Consumer Buying Behavior

Analyzing Consumer Markets and Buying

Behavior
Interest in examining aggregate market response to firm
specific decision variables
 understanding
 explaining
 predicting

Method
 analyze individual level behavior
 analyse aggregate market behavior
 Analysing Consumer Markets and
Buying Behavior
Translation of individual level behavioral analysis to
aggregate level market response is faced with the issues of
aggregation bias and consumer heterogeneity
A prime characteristic of consumers is their variation in
preferences, tastes, likes, dislikes, purchase behavior
patterns. Meaning thereby that markets are heterogenous
and consumers exhibit heterogeneity
Object of consumer behavior analysis - buyer or user ?
 answer - both with emphasis on decision maker
Behavioral processes of consumers
An integrative conceptual framework

Society and
Communication Accultured Market
individuality
sensitivity Environment
() – Behavioral
Process of
Consumers
Rational and
Economic
Decision
making
Behavioral Processes of Consumers-
Communication Sensitivity
Within Market

Within
Market Word of Mouth

Communication sensitivity
Diffusion Processes
Firm To Firm to Market
Market
- Consumer Behaviour Concepts
- One way/Two way.

Communication
 Behavioral Processes of Consumers-
Communication sensitivity

Consumer Behaviour Concepts – Endogenous

Factors

Selectivity
Involvement
Persuasion
Selectivity

Selective attention – Marketers have to work hard to get consumer’s notice –

consumers are more likely to notice stimuli of current need, stimuli
they anticipate, stimuli whose deviations are large e.g. $25 off $100
rather than $5

Selective distortion – tendency to twist information into personal meanings that

will fit our preconceptions e.g. A customer of LG may interpret an
advertisement saying that they are No. 1 company in Microelectronics to
be No.1 company in all of consumer durables

Selective Retention – consumers likely to remember good points of products they

like and forget good points of competing products e.g. a user may
remember that Pears soap is the only soap good for dry skin though
in the market Dove and Mysore Sandal Gold is also good for dry skin
Involvement

Krugman proposed the concept of level of involvement influencing

buyer behavior. Products purchased are either low involvement
Or high involvement. Assael has classified types of buying behavior
based on involvement – See slide next

Persuasion

Low Involvement products use the peripheral route to persuasion

e.g. celebrity endorsements

High Involvement products use both the central route (cognitive reason)
to persuasion and the peripheral route to persuasion.
 Assael’s Classification of types of
Buying Behaviour
High Involvement Low Involvement

Significant Variety-Seeking’
Difference Complex Buying
Behaviour Buying
Between
Brands
Behaviour

Few Dissonance Habitual

Difference Reducing Buying
Between Behaviour Behaviour
Brands
 Assael’s Classification of types of
Buying Behaviour
Complex: First develop beliefs about product.
Then develop attitudes and then make a
choice
Dissonance: First Act, then develop beliefs.
Then end up with attitudes
Habitual: salt- out of habit, beliefs from
passive learning-choice- evaluation/attitudes
Variety seeking- lot of brand switching-
chocolates (Low involvement)-Beliefs-Choice-
Attitudes.
 Behavioral Processes of Consumers-
Accultured Individuality

Consumer Behaviour
Concepts
Culture
• Personality and
Sub Culture
Self concept
Social Class Accultured • Life style
Individuality • Motivation

Personal
- Age and Life cycle Social
- Occupation -Reference groups
- Economic - Family
Circumstances - Roles and Status
Independent Factors

1. Culture –
a) Cultural factors exert the deepest and broadest influence on
buyer behavior. Culture is fundamental determinant of a person’s wants
and behavior
b) Subculture – countries, regions, races, religions
c) Social class

2. Social factors
a. Reference groups – primary (family, coworkers), secondary
(religious groups)
b. Reference groups – aspirational groups and disassociative groups

c. Three influences of reference groups –

1. individual exposed to new behaviors, lifestyle
2. create pressures for conformity (affects choice thereby)
3. influence attitudes and self concept
2. Social Factors
- Family
- Family of orientation – influences beliefs, values, attitudes
- Family of procreation – influences day-to-day living and
purchases

3. People buy products that communicate their role and status in society
Endogenous Factors – Accultured Individuality

Lifestyle

A lifestyle is a person’s pattern of living in the world as expressed in

activities, interests, opinions. Lifestyle portrays the ‘whole person’.
Marketers search for relationships between their products and lifestyle
groups. If it is found that most computer buyers for home purpose are
achievement oriented, then the marketer may aim his brand at
achiever lifestyle

Psychographics is a way of using psychology and demographics for

understanding consumers. VALS of SRI consulting is a useful framework
 Accultured Individuality – Endogenous factors

Personality and Self Concept

Personality is a set of distinguishing human psychological traits that lead to

Consistent responses to environmental stimuli. E.g. Self Confidence, dominance
Autonomy, sociability, defensiveness

Brand Personality is a specific mix of human traits attributable to a particular brand

Consumers choose brands which have a personality similar to that of their own.

