Consumer Behavior:

Introduction:
Consumer behavior is the study of when, why, how, and where people do or do not buy a product. It
blends elements from psychology, sociology, social anthropology and economics. It attempts to
understand the buyer decision making process, both individually and in groups. It studies
characteristics of individual consumers such as demographics and behavioral variables in an attempt
to understand people's wants. It also tries to assess influences on the consumer from groups such as
family, friends, reference groups, and society in general.
Customer behavior study is based on consumer buying behavior, with the customer playing the three
distinct roles of user, payer and buyer. Relationship marketing is an influential asset for customer
behavior analysis as it has a keen interest in the re-discovery of the true meaning of marketing
through the re-affirmation of the importance of the customer or buyer. A greater importance is also
placed on consumer retention, customer relationship management, personalization, customization
and one-to-one marketing. Social functions can be categorized into social choice and welfare
functions.
The study of consumers helps firms and organizations improve their marketing strategies by
understanding issues such as how

The psychology of how consumers think, feel, reason, and select between different
alternatives (e.g., brands, products, and retailers);

The psychology of how the consumer is influenced by his or her environment (e.g., culture,
family, signs, media);

The behavior of consumers while shopping or making other marketing decisions;

Limitations in consumer knowledge or information processing abilities influence decisions

and marketing outcome;

How consumer motivation and decision strategies differ between products that differ in their
level of importance or interest that they entail for the consumer; and

How marketers can adapt and improve their marketing campaigns and marketing strategies to
more effectively reach the consumer.
One "official" definition of consumer behavior is "The study of individuals, groups, or organizations
and the processes they use to select, secure, use, and dispose of products, services, experiences, or
ideas to satisfy needs and the impacts that these processes have on the consumer and society."
Although it is not necessary to memorize this definition, it brings up some useful points:

Behavior occurs either for the individual, or in the context of a group (e.g., friends influence
what kinds of clothes a person wears) or an organization (people on the job make decisions as to
which products the firm should use).

Consumer behavior involves the use and disposal of products as well as the study of how they
are purchased. Product use is often of great interest to the marketer, because this may influence how
a product is best positioned or how we can encourage increased consumption. Since many
environmental problems result from product disposal (e.g., motor oil being sent into sewage systems
to save the recycling fee, or garbage piling up at landfills) this is also an area of interest.

Consumer behavior involves services and ideas as well as tangible products.


The impact of consumer behavior on society is also of relevance. For example, aggressive
marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions
for the national health and economy.
Black Box Model:
The black box model shows the interaction of stimuli, consumer characteristics, decision process and
consumer responses. It can be distinguished between interpersonal stimuli (between people) or
intrapersonal stimuli (within people). The black box model is related to the black box theory of
behaviorism, where the focus is not .set on the processes inside a consumer, but the relation between
the stimuli and the response of the consumer. The marketing stimuli are planned and processed by
the companies, whereas the environmental stimulus is given by social factors, based on the
economical, political and cultural circumstances of a society. The buyers black box contains the
buyer characteristics and the decision process, which determines the buyers response.
Problem recognition:
The black box model considers the buyers response as a result of a conscious, rational decision
process, in which it is assumed that the buyer has recognized the problem. However, in reality many
decisions are not made in awareness of a determined problem by the consumer.
Consumer Behavior Black Box Model:

ENVIRONMENTAL
FACTORS
Marketing
Environme
Stimuli
ntal
Stimuli
Product
Economic
Price

Technologic
al
Political

Place
Promotion

Demographi
c
Natural

BUYER'S BLACK BOX

BUYER'S RESPONSE

Buyer
Decision
Characteris Process
tics
Attitudes
Problem
recognition
Motivation
Information
search
Perceptions
Alternative
evaluation
Lifestyle
Postpurchase
behavior
Knowledge

Product choice

Brand choice
Dealer choice
Purchase timing
Purchase amount

Information search:
Once the consumer has recognized a problem, they search for information on products and services
that can solve that problem. Belch and Belch (2007) explain that consumers undertake both an
internal (memory) and an external search.
Sources of information include:

Personal sources.
Commercial sources

Public sources

Personal experience

The relevant internal psychological process that is associated with information search is perception.
Perception is defined as "the process by which an individual receives, selects, organizes, and
interprets information to create a meaningful picture of the world".
The selective perception process
Stage Description

Selective exposure consumers select which promotional messages they will

expose themselves to.
Selective attention consumers select which promotional messages they will pay
attention to.

Selective comprehension consumers interpret messages in line with their beliefs,

attitudes, motives and experiences.

Selective retention consumers remember messages that are more meaningful or

important to them.

The implications of this process help develop an effective promotional strategy, and select which
sources of information are more effective for the brand.

Information evaluation:
At this time the consumer compares the brands and products that are in their evoked set. How can the
marketing organization increase the likelihood that their brand is part of the consumer's evoked
(consideration) set? Consumers evaluate alternatives in terms of the functional and psychological
benefits that they offer. The marketing organization needs to understand what benefits consumers are
seeking and therefore which attributes are most important in terms of making a decision.
Purchase decision:
Once the alternatives have been evaluated, the consumer is ready to make a purchase decision.
Sometimes purchase intention does not result in an actual purchase. The marketing organization must
facilitate the consumer to act on their purchase intention. The organization can use variety of
techniques to achieve this. The provision of credit or payment terms may encourage purchase, or a
sales promotion such as the opportunity to receive a premium or enter a competition may provide an
incentive to buy now. The relevant internal psychological process that is associated with purchase
decision is integration. Once the integration is achieved, the organization can influence the purchase
decisions much more easily.
Post purchase evaluation:
The EKB model was further developed by Rice (1993) which suggested there should be a feedback
loop, Foxall (2005) further suggests the importance of the post purchase evaluation and that the post
purchase evaluation is key due to its influences on future purchase patterns.
Internal influences:
Consumer behavior is influenced by: demographics, psychographics (lifestyle), personality,
motivation, knowledge, attitudes, beliefs, and feelings. Consumer behavior concern with consumer
need consumer actions in the direction of satisfying needs leads to his behavior of every individual
depend on thinking
External influences:
Consumer behavior is influenced by: culture, sub-culture, locality, royalty, and ethnicity, and family,
social class, past experience reference groups, lifestyle, and market mix factors.

Application of understanding Consumer Behavior:

Marketing Strategy:
All marketing strategies and tactics are based on explicit or implicit beliefs about consumer
behavior. Decisions based on explicit assumptions and sound theory and research are more likely to
be successful then are decision based solely on implicit intuition. Thus, knowledge of consumer
behavior can be an important competitive advantage. Our primary goal is to obtain useful managerial
understanding of consumer behavior. The key accept of this objective is found in the phrase useable
managerial understanding.
Informed individuals:
Most economically developed societies are legitimately referred to as consumption societies. Most
individuals in these societies spend more time engaged in consumption they in any other activity,
including work or sleep (both of which also involve consumption) .therefore, knowledge of
consumer behavior enhance our understanding of our environment and our selves. Such an
understanding is essential for sound citizenship, effective purchasing behavior, and reasoned
business ethics.

Literally thousand o0f firms are spending millions of dollars to influencer you, your family and your
friends. These influence attempts occur in ads, packages, product features, sales pitches and store
environments. However, they also occur in the content of many television shows, in the product that
are used in movies, and in the materials presented to children in school. Given the magnitude of
these direct and indirect influence attempts , it is important that consumers accurately understand the
strategies and tactics being used it is equally important that all of us, as citizens understand the
consumer behavior bases of these strategies so that we can said appropriate limits on them when
required.
Social Marketing:
Social marketing is the application of marketing strategies and tactics to alter or create behaviors that
have a positive effect on the targeted individuals or society as a whole.
Just as for commercial marketing strategy, successful social marketing strategy requires a sound
understanding of consumer behavior.
Regulatory Marketing:
Various bodies exist to develops, interpret and/or implement policies deigned to protect and aid
consumers. Clearly, effective regulation of many marketing practices requires an extensive
knowledge of consumer behavior.
Marketing practices are sometimes controversial. Marketing is a highly visible, important activity. It
affects the lives of individuals, the success of nonprofit group and the profits of businesses. There are
many issues where the appropriate ethical action for marketers is not clear cut. As a marketing
manager, one will face many such situations in ones career. However, society has declared that some
marketing actions are clearly inappropriate. It has done as by enacting laws and regulations that
prohibits or require specific marketing actions. Regulating marketing activities requires the same
level of understanding of consumer behavior as does managing marketing programs.
Better Consumers:
As a final benefit, studying consumer behavior should make us better consumers. Common sense
suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay
less per ounce than if you bought two 32 ounce bottles. In practice, however, you often pay a size
premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize
you to the need to check the unit cost labels to determine if you are really getting a bargain.
There are several units in the market that can be analyzed. Our main thrust in this course is the
consumer. However, we will also need to analyze our own firms strengths and weaknesses and those
of competing firms. Suppose, for example, that we make a product aimed at older consumers, a
growing segment. A competing firm that targets babies, a shrinking market, is likely to consider
repositioning toward our market. To assess a competing firms potential threat, we need to examine
its assets (e.g., technology, patents, market knowledge, awareness of its brands) against pressures it
faces from the market. Finally, we need to assess conditions (the marketing environment). For
example, although we may have developed a product that offers great appeal for consumers, a
recession may cut demand dramatically.

