The Market, Media, Life

Marketing 101: Selecting An Overall Positioning Strategy - Value Proposition

2014-02-20T10:25:00.004-08:00

There are buzz words and phrases in marketing & branding that seem to have an "aura" or "mystery" revolving around them. There are also phrases and words that people who have careers in marketing don't understand at all. One of the most used terms in existence is the Value Proposition. Yet, so many of my colleagues don't really know what one is, or how to use it. So let's spend some time defining it and exploring what it is and how you use it.

What Is A Value Proposition?
Simple question, right? Yet...it's a bit of a complicated answer. So if I'm going to define this as simply as possible, I'm going to say it like this: A Value Proposition is the full positioning of a brand, product or service. If I were to expand on the definition, then I would say that a Value Proposition is the full mix of benefits that the brand, product, or service is differentiated and positioned upon. A Value Proposition answers the question: "Why should I buy this?"

Above is a fairly standard illustration of the matrix of Value Propositions. On the top, we have three Price categories: More, The Same, and Less. On the side, we have three Benefits categories: More, The Same, and Less. So when we assemble a Value Proposition, we are pairing a level of Benefit, with a level of Price. For example, I may choose to take a More for the Same approach, meaning I'm going to offer more features and benefits than my competitors, for the same price.

The combinations in the matrix that are green represent the most favorable approaches to take with your Value Proposition. Those in red are rarely profitable, and tend to lead to problems or a loss of focus down the road.

Let's begin exploring some of these categories of Value Proposition.

More For More
When we tout a "More For More" value proposition, we are telling the consumer that we are providing them the best possible product or service, and we are charging a higher (some would say "premium") price to cover the costs of giving you the "best".

In the real world, it is easy to see who the "More For More" players are. One of my favorites is Apple. They are not shy about "More For More". Apple gives you the best design, the best quality, the best experience, at a price that meets their corporate goals for gross margins and profits. When a company truly stands behind this value proposition, giving the consumer a premium product, with premium service and an experience that is consistent over time (the Macintosh has been around for 30 years), then it can be very successful.

In order to compete in a "More For More" market segment, you are going to have to find a product or service category that is under-serviced. If there is a void in the market segment for a premium product, and if the market segment has consumers that can afford a premium product, then you can consider moving in to that area. However, there are cons to following a "More For More" value proposition. When you have a premium product, there will always be imitators that will produce a similar product or service, and claim that it has the same quality for a lower price. Amazon has been marketing it's Kindle Fire HD as a higher quality, lower priced alternative to Apple's iPad Air tablet. "More For More" brands, products and services will always be under fire by those who use a "More For The Same" or "The Same For Less" value proposition.

More For The Same
How do you counter a "More For More" competitor? You present a "More For The Same" value proposition. A "More For The Same" value proposition entales offering a product, service or brand with comparable quality, at a lower price. Depending on the costs associated with producing your product or service, you may have the same margins as a "More For More" competitor, or you have have smaller margins, which you are hoping to make up for with a higher volume of sales.

What does "More For The Same" look like in the marketplace? The auto industry is a great example. Lexus, Infinity, Kia and Hyundai are perfect examples. Lexus and Infinity were the first to attempt to uproot major luxury "More For More" brands such as Mercedes, BMW and Cadillac. Offering more car, for the same (and usually lower price), these brands were able to take away more and more market share. As a result, Mercedes and BMW realized that there were more customers available at lower price points. More recently, Hyundai and Kia have followed the same approach, introducing their Genesis and Cadenza models to the marketplace. However, "More For The Same" can fail, if you are not backing up your value proposition with the quality and features that you claim you are providing the consumer.

The Same For Less
Probably the most powerful Value Proposition is "The Same For Less". Why? Because we all love getting a great deal. Great product? Lower price? Yes please! Need a high quality PC for less? Get a Dell. Need great quality food, clothes, and electronics? Go to Costco. Want door busting deals on name brand electronics? Go to Best Buy or Fry's Electronics. Need name brand groceries for much less? Go to Winco. You get the idea.

Less For Much Less
If you remember my discussion of social and economic groups, then you know the reality of the consumer: few people want, need, or can even afford the very best products and services. As a result, there will always be a market for value products. "Less For Much Less" is summed up with a definition of "offering a brand, product, or service of less quality, for a lower price". In most cases, the reality of a consumer's monthly budget forces a consumer to stick with "needs" over "wants" during the buyer decision process.

This means you are going to provide a lower "performing" product (less quality and features), at a much lower price. This also means that you are usually relying on a higher volume of sales to make up for much lower margins.

More For Less
I'm going to briefly touch on one Value Propositional tactic that we see fairly often in the marketplace. "More For Less". That's what we all want, right? More features, more product, more value, for a really low price. We typically see "More For Less" when a new brand is entering a target market with established players. Many claim to offer "More For Less" today.

At first it's easy to do. You are ripe with new investment capital, or you are a large company that has just budgeted a large amount of money towards a new product segment. So you market your product, and sometimes sell it at a loss, offering more features, for a better price. However, over time, it becomes very hard to maintain a "More For Less" value proposition. Companies will typically fall into this trap: losing focus. With each new generation of your product, you will add more features. All of this product development, all of this marketing, costs money. Lots of it. And unless you have other products in your stable that are selling well and creating profits, you will have to raise the price of your product in order to cover the costs associated with bring it to market. If you don't, you lose money. Not only are you losing money, but your product and your brand become so "busy" and "cluttered", you begin to lose out to your competitors, who are more focused, and have a more focused product and message. In essence, you eventually confuse your consumers, and once your prices go up, they look elsewhere during the buying decision process. Stay away from "More For Less", unless you can keep your focus, and you can manage your bottom line.

Marketing 101: Choosing the Right Competitive Advantages

2013-10-21T11:43:00.002-07:00

Previously I explored the concept of Market Differentiation which involves Product Positioning through a Value Proposition. Recall that a Value Proposition is not a "mystical" marketing term, but in fact is an essential marketing principle. A Value Proposition consists of two parts: a differentiated value, and a position. The differentiated value refers to the ways our products and services stand out from the competition inside a chosen market segment. The Value Proposition helps us develop a Differentiation Strategy which effectively focuses and communicates our intended position to the selected target market, and gives us sources of competitive advantages.

Evaluating Brand Differences
The truth is some differentiators are not meaningful or worthwhile to consumers - they won't "speak" to them in your messaging. The other often overlooked reality is that each differentiator used in your marketing strategy creates costs for the company (your marketing budget), as well as benefits for the consumer. Therefore each differentiator we choose must be evaluated according to the following criteria:

1) Importance: Does the difference deliver a highily valued benefit to the target customer?
2) Distinctiveness: Do your competitors also offer the difference? Can you offer it to customers in a more distintive and meaningful way?
3) Superiority: Is the difference superior to other ways that customers can obtain the same "benefit"?
4) Communicable: Can the difference be easily communicated and also visible to consumers?
5) Preemptive: Is it difficult for your competitors to copy the difference?
6) Affordable: Can consumers afford to pay for the difference?
7) Profitable: Are you able to introduce the difference profitably?

The ideal differentiators are the ones that meet all 7 of the above criteria fairly well. If you are entering a target segment that has very little competition, this is entirely possible. However if there are already a few well established products in the segment, then you will need to position yourself via multiple differentiators, and your differentiators may have a more difficult time being truly distinctive, preemptive, and important.

Marketing 101: The First Step of Market Differentiation

2013-08-05T09:01:00.002-07:00

In our previous discussion we defined a Target Market as a set of buyers that share a set of common needs or characteristics that we decide to serve. When targeting a market segment we examine three factors: a segment's size and growth trends, a segment's structural attractiveness, and a company's long term objectives and available resources. Once we've defined the target market, and chosen one of four appropriate marketing methods, our eyes turn towards Market Differentiation and Product Positioning through a Value Proposition.

A Value Proposition is not a mystical marketing term, it is an essential marketing principle. A Value Proposition consists of two parts: a differentiated value, and a position. The differentiated value refers to ways our products and services stand out from the competition inside a market segment. A position is the "place" the product occupies inside the consumer's mind relative to competing products in the market segment. Let's address "position" first.

Depending on the product or service, the Buying Decision Process can be tough. To simplify it, consumers will organize products and services into categories and "position" them inside their minds relative to others. This position is built from the consumer's underlying sets of perceptions, impressions, and feelings about a product. We all naturally do this, without any help from advertising. It's human nature - we are chronic "judgers". The painful reality for a marketer is that we cannot leave this natural act of positioning to chance - we MUST influence it. A marketer must first define the positions we want our products and services to occupy, and then create the messaging that will influence consumers and give us a competitive advantage. A great way to plan and visualize positioning is by using Position Maps.

Position Maps
Position Maps are great tools we can use to understand how consumers perceive us versus other competing products. A position map uses two axis. Each axis represents a qualitative or quantitative attribute. Usually using data acquired through primary or secondary sources, we can graph visually where each product is positioned according to the relationships between the two axis.

What you see in the map above is a visual plot of the positioning of common brands of candy. If we were developing a new brand, or trying to reposition an existing one, we can use this map to help guide our differentiation and messaging strategies going forward.

Choosing Differentiation Strategies
The reality is that two or more firms will go after the same position in a targeted segment. A Differentiation Strategy helps us effectively focus and communicate our intended position to the selected target market, and gives us a source of competitive advantage. Differentiation strategies help us describe the differences between our products and services versus our competition. The result of successful differentiation is that categorization by the consumer becomes harder, which reduces comparisons of our products and services with our competition.

Choosing a differentiation strategy generally consists of three steps:
1) Identifying a set of possible customer value differences that provide competitive advatages upon which to build the position.
2) Selecting the best competitive advantages.
3) Creating the overall positioning strategy.

Step 1: Identifying A Set Of Value Differences
If we are able to position our products and services in a manner that sets them apart from our competition, then we have gained a competitive advantage and our position in the comsumer's mind will be higher than the alternatives available. In order to gain this competitive advantage we can differentiate through products, services, channels, people, or image (brand).

Products
Our ability to differentiate ourselves solely on the actual product is dependent on the "sliding scale" of product features. At one end are products that have few real "features" to sell - such as beef, pencils or cartons of milk. The other end is occupied by highly differentiated products, with abundant real "features", such as cars, computers and homes.

Services
Services are defined as "what accompanies the product". Let's use an automobile as an example. When you buy a Ford, consumers can expect a fairly mainstream level of dealer service. Lexus differentiates itself with a higher level of service: luxurious lounges and brand new Lexus loaner cars are the norm for owners of these automobiles.

Channels
Differentiation through channels involves every touch point along the way to finally getting the product into the consumer's hands. Companies enjoy competitive advantages via channel differentiation due to the way they design their channel's coverage, expertise, and execution. Companies such as Dell, Apple, and Amazon have created some of the most well executed direct to consumer channels in their industries.

