UNIT 3: Consumer Markets PDF

Strategic marketing Sofía Alonso Ibáñez 2ºCYM UNIT 3: CONSUMER MARKETS A consumer market: - There is included the personal consumption of final consumers. o Personal consumption is when someone buy...

Strategic marketing Sofía Alonso Ibáñez 2ºCYM UNIT 3: CONSUMER MARKETS A consumer market: - There is included the personal consumption of final consumers. o Personal consumption is when someone buys something to use for its own value and without incorporating that into any production process. - It has several differences with an industrial, institutional or organizational market. o In those business (B2B), whatever is purchased will be introduced in a production process (even to resell). The consumer purchase behavior is: - The buying behavior of final consumers, individuals and households, who buy goods and services for personal consumption. 1. CHARACTERISTICS AFFECTING CONSUMER BEHAVIOR When we are creating a product: - We don´t know how their reaction to stimuli would be. o We target consumers and send them “messages”. ▪ Trought product, price, place, promotion. - The way we are able to see what happens (if consumers buy the product or not, etc), is through market research. - The buyer´s black box is used to understand how consumers behave. o It includes characteristics and different decision processes. - The buyer’s responses are usually obtained by statistics. There are a lot of characteristics affecting consumer behavior. Cultural characteristics. - Culture. o Learned values, perceptions, wants, and behavior from family and other important institutions. - Subculture. o Groups of people within a culture with: ▪ Shared value systems based on. ▪ Common life experiences and situations. Strategic marketing Sofía Alonso Ibáñez 2ºCYM - Social class. o Society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. o How can we determine social class? ▪ Occupation (related to salary and money. differences between uniforms). ▪ Income. ▪ Education. ▪ Neighborhood. o There are consequences, such as differences in hobbies or even in the brand they consume. ▪ Consumers from the same social class normally behave the same, but is hard to tell who belongs to each other. Social factors. - Reference groups. o They influence our behavior. o They can be primary or secondary, depending on the frequency on which we have contact. o There can be formal or informal, depending on if there are clear rules or not. o Membership groups. ▪ Groups with direct influence and to which a person belongs. o Aspirational groups. ▪ Groups an individual wishes to belong to. ▪ They deal with a social need to belong. o Reference groups. ▪ Groups that form a comparison or reference in forming attitudes or behavior. ▪ Opinion leaders: we trust and admire; we aspire to be like them. ▪ Brands try to get them as ambassadors. - Family. o Family is the most important consumer buying organization in society. o There are two types of family: ▪ Family of orientation (where we grow up, we learnt how to behave and consume). ▪ Family of procreation (the family that we form where influences are different because there are household purchases and joint decisions). o There are different consumer buying roles within the family. ▪ Initiator. ▪ Influencer. ▪ Decider. ▪ Buyer. ▪ User. o The purchasing process is different, for example if you are looking for a present. ▪ You are trying to show appreciation, so you have to take care. You probably would buy a different product for a gift than for yourself. Strategic marketing Sofía Alonso Ibáñez 2ºCYM Personal factors. Gráfico savings vs debt in different life stages. - Age and life cycle stage. o We don´t behave the same at every age. ▪ And even people with the same age don´t behave the same because their situations are different. ▪ Young: singled, married without children, married with children, divorced with children. ▪ Middle aged: single, married without children, married with children, married without dependent children, divorced without children, divorced with children, divorced without dependent children. ▪ Elder: older married, older unmarried. - Occupation. - Economic situation. - Lifestyle. o A person’s pattern of living as expressed in his/her activities, interests and opinions. o This is interrelated with social class. ▪ To start a new sport, you need to buy items. In this purchase, it´s important the set of values that the brand offers (created by marketing). ▪ Brands should focus on a way that their consumers are agree with their values, because they choose a brand that is similar to their lifestyle. o Lifestyle classifications. ▪ SRI VALS (9 categories). Upper conservatives, traditional mainstream, traditional working class, modern mainstream, trendsetter, avantgarde, sociocritical, under-privileged. ▪ SINUS GmbH. Basic Orientation: traditional (to preserve). Basic Orientation: materialist (to have). Changing Values: hedonism (to indulge). Changing Values: postmaterialism (to be). Changing Values: postmodernism (to have, to be and to indulge). - Personality. o Unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment: ▪ Self-confidence. ▪ Dominance. ▪ Sociability. ▪ Autonomy. ▪ Defensiveness. ▪ Adaptability. ▪ Aggressiveness. o It´s difficult to measure because consumers have a self-concept which can differ for what you can see. - Self-concept. o How do we see ourselves (actual self-concept). o How would we like to be seen by others (ideal self-concept). ▪ Consumption is used to get closer to this idea. We answer surveys using that. Strategic marketing Sofía Alonso Ibáñez 2ºCYM Psychological factors. - Motivation. o A need becomes a motive when it is aroused to a sufficient level of intensity. ▪ This means, when we become aware of them. ▪ The need for energy is always there, but when we perceive hunger, we become aware of it. ▪ Sometimes there are external stimulus that tells us what we need (commercials). o There is a battle between Freud and Maslow. o Maslow pyramid. ▪ High order needs or motivations will never appear if lower needs are solved. 