Article
Understanding Consumer Behavior in Markets
By Jaya Sinha

The understanding of consumer behavior helps in identifying the weak points and also reflects the
positive aspect of any business. The article has been written with this objective in mind and highlights
the benefits.
The failure or success in any business is dependable upon the behavior of the end-user or consumer
who finally uses the product or any services. This is again vital not only to the producer of the final
goods but also the intermediaries who play a major role in carrying the product from initial level to the
final level i.e. from the manufacturer to the consumer. Of course the final player in the channel is
important to a consumer but the business of all the intermediaries gets affected. The understanding of
consumer behavior helps in identifying the weak points and also reflects the positive aspect of any
business.
It is the behavior of the consumer which impacts their decision to purchase or not purchase the
product. Depending on their decision and their usage, an organization decides which products to
manufacture and to continue. The positioning of the product is defendant on the consumption of the
product and this behavior of consumers may be related to any kind of products or services. The
consumer behavior also reflects the trends in the national growth and economy.
The study by Engel has revealed certain basic facts based on which he designed four models to
ascertain consumer behavior.
It was found out in the study that the purchases made by consumers are mainly to satiate their
demands and to solve the underlying problem. If a consumer purchases a product in order to fulfill his
basic need, it can be said the purchase was necessity-driven and it can be analyzed from this aspect
as to what motivates or drives a consumer to purchase a product. If a consumer does an impulse
purchase, he does it without any preconceived notion or well-thought over buying of a product. The
product in this case seems to be so attractive or beneficial to a consumer that he immediately buys the
product. So, this makes us understand that a product should have certain unique attributes to lure the
customer. In some of the product categories, there are a number of options to choose from and it
becomes difficult for the customer to reach a certain decision. Also it is difficult for the seller to sell his
product as he needs to convince a lot by paying thrust on his product as against his competitors.
Now, let us understand how the behavior of consumer affects a marketer or what the benefits of
understanding consumer behavior are. , I also
It helps the marketer to take vital decisions with respect to designing of future marketing strategies.
What kind of promotional offers or marketing campaigns need to be undertaken.
Whether the marketer should stick to the same product, extend the product portfolio, or probably
launch a new product. If consumers prefer a particular brand and make the purchase and the
consumption of the same their regular habit, it is time that the marketer should think of improving
upon a brand or come out with a different product. Many times, the need calls for a niche marketing.
It also helps an organization to reinstate the corporate policies or take action to re frame the corporate
mission statement.
The consumer behavior also has effects on the entire social network which again helps an organization
to target a specific audience or set of customers.
The behavior of consumers gives the nation a different face, either good or bad.

Also helps in scheduling of events, for example, any product launch or any advertising campaign.
The consumer behavior also is related to cultural attributes. If a product suits a particular crosssection of culture, the marketer can think of extending his products to international arena and across
different cultures.
Above all, the study of consumer behavior helps a marketer to identify or define the basic Ps of
marketing and the marketing mix.

MARKET
SEGMENTATION

Market Segmentation, Targeting and Positioning:

Segmentation, targeting, and positioning together comprise three stage process. We first
(1) Determine which kinds of customers exist, then
(2) Select which ones we are best off trying to serve and, finally,
(3) Implement our segmentation by optimizing our products/services for that segment and
communicating that we have made the choice to distinguish ourselves that way.
Market Segmentation: is the process by which a market is divided into distinct customer subset of
people with similar needs need characteristics that lead them to respond in similar ways to a
particular product offering and strategic marketing program.
Targeting: if any firm could hope to satisfy the needs of all segments, each firm would have to decide
which segment (s) to target .To do so would require evaluating the relative attractiveness of each segment
(size, revenues potential, and growth rate), the benefits sought and the firms relative business strengths. Its
process is called target marketing.

Product Positioning: that is designing product offerings developing strategic marketing

programs that collectively create an enduring competitive advantage in the target marketwould need

What is market segmentation?

Market segmentation is the process of dividing the total market for a product into groups based on
similar needs, characteristics, or behaviors. Summers et al. (2009, p. 132) define market
segmentation as:
The process of dividing a market into meaningful, relatively similar and identifiable segments or
groups.
For example, the market for cars is typically divided into a number of segments based on needs and
lifestyles. Some people are looking for economical transport, while others may be more concerned
about status and prestige. The current Holden range includes cars that are suited to single people,
small and large families, as well as, people who are interested in luxury models and sports models
etc.
Market segmentation is a superb concept in economics and marketing. A market segment is a sub-set
of a market made up of people or organizations with one or more characteristics that cause them to
demand similar product and/or services based on qualities of those products such as price or
function. A true market segment meets all of the following criteria: it is distinct from other segments
(different segments have different needs), it is homogeneous within the segment (exhibits common
needs); it responds similarly to a market stimulus, and it can be reached by a market intervention.
The term is also used when consumers with identical product and/or service needs are divided up
into groups so they can be charged different amounts. The people in a given segment are supposed to
be similar in terms of criteria by which they are segmented and different from other segments in
terms of these criteria. These can broadly be viewed as 'positive' and 'negative' applications of the
same idea, splitting up the market into smaller groups.
Examples:

Gender

Price

Interests

While there may be theoretically 'ideal' market segments, in reality every organization engaged in a
market will develop different ways of imagining market segments, and create Product differentiation
strategies to exploit these segments. The market segmentation and corresponding product
differentiation strategy can give a firm a temporary commercial advantage.

"Positive" market segmentation:

Market segmenting is dividing the market into groups of individual markets with similar wants or
needs that a company divides into distinct groups which have distinct needs, wants, behavior or
which might want different products & services. Broadly, markets can be divided according to a
number of general criteria, such as by industry or public versus private. Although industrial market
segmentation is quite different from consumer market segmentation, both have similar objectives. All
of these methods of segmentation are merely proxies for true segments, which don't always fit into
convenient demographic boundaries.
Consumer-based market segmentation can be performed on a product specific basis, to provide a
close match between specific products and individuals. However, a number of generic market
segment systems also exist, e.g. the system provides a broad segmentation of the population of the
United States based on the statistical analysis of household and geodemographic data.
The process of segmentation is distinct from positioning (designing an appropriate marketing mix for
each segment). The overall intent is to identify groups of similar customers and potential customers;
to prioritize the groups to address; to understand their behavior; and to respond with appropriate
marketing strategies that satisfy the different preferences of each chosen segment. Revenues are thus
improved.
Improved segmentation can lead to significantly improved marketing effectiveness. Distinct
segments can have different industry structures and thus have higher or lower attractiveness

Positioning:
Once a market segment has been identified (via segmentation), and targeted (in which the viability of
servicing the market intended), the segment is then subject to positioning. Positioning involves
ascertaining how a product or a company is perceived in the minds of consumers.
This part of the segmentation process consists of drawing up a perceptual map, which highlights rival
goods within one's industry according to perceived quality and price. After the perceptual map has
been devised, a firm would consider the marketing communications mix best suited to the product in
question.

Using Segmentation in Customer Retention:

The basic approach to retention-based segmentation is that a company tags each of its active
customers with 3 values:
Tag #1: Is this customer at high risk of canceling the company's service? One of the most
common indicators of high-risk customers is a drop off in usage of the company's service. For
example, in the credit card industry this could be signaled through a customer's decline in spending
on his or her card.
Tag #2: Is this customer worth retaining? This determination boils down to whether the postretention profit generated from the customer is predicted to be greater than the cost incurred to retain
the customer. Managing Customers as Investments.
Tag #3: What retention tactics should be used to retain this customer? For customers who are
deemed save-worthy, its essential for the company to know which save tactics are most likely to

be successful. Tactics commonly used range from providing special customer discounts to sending
customers communications that reinforce the value proposition of the given service.
Process for tagging customers:
The basic approach to tagging customers is to utilize historical retention data to make predictions
about active customers regarding:

Whether they are at high risk of canceling their service

Whether they are profitable to retain

What retention tactics are likely to be most effective

The idea is to match up active customers with customers from historic retention data who share
similar attributes. Using the theory that birds of a feather flock together, the approach is based on
the assumption that active customers will have similar retention outcomes as those of their
comparable predecessor.

Article
Why Market Segmentation is Critical?
By Mike Khatib
In the development of any marketing campaign, market segmentation is critical. Market segmentation
is the process of targeting a product, service or specific campaign at a particular group or subset of a
market that is likely to be more receptive to your marketing message than the entirety of the market.
The need for market segmentation stems from the knowledge that customers are not all alike and
have different needs and desires. Segmentation recognizes this fact and tailors a marketing message
to a particular group to maximize the effectiveness of the campaign.
There are hundreds of potential market segments that can be classified geographically,
demographically, on the basis of behavior or in numerous other ways. Young people, baby boomers,
tech-savvy customers, seekers of luxury, low-income, elderly, car lovers, , sophisticated, highly
educated and conservative are just a few examples of the many potential segments in a given market.
In order for any business to determine the most profitable segment for it to pursue, it has to conduct
some research. Segments don't tell you when they want your product; you have to figure out which
segments would be receptive to your product. You can do this by commissioning an internal research
project or outsourcing the research to specialists that do this work regularly. If you are a small
business and do not have the financial resources for such a venture, you need to put in some extra
work yourself. Talk to your clients and get feedback from them about what they like and don't like
about your company. Use the various public resources at your disposal that contain information
about your industry and the big players in it. Don't be afraid to copy a successful idea of a larger
competitor. Make sure you don't infringe on any copyrights or trademarks. Remember, if you're a
small business, you're not going to put a large competitor out of business but you may be able to win
over a chunk of their business.
One industry where you can see market segmentation at work is in politics. Political campaigns, to
the chagrin of some, are heavy on marketing, spin and segmentation. For example, in Presidential
politics, candidates first run in a primary to earn their party's nomination before transitioning to a
general election against an opponent from the other party. In the primary, politicians tend to
articulate a message that is going to appeal to the bases of their respective parties. Democrats will
appeal to environmentalists, peace activists, secular groups, abortion rights groups and consumer
advocacy groups, amongst others. Republicans will appeal to evangelical Christians, low-tax interest
groups, pro-business constituencies, and more hawkish think tanks. Once the candidates earn the
nomination, they significantly alter their respective messages to try to appeal more to folks in the
political middle. Politicians alter their target segment depending on the electorate whose vote they
are seeking.
Segmentation is crucial to the success of any business. Understanding your customers and their
desires will make you a more efficient and profitable entity. That's why Rolls Royce does not market
to low income individuals, and McDonalds does not target connoisseurs of 5-star restaurants; it
would be a waste of money. A smart business will allocate their marketing budget wisely and that
starts with market segmentation.

Why do firms segment their market?

The reason that firms segment the market for their products is that most firms cannot adequately
satisfy all the various needs of the market for their product. Therefore, they select one or more
segments, called target markets that they believe they can serve most efficiently and effectively. If
the firm selects the 'right' target markets and develops offerings that closely match the needs of those
markets, target marketing will provide the firm with a competitive advantage and is a very profitable
strategy. For example, the Jaguar motor company has successfully focused on the luxury car
segment.
Why Segment Your Market?
Now the question that surely arises is what is the purpose of market segmentation analysis, and why
must it be performed. The following are the primary reasons for carrying out market segmentation
for market trend analysis.
To avoid wastage of precious company resources.
To divide the market into various segments, or target groups.
To target each profitable segment in a unique way that suits that particular
segment, and provides adequate returns.
To avoid overlapping and redundant information to one particular segment.
To get maximum response and sales from each segment
To minimize the chance of failure.
To get on right track and ideas of potential market.
To minimize the risk
To identify the target market.

Effective segmentation Criteria:

Before an organization can target a specific segment accurately it must ask itself a number of
questions. It is important to evaluate the effectiveness of a targeting strategy and the viability of the
segment, if this is not done then money will be wasted.
To be useful, market segmentation must rate favorably on five criteria:

Measureable: the size, purchasing power, and characteristics of the segments can be
measured.
Example:
Can you measure the size and growth of the segment. Is the segment growing? In the
UK the DVD market is growing at an extremely fast pace. From January 2002 June
2002 900,000 DVDs were sold. The fast growth rate is attracting many players within
the market.
Substantial: the segments are large and profitable to serve. A segment should be the
largest possible homogeneous group worth going after with tailored marketing program.
Example:
Is there enough spending power within the segment for the company to sustain itself?
Will spending within the DVD marketing continue?

Accessible: the segments can be effectively reached and served.

Example:
Is it easy for you to target and reach your segment? Can they be reached with basic
communication tools such as radio and TV advertising? If you cannot target your
segment effectively with marketing communication then it is not viable.

Differentiable: the segments are conceptually distinguishable and respond differently to

different marketing mix elements and programs.

Example:
What is completive advantage of a company that distinguishes the company from its
competitors? If you are a food manufacturing company which target the children and
if the packaging is colorful and attractive than your sales level will rise as compare to
your competitors?

Actionable: effectives programs can be formulated for attracting and serving the
segments.
Example:
Does the organization have enough resources to reach their segments? It is no point in
targeting segments you do not have the resources to cater for. If you were a car
manufacturer the organization would not concentrate on the affluent and price
sensitive market if they did not have the resources to do so.

Importance of Market Segmentation:

Market segmentation has become increasingly important in the development of marketing strategies
for several reasons. First, population growth has allowed and more products markets are maturing
for. This, in turn, sparks more intense completion as firms seek growth via gains in market share
(the situation in the automobile industry) as well as in brand extensions(Colgate toothbrushes etc.).
Second, such social and economic forces as expanding disposable incomes, higher educational
levels and more awareness of the world have produced customers with more varied and
sophisticated need s, rates and lifestyles than ever. This has led to an outpouring of goods and
services that compete with one another far the opportunity of satisfying some group of consumers.
Third, there is important trend toward micro segmentation. This trend has been accelerated in some
industries by new technology such as computer aided design, which has been an enabled firm to
mass customize many product as diverse as jeans and cars.
Finally, many marketing organizations have facilitated the implementation of specializes marketing
programs by broadening and segmenting their own services. For example, new advertising media
have sprung up to appeal to narrow interest groups. These include special interest magazines, radio
programs, and cable TV. Also, more and more broad based magazines (Times, South Living) offers
advertisers the opportunity to target specific groups of people within subscription form base. This
approach relies heavily on zip codes and permits business to target not specific regions and cities for
their advertising but related, but selected income groups as well.

Benefits of Market Segmentation:

In addition to forcing firms to face the realties of the marketplace, segmentation offers the following
benefits:

It identifies opportunities for new product development. Often, a careful analysis of various
segments of potential reveals one or more groups whose specific needs and concerns are not
being well- satisfied by existing completive offerings. Such uncovered segmentation may
represent opportunities for development o new products innovative marketing approaches: for
example, the laptop computer.
Segmentation helps in the design of marketing programs that are moat effective for reaching
homogenous groups of consumers.
It improves the strategic allocation of marketing resources. The strategic benefits of segments
are sometimes overlooked. Well- defined segments, hen coupled with specific products serve
as potential investment centers for a business. Most successful business strategies are based
on market segmentation and a concentration of resources in the more attractive segments.
Segmentation should focus on subdividing markets into areas in which investment can gain a
long term competitive advantage.

Rationale for market segmentation:

Because markets are rarely homogeneous in benefits wanted, purchase rates, and price and
promotion elasticities, their response rates to products and marketing programs differ. Variations
among markets in product preferences, size and growth in demand, media habits and competitive
structures further affect the differences and response rates. Thus, markets are complex entities that
can be defined (segmented) in a variety of ways. The critical issue is to find an appropriate
segmentation scheme that will facilitate market targeting, product positioning and the formulation of
successful marketing strategies and programs.
A firm has the option of adopting a market aggregation strategy is appropriate where the total
market has few differences in customer needs or desires, especially when the product can be
standardized. It is also appropriate where it is operationally difficult to develop distinct products or
marketing programs to reach different customer segments; that is, not all segmentation schemes are
actionable. Because customer and their needs are diverse, relatively few product-markets meet these
conditions.

