MODULE 2 UNDERSTANDING MARKET & DEVELOPING VIABLE MARKET STRATEGY

Marketers 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.
Analyzing Consumer Markets Pg. 13

2.1 THE MODEL OF CONSUMER BEHAVIOUR

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 create 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 Figure 3.1.

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.

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2.2 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.

1. 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, a child growing up in the United States is exposed
to values such as achievement and success, activity, efficiency and practicality, progress,
material comfort, individualism, freedom, humanitarianism, and youthfulness. A child growing
up in another country might have a different view of self, relationship to others, and rituals.
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). Marketers must closely attend to cultural values in every country to
understand how best to market their existing products and find opportunities to develop new
products. Each culture also consists of subcultures that provide members with more specific
identification and socialization. Subcultures include nationalities, religions, racial groups, and
geographic regions. When subcultures grow sufficiently large and affluent, companies often
design specialized marketing programs to serve them.
To determine the effect of culture on purchases, a recent longitudinal study examined data
from 30,000 customers of a global fashion retailer in 30 countries. The study analyzed
demographic background, shopping behavior, participation in loyalty programs, types of
products bought, product returns, and advertising costs—including e-mail and catalogs—using
a framework that enabled national culture to be examined according to the importance of
individualism and collectivism, level of indulgence or restraint, type of offerings bought,
loyalty to companies/brands, tendency to embrace new technologies, and use of media. Among
the findings: Consumers in individualistic societies like Australia and the United States are
more likely to buy for themselves, follow trends, use multiple purchase channels (including
online and catalog) to find the best deal, and return items that fall below expectations, whereas
consumers in collectivist countries (e.g., Portugal, Mexico, and Turkey) tend to follow the
crowd, value long-term reputation, shop for their families, buy from trusted retailers, and prefer
traditional brick and mortar stores.
Virtually all human societies exhibit social stratification, most often in the form of social
classes—relatively homogeneous, enduring, and hierarchically ordered divisions in a society
whose members share similar values, interests, and behavior. For example, the United States
has lower, middle, and upper classes. Social class members show distinct product and brand
preferences in many areas. They may at times want to communicate that they belong to a
specific social class by purchasing products that can be viewed as status symbols. The rigidity

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of social hierarchies and how difficult it is to move up the social ladder also differ across
cultures. For example, places like India and Brazil have relatively rigid social hierarchies, with
people’s positions on the various rungs being determined at birth.
Pervasive inequality still exists among the upper, middle, and lower classes in Brazil, which
are often divided into A-B-C-D-E socioeconomic segments by statisticians and marketers.
Although it is relaxing slightly, this strict social stratification still divides wealthier and better-
educated property owners, and those with special technical skills and expertise (A and B
classes), from the large and disproportionately poor E-class segment of the population that has
limited access to employment, education, and even basic government services like health and
sanitation. C-class individuals typically have at least a high school degree and provide services
to those in the A & B classes as teachers, managers, nurses, and the like. Individuals in the D
class serve the C class as maids, drivers, bartenders, mechanics, etc. Those in the lowest
economic stratum typically have not completed elementary school, are often illiterate, and,
when employed, are usually found in jobs such as cleaner and street sweeper that pay meagre
wages.

2. SOCIAL FACTORS

In addition to cultural factors, social factors such as reference groups, including family,
affect our buying behavior. We address these factors in more detail next.
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. An individual’s spouse and children, on the other hand,
have a more direct impact on everyday buying decisions, especially in the case of high-ticket
items and items that are used by different members of the household.
Reference groups include not only those that individuals belong to, such as friends,
neighbours, coworkers, and religious and interest-based groups. Individuals may also be
influenced by groups to which they do not belong, such as aspirational groups that they hope
to join and dissociative groups whose values or behavior they reject.
Where reference group influence is strong, marketers must determine how to reach and
influence the group’s opinion leaders. 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.14 Opinion leaders are
often highly confident, socially active, and frequent users of the product category. Marketers
try to reach these leaders by identifying their demographic and psychographic characteristics
and the media they read, as well as by directing messages to them.
All of us participate in many groups—family, clubs, organizations—that often influence
our norms of behavior. We can define a person’s position in each group in terms of role and
status. A role consists of the activities a person is expected to perform. Each role in turn
connotes a status. A senior vice president of marketing may have more status than a sales
manager, and a sales manager may have more status than an office clerk. People choose
products that reflect and communicate their role and their actual or desired status in society.

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Thus, marketers must be aware of the status-symbol and self-defining potential of products and
brands.
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. Even if the buyer no longer interacts very much with his or her parents, parental
influence on behavior can be a significant determinant of purchases.
A more direct influence on everyday buying behavior is the family of procreation —
namely, the person’s spouse and children. In the United States, purchases have in the past varied
widely by product category, with the wife usually acting as the family’s main purchasing agent,
especially for food, sundries, and clothing items. Traditional purchasing roles are now
changing, and marketers now see both men and women as viable targets.
For expensive products and services such as cars, vacations, or housing, the vast majority
of spouses engage in joint decision making. Men and women may respond differently to
marketing messages, however. Research has shown that women tend to place greater value
connections and relationships with family and friends and place a higher priority on people
than on companies.19 Accordingly, marketers have customized the positioning of many
products such as Quaker’s Nutrition for Women cereals and Crest rejuvenating and whitening
toothpaste.
Another shift in buying patterns is an increase in the amount of dollars spent by children
and teens and the direct and indirect purchasing influence they wield. Direct influence takes
the form of children’s hints, requests, and demands: “I want to go to McDonald’s.” Indirect
influence means that parents know the brands, product choices, and preferences of their
children without hints or outright requests: “I think Jake and Emma would prefer to go to
Panera.”
A recent survey of the social media habits of 13- to 33-year-olds reveals that only 2 percent
say they do not use any social platform, and Millennials report that they use their smartphones
more than 11 hours each day, mostly for messaging and social networking. The majority of
participants say they have friended or followed a brand on social media; 38 percent have posted
about a brand, with 54 percent of these posts being positive and only 22 percent negative.

3. PERSONAL FACTORS

Personal characteristics that influence buyers’ decisions include their age and stage in the
life cycle, occupation and economic circumstances, personality and self-concept, and
lifestyle and values. Because many of these factors have a direct impact on consumer behavior,
it is important for marketers to follow them closely.
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. U.S. households are evolving: The traditional family of four with
a husband, wife, and two kids makes up a much smaller percentage of total households than it
once did.

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 In addition, psychological life-cycle stages may matter. Adults experience certain passages,
or transformations, as they go through life, causing their behavior during these intervals to
adapt to changing circumstances. Marketers should consider critical life events or transitions—
marriage, childbirth, illness, relocation, divorce, first job, career change, retirement, death of a
spouse—as giving rise to new needs. Companies should be alert to these needs and provide
products and services that can best meet them.
It’s not surprising that the baby industry attracts many marketers, given the enormous
amount parents spend and the life-changing nature of parenthood.

