavior analysis - buyer or user ?
answer - both with emphasis on decision maker
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Behavioral processes of consumers
An integrative conceptual framework
Communicationsensitivity
Accultured
individuality
Rational and
Economic
Decision making
Society and
MarketEnvironment
( )Behavioral
Process of
Consumers
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Behavioral Processes of Consumers-
Communication Sensitivity
Within
Market
Communication sensitivity
Firm To
Market
Within Market
Word of Mouth
Dif
fusion Processes
Firm to Market
-Consumer Behaviour Concepts-One way/Two way.
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Behavioral Processes of Consumers-
Communication sensitivity
Consumer Behaviour Concepts EndogenousFactors
Selectivity
Involvement
Persuasion
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Selectivity
Selective attentionMarketers have to work hard to get consumers notice consumers are more likely to notice stimuli of current need, stimuli
they anticipate, stimuli whose deviations are large e.g. $25 off $100
rather than $5
Selective distortiontendency to twist information into personal meanings thatwill fit our preconceptions e.g. A customer of LG may interpret an
advertisement saying that they are No. 1 company in Microelectronics to
be No.1 company in all of consumer durables
Selective Retentionconsumers likely to remember good points of products theylike and forget good points of competing products e.g. a user may
remember that Pears soap is the only soap good for dry skin though
in the market Dove and Mysore Sandal Gold is also good for dry skin
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Involvement
Krugman proposed the concept of level of involvement influencing
buyer behavior. Products purchased are either low involvement
Or high involvement. Assael has classified types of buying behavior
based on involvementSee slide next
Persuasion
Low Involvement products use the peripheral route to persuasion
e.g. celebrity endorsements
High Involvement products use both the central route (cognitive reason)
to persuasion and the peripheral route to persuasion.
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Assaels Classification of types of
Buying Behaviour
Complex BuyingBehaviour
Variety-Seeking
Buying
Behaviour
Dissonance
Reducing
Behaviour
Habitual
Buying
Behaviour
Significant
DifferenceBetween
Brands
FewDifference
Between
Brands
High Involvement Low Involvement
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Assaels Classification of types of
Buying BehaviourComplex: First develop beliefs about product.Then develop attitudes and then make achoice
Dissonance: First Act, then develop beliefs.Then end up with attitudes
Habitual: salt- out of habit, beliefs frompassive learning-choice- evaluation/attitudes
Variety seeking- lot of brand switching-chocolates (Low involvement)-Beliefs-Choice-
Attitudes.
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Behavioral Processes of Consumers-
Accultured Individuality
Accultured
Individuality
Culture
Sub CultureSocial Class
Personal- Age and Life cycle
- Occupation
- Economic
Circumstances
Social
-Reference groups
-Family
-Roles and Status
Consumer Behaviour
Concepts
Personality and Self
concept
Life style
Motivation
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Independent Factors
1. Culture
a) Cultural factors exert the deepest and broadest influence onbuyer behavior. Culture is fundamental determinant of a persons wants
and behavior
b) Subculturecountries, regions, races, religions
c) Social class
2. Social factors
a. Reference groupsprimary (family, coworkers), secondary
(religious groups)
b. Reference groupsaspirational groups and disassociative groups
c. Three influences of reference groups
1. individual exposed to new behaviors, lifestyle
2. create pressures for conformity (affects choice thereby)
3. influence attitudes and self concept
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2. Social Factors
- Family
- Family of orientationinfluences beliefs, values, attitudes- Family of procreationinfluences day-to-day living and
purchases
3. People buy products that communicate their role and status in society
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Endogenous FactorsAccultured Individuality
Lifestyle
A lifestyle is a persons pattern of living in the world as expressed in
activities, interests, opinions. Lifestyle portrays the whole person.
Marketers search for relationships between their products and lifestyle
groups. If it is found that most computer buyers for home purpose areachievement oriented, then the marketer may aim his brand at
achiever lifestyle
Psychographics is a way of using psychology and demographics for
understanding consumers. VALS of SRI consulting is a useful framework
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Accultured IndividualityEndogenous factors
Personality and Self Concept
Personality is a set of distinguishing human psychological traits that lead to
Consistent responses to environmental stimuli. E.g. Self Confidence, dominance
Autonomy, sociability, defensiveness
Brand Personality is a specific mix of human traits attributable to a particular brand
Consumers choose brands which have a personality similar to that of their own.