Identification of Market Segments:

There are many ways of dividing a market into segments. The objective of the segmentation process
is to divide the market into relatively homogeneous groups of prospective buyers of a product or
service with regard to their demands. Ideally, the variances within these individual groups would be
relatively small versus the differences between groups. The process must also describe these groups
so that members can be readily identified, must determine the size/value of each group, and must
describe the differences in customer needs. The segmentation criteria (descriptors) should facilitate
these objectives.
Marketers divide segmentation descriptors into four major categories for both consumers and
industrial markets-physical descriptors, person -or firm -related behavioral descriptors, productrelated behavioral descriptors and customer needs descriptors. More and more, segments are defined
using a combination of descriptors from four categories even though this often requires the
collection of marketing researching data and the use of sophisticated statistical methods.

Market Segmentation Analysis:

The act of dividing target markets into various segments based on a number of factors, and then
devising individual market strategies for each segment is a commonly carried out practice. The task
of market segmentation analysis is imperative for the success of the marketing activities of every
company.
When the producer of a specific commodity decides to undertake the marketing and promotional
activities for that commodity, what makes him decide how to approach his potential customers? The
base of his customers is obviously vast and varied and contains people from all walks of life and
belonging to different income groups. Each of these different groups of customers requires an altered
and unique approach. The basis for this approach is arrived at by carrying out market segmentation
analysis.
One of the most widely used concepts in marketing management is that of STP, that is,
Segmentation, Targeting and Positioning. What this implies is that the potential customer base is
studied by the marketer by carrying out market segmentation analysis, the most approachable and
profitable segment is chosen and targeted, and the necessary marketing and promotion steps are
taken. For a marketer his resources are absolutely vital and he cannot afford to waste these resources

on useless purposes. He has to have a specific target audience in mind (for any form of promotion),
and then take steps accordingly. The first step of this entire process is market segmentation analysis
Knowing how to do a market segment analysis provides a marketer with a range of information
about the possible reactions of the customer, and can also help in devising accurate sales projection
charts. The main objective of marketing is to have the customers purchase the products, and there
has to be a means of predicting the sales figures. This information will provide the marketer with
very useful information about which could be the most profitable segment, and he can thus focus his
maximum resources on that particular segment. Market segments that are less profitable can either
be completely scrapped, or if their potential value is high they can be targeted with more intensity.
Thus, there are plenty of advantages of market segmentation analysis, and it is a necessary
marketing tool for the promotional activities undertaken by any company.

Levels of Market Segmentation:

Mass Marketing
Micro Marketing

Mass Marketing :
Segmentation is mass marketing. In mass marketing, the seller engages in the mass production, mass
distribution and mass promotion of one product for all buyers.
The argument for mass marketing is that it creates that largest potential market, which leads to the
lower costs, which in turn can lead to lower prices or higher margins. However, many critics point to
the increase splintering of the market and proliferation of advertising, media and distribution.

Micro Marketing:
Some claim that mass marketing is dying .most companies are turning to micromarketing at four
levels:
Segment Marketing:
A market segment consists to group customers who share a similar set of needs and wants. Rather
than creating the segments, the marketers task is to identify them and decide which one to target.
Segment marketing offers key benefits over mass marketing. The company can often better design,
price, disclose and deliver the product or service and also can fine tune the marketing program and
activities to better reflect competitors marketing.
However, even a segment is partly a fiction, in that not everyone wants exactly the same thing.
Business to business marketing experts Anderson and Narus have urged, marketers to present
flexible market offerings to all members of a segment.
Flexible Market Offerings:
A flexible market offering consists of two parts:

A naked solution containing the product and service elements that all segment members
value
Discretionary solution that some segment members value.

Preference Segments:
Market segment can be characterized in different ways. One way is to identify preference segments.

Homogeneous Preferences exist when all consumer have roughly the same preference:
the market a shows no market segments.

At the other extreme, consumers in diffused preferences vary greatly in their preferences.
If several brands are in the market, they are likely to position themselves through the
space and show real differences to match differences in consumer preference.

Finally, clustered preferences result when natural market segments emerge from groups
of consumers with shared preferences.

Niche Marketing:
A niche is amore narrowly defined customers group seeking a distinctive mix of benefits. Marketers
usually identify niche by dividing a segment into sub segment.
What does an attractive niche look like? The customers have a distinct set of needs: they will pay a
premium to the firm that best satisfies them: the niche is fairly small but has size, profit, and growth
potential and is unlikely to attract many other competitors; and the nicher gains certain economies
through specialization.
Some large companies have even turned to niche marketing .niche marketers aim to understand
their customers needs so well that the customers willingly pay a premium.
As marketing efficiency increases, niches that were seemingly too small may become more
profitable.
The low cost of starting up shop on the internet has led to many small business start- ups aimed at
niches.
Local Marketing:
Target marketing is leading to marketing programs tailored to the needs and wants of local customer
group in trading areas, neighbored, even individuals stores. Local marketing reflects a growing
trend called grassroots marketing. Marketing activities concentrate on getting as close and
personally relevant to individual customers as possible.
Those who favor localized, marketing see national advertising as wasteful because it is too arms
length and fails to address local needs. Those against local marketing argue that it drives up
manufacturing and marketing costs by reducing economies of scale and magnifying logistical
problems. A brands overall image might be diluted if the product and message are different in
different localities.
Individual Marketing:
The ultimate level of segmentation leads to segments of one, customized marketing or one -to
--one marketing . Today customers are taking more individual initiative in determining what and
how to buy. They log onto the internet; look up information and evaluations of product or service
offers; conduct dialogues with suppliers, users and product critics; and in many cases, design the
product they want.
Customerization:
Customerization combines operationally driven mass customization with customized marketing in
away that empowers consumers to design the product and service offering of their choice. The firm
no longer requires prior information about the customers, nor does the firm need to own
manufacturing. The firm provides a platform and tools and rents out to customers the means to
design their own product. A company is customerized when it is able to respond individual customers
by customizing its products, services and messages on one to on basis.

Customization is certainly not for every company. It may be very difficult to implement for complex
products such as automobiles. Customization can also raise the cost of goods by more than the
customer is willing to pay.

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Market segmentation Process:

Segmenting the market involves a six step process:

Step Description
1

Selecting a market or product category for study

Choose a basis or bases for segmenting the market

Select segmentation descriptors

Profile and analyze segments

Select target markets

Design, implement and maintain appropriate positioning strategy and

marketing mix
(Adapted from: Summers, J, Gardiner, M, Lamb, CW, Hair, JF & McDaniel, C 2009 Essentials of
Marketing, 3rd Edition, Thomson, Victoria, p. 133)

Step 1: Selecting a market or product category for study:

This first step involves defining the market or product category to be studied. A product category is
narrower than product class and broader than a brand. For example, if we were considering the
Mazda RX-8:

Product class
Specialty product
Product category Sports car
Brand
Mazda
Mazda RX-8 Sports
Actual product
Coupe

When consumers search extensively for a particular item and

are very reluctant to accept substitutes, then that item (as is the
case when considering a high-priced car) is known as a specialty product (Summers et al. 2009, p.
211).
A product category includes all brands that satisfy a particular need (Summers et al. 2009, p. 233).
So in this example, a Mazda RX-8 would be classified within the sports car category. It is important
not to define the product category too broadly or too narrowly, and this requires judgement. For
example, if you were segmenting the market for cars, it may be not be useful to look at the total
market for all cars. Rather, you may narrow the product category down to focus upon luxury cars,
sports cars, family cars, as we have done in the table above.
A brand is a name, term, symbol, design or combination thereof that identifies a seller's product and
differentiates them from competitors products (Summers et al. 2009, p. 213). Therefore, in this
example, the brand is Mazda.
The actual product, therefore, is the Mazda RX-8 Sports Coupe (when stating an actual product, try
to be as specific as possible).

Step 2: Choose a basis or bases for segmenting the market:

Geographic Segmentation:
Geographic segmentation calls for dividing the market into different geographical units such as
nations, regions, states, counties, cities, or neighborhoods. A company may decide to operate in one
or a few geographical areas, or to operate in all areas but pay attention to geographical differences in
needs and wants. It is common to localize products, advertising, promotions, and sales efforts to fit
the needs of geographical areas (regions, cities, and even neighborhoods).
Geographic descriptors:
Geographic descriptors for segmenting the market include:

Region or area servedglobal, national, state, district, suburb etc.

City sizemajor, regional, town etc.
Density geographic concentrationurban, rural, suburban, etc.
Climate hot, cold, tropical etc.

