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Please use complete sentences and proper grammar in all postings. Word count requirement for initial discussion board post: 250. As discussed in Chapter 5, VALS is a very popular proprietary market segmentation tool.Go to the Strategic Business Insights website at http://www.strategicbusinessinsights.com/vals/pres...Click on “Take the VALS survey” and complete all of the questions. Then, click “Submit” to view your results.Share your results. Were the results surprising to you? Do you agree or disagree? Why or why not? Discuss products or companies where it might be appropriate to utilize market segmentation according to personality traits.Support your post with scholarly RESEARCH on market segmentation and personality. customers_segmentation_and_target_marketing_chapter_5.pdf Unformatted Attachment Preview Customers, Segmentation, and Target Marketing CHAPTER 5 C A L INTRODUCTION V In this chapter, we begin our discussion of marketingEstrategy by examining customers, segments, and target markets. In Chapter 1, we referred to a market as a collection of buyers and sellers. Now, we focus our R attention on the buyers who collectively make up the major portion of most markets. T From this perspective, we concern ourselves with markets as individuals, institutions, or groups of individuals or institutions that have similar needs that can be met, by a particular product offering. As we shall see, firms can attempt to reach all buyers in a market, smaller groups or segments of the market, or even specific buyers on an individual level. Whether the firm aims for the entire market or smaller market T segments, the goal of marketing strategy is to identify specific customer needs, then Edesign a marketing program that can satisfy those needs. To do this effectively, the firm must have a comprehenR sive understanding of its current and potential customers, including their motivaR tions, behaviors, needs, and wants. The ability to determine in-depth information about customers is a fairly recent E phenomenon in marketing. Fifty years ago, for example, technology and marketing N were unable to fully underknow-how were less sophisticated. Marketers of the day stand customers’ needs and wants, much less make fine C distinctions among smaller segments of the total market. Marketers tended to offer products that came in only E is critical to the success of one variety, flavor, or style. Today, market segmentation most firms. Segmentation allows marketers to more precisely define and understand customer needs, and gives them the ability to tailor products to better suit those needs. As discussed in Beyond the Pages 5.1, the level1of detailed information available about customers today has changed the way firms 8 do business. However, the use of such information raises concerns about consumer privacy. Still, without segmentation we would not enjoy the incredible variety5of products available today. Consider the number of choices we have in categories 9 such as soft drinks, cereals, packaged goods, automobiles, and clothing. In many respects, segmentation has T improved our standard of living. Customers now expect firms to delve into their needs and wants, and to tailor products accordingly.SThis fact makes market segmentation a vital part of marketing strategy. Until a firm has chosen and analyzed a target market, it cannot make effective decisions regarding other elements of the marketing strategy. In this chapter, we examine issues associated with buyer behavior in both consumer and business markets. We also discuss traditional and individualized approaches to market segmentation, the criteria for successful market segmentation, and specific target marketing strategies. The potential combinations of target 119 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 120 Chapter 5 • Customers, Segmentation, and Target Marketing BEYOND THE PAGES 5.1 Companies Learn Our Secrets Through Data Mining1 Consider a world where what you eat, read, wear, listen to, watch, buy, and do can be reduced to a mathematical formula. Every move you make is tracked with such a level of specificity that your entire life can be captured in a computer model. Sound far-fetched? It’s not. Today, the combination of computer science, mathematics, and business is changing our view of consumers and their behavior. The ability to track consumer behavior has never been more advanced than it is today. The new insights gained from the mathematical modeling of consumer behavior is creating new avenues for business, allowing marketers to develop one-to-one relationships with consumers, and causing a fair amount of anxiety. It is also causing a sharp increase in the hiring of math graduates from our nation’s universities. Through advanced math, computer modeling, and data mining, businesses have been able to track consumer attitudes and behaviors for some time. The difference today is the unprecedented access to data made available via the Internet and other technologies. Over the past 10 years, a sizable portion of the consuming public has moved its work, play, conversation, and shopping online. These integrated networks collect vast amounts of data and store our lives in databases that can be connected in ways that allow us to capture a more complete picture of consumer behavior. For example, researchers at companies like Facebook, Yahoo!, Google, and Amazon are developing mathematical models of customers. These firms are also working with other companies and government agencies to develop models that can predict voting behavior, how patients respond to disease intervention, or which employee is best suited for a job assignment. For example, Target’s data mining expertise raised a few eyebrows when the New York Times uncovered that the retailer was able to tell when a customer was pregnant or about to deliver. Target’s statisticians are able to tie millions of purchases together to reveal patterns in their data. One of their insights: When women become pregnant, they buy a lot of supplements such as calcium, magnesium, and zinc. When their delivery date is close, pregnant women tend to buy a lot of scent-free products, large bags of cotton balls, hand sanitizer, and washcloths. Target uses this information to target ads and coupons to the right consumers. Data mining results like these are one of the reasons for Target’s incredible growth from $44 billion in revenue in 2002 to roughly $72.5 billion in 2013. Retailers are not the only companies that C use data mining. The advertising and media are perhaps the most