MKTG2112 1 Foundations of Consumer Behaviour Consumer ...
Foundations of Consumer Behaviour
MKTG2112
Consumer behaviour is the display in searching for; purchasing, using, evaluating and disposing of the products and services that they expect will satisfy their needs. − The study of consumer behaviour includes how consumers think, what they buy, why they buy it, how often they buy it, how often they use it and how they dispose of it. − Organisations require consumer behaviour to better understand: o Changing product life cycles § Many product categories, and changes in them, are driven by product life cycle. § Shorter life cycles arise due to the pace of new product introductions and changes in technology. § Life cycles are increasingly shortened à due to changing technologies o Changing environmental views and concerns § Marketers and public policy makers are aware of the potentially negative impact of products and packaging. § Many consumers are socially aware and favour products that address environmental concerns. o Changing consumer protection and public policy § As a result of consumer research and lobbying, marketers have become more aware of their responsibility to protect consumer interests. § The ACCC ensures that companies act responsibly and ethically in their dealings with consumers. o Growing role of services marketing § Australia’s service sector forms a large part of the economy. Marketing service offerings can be difficult as services are intangible, perishable and inconsistent o Not-‐for-‐profit and social marketing § Organisations in both the public and private non-‐profit sectors recognise the need for marketing strategies that target groups. § Not-‐for-‐profit organisations use consumer research to gain a better understanding of their target market. o Changing nature of global marketing § Australian companies recognise the need to move beyond domestic markets. § By marketing globally, they can achieve economies of scale and increase sales. § The federal government encourages small and medium sized businesses to export. § Cultural needs have to be recognised though. o Changing technology § Companies that are responsive to changing technology, and advances in the way that consumers interact with companies through technology, are able to leverage greater relationships. § Consumers have access to more information than ever before and can easily find, or provide, reviews quickly. o Impact of constant change § Due to continual social, economic and technological changes, marketers need to know which markets to target. § Marketers seek to identify key similarities and differences and then segment their markets accordingly. § Done by identifying common characteristics among groups of consumers. Products are bought for final use by individuals (end-‐users) − For his or her own use − Use by the whole household or a household member − A gift for someone else 1
MKTG2112 Organisational consumers buy products to help run their organisations. The organisational consumer includes: − Commercial for-‐profit businesses − Non-‐profit businesses − Public sector agencies (government departments) − Institutions (schools, churches, sports clubs) The marketplace activities of individuals entail three functions: 1. The consumer (user) -‐ who consumes or uses the product 2. The buyer -‐ who undertakes activities to procure or obtain the product 3. The payer -‐ who provides the money (or other value) to obtain the product. Societal marketing concept − Seeks to fulfil the needs of the target audience in ways that improve society as a whole, while also fulfilling the objectives of the organisation. − Marketers should adhere to principles of social responsibility in the marketing of their goods and services and satisfy the needs and wants of their target markets in ways that preserve and enhance the well-‐being of consumers and society Customer Value − Customer value is a balance between customer’s perceived benefits (economic, functional and psychosocial) and a customer’s resources (money, time, effort and psychological) − Customer satisfaction: o Consumers perception of performance compared to consumer’s expectation of performance − Challenge of establishing and maintaining consumer trust in a company and its products. Trust is the foundation for maintaining long-‐term relationships with customers. − Customer retention: o The strategy of retention is to make it in the best interest of customers to stay rather than switch. o Research shows small reductions in customer defections produce significant profit increases due to the fact that: § Loyal customers buy more products and are less price-‐sensitive § It is cheaper to service existing customers § Loyal customers spread positive word-‐of-‐mouth and refer other customers. § Double Jeopardy in marketing: & the habit paradigm: the bigger your share the more loyal your customers o Implies -‐ brand share depends largely on mental and physical availability, rather than differentiated appeals of different brands. Consumer categories − Repeat purchasers of your brands − Light or occasional purchasers of your brands − Category purchasers, but not your brand − Non-‐category purchases Consumer decision-‐making (picture) Market segmentation is the process of dividing a market into distinct subsets of consumers with common needs and selecting one or more segments to target with a distinct marketing strategy. − The marketer may then decide to target that segment. − In doing so, they will adapt the image of the product – position it – so that it will appeal to the consumers in the segment. − Consumers all have similar biological needs: food, water and shelter. − Many people develop similar needs. − This creates a market segment – a group of consumers all with the same or similar needs. 2