Self Concept
- Actual self concept – how he/she views him/herself
- ideal self-concept – how she/he likes to view her/himself
- others self concept – how he/she thinks others see him/her

A marketer has to judge the form of self concept from the above to market his brand
Endogenous Factors – Accultured Individuality

Motivation

A person has many needs (biogenic, psychogenic). A need becomes a motive

When it is aroused to a sufficient level of intensity. In other words a motive
is a need that is sufficiently pressing to drive the person to act.

Freud’s Theory

Motivation Theories Maslow’s Theory

Herzberg Theory
H
e
r
z
b
Freud’s Theory

Consumers’ behavior is shaped largely by unconscious psychological forces.

A technique called LADDERING is used to trace the person’s motivation
From the stated ones to the terminal ones. The marketer can then decide to
Target his appeal to the most appropriate level.

Motivation researchers also use projective techniques such as word association

Sentence completion, picture interpretation etc.
 Maslow’s Theory

Self Actualization Needs

Esteem Needs
S
Social Needs
o
c Safety Needs
i
Physiological
a Needs
l
This helps how various products fit into lives, goals and plans of consumers.
Consumers fill their needs starting from lowest to highest. So it is not of much use
to target a high end need product to a person who is still satisfying his lower
end need.
Endogenous Factors – Accultured Individuality – Motivation

Herzberg Theory

Factors for buyer motivation are of two types – hygiene factors (or
Dissatisfier removers) and motivators (satisfiers). It is not enough if hygiene
Factors are present. Motivators must be present for a purchase.
Behavioral Processes of Consumers- Beliefs
and Attitudes

Communicati Accultured
on Individuality
sensitivity

Experience & usage

Beliefs/Values
In Decision making
For consumption
Society & Mkt. Environment

Attitudes

Inputs from rational and Economic

Decision Making
Beliefs / Values and Attitudes

A Belief is a descriptive thought that a person holds about something. On Blind

Test Diet Coke and Diet Pepsi are equally preferred. But on revealing brand
Names Diet Coke was preferred by 65% of consumers and Diet Pepsi by 35%.
This is an illustration of role of beliefs.

An attitude is a person’s enduring favorable or unfavorable evaluations,

emotional feelings and action tendencies toward some object or idea.

A marketer is well advised to fit his product into existing attitudes rather than try
To change attitudes, which take a long time. Sometimes it pays to change
Attitudes
1. Buying New in exchange for old – pays to change attitude as market
is going to be large
2. These days food brands should have a diet variety as there is
health consciousness in the market – pays to fit product
 Behavioral Processes of Consumers-
Rational and Economic Decision making

Decision making process

- Need Recognition
- Information Search
- Evaluation (perception)
- Purchase (Preference)
- Post-Purchase
 Behavioral Processes of Consumers-
Rational and Economic Decision Making
Consumer
Behaviour
Post Purchase
Processes/Concepts
Individual Feelings
constraints - Cognitive
Budget constraints Rational and Dissonance
Situational factors Economic - Contrast Theory
Beliefs and Decision making
values
Attitudes

Market environment
Store Environment
Firm decision variable
Competitor decision variable
 Behavioral Outcomes of Rational and
Economic Decision making Process
Evoked set
Consideration set

Purchase intention
Rational and Purchase preference
Economic Purchase Behaviour
Decision making
Purchase behaviour decisions
What to Buy (Basket of goods
decision)
Where to Buy (Store choice)
Post purchase feelings Which brands to buy (Brand choice)
How much to Buy (purchase quantity)
 Analysing Consumer Markets and
Buying Behavior
Buying Roles
 Initiator, Influencer, Decider, Buyer, User

Stages of the Buying Decision Process

 Problem Recognition

 Information Search
 Evaluation of alternatives
 Purchase decision

 Post Purchase behavior

Industrial Buying Behavior
Issues in Industrial Markets
 Institutional
markets
Large
organizational Small
markets Organizational business
markets market

Government markets
. Fewer, Larger Buyers – Tire manufacturers have OEM contracts with few
automobile manufacturers.

