Unit 1 - RM

Module 1: UNDERSTANDING CONSUMER BEHAVIOUR

CONSUMER BEHAVIOUR:

Introduction:

Consumer behavior is the study of how individual customers, groups or organizations

select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It
refers to the actions of the consumers in the marketplace and the underlying motives for
those actions.

Marketers expect that by understanding what causes the consumers to buy

particular goods and services, they will be able to determine—which products are needed in
the marketplace, which are obsolete, and how best to present the goods to the consumers.

The study of consumer behavior assumes that the consumers are actors in the
marketplace. The perspective of role theory assumes that consumers play various roles in
the marketplace. Starting from the information provider, from the user to the payer and to
the disposer, consumers play these roles in the decision process.

The roles also vary in different consumption situations; for example, a mother plays
the role of an influencer in a child’s purchase process, whereas she plays the role of a
disposer for the products consumed by the family.

Some selected definitions of consumer behaviour are as follows:

1. According to Engel, Blackwell, and Mansard, ‘consumer behaviour is the actions and
decision processes of people who purchase goods and services for personal
consumption’.

2. According to Louden and Bitta, ‘consumer behaviour is the decision process and
physical activity, which individuals engage in when evaluating, acquiring, using or
disposing of goods and services’.

Consumer behaviour is the study of how individual customers, groups or organizations

select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants.
It refers to the actions of the consumers in the marketplace and the underlying motives
for those actions.
Nature of Consumer Behaviour:

1. Influenced by various factors:

a. Marketing factors such as product design, price, promotion, packaging, positioning

and distribution.
b. Personal factors such as age, gender, education and income level.
c. Psychological factors such as buying motives, perception of the product and attitudes
towards the product.
d. Situational factors such as physical surroundings at the time of purchase, social
surroundings and time factor.
e. Social factors such as social status, reference groups and family.
f. Cultural factors, such as religion, social class—caste and sub-castes.

2. Undergoes a constant change: Consumer behaviour is not static. It undergoes a change

over a period of time depending on the nature of products. For example, kids prefer
colourful and fancy footwear, but as they grow up as teenagers and young adults, they
prefer trendy footwear, and as middle-aged and senior citizens they prefer more sober
footwear. The change in buying behaviour may take place due to several other factors such
as increase in income level, education level and marketing factors.

3. Varies from consumer to consumer: All consumers do not behave in the same manner.
Different consumers behave differently. The differences in consumer behaviour are due to
individual factors such as the nature of the consumers, lifestyle and culture. For example,
some consumers are technoholics. They go on a shopping and spend beyond their means.
They borrow money from friends, relatives, banks, and at times even adopt unethical
means to spend on shopping of advance technologies. But there are other consumers who,
despite having surplus money, do not go even for the regular purchases and avoid use and
purchase of advance technologies.

4. Varies from region to region and country to county: The consumer behaviour varies
across states, regions and countries. For example, the behaviour of the urban consumers is
different from that of the rural consumers. A good number of rural consumers are
conservative in their buying behaviours.
The rich rural consumers may think twice to spend on luxuries despite having
sufficient funds, whereas the urban consumers may even take bank loans to buy luxury
items such as cars and household appliances. The consumer behaviour may also vary across
the states, regions and countries. It may differ depending on the upbringing, lifestyles and
level of development.

5. Information on consumer behaviour is important to the marketers: Marketers need to

have a good knowledge of the consumer behaviour. They need to study the various factors
that influence the consumer behaviour of their target customers.

The knowledge of consumer behaviour enables them to take appropriate marketing decisions
in respect of the following factors:

a. Product design/model
b. Pricing of the product
c. Promotion of the product
d. Packaging
e. Positioning
f. Place of distribution
6. Leads to purchase decision: A positive consumer behaviour leads to a purchase decision.
A consumer may take the decision of buying a product on the basis of different buying
motives. The purchase decision leads to higher demand, and the sales of the marketers
increase. Therefore, marketers need to influence consumer behaviour to increase their
purchases.

7. Varies from product to product: Consumer behaviour is different for different products.
There are some consumers who may buy more quantity of certain items and very low or no
quantity of other items. For example, teenagers may spend heavily on products such as cell
phones and branded wears for snob appeal, but may not spend on general and academic
reading. A middle- aged person may spend less on clothing, but may invest money in savings,
insurance schemes, pension schemes, and soon.

8. Improves standard of living: The buying behaviour of the consumers may lead to higher
standard of living. The more a person buys the goods and services, the higher is the
standard of living. But if a person spends less on goods and services, despite having a good
income, they deprive themselves of higher standard of living.