MKTG2112 − It can also be used to expand a market, or enter a new one, by more effectively satisfying the specific needs or wants of particular consumers. − Retailers have also adopted segmentation to target different markets. − It operates: o Used to guide the positioning of a new product, or the repositioning of an existing product. o Marketers have to consider the different segmentation variables. o Segmentation research also aids in the identification of appropriate media vehicles. o Research can identify profiles of readers of different magazines, viewers of different TV programs and listeners of different radio stations. o Marketers can then match their message to the correct magazine, TV or radio station to best effect. − Criteria for effective targeting: o Identifiable: able to identify and measure the characteristic o Stable: in herms of lifestyles and consumption patterns o Congruent: with company objectives and resources o Sizeable: segment is stable in terms of needs, demographics and psychological factors o Accessible: able to access and reach the segment in an economical way Geographic segmentation − The market is divided by location. − Consumers living in the same area are assumed to share the same needs and wants. Demographic segmentation − Segmentation based upon the identifiable and measurable statistics of a population: age, gender, marital status, income, education and occupation. − Used to locate a target market. − Most accessible and cost-‐effective means of identification. Psychographic segmentation − Commonly referred to as lifestyle analysis. − Psychographic segmentation employs a series of statements designed to identify relevant elements of a consumer’s: personality, buying motives, interests, attitudes, beliefs and values. Sociocultural segmentation − Sociocultural variables (group and cultural) can be used to subdivide markets. − Division is based upon: family life cycle, social class, core cultural values, subcultural memberships and cross-‐cultural affiliation. User related segmentation − User-‐related segmentation categorises consumers in terms of product, brand or service-‐usage. − Characteristics include: rate of usage (heavy, medium, light and non-‐users), awareness, degree of brand loyalty (highly brand loyal to brand switchers). Benefit segmentation − Benefit segmentation, also known as needs-‐based segmentation, examines the major benefits consumers look for in the product class. − Changing lifestyles play a major role in determining important product benefits. − Can be used very effectively for niche market segmentation. 3
MKTG2112 Hybrid segmentation approaches − A hybrid segmentation approach allows the marketer to combine individual approaches to define and identify segments more accurately. − Demographic/psychographic profiling – highly complimentary. Very useful to segment mass markets. − Geodemographic segmentation – assumes that similar financial means, tastes etc. will come together in proximity. Most useful when best prospects can be isolated in terms of where they live. − VALS – segments the population on the basis of attitudinal and demographic questions. Defined in three primary motivations: ideals, achievement and self-‐expression. Implementing segmentation strategies − Behavioural targeting and micro-‐targeting enables marketers to deliver personalised advertising messages. Based upon usage behaviour. − Micro-‐targeting – applies narrowcasting to deliver personalised messages to individuals following extensive use of hybrid segmentation techniques. − Concentrated marketing – targets one segment with a unique marketing mix. − Differentiated marketing – involves targeting several segments with individualised marketing mixes. − Counter-‐segmentation – the marketer combines two or more smaller segments and targets based upon a generic need. Textbook: − Embracing the marketing concept: to identify consumers’ unsatisfied and unrecognised needs, it is important to constantly conduct market research studies to monitor their needs and preferences with respect to the products and services that they currently market and those they would wish to develop in the future. These studies reveal that consumers and highly complex individuals therefore it would be wise for a company to target different products and services to different market segments. − Our society is a study in diversity – diversity among consumers, marketers, retailers, advertising media, cultures and customs – but there are also many similarities among consumers. − Segmenting target audiences on the basis of similarities makes it possible for marketers to design marketing strategies with which their consumers identify. − Before the widespread adoption of market segmentation, the prevailing way of doing business with consumers was through mass marketing – offering the same product to all consumers − A segmentation criterion is used to place potential buyers into two or more subgroups using measurable and accessible criteria. − Targeting can help marketers develop the right product for each target market and adjust their prices, distribution channels and marketing communications to reach their target market more efficiently and effectively. − With consumers having different requirements, target marketing is increasingly taking the form of micromarketing. − Repositioning is accomplished by changing the promotional appeal the distribution strategy or the price, based on the characteristics of a new segment or changing characteristics of the existing segment.