People
Companies can use their own "people resources" as points of differentiation. Grocery stores, retail outlets, call centers, theme parks, and even hospitals all use people as points of differentiation. Where there is a customer touch point, you can differentiate via people.

Brand Image
In some ways, using brand as a point of differentiation seems the simplest to understand. When you think about some of the most common brands in the marketplace, odds are you already have distinctly positioned them in your mind. The caveat is that it is only "easy" to leverage a brand as a point of differentiation if it is well established in the marketplace. If you are relatively new, or unknown, then it is much harder to differentiate solely on brand. In this case you can use brand as a smaller complementary component of your differentiation strategy. The goal with brand differentiation is to convey your product's distinct benefits and positioning through brand messaging. If you are going to use brand differentiation, you must remember that you cannot develop your image in the consumer's mind overnight; it takes long term commitment throughout all company micro-environments. You literally must live and breathe the essence of your products and company.

Regardless of how you choose to differentiate your products and services, they key take-away is this: it is impossible to offer products and services that are built upon empty promises. We must live according to our promises and slogans on a daily basis at all customer touch points.

Marketing 101: Market Targeting

2013-07-11T09:12:00.001-07:00

Recall that a customer driven marketing strategy consists of four distinct "steps". Previously I focused on the first step: Segmentation. I defined Market Segmentation as dividing a market into smaller groups that contain distinct needs, characteristics, or behaviors that may require distinct products, services and marketing mixes. Because buyers have different wants, desires, needs, geographic locations, economic resources, buying attitudes, and buying practices, we use segmentation to divide markets into "pieces" that can be reached more effectively. Market segmentation reveals our potential opportunities. Once we have segmented the market, we must decide what parts of it to target.

Targeting the Market
We can define a Target Market as a set of buyers that share a set of common needs or characteristics that we can decide to serve. When targeting a market segment we must look at three factors: a segment's size and growth trends, a segment's structural attractiveness, and our own company's long term objectives and available resources. The first factor consists of the type of research we have explored in the past when discussing Primary Data. It is vitally important that we collect and analyze data on current segment sales, it's growth rates and potential profitability. Once we have that data, we must compare it to the size and growth characteristics that our own company is seeking.

Next, we must investigate the segment's major structural factors that will determine how attractive our participation will be. There are many reasons a segment may appear unattractive. First, a segment is generally less attractive if it contains numerous strong and potentially aggressive competitors. More competition usually results in many alternative products that create price competition and limit available profits. Second, a segment is less attractive if buyers have more power, forcing participants to keep prices lower in order to increase market share, which also reduces profits. Third, a segment is less attractive if there are suppliers with strong influence in the micro-environments that actively try to hold material costs at a certain level, with increases our cost of goods, which also reduces potential profits.

Once we have produced a detailed evaluation of the target's structural factors, we must consider our own long term objectives and available resources. Quite frankly, your company may not have the skills, knowledge, intellectual property and resources to succeed in a particular market segment. A company should enter a segment only if they can offer outstanding value and can gain and retain competitive advantages over other companies in a given segment.

Choosing a Marketing Method
Once you have selected an attractive market segment, it's time to determine the marketing mix through a targeted marketing method. Targeted Marketing is generally conducted at four distinct levels. These levels are based on the relative size of the targeted segment. In order of large to small, these levels are: Undifferentiated Mass Marketing > Differentiated Segmented Marketing > Concentrated Niche Marketing > Micro-marketing at a local or individual level.

Undifferentiated Mass Marketing
Undifferentiated Mass Marketing is a marketing strategy where a company chooses to ignore market segment differences (presented by their Primary and Secondary Data) and go after the whole market with one distinct product offering. This type of strategy focuses on the most common needs of consumers, rather than on what is distinctly different between them. This is a classic strategy from the early to mid-1900's, with the goal of appealing to the largest group of buyers possible in order to create as many sales as possible. This is the classic volume-based tactic. Product margins are low, and the value given to the customer is marginal as well. Most modern marketers do not believe this strategy is very effective. Today it is very difficult to make a product that appeals to mass-markets due to extreme competition from more focused niche products.

Differentiated Targeted Marketing
Differentiated Targeted Marketing is a strategy where we select several market segments, and design focused products and marketing mixes for each one, with the goal of higher sales and a relatively stronger position within each segment. The advantage of Differentiated Targeted Marketing is that it typically gives a company higher gross sales across segments. However increased sales also bring increased costs, because it can be more expensive to develop and produce 10 units of 10 different products (versions that are focused towards specific types of buyers) than 100 units of one product (for mass appeal or niche segments). It also costs more to market for multiple segments, because each segment requires separate marketing research, analysis, planning, and channel management. Due to these disadvantages, a marketer must weigh the prospects of increased sales versus the potential increased cost of business when choosing a differentiated marketing strategy.

Concentrated Marketing
Concentrated Marketing is a marketing strategy where a firm chooses to pursue a large share of one distinct segment or a few segments or niches. Concentrated Marketing allows a company to achieve a stronger market position within a segment due to their greater knowledge of consumer needs and desires within that segment, fine tuning product features and prices over time in responsive to changing trends. Concentrated Marketing is very appealing for companies that have relatively limited resources for product development and marketing. Concentrated Marketing is also attractive, because segments are generally smaller and usually attract very few competitors, allowing for higher margins. However Concentrated Marketing comes with higher than normal risks. Because most of your business is focused within one or few segments, you may suffer large financial losses a segment turns sour at any time.

Micro-Marketing
Micro-Marketing is a strategy where companies tailor products and marketing mixes to the needs and wants of specific individuals or local consumer groups. Micro-Marketing generally involves consumers in all phases of product development, giving consumers opportunities to practice self-marketing during the buying decision process. Micro-Marketing can give consumers extraordinary value, and can give the companies extraordinary value and consumer equity in return. However Micro-Marketing tends to increase product development and marketing costs by reducing natural economies of scale inherent in manufacturing. Micro-Marketing is also logistically complicated due to the numerous requirements of executing different regional and local marketing mixes.

Once you have evaluated and chosen a segment to target, we must work on Differentiation: differentiating the market offering (ie: the product) and thereby creating superior customer value. I will explore this topic in my next post.

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Marketing 101: Market Segmentation

2013-06-04T15:12:00.002-07:00

In my overview of Customer Driven Targeted Marketing, I stated that no human being is like another. Two people may be very similar, but they will always be different consumers, influenced by different attitudes and beliefs. As marketers we have to accept the fact that we can't appeal to all types of buyers in the marketplace, and there is just no way to appeal to any two buyers in the exact same way. I also stated that in order to achieve maximum value from consumers according to our working definition of marketing, we need to focus on the right target customers that will give us the right relationships that achieve maximum customer value and equity. To do this we use Customer Drive Targeted Marketing.

Segmentation
Recall that a customer driven marketing strategy consists of four distinct "steps". Let's focus on the first step: Segmentation. Market Segmentation is defined as dividing a market into smaller groups that contain distinct needs, characteristics, or behaviors that may require distinct products, services and marketing mixes. Because buyers have different wants, desires, needs, geographic locations, economic resources, buying attitudes, and buying practices, we use segmentation to divide markets into "pieces" that can be reached more effectively. However, there is no one standard way to segment a market. Marketers have to segment using multiple combinations of variables in order to find the best way to view the target market.

Marketers use many variables to segment a market. The major variables we use can be divided into standard categories such as:

1) Geographic - includes world region or country, city or metro size, density, climate
2) Demographic - includes age, gender, family size, famliy life cycle, income level, occupation, education, religion, race, generation, nationality
3) Psychographic - includes social class, lifestyle, personality
4) Behavioral - includes special occassions, benefits, user status, user rates, lotalty status, purchase readiness stage, attitude towards products and brands

With so many variables available to marketers for the purposes of segmentation, it would be so easy just to pick on or two variables and "call it a day". However, what experienced marketers know is that we rarely limit our segmentation analysis to one, two, or even a few variables. Marketers are using more segmentation bases today than in the past in an effort to identify more focused groups of consumers.

However, using more variables does NOT guarantee that our segmentation base is effective. In order for a segmentation to be effective, it must meet the following criteria:

Be Measurable
Be Accessible - The targeted customers can be actively reached and served.
Be Substantial - The targeted group is large enough and profitable enough size-wise to serve.
Be Differentiable - The targeted group is conceptually distinguishable and responds differently to different markeing mix elements and programs.
Be Actionable - The targeted group can be designed for attracting and servicing the segments.

Once we have defined and chosen our market segment, we can work on targeting the segment. My next post will discuss targeting.

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Marketing 101: Overview of Customer Driven Marketing Strategies

2013-05-10T08:19:00.001-07:00

One thing is for sure, no human being is like another. Two people may be very similar, but they will always be different consumers, influenced by different attitudes and beliefs. As marketers we have to accept the fact that we can't appeal to all types of buyers in the marketplace, and there is just no way to appeal to any two buyers in the exact same way.

In order to achieve maximum value from consumers according to our working definition of marketing, we need to focus on the right target customers that will give us the right relationships that achieve maximum customer value and equity. Stop for a moment and notice that I wrote the word "target". This was not a coincidence.

Decades ago, most marketing money was allocated towards mass marketing efforts. Products and services were created to attract and serve as many customers as possible. It was thought that the best way to make as much money as a possible was to sell as many products as possible to as many people as possible. The concept of customer equity wasn't even a part of the mindset of the marketer.

Mass Marketing (also known as undifferentiated marketing) is a marketing strategy that originated in the 1920's as a way of appealing to as many potential buyers in the marketplace as possible. Mass Marketers choose to ignore market segment differences and try to appeal to as large of a customer base as possible with a single product offering. The marketer is assuming that their product meets the needs of an entire population of consumers, and that they can appeal to those consumers in the same way. Mass Marketers aim to broadcast their messaging to as many people as possible, as often as possible. Traditionally mass marketing has focused on the mediums of radio, television and print due to their reach. The marketer assumes that by reaching the largest audience possible, exposure to the product is maximized and sales will be at their maximum.

However there are clear disadvantages to mass marketing practices. First, we know now that consumers don’t all think alike; so what works well for one group of consumers does not always translate well for another. Second, consumers are becoming less and less interested in "standardized" products (think canned soup), and are very willing to pay higher prices for products that cater to their needs and desires. Third, mass marketing usually involves much higher costs, especially for the corresponding media buys. For smaller companies with smaller marketing budgets, mass marketing just isn't possible. A more focused, budget-effective method of marketing is required: Customer Driven Targeted Marketing.

