Consumer Behavior and Market Segmentation

• Consumer behavior and market segmentation are key for marketing strategies.
• Businesses are helped to understand and target their customer effectively.

Consumer Behavior

• Consumer behavior involves how individuals or groups select, purchase, use, and dispose of products and services.
• Consumer behavior is influenced by various factors.

Psychological Factors

• Perception means how consumers interpret information and form opinions about products.
• Motivation is what drives consumers to make a purchase, such as Maslow's hierarchy of needs.
• Learning involves past experiences that shape purchasing behavior.
• Attitudes and beliefs are personal values and opinions that influence buying decisions.

Social Factors

• Family dynamics impact what products are bought through household decision-making.
• Reference groups, including friends, colleagues, and celebrities, influence purchases.
• Culture and subculture create cultural norms and traditions that shape buying habits.
• Social class influences purchasing power and preferences through income, education, and occupation.

Personal Factors

• Age and life stage influence consumer needs change based on their current stage, like being a student, married, or retired.
• Occupation determines professional needs, which in turn affect product preferences.
• Lifestyle, including hobbies, interests, and daily activities, affects purchase decisions.

Situational Factors

• Time and occasion impacts buying behavior, varying depending on urgency or special events.
• Economic conditions influence consumer spending, which changes during recessions or economic booms.
• Marketing stimuli, such as advertisements, promotions, and store layout, influence purchasing.

Market Segmentation

• Market segmentation divides a broad market into smaller consumer groups with similar characteristics and needs.

Types of Market Segmentation

• Demographic segmentation is based on age, gender, income, education, marital status, and occupation.
  • An example includes luxury brands that target high-income earners.
• Geographic segmentation divides consumers by location, climate, or region.
  • An example includes clothing brands selling winter wear in cold regions.
• Psychographic segmentation is based on lifestyle, values, interests, and personality.
  • An example includes eco-friendly brands targeting environmentally conscious consumers.
• Behavioral segmentation focuses on consumer buying behavior, usage, and brand loyalty.
  • An example includes loyalty programs rewarding frequent shoppers.
• Firmographic segmentation (for B2B) segments businesses based on industry, company size, and revenue.
  • An example includes software companies targeting small businesses versus enterprises.

Importance of Market Segmentation

• Better targeting helps businesses tailor marketing efforts to specific customer groups.
• Efficient resource allocation focuses budgets on high-potential customer segments.
• Improved customer experience is delivered through personalized products and messaging.
• Competitive advantage differentiates a brand from competitors.

Understanding Consumer Needs

• Consumer needs are the fundamental reasons people buy products or services.

Maslow's Hierarchy of Needs

• Physiological needs are basic necessities like food, water, and shelter (e.g., grocery shopping).
• Safety needs are for security and protection (e.g., insurance, home security).
• Social needs are for love, belonging, and relationships (e.g., social media, fashion).
• Esteem needs are for recognition, status, and self-respect (e.g., luxury brands, certifications).
• Self-actualization fulfills personal growth (e.g., education, travel experiences).

Functional vs. Emotional Needs

• Functional needs offer practical solutions to problems (e.g., buying a car for transportation).
• Emotional needs fulfill psychological satisfaction (e.g., buying a luxury car for status).

Latent vs. Expressed Needs

• Expressed needs are clearly stated by consumers, such as "I need a new smartphone with a great camera."
• Latent needs are not explicitly stated but can be discovered, for example, customers wanting an easier way to organize photos.

Understanding Buying Behavior

• Buying behavior is how consumers make decisions about purchasing products or services.
• It varies based on involvement level, decision complexity, and personal or external influences.

Types of Consumer Buying Behavior

• Complex buying behavior involves high involvement and significant differences between brands, like buying a car or house.
• Dissonance-reducing buying behavior involves high involvement and little difference between brands, like expensive furniture.
• Habitual buying behavior shows low involvement and little brand difference, like buying toothpaste.
• Variety-seeking buying behavior is shown as low involvement and significant differences between brands, like trying new snacks.

Consumer Decision-Making Process

• Problem recognition involves the consumer realizing a need or problem
  • For example, a phone battery dying quickly.
• Information search occurs when people gather information, like reading reviews or asking friends.
• Alternative evaluations involve comparing different brands and products.
• Purchase decisions involve choosing a product and making a purchase.
• Post-purchase behavior involves evaluating satisfaction and potentially leaving reviews.

Factors Influencing Buying Behavior

• Personal factors include age, lifestyle, income, and occupation.
• Social factors include family, friends, and cultural background.
• Psychological factors include perception, motivation, learning, and attitudes.
• Situational factors include time, occasion, and economic conditions.

Practical Applications for Marketers

• Market research uses surveys and analytics to understand consumer needs.
• Personalization offers tailored recommendations based on past behavior.
• Content marketing educates consumers to influence their decision-making.
• Customer experience provides excellent service to build long-term loyalty.

