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CONSUMER BEHAVIOUR

DEFINITION : The behaviour that consumers display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. It focuses on how individuals make decisions to spend their available resources ( time, money, effort ) on consumption-related items. It includes what they buy, why they buy, when they buy, where they buy, how often they buy, how often they use it, how they evaluate it after the purchase and the impact of such evaluations on future purchases and how they dispose of it. Why study it ? The market place is too dynamic and in order to succeed, the marketer must know everything about the customer : What they want, what they think, how they work, how they spend their leisure time. - They have to understand the personal and group influences that affect consumer decisions. PEOPLE AS CONSUMERS Kinds of consuming entities : (i) The personal consumer Products or services are bought for final use by end users. (ii) Organisational consumer Bought the goods or services to run the organization, e.g profit and non-profit making organizations. Consumer Behaviour deals with the personal consumer Overview of the various concepts i)The production concept : Assumption- Consumers are interested in easily available products at low prices. Consumers will buy what is available rather than wait for what they really want. Marketing objectives: Cheap, efficient production and intensive distribution. Application : Developing countries and where demand exceeds supply. Also if one wants to expand the market. ii)The product concept : Assumption : Consumers will buy that product that offers them the highest quality, best performance, most features. Approach : Organisations will try to constantly improve the quality of the product, add new features without finding out whether or not consumers really want these features. The focus is the product rather than the consumer needs it presumes to satisfy. This is called the marketing Myopia ignoring what is happening in the market place. Looking in the mirror rather than out of the window. E.g focus on trains rather than the needs of transportation. iii) Selling concept : Primary focus is selling what it has decided to produce. Assumption : Consumers are unlikely to buy unless they are persuaded to do so- hard sell approach. It does not consider customer satisfaction However if forced to buy a product they dont need, they will not buy it again. Infact likely to communicate negative word of mouth publicity. E.g life insurance, political parties. iv) Marketing Concept : First confirm what the consumers need and then produce that. Assumption : Consumers will buy and buy again what they need. First determine what consumers want, produce that and then deliver it. Make what you can sell. Focuses on the needs of the buyer and profit through consumer satisfaction. Implememtation : Use marketing research, segmentation, targeting and positioning. 1. MARKET SEGMENTATION

Due to sufficient diversity in the market place to lend itself into sizeable segments. Market Segmentation: Process of dividing a market into distinct subsets of consumers with common needs or characteristics and selecting one or more segments to target with a distinct marketing mix. In the past : Mass marketing- Same product and marketing mix to all consumers. e.d Model T of Ford- any colour they wanted as long as it is black. Mass marketing is appropriate if all consumers are alike: same needs, wants, desires, same background, education and experience e.g agricultural products- undifferentiated marketing. Advantage is costs. Segmentation helps the organization to differentiate its offering on basis of price and other factors like styling, packaging, promotional, appeal, method of distribution, superior service. The additional costs can be easily passed on to the customers since their specific needs are met. SEGMENTATION PROCESS Step 1 : Dividing of the market into homogeneous clusters Step 2 : Select one or more market segments to target by choosing specific marketing mix elements price, channel, promotional appeal for each distinct segment. Step 3 : Positioning the product so that it is perceived as you want by consumers in each target segment as satisfying their needs better than other offerings by competitors. Most organizations , retailers, hotels, automobiles, use market segmentation. Some of them have one product for each segment, e.g Defi plus, Defi jeunes, Defi Sexo BASES FOR SEGMENTATION Select the most appropriate bases on which to segment the market. 9 major categories of consumer characteristics are used. (i) Geographic Segmentation People who live in the same area share some similar needs and wants. These needs and wants differ from those of people living in other areas. Direct-mail merchandise catalogs, satellite television transmission, internet have erased regional boundaries. Some factors to be considered region, city size, density of area, climate (ii) Demographic segmentation Demography gives the vital and measurable statistics of a population Characteristics : age, sex, marital status, income, occupation and education Age : Under 12, 13-17, 18-34, .. +100 Age : product needs and interests often vary with consumers age. Best way to reach a customer due to advertising is due to age. Sex : male / female Marital status : Single, married, divorced, living together, widowed Income : Less than Rs10 000, 10 000 20 000, . Education : CPE, SC, HSC, Graduate, Post graduate Age effects : Occurences due to chronological age Cohort effects : Occurences due to growing up during a specific time period. 2.

Age effects :Heightened interest in leisure, travel during middle age, late 50s or early 60s, learning to play golf Cohort effects are life long. People tend to hold onto the interests they grow up with, e.g the baby boomers grew up with the rock and roll. Sex: Gender. E.g Women are traditionally main users of such products as hair coloring and cosmetics while men tools and shaving preparations. Now sex roles are blurred. Gender is not always an accurate way to distinguish customers. This is mainly due to dual income. Internet usage : Men click- in on a web site to get information. Women for communication interface and to educate Marital status : Family/ household continues to be the relevant consuming unit Singles- one person household wants single serving foods, mini appliances Income, education and occupation : Income indicates the ability to pay for a product or a specific model of the product. Income is often combined with other demographic variables to be more effective. e.g Affluent elderly segment combines age and income High level education leads to high occupation which produces high income. They have access to internet at work. Lower income, lower education, lower job. Spend more time on-line at home. (iii) Psychological or life-style segmentation Psychological characteristic is the inner quality of the individual customer, e.g motivation, personality, perception, learning, attitudes AIO : Composite of consumers measured activities, interests and opinions. It is used to construct psychographic profiles Psychographic segmentation efforts is often reflected in firms marketing messages, e.g Centrum performance vitamins target individuals who would prefer to spend their lunch time working out rather than eating. (iv) Socio Cultural segmentation : Cultures, religion, subcultures (race/ethnic), social class, family life-cycle. Sociological (group) and anthropological (cultural) variables. Family lifecycle : Based on marital and family status. It often reflects relative age, income, employment status. It is based on the fact that many families pass through similar phases in their formation, growth and final dissolution. At each phase, the family unit needs different products and services. Young single people Need basic furniture for their first apartment Parents free of child rearing Refurbish their homes with better pieces Factors like bachelorhood, honeymooners, parenthood, post parenthood and dissolution are important ones to consider. Family financial needs shift as they progress through the various stages of life. Social class : It is measured by a weighted index of several demographic variables like education, occupation and income. Same class has same degree of status. Consumers of various social classes vary in terms of values, product preferences and buying habits. 3.

