Unit 2: Marketing research and Consumer behaviour

MKT201 — Principles Of Marketing 12 min read

I. Orientation

Marketing connects an organisation’s capabilities with customer needs through information, value creation, exchange, and relationship management. Marketing research supplies evidence about markets and customers, while consumer and business buyer behaviour explain how purchase decisions are made. Segmentation, targeting, and positioning then convert this knowledge into a focused market strategy.

Customer value: Customers compare perceived benefits with total costs, including money, time, effort, and psychological risk.
Marketing information: Useful information must be accurate, relevant, timely, accessible, and actionable.
Buyer behaviour: Purchase decisions are influenced by cultural, social, personal, psychological, and organisational factors.
Market structure: Consumer markets involve individuals or households; business markets involve organisations buying for production, resale, operations, or institutional use.
Strategic focus: Firms normally cannot serve every buyer equally well, so they divide markets, select attractive segments, and establish a distinctive position.
Ethical responsibility: Research and customer data must be collected, stored, and used lawfully, transparently, and with respect for privacy.

II. Managing marketing information to gain customer insights — Building an evidence-based marketing system

Managing marketing information means collecting, organising, analysing, and distributing information so that managers can understand customers and make better decisions. The aim is not to gather the greatest quantity of data, but to produce insights that improve actions such as product design, pricing, promotion, and distribution.

A. Managing marketing information to gain customer insights

This process combines internal records, marketing intelligence, and formal marketing research.

Internal databases: These contain customer orders, invoices, website visits, loyalty records, complaints, and sales-force reports. For example, repeated abandoned carts may indicate price resistance or a difficult checkout process.
Marketing intelligence: Intelligence is continuously gathered from competitors, distributors, trade publications, social media, reviews, and observed market trends. A competitor’s store expansion may signal growing demand in a region.
Marketing research: Research is the systematic design, collection, analysis, and reporting of information for a specific marketing problem, such as testing demand for a new service.
Research process: The usual sequence is:
1. Define the problem and research objectives.
2. Develop the research plan.
3. Collect primary or secondary data.
4. Analyse and interpret findings.
5. Present insights and recommend action.
Primary data: This is collected for the current problem through surveys, interviews, observation, experiments, or focus groups. A test market comparing two package designs can measure differences in purchase rates.
Secondary data: This already exists, such as census statistics, industry reports, government publications, or company records. It is usually cheaper and faster but may be outdated or collected for another purpose.
Qualitative methods: Interviews and focus groups explore motives, meanings, and language. They can explain why customers describe a product as “untrustworthy,” but results are not statistically representative.
Quantitative methods: Surveys and experiments produce measurable results. If 240 of 400 respondents prefer Brand A, the observed preference is 60%, although sampling error and question wording still matter.
Data analysis: Analysts identify patterns, relationships, and differences using measures such as frequency, average, cross-tabulation, correlation, or conversion rate. Correlation between advertising exposure and sales does not automatically prove causation.
Customer insight: An insight links a customer need or behaviour to a marketing implication. “Customers want convenience” is broad; “commuters abandon meal orders when delivery exceeds 30 minutes” is more actionable.
Information systems: A marketing information system, or MIS, provides managers with regular flows of relevant information from internal data, intelligence, and research.
Data governance: Organisations should control access, remove duplicates, protect personal information, and comply with applicable privacy and consent requirements.
Decision usefulness: Information is valuable when it reduces uncertainty or improves expected outcomes. A small, well-designed survey may be more useful than millions of unstructured social-media comments.

III. Consumer markets and buyer behaviour — Understanding individual and household decisions

Consumer markets consist of individuals and households that buy goods and services for personal consumption. Consumer buyer behaviour concerns what they buy, why they buy it, where and when they buy, and how they evaluate the result.

A. Consumer markets and buyer behaviour

Consumer decisions range from habitual purchases, such as toothpaste, to extensive decisions, such as selecting a university or car.

