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CONSUMER BEHAVIOUR

Unit I: what is CB, why to study CB, application of CB pincipl!s to stat!"ic

#a$!tin"% Rol! of #a$!tin" in CB, #a$!tin" s!"#!ntation and CB

&% Ma$!tin" and Custo#! Oi!ntation

We should understand about the discipline of consumer behaviour in relation to marketing.&%& 'hat is #a$!tin"(

The philosophy - also termed as marketing concept - has its roots in market economy. There

are four critical ideas that form the foundation of such an economy:

• Individuals pursue their self-interest to seek rewarding experience

• Their choices determine as to what would constitute such experience, the choices

themselves being shaped by personal taste! and external cultural! influences.

• "onsumers en#oy the freedom to choose$ they are sovereign.

• This freedom ensures free and competitive exchange between %buyers and sellers&.

'arketing in turn is based on these four principles.

Thus marketing can be defined as an Introduction

)*oc!ss that ai#s at satisfyin" indi+idual and o"aniational n!!ds -y c!atin",off!in" and !.chan"in" co#p!titi+!ly #ad! poducts that po+id! +alu! to th!

-uy!s/

Today our focus is on customer. (b#ectives like revenue, profit, market share, etc. )e

important, but they will flow only by ac*uiring customer competence. In our country particularly the customer, even as late as in +s, was bereft of alternatives$ he would

uncomplainingly buy whatever the seller dished out. /ot any more. Today0s choice

empowered customer, supported by a competitive environment, global *uality, and neweconomic realities, decides the fate of the marketer.

1o let0s define 'arketing once more: %It is a total business philosophy aimed at identifying

the needs of each customer group, then designing and producing product 2 service package

so as to serve the groups more effectively than the competitors&.0his d!finition !+!als th!! $!y di#!nsions of #a$!tin":

• It s!!$s to id!ntify custo#! n!!ds: 'any manufacturers would know all there is

to know about relevant production technology, but nothing about their customers0wants. They may design products with fancy features without considering the

perceived value of such features to their buyers. Then they wonder why their sales

staff fails to push the product in the market.

• Ma$!tin" att!#pts to s!l!ct custo#! "oups fo which it can d!+!lop a

co#p!titi+! !d"!: "ompanies taking a shotgun approach - meaning all things to all

people - inevitably end up with tactful of unsold product inventories. Those

companies which concentrate their limited resources on meeting specific needs of

the customer have better chances of succeeding.

• It d!si"ns and poduc!s th! i"ht poduct pac$a"!s:

when a company attempts to sell a 'ercedes while the customer is demanding a 3en

si4ed car, failure will greet it with open arms.

&%1 Ma2o Conc!pts in Ma$!tin"

5 course in "onsumer 6ehaviour uses certain terms repeatedly. It would be desirable

therefore that you learn their meaning from the beginning itself.

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combination of these marketing mix <actors so that best sales are generated. 5ny mistake or

delay can cost a marketer dear.

Ma$!tin" #i. +aia-l!

*oduct

We as customers view a product as a =bundle of satisfaction0 and not merely the physicalob#ect. We give importance to both the tangible and intangible attributes of a product.

Intangibles provide psychological and social benefits for the buyer. That is why during

>->+ midsi4e cars had a better sales growth rate than smaller cars$ 'aruti- salesactually declined.

Bandin"

5 firm brands its product to provide it a distinct identity. 5 brand carries brand e*uity, i.e.,reputation. ;osing brand e*uity means losing sales. <or example, this happened to ;imca at

the time of the 6?( controversy.

*ac$a"in"

<or the customer packaging is both a protective and a promotional device: @ackage is themessage, as it is called. @ackaging facilitates brand identification and may even motivate a

person to buy a product like perfume!. It serves as a critical reminder at that critical

moment when the customer is choosing from among several competing brands. In factwhenever a customer visuali4es about a product, its packaging is the first thing that he sees

in his mental eyes.

5s a test, #ust think about @epsi or "oke right now. The first thing you will do is visuali4ingthe distinctive shape of the bottle

*oduct 7if! Cycl!

;ike us human beings, products also take birth through introduction, develop grow!, agemature!, and eventually decline die!. In the first phase, a newly developed product is

introduced in the market, which finds relatively few customers.

If it is an innovative product say a perfumed fabric! then the marketer stimulates primary

demand by educating the customer. In the growth stage, more and more customers start

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buying. 6ut new brands also enter the market. 9ence the marketer has to talk about

differentiating features of his brand. In maturity the brand competes with other successful

brands for selling in a stagnant market. 1o price cuts, exchange offers or add-ons are used towoo the customers.

"ommunication is image based attempting to perfect and reinforce the brand loyalty.

<inally, many products face a phase of obsolescence. 1ome products may of course have acyclical demand pattern. They bounce back after a gap. <or example, in >+ larger frame

sunglasses have comeback. The marketer may even reformulate2reposition a product to

begin a new life like Aabur 9oney or 'ilkmaid. (n the other hand some products have a=stillborn0 fate or may die an infantile death, like )eal ?alue ?acuumi4er.

*icin"

@rice has to be fixed in such a manner as on one hand it is lower or e*ual to the value

delivered by the product, and on the other hand it should cover at least all manufacturingand post manufacturing transportation, warehousing, promotional! costs plus the targeted

level of profit margin. 5ctual price fixing of course depends on the functional features of

the product and the image of the brand. Then there is the degree of competition that dictates

the price of a brand vis-B-vis its competing brands-. That is why you would find @epsi and"oke priced at same level.

<or example price package may give the message of affordability, exclusiveness, etc."artier watches, for example.

*lac!#!nt

@lace convenience is needed to make purchase. 5 marketer has to decide about two things:Ceeping in mind customer0s re*uirements, first, what will be the channel of distribution$

and, second, how will the goods be actually distributed.

@hysical distribution activities are related to the movement of products from the production

site to purchase point. While the buyer must get it in right shape and at right time, thesender should be able to ensure availability at minimum cost to him. The marketer can

either sell directly to the customers or through middlemen. 5 typical distribution chain

could include movement of product from manufacturer to wholesaler to retailer to customer.

*o#otion

@romotion is also called marketing communication. It aims at informing and persuading the

customer to buy whatever the marketer is offering. 1ince a customer can be reached througha number of channels, companies undertake integrated communication, which is a

combination of personal selling, advertising, public relations, and sales promotion.

&%8% E#!"in" I#p!ati+!s

"ustomer of today is the arbiter of corporate destiny. 9e is unrelenting, demanding, andfinicky. 9e wishes to fulfill his needs in the most cost effective manner. "onsumer spending

are rising rapidly, while savings rate in India is falling.

