Segmentation and influence of Reference Groups on Buying Decisions - Research Paper Example

Business Report on Segmentation and influence of Reference Groups on Buying Decisions Student ID: Unit Name: Consumer Behaviour Unit Code: MKW2402 Word Count: 1351 Tutor: Tutorial Time: Friday 2pm Submission Date: Contents Executive Summary 8 Introduction and background 9 Purpose/Objective of the Report 9 Background Information on “Someday” 9 Scope 10 Methodology 10 Assumptions and Limitations 10 Plan 10 Consumer Analysis 11 Aspirational reference group 13 Consumers above 18 14 Primary reference group 15 Market Segmentation 16 Means end analysis for “Someday” 16 A means end analysis of the perfume “Someday” may be done through an analysis of benefits clusters and how these map onto goals or lifestyle values. For instance price focused benefits cluster onto feeling better about oneself, while the fragrance based benefits cluster onto utility. 16 Means end chain analysis for Someday 17 17 17 17 17 From an analysis we may find an idea of the needs of the particular segments of the consumers. First there are those who are interested in aspects of acceptance into a particular group for identity purposes. Then there are those who are interested in keeping up with the reference group. Then there are those who are interested in the quality for the sake of value for money. Those seeking quality and value for money bring into focus the importance of income as a demographic segmentation variable. The socio-cultural dimension of reference groups is also important in the determination of consumer preferences due to influences from peers or from aspirational groups (Alonso & Marchetti, 2008). Then there is the groups that consume the perfume due to benefits sought such as emotional and utility benefits. Lastly all the above aspects will determine the level of consumption and therefore the usage rate is of particular importance to the marketer. 18 Table 2. Potential segmentation variables for segmenting the market for “Someday” perfume 18 Segmentation base 18 Explanation of segmentation base 18 Demographic 18 Socio-cultural dimension 18 Benefits sought 18 Usage rate 18 Three Potential Groups of Consumers for Someday 18 Aspirational consumers 19 Primary reference group consumers 19 Above 18 consumers 19 20 Benefits sought 21 Benefits sought 21 21 Potential Primary Target Audience 21 21 The aspirational segment of the consumer market is the most important segment for this product for the following reasons. 22 This segment is driven by aspiration to be like the celebrity or associated with him 22 This segment is not influenced by aspects of quality 22 This demographic is influenced by aspects of innovation and novelty of design 22 This demographic is at the stage of belonging and fulfillment of social needs and hence they will tend to aspire for a sense of belonging to certain demographics (see appendix three). 22 Analysis of External Characteristics of Target Audience 22 According to Datamonitor, the Global fragrance industry is dominated by females accounting for 65% of consumption, 23% by males and the remaining 12% is termed unisex consumption. Celebrity perfumes on the other hand are mainly intended at certain demographics in which the celebrity has significant influence. The global fragrance industry has grown by 4.2% between 2006 and 2010 and is projected to grow by 4.7% over the course of the next five years. Fragrances by female celebrities lead the way in having the largest growth since the start of the decade with growth of over 65% (Li, Yen, & Hsiao, 2012). Since Someday is manufactured by Conty Inc which is the leading manufacturer of celebrity fragrances in the world Someday promises to have a good run. 22 The instance of Someday being a female fragrance that is driven by a male celebrity is opening of new ground which has not been explored before. Given the large fan base that Justin Bieber has, it is no wonder that the fragrance has thus far exceeded expectations. Trends have shown that young people are increasingly becoming aspirational and this thus puts the fragrance in good stead. Luxury products and cosmetics have especially benefited from changing demographics with cosmetics accounting for 32% of luxury purchases by people aged under 18 (Baker, 2010). The data show that celebrity fragrances have enjoyed the greatest growth over the last four years with a growth of over 75% in sales due to American consumerism. This demographic is also influenced by aspects of innovation and novelty and hence the design of packaging and manufacturing which give the product a touch of the novel will give the product more appeal. 22 Recommendations 23 Since the perfume is intended for a population that is tech savvy, the use of social media such as MY Space and Facebook pages of Justin Bieber to promote the fragrance would boost the success of “Someday”. 23 Through the use of social media campaign messages intended at the aspirational consumers who want to be associated with Justin Bieber could be posted. This may be through messages such as I came up with this perfume just for you (see appendix four). 23 Given that about 65% of fragrance consumers are female and also the fact that a majority of the fans of Justin Bieber are female, messages on social media should be positioned to target this demographic (Lavin, 2012). 23 The need for aspiration should be utilized by using Justin Bieber as a model for the perfume which will make the aspirational consumers develop a taste for the perfume 23 Given the techno savvy nature of this group, the novelty and innovativeness of the fragrance and its bottle design ought to be emphasized in the marketing campaign. 