9. Reflects status: The consumer behaviour is not only influenced by the status of a
consumer, but it also reflects it. The consumers who own luxury cars, watches and other
items are considered belonging to a higher status. The luxury items also give a sense of pride
to the owners.

Why it is important to understand consumer Behaviour?

 Importance of consumer behaviour to Marketers. It is important for marketers to
study consumer behaviour. It is important for them to know consumers as individual or
groups opt for, purchase, consumer or dispose products and services and how they share
their experience to satisfy their wants or needs
Importance of Studying Consumer Behaviour:
Role or importance of study of consumer behaviour can be explained with reference to the
points stated as under:

1. Modern Philosophy: It concerns with modern marketing philosophy – identify

consumers’ needs and satisfy them more effectively than competitors. It makes marketing
consumer-oriented. It is the key to succeed.

2. Achievement of Goals: The key to a company’s survival, profitability, and growth in a

highly competitive marketing environment is its ability to identify and satisfy unfulfilled
consumer needs better and sooner than the competitors. Thus, consumer behaviour helps
in achieving marketing goals.

3. Useful for Dealers and Salesmen: The study of consumer behaviour is not useful for the
company alone. Knowledge of consumer behaviour is equally useful for middlemen and
salesmen to perform their tasks effectively in meeting consumers needs and wants
successfully. Consumer behaviour, thus, improves performance of the entire distribution
system.

4. More Relevant Marketing Programme: Marketing programme, consisting of product,

price, promotion, and distribution decisions, can be prepared more objectively. The
programme can be more relevant if it is based on the study of consumer behaviour.
Meaningful marketing programme is instrumental in realizing marketing goals.

5. Adjusting Marketing Programme over Time: Consumer behaviour studies the consumer
response pattern on a continuous basis. So, a marketer can easily come to know the
changes taking place in the market. Based on the current market trend, the marketer can
make necessary changes in marketing programme to adjust with the market.

6. Predicting Market Trend: Consumer behaviour can also aid in projecting the future
market trends. Marketer finds enough time to prepare for exploiting the emerging
opportunities, and/or facing challenges and threats.

7. Consumer Differentiation: Market exhibits considerable differentiations. Each segment

needs and wants different products. For every segment, a separate marketing programme is
needed. Knowledge of consumer differentiation is a key to fit marking offers with different
groups of buyers. Consumer behaviour study supplies the details about consumer
differentiations.

8. Creation and Retention of Consumers: Marketers who base their offerings on

recognition of consumer needs find a ready market for their products. Company finds it easy
to sell its products. In the same way, the company, due to continuous study of consumer
behaviour and attempts to meet changing expectations of the buyers, can retain its
consumers for a long period.

9. Competition: Consumer behaviour study assists in facing competition, too. Based on

consumers’ expectations, more competitive advantages can be offered. It is useful in
improving competitive strengths of the company.
10. Developing New Products: New product is developed in respect of needs and wants of
the target market. In order to develop the best-fit product, a marketer must know
adequately about the market. Thus, the study of consumer behaviour is the base for
developing a new product successfully.
 11. Dynamic Nature of Market: Consumer behaviour focuses on dynamic nature of the
market. It helps the manager to be dynamic, alert, and active in satisfying consumers better
and sooner than competitors. Consumer behaviour is indispensable to watch movements of
the markets.

12. Effective Use of Productive Resources: The study of consumer behaviour assists the
manager to make the organisational efforts consumer-oriented. It ensures an exact use of
resources for achieving maximum efficiency. Each unit of resources can contribute
maximum to objectives.
It is to be mentioned that the study of consumer behavior is not only important for
the current sales, but also helps in capturing the future market. Consumer behavior
assumes: Take care of consumer needs, the consumers, in return, will take care of your
needs. Most of problems can be reasonably solved by the study of consumer behavior.
Modern marketing practice is almost impossible without the study of consumer behavior.

Understanding consumer through research process:

What is the consumer research process?

Consumer research plays a very important aspect, especially when a company

decides to launch a new product into the market. ... After conducting various surveys and
focus groups, companies analyze the consumer data and then make recommendations
based on the results.
Customer research process:

A well-organized customer research process produces valid, accurate, reliable, timely and
complete results. Carefully gathered research results that reflect your customers' opinions
and needs will help you sales and improve your operations.

To get the results you need, set and follow recognized customer research processes.