Self Concept
- Actual self concepthow he/she views him/herself- ideal self-concepthow she/he likes to view her/himself
- others self concepthow he/she thinks others see him/her
A marketer has to judge the form of self concept from the above to market his brand
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Endogenous FactorsAccultured Individuality
Motivation
A person has many needs (biogenic, psychogenic). A need becomes a motive
When it is aroused to a sufficient level of intensity. In other words a motive
is a need that is sufficiently pressing to drive the person to act.
Motivation Theories
Freuds Theory
Maslows Theory
Herzberg Theory
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Freuds Theory
Consumers behavior is shaped largely by unconscious psychological forces.
A technique called LADDERING is used to trace the persons motivation
From the stated ones to the terminal ones. The marketer can then decide to
Target his appeal to the most appropriate level.
Motivation researchers also use projective techniques such as word association
Sentence completion, picture interpretation etc.
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Maslows Theory
Physiological Needs
Safety Needs
S
o
c
i
a
l
Social Needs
Esteem Needs
Self Actualization Needs
This helps how various products fit into lives, goals and plans of consumers.
Consumers fill their needs starting from lowest to highest. So it is not of much use
to target a high end need product to a person who is still satisfying his lower
end need.
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Endogenous FactorsAccultured IndividualityMotivation
Herzberg Theory
Factors for buyer motivation are of two typeshygiene factors (or
Dissatisfier removers) and motivators (satisfiers). It is not enough if hygiene
Factors are present. Motivators must be present for a purchase.
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Behavioral Processes of Consumers- Beliefs
and Attitudes
Society & Mkt. Environment
Beliefs/Values Experience & usageIn Decision making
For consumption
Attitudes
Inputs from rational and Economic
Decision Making
Communicati
on
sensitivity
Accultured
Individuality
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Beliefs / Values and Attitudes
A Belief is a descriptive thought that a person holds about something. On Blind
Test Diet Coke and Diet Pepsi are equally preferred. But on revealing brand
Names Diet Coke was preferred by 65% of consumers and Diet Pepsi by 35%.
This is an illustration of role of beliefs.
An attitude is a persons enduring favorable or unfavorable evaluations,
emotional feelings and action tendencies toward some object or idea.
A marketer is well advised to fit his product into existing attitudes rather than try
To change attitudes, which take a long time. Sometimes it pays to change
Attitudes1. Buying New in exchange for oldpays to change attitude as market
is going to be large
2. These days food brands should have a diet variety as there is
health consciousness in the marketpays to fit product
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Behavioral Processes of Consumers-
Rational and Economic Decision making
Decision making process
- Need Recognition
- Information Search
- Evaluation (perception)
- Purchase (Preference)
- Post-Purchase
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Behavioral Processes of Consumers-
Rational and Economic Decision Making
Consumer Behaviour
Processes/Concepts
Individual constraints
Budget constraints
Situational factors
Beliefs and values
Attitudes
Market environment
Store Environment
Firm decision variable
Competitor decision variable
Rational and
Economic
Decision making
Post Purchase
Feelings
-CognitiveDissonance
-Contrast Theory
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Behavioral Outcomes of Rational and
Economic Decision making Process
Rational and
Economic
Decision making
Post purchase feelings
Evoked set
Consideration set
Purchase intentionPurchase preference
Purchase Behaviour
Purchase behaviour decisions
What to Buy (Basket of goods decision)
Where to Buy (Store choice)
Which brands to buy (Brand choice)
How much to Buy (purchase quantity)
How often to Buy (Purchase timing)
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Analysing Consumer Markets and
Buying Behavior
Buying Roles
Initiator, Influencer, Decider, Buyer, User
Stages of the Buying Decision Process
Problem Recognition
Information Search
Evaluation of alternatives Purchase decision
Post Purchase behavior
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Industrial Buying Behavior
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Issues in Industrial Markets
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Organizationalmarkets
Institutionalmarkets
Smallbusinessmarket
Largeorganizationalmarkets
Government markets
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1. Fewer, Larger BuyersTire manufacturers have OEM contracts with few
automobile manufacturers.