23 References 23 Alonso, C., & Marchetti, R. (2008). Segmentation and Consumption of Luxury Fragrances: A Means-End Chain Analysis. Latin American Advances in Consumer Research, 2, 40-45. 23 Datamonitor. (2011). Global fragrances. Fragrances Industry Profile. 24 Gutman, J., & Reynolds, T. (1988). Laddering theory, method, analysis, and interpretation. Journal of Advertising Research, February, 11-31. 24 Appendices 24 Fragrances Industry Profile: Global 24 Appendix one 24 Appendix two 25 Appendix three 25 Appendix Four 27 27 http://giftsezone.com/Perfume-by-Justin-Bieber 27 Executive Summary This report is intended at an analysis of three different groups of consumers of Justin Bieber’s “Someday” fragrance. The report is thus an analysis of market segmentation and how two reference groups influence buying decisions. Lastly the report makes recommendations on marketing strategies for the product. The report gives background information on the product including its attributes and its positioning in the fragrance market. The information that will be used in the report will mainly be obtained from Datamonitor.com and related websites. Through a means end analysis the report has established three groups of consumers who are influenced by demographic, benefits sought and values and lifestyles lived. The report establishes that the primary target group for “Someday” are teenagers aged between 14 and 18 who are aspirational reference group consumers. These are consumers who consume the product in order to be associated with Justin Bieber and his sentiments regarding the product. In order to have a successful marketing strategy, the report establishes that the consumers are aspirational and hence the marketing strategy is geared towards messages that link the product to the celebrity. The techno savvy nature of the consumer demographic is also an important factor recommended and hence the use of social media and the emphasis on the innovativeness and novel nature of the product are emphasized in the strategy. Introduction and background Purpose/Objective of the Report This report is a market segmentation report aimed at profiling three different groups of consumers for Justin Bieber’s Fragrance “Someday”. The report will therefore analyze and profile market segmentation, identify the primary target audience and how two reference groups influence buying decisions of the target consumers. Lastly, it will make recommendations on marketing strategies in future. Background Information on “Someday” The product is Justin Bieber’s ‘Someday’ perfume. Bieber is one of the most famous celebrity that has millions of fans. He launched perfume on his name and the sales profit reached over $3 million just in three weeks and a portion of the proceeds will go to charity. ‘Someday’ perfume is available in 30, 50 and 100ml which cost $25 to $55. It smells floral and fruity aroma and contain in a transparent glass bottle with a heart topper in pink. The advertisement, package, limited package, special deal is attractive. This promotion was successful and he received award for ‘Best New Celebrity Fragrance’ at FiFi award. The marketing strategy for Someday which is marketed by is intended to position it to appeal to a certain segment of the population mainly teenagers between 14 and 18 but with a potential of roping in other market segments. The approach makes use of both the primary reference group and the aspiration reference group in positioning the brand. This positioning is informed by current trends in the perfumes and fragrances industry which have seen a rise in sales of 4.5% between 2006-2010 which is projected to rise to 4.7% between 2010-2015 (Datamonitor, 2011) (see appendix 1). Scope This report will make analysis of the target group for Someday who are young people between the ages of 14 to 18. The reference groups to be studied in this report are the informal primary reference group of friends influence and the aspiration reference group which includes celebrities. Data will be collected from Datamonitor research store which focuses on data collected between 2006-2010 in Europe, Asia Pacific, Africa, Americas and the Middle East. Methodology The methodology that will be used will be an analysis of the industry profiles and how these have affected the marketing of “Someday”. It will make use of interviews and consumer surveys which will also be cross checked with expert analysis from industry insiders who will rely on industry databases and profiles. The information from datamonitor.com will offer the basis for industry analysis and trends comparison with the product. Assumptions and Limitations Given that the data to be used in this study is to be collected in 2012, the study will make the assumption that the data collected in the data monitor report in 2010 remains relevant. The limitation in this method therefore is that the accuracy of the report may be diluted given changing trends. An analysis of Someday as compared to the datamonitor report may thus not be an accurate reflection of the relationship between the industry and the aforementioned perfume. Plan This paper will be structured in a business report format. The report will have an introduction which will offer background information on the product give the objective and scope of the project and give assumptions and limitations; it will also give insights on the methodology to be adopted and the targeted audience. The report will then conduct a consumer analysis and market segmentation in which the target consumers of the product will be analyzed. The report will then make an