Set your objectives

Consider your customer research goals and define a clear set of objectives that identify
what you need to know and what you're going to do with the information. Make sure your
objectives don't presume your outcome, and be SMART about setting them:

 Specific - state clearly what you want to achieve

 Measurable - set tangible measures so you know when you've achieved your goals
 Achievable - set goals that are within your capacity and budget
 Relevant - set goals that will help you improve particular aspects of your business
 Time-bound - set goals you can achieve within the time you need them.
Plan your research
Good planning allows you to use creative and logical approaches to gathering information.
Your plan will be influenced by the type and complexity of information you require, your
team's customer research skills, how soon you need the information and your budget.
Identify your list of questions and decide on the research methods that will best achieve
your objectives. Detail your research approach and give some initial thought to how you'll
collate and analyze your data.
Collect and collate your findings
List your research steps, data needs and collection methods. This will help you keep track of
your research processes and make sense of your findings. It will also allow you to check that
your research accurately reflects your customers' and market's opinions. Create a table to
record:

 consumer research activity

 the data needed
 your data collection method
 Your data analysis steps.
Remember, research is only valuable and usable when it is valid, accurate and reliable.
Relying on flawed research is dangerous. It can leave you at risk of basing your important
decisions on incorrect findings and lead to customer losses and decreased sales. Be careful
not to turn one opinion into your research findings.

It's important to make sure your data is:

 valid - well founded, logical, rigorous, sound and unbiased

 accurate - free from error and includes the required detail
 reliable - can be reproduced by other people researching in the someway
 timely - current and gathered within an appropriate timeframe
 Complete - includes all the data you need to support your business
decisions. Learn about collecting and storing customer information.

Analyse and understand your research

Data analysis can range from simple, straightforward steps to technical and complex
processes. Take a common sense approach, and choose your data analysis method based on
the research you've undertaken.

List and group your information

Choose a spreadsheet that allows you to easily enter your data. If you don't have a large
amount of data, you should be able to manage it using basic spreadsheet tools available in
standard office software. If you have collected more comprehensive and complex data, you
may need to consider using specific programs to manage it, such as a database system or
customer relationship management (CRM) program.

Choose a simple structure to record your data - for example, a table that allows you to list
survey questions vertically in your table and record your responses as numbers categorized
by age, gender, income, or other factors that are important to you.

Review and interpret your information to draw conclusions

Once you've gathered all your data, you can scan your information and interpret it to draw
conclusions and make decisions. Review your data and then:
 identify major trends and themes, problems, opportunities and issues that you
observe, and write a sentence about each
 record how frequently each major finding appears
 list your findings in order of most common to least common
  Assess and separately list the strengths, weaknesses, opportunities and threats you
have identified in a SWOT analysis.
Develop conclusions and recommendations about your research
Before you make any conclusions about your research, revisit your research objectives.
Consider whether the process you've completed and data you've gathered helps answer
your questions. Ask yourself what your research revealed and identify your conclusions and
recommendations. Review your findings and, based on what you now know:

 choose a few strategies that will help you improve your business
 act on your strategies
 look for gaps in your information, and consider further research if necessary
 Plan to review your research outcomes, and consider how effective your strategies
have been.
Consumer behaviour in a world of economic instability:

Generally speaking, consumer behaviour is the study of the processes that

individuals or groups go through in making their purchasing choices in order to satisfy their
needs. Usually the buying behaviour takes many forms of consumer's choices that can vary
depending on a broad set of factors such as: earnings, demographics, social and cultural
factors. Beside these basic internal factors which are considered to be influential to the
buying behaviour, there are also a set of factors that would be simulated by the external
circumstances in the environment surrounding the consumer. It is valuable to mention that
the consumer behaviour is a combination of customer's buying awareness combined with
external motivators to result in a change in the consumer's behaviour. This is why most of
the economies around the globe shares one problem; because of the external influence on
the internal community aspects.

The phenomenon of consumer behaviour has been so long attracting many

researches because of its imperative importance to businesses around the world. By
predicting consumers' behaviour, a business can understand consumers' needs, and can
work on fulfilling the needs and meeting the expectations of their customers. This would
eventually help businesses to maintain their prosperity and attain their long term goals. The
context of this research can significantly help businesses and professionals to uncover the
changes that would possibly occur to consumers' buying behaviour as a result of the global
financial crisis. Giant Financial institutions and banks had collapsed during the 2007 financial
crisis. The shortfall in the US financial system and the crisis of the US sub-prime mortgage
market had a ripple effect to other industrialized economies around the world. The crisis
caused disturbances to powerful European and Asian economies putting them on the brick
of deep recession. Other weaknesses in the global financial systems have surfaces.

The financial instruments were too complex and twisted which caused distrust in the
global financial system. The crisis caused inflation and fluctuations in the prices of
commodities, and hence, consumers started to take a shifted action towards their needs
and wants. The psychological outcomes of the crash has extended worldwide as businesses
became receptive to the obstacles caused by this crisis especially regarding expansion of
their current projects and securing capital market investments for future growth. The
uncertainty that surrounded businesses have naturally affected job security for employees,
consumers has faced uncertainty regarding their income, and the consumption level
dropped. The sharp fall in the stock market has caused many distressful events such as,
reduction in credit, bank failures, dismissal of workers, contraction in the money supply and
closing down businesses. The new financial circumstances increased panic and uncertainty
among consumers.
 Many consumers around the world had fears related to their financial and material
safety. Besides reduced employment earnings, many household lost their lifetime savings
due to failure in the banking system or sharp decline in the values of their houses and
stocks. The social impacts of the financial crisis can be seen more obvious in the developing
countries where the poor are being severely hurt during the crisis as demand for their
labour falls, prices of essential commodities rise substantially and social services are cut.
They find themselves forced to pull children out of schools and the food is being rationed
among the family, with women the first to sacrifice their share.

The general economic slowdown and rising unemployment forced household to

increase working hours or send additional members to the labour force. As a consequence,
household expenditure falls by as much as income. The consumers cannot prevent the fall in
total expenditure; they tend to adjust the basket of goods purchased. For example the
expenditure on food and necessities increases comparing to expenditure on clothes. The
crisis caused markets to contract and major changes appeared in their structure. The buyers
changed their buying behaviour. They start to worry about their jobs and do not enjoy
spending their money anymore. They postponed or reduced a big amount of purchases
related to leisure and entertainment. People may start buying less quantities, or switch to
larger size items to avoid repeated purchases. They also started to switch brands, and focus
on price rather than quality and they also have started to intensify the search on the web
looking for valuable bargains.

The role of the government is rather important to protect consumers against

inflation by controlling and preventing prices from further increasing to ensure that the
purchasing power of consumers will not deteriorate causing serious problems such as long
term unemployment and poverty. This research aims to study the impact of the Global
financial crisis on Bahraini consumers, investigate their perception of this problem and
whether their consumption behaviour has changed as a result. The results of this research
were based on the analysis of a questionnaire that was distributed to random consumers in
Bahrain to have an overview of their knowledge about the Global Financial Crisis and some
of its effects and to see if the financial crisis affected their consumption.

The data was analyzed using SPSS package to test the hypotheses. In order to
investigate the existence of the statistical significance between the variables in the
hypothesis, we are going to apply the One Sample T-test method. However, the paper
approaches some difficulties that faced consumers after the financial crisis and tries to
suggest some solutions. One of the most important problems that consumers are suffering
from is the accelerated prices of basic commodities such as food and housing. In order to
form a clear framework and address the objectives of this research, the research can be
divided into seven sections.

Rural consumer behaviour:

Consumer segmentation:

Definition for segmentation: Segmentation means to divide the marketplace into parts, or
segments, which are definable, accessible, actionable, and profitable and have a growth
potential. In other words, a company would find it impossible to target the entire market,
because of time, cost and effort restrictions. It needs to have a 'definable' segment - a mass
of people who can be identified and targeted with reasonable effort, cost and time.

Once such a mass is identified, it has to be checked that this mass can actually be targeted
with the resources at hand, or the segment should be accessible to the company. Beyond
this, will the segment respond to marketing actions by the company (ads, prices, schemes,
promos?)
Or, is it actionable by the company? After this check, even though the product and the
target are clear, is it profitable to sell to them? Is the number and value of the segment going
to grow, such that the product also grows in sales and profits?

Consumer segmentation:

Customer segmentation is the practice of dividing a customer base into groups of

individuals that are similar in specific ways relevant to marketing, such as age, gender,
interests and spending habits.

Customer segmentation, also called consumer segmentation or client segmentation,

procedures include:

 Deciding what data will be collected and how it will be gathered

 Collecting data and integrating data from various sources
 Developing methods of data analysis for segmentation
 Establishing effective communication among relevant business units (such as marketing
and customer service) about the segmentation
 Implementing applications to effectively deal with the data and respond to the
information it provides

Companies employing customer segmentation operate under the fact that every
customer
is different and that their marketing efforts would be better served if they target specific,
smaller groups with messages that those consumers would find relevant and lead them to
buy something. Companies also hope to gain a deeper understanding of their customers'
preferences and needs with the idea of discovering what each segment finds most valuable
to more accurately tailor marketing materials toward that segment.

