Marketing Management Unit II

Unit II 
Analyzing

consumer markets & buyer

behavior,  Analyzing business markets and business buying behavior,  Market segmentation, positioning and targeting;  Tools of product differentiation;  Marketing strategies in the different stage of the product life cycle.

Consumer Behaviour 

Influenced by three factors 1. Cultural ( Culture, subculture and social class) 2. Social (Reference groups, family and social roles and statuses) 3.Personal ( Age, stage in life cycle, occupation, economic circumstances, lifestyle, personality and self concept) Research into all these factors can provide marketers with clues to reach and serve consumers more effectively.

Markets
Markets  Business Market  Global Markets  Non Profit and Government Market 
Consumer

Four main Psychological Processes affect consumer behaviour Motivation Perception Learning Memory . 2. 3. 4.Consumer Behaviour  1.

buyers or users  Different marketing campaigns might be targeted to each type of person.  People can be initiators. influencers. . deciders.Consumer Behaviour ± Buying Decisions  Marketers must identify who makes and who has input into the buying decision.

Buying Process ±Sequence of Events 1.Problem Recognition¶ 2.Evaluation of alternatives 4.Post Purchase behaviour .Information search 3.Purchase decision 5.

1.Other Factors Marketers job is to understand the behaviour at each stage. Unanticipated situational factors 3.Consumer¶s level of post purchase satisfaction and 2 Post purchase actions on the part of the company . The attitude of others. 2. Perceived risk may all affect the decision to buy. as will 1.

Analyzing Consumer Markets & Buyer Behaviour Factors  Social Factors  Personal Factors  Key Psychological Processes  Buying decision process ±Five stage Model  Other Theories of Consumer Decision Making  Cultural .

Analyzing Business Markets and Business Buying Behaviour Factors  Sub cultures  Multi cultural marketing  Social class  Social Factors ± Reference Groups ± Primary and secondary groups.Opinion leader  Cultural . aspirational groups. Disassociative groups .

Perception.learning. Selective Distortion .Selective retention. encoding. Herzberg. Selective attention. memory. occupation and economic circumstances Personality and self concept ± brand personality Life style and Values Key Psychological processes.Motivation ±Freud . Age and stage in the life cycle.Analyzing Business Markets and Business Buying Behaviour       Family Roles and Statuses ±Personal factors. memory processes . Memory Process retrieval .Maslow.

Buying Decision Process-Five Stage Model Problem Recognition  Information Search  Evaluation of Alternatives  Purchase Decisions  Post Purchase Behaviour  .

way consumer code.Other Theories of Consumer Decision Making  Level of consumer involvement  Decision Heuristics (rules of thumb or mental shortcuts in decision process) and biases  Mental Accounting. categorise and evaluate financial outcomes of choices  Profiling the Customer Buying Decision Process .

Analysing Business Markets   Organisational buying is the decision making process by which formal organisations establish the need for purchased products and services. evaluate and choose among alternative brands and suppliers. then identify. Business markets consists of all the organisations that acquire goods and services used in the production of other products or services that are sold/rented or supplied to others .

4. 5. 3. Compared to consumer markets. 6. 2.Business Markets  1. business markets generally have fewer and larger buyers Closer customer ±supplier relationship Professional purchasing Several Buying influences Multiple sales call Derived demand from consumer goods .

Total demand for business goods and services is quite price inelastic. More geographically concentrated buyers 4. Direct Purchasing Demand in the business market is derived from demand in the consumer market and fluctuates with the business cycle. Fluctuating Demand ±acceleration effect 3. Role of professional purchasers and their influencers have to be understood and the need for multiple sales calls as well as importance of direct purchasing. . reciprocity and leasing 1.Business Markets Inelastic demand ± not effected by price changes 2.

acceptable suppliers and selected supplier Customer¶s reference program so that sales team get¶s facilitated by using them as references. maintain product and service quality.delivery more participants on both sides New task ± first time . Can use automatic e reordering systems to save time.Buying Situations     Straight Rebuy ± routine . price limits. greater cost or risk longer the decision time ± awareness. price . Modified Rebuy ± modify product . Buyer has to give product specifications. . order quantities. site visit.choice among suppliers. evaluation trial and adoption. interest.

relaibility and other attributes like service .g oil inventory Compete on price quality.Systems Buying and Selling      Total Solution Approach Prime contractors Second tier contractors Systems Contractor ± single supplier provides buyer with with his or her entire requirement of MRO (maintenance. repair. operating) e. minimum down time .

influencers. interpersonal and individual factors.  Consists of initiators. marketers must be aware of environmental. users. buyers and gatekeepers  To influence these parties.Business Markets  Buying Center is the decision making unit of a buying organisation. organisational. . deciders. approvers.