The Baby Market Although they may not yet have reached their full earning potential,
expectant and new parents seldom hold back when spending on their loved ones,
making the baby industry more recession proof than most. Spending tends to peak
between the second trimester of pregnancy and the twelfth week after birth. First-time
mothers-to-be are especially attractive target customers since they will be unable to use
many hand-me-downs and will need to acquire a full range of new furniture, strollers,
toys, and baby supplies. Recognizing the importance of reaching expectant parents
early to win their trust—industry pundits call it a “first in, first win” opportunity—
marketers use a variety of media, including direct mail, inserts, space ads, e-mail
marketing, and websites. Product samples are especially popular, and kits are often
distributed at childbirth education classes and other places. Many hospitals have banned
the traditional bedside gift bag, however, because of concerns with privacy and
potentially adverse effects on a vulnerable audience (e.g., distributing baby formula
may discourage new mothers from breastfeeding). Other avenues of access exist: For
example, Disney Baby partners with a company that sells baby bedside photos, hands
out playful Disney Cuddly Bodysuits, and solicits sign-ups for e-mail alerts from
[Link]. Not all expenditures go directly to baby-related purchases. Such a
fundamental life change gives expectant or new parents a whole new set of needs that
has them thinking differently about life insurance, financial services, real estate, home
improvement, and automobiles.

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 Occupation also influences consumption patterns. 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. Computer software companies, for example, design
different products for brand managers, engineers, lawyers, and physicians. Michigan-based
Carhartt Inc., founded in 1889, has become a global work-clothing dynasty with 800 products,
a network of some 100 metro-Detroit retail stores, and corporate stores in seven states, as well
as Carhartt Europe and Australia. Carhartt’s line of durable industrial, farm, and outdoor
clothing is known for quality fabrics and workmanship and through the years has gained
traction as streetwear.
Both product choice and brand choice are greatly affected by economic circumstances like
the level, stability, and pattern of spendable income; savings and assets, including the
percentage that is liquid; debts and borrowing power; and attitudes toward spending and saving.
If economic indicators point to a recession, marketers can take steps to redesign, reposition,
and reprice their products or emphasize discount brands so they can continue to offer value to
target customers.
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.
Consumers typically choose and use brands with a brand personality consistent with their
actual self-concept (how we view ourselves), although the match may instead be based on the
consumer’s ideal self-concept (how we would like to view ourselves) or even on others’ self-
concept of us (how we think others see us). These effects may be more pronounced for publicly
consumed products than for privately consumed goods. On the other hand, consumers who are
high “self-monitors”—that is, are sensitive to the way others see them—are more likely to
choose brands whose personalities fit the consumption situation.
Finally, multiple aspects of self (serious, professional, caring family member, active fun-
lover) may often be evoked differently in different situations or around different types of
people. Some marketers, like Joie de Vivre Hotels, carefully orchestrate their brand experiences
to appeal to a variety of different personalities.

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 Joie de Vivre Named one of best boutique hotel chains by the editors of Smarter Travel
magazine, San Francisco-based Joie de Vivre boasts the largest collection of lifestyle
boutique hotels in California, with additional locations in Chicago, Baltimore, and New
York City. The chain views itself as “a collection of heartfelt stories brought to life” and
aims to inspire “the spirt of playful travel through neighborhood connections.” Guests
at Joie de Vivre’s sleek and intimate, pet- and family-friendly, community-focused
hotels have the option to donate $1 a night, which goes directly to each hotel’s
philanthropic partners. The chain donates almost $1.5 million each year to
neighborhood organizations in the form of gift certificates, cash and in-kind donations,
and events. All hotels participate in recycling, composting, and textile and food
donation programs, and all work to conserve water and energy, use environmentally
safe products, and purchase organic, fair trade food.

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. Consumer decisions are also influenced
by these core values, which go much deeper than behavior or attitude and, at a basic level,
guide people’s choices and desires over the long term. Marketers who target consumers on the
basis of their values believe that appealing to people’s inner selves makes it possible to
influence their outer selves—their purchase behavior.

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 Allen Solly is a prominent example of a brand that aligns with the evolving values and
lifestyle of its target audience. Established in 1744, the brand was introduced in India
in the early 1990s. Strategically positioning itself as ‘work casuals’, Allen Solly stood
out in the premium, formal office wear market. The brand attracted the young
professionals, aged between 21 to 30 years, employed in the booming services and
software businesses in India. The brand image reinforced through the ‘Friday Dressing’
concept transformed the office wear range from formal plain and striped shirts and
trousers to relaxed casuals. The success of Allen Solly’s office apparel in colourful
shirts and khaki trousers paved way for it to become one of India’s leading fashion
brand. In response to the changing lifestyle needs of its target audience—the
millennials, Allen Solly later extended its positioning to ‘casual brand for all occasions’
in 2008. The brand’s redesigned logo and a new tag line— ‘My World, My Way’—
reflected the young, independent spirited and dynamic millennials. In 2018, the brand
launched its ‘New Age Work Wear Collection’ to celebrate the emergence of open work
culture in organisations emphasizing work-life balance and employee friendly policies.
Driven by a deep understanding of the ever-evolving young professionals, Allen Solly
continues to lead in defining fashion at work through its distinct offerings.
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.
Lifestyles are shaped partly by whether consumers are money-constrained or time-
constrained. Companies that aim to serve the money-constrained will create lower-cost
products and services. By appealing to thrifty consumers, Walmart has become the largest
company in the world. Its “everyday low prices” have wrung tens of billions of dollars out of
the retail supply chain, passing the larger part of savings along to shoppers in the form of rock-
bottom bargain prices.
Consumers are prone to multitasking. Some will also pay others to perform tasks because
time is more important to them than money. Companies aiming to serve them will create
products and services that offer multiple time-saving benefits. For example, multitasking
beauty balm (BB) skin creams offer an all in one approach to skin care, incorporating a
moisturizer, anti-aging ingredients, sunscreen, and sometimes even a whitening agent.

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2.3 CONSUMER PSYCHOLOGY
When marketing and environmental stimuli enter the consumer’s consciousness, a set of
psychological processes combine with certain consumer characteristics to result in decision
processes and purchase decisions. The marketer’s task is to understand what happens in the
consumer’s consciousness between the arrival of the outside marketing stimuli and the ultimate
purchase decisions. Four key psychological processes— motivation, perception, learning, and
memory—fundamentally influence consumer responses.

1. CONSUMER MOTIVATION

Understanding consumer motivation begins with understanding the needs consumers aim to
fulfill with their actions.
Consumer Needs. Needs are the basic human requirements, such as air, food, water, clothing,
and shelter. Some needs are biological and arise from physiological states of tension such as
hunger, thirst, or discomfort. Other needs are psychological and arise from psychological states
of tension such as the need for recognition, esteem, or belonging.
One of the best-known theories of human motivation, that of Abraham Maslow, carries
important implications for consumer analysis and marketing strategy. Maslow sought to
explain why people are driven by particular needs at particular times. His answer is that human
needs are arranged in a hierarchy from most to least pressing—from physiological needs to
safety needs, social needs, esteem needs, and self-actualization needs (see Figure 3.2). People
try to satisfy their most important needs first and then move to the next important. For example,
a starving man will not take an interest in the latest happenings in the art world (need 5), or in
the way he is viewed by others (need 3 or 4), or even in whether he is breathing clean air
(need2) until he has enough food and water (need 1), after which the next most important needs
will become salient. Needs become wants when directed to specific objects that might satisfy
the need. Our wants are shaped by our society. A U.S. consumer needs food but may want a
Chicago-style “deep-dish” pizza and a craft beer. A consumer in India needs food but may want
chole, tandoori chicken, and naan. Demands are wants for specific products backed by an
ability to pay. Many people want a Mercedes but only relatively few can buy one. Companies
must measure not only how many people want their product but also how many are willing and
able to buy it. These distinctions shed light on the criticism that “marketers get people to buy
things they don’t want.” Marketers do not create needs: Needs pre-exist marketers. Marketers
might promote the idea that a Mercedes satisfies a person’s need for social status. They do not,
however, create the need for social status.

