How Consumer Analysis Affects Business...

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How Consumer Analysis Affects Business Strategy

CHAPTER 2

Marketing Strategy

Involves the allocation of resources todevelop and sell products or services thatconsumers will perceive to provide morevalue than competitive goods

Value: the difference between whatconsumers give up (pay with resources)for a product and the benefits they receivein return

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Foundations of Market-driven Strategies

• A thorough understanding of consumertrends, global markets, models topredict purchase and consumptionpatterns, and communication methodsto reach target markets most effectively

• Consumer Behavior

• Consumer Insight

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Creating Market-driven Strategies• Shared vision (among partners) about the

market and expected changes

• Selecting avenues for delivering superiorvalue to customers

• Positioning the firm and brand based ondistinctive competencies

• Recognizing value of collaborativerelationships with channel members and otherentities

• New organizational designs for implementingand managing strategies

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Implementationin Marketplace

Marketing Mix Product, Brand,

Price, PlacePromotion, and

7Rs

Market AnalysisConsumerCompany

EnvironmentalPolitical/Legal

SegmentationDemographic

SituationalPsychographic

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Market Analysis

The process of analyzing consumers andtrends; current and potential competitors;company strengths and resources; and thetechnological, legal, and economicenvironments

One goal is to minimize the number offailed products introduced to the market bybetter understanding the wants and needsof the market

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Market Analysis: Consumer Insight and Product Development

Consumer Insight: an understanding ofconsumers’ expressed and unspoken needsand realities that affect how they make life,brand, and product choices.

Combines fact (from research) and intuition toyield an insight that can lead to a new product,existing product innovation, brand extension,or revised communication plan

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V8, a brand of vegetable and fruit juices, introduced a new individual size juice box for consumers who want to drink “on the go.”

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Market Analysis: Consumer Environment

Includes demographic trends, personal andgroup influences, motivation, attitudes,knowledge, changing needs, consumptionpatterns, and consumer lifestylesChanges in the consumer environment can leadto changes in packaging, positioning, productdesign, and advertising methods

-Mitsubishi-Healthy Choice

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Changing Consumer Health Trends

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Market Analysis: Corporate Strengths and Resources

Resources:-Financial-Personnel / managerial -Production-Development and design-Research -Marketing / advertising

Strengths:-3M known for leadership, quality, and innovation-Advertising highlights corporate strength

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Market Analysis: Current and Potential Competitors

-Who are current competitors and which firms are likely to become competitors?

-What are advantages/disadvantages of competitors and competitive products?

-How will competitors react to new products or innovations (Manco tape; see Duck Company Case)

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Market Analysis: Market Environment

Physical Conditions

Government Stability and Regulations

Market Environment

Technology

State of Economy

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7Rs





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Market Segmentation

Process of identifying a group of people similarin one or more ways, based on a variety ofcharacteristics and behaviors

Results in market segment: a group ofconsumers with similar needs and behaviors thatdiffer from those of the entire mass market

Goal: minimize variance within groups andmaximize variance between groups

Opposite of market aggregation

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Market Segmentation

Identifying Segments

~Demographics~Psychographics~Purchase & ConsumptionBehavior

~Personality ~Culture ~Values

Consumer Characteristics

Geographical Characteristics

Situational Characteristics

~National boundaries~State or regional boundaries

~Urban/rural ~Zip code

~Work versus Leisure usage~Where used

~Time

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Criteria for Choosing Segments

• Measurability: ability to obtain informationabout the size, nature and behavior of a marketsegment

• Accessibility: degree to which segments can bereached, either through various advertising orcommunication programs or methods ofretailing

• Substantiality: size of the market--is it largeenough to be profitable?

• Congruity: how similar segment members arein characteristics or behaviors

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Market Segmentation

• Increasing diversity in consumer needs andwants leads to mass customization:customizing goods for individual customers inhigh volumes and at relatively low costs

• Key is understanding which customizedfeatures customers value the most

• Ability to reach “segment of one”

• Segmentation can increase profitability-decreases marketing expenses-increases value (and therefore price) to consumers

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Segmentation at The Limited

The Limited:Young to Boomer

Career Women

Structure:Young Men

Lane Bryant:Larger-sizes for“Real” Women

Different stores for different folksEach division evolved from

servicing a new segment of consumer

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7Rs





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Market Mix Strategies: Product

Product: the total bundle of utilities (or benefits) obtained by consumers in the exchange process

Internal considerations include:-What are the costs of developing, producing, distributing, and selling the product?-How much profits will the product generate?