1) Psychological need (hunger, thirst). 2) Safety need (security, protection). 3) Social needs (sense of belonging, love). 4) Esteem needs (self-esteem, recognition, status). 5) Cognitive needs (comprehension, understanding). 6) Aesthetic needs (order, beauty). 7) Self-actualization needs (self-development and realization) - Perception. o Process by which people select, organize, and interpret information to form a meaningful picture of the world from three perceptual processes. ▪ It´s important because the final decisions would depend on how the customer perceives the product. o Selective attention. ▪ It is difficult to perceive something that you are not paying attention to. It is very difficult to sell to customers that don’t know you. We select what to pay attention to: we don’t have the time to pay attention to everything. ▪ We choose between the stimuli we receive. ▪ Adaptation level theory. When we start using a new parfum, it´s good, but then, you stop smelling, so you over splash. When you always drive through the same route, it´s difficult to see when a signal changes. o Selective distortion. ▪ The tendency to interpret information according to the beliefs or perceptions that you have rooted. ▪ How do we know we all see the same blue? When our brain identifies strawberries, it sees it red, despite it is actually green. ▪ When you engage with a brand, the perception will be distorted. Attitudes towards brands act as a filter. That is why many brands do public relations. o Selective retention. ▪ Tendency to remember information that best connects with our needs, beliefs, interests and values. ▪ If you see a trailer about a film about dogs, you will remember it better if you like dogs than if you prefer cats. Strategic marketing Sofía Alonso Ibáñez 2ºCYM - Learning. o Change in an individual’s behavior arising from experience and occurs through interplay of: ▪ Drives, stimuli, cues, responses, reinforcement. o The process of learning. 1) A friend invited us for dinner at his/her place Damn! I should provide something for dinner. (That’s a DRIVE) 2) While reading the newspaper: Look! there’s an article about a wine called Luis Cañas Crianza 2009 that has been named “Wine with the best QPR in the world” by The Wine Advocate. (That’s an STIMULI) 3) In the shop: You do not find the aforementioned wine, but you start looking at other bottles of wine, and pay attention to words as “Rioja”, “Ribera del Duero” “Crianza”, “Reserva” or “Tempranillo”. (Those are CUES). 4) Your purchase: One bottle of Herencia Remondo 2009. (That’s your RESPONSE). 5) You provide: The wine for dinner and everybody loves it. (Your behavior has been REINFORCED). - Beliefs. o A descriptive thought that a person has about something based on: ▪ Knowledge. ▪ Opinion. ▪ Faith. - Attitudes. o Describe a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea. o Attitudes are based on a belief and include an evaluation of that belief. Belief Cognitive Evaluation of believe Affective/Evaluative Action Conative 2. TYPES OF BUYING DECISION BEHAVIOR There are different behaviors when buying a process. - They depend on two factors. - Involvement. o This is how much involved the consumer is in the purchasing process. ▪ How much you put into the purchase (time to search, etc.). o We are involved in a purchase when we perceive risk. There are different types of risks. ▪ Financial risk (when you spend a lot of money). ▪ Social risk (what will another person think of I buy this). ▪ Personal risk (this can hurt me -for example, in cosmetic-). ▪ Functional risk (will this work?). Strategic marketing Sofía Alonso Ibáñez 2ºCYM - After involvement, we can perceive brands that are significantly different or not. - Complex decisions involve: o More buying participants. o More buyer deliberation. Classification of decision behavior. - Complex buying behavior. (cars) o High involvement in a purchase. o Significant differences among brands. o This means that the product is: ▪ Expensive. ▪ Risky. ▪ Purchased infrequently. ▪ Highly self-expressive. - Dissonance-reducing buying behavior. o High involvement. o There are few differences between brands. o The product is: ▪ Expensive. ▪ Infrequent to purchase. ▪ Not big difference among brands. o Important drives. ▪ Good price (if you think they are all the same, you would choose the cheapest). ▪ Convenience (I need water, so I buy what is available). ▪ Brand recognition reduces dissonance (Porcelanosa is more expensive because it is the one that