What are the today0s realitiesD

• Today0s customer is exposed to international *uality, thanks to the entry of more

players - from within India and abroad - in the market in post liberali4ed India.

• 1o he dictates specifications, *uality standards, and even chargeable price.

• 9e wants everything here and now.

• 6oth budget shoppers and high spenders are demanding better return for the money

they spend.

0his in tun has s!+!al l!ssons fo th! #a$!t!s:

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• 5 marketer has to act like a long-term investor. E 9e has to be prepared to accept

wafer thin profit margins.

• 9ence all the planning processes and the people of the organi4ation have to be

configured around the central character, vi4., and the customer.

• 'arketing effort has to be directed at meeting customer needs, and not earning

profits, or building markets. The latter will of course be a fall out of the customerfocus.

• In the competitive world, the marketer has to strategi4e to deliver customer value

greater than that provided by his competitors.

The corporation has to exist for the customer$ the company has to customeri4e itself. 1uchan organi4ation will have to establish a link between itself and the customers in the

following manner:

<ig +.> essence of customer orientation.

1% 9i+!sity in Ma$!t *lac!

• We as consumers differ in age, gender, education, occupation, marital status,

activities F interests, preferences, opinions, foods they eat and products we buy.

• There is diversity among marketers$ not only among producers but also sellers.

Traditional retailers, mass merchandisers, discount stores, and off-price stores. 6ut

there has been a shift from mass marketing to niche marketing to direct marketing,

from custom catalogs to television shopping to cyber shopping.

• There is a great diversity in advertising media. In addition to the traditional broadcast and print media, we have ethnic media within a great variety of alternative

media.

below table shows us how consumers have changed over three decades. In fact, you can seein your own family, if you take your parents as buyers and yourself as a buyer and then see

the difference in your behaviour.

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Chan"!s in consu#! B!ha+iou

The commonality of need constitute a #a$!t s!"#!nt, enabling the marketer to design

specific products or promotional appeals to satisfy the needs of that segment

They have also taken steps by moving away from the traditional distribution channels, tocustomi4ed designed channels and now to direct marketing or to selling directly to the

customers.

So#! chan"!s in th! #a2o s!"#!nts of lif! w! can id!ntify a! as follows:

• *i#ay n!!ds- health, hygiene, basic foods and clothing.

• 7i+in" styl!s- expressed in products such as #eans, fun foods, "A0s.

• I#itation of th! afflu!nt and ego based life styles expressed in expensive watches,

luxury cars.

• Hi"h t!chnolo"y to #atch "lo-al co#p!titi+!n!ss faxes, e-mail, Internet,

photocopying machines along with "5A, "5' and imaging.

•The challenge before the marketer is to determine the appropriate marketingchannels and consumer psychographics to have a better understanding of the

behavour aspects of target market.

• In spite of being surrounded by diverse goods and services, and the freedom to

choose the desired product or service, there are also many similarities found among

consumers.

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If we look at consumer 6ehaviour as a discipline, we can say that:

• We as consumers did not always act or react as marketing theory suggested they

would.

• 5ccelerated rate of new product development

• The consumer movement

• @ublic policy concerns• Gnvironmental concerns

• The opening of national markets throughout the world.

;et us now look at the scope of "onsumer 6ehavior. The scope covers:

• What they buy

• Why they buy

• When they buy

• Where they buy it

• 9ow often they buy it

• 9ow do they buy it

5 well-developed and tested model of buyer behaviour is known as the stimulus-responsemodel, which is summarised in the diagram below:

The 1timulus Hresponse model of 6uying behaviour

In the above model marketing and other stimuli enter the customers %black box& and produce certain responses.

We must try to work out what goes on the in the mind of the customer or the %black box&.

The 6uyer0s characteristics influence how he or she perceives the stimuli$ the decision-

making process determines what buying behaviour is undertaken.

1% 5actos Influ!ncin" Buy! B!ha+iouWhenever we buy anything our final decision, as a consumer will definitely be affected by

certain factors. 1ome of these ma#or factors are as given below:+. "ultural

>. 1ocial

. @ersonalJ. @sychological

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The first stage of understanding buyer behaviour is to focus on the factors that determine he

%buyer characteristics& in the %black box&. These can be summarised as follows:

<actors affecting 6uyer behaviour .

.

1%& Cultual 5actos

"ulture is the most fundamental determinant of a person0s want and behaviour. Thegrowing child ac*uires a set of values$ perceptions, preferences and behaviour through a

process of sociali4ation involving the family and other key institutions.

"ultural factors have a significant impact on customer behaviour. 'arketing are alwaystrying to spot %cultural shifts& which might point to new products that might be wanted by

customers or to increased demand.

<or example, today there seems to be a cultural shift towards greater concern about health

and fitness and that has created opportunities, now even industries, servicing customers whowish to buy products like:

• 9ealth foods

• <itness club memberships

• Gxercise e*uipment

• 5ctivity or health-related holidays etc.

1imilarly our increased desire for %leisure time& has resulted in increased demand for

convenience products and services such as microwave ovens, washing machines, ready-to-

eat meals and direct marketing service businesses such as telephone banking and insurance.Gach culture contains %sub-cultures& H groups of people, which share values. 1ub-cultures

can include nationalities, religions, racial groups, or groups of people sharing the same

geographical location. 1ometimes a sub-culture will create a substantial and distinctivemarket segment of its own.

<or example, the %youth culture& or %club culture& has *uite distinct values and buying

characteristics from the much older %grey generation&1imilarly, differences in social class can create customer groups. In fact, the social classes

are widely used to profile and predict different customer behaviour. 1ocial class is not #ust

determined by income. It is measured as a combination of occupation, income, education,

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wealth and other variables. 1ocial "lasses are relatively homogeneous and enduring

divisions in a society which are hierarchically ordered and whose members have similar

values, interests and behaviour.1ocial scientists have identified seven social classes shown below

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1%1 Social 5actos

5 customer0s buying behaviour is also influenced by social factors, such as the groups to

which the customer belongs and social status. In a group, several individuals may interact toinfluence the purchase decision. The typical roles in such a group decision can be

summarised as follows:

Initiato

The person who first suggests or thinks of the idea of buying a particular product or service

Influ!nc!

5 person whose view or advice influences the buying decision9!cid!

The individual with the power and2or financial authority to make the ultimate choice

regarding which product to buy

Buy!

The person who concludes the transaction

Us!

The one who actually uses the product or service.

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There is evidence that the traditional husband-wife buying roles are changing. 5lmost

everywhere in the world, the wife is traditionally the main buyer for the family, especially

in the areas of food, household products and clothing.The challenge for a marketer is to understand how this might affect demand for products

and services and how the promotional mix needs to be changed to attract male rather than

female buyers."onsumer wants, learning, motives etc. are influenced by opinion leaders, person0s family,

reference groups, social class and culture.