Customer segmentation relies on identifying key differentiators that divide customers

into groups that can be targeted. Information such as a customers' demographics (age, race,
religion, gender, family size, ethnicity, income, education level), geography (where they live
and work), psychographic (social class, lifestyle and personality characteristics) and
behavioural (spending, consumption, usage and desired benefits) tendencies are taken into
account when determining customer segmentation practices.
By enabling companies to target specific groups of customers, a customer segmentation
model allows for the effective allocation of marketing resources and the maximization of
cross- and up-selling opportunities. When a group of customers is sent personalized
messages as part of a marketing mix that is designed around their needs, it's easier for
companies to send those customers special offers meant to encourage them to buy more
products. Customer segmentation can also improve customer service and assist in customer
loyalty and retention. As a by-product of its personalized nature, marketing materials sent
out using customer segmentation tend to be more valued and appreciated by the customer
who receives them as opposed to impersonal brand messaging that doesn't acknowledge
purchase history or any kind of customer relationship.

Other benefits of customer segmentation include staying a step ahead of

competitors in specific sections of the market and identifying new products those existing or
potential customers could be interested in or improving products to meet customer
expectations. Not only do companies strive to divide their customers into measurable
segments according to their needs, behaviors or demographics but they also aim to
determine the profit potential of each segment by analyzing its revenue and cost impacts.
Value-based segmentation evaluates groups of customers in terms of the revenue they
generate and the costs of establishing and maintaining relationships with them. It also helps
companies determine which segments are the most and least profitable so that they can
adjust their marketing budgets accordingly.
 Customer segmentation can have a great effect on customer management in that, by
dividing customers into different groups that share similar needs, the company can market
to each group differently and focus on what each kind of customer needs at any given
moment. Large or small, niche customer segments can be targeted depending on the
company's resources or needs. In B2Bmarketing, companies are concerned with decision-
makers' job titles, the industry sector, whether the company is public or private, its size,
location, buying patterns and their technology at their disposal, for example. In
B2Cmarketing, companies are concerned with particular customers' profiles, attitudes and
lifestyles.

Approaches to B2B customer segmentation include vertical or horizontal alignments.

In vertical segmentation, companies select certain industries or job titles that would likely
find their products appealing and then focus marketing efforts on those segments that they
feel are most ready to buy. In horizontal segmentation, companies simply focus on one job
title across a wide range of industries and organizations.

Targeting and positioning:

Market segmentation is a process, in which groups of buyers within a market are

divided and profiled according to a range of variables, which determine the market
characteristics and tendencies. The processes of segmentation, targeting and positioning are
parts of a chronological order for market segmentation.

Segmentation, Targeting, and Positioning:

Segmentation, targeting, and positioning together comprise a three stage process.

We first (1) determine which kinds of customers exist, then (2) select which ones we are
best off trying to serve and, finally, (3) implement our segmentation by optimizing our
products/services for that segment and communicating that we have made the choice to
distinguish ourselves that way.

Segmentation involves finding out what kinds of consumers with different needs
exist. In the auto market, for example, some consumers demand speed and performance,
while others are much more concerned about roominess and safety. In general, it holds true
that “You can’t be all things to all people,” and experience has demonstrated that firms that
specialize in meeting the needs of one group of consumers over another tend to be more
profitable.

Generically, there are three approaches to marketing. In the undifferentiated

strategy, all consumers are treated as the same, with firms not making any specific efforts to
satisfy
Particular groups. This may work when the product is a standard one where one competitor
really can’t offer much that another one can’t. Usually, this is the case only for
commodities. In the concentrated strategy, one firm chooses to focus on one of several
segments that exist while leaving other segments to competitors. For example, Southwest
Airlines focuses on price sensitive consumers who will forego meals and assigned seating for
low prices. In contrast, most airlines follow the differentiated strategy: They offer high
priced tickets to those who are inflexible in that they cannot tell in advance when they need
to fly and find it impractical to stay over a Saturday. These travelers—usually business
travelers—pay high fares but can only fill the planes up partially. The same airlines then sell
some of the remaining seats to more price sensitive customers who can buy two weeks in
advance and stay over.

