Consumer behavior and Market Segmentation

• Analyzing customers and their activities is consumer behavior
• These activities include purchasing and disposing of goods/services, which involve emotional, mental, and behavioral responses

Importance of Understanding Consumer Behavior

• Understanding consumer behavior is vital for all organizations (private, public, and non-profit)
• Consumer behavior knowledge aids successful marketing and achieving strategic goals

Market Segmentation

• Market segmentation involves dividing a market into groups of consumers with similar needs, desires, interests, and lifestyles
• Segments respond differently to marketing efforts like pricing, campaigns, and distribution
• A segment consists of individuals with shared characteristics that can be targeted with tailored marketing

Segmentation Strategies

• Target groups are selected from segments and marketing is aligned with the groups' characteristics
• Dividing a market involves identifying customers with shared needs and similar responses to marketing strategies
• Segmenting criteria explain differences in needs and desires
• Segmentation examples for banks include dividing the private market into specific groups (children, youth, etc.)

Segment Examples

• Children: Savings needs; parents are the communication group
• Youth: Savings and payment solutions; potential small loans
• Establishing Phase: Loans for housing; initial pension savings
• Adults: Loans for cabins or boats; focus on pension savings
• Elderly: Desire to free up housing assets for travel and experiences, such as senior loans, or pension loans.

STP Model

• STP encompasses segmentation, targeting, and positioning
• The model guides companies in segmenting, selecting target groups, and adjusting their position

Segmentation (Segmentation)

• Dividing the market into smaller subgroups with common traits

Selection (targeting)

• Selecting the most profitable customer segments

Positioning (Positioning)

• Creating a unique position of a product

Segmentation Criteria

• Segmentation uses various criteria, primarily demography, geography, psychography, and behavior

Demographics

• Demographics include gender, age, location, civil status, education, income, municipality

Geography

• Geography includes land, region, and city

Psychographics

• Phychographics include opinions, attitudes, personality traits, and lifestyle

Behavior

• Behavior includes buying habits, frequency, loyalty, occasion

Demographic Breakdown

• "Demography" translates to describing people in the Greek language
• It describes consumers by factors like age, gender, income, and household size, referred to as "hard criteria"
• Example: a 20-year-old cohabitating earner in Bergen with income around 350,000
• Demographic criteria include gender (male, female, other), age segments, income brackets, and civil status (married etc)
• Nasjonalitet (Norwegian, Swedish, etc), Generational cohort (68 generation, Gen X, etc), Education level (high school, bachelor's etc),
• Family Size (2,4,8 etc), and job title (academic, leader, etc.)

Consumer Decision-Making Process

• Steps consumers take from wanting to buy something to making the decision:
  • Problem recognition
  • Information search
  • Alternative evaluation
  • Choice
  • Post-purchase evaluation

Engel, Kollat, and Blackwell Model

• The Engel, Kollat, and Blackwell model outlines five steps consumers take during decision-making
• Problem Recognition: The consumer identifies a need or desire they don't currently have Information Search:
  • Consumers may look internally( such as product, brand, vendor knowledge) as well as externally (online search)
  • A consumer is more likely to search externally if they lack the information or knowledge to address the problem

Alternative Assessment & Choice

• Alternative Evaluation: Consumers compare alternatives to meet needs
  • Choice: A purchase decision including product, store, payment, and whether to buy
  • Post-Purchase Evaluation: Consumers assess if the product meets their needs and if any issues occurred

Cognitive Decision

• The decision-making model developed is the cognitive decision model
• Consumers gather comprehensive information for making purchases
• Consumers assess pros and cons along with existing knowledge
• The decision involves purchasing, postponing, and not purchasing

Problem Recognition

• Problem recognition occurs when one realizes the difference between an actual state and a desired state
• Example: realizing a stolen bicycle will influence the decision

Types of Problem Recognition

• Opportunity recognition: Seeing a way to improve current state toward ideal
• Need recognition: Experiencing a decline from an ideal state
• Marketing can influence need and opportunity recognitions by changing price, advertising, and placement

Generic vs Product-Specific Goals

• Generic Goal: Meeting needs with a general product category
• Product-Specific Goal: Choosing a specific brand within the category
• Marketing intended increase general knowledge about product offerings, stimulates its general goal
• Marketing for a single company falls in the product-specific goal

Information Search

When problem recognition is strong enough, the consumer will collect evidence pertaining to choices

• Internal source search recall information and memory.
• External occurs if the consumer has too little information

External Source - Johan Arndt Vareprat

• "Word of mouth" is conversation with two more people about economical merchandise
• Studies suggest "word of mouth" is statistically more credible
• Electronic forms are the forms of reviews and assessments of customers