Region or area:
Smaller firms are more likely to define a local, smaller geographic region as their target market.
For example, the corner store is serving the local trading area of about a 2-3 km radius around the
store.
Example:

In Australia, firms may serve the national market, various states, or a region. Conversely, larger
firms such as Coca-Cola and McDonalds operate on a global scale.
City size:
Some firms prefer to establish outlets in larger cities.
Example:
Department stores such as Myers or David Jones would only establish retail outlets in larger cities.
Whereas, other companies operate in smaller communities such as IGA food stores.
Density:
In selecting a retail location, many firms are interested in establishing in areas with denser
populations.
Example:
For example, McDonalds only established outlets in areas that represent significant demand for fastfood. Some products may be more popular in rural regions, such as Landrover 4WD vehicles or
Drizabone clothing, whereas other products may only suit city dwellers, such as books of movie
tickets.
Climate:
Some products have higher demand in cooler regions.
Example:
For example, skiing equipment, woolen blankets, etc. Conversely, other
products are more suited to warmer climates, for example air-conditioning,
swimwear, frozen treats etc.

Demographic Segmentation :
Demographic segmentation divides the market into groups based on variables such as age, gender,
family size, family life cycle, income, occupation, education, religion, race, and nationality.
Demographic factors are the most popular bases for segmenting customer groups. One reason is that
consumer needs, wants, and usage rates often vary closely with demographic variables. Another is
that demographic variables are easier to measure than most other types of variables. Even when
market segments are first defined using other bases, such as benefits sought or behavior, their
demographic characteristics must be known in order to assess the size of the target market and to
reach it efficiently. Demographic variables are easier to measure than most other types of variables.
Age and Life-Cycle Stage Age and life cycle segmentation consists of offering different products or
using different marketing approaches for different age and life-cycle groups. Marketers must guard
against stereotypes when using this form of segmentation. While certain age and life cycle groups do
behave similarly, age is often a poor predictor of a persons life cycle, health, work or family status,
needs, and buying power. Consumer needs and wants change with age. Some companies use age and
life cycle segmentation, offering different products or using different marketing approaches for
different age and life-cycle groups.
Gender segmentation calls for dividing a market into different groups based on sex. This
segmentation form has long been used for clothing, cosmetics, toiletries, and magazines. New
opportunities in this area are emerging such as automobiles, deodorants, and financial services. There
is an increased emphasis on marketing and advertising to women. Specialized Web sites are
becoming very popular with this group.

Income segmentation It consists of dividing a market into different income groups. Marketers for
automobiles, boats, clothing, cosmetics, financial services, and travel have long used this form of
segmentation. Using this form, marketers must remember that they do not always have to target the
affluent. Other income groups are also viable and profitable market segments.
Generation:
each generation is profoundly influenced by the times in which it grow up- the music , movies ,
politics and defining events of that period. Demographers call these generational group cohorts.
Members share the same major cultural, political and economic experience and have similar outlooks
and values.
Education:
If the people are more aware and educated than the company has easy margin to convince these
educated people.
Marital Status:
How many are married and unmarried? Both have different preferences.
Occupation:
A persons occupation affects the goods and services bought. Blue collars workers tend to buy mor
rugged work clothes, whereas executives bur more business suits. Marketers tend to identify the
occupational groups that have an above- average interest in their products and services. a company
can even specialize in making product needed by a given occupational group.
Social Class:
Social class has a strong influence on preferences in cars, clothing, home furnishings, leisure
activities, reading habits and retailers and many companies design products and services for specific
social classes.

Warning: demographic segmentation can be misleading

Using a single demographic descriptor, such as age and/or gender is isolation can be misleading. For
example, a 21 year old female could be a full-time student, a professional career woman, a skilled
labourer, unemployed, or a mother with small children, etc. Depending upon their circumstance,
they would have quite different needs and wants. Therefore, a multivariate segmentation approach
based on a mixture of descriptors such as gender, age and family life-cycle (age and lifecycle
segmentation) would be far more useful for segmenting the market for most products.
Example:
Some products that were traditionally targeted at the female market, such as perfume and skincare
products are now making inroads into the male market. Skincare for men is a rapidly growing
market

Psychographic Segmentation:
Psychographic is the science of using psychology and demographics to better understand consumers.
Geographic and demographic variables traditionally have been the major variables for segmenting
markets. Nevertheless, there may be considerable psychographic (Fashion, Self concept ,lifestyle)
differences among the people within a given geographic or demographic group. Markets consist of
buyers, and it is common sense that those buyers differ in one or more respects. They may differ in
how they want a product delivered, where they want to buy it, their available resources, their buying
needs, or their location. Any of these variables can be used to segment a market.
Psychographic variables have been a popular segmentation variable, particularly in consumer
marketing of fast moving goods.

Lifestyles segmentation:
The Oxford English dictionary defines a lifestyle as a way of life and lifestyle segmentation aims to
examine the way people live. In other words it is the reflection of the thought. Life style is closely
related to the likeliness of any particular customer, or customer groups.
Our lifestyle, our every days activities, our interest, opinions and beliefs on certain issues dictates
who we are. Marketers refer to these as AIOs (Activities, Interest and Opinions), and our AIOs
dictate our everyday behavior from where we shop to what we buy
People with a healthy lifestyle may purchase more organic food products and gym memberships.
Whereas, adventurous out-door types may purchase more recreational and sporting products. A
person's lifestyle comprises what a person does (activities), what they are interested in (interests),
and what they think (opinions). Summers et al. (2009, p. 138) explain that 'lifestyle segmentation
divides people into groups according to:

The way they spend their time

The importance of the things around them

Their beliefs

And socio-economic characteristics such as income and education'.

Socio-economic status influences the types of products and brands that people buy,

Fashion:
A fashion is currently accepted or popular style in a given field where as style is defied as a basic and
distinctive mode of expression. Fashion tends to grow slowly, remain popular for a while, and then
decline slowly. It has a travelling concept. It travels from upper class to social class.
Self concept:
Many marketers use a concept related o personality- a persons self concept (also called self image).
The basic self concept premise is that peoples possessions contribute to an reflect their identities:
that is , we are what we have. Thus in order to understand consumer behavior, the, marketer must
first understand the relationship between consumer self concept and possessions.
VALSTM Framework:
One of the most popular commercially available classification systems based on psychographics
measurements is SRI Consulting Business Intelligences (SCRI- BI) VALSTM framework. VALS,
signifying values and lifestyles, classifies adults into eight primary groups based on responses to
questionnaires featuring 4 demographic and 35 attitudinal questions.
The main dimension of the VALS segmentation framework is consumer motivation (the horizontal
dimension) and consumer resources (the vertical dimension). Consumers are inspired by one of the
three primary motivations: ideals, achievement and self expressions. Those primarily motivated by
ideas are guided by knowledge and principles. Those motivated by achievement look for products
and services that demonstrate success to their peers. Consumers whose motivation is self expression
desire social or physical activity, variety, and risk. Personality traits such as energy, self confidence,
intellectualism, novelty seeking, innovativeness, impulsiveness, leadership, and vanity in
conjunction with key demographics- determine an individuals resources. Different levels of
resources enhance or constrain a persons expression of his primary motivation.

The four groups with higher resource are:

1. Innovators: Successful, sophisticated, active, take charge people wit high self esteem.
Purchases often reflect cultivated tastes for relatively upscale, niche- oriented products and
services.
2. Thinkers: Mature, satisfied, and reflective people who are motivated by ides and who value
order, knowledge and responsibility. They seek durability, functionality and value in products.
3. Achievers: Successful, goal oriented people who focus on career and quality.
4. Experiences: Young, enthusiastic, impulsive people who seek variety and excitement.
The four groups with lower resources are:
1. Believers: conservative, conventional, and traditional people with concrete beliefs.
2. Strivers: trendy and fun loving people who are resource constrained.
3. Makers: practical, down to- earth, self sufficient people who like to work with their hands.
4. Survivors: elderly, passively people who are concerned about change. They are loyal to their
favorite brands.

Behavioral Segmentation:
Behavioral segmentation divides customers into groups based on the way they respond to, use or
know of a product. Here the marketer takes into account the general behavioral patterns of the
customers and tries to forecast what reactions they would possibly have to the adopted marketing
strategies.

The benefits that the customers are looking for and the value they seek and derive.

The degree of brand loyalty and brand satisfaction.

The willingness to buy a product, and also the rate of its usage.

The profitability of marketing there and also the income level of the targeted customer
base.
Behavioral segments can group consumers in terms of:
Loyalty:
Loyal consumers - those who buy one brand all or most of the time - are valuable customers. Many
companies try to segment their markets into those where loyal customers can be found and retained
compared with segments where customers rarely display any product loyalty.
Stage

Issues

Awareness

Is the consumer aware that the product exists? Do they know about your
company and your brand?

Knowledge

What does the consumer need to know about the product? Do they know what
benefits the product provides? Do they know what attributes/features the
product has? Do they know how much the product costs and where to buy it?

Liking

Does the consumer like the product? What is their attitude towards the
product? Do they feel that it would provide useful benefits?

