Market Segmentation

• Market segmentation is the process of dividing a target market into smaller, more defined categories. It segments customers and audiences into groups that share similar characteristics such as demographics, interests, needs, or location.

Consumer Behavior & Psychology

Definition

• Consumer buyer behavior refers to the buying behavior of final consumers- individuals and households that buy goods for consumption- Kotler

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• All these final consumers make up the consumer market

Characteristics Affecting Consumer behavior

• Cultural Factors
• Social Factors
• Personal Factors
• Psychological Factors

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Cultural Factors

• Culture- set of basic values, perceptions and behavior learned by a member of society from family and other institutions

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• Subculture- a group of people with shared value systems based on common life experiences

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• Social class- relatively permanent and ordered divisions in a society whose members share similar values and behavior

Social Factors

• Groups- Two or more people interact to achieve mutual goals. Reference groups serve as points of comparison and influence buyer behavior. Opinion leaders drive trends and influence mass opinion
• Family- buying roles have changed with evolving consumer lifestyles. Wives, children play a larger role.
• Roles & Status- a person plays different roles in their lives and is accorded a status based on these roles.

Personal Factors

• Age & life-cycle stage- impact of the family life cycle needs to be considered.
• Occupation
• Economic situation
• Lifestyle- depicts a persons pattern of living. Lifestyle profiling helps to understand persons method of interaction with the world
• Personality & self concept- can be used to describe certain characteristics like sociability, aggressiveness, etc.

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Psychological Factors

• Motivation- a need that is sufficiently pressing to direct the person to seek satisfaction
• Perception- process by which people select, organize & interpret information to form a meaningful picture
• Learning – changes in an individuals behavior arising from experience
• Beliefs & Attitudes- belief is a descriptive thought that a person has about something. Attitude describes a persons consistent tendency towards and object/idea. Attitudes are difficult to change

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Types of Buying Decision Behavior

Complex Buying Behaviour

Type of Product

• Expensive
• Risky
• Purchased infrequently
• Highly self-expressive

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Brand

• Must understand the information gathering and evaluation behaviour of buyers
• Need to help buyers learn about the product –class, attributes and relative importance
• Describe benefits – Print media
• Motivate stores sales people and buyers acquaintance to influence the final brand choice

Dissonance-reducing Buying Behaviour

Type of product

• Expensive
• Risky
• Purchased infrequently
• Highly self-expressive

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Brand

• Provide a good price
• Offer convenience
• Mitigate dissonance - provide after sales communication with evidence and support to help consumers feel good about there product

eg; Carpets, Furniture

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Habitual Buying Behaviour

Type of product

• In expensive
• Frequently Purchased
• Familiar/ loyal

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Brand

• Provide a good price
• Offer Promotions
• Create top of mind – use colors symbols (TV led advertising)

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eg; personnel care products

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Variety Seeking Buying Behaviour

Type of product

• In expensive
• Frequently Purchased
• Familiar
• Large choice/variety

Brand

• Market Leader – create habitual behaviour
• Dominating shelf space
• Stocking up
• Reminder advertisements
• Challengers
• Offers lower price/special deals
• Coupons, samples
• Advertising that presence reason for trying something new

eg; confectionary

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The Buyer Decision Process

The Buyer Decision Process for New Products

Consumer go through five stages in the process of

adopting a new product:

• Awareness
• Interest
• Evaluation
• Trial
• Adoption

Individual Differences in Innovativeness

Influence of Product Characteristics on Rate of Adoption

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• Relative advantage
• Compatibility
• Complexity
• Divisibility
• Communicability

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Business Buyer Behavior

Major types of Buying situations

• Straight re-buy- buyer routinely reorders without any modification
• Modified re-buy- buyer may modify product specs, prices, terms, etc.
• New task- purchases a product or service for the first time
• Systems selling- buying a packaged solution from a single seller

Participants in the Business buying

• Users- Members who will actually use the product
• Influencers- people who affect the buying decision. Will provide information to evaluate alternatives
• Buyers- people with authority to select buyer and arrange terms of purchase
• Deciders – have the power to select/approve the vendor
• Gatekeepers- control the flow of information to others

Major influences on business buyer behavior

Stages of the business buying process