Consumer Buying Behavior

• Consumer buying behavior involves the actions and decisions people take when buying products or services for personal use
• Understanding this behavior helps marketers boost revenue, influencing how much they allocate into marketing programmes
• The consumer market consists of all consumers

Buyer's Black Box

• A model of consumer buying behavior is the buyer's black box, also known as the stimulus-response model
• The black box consists of buyer characteristics (beliefs, attitudes, motives, perceptions, values)
• Also, the buyer's decision-making process is a factor
• Consumer buying behavior is based on stimuli, including:
  • Marketers (4Ps: product, price, promotion, place)
  • Environmental factors (economic, legal/political, technological, cultural)
• The response is the outcome of thinking that happens in the black box

Types of Consumer Buying Behavior

• Buying behavior is also determined by the level of purchase involvement and risk
• These are the four types of consumer buying behavior:
  • Complex usually occurs with higher ticket purchases like cars
  • Dissonance-reducing arises when a purchase is highly-involved, but there are few brands
  • Habitual is common with repeat purchases where there is not much brand loyalty
  • Variety-seeking is characterized by a desire to switch brands

Environmental Factors

• The recent coronavirus pandemic is seen as a recent environmental influence and has changed behaviour and marketing
• It has created impact to respond to three core needs—self-care, social connection, and identity
• To stay competitive and successful marketers are consistently monitoring environmental factors to shift marketing strategies

Factors That Influence Consumer Buying Behavior

• Cultural factors comprise values/ideologies of a community or group, including:
  • Culture is the values/ideas/attitudes that members of a group learn and share
  • Subculture refers to groups that share values
  • Social class refers to definitions of social class based on income, occupation and education
  • Gender also plays a role in buying choices

Cultural Factors Failures and Inspirations

• Cultural factors play a major role in determining how best to market to consumers
• Company efforts have failed when they did not reflect an understanding of the culture in a particular market
• Failures can be important in understanding the need to shift in strategy and possible success

Social Factors

• Social factors are prevalent in the society where the consumer lives
• Composed of individuals affecting personal preferences, including:
  • Family, being a family of orientation and a family of procreation
  • Reference groups can be formal groups or informal groups of friends/acquaintances who influence others
  • Opinion leaders exist
  • Roles and status, where the same person may make different purchasing decisions according to their membership of relevant groups

Personal Factors

• Personal factors include:
  • Your occupation
  • Age and life cycle stage
  • Economic situation
  • Lifestyle
  • Personality and self-concept

Generational Cohorts

• Baby boomers (born 1946-1964):
  • Tend to buy pharmacy and health care products, household goods and appliances, wine, books, cosmetics, and skin care products
• Generation X (born 1965-1979/80):
  • Are an optimal target for higher-end brands and convenience-related goods
• Generation Y/Millennials (born 1981-1994/96):
  • Tend to shop sustainably for food, household cleaning products, linens, and clothing
• Generation Z/Zoomers (born 1997-2012):
  • Are just starting to have an economic impact, and discretionary spending is limited

Personal Factors and Marketing Practice

• It is critical that a marketing professional is capable of relating to each demographic
• The impact of nostalgia is also an important tool to give consumers feeling, meaning and comfort
• There is wide variation between an urban person with no children, and a home owner in the suburbs with children

Psychological Factors

• Personality is the characteristic patterns of thoughts, feelings, and behaviors that make a person unique
• People tend to buy products that are consistent with their self-concept
• Include motivation, perception, learning, feelings, beliefs, and attitudes
• Maslow's hierarchy of needs includes:
  • Physiological, safety, belonging, esteem, and self-actualization
• Perception is the way sensory information is identified, organized, and interpreted
• Consumers apply:
  • Selective attention
  • Selective distortion
  • Selective retention
• Consumer attitudes are components of a consumer's beliefs, feelings, and intentions

Situational Factors

• Factors influencing buying behavior are external and play an important role in consumer experience
• Environmental factors include music, lighting, ambient noise, even smells encouraging a decision to purchases
• Spatial factors make a product seem desirable, but things like long lines or a crowded store make items undesirable
• Social situation, of who a person is with, also acts as a situational factor
• Goal of shopping and timing of the shopping exercise influence behavior

Consumer Purchasing Decision Process

• Underlies the visible act of making a purchase
• The act encompasses five stages: need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation

Five Stages of Consumer Decision Process

• Need Recognition: Triggered by internal stimuli and external stimuli
• Information Search: There is "heightened attention,” in which receive information; and/or stronger search state called "active information search"
• You either engage in an internal or external search
• Evaluation of Alternatives
• Consumers view each product as an accumulation of particular attributes
• Purchase Decision
  • Use of heuristics may determine the specific items chosen and purchased
• Post-Purchase Evaluation
• Buyer may search for additional information to confirm the wisdom of their decision in order to reduce doubt

Market Segmentation

• Market segmentation divides a target market into smaller groups with common needs expected to respond similarly to marketing

Segmentation Benefits

• Improved focus on the “important” customers
• Improved product development
• Improved brand loyalty

Methods of Segmenting Consumer Markets

• Four major types include:
  • Geographic segmentation focuses on the "where"
  • Demographic segmentation focuses on the "who"
  • Behavioral segmentation focuses on the "how"
  • Psychographic segmentation focuses on the "why"

Geographic Segmentation

• Geographic parameters:
  • Location
  • Cultural preferences
  • Climate
  • Language
  • Population type and density
• Language can also be used to segment a market, there are many different dialects that are not translated

