School of International Business

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School of International Business BA (HONS)
Business Studies with Specialisms MKT301 LECTURER
Edel Griffin OFFICE International Business
Centre Tel [phone] Email
e.griffin_at_ulster.ac.uk
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School of International Business BA (HONS)
Business Studies with Specialisms MKT301 LECTURE
4 Target Markets
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• Lecture Outline
• Definition of a Market
• Different types of Market
• Consumer Buying Behaviour and Process
• Organisation and Business-to-Business Buying
  Behaviour
• Market Segmentation
• Targeting Decisions in Markets
• Positioning Strategies.

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Understanding and Targeting Markets
Source Dibb et al 2001
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What Are Markets? A market is an aggregate of
people who, as individuals or as organisations,
have a need for certain products and the
ability, willingness and authority to purchase
such products. Requirements for a Market For a
group of people to be a market, the members of
the group must meet the following four
requirements They must need or want a
particular product or service They must have
the ability to purchase the product or service
They must be willing to use their buying power
They must have the authority to buy the
specific products or services.
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Types of Markets A consumer market consists of
purchasers and/or individuals in their households
who personally consume or benefit from the
purchased products and do not buy products
primarily to make a profit A business-to-busines
s market (also referred to as an organisational
or industrial market) consists of individuals or
groups that purchase a specific kind of product
to re-sell, use directly in producing other
products or use in general daily operations
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Buying behaviour The term used to describe the
decision processes and actions of people involved
in buying and using products. Consumer buying
behaviour The buying behaviour of people who
purchase products for personal or household use
it is not concerned with the purchase of items
for business use.
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Consumer buying decision process and possible
influences on the process
Source Dibb et al 2001
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• The Consumer Buying Decision Process
• Problem Recognition
• Information Search
• Evaluation of Alternatives
• Purchase
• Post-purchase Evaluation

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• Stage 1 Problem Recognition
• Buyer becomes aware of a difference between a
  desired state and an actual condition
• Individual may be unaware of the problem or need
• Use of sales personnel, advertising, sales
  promotion and packaging to help trigger
  recognition of such needs or problems.
• Consumer problem recognition speed can be slow or
  fast, depending on the individual and the way in
  which need recognition was triggered.

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• Stage 2 Information Search
• Begins after the consumer becomes aware of the
  problem or need
• search for information about products will help
  resolve the problem or satisfy the need
• two aspects to information search internal
  search (memory) and external search (other
  sources).
• Repetition increases consumer learning of
  information.
• Depends on the level of involvement with purchase
• Information search yields an evoked set of
  products or a group of brands that the buyer
  views as possible alternatives.

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• Stage 3 Evaluation of Alternatives
• Consumer establishes criteria against which to
  compare the characteristics of the products in
  the evoked set.
• consumer rates and eventually ranks the brands in
  the evoked set, using the criteria and their
  relative importance, or salience.
• Marketers can influence consumers evaluation by
  framing the alternatives, that is, by the manner
  in which an alternative and its attributes are
  described

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• Stage 4 Purchase
• Consumer selects the product or brand to be
  purchased, is mainly the outcome of the
  consumers evaluation of alternatives
• The buyer picks the seller from whom the product
  will be purchased and finalises the terms of
  sale.
• The actual purchase is made, unless the process
  has been terminated earlier.

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• Stage 5 Post-Purchase Evaluation
• Buyer evaluates the product after purchase, based
  on many of the criteria used in the evaluation of
  alternatives stage.
• Determine whether the consumer is satisfied or
  dissatisfied.
• Cognitive dissonance is dissatisfaction that
  occurs when the buyer questions whether he or she
  made the right decision in purchasing the
  product.

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• Personal Factors Influencing the Buying
• Decision Process
• Demographic Factors are individual
  characteristics such as age, sex, race, ethnic
  origin, income, family life cycle and occupation.
  
• Situational Factors are the external
  circumstances or conditions that exist when a
  consumer is making a purchase decision
• Level of Involvement refers to the level of
  interest, emotional commitment and time spent
  searching for a product in a particular
  situation.

