Principles of Marketing()

Ephrem Dejene
BA (AU), MBA (MU)
Lecturer
Department of Marketing Management
Hawassa University of Economics and Business College
email: ephremdejene@hu.edu.et/ephrya@gmail.com
 Chapter Three
Buying Behavior
 Consumer Buying Behaviour
Consumer Behaviour:
The behaviour that
consumers display in
searching for,
purchasing, using, Analysing consumer behaviour
evaluating, and
disposing of products • What do they buy?
and services that they
expect will satisfy their • Where do they buy?
needs.
• When do they buy?
Consumer market: • Why do they buy?
All individuals and
households who buy or • How do they buy?
acquire goods and
services for personal • Who buys?
consumption.
 Why study consumer
behaviour?
 Understanding consumer b/r will
help you become better
marketers as it is the foundation
for:-
 Segmenting markets
 Positioning products
 Developing an appropriate marketing
plan and strategies
Consumer Buying Process

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4
3
 Consumer buying process
Need recognition:
The first stage of
the buyer decision • Need recognition
process in which
the consumer • Difference b/n actual state and desired state
recognises a
problem or need. • Triggered by internal stimuli
• Hunger, thirst
• Triggered by external stimuli
• Visual stimulus, smell, …
 Consumer buying process

Information
search: The
stage of the
• Information search
buyer decision • Info required increases as risk
process in increases.
which the
consumer is
• Active information search
aroused to • Personal sources
search for • Commercial sources
more info. • Public sources
• Internet major sources
 Consumer buying process

Alternative
evaluation: The
stage of the
• Evaluation of alternatives
buyer decision • Look for certain benefits that can be
process in acquired by buying a product
which the
consumer uses
• Attach different degrees of importance to
info to evaluate each attribute
alternative • Then: Ranked and a choice made.
brands in the
choice set.
 Consumer buying process
Purchase
decision: The • Purchase decision
stage of the buyer
decision process • Steps b/n evaluation of alternatives and
in which the purchase decision
consumer
• Purchase decisions remaining at this stage center on
actually buys
• The place of purchase
the product.
• Terms
• Availability
 Consumer buying process
Postpurchase
behaviour: The
stage of the buyer • Postpurchase behaviour
decision process
in which • Consumer’s expectations vs product’s
consumers take perceived performance
further action
after purchase • Cognitive dissonance can be reduced by:
based on their • Follow-up calls
satisfaction or • Extended warranties
dissatisfaction. • Post-purchase advertisement.

Cognitive
dissonance:
Buyer discomfort
caused by
postpurchase
conflict.
 Characteristics Affecting
Consumer Behavior

1) Cultural
2) Social
3) Personal
4) Psychological
 Characteristics Affecting
Consumer Behavior

1) Cultural
a) Culture
Most basic cause of a person’s wants and
b/r
Marketers are always trying to spot “cultural
shifts”
Concern for health & fitness has created opport
desire for “leisure time” has resulted in increased
demand for convenience products like ready meals
 Characteristics Affecting
Consumer Behavior
b) Sub – Culture
 Groups of people with shared value.
nationalities, religions, racial groups, or
groups of people sharing the same
geographical location.
create a substantial and distinctive
market segment
youth culture’ or “club culture
2. Social factors
 Reference Groups
 Groups with whom you interact directly or indirectly
influence your purchase decisions
 Family
 source of major influence on the individual
members’ buying b/r.
 Most important buying org
– Family of orientation(parents, brothers and
sisters)
– Family of procreation (namely one's spouse and
children)
– Interactions of family ties. E.g. children influence
purchase decisions.
 Role and status

Role: Social factors

The activities a • Roles and status
person is
expected to
perform according
to the people around
him or her.

Status: the degree

of influence an
individual
exerts in the b/r
and attitude of others. .

Poeple buy and use

products that reflect
their status. Role as a manager. Role as a mother.
 3. Personal factors
Age and life cycle stage - the type of goods and services people buy change
during their lifetime.
Life cycle is an orderly series of stages in which consumer attitude & b/r evolve
Stages in the Family Life Cycle

1. Bachelor stage: Few financial burdens. Fashion opinion leaders. Recreation

Young, single, not living at home oriented. Buy: basic home equipment, furniture, cars, equipment
for the mating game; vacations.

2. Newly married couples: Highest purchase rate and highest average purchase of durables: cars,
Young, no children appliances, furniture, vacations.

