Market Segmentation, Positioning, and Buyer Behavior in Business and Government Markets

Business market

Larger market in terms of dollars.

Consumer market

Larger market in terms of buyers.

Derived demand

Business demand that comes from consumer demand.

Business buyers/sellers dependence

Fewer, larger purchases create long-term relationships and high switching costs.

High-involvement consumer buying

When consumer buying looks like business buying for expensive or complex purchases (e.g., car, house, college).

Buying center

A group involved in a business purchase decision.

Roles in the buying center

Users, Influencers, Buyers, Deciders, Gatekeepers.

Multiple roles in buying center

One person can hold multiple roles, and a role can be shared by multiple people.

Straight rebuy

Routine reorder, no changes.

Modified rebuy

Buyer changes specs, price, or supplier.

New task

First-time purchase; most effort.

Systems selling

Buying a complete solution/package.

Organizational buying rationality

Not purely rational; mostly rational but influenced by politics, relationships, and risk.

Rational buying focus

Focus on cost, quality, ROI.

Non-rational influences

Emotions, personal interests, and politics influence decisions.

Institutional market

Schools, hospitals, prisons that provide care.

Government market

Agencies at all levels that buy goods/services.

World's largest buyer

The U.S. government.

Government marketing challenges

Contracts often go to the lowest bidder.

Counterexample of government marketing

Defense/aerospace firms market heavily to government.

Segmentation

Dividing a market into groups with distinct needs/behaviors.

Results of segmentation

Groups must be meaningful and actionable.

Criteria for good segments

Measurable, Accessible, Substantial, Differentiable, Actionable.

Geographic variables

Region, city size, climate, population density.

Demographic variables

Age, gender, income, family size, education.

Easiest variables to collect

Demographic and geographic.

Problem with demographic/geographic variables

High variability—people with same demographics may behave differently.

Dude Wipes variables

Gender, lifestyle, humor (demo + psychographic).

Gender segmentation necessity

Not strictly necessary—could succeed with humor/novelty instead.

Psychographic variables

Lifestyle, values, personality.

Behavioral variables

User status, usage rate, loyalty, benefits sought.

Hardest variables to collect

Psychographic variables.

Problem with psychographics

Hard to measure; still useful when combined with others.

Best predictor of future behavior

Past behavior.

User status

Non-user, ex-user, potential, or regular.

Usage rate

Light, medium, or heavy user.

Pareto principle

80/20 rule (20% of buyers = 80% of sales).

Share of wallet

% of customer's spending you capture in a category.

Differentiation

Making your offer meaningfully different.

Positioning

How a brand is perceived in customers' minds vs. competitors.

Two key ideas of positioning

Relative to competitors; mental space in consumer's mind.

Perceptual maps

Graphs showing brands on key attributes.

7 criteria for differentiation

Important, Distinctive, Superior, Communicable, Preemptive, Affordable, Profitable.

Value proposition

Why consumers should buy from you.

Potential value propositions

More for more, More for same, Same for less, Less for much less, More for less.

Targeting

Choosing which segments to serve.

Targeting types

Mass, Differentiated, Concentrated, Micromarketing.

Best for limited resources

Concentrated.

Best for uniform products

Mass marketing.

Best for mature markets

Differentiated.

5 stages of buyer decision process

Need recognition → Info search → Evaluation → Purchase → Post-purchase.

3 factors causing breakdown between intention & purchase

Lack of money, lack of access, changed attitude.

Involvement

Personal importance/interest in a purchase.

High involvement

More thinking/judgment.

Low involvement

Habit/routine decisions.

Celebrity endorsers

Work best for low-involvement products.

Complex buying behavior

High involvement, big brand differences (cars).

Habitual buying behavior

Low involvement, few differences (toothpaste).

Attitude

Consistent evaluation/feeling toward something.

Stability of attitudes

Yes, relatively stable; change with experiences or major events.

Levels of Maslow's Hierarchy

Physiological → Safety → Social → Esteem → Self-actualization.

Ideas about hierarchy

Products can target multiple levels; any product can be marketed at any level.

Forms of selective perception

Attention, Distortion, Retention.

Impact of selective perception on marketing

Ads may be ignored, misinterpreted, or forgotten.

Self-concept

How people see themselves.

Roles vs traits

Roles = positions (student); Traits = qualities (funny).

Actual vs ideal self-concept

Actual = who I am; Ideal = who I want to be.

Reference groups

Groups that influence attitudes/behaviors.

Sequence of reference groups

Family → friends → peers → aspirational.

Factors influencing reference group impact

Importance, similarity, credibility, attractiveness.

Rationality in consumer buying

No—5-20% rational, 80-95% habitual/irrational.

Support for irrational consumer buying

Purchases are often emotional, habitual, or identity-driven.

Link to Bjorn's electric car statement

Even with rational benefits, emotions and habits strongly influence choices.