2. Close supplier customer relationshipas there are fewer customers, suppliers
tend to develop a closer customer relationship. WIPROs close relationship
with IIMB, for the sale of computers
3. Professional purchasinguse of buying instruments such as quotations,proposals and purchasing contracts; buyers guided by firms purchasing
policies, constraints and requirements
4. Several buying influencesthe buying committee may consist of technical
experts, senior management, gatekeepers from consultancies etc. Thus the sellershould send trained sales people.
5. Multiple sales callssales cycles extends from few days to few years; thus seller
needs to make multiple sales calls to win orders.
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6. Derived demandThe demand for industrial goods is driven by the
demand for consumer goods. The boom in the construction industry is
driving the demand for cement and steel.
7. Inelastic demandDemand for many business goods and services is inelastic
- that is not much affected by price changes. For example the demand for
batteries is not going to change much with price as the demand of batteries
is driven by the demand for automobiles.
8. Fluctuating demandA small increase in the consumer demand can give rise
to a significantly large increase in industrial demandthis effect is called the
acceleration effect. Similarly a 10% fall in consumer demand can cause a
significant decrease of the industrial demand.
9. Geographically concentrated buyersthere is clustering to rationalizeproductionsoftware in Bangalore; hosiery in Coimbatore; auto-ancillaries
in Pune and Nasik etc.
10. Direct PurchasingFirms buy direct mostly rather than thru intermediaries
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Key Elements of Industrial Buying Behavior
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Buying Process
Buy Situations Straight Re-buyroutine order
consumables, office supplies; outside
Suppliers tend to get in on dissatisfac
tion of existing supplier
Modified RebuyModify specs,
Prices, delivery requirements. In-
Suppliers have to protect an account;Out-suppliers try for an opportunity
e.g. computers
New TaskBuy for first time; greater the cost / risklonger it takes to decide
Pass through stagesawareness, interest, evaluation, trial, adoption.
Includes setting specs, price limits, delivery terms, order qty, acceptable
Suppliers and selected supplier(s). Because of complex selling use of
Dedicated missionary sales force.
Systems Buying and Sellingalso called turnkey solutionskey industrial
Marketing strategy in bidding large projectsdams, steel factories etc.
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Buying Centre - Includes all members of the organization who play any of seven
roles in the purchase decision process (UIIBADGU, I Bad ji)
1. Initiatorsthose who put up the request
2. Users - Those who use the product; many times the user is
the initiator
3. Influencershelp define specs, provide info for evaluating
alternatives, technical people are good influencers
4. Decidersthose who decide on requirements.
5. Approversthose who authorize deciders and buyers
6. Buyersmembers authorized to select supplier and decide terms
7. GatekeepersMembers who are info conduits to other
members of buy center e.g. receptionists , agents
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Several individuals can occupy a given role (e.g. many users / influencers) and
one individual can occupy multiple roles.
The buying center may include people outside the organization such as
government officials, consultants, technical advisors and other members of the
marketing channel.
Different members of the buy centre have different influences, for e.g. the
engineering department may be concerned with actual performance of the
product, whereas production may be more interested in ease of use and reliability
of supply.
Members of buy centredifferent personal motivations, perceptions and
Preferences which in turn are dependent on - age, income, education, job position,
personality, attitudes towards risk and culture
Characteristics of BUY CENTER
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Characteristics of BUY CENTER .. Cont.
Small sellers are advised to concentrate on key buying influencers. Large sellersGo for multilevel in-depth selling
Sellers are advised to periodically question or revise their assumptions about the
Buy center to adapt to organizational changes
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Purchasing / Buying Orientations
1. Buying OrientationBuy at lowest price given a quality level . Use two
Techniques (a) commoditizationregard the product is only a commodity and
care only about price (b) multi-sourcing to bring in competition among vendors
2. Procurement Orientationlook for collaborative relationships and seeksavings through better managementsuch as material requirements
planning, just-in-time management and even product design.