3. Full nest I: Home purchasing at peak. Liquid assets low. Interested in new
Youngest child under six products, advertised products. Buy: washers, dryers, TV, baby food,
chest rubs and cough medicines, vitamins, dolls, wagons, sleds,
skates.

4. Full nest II: Financial position better. Less influenced by advertising. Buy larger-
Youngest child six or over size packages, multiple-unit deals. Buy: many foods, cleaning
materials, bicycles, music lessons, pianos.
Other personal factors
Occupations and Economic conditions: income level of the
buyers

Life style; Interests, opinion and activities

Personality and self concepts

Personality: distinguishing psychological characteristics that

lead to relatively consistent and enduring responses to the
environment.

Self concepts (self image): is a mental self-picture.

 4. Psychological factors
• Motivation
Motive or drive: A
need that is • Biological, psychological needs
sufficiently
pressing to direct • Need  motive
the person to seek
satisfaction of the
• All our needs can be classified into:–
need. • Primary
• Physiological needs, which we are born
with, such as the need for air, water,
food, clothing, shelter.
• Secondary
• Acquired needs, which we have
developed in relationship with other
members of the society.
 Market segmentation,
targeting and positioning

Chapter 4

4-19
 Overview
Why Segmentation?

Mass marketing doesn't work for

customers because...
 Customers are too scattered
Customers are too varied in buying
practices
Companies vary in their ability to serve
a segment
Market Segments and Market Segmentation
 Market Segment: A group of
customers who share a similar set
of wants.
MS: The act of dividing a
market into distinct groups of
customers who might require
separate products and/or
marketing mixes.
 Process of dividing the whole mkt
into several smaller, internally
homogenous groups.
 A company that practices MS recognizes
that buyers differ in
 their needs perceptions, and buying
b/rs.
 Basis for segmenting consumer market
A marketer has to try different segmentation variables, alone
and in combination, hoping to find the best way to view the
market structure.

Basis to
segment
a
market
 Bases for segmentation consumer market
• Geographic — The city size, urban/ suburban/ rural population
distribution and climate.
• Demographic — The distribution of a population’s age, gender,
income, occupation, education, religion, family size, nationality
and ethnic background.
• Most popular bases for segmenting
• Easier to measure
• Most needs, wants and usage rates vary closely with
demographic variables
• Psychographic — Personalities, lifestyles, social class including
activities, interests and opinions (AIO).
– People within the same demographic group can exhibit very different
psychographic profile
• Behaviour towards products.
– Benefits desired or sought.
– Attitude towards the product (enthusiastic, positive, indifferent,
negative, and hostile)
– Product usage rate ((heavy users, medium users or light users)).
– Buyers’ readiness stage (unaware, aware, informed, interested,4-23
desirous, and intending to buy)
Importance of segmentation

Segmentation enables marketers to:

• Identify and satisfy specific benefits sought
by particular groups.
• Divide the market into segments by
separating marketing programs.
• Select target market.
• Action the market segmentation plan.

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Criteria's for effective segmentation
A segmentation process must meet 5 conditions:
1. Measurable: The size, purchasing power and
profiles of the segments must be measurable.
2. Accessible: The degree to which segments can be
effectively reached and served.
3. Differentiable: The degree to which segments are
conceptually distinguishable and respond differently
to different marketing mix elements and programs.
4. Substantial: A segment must be large enough to be
profitable.
5. Actionable: the degree to which effective programs
can be designed for attracting and serving markets.

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 Target Marketing
• A target market consists of a set of buyers who
share common needs or characteristics that the
company decides to serve.
• In selecting markets, it is advisable for companies
to consider the followings:
– First, target markets should be compatible with the
organization’s goals and image.
– Second, the segment’s opportunity should
commensurate with the company’s resource.
– Third, the segment must be profitable.
– Fourth, a company ordinarily should seek a market
where there are the least and smallest competitors.