analysis of how reference group affect the purchasing decisions of the various segments of the market. Finally the report will offer recommendations on how to improve marketing strategies for the product. Consumer Analysis The consumers of someday are divided into several categories based on market segment and on reference group. According to Claeys, C., Swinnen, A., & Vanden Abeele, P. the analysis of the motivations and needs of the consumers is the fundamental aspect in the formulation of an appropriate marketing strategy (1995). An important aspect of the development of the marketing strategy is an analysis that the consumer seeks from the product. Consumers needs become motives when they are aroused to a given level of intensity (Schiffman, O’cass, Paladino, D’alessandro & Bednall, 2011). The main target for the perfume are people who are aged between 14 and 18 and therefore the reference groups will play a significant role in the determination of needs and motivations of the target market. The needs and motivations of this group is thus related to these reference groups. Table 1 Segment Link between product attributes and benefits sought Aspirational reference group Product attributes: Novel fruity fragrance. Novel bottle design. High product price. Functional benefits sought: Novel fragrance that would get one stand out. High price normally associated with quality. Emotional benefits sought: A sense of being better than others due to having a product used by the best. There is an added pleasure of looking like the celebrities wearing the perfume. Consumers outside the 14 to 18 age bracket Product attributes: Novel fruity fragrance has become a much sought after scent. Innovative packaging is a big draw. High price driven by consumerism. Functional benefits sought: Novel fragrance that satisfies curiosity and adventure. Moderate to high price due to consumerist nature of modern day society. Emotional benefits sought: A sense of achievement due to capacity to afford expensive luxury products. A sense of being better than peers Primary reference group Product attributes: Novel fruity fragrance, Novel bottle design. Moderate to low product price. Functional benefits sought: Novel fragrance that would make one accepted into their reference group. Moderate to low price associated with keeping up with the reference group. Emotional benefits sought: A sense of belonging in the reference group. An important aspect that is evidence in this is the importance of the concepts put forth in Maslow’s hierarchy of needs (Gutman, 1982). Maslow put forth five basic human needs which are developed over time. The attainment of these needs is thus achieved progressively and actively by persons over time and age (see appendix two). In recent times the market for fragrances just like all other goods has seen an increase in the consumption by young people especially those aged between 13 and 24. Someday has been modeled and positioned especially to target the age group between 14 and 18. The decision to produce a perfume intended for 14 to 18 year olds is driven by a need to satisfy the aspirational group of teens who are the core of Justin Bieber’s fan base. The fragrance is targeted to fulfill social needs such as acceptance, love, belonging, and affection. It is also intended to satisfy ego needs such as self respect, prestige, and status. This fragrance therefore not only targets the needs and motivations of the aspirational consumers who consume products in order to look like the celebrities but also the primary reference group consumers who consume products in order to fit into their peer groups. There is also the group of consumers who are above the 14-18 age group primary target. This group of consumers, while not the primary target will be attracted to the product not because of feelings of belonging or aspiration, but rather on the basis of product attributes. Overview of benfits sought by different types of consumers Aspirational reference group Benefits sought Product attributes: Novel fruity fragrance Novel bottle design High product price Functional benefits sought: Novel fragrance that would get one stand out High price normally associated with quality Emotional benefits sought: A sense of being better than others due to having a product used by the best There is an added pleasure of looking like the celebrities wearing the perfume. Consumers above 18 Benefits sought Product attributes: Novel fruity fragrance has become a much sought after scent Innovative packaging is a big draw High price driven by consumerism Functional benefits sought: Novel fragrance that satisfies curiosity and adventure Moderate to high price due to consumerist nature of modern day society Emotional benefits sought: A sense of achievement due to capacity to afford expensive luxury products A sense of being better than peers A sense of reclaiming their youth Primary reference group Benefits sought Product attributes: Novel fruity fragrance Novel bottle design Moderate to low product price Functional benefits sought: Novel fragrance that would make one accepted into their reference group Moderate to low price associated with keeping up with the reference group Emotional benefits sought: A sense of belonging in the reference group Market Segmentation Means end analysis for “Someday” A means end analysis of the perfume “Someday” may be done through an analysis of benefits clusters and how these map onto goals or lifestyle values. For instance price focused benefits cluster onto feeling better about oneself, while the fragrance based benefits cluster onto utility. Means end chain analysis for Someday From an