1%4 *!sonal

@ersonal factors are those factors, which are uni*ue to a particular person including

demographic factors, 1ex, )acial, and 5ge etc. @ersonal factors also include who in the

family is responsible for the decision-making.

1%6 *sycholo"ical 5actos

@sychological factors include:

'otives85 motive is an internal energi4ing force that orients a person0s activities toward

satisfying a need or achieving a goal.

5ctions are effected by a set of motives, not #ust one. If marketers can identify motives thenthey can better develop a marketing mix.

'51;(W hierarchy of needs is the theory, which explains concept of motivation throughunfulfilled needs which could be any of the following:

E @hysiological

E 1afetyE ;ove and 6elonging

E Gsteem

E 1elf 5ctuali4ation

E /eed to determine what level of the hierarchy the consumers are at to determine whatmotivates their purchases

*!c!ption

@erception is the process of selecting, organi4ing and interpreting information inputs to

produce meaning. This means we chose what info we pay attention to, organi4e it and

interpret it. Information inputs are the sensations received through sight, taste, hearing,smell and touch.

Selective Exposure- This means we tend to select inputs to be exposed to our awareness.

This is more likely if it is linked to an event, and2or satisfies current needs.

Selective Distortion- This happens when we change or twist current received information,which is inconsistent with our beliefs.

Selective Retention- In this case we remember only those inputs that support our beliefs, and

forget those that don0t.<or instance, an average supermarket shopper is exposed to +K, products in a shopping

visit lasting minutes-LM of purchases are unplanned and is also exposed to +,N

advertisement per day. 9ence they cannot be expected to be aware of all these inputs, andcertainly will not retain many.

Interpreting information is based on what is already familiar, on knowledge that is stored in

the memory.

A-ility and ;nowl!d"!

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;earning can be said to be changes in a person0s behavior caused by information and

experience. Therefore to change consumers0 behavior about your product, you need to give

them new information regarding the product like free sample etc.When making buying decisions, buyers must process information.

Knowledge is the familiarity with the product and expertise. Inexperience buyers often use

prices as an indicator of *uality more than those who have knowledge of a product. /on-alcoholic 6eer example: consumers chose the most expensive six-pack, because they

assume that the greater price indicates greater *uality.

earning is the process through which a relatively permanent change in behavior resultsfrom the conse*uences of past behavior.

Attitud!s

We can say that attitudes are knowledge and positive and negative feelings about an ob#ect

or activity. It may be tangible or intangible, and living or non- living. Oenerally it seen thatattitudes drive perceptions

We learn attitudes through experience and interaction with other people. "onsumer attitudes

toward a firm and its products greatly influence the success or failure of the firm0s

marketing strategy.<or instance, 9onda says, %7ou meet the nicest people on a 9onda&, dispelling the

unsavory image of a motorbike rider, in the late +Ns. "hanging market of the +s, baby boomers aging, and 9ondas market returning to hard core. To change this they have a new

slogan %"ome ride with us&.

5ttitudes and attitude change are influenced by consumer0s personality and lifestyle. 6ut, bear in mind that there is a difference between attitude and intention to buy i.e., ability to

buy.

*!sonality

(ne way of explaining personality is all those internal traits and behaviors that make a person uni*ue, keeping in mind the fact that uni*ueness arrives from a person0s heredity

and personal experience. Gxamples include:

.Traits affect the way people behave. 'arketers try to match the store image to the perceived

image of their customers.

7if!styl!s

7ou may have observed that recently trends in lifestyles are shifting towards personal

independence and individualism and a preference for a healthy, natural lifestyle.

;ifestyles are the consistent patterns people follow in their lives. <or Gxample you buy

healthy foods to maintain a healthy lifestyle.

Opinion 7!ad!s

(pinion leaders basically play the role of spokesperson etc.

'arketers try to attract opinion leaders...they actually use pay! spokespeople to markettheir products. 1ay, for example 1achin Tendulkar @epsi, ?isa , 6iscuit, 5didas etc.!

Rol!s and 5a#ily Influ!nc!s

)oles are things you should do based on the expectations of you from your position within agroup.

*!opl! ha+! #any ol!s%

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9usband, father, employer2ee. Individuals role are continuing to change therefore marketers

must continue to update information. <amily is the most basic group a person belongs to.

'arketers must understand:

• That many family decisions are made by the family unit E consumer behavior starts

in the family unit

• <amily roles and preferences are the model for children0s future family canre#ect2alter2etc!

• <amily buying decisions are a mixture of family interactions and individual decision

making

• <amily acts an interpreter of social and cultural values for the individual. The

<amily life cycle: families go through stages, each stage creates different consumerdemands:

• 6achelor stage

.

R!f!!nc! <oups

Individual identifies with the group to the extent that he takes on many of the values,

attitudes or behaviors of the group members.<amilies, friends, sororities, civic and professional organi4ations. 5ny group that has a positive or negative influence on a person0s attitude and behavior.

!embership groups belong to!

5ffinity marketing is focused on the desires of consumers that belong to reference groups.'arketers get the groups to approve the product and communicate that approval to its

members.

"spiration groups want to belong to! Disassociate groups do not want to belong to!9onda, tries to disassociate from the %biker& group.

The degree to which a reference group will affect a purchase decision depends on an

individuals susceptibility to reference group influence and the strength of his2her

involvement with the group.

Social Class

5n open group of individuals who have similar social rank. P1 is not a classless society. P1

criteria$ occupation, education, income, wealth, race, ethnic groups and possessions. 1ocial

class determines to some extent, the types, *uality, and *uantity of products that a person buys or uses.

;ower class people tend to stay close to home when shopping, do not engage in much

prepurchase information gathering. 1tores pro#ect definite class images. <amily, referencegroups and social classes are all social influences on consumer behavior. 5ll operate within

a larger culture.

Cultu! and Su-=cultu!

"ulture refers to the set of values, ideas, and attitudes that are accepted by a homogenous

group of people and transmitted to the next generation.

"ulture also determines what is acceptable with product advertising. "ulture determineswhat people wear, eat, reside and travel. "ultural values in India are good health, education,

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individualism and freedom. In today0s culture time scarcity is a growing problem. 1o as a

result there is a change in meals.

Aifferent society, different levels of needs, different cultural values."ulture can be divided into subcultures:

• Oeographic regions

• 9uman characteristics such as age and ethnic background. "ulture effects what people buy, how they buy and when they buy.

OR<ANI>A0IONA7 BU?IN<.

• We often use the term "onsumer to describe two different kinds of consuming

entities: the p!sonal consu#! and the o"anisational consu#! or business-to

business purchasing!.

• The personal consumer is one who buys goods and services for his or her own use,

for the use of the household, or as a gift for a friend.