3. Supply Chain Management Orientationpurchasing is a strategic value
adding operation and purchase department betters its role as a part of the value
chain from raw materials to finished goods
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BUYGRID FRAMEWORK
BUY
PHASES
BUYCLASSES
New Modified Straight
Task Rebuy Rebuy
1. Problem recognition2. General need description
3. Product specification
4. Supplier Search
5. Proposal Solicitation
6. Supplier selection7. Order-routine specification
8. Performance review
Yes Maybe NoYes Maybe No
Yes Yes Yes
Yes Maybe No
Yes Maybe No
Yes Maybe No
Yes Maybe No
Yes Yes Yes
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Problem recognition
Marketer stimulates problem recognition by
Direct mail, telemarketing, calling on prospects
Internal stimulinew product development
for which parts are needed, breakdown of
equipment, existing suppliers unsatisfactory
Buyer attends a trade show
Purchase Manager senses an opportunity to
get lower prices or better quality
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General need descriptionand product specification
Standard itemsgo as per internal records or
as per specs laid out in ISI documents
Complex itemscollaborate with engineers,
users; else sit with marketers application
engineers who do consultative selling and
work out specs and likely price
Certain buying organizations attach a PVA or
product value analysis team to the project
who will conduct extensive analysis to arriveat specs that will lead to minimum cost
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Supplier Search
Identify suppliers
- trade directories, hunt online catalogs for suppliers
- trade shows- trade advertisements
- Internet searchWebsites have two types of e-hubs
Vertical hubs centered on industries
-plastics, steel, paper
Functional hubs centered on logistics
media buying, advertising
-Direct extranet links to major suppliers
(WalMartP&G)
-Buying alliances to get best price.
Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette
P&G, have joined to form allianceTransora-Company buying sitesFirms like GE have their
own site where it places Requests for Proposal,
negotiate terms, place orders
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Proposal Solicitation
Invite suppliers to make detailed proposals
Set up quality standards if any e.g ISO 9000 or
ISI etc.
Large technology systems need a detailed
Techno-Commercial proposal. The technicalquote will be cleared first and after that only
qualified technical bidders will be called for
commercial negotiation
Buyers can invite suppliers to make presentations.
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Supplier Selection
A supplier rating list is made by some companies
based on relative importance given to a select set
of attributes.
For routine order products the factors are : price,
supplier reputation, delivery .
For procedural problem products such as copiers the
important attributes are : technical service, supplier
flexibility, reliability and price
For political problem products such as choice of a
set of computers the factors are price, reputation,
reliability and flexibility
One way to encounter price factor from supplier side
is to talk of total cost of product or life cycle cost.
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Order routinespecification
Buyers negotiate the final order with the selected
suppliers, and details the tech. specs., the quantity
the delivery time, return policies, warranties etc.
For maintenance and repair items , firms are moving
towards a blanket contract that establishes a long run
relation. Such contracts are called stockless
purchase plans as the stock is held by the supplier
Long run contracts are also agreed upon in case of
shortage raw materials / inputs so that there is a
steady flow of material. In many cases the supplier
locates his factory near the buyer for bringing down
inventory and transport costs.
Vendor managed inventory is when the responsibility
rests with the vendor for maintaining inventory
Important parameters to see are OTdeliver on time
IFin full, NENo error
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Performance Review
Three methods of review
1 Ask for evaluation from buyers2 Buyer rates supplier on weighted score
method
3. Based on drawbacks of performance the
buyer may come up with adjusted cost
of purchase including price
4. Managers are rewarded for good buying
performance
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Institutional and Government Markets
1. Institutional Markets areschools, colleges, universities, hospitals,nursing homes.
2. Institutions normally ask for lowest price given a minimum quality
3. In government organizations the normal process is bidding with the
order going to the lowest bidder(s)
4. Negotiated contracts are applicable where the project is complex andrisky.
5. Governments tend to favor domestic suppliers
6. Government decisions are subject to review, so there is lot of paperwork
in contracting
7. Director General of Supplies and Disposals is the central purchasing unit ofIndian Government.
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Segmentation, Targeting, Positioning
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Identifying Market Segments and
Selecting Target Markets
Segmentation is the process of placing togetherconsumers into groups such that consumerheterogeneity on specified characteristics is
minimized within groups and maximized acrossgroups e.g. value for money buyers as distinctfrom economy buyers.
Segmentation can also be thought of as taking a
market and dividing them into groups based onsome common characteristic e.g. diet-colas,regular colas.