Consumer Decision-Making Process

• The consumer decision-making process includes several stages that individuals go through before, during, and after making a purchase.
• Understanding these stages helps businesses influence buying decisions effectively.

Problem Recognition (Need Recognition)

• The consumer identifies a need or a problem that can be triggered by internal factors (hunger, boredom) or external factors (advertisements, peer influence).
  • Example: A person realizes their phone battery drains too quickly.

Information Search

• The consumer seeks information about possible solutions from internal sources for personal experience and memories.
• External sources from online reviews, recommendations, social media, and advertisements; example of researching smartphones online, reading reviews, asking friends for recommendations.

Evaluation of Alternatives

• Consumers compare different products based on features, price, quality, and brand reputation.
• Logical reasoning, emotional preferences, or a combination of both can be used.
  • Example: Comparing different smartphone models, checking specifications, considering brand trust.

Purchase Decision

• The final decision is based on preferences and constraints (budget, availability)
• Factors affecting the decisions being discounts, promotions, brand loyalty, store experience, and influence from family and friends.
  • Example: Choosing to buy an iPhone over a Samsung due to brand loyalty and past experience.

Post-Purchase Behavior

• Consumers evaluate their satisfaction after purchase, with possible outcomes being satisfaction, dissatisfaction, or cognitive dissonance.
  • Satisfaction leads to repeat purchases and positive word-of-mouth.
  • Dissatisfaction leads to complaints, returns, or negative reviews.
  • Cognitive Dissonance makes the consumer doubts whether they made the right choice.
  • Example: Customer leaves a positive review online after a great experience or returns the product if dissatisfied.

Factors Influencing Consumer Decision-Making

• Psychological factors include motivation, perception, and attitudes & beliefs.
• Social Factors include family & friends, social class, and cultural influences.
• Personal factors include age & life stage, occupation & income, and lifestyle & personality.

Marketing Strategies to Influence Consumer Decision-Making

• Trigger need recognition through advertisements, limited-time offers, and influencer marketing.
• Simplify information search through SEO, content marketing, and product demonstrations.
• Highlight the unique value in alternatives through comparisons, testimonials, and social proof.
• Encourage purchase through discounts, easy checkout, and multiple payment options.
• Enhance post-purchase experience through customer support, follow-up emails, and loyalty programs.

Market Segmentation, Targeting, and Positioning (STP Model)

• The STP model is a fundamental marketing strategy that helps businesses identify and reach their ideal customers effectively.

Market Segmentation

• Market segmentation divides a large market into smaller, more manageable groups of consumers with similar needs, behaviors, or characteristics.

Types of Market Segmentation

Demographic: Based on variables like age, gender, income, education, occupation, and family status

• Example: A luxury car brand targeting high-income individuals.
• Geographic: Dividing the market by location, such as country, city, climate, or urban vs. rural areas.
  • Example: A clothing brand sells winter wear in colder regions.
• Psychographic Segmentation: Focusing on personality, values, interests, lifestyle, and social class.
  • Example: A fitness brand targets health-conscious individuals.
• Behavioral: Based on consumer behaviors like usage rate, brand loyalty, and purchase patterns.
  • Example: A streaming service offers different plans for casual vs. frequent users.

Targeting

• Once the market is segmented, businesses select the most suitable segment(s) to focus on.

Targeting Strategies

• Mass Marketing (Undifferentiated Targeting) uses a single strategy for the entire market.
  • Example: Coca-Cola markets to all consumers without major differences.
• Differentiated Targeting uses different strategies for different segments.
  • Example: Nike markets running shoes for athletes and casual sneakers for everyday users.
• Niche Marketing (Concentrated Targeting) focusing on a highly specific segment.
  • Example: Rolex targets high-income luxury watch buyers.
• Micromarketing (Individual or Local Targeting) customizes products for individuals or small local groups.
  • Example: A local bakery offering custom cakes for neighborhood events.

Positioning

• Positioning is how a brand establishes itself in the minds of consumers compared to competitors.

Positioning Strategies

• Price-Based Positioning means competing affordability.
  • Example: Walmart offers “Everyday Low Prices.”
• Quality-Based Positioning highlights superior product quality.
  • Example: Apple is known for premium technology and innovation.
• Differentiation-Based Positioning emphasizing unique features or benefits.
  • Example: Tesla is positioned as an innovative electric vehicle brand.
• Benefit-Based Positioning focuses on key consumer benefits.
  • Example: Colgate promotes dental health and protection.
• Lifestyle-Based Positioning aligns with a specific lifestyle or values.
  • Example: Patagonia appeals to eco-conscious consumers.

STP Example: Starbucks

• Segmentation:
  • Demographic: Middle- to upper-class consumers, professionals, students.
  • Geographic: Urban and suburban locations worldwide.
  • Psychographic: Coffee lovers, social individuals, eco-conscious consumers.
• Targeting:
  • Targets busy professionals and young adults looking for premium coffee and a comfortable space.
• Positioning:
  • Markets as a “Premium coffee experience” with high-quality ingredients and a cozy atmosphere.