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Consumer Motivation. We all have many needs at any given time. A need becomes a
motivation when aroused to a sufficient level of intensity to drive us to act. Motivation has both
direction (we select one goal over another) and intensity (we pursue the chosen goal with more
or less vigor).
Motivation researchers often conduct in-depth interviews with a few dozen consumers to
uncover deeper motives triggered by a product. They do this by using various psychology-
based projective techniques such as word association, sentence completion, picture
interpretation, and role play to probe consumers’ mindset indirectly, which can yield
information not elicited by explicit questioning.

Betty Crocker The name Betty Crocker, synonymous with cooking and baking, came
into being in 1921 to personalize responses to consumer inquiries resulting from a
promo for Gold Medal Flour. Betty catapulted to fame via a popular radio show and,
according to Fortune magazine, in 1945 was second only to First Lady Eleanor
Roosevelt in popularity. Betty’s image has morphed from the first rather motherly figure
in 1936 to that of a modern working woman, and she has managed to stay relevant
throughout the years through painstaking research. For example, when sales of its
instant Betty Crocker cake mix began to plateau in the 1950s, General Mills looked to
Viennese-American psychologist and behavioral marketer Ernest Dichter. The dry cake
mix required only the addition of water. Using Freudian methods to query focus groups
of women, Dichter concluded that the ritual of baking a cake was rife with relationship
and fertility symbolism and suggested removing the powdered egg from the mix,
instead making housewives add their own fresh eggs. Sales soared after General Mills
followed this advice.

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Another motivation researcher and cultural anthropologist, Clotaire Rapaille, worked on
breaking the “code” behind product behavior—the unconscious meaning people give to a
particular market offering. Rapaille worked with Boeing on its 787 “Dreamliner” to identify
features in the airliner’s interior that would have universal appeal. Based in part on his research,
the Dreamliner has a spacious foyer; larger, curved luggage bins closer to the ceiling; larger,
electronically dimmed windows; and a ceiling discreetly lit by hidden LEDs. The opposite
occurred with Chrysler’s PT Cruiser, which reached the end of the road in less than a decade.

PT Cruiser When introduced at the beginning of the 21st century, the PT (Personal
Transportation) Cruiser’s retro looks and accessible price proved to be a hit with
consumers in all age groups, although the polarizing design (“a cross between an old-
time milk truck and luxurious sedans of the 1930s”) had its critics as well as its
imitators, like the Chevrolet HHR. The PT Cruiser was the first DaimlerChrysler
vehicle designed using archetype research, a qualitative method developed by French
medical anthropologist Clotaire Rapaille. Rapaille’s approach focused on uncovering
the deep-seated psychological drivers of consumers’ behavior that go beyond such
specific product attributes as color, size, and convenience to capture the feelings and
emotions that define the “cultural unconscious” (or, in the words of Rapaille,
consumers’ “reptilian hot button”) that defines product choice. The result was a five-
door, tall-roofed hatchback that was intended to evoke a nostalgic emotional reaction.
Upon its launch, the PT Cruiser was considered a massive success, selling 145,000
vehicles in 2001. But by 2009, sales had plummeted to 18,000. The reason for the PT’s
decline came down to Chrysler’s failure to invest in improving and updating the car, as
well as its failure to release new models in response to consumer demand. In addition,
the design appealed to a distinctly American audience during a time when globalization
was becoming increasingly important to recouping research and development costs.

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2. PERCEPTION

Perception is the process by which we select, organize, and interpret information inputs to
create a meaningful picture of the world. A motivated person is ready to act. How this person
will act is influenced by his or her perception of the situation. In marketing, perceptions are
more important than reality because they affect consumers’ actual behavior.
Perception depends not only on physical stimuli but also on the stimuli’s relationship to the
surrounding environment and on conditions that exist within each of us. One person might
perceive a fast-talking salesperson as aggressive and insincere, whereas another might regard
the salesperson as intelligent and helpful. Each will respond to the salesperson differently.
People emerge with different perceptions of the same object because of three perceptual
processes: selective attention, selective distortion, and selective retention.
Selective Attention. Attention is the allocation of processing capacity to some stimulus.
Voluntary attention is something we do purposefully; involuntary attention occurs when our
attention is grabbed by someone or something. It’s estimated that the average person may be
exposed to thousands of ads or brand communications every day. Because we cannot possibly
attend to all these, we screen out most stimuli, a process called selective attention. Selective
attention means that marketers must work hard to attract the notice of consumers. The real
challenge is to determine which stimuli people will notice. Here are some findings:
▪ People are more likely to notice stimuli that relate to a current need. A person who is
motivated to buy a smartphone will notice smartphone ads and be less likely to notice non-
phone-related ads.
▪ People are more likely to notice stimuli they anticipate. You are more likely to notice
laptops than portable radios in a computer store because you don’t expect the store to carry
portable radios.
▪ People are more likely to notice stimuli whose deviations are large in relationship to the
normal size of the stimuli. You are more likely to notice an ad offering $100 off the list
price of a computer than one offering $5 off.
Although we screen out much information, we are influenced by unexpected stimuli, such
as unanticipated offers in the mail, over the internet, or from a salesperson. Marketers may
attempt to promote their offers intrusively in order to bypass selective attention filters.
Selective attention mechanisms require active engagement and thought on the part of the
consumer. Subliminal perception has long fascinated armchair marketers, who argue that
marketers embed covert, subliminal messages in ads or packaging that consumers are not
consciously aware of but that affect their behavior. Although it’s clear that mental processes
include many subtle subconscious effects, no evidence supports the notion that marketers can
systematically control consumers at that level, especially enough to change strongly held or
even moderately important beliefs.
Selective Distortion. Ever noticed that stimuli don’t always come across in the way the
senders intended? Selective distortion is the tendency to interpret information to fit our
preconceptions. Consumers will often distort information to make it consistent with prior brand
and product beliefs and expectations. For a stark demonstration of the power of consumer brand
beliefs, consider taste tests in which one group of consumers samples a product without

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knowing the brand, while another group is aware of the brand during sampling. Invariably, the
groups will have different opinions despite consuming exactly the same product.
When consumers report different opinions of branded and unbranded versions of identical
products, it must be that their brand and product beliefs, created by whatever means (e.g., past
experiences, brand promotions, familial preferences), have somehow changed their product
perceptions. We can find examples of this for virtually every type of product. When Coors
changed its label from “Banquet Beer” to “Original Draft,” consumers claimed the taste had
changed even though the formulation remained the same.
In another study, Frédéric Brochet, at the University of Bordeaux, gave glasses of red and
white wine to wine science students and asked for descriptions. At a follow-up tasting, the
students received glasses of the same white wine, with the catch that half the wine was dyed
red. They described the white wine as they had previously but described the same red-tinted
white wine in terms of red wine, showing that visual cues can override smell, taste— and
expertise.
Selective distortion can work to the advantage of marketers with strong brands when
consumers distort neutral or ambiguous brand information to make it more positive. In other
words, coffee may seem to taste better, a car may seem to drive more smoothly, and the wait in
a bank line may seem shorter, depending on the brand.

