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THE CONSUMER MARKET
LEARNING goal 5

Explain how marketers apply the tools of market segmentation, relationship marketing, and the study of consumer behavior.

THE CONSUMER MARKET

The total potential consumer market consists of the 7 billion or so people in global markets. Because consumer groups differ greatly by age, education level, income, and taste, a business usually can't fill the needs of every group. It must decide which groups to serve, and then develop products and services specially tailored to their needs.

Take the Campbell Soup Company, for example. You know Campbell for its traditional soups such as chicken noodle and tomato. You may also have noticed that Campbell has expanded its U.S. product line to appeal to a number of different tastes. Aware of population growth in the South and in Latino communities in cities across the nation, it introduced a Creole soup for the southern market and a red bean soup for the Latino market. In Texas and California, where people like their food with a bit of kick, Campbell makes its nacho cheese soup spicier than in other parts of the country. It's just one company that has had some success studying the consumer market, breaking it down into categories, and developing products for separate groups.

The process of dividing the total market into groups with similar characteristics is called market segmentation. Selecting which groups or segments an organization can serve profitably is target marketing. For example, a shoe store may choose to sell only women's shoes, only children's shoes, or only athletic shoes. The issue is finding the right target market—the most profitable segment—to serve.

market segmentation The process of dividing the total market into groups whose members have similar characteristics.
target marketing Marketing directed toward those groups (market segments) an organization decides it can serve profitably.
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Segmenting the Consumer Market

A firm can segment the consumer market several ways (see Figure 13.6). Rather than selling your product throughout the United States, you might focus on just one or two regions where you can be most successful, say southern states such as Florida, Texas, and South Carolina. Dividing a market by cities, counties, states, or regions is geographic segmentation.

geographic segmentation Dividing a market by cities, counties, states, or regions.
table

d

MAIN DIMENSION

SAMPLE VARIABLES

TYPICAL SEGMENTS

Geographic segmentation

Region

Northeast, Midwest, South, West

City or county size

Under 5,000; 5,000–10,999; 20,000–49,000; 50,000 and up

Density

Urban, suburban, rural

Demographic segmentation

Gender

Male, female

Age

Under 5; 5–10; 11–18; 19–34; 35–49; 50–64; 65 and over

Education

Some high school or less, high school graduate, some college, college graduate, postgraduate

Race

Caucasian, African American, Indian, Asian, Hispanic

Nationality

American, Asian, Eastern European, Japanese

Life stage

Infant, preschool, child, teenager, collegiate, adult, senior

Income

Under $15,000; $15,000–$24,999; $25,000–$44,999; $45,000–$74,999; $75,000 and over

Household size

1; 2; 3–4; 5 or more

Occupation

Professional, technical, clerical, sales supervisors, farmers, students, home-based business owners, retired, unemployed

Psychographic segmentation

Personality

Gregarious, compulsive, extroverted, aggressive, ambitious

Values

Actualizers, fulfillers, achievers, experiencers, believers, strivers, makers, strugglers

Lifestyle

Upscale, moderate

Benefit segmentation

  • Comfort

  • Convenience

  • Durability

  • Economy

  • Health

  • Luxury

  • Safety

  • Status

(Benefit segmentation divides an already established market into smaller, more homogeneous segments. Those people who desire economy in a car would be an example. The benefit desired varies by product.)

Volume segmentation

Usage

Heavy users, light users, nonusers

Loyalty status

None, medium, strong

figure 13.6
MARKET SEGMENTATIONThis table shows some of the methods marketers use to divide the market. The aim of segmentation is to break the market into smaller units.

Alternatively, you could aim your product's promotions toward people ages 25 to 45 who have some college education and above-average incomes. Automobiles such as Lexus are often targeted to this audience. Age, income, and education level are criteria for demographic segmentation. So are religion, race, and occupation. Demographics are the most widely used segmentation variable, but not necessarily the best.

demographic segmentation Dividing the market by age, income, and education level.
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You may want your ads to portray a target group's lifestyle. To do that, you would study the group's values, attitudes, and interests in a strategy called psychographic segmentation. If you decide to target Generation Y, you would do an in-depth study of members' values and interests, like which TV shows they watch and which personalities they like best. With that information you would develop advertisements for those TV shows using those stars.

psychographic segmentation Dividing the market using groups' values, attitudes, and interests.

In marketing for Very Vegetarian, what benefits of vegetarianism might you talk about? Should you emphasize freshness, heart-healthiness, taste, or something else? Determining which product benefits your target market prefers and using those benefits to promote a product is benefit segmentation.

benefit segmentation Dividing the market by determining which benefits of the product to talk about.