analysis we may find an idea of the needs of the particular segments of the consumers. First there are those who are interested in aspects of acceptance into a particular group for identity purposes. Then there are those who are interested in keeping up with the reference group. Then there are those who are interested in the quality for the sake of value for money. Those seeking quality and value for money bring into focus the importance of income as a demographic segmentation variable. The socio-cultural dimension of reference groups is also important in the determination of consumer preferences due to influences from peers or from aspirational groups (Alonso & Marchetti, 2008). Then there is the groups that consume the perfume due to benefits sought such as emotional and utility benefits. Lastly all the above aspects will determine the level of consumption and therefore the usage rate is of particular importance to the marketer. Table 2. Potential segmentation variables for segmenting the market for “Someday” perfume Segmentation base Explanation of segmentation base Demographic Income (high; medium; low). Given that luxury perfume, it is likely to cost more than the average non celebrity inspired perfumes. Therefore due consideration of consumer purchasing capacity ought to be taken into account. Socio-cultural dimension Reference groups: groupings of consumers for instance aspirational consumers and primary reference group consumers. Division of the consumers may also be on the basis of whether living with parents or living alone. The benefits sought by these different reference groups and demographics will be different according to the stage of development of the market which will differentiate the consumer segments. Benefits sought Standing out, quality, satisfy curiosity, acceptance in reference group, keeping up with peers Usage rate None; Very low; Medium; Very High Three Potential Groups of Consumers for Someday Aspirational consumers Price: May be less aware or conscious of the high price of luxury perfumes given that they get their money from their parents as compared to other consumers of luxury products. Luxury Perfume: Desire for this attribute differs across the gender divide since there is more demand for luxury products among females as compared to among males. Since the product is generally intended for females there will be more female, followed by unisex, and lastly male consumption. Packaging: Innovative novel packaging drives the consumption of aspirational consumers who need to the feeling of being trendy and thus the purchase of objects sported by their aspirational characters Innovative flavor: The use of fruity flavored fragrance which is innovative and has been deemed to be a favorite in the manufacture of celebrity perfumes and hence consumers will be much obliged to use Someday Quality: This segment of consumers is less concerned with quality attributes of the product but rather with the fact that it is associated with a celebrity associated with their aspiration Primary reference group consumers Price: Since they are driven by acceptance and fitting or keeping up with the reference group such as friends or family, this group will be influenced by pricing decisions to some extent and hence will not purchase the perfume that is highly priced unless the reference group upgrades to the perfume. Luxury Perfume: On the whole demand for luxury products and cosmetics is lower among the male population as compared to the female. Reference groups such as friends or peers will influence perceptions on what is deemed luxury or not. Packaging: Innovative packaging does not drive consumption in reference group consumers though it might influence it in instances of group perceptions and attitudes towards the value of innovative packaging. Innovative packaging as an attribute should therefore be marketed to target the general consumer group which will then influence consumption. Innovative flavor: The sense of innovativeness of the product is driven by group influences and hence the innovativeness of the product will tend to be determined by the reference group as a whole and not the individual consumer. Quality: With demand driven by friends peers and families, the quality of Someday will be determined by the group and hence quality will not matter to a great extent since the perceptions and attitudes of the group towards quality is what counts. Above 18 consumers Price: May be more aware of aspects of pricing though this may be mitigated by the fact that they may be earning their own incomes and do not have families to support hence high prices may not be a deterrent to purchasing “Someday”. Luxury Perfume: This group of consumers is newly independent and may want to relive their youth and since they may now have jobs they may be more inclined to spend on luxury products. Packaging: This group of consumers is also to someextent by aspirational as well as aspects of primary reference groups given the consumerism of modern day society. This group will therefore be attracted not only to the innovative packaging in order to be deemed better than friends or peers. Innovative flavor: The use of innovative fruity flavor has been found to be attractive not only to teenagers who are primary target market but also to other age groups and hence Someday may have strong sales among consumers seeking innovative novel flavors. Quality: This group of consumers is more interested in the quality of the product and will thus pay more attention to its quality rather than who it is associated with. This group will thus pay great attention to the value for money being gotten from the