Customer Driven Targeted Marketing
Because of its advantages and the reality that all companies differ in their abilities to serve different market segments, most marketers have shifted over to customer driven targeted marketing. In the process of creating a targeted marketing plan we identify one or more marketing segments, and then develop products and marketing programs that are "targeted" to each type of consumer we are pursuing. A customer driven marketing strategy consists of four distinct "steps", typically grouped into two groups:

1) Selecting The Right Customers To Serve:
-Via segmentation: by dividing the total mass market into smaller segments
-Via targeting: by selecting the right segment or segments of the marketplace to enter

2) Deciding On a Unique Value Proposition:
- Via differentiation: differentiating the market offering (ie: the product) and thereby creating superior customer value
- Via positioning: placing the product offering in the minds of the target consumer with the right messaging

These four steps create value for the target consumer, and allow us to receive value from them. Over the next few posts I will be diving in further to the Customer Drive Targeted Marketing process.

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Marketing 101: Post-Purchase Behavior

2013-04-08T13:08:00.001-07:00

So far I've examined four of the five stages of the Buyer Decision Process: Need Recognition, Information Search, Evaluation of Alternatives, and the actual Purchase Decision. We've discovered that each stage is complicated, and that marketers will need to understand their customer's journey as they construct meaningful campaigns and messaging. These statements are even more important to reckon with in the last stage of the Buyer Decision Process: Post-Purchase Behavior.

What is Post-Purchase Behavior?
Simply defined, Post-Purchase Behavior is the stage of the Buyer Decision Process when a consumer will take additional action, based purely on their satisfaction or dissatisfaction. The consumer's level of satisfaction or dissatisfaction is directly related to the varying relationship between their initial expectations of the product (pre-purchase), and their perception of the actual performance of the product (post-purchase) in their hands.

If after the purchase the consumer perceives the product's performance as matching their expectations, or even exceeding them, they will be "satisfied". If their perception of the product's performance is less than their expectations, then the consumer will feel "dissatisfied". The larger the gap between their expectations and the product's performance, the more dissatisfaction. This dissatisfaction leads to Cognitive Dissonance.

Cognitive Dissonance is buyer discomfort caused by post-purchase conflict resulting from dissatisfaction. The reality is that all purchases, big and small, will result in some degree of Cognitive Dissonance. This is always the case, because every purchase a consumer makes involves some sort of compromise, however small or minute. Since consumers form beliefs and attitudes early in the Buyer Decision Process, at some point they will be concerned about having a negative experience with the product they may chose, or potentially missing the perceived benefits of other competing brands.

The issue of Cognitive Dissonance raises an important question: Why is it so important to satisfy the consumer? It all comes back to our basic definition of marketing: Managing profitable customer relationships. The goal is to attract new customers through superior value, and to keep growing customers by delivering customer satisfaction. If we are doing these things, then we will be able to capture value from customers to create profits and build customer equity. So, if our customers are satisfied they will begin to develop brand loyalty. This brand loyalty will help us develop profitable relationships. Our satisfied customers will buy from us again. They will become influencers in their cultural and social groups. They will pay less attention to competitors, and buy more of our products.

Dissatisfaction breeds the opposite. Consumers that perceive poor product performance will not create profits and will erode customer equity. They will not be loyal, and they will become negative influencers in their cultural and social groups, leading others away from our brands. What should we do with dissatisfied customers? We should pursue them. Even if they do not want to buy our products, we can still target them with dedicated messaging. We can directly reach out to them, and we can figure out ways to repair the relationship. These consumers can provide us with a wealth of primary data that can be used to improve our offerings and create focused marketing campaigns. Dissatisfied consumers are just as valuable as satisfied ones.

The conclusion is clear: Our job is not done once the consumer buys our product. Once a consumer buys a product they will enter some degree of post-purchase behavior. These behaviors, based on their satisfaction or dissatisfaction, will either build customer equity and brand loyalty, or lead to eroding sales and brand image issues. This all is related to their relationship between their expectations and the perceivced performance of the products in their hands. As marketers, we must have messaging ready for this specific part of the Buyer Decision Process. It is our job to encourage happy consumers to share their experiences and dive deeper into brand offerings. It is also our job to be brand advocates by reaching out to dissatisfied consumers and transforming their experience into one that leads to a profitable relationship.

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Marketing 101: Purchase Decision

2013-03-25T07:42:00.001-07:00

In my examination of the Buyer Decision Process I've explored the first three steps: Need Recognition, Information Search, and the Evaluation of Alternatives. Generally the completion of alternative evaluation will lead to our fourth step, the Purchase Decision.

The Purchase Decision
We can define the Purchase Decision simply as the consumer's choice of which brand to purchase. Once the consumer forms their beliefs and attitudes about a product segment's brands, the consumer will usually purchase the most preferred brand. Notice that I said usually. Sometimes two factors can come between the purchase intention and the purchase decision: the attitudes of others, and unexpected situations.

Sometimes the attitudes of others can change our minds before the sales transaction. For example, someone in a family group or social group might think that you should get an Apple iPad instead of a comparable competitor's tablet device. If this person is important enough in your life, they may exert enough "peer" pressure to cause you to suddenly alter your attitudes and beliefs, greatly reducing the chances of you buying another brand of tablet.

Your tablet purchasing decision may also be altered by our second factor: unexpected situations. Consumers will usually form their purchase decisions based on factors such as their current income level, expected prices, and assumed product benefits. However unexpected events often will change their original purchase intention. Some examples of purchase altering situations are unexpected sales, competitors dropping their prices, a sudden economic downturn, or a sudden change in employment.

Marketers need to understand that their work is not done once a consumer reaches the point of making a purchase. Because consumers can, and often will change their minds, consistent messaging needs to be placed in front of the consumer all the way up to the actual sales transaction. Even then our job is not done. In my next post I will explore Post-Purchase Behavior.

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Marketing 101: The Buyer Decision Process: Evaluation of Alternatives

2013-03-05T18:49:00.001-08:00

In my examination of the Buyer Decision Process, I've started by exploring the first two stages: Need Recognition and Information Search. Need Recognition refers to the instance when a consumer recognizes that a need, or problem exists that needs to be satisfied, ie: I need a new refrigerator. If the need is strong enough, an Information Search is usually initiated. As a consumer does more research they will inevitably become aware of competing brands and products that are available for purchase. It is at this point that the Evaluation of Alternatives begins. An Evaluation of Alternatives is the stage of the buyer decision process in where a consumer uses the information gathered in the Information Search to evaluate alternative brands in the product category.

So how does a consumer choose among these alternatives? The truth is that there are several processes at work inside the consumer's mind, forming beliefs and attitudes about all of the products to choose from. However these processes all "evolve" based on the individual's buying situation. The situation evolves from the set of attributes the consumer is choosing to evaluate products by.

Let's say a consumer is evaluating the attributes of a groups of computers. They have identified four attributes: performance, design, price, and value. During the evaluation the consumer will place different levels of importance with each attribute based off of what is most important to them. The consumer will "evaluate" each brand and form beliefs on how each brand rates on each attribute. The consumer may turn to friends and family, consult consumer reviews, or discuss their situation with sales people during the Information Search.

We know that all brands vary in their degree of appeal to each consumer. A consumer may buy a brand based on a single attribute, or a number of them. If during the Information Search you were able to deduce how a consumer assigned value to each attribute you could predict the buying behavior more accurately. Marketers must study buyers to discover how they actually evaluate brand alternatives. If you know how your target customer's evaluation process occurs, you can take steps to influence the buying decision early on and lead the buyer to purchase much faster.

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Marketing 101: The Buyer Decision Process - Information Search

2013-02-25T08:04:00.001-08:00

In my last posted I started to discuss the Buyer Decision Process. Simply defined, it's conducted by a consumer before, during, and after the purchase of products and services. The process consists of five defined steps or stages that typically occur in a certain order: Need recognition > Information Search > Evaluation of Alternatives > Purchase Decision > Post-Purchase Behavior.

Need Recognition refers to the instance where a consumer recognizes that a need or problem exists that needs to be satisfied. Need Recognition is usually triggered by an internal stimuli when a particular need, such as hunger or thirst, rises to a high enough level to become a drive. Once the need has been identified and has become a drive, the pursuit of information begins.

Information Search
Information Search is the second stage of the buyer decision process. In this stage consumers are driven (by their drive) to search for more information related to their need. If the drive is strong and a satisfying product is near at hand, the consumer is likely to buy it then, barely collecting any information, or skipping this stage altogether. If the drive is not strong, the consumer will usually store their need in memory and begin an information search. As a consumer does more research they will inevitably become aware of competing brands and products that are available for purchase.

Appliances are a product category where consumers conduct lots of research and there is ample competition. Let's say a consumer needs to replace their refrigerator. Because the most effective sources of information tend to be personal in nature, a consumer might start their information search by asking members of their friends and family social and cultural groups what refrigerators they would recommend. Next, the consumer will typically begin to use commercial sources of information to "fill in the blanks", such as advertisements, editorial reviews, and in-store sales staff.

Marketers must design their marketing mix to make target customers aware of their brand in the midst of all of this "noise". Ad messaging must address the typical needs, lifestyle aspirations and answer the common questions of their target demographics. Sales staff must be properly trained and incentivized so that in-store touch points are as successful as possible. If a marketing mix is properly created, it can help accelerate consumers quickly past the Evaluation of Alternatives stage and towards the Purchase Decision.

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Marketing 101: The Buyer Decision Process - Need Recognition

2013-02-04T17:19:00.000-08:00

Over the past few months we've spent the majority of our time exploring the many ways consumers are influenced throughout the buying process. First was an overview of Consumer Buying Behavior, which we placed into the Model of Consumer Buyer Behavior. We summarized that [1] Consumers "ingest" marketing and other stimuli, such as the four P's: Product, Price, Place and Promotion [2] the stimuli enters their "buyer black box" [3] the "black box" creates buyer responses.

Next we looked at Cultural Factors affecting consumer purchases, noting that Cultural Factors are some of the strongest influences of consumer buyer behavior, because they are the set of basic values, perceptions, wants and behaviors that are "learned" by a consumer from their families and other important social institutions. Also recall the fact that we need to remember that every group or society has a culture influencing them in some form or degree.

Along with cultural factors, there are also Social Factors affecting consumer buyer behavior. Human beings are social, and they need people around them to interact with and to discuss various issues in order to reach better solutions and ideas. We learned that these social factors typically consist of the consumer's small groups, their family, and their social roles and status. We also learned about social roles such as Initiators, Influencers, Deciders, Buyers, and Users. These roles play a part within social groups consisting of friends and familes. We also quickly examined how economic status enables or disables a person's abilties as a consumer.

On top of the social factors affecting consumer buyer behavior, we also have Psychological Factors. The consumer's own personality is constructed by the unique psychological characteristics that create relatively consistent, lasting behavior in response to their own environment. These characteristics include Self Concept, Motivation and the five motivational needs, Perception, Learning, and Beliefs and Attitudes. In summary, all of these factors and stimuli illustrate an important point: consumers are complicated. Now let's see how complicated reaching a buying decision can be.

