Module II

‘Understanding market and

developing viable market
strategy’
 Session 10,11 & 12
Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.
Analyzing Consumer Markets

M arketers must have a thorough understanding of how consumers think, feel, and act and must offer clear
value to each and every target customer. Understanding consumer needs is the key to designing a value
proposition that creates value for each and every customer.

The Model of Consumer Behavior

Research on consumer behavior explores how individuals, groups, and organizations select, buy, use, and dispose
of goods, services, ideas, or experiences to satisfy their needs and wants. To creates customer value, marketers
must fully understand both the theory and the reality of consumer behavior.

The starting point for understanding consumer behavior is the model shown in the figure in the next slide.
 Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

Marketing Tactics Consumer

Buying Decision Process
Characteristics
Product
Problem recognition
Service Cultural
Information search
Brand Social
Evaluation of alternatives
Price Personal
Purchase decision
Incentives
Postpurchase behavior
Communication
Distribution
Model of
Consumer
Behavior
Market Context Purchase Decision
Consumer
Psychology
Economic Product choice
Technological Brand choice
Motivation
Legal Store choice
Perception
Political Purchase quantity
Emotions
Sociocultural Purchase timing
Memory
Physical Payment method

The tactics shaping the offering and the context of the market in which the offering will be sold are filtered
through the cultural, social, and personal lenses of target customers, as well as being influenced by consumer
motivation, perception, emotions, and memory. This, in turn, influences the consumer buying process – a
journey that entails recognition of a need, a search for the best means to fulfill that need, and evaluation of the
available options to finally arrive at the ultimate decision of what, when, where, and how much to buy, and how
to pay for these purchases.
Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

 Consumer Characteristics
A consumer’s buying behavior is influenced by cultural, social, and personal factors. Of these, cultural factors
exert the broadest and deepest influence on people’s perceptions and desires and on how they go about
fulfilling their needs and wants.

A] CULTURAL FACTORS

A culture is a way of life among a group of people – the behaviors, beliefs, values, and symbols that they
accept, generally without thinking about them, and that are passed along by communication and imitation
from one generation to the next.
Culture, subculture, and social class are particularly important influences on consumer buying behavior. Culture
is a fundamental determinant of a person’s wants and behavior. Through family and other key institutions.
Cultures can differ on a variety of dimensions, such as the extent to which people prioritize close (vs. distant)
others and whether they behave as if they are part of a collective (i.e., collectivistic cultures) or see
themselves as independent agents who value their autonomy (i.e., individualistic cultures).
Each culture also consists of subcultures that provide members with more specific identification and
socialization. Subcultures include nationalities, religions, racial groups, and geographic regions.
Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

B] SOCIAL FACTORS

Reference Groups. Reference groups include all the groups that have a direct or indirect effect on a
person’s beliefs, decisions, and behavior. Family members typically constitute the most influential primary
reference group. Parents and siblings have a major influence in forming an individual’s beliefs, value system,
and behavior.
Reference groups include not only those that individuals belong to, such as friends, neighbors, coworkers,
and religious and interest-based groups.
An opinion leader, or an influencer, is a person who offers informal advice or information about a specific
product or product category, such as which of several brands is best or how a particular product may be
used.
All of us participate in many groups – family, clubs, organizations – that often influence our norms of
behavior.

Family. The family, as the most influential primary reference group, is the most important consumer buying
organization in society. There are two families in the buyer’s life. The family of orientation consists of
parents and siblings. From parents a person acquires an orientation toward religion, politics, and economics,
along with a sense of personal ambition, self-worth, and love.
Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

C] PERSONAL FACTORS

Personal characteristics that influence buyer’s decisions include their age and stage in the life cycle, occupation
and economics circumstances, personality and self-concept, and lifestyle and values.
Our taste in food, clothes, furniture, and recreation is often related to our age. Consumption is also shaped by
the family life cycle and the number, age, and gender of people in the household at any given time.
Marketers should consider critical life events or transitions – marriage, child-birth, illness, relocation, divorce,
first job, career change, retirement, death of a spouse – as giving rose to new needs.
Marketers try to identify the occupational groups that have above-average interest in their products and
services, and they even tailor products for certain occupational groups.