Large ones go for multi level indepth selling .What decisions do they influence. deciders. status and persuasiveness giving priority to different decision area. Influencers. authority. buyers. job position. Based on this sales personnel and budget constraints to place. education. Keep it simple . Small sellers reach out to key buying influences . Some do rigourous analysis group. Buyers influences ±age. May include people from outside the organisation Buying Center Influences ± different interests. want the best. personality. Ultimately individuals make buying decisions. users.Participants in Business Buying Process    Buying Center ±decision making unit ±initiators. gatekeepers . income. attitudes towards risk and culture. Buying Center Targeting ± major decision participants . want everything done. approvers. group dynamics not known.

Transactional selling (Price is everything) Solution Oriented Customers ± (Consultative selling). assistance Strategic Value Customers (Enterprise selling) Solution s to enhance customer revenues. decrease customer risks.Business Customers      Price Oriented Customers. reduce customer costs .Lower toatla cost or more dependable supply or service Gold Standard Customers (Quality selling) Best performance in terms of product quality.

Procurement orientation .seek best value from fewer and better suppliers. Leveraged products. Bottleneck products Purchasing Organisation and Administration ±Purchasing is doing more cross functional work than ever before .increase in importance of procurement functions.Purchasing Procurement Process    Purchasing Orientations.Supply chain management orientation Types of Purchasing Processes ±Routine products. Can be buying orientation. Strategic products.

Stages in the Buying Process Buy phase New Task Problem Recognition Yes General need recognition Product Specification Supplier Search Proposal Solicitation Supplier Selection Order ±Routine Specification Yes Yes Yes Yes Yes Yes Buy Classes Modified rebuy Maybe Maybe Yes May be May be Maybe May be Yes Straight Rebuy No No Yes No No No No Yes Performance Review Yes .

E-Procurement  Direct extranet links to suppliers  Buying Alliances ±Transora by Coke and Pepsi  Company Buying Sites ±RFP¶s are posted .

Supplier Selection  Price  Supplier Reputation  Product reliability  Service reliability  Supplier Flexibility  Total Score .

Order ±Routine Specification           Negotiate final order Technical specifications¶ Quantity needed Expected time of delivery Return policies Warranty Leasing Stockless purchase plans.blanket contract ±resupply at agreed price Vendor managed inventory OTIFNE ± On time in full no error .

Managing Business to Business Customer Relationships  Benefits of Vertical Coordination ± partner independence . environment uncertainty  Availability of alternatives  Importance of supply  Complexity of supply  Supply market dynamism  Risk and Opportunism ±safeguarding and adaptation .

Buyer Supplier Relationships         Basic Buying and Selling Bare bones Contractual transaction Customer supply Cooperative systems Collaborative Mutually Adaptive Customer is king .

Buying Process -8 Stages         Problem Recognition General need description Product specification Supplier search Proposal solicitation Supplier selection Order routine specification Performance review .

psychographic and behavioural differences among buyers . Company needs to identify which market segments it can serve effectively. Identifying and profiling distinct groups of buyers who might prefer or require varying product and services mixes by examining demographic.Market Segmentation. Market is divided into segments. Positioning and Targeting     A marketer can rarely satisfy every one in the market as everyone tastes and preference are different.

It can be combination of products. there is an market offering( a value proposition which is a set of benefits that are offered to customers to satisfy their needs. services.Market Segmentation.g. King fisher for class in air travel. information and experiences. For each chosen target market . Positioning and Targeting    Marketer then decides which segments presents the greatest opportunity ±called Target Markets. The offering is POSITIONED in the minds of the target buyers as delivering some central benefit ± e. . Platinum Card for the HNI.

Mass marketing Micromarketing Segments Niches Local areas Individuals .Levels of Market Segementation   1. 4. 2. 3.