. Close supplier customer relationship – as there are fewer customers, suppliers

tend to develop a closer customer relationship. WIPRO’s close relationship
with IIMB, for the sale of computers

. Professional purchasing – use of buying instruments such as quotations,

proposals and purchasing contracts; buyers guided by firm’s purchasing
policies, constraints and requirements

. Several buying influences – the buying committee may consist of technical

experts, senior management, gatekeepers from consultancies etc. Thus the seller
should send trained sales people.

. Multiple sales calls – sales cycles extends from few days to few years; thus seller
needs to make multiple sales calls to win orders.
6. Derived demand – The demand for industrial goods is driven by the
demand for consumer goods. The boom in the construction industry is
driving the demand for cement and steel.

7. Inelastic demand – Demand for many business goods and services is inelastic
- that is not much affected by price changes. For example the demand for
batteries is not going to change much with price as the demand of batteries
is driven by the demand for automobiles.

8. Fluctuating demand – A small increase in the consumer demand can give rise
to a significantly large increase in industrial demand – this effect is called the
acceleration effect. Similarly a 10% fall in consumer demand can cause a
significant decrease of the industrial demand.

9. Geographically concentrated buyers – there is clustering to rationalize

production – software in Bangalore; hosiery in Coimbatore; auto-ancillaries
in Pune and Nasik etc.

10. Direct Purchasing – Firms buy direct mostly rather than thru intermediaries
Key Elements of Industrial Buying Behavior
 Buy Situations Straight Re-buy – routine order –
consumables, office supplies; outside
Suppliers tend to get in on dissatisfac
tion of existing supplier

Modified Rebuy – Modify specs,

Prices, delivery requirements. In-
Buying Process Suppliers have to protect an account;
Out-suppliers try for an opportunity
e.g. computers

New Task – Buy for first time; greater the cost / risk –longer it takes to decide
Pass through stages – awareness, interest, evaluation, trial, adoption.
Includes setting specs, price limits, delivery terms, order qty, acceptable
Suppliers and selected supplier(s). Because of complex selling use of
Dedicated missionary sales force.

Systems Buying and Selling – also called turnkey solutions – key industrial
Marketing strategy in bidding large projects – dams, steel factories etc.
Buying Centre - Includes all members of the organization who play any of seven
roles in the purchase decision process

1. Initiators – those who put up the request

2. Users - Those who use the product; many times the user is
the initiator

3. Influencers – help define specs, provide info for evaluating

alternatives, technical people are good influencers

4. Deciders – those who decide on requirements.

5. Approvers – those who authorize deciders and buyers

6. Buyers – members authorized to select supplier and decide terms

7. Gatekeepers – Members who are info conduits to other

members of buy center e.g. receptionists , agents
 Characteristics of BUY CENTER

 Several individuals can occupy a given role (e.g. many users / influencers) and
one individual can occupy multiple roles.

 The buying center may include people outside the organization such as
government officials, consultants, technical advisors and other members of the
marketing channel.

 Different members of the buy centre have different influences, for e.g. the
engineering department may be concerned with actual performance of the
product, whereas production may be more interested in ease of use and reliability
of supply.

 Members of buy centre – different personal motivations, perceptions and

Preferences which in turn are dependent on - age, income, education, job position,
personality, attitudes towards risk and culture
 Characteristics of BUY CENTER ……….. Cont…….

Small sellers are advised to concentrate on key buying influencers. Large sellers
Go for multilevel in-depth selling

Sellers are advised to periodically question or revise their assumptions about the
Buy center to adapt to organizational changes
Purchasing / Buying Orientations

1. Buying Orientation – Buy at lowest price given a quality level . Use two
Techniques (a) commoditization – regard the product is only a commodity and
care only about price (b) multisourcing to bring in competition among vendors

2. Procurement Orientation – look for collaborative relationships and seek

savings through better management – such as material requirements
planning, just-in-time management and even product design.

