Understanding Consumer Behavior: Keys to Marketing Success

1. Unit 2 “Understanding Consumers” Consumer Behavior Buying Motives Influences on the Consumer Decision Making Segmentation

2. Why Do People Buy Products? • To satisfy their individual wants and needs. • To enjoy the benefits that products offer. • People make product decisions every day. • Marketers spend millions of dollars to uncover the reasons behind these decisions. Consumer Behavior: The study of consumers and how they make buying decisions. Successful marketers consider: • What makes or forces or influences customers to buy? • How, Where, When & Why they make those choices.

3. 5 Reasons You Buy (Buying Motives) 1. Physical – food, sleep, water, shelter, air 2. Psychological (mental): • Security (physical safety & economic security) • Social ( friends, love, belonging) • Esteem (respect and recognition) 3. Emotional – feelings (pleasure, excitement) 4. Rational – facts (convenience, performance) 5. Patronage – loyalty to a product or business

4. What Influences YOU in Decision-Making? External Internal Marketing Product Price Place Promotion Decision-Making Process: 1) problem recognition; 2) information search; 3) alternative evaluation; 4) purchase; and 5) post-purchase evaluation. Buyer’s Remorse – 2nd thoughts about expensive purchase.

5. 3 Types of Decision-Making • ________________ – purchased frequently with little thought; over time becomes a habit; little to no time to communicate to customers. • _______________ – requires more time and is usually more expensive; some time to give information. • _____________________ - requires going through all five stages; very expensive or life changing; plenty of time/opportunity to communicate to customers.

6. Market Segmentation • Market – all potential customers a company would like to serve. • Mass Marketing – try to appeal to the entire market; “one size fits all”. • Segmentation– ID smaller group(s) whose members share 1+ characteristics (variables). • Target Marketing – focus time, money, and effort on segment that wants to & is able to buy. • “Mass” vs “Target” Pros and Cons?

7. Pros and Cons Vs Mass Marketing Target Marketing More difficult strategy (multiple markets) Better focus of company’s Time Effort Money Concentrates on just those people likely to buy. • Simpler (1) strategy • Reaches more people • Reaches a lot who won’t buy product. • Hopes that the right consumers get message

8. 5 Segmentation Variables • Geographic – dividing consumers into markets based on where they live. • Demographic – age, gender, race, income, and educational level; measurable statistics. • Psychographics – peoples’ social class, lifestyles & personalities (Baby Boomer, active, etc). • Product Usage – how consumers use the product and how often . • Benefits Derived – value or satisfaction consumers receive from a product.

9. How do these variables help a business?

10. Questions for a Good Market Segment • Are there enough customers to be worthwhile? • Would they buy the product? • Can they afford to buy the product? • Can they be reached by promotion/distribution? • Market Potential –total revenue that can be gotten from a market segment. • Market Share – % of the total market that each company or product controls. • Marketing Intelligence – process of gathering competitive marketing information.

11. Types of Competition Competition –rivalry between 2+ businesses for the consumers’ spending money. • Direct – sells product within same category • Indirect – sells product outside of category (Delta vs United; Delta Airlines vs Amtrak Trains) • Price Competition – sales & discounts, etc. • Non-Price Competition – focus is on quality, brand, location, or service.

12. Consumers Benefit From Competition