Consumer Behavior and Market Segmentation

Decision-Making, Involvement, and the Customer Journey

• Decision-making is a complex process, influenced by personal involvement and the customer journey.
• Different levels of involvement affect decision-making.
• Understanding the stages of the decision-making process is important.
• Consumer motivations and shopping behaviors shape the way people buy and engage with products.

Market Segmentation and Consumer Behavior

• Market segmentation is dividing a broad market into smaller sub-markets with shared needs. This aims to predict consumer needs and improve profitability.
• Segmentation factors include:
  • Demographics (age, gender, income, education)
  • Psychographics (lifestyles, attitudes, personalities)
  • Behavioral factors (usage frequency, benefits sought, user status)
  • Geography (where consumers live)
• Example: A company might target health-conscious individuals with Diet Coke while offering energy drinks to athletes.
• Multi-dimensional segmentation is more effective than single-variable segmentation.

Understanding Consumer Personas

• Customer personas are detailed profiles representing ideal customers (demographics, shopping habits, lifestyle choices, pain points).
• Example A travel company might create a persona for a budget-conscious family.
• Personas help tailor marketing strategies.

Advantages of Market Segmentation

• Better understanding of customer needs.
• Effective marketing strategies.
• Tailoring the marketing mix (product, price, promotion, placement).
• Identifying new opportunities.
• More efficient use of resources.

The Consumer Decision-Making Process

• It is not a straightforward process, involving several stages.
  • Problem recognition: Consumers realize a need or problem.
  • Information search: Internal or external, online or offline.
  • Evaluation of alternatives: Consumers compare options, using shortcuts/heuristics, or relying on product signals.
  • Purchase decision: Based on evaluation, a purchase decision is made.
  • Post-purchase evaluation: Satisfaction or dissatisfaction judged based on expectations matching performance.

Challenges in Consumer Decision-Making

• Paradox of choice: Too many options can overwhelm consumers.
• Satisficing: Choosing a "good enough" option.
• Maximising: Trying to make the best possible choice, but can be difficult with many alternatives.

Decision-Influencing Factors

• Amount of available alternatives: The more options, the more complex the decision.
• Amount of information available: Too much information can cause confusion.
• Uncertainty about product performance.

Post-Purchase Dissonance

• Discomfort or regret after a purchase.
• Common in high-involvement purchases (e.g., cars).
• Marketers aim to reduce dissonance.

Disposal of Goods

• Consumers make decisions about what to do with products after use.
• Includes various methods like recycling, reselling, donations, and disposal.

Fast vs. Slow Thinking in Decision-Making

• Fast thinking: Unconscious, automatic (used for everyday decisions).
• Slow thinking: Deliberate, effortful (used for complex decisions).

Different Types of Buying Situations

• Routine problem solving: Habitual purchases, minimal effort (e.g., toothpaste).
• Limited problem solving: Consumers are somewhat familiar with a product.
• Extended problem solving: High-involvement purchases, significant research and evaluation (e.g., cars, houses).

Techniques to Increase Involvement

• Link the product to a larger issue (like sustainability.)
• Create a problem and solve it.
• Link the product to personal situations/activities.
• Use engaging advertising (emotional appeal, strong visuals).
• Change the importance of product attributes.
• Add a new attribute (new feature).

The Social Customer Journey

• Decision-making influenced by social factors (social media, recommendations, friends).
• Consumer journey shaped by social interactions and external influences.

The Twelve Shopper Journey Archetypes

• Groups to describe different shopper behaviors.
  • Classic, Entertainment, Impulsive, Retail therapy, Required, Routinised habit, Learning, Social network, Opportunistic, Joint, Gifting, Outsourced.

The Role of Culture in the Consumer Journey

• Cultural factors significantly shape consumer behaviors.
• Importance of understanding the cultural norms and values.

Summary

• Decision-making is a process that involves various stages, with multiple influences.
• Marketers need to understand consumer behavior to create effective strategies.