• The organi4ational consumers include profit and not-for-profit business, government

agencies, and institutions, all of which must buy products, e*uipment, and servicesin order to run their organisations.

• We try to understand the basics of buyer behaviour, i.e., why study consumers# "nd

who is our customer $consumer%#

&% Buy! B!ha+iou

&%& 'hy Study Custo#!s(

1pecifically, in order to tailor solutions to customers0 particular needs and desires, the

marketer re*uires a grounded knowledge of buyer motivations and decision-making

processes, together with all those environmental factors which may exert influence uponthem. @ut another way, the marketer is seeking to address three basic *uestions: -

•

Why does the customer want to buy a particular product or serviceD• 9ow will he or she decide which option to purchaseD

• QWhat factors may influence this decisionD

1%1% 'hat is Consu#! B!ha+iou(

M!ntal and physical acti+iti!s und!ta$!n -y hous!hold and -usin!ss custo#!s that

!sult in d!cisions and actions to pay fo, puchas! and us! poducts and s!+ic!s

<or a marketing manager, the challenge is to understand how customers might respond to

the different elements of the marketing mix that are presented to them.If management can understand these customer responses better than the competition, then it

is a potentially significant source of competitive advantage."onsumer 6uying 6ehavior refers to the buying behavior of the ultimate consumer. 5 firmneeds to analy4e buying behavior for:

• 6uyers0 reactions to a firms marketing strategy has a great impact on the firm0s

success.

• QThe marketing concept stresses that a firm should create a marketing mix ''! that

satisfies gives utility to! customers, therefore need to analy4e the what, where,

when and how consumers buy..

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" customer is a person in either a household or an organi&ational unit who plays a role in

the completion of a transaction with a marketer or an entity

'ho th!n is a Consu#!(

<or example, you as a customer purchasing a burger at a restaurant versus the restaurant

purchasing the burger meat, bun and condiments to prepare the hamburger for sale "an you

bring out the difference between the terms consumer, buyer, and customerDCusto#! Rol!s

5 customer plays different roles

• QPser H the person who actually consumes or uses the product and receives the

benefits

HG.g. in the example of burger, the person who actually eats the burger

• @ayer H the person who finances the purchase

HG.g. the person who provides the money to pay for the burger

• Q6uyer - the person who participates in ac*uiring the product

HG.g. the person who orders and2or actually hands over the money for the hamburger

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Busin!ss custo#! d!cision=#a$in" and th! th!! custo#! ol!s

6usinesses now spend considerable sums trying to learn about what makes %customers

tick&. The *uestions they try to understand are:

• QWhy consumers make the purchases that they makeD

• QWhat factors influence consumer purchasesD

• QThe changing factors in our society.

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The purchase of the same product does not always elicit the same 6uying 6ehavior. @roduct

can shift from one category to the next.

5o !.a#pl!

Ooing out for dinner for you may be extensive decision making for someone that does not

go out often at all!, but limited decision making for someone else. The reason for the dinner,

whether it is a birthday celebration, or a meal with a couple of friends will also determinethe extent of the decision-making.

1% O"aniational Buyin" +s% Consu#! Buyin"

• 'arketing theory traditionally splits analysis of buyer or customer behaviour into

two broad groups for analysis H 'onsumer (uyers and )rganisational (uyers

• Consu#! -uy!s are those who purchase items for their personal consumption

• O"anisational -uy!s are those who purchase items on behalf of their business or

organisation In contrast to consumers, o"anisational -uy!s represent those%buying goods and services on behalf of an organisation for the purpose of the

furtherance of organisational ob#ectives& .6efore highlighting some of the

differences between the two, however, it is important to caution you against over

stressing the differences.• The most obvious difference between consumer and organisational buying is that the

underlying motivation is different$ i.e. personal consumption versus business usage.

• S!ttin" fo Buyin": <or consumers, the buying unit is within the household,

whereas for the organisational buyer, the setting is within the firm. This means as anindustrial marketer targeting the organisational buyer, you must take account of

factors such as buying procedures, levels of authority, and so on, factors not relevant

in consumer marketing.

• 0!chnical3Co##!cial ;nowl!d"!: 7ou will see that usually, the organisational

purchaser will be a trained professional, more knowledgeable than the average

consumer purchaser. This can often necessitate a completely different sales

approach.

• Contact with Buy!s39isti-ution Chann!ls: 7ou will find that organisational

markets are usually more geographically concentrated than consumer markets.

<actors such as proximity to available labour, raw materials, and transportation

facilities often dictate an industry0s location. In addition, compared to consumermarkets, there can be far fewer potential customers.

• Nu#-! of 9!cision=Ma$!s: /ormally in consumer purchasing, the number of

people involved in the decision making process can be very small$ i.e. an individual,

a couple, a family, etc. In organisational buying, however, a great many people can be involved in the purchasing process.

•

9!i+!d 9!#and: (rganisational buyers often continually ad#ust their buyingdecisions on the basis of pro#ected sales figures, buying more units when forecastsales are higher.

• R!cipocal 9!#and: 1ometimes, a buyer can also be a seller at the same time. 5

software company producing a package for an insurance company, for instance,

might also purchase its insurance services from what is effectively one of its owncustomers. 6oth companies want to sell to each other, affecting each other0s

eventual buying decisions to a varying degree..

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Conc!pts Us! *ay! Buy! Conflict !solution

Three roles often in conflict. @ayers often overly concerned with cost minimi4ation.

4%& *uchas! O-2!cti+!s

'hat do o"aniations puchas! fo( %

• Q<urther production,

• QPsage in operating the organi4ation, and2or

• Q)esale to other consumers

Whereas,

5inal @o ulti#at! consu#!s no#ally puchas! fo:

• Q@ersonal,

• Q<amily, or

• Q9ousehold use

4%1 Industial3o"aniational #a$!ts

*oduc!

• Q'anufacturers

• Q1ervice producers

R!s!ll!

• Wholesalers

• )etailers

<o+!n#!nt

• Q<ederal

• Q1tate

• Q"ounty

• Q;ocal

Institutional

• Q"haritable

• Gducational

• "ommunity

• Q(ther non-business

4%1 9iff!!nc!s In O"aniational Ma$!ts

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We know that (rgani4ational markets are different in nature from household consumer

markets. ;et us see how they are different

• Us! "oods fo futh! poduction, op!ations, o !sal!% 9ousehold, or final ,

consumers purchase product for personal consumption.

• *uchas! !uip#!nt, aw #at!ials, and s!#i=finish!d "oods% 9ousehold

purchasers almost always purchase finished goods for personal consumption.• 9!#and is derived fo# that of final consu#!s% If you own a machine shop that

makes bushings that are used in washing machine motors, then the demand for your

products bushings! is derived from final consumer demand for washing machines.

