UNIT TWO CONSUMER BEHAVIOUR AND MARKET SEGMENTATION # Nature and scope # Significance of consumer behaviour; # Market segmentation – concept and importance; # Bases for market segmentation CONSUMER BEHAVIOUR # Introduction Why do people buy one product and not another? V Discovering that answer requires an understanding of buyer behaviour , the process by which consumers and business-to-business buyers make purchase decisions. Buyer behaviour is a broad term that covers both individual consumers who buy goods and services for their own use and organizational buyers who purchase business products # What is Buyer Behaviour? V Consumer behaviour is the process through which the ultimate buyer makes purchase decisions. V Jacob Jacoby defines Consumer behaviour as ‘… reflects the totality of consumers’ decisions with respect to the acquisition, usage and disposition of goods, services, time and ideas by (human) decision making units (over time)’ The totality of consumers’ decisions include whether to buy or not, what to buy, why to buy, how to buy, when to buy, where to buy and also how much/ how often/ how long. The idea of consumption not only includes purchasing and using, but also disposing . The marketer’s offering can mean many things – be it product, service, time, ideas, people and so on. The term decision making unit obviously refers to people involved. In a typical purchase, many people may be involved and they play different roles such as information gatherer, influencer, decider, purchaser and user. In a consumer buying context, it may mean a family or group influence where as in the industrial buying context; it means a cross-functional team with each member of the team performing a particular role in the buying decision. # Models of Consumer Behaviour V Consumer behaviour is a dynamic, multi-disciplinary process . V The study of consumer behaviour builds upon an understanding of human behaviour in general. In an effort to understand why and how consumers make buying decisions, marketers borrow extensively from the sciences of psychology and sociology. The work of psychologist Kurt Lewin provides a useful classification scheme for influences on buying behaviour. Lewin’s proposition is B = f(P,E) which means that behaviour (B) is a function (f) of the interactions of personal influences (P) and pressures exerted by outside environmental forces (E). V This statement is rewritten to apply to consumer behaviour as B = f(I,P) (i.e.) consumer behaviour (B) is a function (f) of the interactions of interpersonal influences (I) such as culture, role models, friends and family – and personal factors (P) such as attitudes, learning and perception. Therefore inputs from others and an individual’s psychological makeup both affect a consumer’s purchasing behaviour. Consumer Behaviour and Market Segmentation [Dr Joydip Dasgupta] 1 | P a g e # The most generic model of consumer behaviour suggests a stimulus-response pattern of understanding the consumer’s behaviour. The stimulus can be marketing stimuli (which can be manipulated by the marketer) and other external stimuli (like the economy, culture, technology and so on ). The response includes the decision to buy, product choice, dealer choice and choices regarding time, quantity, etc. The consumer is at the center of this model. The stimulus is applied to this consumer who in turn comes up with a response. The consumer has his/her own characteristics and a multi-staged decision-making process. There are also several influencing factors acting upon the consumer. The influencing factors may include personal and interpersonal influences. # Determinants of Consumer Behaviour Consumers don’t make purchase decisions in a vacuum ; rather, they respond to a number of external, interpersonal influences and internal, personal factors. Consumer often decides to buy goods and services based on what they believe others expect of them. They may want to project positive images to peers or satisfy the unspoken desires of family members. Marketers recognize three broad categories of interpersonal influences on consumer behaviour: V Cultural influences - Culture can be defined as the values, beliefs, preferences and tastes handed down from one generation to the next. Culture is the broadest environmental determinant of consumer behaviour. Therefore, marketers need to understand its role in customer decision making. They must also monitor trends to spot changes in cultural values. Each culture includes numerous subcultures – groups with their own distinct modes of behaviour. V Group influences - Every consumer belongs to a number of social groups. Group membership influences an individual’s purchase decisions and behaviour in both overt and subtle ways. The influences may be informational and/or normative. Every group establishes certain norms of behaviour. Group members are expected to comply with these norms. Difference in group status and roles can also affect buying behaviour. Childre n are especially vulnerable to the influence of reference groups. They often base their buying decisions on outside forces – what is popular with their friends, what is fashionable and trendy, what is popular, what are their heroes and role models (usually, celebrities) using V Family influences . The family group is perhaps the most important determinant of consumer behaviour because of the close, continuing interactions among family members. Like other groups, each family typically has norms of expected behaviour and different roles and status relationships for its members. The traditional family structure consists of a husband and wife. Marketers have created four categories to describe the role of each spouse : 1. Autonomic, in which the partners independently make equal numbers of decisions (e.g. personal- care items) 2. Husband-dominant, in which the husband makes most of the decisions (e.g. insurance) 3. Wife-dominant, in which the wife makes most of the decisions (e.g. children’s clothing) and 4. Syncretic in which both partners jointly make most decisions (e.g. vacation). Consumer Behaviour and Market Segmentation [Dr Joydip Dasgupta] 2 | P a g e Consumer behaviour is affected by many internal, personal factors, as well as interpersonal ones. Each individual brings unique needs, motives, perceptions, attitudes, learning and self-concepts to buying decisions. V Needs and motives : Individual purchase behaviour is driven by the motivation to fill a need. A need is an imbalance between the consumer’s actual and desired states. Someone who recognizes or feels a significant or urgent need then seeks to correct the imbalance. Marketers attempt to arouse this sense of urgency by making a need ‘felt’ and then influence consumers’ motivation to satisfy their needs by purchasing specific products. Motives are inner states that direct a person toward the goal of satisfying a felt need. The individual takes action to reduce the state of tension and return to a condition of equilibrium. V Perceptions : Perception is the meaning that a person attributes to incoming stimuli gathered through the five senses – sight, hearing, touch, taste and smell. Certainly buyer’s behaviour is influenced by his or her perceptions of a good or service. V Attitudes : Perception of incoming stimuli is greatly affected by attitudes. In fact, the decision to purchase a product is strongly based on currently held attitudes about the product brand, store or salesperson. Attitudes are a person’s enduring favourable or unfavourable evaluations, emotional feelings or action tendencies toward some object. Because favourable attitudes likely affect brand preferences, marketers are interested in determining consumer attitudes toward their products. V Learning : In a marketing context, refers to immediate or expected changes in consumer behaviour as a result of experience (that of self or others’). Consumer learning is the process by which individuals acquire the purchase and consumption knowledge and experience that they apply to future related behaviour. Marketers are interested in understanding how consumers learn so that they can influence consumers’ learning and subsequently, their buying behaviour. V Self-concept : The consumer’s self-concept – a person’s multifaceted picture of himself or herself – plays an important role in consumer behaviour. The concept of self emerges from an interaction of many of the influences – both personal and interpersonal – that affect buying behaviour. Consumer Behaviour and Market Segmentation [Dr Joydip Dasgupta] 3 | P a g e MARKET SEGMENTATION 1. Introduction Development of a successful marketing strategy begins with an understanding of the market for the good or service. A market is composed of people or institutions with need, sufficient purchasing power and willingness to buy. The market place is heterogeneous with differing wants and varying purchase power . The heterogeneous marketplace can be divided into many homogeneous customer segments along several segmentation variables. The division of the total market into smaller relatively homogeneous groups is called market segmentation . Products seldom succeed by appealing to everybody . The reasons are simple: not every customer is profitable nor worth retaining, not every product appeals to every customer . Hence the organizations look for a fit between their competencies and the segments’ profitability. The identified segments are then targeted with clear marketing communications . Such communications are referred to as positioning the product