3. EMOTIONS

Emotions are mental states that arise spontaneously rather than from conscious effort and
reflect people’s positive or negative reactions to internal and external stimuli. We typically
have little control of feelings such as joy, sorrow, anger, fear, and ambivalence, which vary in
intensity and complexity depending on our personal reactions and can be accompanied by
physiological and behavioral changes.
Consumer response is not all cognitive and rational. Many responses may be emotional and
evoke different kinds of feelings. A brand or product may make a consumer feel proud, excited,
or confident. An ad may create feelings of amusement, disgust, or wonder. Brands like
Hallmark, McDonald’s, and Coca-Cola have made an emotional connection with loyal
customers for years. Marketers increasingly recognize the power of emotional appeals,
especially if they are rooted in some functional or rational aspects of the brand.
To help teen girls and young women feel more comfortable talking about feminine-hygiene
and feminine-care products, Kimberly-Clark used four different social media networks in its
“Break the Cycle” campaign for its U by Kotex brand. With overwhelmingly positive feedback,
the campaign helped Kotex move into the top spot in terms of word-of-mouth share for that
feminine-care target market.
An emotion-filled brand story has been shown to trigger’s people desire to pass along things
they hear about brands through either word of mouth or online sharing. Firms are giving their
communications a stronger human appeal to engage consumers in their brand stories. Ray-
Ban’s 75th anniversary campaign, “Never Hide,” showed a variety of stand-out and stylish
hipsters to suggest that wearers of the brand’s aviator glasses and sunglasses feel attractive and
cool. Some brands have tapped into the hip-hop culture and music to market a brand in a
modern multicultural way, as Apple did with its iPod.

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 Many marketers like Ray-Ban have leveraged the emotional appeal of the past to connect
with current customers, particularly younger ones. Although e-mail, Webinars, and social
media platforms have seriously displaced direct mail, seminars, and trade shows, the latter can
still play an effective role in marketing efforts. Retro marketing tactics and products have
shown that nostalgia can pay, as costumed mascots, spinning signs, community gatherings, and
billboards continue to capture the attention of customers. Products like the revived Beetle, the
Fiat 500, and Cadbury’s resurrected Wispa chocolate bar show that products steeped in the aura
of days gone by enjoy a visceral connection with customers. Fashion houses base new designs
on those of past eras. MillerCoors announced a retro marketing campaign for Miller Lite beer,
along with a version of the original Miller Lite label from the 1970s. Cartier, Motel 6, and Life
Savers are among other major brands that have gone retro with ad campaigns. Even football
players cash in on nostalgia marketing: The NFL Pittsburgh Steelers have worn jerseys that are
a throwback to the team’s 1932 uniforms.
Just as products and brands can elicit certain emotions, different emotional states can
influence people’s judgments and decisions. For example, emotions such as fear can increase
or decrease the effectiveness of different marketing strategies that include social proof (e.g.,
communicating a product’s popularity) and scarcity (e.g., “limited edition”). Similarly, seeing
the emotions of others can also be used as a marketing tool. For example, displaying sad (vs.
neutral or happy) faces of victims could increase the likelihood that people will donate to a
charity.

4. MEMORY

Memory—the brain’s ability to record, store, and retrieve information and events—also plays
a role in consumers’ purchasing decisions. The different types of memory and the way memory
processes work are described in the following sections.
Memory Models. Cognitive psychologists distinguish between short-term memory—a
temporary and limited repository of information—and long-term memory—a more permanent,
potentially unlimited repository. All the information and experiences we encode as we go
through life can end up in our long-term memory.
Researchers distinguish three types of long-term memory: episodic, semantic, and procedural.
▪ Episodic memory is responsible for storing information about events (i.e., episodes) that
we have experienced in our lives. It is an individual’s memory of autobiographical
events that capture the context—such as times, places, and associated emotions—in
which a particular event has occurred.
▪ Semantic memory is responsible for storing information about the world, such as facts,
meanings, and concepts. Unlike episodic memory, which is directly linked to an
individual’s personal experience, semantic memory captures general knowledge that is
independent of personal experience.
▪ Procedural memory is responsible for knowing how to perform certain procedures such
as walking, talking, and riding a bike. It is a memory of motor skills typically acquired
through repetition and involves automatic sensorimotor activities that are so deeply
embedded in our minds that they do not involve conscious thought.

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Most widely accepted views of the structure of long-term memory assume we form some kind
of associative model. For example, the associative network memory model views long-term
memory as a set of nodes and links. Nodes are stored information connected by links that vary
in strength. Any type of information can be stored in the memory network, including verbal,
visual, abstract, and contextual information.
An activation process that spreads from node to node determines how much information we
retrieve and can recall in any given situation. When a node becomes activated because we’re
encoding external information (when we read or hear a word or phrase) or retrieving internal
information from longterm memory (when we think about some concept), other nodes are also
activated if they’re associated strongly enough with the initially activated node.
Based on the associative network memory model, we can think of consumer brand knowledge
as a node in memory with a variety of linked associations. The strength and organization of
these associations are important determinants of the information we can recall about the brand.
Brand associations consist of all brand-related thoughts, feelings, perceptions, images,
experiences, beliefs, and attitudes that become linked to the brand node. For example, the
Adidas brand can conjure thoughts of soccer, shoes, running, tennis, sports apparel, health,
fitness, active lifestyle, and outdoor adventures. It also might evoke associations with
competitive brands such as Nike, Puma, and Reebok; brand ambassadors such as Lionel Messi
and Kylie Jenner; and country of origin—Germany.
In this context, we can think of marketing as a way of making sure consumers have product
and service experiences that create the right brand knowledge structures and maintain them in
memory. Companies such as Procter & Gamble like to create maps that depict the key
associations likely to be triggered in consumers’ minds by a particular brand in a marketing
setting and their relative strength, favorability, and uniqueness.
Memory Processes. Memory is very much a process of construction, because people don’t
remember information completely and accurately. Often, we remember just bits and pieces and
fill in the rest based on whatever else we know. In general, memory can be described as a
process of encoding and retrieval.
Memory Encoding describes how and where information gets into memory. The strength
of the resulting association depends on the degree to which we process the information
we’re encoding (e.g., how much we think about it) and in what way. In general, the more
attention we pay to the meaning of information during encoding, the stronger the resulting
memory associations. And the more we are able to associate new information with other
information already encoded in our memory, the better we will be able to remember it.
Memory Retrieval is the way we reclaim information from memory. Three facts are
important about memory retrieval.
▪ Cognitive psychologists believe that once information is encoded and stored in
long-term memory it is extremely durable and its strength of association decays
very slowly.
▪ Information may be available in memory but not be accessible for recall without
the proper retrieval cues or reminders. The effectiveness of retrieval cues is one
reason why marketing inside a supermarket or retail store is so critical: The product
packaging and use of in-store Mini billboard displays remind us of information

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 already conveyed outside the store and become prime determinants of consumer
decision making. Accessibility of a brand in memory is important for another
reason: People talk about a brand when it is top of mind.
▪ Information about other offerings can produce interference effects and cause us to
either overlook or confuse new data. One marketing challenge in a category
crowded with many competitors— e.g., airlines, financial services, and insurance
companies—is that consumers may mix up brands.
Because of Selective Retention, we’re likely to remember only the positive aspects of a product
we like, forgetting its negative aspects and the good points about competing products.