If the economy is poor, and demand for washing machines is down, then so too will be the demand for washing machine motors and for the bearings that are used in

them.

• Can #a$! it!#s th!#s!l+!s% "ompetition in organi4ational markets comes not

only from suppliers of similar goods and services, but can come from Gxtractive'anufacturing consuming and Industries user industries or units

*aticipants in Industial Ma$!tin"

+. 'ining and 'anufacturer households "onstruction selling to other Oovernment> <orestry manufacturers 5griculture importers middlemen, business and

J <isheries Oovernment F its industrial users

N <arming enterprises etc

4%6 9iff!!nc!s in O"aniational 0ansactions

• Buyin" sp!cialists a! oft!n us!d% It is usually seen that organi4ations often employ

people who are professional purchasing agents. Whatever stereotypes you mighthave from experiences with salespeople in consumer sales, any negative stereotypes

of salesperson behavior probably would not be appropriate in dealing with

professional buyers.

• Oft!n us! #ultipl! -uyin" !sponsi-iliti!s% 5 household purchaser is often the sole

decision maker. 'aking a sale to an organi4ation, however, often re*uires selling to

several entities within the buying center. <or example, you might be using a desktop

computer at work, but the decision as to what specifications were needed might have

been set by someone in the computer department, the decision to buy might have been made by your department manager, bids taken by someone in the purchasing

department, and the final authori4ation made by the company president.

• Oft!n us! #ultipl! suppli!s% It is often desirable to have a long-term relationship

with more than one supplier, even if a second supplier has higher prices for

otherwise similar terms and conditions. If problems in *uality or delivery are

experienced with a supplier, production can still be maintained if the second suppliercan be used to replace the first

• Mo! li$!ly to !ui! !.act sp!cifications% 5 household purchaser might select a

particular model of desktop computer for no other reason than it has a pleasing

color. 5n organi4ational purchaser is more likely to set specifications regarding processor speed, memory, hard drive si4e, and such before taking bids on price.

• Oft!n l!as! !uip#!nt and spac!% 5s a household consumer, you would probably

prefer to own your own car, furniture, and home. These are things that represent

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personal expression, status, and wealth. 7our ob#ectives as a business manager,

however, are very different. 7ou might prefer to lease public warehouse space to

provide the flexibility to change locations when the market demands, to lease trucksso that you can leave the problems of maintenance and disposition to someone else,

etc.

•Mo! f!u!ntly !#ploy competitive bidding and negotiation% 9ouseholdconsumers especially those of us in urban settings! are more likely to accept as final

a price that is placed on a product in a retail setting or to accept a price that is given

to us by a service provider. 5s a business manager, your employer is more likely tore*uire that you accept, say, three bids for a service or to negotiate various terms and

conditions associated with product specifications, delivery, and price.

0yp!s of I3O *uchas!s

Stai"ht R!-uy

• Q)outine purchase

• Q5ssociated with fre*uently purchased items

Modifi!d R!-uy

• Q)outine purchase• <re*uent purchase, but buyer does review product specifications or supplier

N!w 0as$

• Q /ot routine

• Q@roduct needs and specifications researched, vendors evaluated

0yp!s of Buyin" Situations

In a straight rebuy situation, the buyer is likely to periodically apply value analysis and

vendor analysis.

Valu! analysis: a periodic review of the *ualities of the product for the price

V!ndo analysis: a periodic review of the services of the vendor seller! 5n annual value

analysis of the paper might show that the product performs well, but a vendor analysismight show that the vendor is often late in deliveries and often delivers the wrong

assortment of products. In this situation, the purchasing agent might search for a new

supplier of the same brand of paper.Buyin" C!nt!

)ecall that there are often multiple decision makers involved in organi4ational purchases.

This re*uires that the marketer is aware of the needs of the various constituencies involved

in making decisions. 5dditionally, there can be constituencies in an organi4ation who donot have decision-making authority, but who nonetheless might have some influence over

the purchase and consumption process.

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Us!s: If you are a secretary, you might have had the experience of arriving to work one

day to find a new typewriter on your desk, whether or not you even wanted it. 5 salesperson

would not call on you if you had no influence over what product was purchased. 9owever,if you and your co-workers submit numerous complaints about missing or problematic

features of the new replacements, the salesperson might be faced with a very expensive

customer service problem to solve. 5 user is the end consumer of a product.Influ!nc!s: @erhaps in this case, the office manager was consulted with regard to features

or specifications to set in the purchase of new typewriters. 5lthough the office manager

might have no decision-making authority with regard to the purchase, whateverspecifications s2he re*uests could be used without change in making the purchase. 5

salesperson might need to be aware of these influencers - a special trick is to get the

influencer to write a specification list that happens to match the seller0s product features

5n influencer is someone who has influence over what is purchased.

9!cid!s: In this case, some middle manager, ignorant of the needs of secretaries, might

have made the decision as to when and what to purchase. The point of this statement is that

the marketer or seller must be aware of how it is that decisions are made and often must

focus some or all efforts at whomever it is that makes decisions in the organi4ation. /ote,however, that decision-making authority does not necessarily mean that this person exerts

any influence on what is purchased. The company president might be the only person whosigns all purchase re*uisitions, and therefore has ultimate decision authority, but might

otherwise merely sign some re*uisitions without *uestion or involvement. 5 decider is

someone who ultimately has authority if or what to purchase.

Buy!s: The final purchase transaction might be left to a purchasing agent who otherwise

has no involvement in decision-making. 5 sales agent for an office e*uipment supply house

might help an organi4ation to decide what brand of typewriters would be best, but that

organi4ation could then allow the purchasing agent to find the best deal on that brand, andthe best deal with regard to price might come from a competing office supply house. 5

responsibility of salespeople, then, is often to maintain good, trusting, and long-term

relationships with the purchasing agents in prospective buying organi4ations, whether or notthey have purchased in the past. 5 buyer is someone who arranges the transaction.

<at!$!!p!s: Why do salespeople often give secretaries little gifts of chocolates or flowers

or an occasional free lunchD 5 secretary can be nice or nasty in passing information ineither direction. The prospective buyer0s secretaries can be helpful in providing names,

telephone numbers, and office hours of key members of a buying center in an organi4ation.

They can also be helpful in passing messages from the salesperson to members of the

organi4ation. 5 gatekeeper could include anyone in the organi4ation who can control theflow of information.

&% 'hat is a Ma$!t(

To a marketer, the term marketer means:+. @eople as individuals or members of an organi4ation.

>. @eople with desires.

. @eople with willingness and ability or buying power to satisfy their desires.J. @eople who can become customers because they have been authori4ed to buy.