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Levels of Market
Segmentation
Mass Marketing or Undifferentiated Marketing
e.g. Ruf & Tuf Jeans, Model T Henry Ford
Segment Marketing - Cars
Niche Marketingspecialize to a narrowly defined
customer groupTemple jewellery for South Indian
women wanting to take part in cultural programmes
Local MarketingAthica for IIMB and around
Individual Marketing
One to One Marketing
Mass customization
ability to prepare on a
mass basis individually
designed products
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Segment Marketing
Flexible market offeringnaked solution containing the
No frills product and discretionary options that are
Priced extra such as A/C, power windows, moon roof
Homogenous preferences e.g. bite size candies, eclairs
(Patterns of Segment
Markets)
Diffused PreferencesHouse Buildings
Clustered Preferencesdistinct clusters in the
Market also called natural market segments
e.g. car market
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Why is segmentation useful ?
Segmentation helps firm tailor their marketing programs
focuses an actionable and accessible set of the market.
cuts of wasteful expenditures on unwanted consumers
matches needs and wants of specific groups of buyers to firms offerings
stimulates demands through multi-products for multi-segments
resource allocation to segment specific marketing mix activities will be made
more efficient
Segmentation is a way to plan rather than explain
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Criteria for Segmentation
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1. Measurablesize, purchasing power etcfinding the size of
market for refurbished home appliances is not that easy.
2. Substantiallarge enough for the firm to find it as a marketingopportunityPremium car market in India may
not be substantial to warrant local manufacture
3. Accessiblesegments can be effectively reached and served
in communication, serving last mile is not easy
4. Differentiablesegments should be differentiable from one another
if rural consumers and urban consumers show
no difference in features of mobile handsets
5. ActionableIt should be possible for formulating marketing programs for
serving the segment (it cannot add segment descriptors
so easily) how to sell money for value products such as
expensive watches and pensnot only the monetarily rich
buy it, the mentally rich also buyhow to identify
ADAMS
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Bases for Consumer Market Segmentation
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Bases
Geographic - Rural / Urban; metropolis/city/town/village;
modern retail stores/kirana stores / mandis/ haats
DemographicAge, Family Size (nuclear or joint ), gender,
Income, Occupation, Education, SEC, religion, race,
Nationality, social class
PsychographicUse of Psychology and demographics
* Lifestyle (AIO)Nike, Benetton, Gatorade
* PersonalityFeminawoman of substance
* ValuesHiDesign leather accessoriesconsumers
who hold the value style and elegance in a classical sense
Behavioral Segmentationnext slide
GDPB
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Behavioral Segmentation -based on buyers knowledge of, attitude towards,
use of, or response to a product
OccasionsMarriage, BirthArchies and Hallmark cards
BenefitsIn soaps - Dettolantiseptic, LuxBeauty
User StatusNon users, first time users, potential users, regular user
Usage rateLight users, medium users, heavy users
Buyer Readiness StateCold Prospect, Hot Prospect
Loyalty statusHard Core Loyals, Split Loyals, Shifting Loyals, Switchers
Attitudeenthusiastic, positive, indifferent, negative, hostile
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Bases of Industrial Market Segmentation
Nested Basis
Nested Approach
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Nested Approach
DemographicOperating variables
Purchasing
approachesSituational factorsPersonal Characteristics
l ifi i f
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Classification of Nests
Personal
characteristics Purchase processPurchase
decision
Situational factors
Company variables
Demographics
Purchasing approaches
Operating
variables
Inner middle nest
Innermost nest
Outer nests
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Demographic Variables
Industry, Company Size (Large, SMEs) , Location
Operating Variables
Technology, User or Nonuser status (light, medium, heavy users)
Customer requirements (few services or extended requirements)
Purchasing Variables
Purchasing function approach (centralized or decentralized), Power
structure( technology top, finance top, marketing top), Nature ofexisting relationships( old firms or new firms), general purchasing
policies ( leasing, service contracts, sealed bidding ) , purchasing
criteria (quality, service, price)
Situational FactorsUrgency of requirement, size of order
Personal Characteristics
Loyalty, attitude toward risk, some similarities between buyer-seller
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Segment based on existing relationship
First time prospects, novices, sophisticates
Segment based on purchasing criteria
price oriented customers, solution oriented customersstrategic value customers (enterprise selling or partners)
Super Segments
A set of segments sharing some exploitable similarity
Perfume manufacturers target to modern women rather
only to working women or rich women. Both segments have
a similarity of attempting to obtainindependent identity
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Methods to Segmentation
Self Selection
Profiling
Competitive Market Structuring
Attitudinal Segmentation - Survey Method
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Self Selection
One of the powerful means of segmenting markets is to allow consumers to
Self select by mass-customizing the marketing offer
American Express works on self selection of customers on dimension ofextent of spending by offering different categories of rewards for light and
heavy users ; Heavy users2 airline round trip tickets to extra-spending
within six months; Light usersmoney towards purchase of car by saving
in five years.