Personality and Self - Concept. By personality we mean a set of distinguishing human psychological traits
that lead to relatively consistent and enduring responses to environmental stimuli, including buying behavior.
We often describe personality in terms of such traits as self-confidence, dominance, autonomy, deference,
sociability, defensiveness, and adaptability.
Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

Values and Lifestyle. Consumer behavior is guided by a value system – a set of principles and notions of
“right and wrong” – that determines what is meaningful and important to consumers and how they choose
to live and interact with others.

People from the same subculture, social class, and occupation may adopt quite different lifestyles. A
lifestyle is a person’s pattern of living in the world, as expressed in activities, interests, and opinions. It
portrays the “whole person” interacting with his or her environment.
 Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

The Level of Consumer Involvement. The expectancy-value model assumes a high level of consumer
involvement and active processing by the consumer in response to a marketing stimulus.
Evidence suggests there is low involvement with most low-cost, frequently purchased products. Low-
involvement products carry little cost or risk and are not well differentiated, which also means that it’s easy
for consumers to switch to other products in this category or indulge in impulse buying to satisfy their need
for variety.

Intervening Factors. Even if consumers form an evaluation, two general factors can intervene between
the purchase intention and the purchase decision in the below figure. The first factor is the attitudes of
others. The more intense the other person’s attitude and the closer he or she is to us, the more we will
adjust our purchase intention. The converse is also true.
Steps between
Evaluation of
Alternatives
and a Purchase Situational
Decision.
factors
Evaluation of Purchase Purchase
alternatives intent decision
Opinions
of others
Analyzing consumer market- Key Consumer characteristics,
Consumer psychology and Buying decision process.

POSTPURCHASE BEHAVIOR

After the purchase, the consumer might experience dissonance from noticing certain disquieting
features or hearing favorable things about other brands and will be alert to information that supports
his or her decision. Marketing communications should supply beliefs and evaluations that reinforce the
consumer’s choice and help her or him feel good about the brand. The marketer’s job doesn’t end with
the purchase. Marketers must monitor postpurchase satisfaction, postpurchase actions, and
postpurchase product uses and disposal.
 Session 13 & 14
Identifying Marketing Segments and target customers.

C ompanies cannot connect with all customers in large, broad, or diverse markets. They need to identify
the market segments they can serve effectively. Identifying these market segments requires a keen
understanding of consumer behavior and careful strategic thinking about what makes each segment unique
and different. Identifying and uniquely satisfying the right market segments are key to marketing success.

To compete more effectively, many companies are now embracing target marketing. Instead of scattering
their marketing efforts, they’re focusing on those consumers they have the greatest chance of satisfying.
Effective targeting requires that marketers:

1. Identify distinct groups of buyers who differ in their needs and wants (segmentation).
2. Select one or more market segments to enter (targeting).
3. For each target segment, establish, communicate, and deliver the right benefit(s) for the company’s
market offering (developing a value proposition and positioning).
Identifying Marketing Segments and target customers.

Identifying Target Customers

Targeting is the process of identifying customers for whom the company will optimize its offering. Simply put,
targeting reflects the company’s choice of which customers it will prioritize and which customers it will ignore
when designing, communicating, and delivering its offering.

THE LOGIC OF TARGETING

In mass marketing, the firm ignores segment differences and goes after the whole market with one offer. It
designs a marketing program for a product with a superior image that can be sold to the broadest number of
buyers via mass distribution and mass communications. Undifferentiated marketing is appropriate when all
consumers have roughly the same preferences and the market shows no natural segments.

The argument for mass marketing is that it creates the largest potential market, which leads to the lowest
cost, which in turn can lead to lower prices or higher margins.
When different groups of consumers have different needs and wants, marketers can define multiple segments.
The company can often better design, price, disclose, and deliver the product or service and also fine-tune the
marketing program and activities to better counter competitors’ marketing.
In target marketing, the firm sells different products to all the different segments of the market.
 Identifying Marketing Segments and target customers.

The ultimate level of targeting is the one-to-one approach in which each market segment comprises a single customer.
One-to-one marketing is not for every company. It works best for firms that normally collect a great deal of individual
customer information and carry a lot of products that can be cross-sold, need periodic replacement or upgrading, and
offer high value.

Mass customization is the ability of a company to meet each customer’s requirements – to prepare on a mass basis
individually designed products, services, programs, and communications.

STRATEGIC AND TACTICAL TARGETING

Strategic targeting focuses on customers whose needs the company can fulfill by ensuring that its offerings are
customized to their needs. Tactical targeting identifies the ways in which the company can reach these strategically
important customers.

The goals of strategic and tactical targeting, however, do differ. Strategic targeting calls for a trading market size that
yields a better fit between the offering’s benefits and the customers’ needs. Thus, rather than trying to reach the target
audience with one offering that endeavors to lure a wide range of customers with diverse needs, strategic targeting is
based on the deliberate choice to ignore some customers to better serve other customers with an offering that matches
their specific needs.
Identifying Marketing Segments and target customers.

Tactical targeting takes the opposite approach. Rather than excluding any potential customers, tactical
targeting strives to reach all strategically important customers in an effective and cost-efficient manner.

STRATEGIC TARGETING
Effective strategic targeting requires the company to make an important but difficult tradeoff: the
calculated decision to deliberately forgo some potential customers to more effectively meet the needs of
other customers. Companies have failed because of their unwillingness to sacrifice market breadth and
focus only on customers for whom their offering could create superior value.

TARGET COMPATIBILITY
Target compatibility is a reflection of the company’s ability to outdo the competition in fulfilling the needs
of target customers – in other words, to create superior customer value. Target compatibility is a function
of the company’s resources and its capacity to use these resources in a way that creates value for target
customers. The right resources are important because they allow the company to create an offering that
can deliver superior value to customers in a manner that is both effective and cost efficient.
 Identifying Marketing Segments and target customers.

Essential requirements for the success of a company’s targeting strategy:

i.Business Infrastructure

ii.Access to scarce resources

iii.Skilled employees

iv.Technological expertise

v.Strong brands

vi.Collaborator networks

TARGET ATTRACTIVENESS
Target attractiveness reflects the ability of a market segment to create superior value for the company. Thus, the
company must carefully select customers for whom to tailor its offering based on the degree to which they can
contribute value to the company and assist the company in reaching its goal. Target customers can create two
kinds of value for a company: monetary and strategic.
 Identifying Marketing Segments and target customers.

Monetary Value. Monetary value consists of the capability of customers to engender profits for the
company. Monetary value includes both the revenues a particular customer segment generates and the costs
of serving these customers.

Customer revenues involve money received by the company from customers for the right to own or use its
offering.
Costs of serving target customers include the expense of tailoring the offering’s benefits to the needs of
target customers, along with communicating and delivering the offering to them.

Strategic Value. Strategic value refers to nonmonetary benefits that customers bring to the company. The
three main types of strategic value are social value, scale value, and information value.

Social value reflects the influence of target customers on other potential buyers.
Scale value denotes the benefits derived from the scale of the company’s operations.
Information value is the worth of the information that customers provide. One reason why a company might
target customers is for the wealth of data they can furnish the company about their needs and profile.
 Identifying Marketing Segments and target customers.

TACTICAL TARGETING
Tactical targeting involves identifying target customers to determine which customers to target and which to
ignore, and to determine how the company’s offering can be effectively and cost-efficiently communicated and
delivered to the target customers that have already been selected.

Key aspects of Tactical Targeting

After company decides on a strategically viable target market, it must garner information on the profile of
these customers to communicate the offering’s attributes and deliver it to them.

Demographic factors include age, gender, income, occupation, level of education, religion.

Geographic (geolocation) factors reflect the physical location of target customers.

Behavioral factors describe customers’ actions.

