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Marketing ManagementUnit II
Unit II Analyzing consumer markets & buyer
behavior, Analyzing business markets and business
buying behavior, Market segmentation, positioning and
targeting; Tools of product differentiation; Marketing strategies in the different stage
of the product life cycle.
Consumer Behaviour Influenced by three factors1. Cultural ( Culture, subculture and social class)2. Social (Reference groups, family and social roles and
statuses)3.Personal ( Age, stage in life cycle, occupation, economic
circumstances, lifestyle, personality and self concept)
Research into all these factors can provide marketers with clues to reach and serve consumers more effectively.
Markets Consumer Markets - Business Market Global Markets Non Profit and Government Market
Consumer Behaviour Four main Psychological Processes affect
consumer behaviour
1. Motivation
2. Perception
3. Learning
4. Memory
Consumer Behaviour – Buying Decisions
Marketers must identify who makes and who has input into the buying decision,
People can be initiators, influencers, deciders, buyers or users
Different marketing campaigns might be targeted to each type of person.
Buying Process –Sequence of Events
1.Problem Recognition’
2.Information search
3.Evaluation of alternatives
4.Purchase decision
5.Post Purchase behaviour
Other FactorsMarketers job is to understand the behaviour at each stage.
1. The attitude of others,
2. Unanticipated situational factors
3. Perceived risk
may all affect the decision to buy, as will
1.Consumer’s level of post purchase satisfaction and
2 Post purchase actions on the part of the company
Analyzing Consumer Markets & Buyer Behaviour
Cultural Factors Social Factors Personal Factors Key Psychological Processes Buying decision process –Five stage Model Other Theories of Consumer Decision
Making
Analyzing Business Markets and Business Buying Behaviour
Cultural Factors Sub cultures Multi cultural marketing Social class Social Factors – Reference Groups –Primary
and secondary groups, aspirational groups, Disassociative groups ,Opinion leader
Analyzing Business Markets and Business Buying Behaviour
Family Roles and Statuses –Personal factors, Age and stage in the
life cycle, occupation and economic circumstances Personality and self concept – brand personality Life style and Values Key Psychological processes- Motivation –Freud ,Maslow,
Herzberg, Perception, Selective attention, Selective Distortion ,Selective retention- learning, memory, memory processes , encoding.
Memory Process retrieval
Buying Decision Process-Five Stage Model
Problem Recognition Information Search Evaluation of Alternatives Purchase Decisions Post Purchase Behaviour
Other Theories of Consumer Decision Making
Level of consumer involvement Decision Heuristics (rules of thumb or mental
shortcuts in decision process) and biases Mental Accounting- way consumer code,
categorise and evaluate financial outcomes of choices
Profiling the Customer Buying Decision Process
Analysing Business Markets Organisational buying is the decision making process by
which formal organisations establish the need for purchased products and services, then identify, evaluate and choose among alternative brands and suppliers.
Business markets consists of all the organisations that acquire goods and services used in the production of other products or services that are sold/rented or supplied to others
Business Markets Compared to consumer markets, business
markets generally have1. fewer and larger buyers2. Closer customer –supplier relationship3. Professional purchasing4. Several Buying influences5. Multiple sales call6. Derived demand from consumer goods
Business Markets1. Inelastic demand – not effected by price changes2. Fluctuating Demand –acceleration effect3. More geographically concentrated buyers4. Direct Purchasing Demand in the business market is derived from demand in the consumer
market and fluctuates with the business cycle.Total demand for business goods and services is quite price inelastic.Role of professional purchasers and their influencers have to be
understood and the need for multiple sales calls as well as importance of direct purchasing, reciprocity and leasing
Buying Situations Straight Rebuy – routine ,choice among suppliers, maintain product
and service quality. Can use automatic e reordering systems to save time.
