Market Realities (Buyer Behaviour) Flashcards
3 models of consumer behaviour
- EKB (Engel, Kolatt and Blackwell)
- AIDA
- ATR(N)
Issues with EKB
- EKB is highly complex
- There is no research/empirical evidence that supports it
ATR(N), how it works
Awareness, Trial, Reinforcement, Nudging
- If consumer is unaware, advertising can make him/her aware
- Once consumer is aware, advertising can induce trial
- Once consumer tries, advertising can reinforce usage
- When making purchase decisions, advertising might nudge him/her to buying a brand over the other
Attitudes vs Behaviour (Importance of measuring behaviour)
- If using attitudinal research to develop new brands/re-position existing ones, there must be a strong congruence between attitude/behaviour
- Attitudes matter for monitoring change, but most markets change slowly
- Evidence: People’s attitudes explained only 9% of variance in people’s behaviours (behaviour is explained by over 90% other factors than attitude)
4 key measures of stationary markets (evaluating stationary markets - e.g. FMCG)
- Penetration
- Purchase frequency
- Repeat buying rate
- Brand switching rate
How do we measure purchase behaviour?
Using the Dirichlet
The Dirichlet
- Not ‘why’ but ‘what’ first
- Descriptive model
- Assumes stationarity
- Understand what market looks like and what are the constraints
Double Jeopardy concept
Big brands benefit in two ways
- More buyers
- Who buy more frequently
Big brands gain higher proportion of light buyers, whom are ‘loyal’ (less knowledge, choose most well-known)
Sole buyers (definition, misconceptions)
- Buy only one brand
- Are not valuable: tend to be light buyers of the category
- Buy at same or slightly lower rate than ‘multi-brand’ buyer
80:20 rule
80% of buyers account for half of sales (light buyers), 20% of buyers account for the other half (heavy buyers)
Market realities: how brands compete
- Brands sell to all category buyers, not a particular segment
- Leaky bucket theory is wrong: its about refreshing and maintaining existing loyalties
- Category growth leads to loyalty declines
- Successful new brands receive almost immediate ‘normal’ purchase rates
Market realities: buyer behaviour
- Consumers are polygamously loyal to several brands
- Loyalty is stable in the medium to long term
- Price promotions increases purchases, but then rates go back to normal levels
- Seasonal brands have two buyers - peak-season and year-round buyers
Benefits of Dirichlet
- Benchmark to interpret brand performance
- See through stochastic variation that conceals underlying loyalties
- Robust to minor seasonal variations
- Accurately describes buying behaviour over time
Stationary model
Brands don’t grow or decline (market share), consumers (although different from one another) don’t change loyalties
Random/stochastic wobble
Events sway purchases, but rarely produce ongoing change in loyalty (promotions, advertising, life events)
