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Knowing customers is to identify who are current customers, potential customers. Marketers must study customer’s perceptions, preferences, shopping and buying behavior. Studying customers provides clues for developing new products, product features, prices, channels, messages, and other marketing-mix elements.
Consumer Behavior Consumer behavior refers to the buying behavior of final consumers -- individuals and households who buy goods and services for personal consumption. Model of Consumer Behavior Marketers control the stimuli or inputs consisting of the four Ps: Product, Place, Price, and Promotion. Environmental and situational influences, though perhaps beyond the control of the marketer, also influence many consumer choices. But what happens between the marketing stimuli input and the buyer’s response or output? That “black box” processing is the central question for marketers. Teaching Tip: You may wish to discuss the “buyer’s black box” in more detail at this stage. Students sometimes become involved in the controversy regarding the presence or absence of consciousness in consumers. Consider using a two-side in-class discussion: Side A: Experimental psychologists argue that what we call consciousness is merely a set of complex learned responses -- an ordinary physiological function. Side B: Sociologists and social psychologists argue that consciousness is greater than the sum of its physiological parts. For marketers, the issue is sometimes linked to free will: Do marketers create needs by conditioning consumers? Do marketers offer need-fulfillers to needs consumer’s create in their “black box?” Model of Consumer Behavior This CTR corresponds to Figure 5-1 on p. 143 and to the material on pp. 143-144.
In general, marketers can not control such factors, but they must take them into account. - Cultural factor: this factor exert the broadest and deepest influence on consumer behavior. It includes culture, subculture, social class. Culture : is the set of basic values, perceptions, wants, and behaviors learned by member of society from family and other important institutions. This is the most basic cause of a person’s wants and behavior. Cultural influences on buying behavior may vary greatly from country to country. Subculture : A group of people with shared value systems based on common life experiences and situations. It includes religions, racial groups, geographic regions. Social class : are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. It is determined by a combination of factors such as occupation, income…Marketers are interested in social class because people within a given social class tend to exhibit similar buying behavior. And social classes how distinct product and brand preferences in areas such as clothing, home furnishings, leisure activity. - Social factor: Reference groups : these groups expose a person to new behaviors and lifestyles, influence (direct, indirect) the person’s attitudes and self-concept, and create pressures to conform that may affect the person’s product and brand choices. Family : The family is the most important consumer buying organization in society. Family members may strongly influence buyer behavior. The roles and relative influence of the family members vary widely in different countries and social classes. Roles and status :The person’s position in each group can be defined in terms of both role and status. A role consists of the activities people are expected to perform. Each role carries a status. People often choose products that communicate their role and status. - Personal factor: Age and lifecycle stage : People buy different goods and services over their lifetime. Tastes in food, clothes, furniture and recreation are often age related. Consumption is also shaped by the family life cycle. Occupation : it influences consumption pattern. Economic circumstances : they consist of their spendable income, savings and assets, attitude toward spending versus saving. Lifestyle : A person’s pattern of living as expressed in his or her activities, interests, and opinions. Personality and self-concept : it refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Related to personality is a person’s self-concept. - Psychological factors: Motivation : A motive is a need that is sufficiently pressing to drive the person to act. Perception : It is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world. Learning : It describes changes in an individual’s behavior arising from experience. Beliefs and attitudes : A belief is a descriptive thought that a person has about something. An attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea.
The consumer buying process starts long before actual purchase and continues long after. However, in more routine purchases, consumers often skip or reverse some of these stages. Marketers need to focus on the entire buying process rather than on just the purchase decision. - Problem recognition: The buyer senses a difference between his or her actual state and a desired state. The need can be triggered by internal or external stimuli. - Information seeking: Consumers are aroused to search for more information. The consumer may simply have heightened attention or may fo into active information search. The relative amount and influence of these information sources vary with the product and the consumer’s characteristics. The company should identify the consumer’s information sources and evaluate their relative importance. - Evaluation of alternatives: Consumer use information to evaluate alternative brands in the choice set. There is no simple and single evaluation process used by all consumers or by one consumer in all buying situations. - Purchasing decisions: Consumer actually buys the product. However, two factors can intervene between the purchase intention and the purchase decision. They are attitudes of others, unexpected situational factors. - Post-purchase evaluation: Consumers take further action after purchase based their satisfaction or dissatisfaction. Marketers must monitor post-purchase satisfaction, post-purchase actions.
