Marketing Notes for Term-1

8/8/2019 Marketing Notes for Term-1

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MODULE 1

CORE

MARKETING

ISSUES

Marketing: the delivery of customer value at a profit

Marketing Vs Selling:

Selling occurs only after a product is produced.

Marketing starts long before a company has a product.

Core Marketing Activities

Product development R & D

Communication

Distribution

Pricing

Service

TRANSACTION MARKETING: trading of values between parties (either monetary or

barter transaction)

RELATIONSHIP MARKETING: the process of creating, maintaining and enhancing

strong value-laden relationships with customers and other stakeholders

Marketing Management: The analysis, planning, implementation and control of

programmes designed to help marketing.

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MARKETING MANAGEMENT CONCEPTS

The production concept

The product concept

The selling concept

The Marketing concept

The societal marketing concept

The production concept

It holds that management should focus on improving production and distributionefficiency because customers favour products that are available and highly affordable (it

is behind selling). This concept works better when demand exceeds supply.

The product concept

Consumers favour goods that offer quality, performance and features. In that respect we

should devote our energy in improving products (companies that have good research and

development and technology follow this concept). It can lead to “marketing myopia”.

The selling concept

Consumers will not buy enough of a product unless we undertake a large-scale selling

and promotion effort (i.e. unsought goods: encyclopedias, insurance). It aims on creating

sales transactions in the short-term – not building relationships.

The Marketing concept

Adding value to the customer more efficiently and more effectively than competitors.

The focus is on customer needs, and creating long term relationships (i.e. Toyota). It

works better when there is a clear need and when customers know what they want.

The societal marketing concept

Balancing company profits, customer wants and society’s interests. (it questions whether

purer marketing is adequate in an age of environmental problems and shortages,

worldwide economic problems and neglected social services. It asks, what is best to do

for society in the long-term) (i.e., consumer and doctor complaints that hamburgers are

rich in fat and salt)

Marketing in the Business Sector:

1. Consumer-packaged goods and companies

2. Consumer durables

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3. Industrial equipment

4. Airline firms

5. Insurance and financial services

6. Business groups (lawyers, accountants, physicians, architects etc.) 7. Non-profit organizations (schools, churches, hospitals, museums, performing arts,

police departments)

Markets and geographical barriers:1. North & South America

2. Europe and Asia

3. Eastern Europe

4. Former Soviet Republics

Needs, Wants

Demands

Products

Value,Satisfaction,

Quality

Exchange,

Transactions,

relationships

Markets

CORE MARKETING CONCEPTS

NEEDS: Needs are states of felt deprivation. Abraham Maslow relates a hierarchy of

needs below:

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THE HIERARCHY OF NEEDS - MASLOW

Physiological needs

Security needs

Social needs

Esteem needs

Self-

Actualization

needs

WANTS: The form that a human need takes as shaped by culture and individual

personality. (A hungry person in Mauritius may want a mango and rice; a hungry person

in Hong Kong may want a bowl of noodles and jasmine tea; a hungry person in

Eindhoven may want a ham and cheese roll).

DEMANDS: human wants that are backed by buying power.

The relation between wants, resources and scarcity:

Wants are unlimited

Finite

(limited)

resources

Insatiable

(unlimited)

wants

Scarcity

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Marketing management and demand Marketing management is concerned with finding and increasing demand. It also is

connected with changing demand or reducing it.

Marketing Management and relationships:

Emphasis shifts towards retaining profitable customers and building lasting relationships

with them (example: a Ford customer might well exceed 350,000 euros).

Marketing management practices

1. Entrepreneurial marketing: visualizing an opportunity and doing what it tales to

gain attention (i.e., Virgin Atlantic, Harley-Davidson)

2. Formulated Marketing: spending more on advertising in selected markets and

establishing marketing departments and marketing research (i.e. McDonalds)3. Intrepreneurial Marketing: moving to the customer and re-establishing an

entrepreneurial spirit.