Psychographic factors involve aspects of an individual’s personality – such as attitudes, value system,
interests, and lifestyle.
 Identifying Marketing Segments and target customers.

Single-Segment and Multi-Segment Targeting

LE-SEGMENT TARGETING
single-segment concentration, the firm markets to only one particular segment.

ETING MULTIPLE SEGMENTS

arkets become more fragmented, an increasing number of companies develop offerings targeting a
er number of smaller customer segments. Even companies that start with a single offering aimed at a
fics target market achieve wider customer adoption over time. As their customer base becomes more
se, these companies transition from a single offering to a product line containing offerings that fit the
s of the diverse customers it serves.

menting Consumer Markets

et segmentation divides a market into well-defined slices. A market segment consists of a group of
umers who share a similar set of needs and/or profile characteristics. Common types of segmentation
de demographic, geographic, behavioral, and psychographic.
 Identifying Marketing Segments and target customers.

1] DEMOGRAPHIC SEGMENTATION

Age. Marketers often group customers based on their age into different generations.

Stage in the Life Cycle. People in the same part of the life cycle may still differ in their life stage.

Gender. Men and women have different attitudes and behave differently, based partly on genetic
makeup and partly on socialization.

Income. Income segmentation is a long-standing practice in such categories as automobiles, clothing,

cosmetics, financial services, and travel.

2] GEOGRAPHIC SEGMENTATION

Geographic segmentation divides the market into geographic units such as nations, states, regions,
counties, cities, or neighborhoods.
Identifying Marketing Segments and target customers.

3] BEHAVIORAL SEGMENTATION

In behavioral segmentation, marketers divide buyers into groups on the basis of their actions.

User status. Based on their prior experience with the company’s offering, consumers can be classified
into nonusers, potential users, first-time users, regular users, and ex-users.

Usage rate. We can segment markets into light, medium, and heavy product users.

Buyer-readiness stage. Some people are unaware of the product, some are aware, some are
informed, some are interested, some desire the product, and some intend to buy.

Loyalty status. Based on brand loyalty status.

Occasions. Consumers buy for different occasions.

 Identifying Marketing Segments and target customers.

4] PSYCHOGRAPHIC SEGMENTATION

In psychographic segmentation, buyers are divided into groups on the basis of psychological traits,
lifestyle, or values.

Segmenting Business Markets-Criteria

Demographic/geographic etc. factors such as industry (e.g., Which industries should we serve?), company size (e.g.,
What size companies should we serve?), and location (e.g., What geographic areas should we serve?)

Operating variables such as technology (e.g., What consumer technologies should we focus on?), user or nonuser
status (e.g., Should we serve heavy users, medium users, light users, or nonusers?), and customer capabilities.

Purchasing approaches such as purchasing-function organization (e.g., Should we serve companies with a highly
centralized or a decentralized purchasing organization?); power structure (e.g., Should we serve companies that are
engineering dominated? Financially dominated?); nature of existing relationship
(e.g., Should we serve companies with which we have strong relationships or simply go after the
most desirable companies?); general purchasing policies.
Identifying Marketing Segments and target customers.

 Situational factors, such as urgency (e.g., Should we serve companies that need immediate delivery or
service?); specific application (e.g., Should we focus on a certain application of our product rather than
all applications?); and loyalty [e.g., Should we serve companies that show high loyalty to their
suppliers?)

 Personal characteristics such as buyer-seller similarity (e.g., Should we serve companies whose people
and values are similar to ours?); attitude toward risk (e.g., Should we serve risk-taking or risk-avoiding
customers?); and loyalty (e.g., Should we serve companies that show high loyalty to their suppliers?)
 Session 15 & 16
Developing Customer Value Proposition.

Developing a Customer Value Proposition and Positioning

A key aspect of marketing strategy is developing a value proposition and positioning a company’s offering to
target customers. A company discovers different needs and groups of consumers in the marketplace, targets
those it can satisfy in a superior way, and then develops a value proposition and positions its offerings so the
target customers recognize the distinctive benefits of its offerings.