Modified Rebuy – modify product , price ,delivery more participants on both sides
New task – first time , greater cost or risk longer the decision time – awareness, interest, evaluation trial and adoption. Buyer has to give product specifications, price limits, order quantities, acceptable suppliers and selected supplier
Customer’s reference program so that sales team get’s facilitated by using them as references, site visit,
Systems Buying and Selling Total Solution Approach Prime contractors Second tier contractors Systems Contractor – single supplier provides buyer with
with his or her entire requirement of MRO (maintenance, repair, operating) e.g oil inventory
Compete on price quality, relaibility and other attributes like service , minimum down time
Business Markets Buying Center is the decision making unit
of a buying organisation. Consists of initiators, users, influencers,
deciders, approvers, buyers and gatekeepers To influence these parties, marketers must
be aware of environmental, organisational, interpersonal and individual factors.
Participants in Business Buying Process Buying Center –decision making unit –initiators, users, Influencers,
deciders, approvers, buyers, gatekeepers . Based on this sales personnel and budget constraints to place. May include people from outside the organisation
Buying Center Influences – different interests, authority, status and persuasiveness giving priority to different decision area. Buyers influences –age, income, education, job position, personality, attitudes towards risk and culture. Keep it simple , want the best, want everything done. Some do rigourous analysis group. Ultimately individuals make buying decisions.
Buying Center Targeting – major decision participants ,What decisions do they influence, group dynamics not known. Small sellers reach out to key buying influences .Large ones go for multi level indepth selling
Business Customers Price Oriented Customers- Transactional selling (Price is
everything) Solution Oriented Customers – (Consultative
selling).Lower toatla cost or more dependable supply or service
Gold Standard Customers (Quality selling) Best performance in terms of product quality, assistance
Strategic Value Customers (Enterprise selling) Solution s to enhance customer revenues, decrease
customer risks, reduce customer costs
Purchasing Procurement Process Purchasing Orientations- increase in importance of
procurement functions- seek best value from fewer and better suppliers. Can be buying orientation, Procurement orientation ,Supply chain management orientation
Types of Purchasing Processes –Routine products, Leveraged products, Strategic products, Bottleneck products
Purchasing Organisation and Administration –Purchasing is doing more cross functional work than ever before
Stages in the Buying Process
Buy phase Buy Classes
New Task Modified rebuy Straight Rebuy
Problem Recognition Yes Maybe No
General need recognition
Yes Maybe No
Product Specification
Yes Yes Yes
Supplier Search Yes May be No
Proposal Solicitation Yes May be No
Supplier Selection Yes Maybe No
Order –Routine Specification
Yes May be No
Performance Review Yes Yes Yes
E-Procurement
Direct extranet links to suppliers Buying Alliances –Transora by Coke and
Pepsi Company Buying Sites –RFP’s are posted
Supplier Selection Price Supplier Reputation Product reliability Service reliability Supplier Flexibility Total Score
Order –Routine Specification Negotiate final order Technical specifications’ Quantity needed Expected time of delivery Return policies Warranty Leasing Stockless purchase plans- blanket contract –resupply at agreed price Vendor managed inventory OTIFNE – On time in full no error
Managing Business to Business Customer Relationships
Benefits of Vertical Coordination – partner independence , environment uncertainty
Availability of alternatives Importance of supply Complexity of supply Supply market dynamism Risk and Opportunism –safeguarding and
adaptation
Buyer Supplier Relationships
Basic Buying and Selling Bare bones Contractual transaction Customer supply Cooperative systems Collaborative Mutually Adaptive Customer is king
Buying Process -8 Stages Problem Recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review
Market Segmentation, Positioning and Targeting
A marketer can rarely satisfy every one in the market as everyone tastes and preference are different.
Market is divided into segments. Company needs to identify which market segments it can
serve effectively. Identifying and profiling distinct groups of buyers who
might prefer or require varying product and services mixes by examining demographic, psychographic and behavioural differences among buyers
Market Segmentation, Positioning and Targeting
Marketer then decides which segments presents the greatest opportunity –called Target Markets.
For each chosen target market , there is an market offering( a value proposition which is a set of benefits that are offered to customers to satisfy their needs. It can be combination of products, services, information and experiences.
The offering is POSITIONED in the minds of the target buyers as delivering some central benefit – e.g. King fisher for class in air travel, Platinum Card for the HNI.