4
Consumer as an Individual
MKTG2112
Consumer Research: − Primary research: o Qualitative is in focus groups and in depth interviews o Quantitative: observational research, experimentation and survey research Consumer Needs and Motivation − Motivation is defined as the driving force within individuals that impels them to action. − This driving force is produced by a state of tension that exists as the result of an unfulfilled need. − Individuals strive both consciously and subconsciously to reduce the tension they feel by addressing the need. − Needs underlie all human actions. A need becomes a motive when it is aroused to a sufficient level of intensity − Two types of needs are: − Goals o Goals are the sought after results of motivated behaviour. o Can be considered to be internal representations of desired states. o Marketers are concerned with consumers’ product‐specific goals: § That is, the branded products that they select to fulfil their needs. − Goals are selected through: o Personal experiences o Physical capacity o Cultural values and norms o Accessibility in physical and social environment − Interdependence of needs and goals o Needs cannot exist without goals. o Can sometimes be difficult to identify needs: § Physiological needs are generally easily identified – hungry, thirsty, cold, hot § Psychological needs are not generally easy to identify – self esteem, status, social. − Positive and negative motivation o Positive goals: referred to as an approach object o Negative goals: referred to as an avoidance object o One consumer may join a gym in order to get fit (approach object) or another consumer may join the gym to stop getting fat (avoidance object) − Rational versus emotional motives o Rational – consumers select goals based upon objective criteria o Emotional – consumers selected based upon personal or subjective criteria − Motivation is a dynamic contrast: needs and goals are ever changing o Needs are never fully satisfied o New needs emerge as old needs are satisfied o Success and failure influence goals o Substitute goals may be pursued (if another goal is unattainable) 5
MKTG2112
Consumer behaviour is the display in searching for; purchasing, using, evaluating and disposing of the products and services that they expect will satisfy their needs. − The study of consumer behaviour includes how consumers think, what they buy, why they buy it, how often they buy it, how often they use it and how they dispose of it. − Organisations require consumer behaviour to better understand: o Changing product life cycles § Many product categories, and changes in them, are driven by product life cycle. § Shorter life cycles arise due to the pace of new product introductions and changes in technology. § Life cycles are increasingly shortened à due to changing technologies o Changing environmental views and concerns § Marketers and public policy makers are aware of the potentially negative impact of products and packaging. § Many consumers are socially aware and favour products that address environmental concerns. o Changing consumer protection and public policy § As a result of consumer research and lobbying, marketers have become more aware of their responsibility to protect consumer interests. § The ACCC ensures that companies act responsibly and ethically in their dealings with consumers. o Growing role of services marketing § Australia’s service sector forms a large part of the economy. Marketing service offerings can be difficult as services are intangible, perishable and inconsistent o Not-‐for-‐profit and social marketing § Organisations in both the public and private non-‐profit sectors recognise the need for marketing strategies that target groups. § Not-‐for-‐profit organisations use consumer research to gain a better understanding of their target market. o Changing nature of global marketing § Australian companies recognise the need to move beyond domestic markets. § By marketing globally, they can achieve economies of scale and increase sales. § The federal government encourages small and medium sized businesses to export. § Cultural needs have to be recognised though. o Changing technology § Companies that are responsive to changing technology, and advances in the way that consumers interact with companies through technology, are able to leverage greater relationships. § Consumers have access to more information than ever before and can easily find, or provide, reviews quickly. o Impact of constant change § Due to continual social, economic and technological changes, marketers need to know which markets to target. § Marketers seek to identify key similarities and differences and then segment their markets accordingly. § Done by identifying common characteristics among groups of consumers. Products are bought for final use by individuals (end-‐users) − For his or her own use − Use by the whole household or a household member − A gift for someone else 1