Consumer market: The market includes final users rather than organisations purchasing for further business activity. A family buying a refrigerator is a consumer purchase.
Stimulus-response model: Marketing stimuli include product, price, place, and promotion; other stimuli include economic, technological, political, and cultural forces. These enter the buyer’s “black box,” producing product choice, brand choice, retailer choice, timing, and quantity.
Cultural factors: Culture provides values and norms; subcultures may reflect religion, nationality, region, or ethnicity; social class can affect preferences and consumption patterns.
Social factors: Reference groups, family, roles, and status influence choices. A professional may choose a laptop partly because colleagues recommend the same operating system.
Personal factors: Age, life-cycle stage, occupation, income, lifestyle, personality, and self-concept shape demand. A new parent’s priorities differ from those of a retired traveller.
Psychological factors: Motivation, perception, learning, beliefs, and attitudes influence how stimuli are interpreted. Selective attention means buyers notice only some available advertising messages.
Needs and motives: A need becomes a motive when it reaches sufficient intensity to drive action. Functional motives concern performance; emotional motives concern identity, pleasure, security, or belonging.
Buying roles: An initiator suggests the purchase, an influencer affects the decision, a decider chooses, a buyer completes the transaction, and a user consumes the product. One person may perform all five roles.
Decision process: Buyers commonly move through need recognition, information search, evaluation of alternatives, purchase decision, and post-purchase behaviour.
Evaluation criteria: Buyers compare attributes such as price, quality, durability, appearance, delivery, and warranty. The importance of each attribute depends on the buyer and situation.
Post-purchase behaviour: Satisfaction depends on the relationship between perceived performance and expectations. Performance below expectations produces dissatisfaction; performance meeting or exceeding expectations supports loyalty and positive word of mouth.
Involvement and risk: High-price, infrequent, or socially visible purchases usually involve greater financial, functional, and psychological risk. Information, guarantees, reviews, and demonstrations can reduce perceived risk.

IV. Business markets and business buyer behaviour — Organisational purchasing

Business markets include organisations that buy goods and services to produce other products, resell them, operate their institutions, or fulfil public and social objectives. Business buyer behaviour is more formal and often involves several decision makers.

A. Business markets and business buyer behaviour

Business purchases are shaped by derived demand, technical requirements, relationships, and organisational procedures.

Business market types: Producer markets buy inputs for production; reseller markets buy for resale; government and institutional markets buy to provide public or organisational services.
Derived demand: Demand for business inputs depends on demand for final products. Demand for commercial tyres rises when demand for trucks and transport services rises.
Fewer, larger buyers: Business sellers may serve relatively few customers, each placing large orders. Losing one major account can affect revenue substantially.
Buying situations: A straight rebuy repeats a routine order; a modified rebuy changes specifications, supplier, or terms; a new task requires extensive information and evaluation.
Buying centre: Users need the product, influencers provide technical input, buyers handle supplier selection, deciders approve the choice, and gatekeepers control information. A hospital’s procurement committee may include clinicians, finance staff, and engineers.
Decision criteria: Buyers assess price, quality, capacity, delivery reliability, technical compatibility, service, sustainability, and total cost of ownership.
Formal process: Organisational buying often involves identifying a need, developing specifications, searching for suppliers, requesting proposals, evaluating offers, selecting a supplier, and reviewing performance.
Reciprocity and relationships: Long-term supplier relationships can reduce transaction costs and improve coordination, but buyers may still require competitive bids and evidence of performance.
Electronic purchasing: E-procurement systems standardise approvals, compare suppliers, record transactions, and improve auditability.
Negotiation: Terms may cover volume, credit, delivery schedules, installation, training, maintenance, and warranties. The lowest purchase price may not equal the lowest total cost.
Environmental influences: Economic conditions, regulation, technology, competition, and supply shortages can change organisational purchasing. A semiconductor shortage may force buyers to qualify alternative suppliers.
Risk management: Businesses reduce risk through multiple suppliers, service-level agreements, audits, pilot projects, and performance guarantees.