people know; the fact that the only one you know is the most expensive reinforces the thought of the tiles been Good) - Habitual buying behavior. o Low involvement. o Little brand difference. o Brand choice can be habit more than preference. o It is more about brand familiarity than brand conviction. o Price and sale promotions are very strong drives. - Variety-seeking behavior. o Low involvement. o Significant perceived differences between brands. o Consumers do a lot of brand switching: ▪ Boredom. ▪ For the fun of trying something different. Typical strategies. Brand leaders try to promote habitual behavior by dominating shelf-space, advertising and avoiding out-of-stock conditions. Brand challengers will encourage variety seeking by offering lower prices, deals, coupons, free samples and advertising centering on the fun of trying something new. Strategic marketing Sofía Alonso Ibáñez 2ºCYM 3. THE BUYER DECISION PROCESS The buyer decision process has five stages. Need recognition. - Buyer senses a difference between an actual state and some desired state, triggered by: o Internal stimuli (you become angry because you are hungry). o External stimuli (you perceive the smell of food and you become hungry – also with an ad-). - Marketers want to understand the factors and situations that usually trigger consumer need recognition. Information search. - When a consumer has a need, there are three possible outcomes. o Strong drive, satisfying product at hand… just purchase it (sometimes you don´t need info; if your iPhone gets stolen, you are going to get a new one). o Just store the need in memory (heightened attention). ▪ If you are considering buying some specific car model, it becomes your center of attention, and you start seeing them everywhere; then you start looking at who is driving, and it might change your thinking. o Let’s search for information on how to solve my needs (active search). - Sources of information. o Personal sources: family, friends… (I’ve seen you drive a Yaris, what can you tell me about it? Are you happy?). o Commercial: advertising, salespeople, Internet, packaging, displays. o Public sources: mass media, consumer-rating organizations. o Experiential sources: handling, examining and using the product. - Marketers want to understand where do customers get their information, and how they trust it depending on the source. Evaluation of alternatives. - How do consumers process information to arrive at brand choices. o Certain needs take consumers to value certain product benefits. - Consumers attach different degrees of importance to each attribute. o The difference between “importance” and “saliency”. o Someone can value how cute the car is while other would value how sportive it is. - Consumers develop brand beliefs. - Consumers have a utility function for each attribute. o An attribute is not a product characteristic. ▪ This is what a consumer perceives and what consumers give the value for. - There are different models: o Expectancy value model of consumer choice (composite index of attributes x importance). ▪ Consumers make some kind of calculations on their minds. o Conjunctive models: my choice must have this attribute. (A filter. You only consider cars that meet at least 1 criterion) Doesn´t happen in real life. o Disjunctive model: my choice should rank high in this attribute. I want a car that is large, but maybe I don’t need the largest so I choose one that is good an has big trunk - Marketers want to understand how consumers evaluate alternatives. Strategic marketing Sofía Alonso Ibáñez 2ºCYM Purchase decision. - After evaluation, the preferred brand is most likely to be purchased. - But: o It can also be postponed. o Decision can be influenced by: ▪ Other people. ▪ Situational determinants (influencers, parents, friends). - Perceived risk poses several threats in this stage. o If you started a complex buying behavior, and you couldn’t make your mind clear, maybe you just abandon because it is too risky. - Maybe you don’t reach a decision: not that product on the market, or not affordable. - Marketers want to understand why consumers engage in exchange, and how those exchanges are created, resolved or avoided. Post purchase behavior. - Comparison between expectations and perceived performance. - Size of the gap determines levels of: o Satisfaction. o Dissatisfaction. - Cognitive dissonance: discomfort caused by post-purchase conflict. o When I buy a car, maybe I start regretting it when I buy it. ▪ (should I have bought the Toyota instead of the Honda?) o This is independent of the consumer using the product: it can happen before you try the product. ▪ Eventually, you will use the car; if you’re satisfied, you could buy again, if not, not, you’re happy, you’ll tell friends, family (mouth to mouth) and also if you’re dissatisfied (bad word of mouth). - The double speed magnitude: WOM. If consumers are not buying a product because they do not perceive a need for it, Marketing might launch advertising messages that trigger the need and show how the product solves customer’s problems. If customers know about the product but are not buying because they hold unfavourable attitudes towards it, the marketer must find ways either to change the product or to change consumer perceptions.