You can also determine who are the big eaters of vegetarian food. Does your restaurant seem to attract more men or more women? More students or more faculty members? Are your repeat customers from the local community or are they commuters? Separating the market by volume of product use is called volume (or usage) segmentation. Once you know who your customer base is, you can design your promotions to better appeal to that specific group or groups.

volume (or usage) segmentation Dividing the market by usage (volume of use).

The best segmentation strategy is to use all the variables to come up with a consumer profile that represents a sizable, reachable, and profitable target market. That may mean not segmenting the market at all and instead going after the total market (everyone). Or it may mean going after ever-smaller segments. We'll discuss that strategy next.

Reaching Smaller Market Segments

Niche marketing is identifying small but profitable market segments and designing or finding products for them. Because it so easily offers an unlimited choice of goods, the Internet is transforming a consumer culture once based on big hits and best-sellers into one that supports more specialized niche products.26 Just how small such a segment can be is illustrated by FridgeDoor.com. This company sells refrigerator magnets on the Internet. It keeps some 1,500 different magnets in stock and sells as many as 400 a week.

niche marketing The process of finding small but profitable market segments and designing or finding products for them.

One-to-one marketing means developing a unique mix of goods and services for each individual customer. Travel agencies often develop such packages, including airline reservations, hotel reservations, rental cars, restaurants, and admission to museums and other attractions for individual customers. This is relatively easy to do in B2B markets where each customer may buy in huge volume. But one-to-one marketing is now becoming possible in consumer markets as well. Dell produces a unique computer system for each customer. Can you envision designing special Very Vegetarian menu items for individual customers?

one-to-one marketing Developing a unique mix of goods and services for each individual customer.
The Internet has dramatically increased the ways in which companies can reach out to customers and conduct relationship marketing. For example, it can assist marketers in customizing products like photo books and calendars shown here. What appeals to you about these firms?
Moving toward Relationship Marketing

In the world of mass production following the Industrial Revolution, marketers responded by practicing mass marketing. Mass marketing means developing products and promotions to please large groups of people. That is, there is little market segmentation. The mass marketer tries to sell the same products to as many people as possible. That means using mass media, such as TV, radio, and newspapers to reach them. Although mass marketing led many firms to success, marketing managers often got so caught up with their products and competition that they became less responsive to the market. Airlines, for example, are so intent on meeting competition that they often annoy their customers.

mass marketing Developing products and promotions to please large groups of people.
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Relationship marketing tends to lead away from mass production and toward custom-made goods and services. The goal is to keep individual customers over time by offering them new products that exactly meet their requirements. The latest in technology enables sellers to work with individual buyers to determine their wants and needs and to develop goods and services specifically designed for them, like hand-tailored shirts and unique vacations.

relationship marketing Marketing strategy with the goal of keeping individual customers over time by offering them products that exactly meet their requirements.

Understanding consumers is so important to marketing that a whole area of marketing emerged called consumer behavior. We explore that area next.

The Consumer Decision-Making Process

Figure 13.7 on p. 370 shows the consumer decision-making process and some outside factors that influence it. The five steps in the process are often studied in courses on consumer behavior.

THE CONSUMER DECISION-MAKING PROCESS AND OUTSIDE INFLUENCES
figure 13.7
THE CONSUMER DECISION-MAKING PROCESS AND OUTSIDE INFLUENCESThere are many influences on consumers as they decide which goods and services to buy. Marketers have some influence, but it's not usually as strong as sociocultural influences. Helping consumers in their information search and their evaluation of alternatives is a major function of marketing.
Consumer behavior researchers investigate people's buying decisions and the factors that influence their choices. Social, psychological, and marketing-mix factors are important when we decide what to buy. So are the store environment and our previous buying experiences. What influences the choices you make in your local supermarket?

The first step is problem recognition, which may occur when your washing machine breaks down and you realize you need a new one. This leads to an information search—you look for ads and brochures about washing machines. You may consult a secondary data source like Consumer Reports or other information, perhaps online. And you'll likely seek advice from other people who have purchased washing machines.

After compiling all this information, you evaluate alternatives and make a purchase decision. But your buying process doesn't end here. After the purchase, you may ask the people you spoke to previously how their machines perform and then do other comparisons to your new washer.

Marketing researchers investigate these consumer thought processes and behavior at each stage in a purchase to determine the best way to help the buyer buy. This area of study is called consumer behavior.

Consumer behavior researchers also study the influences that affect consumer behavior. Figure 13.7 shows several: marketing mix variables (the four Ps); psychological influences, such as perception and attitudes; situational influences, such as the type of purchase and the physical surroundings; and sociocultural influences, such as reference groups and culture. Other important factors include these:

Many universities have expanded the marketing curriculum to include courses in business-to-business marketing. As you'll learn below, that market is huge.