Applied Marketing Notes 2

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Applied

Marketing
Session 2:
Influences
on
Customer
Behaviour
Segmentation , Targeting and Positioning

Segmentation, targeting and positioning is a three-step process:

Segmentation can be defined as the process of dividing a varied and differing group
of buyers into smaller groups, within which broadly similar patterns of buyers’
characteristics and/or needs exist.

Targeting is the process of deciding how many of these segments the organisation
has the skills and capabilities to serve. Targeting should not be confused with
segmentation

Positioning, is the determination of the position the product or service will occupy in
the minds of the customers versus the competition.

Why use segmentation?

Focuses efforts on those segments where the greatest sales, profitability or


awareness can be generated.

Can adapt products to the customers in target segments through a greater


understanding of needs.

More satisfied customers – communication and products are more relevant to them.

Create greater differentiation leading to greater standout from your competitors.


Using Multiple Segmentation Bases

The 8 Stage STP Process

An effective STP approach must be developed from the situation analysis and
should answer the following questions:
 How do we define the market – what is the scope and constitution?

 How is the market segmented into different customer groups?

 How attractive are the alternative market segments?

 How strong a competitive position could we take – where do our current or


potential strengths lie?

Building and Managing Customer Relationships

Segmentation is key to customer selection, when organisation’s make decisions


about which customers to target. This model shows a classic cyclical CRM
approach, sometimes called the Spiral of Prosperity. CRM can be used for Customer
Selection, Acquisition, Retention and Extension.

Consumer Segmentation
The segmentation of consumer and business to business markets have different
approaches. The segmentation of consumer markets falls into 4 key areas:
demographic; geographic, psychographic and behavioral.

Multi-level Segmentation

Multi-level segmentation means having sub-segments with segments and using


different types of variable at each level,.

e.g. an organisation may segment by geodemographics, and then within that by


credit ratings. Tools to help do this would be ACORN, MOSAIC, etc. Lifestyle
segmentation may also split a group by activities.

Psychographics is about attitudinal approaches, as there are lots of different


attitudes there are multiple options for segmenting groups like this.
Business Segmentation

Like consumer markets, business to business markets can also be segmented using
a number of different bases and can also adopt a multi-level segmentation approach.

Salesforce is a b2b organisation that offers a cloud-based customer relationship


management (CRM) platform for companies to use to interact with their own
customers.

Salesforce focus on their most important segments by breaking down the market by
geography, company size, business role and industry.

Targeting Markets

Targeting involves marketers making decisions about which market segment(s) a


business should prioritise for its marketing efforts and how many.

• Undifferentiated: an organisation defines an entire market for a particular product


as its target market
• Differentiated: an organisation directs it marketing efforts towards two or more
marketing segments by developing a different marketing mix for each
• Concentrated/niche: an organisation directs its marketing effort towards a single
market segment through one marketing mix
• Customised: targeting each customer individually
A number of factors affect the choice of targeting strategy:
• The nature of the needs and wants of end users
• The size, structure and future potential of the segment
• The availability of company resources
• The intensity of the competition
• The size of the company’s existing market share
• The possibility of any product/market scale economies

Positioning

Positioning = the space we want to occupy in the minds of the customer.

When developing positioning, in line with 4C’s model (Jobber & Fahy, 2009)
marketers should aim for;

 Clarity a clear, unambiguous message

 Credibility consistent with mission and ethics of the company

 Consistency consistent with other activities of the company

 Competitiveness benefits well defined in relation to competitors

Creating Personas

Personas depict a static picture of the organisation's ideal buyer, their habits, needs
and behaviour.

Data for personas can be captured from a range of internal and external sources.
Such as market research reports, government data, sales data, Google analytics,
social media analytics etc.
Kotler’s Black Box Theory : A Model for Buyer Behaviour

There are several influences on purchasing and we know that certain outcomes will
take place but very little is known in terms of what goes on inside the prospective
purchaser’s head.

The Purchase Decision Making Process

The Decision Making Process (DMP) is a model that attempts to identify the stages a
consumer may pass through towards purchase and beyond. A

Post purchase evaluation is important because if customers are not satisfied with the
decision, they have made then they are unlikely to repeat it. This is referred to as
cognitive dissonance
Influences on the Consumer Buying Process

The principle aim is to help firms and businesses improve their marketing strategies.
This is achieved by an understanding of how the environment may influence an
individual to purchase items, along with other influences from other factors (friends,
family, media and signs).