Levels of Market Segementation Mass marketing Micromarketing
1. Segments
2. Niches
3. Local areas
4. Individuals
Market Segmentation, Target Markets and Positioning
Concepts Process Basis Target market Strategies – Aggregation,
single segment and multiple segment Steps in developing a positioning strategy. Frequently used methods of forecasting
demand in market segments.
Market Segments and Target Markets
Needs, spending power, willingness to spend Diversity among buyers Groups of customers with similar needs clubbed as
segments (homogenity within a segment )and heterogenity (between segments)
Market segments –different wants, buying preferences, or product use behaviour
Segment targeted differently with different marketing mixes
Market Segmentation Benefits of Market Segmentation Process of Market Segmentation
Process of Market Segmentation Identify current and potential wants that
exist within a market Identify characteristics that distinguish
among the segments Determine the size of segments and how
well they are being satisfied
Market Segments A group that shares a want distinguishable from the rest of
the market is a market segment Basis for segmenting – 1.Measurable2.Obtainable , 3.Accessible,4. Large enough to be profitable 5. Even micro marketing in consumer marketing like
customer loan, home design
Market Segementation Groups of customers with different wants,
buying preferences or product use behaviour,
Process of dividing the total market for a good or service into several smaller, internally homogenous groups
Members of each group are similar with respect to to factors that influence demand
Target Market A specific market segment (people or
organisations) for which the seller designs a particular marketing mix is a target market
Benefits Customer oriented -tailored to want of
customers Efficient use of resources Firms can compete in selected segments
Ultimate Consumers and Business Users
Ultimate consumers business users
Segmenting Consumer Markets Segmentation Basis Geographic Demographic Psychographic Behavioural
Geographic
Regions, districts ,cities, metros, tier II cities, semi urban, rural , North East South, west, State wise, hilly areas, coastal areas
Regional Population distribution
Demographic Age Gender Family life style , income, education Social class Clusters of similar characteristics
Psychographic Segmentation Examining Attributes related to how person thinks ,feels
and behaves- personality dimensions (compulsive vs cautious, quiet vs outgoing not easy to measure) life style characteristics, consumer values
Personality Characteristics Lifestyle Values- Self respect ,Fun and enjoyment, Sense of
belonging, Security, Having warm relationships, Sense of accomplishments, Excitement,Being well respected
Behavioral Segmentation
Based on product related behaviour Benefits desired Usage rate
Segmenting Business Markets Customer Location _Region,Location Customer type- industry, size, org.
structure, purchase criteria Transaction conditions –buying
situation(new , modify rebuy, Usage rate, purchase procedure
Target Market Strategies Aggregation Strategy- mass market strategy
,undifferentiated market strategy toatl m,arket as sisngle segment –enjoy primary benefit and disregard frills-single product for mass audience- customers likely to respond well to a single marketing mix.Objective is cost minimisation.
Single Segment Strategy Concentration strategy involves selecting one segment
from within the total market as the target market One marketing mix to reach this single segment Niche markets – penetrate one market in depth and acquire
reputation as specialist in relatively small markets Risks and limitations- all eggs in one basket
Multiple Segment Strategy Tow or More different groups of potential
customers are identified as target marketers A separate mix is developed to reach each
target ed segment
Guidelines in Selecting Target Markets
Positioning Select the positioniong Concept Design the dimension or feature that most
effectively conveys a consistent position
Forecasting Market Demand Demand forecasting Basic forecasting terms Market share Market factor – no of cars three years and above older –
relates to replacement demand for tyres. Population, per capita income, no of people served by a store are market factors to get an idea of how many retail stores RIL needs
Methods for forecasting sales Market Factor Analysis- select the best market factors and
minimise the number of market factors. Direct derivation method correlation analysis
Survey of Buyer Intentions – intend to actual Test Marketing Past Sales and Trend Analysis Sales –Force Composite Executive Judgement – Delphi Technique
Segment Marketing Market segment consists of a group of customers who share a similar
set of needs and wants. Car buyers who just need transportation versus sports car lovers
Difference in segment( small medium or large car segment) and sector (young middle income car buyers)
Segment s not created but identified Segment marketing can fine tune attributes to meet customer
requirements like flexible market offering (naked solutions with discretionary options at additional charge)
Market Segments Can be defined in different ways Preference segments based on proportion of attributes that
customer prefer -say in Ice cream sweetness and creaminess. They can be categorised as
1. Homogenous preferences -Same2. Diffused preferences- Scattered in space. First may be in the center
and other may be in corner catching those dissatisfied3. Clustered preferences – reveal distinct preference clusters called
natural market segment. First firm may position in center or to largest group (concentrated marketing or could develop several brands positioned in different segments.