Market Segmentation.  Frequently used methods of forecasting demand in market segments. single segment and multiple segment  Steps in developing a positioning strategy. . Target Markets and Positioning  Concepts  Process  Basis  Target market Strategies ± Aggregation.

spending power. buying preferences.Market Segments and Target Markets      Needs. willingness to spend Diversity among buyers Groups of customers with similar needs clubbed as segments (homogenity within a segment )and heterogenity (between segments) Market segments ±different wants. or product use behaviour Segment targeted differently with different marketing mixes .

Market Segmentation  Benefits of Market Segmentation  Process of Market Segmentation .

Process of Market Segmentation  Identify current and potential wants that exist within a market  Identify characteristics that distinguish among the segments  Determine the size of segments and how well they are being satisfied .

Even micro marketing in consumer marketing like customer loan.Measurable 2. home design  .Accessible.Market Segments A group that shares a want distinguishable from the rest of the market is a market segment  Basis for segmenting ± 1.Obtainable . 4. Large enough to be profitable 5. 3.

buying preferences or product use behaviour. internally homogenous groups  Members of each group are similar with respect to to factors that influence demand .Market Segementation  Groups of customers with different wants.  Process of dividing the total market for a good or service into several smaller.

Target Market A specific market segment (people or organisations) for which the seller designs a particular marketing mix is a target market .

Benefits  Customer oriented -tailored to want of customers  Efficient use of resources  Firms can compete in selected segments .

Ultimate Consumers and Business Users  Ultimate consumers  business users .

Segmenting Consumer Markets  Segmentation  Geographic  Demographic  Psychographic  Behavioural Basis .

tier II cities. North East South. districts . State wise. rural . semi urban.Geographic  Regions. coastal areas  Regional Population distribution . metros. west. hilly areas.cities.

education  Social class  Clusters of similar characteristics .Demographic  Age  Gender  Family life style . income.

Sense of belonging.Fun and enjoyment. quiet vs outgoing not easy to measure) life style characteristics.Being well respected .Psychographic Segmentation     Examining Attributes related to how person thinks .personality dimensions (compulsive vs cautious.feels and behaves.Self respect . consumer values Personality Characteristics Lifestyle Values. Having warm relationships. Sense of accomplishments. Excitement. Security.

Behavioral Segmentation  Based on product related behaviour  Benefits desired  Usage rate .

modify rebuy.Location  Customer type. Usage rate.industry.Segmenting Business Markets Customer Location _Region. size. purchase criteria  Transaction conditions ±buying situation(new . structure. purchase procedure  . org.

.Target Market Strategies  Aggregation Strategy.arket as sisngle segment ±enjoy primary benefit and disregard frills-single product for mass audience.mass market strategy .Objective is cost minimisation.undifferentiated market strategy toatl m.customers likely to respond well to a single marketing mix.

all eggs in one basket .Single Segment Strategy     Concentration strategy involves selecting one segment from within the total market as the target market One marketing mix to reach this single segment Niche markets ± penetrate one market in depth and acquire reputation as specialist in relatively small markets Risks and limitations.

Multiple Segment Strategy  Tow or More different groups of potential customers are identified as target marketers  A separate mix is developed to reach each target ed segment .

Guidelines in Selecting Target Markets  Positioning  Select the positioniong Concept  Design the dimension or feature that most effectively conveys a consistent position .

Population. per capita income. no of people served by a store are market factors to get an idea of how many retail stores RIL needs .Forecasting Market Demand     Demand forecasting Basic forecasting terms Market share Market factor ± no of cars three years and above older ± relates to replacement demand for tyres.

Direct derivation method correlation analysis Survey of Buyer Intentions ± intend to actual Test Marketing Past Sales and Trend Analysis Sales ±Force Composite Executive Judgement ± Delphi Technique .Methods for forecasting sales       Market Factor Analysis.select the best market factors and minimise the number of market factors.

Segment Marketing     Market segment consists of a group of customers who share a similar set of needs and wants. Car buyers who just need transportation versus sports car lovers Difference in segment( small medium or large car segment) and sector (young middle income car buyers) Segment s not created but identified Segment marketing can fine tune attributes to meet customer requirements like flexible market offering (naked solutions with discretionary options at additional charge) .