Defining the Buyer Decision Process
The Buyer Decision Process is conducted by a consumer before, during, and after the purchase of products and services. Purchasing decisions are usually considered to be psychological constructs, because although we never "see" a decision, usually we infer from observed behaviors that a decision has been made. Therefore we are able to conclude that a psychological event, the "decision", has occurred. This assumption of a process suggests a commitment to action; that commitment to buy.

The Buyer Decision Process is usually split up into 5 distinct stages that typically occur in a certain order: Need recognition > Information Search > Evaluation of Alternatives > Purchase Decision > Post-Purchase Behavior. This order seems to suggest that a consumer will pass through all five stages, however this is not always the case. Often with habitual buying behavior a consumer will usually skip or reverse some of these steps in the Buyer Decision Process. However one step, Need Recognition, is never skipped.

Need Recognition
The first stage of the buyer decision process is Need Recognition. Need Recognition refers to the instance where a consumer recognizes that a need or problem exists that needs to be satfisfied. Need Recognition is usually triggered by an internal stimuli when a particular need, such as hunger or thirst, rises to a high enough level to become a drive.

External stimuli can also create a need and lead to drives. For example, advertisements that consumers hear and see, or discussions with other people can cause them to consider buying a particular product.

When preparing a campaign and settling on your target audience, you need to conduct research that helps you define the needs of the consumer, how the needs arose, what stimuli brought them about, and how that stimuli led the consumer to determine they needed your product.

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Marketing 101: Variety Seeking Buying Behavior

2013-01-14T06:21:00.002-08:00

In previous posts I examined Complex Buying Behavior, Dissonance-Reducing Buying Behavior, and Habitual Buying Behavior. Finally, we will quickly define Variety Seeking Buying Behavior.

Variety Seeking Buying Behavior
Variety Seeking Buying Behavior refers to situations where there is low consumer involvement, but the consumer perceives significant differences between the brand options in front of them. In variety seeking situations consumers tend to do a lot of brand switching. There is no real brand loyalty. Common variety seeking types of products are cookies and crackers. Let's take a quick look at crackers.

Consumers may already have a few beliefs about crackers. However most consumers will buy a particular brand with very little evaluation before the purchase. In fact in product categories such as crackers, evaluation tends to happen during consumption of the product. Beliefs and attitudes will come during the experience of eating them, or using them at parties. The next time the consumer is ready to buy, they will sometimes buy the same brand if the experience was favorable. However, they may also pick another brand purely out of boredom or to just try something different. All of this happens for the sake of variety rather than any negative beliefs or attitudes about the cracker brand.
The marketing strategy might differ for the market leader versus the competitors trying to grab market share. Leaders should encourage habitual buying - dominating shelf space and keeping shelves stocked, running frequent reminder advertising.

Marketers should encourage variety seekers to buy by using lower prices, special deals, coupons, samples, and ads that have messaging that give reasons for trying something new.

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Marketing 101: Habitual Buying Behavior

2013-01-07T05:47:00.002-08:00

So far we have examined Complex Buying Behavior and Dissonance-Reducing Buying Behavior. Next, let's quickly look at Habitual Buying Behavior.

Habitual Buying Behavior
Habitual Buying Behavior refers to situations where a consumer has low involvement in a purchase, and is perceiving very few significant differences between brands in a given product category. So many products fit into this scenario. Most of them are everyday use products and commodities, such as toilet paper, salt and black pepper. Let's consider black pepper.

There isn't much to ground black pepper. Unless you are actively cooking as a hobby (or a profession), you just need some pepper to throw into your mac-and-cheese or season the mashed potatoes on your plate. There is very little consumer involvement in this product category. Typically a consumer will go to the store and reach for a brand. If the consumer grabs the same brand repeatedly, this is almost always habitual buying, not brand loyalty.

In these scenarios the consumer's buyer behavior doesn't go through the normal belief-attitude-behavior sequence. Instead, consumers passively learn about low involvement products and brands through passive consumption media - television, radio, and Hulu ads. Because consumers are buying based on brand familiarity, marketers must use ad repetition to build brand familiarity instead of brand conviction. In order to encourage sales, marketers will need to use tactics such as price and sales promotions to initiate product trial.

Marketers should create messaging that emphasizes only a few key points. Marketers should also use more visual symbols and imagery within their advertising, because they can easily be remembered by the consumer and associated with the brand. Ad campaigns should have high repetition rates and the duration of messages should be short.

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Marketing 101: Dissonance-Reducing Buying Behavior

2013-01-02T06:29:00.000-08:00

In my last post I examined Complex Buying Behavior. Next, let's quickly dig into Dissonance-Reducing Buying Behavior.

Dissonance-Reducing Buying Behavior
Just like Complex Buying Behavior, consumers with Dissonance-Reducing Buying Behavior have high amounts of involvement. However, buyers in this behavioral situation are perceiving very few differences among the brands they are selecting products from. The key word here is perceiving. There may be many real differences between the different brands, however the buyer's beliefs about the other brands are that there are very similar or essentially the same. Let's examine a common product such as paint.

Choosing paint for the interior of your house is an extremely expressive process. The colors a person may choose are varied and will always vary from person to person depending on their highly personal tastes. Paint can also be expensive, with some brands costing over $20 per gallon. When a consumer finds a group of brands in a determined price range, their understanding of the difference between brands may be very low. As a result, a consumer may do some research, but in the end, they may be swayed by price or convenience of purchase in the end.

Post-Purchase Dissonance
Post-Purchase Dissonance is another way to say "after the sale discomfort". It's also the on-set of "buyer's remorse". Post-Purchase Dissonance will begin once a consumer begins to "notice" any disadvantages of their purchase, and begin to hear "good" things about the other products they did not buy. To counter these feelings, marketers should be running after-sale communication campaigns with focused targeted messaging. These campaigns should give encouragement and help support consumers, convincing them to continue to "feel good" about their brand choice. These marketing campaigns should also be encouraging additional purchases or referrals, offering discounts and incentives for additional purchasing.

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Marketing 101: Complex Buying Behavior

2012-12-04T13:46:00.001-08:00

The process consumers use to buy products and services is different for every individual and every category of product. However, we have been able to categorize this behavior based on their degree of involvement, and the degree of difference between the brands in the product category. There are four types of Buying Behavior:

1) Complex Buying Behavior - Has high involvement with significant levels of differences between brands.
2) Variety-seeking Buying Behavior - Has low involvement with significant levels of differences between brands.
3) Dissonance-reducing Buying Behavior - Has high involvement with very few differences between brands.
4) Habitual Buying Behavior - Has very low levels of involvement and very few differences between brands.

Let's start by examining Complex Buying Behavior.

Complex Buying Behavior
Complex Buying Behavior defines buying scenarios that are characterized by high levels of consumer "involvement" in a purchase decision; with significant amounts of perceived differences between brands in the product category. Involvement refers to actions the consumer must take to understand the product or service they are motivated to buy. When high involvement is necessary, the consumer does whatever they can to learn: research, read reviews, talk to others, and "test drive" different models at retail locations.

High involvement tends to be associated with products that are more expensive, infrequently purchased, technologically advanced, and highly expressive of the buyer's personality profile.
The involvement process helps the consumer understand the differences between the brands of products they are motivated to buy. This process is where the consumer develops (and sometimes changes) their beliefs and attitudes. These beliefs and attitudes, along with their buying motives, will influence the consumer's decision.

Marketers of high-involvement products need to have an understanding of the buying process. It is their job to help the consumer learn about their product, and create messaging that influences the buyer's beliefs and attitudes about competitor's products. Understanding your target customer's Personality Profile is a key component of your marketing plan.

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Marketing 101: Pyschological Factors of Consumer Buyer Behavior

2012-11-27T11:37:00.001-08:00

Consumers are complicated. If they bought things based on only a select criteria, then it would be easy to convince others to buy our products and services. There would be no need for elaborate ad campaigns and large advertising budgets. Unfortunately, consumers are influenced by many different stimuli, and they use many different factors to decide what to buy and when to buy it. One of the major influencers of consumer buyer behavior is the consumer's own unique personality.

When we study personality, we are examining the unique psychological characteristics that create relatively consistent, lasting behavior in response to the consumer's environment. We usually refer to someone's personality by traits, such as self-confidence, dominance, sociability, autonomy, defensiveness, adaptability, and aggressiveness. Personality is extremely important, because it allows us to build a profile of our customer. It allows us to really understand who they are, and why they buy. You can use that profile to better understand how to tailor your products and services to that buyer, and tailor your messaging to be as affective as possible when selling to that customer segment.

Consumers aren't the only ones who can have personalities and profiles. So can brands. Brand personalities are the specific mix of human traits that may be attributed to that brand. In order to better associate our brands with our target customers, we try to give them personalities that are relatable. We use these personalities to tailor the look and perception of the brand and its messaging in the marketplace so that we can attract specific consumers to our products and services.

Self Concept
Many marketers use a concept related to personality, called Self-Concept. The main premise of self-concept is that a consumer's possessions directly contribute to, and directly reflect their identities. Basically a person "is" what they have. Therefore, marketers try to understand our target customers by the things that they own and the things that they buy.

When we know the buyer's personality, when we have defined our brand personality, and when we have attempted to understand our consumer buy their existing buying patterns, we then combine all of this along with specific psychological factors to better understand their buyer behavior. Currently we look to four specific factors of our target customers when building their personality profile:

1) Motivation
2) Perception
3) Learning
4) Beliefs and Attitudes

Let's examine these one by one.

Motivation
A motive is a need that has become so sufficiently pressing that it directs the consumer to seek satisfaction of that need. A consumer has a number of needs at any given time of their life. Humans are constantly being influenced by various biological and psychological motivations. Many common biological needs arise from various states of "tension", such as hunger, thirst, or some form of physical discomfort. Psychological needs will arise from a desire for social recognition, esteem, or belonging in familial, social, or political groups. If one of these motivations becomes strong enough within the consumer, it "becomes" a need.

Through various research marketers have identified five "categories" of motivational needs:
1) Self-Actualization: a consumer's self-development and realization
2) Esteem: a consumer's sense of self-esteem, self-recognition, and social/economic status in the world
3) Social: a consumer's sense of belonging and feeling loved in their environment
4) Satisfaction: a consumer's sense of security and level of protection in their environment
5) Physiological: a consumer's basic need for food, water and shelter

Marketer's have found that there tends to be a hierarchy of need satisfaction within the typical human being: Physical needs must be satisfied first, then a person is willing to seek satisfaction fulfillment, then a person will approach social needs, then a person will pursue esteem, and then finally self-actualization within their environment. The basic principle here is that a consumer will almost always try to satisfy the most "pressing" needs first above anything else. When that need is met, it will stop being a motivator, and the consumer will "move on" to the next most influential motivator in the hierarchy of needs.