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Profiling
Method of describing a set of consumers on market
Characteristics and attaching a tag description to it.
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Basic profiling of customers in toothpaste
market
Segment 1 Segment 2
Demographic
Age 15-40 years 3-60 years
Family size Small (
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Segment Profiling Based on Cluster Analysis
The severe sufferers
The severe suffers are the extreme group on the potency side of the
Market. They tend to be young, have children, and be well educated.
They are irritable and anxious people, and believe that they suffer more severely
than others. They take the ailment seriously, fuss about it, pamper themselves, andkeep trying new and different products in search of greater potency. A most
advanced product with new ingredients best satisfies their need for potency and fast
relief, and ties in with their psychosomatic beliefs.
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The Active Medicators:
The Active Medicators are on the same side of the motivational spectrum.
They are typically modern suburbanites with average income and education.
They are emotionally well adjusted to the demands of their active lives.
They have learned to cope by adopting the contemporary beliefs of seeking
help for every ill, and use remedies to relieve even minor signs of ailments
and every ache and pain. In a modern product they seek restoration of their
condition and energy, mental recovery, and a lift for their active lives.
They tend to develop strong brand loyalties.
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The Hypochondriacs
The hypochondriacs are on the opposite side of the motivational spectrum.
They tend to be older, not as well educated, and women. They have
conservative attitudes toward medication and a deep concern over health.
They see possible dangers in frequent use of remedies, are concerned over
side effects, and afraid of remedies with new ingredients and extra potency.
To cope with these concerns they are strongly oriented toward medical
authority, seeking guidance in treatment and what products they should use.
They hold rigid beliefs about the ailment and are disciplined in the products
they use and how frequently they use them. They want a simple, single-
purpose remedy that is safe and free from side effects and backed by doctorsor a reputable company.
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The Practicalist:
The practicalists are in the extreme position on this side of themotivational spectrum. They tend to be older, well educated,
emotionally the most stable, and least concerned over their
ailment or the dangers of remedies. They accept the ailment and
its discomforts as part of life, without fuss and pampering. They
use a remedy as a last resort, and just to relieve the particularsymptom. They seek simple products whose efficacy is well
proved, and are skeptical of complicated modern remedies with
new ingredients and multiple functions.
(Wells 1975, p.203; Journal of marketing research published by
the AMA)
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Competitive Market Structuring
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C CF C CF C CF C CF
BRANDS
Cola
DietRegular
Diet
Regular
Non-cola
Market Structure of Soft drinks
Caffeine
Caffeine-Free
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DecaffeinatedCaffeinated
Hierarchical definition of the coffee market with perceptual maps in each submarket (Urban
Johnson and Brudnick 1981)
CoffeeGround Instant
Mildness
Brimsanka
TasteMaxwell
HillsBrosFolgers
Chuck Full o Nuts
Regular FreezeDried Regular Freezedried
Store brands
Mildness Mildness Mildness Mildness
Taste Taste Taste Taste
Nescafe
Folgers
Maxwell house
Tasters Choice
Maxium
High Point
Sanka Nescafe
SankaTasters
ChoiceBrim
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Competitive Market structuring can also be obtained, by putting brands
Together in groups based on choice probabilities. In this way, market segments
Are a group of consumers who are homogenous in terms of probabilities ofChoosing different brands in a product class
Coke, Pepsiconsideration set
Segment 1 Segment 2 Segment 3
Coke 0.50 0.30 0.70
Pepsi 0.5 0.70 0.30
Descriptor Hedonist or Next Generation Seekers ofVariety Seeker Protagonist Real Thing
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Attitudinal SegmentationSurvey Method
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1. Whom to Interview.