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• Psychological Factors Influencing the Buying
• Decision Process
• Psychological factors operating within
  individuals partly determine
• peoples general behaviour and thus influence
  their behaviour as
• consumers.
• Perception - is the process of selecting,
  organising and interpreting
  information inputs to produce
  meaning.
• Motives - is an internal, energy giving
  force that directs a persons
  activities towards satisfying a need or
  achieving a goal.
• Learning - Learning refers to changes in a
  persons behaviour caused by
  information and experience.

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• Psychological Factors Influencing the Buying
• Decision Process
• Psychological factors (contin)
• Attitudes - An attitude refers to an
  individuals enduring evaluation,
  feelings and behavioural
  tendencies towards an object or
  activity.
• Personality- Personality includes all the
  internal traits and behaviours that
  make a person unique.

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• Social Factors Influencing the
• Buying Decision Process
• Roles and Family
• Reference Groups
• Social Classes
• Culture and Sub-cultures

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Roles that people might play in a buying
decision Initiator the person who first
suggests or thinks of the idea of buying the
particular product / service Influencer the
person whose views/advice carries some weight in
making the final decision Decider is the
person who ultimately determines the buying
decision or any part of it whether to buy, what
to buy, how to buy, or where to buy Buyer is
the person who makes the actual purchase User
is the person who consumes or uses the product or
service.
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Example A Childs Toy Initiator
Parent/Child Influencer Grandparents, Friends,
Colleagues, Shop Assistant etc Decider
Parent Buyer Parent User Child.
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Types of Buying Decision Making? Consumer
Decision Making varies with the type of buying
decision. Differences between toothpaste, cans
of mineral, an expensive television, camera, new
car etc More complex the decision (less familiar
with) are likely to involve more buying
participants and more buyer deliberations.
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Routine response behaviour generally occurs when
buying frequently purchased, low cost, low risk
items. Buyers have few decisions to make
therefore are well acquainted with the product
class, know the major brands, and have fairly
clear preferences among the brands. Do not give
much thought, search, or time to purchase. These
goods are known as low involvement
goods Examples Mineral Drinks, toothpaste,
cornflakes etc Task for Marketers Maintain
positive satisfaction for current customers and
attract new buyers by heightening
attention.product displays, price promotions etc
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Buyers engage in limited decision-making when
buying products that are purchased only
occasionally and when they need to obtain
information about an unfamiliar brand in a
familiar product category. Hence consumers may
ask more questions and watch adverts to find out
more about the brand and its features Consumers
are trying to reduce the risk by gathering
information Task for Marketers To design a
communications programme that will increase the
buyers brand comprehension and confidence.
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Buyers engage in extensive decision-making when
a purchase involves unfamiliar, expensive, high
risk or infrequently bought products, such as
cars, homes, holidays or personal
pensions. Buying reaches its greatest complexity
when buyers face unfamiliar products. Task for
Marketers Must educate the potential customers,
must understand, information gathering and
evaluation activities of perspective buyers. By
contrast, impulse buying involves no conscious
planning but a powerful, persistent urge to buy
something immediately.
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Understanding Consumer Behaviour Marketers try
to understand consumer buying behaviour so that
they can offer consumers greater
satisfaction. An appreciation of how and why
individuals buy products and services helps
marketers design more appealing marketing
programmes. Consumer expectations are now
rising, making it more important than ever for
marketers to focus on the marketing concept and
to be consumer oriented.
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• Types of Organisational Market
• Producer markets consist of individuals and
  organisations that purchase products for the
  purpose of making a profit by using them to
  produce other products or by using them in their
  operations. (Buyers of Raw Materials, Industries
  etc)
• Reseller markets consist of intermediaries that
  buy finished goods and re-sell them to make a
  profit. (Retailer, Wholeslr)
• Government markets include national and local
  governments
• Organisations with charitable, educational,
  community or other non-business goals constitute
  institutional markets.

