​Consumer Decision Making and Market Segmentation

Need recognition

perceived actual state and plausible desired state

Information search

internal and external ask a friend or google

Alternative evaluation

systematic and heuristic processing

Purchase

product is out of stock or purchasing process is too long

Post Purchase

evaluate if we like the product or not/ satisfaction with the purchase/ expectancy confirmation theory and outcomes / good data opportunity

1. What are factors that affect the consumer purchase decision journey?

Decision-making complexity

Individual differences

Social influences

Situational influences

Decision-making complexity

High personal, social, or financial risk coupled with lack of experience

Individual differences

Demographic, psychographic, geographic, behavioral

Social influences

Culture, subculture, social class, reference groups (targeting the neighbors' different types of appeals to energy in cali/ kids don't make the decision they have influence), and family

Situational influences

Physical and spatial, time, social and interpersonal, purchase task or product usage, consumer dispositional

What are the four types of business markets

commercial, reseller, government, institutional

Commercial market

buying raw materials for finished goods

Reseller market

Buy producer finished goods and sell at a profit

Government market

Federal, state, local, county, city purchases to provide services to citizens: education, fire, road, police, etc.

Institutional market

Noncommercial; churches, schools, hospitals, etc.

Market Segmentation

Dividing the total market for a product into homogenous segments or groups

Why Segment?

Identify the most profitable customers, Capture maximal value via price discrimination, Reduce the costs of marketing activities, Provide guidelines for marketing decisions (e.g., Marketing Mix)

What are segmenting consumer markets

1. Demographic

2. Psychographic

3. Geographic

4. Behavioral

Demographic Segmentation

Gender Age/Lifecycle, income, education, occupation

Psychographic Segmentation

Personality (OCEAN) VALS Framework (Motives, Values) Lifestyle/Activities

Geographic Segmentation

Weather, culture, access, Geodemographic PRIZM

Behavioral Segmentation

Product usage and why people buy/benefits sought

Segmentation Approaches (Traditional Market)

Mass Marketing, Differentiated Marketing, Niche Marketing

Segmentation Approaches (Individualized Market)

One-to-One Marketing, Mass Customization, Permission Marketing

Patterns of target market selection

Single-segment concentration, Selective targeting, Product specialization, Market Specialization, Mass market targeting

Single-segment concentration

Capabilities are tied to the needs of a specific target market, Complete understanding of customers' needs, preferences, and lifestyle, Focus on quality and customer satisfaction, Example: Local vets, doctors, dentists, restaurants, and dating sites

Selective targeting

Multiple capabilities in many product categories, Focus on most attractive market segments, Diversification of the firm's risks

Product specialization

When expertise in one market category can be leveraged across different markets.

Market Specialization

Extensive knowledge and expertise in one market.

Mass market targeting

Development of multiple programs to serve all customer needs simultaneously.

How services differ from products

intangible, inseparable, heterogeneous, perishable

Perishability

Services can't be inventoried or stored.

Heterogeneity

Unwanted or random levels of service quality customers receive when they patronize a service firm.

Inseparability

Simultaneous production and consumption.

Intangibility

Lack of tangible assets which can be seen, touched, or smelled prior to purchase.

Pricing strategies

Various methods used to set prices for products or services.

Price skimming

Set the initial price high for the introduction of a new product or service before decreasing the price.

Price penetration

Set the initial price low to maximize sales, exposure, and grow market share before increasing the price.

Freemium pricing

Free for the basic version or trial period, aiming to secure paid upgrades or renewals.

Prestige pricing

High price to promote exclusivity and luxury.

Value-based pricing (EDLP)

A pricing strategy where retail prices are somewhat between regular prices and deep-discounted prices.

Adjusting the base price

Includes discounting, reference pricing, odd pricing, price bundling, and tiered pricing.

High/low pricing

A pricing strategy that relies on promotion of sales, during which prices are temporarily reduced to encourage purchase.

Price strategies in business markets

1. Trade discounts:

2. Discounts and allowances

3. Geographic pricing

4. Transfer pricing

5. Barter and countertrade

Research and development

Integral to marketing success.

Customized marketing solutions

Can be offered through extensive knowledge and expertise in one market.

Service provider quality

Critical to the customer experience in inseparable services.

Physical evidence

Customers often rely on this to gauge quality of services.

Service prices

Difficult to set and justify due to intangibility.

Trade discounts

Reduced prices for intermediaries such as wholesalers.

Discount or allowances

Cash, quantity purchased, seasonal, or allowances for ads.

Per unit/user pricing

Subscription services offering reduced prices for larger number of employees (Zoom, office).

Geographic pricing

Transportation costs, distance, and zone pricing.

Transfer pricing

When one unit in an organization sells to another unit.

Barter and countertrade

In international trade, the use of products, not cash, for payments or partial payment in cash and goods.

AIDA Model

Awareness, Interest, Desire, Action; used to determine objectives in a communication campaign.

Informational Appeals vs. Emotional appeals

Different methods to convey the message in a communication campaign.

Media selection

Depends on Reach (Number of people), Targeting (the right audience), Budget, Nature of message.

Awareness metrics

Brand recall, product awareness, attribute awareness.

Impact metrics

Cause attitude, evaluation of issues, donation intentions, donation amount, signing petitions.

Advantages of Branding

Product awareness and identification, shopping efficiency and comparison shopping, product acceptance, risk reduction, enhanced self-image and product loyalty.

Brand Equity

The difference between the value of the brand to the customer and the value of the consumer of the product without that branding.

Branding Strategies

Manufacturer vs. Private label, Family vs. Individual, Cobranding vs. brand licensing.

Positioning

Providing a clear, distinct, and attractive position relative to competitors/competing products.

Positioning Statement

How do you want to be seen by the target segment(s)? What is distinctive and relevant about your company and offerings?

Perceptual Map

A positioning tool that summarizes visually the way customers compare brands on different dimensions.

Positioning Strategies

Strengthening a current position, monitor the target market's wants and satisfaction, continually raising the bar: customer expectations.

Finding a new positioning

May require a focus on new products; firms like Apple and Stryker embrace innovation.

Renova Case options

Lower price, produce for private labels, functional innovation, black toilet paper as a limited time PR opportunity, black toilet paper as a full product line.