Sophisticated Segments of the Market: Changes in Consumer Dynamics and Behaviors

Sophisticated Segments of the Market: Changes in Consumer Dynamics and Behaviors

Sidney Ornelas, Jorge Vera-Martínez
DOI: 10.4018/978-1-7998-2220-2.ch011
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Certain industries have developed segments in which both consumers and businesses have attitudes, expectations, and behaviors that differ significantly from those of the industries they are part of. Some of these new dynamics include a heightened interest in quality and the concomitant development of entities and mechanisms designed to ensure certain standards, as well as an increased level of involvement of the consumer with the product. Consumers who show the various characteristics mentioned above are part of what may be considered sophisticated segments of the market. This chapter analyses the relevance of perception of quality, the importance of educating consumers, and the changes in levels of consumer engagement in these segments. The chapter also suggests theoretical and practical implications regarding marketing strategies, as well as some gaps of knowledge that further research might address.
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Recognizing Sophisticated Segments Of The Market

Segmentation has been recognized for its role as an indispensable marketing function in the path towards business development. Successful brands and companies are able to define in detail the characteristic of the segment(s) they are trying to reach and serve. However, it has also been recognized that the segments might evolve and change; and certain relevant segments might emerge or disperse according to certain market circumstances (Carvalho, Paiva, & Vieira, 2016). This change and evolution may be accompanied by variations in certain behaviors observed among consumers. How these consumers relate to the products, companies, and brands also tends to undergo a transformation. Therefore, various roles and dynamics among these entities may also be subject to change.

Some industries have developed segments that differ significantly from those of the industries they are part of in the way consumers and businesses interact and behave. These new dynamics include a heightened interest in quality and the concomitant development of entities and mechanisms designed to ensure standards, as well as an increased level of consumer engagement with the product. Furthermore, the circumstances (e.g., the brand’s actions) likely to enhance this new level of consumer engagement are different from the level prior to these developments, possibly calling for distinct business and marketing strategies. Consumers who show the characteristics mentioned above are part of what may be termed sophisticated segments of the market.

A possible example of such an industry in the food and beverage category is coffee. Throughout this chapter, coffee refers to coffee in its final stages of the value chain, when it is made available to the consumer for personal consumption. This includes coffee sold in a cup and ready to drink, and ground coffee consumers buy to brew at home. Within this part of the industry, coffee has been commonly considered a mass consumption product. However, a segment has evolved in recent years implementing new business models requiring that companies analyze and build specific marketing strategies in response to parallel changes in consumer behavior. These changes include alternative schemes to trade coffee, as well as increasing numbers of consumers expecting higher quality coffee (Carvalho et al., 2016). Some consumers who have been used to drinking instant coffee most of their lives may happen to be exposed to higher quality coffee and thus start their journey toward consumer sophistication. Certain global brands have been part of this evolution, and new brands have also been developing in response to this market need. For example, Nestlé group, which has had a long and successful history with Nescafé (its instant coffee brand), has recently launched its highly popular Nespresso brand, whose products are marketed as high quality. Some other brands have emerged, Blue Bottle Coffee, Sightglass Coffee, and Ritual Coffee Roasters, among others, particularly targeting this demanding and sophisticated new market. This type of brand has a special relationship with consumers. Such companies do not merely provide coffee in a cup to the consumer in their coffee shops; they also invite the consumer to buy their ground coffee beans and make their own brew at home, as part of a ritual. What's more, they dispense advice on the different ways of making coffee to bring out the best possible flavor. Buying ground coffee from this type of business thus involves a new type of consumer—one who has a distinctive relationship with the product category and the companies involved in it. Someone who brews supermarket-purchased, global brand coffee at home will have a different purchasing behavior than someone who goes to specialty shops and values a freshly roasted high-quality coffee bean.

Key Terms in this Chapter

Perception of Quality: The way in which a consumer assesses the overall superiority or inferiority of a product/brand in contrast with their competitors or compared to certain standards.

Sophistication: The transition of a consumer from a mass market consumption to a more elaborated and differentiated consumption that involves a process of consumer learning. It also embeds the transition of a product/brand from targeting a mass market to acquiring the characteristics that sophisticated segments of the market require.

Segmentation: The division of the market into smaller groups, identified by certain common needs and desires, which require distinct marketing efforts.

Marketing Strategies: Specific plans and actions that companies perform in order to serve their target market in the best way possible in order to achieve certain business goals.

Sophisticated Industries: The result of the evolution of the market given certain contextual characteristics that include some consumer learnings and behavioral changes that involve a more complex consumption and the emergence of products and brands of higher quality.

Consumer Engagement: The level of emotional commitment, attraction and/or captivation of a consumer with a product/brand which results in attitudes and behaviors towards the product/brand.

Consumer Education: The result of a consumer learning about a certain product and its proper consumption (characteristics, quality, performance, etc.).

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