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Figure 5.4Business-to-business buying decision
process and factors that may influence it
Source Adapted from Frederick E. Webster, Jr,
and Yoram Wind, Organisational Buying Behavior
(Englewood Cliffs, N.J. Prentice-Hall, 1972),
pp. 33-37. Adapted by permission.
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• Selecting Target Markets
• Total Market Approach or Market Segmentation?
• Total Market Approach - all customers have
  similar needs and wants and can be served with a
  single marketing mix.
• Appropriate only under two conditions
• There must be little variation in the needs of
  customers for a single product.
• The company must develop and sustain one
  marketing mix that satisfies everyone.

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Selecting Target Markets Total Market Approach or
Market Segmentation? Market Segmentation -
involves identifying groups of customers in
markets who share similar buying needs and
characteristics By identifying and
understanding such groups, marketers are better
able to develop product or service benefits that
are appropriate for them.
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Market segmentation approach
Source Dibb et al 2001
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Applying Market Segmentation Heterogeneous
markets are markets in which all customers have
different requirements. Market segmentation is
the process of grouping customers in markets with
some heterogeneity into smaller, more similar or
homogeneous segments.
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Applying Market Segmentation Market segmentation
helps companies pursue four types of product and
marketing opportunities - Market penetration -
increasing the percentage of sales in present
markets by taking sales from the competition.
- Product development offers new or improved
products to existing markets by expanding the
range of products on offer. - Market
development develops existing products in new
markets by finding new applications and/or
customer groups. - Diversification involves
moving into different markets by offering new
products.
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• Applying Market Segmentation
• The Advantages of Market Segmentation
• Customer Analysis
• Competitor Analysis
• Effective Resource Allocation
• Strategic Marketing Planning

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3 Stages to Segmentation 1.Segmenting the
Market Understand which variables in particular
markets are the most suitable for distinguishing
between different product requirements
2.Targeting Strategy Once segments have been
identified, decisions about which and how many
customer groups to target can be made. 3.
Positioning the Product Decide how and where
within the targeted segments to aim the product
or products, brand or brands.
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Basic elements of segmentation
Source Dibb et al 2001
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• Choosing Segmentation Variables
• Variables for Segmenting Consumer Markets
• Dimensions or characteristics of individuals,
  groups or businesses that are used for dividing a
  total market into segments.
• The segmentation variable must be measurable
• Variables can be divided into those that relate
  to basic customer characteristics and those that
  are product related behavioural characteristics.
• Generally, marketers select a combination of
  base variables

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• Demographic variables
• The ease with which demographic variables can be
  measured has largely contributed to their
  widespread use in segmenting markets.
• The characteristics used most often include age,
  sex, family, race and religion
• These variables are closely related to consumers
  product needs and purchasing behaviour.

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• Socio-economic variables
• This group of variables includes income,
  occupation, education and social class.
• Sometimes these variables are included under the
  demographics label.

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• Geographic variables
• Geographic variables include climate, terrain,
  natural resources and population density
• Market density refers to the number of potential
  customers within a unit of land area, such as a
  square kilometre.
• ACORN (A Classification of Residential
  Neighbourhoods) develops geographic location
  further.

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• Personality, Motives and Lifestyle
• Personality is a useful variable when products
  are similar to competing products and when
  consumers needs are not significantly affected
  by other segmentation variables
• Motives for Purchasing - Product durability,
  value for money, concern for the environment,
  convenience and status are all motives affecting
  the types of products purchased and the choice of
  stores in which they are bought.
• Lifestyle segmentation groups individuals
  according to how they live and spend their time,
  the importance of items in their surroundings,
  their beliefs about themselves and broad issues,
  and some socio-economic characteristics, such as
  income and education.