Market Segments   1. Can be defined in different ways Preference segments based on proportion of attributes that customer prefer -say in Ice cream sweetness and creaminess. They can be categorised as Homogenous preferences -Same Diffused preferences. 3. . First firm may position in center or to largest group (concentrated marketing or could develop several brands positioned in different segments.Scattered in space. 2. First may be in the center and other may be in corner catching those dissatisfied Clustered preferences ± reveal distinct preference clusters called natural market segment.

Niche marketing A niche is a narrowly defined customer group seeking a distinctive mix of benefits. Marketers usually identify niches by dividing a segment into sub segments. Those with bad credit history can be targeted by high risk credit card providers who will take a hefty premium for such services .

.Attractive Niche  Customers in a niche have distinct set of needs  They will pay a premium for the needs.

Product Differentiation Central themes in marketing strategy are  Product Differentiation  Product positioning .

quality and brand. color price. person or ideas which results in a want satisfaction of a consumer. plus the seller¶s services and reputation . place.  It may include packaging.Product A set of tangible and intangible attributes which may be a good service.

Types  Based on who will use them and how they will be used  Consumer Products  Business Products .

not bulky not affected by changes in fad and fashion accessible when demand arises so distributed widely and inventory maintained. Retailers do not advertise convenience goods .Consumer Products Classification      Convenience good ± item bought without gathering much additional information like comparing price and quality ± food items. bulbs batteries. toothpaste. Retailers stock several brands of same item.low unit price. drugs.

E. cars/scooters Buying habits effect distribution and promotion strategies of both manufacturers and middlemen.Shopping Goods    A tangible good for which a consumer wants to compare quality. and perhaps style in several POS before making a purchase is considered a shopping gooddesigner wear. major appliances.fewer retail outlets Manufacturers dependent on retailers as retailers image more important than manufacturers. price.g . furniture.

Expensive men¶s suiting .stereo sound equipment.  Fewer retail outlets as brand preference exists  Advertisement is high .Speciality Goods A tangible product for which a consumer has s strong brand preference and is willing to expend substantial time and effort in locating the desired brand is called a specialty good. HDTV.photographic equipment.

A battery powered car or one person scooter  Difficult and impossible advertising task and personal selling job when marketing unsought goods .Unsought Goods A new product that the consumer is not yet aware of or a product that the consumer is aware of but does not want it right now.

minerals or agri produce/livestock and animal products  Prices by supply and demand  Transportation major consideration  Natural resources marketed directly from producer to user  Not much scope in product differntiation .goods from nature ±forest mines.Business Goods  Raw materials.

stationary.Business goods-Fabricating materials and Parts      Fabricating material require further processing ± steel. flour into bread Fabricated parts can be used without any further change in formzipper in clothing Installations ± Manufactured products major expensive and long lived equipment ± large generators in a dam/ thermal power station. heating oil. Each unit sold is high value and each manufacturer has reputation Accessory Equipment. Distributed widely . factory equipment.bought by many organisations .like fork lift with life shorter than installations but not part of inventory or used up in production Operating Supplies. yarn.low value short life items not incorporated in the product but gets used up in manufacture ±lubricating oils.

Mark is appears in the form of symbols. .Brand and Trade mark     A name and /or mark intended to identify and differentiate the product of one seller or a group of sellers Brand name/mark is part of a brand that can be vocalised ±words /letters or numbers. design or distinctive cover or type of lettering Brand equity ± is the value a brand adds to a product. Trademark is a legal term and is a brand that has been adopted by a sellerand given legal protection.

Product Differentiation -Max Scope in Product Management  Tangible Product attributes and functions  Intangible characteristics and emotional associations .

Close Up with Gel. computer controlled fridge ±Video con Additional features. TTK with Teflon.3m Scotch tape ±transparent. Promise with clove oil.Frooti in aesthetic hygienic tetra pack Design superiority ± Kinetic Honda. Titan watches Product quality/technological/operational efficiency/service ± Maruti service .Tangible Product Attributes and Functions       Ingredients/formula. Vatika with herbal mix Functional value. disappears when applied.Aristocrat suitcase with wheels and suit compartment Packaging.