In general, marketers can not control such factors, but they must take them into account. - Cultural factor: this factor exert the broadest and deepest influence on consumer behavior. It includes culture, subculture, social class. Culture : is the set of basic values, perceptions, wants, and behaviors learned by member of society from family and other important institutions. This is the most basic cause of a person’s wants and behavior. Cultural influences on buying behavior may vary greatly from country to country. Subculture : A group of people with shared value systems based on common life experiences and situations. It includes religions, racial groups, geographic regions. Social class : are society’s relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. It is determined by a combination of factors such as occupation, income…Marketers are interested in social class because people within a given social class tend to exhibit similar buying behavior. And social classes how distinct product and brand preferences in areas such as clothing, home furnishings, leisure activity. - Social factor: Reference groups : these groups expose a person to new behaviors and lifestyles, influence (direct, indirect) the person’s attitudes and self-concept, and create pressures to conform that may affect the person’s product and brand choices. Family : The family is the most important consumer buying organization in society. Family members may strongly influence buyer behavior. The roles and relative influence of the family members vary widely in different countries and social classes. Roles and status :The person’s position in each group can be defined in terms of both role and status. A role consists of the activities people are expected to perform. Each role carries a status. People often choose products that communicate their role and status. - Personal factor: Age and lifecycle stage : People buy different goods and services over their lifetime. Tastes in food, clothes, furniture and recreation are often age related. Consumption is also shaped by the family life cycle. Occupation : it influences consumption pattern. Economic circumstances : they consist of their spendable income, savings and assets, attitude toward spending versus saving. Lifestyle : A person’s pattern of living as expressed in his or her activities, interests, and opinions. Personality and self-concept : it refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Related to personality is a person’s self-concept. - Psychological factors: Motivation : A motive is a need that is sufficiently pressing to drive the person to act. Perception : It is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world. Learning : It describes changes in an individual’s behavior arising from experience. Beliefs and attitudes : A belief is a descriptive thought that a person has about something. An attitude describes a person’s relatively consistent evaluations, feelings, and tendencies toward an object or idea.
Consumer Buying Roles This CTR relates to the material on pp. 159-160. Teaching Tip: Involving students in a discussion of different consumer buying roles can be challenging. You might wish to link a discussion to social influences or family roles and have students describe purchasing responsibilities each role has. Consumer Buying Roles Include Initiator. The person who first suggests or thinks of the idea of buying a particular product or service. For example, Bill may suggest a Disney World trip for a family vacation. Influencer. The person whose views or advice carries some weight in the final decision. This person may influence the decision criteria used as well. For example, Dad's feelings about Florida may influence the Disney World trip. Decider. The person who authorizes the purchase. For example, Mom's vacation time may be limited by her schedule as an attorney, so she decides when and where the family goes. Buyer. The person who actual makes the purchase. For example, Jane may telephone the reservation at Disney World once given the authorization. User. The person who consumes the product. For example, the whole family would use the Disney product. For equipment purchases like computers at universities, it might be students enrolled in courses coming to the computer lab.
The business market is huge. It consists of all the organizations that acquire goods and services used on the production of other products or services that are sold, rented, or supplied to others. Business markets have several characteristics that contrast sharply with consumer markets.(see slide and page 205,206- Marketing management-7th edition, Philip Kotler) (Attachment)
A Model of Business Buyer Behavior This CTR corresponds to Figure 6-1 on p. 185 and the material on pp. 184-186. A Model of Business Buyer Behavior The Environment. The business buyer operates in a competitive environment consisting of two categories: Marketing Stimuli. Marketer controlled stimuli consist of the product, place, price, and promotion. Other Stimuli . As with consumer markets, other stimuli consist of the forces in the economic, technological, political, cultural, and competitive environments. However, group membership in the business organization and participation in the business buying process affects how these environmental forces influence decision making. The Buying Organization. The buying organization is influenced by the overall organization -- its corporate culture and values, traditions, and procedures and regulations. The buying center and the business buying decision process also differs from consumer buying influences and is discussed on a following CTR. Buyer Responses. Buyer responses in business buying situations often consist of more alternatives than those available to consumers. Supplier choice, order quantities, delivery terms, service options, and payment terms are often more negotiable than they are to the consumer.
