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