Professional Documents
Culture Documents
Cbunit I
Cbunit I
The corporation has to exist for the customer; the company has to customerize itself. Such
an organization will have to establish a link between itself and the customers in the
following manner:
In the above model marketing and other stimuli enter the customers “black box” and
produce certain responses.
We must try to work out what goes on the in the mind of the customer or the “black box”.
The Buyer’s characteristics influence how he or she perceives the stimuli; the decision-
making process determines what buying behaviour is undertaken.
2. Factors Influencing Buyer Behaviour
Whenever we buy anything our final decision, as a consumer will definitely be affected by
certain factors. Some of these major factors are as given below:
1. Cultural
2. Social
3. Personal
4. Psychological
The first stage of understanding buyer behaviour is to focus on the factors that determine he
“buyer characteristics” in the “black box”. These can be summarised as follows:
Factors affecting Buyer behaviour
.
.
2.1 Cultural Factors
Culture is the most fundamental determinant of a person’s want and behaviour. The
growing child acquires a set of values; perceptions, preferences and behaviour through a
process of socialization involving the family and other key institutions.
Cultural factors have a significant impact on customer behaviour. Marketing are always
trying to spot “cultural shifts” which might point to new products that might be wanted by
customers or to increased demand.
For example, today there seems to be a cultural shift towards greater concern about health
and fitness and that has created opportunities, now even industries, servicing customers who
wish to buy products like:
Health foods
Fitness club memberships
Exercise equipment
Activity or health-related holidays etc.
Similarly our increased desire for “leisure time” has resulted in increased demand for
convenience products and services such as microwave ovens, washing machines, ready-to-
eat meals and direct marketing service businesses such as telephone banking and insurance.
Each culture contains “sub-cultures” – groups of people, which share values. Sub-cultures
can include nationalities, religions, racial groups, or groups of people sharing the same
geographical location. Sometimes a sub-culture will create a substantial and distinctive
market segment of its own.
For example, the “youth culture” or “club culture” has quite distinct values and buying
characteristics from the much older “grey generation”
Similarly, differences in social class can create customer groups. In fact, the social classes
are widely used to profile and predict different customer behaviour. Social class is not just
determined by income. It is measured as a combination of occupation, income, education,
wealth and other variables. Social Classes are relatively homogeneous and enduring
divisions in a society which are hierarchically ordered and whose members have similar
values, interests and behaviour.
Social scientists have identified seven social classes shown below
2.2 Social Factors
A customer’s buying behaviour is also influenced by social factors, such as the groups to
which the customer belongs and social status. In a group, several individuals may interact to
influence the purchase decision. The typical roles in such a group decision can be
summarised as follows:
Initiator
The person who first suggests or thinks of the idea of buying a particular product or service
Influencer
A person whose view or advice influences the buying decision
Decider
The individual with the power and/or financial authority to make the ultimate choice
regarding which product to buy
Buyer
The person who concludes the transaction
User
The one who actually uses the product or service.
There is evidence that the traditional husband-wife buying roles are changing. Almost
everywhere in the world, the wife is traditionally the main buyer for the family, especially
in the areas of food, household products and clothing.
The challenge for a marketer is to understand how this might affect demand for products
and services and how the promotional mix needs to be changed to attract male rather than
female buyers.
Consumer wants, learning, motives etc. are influenced by opinion leaders, person’s family,
reference groups, social class and culture.
2.3 Personal
Personal factors are those factors, which are unique to a particular person including
demographic factors, Sex, Racial, and Age etc. Personal factors also include who in the
family is responsible for the decision-making.
2.4 Psychological Factors
Psychological factors include:
Motives—A motive is an internal energizing force that orients a person’s activities toward
satisfying a need or achieving a goal.
Actions are effected by a set of motives, not just one. If marketers can identify motives then
they can better develop a marketing mix.
MASLOW hierarchy of needs is the theory, which explains concept of motivation through
unfulfilled needs which could be any of the following:
· Physiological
· Safety
· Love and Belonging
· Esteem
· Self Actualization
· Need to determine what level of the hierarchy the consumers are at to determine what
motivates their purchases
Perception
Perception is the process of selecting, organizing and interpreting information inputs to
produce meaning. This means we chose what info we pay attention to, organize it and
interpret it. Information inputs are the sensations received through sight, taste, hearing,
smell and touch.