The consumer buying process is influenced by factors that can be grouped as either
individual to the consumer that is buying, or social factors that relate to the wider
groups that they belong to.

Types of Buyer Behaviour

- Complex buyer behaviour e.g. Car, Laptop

- Dissonance-reducing behaviour (brand reduces after- sales discomfort)

- Habitual buying behaviour e.g. salt - little difference

- Variety seeking behaviour - significant brand differences e.g soap powder


Test Your Knowledge

An understanding of customer buying behaviour is important to marketers. Which of


the following best describes its value to an organisation:

1. It ensures better cross-functional working

2. It bridges the gap between the organisation and its stakeholders

3. It helps the organisation to design better marketing programmes

4. It enables identification of market trends and competitiveness

AIDA

This is a sequential model that basically states that in order to gain an


action e.g., purchase, request for information, drive to a website, a
prospect customer attention must be gained, their interest aroused, this
must be followed by a strong enough desire to motivate the action.

Hierarchy of Effects Model


This is a development of the AIDA model which deems that knowledge, liking,
preference and conviction must be gained before purchase. This is linked to the
components of an attitude: think, feel and do as a positive, rather than a neutral or
negative attitude towards the product or service must be gained.

The Multichannel Customer Journey


Consumers are adopting a multi-channel approach to purchasing, and an
appreciation of this can help organizations understand how to influence customers.

Diffusion Adoption Curve

 Innovators: risk-taking, information seeking, and very experimental, enjoy the


degree of early challenge or even uncertainty involved.

 Early adopters: Often respected opinion leaders within their social groups,
seen often as role models for others.

 Early majority: more deliberate before adopting new ideas; interact


frequently with peers and trendsetters. They like to merely stay ahead within
the curve from that more informed decision-making.

 Late majority: Tend to be cautious to adopt but ‘feel’ pressure of peers to


adopt, tend to need intervention strategies to overcome barriers and see their
‘needs’ resolved by the innovation.

 Laggards: Traditional, last in the social system, often they pay little attention
to opinions of others, they have more a clear point of reference in the past to
overcome, are often suspicious of new innovations and their decision process
is often lengthy.

Levels of Decision Making

Depends on the type of purchase:


Impulse. Occasion. Frequency. Complex

Involvement Theory

Involvement is the degree of personal relevance and risk perceived by consumers


when making a particular purchase decision.

Perceived Risk
Influence of Groups

Purchases can and very frequently are influenced by others. The influencers are
referred to as the Decision Making Unit.

This is important for marketers because if they do not understand the various roles in
the DMU marketing activity may fail as it is not aimed at the right person within the
DMU.
Reference Groups
Any groups, whether formally or informally constituted, to which an individual either
belongs or aspires to belong to.

Opinion Leaders and Opinion Formers


Organisational Buying Processes

There are four broad classifications of organisational markets:


Producer markets – organisations that purchase goods/services to turn them into a
product which can be sold.
Reseller markets – organisations that purchase goods/services to sell them on for
profit rather than consume or use them.
Government markets – organisations that are state or local government that
purchase goods/services.
Institutional markets – organisations who purchase goods/services to use in the
production of their own goods or services.

Most organisational purchases will take one of three forms:


New buy which is where a totally new product or service is sought.
Modified rebuy where a product or service is sought as a modification to the one
bought previously.
Straight rebuy which is a straightforward repurchasing without change of a product
or service previously bought.

Organisational Decision-Making Process

Influences on Organisational Buying Processes


The Decision-Making Unit (DMU)

Differences Between Organisational and Consumer Marketing


Test Your Knowledge

You work for a small food manufacturer which sells its products online and through
several chains of retailers. Your manager has asked you to identify the key
differences between consumer and organisational buying behaviour to help improve
the sales performance of the sales team. Which of the following factors best explains
these differences?
1. Complexity
2. Time involved
3. People involved
4. Rationality
5. Information requirements

a. All of the above

b. 1, 2 and 4 only

c. 2,4and5only

d. 1, 4 and 5 only

You work for an organisation that supplies parts to the automotive manufacturing
industry. You have recently been joined in your office by a new member of staff who
has come from a consumer marketing background. As part of their induction process
you explain the key influences on organisational buying behaviour. Which of the
following best describes the factors involved?

1. Straight rebuy, group factors, social and cultural factors and organisational
factors

2. Environmental factors, family influences, group and organisational factors

3. Environmental factors, organisational factors, individual and group factors

4. Group factors, environmental and organisational factors, social class

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