Consumer Psychology Marketing

Evolution of Marketing

•       Production era

–      Mass market.

•       Selling era

–      An attempt to appeal to the entire market with a huge variety of products. However, like mass marketing the customers needs & wants are not taken into account while developing the product.

•       Consumer and New era

–      Target Marketing: Market segmentation. Product developed and marketed for well-defined, specific consumer groups.

–      Target marketing is particularly effective for small companies with limited resources because it enables the company to achieve a strong market position without mass production, distribution or advertising.

Market Segmentation

•       Market segmentation: subdividing of large heterogeneous markets into small markets (distinct subsets of customers) that can be reached more efficiently and effectively with products and services that match their unique needs.

•       Segments: Members are different between segments but similar within.

•       Market Segmentation:  division of the total market into smaller, relatively homogeneous groups

•       No single marketing mix can satisfy everyone.  Therefore, separate marketing mixes should be used for different market segments.

Segmentation Marketing

Definition

Differentiating your product and marketing efforts to meet the needs of different segments, that is, applying the marketing concept to market segmentation

Segmentation in Action

We segment our customers by letter volume, by postage volume, by the type of equipment they use.  Then we segment on whether they buy or lease equipment.

Based on this knowledge, we target our marketing messages, fine tune our sales tactics, learn which benefits appeal to which customers and zero in on key decision makers at a company.

                —Kathleen Synnot,  VP, Worldwide Marketing
 Mailing Systems Division, Pitney Bowes, Inc

If you’re not thinking segments, you’re not thinking.  To think segments means you have to think about what drives customers, customer groups, and the choices that are or might be available to them.

—Levitt, Marketing Imagination

Types of Markets

•       Consumer products: goods or services purchased by an ultimate consumer for personal use

•       Business products: goods or services purchased for use either directly or indirectly in the production of other goods and services for resale

•       The key to classification is to identify the purchaser and the reasons for buying the goods.

Requirements of Market Segments

In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:

•        Identifiable: the differentiating attributes of the segments must be measurable so that they can be identified.

•       Accessible: the segments must be reachable through communication and distribution channels.

Requirements of Market Segments

Measurable: It has to be possible to determine the values of the variables used for segmentation with justifiable efforts. This is important especially for demographic and geographic variables. For an organization with direct sales (without intermediaries), the own customer database could deliver valuable information on buying behaviour (frequency, volume, product groups, mode of payment etc).

•       Substantial: the segments should be sufficiently large to justify the resources required to target them.

•       Unique needs: to justify separate offerings, the segments must respond differently to the different marketing mixes.

•       Durable: the segments should be relatively stable to minimize the cost of frequent changes.

Steps in Segmentation Marketing

•          Segmentation:

•           Identify segmentation bases and segment the market.

•           Develop profiles of resulting segments.

•           Targeting

•           Evaluate attractiveness of each segment.

•           Select target segments.

•           Positioning

•           Identify possible positioning concepts for each target segment.

•           Select, develop, and communicate the chosen concept.

A Note on Positioning

Positioning involves designing an offering so that the target segment members perceive it in a distinct and valued way relative to competitors.

Three ways to position an offering:

1. Unique: “Only product/service with XXX”
2. Difference: “More than twice the [feature] vs.
   [competitor]”
3. Similarities: (“Same functionality as [competitor]; lower price”)

What are you telling your targeted segments?

What are the advantages and disadvantages of market segmentation?

Target Marketing

•       Advantages

–      Easier analysis of potential and actual consumers

–      Tailoring of products to market

–      Assessment of demand potential

–      Identify competing products

–      Increased sales effectiveness and cost efficiencies

–      Product positioning and easy identification of opportunities

•       Disadvantages

–      Increased marketing costs

–      Personalization can become burdensome to manage

–      Faux segmentation may be viewed cynically

–      Narrow segmentation can impact brand loyalty

–      Ethics and stereotyping issues

•       

Segmentation Variables

Key segmenting variables:

•       Geographic

•       Demographic

•       Psychographic

•       Behavioral

•       Different segments desire different benefits from products.

•       Best to use multivariable segmentation bases in order to identify smaller, better-defined target groups.

•       No single way to segment is best. Often combine more than one variable to better define segments.

•       Geographic- simply where people live

•       Demographic- the easiest and most popular segmenting variable.

•       Psychographic segmentation:

•       Dividing a market into different groups based on social class, lifestyle, or personality characteristics.

•       Behavioral segmentation:

•       Dividing buyers into groups based on consumer knowledge, attitudes, uses, or responses to a product.

•       MTV- different ages favour different channels. MTV pay attention to geographical differences also.

Life-Cycle

•          Life-cycle stage

•          Dividing a market into different groups based on which stage in the life-cycle, presented in the table on the next slide, reflects the fact that people change the goods and services they want and need over their lifetime.