Stages in Business Buying Process This CTR corresponds to Table 6-2 on p. 194 and relates to the material on pp. 193-196. Stages in Business Buying Problem Recognition . Problem recognition can result from internal or external stimuli. They may emerge from an identified shortage or ideas for improvements recognized by buyers. General Need Description. The buyer describes the overall characteristics and quantities of the needed item. For complex items, this step may require coordinating the efforts of many specialists. Product Specification. A developmental team must translate general needs into product specifications. An engineering value analysis team may look at alternative designs to reduce production costs. Supplier Search. The buyer conducts a search for the best vendors for the product specifications. Proposal Solicitation. The buyer invites qualified suppliers to submit proposals covering the terms of supply and support. Selected proposals may be asked to make formal presentations. Supplier Selection. The buyer selects suppliers based upon a combination of technical competence and service record and reputation. Negotiation of specific terms may occur before final selection, especially on price. Order Routine Specification. The buyer specifies the details of the supplier's contract listing technical specifications, delivery terms, policies for return and warranties, and quantities needed. Sellers will seek blanket contracts binding them closer to the buyer. Performance Review. The buyer will review how the supplier contract is working for the company and may continue, amend, or drop the seller.
Major Influences on Business Buying This CTR corresponds to Figure 6-2 on p. 191 and the material on pp. 189-193. Major Influences on Business Buying Environmental Factors. Industrial Buyers are heavily influenced by the economic environment especially the level of primary demand, economic outlook, and the cost of money. Materials shortages are also increasing in importance. Organizational Factors . These factors stem from each organization's objectives, policies, procedures, and ways of doing business. Marketers must identify how each of these elements are manifest in a particular company. Interpersonal Factors . Interpersonal influences center on group dynamics and the interplay of personalities and organizational roles. Buyer roles within the buying unit may differ not only from organizational factors but from the interpersonal interaction of the individuals involved as well. Individual Factors. A person's age, status, education, professional specialty, and overall personality and attitudes affect how they participate in organizational buying decisions. It may be difficult for the marketer to identify individual factors directly.
- Initiators: Those who request that something be purchased. They may be users or others in the organization. - Users: Those who will use the product or service. In many cases, the users initiate the buying proposal and help define the product requirements. - Influencers: People who influence the buying decision. They often help define specifications and also provide information for evaluating alternatives. Technical personnel are particularly important influencers. - Deciders: people who decide on product requirements and/or on suppliers. - Approvers:People who authorize the proposed actions of deciders or buyers. - Buyers: People who have formal authority to select the supplier and arrange the purchase terms. Buyers may help shape product specifications, but they play their major role in selecting vendors and negotiating. In more complex purchases, the buyers might include high-level managers participating in the negotiations. - Gatekeepers: People who have the power to prevent sellers or information from reaching members of the buying center.
Market Segmentation This CTR relates to the material on pp. 237-245. Bases for Segmenting Markets Geographic Segmentation. Geographic segmentation divides the market into different geographic units based upon physical proximity. While location determines how geographic segmentation is done, it is also true that many consumer products have attribute differences associated with regional tastes. Demographic Segmentation. Dividing the market into groups based upon variables such as sex, age, family size, family life cycle, income, education, occupation, religious affiliation, or nationality are all demographic segmentations. Consumer needs often vary with demographic variables. Demographic information is also relatively easy to measure. Age and life-cycle stage, sex, and income are three major demographic bases for segmentation. Psychographic Segmentation. Psychographic Segmentation divides the market into groups based on social class, life style, or personality characteristics. Psychographic segmentation cuts across demographic differences. Social class preferences reflect values and preferences that remain constant even as income increases. Life style describes helps group markets around ideas such as health, youthful, or environmentally conscious. Personalities may transcend other differences in markets and may be transferred to products themselves. Behavioral Segmentation. Behavioral Segmentation divides markets into groups based on their knowledge, attitudes, uses, or responses to a product. Types of of behavioral segmentation are based upon occasions, benefits sought, user status, usage rates, loyalty, buyer readiness stage, and attitude.