2.4 BUYING DECISION PROCESS

Smart companies try to fully understand a customer’s buying decision process, which involves
all the experiences in learning, choosing, using, and even disposing of a product. Marketing
scholars have developed a “stage model” of this decision process (see Figure 3.3), in which the
consumer typically passes through five stages: problem recognition, information search,
evaluation of alternatives, purchase decision, and post-purchase behavior.

1. PROBLEM RECOGNITION
The buying process starts when the buyer recognizes a problem or need triggered by internal
or external stimuli. With an internal stimulus, one of the person’s basic needs—hunger, thirst,
sex—rises to a threshold level and becomes a drive. A need can also be aroused by an external
stimulus. A person may admire a friend’s new car or see a television ad for a Hawaiian vacation,
which inspires thoughts about the possibility of making a similar purchase.
2. INFORMATION SEARCH
Surprisingly, consumers often search for only limited information. Surveys have shown that
half of all consumers look for durable goods at just one store, and a mere 30 percent look at
more than one brand of appliances. We can distinguish between two levels of engagement in
the search. The milder search state is called heightened attention. At this level a person simply
becomes more receptive to information about a product. At the next level, the person may enter
an active information search: looking for reading material, phoning friends, going online, and
visiting stores to learn about the product. Example; Unilever, in collaboration with Kroger, the
largest U.S. retail grocery chain, has learned that meal planning goes through a three-step
process: discussion of meals and what might go into them (heightened attention), choice of
exactly what will go into a particular meal (information search), and, finally, purchase.

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Information Sources. Major information sources to which consumers turn fall into four
groups: personal, such as family, friends, neighbours, acquaintances; commercial, such as
advertising, websites, e-mails, salespersons, dealers, packaging, displays; public, such as mass
media, social media, consumer-rating organizations; and experiential, such as handling,
examining, or using the product.
Search Dynamics. By gathering information, the consumer learns about competing brands and
their features. The first box in Figure 3.4 shows the total set of brands available. The individual
consumer will come to know a subset of this group, the awareness set. Only some brands, the
consideration set, will meet the consumer’s initial buying criteria. As the consumer gathers
more information, just a few options, the choice set, will remain strong contenders. The
consumer makes a final choice from these.

Marketers need to identify the hierarchy of attributes that guide consumer decision making in
order to understand different competitive forces and how various decision sets are formed. The
process of identifying this attribute hierarchy is called Market Partitioning.
Figure 3.4 implies that a company must strategize to get its brand into the prospect’s awareness,
consideration, and choice sets.
3. EVALUATION OF ALTERNATIVES
The way consumers decipher the pros and cons of available options is affected by the beliefs
and attitudes (i.e., perceptions) they hold, irrespective of whether these are valid or erroneous.
These perceptions & ways of information processing weigh heavily on purchase decision.
Beliefs and Attitudes. A belief is a conviction that something is true or real, regardless of
whether or not it is. Whereas attitudes are a person’s enduring favorable or unfavorable
evaluations, emotional feelings, and behavioral tendencies toward an object or idea. People
have attitudes about almost everything: religion, politics, clothes, music, food.
Attitudes put us into a frame of mind: liking or disliking an object, moving toward or away
from it. Because attitudes economize on energy and thought, they can be very difficult to
change. As a general rule, a company is well advised to adapt its product to existing attitudes,
rather than trying to change attitudes. However, if beliefs and attitudes become too negative, it
may be necessary for the company to take more active steps.
Information Processing. How does the consumer process the information about the available
options and make a final value judgement? No single process is used by all consumers or by
one consumer in all buying situations.

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4. PURCHASE DECISION
In the evaluation stage, the consumer forms preference among the brands in the choice set and
may also form an intention to buy the most preferred brand. In executing a purchase intention,
the consumer may make as many as five purchase decisions: Brand (Brand A), Distribution
channel (Retailer X), Quantity (one computer), Timing (weekend), and Payment method (credit
card). This decision complexity often leads consumers to use mental shortcuts, or heuristics.
Decision Heuristics. The expectancy-value model is a compensatory model, in which
perceived good things about a product can help to overcome perceived bad things. Whereas in
non-compensatory models of consumer choice, positive and negative attribute considerations
don’t necessarily net out.
Rather than calculating the perceived importance of every attribute across products in a
consideration set, consumers often take “mental shortcuts,” called heuristics or rules of thumb
in the decision process. This is especially true when people are short on time or cognitive
resources.
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 intervene
between the purchase intention and the purchase decision (see Figure 3.5).
The first factor is the attitudes of others. The second intervening factor involves the situational
considerations that may erupt to change the purchase intention.

5. 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 post purchase
satisfaction, post purchase actions, and post purchase product uses and disposal.
{Read Page 210 Summary}

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Chapter 6 Identifying Market Segments and Target Customers Pg. 15/ Pg. 315

2.5 IDENTIFYING MARKET SEGMENTS AND TARGET CUSTOMERS

Companies 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).
Part A – S
2. Select one or more market segments to enter (targeting).
Part B – T
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).
Part C – P … check 2.7

A1 : Segmenting Consumer Markets

Market segmentation divides a market into well-defined slices. A market segment consists of a
group of consumers who share a similar set of needs and/or profile characteristics. Common
types of segmentation include demographic, geographic, behavioral, and psychographic.
1. Demographic Segmentation
Age. Marketers often group customers based on their age into different generations. For
example, one of the commonly used demographic factors is that of generation, such as the
Silent Generation (1925–1945); Baby Boomers (1946–1964); Generation X (1965–1981);
Generation Y, also referred to as Millennials (1982–2000); and Generation Z (2001–
present). Each generation is profoundly influenced by the times in which it grows up —the
music, movies, politics, and defining events of that period. Members share the same major
cultural, political, and economic experiences and often have similar outlooks and values.
Age-specific products include diapers, baby foods, college loans, and retirement
communities.
Stage in the Life Cycle. People in the same part of the life cycle may still differ in their life
stage. Life stage reflects a person’s major concern, such as going through a divorce,
entering a second marriage, taking care of an older parent, deciding to cohabit with another
person, and buying a new home. These life stages present opportunities for marketers who
can help people cope with the accompanying decisions. For example, Singles Day is a
popular Chinese holiday on which young people celebrate their pride in being single. The
holiday was named Singles Day because its date, November 11 (11/11), consists of four