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MODULE 2:STRATEGIC

MARKETING

PLANNING

1. Technologies

a. The internet

b. Cell phones

c. Fax

d. CD Roms

2. Customers

a. Selecting customersb. Lifetime connections

c. Connect directly by use of IS

1. Marketing partnersa. Internal marketing

b. Supply chain management

c. Strategic alliances

2. Global connections

a. Global alliances

b. Connections with value & social responsibility (i.e., Mc Donald inBeijing)

c. Broadening connections (i.e. the EURO)

Strategic planning

Planning to meet changing needs for the organization. It is the first stage of marketing

planning.

Marketing planning

It provides information and other inputs about the market to prepare the strategic plan.

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The annual planA short-term plan describing the company’s current situation, its objectives, the strategy,

action programme and budgets for the year ahead, and controls

The long-range planA plan describing the factors and forces affecting the organization during the next several

years (objectives and marketing strategies)

The strategic plan

A plan describing how a firm will adapt to take advantage of future opportunities and fit

them with company capabilities.

THE PLANNING PROCESS 1. Analysis: a complete analysis of the company’s situation. Analyze opportunities

and threats in the environment and strengths and weaknesses within the company.

2. Planning: this involves finding strategies that meet objectives (marketing,

product or brand plans).

3. Implementation: turning strategic plans into actions

4. Control: measuring and evaluating the results of plans and activities and taking

corrective action.

THE STRATEGIC PLAN

1. The mission

2. Strategic objectives

3. Strategic audit (external (PEST), internal – (value chain, balance sheet and profit

and loss account)

4. SWOT analysis5. Portfolio analysis (Boston Consulting Group Martix)

6. Objectives and strategies (Generic Strategies matrix)

PEST Analysis

The Economic Environment

The factors that affect consumer buying power and spending patterns. Nations varygreatly in their level of distribution of income (subsistence or agricultural Vs industrial

economies).

Purchasing power: when consumers' purchasing power is reduced (i.e., during

recession) they tend to spend more carefully and seek greater value in the products and

services they buy.

Income Distribution: how income is distributed among the population (middle class,

working class, upper class etc.) In general middle income groups are more careful

about their spending.

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Changing consumer spending habits: people shift their spending as income rises

(Ernst Engel). For example as income rises people spend less for food and more for

investments.

The Natural Environment

Natural resources that are needed as inputs by marketers or that are affected by marketing

activities. These resources are:

Shortages of raw materials: (forests, water, food, etc)

Increased cost of energy: As oil reserves will become lesser companies are searching

for other forms of energy like solar energy, electricity, natural gas, nuclear energy,

wind etc. This also affects products and consumption patterns (i.e., from big cars to

small and economical cars)

Increased pollution: the green movement makes companies think more about disposal

of chemicals, nuclear waste, mercury spills in seas, chemical pollutants and loitering

the environment. This enforces a trend toward “green marketing” in cosmetics,

detergents, catalysts, unleaded petrol etc.

Government intervention in natural resources: governments enforce environmental

sustainability and environmental control (i.e., on pollution, global warming etc.)

Technological Environment

Forces that create new technologies, creating new product and market opportunities (i.e.,

the Internet creates opportunities for teleworking and e-commerce). These forces are:

Fast pace of technological change: technology life-cycles are getting shorter (i.e., the

Pentium microprocessors). Companies that fail to anticipate and keep up with

technological change soon find their products outdated.

Fast Research & Development budgets: Technology and innovations require moreinvestments in R&D (i.e., pharmaceutical firms spend 450 EURO to develop a new

drug)

Concentration on minor improvements: as a result of the high cost of developing and

introducing new technologies companies make minor product improvements instead

of major innovations.

Increased regulations: government agencies investigate and ban unsafe products (i.e.,

in testing new drugs)

The Political EnvironmentLaws, government agencies and pressure groups that influence and limit various

organizations and individuals in a given society. Such issues are

Legislation regulating businesses: well conceived regulation can encourage

competition and ensure fair markets for goods and services. This governments develop

public policies to guide commerce (laws, regulations etc.) Examples are: packaging

&labeling, pricing, truth in advertising, product standards, fair trade.

Growth of public interest groups: growth of environmental, feminist groups, ethic

minorities, senior citizens and handicapped people.

