It is essential for marketing managers to understand two critical elements: why consumers purchase the products they do and how exactly consumers intend to use those products. In general, the consumer decision-making process can be summed up as follows: need recognition; followed by information searching (otherwise known as research, such as combing reviews online or reading Consumer Reports); an evaluation of alternatives (formally or informally through vehicles such as a cost-benefit analysis); followed by the actual purchase, and finally the post-purchase behavior whereby the consumer evaluates the decision.
All purchases are motivated to some degree by need recognition. Needs recognition reflects the consumer's acknowledged state of imbalance between an actual and desired state. While this recognition may be consumer-driven and relatively internal (for example, a consumer with a cold deciding he or she needs to purchase tissues because he or she has 'run out') marketers can stimulate that need recognition such as when the consumer's current product is not performing as it should or when another product is superior for the same use (such as the desire for a new car based upon the sense that the driver's current car is not 'cool' enough after seeing an advertisement).
Consumers seek information in the external environment in a manner which can be controlled by marketers or they can do so in an uncontrolled fashion. Not all purchases bring about the same intensive search for information. When the purchase is high risk (say, an expensive appliance) and consumers have less knowledge and confidence about the item, they are more likely to embark upon an intensive research study of available information, versus a low risk purchase (say, for example, a new flavor of yogurt) in which they have more information about, less interest in, and greater confidence in their ability to make discerning choices. Evaluation of purchases may be more unconscious in these instances, such as a casual glance of the grocery aisles.
Routine purchases (usually for low-cost, everyday goods with few alternative brands that require little time for consumers to decide upon out of habit) involve a less tortured decision-making process; less routine purchases requires more involved (in time and effort) decision-making for high-cost goods with many brand offerings or options. The perceived social costs of the decision can also raise the stakes. For example, a bad purchase of a car in car-obsessed America is often seen to reflect poorly on the consumer. Previous experience can also create greater anxiety (the purchase of a first car is more stressful than the purchase of a third).
Marketers must determine what attributes are most important and influential upon a consumer's choice and also if consumers are satisfied with their post-purchase decision. Even if a consumer makes a purchase, if he or she is dissatisfied, this is not necessarily a successful sale. Ideally, the marketer desires to minimize any cognitive dissonance in the form of post-purchase regret the consumer might feel. Consumers usually wish to minimize dissonance or regret by seeking information to affirm their choice; avoiding information that contradicts it (i.e., not seeing if the product is advertised at a cheaper price elsewhere), or returning the product if the dissonance becomes unbearable (the worst case scenario for the retailer).
Not all levels of involvement are the same: products; situations; shopping context; the enduring nature of the brand; and emotional involvement can all color consumer perceptions. (A consumer might experience less regret overpaying for a restaurant meal at Disney World than near home, for example). Regardless, marketers must tailor their appeal to the nature of the level of the involvement and the decision. They must also understand the social, cultural, psychological, and individual factors that affect purchases. Personal values and membership within various subcultures as well as class (the consumer's job, level of income, education, etcetera) will determine the medium of advertising to which the consumer is most receptive as well as distribution of the product (i.e., elderly consumers will be less receptive to Internet advertising). Socially, direct influencers like friends and acquaintances or indirect influencers (like persons the individual aspires to become or wishes to avoid) will likewise affect product choice. For example, even though an upper middle class homemaker might be able to afford a 'monster' truck, she would not purchase it to avoid seeming like what her friends perceive to be 'lower class.'
Individual influences include gender, age, and personality self-concept. For example, someone might see him or herself as a 'foodie' and refuse to purchase cake mix or processed cheese based upon the image he or she has of these products. Psychological influences include perception, motivation, beliefs, and attitudes as they relate to conscious aspects of the brand like price, brand names and quality and also to more subtle, subliminal associations as well as the consumer's level of receptiveness to product repositioning.
In general, a product must first satisfy basic physiological needs (such as being within the target customer's price range and fulfilling a function) before it can aspire to satisfy higher-level needs. Marketers can change the consumer's individual direct learning experiences (through free trial offers) or they can change conceptual learning experiences through observation. They can try to change beliefs about the product or the importance of those beliefs or replace them with new beliefs and attitudes about a new product.
Chapter 8: Market segmentation: What is the value of market segmentation?
A market is a group of people with needs or wants and the capabilities to buy them. A market subgroup is a segment with particular, similar needs, hence their being grouped together. Marketers must segment because that way they can spend their advertising resources more efficiently. Market segments must be substantial, identifiable, accessible with a marketing mix, and responsive. Geography, demographics, psychographics, benefits sought, and usage rates are all ways to segment the market. Regionalization can cater to specific needs (for example, products to prevent icing in cold weather climates) or can use the appeal or a regional, local brand to generate interest (like RC cola).
Age, gender, income level, ethnicity, and stage in the life cycle are all demographic factors which can impact consumer purchasing decisions. Within demographic segmentation, women are always of particular interest given it is they who make the bulk of the purchases in all households: 85% of consumer goods are purchased by women. Income, of course, has an impact upon consumer self-perceptions as well the actual ability to make purchases although some retailers such as Costco can appeal to elements of both the high and low-end markets. Ethnicity can impact decisions such as food purchases in terms of tastes and flavor profiles favored by consumers (such as dulce la leche by Hispanic consumers as a dessert flavor) and of course age and lifecycle-related decisions. For example, whether one has a baby or not or is about to retire will impact purchase decisions.
Psychographic factors can be more difficult to define as they relate more subjectively to consumer self-perceptions like personality, motivations, and lifestyles. Personal attitudes as well as rational and irrational motivations all factor into a decision. Lifestyle factors may include objectively-measured characteristics like hobbies but also simply how the consumer sees him or herself. Even if someone does not snowboard they may like to look like someone who has an outdoorsy life during the winter.
Marketers have grown increasingly sophisticated in regards to segmentation: geo-demographic segmentation, for example, creates categories based upon a blend of all of these factors, such as 'suburban soccer moms.' In contrast, benefit segmentation more directly segments consumers based upon the benefits they desire to accrue from the product. Usage rate segmentation divides the market according to the amount of the product used: high-volume users are obviously more desirable, according to the principle that with most products 80% of the purchases are made by 20% of the users.
B2B sellers must likewise engage in market segmentation. Typical market segments include producers, resellers, governments, and institutions. Both the entity's characteristics and the entity's purchasing process must be considered. However, segmentation considerations are somewhat different between the two groups of consumers and businesses. For example, some businesses are 'satisficers' which means that they tend to stick to the same supplier while others are 'optimizers' that consider numerous suppliers and evaluate their choices more judiciously. Demographics, decision style, risk tolerance, and confidence level all impact business segmentation as can job responsibilities.
When engaging in market segmentation, there is a clear sequential process. The marketer must select a market (such as the Midwest); choose the bases by which to segment that market (such as gender); select the specific factors by which the segmentation will take place; profile and analyze the different segments for the factors germane to the product; and then engage in the final selection of the target markets. Only then can there be 'marketing mix' deployed to attract that segment. Different people and different businesses may fall into different market segments depending upon the nature of the product.