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 “ones.” The holiday has become the largest offline and online shopping day in the world,
with the Chinese e-commerce giants Alibaba and [Link] generating around $115 billion
in sales for the duration of the sales event running from November 11 to midnight on
November 12. Alibaba and other retailers and manufacturers have embraced the holiday as
a means to reach single young adults and have launched a barrage of targeted promotions
to persuade them to shop. Taobao, the world’s biggest e-commerce website (owned by
Alibaba), even added a feature to its app to show how users’ spending that day ranked
against that of other people in their area.
Gender. Men and women have different attitudes and behave differently, based partly on
genetic makeup and partly on socialization. Gender differences are shrinking in some other
areas as men and women expand their roles. One Yahoo survey found that more than half
of men identified themselves as the primary grocery shoppers in their households. Procter
& Gamble now designs some ads with men in mind, such as ads for Gain and Tide laundry
detergents, Febreze air freshener, and Swiffer sweepers. Nevertheless, gender
differentiation has long been applied in clothing, hairstyling, and cosmetics categories.
Income. Income segmentation is a long-standing practice in such categories as
automobiles, clothing, cosmetics, financial services, and travel. However, income does not
always predict the best customers for a given product. Despite the high price of early color
television sets, blue-collar workers were among the first to purchase them; it was cheaper
for them to buy a television than go to movies and restaurants.
2. Geographic Segmentation
Geographic segmentation divides the market into geographic units such as nations, states,
regions, counties, cities, or neighbourhoods.
3. Behavioural 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. hard-core loyal, split-loyal, shifting-loyal,
switchers.
Occasions. Consumers buy for different occasions.
4. Psychographic Segmentation
In psychographic segmentation, buyers are divided into groups on the basis of
psychological traits, lifestyle, or values. Psychographic segmentation is important because
demographic, geographic, and behavioral characteristics of consumers do not always
accurately reflect their underlying needs. For example, people within the same
demographic group can exhibit very different psychographic profiles: Some older

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 consumers may be psychologically young, as Honda’s experience shows. Honda Element
To target 21-year-olds with its boxy Element, which company officials described as a “dorm
room on wheels,” Honda ran ads depicting sexy college kids partying near the car at a
beach. So many Baby Boomers were attracted to the ads, however, that the average age of
Element buyers turned out to be 42! With Baby Boomers seeking to stay young, Honda
decided the lines between age groups were getting blurred. After sales fizzled, Honda
decided to discontinue sales of the Element. When it was ready to launch a new subcompact
called the Fit, the firm deliberately targeted Gen Y buyers as well as their empty-nest
parents. Psychographic segmentation can also be based on consumers’ sexual orientation
and gender identification. The lesbian, gay, bisexual, and transgender (LGBT) market is
estimated to make up around 7 percent of the population and to have approximately $917
billion in buying power.

A2 : Segmenting Business Markets

1. 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?)
2. 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.
3. 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 (e.g., Should we serve companies
that prefer leasing? service contract? systems purchases? sealed bidding?); and
purchasing criteria (e.g., Should we serve companies that are seeking quality? service?
price?)
4. 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 size of order (e.g., Should
we focus on large or small orders?)
5. 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?)

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Targeting is the process of identifying customers for whom the company will optimize its
offering. In other words, it reflects whom to prioritize and whom to ignore when designing,
communicating and delivering its offering. Pg 315/319
Why Targeting (Custom Marketing) & Why not Mass Marketing?
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. Henry Ford epitomized this strategy
when he offered the Model-T Ford in one color, black.
The argument for mass marketing is that it creates the largest potential market, which leads to
the lowest costs, which in turn can lead to lower prices or higher margins. The narrow product
line (i.e., product doesn’t have customization) keeps down the costs of research and
development, production, inventory, transportation, marketing research, advertising, and
product management. The undifferentiated communication program also reduces costs.
However, many critics point to the increased splintering of the market and the proliferation of
marketing channels and communication, which make it difficult and increasingly expensive to
reach a mass audience. 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 targeted marketing, the firm sells different products
to all the different segments of the market. 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.
We have to learn 4 terms under Targeting
I. Strategic Targeting ……... Who
II. Tactical Targeting ……… How to reach the who
III. Single – Segment Targeting
IV. Multiple – Segment Targeting
How are these terms interrelated?
→ Strategic Targeting is the foundation. It involves deciding which segments to target based
on market analysis and company objectives. Once the strategy is set, a company can choose
between Single-Segment Targeting or Multi-Segment Targeting based on its resources and
goals. Tactical Targeting then comes into play to execute the strategy. It involves the practical
steps and marketing activities to reach the chosen segments effectively.

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I : STRATEGIC TARGETING & TACTICAL TARGETING
The focus of strategic targeting is on the value that the company can create for and capture
from target customers, tactical targeting concentrates on the means the company can use to
reach these customers. Together, strategic and tactical targeting seek to answer two questions,
the first focusing on strategy and the second on tactics: Who are the customers that the company
can establish a mutually beneficial relationship with? and How can the company reach these
customers most effectively and efficiently?

B1 : Strategic Targeting

Def n : “Strategic targeting focuses on customers whose needs the company can fulfill by
ensuring that its offerings are customized to their needs.”
Effective strategic targeting requires the company to make an important but difficult trade off:
the calculated decision to deliberately forgo some potential customers to more effectively meet
the needs of other customers. A manager must address 2 Questions when evaluating the
viability of a particular customer segment:
1st Can the company create superior value for these customers?
2nd Can these customers create superior value for the company?
Answers
1st Target Compatibility
[Ability of company to undo competition by creating superior customer value]
2nd Target Attractiveness
[Ability of Market Segment to create superior value for company]
B1.i. What is 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..
Essential resources for the success of a company’s targeting strategy include factors such as:
a. Business infrastructure which includes assets such as manufacturing infrastructure that
houses the company’s production facilities and equipment; service infrastructure like call
centres and customer relationship management solutions; supply-chain infrastructure that
includes procurement infrastructure and processes; and management infrastructure that
encompasses the company’s business management culture.
b. Access to scarce resources gives the company a distinct competitive edge because it
restricts the strategic options of competitors. For example, securing unique natural
resources, prime manufacturing and retail locations, and a memorable web domain can be
highly beneficial for the company.
c. Skilled employees with technological, operational, and business expertise—especially
those involved in research and development, education, and consulting—are prime
strategic assets.
d. Technological expertise the expertise required to develop an offering that addresses a
particular customer need, includes a company’s proprietary processes, its technological
processes, and its intellectual property such as patents and trade secrets.
e. Strong brands enhance value by conferring unique identification on the offering and
generating meaningful associations that create value over and above the value created by

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 the offering’s attributes. Brands are of particular importance in commoditized industries
where only minor differences exist among the competitive products and services.
f. Collaborator networks include vertical networks of collaborators in the company’s supply
chain (suppliers and distributors) and horizontal networks of research and development,
manufacturing, and promotion collaborators that help the company create its offering and
inform customers about it.
[Link]. What is Target Attractiveness?
Target attractiveness reflects the ability of a market segment to create superior value for the
company. Target customers can create two kinds of value for a company: monetary and
strategic.
[Link].a. Monetary Value
Monetary value consists of the capability of customers to create profits for the company. They
can do this by 2 ways.
1. Customer Revenues→ buying power/brand loyalty/price sensitivity/ competition intensity
… More Revenues More Profits
2. Cost of Serving Target Customers → tailoring offering/delivering/retaining customer
… Less Cost More Revenue
[Link].b. Strategic Value
Strategic value refers to nonmonetary benefits that customers bring to the company. The three
main types of strategic value are
1. Social Value
→ influence of target customers on other potential buyers
2. Scale Value
→ benefits derived from the company’s scale of operations. A company in its early
growth stages might decide to target low-margin customers to build a product and user
base that will serve as a platform for future growth.
3. Information Value
→ worth of the information that customers provide. This information can help the
company design, communicate, and deliver value to other customers with similar needs