Marketers need to remember that motivated people are ready to buy. Use that to your advantage.

Perception
How a consumer determines what they will buy is heavily influenced by their perception of the situation they are in at that moment in time. Perception is the process by which consumers select, organize, and interpret information and environmental stimuli in order to form a more meaningful picture of the world around them.

One of the most massive forms of environmental stimuli is advertising. On average, consumers are exposed to 3000 - 5000 advertisements everyday. It is physically impossible for a consumer's brain to actively pay attention to all of that stimuli. Add to that all of the other environmental stimuli around them: smells, tastes, sounds, conversations; it's a wonder that humans are able to concentrate on anything at all. As a result, the brain controls what stimuli it will engage with. It is this process that creates perception. Consumers form their perceptions through the brain's distinct processes of selective attention, selective distortion, and seletice retention.

1) Selective Attention is the tendency for consumers to screen out most of the information they are exposed to. We have to work very hard to get the consumer's attention.

2) Selective Distortion: Every consumer fits incoming stimuli into their own mind-set - through their own set of "rose colored glasses". Selective distortion is the tendency of people to interpret information in a way that will support what they already believe, or what they want to believe.

3) Selective Retention: Consumers will usually forget much of the stimuli they have been exposed to. Consumers will usually store the information that best supports their existing attitudes and beliefs (or the ones they want to have), so selective retention allows them "remember" the good points they favor and "forget" the negative points that have been made about other brands that they don't like.

These processes are why marketers use so much repetition in their advertising campaigns. We have to battle our way into the minds of the consumer, force our way in, and in the end, convince the mind of the consumer that our message is the right one to pay attention to.

Learning
When people perform an activity, they are actively learning. Most learning theorists believe that the majority of human behavior is "learned" behavior. Consumer buyer behavior is a partly learned behavior. Consumers "learn" their buyer behavior through drives, cues, responses, and reinforcement. Each one of these builds upon the other.

Drives are strong internal stimuli inside the consumer's mind that create calls for action. These calls for action, if strong enough, will create a motive (see above), and lead the consumer to attempt to move towards an object of stimuli. That object usually will be what satisfies the need.

Drives create Cues. Cues refer to more "minor" stimui that condition the consumer's behavior. Cues help the consumer decide when, where, and how to respond to a drive.

Responses are the consumer's actions based off of drives, motives, and cues from environmental stimuli.

Responses build Reinforcement, which influences the consumer's future buyer behavior. If the purchase experience and immediate experience with the product has been positive, then the consumer will likely consider buying that same product in the future. If the consumer's experience is somewhat negative, then they are likely to seek a different product later when the need has to be fulfilled again.

Beliefs and Attitudes
Through our daily activities, we build beliefs and attitudes that in turn influence our buying behavior.
A consumer's beliefs are descriptive thoughts that they have about something, while attitudes are a consumer's "relatively" consistent evaluations, feelings, and tendencies toward an object or idea. Attitudes put people into specific frames of mind, and help to move them towards or away from certain products and brands. Unfortunately attitudes can be very difficult to change. Attitudes are a part of a consumer's learned behavior patterns. Changing a consumer's attitudes and beliefs usually will require us try to change many other perceptions and attitudes in other areas of the consumer's mind. Often it is easier to position a product into an existing attitude, than to fight against them and try to change them.

Marketers need to understand these beliefs and attitudes in order to best position their messaging in front of the target consumer. If we believe some of the target consumer's beliefs and attitudes are wrong about us, thereby preventing sales, then we can understand how to launch focused messaging campaigns to change beliefs about our products and brands.

Consumers are complicated. Their unique personalities have many facets, and all of them are involved in what is hardly a simple decision when they are choosing to buy something. It is the marketer's responsibility to do their due diligence and learn as much as possible about their target customer. Failing to have some understanding of the pyschological factors of consumer buyer behavior will result in unfocused messaging, and wasted marketing dollars. Today's economic reality forces us to do enough research before starting any creative for our ad campaigns.

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Marketing 101: The VALS Study

2012-10-23T20:44:00.001-07:00

As marketers are certainly aware, a consumer's economic situation will undoubtedly affect their purchasing decisions in some way. Marketers of income-sensitive products and services should be watching for changes in a demographic's income, savings and access to the prevailing interest rates. If financial trends are towards a recession, we should be making proactive changes to alter our product and service lines, or reposition the messaging of our campaigns. During good economies, we should be doing the same. The point is, our messaging, and our products, should be CONSTANTLY evolving to best reflect the consumer's buying environment.

Marketer's need to remember that although consumers in a chosen demographic may be coming from the same subculture, social class and occupation, they will usually have very different lifestyles. It is our job to understand these lifestyles so we can tailor our messaging as best as possible to convince the consumer that our products and services have the right value they are looking for. Recall, a lifestyle is a consumer's pattern of living, and is expressed within their activities, interests and opinions. Activities, Interests, and Opinions are commonly referred to as AIO Dimensions. These AIO Dimensions are usually defined as:

- Activities: work, hobbies, shopping, sports, social events
- Interests: food, fashion, family and recreation
- Opinions: about themselves, social issues, business, products

Lifestyle is more than a social class or a consumer's personality, it encompasses a consumer's patterns of action and their interaction with the world around them. When utilized affectively, the lifestyle concept helps us understand changing consumer values and how they affect consumer buyer behavior.

The most widely used lifestyle classification system is the VALS study. VALS classifies people by their psychological characteristics via four major demographics that correlate with consumer buyer behavior. The VALS study helps us understand how consumers spend their time and money, and it divides consumers into groups we can understand based on their primary motivations and resources.

Primary Motivations are defined by the consumer's ideals, the achievements they are seeking to attain, and their methods of self expression. Consumers that are primarily motivated by ideals are usually guided by knowledge and principles. Consumers that are primarily motivated by achievement tend to look for products and services that demonstrate their success in an outward manner to their peers. Consumers that are primarily motivated by self expression usually desire social or physical activities that provide their lives with variety and some sense of risk.

Resources refers to the consumer's level of economic, education, health, self-confidence, and "energy" resources. In a VALS study you are categorized has having high resources or low resources. The resource classification does not have any regard for a consumer's Primary Motivations. The resource categorization also defines consumers that have extremely high or low resources: Innovators and Survivors. Innovators have so many resources (ie: usually money since it enables so many things) that they will display all of the primary motiavtors to some degree. On the other hand, Survivors have so few resources (ie: economically poor) that they usually show no primary motivations at all. These consumers have to focus on meeting needs and not on fulfilling any of their desires.

There is so much more to say about these different classifications of consumers. Let's dive deeper into the classifications of the VALS study.

Innovators
Innovative consumers are typically defined as sophisticated, successful, "take-charge" people with extremely high self-esteem and self-confidence. Because these consumers have such abundant amounts of resources, they are able to exhibit all three primary motivations at various levels. They are considered to be change and thought leaders. Innovators are usually extremely receptive to new ideas and technologies in the marketplace. Innovators are very active consumers, and their buyer behavior reflects their tastes for upscale, niche products and services. Innovators are very conscious about their "image", however not as an outward appearance of their status or power, but as an individual expression of their tastes, style, independence, and personality. Innovators are usually members of the established and emerging leaders in society, business and government, yet they continue to seek new challenges. They never stand still; they love variety. Their material possessions and recreational activities reflect a preference for the "finer things in life."

Survivors
Survivors live very focused lives. Because they have few resources (mainly economic) with which to exist, these consumers often feel like that the world around them is changing too fast . Survivors are more comfortable with the "familiar" and "traditional", and they are primarily concerned with the safety and security of their families. Because these consumers must focus on meeting needs rather than fulfilling wants and desires, Survivors don't show a strong levels of primary motivations. Out of the necessity of their situations, Survivors are cautious consumers. These consumers represent a very modest market for most products and services. Survivors tend to be loyal to specific, habitually purchased brands, especially if they are at discounted prices.

Thinkers
Thinkers represent consumers motivated by their ideals. These consumers are more mature, more satisfied, more comfortable with themselves, and are highly reflective. Thinkers value order in life, knowledge through educational opportunities, and personal responsibility. Thinkers are usually well educated, and eagerly seek out information to aid in the process of decision making. These consumers keep up with current events. Thinkers have a moderate respect for institutions of authority and social decorum, but they are always open to entertain new ideas. Even though Thinkers usually have incomes that enable them the freedom to satisfy many desires, they tend to be conservative, practical consumers. Thinkers look for durability, functionality, and value in the products that they purchase.

Believers
Like Thinkers, Believers are motivated by ideals. They are conservative, conventional people with concrete beliefs based on traditional, established codes: family, religion, community, and the nation. Many Believers express moral codes that have deep roots and literal interpretation. They follow established routines, organized in large part around home, family, community, and social or religious organizations to which they belong. As consumers, Believers are predictable; they choose familiar products and established brands. They favor U.S. products and are generally loyal customers.

Achievers
Motivated by the desire for achievement, Achievers have goal-oriented lifestyles and a deep commitment to career and family. Their social lives reflect this focus and are structured around family, their place of worship, and work. Achievers live conventional lives, are politically conservative, and respect authority and the status quo. They value consensus, predictability, and stability over risk, intimacy, and self-discovery. With many wants and needs, Achievers are active in the consumer marketplace. Image is important to Achievers; they favor established, prestige products and services that demonstrate success to their peers. Because of their busy lives, they are often interested in a variety of time-saving devices.

Strivers
Strivers are trendy and fun loving consumers. Because they are motivated by achievements, Strivers are concerned about the opinions and approval of others. Money defines success for Strivers, who don't ever seem to have enough of it to meet their desires (which can become viewed as needs for them). These consumers prefer stylish trendy products that give the appearance of the lifestyle of people with greater material riches. Many Strivers see themselves as having a job rather than a career, and a lack of skills, education and focus often prevents these consumers from moving ahead. However, Strivers are active consumers, because for them shopping is a social activity and an opportunity to show off to people in their circle of influence their ability to buy. Strivers are as impulsive as their financial circumstance will allow them to be, sometimes to their own economic demise.

Experiencers
Experiencers are consumers that are primarily motivated by self-expression. These are younger, enthusiastic, and impulsive consumers. Experiencers will quickly become enthusiastic about new opportunities, but are equally quick to cool it they cannot get what they want soon, or after they have experienced the "high" once or twice. As such, these consumers will seek variety and excitement, savoring the fresh, the "offbeat", and the risky. Their energy (remember that energy is s resource) finds an outlet in exercise, sports, outdoor recreation, and social activities. They are avid consumers and are willing to spend a high proportion of their income on fashion, entertainment, and socializing activities. Their buying behavior reflects an emphasis on looking good and having trendy things.