Niche marketing A niche is a narrowly defined customer
group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments. Those with bad credit history can be targeted by high risk credit card providers who will take a hefty premium for such services
Attractive Niche Customers in a niche have distinct set of
needs They will pay a premium for the needs.
Product DifferentiationCentral themes in marketing strategy are
Product Differentiation Product positioning
Product A set of tangible and intangible attributes
which may be a good service, place, person or ideas which results in a want satisfaction of a consumer.
It may include packaging, color price, quality and brand, plus the seller’s services and reputation
Types
Based on who will use them and how they will be used
Consumer Products Business Products
Consumer Products Classification
Convenience good – item bought without gathering much additional information like comparing price and quality – food items, drugs, toothpaste, bulbs batteries- low unit price, not bulky
not affected by changes in fad and fashion accessible when demand arises so distributed widely and
inventory maintained. Retailers stock several brands of same item. Retailers do not advertise convenience goods
Shopping Goods A tangible good for which a consumer wants to compare
quality, price, and perhaps style in several POS before making a purchase is considered a shopping good- designer wear, furniture, major appliances, cars/scooters
Buying habits effect distribution and promotion strategies of both manufacturers and middlemen- fewer retail outlets
Manufacturers dependent on retailers as retailers image more important than manufacturers. E.g
Speciality Goods A tangible product for which a consumer has s
strong brand preference and is willing to expend substantial time and effort in locating the desired brand is called a specialty good. Expensive men’s suiting ,stereo sound equipment, HDTV,photographic equipment.
Fewer retail outlets as brand preference exists Advertisement is high
Unsought Goods A new product that the consumer is not yet
aware of or a product that the consumer is aware of but does not want it right now. A battery powered car or one person scooter
Difficult and impossible advertising task and personal selling job when marketing unsought goods
Business Goods Raw materials- goods from nature –forest
mines, minerals or agri produce/livestock and animal products
Prices by supply and demand Transportation major consideration Natural resources marketed directly from
producer to user Not much scope in product differntiation
Business goods-Fabricating materials and Parts
Fabricating material require further processing – steel, yarn, flour into bread
Fabricated parts can be used without any further change in form- zipper in clothing
Installations – Manufactured products major expensive and long lived equipment – large generators in a dam/ thermal power station, factory equipment. Each unit sold is high value and each manufacturer has reputation
Accessory Equipment- like fork lift with life shorter than installations but not part of inventory or used up in production
Operating Supplies- low value short life items not incorporated in the product but gets used up in manufacture –lubricating oils, stationary, heating oil. Distributed widely ,bought by many organisations
Brand and Trade mark A name and /or mark intended to identify and
differentiate the product of one seller or a group of sellers Brand name/mark is part of a brand that can be vocalised
–words /letters or numbers. Mark is appears in the form of symbols, design or distinctive cover or type of lettering
Brand equity – is the value a brand adds to a product. Trademark is a legal term and is a brand that has been
adopted by a sellerand given legal protection.
Product Differentiation -Max Scope in Product Management
Tangible Product attributes and functions Intangible characteristics and emotional
associations
Tangible Product Attributes and Functions Ingredients/formula- Close Up with Gel, TTK with
Teflon, Promise with clove oil, Vatika with herbal mix Functional value- 3m Scotch tape –transparent, disappears
when applied, computer controlled fridge –Video con Additional features- Aristocrat suitcase with wheels and
suit compartment Packaging- Frooti in aesthetic hygienic tetra pack Design superiority – Kinetic Honda, Titan watches Product quality/technological/operational
efficiency/service – Maruti service
Intangible characteristics and Emotional Associations
Prestige – “Take the world in your stride”, “James Bond-the legend of a man” Reid and Taylor
Locate attributes that makes the product distinct
Enhancing value the aim , Product attributes the tool
Giving customer the value he seeks
Identifying the Buying Motives of Target Consumers
Leading Customer Benefits and Product attributes
Value addition and product differentiation are concurrent processes
Condition for Differentiation to succeed
The differentiation should be perceptible Should be routed in competitive advantage- chanel
technology, clout, unique production process flexible production facilities, advanced R&D for product innovation are competitive advantages- develop these avenues
Coco Cola fights on the power of its name Maruti uses service as differentiator
Product Positioning Positioning is a platform for the brand and
acts as facilitator for the brand to get through to the consumer
Act of fixing the locus of the product offer in the minds of the target consumers.