In a survey of finding segments of customers who are travelers / tourists
to Europe, it is not appropriate to count only those who have been to
Europe, because that accounts for a small percentage. You have totalk to potential travelers
2. Frame of reference for questioning
When you are questioning customers on vacations do you take (a) overall
experience of vacations (b) last vacation
3. Find different ways of segmentation
For example : Vacation to Europe, segment on (a) Favourability towards
Europe (b) Segmenting on Income brackets segmenting customers
based on desires sought on their last vacation
In a study on 1750 interviews for vacationing the following segments were
Uncovered(1) visit friends and relatives segments (2) good for family sight-
Seeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer
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Shells Customer Segmentation study
Methodology
Surveyed 5000
respondents in 6
markets.Questions included
* Behavior patterns* Desired Features
* Frustrations
* Brand Ratings* Psychographics
* Demographics
* Statistically
identified 10
distinctClusters of
customers
with different
needs/
attitudes
Studied
Survey
resultsfrom each
cluster
Developed
name and
personalityfor each
cluster
Source: Wharton School
Shell Customers Target
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Shell Customers Target
Segments and Characteristics
Premium speedsters
13%
Struggling survivors 9%
Value minded Planners 6%
Safety firsters 6%
Sentimentalist13%
Comfort Zoners 15%Relationship shoppers 13%
Low octane communicators
7%
Hands-on individualists
12%
Simplicity seekers
11%
Source: Wharton School
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Segments selectedPremium speedsters
Simplicity SeekersPersonality: Overburdened, Frustrated, Loyal to
others, caring, sensitive. Hard to motivate.
Gas Purchasing:
Reactive. Want things that make buying gas easy.
Major brand= product reassurance.
In a WordOverwhelmed
Safety Firsters
Personality: Confident, Self-
assured, ResponsibleControl oriented, well prepared.
Gas purchasing: want cleanliness,
comfort, Efficiency, safety
In a word.Safety MindedSource: Wharton School
Personality : Internally driven, CompetitiveMentality
Gas Purchasing : Fast pumps, quick access
In a word: Power minded
Brand Identities Considered
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Brand Identities Considered
One stop convenience
(Value minded planners,struggling survivors)
Friendliest Service
(Relationship Shoppers,Comfort Zoners)
Community support
(Comfort Zoners)
Lowest Price
(Low octane commuters,
Sentimentalists)
Best Gasoline
performance(Hands on individuals,
premium speedsters)
Quick & Easy
(Premium speedsters, simplicityseekers, safety firsters)
Source: Wharton School
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Market Targeting
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Market Targeting
Single Segment Concentration
Zodiac concentrating on executive and professionals
Selective Specializationmay be or may not be
Synergy among the segments selected
HLL in Soaps
Product specialization - Specialized product toseveral segmentsTVS makes scooters of all
ranges to several socio-economic classes
Market specializationServing many needs of
a single customer group. Financial services toNRIs
Full Market Coverage - General Motors,
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What is Positioning
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To some it means the segmentation decision (economy and premium segments).
To others it is an image question (Casual, sporty wearBenetton)
To still others it means selecting which product features to emphasize(flavor
or foaminess of toothpastes)
Positioning a brand is obtaining mind-space of the consumer for the brand with
Respect to competition
Positioning is the act of designing the companys offering and image to occupya distinctive place in the mind of the target market so as to maximize the
Potential benefit to the firm. The result of positioning is the successful creation
Of a customer focused value proposition
e.g.Colgate TotalMulti-benefit toothpaste as a one product solution forpeople with tooth problems
As against Colgate Dental CreamCore Identity for strong, white teeth meaning
a toothpaste to maintain healthy teeth.
