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Consumer Buying Behavior
Analyzing Consumer Markets and Buying
Behavior
Interest in examining aggregate market response to firm
specific decision variables
 understanding
 explaining
 predicting
Method
 analyze individual level behavior
 analyse aggregate market behavior
Analysing Consumer Markets and
Buying Behavior
Translation 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
Behavioral processes of consumers
An integrative conceptual framework
Communication
sensitivity
Accultured
individuality
Rational and
Economic
Decision making
Society and
Market
Environment
() – Behavioral
Process of
Consumers
Behavioral Processes of ConsumersCommunication Sensitivity
Within Market
Within
Market
Communication sensitivity
Firm To
Market
Word of Mouth
Diffusion Processes
Firm to Market
-Consumer Behaviour Concepts
-One way/Two way.
Behavioral Processes of ConsumersCommunication sensitivity
Consumer Behaviour Concepts – Endogenous
Factors
Selectivity
Involvement
Persuasion
Selectivity
Selective attention – Marketers have to work hard to get consumer’s 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 distortion – tendency to twist information into personal meanings that
will 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 Retention – consumers likely to remember good points of products they
like 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
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 involvement – See 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.
Assael’s Classification of types of
Buying Behaviour
High Involvement
Significant
Difference
Between
Brands
Few
Difference
Between
Brands
Complex Buying
Behaviour
Dissonance
Reducing
Behaviour
Low Involvement
Variety-Seeking’
Buying
Behaviour
Habitual
Buying
Behaviour
Assael’s Classification of types of
Buying Behaviour
Complex: First develop beliefs about product.
Then develop attitudes and then make a
choice
Dissonance: First Act, then develop beliefs.
Then end up with attitudes
Habitual: salt- out of habit, beliefs from
passive learning-choice- evaluation/attitudes
Variety seeking- lot of brand switchingchocolates (Low involvement)-Beliefs-ChoiceAttitudes.
Behavioral Processes of ConsumersAccultured Individuality
Culture
Sub Culture
Social Class
Personal
- Age and Life cycle
- Occupation
- Economic
Circumstances
Accultured
Individuality
Consumer Behaviour
Concepts
•Personality and Self
concept
•Life style
•Motivation
Social
-Reference groups
-Family
-Roles and Status
Independent Factors
1.
Culture –
a) Cultural factors exert the deepest and broadest influence on
buyer behavior. Culture is fundamental determinant of a person’s wants
and behavior
b) Subculture – countries, regions, races, religions
c) Social class
2.
Social factors
a.
Reference groups – primary (family, coworkers), secondary
(religious groups)
b.
Reference groups – aspirational 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
2.
Social Factors
- Family
- Family of orientation – influences beliefs, values, attitudes
- Family of procreation – influences day-to-day living and
purchases
3.
People buy products that communicate their role and status in society
Endogenous Factors – Accultured Individuality
Lifestyle
A lifestyle is a person’s 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 are
achievement 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
Accultured Individuality – Endogenous 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 concept – how he/she views him/herself
- ideal self-concept – how she/he likes to view her/himself
- others self concept – how he/she thinks others see him/her
A marketer has to judge the form of self concept from the above to market his brand
Endogenous Factors – Accultured 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.
Freud’s Theory
Motivation Theories
Maslow’s Theory
Herzberg Theory
H
e
r
z
b
Freud’s Theory
Consumers’ behavior is shaped largely by unconscious psychological forces.
A technique called LADDERING is used to trace the person’s 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.
Maslow’s Theory
Self Actualization Needs
Esteem Needs
S
Social Needs
o
c Safety Needs
i
Physiological
Needs
a
l
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.
Endogenous Factors – Accultured Individuality – Motivation
Herzberg Theory
Factors for buyer motivation are of two types – hygiene factors (or
Dissatisfier removers) and motivators (satisfiers). It is not enough if hygiene
Factors are present. Motivators must be present for a purchase.
Behavioral Processes of Consumers- Beliefs
and Attitudes
Communicati Accultured
on
Individuality
sensitivity
Beliefs/Values
Experience & usage
In Decision making
For consumption
Society & Mkt. Environment
Attitudes
Inputs from rational and Economic
Decision Making
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 person’s 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
Attitudes
1. Buying New in exchange for old – pays 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 market – pays to fit product
Behavioral Processes of ConsumersRational and Economic Decision making
Decision making process
- Need Recognition
- Information Search
- Evaluation (perception)
- Purchase (Preference)
- Post-Purchase
Behavioral Processes of ConsumersRational 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
-Cognitive
Dissonance
-Contrast Theory
Behavioral Outcomes of Rational and
Economic Decision making Process
Evoked set
Consideration set
Rational and
Economic
Decision making
Post purchase feelings
Purchase intention
Purchase 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)
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
Industrial Buying Behavior
Issues in Industrial Markets
Institutional
markets
Large
organizational
Organizational
markets
markets
Government markets
Small
business
market
1.