Selective Exposure- This means we tend to select inputs to be exposed to our awareness.
This is more likely if it is linked to an event, and/or satisfies current needs.
Selective Distortion- This happens when we change or twist current received information,
which is inconsistent with our beliefs.
Selective Retention- In this case we remember only those inputs that support our beliefs, and
forget those that don’t.
For instance, an average supermarket shopper is exposed to 17,000 products in a shopping
visit lasting 30 minutes-60% of purchases are unplanned and is also exposed to 1,500
advertisement per day. Hence they cannot be expected to be aware of all these inputs, and
certainly will not retain many.
Interpreting information is based on what is already familiar, on knowledge that is stored in
the memory.
Ability and Knowledge
Learning can be said to be changes in a person’s behavior caused by information and
experience. Therefore to change consumers’ behavior about your product, you need to give
them new information regarding the product like free sample etc.
When making buying decisions, buyers must process information.
Knowledge is the familiarity with the product and expertise. Inexperience buyers often use
prices as an indicator of quality more than those who have knowledge of a product.
Non-alcoholic Beer example: consumers chose the most expensive six-pack, because they
assume that the greater price indicates greater quality.
Learning is the process through which a relatively permanent change in behavior results
from the consequences of past behavior.
Attitudes
We can say that attitudes are knowledge and positive and negative feelings about an object
or activity. It may be tangible or intangible, and living or non- living. Generally it seen that
attitudes drive perceptions
We learn attitudes through experience and interaction with other people. Consumer attitudes
toward a firm and its products greatly influence the success or failure of the firm’s
marketing strategy.
For instance, Honda says, “You meet the nicest people on a Honda”, dispelling the
unsavory image of a motorbike rider, in the late 1950s. Changing market of the 1990s, baby
boomers aging, and Hondas market returning to hard core. To change this they have a new
slogan “Come ride with us”.
Attitudes and attitude change are influenced by consumer’s personality and lifestyle. But,
bear in mind that there is a difference between attitude and intention to buy i.e., ability to
buy.
Personality
One way of explaining personality is all those internal traits and behaviors that make a
person unique, keeping in mind the fact that uniqueness arrives from a person’s heredity
and personal experience. Examples include:
.
Traits affect the way people behave. Marketers try to match the store image to the perceived
image of their customers.
Lifestyles
You may have observed that recently trends in lifestyles are shifting towards personal
independence and individualism and a preference for a healthy, natural lifestyle.
Lifestyles are the consistent patterns people follow in their lives. For Example you buy
healthy foods to maintain a healthy lifestyle.
Opinion Leaders
Opinion leaders basically play the role of spokesperson etc.
Marketers try to attract opinion leaders...they actually use (pay) spokespeople to market
their products. Say, for example Sachin Tendulkar (Pepsi, Visa , Biscuit, Adidas etc.)
Roles and Family Influences
Roles are things you should do based on the expectations of you from your position within a
group.
People have many roles.
Husband, father, employer/ee. Individuals role are continuing to change therefore marketers
must continue to update information. Family is the most basic group a person belongs to.
Marketers must understand:
That many family decisions are made by the family unit · consumer behavior starts
in the family unit
Family roles and preferences are the model for children’s future family (can
reject/alter/etc)
Family buying decisions are a mixture of family interactions and individual decision
making
Family acts an interpreter of social and cultural values for the individual. The
Family life cycle: families go through stages, each stage creates different consumer
demands:
Bachelor stage
.
Reference Groups
Individual identifies with the group to the extent that he takes on many of the values,
attitudes or behaviors of the group members.
Families, friends, sororities, civic and professional organizations. Any group that has a
positive or negative influence on a person’s attitude and behavior.
Membership groups (belong to)
Affinity marketing is focused on the desires of consumers that belong to reference groups.
Marketers get the groups to approve the product and communicate that approval to its
members.
Aspiration groups (want to belong to) Disassociate groups (do not want to belong to)
Honda, tries to disassociate from the “biker” group.
The degree to which a reference group will affect a purchase decision depends on an
individuals susceptibility to reference group influence and the strength of his/her
involvement with the group.
Social Class
An open group of individuals who have similar social rank. US is not a classless society. US
criteria; occupation, education, income, wealth, race, ethnic groups and possessions. Social
class determines to some extent, the types, quality, and quantity of products that a person
buys or uses.
Lower class people tend to stay close to home when shopping, do not engage in much
prepurchase information gathering. Stores project definite class images. Family, reference
groups and social classes are all social influences on consumer behavior. All operate within
a larger culture.
ORGANIZATIONAL BUYING
.
We often use the term Consumer to describe two different kinds of consuming
entities: the personal consumer and the organisational consumer (or business-to
business purchasing).
The personal consumer is one who buys goods and services for his or her own use,
for the use of the household, or as a gift for a friend.
The organizational consumers include profit and not-for-profit business, government
agencies, and institutions, all of which must buy products, equipment, and services
in order to run their organisations.
We try to understand the basics of buyer behaviour, i.e., why study consumers? And
who is our customer (consumer)?
1. Buyer Behaviour
1.1 Why Study Customers?
Specifically, in order to tailor solutions to customers’ particular needs and desires, the
marketer requires a grounded knowledge of buyer motivations and decision-making
processes, together with all those environmental factors which may exert influence upon
them. Put another way, the marketer is seeking to address three basic questions: -
Why does the customer want to buy a particular product or service?
How will he or she decide which option to purchase?
this decision?
2.2. What is Consumer Behaviour?
Mental and physical activities undertaken by household and business customers that
result in decisions and actions to pay for, purchase and use products and services
For a marketing manager, the challenge is to understand how customers might respond to
the different elements of the marketing mix that are presented to them.
If management can understand these customer responses better than the competition, then it
is a potentially significant source of competitive advantage.
Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm
needs to analyze buying behavior for:
Buyers’ reactions to a firms marketing strategy has a great impact on the firm’s
success.
marketing mix (MM)
that satisfies (gives utility to) customers, therefore need to analyze the what, where,
when and how consumers buy..
A customer is a person in either a household or an organizational unit who plays a role in
the completion of a transaction with a marketer or an entity
Who then is a Consumer?
For example, you as a customer purchasing a burger at a restaurant versus the restaurant
purchasing the burger meat, bun and condiments to prepare the hamburger for sale Can you
bring out the difference between the terms consumer, buyer, and customer?
Customer Roles
A customer plays different roles
– the person who actually consumes or uses the product and receives the
benefits
–E.g. in the example of burger, the person who actually eats the burger
Payer – the person who finances the purchase
–E.g. the person who provides the money to pay for the burger
- the person who participates in acquiring the product
–E.g. the person who orders and/or actually hands over the money for the hamburger
Business customer decision-making and the three customer roles
Businesses now spend considerable sums trying to learn about what makes “customers
tick”. The questions they try to understand are:
The purchase of the same product does not always elicit the same Buying Behavior. Product
can shift from one category to the next.
For example
Going out for dinner for you may be extensive decision making (for someone that does not
go out often at all), but limited decision making for someone else. The reason for the dinner,
whether it is a birthday celebration, or a meal with a couple of friends will also determine
the extent of the decision-making.
2. Organizational Buying vs. Consumer Buying
Marketing theory traditionally splits analysis of buyer or customer behaviour into
two broad groups for analysis – Consumer Buyers and Organisational Buyers
Consumer buyers are those who purchase items for their personal consumption
Organisational buyers are those who purchase items on behalf of their business or
organisation In contrast to consumers, organisational buyers represent those
“buying goods and services on behalf of an organisation for the purpose of the
furtherance of organisational objectives” .Before highlighting some of the
differences between the two, however, it is important to caution you against over
stressing the differences.
The most obvious difference between consumer and organisational buying is that the
underlying motivation is different; i.e. personal consumption versus business usage.
Setting for Buying: For consumers, the buying unit is within the household,
whereas for the organisational buyer, the setting is within the firm. This means as an
industrial marketer targeting the organisational buyer, you must take account of
factors such as buying procedures, levels of authority, and so on, factors not relevant
in consumer marketing.
Technical/Commercial Knowledge: You will see that usually, the organisational
purchaser will be a trained professional, more knowledgeable than the average
consumer purchaser. This can often necessitate a completely different sales
approach.
Contact with Buyers/Distribution Channels: You will find that organisational
markets are usually more geographically concentrated than consumer markets.
Factors such as proximity to available labour, raw materials, and transportation
facilities often dictate an industry’s location. In addition, compared to consumer
markets, there can be far fewer potential customers.
Number of Decision-Makers: Normally in consumer purchasing, the number of
people involved in the decision making process can be very small; i.e. an individual,
a couple, a family, etc. In organisational buying, however, a great many people can
be involved in the purchasing process.
Derived Demand: Organisational buyers often continually adjust their buying
decisions on the basis of projected sales figures, buying more units when forecast
sales are higher.
Reciprocal Demand: Sometimes, a buyer can also be a seller at the same time. A
software company producing a package for an insurance company, for instance,
might also purchase its insurance services from what is effectively one of its own
customers. Both companies want to sell to each other, affecting each other’s
eventual buying decisions to a varying degree..
Concepts User Payer Buyer Conflict resolution
Three roles often in conflict. Payers often overly concerned with cost minimization.
3.1 Purchase Objectives
What do organizations purchase for? .
the organization, and/or
Whereas,
Final (or ultimate) consumers normally purchase for:
3.2 Industrial/organizational markets
Producer
Reseller
Wholesalers
Retailers
Government
Institutional
Educational
Community
-business
Segmentation variables
Market segmentation is a two-step process of:
1. Naming broad product-markets and
2. Segmenting these broad product-markets in order to select target markets and develop
suitable marketing mixes.
This two-step process isn’t well understood. First-time market segmentation efforts often
fail because beginners start with the whole mass market and try to find one or two
demographic characteristics to segment this market. Customer behavior is usually too
complex to be explained in terms of just one or two demographic it would not be a useful
dimension for segmenting
2.3 Criteria for segmenting a broad product-market and/or service)
Effective market segments generally meet the following criteria:
1. Homogeneous (similar) within—the customers in a market segment should be as similar
as possible with respect to their likely responses to marketing mix variables and their
segmenting dimensions.
2. Heterogeneous (different) between—the customers in different segments should be as
different as possible with respect to their likely responses to marketing mix variables and
their segmenting dimensions.
3. Substantial—the segment should be big enough to be profitable.
4. Operational—the segmenting dimensions should be useful for identifying customers and
deciding on marketing mix variables.
The combined target market approach—combining two or more sub markets into one larger
target market as a basis for one strategy.
Qualifying dimensions are those relevant to including a customer type in a product-market.
Determining dimensions are those that actually affect the customer’s purchase of a specific
product or brand in a product-market.
By differentiating the marketing mix to do a better job meeting customers’ needs, the firm
builds a competitive advantage. When this happens, target customers view the firm’s
position in the market as uniquely suited to their references and needs. Further, because
everyone in the firm is clear about what position it wants to achieve with customers, the
Product, Promotion, and other marketing mix decisions can be blended better to achieve the
desired objectives.
3. Positioning
Positioning refers to how customers think about proposed and/or present brands in a market.
A marketing manager needs a realistic view of how customers think about offerings in the
market. Without that, it’s hard to differentiate. At the same time, the manager should know
how he or she wants target customers to think about the firm’s marketing mix. Positioning
issues are especially important when competitors in a market appear to be very similar. For
example, many people think that there isn’t much difference between one brand of TV and
another. But Sony wants TV buyers to see its Trinitron brand screen as offering the very
best picture.
4. Developing a Target Market Strategy
Developing a target market strategy has three phases:
1. Analyzing consumer demand
2. Targeting the market(s)
Undifferentiated
Concentrated
Multisegmented
3. Developing the marketing strategy
4.1 Selecting Target Markets (Analyzing Demand)
Need to aggregate consumers with similar needs.
Demand patterns: Do all potential customers have similar needs/desires or are there
clusters? Types of demand patterns are:
· Homogeneous Demand-uniform, everyone demands the product for the same reason(s).
· Clustered Demand-consumer demand classified in 2 or more identifiable clusters.
· Diffused Demand-Product differentiation more costly and more difficult to communicate
IE Cosmetic market, need to offer hundreds of shades of lipstick. Firms try to modify
consumer demand to develop clusters of at least a moderate size. Or uses one
MARKETING MIX.
4.2 Targeting the Market
4.2.1 Undifferentiated Approach (Total Market approach)
Single Marketing Mix for the entire market.
All consumers have similar needs for a specific kind of product.