Thus, in summari4ation we van say that a market is:

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5n aggregate of people who, as individuals or organi4ations, have needs for products in a

product class and who have the ability, willingness and authority to purchase such products

conditions needed for an exchange!.Types of 'arkets

*. 'onsumer Intend to consume or benefit, but not to make a profit.

+. )rgani&ational,(usiness <or:• Q)esale

• Airect use in production Q)r general daily operations.

5 marketing manager who really understands a target market may see breakthrough

opportunities. 6ut a target market0s real needs8and the breakthrough opportunities that cancome from serving those needs8are not always obvious.

Identifying a company0s market is an important but difficult issue.

In general, a market is a group of potential customers with similar needs who are willing to

exchange something of value with sellers offering various goods and,or services-that isways of satisfying those needs. 'arketing-oriented managers develop marketing mixes for

specific target markets. Oetting the firm to focus on specific target markets is very vital.

& 5o# <!n!ic Ma$!ts to *oduct=#a$!ts6roaden 'arket definitions to find (pportunities (roader market definitions8including

both generic market definitions and product-market definitions8can help firms find

opportunities. 6ut deciding how broad to go isn0t easy. Too narrow a definition limits afirm0s opportunities8but too broad a definition makes the company0s efforts and resources

seem insignificant.

9ere we try to match opportunities to a firm0s resources and ob#ectives. 1o the relevantmarket for finding opportunities should be bigger than the firm0s present product-market8

but not so big that the firm couldn0t expand and be an important competitor.

5 small manufacturer of screwdrivers in @un#ab, for example, shouldn0t define its market as

broadly as %the worldwide tool users market& or as narrowly as %our present screwdriver

customers.& 6ut it may have the production and2or marketing potential to consider %thehandyman0s hand-tool market in /orth India.& "arefully naming your product-market can

help you see possible opportunities.@roduct-related terms do not8by themselves8ade*uately describe a market. 5 complete

product-market definition includes a four-part description.

What: +. @roduct type type of good and type of service!

To meet what: >. "ustomer user! needs

<or whom: . "ustomer typesWhere: J. Oeographic area

We refer to these four-part descriptions as product-market %names& because most managers

label their markets when they think, write, or talk about them. 1uch a four-part definitioncan be clumsy, however, so we often use a nickname. 5nd the nickname should refer to

people8not products8because, as we emphasi4e, people make markets

/roduct type describes the goods and2or services that customers want. 1ometimes the product type is strictly a physical good or strictly a service. 6ut marketing managers who

ignore the possibility that both are important can miss opportunities.

@roduct type should meet customer needs /aming @roduct-'arkets and Oeneric 'arkets

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"ustomer user! needs refer to the needs the product type satisfies for the customer. 5t a

very basic level, product types usually provide functional benefits such as nourishing,

protecting, warming, cooling, transporting, cleaning, holding, saving time, and so forth. Thegeographic area is where a firm competes8or plans to compete8for customers. /aming

the geographic area may seem trivial, but understanding geographic boundaries of a market

can suggest new opportunities. 5 firm aiming only at the domestic market, for example,may want to expand into world markets.

5 generic market description doesn’t include any product0type terms. It consists of only

three parts of the product-market definition8 without the product type. This emphasi4esthat any product type that satisfies the customer0s needs can compete in a generic market.

Ma$!t S!"#!ntationThe method of identifying a group of consumers, within a broader market, that has similarcharacteristics and needs. 1egments can be identified by examining demographic,

@sychographic, and behavioral differences. Thus a car manufacturer may identify different

types of consumers preferring different styles of cars, so they will segment their car buying

markets accordingly. @erhaps identifying that younger car buyers, with high incomes, will

be more likely to buy a sports car, while an older population of car buyers may be more aptto purchase a town car. (nce these segments are identified, marketers can develop different

marketing mixes that target each segment.5gain, the marketer may identify a number of specialty maga4ines that the young, affluent

market reads, thus they will run their advertisements for sports cars in these maga4ines.

Individuals with diverse product needs have heterogeneous needs.'arket segmentation is the process of dividing a total market into market groups consisting

of people who have relatively similar product needs, there are clusters of needs.

The purpose is to design a '5)CGTI/O 'IRs! that more precisely matches the needs of

individuals in a selected market segments!.5 market segment consists of individuals, groups or organi4ations with one or more

characteristics that cause them to have relatively similar product needs.1%& Cit!ia N!!d!d fo S!"#!ntation

<or segmentation to occur:

+. 1egments must have enough profit potential to #ustify developing and maintaining a

'5)CGTI/O 'IR>. "onsumer must have heterogeneous different! needs for the product.

. 1egmented consumer needs must be homogeneous similar!

J. "ompany must be able to reach a segment with a '5)CGTI/O 'IR,<or example, how do marketers reach childrenD

• "artoons

• "ereal boxes

• 1ports illustrated for kids;ook at how media has changed recently due to changing demographics etc. and thereforethe need of marketers to reach these groups.

!edia must respond because they are essentially financed by the marketers or at least

heavily subsidised N. 'ust be able to measure characteristics F needs of consumers to establish groups.

1%1 Vaia-l!s that can -! us!d to S!"#!nt Ma$!ts

/eed to determine the variables that distinguish marketing segments from other segments.

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• Q1egmentation variables should be related to consumer needs for, and uses of, or

behavior toward the product. IG 1tereo$ age not religion.

• 1egmentation variable must be measurable. /o best way to segment the markets.

1electing inappropriate variable limits the chances of success.?ariables for segmenting "onsumer 'arkets include:

• Q Demographic - age, sex, migration patterns, and mortality rates, ethnic groups,income, education, occupation, family life cycle, family si4e, religion and socialclass.

• Q1eographic -"limate, terrain, natural resources, population density, sub cultural

values, different population growths in different areas.

City Si!

'etropolitan 1tatistical 5rea

Q @rimary 1tatistical 'etropolitan 5rea

"onsolidated 'etropolitan 1tatistical 5rea

• Q /sychographic - personality characteristics, motives and lifestyles

• Q (ehaviouristic 2ariables - )egular users-potential users-nonusers

9eavy2moderate2light users, -> rule <re*uent Pser Incentives

Sin"l! Vaia-l! +s% Multi=Vaia-l! S!"#!ntation

• QSingle variable 8achieved by using only one variable to segment

• Q !ulti0variable 8 more than one characteristic to divide market.

@rovides more information about segment. 5ble to satisfy customers more precisely. 'ore

variables create more segments reducing the sales potential in each segment.

Ma$!t S!"#!ntation = -as!s of S!"#!ntation

It is widely thought in marketing that segmentation is an art, not a science.

The key task is to find the variable, or variables that split the market into actionable

segments

There are two types of segmentation variables:+. /eeds

>. @rofilersThe basic criteria for segmenting a market are customer needs.