Preference

Does the consumer prefer your brand? Do they believe that your brand
provides the right mix of attributes to deliver desired benefits?

Conviction

Is the consumer convinced that they should buy your brand? Are they
convinced that your brand would meet their needs and is value for money?

Purchase

Have they moved from purchase intention to actually purchasing the product?

Benefits Sought:
An important form of behavioral segmentation. Benefit segmentation requires Marketers to
understand and find the main benefits customers look for in a product. An excellent example is the
toothpaste market where research has found four main "benefit segments" - economic; medicinal,
cosmetic and taste.
Usage:
Some markets can be segmented into light, medium and heavy user groups. Heavy users are often a
small percentage of the market but account for a high percentage of total consumption. Marketers

would rather attract one heavy user than several light users. A potential problem, however, is that
heavy users are often rather extremely loyal to one brand or never loyal to any brand and always
looking for the lowest price.
Buyer Readiness Stage:
Some people are unaware of the product, some are aware, some are informed, some desire the
product, and some intend to buy. To help characterize how many people are at different stages and
how well they have converted people from one stage to another, some marketers employ a marketing
funnel.
Physiological Segmentation:

It is the part of psychographic segmentation which is related to the human physical behavior and
needs. It includes.
Attitude:
Attitudes describe a persons relatively consistent evaluations, feelings and tendencies toward an
object and ideas
Learning involvement:
It describes changes in an individuals behavior arising from experiences. Learning theorists say that
most human behaviors are learned
Perception:
The process by which people select, organize and interpret information to forma meaningful
picture of the world.
Need and Motivation:
Need is defined as state of deprivation and a need becomes motive when it is aroused to
sufficient level of intensity. A motive or drive is a need that is sufficiently pressing to direct the
person to seek satisfaction.
Personality:
Personality refers to the unique psychological characteristics that lead to relatively consistent and
lasting responses to ones own environment. A brand personality is the specific mix of human
traits that may be attributed to the particular brand.
Socio- Cultural Segmentation:

Socio -cultural segmentation combines social (related to groups) and cultural variables (related to the
shared values, beliefs, and attitudes of people) that provide further basis for segmentation.
Groups:
Group may be defined as two or more people who interact with each other to accomplish either
individual or mutual goals.
Family Lifecycle:
Many families pass through similar phases in their formation, growth and final dissolution. At each
stage the family unit needs different products and services.
Family life cycle stages include:

young single
young married without children

young married with children

middle-aged married with children

middle-aged married without children

older married

older unmarried

Social Class:
It is defined as relatively permanent and ordered division in a society whose members share similar
values, interests and behaviors.
Culture:
Culture refers to relatively specialized lifestyle of a group consisting of their beliefs, values, artifacts,
ways of behaving, ways of communicating that is passed on from one generation to the next.
Religion:
Within different regions and cities or societies, there many different religion such as Hinduism,
Christianity, Judaism and Islam etc.
Sub cultural Group:
A group of people with shared value systems based on common life experiences and situations

Race: segmentation on the basis of the biological characteristics.

Ethnicity: segmentation on the basis of the national, cultural and lingual basis.

Benefit Segmentation:
An approach to market segmentation, whereby it is possible to identify market segments by causal
factors rather than descriptive factors, might be called "benefit segmentation, The belief underlying
this segmentation strategy is that the benefits which people are seeking in consuming a given product
are the basic reasons for the existence of true market segments. Experience with this approach has
shown that benefits sought by consumers determine their behavior much more accurately than do
demographic characteristics or volume of consumption. This does not mean that the kinds of data
gathered in more traditional types of segmentation are not useful. Once people have been classified
into segments in accordance with the benefits they are seeking, each segment is contrasted with all of
the other segments in terms of its demography, its volume of consumption, its brand perceptions, its
media habits, its personality and lifestyle, and so forth.
Convenience: How much it is easy to use the product?
Social acceptance: Is product socially acceptable in the targeted society?
Long lasting: How long will be the product durable?
Value for the money: What is and what will be the value and level of satisfaction provided
by the product or service after paying the required amount in monetary terms?
Economy: Is the product economical to the customers?

Wide Range of Applications:

But is benefit segmentation practical? And is it truly operational? The answer is yes. In effect, the
crux of the problem of choosing the best segmentation system is to determine which has the
greatest number of practical marketing implications.
The benefit segmentation approach is of particular interest because it never fails to provide fresh
insight into markets. The marketing implications of this analytical research tool limited only by
the imagination of the person using the information a segmentation study provides.

Benefit Segmentation

According to Haley (1968), the benefits that people are seeking in consuming a given product are the
basic reasons for the existence of true market segments. As an illustration, Ms Smith is a healthy, 60year-old lady and a pensioner, who cycles, rather than drives, to keep fit, and buys organic foods for
their perceived health benefits. She is not an environmentalist and her main reason for not driving
was not because she wants to avoid polluting the environment with [CO.sub.2], but to be fit and
healthy. The benefits that she seeks from her shopping are likely to be a wide choice of 'healthy
foods' and advice on fitness training. An ample parking space and free home delivery will not be of
benefit to her. Benefits sought are manifestations of both consumer requirements (needs and/or
wants) and the value that consumers such as Ms Smith are willing to pay in return for the sacrifices
that they are willing to make.
Benefit segmentation is a technique that segments customers on the basis of desired or sought
benefits. These benefits, when they are present as attributes of a product, service or market offering,
cause consumers to purchase those products, rather than merely describe who they are as consumers
in terms of socio-economic, demographical or psycho graphical data. Benefit segmentation offers
more utility than the traditional methods because it explains the reasons why consumers choose to
buy or prefer particular products, or patronize particular suppliers or providers of services.
Segments of consumers, in terms of benefits they seek, are established as an ex-post rather than an a
priori theory of consumption and/or buying behaviour. A marketer no longer has to guess which
stimulus might induce consumers to try or buy a particular product. If a grocer knows older
customers seek worry-free shopping for healthy produce, that grocer can expect older customers to
visit the grocery when the factors that worry them have been removed, and the presence of desired
benefits has been communicated to them. A grocer that offers 'worry-free shopping for healthy
produce', among other benefits, will attract consumers who seek healthy produce regardless of its
country of origin and high price, as long as the quality of that produce is credible and guaranteed.
Healthy food shoppers may not necessarily be those who belong to social grade 'A', 'empty nest' life
stage, or a particular age bracket.
In re-examining the utility offered by benefit segmentation method, Haley (1984) considered it as a
useful approach in running two models of advertising process. The first model is about convincing
people that a particular brand is superior by delivering or communicating its cognitive benefits. The
second model is about making a brand more salient and therefore more likely to be purchased by
emphasizing its cognitive benefits. In the travel industry, a no-frills airline could convince
consumers of the superiority of its brand by communicating the benefits of much lower fares when
tickets are purchased in advance, a higher level of safety as a result of using newer aircraft of less
than five years old, and the benefit of its punctuality in departures, if it has a good record to show. In
making the brand more salient the airline could point out the overriding benefit that its fares, on
similar routes, are half the price charged by scheduled airlines.
Although the usefulness of benefit segmentation is well established in the literature (among others
see Haley 1984; Tynan & Drayton 1987; Loker & Perdue 1992), the use of benefit segmentation to
segment older consumers in any particular product markets has not been reported. In the next
sections we illustrate how benefit segmentation may be used to segment older consumers in the
context of shopping for groceries and in purchasing vacations or holiday breaks.
Why grocery retailing and vacations?
Groceries form part of the basic daily needs of everyone. In the UK, household expenditure on food
and non-alcoholic drinks among households where the head of the household is aged between 50
and 64 accounts for their largest weekly expenditure at an average [pounds sterling]65.70 (Office
for National Statistics 2002b, p.44). Grocery retailing has also been the subject of many studies and
its significance to older people has been debated (among others see Goodwin & McElwee 1999;
Hare et al. 1999; Hare et al. 2001). Extending the knowledge of the benefits that the UK's older
people seek from shopping for groceries would be useful in order to provide a deeper understanding
on the determinants of older consumers buying behavior. Such knowledge would provide marketing
ideas for managers of grocery shops, including supermarkets.