Fewer, Larger Buyers – Tire manufacturers have OEM contracts with few
automobile manufacturers.
2.
Close supplier customer relationship – as there are fewer customers, suppliers
tend to develop a closer customer relationship. WIPRO’s close relationship
with IIMB, for the sale of computers
3.
Professional purchasing – use of buying instruments such as quotations,
proposals and purchasing contracts; buyers guided by firm’s purchasing
policies, constraints and requirements
4.
Several buying influences – the buying committee may consist of technical
experts, senior management, gatekeepers from consultancies etc. Thus the seller
should send trained sales people.
5.
Multiple sales calls – sales cycles extends from few days to few years; thus seller
needs to make multiple sales calls to win orders.
6.
Derived demand – The 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 demand – Demand 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 demand – A small increase in the consumer demand can give rise
to a significantly large increase in industrial demand – this 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 buyers – there is clustering to rationalize
production – software in Bangalore; hosiery in Coimbatore; auto-ancillaries
in Pune and Nasik etc.
10. Direct Purchasing – Firms buy direct mostly rather than thru intermediaries
Key Elements of Industrial Buying Behavior
Buy Situations
Buying Process
Straight Re-buy – routine order –
consumables, office supplies; outside
Suppliers tend to get in on dissatisfac
tion of existing supplier
Modified Rebuy – Modify specs,
Prices, delivery requirements. InSuppliers have to protect an account;
Out-suppliers try for an opportunity
e.g. computers
New Task – Buy for first time; greater the cost / risk –longer it takes to decide
Pass through stages – awareness, 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 Selling – also called turnkey solutions – key industrial
Marketing strategy in bidding large projects – dams, steel factories etc.
Buying Centre - Includes all members of the organization who play any of seven
roles in the purchase decision process
1.
Initiators – those who put up the request
2.
Users - Those who use the product; many times the user is
the initiator
3.
Influencers – help define specs, provide info for evaluating
alternatives, technical people are good influencers
4.
Deciders – those who decide on requirements.
5.
Approvers – those who authorize deciders and buyers
6.
Buyers – members authorized to select supplier and decide terms
7.
Gatekeepers – Members who are info conduits to other
members of buy center e.g. receptionists , agents
Characteristics of BUY CENTER
 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 centre – different 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 ……….. Cont…….
Small sellers are advised to concentrate on key buying influencers. Large sellers
Go for multilevel in-depth selling
Sellers are advised to periodically question or revise their assumptions about the
Buy center to adapt to organizational changes
Purchasing / Buying Orientations
1. Buying Orientation – Buy at lowest price given a quality level . Use two
Techniques (a) commoditization – regard the product is only a commodity and
care only about price (b) multisourcing to bring in competition among vendors
2. Procurement Orientation – look for collaborative relationships and seek
savings through better management – such as material requirements
planning, just-in-time management and even product design.
3. Supply Chain Management Orientation – purchasing 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
BUYGRID FRAMEWORK
BUYCLASSES
New Modified
Task Rebuy
1.
2.
BUY
PHASES 3.
4.
5.
6.
7.
8.
Problem recognition
General need description
Product specification
Supplier Search
Proposal Solicitation
Supplier selection
Order-routine specification
Performance review
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Maybe
Maybe
Yes
Maybe
Maybe
Maybe
Maybe
Yes
Straight
Rebuy
No
No
Yes
No
No
No
No
Yes
Marketer stimulates problem recognition by
Direct mail, telemarketing, calling on prospects
Internal stimuli – new product development
for which parts are needed, breakdown of
equipment, existing suppliers unsatisfactory
Problem recognition
Buyer attends a trade show
Purchase Manager senses an opportunity to
get lower prices or better quality
Standard items – go as per internal records or
as per specs laid out in ISI documents
Complex items – collaborate with engineers,
users; else sit with marketer’s application
engineers who do consultative selling and
work out specs and likely price
General need description
and product specification
Certain buying organizations attach a PVA or
product value analysis team to the project
who will conduct extensive analysis to arrive
at specs that will lead to minimum cost
Supplier Search
Identify suppliers
- trade directories, hunt online catalogs for suppliers
- trade shows
- trade advertisements
- Internet search – Websites 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
(WalMart – P&G)
-Buying alliances to get best price.
Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette
P&G, have joined to form alliance – Transora
-Company buying sites – Firms like GE have their
own site where it places Requests for Proposal,
negotiate terms, place orders
Invite suppliers to make detailed proposals
Set up quality standards if any e.g ISO 9000 or
ISI etc.
Proposal Solicitation
Large technology systems need a detailed
Techno-Commercial proposal. The technical
quote will be cleared first and after that only
qualified technical bidders will be called for
commercial negotiation
Buyers can invite suppliers to make presentations.
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 .
Supplier Selection
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.
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
Order routine
specification
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 OT – deliver on time
IF – in full, NE – No error
Three methods of review
1
2
3.
Performance Review
4.
Ask for evaluation from buyers
Buyer rates supplier on weighted score
method
Based on drawbacks of performance the
buyer may come up with adjusted cost
of purchase including price
Managers are rewarded for good buying
performance
Institutional and Government Markets
1.
2.
3.
4.
5.
6.
7.
Institutional Markets are – schools, colleges, universities, hospitals,
nursing homes.
Institutions normally ask for lowest price given a minimum quality
In government organizations the normal process is bidding with the
order going to the lowest bidder(s)
Negotiated contracts are applicable where the project is complex and
risky.
Governments tend to favor domestic suppliers
Government decisions are subject to review, so there is lot of paperwork
in contracting
Director General of Supplies and Disposals is the central purchasing unit of
Indian Government.
Segmentation, Targeting, Positioning
Identifying Market Segments and
Selecting Target Markets
Segmentation is the process of placing together
consumers into groups such that consumer
heterogeneity on specified characteristics is
minimized within groups and maximized across
groups e.g. value for money buyers as distinct
from economy buyers.
Segmentation can also be thought of as taking a
market and dividing them into groups based on
some common characteristic e.g. diet-colas,
regular colas.
Mass Marketing or Undifferentiated Marketing
e.g. Ruf & Tuf Jeans, Model T Henry Ford
Segment Marketing - Cars
Niche Marketing – specialize to a narrowly defined
customer group – Temple jewellery for South Indian
women wanting to take part in cultural programmes
Levels of Market
Segmentation
Local Marketing – Athica for IIMB and around
One to One Marketing
Individual Marketing
Mass customization –
ability to prepare on a
mass basis individually
designed products
Flexible market offering – naked 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
Segment Marketing
(Patterns of Segment
Markets)
Diffused Preferences – House Buildings
Clustered Preferences – distinct clusters in the
Market also called natural market segments
e.g. car market
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 firm’s 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
Criteria for Segmentation
1.
Measurable – size, purchasing power etc – finding the size of
market for refurbished home appliances is not that easy.
2.
Substantial – large enough for the firm to find it as a marketing
opportunity – Premium car market in India may
not be substantial to warrant local manufacture
3.
Accessible – segments can be effectively reached and served –
in communication, serving last mile is not easy
4.
Differentiable – segments should be differentiable from one another –
if rural consumers and urban consumers show
no difference in features of mobile handsets
5.
Actionable – It 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 pens – not only the monetarily rich
buy it, the mentally rich also buy – how to identify
Bases for Consumer Market Segmentation
Geographic - Rural / Urban; metropolis/city/town/village;
modern retail stores/kirana stores / mandis/ haats
Demographic – Age, Family Size (nuclear or joint ), gender,
Income, Occupation, Education, SEC, religion, race,
Nationality, social class
Bases
Psychographic – Use of Psychology and demographics
* Lifestyle (AIO) – Nike, Benetton, Gatorade
* Personality – Femina – woman of substance
* Values – HiDesign leather accessories – consumers
who hold the value ‘style and elegance in a classical sense’
Behavioral Segmentation – next slide
Behavioral Segmentation - based on buyer’s knowledge of, attitude towards,
use of, or response to a product
Occasions – Marriage, Birth – Archies and Hallmark cards
Benefits – In soaps - Dettol – antiseptic, Lux – Beauty
User Status – Non users, first time users, potential users, regular user
Usage rate – Light users, medium users, heavy users
Buyer Readiness State – Cold Prospect, Hot Prospect
Loyalty status – Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers
Attitude – enthusiastic, positive, indifferent, negative, hostile
Bases of Industrial Market Segmentation
Nested Basis
Nested Approach
Demographic
Operating variables
Purchasing
approaches
Situational factors
Personal Characteristics
Classification of Nests
Personal
characteristics
Inner middle nest
Innermost nest
Outer nests
Situational factors
Company variables
Operating
Demographics
Purchasing approaches variables
Purchase process
Purchase
decision
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 of
existing relationships( old firms or new firms), general purchasing
policies ( leasing, service contracts, sealed bidding ) , purchasing
criteria (quality, service, price)
Situational Factors
Urgency of requirement, size of order
Personal Characteristics
Loyalty, attitude toward risk, some similarities between buyer-seller
Segment based on existing relationship
First time prospects, novices, sophisticates
Segment based on purchasing criteria –
price oriented customers, solution oriented customers
strategic 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 obtain – independent identity
Methods to Segmentation
Self Selection
Profiling
Competitive Market Structuring
Attitudinal Segmentation - Survey Method
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 of
extent of spending by offering different categories of rewards for light and
heavy users ; Heavy users – 2 airline round trip tickets to extra-spending
within six months; Light users – money towards purchase of car by saving
in five years.