To find the needs of customers in a market, it is necessary to undertake market research.

@rofilers are the descriptive, measurable customer characteristics such as location, age,

nationality, gender, income! that can be used to inform a segmentation exercise.The most common profilers used in customer segmentation include the following:

@rofiler Gxamples

<!o"aphic

• Q)egion of the country

•

QPrban or rural9!#o"aphic

• Q5ge, sex, family si4e

• QIncome, occupation, education

• Q)eligion, race, nationality

*sycho"aphic

• Q1ocial class

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• Q;ifestyle type

• Q@ersonality type

B!ha+ioual

• Q@roduct usage - e.g. light, medium, heavy users

• Q6rand loyalty: none, medium, high

Ma$!t S!"#!ntation D 9!#o"aphic S!"#!ntation

Aemographic segmentation consists of dividing the market into groups based on variablessuch as age, gender, family si4e, income, occupation, education, religion, race and

nationality.

5s you might expect, demographic segmentation variables are amongst the most popular bases for segmenting customer groups.

This is partly because customer wants are closely linked to variables such as income and

age. 5lso, for practical reasons, there is often much more data available to help with thedemographic segmentation process.

The main demographic segmentation variables are summari4ed below:

a% A"!"onsumer needs and wants change with age although they may still wish to consumer thesame types of product. 1o marketers design, package and promote products differently to

meet the wants of different age groups. Oood examples include the marketing of toothpaste

contrast the branding of toothpaste for children and adults! and toys with many age-basedsegments!.

-% 7if!=cycl! Sta"!

5 consumer stage in the life cycle is an important variable - particularly in markets such asleisure and tourism. <or example, contrast the product and promotional approach of "lub

+- holidays with the slightly more refined and sedate approach adopted by 1aga

9olidays.

c% <!nd!Oender segmentation is widely used in consumer marketing. The best examples include

clothing, hairdressing, maga4ines and toiletries and cosmetics.

d% Inco#!

'any companies target affluent consumers with luxury goods and convenience services.

Oood examples include ;ouise @hillip shirts, 9ush @uppies shoes, mango and 5merican

Gxpress. 6y contrast, many companies focus on marketing products that appeal directly toconsumers with relatively low incomes. Gxamples include /irma detergents, ;ifebuoy soap,

and discount clothing retailers such as 'egamaart.

!% Social Class

'any marketers believe that consumers %perceived& social class influences their

preferences for cars, clothes, home furnishings, leisure activities and other products Fservices. There is a clear link here with income-based segmentation.

f% 7if!styl!

'arketers are increasingly interested in the effect of consumer %lifestyles& on demand.

Pnfortunately, there are many different lifestyle categori4ation systems, many of them

designed by advertising and marketing agencies as a way of winning new marketing clientsand campaigns.

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Ma$!t S!"#!ntation D B!ha+ioual S!"#!ntation

6ehavioural segmentation divides customers into groups based on the way they respond to,

use or know of a product. 6ehavioural segments can group consumers in terms of:

a% Occasions

When a product is consumed or purchased. <or example, cereals have traditionally been

marketed as a breakfast-related product. Cellogg0s have always encouraged consumers toeat breakfast cereals on the %occasion& of getting up. 'ore recently, they have tried to

extend the consumption of cereals by promoting the product as an ideal, anytime snack

food.

-% Usa"!

1ome markets can be segmented into light, medium and heavy user groups

c% 7oyalty

;oyal consumers - those who buy one brand all or most of the time - are valuablecustomers. 'any companies try to segment their markets into those where loyal customers

can be found and retained compared with segments where customers rarely display any

product loyalty. The airlines market is a very good example in this case. 'ost of these

airlines run very good fre*uent fliers programme to retail customer loyalty.d% B!n!fits Sou"ht

This is an important form of behavioural segmentation. 6enefit segmentation re*uiresmarketers to understand and find the main benefits customers look for in a product. 5n

excellent example is the toothpaste market where research has found four main %benefit

segments& - economic$ medicinal, cosmetic and taste.

Ma$!t S!"#!ntation D <!o"aphic S!"#!ntation

Oeographic segmentation tries to divide markets into different geographical units: these

units include:

• Q)egions: e.g. in India these might be /orth, 1outh Gast, /ortheast and West.

• Q"ountries: perhaps categorised by si4e, development or membership of geographic

region• Q"ity 2 Town si4e: e.g. population within ranges or above a certain level

• @opulation density: e.g. urban, suburban, rural, and semirural

• Q"limate: e.g. /orthern, 1outhern

Oeographic segmentation is an important process H particularly for multi-national and

global businesses and brands. 'any such companies have regional and national marketing

programmes, which alter their products, advertising and promotion to meet the individualneeds of geographic units.

<irms need creative strategy planning to survive in our increasingly competitive markets.

(nce a broad product-market is segmented, marketing managers can use one of threeapproaches to market-oriented strategy planning:

+. The single target market approach,>. The multiple target market approach, and

. The combined target market approach.

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1egmentation variables

'arket segmentation is a two-step process of:

*. 3aming broad product-markets and

>. Segmenting these broad product-markets in order to select target markets and developsuitable marketing mixes.

This two-step process isn0t well understood. <irst-time market segmentation efforts often

fail because beginners start with the whole mass market and try to find one or twodemographic characteristics to segment this market. "ustomer behavior is usually too

complex to be explained in terms of #ust one or two demographic it would not be a useful

dimension for segmenting

1%4 Cit!ia fo s!"#!ntin" a -oad poduct=#a$!t and3o s!+ic!

Gffective market segments generally meet the following criteria:

&% Ho#o"!n!ous @si#ila! within8the customers in a market segment should be as similar

as possible with respect to their likely responses to marketing mix variables and theirsegmenting dimensions.

1% H!t!o"!n!ous @diff!!nt between8the customers in different segments should be as

different as possible with respect to their likely responses to marketing mix variables andtheir segmenting dimensions.

4% Su-stantial 8the segment should be big enough to be profitable.

6% Op!ational 8the segmenting dimensions should be useful for identifying customers anddeciding on marketing mix variables.

The combined target market approach8combining two or more sub markets into one larger

target market as a basis for one strategy.

Sualifying dimensions are those relevant to including a customer type in a product-market.Aetermining dimensions are those that actually affect the customer0s purchase of a specific

product or brand in a product-market.

6y differentiating the marketing mix to do a better #ob meeting customers0 needs, the firm builds a competitive advantage. When this happens, target customers view the firm0s

position in the market as uni*uely suited to their references and needs. <urther, because

everyone in the firm is clear about what position it wants to achieve with customers, the@roduct, @romotion, and other marketing mix decisions can be blended better to achieve the

desired ob#ectives.