3. Supply Chain Management Orientation – purchasing is a strategic value

adding operation and purchase department betters its role as a part of the value
chain from raw materials to finished goods
 BUYGRID FRAMEWORK

BUYCLASSES

New Modified Straight

Task Rebuy Rebuy

1. Problem recognition Yes Maybe No

BUY 2. General need description Yes Maybe No
PHASES 3. Product specification Yes Yes Yes
4. Supplier Search Yes Maybe No
5. Proposal Solicitation Yes Maybe No
6. Supplier selection Yes Maybe No
7. Order-routine specification Yes Maybe No
8. Performance review Yes Yes Yes
 Marketer stimulates problem recognition by
Direct mail, telemarketing, calling on prospects

Internal stimuli – new product development

for which parts are needed, breakdown of
equipment, existing suppliers unsatisfactory

Problem recognition Buyer attends a trade show

Purchase Manager senses an opportunity to
get lower prices or better quality
 Standard items – go as per internal records or
as per specs laid out in ISI documents

Complex items – collaborate with engineers,

users; else sit with marketer’s application
engineers who do consultative selling and
work out specs and likely price
General need description
and product specification

Certain buying organizations attach a PVA or

product value analysis team to the project
who will conduct extensive analysis to arrive
at specs that will lead to minimum cost
 Identify suppliers
- trade directories, hunt online catalogs for suppliers
- trade shows
- trade advertisements
- Internet search – Websites have two types of e-hubs
Vertical hubs centered on industries
-plastics, steel, paper
Functional hubs centered on logistics
Supplier Search media buying, advertising
- Direct extranet links to major suppliers
(WalMart – P&G)
- Buying alliances to get best price.
Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette
P&G, have joined to form alliance – Transora
- Company buying sites – Firms like GE have their
own site where it places Requests for Proposal,
negotiate terms, place orders
 Invite suppliers to make detailed proposals

Set up quality standards if any e.g ISO 9000 or

ISI etc.

Large technology systems need a detailed

Techno-Commercial proposal. The technical
Proposal Solicitation quote will be cleared first and after that only
qualified technical bidders will be called for
commercial negotiation

Buyers can invite suppliers to make presentations.

 A supplier rating list is made by some companies
based on relative importance given to a select set
of attributes.

For routine order products the factors are : price,

supplier reputation, delivery .

For procedural problem products such as copiers the

important attributes are : technical service, supplier
Supplier Selection flexibility, reliability and price

For political problem products such as choice of a

set of computers the factors are price, reputation,
reliability and flexibility

One way to encounter price factor from supplier side

is to talk of total cost of product or life cycle cost.
 Buyers negotiate the final order with the selected
suppliers, and details the tech. specs., the quantity
the delivery time, return policies, warranties etc.

For maintenance and repair items , firms are moving

towards a blanket contract that establishes a long run
relation. Such contracts are called stockless
purchase plans as the stock is held by the supplier
Order routine
specification Long run contracts are also agreed upon in case of
shortage raw materials / inputs so that there is a
steady flow of material. In many cases the supplier
locates his factory near the buyer for bringing down
inventory and transport costs.

Vendor managed inventory is when the responsibility

rests with the vendor for maintaining inventory

Important parameters to see are OT – deliver on time

IF – in full, NE – No error
 Three methods of review

1 Ask for evaluation from buyers

2 Buyer rates supplier on weighted score
method
3. Based on drawbacks of performance the
buyer may come up with adjusted cost
of purchase including price
Performance Review 4. Managers are rewarded for good buying
performance
Institutional and Government Markets

1. Institutional Markets are – schools, colleges, universities, hospitals,

nursing homes.
2. Institutions normally ask for lowest price given a minimum quality
3. In government organizations the normal process is bidding with the
order going to the lowest bidder(s)
4. Negotiated contracts are applicable where the project is complex and
risky.
5. Governments tend to favor domestic suppliers
6. Government decisions are subject to review, so there is lot of paperwork
in contracting
7. Director General of Supplies and Disposals is the central purchasing unit of
Indian Government.
Segmentation, Targeting, Positioning
 Identifying Market Segments and
Selecting Target Markets
Segmentation is the process of placing together
consumers into groups such that consumer
heterogeneity on specified characteristics is
minimized within groups and maximized across
groups e.g. value for money buyers as distinct
from economy buyers.
Segmentation can also be thought of as taking a
market and dividing them into groups based on
some common characteristic e.g. diet-colas,
regular colas.
 Mass Marketing or Undifferentiated Marketing
e.g. Ruf & Tuf Jeans, Model T Henry Ford