Profiling
Method of describing a set of consumers on market
Characteristics and attaching a tag description to it.
Basic profiling of customers in toothpaste
market
Segment 1
Segment 2
Age
15-40 years
3-60 years
Family size
Small (<4)
Large (5+)
Education
Well educated
Moderately educated
Psychographics
Conservative shopper
Utilitarian shopper
Behavioral
Quality seeking twice a
day brusher, loyal
Economy seeking
once-a-day brusher
deal-prone
Possible segment
descriptor
Upwardly mobile
nuclear family
Conventional large
family
Demographic
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, and
keep 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.
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.
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, singlepurpose remedy that is safe and free from side effects and backed by doctors
or a reputable company.
The Practicalist:
The practicalists are in the extreme position on this side of the
motivational 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 particular
symptom. 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)
Competitive Market Structuring
Caffeine
Non-cola
Caffeine-Free
Cola
Regular
Diet
C
CF
Regular
Diet
C
CF
C
CF
BRANDS
Market Structure of Soft drinks
C
CF
Ground
Coffee
Mildness
Brim
Instant
sanka
Taste
Maxwell
Store brands
Folger’s
HillsBros
Chuck Full o Nuts
Regular
Mildness
Nescafe’
Freeze Dried
Mildness
Taster’s Choice
Folger’s
Maxwell house
Taste
Decaffeinated
Caffeinated
Maxium
Taste
Regular
Mildness
High Point
Freeze dried
Mildness
Sanka
Sanka
Nescafe’
Taste
Taster’s
Choice
Brim
Taste
Hierarchical definition of the coffee market with perceptual maps in each submarket (Urban
Johnson and Brudnick 1981)
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 of
Choosing different brands in a product class
Coke, Pepsi – consideration set
Coke
Pepsi
Descriptor
Segment 1
Segment 2
Segment 3
0.50
0.5
0.30
0.70
0.70
0.30
Hedonist or
Variety Seeker
Next Generation Seekers of
Protagonist
‘Real Thing’
Attitudinal Segmentation – Survey Method
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 to
talk 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 sightSeeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer
Shell’s Customer Segmentation study
Methodology
•Surveyed 5000
respondents in 6
markets.
•Questions included
* Behavior patterns
* Desired Features
* Frustrations
* Brand Ratings
* Psychographics
* Demographics
Source: Wharton School
* Statistically
identified 10
distinct
“Clusters” of
customers
with different
needs/
attitudes
•Studied
Survey
results
from each
cluster
•Developed
name and
personality
for each
cluster
Shell Customers Target
Segments and Characteristics
Relationship shoppers 13%
Comfort Zoners 15%
Low octane communicators
7%
Sentimentalist 13%
Safety firsters 6%
Hands-on individualists
12%
Simplicity seekers
11%
Source: Wharton School
Value minded Planners 6%
Struggling survivors 9%
Premium speedsters
13%
Segments selected
Premium speedsters
Personality : Internally driven, Competitive
Mentality
Gas Purchasing : Fast pumps, quick access
In a word:
Power minded
Simplicity Seekers
Personality: 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 Word…”Overwhelmed”
Source: Wharton School
Safety Firsters
Personality: Confident, Selfassured, Responsible
Control oriented, well prepared.