Step 3: Select segmentation descriptors:

It is important only to use relevant descriptors in order to arrive at meaningful or useful segments.
A meaningful segment is one that can be clearly distinguished from other segments, in terms of the
needs, characteristics and/or behaviors for that segment, and therefore the segments' need for a
particular product. In other words, each market segment must have some unique need,
characteristic or behavior that would make it respond differently to a given marketing mix.
Physical Descriptors:
These are used mainly to describe consumers (in contrast to organizations) largely on the basis of
such demographics which are as follows:
Gender: recently General Motor's Chevrolet division spent considerable funds on advertising and
events to convince women that its cars are made with them in mind.
Household life cycle: formerly known as family life cycle, this concept has been "modernized by
incorporating nontraditional households such as single parent households. Essentially it describes the
stages in the formation, growth and decline in a house hold unit. Each stage differs in its expenditure.
Income: higher-income households purchase a disproportionate number cellular phones, expensive
cars and theater. Occupation: the sales of certain kinds of products (e.g., work shoes, automobiles,
uniforms, and trade magazines) are tied closely to occupation type.
Education: there is a strong positive correlation between the level of education and the purchase of
travel books, magazines, insurance, theater tickets and photographic equipment.
Geography: different locations vary in their sales potential, growth rates, customer needs, cultures,
climates ,service needs and competitive structures, as well as purchase rates for a variety of goods.

Geo-demographic is an increasingly popular type of segmentation; it attempts to predict

consumer behavior by making demographic, psychographic, and consumer information.

Events: these include a varied set of activities ranging from national holidays, sports and back to
school week, to personal events.
Race and ethnic origin: more and more companies are targeting three segments via specialized
marketing programs.
General Behavioral Descriptors:

These seek to produce a better understanding of how a consumer behaves in the marketplace and
why. The most common behavioral descriptors in consumer markets are lifestyle and social class.
Lifestyle: segmentation by lifestyle groups consumers on the basis of their activities, interests and
opinions.
Resources include all of the psychological, physical, demographic and material means consumers
have to draw on. They include education, income, self-confidence, health, eagerness to buy,
intelligence and energy level-on a continuum from minimal to abundant.
Social class :every society has its status groupings based on similarities in income,eduction and
occupation.
Industrial or Firm Behavioral Descriptors:

Purchasing structure is the degree to which the purchasing is centralized.

The buying situation descriptor includes three situations: straight rebuy, a recurring
Geographic descriptors:

Geographic descriptors for segmenting the market include:

Region or area servedglobal, national, state, district, suburb etc.

City sizemajor, regional, town etc.
Density geographic concentrationurban, rural, suburban, etc.
Climate hot, cold, tropical etc.

Step 4: Profile and analyze segments:

Once the market for a product has been segmented using relevant variables, then the next step is to
develop rich profiles of the resultant segments. Each segment must be evaluated to determine
whether it is a viable market segment. Summers et al. (2009) point out that in addition to a
description on relevant segmentation variables, the profile should include a statement about:

Segment size - how many people are in that segment;

Expected growth rate of the segment;

How often the product is purchased;

Current brand usage and brand loyalty; and

Long-term sales and profit potential.

Information on the size of the segment is easy to obtain if the market is segmented using basic
demographic descriptors, such as age, gender and income.
Example:
Information for the Australian market on these descriptors can be obtained from the Australian
Bureau of Statistics. However, if you have used other bases for segmentation, information on
the size and growth rate of the segment could only be obtained by conducting some market
research or purchasing some pre-collected data on this market. Occasionally, articles on some
product categories can be found on the Internet or in publications, such as Retail World. As a
student, you are expected to determine the size of the segment based on the demographic
descriptors, and then if unable to access further information on other descriptors, make
assumptions about what percentage of that segment may have a certain lifestyle, be seeking
certain benefits or have a certain usage rate etc.

Step 5: Evaluating and Selecting the Market Segments (target marketing segments):
Before selecting target markets, the firm must decide on their targeting strategy. There are three
main strategies for selecting target markets.

Undifferentiated targeting - mass market approach - one marketing mix for the whole
market
Multi-segment targeting - separate marketing mixes for each distinct segment to be
targeted
Concentrated targeting - niche marketing - one marketing mix tailored to the needs of one
or a few market segments

Undifferentiated targeting:
Having segmented the market, the firm may decide that an undifferentiated or mass- marketing
approach is relevant. This would infer that the needs and wants of various market segment do not
differ enough to warrant the development of a unique marketing mix for each segment. Therefore,

the firm focuses on developing a marketing mix that caters for the common needs and wants of the
market. This approach relies on mass production, advertising and distribution. Provided the needs
of the market are not differentiated, this strategy can be quite cost-effective.
Example:
For example, your local service station would probably take this approach. It is becoming
increasingly harder for me to think of examples of mass marketing. I used to use things like energy
and postal services. However, while Ergon Energy uses a mass marketing approach with its
consumer market, it uses a differentiated strategy for rural, business and large commercial clients.
Likewise, Australia Post now serves a variety of market segments, including the market for
personalized stamps!
Multi-segment targeting:
A multi-segment targeting approach acknowledges that different target markets require a different
marketing mix. This approach involves selecting a few key target markets and developing separate
marketing mixes to cater for those needs of those distinct market segments. Provided the segments
are meaningful and distinct, this can be a very profitable strategy.

Rolex watches take this approach by catering quite specifically to the needs of their various markets.
Which Rolex watch would best suit you - click on About You? Pepsi-Cola also takes this approach
with a wide range of products to meet the various needs of its target markets.
Concentrated targeting:
Concentrated or niche targeting involves selecting one or a very few segments and developing a
unique marketing mix that really caters to the specific needs of that market.
Example:
Jaguar motor company takes this approach as it focuses on the prestige segment. Can you think of
some other examples?
Other strategies:
Selective Specialization:

A firm selects a numbers of segments, each objectively attractively and appropriate. There may be
little or no synergy among the segment, but each promises to be a moneymaker. This multi segment
strategy has the advantage of diversifying the firms risk.
Product Specialization:

The makes a certain product that it sells to several different market segments. The firm makes
different product for the different customer groups and builds a strong reputation in the specific
product areas. The downside risk that the product may be supplanted by an entirely new technology.
Market Specialization:

The firm concentrates on serving many needs of a particular customer groups. The firm gains a
strong reputation in serving this customer group and becomes a channel for additional product the
customer group can use. The downside risk is that the customer group may suffer budget cuts or
shrink in size.

Step6: Design, implement and maintain appropriate positioning strategy and

marketing mix:

Positioning (marketing):
In marketing, positioning has come to mean the process by which marketers try to create an image
or identity in the minds of their target market for its product, brand, or organization. Positioning is a
concept in marketing which was first introduced by Jack Trout ( "Industrial Marketing" MagazineJune/1969) and then popularized by Al Ries and Jack Trout in their bestseller book "Positioning The Battle for Your Mind." (McGraw-Hill 1981)
This differs slightly from the context in which the term was first published in 1969 by Jack Trout in
the paper "Positioning" is a game people play in todays me-too market place" in the publication
Industrial Marketing, in which the case is made that the typical consumer is overwhelmed with
unwanted advertising, and has a natural tendency to discard all information that does not
immediately find a comfortable (and empty) slot in the consumers mind
Example of positioning:
I like to buy chocolate that is good quality at a reasonable price. I can think of a few brands off the
top of my head including Lindt, Nestle, Cadbury, and a generic brand. If I consider these four brands
on these two important attributes (quality and price), then my positioning or perceptual map for
chocolate looks like this.
Re-positioning:
Re-positioning involves changing the identity of a product, relative to the identity of competing
products, in the collective minds of the target market.Repositioning may be required to change
consumer's perception of a brand relative to competing brands.
Example:
If you consider that a certain product to be high in fat and sugar, then the manufacturer may seek to
reposition the product by modifying the product to be lower in fat and sugar, and then
communicating the lower fat and sugar content to consumers. Sometimes consumers have
misperceptions about the brand or do not adequately value a particular product attribute. The firm
can seek to change consumer's attitudes through promotional activities that educate the consumer on
the product's attributes and benefits. For example, a campaign in June 2006 by McDonald's sought
to overcome some consumer misperceptions about the nutritional value of McDonald's Kids Meals.
De-positioning:
De-positioning involves attempting to change the identity of competing products, relative to the
identity of your own product, in the collective minds of the target market.
The original work on Positioning was consumer marketing oriented, and was not as much focused on
the question relative to competitive products as much as it was focused on cutting through the
ambient "noise" and establishing a moment of real contact with the intended recipient.
Positioning and High tech Marketing:
The growth of high-tech marketing may have had much to do with the shift in definition towards
competitive positioning. An important component of hi-tech marketing in the age of the world wide
web is positioning in major search engines such as Google, Yahoo and Bing, which can be
accomplished through Search Engine Optimization , also known as SEO. This is an especially
important component when attempting to improve competitive positioning among a younger
demographic, which tends to be web oriented in their shopping and purchasing habits as a result of
being highly connected and involved in social media in general.