Segment Marketing - Cars

Niche Marketing – specialize to a narrowly defined

customer group – Temple jewellery for South Indian
women wanting to take part in cultural programmes
Levels of Market
Segmentation
Local Marketing – Athica for IIMB and around

One to One Marketing

Individual Marketing
Mass customization –
ability to prepare on a
mass basis individually
designed products
 Flexible market offering – naked solution containing the
No frills product and discretionary options that are
Priced extra such as A/C, power windows, moon roof

Homogenous preferences e.g. bite size candies, eclairs

Segment Marketing Diffused Preferences – House Buildings

(Patterns of Segment
Markets)
Clustered Preferences – distinct clusters in the
Market also called natural market segments
e.g. car market
 Why is segmentation useful ?
 Segmentation helps firm tailor their marketing programs

 focuses an actionable and accessible set of the market.

 cuts of wasteful expenditures on unwanted consumers

 matches needs and wants of specific groups of buyers to firm’s offerings

 stimulates demands through multi-products for multi-segments

 resource allocation to segment specific marketing mix activities will be made

more efficient

 Segmentation is a way to plan rather than explain

Criteria for Segmentation
1. Measurable – size, purchasing power etc – finding the size of
market for refurbished home appliances is not that easy.

2. Substantial – large enough for the firm to find it as a marketing

opportunity – Premium car market in India may
not be substantial to warrant local manufacture

3. Accessible – segments can be effectively reached and served –

in communication, serving last mile is not easy

4. Differentiable – segments should be differentiable from one another –

if rural consumers and urban consumers show
no difference in features of mobile handsets

5. Actionable – It should be possible for formulating marketing programs for

serving the segment (it cannot add segment descriptors
so easily) – how to sell money for value products such as
expensive watches and pens – not only the monetarily rich
buy it, the mentally rich also buy – how to identify
Bases for Consumer Market Segmentation
 Geographic - Rural / Urban; metropolis/city/town/village;
modern retail stores/kirana stores / mandis/ haats

Demographic – Age, Family Size (nuclear or joint ), gender,

Income, Occupation, Education, SEC, religion, race,
Nationality, social class

Bases
Psychographic – Use of Psychology and demographics
* Lifestyle (AIO) – Nike, Benetton, Gatorade
* Personality – Femina – woman of substance
* Values – HiDesign leather accessories – consumers
who hold the value ‘style and elegance in a classical sense’

Behavioral Segmentation – next slide

Behavioral Segmentation - based on buyer’s knowledge of, attitude towards,
use of, or response to a product

Occasions – Marriage, Birth – Archies and Hallmark cards

Benefits – In soaps - Dettol – antiseptic, Lux – Beauty

User Status – Non users, first time users, potential users, regular user

Usage rate – Light users, medium users, heavy users

Buyer Readiness State – Cold Prospect, Hot Prospect

Loyalty status – Hard Core Loyals, Split Loyals, Shifting Loyals, Switchers

Attitude – enthusiastic, positive, indifferent, negative, hostile

Bases of Industrial Market Segmentation

Nested Basis
Nested Approach

Demographic
Operating variables
Purchasing
approaches
Situational factors
Personal Characteristics
Classification of Nests

Inner middle nest

Personal Purchase
characteristics Innermost nest Purchase process
decision
Outer nests
Situational factors

Company variables
Demographics Operating
Purchasing approaches variables
Demographic Variables
Industry, Company Size (Large, SMEs) , Location

Operating Variables
Technology, User or Nonuser status (light, medium, heavy users)
Customer requirements (few services or extended requirements)

Purchasing Variables
Purchasing function approach (centralized or decentralized), Power
structure( technology top, finance top, marketing top), Nature of
existing relationships( old firms or new firms), general purchasing
policies ( leasing, service contracts, sealed bidding ) , purchasing
criteria (quality, service, price)

Situational Factors
Urgency of requirement, size of order

Personal Characteristics
Loyalty, attitude toward risk, some similarities between buyer-seller
Segment based on existing relationship

First time prospects, novices, sophisticates

Segment based on purchasing criteria –

price oriented customers, solution oriented customers

strategic value customers (enterprise selling or partners)

Super Segments

A set of segments sharing some exploitable similarity

Perfume manufacturers target to modern women rather
only to working women or rich women. Both segments have
a similarity of attempting to obtain – independent identity
Methods to Segmentation

Self Selection

Profiling

Competitive Market Structuring

Attitudinal Segmentation - Survey Method

Self Selection

One of the powerful means of segmenting markets is to allow consumers to

Self select by mass-customizing the marketing offer

American Express works on self selection of customers on dimension of

extent of spending by offering different categories of rewards for light and
heavy users ; Heavy users – 2 airline round trip tickets to extra-spending
within six months; Light users – money towards purchase of car by saving
in five years.
Profiling

Method of describing a set of consumers on market

Characteristics and attaching a tag description to it.
Basic profiling of customers in toothpaste
market
Segment 1 Segment 2

Demographic

Age 15-40 years 3-60 years

Family size Small (<4) Large (5+)

Education Well educated Moderately educated

Psychographics Conservative shopper Utilitarian shopper

Behavioral Quality seeking twice a Economy seeking

day brusher, loyal once-a-day brusher
deal-prone
Possible segment Upwardly mobile Conventional large
descriptor nuclear family family
 Segment Profiling Based on Cluster Analysis

The severe sufferers

The severe suffers are the extreme group on the potency side of the
Market. They tend to be young, have children, and be well educated.
They are irritable and anxious people, and believe that they suffer more severely
than others. They take the ailment seriously, fuss about it, pamper themselves, and
keep trying new and different products in search of greater potency. A most
advanced product with new ingredients best satisfies their need for potency and
fast relief, and ties in with their psychosomatic beliefs.
The Active Medicators:

The Active Medicators are on the same side of the motivational spectrum.
They are typically modern suburbanites with average income and education.
They are emotionally well adjusted to the demands of their active lives.
They have learned to cope by adopting the contemporary beliefs of seeking
help for every ill, and use remedies to relieve even minor signs of ailments
and every ache and pain. In a modern product they seek restoration of their
condition and energy, mental recovery, and a lift for their active lives.
They tend to develop strong brand loyalties.
The Hypochondriacs

The hypochondriacs are on the opposite side of the motivational spectrum.

They tend to be older, not as well educated, and women. They have
conservative attitudes toward medication and a deep concern over health.
They see possible dangers in frequent use of remedies, are concerned over
side effects, and afraid of remedies with new ingredients and extra potency.
To cope with these concerns they are strongly oriented toward medical
authority, seeking guidance in treatment and what products they should use.
They hold rigid beliefs about the ailment and are disciplined in the products
they use and how frequently they use them. They want a simple, single-
purpose remedy that is safe and free from side effects and backed by doctors
or a reputable company.
The Practicalist:

The practicalists are in the extreme position on this side of the

motivational spectrum. They tend to be older, well educated,
emotionally the most stable, and least concerned over their
ailment or the dangers of remedies. They accept the ailment and
its discomforts as part of life, without fuss and pampering. They
use a remedy as a last resort, and just to relieve the particular
symptom. They seek simple products whose efficacy is well
proved, and are skeptical of complicated modern remedies with
new ingredients and multiple functions.

(Wells 1975, p.203; Journal of marketing research published by

the AMA)
Competitive Market Structuring
Caffeine
Non-cola
Caffeine-Free
Cola

Regular Regular
Diet
Diet

C CF C CF C CF C CF

BRANDS
Market Structure of Soft drinks
 Ground Instant
Coffee
Mildness
sanka
Brim
Taste
Maxwell
Folger’s
Store brands
HillsBros Caffeinated Decaffeinated
Chuck Full o
Nuts

Regular Freeze Dried Regular Freeze dried

Mildness Mildness Mildness
High Point Mildness
Nescafe’ Taster’s Choice Sanka
Folger’s Taster’s
Sanka Nescafe’ Choice
Maxwell house Maxium
Brim
Taste Taste Taste Taste

Hierarchical definition of the coffee market with perceptual maps in each submarket (Urban
Johnson and Brudnick 1981)
Competitive Market structuring can also be obtained, by putting brands
Together in groups based on choice probabilities. In this way, market segments
Are a group of consumers who are homogenous in terms of probabilities of
Choosing different brands in a product class

Coke, Pepsi – consideration set

Segment 1 Segment 2 Segment 3

Coke 0.50 0.30 0.70

Pepsi 0.5 0.70 0.30

Descriptor Hedonist or Next Generation Seekers of

Variety Seeker Protagonist ‘Real Thing’
Attitudinal Segmentation – Survey Method
1. Whom to Interview.
In a survey of finding segments of customers who are travelers / tourists
to Europe, it is not appropriate to count only those who have been to
Europe, because that accounts for a small percentage. You have to
talk to potential travelers

2. Frame of reference for questioning

When you are questioning customers on vacations do you take (a) overall
experience of vacations (b) last vacation

3. Find different ways of segmentation

For example : Vacation to Europe, segment on (a) Favourability towards
Europe (b) Segmenting on Income brackets © segmenting customers
based on desires sought on their last vacation

In a study on 1750 interviews for vacationing the following segments were

Uncovered – (1) visit friends and relatives segments (2) good for family sight-
Seeing (3) outdoor vacationeer (4) resort vacationeer (5) foreign vacationeer
 Shell’s Customer Segmentation study
Methodology

• Surveyed 5000 * Statistically • Studied

respondents in 6 identified 10 Survey
markets. distinct results
• Questions included “Clusters” of from
customers each
* Behavior patterns with different cluster
* Desired Features needs/ • Develope
* Frustrations
attitudes d name
* Brand Ratings
* Psychographics and
* Demographics personalit
y for
Source: Wharton School each
 Shell Customers Target
Segments and Characteristics
Relationship shoppers 13%
Comfort Zoners 15%
Low octane communicators
7%
Sentimentalist 13%

Hands-on individualists Safety firsters

6%
Value minded Planners 6%
12%
Simplicity Struggling survivors 9%
seekers
11% Premium speedsters
13%
Source: Wharton School
 Segments selected
Premium speedsters
Personality : Internally driven, Competitive
Mentality
Gas Purchasing : Fast pumps, quick access
In a word: Power minded

Simplicity Seekers
Personality: Overburdened, Frustrated, Loyal to
others, caring, sensitive. Hard to motivate.
Gas Purchasing:
Reactive. Want things that make buying gas easy. Safety Firsters
Major brand= product reassurance. Personality: Confident, Self-
In a Word…”Overwhelmed” assured, Responsible
Control oriented, well prepared.
Gas purchasing: want cleanliness,
comfort, Efficiency, safety
In a word….”Safety Minded”
Source: Wharton School
 Brand Identities Considered
Quick & Easy
(Premium speedsters, simplicity
Friendliest Service seekers, safety firsters) One stop convenience
(Relationship Shoppers, (Value minded planners,
Comfort Zoners) struggling survivors)

Best Gasoline
performance
Lowest Price (Hand’s on individuals,
Community support
premium speedsters)
(Comfort Zoners) (Low octane commuters,
Sentimentalists) Source: Wharton School
Market Targeting
 Single Segment Concentration
Zodiac concentrating on executive and professionals

Selective Specialization – may be or may not be

Synergy among the segments selected
HLL in Soaps

Product specialization - Specialized product to

Market Targeting several segments – TVS makes scooters of all
ranges to several socio-economic classes

Market specialization – Serving many needs of

a single customer group. Financial services to
NRIs

Full Market Coverage - General Motors,

What is Positioning
To some it means the segmentation decision (economy and premium segments).
To others it is an image question (Casual, sporty wear – Benetton)
To still others it means selecting which product features to emphasize – (flavor
or foaminess of toothpastes)

Positioning a brand is obtaining mind-space of the consumer for the brand with
Respect to competition

Positioning is the act of designing the company’s offering and image to occupy
a distinctive place in the mind of the target market so as to maximize the
Potential benefit to the firm. The result of positioning is the successful creation
Of a customer focused value proposition

e.g. – Colgate Total – Multi-benefit toothpaste as a one product solution for

people with tooth problems
As against Colgate Dental Cream – Core Identity for strong, white teeth meaning
a toothpaste to maintain healthy teeth.
Jack Trout issues on Positioning
1. Embrace the obvious position possible in the market or granted by the
market. Positioning should be in line with the perception of consumers’
mind not against it

Coke: ‘The Real Thing’ is fine; it is the original cola

Coke: Always Coca-Cola may not be fine as half the market is Pepsi

2. Many positioning ideas are founded on how company estimates the future

Samsung – Challenging Limits – Looks alright

Avis: We are No.2. We try harder

3. Be Simple: Volvo – Drive Safely

4. Positioning is long term. Do not be driven by the stock market

Kotler et.al on Positioning
Steps to a Positioning Strategy
1. Determine Target Market

Laptop for the business professional

2. Determine category membership of the brand under consideration

Hewlett Packard dv1000 is a sophisticated business laptop

3. Identify the competition

Sony, Toshiba
4. Establish the Category Points of Parity to fulfill the necessary conditions
of category membership

there are three main ways to convey a brand’s category membership

- announcing category benefits
centrino mobile technology

- comparing to exemplars
on par with HP’s excellence in instrumentation

- relying on the product descriptor

HP Pavillion dv1000 is an entry level business
laptop
5. Establish the Competitive Points of Parity to establish the equivalence of
Product benefits, attributes, values with respect to competition

HP’s manufacturing quality is no way behind Sony or Toshiba. It is

backed by decades of manufacturing electronic systems
6. Establish the Points of Difference if any to take a differentiated position
If no POD exists then the brand takes a head on position or a me-too
position

HP has an excellent service network in India as compared to Toshiba.

HP is not as expensive as Sony

7. Write out the Positioning Statement

To the young urban professional (target market) our product – HP

Pavilion dv 1000 is a rugged system with all the necessary features of a state-
Of-art business computer and is offered as a value for money laptop with
Excellent service backup.
Important considerations in choosing Points of Difference (PODs)

(1) PODs are desirable by the customer

- Relevant and important to the customer – e.g. price of HP

Laptop

- Distinctiveness – Service backup is not a common feature

of all foreign made laptops in India

- Believable – HP has been in the electronic business for

decades
(2) PODs are deliverable to the customer

- Feasibility – HP has the required organization to make the

service deliverable and the required technology
to offer a value for money product

- Communicability
- HPs products are not known as very expensive

- Sustainable
- HP has the required R&D to continue making
state-of –art upgrades

In this case PODs are anchored at the benefit level, sometimes they could be
Anchored at the attribute or value level
Handling Conflicting POPs and PODs

Sometimes attributes and benefits are negatively correlated or move in the opposite
Direction. Ideally consumers want to maximize their benefit package.

Examples of such cases are

(1) Low Price vs High Quality

(2) Taste vs Low Calories

(3) Nutritious vs Good Tasting.

Methods to overcome such situations

- Go for straddle positioning – do both simultaneously. BMW designed

its car for both luxury and performance

- Present the communication messages for each attribute / benefit

Separately

- Leverage equity of another entity e.g. Intel Inside

- Redefine the relationship – Teach customers that the relation between

attributes is redefined and now stands positive e.g. Apple is user friendly
and not regarded as powerful. Apple came up with an ad campaign that
had the tag – ‘Power to be your best’, teaching customers that they used it
because it was user friendly and having used it successfully it was powerful.
 Differentiation
It is the process of adding a set of meaningful and valued differences to
Distinguish a company’s offering from competitor offerings

A difference will be stronger if it satisfies one or more of the following criteria

1. Important - Infrastructure investment of business school

2. Distinctive , but not necessarily superior - Bajaj scooter

3. Superior - Product superiority of Gillette

4. Preemptive - cannot be easily copied - Zilog Processor

5. Affordable - Personal Computer of Acer

6. Profitable - MTR’s food products

Dimensions on which differentiation can be achieved by firms

1. Product / Services

2. Personnel

3. Channel

4. Image
Product / Services

- Product / Service Quality

performance based – BMW
conformance quality – CMM in software
physical signs and cues – Tata Indica
- Form - Satchets
- Features – Cameras
- Durability – Volvo
- Reliability – Maytag
- Repairability – Maruti
- Style – Benetton
- Design – Designer wear
Services
- Ordering ease – home delivery pizzas
- Installation – Mobile
- Customer Training – GE Medical Systems
- Customer Consulting - Saree selling
- Maintenance and repair – Premium apartments in the city.
Personnel

- Trained personnel should exhibit the following

- Competence – Repair engineers of process plants

- Courtesy - Front line staff in premium hotels

- Credibility – Premium hospital doctors

- Reliability – Parallel computers

- Responsiveness and Communication – Beauty Consultants

 Channel

- Coverage – HLL

- Expertise – Avon

- Performance - Caterpillar

Image

- Differentiate Identity – Mysore Sandal Gold vs Dove

- Differentiate Logo, colors, slogans, events and sponsorships – Coca-Cola