Major banks and investment companies target people of different social classes. Cultures and subcultures : Members of same cultures tend to share same values, beliefs and customs. This aspect is valuable in international marketing. Different promotional appeals are used. e.g bicycle an efficient means of transport in Asia while a health and fitness product in USA. Cross-cultural or global marketing segmentation : Some global market segments ( e.g teenagers ) appear to want the same types of products trendy, entertaining, image oriented, e.g Reebok launched its Instapump line of sneakers using the same global advertising campaign the world over. Use-related segmentation : Level of usage, level of awareness and degree of brand loyalty. Rate of usage ; Heavy users, medium users, light users, non-users of a specific product, service or brand. 20% of beer drinkers consume 80% of beer. More economical to concentrate on these. Awareness status: Notion of consumer awareness of the product, interest level in the product, readiness to buy the product or whether the consumers need to be informed about the product. Brand loyalty : Try to identify characteristics of their brand loyal customers in order to direct their promotion efforts at them. Often reward brand loyalty by offering special benefits loyalty cards, gifts Usage-situation segmentation: Occasion or situation often determine what consumers will purchase or consume. E.g Greeting card industry stresses on special cards for different occasions. (iv) Benefit segmentation : Identify the one most important benefit of their product or service that will be most meaningful to consumers. Nothing is as effective as segmentation based on the benefits a group of customers seek from your brand. E.g Dettol soap the hygiene conscious consumer. The individual seeking protection from germs and contamination, Not those seeking beauty, fragrance. Toothpaste- protection, fresh breath, white teeth, Can be used to position various brands within the same product category. (v)Hybrid segmentation approaches : A combination of several segmentation variables, e.g psychographic-demographic profiles provide powerful information about target markets. In developing of advertising campaigns . Whom to target ? What to say ? Advertisements are designed that depict in words and pictures the essence of a particular target markets lifestyle or segment that they want to reach. (vi) Geodemographic segmentation ; This is also used. It is based on the fact that people who live very close together have similar financial means, tastes, lifestyles and consumer habits. CRITERIA FOR EFFECTIVE TARGETING OF MARKET SEGMENTS To be an effective segment, a market segment should be : (i) Identifiable : Able to identify the relevant characteristics ( observable ones, determined by questionnaires ), benefits sought or lifestyle. (ii) Sufficient : In terms of size There are sufficient number of people to be worth targeting. 4.

(iii) Stable or growing : The segment is likely to be stable or growing but not decreasing (iv) Accessible (reachable) : In terms of both media and cost. Able to reach the market segments they want to target in an economical way. Implementing segmentation strategies Concentrated V/S differentiated marketing Once the most promising market segments have been identified the organization must target one segment or several segments. Targeting several segments using individual marketing mixes is called differentiated marketing. Targeting one segment with a unique marketing mix is called concentrated marketing. This is applicable to small organizations. Differentiated marketing is applicable to financially strong organizations with well established products. Counter Segmentation If some segments have contracted over time and is not economical, the organization may recombine several segments into a single large segment. An example is that of certain business schools. They were offering a wide number of courses. They found that some students did not have enough credits to take a full spectrum of in-depth courses in their major area of study. Some courses had to be cancelled each semester due to inadequate registration. Some solved the problem by combining advertising, publicity, sales promotion, personal selling courses into a single course called promotion. SRI CONSULTINGS VALUES AND LIFESTYLE SYSTEM (VALS) This is a generalized segmentation scheme of the American population. 8 distinctive groups or segments 1. Actualizers : Enjoy the finer things. Receptive to new products technologies, Skeptical of advertising. Frequent readers of a wide variety of publications. Light TV viewers (11.7%) 2. Fulfilleds : Little interest in image or prestige. Above average consumers of products for the home. Read widely and often (10.5%) 3. Achievers : Attracted to premium products. Prime target for a number of products Average Tv watchers, read business, news, and self-help publications (17.0%) 4. Experiencers : Follow fashion and fads. Spend much of disposable income on socializing. Buy on impulse. Attend to advertising. Listen to rock music. (14.7%) 5. Believers : Buy American. Slow to change habits. Look for bargains. Watch TV more than average. Read home, garden and general magazines. (11.8%) 6. Strivers : Image conscious. Limited discretionary incomes but carry credit cards. Spend on clothing and personal care products. Prefer TV to reading. (12.9%) 7. Makers : Shop for comfort, durability, value. Unimpressed by luxuries. Buy basics. Listen to radio. Read auto, home, mechanics, fishing, outdoor magazines (12.0%) 8. Strugglers : Brand loyal. Use coupons and watch for sales. Trust advertising. Watch TV often. Read tabloids and womens magazines. (9.5%) Each segment differs in some important ways from the others. Believers tend to buy American made products and slow to alter habits. Actualizers are drawn to new products and top of the line ones. They are early adopters. 5.