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 Strategy in Market Segments
A.Undifferentiated marketing: one marketing mix all
markets
B.Differentaited marketing:
– Marketing mix A Segment A
– Marketing mix B Segment B
– Costs associated with this strategy is relatively greater
C.Concentrated Marketing: is especially appealing to
companies with limited resources Instead of going for a
small share of a large market, the firm pursues a large share
of small markets.
 Strategies
Undifferentiated
marketing or • Undifferentiated (mass) marketing
mass-marketing:
A market
• Aggregation strategy
coverage strategy • Focus on what is common in the needs
in which a firm rather than on what is different
decides to ignore
market segment • Treating the total market as a single
differences and segment
go after the whole
market with one
• It relies on mass distribution and mass
offer. advertising and one pricing strategy
• provides cost economies
• Staple product like salt or sugar
 Strategies
Differentiated
marketing or • Differentiated (segmented)
segmented
marketing:
marketing or Multiple segment
A market coverage • Higher sales
strategy in which a
firm decides to • Minimizes the vulnerability of the
target several
market segments
firm for risk as it operates in more
and designs segments.
seperate offers for
each. • Stronger position withing each
market segment will strengthen
consumers’ over all product
category.
 Strategies
Concentrated
marketing: • Concentrated (niche) or single
A market
coverage strategy
segment strategies
in which a firm • Company resources are limited
goes after a large
share of one or a • To acquire reputation as a specialist
few submarkets.
• One or a few competitors
• Higher than normal risks
• company in a single market and if
anything wrong happens with that
market, seller will suffer considerably
Market coverage strategies
A. Undifferentiated marketing (Aggregation)

Company
marketing Market
mix

B. Differentiated marketing (Multiple segment)

Company mix 1 Segment 1
Company mix 2 Segment 2
Company mix 3 Segment 3

C. Concentrated marketing (Single segments)

Company Segment 1
marketing Segment 2
mix
Segment 3

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 Positioning
A product’s position is the way the
product is defined by consumers on
important attributes-the place the
product occupies in the consumer’s
mind relative to competing products.
Note: Positioning is not what you do
to a product. Positioning is what you
do to the mind of the prospect. That
is, you position the product in the
mind of the prospect.
 Positioning steps

Positioning task consists of three steps:-

• Identifying a set of possible customer
value differences that provide competitive
advantages upon which to build a position
• Choosing the right competitive
advantages
• Effectively communicate and deliver the
chosen position to the market
 Differentiation and positioning
Competitive 1. Identifying possible value
advantage:
An advantage differences and competitive
over
competitors advantages
gained by
offering
• Sources of differentiation
consumers • Product
greater value, • Features, performance, durability, reliability,
either through reparability, style and design.
lower prices or
by providing • Services
more benefits • Speed, convenient, careful delivery, installations
that justify
higher prices. • Channels
• coverage, expertise and performance
• People
• hiring and training better people
• Image
 Differentiation and positioning

2. Choosing the right competitive

advantage
• Choose the ones on which it will build its
positioning strategy. And decide
• How many differences to promote?

• Which differences to promote?

 Cont’d

• How many differences to promote?

• Unique selling proposition?
• More than 1 differentiator?
• BUT: risk of disbelief and loss of clear positioning
• Which differences to promote? Cont’d
• The company must carefully select the ways in
which it will distinguish itself from competitors.
• Important
• extent that it satisfies highly valued benefit to customers
• Distinctive
• deliver it in distinct way than competitors
• Superior
• presented in superior ways than it is presented by competitors
• Communicablity
• communicable and visible to customers
• Pre-emptive
• difficult for competitors to copy
• Affordable
• affordable at prices desired by buyers
• Profitable
• it should be profitable to the company
 Differentiation and positioning
3. Communicating and delivering the chosen
position
• Deliver that position
• Design the marketing mix
• All company’s marketing mix elements should
support the positioning strategy
 Chapter – 5