affected by this A industries shift. As mass audience advertising has declined, L marketers have been looking for ways to target more directly. Google is a pioneer in V customers this effort because the company has amassed an E unfathomable amount of data on what custoR mers do online. Other companies now provide data mining solutions. In research conducted T with SPSS, for example, Italian carmaker Fiat , was able to improve customer relations and increase customer retention by 6 to 7 percent. Microsoft uses its own analytical techniques to T study the productivity of its workforce. Furthermore, Harrah’s Entertainment (a major player in E the casino industry) has increased their annual R growth rate by using computer models to predict which customers will respond to the comR pany’s targeted advertising and promotional E offers. Of course, all of this sophistication comes at N a price. The ability of companies to track custoC mers and model their behavior raises a number privacy concerns. Although most companies E of take great pains to protect individual consumer identities and their private information, major 1 issues often arise. For example, that same data warehouse Target uses to reach its customers 8 was hacked in late 2013. The hackers stole per5 sonal information and credit card numbers for over 70 million Target customers. Major pro9 blems like this are still relatively rare; however, T the continuing erosion of consumer privacy is likely to continue. A key question for marketers S is at what point will consumers say enough is enough? How far can firms push the boundaries of data collection and analysis before consumers mount a backlash? 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 Chapter 5 • Customers, Segmentation, and Target Marketing markets and marketing programs are essentially limitless. Choosing the right target market from among many possible alternatives is one of the key tests in developing a good marketing strategy. BUYER BEHAVIOR IN CONSUMER MARKETS Trying to understand the buyer behavior of consumers is a very trying and challenging task. The behavior of consumers is often irrational and unpredictable. Consumers often say one thing but do another. Still, the effort spent trying to understand consumers is valuable because it can provide needed insight on how to design products and marketing programs that better meet consumer needs and wants. One of the most recent trends in learning about customers is the rising use of ethnography, a qualitative research technique designed to understand cultural phenomena such as C Computer maker Lenovo, communication, shared meanings, and personal interests. for example, has used ethnographic research to learn Amore about how families in India use consumer electronics. One interesting finding is that the family social cenL serves the same social functer in Indian homes is the parents’ bedroom. The kitchen tion in American homes. Lenovo uses this type of information to develop consumer V electronics that better fit differing family lifestyles in India and the United States. E have been scouring social With the continuing growth of the Internet, marketers media such as Facebook, Twitter, and Instagram to gain R cultural insights about consumers. One of the most useful of these sites is Pinterest, where people can “pin” T anything that interests them. Pinterest’s phenomenal growth (up 111 percent in 2014) and its open nature make it a treasure trove of, information about American culture. Marketers see Pinterest as a great way to showcase brands, especially among women (42 percent of all women online use Pinterest). The number of male users has also been growing—up 73 percent in 2014.2 T In this section, we look at key issues with respect to E buyer behavior in consumer markets. Here, we examine the consumer buying process and the factors that alter R see, successful marketing the ways consumers buy goods and services. As we will strategy depends on a clear understanding of customers R with respect to who they are, what they need, what they prefer, and why they buy. Although this understandE it also impacts the pricing clearly has relevance for designing the product offering, ing, distribution, and promotion decisions in the marketing N program. The Consumer Buying Process C E The consumer buying process shown in Exhibit 5.1 depicts five stages of activities that consumers may go through in buying goods and services. The process begins 1 the stages of information with the recognition of a need, and then passes through search, evaluation of alternatives, purchase decision,8and postpurchase evaluation. A marketer’s interest in the buying process can go well beyond these stages to 5 product disposal after coninclude actual consumption behaviors, product uses, and sumption. As we consider each stage of the buying process, 9 it is important to keep a few key issues in mind. T of activities that may occur First, the buying process depicts the possible range in making purchase decisions. Consumers, however,Sdo not always follow these stages in sequence and may even skip stages en route to making a purchase. For example, impulse purchases, such as buying a pack of chewing gum or a newspaper, do not involve lengthy search or evaluation activities. On the other hand, complex purchases like buying a home are often quite lengthy as they incorporate every stage of the buying process. Likewise, consumers who are loyal to a product or brand will skip some stages and are most likely to simply purchase the same product they bought last time. Consequently, marketers have a difficult time promoting brand 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 121 122 Chapter 5 • Customers, Segmentation, and Target Marketing EXHIBIT 5.1 The Consumer Buying Process. Stages Key Issues Need Recognition • • • • • Information Search • Evaluation of Alternatives • • • • • Purchase Decision • Postpurchase Evaluation • • Consumer needs and wants are not the same. An understanding of consumer wants is essential for market segmentation and the development of the marketing program. Marketers must create the appropriate stimuli to foster need recognition. Consumers trust internal and personal sources of information more than external sources. The amount of time, effort, and expense dedicated to the search for information depends on (1) the degree of risk involved in the purchase, (2) the amount of experience the consumer has with the product category, and (3) the actual cost of the search in terms of time and money. Consumers narrow their potential choices to an evoked set of suitable