Demographic segmentation

• With demographic segmentation, the marketer will divide the market into smaller groups, on the basis of factors such as:
  • Gender
  • Income
  • Age
  • Educational level
  • Race
  • Religion
  • Ethnicity
  • Occupation or job type
  • Family structure

Age Segmentation

• Age Range, this type of segmentation represents a specific age group, such as children, teens, adults, and older adults
• Life Cycle or Life Stage, in the same way that preferences change with age, they change with the individual's life stage
• Generation Based defines age by generation, such as baby boomers, millennials, and Generation X

Behavioral Segmentation

• Benefit segmentation focuses on which benefits are most applicable to the customer
• Occasion segmentation divides consumers on the basis of the occasions they make purchases
• Usage-based segmentation various segments of users based on how much they use a product

Pareto Principle

• 80 percent of a company’s revenue comes from the top 20 percent of repeat or loyal customers

Psychographic Segmentation

• Segmentation breaks down consumer groups into segments that influence buying behaviors
• Include Lifestyle, personality variables, and values
• 3 lifestyle dimensions analyzed by marketers - called the AIO's:
  • Activities
  • Interests
  • Opinions
• Another model known as VALS (values, attitudes, and lifestyles) that segments consumers into eight different types

Using Multiple Segmentation Bases

• Use all the segmentation bases for multi-segment marketing
• It is not uncommon for companies to develop products that compete against their own offerings as long as the new products offer different perceived benefits to consumers

B2B Market Segmentation

• B2B market segmentation concentrates upon identifying unique market segments based on common characteristics
• Because motivations/processes/considerations of B2B buyers are quite different from those of B2C buyers, the approach is more challenging
• Firms need to address what are people on the organizations looking for

3 main B2B Challenges

• Dealing with Highly Complex B2B Markets
• Dealing with More Rational Buyers, where as B2C is swayed by emotion
• Complexity of B2B Products, where even the simplest of products may have to be integrated into a larger system

3 advantages of B2B Segmentation

• Improved Campaign Performance, directed toward defined market segments
• Improved Customer Loyalty and Retention, the better the marketer knows about their customers’ business objectives
• Assistance in Product Development, to better meet needs of those B2B customers
• All lead to improved profitability

Segmentation based on firmographics

• Firmographics are grouping of B2B customers based on shared company attributes.
• Industry - What are the organization's primary activities?
• Location- like with geographic segmentation in the B2C market, a marketer can choose a city, state, country or even a continent
• Size- Will your company target small and midsize operations or Fortune 500 companies?

Segmenting Customers

• Segmenting Customers Based on Technographics- organize prospects by their technology ownership and usage and narrow the market to those prospects who want to invest in new technological solution in the future
• Needs-Based Segmentation- focus limited resources on those customers that need the product and have the ability to purchase it.
• Value-Based Segmentation groups customers according to the potential value they may bring to a business.
• Behavioral Segmentation considers the behavior of customers toward a company's products/services

Segmenting International Markets

• 3 challenges of segmenting international markets:
• Differences in cultural
• Economic
• Political environments in various countries Consumers in international markets tend to be more diverse in character than domestic markets.

Main Methods

• Geographic Segmentation, regions, such as Western Europe, the Middle East, Africa, Latin America, etc. Keep in mind, however, that with location, be in different respects
• Segmentation Based on Political and Legal Factors- such as the type and stability of the government, how receptive the government is to foreign firms, monetary regulations, and how complex the bureaucracy of the nation is.
• Segmentation Based on Economic Factors
  • Level of economic development
  • Income levels of the population - whether the country is developing, developed, or underdeveloped
• Segmentation Based on Cultural Factors
  • Common language
  • Religions
  • Values
  • Attitudes

Market Segmentation Factors

• Accessible- Can you reach consumers in that segment at an affordable cost using your strengths?
• Differentiable - In an ideal world, a market segment should be -> Internally homogeneous: (Similar preferences/characteristics) -> Externally heterogeneous: (Different segments; distinctly different)
• Actionable- Is it Practical/Profitable to market/ target towards that segment? A market segment should be able to respond to a certain marketing strategy and have easy to qualify outcomes
• Measurable. You should be able to accurately estimate the size of the market segment in terms of either sales value or number of customers
• Substantial- Doesn't make sense to waste resources if the group is too small to justfiy the expenditure

Target Market:

• The final goal in segmenting you market is highlight difference so that you can identify which groups to focus efforts on, your target market

Target Market and Target Audience:

• Target market and target audience are not the same. Target audience is more narrower in the sense is those that are expecting the purchase the product for all intended use
• The best is to review LEGO's approach from this perspective

Personas:

• It is important to develop personas to help the marketeers understand and relate to their target market
• Typically includes the following:
  • Name
  • Age: understanding generation-specifics.
  • Interests
  • Media Usage
  • Finances
  • Brand affinities

Target Market Strategies

• 4 Strategies: 1: Undifferentiated marketing (Mass Marketing) - no strong distinction in customer characteristics/high market appeal items are produced

2: Differentiated Marketing - design concentrated strategies for the segments

3: Concentrated Marketing - focus on just one target market via marketing strategy

4: Micromarketing (Customized Marketing) - going a step further by targeting individuals/ groups within a niche market

Core Focus and Positioning

• Core focus is the "positioning statement"
• Vision and Mission are already known
• Market Product and Service, to make target react in a certain way
• Two Approaches: Head-to-Head: Comparison Differentiation: Make it unique

Perceptual Positioning Maps

• Help show the Target Market Consumer vs Product Relationship
• 2 Determinate Attributes: Consumer uses it is making purchase