Makers
These consumers, like Experiencers, are motivated by self-expression. Makers express themselves and experience the world by working on it - building a house, raising children, fixing a car, or canning vegetables - and have enough skill, education and energy to carry out their endevours successfully. These consumers are highly practical people who have constructive skills and value self-sufficiency and independence. They usually live within a traditional context of family, practical work, and physical recreation and have little interest in what lies outside that lifesyle. Makers are suspicious of new ideas and large institutions such as big business. They are respectful of government authority and organized labor but are often resentful of government intrusion on individual rights. Makers are motivated by the accumulation of material possessions other than those with a practical or useful purpose. Because they prefer value to luxury, they buy basic products that meet their needs on a daily basis.

When sales are trending down, conducting a VALS Study is a great way to find new customer segments to sell to. It is also a great way to understand how to create messaging for these specific customer segments.

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Marketing 101: Social Factors Affecting Consumer Buyer Behavior

2012-10-02T07:58:00.002-07:00

In my last post I examined the cultural factors influencing consumer buyer behavior. Cultures, subcultures and cultural trends all shape the Model of Consumer Buying Behavior. Another major part of consumer buyer behavior is the element of Social Factors. Human beings are social. They need people around them to interact with, and to discuss various issues in order to reach to better solutions and ideas. We all live in a society of some form, and it is very important for individuals to adhere to the "laws" and social "regulations" of a community. These Social Factors typically consist of the consumer's small groups, their family, and their social roles and social status.

First let's examine Groups. For the marketer, a social group is defined as having two or more people who will interact to accomplish individual or mutual goals - one of which is usually purchasing a good or service to meet a need or desire. The reality is that a consumer's behavior isn't influenced my just one group; it is influenced by many different groups. We refer to these groups as Reference Groups.

Reference groups influence the consumer by serving as direct (face to face) or indirect points of comparison or "reference" in building a consumer's behavior and attitudes. In a reference group with direct influence, several individuals may be a part of the consumer's purchase decision. The typical roles of these individuals are:

The Initiator

The Initiator is the individual that first suggests or thinks of the idea of buying a product or service.

The Influencer

The Influencer is the individual whose view or advice influences the consumer's buying decision. This person is sometimes also referred to as the Opinion Leader. The Influencer is usually has special skills or knowledge, personality or other characteristics that will exert social influence on other members of the group. The role of the Influencer or Opinion Leader has taken on a whole new meaning and emphasis with the advent of social media platforms.

The Decider

The Decider is an individual with power and/or the financial authority to make the choice regarding which product to buy. This is usually the consumer, but it can also be another person.

Buyer

The Buyer is a person who conducts the buying transaction. This is also usually the consumer, but it can be another person as well.

User

The User is the person (or persons) who will actually use the product or service that has been bought.

It is important to note that very often consumers are influenced by reference groups that they do not belong to. We will sometimes refer to these groups as aspirational groups. One example of an aspirational group would be the olympic team of the consumer's country. The consumer may aspire, due to the success of the team members, to "be like them." This may lead them to buy many of the same products that the team members may be endorsing, so that they can move towards their goal of acquiring many of the same traits of those group members. Aspirational groups can exert a lot of influence over a group of consumers, and their potential to help a marketer increase sales should not be ignored.

Family Groups
Family Groups are usually considered to be the most important “buying” organisations within a given society. Marketers are most interested in the roles and influence different members of a family group on a large variety of products and services a consumer may buy. Over time the buying roles of the traditional husband-wife model relationship have been changing. In most societies, the wife is usually the primary buyer for the family unit, primarily in the product categories of food, household products and clothing. However, with more women entering into full-time work, and more men becoming telecommuting, traditional family roles are changing. The challenge for the marketer is understanding how these societal changes affect demand for their products and services, and how the messaging mix might need to be changed to attract male rather than female buyers in a given product category (or vice versa).

Another factor to consider in Family Groups is the stage of life of its members. Married individuals tend to show strong desires towards buying products and services which would benefit not only them but also the members of their family group. A consumer who has a spouse and child at home usually will buy for them rather than spending on themselves. An consumer entering into marriage would be more interested in buying a house, a car, and other household items such as furniture and decorating products. Every consumer will usually go through a common set of stages of life, and will show a different buying mindset in each stage. For a common male consumer this tends to look like:

Bachelorhood: Trends towards alcohol, electronics, vehicles, mobile technology (Spends Lavishly)
Newly Married: Trends towards purchasing a home, car, furnishings. (Spends sensibly)
Family with Children: Trends towards purchasing products to secure the well-being of his family’s future.
Empty Nest (Children getting married)/Retirement/Old Age: Trends towards medicines, health product categories, and products that are part of an increased lifestyle and income level.

Social Status
One aspect of social status is a consumer's economic status. Marketers take into consideration the social class of the consumer when tailoring messaging to them. A social class is a relatively "permanent" and ordered division in a society whose members share similar values, interests, and behaviors. These classes have their own distinct reference groups, and often reference groups in some classes will influence consumers who are members of a different social class. Different social classes will tend to desire different categories of products as part of their consumer buyer behavior. For example, an upper middle class consumer will tend to spend more of their disposable income on "luxury" items, whereas a consumer from middle to lower income groups will tend to purchase items that are required for their own survival over day-to-day comfort.

In the United States, there are four distinct class groups:

Upper Class (3%)
- Upper Uppers: The social elite who live on inherited wealth. They are philanthropic, own many homes, and send their children to the best schools.
- Lower Uppers: Consumers who earn high income through great ability. They are active in social and political culture groups, buy expensive homes, educations and vehicles.

Middle Class (44%)
- Upper Middles: Professionals and corporate managers who don't have a high family status or unusual levels of wealth. They believe in higher education, and they want the "better things in life".
- Middle Class: "Average" income white and blue collar consumers who live in the better part of town. They buy products to keep up with current trends. They want to be in a nice home in a nice area and send their kids to quality schools.

Working Class (38%)
- They lead a working class lifestyle at any income level, education level, or job. They usually will depend on relatives for economic and emotional support, for purchasing advice, and for assistance in rough times. Family is the most important reference and cultural group.

Lower Class (16%)
- Upper Lowers: These are the working poor. Their living standard is just above the poverty line, and they actively strive to advance to a higher class of life. Often they do not a great education or skills, and they are often poorly paid for unskilled work and tasks.
- Lower Lowers: These are the visibly poor in society. They are poorly educated and unskilled. They are usually out of work and depend on the government for assistance most of the time. They are in the middle of a day-to-day existence.

It is the marketer's job to not ignore any of the reference groups of our target markets. We must be constantly researching and identifying these groups, because they will expose people to new lifestyles and behaviors, and change their attitudes and influence the consumer's self-image. Reference groups are a vital component of our marketing campaigns.

In my next post I will examine other types of social factors. After that I will look at the VALS Lifestyle Classification System.

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Marketing 101: Cultural Factors Affecting Consumer Purchases

2012-09-17T10:57:00.001-07:00

In my last post I discussed the basics of Consumer Buyer Behavior, and I explored the Model of Consumer Buyer Behavior. We are going to continue our discussion by exploring the various characteristics affecting consumer buying behavior. Recall that consumer purchases are not just simple one-and-done affairs. They are affected strongly by cultural, social, personal, and psychological factors. These are all factors that we cannot control, but we have to take them into account or else our marketing is ineffective and money is washed down the drain. Let's begin by examining Cultural Factors.

Cultural Factors
Cultural Factors are some of the strongest influences of consumer buyer behavior. Cultural Factors are the set of basic values, perceptions, wants and behaviors that are "learned" by a consumer from their families and other important social institutions. "Culture" is the most basic source of a consumer's wants and behavior. It lives at the foundation of a consumer's world view. Culture is mostly a learned behavior, being constructed by the society a consumer grows up in. That society "teaches" the consumer basic values, perceptions, wants and behaviors. What a consumer is "taught" can vary greatly in different parts of the world. For example, in the United States a child will learn such values as liberty, democracy, freedom, American Exceptionalism, working hard, making your own success, and family values. Children in many Asian countries will learn such values as social harmony, concern with social and economic well-being instead civil and human rights, loyalty towards authority and the well being of the family over the well being of self.

Marketers need to remember that every group or society has a culture. Cultural influences can and will vary greatly from country to country, social group to social group. If you do not account for these values in your marketing plans, your campaigns could be ineffective, and at worst embarrassing.

Subcultures
Every cultural group has numerous subcultures. Subcultures are groups of people that have a set of shared values based on common life experiences and situations. Subcultures can include different nationalities, religions, racial groups, and geographic regions. Many of these subcultural groups make up important customer segments. Because of this, marketers are designing products and marketing campaigns that are specifically tailored to their needs and wants. An example of a growing customer segment and subculture is the "mature" consumer.

The MetLife Mature Market Institute published a report in 2010 summarizing this growing consumer segment. In 2009 there were over 39 million people over 65 years of age, the majority of which are female. The majority of these people were reported as healthy and active. The top three areas of annual spending were in housing, transportation and food/beverage categories. Armed with basic information such as this, many CMO's are finding opportunities to create new messaging campaigns for existing products to grow sales in this growing customer segment.

Trends
CMO's and marketers need to always try to notice cultural shifts in order to discover new products that might be desired by consumers in other cultures and subcultures. Recent trends that have developed over the past decade are the growth of health and fitness over junk and processed food products, and the personal entertainment market which has grown as group and family entertainment in the living room has decreased (think tablets and Netflix). It is your responsibility to keep an eye on your customer segments, their cultures, subcultures, and any new trends that effect them or may bring new groups of customers to your products. Are you?

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Marketing 101: An Overview of Consumer Buying Behavior

2012-09-06T20:16:00.002-07:00

There are many mysteries in life. Love, happiness, success, the meaning of life, teenagers, and for marketing professionals, consumers can be the biggest nut we try to crack and understand on a daily basis. It's our job to understand how to convince our target market to buy what we have to offer. How do we get them to see the value in our messaging so that we can get value from them in return? It all revolves around the "mystery" of consumer buying behavior, and the factors that affect it.

What is Consumer Buyer Behavior? Consumer Buyer Behavior refers to the behavior of the final consumers. These consumers are the individuals and households who are buying goods and services in the marketplace for their own personal consumption. It is important to note that I did not mention the word "business". Consumer Buyer Behavior focuses on B2C transactions, not B2B transactions.

Consumer Buyer Behavior is a "mystery", because consumers vary greatly in their demographics and individual characteristics. No one buyer is alike another. However some groups of buyers do act similarly to each other. In order to study buyer behavior, we have had to create a model to answer the central question of how consumers will respond to different marketing efforts and stimuli. It's called...the "Model of Consumer Buyer Behavior". Original, I know. This stimulus response model is our guide.