MKTG2112 Organisational consumers buy products to help run their organisations. The organisational consumer includes: − Commercial for-‐profit businesses − Non-‐profit businesses − Public sector agencies (government departments) − Institutions (schools, churches, sports clubs) The marketplace activities of individuals entail three functions: 1. The consumer (user) -‐ who consumes or uses the product 2. The buyer -‐ who undertakes activities to procure or obtain the product 3. The payer -‐ who provides the money (or other value) to obtain the product. Societal marketing concept − Seeks to fulfil the needs of the target audience in ways that improve society as a whole, while also fulfilling the objectives of the organisation. − Marketers should adhere to principles of social responsibility in the marketing of their goods and services and satisfy the needs and wants of their target markets in ways that preserve and enhance the well-‐being of consumers and society Customer Value − Customer value is a balance between customer’s perceived benefits (economic, functional and psychosocial) and a customer’s resources (money, time, effort and psychological) − Customer satisfaction: o Consumers perception of performance compared to consumer’s expectation of performance − Challenge of establishing and maintaining consumer trust in a company and its products. Trust is the foundation for maintaining long-‐term relationships with customers. − Customer retention: o The strategy of retention is to make it in the best interest of customers to stay rather than switch. o Research shows small reductions in customer defections produce significant profit increases due to the fact that: § Loyal customers buy more products and are less price-‐sensitive § It is cheaper to service existing customers § Loyal customers spread positive word-‐of-‐mouth and refer other customers. § Double Jeopardy in marketing: & the habit paradigm: the bigger your share the more loyal your customers o Implies -‐ brand share depends largely on mental and physical availability, rather than differentiated appeals of different brands. Consumer categories − Repeat purchasers of your brands − Light or occasional purchasers of your brands − Category purchasers, but not your brand − Non-‐category purchases Consumer decision-‐making (picture) Market segmentation is the process of dividing a market into distinct subsets of consumers with common needs and selecting one or more segments to target with a distinct marketing strategy. − The marketer may then decide to target that segment. − In doing so, they will adapt the image of the product – position it – so that it will appeal to the consumers in the segment. − Consumers all have similar biological needs: food, water and shelter. − Many people develop similar needs. − This creates a market segment – a group of consumers all with the same or similar needs. 2
MKTG2112 − It can also be used to expand a market, or enter a new one, by more effectively satisfying the specific needs or wants of particular consumers. − Retailers have also adopted segmentation to target different markets. − It operates: o Used to guide the positioning of a new product, or the repositioning of an existing product. o Marketers have to consider the different segmentation variables. o Segmentation research also aids in the identification of appropriate media vehicles. o Research can identify profiles of readers of different magazines, viewers of different TV programs and listeners of different radio stations. o Marketers can then match their message to the correct magazine, TV or radio station to best effect. − Criteria for effective targeting: o Identifiable: able to identify and measure the characteristic o Stable: in herms of lifestyles and consumption patterns o Congruent: with company objectives and resources o Sizeable: segment is stable in terms of needs, demographics and psychological factors o Accessible: able to access and reach the segment in an economical way Geographic segmentation − The market is divided by location. − Consumers living in the same area are assumed to share the same needs and wants. Demographic segmentation − Segmentation based upon the identifiable and measurable statistics of a population: age, gender, marital status, income, education and occupation. − Used to locate a target market. − Most accessible and cost-‐effective means of identification. Psychographic segmentation − Commonly referred to as lifestyle analysis. − Psychographic segmentation employs a series of statements designed to identify relevant elements of a consumer’s: personality, buying motives, interests, attitudes, beliefs and values. Sociocultural segmentation − Sociocultural variables (group and cultural) can be used to subdivide markets. − Division is based upon: family life cycle, social class, core cultural values, subcultural memberships and cross-‐cultural affiliation. User related segmentation − User-‐related segmentation categorises consumers in terms of product, brand or service-‐usage. − Characteristics include: rate of usage (heavy, medium, light and non-‐users), awareness, degree of brand loyalty (highly brand loyal to brand switchers). Benefit segmentation − Benefit segmentation, also known as needs-‐based segmentation, examines the major benefits consumers look for in the product class. − Changing lifestyles play a major role in determining important product benefits. − Can be used very effectively for niche market segmentation. 3
