MGT 252

1. MGT 252 Lecture 3 Understanding the Consumer Market Segmentation Maggie Wenjing Liu

2. Today�s Agenda Understanding Customers Case analysis Segmentation

3. Michael Dell�s secret �It�s really a pretty data-driven process. We have enormous amounts of information on what customers like and don�t like.�

5. Variations in the Purchase Process the consumer can withdraw at any stage some stages may be skipped the stages are generally of varying length some stages may be performed subconsciously

6. Need Recognition may be aroused internally or as a result of an external stimulus Internal stimulus (e.g. hunger) External stimulus (e.g. advertising) needs exist at a series of levels may be driven by the failure or lack of appeal of existing products or services �wants� are also considered �needs�

7. Choice of Involvement Level Determine how much time, effort, and energy to expend in satisfying a need High involvement go through all six stages Low involvement more common some stages are skipped (e.g., from need recognition to purchase) Examples?

8. Choice of Involvement Level Situational factors increasing involvement: lack of information the product is viewed as important the risk of making a bad choice is high

9. Identification of Alternatives

10. Evaluation of Alternatives various alternatives identified must then be evaluated in varying degrees of depth evaluation of alternatives is based on certain criteria, which vary in importance across consumers -- this is what make for the existence of market segments criteria come from several sources, including our own experience and the opinions of others

11. Purchasing and Related Decisions decision to buy is only the beginning of a more complex decision process marketers must make it as easy as possible for the customer to make these decisions the additional decisions that have to be made include where to buy, how to pay for the purchase, how to take delivery, whether to buy the extended warranty, etc. purchase decision is influenced by a series of patronage motives

12. Consumption Experience after buying, the consumer has learned factors that affect future purchases also may go through a period of anxiety known as cognitive dissonance; not sure whether he or she has made the right decision dissonance is greater when price is high, when alternatives are similar, and when the purchase is perceived to be important consumers try to reduce dissonance by seeking positive reinforcement

13. Figure 3-1 The Consumer Decision Making Process and Its Environment

14. Information and Purchase Decisions customer may or may not search for additional information -- depends on current knowledge level and other factors information may come from commercial or social/interpersonal sources advertising is the most common of commercial sources, but also includes sales people, e-mail and the Web most important form of information comes from word-of-mouth

15. Cultural Influences on Behaviour buying is influenced by social forces and groups culture has the most indirect impact; we are all products of a handed-down culture cultural influences change slowly over time ethnic subcultures have a profound effect on how Canadians lead their lives the most obvious subcultural differences are between French- and English-Canadians, although many other ethnic subcultures exist

16. Examples of Cultural Differences Different meanings of colors across countries White death in the Far East; purity in USA Blue female color in Holland; male color in Sweden, USA Red unlucky in Germany; positive in Denmark, Rumania; masculine in UK, France Changes over time It used to be good manners to have ashtrays on hand in any home or office.

17. Reference Group Influences reference groups are those with whom we interact and who influence our attitudes, values and behavior small reference groups establish norms that influence purchase decisions, and their word-of-mouth is considered to be more powerful than advertising and other commercial forces innovators and opinion leaders the family Membership Group Inspiration Group

18. Psychological Factors a stimulated need is a motive; consumers are motivated to act by a variety of motives consumers process information from their environment through perception; the result of stored experiences and references messages are perceived and retained selectively, and may be distorted through rationalization consumers learn from past experience and from information received, and are conditioned to respond in a certain way

19. Figure 3-2 Maslow�s Hierarchy of Needs

20. Personality and Attitudes personality is a pattern of traits that influence behaviour; but it is not always clear how personality affects consumption behaviour a consumer tends to act in a way that is consistent with his or her self-concept Actual Self and Ideal Self Question: which self influence purchase more? attitude is a learned disposition to act in a certain way toward objects. Formed over time, slow to change, and excellent predictors of behavior.

21. Situational Influences purchase situations often influence consumer behaviors. how time affects the decision to buy physical surroundings often influence purchases the terms and conditions surrounding the actual purchase will influence the buying decision the final buying decision is often influenced by the consumer�s physical and emotional condition and mood

22. CASE 2-1 S. C. JOHNSON - Bug Off 1.Can SCJ retain its reputation as a family company with quirky and edgy ads? Should be little difficulty: It has a reliable quality reputation among end consumers for a long time. It is likely that consumers are less familiar with SCJ than with its various brands. Ads for a single brand like Off! are unlikely to affect the image of the company itself. This is a good example of a branding strategy that features the brand of the product rather than name of company.

23. 2. Who is target market and how to reach out? The target segment for Off! is outdoors people and family who spend a lot of time camping, hiking, etc. In that sense it is a functional product that stresses its effectiveness. SCJ is trying to advertise unconventional messages in unconventional media � shopping carts, billboards, etc. It is also doing a very effective job of reaching people at two critical decision points: (1) in the store and (2) on the way to the outdoors.

24. 3. What�s SCJ�s strategy for differentiating Off ? The differentiation strategy is reflected in the message. They are no longer making only product claims. They are trying to imprint the brand in the consumer�s mind by standing out from the crowd. It isn�t a product-based differentiation, backed by claims of product effectiveness. It is a strategy based on communications through messages in terms of their quirkiness and where they appear.

25. Market Segmentation and Other Strategies

29. WHY??? Segmentation Different Customers and different Occasions want different things are able to pay different prices have different information sources buy at different places

30. But� Developing a different marketing program for each customer is extremely expensive. Segmentation allows a marketer to target people that behave similarly. Marketers can then position their products to fit their target market segment.

31. A Definition Segmentation is the process of dividing the total heterogeneous market for a product or service into several segments, each of which tends to be homogeneous in some significant aspects.

33. Example 2: Different companies serve different segments Canoe (located in the 54th floor of TD tower) serves customers who are well-off, care about quality, atmosphere, and services. McDonald (everywhere) serves customers who care about convenience.

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36. Bases for market segmentation

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38. Geographic Segmentation Example Canwest/Global Newspapers

40. Demographic Segmentation Example Age Segmentation: Cruises Colour discrimination: Older people have difficulty distinguishing the green-blue-violet part of the colour spectrum. The marketer should use significant colour contrast to enhance the older consumer�s ability to see packaging, brochures, and displays.

41. Segmentation by Psychographics

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44. Behaviour segmentation

45. Selecting Target Markets

47. Positioning Positioning � arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers (via the use of various marketing techniques and marketing-mix variables). Product position: the way the product is defined by consumers on important attributes � the place the product occupies in consumers� minds relative to competing products.

48. Perceptual map of beer brands One way to think of positioning is with a positioning map.One way to think of positioning is with a positioning map.

50. Choosing a Positioning Strategy Identifying a set of possible competitive advantages. Choosing the right competitive advantages. Selecting an overall positioning strategy.

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52. Positioning strategies

55. Positioning by usage situation

57. Potential positioning problems

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59. Key points for STP

60. Summary Segmentation is the process of dividing a large market into smaller markets Four Main Types of Segmentation Geographic Demographic Psychographic Behavioural Selecting a Target Market Positioning Strategies

61. Next Class Getting the Marketing Information Marketing Research Study Guide: SECTION 6.8.2 p121 Sample Mid-term questions in website Beginning to think about your term project topic.