Intangible characteristics and Emotional Associations  Prestige ± ³Take the world in your stride´. ³James Bond-the legend of a man´ Reid and Taylor  Locate attributes that makes the product distinct  Enhancing value the aim . Product attributes the tool  Giving customer the value he seeks .

Identifying the Buying Motives of Target Consumers  Leading Customer Benefits and Product attributes  Value addition and product differentiation are concurrent processes .

advanced R&D for product innovation are competitive advantages. clout.chanel technology. unique production process flexible production facilities.develop these avenues Coco Cola fights on the power of its name Maruti uses service as differentiator .Condition for Differentiation to succeed     The differentiation should be perceptible Should be routed in competitive advantage.

 Firm decides around what parameters the product offer has to be placed before target consumers .Product Positioning  Positioning is a platform for the brand and acts as facilitator for the brand to get through to the consumer  Act of fixing the locus of the product offer in the minds of the target consumers.

Positioning      Product cannot be Everything to Everyone ±hence positioning Attempt is to lodge the differntaited product in a particular locus in the minds of the consumer Positioning means putting the product in a predetermined orbit Positing connects product offering with target market Consumer¶s mind is a geometric Perceptual space : Product seeks a locus in the space through positioning .

Positioning        While positioning reckon with (take into consideration) competitiors¶s especially leaders positioning Has to be monitored and adapted continually Product and Value Positioning Avenues for positioning are many Communicating the value proposition to Target consumer Product and Brand Positioning Product repositionoing .

plant location. after sales can be made to differentiate an offer to make it distinct. Also firm collaboration. distribution methods or promotion. L& T in Selecting HR with superiority in executing projects .low cost position/cost leadership Differentiation.offer superior value to the customer Helps the firm fight on non price plank Can be achieved through multiple sourcing in multiple ways ± product .Differentiation in Marketing     Price .

however may prefer more of a transactional relationship. .Business markets  Must form strong bonds and relationships with their customers and provide them added value. Some customers.

hospitals. Suppliers must be prepared to adapt their offers to the special needs and procedures found in institutional and government markets . and other institutions that provide goods and services to people in their care.Institutional Markets    Consists of schools. Buyers for government organisations tend to require a great deal of paperwork from their vendors and to favour open bidding and domestic companies. nursing homes. prisons.

Product Differentiation  Allows firm o operate on a non price plank .

Marketing Strategies in the Different Stages of the Product life Cycle  Life Cycle consists of four stages  Introduction  Growth  Maturity  Decline .

 Shapes of PLC curves vary from one product category to the other  Consists .Product Life Cycle of the aggregate demand over an extended period of time of all brands comprising a generic product category.

Characteristics ±Stages of PLC
Stage
Characteristics Introduction Customers Competition Sales Innovators Little ,if any Low levels, then rising None Growth Mass market Maturity Mass Market Decline Loyal customers Decreasing Decreasing

Increasing Intense Rapid growth Slow/no annual growth

Profits

Strong Declining ,then peak Annually

Low /none

Marketing Implications of Different Product Life Cycle Stages
Stage Introduction Growth Maturity Decline

Overall Strategy

Market Development

Market Penetration

Defensive positioning

Efficicency

Costs

High per unit

Declining

Stable or increasing Differentiated

Low

Product Strategy

Undifferentiated

Improved Items Lower over time Intensive Brand preference

Pruned Line

Pricing Strategy

Most likely high

Lowest

Increasing

Distribution Strategy Promotion strategy

Scattered Category awareness

Intensive Brand loyalty

Selective Reinforcement

PLC Concept as Tool in Formulating and Implementing Marketing Strategy 
  

Product has to pass through certain staes in its life Stage depends on market reaction, market behaviour and response Duration of phase depends on newness,functions and marketing strategy By manipulating market behaviour ,life cycle stages can be manipulated.(can prolong/manipulate each phase)

PLC Concept Helps Strategy Formulation 
Pre-Planning

product launch  Prolonging the profitable phase  Facilitates investment decisions  Facilitates choice of appropriate entry strategy  Helps to identify right time to exit  Provides Useful clues for managing customers

Linkage in PLC and Entry Strategy  Innovator at introduction stage  Early follower in early growth stage  Segmenter in late growth stage  Me ±too in maturity stage .

PLC Operates at three levels  Product level  Product sub category level  Brand level .

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