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Jack Trout issues on Positioning
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1. Embrace the obvious position possible in the market or granted by the
market. Positioning should be in line with the perception of consumers
mind not against it
Coke: The Real Thing is fine; it is the original cola
Coke: Always Coca-Cola may not be fine as half the market is Pepsi
2. Many positioning ideas are founded on how company estimates the future
SamsungChallenging LimitsLooks alright
Avis: We are No.2. We try harder
3. Be Simple: VolvoDrive Safely
4. Positioning is long term. Do not be driven by the stock market
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Kotler et.al on Positioning
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Steps to a Positioning Strategy
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1. Determine Target Market
Laptop for the business professional
2. Determine category membership of the brand under consideration
Hewlett Packard dv1000 is a sophisticated business laptop
3. Identify the competition
Sony, Toshiba
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4. Establish the Category Points of Parity to fulfill the necessary conditions
of category membership
there are three main ways to convey a brands category membership
- announcing category benefits
centrino mobile technology
- comparing to exemplarson par with HPs excellence in instrumentation
- relying on the product descriptor
HP Pavillion dv1000 is an entry level business
laptop
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5. Establish the Competitive Points of Parity to establish the equivalence ofProduct benefits, attributes, values with respect to competition
HPs manufacturing quality is no way behind Sony or Toshiba. It is
backed by decades of manufacturing electronic systems
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6. Establish the Points of Difference if any to take a differentiated position
If no POD exists then the brand takes a head on position or a me-too
position
HP has an excellent service network in India as compared to Toshiba.
HP is not as expensive as Sony
7. Write out the Positioning Statement
To the young urban professional (target market) our productHP
Pavilion dv 1000 is a rugged system with all the necessary features of a state-Of-art business computer and is offered as a value for money laptop with
Excellent service backup.
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Important considerations in choosing Points of Difference (PODs)
(1) PODs are desirable by the customer
- Relevant and important to the customere.g. price of HP
Laptop
- DistinctivenessService backup is not a common featureof all foreign made laptops in India
- BelievableHP has been in the electronic business for
decades
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(2) PODs are deliverable to the customer
- FeasibilityHP has the required organization to make theservice deliverable and the required technology
to offer a value for money product
- Communicability
- HPs products are not known as very expensive
- Sustainable
- HP has the required R&D to continue making
state-ofart upgrades
In this case PODs are anchored at the benefit level, sometimes they could be
Anchored at the attribute or value level
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Handling Conflicting POPs and PODs
Sometimes attributes and benefits are negatively correlated or move in the oppositeDirection. Ideally consumers want to maximize their benefit package.
Examples of such cases are
(1) Low Price vs High Quality
(2) Taste vs Low Calories
(3) Nutritious vs Good Tasting.
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Methods to overcome such situations
- Go for straddle positioningdo both simultaneously. BMW designedits car for both luxury and performance
- Present the communication messages for each attribute / benefit
separately
- Leverage equity of another entity e.g. Intel Inside
- Redefine the relationshipTeach customers that the relation between
attributes is redefined and now stands positive e.g. Apple is user friendly
and not regarded as powerful. Apple came up with an ad campaign thathad the tagPower to be your best, teaching customers that they used it
because it was user friendly and having used it successfully it was powerful.
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Differentiation
It is the process of adding a set of meaningful and valued differences toDistinguish a companys offering from competitor offerings
A difference will be stronger if it satisfies one or more of the following criteria
1. Important - Infrastructure investment of business school
2. Distinctive , but not necessarily superior - Bajaj scooter
3. Superior - Product superiority of Gillette
4. Preemptive - cannot be easily copied - Zilog Processor
5. Affordable - Personal Computer of Acer
6. Profitable - MTRs food products
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Dimensions on which differentiation can be achieved by firms
1. Product / Services
2. Personnel
3. Channel
4. Image
Product / Services
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Product / Services
- Product / Service Quality
performance basedBMWconformance qualityCMM in software
physical signs and cuesTata Indica
- Form - Satchets
- FeaturesCameras
- DurabilityVolvo
- ReliabilityMaytag
- RepairabilityMaruti
- StyleBenetton
- DesignDesigner wear
Services
- Ordering easehome delivery pizzas- InstallationMobile
- Customer TrainingGE Medical Systems
- Customer Consulting - Saree selling
- Maintenance and repairPremium apartments in the city.
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Personnel
- Trained personnel should exhibit the following
- CompetenceRepair engineers of process plants
- Courtesy - Front line staff in premium hotels
- CredibilityPremium hospital doctors
- ReliabilityParallel computers
- Responsiveness and CommunicationBeauty Consultants
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Channel
- CoverageHLL
- ExpertiseAvon
- Performance - Caterpillar
Image
- Differentiate IdentityMysore Sandal Gold vs Dove
- Differentiate Logo, colors, slogans, events and sponsorshipsCoca-Cola