Firm decides around what parameters the product offer has to be placed before target consumers
Positioning Product cannot be Everything to Everyone –hence
positioning Attempt is to lodge the differntaited product in a particular
locus in the minds of the consumer Positioning means putting the product in a predetermined
orbit Positing connects product offering with target market Consumer’s mind is a geometric Perceptual space :
Product seeks a locus in the space through positioning
Positioning While positioning reckon with (take into consideration)
competitiors’s especially leaders positioning Has to be monitored and adapted continually Product and Value Positioning Avenues for positioning are many Communicating the value proposition to Target consumer Product and Brand Positioning Product repositionoing
Differentiation in Marketing Price - low cost position/cost leadership Differentiation- offer superior value to the customer Helps the firm fight on non price plank Can be achieved through multiple sourcing in multiple
ways – product , distribution methods or promotion. Also firm collaboration, plant location, after sales can be made to differentiate an offer to make it distinct. L& T in Selecting HR with superiority in executing projects
Business markets Must form strong bonds and relationships
with their customers and provide them added value. Some customers, however may prefer more of a transactional relationship.
Institutional Markets Consists of schools, hospitals, nursing homes, prisons, and
other institutions that provide goods and services to people in their care.
Buyers for government organisations tend to require a great deal of paperwork from their vendors and to favour open bidding and domestic companies.
Suppliers must be prepared to adapt their offers to the special needs and procedures found in institutional and government markets
Product Differentiation Allows firm o operate on a non price plank
Marketing Strategies in the Different Stages of the Product life Cycle
Life Cycle consists of four stages Introduction Growth Maturity Decline
Product Life Cycle Consists of the aggregate demand over an
extended period of time of all brands comprising a generic product category.
Shapes of PLC curves vary from one product category to the other
Characteristics –Stages of PLC
Stage
Characteristics Introduction Growth Maturity Decline
Customers Innovators Mass market
Mass Market
Loyal customers
Competition Little ,if any Increasing Intense Decreasing
Sales Low levels, then rising
Rapid growth
Slow/no annual growth
Decreasing
Profits None Strong ,then peak
Declining
Annually
Low /none
Stage Introduction Growth Maturity Decline
Overall Strategy
Market Development
Market Penetration
Defensive positioning
Efficicency
Costs High per unit Declining Stable or increasing
Low
Product Strategy Undifferentiated Improved Items
Differentiated Pruned Line
Pricing Strategy Most likely high Lower over time
Lowest Increasing
Distribution Strategy Scattered Intensive Intensive Selective
Promotion strategy Category awareness
Brand preference
Brand loyalty Reinforcement
Marketing Implications of Different Product Life Cycle Stages
PLC Concept as Tool in Formulating and Implementing Marketing Strategy
Product has to pass through certain staes in its life Stage depends on market reaction, market behaviour and
response Duration of phase depends on newness,functions and
marketing strategy By manipulating market behaviour ,life cycle stages can be
manipulated.(can prolong/manipulate each phase)
PLC Concept Helps Strategy Formulation
Pre-Planning product launch Prolonging the profitable phase Facilitates investment decisions Facilitates choice of appropriate entry
strategy Helps to identify right time to exit Provides Useful clues for managing
customers
Linkage in PLC and Entry Strategy
Innovator at introduction stage Early follower in early growth stage Segmenter in late growth stage Me –too in maturity stage
PLC Operates at three levels Product level Product sub category level Brand level