Note that segmentation calls for some tough choices. There may be a large number of
variables that can be used to differentiate consumers of a given product category; yet, in
practice, it becomes impossibly cumbersome to work with more than a few at a time. Thus,
we need to determine which variables will be most useful in distinguishing different groups
of consumers. We might thus decide, for example, that the variables that are most relevant
in separating different kinds of soft drink consumers are (1) preference for taste vs. low
calories,
(2) Preference for Cola vs. non-cola taste, (3) price sensitivity—willingness to pay for brand
names; and (4) heavy vs. light consumers. We now put these variables together to arrive at
various combinations.

Several different kinds of variables can be used for segmentation.

 Demographic variables essentially refer to personal statistics such as income,

gender, education, location (rural vs. urban, East vs. West), ethnicity, and family size.
Campbell’s soup, for instance, has found that Western U.S. consumers on the
average prefer spicier soups—thus, you get a different product in the same cans at
the East and West coasts. Facing flat sales of guns in the traditional male dominated
market, a manufacturer came out with the Lady Remington, a more compact,
handier gun more attractive to women. Taking this a step farther, it is also possible to
segment on lifestyle and values.”
 Some consumers want to be seen as similar to others, while a different segment
wants to stand apart from the crowd.
 Another basis for segmentation is behaviour. Some consumers are “brand loyal”—
i.e., they tend to stick with their preferred brands even when a competing one is on
sale. Some consumers are “heavy” users while others are “light” users. For example,
research conducted by the wine industry shows that some 80% of the product is
consumed by 20% of the consumers—presumably a rather intoxicated group.
 One can also segment on benefits sought, essentially bypassing demographic
explanatory variables. Some consumers, for example, like scented soap (a segment
likely to be attracted to brands such as Irish Spring), while others prefer the “clean”
feeling of unscented soap (the “Ivory” segment). Some consumers use toothpaste
primarily to promote oral health, while another segment is more interested in
breathe freshening.

In the next step, we decide to target one or more segments. Our choice should
generally depend on several factors. First, how well are existing segments served by
other manufacturers? It will be more difficult to appeal to a segment that is already well
served than to one whose needs are not currently being served well. Secondly, how large is
the segment, and how can we expect it to grow? (Note that a downside to a large, rapidly
growing segment is that it tends to attract competition). Thirdly, do we have strengths as a
company that will help us appeal particularly to one group of consumers? Firms may already
have an established reputation.
 It is possible using to target very specific customer groups based on magazine
subscriptions, past purchases, and demographic variables. A number of list brokers will sell
lists of names and addresses of homeowners in a particular area (information they get from
county registrars) or the subscribers to various magazines. Firms will often sell lists of their
customers to competitors since it is widely believed in the industry that more catalogs tend
to result more in incremental sales than in losing share in fixed-size pie. One can also buy e-
mail lists, but it is generally not legal to send soliciting e-mails to individuals with which one
does not already have an established business relationship, and these are also likely to be
discarded by "spam" filters. In the "merge-purge" process, lists from several sources are
combined (since none contains every relevant individual by itself), after which duplicates are
removed. Here is an illustration of what could be used by an online merchant of surf gear
seeking to find additional potential customers:

Positioning involves implementing our targeting. For example, Apple Computer has
chosen to position itself as a maker of user-friendly computers. Thus, Apple has done a lot
through its advertising to promote itself, through its unintimidating icons, as a computer for
“non-geeks.” The Visual C software programming language, in contrast, is aimed a “techies.”
Michael Treacy and Fred Wiersema suggested in their 1993 book The Discipline of Market
Leaders that most successful firms fall into one of three categories:

 Operationally excellent firms, which maintain a strong competitive advantage by

maintaining exceptional efficiency, thus enabling the firm to provide reliable service
to the customer at a significantly lower cost than those of less well organized and
well run competitors. The emphasis here is mostly on low cost, subject to reliable
performance, and less value is put on customizing the offering for the specific
customer. Wal-Mart is an example of this discipline. Elaborate logistical designs allow
goods to be moved at the lowest cost, with extensive systems predicting when
specific quantities of supplies will be needed.
 Customer intimate firms, which excel in serving the specific needs of the individual
customer well. There is less emphasis on efficiency, which is sacrificed for providing
more precisely what is wanted by the customer. Reliability is also stressed.
Nordstrom’s and IBM are examples of this discipline.
 Technologically excellent firms, which produce the most advanced products currently
available with the latest technology, constantly maintaining leadership in innovation.
These firms, because they work with costly technology that needs constant
refinement, cannot be as efficient as the operationally excellent firms and often
cannot adapt their products as well to the needs of the individual customer. Intel is
an example of this discipline.