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Product related behavioural characteristics
Consumers behaviour towards the product might
relate to the way the particular product is used
or purchased, or to the benefits consumers
require from it. Purchase behaviour may depend
on brand loyalty or price.
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• Variables for Segmenting Business-to
• Business Markets
• Company Demographics
• Operating Variables
• Purchasing Approach
• Situational Factors
• Personal Characteristics
• Single Variable or Multivariable Segmentation
• Segmentation Analysis Stages

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• With segments there are Differences!
• Depending on the length of time it takes to adopt
  a new product,
• people can be divided into five major adopter
  categories
• Innovators First people to adopt a new product
• Early AdoptersPeople who choose new products
  carefully and are often consulted by people from
  the remaining adopter categories
• Early Majority People who adopt products just
  prior to the average person
• Late Majority People who are quite sceptical
  about new products but eventually adopt them
  because of economic necessity or social pressure
• Laggards The last people to adopt a new product,
  suspicious of new products and oriented towards
  the past.

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Segmentation Effectiveness Haphazard
implementation of base variables can lead to
ineffective market segmentation, missed
opportunities and inappropriate investment
There must be real differences in the needs of
consumers for the product or service
Dissimilar consumers, in terms of their needs
and purchasing behaviour, must not be grouped
together in the same market segment. The
segments revealed must be measurable,
substantial, accessible, stable and
useful. Requires a good deal of common sense.
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Profiling Market Segments A comprehensive
understanding of the characteristics of
individuals in segments is essential. Building
up a fuller picture of target segments is
sometimes called profiling
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Targeting Strategies Concentration Strategy
the organisation directs its marketing efforts
towards a single market segment by creating and
maintaining one marketing mix. Multi-segment
Strategy - an organisation directs its marketing
efforts at two or more market segments
by developing a marketing mix for each selected
segment.
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Factors affecting choice of target market
strategy
Source Data from D. Cravens, Strategic Marketing
(Homewood, Ill. Irwin, 1982).
Source Dibb et al 2001
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Positioning - Determining a Position Positionings
are described by variables and
within parameters that are important to the
customers and are essentially selected by them.
In-depth market research is required to fully
understand customer motivations and
expectations. Perceptual mapping is a tool
commonly adopted by marketers and marketing
researchers to depict visually consumer
perceptions and prioritising of brands and their
perceived attributes.
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Positioning - Steps in Determining a Position 1.
Define the segments in a particular market. 2.
Decide which segment (or segments) to target.
3. Understand what the target consumers expect
and believe to be the important considerations
when deciding on the purchase 4. Develop a
product that caters specifically for these needs
and expectations. 5. Evaluate the positioning
and images, as perceived by target customers, of
competing products in the selected market
segment. 6. Select an image that sets the
product apart from the competing products
7. Inform target customers about the product,
which is made readily available at the right
price, through the development of the full
marketing mix.
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Competitive Edge Decisions about which
marketing strategy to follow and which segments
to target cannot be made without considering
the competitive arena.
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• Competitive Edge
• Steps in Determining a Differential Advantage
• Identify the markets segments
• Establish what product and service attributes are
  desired by each segment
• Decide which attributes the business in question
  offers
• Determine which attributes the businesss
  competitors offer
• Consider what the marketplace perceives the
  competitors strengths to be
• Identify whether any gaps exist between customer
  expectations of the product/service on offer and
  perceptions of competitors offers
• Consider whether these gaps are matched by the
  business and its own offerings
  (cont.)

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• Competitive Edge
• Steps in Determining a Differential Advantage
  (cont)
• Question whether any of these potential
  advantages for the business can be emphasised
  through sales and marketing programmes
• Consider the sustainability of these advantages
  and how easily or quickly competitors could catch
  up.
• If no advantages exists, given the gaps
  identified between competitors offerings and
  customer expectations, consider which areas offer
  potential for developing a future differential
  advantage
• Maximise existing or potential differential
  advantages by detailing changes that must be made
  to research and development, engineering, sales
  and marketing activities.

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• Competitive Edge
• Evaluating Markets and Forecasting Sales
• Marketers must be able to measure the sales
  potential of the chosen target market or markets.
  
• The target market or markets selected must have
  enough
• sales potential to justify the costs of
  developing and
• maintaining one or more marketing mixes.
• 3. The potential for sales can be measured along
  several
• dimensions, including product, geographic area,
  time and level of competition.
• 4. Marketers measure sales potential both for the
  entire market and for their own companies and
  then develop a sales forecast.