"Sales and Segmentation" review (Article-5)

INTRODUCTION

Recently I enrolled for a Mini-degree in "Digital Psychology and Persuasion" from CXL Institute. I would love to share whatever I will learn from this Mini-degree through a series of articles.

This is my 5th "Digital Psychology and Persuasion" review article in a series of a total of 12 articles. I will be posting an article on each weekend for consecutive 7 upcoming weeks in which I will cover all the tactics and principles of Digital psychology, Consumer Behavior, and Persuasion and Neuro-Marketing which will surely help anyone passionate about marketing.

***Segmentation of Market***

Marketing is designed to provide value to customers. Thus, marketers must conduct research to understand the various groups of consumers within the marketplace so that they can develop a strategy and specific offerings that will provide such value. Once they develop and implement a suitable strategy, marketers need research to determine how well it is working and whether it is delivering the expected results.

Market "Grouping and Segmentation"

What one consumer values in a product may not be the same as what other consumer values. A well planned and executed consumer research can predict very helpful strategies to be implemented in order to acquire maximum customers at minimal customer acquisition cost.

How "Profitable" Is each Segment?

Consumer research can help marketers identify consumers who are not in the hot target of any big competitors and can leverage the unseen market advantage to drastically increase sales. Learning about the characteristics of consumers in each segment, such as their age, education, and lifestyle is also very helpful to create one to one marketing campaigns. This information helps marketers project whether the segment is likely to grow or to shrink over time, a factor that affects future marketing decisions. For example, sales of fitness goods and services are expected to rise as children turn to adults and strive more to stay fit.

"Customers Satisfaction"

It has also seen that most success full organizations and companies conduct regular ground-level feedback and interest-grabbing exercises to find out the expectations of customers from their brand or company. For example, Harley-Davidson executives regularly ride with members of the Harley Owners Group to find out firsthand what satisfies motorcycle buyers and what else they are looking for. Combining this information with data from other research helps the company come up with new product ideas and promote new bikes to current and potential customers.

***Making Pricing Decisions***

Price is a very important part of a successful marketing strategy and has a direct influence on our targeted consumer's acquisition, usage, and disposition decisions. It is therefore very important for marketers to understand how consumers react to price and to use this information in pricing making decisions.

The "9" Game :

Why do prices often end in 99? Consumer research has shown that people perceive $9.99 or $999.99 to be cheaper than $10.00 or $1000.00. Perhaps this is one reason why so many prices end in the number 9. Although economic theory suggests that a low price will increase the likelihood of purchase but, too low a price can make consumers suspect the product’s quality. In general, consumers respond positively to a discount presented as a percentage reduced from the regular price (e.g., 25 percent subtracted from the original cost) than to a discount presented as a specific amount of money subtracted from the regular price (originally $25, now only $15).

"Belief" affects too :

Also, when making a purchase, consumers consider the thoughts of any prior purchases of similar products and remember the prices they previously paid for that product, so marketers must be aware of these reference prices. When buying multiple units of service for one bundled price, consumers may not feel a great loss if they use only some of the units because they have difficulty assigning value to each unit. In addition, when consumers buy multiple products for one bundled price, they are likely to increase their consumption because unit costs seem low. According to research, how much consumers will pay for a given item can even be affected by the price of unrelated products they happen to see first. Thus, the price you would be willing to pay for a T-shirt may vary, depending on whether the prices you noticed for shoes in the store next door were high or low. Studies also indicate that consumers have different perceptions of what a product is worth, depending on whether they are buying or selling it. Sellers should, therefore, avoid this endowment effect; that is, they should not set a higher price than buyers are willing to pay.

"The Sensitivity" of buyers regarding pricing :

Research also suggests that consumers have different views on the importance of price. Some consumers are very active in comparing prices, meaning that a small change in price will have a large effect on consumers’ willingness to purchase the product.

However, other consumers are not very price mined and do not think much over prices and avoid immediate comparisons thus likely to buy an offering regardless of its price. Demand for coffee generally remains steady despite price increases, a situation that means Starbucks is unlikely to lose many customers when it raises its coffee prices. Marketers can use research to determine which consumers are likely to be price-sensitive and when. For fashion or prestige goods, a high price symbolizes status. Thus, status-seeking consumers may be less sensitive to a product’s price and pay more than $50 for a T-shirt with a prestigious label.

When Should "Certain Price Tactics" Be used?

Research also reveals when consumers are likely to be most responsive to various pricing tactics. For example, consumers have traditionally been very responsive to price cuts on almost all house utilities and clothes during Diwali Sales. These “white sales” are effective because consumers have come to anticipate them and are unlikely to buy these items after Diwali without a financial incentive to do so.

Thus when it comes to pricing, we need to have a proper pen-paper strategy and analysis to determine the exact mood of our customers when they will be making the decision to buy or not buy the product. Even some strange tactics could be used when it comes to pricing like JIO has set its JIO PHONE price to 1500 INR instead of 1499 INR because it has carefully analyzed its market that 1500 INR is a very common amount used in a middle-class family in India. A good 4G phone available at a very cheap and common price is a highly effective product in a developing country like India. So setting pricing at values that are equal to the prices of famous or daily use products used by people can make people feel the price appropriate and ultimately buy the product.

As a conclusion, we must not underestimate the powers of human behavior and marketing psychology in order to get success as a good marketer and to grow our business exponentially.

Congrats! You are now one step ahead in the competition after understanding Marketing Psychology and Consumer behavior.

Stay tuned for the next Article!

 (This article is a review for the mini degree, "Digital Psychology and Persuasion" from CXL institute".)

Thanks :-)

Gaurav Panwar