External considerations include:-Will new product satisfy consumer demand better than old product or competitive product?-What packaging will most likely attract consumers and fulfill storage needs best?

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Market Mix Strategies: Price

• Price: the total bundle of costs given up by consumers in the exchange process

• Pricing considerations include:-What is the best pricing policy for the product or for the store? -How will consumers react to Everyday Low Prices or promotional prices?-Is it more important to have the “lowest price” or prices in the range consumers expect to pay?-What effect does price reduction or price ending have on perceived quality of product?-What does pricing policy need to be to maintain a healthy profit margin?

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Market Mix Strategies: Promotion and Place

• Promotion: activities involved in selling aproduct, including advertising, personal sales,publicity, and public relations-What message should be sent to consumers?-Which elements will best reach segments?-How will attributes be communicated best?

• Place: physical distribution and location of sale(retail outlet)-Where do consumers want or expect to buy this product?-What is the most efficient distribution channel and method to get productto place of sale?

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Market Mix Strategies: Brand

Brand: a trademark or distinctive name identifying a product or manufacturer

A promise to consumers that attributes they desire most will be obtained when they buy the preferred brand

Often create an emotional attachment

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7Rs





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Strategy Implementation• Even the best strategies are worthless if not

implemented well in the marketplace

• 7Rs for formulation and implementation

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Strategy Implementation

Research

Rate

Resources

Retailing

Reliability

Reward

Relationship

Design, conduct, analyze

Speed to market

Company resources

Methods, type, location

Upon channel members

Design and run programs

With partners & customers

Give information

Speed of shopping

Forms of payment

Where shop & buy

Of brand & retailer

From programs

To store and brand

Customer Satisfaction

ConsumerOrganization

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Customer Loyalty and Retention Strategies

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Customer Loyalty Programs (1 of 2)

It is less costly and easier to keep a customer than it is to create a new one

With increased choices, consumers are becoming more fickle and less loyal

Loyalty programs are designed to reward consumers for repeat patronage rather than reward cherry-pickers

These programs can increase loyalty to a brand, service, retailer, or organization

Common programs include purchase (store/brand), stay (hotel), or flyer (airline)

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Customer Loyalty Programs (2 of 2)

Help identify customer segments that can be targeted with special offers or perks that are of more value to customers

Ultimate goal is to strengthen the relationship with the customer

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Strengthening Relationships with Loyalty Programs

Make individualized marketing a reality

Institute a total quality control policy

Introduce an early warning system

Build realistic expectations

Provide guarantees

Provide information on product use

Solicit customer feedback

Acknowledge, address & rectify complaints

Reinforce customer loyalty

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Global Marketing Strategy

Thinking Globally: involves ability to understand markets beyond one’s own country of origin with respect to:

Sources of demandSources of supplyManagement & marketing methods

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Organizations must understand consumers on a global basis

Globalization provides opportunities for growth for large and small firms

The Internet provides a way to reach global markets inexpensively

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Can marketing be standardized?

-Can a firm use the same marketing program in all target countries, or must it create a different program for each?

-Which are greater-- the similarities among or differences between consumers in different countries?

-How do advantages of economies of scale and unified brand image compare to advantages of culture-specific messages?

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• Cultural analysis: the comparison ofsimilarities and differences in behavioral andphysical aspects of cultures

• Cultural empathy: the ability to understandthe inner logic and coherence of other ways oflife and refrain from judging other valuesystems

• Intermarket segmentation: the identificationof groups of customers who transcendtraditional market or geographic boundaries(similar segments around the world)

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Intermarket Segmentation

Building marketing strategy on peoples’ universals rather than differences. Escada customers are similar in affluence, taste, and style, regardless of where they live.

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Global Advertising Effectiveness

• Global advertising sends the same message toconsumers around the world

• Localized campaigns adapt messages to the norms ofthe different cultures

• When is global advertising most effective?

-Message is based on similar lifestyle

-Ad appeals to basic human needs and emotions

-Product satisfies universal needs and desires

• Language problems may occur, but back- translation,visual language, and local experts (advice) helpsovercome them

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Global Advertising Effectiveness

Before choosing a brand name, marketersshould consider the following:-Does the name of the product have another meaning in other countriesin which it might be marketed?

-Can the name be pronounced everywhere?

-Is the name close to that of a foreign brand, or does it duplicate anotherproduct sold in other markets?

-If the product is distinctly American, will national pride and prejudicework against the acceptance of the product in foreign markets?

Review Question

What are the characteristics of customer loyalty programs?

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How Consumer Analysis Affects Business...

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