V. Segmenting — Dividing a diverse market into meaningful groups

Market segmentation divides a broad market into groups whose members share important needs, characteristics, or behaviours. Effective segments allow a firm to design a more relevant marketing mix and allocate resources efficiently.

A. Segmenting

Segmentation is useful only when the groups are identifiable and commercially actionable.

Geographic segmentation: Markets are divided by country, region, city, climate, or population density. Winter clothing demand is likely to differ between northern and tropical climates.
Demographic segmentation: Variables include age, gender, income, occupation, education, family size, and life-cycle stage. Income can help distinguish economy, standard, and premium product demand.
Psychographic segmentation: Lifestyle, personality, values, and social class explain differences that demographics alone may miss. Two buyers with equal income may differ because one values sustainability and another prioritises convenience.
Behavioural segmentation: Buyers are grouped by occasions, benefits sought, usage rate, loyalty status, readiness, or attitude. A streaming service may distinguish heavy users from occasional users.
Benefit segmentation: This focuses directly on the outcome customers seek, such as speed, safety, status, low price, or reliability.
Business segmentation: Organisational markets may be segmented by industry, company size, location, technology, purchasing approach, and specific operating requirements.
Measurable: Segment size, purchasing power, and characteristics should be estimated. A segment defined as “people who like good products” is too vague.
Substantial: The segment should be sufficiently large or profitable to justify a tailored offer.
Accessible: The organisation must be able to reach and serve the segment through channels and communication media.
Differentiable: Members should respond differently to a marketing programme. If two groups respond identically, separate treatment may add cost without value.
Actionable: The firm must possess resources and capability to serve the segment effectively.

VI. Targeting — Selecting customers to serve

Targeting evaluates identified segments and selects one or more as the organisation’s priority markets. The decision balances market attractiveness with strategic fit and available resources.

A. Targeting

Targeting determines where the firm will concentrate its product, pricing, communication, and distribution efforts.

Segment evaluation: Managers examine size, growth, profitability, competition, customer bargaining power, and likely future demand. A rapidly growing segment may still be unattractive if entry costs are excessive.
Strategic fit: The segment should match the firm’s objectives, technology, brand reputation, skills, and financial capacity.
Undifferentiated marketing: One offer serves the whole market, emphasising common needs. This can create scale economies but may ignore meaningful differences.
Differentiated marketing: Separate offers serve several segments, such as a manufacturer offering economy, family, and professional models. Sales potential rises, but product and communication costs also increase.
Concentrated marketing: The firm focuses on one segment or niche. A small firm may specialise in ergonomic office furniture for medical practices.
Micromarketing: Local or individual marketing adapts offers to specific communities or customers. Personalised recommendations are an example.
Target attractiveness: A useful assessment considers segment profitability:

TEXT

Expected contribution = Expected sales revenue - Variable costs - Segment-specific fixed costs

Here, expected sales revenue is projected income, variable costs change with volume, and segment-specific fixed costs are costs required only to serve that segment.

Ethical targeting: Marketers should avoid exploiting vulnerable groups, making discriminatory assumptions, or using sensitive data unfairly.
Cannibalisation: A new offer may take sales from the firm’s existing products rather than generate new demand, so portfolio effects must be considered.

VII. Positioning — Creating a distinctive place in the customer’s mind

Positioning is the deliberate design of a product and marketing programme to occupy a clear, distinctive, and valued place relative to competing alternatives. It translates the selected target market into a customer-facing value proposition.

A. Positioning

Strong positioning links a target customer, a meaningful benefit, and a credible reason to believe.

Frame of reference: The firm identifies the category or alternatives against which the product is judged, such as “urban commuter bicycles” rather than merely “bicycles.”
Points of difference: These are attributes or benefits customers associate strongly with the brand and believe competitors cannot match equally, such as faster delivery or superior battery life.
Points of parity: These are expected category features needed for legitimacy. A bank’s mobile app may be a point of parity, while personalised financial coaching may be its difference.
Value proposition: This states the value promised to the target customer. A useful structure is: