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The buying decision process, also known as the consumer decision-making process, typically
consists of several stages:
Recognition of Need: The process begins when a consumer recognizes that they have a need or
want that requires satisfaction. This need can arise from internal stimuli (such as hunger or
thirst) or external stimuli (such as advertisements or recommendations).
Information Search: Once the need is recognized, the consumer may engage in an information
search to gather information about available options. This search can involve internal sources
(memory, past experiences) or external sources (family, friends, reviews, advertisements, online
research).
Evaluation of Alternatives: After gathering information, the consumer evaluates the available
alternatives based on various criteria such as price, quality, features, brand reputation, and
personal preferences. This evaluation may involve comparing different options and weighing
their pros and cons.
Purchase Decision: Once the alternatives have been evaluated, the consumer makes a decision
to purchase a particular product or service. This decision can be influenced by factors such as
availability, pricing, promotions, and personal preferences.
Purchase: The consumer then engages in the act of making the purchase, which involves
selecting the specific product, choosing the seller or retailer, and completing the transaction.
Post-Purchase Evaluation: After making the purchase, the consumer evaluates their decision
and the satisfaction derived from the purchase. If the product meets or exceeds expectations, it
reinforces the consumer's satisfaction and loyalty. However, if the product fails to meet
expectations, it may lead to dissatisfaction and potentially negative word-of-mouth.
Entering goods, foundation goods, and facilitating goods are all categories used to classify
products used in the business market (B2B). They differ based on their role in the production
process:
1. Entering Goods:
These are raw materials or component parts that are directly transformed into a finished
product. They become a physical part of the final good.
Examples:
2. Foundation Goods:
These are indirect goods used in the production process. They are not physically
incorporated into the final product but are essential for creating it.
Examples:
Factory buildings
Delivery vehicles
3. Facilitating Goods:
These are goods or services that support the overall business operations but are not directly
involved in production.
Examples:
Cleaning supplies
Office supplies
Imagine a bakery.
Foundation goods: Ovens, mixing machines (used in production but not part of the bread)
Facilitating goods: Cleaning supplies for the bakery (support operations but not baking)
1. Demographic Segmentation:
This approach divides the market based on basic characteristics of the population. These
characteristics are often easy to measure and can be a good starting point for segmentation.
Here are some common demographic factors:
Age: Targeting products or services to specific age groups (e.g., toys for children, retirement
planning for seniors).
Gender: Marketing products differently based on male or female preferences (e.g., clothing
styles, beauty products).
Income: Tailoring offerings to different income levels (e.g., luxury goods vs. budget-friendly
options).
Family Size and Life Stage: Catering to families with young children, empty nesters, or single
adults (e.g., family vacations, downsizing solutions).
Occupation: Targeting products or services relevant to specific professions (e.g., workwear for
construction workers, software for graphic designers).
2. Geographic Segmentation:
This approach divides the market based on geographic location. Geographic factors can
influence consumer preferences due to climate, culture, or regional trends. Here are some ways
to segment geographically:
Countries or Regions: Adapting marketing strategies for different countries with distinct cultural
preferences or regulations.
Urban vs. Rural: Creating campaigns for city dwellers with different needs and lifestyles
compared to rural populations (e.g., online shopping vs. brick-and-mortar stores).
Climate: Offering seasonal products or highlighting features relevant to the local climate (e.g.,
winter clothing in cold regions, sunscreen in sunny areas).
3. Psychographic Segmentation:
This approach divides the market based on psychological characteristics, values, lifestyles,
interests, and opinions (VALS). It goes beyond demographics to understand consumers'
motivations and aspirations. Here are some psychographic factors:
Personality Traits: Targeting products to specific personality types (e.g., adventurous vs. risk-
averse consumers, outgoing vs. introverted individuals).
Lifestyles: Matching products or services to consumers' lifestyles (e.g., active lifestyles, busy
professionals, homemakers).
Interests and Hobbies: Reaching consumers through their hobbies and passions (e.g., sports
equipment for athletes, art supplies for creative individuals).
4. Behavioral Segmentation:
This approach divides the market based on consumers' past purchase history, usage habits,
brand loyalty, and how they engage with products. Behavioral segmentation helps understand
how consumers make purchasing decisions. Here are some behavioral factors:
Benefits Sought: Targeting consumers based on the benefits they seek from a product (e.g.,
convenience, value for money, status symbol).
Purchase Occasion: Marketing products relevant to specific occasions (e.g., holiday gift ideas,
back-to-school supplies).
Usage Rate: Segmenting by how often consumers use a product (e.g., heavy users vs.
occasional users, offering loyalty programs for frequent buyers).
Brand Loyalty: Identifying loyal customers and tailoring marketing efforts to retain them (e.g.,
exclusive discounts, personalized offers).
Points-of-Difference (POD):
These are the unique attributes or benefits that set your brand apart from competitors. They
are the reasons why a customer would choose you over others.
PODs should be strong, relevant to your target audience, and difficult for competitors to
replicate.
Examples of PODs:
Superior Quality: Higher quality materials, better craftsmanship, or longer lifespan compared
to competitors.
Unique Brand Image: A strong brand identity that evokes specific emotions or associations.
Points-of-Parity (POP):
These are the essential characteristics or features that a product or service must possess
to be considered a viable option in the market. They represent the baseline expectations of
consumers in that category.
POPs are not necessarily unique to your brand, but failing to meet them can put you at a
disadvantage.
Examples of POPs:
Customer Service: Offering basic customer support channels and response times.
Here's an Analogy:
POPs would be the basic expectations, like freshness, ripeness, and competitive pricing. You
wouldn't necessarily win customers just by offering fresh apples, but rotten ones would
definitely turn them away.
Examples of Points-of-Parity include product features that are standard across brands within a
category (e.g., a certain level of durability for smartphones), category-related benefits (e.g.,
freshness for food products), or customer service standards (e.g., return policies for retail
brands)
1. Core Benefit:
This is the fundamental reason why a customer buys a product or service. It addresses a
basic need or want.
For example, the core benefit of a car is transportation, of a painkiller is pain relief, and of a
social media platform is connection.
2. basic Product:
This is the basic version of a product that fulfills the core benefit. It's the most stripped-down
functional form that delivers the core value.
For example, the generic product of a car is a simple vehicle with wheels and an engine that
gets you from point A to point B.
3. Expected Product:
This level represents the set of attributes and features that customers now expect in a
product category. These features are often considered hygiene factors; if they're missing, the
product might be seen as lacking.
For example, expected features in a car might include safety features like airbags, seatbelts,
and a braking system. Customers wouldn't necessarily consider these features a plus, but
their absence would be a major negative.
4. Augmented Product:
This level goes beyond the expected product by offering additional features and benefits that
differentiate the product from competitors. These features add value and can influence a
customer's purchase decision.
For example, augmented features in a car could include a sunroof, navigation system, heated
seats, or a premium sound system. These features enhance the core benefit (transportation)
and create a more desirable product.
5. Potential Product:
This is the level that focuses on future possibilities and innovations. It involves anticipating
future customer needs and wants and developing features that aren't yet common in the
market.
Consumer-Goods Classification
1. Convenience
Shopping
Specialty
Unsought
Convenience Goods:
Characteristics: These are frequently purchased items that require minimal planning or
decision-making. Consumers prioritize convenience and accessibility when buying them.
Subcategories:
Emergency Goods: Items bought immediately when needed, like pain relievers or umbrellas
during rain.
Example Shopping Behavior: Grabbing a pack of gum at the checkout counter without much
thought.
2. Shopping Goods:
Examples:
Furniture: Consumers compare styles, comfort, material, and durability before buying a
couch.
Clothing: People consider factors like fit, brand, price, and fashion trends when choosing
clothes.
Major Appliances: Researching features, energy efficiency, brand reputation, and price is
common before buying a refrigerator or washing machine.
Example Shopping Behavior: Visiting different furniture stores to try out couches before making
a purchase decision.
3. Specialty Goods:
Characteristics: These are unique products with strong brand recognition or specific
features that consumers are willing to make a special effort to purchase. They are often less
price-sensitive and prioritize obtaining a specific brand or product.
Examples:
Luxury Cars: Consumers might travel long distances to visit a specific dealership for a
desired car model.
Designer Clothing: People might seek out specific brands or limited-edition clothing lines.
High-end Electronics: Customers might be willing to wait for the latest smartphone release from
a particular brand.
Example Shopping Behavior: Traveling to a specific store to buy a new iPhone model even if it's
available elsewhere.
4. Unsought Goods:
Characteristics: These are goods that consumers either don't know about or don't normally
think of buying. They require significant marketing or sales efforts to introduce and convince
consumers of their value.
Examples:
New life insurance plans: Consumers might not actively seek out life insurance but may be
convinced by a financial advisor.
Security systems: Homeowners might not consider a security system until a salesperson
educates them on its benefits.
Funeral services: This is a product typically not actively sought out until a time of need.
Width:
Width refers to the number of product lines or categories offered by a company. It represents
the variety of different product types within the product mix.
Width:
Width refers to the number of product lines or categories offered by a company. It represents
the variety of different product types within the product mix.
Length:
Length refers to the total number of products or items within a specific product line or category.
For example, a shoe company that offers a wide range of styles, sizes, colors, and designs
within its footwear product line has a long product length.
Depth:
Depth refers to the variations or options available for each specific product or item within a
product line.
For example, a smartphone manufacturer that offers multiple models, storage capacities,
colors, and features within its product line has deep product depth.
Consistency:
Consistency refers to the degree of similarity or relatedness among different product lines
within the product mix.
For example, a luxury fashion brand that offers clothing, accessories, and fragrances with a
consistent focus on high-quality materials, elegant design, and premium pricing has a
consistent product mix.
CHARACTERISTICS OF SERVICES
Intangibility:
Services are intangible, meaning they cannot be seen, touched, tasted, or smelled before they
are purchased.
Inseparability:
Inseparability
refers to the simultaneous production and consumption of services, meaning that services are
typically created and consumed at the same time
Variability:
Variability, also known as heterogeneity or inconsistency, refers to the fact that services may
vary in quality, consistency, and delivery from one interaction to another, or from one service
provider to another.
Due to the human element involved in service delivery and the influence of factors such as
employee performance, customer preferences, and environmental factors,
Example: The quality of customer service provided by different call center representatives may
vary based on individual communication skills, training, and knowledge, leading to inconsistent
customer experiences.
Perishability:
Perishability refers to the fact that services cannot be stored, inventoried, or resold once they
have been provided
Setting a pricing policy involves a systematic approach that considers various factors to
determine the most appropriate pricing strategy for a product or service. Here are the steps
involved in setting a pricing policy:
Determining Demand:
Conduct market research to understand the demand for the product or service at
different price points.
Analyze customer preferences, price sensitivity, buying behavior, and willingness to pay
to estimate demand elasticity.
Estimating Costs:
Calculate all costs associated with producing, marketing, and delivering the product
or service. This includes variable costs (e.g., materials, labor) and fixed costs (e.g.,
overhead, administrative expenses).
Determine the break-even point and target profit margin to ensure pricing covers costs
and generates a desired level of profitability.
It's essential to be aware of your competitors' pricing strategies. Consider these factors:
Competitors' prices: Analyze what your competitors are charging for similar products or
services.
Competitors' costs: If possible, estimate your competitors' costs to understand their
pricing margins.
Competitors' value propositions: Consider what features and benefits your competitors
offer and how they position their products.
5. Selecting a Pricing Method:
Based on your objectives, costs, and competitive landscape, choose a pricing method. Here are
some common approaches:
Cost-plus pricing: Adding a markup to your production cost to determine the selling price.
Value pricing: Setting prices based on the perceived value your product or service delivers to
customers.
Market skimming: Initially charging a high price to capture early adopters willing to pay a
premium.
Penetration pricing: Setting a low introductory price to gain market share quickly.
After considering all the above factors, select a final price that aligns with your
objectives and takes into account market realities. This price should be profitable,
competitive, and reflect the perceived value you offer to customers.
Remember: Pricing is a dynamic process. It's essential to monitor market conditions,
customer behavior, and competitor actions to ensure your pricing strategy remains
effective over time. Be prepared to adjust your pricing as needed to maintain
competitiveness and achieve your business goals.
After considering all the above factors, select a final price that aligns with your
objectives and takes into account market realities. This price should be profitable,
competitive, and reflect the perceived value you offer to customers.
Define and segment the target audience based on demographic, psychographic, behavioral, or
geographic characteristics.
Determine Objectives:
Establish clear and measurable communication objectives that align with overall marketing
goals.
Objectives may include increasing brand awareness, driving website traffic, generating leads,
increasing sales, or enhancing customer engagement.
Design Communications:
Develop compelling and relevant messages that resonate with the target audience and address
their needs, desires, and pain points.
Craft messages that are clear, concise, consistent, and aligned with the brand's value
proposition and positioning.
Select Channels:
Choose communication channels and touchpoints that allow for effective reach and
engagement with the target audience.
Consider a mix of traditional and digital channels, such as advertising, public relations, social
media, email marketing, content marketing, events, and direct marketing.
Establish Budget:
Determine the resources and budget allocated to communications activities based on available
funds, expected return on investment (ROI), and strategic priorities.
Consider factors such as production costs, media placement fees, agency fees, and
promotional expenses.
Determine the optimal media mix that maximizes reach, frequency, and impact within budget
constraints.
Allocate budget across different media channels and tactics based on their effectiveness,
audience reach, and contribution to marketing objectives.
Measure Results:
Monitor key performance indicators (KPIs) such as reach, engagement, conversion rates,
website traffic, leads generated, sales revenue, and return on investment (ROI).
Coordinate and integrate various communication activities and channels to ensure consistency
and synergy across all touchpoints.
Align messaging, branding, and visuals across channels to reinforce brand identity and
positioning.
Question paper
What are the major channel alternatives? How will you evaluate and select the appropriate
one?
Direct Sales:
Direct sales channels offer greater control over the customer experience, branding, pricing, and
relationships but may require significant investments in infrastructure, marketing, and
customer support.
Retailers:
Distributing products through retailers such as department stores, specialty shops,
supermarkets, convenience stores, or franchise outlets.
Retail channels provide broad market coverage, convenient access to customers, and
opportunities for product placement and promotion but may involve negotiating with multiple
retail partners and sharing margins.
Wholesalers:
Selling products in bulk quantities to wholesalers or distributors who then resell them to
retailers or other customers.
Wholesalers help reach smaller retailers or businesses that cannot purchase directly from
manufacturers and provide services such as warehousing, inventory management, and order
fulfillment.
Distributors:
Distributors offer market expertise, established customer relationships, and logistical support
but may require contractual agreements, pricing negotiations, and ongoing management.
Agents or Brokers:
Engaging independent agents or brokers to represent and sell products on behalf of the
manufacturer or supplier.
Agents work on a commission basis and typically focus on specific territories or customer
segments, providing market insights, sales expertise, and customer service.
E-commerce Platforms:
E-commerce channels offer global reach, 24/7 availability, and low entry barriers but require
investment in digital marketing, website development, and order fulfillment capabilities.
1. Product Characteristics:
Complexity: Complex products often require a direct sales force for demonstrations and
technical support.
Value: High-value products might benefit from a direct sales approach for better control over
pricing and customer interaction.
2. Target Market:
Buying Habits: Understand how your target customers prefer to purchase similar products
(online, retail stores, etc.).
Geographic Location: Consider the geographic concentration of your target market and the
reach of different channels.
3. Company Resources:
Budget: Direct selling can be expensive compared to utilizing existing distribution networks.
Sales Force Capabilities: Evaluate your team's skills and capacity for direct customer
interaction.
Evaluation Techniques:
Cost Analysis: Compare the costs associated with establishing and managing each channel.
Market Research: Gather data on customer preferences and buying habits in your target
market.
Channel Analysis: Evaluate the strengths and weaknesses of each type of intermediary in
reaching your target audience.
The Big Three Pricing Strategies: Cost-Based, Competition-Based, and Customer Value-Based
Choosing the right pricing strategy is crucial for any business. Here's a breakdown of the three
major approaches to pricing your products or services:
1. Cost-Based Pricing:
Concept: This strategy sets the price based on the total cost of producing, distributing, and
selling the product or service. A markup is then added to the cost to determine the final selling
price.
Calculation: Price = Total Cost (Materials, Labor, Overhead) + Desired Profit Margin
Advantages:
Ensures profitability: Guarantees covering all expenses and generating a desired profit.
Disadvantages:
Ignores customer value: Doesn't consider what customers are willing to pay or the competitive
landscape.
Potential price inflexibility: Might lead to overpriced products that struggle to compete.
2. Competition-Based Pricing:
Concept: This strategy focuses on the prices charged by competitors for similar products or
services. Businesses can choose to:
Price skimming: Set a high price initially, then gradually lower it over time (often used for new
products).
Penetration pricing: Set a low introductory price to gain market share, then raise prices later
(common in competitive markets).
Match competitor pricing: Set prices that align with the prevailing market price for similar
offerings.
Advantages:
Reduced pricing risk: Reduces the risk of setting a price that's significantly off the market
average.
Faster market entry: Competitive pricing can help gain a foothold in a new market.
Disadvantages:
Price wars: Can lead to price wars that erode profit margins for all competitors.
Focus on competition, not customer value: Doesn't necessarily reflect the true value
proposition for the customer.
Concept: This strategy sets the price based on the perceived value the customer gets from the
product or service. It focuses on the benefits customers receive and their willingness to pay for
those benefits.
Considerations:
Customer needs: Understand what problems your product solves and the value it offers to
customers.
Customer perception: Consider how customers perceive the value of your product compared to
alternatives.
Willingness to pay: Research what customers are willing to pay for products with similar
benefits.
1. The major channel alternatives refer to the various ways businesses can use to
distribute their products or services to customers. These options include:
3. Retailers: Selling products through retail stores, either owned by the company or
independent retailers.
7. Agents: Using sales agents or representatives who sell products on behalf of the
company in exchange for commissions or fees.
1. **Consumer Spending**: When the economy is doing well, people tend to spend
more money on things they want. But when the economy is bad, they're more careful
about what they buy. Marketers need to adjust their prices and promotions to match
what people can afford.
2. **Business Investment**: When businesses have more money to spend, they buy
more stuff from other businesses. But when times are tough, they cut back on spending.
This affects how much companies buy from each other, and marketers need to change
their messages to match.
4. **Supply Chain Disruptions**: Sometimes, economic ups and downs can mess up
the way things get made and delivered. This can make it harder for businesses to get
what they need to sell. Marketers need to work with other companies to make sure
everything keeps running smoothly.
5. **Interest Rates and Financing**: Changes in how much it costs to borrow money
can affect what people buy. When borrowing money is cheap, more people buy big
things like houses and cars. But when borrowing money is expensive, people spend
less. Marketers have to think about this when selling expensive items.
Basically, the economy affects how much people buy and what they buy. Marketers
have to pay attention to these changes and adjust their plans to keep selling stuff
successfully.
Internal Marketing:
Definition: Internal marketing involves engaging and aligning employees with the
organization's vision, values, and service objectives to ensure they deliver consistent
and high-quality service experiences.
Example: A hotel chain implements internal marketing by conducting regular training
sessions for its staff on customer service skills, brand values, and service standards.
Employees are empowered and motivated to embody the brand's ethos and provide
exceptional service to guests. By fostering a culture of service excellence internally, the
hotel ensures that employees are enthusiastic brand ambassadors who deliver
memorable guest experiences consistently.
External Marketing:
is a pricing strategy where a company charges different prices for the same product or
service to different customers or market segments.
Segmented Pricing: Offering different versions or variations of a product at different
price points to target different customer segments based on their willingness to pay or
preferences. For example, airlines offer different fare classes with varying levels of
flexibility, amenities, and pricing to cater to different traveler needs.
Dynamic Pricing: Adjusting prices in real-time based on factors such as demand, time
of purchase, customer demographics, or competitor pricing. For example, ride-sharing
platforms like Uber use dynamic pricing algorithms to increase prices during peak
demand periods or in high-traffic areas.
Market Segmentation: When the market can be segmented into distinct customer
groups with different price sensitivities, preferences, or purchasing behaviours. By
offering tailored pricing options, companies can capture value from each segment more
effectively.
Variable Costs: When the costs of production, distribution, or delivery vary depending
on factors such as time, location, or volume. By adjusting prices to reflect these variable
costs, companies can improve profitability and resource allocation.
Demand Fluctuations: When demand for the product or service fluctuates over time,
companies may use differential pricing to balance supply and demand, optimize
capacity utilization, and maximize revenue during peak periods.
Competitive Pressures: When faced with intense competition or price sensitivity in the
market, companies may adopt differential pricing to differentiate their offerings, capture
market share, or maintain profitability while meeting diverse customer needs.
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Threat of New Entrants: This force assesses the likelihood of new competitors entering
the industry. Factors such as barriers to entry, economies of scale, capital
requirements, and government regulations determine the threat posed by new entrants.
Higher barriers make it more difficult for new competitors to enter, reducing the threat.
Bargaining Power of Buyers: Buyers' bargaining power refers to their ability to influence
prices, terms, and conditions of purchase. Factors such as buyer concentration, price
sensitivity, availability of alternatives, and switching costs determine the bargaining
power of buyers. Strong buyer power can pressure firms to lower prices or improve
product quality, reducing profitability.
Intensity of Competitive Rivalry: Competitive rivalry measures the degree of rivalry and
competition among existing firms within the industry. Factors such as industry growth
rate, number of competitors, differentiation, and exit barriers influence competitive
intensity. High rivalry leads to price wars, aggressive marketing tactics, and reduced
profitability.
Consumer needs and trends are the cornerstones of successful marketing. Let's
break down the key terms:
By understanding the relationship between needs and trends, marketers can develop
strategies that effectively connect with consumers and drive business growth.