B2 : Tactical Targeting

Tactical targeting identifies the ways in which the company can reach the strategically
important customers. 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.
i. Defining Customer Profile
ii. Aligning Customer Value with Customer Profile
iii. Bringing Target segments to life with personas

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i. DEFINING THE CUSTOMER PROFILE
After the 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. These observable factors—the customer profile—involve
demographic, geographic, behavioral, and psychographic descriptors.
Demographic factors include age, gender, income, occupation, level of education,
religion, ethnicity, nationality, employment status, population density (urban or rural),
social class, household size, and stage in the life cycle.
Geographic factors reflect the physical location of target customers. Geographic data
describe where the customers are located, in contrast to demographic data, which
describe who the target customers are.
Behavioral factors describe customers’ actions. These factors can include customers’
prior experience with the company’s offering, which can be as current customers,
competitors’ customers, or new-to-the-category customers.
Psychographic factors involve aspects of an individual’s personality—such as
attitudes, value system, interests, and lifestyle.

ii. ALIGNING CUSTOMER VALUE AND CUSTOMER PROFILE

Linking the value-based customer segment with the observable characteristics of
customers in this segment. By focusing on customers with profiles that are aligned with
the value-based target segment, a company can optimize its targeting activities.

iii. BRINGING TARGET SEGMENTS TO LIFE WITH PERSONAS

To bring all their acquired information and insights to life, some researchers develop
personas. Personas are detailed profiles of one, or perhaps a few, hypothetical target
consumers, imagined in terms of demographic, psychographic, geographic, or other
descriptive attitudinal or behavioral information. Photos, images, names, or short bios
help convey how the target customer looks, acts, and feels so that marketers can
incorporate a well-defined target-customer point of view in all their marketing decision
making. For example: Unilever’s biggest and most successful hair care launch, for
Sunsilk, was aided by insights into the target consumer the company dubbed “Katie.”
The Katie persona personified the 20-something female’s hair care needs along with
her perceptions and attitudes and the way she dealt with her everyday “dramas.”

B3 : Single Segment Targeting

With single-segment concentration, the firm markets to only one particular segment.

B4 : Multiple Segment Targeting

As markets become more fragmented, an increasing number of companies develop offerings

targeting a greater number of smaller customer segments. Even companies that start with a
single offering aimed at a specifics target market achieve wider customer adoption over time.
As their customer base becomes more diverse, these companies transition from a single offering
to a product line containing offerings that fit the needs of the diverse customers it serves.

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The process of identifying multiple customer segments is similar to that of identifying a single
customer segment. But here the targeting analysis brings forth several viable segments.
Firm can achieve this through 2 ways
1. Product Specialization
Firm sells a certain product to several different segments
For e.g. Microscope for university, government, commercial laboratories, etc
The risk in above one is entirely new technology which might wipe out the firm’s product
2. Market Specialization
Firm concentrates on serving many needs of a particular customer group
For e.g. Assortment of products only to university laboratories.

2.6 DEVELOPING CUSTOMER VALUE PROPOSITION

No company can win if its products and services resemble every other product and offering.
[Jio example]. The key aspect of marketing strategy is developing a value proposition and
positioning a company’s offering in such a way that target customers can recognize the
distinctive benefits of such offering.
DEVELOPING A VALUE PROPOSITION
How do customers ultimately make choices? They tend to be value maximizers, within the
bounds of search costs and limited knowledge, mobility, and income. Customers choose—for
whatever reason—the offer they believe will deliver the highest value and act on it. Whether
the offer lives up to expectations affects customer satisfaction and the probability that the
customer will purchase the product again.
Depending on the needs of customers, an offering can create value across three domains:
functional, psychological, and monetary
1. 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.
Functional value is often the primary consideration for offerings that are regarded as
mostly utilitarian, such as office and industrial equipment.
2. 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. For example, customers might value the emotional
benefits they derive from a car (e.g., the joy of driving a high-performance automobile
and the social status and lifestyle its ownership conveys). Psychological value is of
primary importance in luxury and fashion categories.
3. 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 associated with using and disposing of the offering.

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 Although monetary value is typically associated with costs, an offering can also include
such monetary benefits as monetary bonuses, cash-back offers, cash prizes, financial
rewards, and low-interest financing. Monetary value is often the prevailing choice
criterion for undifferentiated offerings in commoditized categories.
“Customer Value is the difference between the prospective customer’s evaluation of all the
benefits and costs of an offering and her or his evaluation of the costs and benefits of the
perceived alternatives.”
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.
{Extra: Customer Value is from the Customer’s Perspective and Customer Value Proposition
is from the Company’s Perspective Check Page 362}
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. 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. The value proposition is thus a
promise about the experience that customers can expect from the company’s market offering
and their relationship with the supplier. Whether the promise is kept depends on the company’s
ability to manage its value delivery system.
Very often, managers conduct a customer value analysis to reveal the company’s strengths
and weaknesses relative to those of various competitors. The steps are
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.
Customer value analysis suggests that the seller must assess the total customer benefit and total
customer cost associated with each competitor’s offer in order to know how its own offer rates
in the buyer’s mind.
It also implies that the seller at a disadvantage has two alternatives: increase total customer
benefit or decrease total customer cost. The former calls for strengthening or augmenting the
functional, psychological, and monetary benefits of the offering’s product, services, and brand
image. The latter calls for reducing the buyer’s costs by reducing the price or cost of ownership
and maintenance, simplifying the ordering and delivery process, or absorbing some buyer risk
by offering a warranty.

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2.7 DEVELOPING A POSITIONING STRATEGY [PART C – P]
“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. Unlike the Value Proposition, which articulates all benefits and costs of the offering,
the Positioning zeroes in on the key benefits that will provide consumers with a reason to
choose the company’s offering.
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.
When research on the scar-treatment product Mederma found that women were buying it not
just for the physical treatment but also to increase their self-esteem, the marketers of the
brand added emotional messaging to what had traditionally been a practical message that
stressed physician recommendations: “What we have done is supplement the rational with the
emotional.”

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 Titan, set up in 1984 to manufacture watches in a market dominated by mechanical watches,
has evolved into one of India’s best-known lifestyle companies. In 1987, the company launched
technologically superior quartz watches in a wide variety of designs, styles and price range.
Quartz was then a superior technology for accurate timekeeping, contained fewer components
and suited for sleek and fashionable designs.9 Backed by extensive catalogue-style print
advertisements and a series of television campaigns that showcased Titan’s entire range, the
stylish, breathtaking and elegant watches positioned the brand as a fashion accessory.
Associating Mozart’s 25th Symphony as its signature tune gave the brand a world-class feel,
and it would go on to entrench the brand deeply among viewers by creating strong positive
associations and recall.10 Titan transformed watches from being utilitarian time-telling objects
to a fashion accessory and a contemporary style statement, propelling a freshness into the
market and in retail spaces through its marketing strategy and empathetic advertising.
Customers would end up owning multiple Titan watches—each for a different occasion.11
Quality products, creative designs, modern retail experience and a professional service network
soon catapulted Titan to leadership position. As a progression, Titan entered the fragmented
jewellery market in 1996, with its brand—Tanishq—promising purity of gold and intricate
modern-day designs for woman.12 Titan continued expanding into new lifestyle categories
with new brands, namely Fastrack (accessories for fun and youth), Titan Eye+ (eyewear and
eye accessories), Mia (workwear jewellery for women), SKINN (perfumes), and Taneira –
(handloom sarees).13 Each of these brands tells a story reflecting the persona of its users. The
company carefully crafted and positioned its offerings to match the needs of its diverse
customer segments and usage occasions while creating a distinct identity for each brand. Titan
associates with famous celebrities like leading Bollywood actors, Indian sports personalities or
theme-based characters as brand ambassadors to connect uniquely with its target audience, like
for FastTrack the choice is a youth icon, for Raga it can be a leading actress depicting
accomplishments of women, and for Zoop it is the superhero characters.14 The company’s
systematic ventures with new brands—Tanishq, Titan Eyeplus, Skinn and Taneira—established
it as a winner across multiple verticals. The company engages with over 10 million members
of Encircle—its unified loyalty program—on social media and digital channels. Credited with
transforming the watch, jewellery and eyewear industries by pioneering experiential retail,
Titan continues its legacy of aligning with the evolving needs of customers – and the essence
of this is summed up in its taglines ‘What’s Your Style’ and ‘Be More’.
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 on the basis of the
current state of the market is not sufficiently forward-looking, but at the same time the
positioning cannot be so removed from reality that it is essentially unobtainable. The real trick
is to strike just the right balance between what the brand is and what it could be. Positioning
requires that marketers define and communicate similarities and differences between their
brand and its competitors.
DECIDING ON POSITIONING INVOLVES 2 ASPECTS:
1. Choosing a FORs by identifying the target market and relevant competition
2. Identifying the optimal POPs and PODs given that FORs
And Finally Aligning these 2 aspects together.

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1. CHOOSING A FRAME OF REFERENCE (FORs)
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 FORs can serve as a benchmark against which customers
can evaluate the benefits of a company’s offering.
Customers naturally create FORs but a skilled marketer can design these FORss in such a
way that it highlights key benefits & value of its offering. Firms should choose their
competitive frame to evoke more advantageous comparisons. Consider these examples:
In the United Kingdom, the Automobile Association positioned itself as the fourth
“emergency service”—along with police, fire, and ambulance —to convey greater
credibility and urgency.
The International Federation of Match Poker is attempting to downplay some of the
gambling image of poker to emphasize the similarity of the card game to other “mind
sports” such as chess and bridge.
The U.S. Armed Forces changed the focus of its recruitment advertising from the military
as patriotic duty to the military as a place to learn leadership skills—a much more rational
than emotional pitch that better competes with private industry (corporate jobs).
A good starting point in defining a competitive FORs 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.
2. IDENTIFYING POTENTIAL PODs & POPs
Once marketers have fixed the FORs for positioning by defining the customer market and
the nature of the competition, they can define the appropriate PODs (attributes or benefits
that are unique to the company’s offering) and POPs (attributes or benefits that the
company’s offering has in common with the competition).
2.A. PODs
PODs (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.
Strong brands often have multiple PODs. Some examples are Apple (design, ease of use,
and irreverent attitude), Nike (performance, innovative technology, and winning), and
Southwest Airlines (value, reliability, and fun personality).
Creating strong, favorable, and unique associations is a real challenge, but it is essential for
competitive brand positioning. Aries Agro Example Pg 370
The 3 criteria that determine whether a brand association can truly function as a POD are

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1. 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 for e.g.
Mountain Dew may argue that it is more energizing than other soft drinks and support
this claim by noting that it has a higher level of caffeine.
2. 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.
3. Differentiating from competitors. Finally, consumers must see the brand association
as distinctive and superior to relevant competitors.

2.B. POPs
POPs (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 3 basic forms
1. Category POPs 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.
For e.g. Consumers may not consider a travel agency truly a travel agency unless it is
able to make air and hotel reservations, provide advice about leisure packages, and offer
various ticket payment and delivery options.
2. Correlation POPs 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.”
3. Competitive POPs are associations designed to overcome perceived weaknesses of the
brand in light of competitors’ PODs.

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3. ALIGNING FORs , POPs and PODs
It is common for a brand to identify more than one actual or potential competitive FORs if
competition widens or the firm plans to expand into new categories.
For example, Starbucks could define very distinct sets of competitors, suggesting different
possible POPs and PODs as a result:
1. 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.
2. Home & office consumption (Folgers, NESCAFÉ instant Green Mountain Coffee K-Cups)
Intended PODs might be quality, image, experience, variety, and freshness
Intended POPs might be convenience and value.
3. Local cafés
Intended PODs might be convenience and service quality
Intended POPs might be product quality, variety, price, and community.
Note that some potential POPs and PODs for Starbucks are shared across competitors;
others are unique to a particular competitor.
Under such circumstances, marketers have to decide what to do. There are two main options
with multiple FORs. 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. (One for 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. One crucial
consideration is not to try to be all things to all people; this leads to “lowest common
denominator” positioning, which is typically ineffective. 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) or with an exemplar from each category (McDonald’s or NESCAFÉ for
Starbucks). Occasionally, a company will be able to straddle two FORs with one set of PODs
and POPs. In these cases, the PODs for one category become POPs for the other, and vice
versa. Subway restaurants are positioned as offering healthy, good-tasting sandwiches. This
positioning allows the brand to create a POP on taste and a POD on health with respect to
quick-serve restaurants such as McDonald’s 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! Straddle
positions allow brands to expand their market coverage and potential customer base. One
example of such straddle positioning is BMW.

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 When BMW first made a strong competitive push into the U.S. market in the late 1970s,
it positioned the brand as the only automobile that offered both luxury and performance.
At that time, consumers saw U.S. luxury cars as lacking performance and U.S.
performance cars as lacking luxury. By relying on the design of its cars, its German
heritage, and other aspects of a well-conceived marketing program, BMW was able to
simultaneously achieve: (1) a point of difference on luxury and a point of parity on
performance with respect to U.S. performance cars like the Chevy Corvette and (2) a
point of difference on performance and a point of parity on luxury with respect to U.S.
luxury cars like Cadillac. The clever brand motto “The Ultimate Driving Machine”
effectively captured the newly created umbrella category: luxury performance cars.
Although a straddle positioning is often attractive as a means of reconciling potentially
conflicting consumer goals and creating a “best of both worlds” solution, it also carries an extra
burden. If the POPs and PODs are not credible, the brand may not be viewed as a legitimate
player in either category. Many early personal digital assistants (palm-sized computers) such
as the Palm Pilot and Apple’s Newton, which unsuccessfully tried to straddle categories ranging
from pagers to laptop computers, provide a vivid illustration of this risk. 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. The remaining 20 percent of
products should be reviewed to ensure that they have the proper branding strategy and to see
how they could be changed to better reflect the brand positioning. 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.
They provide quantitative pictures of market situations and the way consumers view different
products, services, and brands along various dimensions. By overlaying consumer preferences
on brand perceptions, marketers can reveal “holes” or “openings” that suggest unmet consumer
needs and marketing opportunities.
Unilever Axe & Dove Case Study Page 396

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