The model looks like this:

[1] Consumers "ingest" marketing and other stimuli > [2] the stimuli enters their "buyer black box" > [3] the "black box" creates buyer responses.

It starts with marketing and other stimuli. When we consider marketing stimuli, we usually focus on the "4 P's": Product, Price, Place and Promotion. When we are examining other stimuli, we usually look at internal and outside economic, technological, political and cultural factors that influence the buyer.

All of that stimuli enters what we call the "buyer black box"... the brain. This "black box" contains all of the characteristics of the buyer. The buyer characteristics influence how he or she perceives the marketing stimuli, and creates a reaction. The "black box" also contains the consumer's individual decision process, which is used to evaluate whether or not they will purchase a product.

Finally, this black box creates the "buyer response". This buyer response influences the choice of product, their individual brand choice, the choice of dealer, the timing of the purchase, and the amount of money they will be spent on the goods and services.

Over the next few weeks we will be examining these characteristics as they affect buyer behavior, and discuss the decision process that the consumer follows.

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Marketing 101: Sampling Plan

2012-08-27T10:40:00.002-07:00

In the last Marketing 101 post we examined common Contact Methods for acquiring Primary Data. I listed three traditional methods: telephone, mail, and focus groups. The fact of the matter is that online technologies have completely changed how we as marketing directors and CMO's do our jobs. I truly believe this is for the better. It so so much easier to collect the Primary Data we need via online methods, and it tends to be more cost effective than offline methods. However there are also challenges to online methods, and some of the same issues exist when it comes to the reliability of the data we collect.

Whether it's online or offline, if we're not doing focus groups, we're usually using surveys to collect Primary Data. Surveys give us the opportunity to draw conclusions about different groups of consumers by studying a small statistical sample of the total consumer population. The "sample" is the key. A sample is usually defined as a segment of the population selected for our research that will represent the larger population as a whole. Whether or not a sample is good enough to make observations with, depends on how we've designed it.

Designing a sample is a three step process:
1) Decide who you are going to survey
2) Decide how many you are going to survey
3) Decide how you are selecting the participants in the sample

Let's examine each of these three steps a little more.

1) Decide who you are going to survey
First, you have to decide who you are actually going to survey. In more statistical terms, we are asking "what is the sampling unit"? Any group of people can be used as a sampling unit. What I mean here is children, adult women, men, etc. Your sampling unit should be determined by the target groups in your survey, and the data you have about your target customers. If you don't know who your target customer is, then you have some research to do first. Choosing the wrong sampling unit will waste your time and your money. It will give you data that you cannot use, because the results from that group will be irrelevant.

2) How many should be surveyed (what is the sample size)
When we are asking ourselves "how many should be surveyed", what we are saying here is "what is the sampling size?" Sample sizes that contain more people usually give us increased accuracy. For you statistical junkies, there are certain facts of mathematical statistics that describe this, such as the law of large numbers and the central limit theorem. To keep this simple for our discussion, larger samples will give you more statistically reliable results than smaller sample sizes. However, larger sample sizes will cost you more money. Do not assume that you need to attempt to sample an entire population segment (which would take forever, and be almost impossible). Usually less than 1 percent of a population segment will provide statistically reliable results. There is a down-side to Probability Samples: cost. Depending on your Contact Method, larger samples will result in drastically higher costs. When cost is a factor, then researchers turn to Non-Probability samples.

3) How should the people in the sample be selected?
What we are asking here is, "What is the sampling procedure we are going to follow?" There are two different types of samples we can choose from: Probability Samples, and Non-Probability Samples. Probability Samples give each population member (a.k.a. a potential participant) a possible chance of being included in the sample. Because you are not sampling the entire population, probability samples will always contain margin for error. The larger the margin of error, the less trust you can place in the data you have that is supposed to represent your "population". Larger samples give you less margin of error, and less margin of error lets you trust your data more.

There are three different types of Probability Samples:
Simple Random Sample
Every member of the population has a known and equal chance of selection.

Stratified Random Sample
The population is divided into mutually exclusive groups (such as age and race) and random samples are drawn from each group. Basically, you are splitting your population into defined groups, and then sampling each of those groups.

Cluster (area) Samples
The population is divided into mutually exclusive groups (such as blocks, and they are relatively homogeneous) and the researcher draws a simple random sample of each group.

Non-probability sampling is much less expensive than doing Probability Sampling, but the results are of limited value, because the data is less reliable. Non-probability samples should be used with caution. Non-probability sampling techniques cannot be used to deduce generalizations from the sample to the general population. Any generalizations created from a non-probability sample MUST be filtered through the researcher's knowledge (and yours) of the customer population being studied.

There are three different kind of Non-probability samples:

Convenience Sample
In a Convenience Sample, the researcher selects the "easiest", most convenient to locate member from the immediate population to obtain research data from. I would consider this one of the most hap-hazard methods. There is practically nothing you can generalize about the data you obtain, other than considering it a "snapshot" of a a particular group, at a particular time, at a particular place.

Judgment Sample
In a Judgment Sample, the researcher will use his/her judgement to select the the people sampled. Immediately you have to ask...how good is their judgment in selecting a good candidate? Again, the data that you obtain from this sort of sampling is just not reliable for generalized conclusions, but it may be interesting to use as a "snapshot".

Quota Sample
Probably the worst method I can think of, a Quota Sample is simply a researcher grabing enough people to meet a quota requirement for sampling participants. Stay away from this sort of methodology. Your data is practically useless.

Never select a sampling method without taking the time (as you always should) to weigh the needs you have when collecting Primary Data. Always take into consideration your time-frame and your budget, and always try to be as objective as possible when you are evaluating the Primary Data you have obtained.

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Marketing 101: Primary Data - Contact Methods

2012-08-14T09:05:00.001-07:00

In my last Marketing 101 piece, I spent some time introducing the Research Methods that we typically use in Primary Data collection. Remember that Research Methods consist of surveys, experimentation and observation. Surveys are the workhorse of Primary Data collection. They tend to give us the bulk of our information related to customer trends and buying behaviors. In order to conduct these surveys, information is collected in a variety of manners. Typically these Contact Methods include mail, telephone, focus groups, and various other online technologies.

Mail
The mailed questionnaire is a classic primary data collection method. It is very valuable, because it can be used to collect massive amounts of primary data for a very low cost per respondent. We're talking the cost of paper and postage. (Remember that you do need to calculate the labor costs of crafting the survey and processing the data once it comes back to you) The data that you can collect from mail methods is usually considered very good for a few reasons. First, there is little chance for "interviewer bias", because there is no live person there to ask the questions in a manner that could influence a person to respond in a manner different than they normally would. Second, because they are not being interviewed in person, the respondents are usually more willing to give more honest responses. And third, because you are not relying on the interviewer to record responses, no interviewer bias is introduced to the answers.

However there are downsides to using mail as a contact method. First, mail-based surveying is not very flexible, because all respondents are required to approach their surveys in the same way. Second, collecting primary data via mail is very slow. It can take months before a reasonable amount of your sample sends the questionnaires back to you for processing. Third, because written surveys usually take longer to complete, the response rate trends lower - simply because it takes more work. The response rate is actually considred to be very fair. It's harder to control the sample, beacuse you don't know which households will respond, let alone who at the residence will respond.

Telephone
Telephone has always been a fairly good method of collecting Primary Data. First, it is possible to collect massive amounts of data very quickly by using multiple people at the same time to call and conduct phone interviews everyday. Second, telephone interviews allow for more flexibility, because your interviewers have the opportunity to provide clarity about any questions that respondents don't understand. Third, you have excellent control of the sample, because interviewers can screen out callers before an interview is conducted. Fourth, with the right incentives, typically the response rate is actually very good.

There are problems with collecting Primary Data via telephone as well. First, the quality of the data you collect can only be considered fair at times, because the interviewer can inadvertently introduce bias into the answers based on how the questions are asked. Second, because the respondents are interacting with a live person, they may not want to provide completely honest answers to questions that they may consider too private. Third, telephone surveys are more expensive, because they require more labor.

Focus Groups
Focus Groups are a Primary Data collection standard. Focus Groups have become a leading method for gaining valuable insight into consumer thoughts and feelings and their buying behaviors. Traditionally focus groups consist of a moderator leading six to ten people. However technology has allowed focus groups to be conducted through video conferencing and webinars via the internet, which allows people from different locations to be connected together which can improve sampling. These groups will participate in discussions about products, advertisements, services, and even organizations. The focus group attendees are usually paid a small sum for attending. The moderator will attempt to lead an easy and free flowing discussion hoping that free honest responses will be given. Data is usually recorded by the moderator, however sometimes focus groups are observed by staff members via cameras or through one-way windows.

Focus groups also have their issues. First, focus groups use much smaller sample sizes in order to control cost and keep their sizes manageable. Second, because sample sizes are so small, it is hard to reliably statistically generalize the results. Third, attendees of focus groups are not always candid and honest. The phyiscal and sociological environment of the focus group can create peer pressure, which leads attendees to alter their results in order to "fit in" with the people surrounding them. This is being combated by using environments that are relevant to the products and services being studied in order to get more relevant and open responses. Fourth, focus groups cost much much more to conduct due to the costs of time, labor, location, and data acquisition. Only use focus groups when it is appropriate and you are looking for specific types of data that you cannot reliably acquire with other Contact Methods.

Online Methods
The internet has single-handedly changed the Primary Data landscape. Researchers are no longer confined to using mail, telephone, or physically location-bound focus groups. There are many electronic alternatives to all three primary contact methods.

Email surveys and survey research websites are very affordable alternatives to direct mail and telephone interviews. Because they are electronic, they are much less expensive to conduct, and data is instantly stored into a database that can be manipulated and analyzed. It is also quicker to create a large sampling, because your contact list can be created by interfacing with your existing customer database, or by purchasing lists of consumers from secondary data companies. As with mail, the quality of responses tends to be very good, because it is an impersonal process and respondents feel more open to share more "private" information.

Another alternative to the telephone or physical focus group collection methods is Skype, or any other video conferencing type of technology. Because Skype and services such as Oovoo are available for free or very little cost, it is much less expensive to conduct focus group research when the researcher needs to observe the reactions of the attendees. These services will usually have the ability to record online "meetings", which allows you to store and refer back to interviews easily.

No matter what contact method you choose to use in your Primary Data collection process, it is important to spend extensive time up front evaluating the type of data you need, and which methods fit your required data types, cost, and schedule.

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Marketing 101: Primary Data Collection - Research

2012-07-31T15:42:00.000-07:00

In this edition of the Marketing 101 series we will take a quick look at Primary Data collection. So far we have been discussing data that is considered secondary. Secondary data was collected by someone else. Whether it was your sales department, or a comScore research report that you purchased, it was created by someone else other than your department. It did not involve any of your department interacting with existing and potential customers to collect data. It was not collected with your marketing objectives in mind.