Segmenting Business Markets This CTR corresponds to Table 8-3 on p. 247 relates to the material on pp. 245-246. Major Segmentation Variables for Business Markets Demographics . Industry segmentation focuses on which industries buy the product. Company size can be used. Geographic location may be used to group businesses by proximity. Operating Variables. Business markets can be segmented by technology (what customer technologies should we focus on?), user/nonuser status (heavy, medium, light), or customer capabilities (those needing many or few services). Purchasing Approaches. Five approaches are possible. Segmentation can be by purchasing function organization (centralized or decentralized), power structure (selecting companies controlled by a functional specialty), the nature of existing relationships (current desirable customers or new desirable customers), general purchase policies (focus on companies that prefer some arrangements over others such as leasing, related support service contracts, sealed bids), or purchasing criteria (focus on noncompensatory criteria such as price, service, or quality). Situational Factors. Situational segmentation may be based upon urgency (such as quick delivery needs), specific application (specific uses for the product) or size of order (few large or many small accounts). Personal Characteristics. Personal comparisons can lead to segmentation by buyer-seller similarity (companies with similar personnel and values), attitudes toward risk (focus on risk-taking or risk-avoiding companies), or loyalty (focus on companies that show high loyalty to their suppliers.
Effective Segmentation This CTR relates to the material on pp. 248-249. Requirements for Effective Segmentation Measurability . This refers to the degree to which the size and purchasing power of the segments can be measured. The accuracy and availability of measures of market potential are important. Accessibility. This refers to the degree to which a market segment can be reached and served. Identifying a segment is useless if the marketer has limited access to the customer. Substantiality. This refers to the degree to which the segments are large or profitable enough to service. Actionability . This is the degree to which an effective marketing program can be designed for attracting and serving segments. Company resource limitations figure prominently in actionability issues.
Evaluating Market Segments Segment Size and Growth. The company must collect and analyze data on current dollar sales, projected sales-growth, and expected profit margins for each market segment. Segment Structural Attractiveness. Long run attractiveness includes an assessment of current and potential competitors, the threats of substitutes, and the power of buyers and suppliers. Company Objectives and Resources. The company’s resources and core business strengths should also fit well with the market segment opportunities. Evaluating Market Segments This CTR relates to the material on pp. 259-250.
Market Coverage Strategies This CTR corresponds to Figure 8-3 on p. 250 relates to the discussion on pp. 250-254. Market Coverage Strategies Undifferentiated Marketing . This strategy uses the same marketing mix for the entire market. This strategy focuses on the common needs of the market rather than differences in it. Undifferentiated marketing provides economies of scale on product costs but may be limited in application. Differentiated Marketing. This strategy targets several market segments and designs separate marketing mixes for each of them. Product and marketing variation also helps company image and may produce loyalty in consumers as they change segments. Concentrated Marketing. This strategy commits a company to pursue a large share of one or more submarkets. Economies and segment knowledge and service are strengths of this approach but risk due to smaller market size is greater.
Steps in Segmentation, Targeting, and Positioning Market Segmentation. Market segmentation is the process of dividing a market into distinct groups of buyers who might require separate products or marketing mixes. All buyers have unique needs and wants. Still it is usually possible in consumer markets to identify relatively homogeneous portions or segments of the total market according to shared preferences, attitudes, or behaviors that distinguish them from the rest of the market. These segments may require different products and/or separate mixes. Market Targeting. Market targeting is the process of evaluating each market segment's attractiveness and selecting one or more segments to enter. Given effective market segmentation, the firm must choose which markets to serve and how to serve them. Discussion Note: In targeting markets to serve the firm must consider its resources and objectives in setting strategy. Market Positioning. Market positioning he process of formulating competitive positioning for a product and a detailed marketing mix. Marketers must plan how to present the product to the consumer. Discussion Note: The product's position is defined by how consumers view it on important attributes. Steps in Segmentation, Targeting, and Positioning This CTR corresponds to Figure 8-1 on p. 235 and relates to the material on pp. 235-237.