Managing Marketing Mix

Elements
Introduction
 Marketing revolves around the customers;
 To meet the wants of the customer; Marketers
formulate & design the Marketing Mix (4 –
P’s):
 Product
 Price
 Place and
 Promotion
What is a Product?
Product is anything that can be offered to a
market for attention, acquisition, use, or
consumption that might satisfy a want/need.
Includes physical objects, services, orgs, ideas etc.
Classification of a Product
Based on the purpose that products offer or
types of consumers:
1) Consumer Products
2) Industrial Products
1) Consumer Products:
It are products bought by the final consumers for
personal consumption.
On the basis of consumer shopping habits.
a) Convenience Products
b) Shopping Products
c)Specialty Products
d) Unsought Products
2) Industrial Products
Products bought by individuals & orgs for further
processing or for use in conducting business.
a) Materials & parts
b)Capital items
c)Supplies and service
Product Life-Cycle (PLC)
The PLC has 4 – distinct stages but Not all
products follow this cycle.
Product Life-Cycle/PLC (Cont’d)
• Introduction
– Starts, with the launching of the new product. and
characterized by:
 Low sales
 High cost per unit: Coz of low sales and high
promotional expenditure
 low or negligible profits
 Absence or low competition if the product is entirely
new.
Product Life-Cycle/PLC (Cont’d)
• Growth
 Rapidly rising sales Coz of CA and expansion
of marketing Growing profits Coz of Fall of fixed
prod’n and mkting costs.
Growing competition
introduction of different versions (models) of
the product
Product Life-Cycle/PLC (Cont’d)
4) Maturity
 Saturation of sales.
 Failing profits coz of high promotion
expenditure
 Competition begins to decline
Product Life-Cycle/PLC (Cont’d)
5) Decline
 Declining sales
 Exit of some of the firms
 Declining profits
 Declining competition
New Product Development
Every product seems to go through a life cycle.
So company has to be good at developing and
managing new products.
A firm can obtain new products in two ways:
i. Acquisition: by buying the whole company,
patent or license etc.
ii. New Product Development. Through
innovation.
New-Product Development Process
1. Idea generation
2. Idea screening
3. Concept development and testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Test marketing
8. Commercialization

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New Product Development
Process
1) Idea Generation: refers to the systematic search
for new product ideas.
2) Idea Screening: is accommodating good ideas
& dropping poor ones so that the company can
go ahead with the product ideas.
3) Concept Development & Testing:
 Product concept is a detailed version of the
idea stated in a meaningful consumer terms.
 Concept tests ask target consumers to
New Product Development Process
(Cont’d)
4) Developing marketing strategy:
 Describe target market size, structure &
behavior
 About product positioning;
 About the sales, market share and profit goals
required in the first few years.
New Product Development Process
(Cont’d)
5) Business Analysis
It involves a review of the sales, costs, & profit
projections for a new product to find out whether
they satisfy the company's objectives.
6) Prototype/ Product Development
 Refers to developing product concept into a
physical product.
 Prototype (trial product) development &
New Product Development Process
(Cont’d)
7) Test Marketing
Here the product & marketing program are
introduced into more realistic market settings in
order to examine how well it will perform.
 It gives the marketer an opportunity to twist the marketing mix
before the going into the expense of a product launch
8) Commercialization
Test marketing gives management the
information needed to make a final decision
about whether to launch the new product.
Product Mix
PM is full list of all the products offered for sale by a
company.
 Product line:- a group of products that are closely related.
 Product item:- specific version of a product that has a
separate designation in the seller’s list.
The product mix has certain width, depth and
consistency.
Width: Number of d/t product lines company carries.
Depth: How many variants are offered of each product in
the line.
Consistency: Extent to which the various product lines are
closely related.
2) Branding
A name, term, sign, symbols, or design, or a
combination of these, that identifies the
maker/seller of a product/service.
Benefits
 Helps consumers to identify products & tells
something about quality(customer)
 Gives the seller legal protection for unique
product features.(company)
It give them a guarantee that they will get the
same features and benefits and quality each
time they buy a given product.
Brand Name Selection
 Suggest something about the product
qualities/benefits
 Be easy to say, recognize and remember
 Be distinctive & extend
 Translate well into other languages
 Have no undesirable associations
 Can be registered and legally protected
3) Packaging
Activity of designing & producing the
container/wrapper for a product.
It may take different forms.
 It used to just contain & protect the product.
 Nowadays; it is a vital marketing tool.
Attracting attention on store shelves
describing product,
convincing buyers to make sale.
4) Labeling
• Printed information appearing on or with the
package.
– Its functions:
• Identifies product/brand
• Describes several things about the product
• Promotes the product through attractive graphics.
Price Decisions
DEFINITION
Narrowly, price is the amount of money
charged .

Broadly, price is the sum of all the values

that consumers exchange for the benefits of
having/using the P or S.