DEVELPOING A VALUE PROPOSITION

Customers choose – for whatever reason – the offer they believe will deliver the highest value and act on it.
Depending on the needs of customers, an offering can create value across three domains: functional,
psychological, and monetary.

Functional value reflects the benefits and costs that are directly related to an offering’s performance. Among
the offering attributes that create functional value are performance, reliability, durability, compatibility, ease
of use, customization, form, style, and packaging.
 Developing Customer Value Proposition.

 Psychological value encompasses the psychological benefits and costs associated with the offering.
Psychological value extends beyond the functional benefits to create emotional benefits for target
customers.

 Monetary value includes the financial benefits and costs associated with the offering. Offering
attributes that create monetary value include price, fees, discounts, and rebates, along with various
monetary costs.

Total customer benefit is the perceived value of the bundle of functional, psychological, and monetary
benefits customers expect from a given market offering because of the product, service, and image.

Total customer cost is the perceived bundle of functional, psychological, and monetary costs customers will
incur in evaluating, obtaining, using, and disposing of the given market offering.

The customer value proposition is based on the difference between benefits the customer gets and the
costs he or she assumes for different choices.
The value proposition consists of the whole cluster of benefits the company promises to deliver; it is more
than the core positioning of the offering.
 Developing Customer Value Proposition.

For example, Volvo’s core positioning has been “safety,” but the buyer is promised more than just
a safe car. Other benefits include good performance, good design, and concern for the
environment.

Very often, managers conduct a customer value analysis.

1.Identify the relevant attributes and benefits that customers value.

2.Assess the relative importance of these attributes and benefits.
3.Assess the company’s and competitors’ performance on the key attributes/benefits.
4.Monitor customer value over time.
 Session 17 & 18
Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .

DEVELOPING A POSITIONING STRATEGY

Positioning is the act of designing a company’s offering and image to occupy a distinctive place in the minds of
the target market. The goal is to instill the brand in the minds of consumers to maximize the potential benefit
to the firm.
Effective positioning helps guide marketing strategy by clarifying the brand’s essence, identifying the goals it
helps the consumer achieve, and showing how it does so in a unique way.
Many marketing experts believe positioning should have both rational and emotional components. In other
words, it should appeal to both the head and the heart.

A good positioning has one foot in the present and one in the future. It needs to be somewhat aspirational so
that the brand has room to grow and improve.

Positioning requires that marketers define and communicate similarities and differences between their brand
and its competitors. Specifically, deciding on a positioning involves;

1. Choosing a frame of reference[benchmark] by identifying the target market and relevant competition.
2. Identifying the optimal points of parity and points of difference given that frame of reference.
Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .

Choosing a Frame of Reference

Consumers determine the value of an offering relative to a reference point used to assess its benefits
and costs. An offering can be viewed as attractive in comparison to an inferior offering, but the same
offering can be perceived as unattractive when compared to a superior offering. Therefore, a frame
of reference can serve as a benchmark against which customers can evaluate the benefits of a
company’s offering.

A good starting point in defining a competitive frame of reference for brand positioning is category
membership – the products or sets of products with which a brand competes and that function as
close substitutes.

The range of a company’s actual and potential competitors, however, can be more extensive than
the obvious ones. To enter new markets, a brand with growth intentions may need a broader – or
maybe even a more aspirational – competitive frame.
 Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .
Identifying Potential Points of Difference and Points of Parity

Once marketers have fixed the frame of reference for positioning by defining the customer market and the
nature of the competition, they can define the appropriate points of difference (attributes or benefits that are
unique to the company’s offering) and points of parity (attributes or benefits that the company’s offering has in
common with the competition).

IDENTIFYING POINTS OF DIFFERENCE

Points of difference (PODs) are attributes or benefits that differentiate the company’s offering from the
competition. These are attributes or benefits that consumers strongly associate with a brand, that they
positively evaluate, and that they believe could not be found to the same extent with a competitive brand.

An increasingly important aspect of differentiation is brand authenticity – the extent to which consumers
perceive a brand to be faithful to its essence and its reason for being.
Strong brands often have multiple points of difference. Some examples are Apple (design, ease of use, and
irreverent attitude), Nike (performance, innovative technology, and winning), and Southwest Airlines (values,
reliability, and fun personality).
 Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .

Creating strong, favorable, and unique associations is a real challenge, but it is essential for competitive brand
positioning.

Three criteria determine whether a brand association can truly function as a point of difference:
Desirability, deliverability, and differentiability. Some key considerations follow.

Desirable to consumer. Consumers must see the brand association as personally relevant to them,
Consumers must also be given a compelling reason to believe and an understandable rationale for why the
brand can deliver the desired benefit.

Deliverable by the company. The company must have the internal resources and commitment to feasibly
and profitably created and maintain the brand association in the minds of consumers. The product design and
the way the product is marketed must support the desired association.

Differentiating from competitors. Finally, consumers must see the brand association as distinctive and
superior to relevant competitors.
Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .
IDENTIFYING POINTS OF PARITY

Points of parity (POPs), on the other hand, are attribute or benefit associations that are not necessarily
unique to the brand but may in fact be shared with other brands. These types of associations come in basic
forms: category, correlation, and competitive.

Category points of parity are attributes or benefits that consumers view as essential to a legitimate and
credible offering within a certain product or service category. In other words, they represent necessary – but
not sufficient – conditions for brand choice.

Correlation points of parity are potentially negative associations that arise from the existence of positive
associations for the brand. One challenge for marketers is that many attributes or benefits that make up their
POPs or PODs are inversely related. In other words, if your brand is good at one thing, such as being
inexpensive, consumers can’t see it also good at something else, like being “of the highest quality.”

Competitive points of parity are associations designed to overcome perceived weaknesses of the brand in
light of competitors’ points of difference.
 Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .

ALIGNING THE FRAME OF REFERNCE, POINTS OF PARITY, AND POINTS OF DIFFERENCE

It is not uncommon for a brand to identify more than one actual or potential competitive frame of reference if
competition widens or the firm plans to expand into new categories.

Quick-serve restaurants and convenience shops (McDonald’s and Dunkin’ Donuts) – Intended PODs might be quality,
image, experience, and variety; intended POPs might be convenience and value.

Under such circumstances, marketers have to decide what to do., There are two main options with multiple frames of
reference. One is to first develop the best possible positioning for each type or class of competitors and then see
whether there is a way to create one combined positioning robust enough to effectively address them all. If
competition is too diverse, however, it may be necessary to prioritize competitors and then choose the most important
set of competitors to serve as the competitive frame.

Finally, if there are many competitors in different categories or subcategories, it may be useful to develop the
positioning, either at the category level for all relevant categories (“quick-serve restaurants” or “supermarket take-
home coffee” for Starbucks)
Occasionally, a company will be able to straddle two frames of reference with one set of points of difference and points
of parity. In these cases, the points of difference for one category become points of parity for the other, and vice versa.
Developing Positioning strategy: Aligning POP, POD and
Frame of Reference .
Subway restaurants are positioned as offering healthy, good-tasting sandwiches. This positioning allows the
brand to creates a POP on taste and a POD on health with respect to quick-serve restaurants such as
McDonalds and Burger King, and, at the same time, to
create a POP on health and a POD on taste with respect to health food restaurants and cafés!

Although a straddle positioning is often attractive as a means of recording potentially conflicting consumer
goals and creating a “best of both worlds” solution, it also carries an extra burden. If the points of parity and
points of difference are not credible, the brand may not be viewed as a legitimate player in either category.

Often a good positioning will have several PODs and POPs. Of those, two or three often really define the
competitive battlefield and should be analyzed and developed carefully. A good positioning should also
follow the “80-20” rule and be highly applicable to 80 percent of the products carrying the brand.
Attempting to position based on 100 percent of a brand’s products often yields an unsatisfactory, “lowest
common denominator” result.

Perceptual maps, also called positioning maps, may be useful for choosing specific benefits as POPs and
PODs to position a brand. Perceptual maps are visual representations of consumer perceptions and
preferences.
Thank You