4% *ositionin"

@ositioning refers to how customers think about proposed and2or present brands in a market.

5 marketing manager needs a realistic view of how customers think about offerings in the

market. Without that, it0s hard to differentiate. 5t the same time, the manager should know

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how he or she wants target customers to think about the firm0s marketing mix. @ositioning

issues are especially important when competitors in a market appear to be very similar. <or

example, many people think that there isn0t much difference between one brand of T? andanother. 6ut 1ony wants T? buyers to see its Trinitron brand screen as offering the very

best picture.

6% 9!+!lopin" a 0a"!t Ma$!t Stat!"yAeveloping a target market strategy has three phases:

+. 5naly4ing consumer demand

>. Targeting the markets!

• Pndifferentiated

• Q"oncentrated

• Q'ultisegmented

. Aeveloping the marketing strategy

6%& S!l!ctin" 0a"!t Ma$!ts @Analyin" 9!#and

/eed to aggregate consumers with similar needs.

Aemand patterns: Ao all potential customers have similar needs2desires or are there

clustersD Types of demand patterns are:E 9omogeneous Aemand-uniform, everyone demands the product for the same reasons!.

E "lustered Aemand-consumer demand classified in > or more identifiable clusters.

E Aiffused Aemand-@roduct differentiation more costly and more difficult to communicateIG "osmetic market, need to offer hundreds of shades of lipstick. <irms try to modify

consumer demand to develop clusters of at least a moderate si4e. (r uses one

'5)CGTI/O 'IR.

6%1 0a"!tin" th! Ma$!t

6%1%& Undiff!!ntiat!d Appoach @0otal Ma$!t appoach

1ingle 'arketing 'ix for the entire market.

5ll consumers have similar needs for a specific kind of product.

9omogeneous market, or demand is so diffused it is not worthwhile to differentiate, try tomake demand more homogeneous.

1ingle marketing mix consists of:

• @ricing strategy

• @romotional program aimed at everybody

• Type of product with little2no variation

• Aistribution system aimed at entire market

The elements of the marketing mix do not change for different consumers$ all elements aredeveloped for all consumers. Gxamples include 1taple foods-sugar and salt and farm

produce. 9enry <ord, 'odel T, all in black. @opular when large-scale production began.

/ot so popular now due to competition, improved marketing research capabilities, and total production and marketing costs can be reduced by segmentation.

(rgani4ation must be able to develop and maintain a single marketing mix.

Ma2o O-2!cti+! is to Ma.i#i! Sal!s

Ma$!t s!"#!ntation = why s!"#!nt #a$!ts(

There are several important reasons why businesses should attempt to segment their

markets carefully. These are summari4ed below

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B!tt! #atchin" of custo#! n!!ds

"ustomer needs differ. "reating separate offers for each segment makes sense and provides

customers with a better solution

Enhanc!d pofits fo -usin!ss

"ustomers have different disposable income. They are, therefore, different in how sensitive

they are to price. 6y segmenting markets, businesses can raise average prices andsubse*uently enhance profits

B!tt! oppotuniti!s fo "owth

'arket segmentation can build sales. <or example, customers can be encouraged to %trade-up& after being introduced to a particular product with an introductory, lower-priced product

R!tain #o! custo#!s

"ustomer circumstances change, for example they grow older, form families, change #obs

or get promoted, change their buying patterns. 6y marketing products that appeal tocustomers at different stages of their life %life-cycle&!, a business can retain customers who

might otherwise switch to competing products and brands

0a"!t #a$!tin" co##unications

6usinesses need to deliver their marketing message to a relevant customer audience. If thetarget market is too broad, there is a strong risk that +! the key customers are missed and

>! the cost of communicating to customers becomes too high 2 unprofitable. 6y segmentingmarkets, the target customer can be reached more often and at lower cost

<ain sha! of th! #a$!t s!"#!nt

Pnless a business has a strong or leading share of a market, it is unlikely to be maximi4ingits profitability. 'inor brands suffer from lack of scale economies in production and

marketing, pressures from distributors and limited space on the shelves.

Through careful segmentation and targeting, businesses can often achieve competitive

production and marketing costs and become the preferred choice of customers anddistributors. In other words, segmentation offers the opportunity for smaller firms to

compete with bigger ones

8% Ma$!t S!"#!ntation Stat!"i!s

There are two 'arket 1egmentation 1trategies

N.+ "oncentration 1trategy.

This strategy talks of single market segment with one marketing mix.

@)(1 include

• QIt allows a firm to speciali4e

• Q"an focus all energies on satisfying one group0s needs

• Q5 firm with limited resources can compete with larger organi4ations.

"(/1 include

• @uts all eggs in one basket.

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• Q1mall shift in the population or consumer tastes can greatly effect the firm.

• Q'ay have trouble expanding into new markets especially up-market!. 9aggar

having problems finding someone to license their name for womens apparel, even

though women purchase KM 9aggar clothes for men.(b#ective is not to maximi4e sales$ it is efficiency, attracting a large portion of one section

while controlling costs.Gxamples include )(;GR, 5nyone wear one.Who are their target marketsDD

8%1 Multi=s!"#!nt Stat!"y

> or more segments are sought with a marketing mix for each segment, different marketing plan for each segment. This approach combines the best attributes of undifferentiated

marketing and concentrated marketing.

'arket'arketing mix8888888888Ua market segment

UVVVVVVVVVVVVVVVVVVVVVVV

'arketing mix8888888888Ua market segment

UVVVVVVVVVVVVVVVVVVVVVVV 'arketing mix8888888888Ua market segment

UVVVVVVVVVVVVVVVVVVVVVVV

'arketing mix8888888888U5 'arket 1egmentU

Gxample: 'arriott International:

+. 'arriott 1uites...@ermanent vacationers>. <airfield Inn...Gconomy ;odging

. )esidence Inn...Gxtended 1tay

J. "ourtyard 6y 'arriott...6usiness Travelers

@)(1 include

• 1hift excess production capacity.• Q"an achieve same market coverage as with mass marketing.

• Q@rice differentials among different brands can be maintained "ontact ;ens

• Q"onsumers in each segment may be willing to pay a premium for the tailor-made

product.

• Q;ess risk, not relying on one market.

"(/1 include

• Aemands a greater number of production processes.

• Q"osts and resources and increased marketing costs through selling through different

channels and promoting more brands, using different packaging etc.

•

Q'ust be careful to maintain the product distinctiveness in each consumer group andguard its overall image "ontact lenses!

The core product is the same, use different @ackaging, 6rand /ame, @rice to differentiateand create a different marketing mix. What will happen if consumers find outDD

(b#ective: 1ales maximi4ation, but can remain a specialist. "an get firmly established in

one segment, then pursue another.

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