alternatives that may C meet their needs. A into wants for specific products or brands. Consumers translate their needs Consumers evaluate productsL as bundles of attributes that have varying abilities to satisfy their needs. V Marketers must ensure that their product is in the evoked set of potential alternatives. Marketers must take steps toE understand consumers’ choice criteria and the importance they place on specific product attributes. R A consumer’s purchase intention T and the actual act of buying are distinct concepts. Several factors may prevent the actual purchase from taking place. , Marketers must ensure that their product is available and offer solutions that increase possession utility. Postpurchase evaluation is theTconnection between the buying process and the development of long-term customer relationships. E Marketers must closely followR consumers’ responses (delight, satisfaction, dissatisfaction, cognitive dissonance) to monitor the product’s performance and its ability to meet customers’ R expectations. E N C switching because they must convince these customers to break tradition and take a look at what different productsEhave to offer. Second, the buying process often involves a parallel sequence of activities associated with finding the most suitable merchant of the product in question. That is, while consumers consider which 1 product to buy, they also consider where they might buy it. In the case of name brand products, this selection process may focus 8 on the product’s price and availability at different stores or online merchants. A specific model of Sony television,5for example, is often available from many different retailers and may even be available at Sony’s website. Conversely, in the case of 9 private-label merchandise, the choices of product and merchant are made simultaneously. If a customer is interested T only in Gap brand clothing, then that customer must purchase the clothing from a Gap store or the Gap website. S Third, the choice of a suitable merchant may actually take precedence over the choice of a specific product. In some cases, customers are so loyal to a particular merchant that they will not consider looking elsewhere. For example, many older consumers are fiercely loyal to American car manufacturers. These customers will limit their product selection to a single brand or dealership, greatly limiting their range of potential product choices. In other cases, customers might be loyal to a particular merchant because they hold that merchant’s credit card or are a member of its frequent-user customer program. Finally, some merchants become so well known 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 C A L V E R they rarely go through each When consumers purchase products like candy or gum on impulse, stage of the buying process. T , David R. Frazier Photolibrary, Inc. / Alamy Chapter 5 • Customers, Segmentation, and Target Marketing for certain products that customers just naturally execute their buying process with those merchants. Sears, for example, is well known for T its selection of name-brand appliances and tools. For many customers, Sears is the natural place to go when E they are in the market for a new refrigerator, washer, or wrenches. R R The buying process begins when consumers recognize that they have an unmet need. E This occurs when consumers realize that there is a discrepancy between their existing level of satisfaction and their desired level of satisfaction. Consumers can recogN nize needs in a variety of settings and situations. Some needs have their basis in C internal stimuli, such as hunger, thirst, and fatigue. Other needs have their basis in Einteracting with salespeople, external stimuli, such as advertising, window shopping, Need Recognition or talking with friends and family. External stimuli can also arouse internal responses, such as the hunger you might feel when watching an advertisement for 1 Pizza Hut. Typically, we think of needs as necessities, particularly with respect to the 8 necessities of life (food, water, clothing, safety, shelter, health, or love). However, 5 perspective on what conthis definition is limited because everyone has a different stitutes a need. For example, many people would argue 9 that they need a car when their real need is for transportation. Their need for a car is really a “want” for a car. T wants. A need occurs when This is where we draw the distinction between needs and an individual’s current level of satisfaction does not equal S their desired level of satisfaction. A want is a consumer’s desire for a specific product that will satisfy the need. Hence, people need transportation, but they choose to fulfill that need with a car, rather than with alternative products like motorcycles, bicycles, public transportation, a taxi, or a horse. The distinction between needs and wants is not simply academic. In any marketing effort, the firm must always understand the basic needs fulfilled by their products. For example, people do not need drills; they need to make holes or 9781337669078, Marketing Strategy: Text and Cases, Seventh Edition, O.C. Ferrell - © Cengage Learning. All Rights Reserved. No distribution allowed without express authorization. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-240 123 124 Chapter 5 • Customers, Segmentation, and Target Marketing drive screws. Similarly, they do not need lawnmowers; they need shorter, wellmanicured grass. Understanding these basic needs allows the firm to segment markets and create marketing programs that can translate consumer needs into wants for their specific products. An important part of this effort involves creating the appropriate stimuli that will foster need recognition among consumers. The idea is to build on the basic need and convince potential consumers to want your product because it will fulfill their needs better than any competing product. It is also important to understand that wants are not the same thing as demand. Demand occurs only when the consumer’s ability and willingness to purchase a specific product backs up their want for the product. Many customers want a luxury yacht, for example, but only a few are able and willing to buy one. In some cases, consumers may actually need a product, but not want it. So-called “unsought products” like life insurance, cemetery plots, long-term health insurance, and continuing education are good examples. In these cases, the marketer must first educate consumers on C the need for the product, and then convince consumers to want their products over ... Purchase answer to see full attachment