SMM14

Service Industry Marketing

Workshop 3

Changing Consumer Behaviour

What Is The Problem With Segmentation

1
 Outline

• Customers as assets

• Segmentation

• Changing consumer trends

• Impacts upon buyer behaviour

 Customers As Assets

Customer Turnover (Churn)

• What is the customer turnover

• What is the life of a customer
• What is the growth in the customer base

Customer Status

• New customers
• Loyal stable customers
• Disillusioned customers
• Lost customers
 Customers As Assets

* Process
customer database
- transaction history of each customer
- socio economic profile if possible
- media habits
segmentation
marketing mix appropriate to targeted segment

* Barriers
assembling the information

* Tactical
sales promotions

* Strategic
new product development
customer retention
cross selling
lapsed customer reactivation
 Customers As Assets

Regular customers

- Become aware of the breadth of products

- Familiar with performance characteristics
- Know the systems and procedures of the company
- Believe they have made the right choice
- the organisations
- the product / service

Focus on loyal customers

- Stop the shopping around concept

- Less likely to buy on price
- More efficient and effective for company
- Highly target communication
- Identify profitable lost customers quickly
- More focused new product development
- Cross selling
- Competitive advantage
 Segmentation - broad definitions

• “The process of dividing a total market into groups

of people with relatively similar product needs, for
the purpose of designing a marketing mix that
matches precisely the needs of individuals in a
segment” (Dibb et al, 1994)

• The identification of the ultimate market segment

….. the individual (Gordon, 1998)
 The 8 stages of the STP process

1 Identify the organisation’s Situation

current position, capabilities, analysis
objectives and constraints

2 Identify the segmentation

Market variables and segment the
markets
segmentation 3 Develop profiles of each
segment

4 Evaluate the potential and

attractiveness of each segment Market targeting
5 Select the target segment(s)

6 Identify the positioning concept

within each target segment
Product 7 Select and develop the
positioning appropriate positioning concepts

8 Develop the marketing mix The marketing mix

strategy
 Factors For An Effective Segment

1. Identification - can you identify a distinct group of customers with

the same needs

2. Measurability - target segment must be capable of some form of

measurement, or at least a best guess

3. Adequate Size - the target segment has to be large enough to make

the marketing effort financially worthwhile

4. Accessibility - targeting is useless unless this group can be accessed

by promotion and distribution. Can you access the decision makers?

5. Responsiveness - the target group should react to any change in the

marketing mix elements.

Unique / Appropriate / Stable ??

 Hooley, Piercy and Saunders

FOUR basic questions need to be answered:

• How do we define the market – what is the scope and

constitution?

• How is the market segmented into different customer

groups?

• How attractive are the alternative market segments?

• How strong a competitive position could we take – where do

our current or potential strengths lie?
 Target market selection

Market segment attractiveness

Unattractive Average Attractive

strengths in serving segment)
(Current & potential company

Weak

Strongly Avoid Possibilities

avoid

Avoid Possibilities Secondary

Average
Strengths

targets
Strong

Possibilities Secondary Prime

targets targets
 Traditional Segmentation Characteristics

• Demographic (Who)
e.g. age, gender, social class, income, education,
occupation, lifecycle (e.g. single, married, children, retired)

• Sociological (Who)
e.g. culture, racial differences, lifestyle, religion,
race, culture, nationality

• Geo-demographic (Where)
e.g. north / south, urban, rural, high street,
out of town, village, global, European.
 Towards A Better Understanding

Psychographic / Behaviourist (What and Why)

e.g. lifestyles, personality, benefits sought, product features,
price, delivery, loyalty, usage rate, innovation, readiness

Behavioural differences lifestyle is one of the

in buyer behaviour : key profiling tools to
determine possible
likes and dislikes
• Brand Seekers
• Low Price Ferrets
• Sport
• Promotion Junkies
• Theatre and Cinema
• Stock Pilers
• Arts and Culture
• Budget Bound
• Keep fit
• Promotion Opportunists
• Music
• Promotional Oblivious
• Outdoor
 Value Based Segmentation

Define value
• profitability to date. Favours older customers as they are
likely to have generated more profit over a lifetime but
may not necessarily be the most profitable
• recently, frequency, monetary – popular in mail order
• recent profitability – if you have limited historical data
• average profitability – over a 12 month period and does
not discriminate against new customers
• potential profitability – life time value
• connected profitability e.g. a student who costs you £ but
their parents can make you £

Richard Clarke (2004)

 Benefits of Segmentation

Maximising customer needs

Mass markets vs customisation

Competitive advantage Dangers of Segmentation

Descriptive not predictive

Resource allocation

Assumes competition free

May define wrong segment

Alienates consumer groups

 Changing Consumer Trends

Self segmentation
•

Media habits and consumption

• Use of technology
Opinion formers / influencers
Choice

Consumer power / knowledge

• Lobbying / boycotts
Feedback / reviews

Values & lifestyles

• Ethical /
Green / Fair Trade
Cause related
marketing
 Changing Consumer Trends

• Healthy lifestyles

• Fashions & fads

Motivations & Aspirations
Bargaining

• Legal
More aware of rights
Protectionism

• Demographic trends
Singles, aging, ethnicity, religion

• Permission
Trust
Volunteer
The Impact On Buyer Behaviour And Problem Solving

Levels of
Involvement & Risk Bennett, 2006
 Consumer Risk

• Performance risk

• Financial risk

• Physical risk

• Social risk

• Ego risk
 Choice criteria

• Technical e.g. reliability, comfort

• Economic - e.g. price, value for money

• Social - e.g. status, fashion

• Personal e.g. self image, ethics

About understanding the key criteria / benefits to the

customer of the purchase. What is it you are
offering them (what they think … not you!)
 Factors Influencing Consumer Buying Behaviour

P ti S
P y s u
-a noit
r e ohc gol
uC coS nos - aci la
utl l ai la l
Social Personal Psychological Situational
Cultural Occasion
Friendship Age / life stage Motivation
Values Environment
groups Occupation Perception
Systems Marketing
Work groups Economic Learning
Beliefs status influences
Family Beliefs
Cross-cultural Lifestyle Selling
Roles Attitudes
Social class influences
Status Personality
Factors Influencing Organisational Buying Behaviour

ti S
nI nI u
et
-r r ep i d -a noit
os udi v la
l an la
Environmental
Level ofr Odemand
g Organisational Individual
i na outlook
Economic
s Situational
i
ot a rates Objectives Personal Age
n
Interest
l aTechnological
Occasion
change Policies Interests Income
Environment
Political / regulatory Procedures Authority Education
Marketing
Competitive Structures Status Job position
environment
influences
Systems Empathy Personality
Social responsibility / Selling
ethical concerns Culture Persuasiveness Risk attitude influences
Who is important in the decision making unit
(DMU)

B2C B2B

Initiator Initiator
Influencer Gatekeeper
Decider Influencer
Buyer Decider
User Buyer
User
High Customer Perception vs Motivation

100% 50%
Perception

50% 0%
Low

High Motivation Low

 Sources of Segmentation Data

National Statistics Online - http://www.statistics.gov.uk/

Acorn Classifications Data

Mori and/or Mintel

Quality Press (e.g. Guardian, Independent) - every now and then turn up with more
modern classifications

Institute of Direct Marketing

Chartered Institute of Marketing

WARC Marketing Pocket Book (World Advertising Research Centre)