Customers Segmentation, Target

Marketing & Positioning

C H A P T E R

Lecturer: Nguyen Trung Thang, PhD.

Learning Outcomes
1. Understand customer needs and wants
2. Conduct analysis and segment markets and
3. Analyze and identify target markets

6-2

Buyer Behavior in
Consumer Markets

Irrational and unpredictable

Can progress through 5 stages (see next slide)
Does not always follow these stages in sequence
May be characterized by loyalty
Includes what to buy and where to buy

6-3

The Consumer Buying Process

Need Recognition
Information Search
Evaluation of Alternatives
Purchase Decision
Postpurchase Evaluation

From Exhibit 6.1

6-4

Need Recognition
Need
Occurs when the consumers current level of satisfaction does
not equal their desired level of satisfaction.

Want
A consumers desire for a specific product that will satisfy the
need.

Demand
When wants for specific products are backed up by the
customers ability and willingness to pay for the product.

6-5

Information Search (1 of 2)
Marketing activities can stimulate a desire for
information:
Passive information search
Active information search

Sources of information:
Internal sources
Personal sources
External sources

6-6

Information Search (2 of 2)
Time, effort, and expense dedicated to information
search depends on:
Degree of risk involved in the purchase

Financial risk
Social risk
Emotional risk
Personal risk

Amount of expertise with the product category

Actual cost of the search

Evoked set
A narrowed down set of alternatives that the customer is
considering
6-7

Evaluation of Alternatives
Customers evaluate products as bundles of attributes

Brand attributes
Product features
Aesthetic attributes
Price

Customers place different levels of importance on

attributes
Important considerations in the evaluation stage:
Products must be in the evoked set
Consumers choice criteria must be understood
Marketing programs must be designed to influence consumers
opinions about product or brand image
6-8

Purchase Decision
Purchase intention and the act of buying are distinct
concepts
Potential intervening factors between intention and
buying (car example):

Unforeseen circumstances
Angered by the salesperson or sales manager
Unable to obtain financing
Customer changes mind

Key issues in the purchase decision stage:

Product availability
Possession utility
6-9

Postpurchase Evaluation
Four possible outcomes in the postpurchase stage:

Delight
Satisfaction
Dissatisfaction
Cognitive Dissonance

Cognitive dissonance is more likely to occur when:

Dollar value of the purchase increases
Opportunity cost of rejected alternatives is high
Purchase decision is very involving or emotional

Firms ability to manage dissatisfaction and cognitive

dissonance is:
A key to creating customer satisfaction
A major influence on word of mouth communication

6-10

Factors Affecting the

Consumer Buying Process
Decision-Making Complexity
High/Low Complexity

Individual Differences
Demographics, perceptions, motives, interests, attitudes,
opinions, lifestyles, etc.

Social Influences
Culture, subculture, social class, reference groups, opinion
leaders, etc.

Situational Influences
6-11

Common Situational Influences

Physical and Spatial Influences

Social and Interpersonal Influences
Temporal (Time) Influences
Purchase Task or Product Usage Influence
Consumer Dispositional Influences

From Exhibit 6.2

6-12

Understanding Business Buying

Behavior
Four Types of Business Markets:

Producer markets (a.k.a. commercial markets)

Reseller markets
Government market
Institutional markets

Unique Characteristics of Business Markets:

The Buying Center

Hard and Soft Costs
Reciprocity
Mutual Dependence
6-13

The Business Buying Process

1.
2.
3.
4.
5.
6.
7.

Problem Recognition
Develop Product Specifications
Vendor Identification and Qualification
Solicitation of Proposals or Bids
Vendor Selection
Order Processing
Vendor Performance Review

6-14

Market Segmentation
The process of dividing the total market for a particular
product or product category into relatively homogeneous
segments or groups
Should create groups where members are similar to each
other but dissimilar to other groups
Involves the fundamental decision of whether to segment
at all
Typically allows firms to be more successful
6-15

Traditional Market
Segmentation Approaches
Used successfully for decades by many successful firms
Are not out-of-date
Are sometimes used in combination with newer
approaches

6-16

Mass Marketing
Involves no segmentation whatsoever
Is an undifferentiated approach
Works best when the needs of an entire market are
homogeneous
Is efficient from a production standpoint
Results in lower marketing costs
Is inherently risky and vulnerable to competitors

6-17

Differentiated Marketing
Involves dividing the total market into groups of
customers having relatively common or homogenous
needs and developing a strategy to pursue one or more of
these groups
May be necessary when customer needs are similar
within groups but differ across groups
Involves two options:
Multisegment approach
Market concentration approach
6-18

Niche Marketing
Focuses marketing efforts on one small, well-defined
market segment or niche that has a unique, specific set of
needs
Requires that firms understand and meet the needs of
target customers so completely that the firms substantial
share of the segment makes it highly profitable

6-19

Individualized
Segmentation Approaches
Are viable due to advances in technology
Allow firms to combine demographic data with
behavioral data to precisely match customer preferences
Will become more important in the future
Can be prohibitively expensive to deliver
Depend on:
Automated delivery
Personalization

6-20

Three Individualized
Segmentation Approaches
One-to-one marketing
Involves creating an entirely unique product offering for each
customer

Mass customization
An extension of one-to-one marketing
Refers to providing unique solutions to individual customers
on a mass scale

Permission marketing
Customers choose to become a member of the firms target
market
Key advantage Customers are already interested in the
product offering
6-21

Successful Segmentation
Requires that market segments fulfill 5 criteria:

Identifiable and Measurable

Substantial
Accessible
Responsive
Viable and Sustainable

Avoid ethically sensitive, but legal, segments

Avoid segments that do not match the firms expertise

6-22

Identifying Market Segments

Involves selecting the most relevant variables to identify
and define the target market
Involves the isolation of individual characteristics that
distinguish one or more segments

6-23

Segmenting Consumer Markets

Behavioral Segmentation
Demographic Segmentation
Geographic Segmentation
Psychographic Segmentation

From Exhibit 6.3

6-24

Benefit Segmentation
of the Snack Food Market

Exhibit 6.4

6-25

VALS Consumer Profiles

Innovators
Thinkers
Achievers
Experiencers

Believers
Strivers
Makers
Survivors

From Exhibit 6.5

6-26

Segmenting Business Markets

Type of Organization
Organizational Characteristics
Benefits Sought or Buying Process
Personal and Psychological Characteristics
Relationship Intensity

6-27

Target Marketing Strategies

Single Segment Targeting

Selective Targeting
Mass Market Targeting
Product Specialization

6-28

Basic Strategies for

Target Market Selection

Exhibit 6.6

6-29

Focus Areas and Assigned Readings

6-30

Focus Areas and Assigned Readings

6-31

Focus Areas and Assigned Readings

6-32