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Increased stress on ethics and socially responsible actions: Beyond government

regulations companies are also governed by social codes and ethical rules (i.e. adult

oriented material to the Internet should not go to small children)

The Social Environment

Institutions and other forces that affect society’s basic values, perceptions, preferences

and behaviors. Here we have core beliefs against secondary beliefs that are open to

change.

Example: PEST Analysis for the global airline industry

Political: DeregulationWar and Terrorist Attack

Socio-Cultural: People Perception of Airline Safety

Economic: Global Economic Slowdown

Technological: Internet

Internal Analysis

Evaluation of company position

The Value Chain

MARKETING

FINANCE

PERSONNEL

R & DOPERATIONS

Internal

analysis

FINANCE

Does the firm has sufficient financial resources to fund its strategy? Is the mix of funding flexible?

What is the cost of capital?

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Can the firm raise new capital?

How effective is financial planning and control?

PERSONNEL

Is the recruitment policy developing the number and quality of people required to

implement the strategy? Is the training policy developing the necessary new skills and improving existing

competencies?

Is the management development programme providing the quality of management

necessary to implement the corporate strategy?

MARKETING How efficient and effective are the component parts of the marketing mix? How strong (in terms of market share) is the firm in the market served?

How effective is product development?

How good is the firm at market research and at identifying trends or gaps in the

market?

What is the relationship between turnover and profits?

What is the relationship between profits and the customer base?

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Strategic advantage profile(+ indicates a strength, - a weakness, and 0 indicates the null position)

+

+

-

Company size good for industry

Good strategic ability

Strategies reviewed less often

Corporate Resources

+Good motivation, superior trainingHR

+Market research oriented R&DR&D

+

+

+

Modern technology

Good operations management capabilities

Good Inventory management

Production

+

-

0

Excellent New Product Development with

international distribution.

Some problems in segmenting foreign markets

Limited insight about brand image

Marketing

+High profitability, good cash flow, good budgeting

system

Finance

EvaluationCompetitive Strength/Weakness Internal Area

Firm Infrastructure

Human Resource Management

Technology Development

Procurement

M a r g i n

M a r g

i n

Inbound

Logistics

Operations Outbound

Logistics

marketing

and sales

Service

Primary Activities

Support

Activities

THE VALUE CHAIN (PORTER)

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THE COMPANY MICROENVIRONMENT

Suppliers

Company

Competition

Marketing

intermediariesBuyers

The public

The Forces of Competition

According to Porter, the fight for market share competition is not manifested only in the

other players.....it is rooted in its underlying economics, and competitive forces exist that

go well beyond the established combatants in a particular industry. Customers, suppliers,

potential entrants, and substitute products are all competitors. Porter’s 5 forces (buyers,

suppliers, new entrants, substitute products and services and rivalry – see table below)

help us determine the nature and level of competition in any industry, and hence the basic

attractiveness of that industry in its terms of its profit-making potential. Awareness of the

five forces may help the company stake out a position in that industry that is less

vulnerable to attack and which could serve to gain more power in the future.

]

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New entrants

Buyers

Substitute

products/services

Suppliers Rivalry

Bargaining power of buyers

Jockeying

for position

Bargaining power of suppliers

Threat of new

entrants

Threat of substitute

products and services

THE 5 COMPETITIVE FORCES – M. PORTER

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How the competitive forces influence strategy

Sole partnerships

Use IT

Switching costs

Price cutting

Product differentiation

Mergers/acquisitions

R&D

Supplier/customer

alliances

Switching costs

takeovers

Raising prices

Reducing quality of

goods/services

Forward integration

Price competition

New products

Advertising

Suppliers

Rivalry


Improved quality of

products and services

Price reductions

Advertising, IT

Lock customers in

(switching costs)

Buy better products

Force down prices

Increase competition

Customers

Differentiation

(marketing)

Product quality

Avoiding ceiling on

prices

Limited return

Placing ceiling on pricesSubstitutes

Economies of scale


Government regulation

Entry barriersNew capacity

Reduces pricesNew entrants

MEANS

HOW TO

CONTROL?

HOW THEY

INFLUENCE

THREAT/FORCE

SWOT Analysis

A final and necessary step of the strategic analysis involves bringing together the critical

strengths, Weaknesses, Opportunities and Threats in such a way that strategy options are

immediately obvious. To discover strengths and weaknesses we look at the internal

analysis. Similarly we can obtain a good indication of opportunities and threats by

looking at PEST analysis. The SWOT is a valuable tool in visualizing strategic options

and searching possible alternative strategies for the company.

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Example of a SWOT analysis (Value Shops – Hellenic Duty Free Shops)

S O

W T

Strong financial position

good financial managementGood product line/variety

Good trading abilityy

Good management team

Good marketing capabilities

Good distribution channels

Low price capability]

Company is growing

Satisfactory market share

Exclusivity at points of sale

Costs are rising

Need to see various futuresThe Share is falling

Delays in privitisation

Conflict amon g different actors

Difficulty to forecast sales

Avoiding to reach decisions

Short-termism

Failure to attract investors

Inexperience with taxed goods

Inexperience with wholesaling

Customers becoming selective

Global market expandsDemand for Duty Free

Electronic commerce

New products/growing brands

Industry is growing

Industry growth profitability

Duty Free market stability

Duty Free as adventure shoping

Duty Free as sources of profit

Rise in tourism

Pressure to reduce prices

Increased competition

Threat of new entrants

Wholesalers’ growing power

Need to adjust quickly to change

Unpredictability of the future

Duty Free Abolition

Delay in EU integration

Delays in Fiscal Harmonisation

Instability of Money markets

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Tows Analysis (Example of ETA/SWATCH)

Formulating Strategy at ETA- Swatch

STRENGTHS1) Strong financial position

2) Good financial management

3) Good trading ability4) Improved productivity5) Good management team

6) Improved communication7) Good R&D capabilities8)Improvements in quality/productio9) Unique product

10) Marketing capabilities good11) Good distribution channels12) Low price capability

WEAKNESSES1) Costs are rising

2) Doubts about brand name

(fashion product)3) Difficulties with segmentation4) Need to see the various futures

OPPORTUNITIES1) Demand for standard watches2) Demand for unfinished products

3) Demand for luxury watches

4) Opportunities in electronics5) Global market expands6) New Technologies and materials

7) Need for improved products8)Need for quality accuracy andstyle

9)Industrial buyers

10) Demand for individualisedwatch11) Product is growing

SO STRATEGIES1) Expand into more markets(Q4Q5Q9Q11S1S2,S3,S4,S5,S9S10,S11

)

2) Diversify in standard andunfinished products(Q1,Q2,Q9,S7,S8,S11,S12) 3)Emphasize quality/develop watch(Q7,Q6,Q11,S4,S7,S8,S9,S10,S12)

4) Enter electronics market(Q4,Q5,Q6,Q7,Q9,S1,S2,S4,S7,S11,S12)

5) Create a total Swatch

environment(Q10,Q5,Q6,Q7,Q9,S1,S2,S3,S5,S6,S9)

WO STRATEGIES1) Develop/produce cheaper watches(Q1,Q5,Q6,Q9,W1,W2,W3)

2) Invest only in profitable markets

(Q4,Q5,Q6,Q7,Q8,Q9,Q11,W3,W4)3) Make alliance with industrialbuyers (Q9,Q11,S4)

THREATS1) Barriers to foreign competition

2) Slackening demand3) Pressure to reduce prices

4) Increased competition5) Value added shifts to distribution

6) Threat of New entrants7) Retailer's growing power8) Need to adjust quickly to changes

9) Capacity is augmented

10) Substitutes to time delivery11)Unpredictability of the future

ST STRATEGIES1) Differentiate on product(T8,T9,T4,T6,T8,T10,T12,S1,S2,S4,S5,S

7,S8,S9,S10,S12)

2)Sell cheaper(T1,T2,T3,T4,T6,T8,T9,T10,S7,S8,S9,S1

0,S12) 3) Consider alternative timedeliveries - make alliance in relatedindustries(T11,T12,T2,T8,T9,S4,S5,S6,S7,S8,S12)

WT STRATEGIES1) Withdraw(T1,T2,T3,T4,T6,T7,T9,T10,W1,W2,W3

,W4)

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Generic Strategies Martix

GENERIC STRATEGIES MATRIX (PORTER)

Cost

Leadership Differentiation

Focus

Cost

Leader

Focus

Differentiation

Competitive Advantage

Competitive

Scope

Narrow

Target

Broad

Target

THE MARKETING PROCESS

1. PEST (Political, Economic, Social, Technological forces)

2. Demand measurement and forecasting (marketing research)

3. Market segmentation (dividing into market segments)

4. Market targeting (evaluation of segment attractiveness)

5. Positioning (the marketing-mix – 4Ps)

The marketing mix (4Ps)

1. Product (it includes both products and services)

2. Price (how much we charge for the product or service)

3. Place (All the company activities that make a product available to customers)

4. Promotion (Activities that communicate the product or service)

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The marketing plan

1. Executive summary ( a quick overview of the plan)

2. Current marketing situation (the marketing audit that presents background data

on the market, product, competition and distribution – see Textbook, p. 100 –

Table 3.2)

3. SWOT analysis (identifying opportunities, threats, strengths and weaknesses)

4. Objectives (define the company’s objectives in Sales, Market share, profits, etc.)

5. Marketing strategy (the broad marketing approach that will be used to achieve

objectives)

6. Action programs (what will be done? Who will do it? When?)

7. Budgets (profit and loss)

8. Controls (monitor the progress of the plan)

The Global Market: Global challenges for firms today

As international trade becomes more liberalized, firms are facing tougher foreign

competition in the domestic market (i.e., Indian banks trying to stop HSBC from

spreading to the Indian market). They must develop the ability to fight off competition in

their own country or to exploit business opportunities in foreign markets.

A global industry

Where the strategic positions of competitors in given geographic or national markets are

affected by their overall global positions.

The global firm

A firm that, by operating in more than one country, gains R&D, production, marketing

and financial advantages that are not available to purely domestic competitors (seeing the

world as one market)

Global Marketing

Global marketing is concerned with integrating or standardizing marketing actions across

a number of geographic markets.

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The global environment

The international trade system:

Tariff : the tax levied by a foreign government against certain important products.

Tariffs are designed to raise revenue or to protect domestic firms.

Quota: a limit in the amount of goods that an importing country will accept in

certain product categories. A Quota is designed to conserve on foreign exchange

and to protect local industry and employment.

Embargo: a ban on the import of a certain product. (i.e., The Arab countries oil

embargo in 1973).

Exchange controls: government limits on the amount of its country’s foreign

exchange with the countries and on its exchange rate against other currencies.

Non tariff trade barriers: (i.e. bias against a foreign company’s product

standards).

The General Agreement on Tariffs and Trade (GATT)

A 50 year old treaty designed to promote world trade by reducing tariffs and other trade

barriers.

Regional free trade zones

EU and the EURO NAFTA (North American Free Trade Association)

MERCOSUR (Brazil, Argentina, Paraguay, Uruguay)

EFTA (European Free Trade Association – Norway, Switzerland, Iceland,

Liechtenstein, FYROM, Ukraine, Croatia)

AFTA (Asian Free trade Association – Philippines, Malaysia, Indonesia,

Singapore, Thailand, Vietnam, Cambodia, Laos, Myanmar)

The economic environment factors

Industrial structure (agriculture economies, raw materials economies, exportingeconomies)

Income distribution

Political, Legal, and Environmental factors

Attitudes towards international buying (India toward US firms)

Government bureaucracy (is the system efficient for helping foreign companies?)

Political stability (democracy? dictatorship?)

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Monetary regulations (how much local money government lets go away?)

Countertrade: paying with other items instead of cash (Boeing 747 with Rolls

Royce engines exchanged with Saudi oil).

The Cultural environment

Different cultures: a culture is a set of basic values, perceptions, wants and behavior

learned by a member of society from family and other important institutions.

Class system in the UK

Caste system in India

Religion in Islam

Social welfare in Sweden

In Belgium baby girls wear blue and baby boys wear pink!

Basic questions in going global

Should we go international?

Which markets we enter?

How we enter these markets?

How to enter?

ExportingIndirect (working through independent home-based international marketing

intermediaries

Direct: (the company itself handles its exports)

Joint-venturing (Entering foreign markets by joining with foreign companies

to produce or market a product or service.)

Licensing (the company enters into an agreement with a licensee in another

country (i.e., a trademark)

Contract manufacturing: (a joint venture in which a company contracts with

manufacturers in another country to produce the product.)

Management contracting (where the domestic firm supplies the management

know-how to a foreign company that supplies the capital)

Joint ownership (when a company joins investors in a foreign market to create a

local business in which the company shares ownership/control)

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Direct investment (entering a foreign market by developing foreign based

assembly or manufacturing facilities)

Which markets we enter?

Demographics

The study of human populations in terms of:

Size (a growing population means growing human needs to satisfy, offering marketers

an indication of demand for certain goods and services.

Chinese have reached 1.5 billion

Age (the changing age structure of the population)

Baby boomers in the USA grow older; the GenXers entered the picture; at the

same time Echo boomers grow. - this means there is movement from

consumerism to better quality of life or from food etc., to electronics and PCs.

The aging population (the older people become more)

Family

- There is a shift from the traditional family to the nuclear family with only one child

- fewer married couples

- growth of one person and non-family households

- more single parents

- adult-live-togethers of one or both sexes

- widowed, separated, divorced, single

Education

- the rising number of educated people

- the gap between the men and women that have a university degree has closed

especially in developed counties

Diversity

There is more economic integration both regional and national (EU, NAFTA, etc.). This

requires careful planning when standardizing marketing efforts.

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Demographic

Characteristics•Size

•Growth

•Urban/rural

•Density

•Age structure

Technological

Characteristics•Skills

•Production tech•Consumption

•Education

Geographic

Characteristics•Size’

•Topography

•climate

Economic

Factors•GDP

•Income distribution

•Rate of growth

•Investments

Socio/cultural

Characteristics•Values

•Lifestyles

•Ethnic groups

•Linguistic groups

National goals•Industry p riorities•Infrastructure

•Investment plans

Global Marketing Programs

Standardization: selling the same products and using the same marketing

approaches worldwide

Adaptation: we adjust the Marketing Mix elements (Product, Place, Price,

Promotion - to each market)

St ra igh t

ex tens ion

P r o d u c t

adap ta t ion

C o m m u n i c a t i o n

adap ta t ionD u a l

a d a p t a t i o n

P r o d u c t

inven t ion

P R O D U C T

P R O M O T I O N

Do n o t c h a n g e p ro d u c t Ad a p t p ro d u c t De ve lo p n e w p ro d u c t

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Straight extension: Marketing a product in a foreign market without any change

Product adaptation: adapting a product to meet local conditions

Price Issues

Dumping: pricing exports at levels less than their costs, or less than prices

charged in its home (i.e., Renault in France)

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MODULE 3:

CONSUMER

BUYING

BEHAVIOUR

The buying behaviour of final consumers that buy goods and services for personal

consumption.

Consumer marketAll the individuals and households who buy or acquire goods and services for personal

consumption.

Marketing

Stimuli

Product

Price

Place

Promotion

Other

Stimuli

Political

Economic

Social

Technological

Buyer’s

Buyer

Characte-

ristics

Black

bo x

Buyer

Decision

process

Buyer’s

Responses

-Product

Choice

-BrandChoice

-Dealer’s

Choice

-Purchase

Choice

-Purchase

ammount

MODEL OF BUY ING BEHAVIOUR

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Marketing Stimuli: The 4Ps (Product, Price, Place, Promotion)

Other Stimuli: the significant forces and events in the buyer’s environment, economic,

technological, political, cultural.

Buyer’s black box: where stimuli are changed into responses.

Buyer’s Responses: product choice, brand choice, etc.

Personal

•A ge

•Life-cycle

•Occupat ion

•Economic

circumstances

•Lifestyle

•Personality

•Self-consent

Buyer

Cultural

Culture

Subculture

Social

Class

Social

Reference

Groups

Family

Roles &

Status

Psychological

•Motivation

•Perception

•Learning

•Beliefs

•Attitudes

FA CTO RS I N FLU EN CI N G BEH A V I O U R

Cultural Factors

Culture: the set of values, perceptions, wants and behaviour learned by a member of

society from family and other important institutions (i.e., bringing green baseball capgifts to Taiwanese people when green is wore by men with unfaithful wives)

How culture helps us?Marketers are always trying to spot cultural shifts in order to imagine new products (i.e.

the concern about health and fitness)

Subculture: each culture contains smaller subcultures or groups of people with shared

values based on common life experiences and situations (i.e., nationalities, religion, racial

groups).

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How subculture helps us?

Subcultures make up important market segments and marketers often design products and

marketing programs tailored to their needs (i.e. Hispanics in USA)

Social Class: permanent and ordered divisions in a society whose members share similar

values, interests and behaviour. Examples are

Social classification in Britain

Pyramid – rich v poor in Latin America and Africa

Diamond shaped classification (few people at the top and bottom with many in the

middle in developed countries)

Caste system in India

How social class helps marketers: It tells us about customer income and buying power

UK National statistics classification

Routine occupations (semi-skilled, unskilled workers)7

Semi-routine occupations (assistants)6

Lower supervisory, craft, etc.5

Small employers and sole traders4

Intermediate occupations (secretaries, policemen, etc.)3

Lower managerial professional (middle managers)2

Higher professional (in law firms etc)1.2

Employers and managers in large firms (both private and

public)

1.1

Higher managerial and professional1

MEMBERSHIPCLASSIFICATION

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Social Factors

Membership groups: groups having a direct influence on a person’s behaviour and to

which a person belongs (primary {family) v secondary (religion) etc)

Reference groups: groups having a direct or indirect influence on the person’s attitude

and behaviour (i.e., a teenager following David Beckham – also called Aspiration

Groups)

Group Influence on Product/Brand Choice

P u b l i c L u x u r ie s

A y a c h t

P r i v a t e L u x u r i e s

T V v id e o g a m e s

P u b l i c N e c e s s it ie s

C a r s

D r e s s c l o t h e s

P r i v a t e N e c e s s i ti e s

R e f r i g e r a t o r

S tro n g W e a k

S t r o n g

W e a k

G r o u p

I n f l u e n c e

O n

P r o d u c t

c h o i c e

G r o u p i n f lu e n c e

O n b r a n d c h o i c e

Family

Family of orientation: the buyer’s parents providing with orientation toward religion,politics, economics, self-worth and love.

Family of procreation: the buyer’s spouse and children have a direct influence on

everyday buying behaviour.

Consumers’ buying roles

Initiator: the person who first thinks about buying a product.

Influencer: the one who influences buying behaviour.

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Decider: the person who decides to buy

Buyer: He who makes an actual purchase

User: he who uses the product.

Roles and Status

Role: the activities a person is expected to perform according to the people around him or

her.

Status: the general esteem given to a role in society.

Personal factors

Age and life cycle stage (family-life cycle)

The stages through which families might pass as they mature over time. An example

follows below:

Example: A family life cycle for financial services.

Stage in family life cycle

Life cycle stage

.

Buying or behavioural pattern

1. Bachelor stage - Young, single

people not living at home

Few financial burdens. Fashion opinion leaders. Recreation

oriented. Buy: basic kitchen equipment, basic furniture, cars,

equipment for the mating game, vacations.2. Newly married couples -

Young, no children

Better off financially than they will be in the near future. Highest

purchase rate and highest average purchase of durables. Buy: cars,

refrigerators, stoves, sensible and durable furniture, vacations.

3. Full nest I - Youngest child

under six

Home purchasing at peak. Liquid assets low. Dissatisfied with

financial position and amount of money saved. Interested in new

products. Buy: washers, dryers, TV, baby food, chest rubs and

cough medicines, vitamins, dolls, wagons, sleds, skates.

4. Full nest II - Youngest child

six and over

Financial position better. Some wives work. Less influenced by

advertising. Buy larger-sized packages, multiple unit deals, many

foods, cleaning materials, bicycles, music lessons, pianos.

5. Full nest III - Older married

couples with dependent children

Financial position still better. More wives work. Some children get

jobs. Hard to influence with advertising. High average purchase of

durables. Buy: new, more tasteful furniture, auto travel,unnecessary appliances, boats, dental services, magazines.

6. Empty nest I - Older married

couples, no children living with

them, head in labour force.

Home ownership at peak. Most satisfied with financial position and

money saved. Interested in travel, recreation, self-education. Make

gifts and contributions. Not interested in new products. Buy:

vacations, luxuries, home improvements.

7. Empty nest II - Older married,

no children at home, head retired

Drastic cut in income. Keep home. Buy: medical appliances,

medical-care products that aid health, sleep and digestion.

8. Solitary survivor - In labour

force

Income still good but likely to sell home.

9. Solitary survivor Retired Same medical and product needs as other retired group; drastic cut

in income. Special need for attention, affection and security.

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Psychological life cycles

Adults experience certain passages as they go through life (weddings, graduations,

having children). Marketers must take advantage of that and market products related to

them.

Occupation

People, profession particulars (i.e. floor workers buy more work clothes while managers

buy more smart clothes)

Economic circumstances

Market growth or recession influence buying habits

Lifestyle

A person’s pattern of living as expressed in his/her activities, interests and opinions.

Some examples of lifestyle are:

SINUS classification in Germany. It divides people according to the following

lifestyles:

o Traditional: to preserve

o Materialist: to have

o Hedonist: to indulge

o Postmaterialist: to beo Postmodernist: to have, to be and to indulge

Personality and self-concept

Personality: a person’s distinguishing psychological characteristics that lead to

responses to his/her environment.

Self-concept: self-image or the mental picture that one has of himself (we are

what we have)

Psychological factors

Motivation

A need that is sufficiently pressing to direct the person to seek satisfaction of the need.

Theories of motivation

Freud: people are largely unconscious of the real psychological forces shaping

behaviour (a person does not really understand his motivation)

Maslow: the hierarchy of needs

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PerceptionThe process by which people select, organize and interpret information to form a

meaningful picture of the world.

Selective attention: the tendency of people to screen out most of the information

to which they are exposed

Selective distortion: the tendency of people to adapt information to their personal

meanings

Selective retention: the tendency of people to retain only part of the information

to which they are exposed, usually information that supports their attitudes or

beliefs.

LearningChanges in individual’s behaviour arising from experience. Learning happens through the

interplay of:

Stimuli: a motive directing toward a particular thing

Cues: stimuli saying when, where and how we respond.

Responses: buying a product

Beliefs and attitudes

Belief: A descriptive thought that a person holds about something (Marketers are

interested in the beliefs that people formulate about specific products and services

because these beliefs make up product and brand images that affect buying

behaviour).

Attitudes: favourable or unfavourable evaluation, feelings and tendencies towardan object or idea.

The consumer decision process

Complex buying behaviour: consumer behaviour in situations characterized by

high consumer involvement in a purchase and significant perceived differences

among brands.

Dissonance-reducing behaviour: Consumer behaviour in situationscharacterized by high involvement but few perceived differences among brand

Habitual buying behaviour: Consumer buying behaviour characterized by low

consumer involvement and few significant perceived brand differences.

Variety seeking buying behaviour: Consumer buying behaviour in situation

characterized by low consumer involvement but significant perceived brand

differences.

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1 . N e e d

r e c o g n i t i o n2 . I n f o r m a t i o n

S e a r c h

3 . E v a l u a t i o n o f

a l t e rna t ives

4 . P u r c h a s e

d e c i s i o n

5 . P o s t - p u r c h a s e

b e h a v i o u r

T h e B u y e r d e c i s io n p r o c e s s

Need Recognition: the consumer recognizes a problem or need

Information search: the consumer searches for more information

Evaluation of alternatives: the consumer uses information to evaluate alternative brands

in the choice set.

Purchase decision: the buyer actually buys the product or service.

Post-purchase behaviour: when consumers take further action after the purchase based

on their satisfaction or dissatisfaction.

Documents

Marketing Notes for Term-1