There is nothing wrong with secondary data. You cannot perform any Market Intelligence without secondary data. It is a great and necessary starting point for any of your research. Secondary data is critical when you are defining the problems and objectives that are the focus of your Marketing Intelligence initiatives. However in most cases, you will need to collect primary data of some kind in order to have the information you need to make real decisions.

What is Primary Data?
Primary Data is research that has been conducted by your organization, first hand. It is also known as Field Research. It is usually more reliable than secondary data, because it is usually more accurate since you collected it yourself. Primary data is specific and relevant to your products and services. However, Primary Data is often very time consuming to collect, and usually costs more to create than purchasing secondary data reports. You must take special care when collecting primary data. It needs to be relevant, current, and as unbiased as possible.

Primary Data is relevant when it directly applies to your company's products and services. It is relevant when it relates to the problems you are trying to solve, and the marketing goals of your organization. Primary Data is current when it is recent, and directly corresponds to the profile of your customers TODAY. Primary Data is unbiased when your subjects have been honest and open during data collection. When constructing your Primary Data collection plan, you must consider research methods, contact methods, the sampling plan, and your research instruments.

Research Methods consist of observation, surveys, and experimentation. Contact Methods typically consist of mail, phone, personal interaction, and various online methods. Sampling Plans take into account units, size, and procedures. Research Instruments typically consist of questionnaires and other mechanical instruments. Let's start with a quick discussion of Research Methods. There are three typical ways that Primary Data is collected in marketing: observation, surveys, and experiments.

Observation
Observation is the collection of Primary Data through observing people, their actions and the situations they are in. Observation may be the easiest research to do. Typically, observation is also the most cost effective method. Observation can also give you data that people aren't usually willing to tell you themselves, such as their feelings, emotions, attitudes or the motives behind their buying decisions.

How does observation work? It's extremely simple. Take a restaurant franchise owner. He may be planning on opening another location. He may also have little or no money to pay for marketing research. However a lot of the data he needs he can collect himself. He can get into his car and drive around town, observing the traffic patterns. He can see where his clientele goes to shop. He can see what time the traffic appears. He can call real estate agents and ask them for lease prices for different properties. He can drive around and look for areas that don't have his type of restaurant, looking for areas of little competition. He can do all of this for just the cost of the gas in his car. You can do this yourself.

Surveys
Surveys are the most common method of collecting Primary Data. Surveys are the best way to get the descriptive information that you need for your marketing intelligence. Simply put, surveys collect data by asking other people a series of questions about their personal knowledge, emotions, attitudes, preferences, and buying behaviors. Surveys can provide you a wealth of data. There is always a golden nugget, a piece of data that can give you the insight you need to figure out the direction of your next campaign.

However, there are drawbacks to the data you collect via surveys. Often people just don't recall some of the information that you are asking for, and as a result, they are unable to answer the questions. Therefore the response that they give will not be the complete truth, it may be something that they feel you want to hear. Sometimes people are unwilling to provide information that they might deem "private". This prevents completely truthful responses, and it skews the data that you are analyzing. If the responses seem too good to be true...they just may be.

Experimentation
Primary Data can also be collected via experimentation. Experimentation is the practice of gathering data by selecting matched groups of people, giving them different treatments or scenarios, controlling related factors in their environments, and checking for differences in their responses. Experimentation gives us what we call "causal" data. Causal data helps us explain cause and effect relationships. Experimenting helps us try to answer "why" someone is doing something, and what influences their buying behavior.

A common example of experimentation is price testing. To the buyer, price will be the final emotional factor that determines whether or not they will give us their hard earned money. Depending on the product and market segment, price may be the most important factor. How do you know what price is the right price? You have to test it. Many companies will test certain prices when collecting primary data on a new menu item that is being developed. How do you think McDonalds knows how much to charge for a Big Mac? They tested how much they can charge for that Big Mac, looking for that magic number that will provide the most sales and the most profit.

In my next post we will continue this exploration of Primary Data by examining different contact methods.

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Marketing 101: Marketing Intelligence: External Data Sources

2012-07-22T14:40:00.001-07:00

When conducting Marketing Intelligence you will need to explore External Data sources. Here is a list of popular paid and free external data sources.

ACNielsen Corporation
www.nielsen.com/us/
In 100 countries around the world, Nielsen provides clients the most complete understanding of what consumers watch and buy. Provides television audience data along with supermarket scanner data on sales, market share, retail prices, and household purchases.

Ad Age Datacenter
http://adage.com/datacenter/
AdAge.com's DataCenter features premium content, including profiles of top advertisers, media, agencies and more.

American Demographics
American Demographics creates reports on demographic trends and their significance.

Arbitron
www.arbitron.com
Arbitron provides local radio market and internet radio audience data, along with advertising expenditure information data.

ClickZ Stats/CyberAtlas
www.clickz.com
Provides information about internet use by consumers, such as e-commerce statistics.

comScore Networks
www.comscore.com
comScore provides consumer behavior information and geo-demographic analysis of internet use. They also have large amounts of data about digital media use around the world.

Dun & Bradstreet
www.dnb.com
D&B maintains a massive database with information on over 50 million individual companies around the globe.

Factiva
global.factiva.com
Factiva offers business and knowledge management solutions, and competitive intelligence data. They specialize in in-depth financial, historical, and operational data on public and private companies.

Federal Trade Commission
www.ftc.gov
The FTC website provides information on regulations and decisions related to consumer protection and antitrust laws in the United States.

Forrester Reasearch (Acquired Jupiter Research)
www.forrester.com/home
Forrester Research monitors internet traffic and provides rankings on the most popular sites.

Hoovers, Inc.
www.hoovers.com
Hoovers provides business descriptions, financial overviews, and news about major companies around the world.

IMS Health
www.imshealth.com
IMS Health specializes in tracking drug sales, monitoring performance of pharmaceutical sales representatives, and offers pharmaceutical market forecasting data.

Interactive Advertising Bureau
www.iab.net
iab creates statistics about advertising on the internet.

J.D. Power and Associates
www.jdpower.com
J.D. Power and Associates provides information via independent consumer surveys of product and service quality, customer satisfaction, and buyer behavior.

LexisNexis
www.lexisnexis.com
LexisNexis features articles from business, consumer, and marketing publications, and tracks firms, industries, trends, and promotion techniques.

NetBase
www.netbase.com
Offers social media analysis tools that help marketing and sales professionals analyze consumer insights, opinion, emotion, and behavior online.

Securities and Exchange Commission Edgar Database
www.sec.gov/edgar.shtml
This SEC database provides financial data on U.S. public corporations.

Simmons Market Research Bureau
www.simmonssurvey.com
Provides detailed analysis of consumer patterns in 400 product categories in selected markets.

SocialBakers
http://analytics.socialbakers.com/
SocialBakers is a premiere provider of social media metrics and analytics tools.

Stat-USA
This popular Department of Commerce site, highlighting statistics on U.S. business and international trade was closed in 2010. Various websites provide links to all of the data that was hosted there.
http://library.apsu.edu/inform/21STAT-USAtransition.htm (Felix G Woodard Library)

SymphonyIRI (formerly Information Resources, Inc.)
www.symphonyiri.com
Provides supermarket scanner data for tracking grocery product movement and new product purchasing data.

Thomson Dialogwww.dialog.com
Thomson Dialog offers access to more than 900 database containing publications reports newsletters and directories covering dozens of industries.

U.S. Census
www.census.gov
The U.S. Census provides detailed statistics and trends about the U.S. population

U.S. Patent and Trademark Office
www.uspto.gov
This U.S. government agency allows searches to find out who has filed for trademarks and patents across the United States.

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Marketing 101: Developing Marketing Information

2012-07-10T10:40:00.001-07:00

Next in our discussion of Marketing Information Systems, we're going to explore Developing Marketing Information. Marketing Information Systems rely on multiple types of marketing data. As a Marketing Manager, you need to stay on top of creating and maintaining these data sources that are vital to your ability to make strategic marketing decisions. You can obtain the data you need from internal databases, marketing intelligence, and marketing research.

Internal Data Sources
Internal Data is usually your first stop when doing marketing research. Internal data consists of your collections of electronic data. This data contains consumer and marketing information, and it is usually created from existing data sources inside your own business. This data comes from numerous sources. Your accounting department keeps records of sales, costs and cash flows. Your operations department will have data on production schedules, logistics, and staffing. Your own marketing department will have information on your customers, their transactions, their demographics, psychographics, and buying behaviors. Your customer service representatives will have data on customer satisfaction, and any service issues that they deal with. (Side note: if you do not have anyone devoted to customer service in your business, seriously think about hiring someone) Your sales department has tons of valuable information. They will have reports on your resellers, activity of your competitors, and your channel partners will have data on point-of-sale transactions. All of this data can be found inside of your Marketing Micro-environment.

Internal data is usually faster to get ahold of, and much cheaper to use, but there are potential issues to be aware of. First, your own internal data may be incomplete, and it might not contain the data you really need. Second, often that data is not in the right form you need to use it. For example, sales data usually will need to be converted from existing financial reports into a format that can be used for evaluating your customer segments, your sales force, or your channel performance. Third, data ages quickly. In fact, it ages immediately. It is always old. Data is only as fresh as that date it was collected. Keeping data current takes a lot of man power and time to update. There must be a staff person dedicated to this task at all times. Fourth, managing your data requires data backup, higher end PC's for transforming data, and more advance reporting techniques depending on how you want to look at your data.

External Data Sources
Eventually you will run out of usable data inside your own walls. Inevitably you will have to do some additional research, depending on the data requirements you have, and the reports you are looking to create. It's time to do some Marketing Intelligence. Marketing Intelligence is the systematic collection and analysis of publically available information about your competitors and other developments in the marketplace. Marketing Intelligence aims to improve your strategic decision making, helps you assess and track your competitors actions, and can give you an early alert of new opportunities and potential threats coming from outside your own walls.

The practice of, and the "art" of Marketing Intelligence, has grown exponentially as more businesses are "spying" on their competitors. Common Marketing Intelligence practice has grown to include interviewing competitors staff, benchmarking competitor's products, doing research online, attending trade shows, and even some occassional dumpster diving. There is also a wealth of publically available information online. You can monitor publically published information - such as product reviews, SEC filings, pubically available financial records, annual reports, business publications (corporate magazines that go to partners), press releases, advertisements, and competitor's websites. It is also possible to acquire information from competitor's suppliers, your own resellers, and competitor's major customers. All of this information provides a wealth of information about your competitor's strategies, markets, new products, and other company happenings.

In my next post I will cover a number of free and paid database services that you can use in your marketing intelligence endevors.

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