product. Benefits sought Benefits sought Benefits sought Potential Primary Target Audience The aspirational segment of the consumer market is the most important segment for this product for the following reasons. This segment is driven by aspiration to be like the celebrity or associated with him This segment is not influenced by aspects of quality This demographic is influenced by aspects of innovation and novelty of design This demographic is at the stage of belonging and fulfillment of social needs and hence they will tend to aspire for a sense of belonging to certain demographics (see appendix three). Analysis of External Characteristics of Target Audience According to Datamonitor, the Global fragrance industry is dominated by females accounting for 65% of consumption, 23% by males and the remaining 12% is termed unisex consumption. Celebrity perfumes on the other hand are mainly intended at certain demographics in which the celebrity has significant influence. The global fragrance industry has grown by 4.2% between 2006 and 2010 and is projected to grow by 4.7% over the course of the next five years. Fragrances by female celebrities lead the way in having the largest growth since the start of the decade with growth of over 65% (Li, Yen, & Hsiao, 2012). Since Someday is manufactured by Conty Inc which is the leading manufacturer of celebrity fragrances in the world Someday promises to have a good run. The instance of Someday being a female fragrance that is driven by a male celebrity is opening of new ground which has not been explored before. Given the large fan base that Justin Bieber has, it is no wonder that the fragrance has thus far exceeded expectations. Trends have shown that young people are increasingly becoming aspirational and this thus puts the fragrance in good stead. Luxury products and cosmetics have especially benefited from changing demographics with cosmetics accounting for 32% of luxury purchases by people aged under 18 (Baker, 2010). The data show that celebrity fragrances have enjoyed the greatest growth over the last four years with a growth of over 75% in sales due to American consumerism. This demographic is also influenced by aspects of innovation and novelty and hence the design of packaging and manufacturing which give the product a touch of the novel will give the product more appeal. Recommendations Since the perfume is intended for a population that is tech savvy, the use of social media such as MY Space and Facebook pages of Justin Bieber to promote the fragrance would boost the success of “Someday”. Through the use of social media campaign messages intended at the aspirational consumers who want to be associated with Justin Bieber could be posted. This may be through messages such as I came up with this perfume just for you (see appendix four). Given that about 65% of fragrance consumers are female and also the fact that a majority of the fans of Justin Bieber are female, messages on social media should be positioned to target this demographic (Lavin, 2012). The need for aspiration should be utilized by using Justin Bieber as a model for the perfume which will make the aspirational consumers develop a taste for the perfume Given the techno savvy nature of this group, the novelty and innovativeness of the fragrance and its bottle design ought to be emphasized in the marketing campaign. References Alonso, C., & Marchetti, R. (2008). Segmentation and Consumption of Luxury Fragrances: A Means-End Chain Analysis. Latin American Advances in Consumer Research, 2, 40-45. Baker, M. J. (2010). Marketing theory: A student text. London: SAGE. Claeys, C., Swinnen, A., & Vanden Abeele, P. (1995). Consumers’ means-end chains for think and feel products. International Journal of Research in Marketing, 12, 193-208. Claeys, C., Swinnen, A., & Vanden Abeele, P. (1995). Consumers’ means-end chains for think and feel products. International Journal of Research in Marketing, 12, 193-208. Datamonitor. (2011). Global fragrances. Fragrances Industry Profile. Gutman, J. (1982). A means-end model based on consumer categorisation processes. Journal of Marketing, 46, 60-72. Gutman, J., & Reynolds, T. (1988). Laddering theory, method, analysis, and interpretation. Journal of Advertising Research, February, 11-31. Lavin, S. (2012). Consumer B.S. # 24: Yet another piece of Justin Bieber Trash. Vigilante. Retrieved from http://helenavigilante.com/archives/7492 Li, E., Yen, H., & Hsiao, C. (2012). Exploring consumer value of multi-channel shopping: a perspective of means-end theory. Internet Research, 22, 318-339. Schiffman, L.D., O’cass, A., Paldino, A., D’alessandro, S., & Bednall, D. (2011). Consumer Behaviour (5th edition). Frenchs Forest, N.S.W.: Pearson Australia Appendices Fragrances Industry Profile: Global Appendix one Table 1: Global fragrances market value: $ million, 2006–10 Year $ million € million % Growth 2006 30,789.6 23,186.9 2007 32,515.8 24,486.8 5.6% 2008 33,895.7 25,526.0 4.2% 2009 34,942.7 26,314.5 3.1% 2010 36,293.0 27,331.3 3.9% CAGR: 2006–10 4.2% Source: Datamonitor D A T A M O N I T O R Appendix two http://www.expresspros.com/us/exchange/2007/01/ Appendix three Means-End Chain for ‘Someday’ Perfume Product Attributes Product Benefits Personal Values Nice smell Personal hygiene Beauty Special package Self-express Self-esteem Celebrity’s fragrance Belongingness High quality Appendix Four ‘Someday’ advertisement 1 https://www.google.com.au/search?q=someday+perfume&hl=ko&prmd=imvns&source=lnms&tbm=isch&sa=X&ei=l54qUNLfGqSwiQeR9IBY&ved=0CAcQ_AUoAQ&biw=824&bih=631 ‘Someday’ perfume advertisement 2 http://giftsezone.com/Perfume-by-Justin-Bieber Read More