Psychographic segmentation

–      Divides a population into groups that have similar psychological characteristics, values, and lifestyles

–      Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities

–      The most common method for developing psychographic profiles of a population is to conduct a large-scale survey:
VALS and VALS 2.
“Values and Lifestyles”

–      Personality (thoughts, feelings, emotions)

–      Twitter vs. Facebook

–      Music

–      Jazz, blues or soul:  High extravert with high self-esteem, high creative, intelligent.

–      Country music: hardworking, conventional, outgoing.

–      Indie: introverted, intellectual and creative

–      Dance: Extraverted, sociable

–      Pop: Extraverted, honest

–      Rock: Introverted

–      All sorts…

VALS System

The VALS theory and database were first applied to markets in 1978. VALS provides a dynamic framework of values and lifestyles; which helps to explain why people act as they do as social groups and as consumers. VALS, unlike some other approaches, waves together:

Demographics, 2. Attitudes, 3. Activities, 4. Consumption patterns, 5. Brand preferences. 6. Media graphics.

 

The VALS study leads to the identification of four major groups:

 

The need driven

The outer directed

The inner directed

The integrated

http://www.context.org/iclib/ic03/srivals/

Female Lifestyle Types

•       Cathy the contented housewife 

–      Cathy epitomises simplicity. She is devoted to her family and faithfully serves them as mother housewife and cook. She enjoys a relaxed pace and avoids anything which might disturb her equilibrium.

•       Candice-the chic subarbanite 

–      Candice is an urban woman. She is well educated and genteel. Socializing is an important part of her life. She is a doer, interested in sports and the outdoors, politics and current affairs. Her life is hectic and lived at a fast clip. She is a voracious reader and there are few magazines she does not read.

•       Eleanor-the elegant socialite: Eleanor is a woman with style. She lives in the city because that is where she want to be. She likes the socio-economic aspects of the city in terms of her career and leisure time activities. She is fashion conscious and dresses well. She is financially secure and hence not a careful shopper. She shops for status and style and not for price. She is a cosmopolitan woman who has travelled abroad and wants to.

•       Mildred-the militant mother: Mildred is a woman who got married young and had children before she was ready to raise a family. Now she is unhappy. She is frustrated and vents her frustration by rebelling against the system. Television provides an ideal medium for her to live out her fantasies

•       Thelma-the old fashioned traditionalist: Thelma is a lady who has lived a good life. She has been a devoted wife, a doting mother and a conscientious housewife. Even now, when most of her children have left home, her life is centred around the kitchen. She lacks higher education and has little appreciation for the arts or cultural activities. Her spare time is spent watching TV.

Male lifestyle types

•       Ben - the self made businessman.

•        Scott - the successful professional.

•        Dale - the devoted family man

•        Fred - the frustrated factory worker

•        Herman - the retiring homebody.

Behavioural segmentation

Usage

•          Customers can be segmented on the basis of usage status:

•          Heavy, light & non-users

•           The profiling of heavy users allows this group to receive most marketing attention (particularly promotion efforts) on the assumption that brand loyalty among these people will pay heavy dividends.

•           The 80/20 principle (“Praedo’s Law”) holds that a big percentage of a product’s revenues (roughly 80%) comes from a relative small, loyal percentage (around 20%) of total customers.

•          User status

•          Every product has its nonusers, ex-users, potential users, first-time users and regular users. A company cannot always rely on the regular users, it has to attract the other types as well. The key to attracting potential users, or possibly, even non-users, is understanding the reasons why they are not using your product.

Segmentation Process

•       Stage I: Identify Segmentation Process

•       Stage II: Develop Relevant Profile

•       Stage III: Forecast Market Potential

•       Stage IV: Forecast Market Share

•       Stage V: Select Specific Segment

•       Stage I: Identify Segmentation Process

•       Marketers follow two methods to determine the bases on which to identify markets:

•       Segments are predefined by managers based on their observation of the behavioral and demographic characteristics of likely users

•       Segments are defined by asking customers which attributes
are important and then
clustering the responses

•       Stage II: Develop Relevant Profile

•       Next, marketers seek further understanding of the consumer in each promising segment

•       Must develop a profile of the typical consumer and each segment

•       Helps to accurately match consumer needs with the firm’s marketing offers

•       Stage III: Forecast Market Potential

•       Market segmentation and market opportunity analysis combine to produce a forecast of market potential within each segment

•       Defines a preliminary “go or no-go” decision since the sales potential in each segment must justify resources devoted    to further analysis

•       Stage IV: Forecast Market Share

–      The next step is to forecast the firm’s probable market share

–      Competitors’ positions in targeted segments must be analyzed

–      A specific marketing strategy must be designed to serve the targeted segments

–      The firm determines the expected level of resources it must commit to tap the     potential demand in each segment

•       Stage V: Select Specific Segment

–      The preceding information, analysis, and forecasts allow management to assess the potential for achieving company goals and to justify committing resources in developing one or more segments

–      Marketers also weigh more than
monetary costs and benefits
at this stage