Homogeneous market, or demand is so diffused it is not worthwhile to differentiate, try to
make demand more homogeneous.
Single marketing mix consists of:
Pricing strategy
Promotional program aimed at everybody
Type of product with little/no variation
Distribution system aimed at entire market
The elements of the marketing mix do not change for different consumers; all elements are
developed for all consumers. Examples include Staple foods-sugar and salt and farm
produce. Henry Ford, Model T, all in black. Popular when large-scale production began.
Not so popular now due to competition, improved marketing research capabilities, and total
production and marketing costs can be reduced by segmentation.
Organization must be able to develop and maintain a single marketing mix.
Major Objective is to Maximize Sales
Market segmentation - why segment markets?
There are several important reasons why businesses should attempt to segment their
markets carefully. These are summarized below
Better matching of customer needs
Customer needs differ. Creating separate offers for each segment makes sense and provides
customers with a better solution
Enhanced profits for business
Customers have different disposable income. They are, therefore, different in how sensitive
they are to price. By segmenting markets, businesses can raise average prices and
subsequently enhance profits
Better opportunities for growth
Market segmentation can build sales. For example, customers can be encouraged to “trade-
up” after being introduced to a particular product with an introductory, lower-priced product
Retain more customers
Customer circumstances change, for example they grow older, form families, change jobs
or get promoted, change their buying patterns. By marketing products that appeal to
customers at different stages of their life (“life-cycle”), a business can retain customers who
might otherwise switch to competing products and brands
Target marketing communications
Businesses need to deliver their marketing message to a relevant customer audience. If the
target market is too broad, there is a strong risk that (1) the key customers are missed and
(2) the cost of communicating to customers becomes too high / unprofitable. By segmenting
markets, the target customer can be reached more often and at lower cost
Gain share of the market segment
Unless a business has a strong or leading share of a market, it is unlikely to be maximizing
its profitability. Minor brands suffer from lack of scale economies in production and
marketing, pressures from distributors and limited space on the shelves.
Through careful segmentation and targeting, businesses can often achieve competitive
production and marketing costs and become the preferred choice of customers and
distributors. In other words, segmentation offers the opportunity for smaller firms to
compete with bigger ones
5. Market Segmentation Strategies
There are two Market Segmentation Strategies
5.1 Concentration Strategy.
This strategy talks of single market segment with one marketing mix.
PROS include
It allows a firm to specialize
Can focus all energies on satisfying one group’s needs
A firm with limited resources can compete with larger organizations.
CONS include
Puts all eggs in one basket.
Small shift in the population or consumer tastes can greatly effect the firm.
May have trouble expanding into new markets (especially up-market). Haggar
having problems finding someone to license their name for womens apparel, even
though women purchase 70% Haggar clothes for men.
Objective is not to maximize sales; it is efficiency, attracting a large portion of one section
while controlling costs.
Examples include ROLEX, Anyone wear one.
Who are their target markets??
5.2 Multi-segment Strategy
2 or more segments are sought with a marketing mix for each segment, different marketing
plan for each segment. This approach combines the best attributes of undifferentiated
marketing and concentrated marketing.
Market
Marketing mix——————————>|a market segment
|_______________________
Marketing mix——————————>|a market segment
|_______________________
Marketing mix——————————>|a market segment
|_______________________
Marketing mix——————————>|A Market Segment
|
Example: Marriott International:
1. Marriott Suites...Permanent vacationers
2. Fairfield Inn...Economy Lodging
3. Residence Inn...Extended Stay
4. Courtyard By Marriott...Business Travelers
PROS include
Shift excess production capacity.
Can achieve same market coverage as with mass marketing.
Price differentials among different brands can be maintained Contact Lens!!
Consumers in each segment may be willing to pay a premium for the tailor-made
product.
Less risk, not relying on one market.
CONS include
Demands a greater number of production processes.
Costs and resources and increased marketing costs through selling through
different channels and promoting more brands, using different packaging etc.
Must be careful to maintain the product distinctiveness in each consumer group
and guard its overall image (Contact lenses)
The core product is the same, use different Packaging, Brand Name, Price to differentiate
and create a different marketing mix. What will happen if consumers find out??
Objective: Sales maximization, but can remain a specialist. Can get firmly established in
one segment, then pursue another.