Positioning strategies:

In positioning their product in the market, a variety of positioning strategies could be used by the
marketing organization including:
I.
II.

Product attributes
Price and quality

III.

Use or application

IV.

Product user

V.

Product class

VI.

Competitor.

Product attributes: In this case the firm uses one or more product attributes or features as the
basis for positioning its product.
Example:
For example, while the Dairy Australia focuses on the nutritional attributes of milk as a key selling
point, Kleenex tissues focus on softness, strength and absorbency. The firm may also use a key
benefit that the market is seeking as the basis of positioning their product.
Price and quality: Two of the key dimensions used by consumers in evaluating alternative brands
is price and quality.
Example:
Some firms use a high price (premium pricing) strategy to indicate that their product is high or
superior quality, for example Godiva chocolates. Other firms use a lower price, good quality
strategy, such as Big W with its everyday low pricing strategy.
Use or application: Products can be positioned as the right product to use for a particular
occasion or purpose.
Example:
For example, meat pies may be targeted for consumption at the football, or a CUB Victorian Bitter
may be a reward for a hard days work.
User: This strategy is based on certain products being suited for certain users.
Example:
For example, Some of the classical examples of positioning strategies that have been aimed at
gaining new users was the repositioning of Johnson's baby oil as a sun tanning lotion (not
recommended!) and baking soda as a kitchen deodorising agent. Another example, that a campaign
that was run a few years ago by Kellogg's Coco-Pops who traditionally market a chocolate-flavoured
cereal to the children's segment, but the campaign depicted adult males confessing to secre
Product class:When close substitutes exist, the firm may focus on the benefits its product class
relative to other product classes.
Example:

For example, a manufacturer of vinyl shutters may propose that vinyl is more durable, easier to clean
and need less maintenance than wood shutters. Likewise, the dairy industry may seek to convince us
that real cheese, such as Coon is more natural than processed cheese.
Competitor: Some firms deliberately compare themselves to competitors as a means of gaining the
desired position for their product in the mind of the consumer.
Example:
For example, advertising conducted by an Australian company Herron Pharmaceuticals that
compared their products with products of US based competitor has resulted in legal action. Telstra
uses a strong 'I am Australian' theme to appeal to nationalistic buying motives

Product positioning process:

Generally, the product positioning process involves:
1. Defining the market in which the product or brand will compete (who the relevant buyers are)
2. Identifying the attributes (also called dimensions) that define the product 'space'
3. Collecting information from a sample of customers about their perceptions of each product
on the relevant attributes
4. Determine each product's share of mind
5. Determine each product's current location in the product space
6. Determine the target market's preferred combination of attributes (referred to as an ideal
vector)
7. Examine the fit between:
o

The position of your product

The position of the ideal vector

8. interest and started a conversation, you'll know you're on the right track.

Positioning concepts:
More generally, there are three types of positioning concepts:
1. Functional positions :
o Solve problems
o

Provide benefits to customers

Get favorable perception by investors (stock profile) and lenders

2. Symbolic positions :
o

Self-image enhancement

Ego identification

Belongingness and social meaningfulness

Affective fulfillment

3. Experiential positions :
o

Provide sensory stimulation

Provide cognitive stimulation

Measuring the Positioning:

Positioning is facilitated by a graphical technique called perceptual mapping, various survey
techniques, and statistical techniques like multi dimensional scaling, factor analysis, conjoint
analysis, and logic analysis.
Who should be Involved:
Positioning should be a formal exercise, no matter how large or small the organization. If you are
discussing company positioning, it should involve all senior management. If it is product positioning,
it should involve representatives from Sales, Field Engineering, and both product marketing and
marketing communications.
Five Great Product Positioning Success Stories
Courtesy of Steven sbhoward Howard
In Destroy the Competition With Positioning Strategy, I provided five key product positioning
principles and Toyotas Lexus brand as an example that used most of them.
Although I view product positioning strategy as critical for success in todays hyper-competitive
marketplace where everybodys competing for the same shrinking budget and differentiation is hard
to come by, marketers often think of price as their only lever.
And as Ive said before, thats just incompetent marketing.
Anyway, when I wrote the post I invited readers to reply with product positioning success stories. You
can learn a lot from others successes and failures. I was surprised at the enthusiastic response. Here
are five, including three write-ins from readers:

7-Up.The famous positioning of 7-UP as the Uncola perfectly positioned that product for
those who did not want to consume cola drinks. For those who do (a confirmed Coca-Cola
fanatic), the positioning of 7-UP had no appeal. But thats fine, since I am not their prospective
customer anyway (even though THEY might consider me a prospect).
Starbucks. Ive been critical of Howard Schultz the turnaround CEO, but Howard Schultz the
entrepreneur franchised premium coffee, forever upgraded the coffee shop experience, and
created one of the worlds most powerful brands in the process.

Swatch. The most famous example I can think of is Swatch. Created as a defense against
low priced Japanese quartz watches that swamped the market, instead of competing on price,
[parent company] SMH positioned the product as the famous fashion watch, thereby creating a
whole new market, much larger in size than the original watch market.
- Courtesy of Ricky rdewerk de Werk

Hyundai. Another fantastic example is Hyundai, a company that understands how to

consistently move upstream through intelligent product positioning. Hyundai is increasingly
creating havoc in the market for their competitors and finding ways to innovate, and develop
value propositions that resonate with their customers and prospects.
- Courtesy of Mikah MikahDC Sellers
Hmm, guess thats just four. Sorry about that. Can you come up with a fifth that isnt lifted from
Blue Ocean Strategy or some other book?
You know whats harder and perhaps even more interesting than
Five fundamental product positioning principles :

1.
Find a product attribute that captures the customers imagination: Its so easy to get
trapped in the same old box of features and benefits. If you cant differentiate that way, look at the
problem with fresh eyes and fresh data. Find a new attribute that can get customers excited and focus
your positioning around it.
2. Market share gains are expensive: Theres simply no way around this. Market share comes at a
heavy cost and your product planning and positioning must reflect that or your P&L will suffer and
youll end up back at the drawing board. The cost is a function of how entrenched the leaders are and
the perceived switching cost for customers.
3. Reinvent the customer experience: Nothing matters more, and its not just for Internet and
B2B. Just as with product attributes, you can shake up the competitive landscape by rethinking the
customer experience in new terms. Whats important to customers changes as a function of time and
market conditions? Take advantage of it.
4. Only target up, not down the totem pole: Publicly and to customers, always position your
product relative to the market leader. It elevates your product in terms of customer perception. That
said; train your sales force (and other internal groups) on features - benefits versus all competitors.
Thats a whole different story.
5. Infrastructure (or ecosystem) as a competitive barrier: This is an important and often ignored
aspect of product planning and positioning. Many products and services, especially in technology,
require related companies and industries to support them in some way. If you get enough support for
your product, it can be an extraordinarily effective competitive barrier that you can use in
positioning.
Marketing mix:
Once the market has been segmented, target markets selected, and positioning strategies have been
determined, then the firm needs to develop the marketing mix for their offering. It is not the purpose
of this web site to discuss the marketing mix in detail, rather a brief introduction of the marketing
mix is provided and key decisions for each element in the marketing mix are identified. Your text
provides a more detailed discussion of each of the four elements of the traditional marketing mix.
What is the marketing mix?

The traditional marketing mix, also known as the 4P's of marketing comprises four key elements:

Product
Price

Promotion

Placement (or distribution).

A number of strategic decisions need to be made with respect to each element. The four elements of
the marketing mix should be carefully integrated (blended together) to develop an offering that
closely matches the needs and wants of the target market and reflects the desired product
positioning. To reflect service products and the service elements of physical goods, the traditional
marketing mix has now been extended to 7P's and also includes:

People
Processes

And physical evidence.

Some of the key strategic decisions that need to made for the four traditional elements of the
marketing mix are:

Product

What benefits must the product provide?

What features and attributes will we include to deliver those benefits?

What type of design and styling will we use?

What level of quality is required?

What types and levels of service are required?

Price

What factors influence the price?

What is the total cost of the product?

What prices are our competitors charging?

What are our customer's perceptions of value?

What are our pricing objectives?

What pricing strategies and tactics will we use?

Will we offer discounts or allowances?

Promotion

Who is our target audience?

What response are we seeking from our target audience?

What message strategy will we use to reach our target audience?

What media strategy will we use?

What is our promotional budget?

How will evaluate the effectiveness of our promotional efforts?

Placement

How will we distribute our products?

Will we market direct to end-users or will we use intermediaries?

Is so, what types of intermediaries will we use?

What types of outlets will we use?

Where will we distribute?

How will we store, manage, and transport our product?