MKTG2112 Hybrid segmentation approaches − A hybrid segmentation approach allows the marketer to combine individual approaches to define and identify segments more accurately. − Demographic/psychographic profiling – highly complimentary. Very useful to segment mass markets. − Geodemographic segmentation – assumes that similar financial means, tastes etc. will come together in proximity. Most useful when best prospects can be isolated in terms of where they live. − VALS – segments the population on the basis of attitudinal and demographic questions. Defined in three primary motivations: ideals, achievement and self-‐expression. Implementing segmentation strategies − Behavioural targeting and micro-‐targeting enables marketers to deliver personalised advertising messages. Based upon usage behaviour. − Micro-‐targeting – applies narrowcasting to deliver personalised messages to individuals following extensive use of hybrid segmentation techniques. − Concentrated marketing – targets one segment with a unique marketing mix. − Differentiated marketing – involves targeting several segments with individualised marketing mixes. − Counter-‐segmentation – the marketer combines two or more smaller segments and targets based upon a generic need. Textbook: − Embracing the marketing concept: to identify consumers’ unsatisfied and unrecognised needs, it is important to constantly conduct market research studies to monitor their needs and preferences with respect to the products and services that they currently market and those they would wish to develop in the future. These studies reveal that consumers and highly complex individuals therefore it would be wise for a company to target different products and services to different market segments. − Our society is a study in diversity – diversity among consumers, marketers, retailers, advertising media, cultures and customs – but there are also many similarities among consumers. − Segmenting target audiences on the basis of similarities makes it possible for marketers to design marketing strategies with which their consumers identify. − Before the widespread adoption of market segmentation, the prevailing way of doing business with consumers was through mass marketing – offering the same product to all consumers − A segmentation criterion is used to place potential buyers into two or more subgroups using measurable and accessible criteria. − Targeting can help marketers develop the right product for each target market and adjust their prices, distribution channels and marketing communications to reach their target market more efficiently and effectively. − With consumers having different requirements, target marketing is increasingly taking the form of micromarketing. − Repositioning is accomplished by changing the promotional appeal the distribution strategy or the price, based on the characteristics of a new segment or changing characteristics of the existing segment.
4
Consumer as an Individual
MKTG2112
Consumer Research: − Primary research: o Qualitative is in focus groups and in depth interviews o Quantitative: observational research, experimentation and survey research Consumer Needs and Motivation − Motivation is defined as the driving force within individuals that impels them to action. − This driving force is produced by a state of tension that exists as the result of an unfulfilled need. − Individuals strive both consciously and subconsciously to reduce the tension they feel by addressing the need. − Needs underlie all human actions. A need becomes a motive when it is aroused to a sufficient level of intensity − Two types of needs are: − Goals o Goals are the sought after results of motivated behaviour. o Can be considered to be internal representations of desired states. o Marketers are concerned with consumers’ product‐specific goals: § That is, the branded products that they select to fulfil their needs. − Goals are selected through: o Personal experiences o Physical capacity o Cultural values and norms o Accessibility in physical and social environment − Interdependence of needs and goals o Needs cannot exist without goals. o Can sometimes be difficult to identify needs: § Physiological needs are generally easily identified – hungry, thirsty, cold, hot § Psychological needs are not generally easy to identify – self esteem, status, social. − Positive and negative motivation o Positive goals: referred to as an approach object o Negative goals: referred to as an avoidance object o One consumer may join a gym in order to get fit (approach object) or another consumer may join the gym to stop getting fat (avoidance object) − Rational versus emotional motives o Rational – consumers select goals based upon objective criteria o Emotional – consumers selected based upon personal or subjective criteria − Motivation is a dynamic contrast: needs and goals are ever changing o Needs are never fully satisfied o New needs emerge as old needs are satisfied o Success and failure influence goals o Substitute goals may be pursued (if another goal is unattainable) 5