Produces revenues and most flexible

 Pricing Objectives
 Clearer a firm is about its objs, the
easier it is to set price.
– Survival,
– Current profit maximization,
– Market share leadership and
– Product quality leadership.
 Factors to Consider When Setting Prices
A company's pricing decisions are affected by:
1) Internal Factors
– Marketing Objectives
– Marketing Mix Strategy
– Costs
– Organizational Considerations
2) External Factors
– The Market & Demand
– Competitor’s Costs, Prices & Offers
– Other Environmental Factors
General Pricing Approaches
1) Cost–Plus Pricing
 Is the simplest pricing method
 Doesn’t take into consideration demand &
competitors price
 It consider Cost of the company and the desired
Profit
 Popular one
2) Break-Even or Target Profit Pricing
 Determine the price at which it will break
even. E.g. Public Utilities
General Pricing Approaches… (Cont’d)
3) Value Based Pricing
 Setting prices based on buyers' perceptions of
value rather than on the seller's costs.
 The strategy is offering the right mixture of
quality & good service at a fair price
General Pricing Approaches… (Cont’d)
4) Competition Based Pricing
 Setting prices based on the prices that
competitors charge for similar products.
Price capable enough to attract consumers than
competitors’ products.
Companies follow the market leader’s price
New Product Pricing Strategy
Pricing strategies usually change as the product passes
through its life cycle.
1) Market-Skimming Pricing
Set high prices initially to “skim” revenues.
Conditions
 Products quality and image must support its higher price.

2) Market-Penetration Pricing
 Low initial price to penetrate market quickly
and deeply to win a large market share.
 High sales volume results in falling costs,
 Allowing the company to cut prices even further.
The End
 PLACING PRODUCT
(DISTRIBUTION
CHANNELS) DECISION
Meaning
A distribution channel is a set of
interdependent organizations involved in
the process of making a product or service
available for use or consumption by the
consumer or business user.
 Channel members add value by bridging the
time, place, and possession gaps
Members of the marketing channel perform a
number of key functions.
Importance of Distribution
Information
Promotions
Contract:
Matching

Negotiation

Ordering
Physical distribution
Financing
Risk taking & Payment
Functions of Distributin Channels
– Information-

– Promotion-

– Contact-.

– Matching-

– Negotiation-

– Physical distribution- transport and storing

– Financing-

– Risk taking- in tha time of uncertainty

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Factors influancing channel decision?
 Cost
 Accessibility

 Suitability and

 Nature of the product.

 Channel Design Decisions
1) Analyze Customers’ Desired Service Output Levels
 Assessing the level of services that target market
customers expect from the company’s distribution
channel.
2) Establish Channel Objectives & Constraints
 It should be assessed taking in to account the targeted service
output level to customers
3)Identify Major Channel Alternatives
 Channel for reaching customers- from company’s own sales force to
agents, distributors, internet etc.
4)Evaluate the different alternatives and choose the conducive one
Intermediary Distributions
 Intensive Distribution: it is a strategy to use as
many outlets (intermediaries) as possible.
Feasible and advantageous for convenience products

 Exclusive Distribution: Putting some producers

purposefully may limit the number of their
intermediary.
exclusive right to distribute the company’s products
in the specified region.

 Selective Distribution: Companies may limit the

right to distribute their products to only
one/specific intermediary
 Promotion
(Communication) Decision
Meaning of promotion
Form of corporate comm’n that uses various
methods to reach a targeted audience with a
certain message in order to achieve specific
organizational objectives.

MC is element of marketing mix that assists

and/or persuades a prospective customer to buy a
product.
Objectives Communication Decision
1) To Inform
2) To persuade
3) To remind
 The Purpose of Promotion
 BuildAwareness & Provide Information
 Create Interest

 Stimulate Demand

 Reinforce the Brand

 Enables a firm to establish an image

The Marketing Communications Mix
The following major promotional tools:
1)Advertising: Any paid form or non-
personal presentation & promotion of ideas,
goods/services by an identified sponsor.
Includes print, broadcast, outdoor & other
forms.
2)Sales Promotions: A variety of short-term
incentives to encourage trail or purchase of
a product/service. Includes contests,
premiums, discounts, coupons etc.
The Marketing Communications
Mix… (Cont’d)
3) Public Relations: A variety of programs designed to
promote & protect a company’s image or its individual
products. (by building good relations with the company’s
various publics)
4)Personal Selling: Face-to-face interaction with
prospective purchasers. Includes sales presentations,
trade shows & incentive programs.
5) Direct Marketing: Use of mail, telephone, fax, e-mail &
other non-personal contact tools to communicate directly
with specific customers & prospects.
 Promotion mix strategies
Push: pushing’ the product through distribution
channels to final consumers. (PS and SP used)
Pull: a company directs its marketing activities
(primarily Ads and SP) toward final consumers to
induce them to buy the product.
 MAY YOUR FUTURE
THE END BE FULL OF
HAPPYNESS AND
PROSPERITY !!!

THANK YOU VERY MUCH !!!