People as Consumers

Studying People as consumers: Positivist Aproach: Focuses on predicting what the consumer will do under certain specified conditions. Uses scientific research. Focuses on the following points: 1. All behavior has objectively identifiable causes and effects that can be studied and measured. 2. When faced with a problem people process all the relevant information available to deal with it. 3. After processing this information people make a rational decision about the best choice. The main problem is that it leaves a lot of human behavior unaccounted for. Reductionist Approach: All human behavior can be reduced to consumerism, such as a doctor-patient relationship. What is missing is the psychological content of the relationship. Interpretivist Aproach: Combines Positivist and Reductionist approaches. 1. Cause and effect cant be isolated. 2. Reality is an individuals subjective experience of it. Each consumers experience is unique. 3. People are not always rational. This takes into account emotional states, fantasies, feelings and fun. Consumer: is a much more general term Customer: usually implies a relationship over time between the buyer and a particular brand or retail outlet. Consumer Behavior: The emotional, mental and physical activities that people engage in when selecting, purchasing using, and disposing of products and services so as to satisfy needs and desires. Markets and Marketing: Production Orientation: Demand exceeds supply. Consumers are forced to buy what there is rather than what they really want. Marketing Concept: The producer first has to Identify the needs, wants and preferences of the consumer and then satisfy them better than the competition would. Supply exceeds demand.

Mod: 2 Market Segmentation

Positioning: Products are positioned to satisfy different segments in the market. A number of marketing conditions must be met for segmentation to work:

1. Identify: The consumer must be identifiable and distinguishable form

other consumers.

2. Access: How easy is it to reach this segment with marcom? 3. Size: Is the segment large enough to justify the cost of marketing to
them? Types of segmentation:

1. Geographic segmentation: People living in a given location have the

same needs, wants and preferences that differ from people living in other locations. For example Campbells Southwestern US soups are much spicier than the Midwestern versions. This is known as micromarketing. Climactic conditions also vary. For example many more swimming pools are sold in Florida than Illinois. And the water in Scotland is harder and therefore less foaming to soap than the water in London. Cultural effects also differ over different locales.

2. Demographic segmentation: Deals with statistically categorizing the

people of a population. Several trends may be discerned in the industrialized world: 1. The population is aging. 2. Baby boomers are now middle aged. 3. The proportion of young people is declining. 4. Average household sizes have declined. 5. Women are having fewer children later in life. Types of demographic segmentation:

1. Age:

People of the same age usually have the same needs, wants and interests. A problem is people that perceive themselves as being a different age than what they actually are. 2. Sex

3. Socio-Economic: Education, Income and Occupation. Income

is usually considered the most important SES Variable because it is so easily measured.

4. Geodemographic

segmentation: deviding up markets according to Neighborhoods. PRIZM Uses 40 categories to divide up Americas zip code districts From the Blue Blood estates to Public assistance to Grain Belt. ACORN - Devides Britain into 38 types of Neighborhoods. 5. Psychological (Lifestyle) segmentation: Divides consumers into segments based on Activities, Interests and Opinions. Using this approach the American market has been divided into 10 segments of which the five female segments are: Thelma: Traditionalists, devoted to husband children and home is a churchgoer has no higher education and watches a lot of TV. 25% Candice: Chic suburbanite, Highly educated and sophisticated reads and watches little TV. 20% Mildred: Militant mother, Maried young and has children. Husband has insecure job, not happy with her lot, listens to rock and watches a lot of TV. 20% Cathy: Contented housewife, a younger version of Thelma but without the religion avoids news and looks for wholesome family entertainment. 18% Eleanor: Elegant socialite, Big city version of Candice through career rather than community. 17% VALS: (Values and Lifestyles) The most elaborate psychological segmentation classification. Was carried out in the 70s and classified Americans into 9 categories such as Survivor, sustainer, believer, belonger, struggler. Updated in the 80s VALS-2 reduced to 8 categories.

6. Usage

Segmentation: Uses EPOS (electronic point of sale) systems to gather info. The market is usually divided into users and non users. Only a small percentage of users will be heavy users. 80-20 rule. Infrequent buyers may still buy the product in great bulk. There is some evidence that it is easier to increase sales by getting existing buyers to increase usage. Time is also

important. Students who have small bank accounts now will most likely turn into much more attractive customers after graduation. 7. Benefit Segmentation: Based on a knowledge of the benefits that consumers seek from a product.

Mod: 3 New Products and Innovations

Pressures that lead companies to the development of new products: 1. Declining birth rates. 2. Technological innovation the shortening of PLCs. 3. Pressure of organizational change and renewal. Total Product Concept: Theodore Levitt sees a product as being a combination of various attributes that increase in complexity through 4 levels:

1. Generic

Product: The core of the product (Hamburger, shoes, life insurance). Product: The Generic attributes expectations (price, packaging, delivery). PLUS minimal

2. Expected

3. Augmented Product: The Generic attributes PLUS the attributes that

differentiate the product from its competitors (bonuses, gifts, free service included)

4. Potential Product: What is possible but not yet attained.

Potential Product INNOVATIONS Augmented Product Expected Product Levitts Generic Total Product Product Concept

Successful Innovation The most potent secret lies in changing some aspect, however small, of the way society is organized, which results in satisfying a demand that consumers were perhaps unaware that hey had. Kaizen continuous improvement. Big leaps forward are much more satisfying than small incremental changes. Yet, it is notoriously slow and difficult to make money from a great invention. It is the small innovations targeted directly at someones needs that produce the quick and generous paybacks. Product Life Cycle

S a l e s

Introduction Growth

Maturity Time

Saturation

Decline

The five stages of the life cycle will be common to all products but the shape of the curve will differ from product to product. Product Champions: Can be difficult to work with because they are unusual to the corporate world. Tom Peters list their characteristics as: Energy, passion, idealism, pragmatism, impatience, dont recognize barriers, love hate relationships with colleagues.

Opinion Leaders: As consumers they are not always innovators but are more open to new ideas. They range from 10 to 25% of the population. They tend to be more outgoing, and knowledgeable about the product in question. Are very important for the word of mouth communication about the product. La Coste gave away shirts to famous tennis players. Advertisers use celebrities in advertisements. Diffusion of new Products and Innovations: The process by which an innovation is communicated through certain channels over time among the members of a social system.

3 main types of Innovation

1. Continuous:

Modifications to existing products, new models and flavors. New model car, a new flavor of yougurt. Continuous: Requires more change in consumer behavior. Can be the modification of an existing product or the creation of a new one. Compact disks, new foods. Requires a new form of consumer behavior. The rarest innovations but th ones with the greatest social impact. Telephone, Radio, TV.

2. Dynamically

3. Discontinuous:

5 product characteristics which determine consumer response: 1. Relative Advantage 2. Compatibility 3. Complexity 4. Trialability 5. Observability Adoption of new Products: Different generations grow up with different innovations. Some innovations are so widely diffused they are accepted by all generations. Some innovations are so user friendly that all generations use them. Some innovations can achieve widespread penetration because

of usefulness but only be user friendly to the younger generation. No innovation will ever be adopted by everyone

A D 13.5% O P 2.5% T E R 34% S Inovators Early Early Adopters Majority

16% 34%

Some commercially successful innovation are actually rejected by most of the population!

Late Majority

Laggards