Gas purchasing: want cleanliness,
comfort, Efficiency, safety
In a word….”Safety Minded”
Brand Identities Considered
Quick & Easy
(Premium speedsters, simplicity
Friendliest Service
seekers, safety firsters)
(Relationship Shoppers,
Comfort Zoners)
One stop convenience
(Value minded planners,
struggling survivors)
Best Gasoline
performance
Community support
(Comfort Zoners)
Lowest Price
(Low octane commuters,
Sentimentalists)
(Hand’s on individuals,
premium speedsters)
Source: Wharton School
Market Targeting
Single Segment Concentration
Zodiac concentrating on executive and professionals
Selective Specialization – may be or may not be
Synergy among the segments selected
HLL in Soaps
Market Targeting
Product specialization - Specialized product to
several segments – TVS makes scooters of all
ranges to several socio-economic classes
Market specialization – Serving many needs of
a single customer group. Financial services to
NRIs
Full Market Coverage - General Motors,
What is Positioning
To some it means the segmentation decision (economy and premium segments).
To others it is an image question (Casual, sporty wear – Benetton)
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 company’s offering and image to occupy
a 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 Total – Multi-benefit toothpaste as a one product solution for
people with tooth problems
As against Colgate Dental Cream – Core Identity for strong, white teeth meaning
a toothpaste to maintain healthy teeth.
Jack Trout issues on Positioning
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:
Coke:
2.
‘The Real Thing’ is fine; it is the original cola
Always Coca-Cola may not be fine as half the market is Pepsi
Many positioning ideas are founded on how company estimates the future
Samsung – Challenging Limits – Looks alright
Avis: We are No.2. We try harder
3.
Be Simple: Volvo – Drive Safely
4.
Positioning is long term. Do not be driven by the stock market
Kotler et.al on Positioning
Steps to a Positioning Strategy
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
4.
Establish the Category Points of Parity to fulfill the necessary conditions
of category membership
there are three main ways to convey a brand’s category membership
- announcing category benefits
centrino mobile technology
- comparing to exemplars
on par with HP’s excellence in instrumentation
- relying on the product descriptor
HP Pavillion dv1000 is an entry level business
laptop
5.
Establish the Competitive Points of Parity to establish the equivalence of
Product benefits, attributes, values with respect to competition
HP’s manufacturing quality is no way behind Sony or Toshiba. It is
backed by decades of manufacturing electronic systems
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 product – HP
Pavilion dv 1000 is a rugged system with all the necessary features of a stateOf-art business computer and is offered as a value for money laptop with
Excellent service backup.
Important considerations in choosing Points of Difference (PODs)
(1) PODs are desirable by the customer
- Relevant and important to the customer – e.g. price of HP
Laptop
- Distinctiveness – Service backup is not a common feature
of all foreign made laptops in India
- Believable – HP has been in the electronic business for
decades
(2) PODs are deliverable to the customer
- Feasibility – HP has the required organization to make the
service 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-of –art upgrades
In this case PODs are anchored at the benefit level, sometimes they could be
Anchored at the attribute or value level
Handling Conflicting POPs and PODs
Sometimes attributes and benefits are negatively correlated or move in the opposite
Direction. 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.
Methods to overcome such situations
- Go for straddle positioning – do both simultaneously. BMW designed
its 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 relationship – Teach 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 that
had the tag – ‘Power to be your best’, teaching customers that they used it
because it was user friendly and having used it successfully it was powerful.
Differentiation
It is the process of adding a set of meaningful and valued differences to
Distinguish a company’s 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 - MTR’s food products
Dimensions on which differentiation can be achieved by firms
1.
Product / Services
2.
Personnel
3.
Channel
4.
Image
Product / Services
-
-
Product / Service Quality
performance based – BMW
conformance quality – CMM in software
physical signs and cues – Tata Indica
Form - Satchets
Features – Cameras
Durability – Volvo
Reliability – Maytag
Repairability – Maruti
Style – Benetton
Design – Designer wear
-
Ordering ease – home delivery pizzas
Installation – Mobile
Customer Training – GE Medical Systems
Customer Consulting Saree selling
Maintenance and repair – Premium apartments in the city.
Services
Personnel
- Trained personnel should exhibit the following
-
Competence – Repair engineers of process plants
-
Courtesy - Front line staff in premium hotels
-
Credibility – Premium hospital doctors
-
Reliability – Parallel computers
-
Responsiveness and Communication – Beauty Consultants
Channel
- Coverage – HLL
- Expertise – Avon
- Performance - Caterpillar
Image
- Differentiate Identity – Mysore Sandal Gold vs Dove
- Differentiate Logo, colors, slogans, events and sponsorships – Coca-Cola