Treacy and Wiersema suggest that in addition to excelling on one of the three value
dimensions, firms must meet acceptable levels on the other two. Wal-Mart, for example,
does maintain some level of customer service. Nordstrom’s and Intel both must meet some
standards of cost effectiveness. The emphasis, beyond meeting the minimum required level
in the two other dimensions, is on the dimension of strength.
Repositioning involves an attempt to change consumer perceptions of a brand, usually
because the existing position that the brand holds has become less attractive. Sears, for
example, attempted to reposition itself from a place that offered great sales but
unattractive prices the rest of the time to a store that consistently offered “everyday low
prices.” Repositioning in practice is very difficult to accomplish. A great deal of money is
often needed for advertising and other promotional efforts, and in many cases, the
repositioning fails.
 To effectively attempt repositioning, it is important to understand how one’s brand
and those of competitors are perceived. One approach to identifying consumer product
perceptions is multidimensional scaling. Here, we identify how products are perceived on
two or more “dimensions,” allowing us to plot brands against each other. It may then be
possible to attempt to “move” one’s brand in a more desirable direction by selectively
promoting certain points. There are two main approaches to multi-dimensional scaling. In
the prior approach, market researchers identify dimensions of interest and then ask
consumers about their perceptions on each dimension for each brand. This is useful when
(1) the market researcher knows which dimensions are of interest and (2) the customer’s
perception on each dimension is relatively clear (as opposed to being “made up” on the spot
to be able to give the researcher a desired answer).
In the similarity rating approach, respondents are not asked about their perceptions of
brands on any specific dimensions. Instead, subjects are asked to rate the extent of
similarity of different pairs of products (e.g., How similar, on a scale of 1-7, is Snicker’s to
Kitkat, and how similar is Toblerone to Three Musketeers?) Using computer algorithms, the
computer then identifies positions of each brand on a map of a given number of
dimensions. The computer does not reveal what each dimension means—that must be left
to human interpretation based on what the variations in each dimension appears to reveal.
This second method is more useful when no specific product dimensions have been
identified as being of particular interest or when it is not clear what the variables of
difference are for the product category.

With high volumes of data created across multiple marketing channels, brands are
challenged to organize and active the right data assets to maximize cross-channel
performance. To better understand your target audience, drive more sales, and reduce
marketing waste, you need to align your brand segmentation with digital activation and
reporting.

You must align the why they purchase with the who that buys (audience
segmentation) to the what (experience) and how (digital activation) so that all your efforts
are on the same page. The key reason for this alignment is to increase efficiencies and
synchronize your efforts so that each element is working in correlation with the other.
Knowing what audience to target determines what marketing initiatives you should use to
engage them, which in turn directs you to the right insights to improve your segmentation.
It’s a cycle that is interrelated and symbiotic.

Segmentation directs your strategy:

Segmentation is making sure the right message -> gets to the right buyer ->at the
right time. It’s also a great deal more economically efficient than mass marketing. By
segmenting high-performing users you will increase engagement with current users to drive
more value from your audiences. Aligning your segmentation with the activation strategy is
key.

By gaining an understanding of consumer behaviour you have the insights needed to

increase conversions. Segmentation is the tool that helps you analyze aggregates of
consumers that share common characteristics.

By targeting the segments which have the highest propensity to engage, you can
develop a more effective marketing strategy that better serves consumer needs and
ultimately boosts conversions.
5 elements of the most effective segments should be

1. Measurable – based on size, purchasing power, and segment profile

2. Substantial – of a critical mass that is profitable
3. Accessible – one that can easily be reached
4. Differential – is distinctive from others
5. Actionable – that enables effective programs/campaigns to be developed
 To segment markets properly, you need to divide them into distinct groups with
specific needs, characteristics, or behaviors which require separate products or marketing
mixes. It’s key to activate the audience segments you have identified across the entire
digital ecosystem.

Your target segmentation should be made on the basis of

 Which consumers will best respond to your brand(s)

 What most addresses a buyer’s needs and motivations
 Where consumers are in the buying cycle
 Quantifiable characteristics which link to KPIs such as size and market share
 Ease of persona (profile)identification
 Feasibility in targeting (based on fiscal, resource, and practical considerations) and the
consistent growth potential of the segment

You need to understand the buying behaviors of each segment and develop consumer profile
(via surveys and tracking of data rich websites).

 You need to start with a brand DNA study to evaluate the strengths/weaknesses of
the brand
 Segment to identify the target groups to focus on
 Identify primary and secondary targets
 Establish the brand positioning
 Activate the target to interact with the brand in a meaningful way

Once you’ve segmented your target audience, you should be looking for the influencers,
brand ambassadors, evangelists, and advocates. Using these individuals or groups, you can
maximize the efficiency of brand activation and increase response rates.

Segmentation drives efficient activation

To optimize brand management efficiency and achieve/retain your competitive

advantage and increase conversions, you have to align brand segmentation, messaging, and
activation.

Successfully segmenting your brand and aligning it with activation increases:

 Top of mind awareness

 Brand likeability
 Brand purchase

Making use your CRM and third-party data sources, you can segment your audiences
and help plan activation. By identifying your best customers, you can focus on the best
media to reach them and the best message to engage them.

When you’re planning your marketing activities you have to keep segmentation in
mind so you can determine which elements to include in your marketing mix. The right mix
of marketing activities and vehicles is closely linked to the behaviors of the target audience.

Market segmentation and building a differentiated value proposition are two of

marketing’s most powerful tools for guiding a marketing strategy. It clearly identifies which
consumer targets will generate the highest return in conversions and provides a better view
of how to best reach and engage them.

Once you’ve figured out segmentation, you can align it with activation. Brand
activation involves bringing a brand to life in the marketplace. It’s about delivering brand
 Growth by using all channel opportunities to connect with consumers and deepen their
experiences/relationships with your brand. You need to:

 Convert brand strategies into innovative activity plans

 Develop closer marketplace connections with consumers
 Implement consumer activation programs
 Drive brand visibility and channel presence
 Monitor market developments and brand performance

Establishing an emotional or rational attachment between consumers and your brand

to foster the engagement is paramount. This is aligned with how you craft perceptions and
behaviors in relation to your company.

Brand reporting gives you better insight into segmentation

Reporting that is aligned to segmentation helps provide the insights needed to

inform the marketing process and guide campaign development. Aligning segments to
reporting, allows you to determine which segments are most profitable so you can increase
targeting efficiency. This strategy provides you with a more accurate picture of which
individual segments contribute to your ROI, which ones require greater attention and more
resources, and which to eliminate.

Alignment equals optimization

Your competitive edge depends on you finding the right audience for your
products/services, and then getting the right message to them.

Segmentation is the tool to help achieve this, but unless it is targeted with the right
marketing mix, you are wasting efficiency and cutting into your margins. The vast store of
data you have must be used to determine both who to talk to and how to reach them
effectively to drive engagement. Once you have aligned segmentation to optimization, and
tacked on equally effective reporting to gain insights, then you finally have the knowledge
you need to consistently optimize conversions.

Rural Marketing:

Introduction:

The emergence of rural markets as highly untapped potential emphasizes the need
to explore them. Marketers over the past few decades, with innovative approaches, have
attempted to understand and tap rural markets. Some of their efforts paid off and many
markets still an enigma. Rural marketing is an evolving concept, and as a part of any
economy, has untapped potential; marketers have realized the opportunity recently.
Improvement in infrastructure and reach, promise a bright future for those intending to go
rural. Rural consumers are keen on branded goods nowadays, so the market size for
products and services seems to have burgeoned.
The rural population has shown a trend of moving to a state of gradual urbanization
in terms of exposure, habits, lifestyles, and lastly, consumption patterns of goods and
services. So, there are dangers on concentrating more on the rural customers. Reducing the
product features in order to lower prices is a dangerous game to play. Rural buyers like to
follow the urban pattern of living. Astonishingly, as per the census report 2003-04, there are
total 638365 villages in India in which nearly 70% of total population resides; out of them 35
% villages have more than 1000population.
Rural per capita consumption expenditure grew by 11.5 per cent while the urban
expenditure grew by 9.6 per cent. There is a tremendous potential for consumer durables
like two-
 Wheelers, small cars, television sets, refrigerators, air-conditioners and household
appliances in rural India.

Definitions:
“Rural marketing is a process of developing, pricing, promoting, and distributing rural
specific goods and services leading to desired exchange with rural customers to satisfy their
needs and wants, and also to achieve organizational objectives.”

Concept of Rural Marketing:

The concept of Rural Marketing in India Economy has always played an influential
role in the lives of people. In India, leaving out a few metropolitan cities, all the districts and
industrial townships are connected with rural markets. The rural market in India generates
bigger revenues in the country as the rural regions comprise of the maximum consumers in
this country. The rural market in Indian economy generates almost more than half of the
country’s income. Rural marketing in Indian economy can be classified under two broad
categories.
1