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Marketing Marketing ManagementManagementManagementManagement
WEDNESDAY 22WEDNESDAY 22NDND January 2014 January 2014
Marketing Management Marketing Management
Paul OumaPaul Ouma
Strathmore Business Strathmore Business School, 2014School, 2014
Teaching Teaching : Entrepreneurship : Entrepreneurship Teaching Teaching : Entrepreneurship : Entrepreneurship
Business Development Business Development -- MarketingMarketing
ConsultancyConsultancy: Family Business ( Multi disciplinary ): Family Business ( Multi disciplinary )
Consumer Markets Consumer Markets
andandandand
Consumer Buyer Consumer Buyer BehaviorBehavior
Individual Behaviour and Buying MotivationsIndividual Behaviour and Buying MotivationsConsumer Markets.Consumer Markets.
New Economy Changes in Markets
A substantial increase in buying power e.g. Internet-buyers comparing competitor prices and product attributes
A greater variety of available goods and servicese.g. Amazon.com,world`s largest bookstore
A great amount of information to buyers on available choicesWith greater ease in interacting, placing and receivingorders
ObjectivesObjectives
• Be able to define the consumer
market and construct a simple
model of consumer buyer model of consumer buyer
behavior.
• Know the four major factors that
influence consumer buyer
behavior.
ObjectivesObjectives
• Understand the major types of
buying decision behavior and the
stages in the buyer decision process.stages in the buyer decision process.
• Be able to describe the adoption and
diffusion process for new products.
DefinitionsDefinitions
• Consumer Buying Behavior
– Buying behavior of individuals and
households that buy products for personal households that buy products for personal
consumption.
• Consumer Market
– All individuals/households who buy products
for personal consumption.
Model of Buyer Behavior
6 - 8
• Stimulus Response Model
– Marketing and other stimuli enter the buyer’s
“black box” and produce certain choice /
Model of
Consumer Behavior
“black box” and produce certain choice /
purchase responses.
– Marketers must figure out
what is inside of the buyer’s
“black box” and how stimuli
are changed to responses.?
Factors Influencing Consumer Behavior
6 - 10
Characteristics Affecting Consumer
Behavior• Culture
• Subculture
– Hispanics
Key FactorsKey Factors– Hispanics
– Islamic consumers
– Indigenous Africans
– African American
– Asian Africans
– Mature consumers
• Social Class
CulturalCulturalSocialSocialPersonalPersonalPsychologicalPsychological
• Hispanics
– 35 million consumers
Characteristics Affecting
Consumer Behavior
– 35 million consumers purchase $425 billion worth of goods and services.
– Expected to grow 64% in 20 years.
– Spanish media makes group easy to reach.
– Brand loyal group.
Sears uses the Fiesta mobile to visit Hispanic neighborhoods regularly
6 - 13
• African Americans– 35 million consumers purchase
$527 billion worth of goods and
Characteristics Affecting
Consumer Behavior
35 million consumers purchase $527 billion worth of goods and services.
– Growing more affluent / sophisticated.
– Price and brand name conscious; quality and selection are important.
– Certain media target this group.
Hallmark offers an Afrocentric line of greeting car ds called Mahogany. What other brands have been targeted spe cifically to African Americans?
6 - 15
• Asian Americans– 10 million consumers
purchase $229 billion worth
Characteristics Affecting
Consumer Behavior
10 million consumers purchase $229 billion worth of goods and services.
– Fastest growing, most affluent subculture.
– Many nationalities comprise this group.
– Consumer packaged goods firms now target this group more heavily.
• Mature Consumers– 75 million consumers age 50+will grow to 115 million
within 25 years.
Characteristics Affecting
Consumer Behavior
within 25 years.
– Mature consumers control 50% of all discretionary income.
– Attractive market for travel, restaurant, and cosmetics products, among others.
Characteristics Affecting Consumer
Behavior• Groups
– Membership
– Reference
• Aspiration
Key FactorsKey Factors
• Aspiration groups
– Opinion leaders
• Buzz marketing
• Family
– Kids can influence
• Roles and Status
CulturalCulturalSocialSocialPersonalPersonalPsychologicalPsychological
Characteristics Affecting Consumer
Behavior
• Age and life-cycle
• Occupation
• Economic situation
Key FactorsKey Factors
• Economic situation
• Lifestyle
– Activities, interests, and
opinions
– Lifestyle segmentation
• Personality and self-
concept
– Brand personality
CulturalCulturalSocialSocialPersonalPersonalPsychologicalPsychological
Lifestyles:Jeep targets people who want to “leave the civilized world behind”
6 - 20
world behind”
What other types of images could be used to appeal to this lifestyle?
Characteristics Affecting Consumer
Behavior
Brand Personality DimensionsBrand Personality Dimensions
6 - 21
SinceritySincerity
RuggednessRuggedness
ExcitementExcitement
CompetenceCompetence
SophisticationSophistication
Think about Arial detergent.
What brand personality seems to describe Arial best?
6 - 22
best?
Can you think of examples of brands that fit each personality type?
Characteristics Affecting Consumer
Behavior• Motivation
– Needs provide motives
– Motivation research
– Maslow’s hierarchy of needs
Key FactorsKey Factors– Maslow’s hierarchy of needs
• Perception– Selective attention, selective
distortion, selective retention
• Learning– Drives, stimuli, cues, responses
and reinforcement
• Beliefs and attitudes
CulturalCulturalSocialSocialPersonalPersonalPsychologicalPsychological
Maslow’s Hierarchy
6 - 24
The Buyer Decision Process
6 - 25
The Buyer Decision Process
• Need recognition
Information search
• Needs can be triggered by:
– Internal stimuli
StagesStages
• Information search
• Evaluation of
alternatives
• Purchase decision
• Postpurchase behavior
– Internal stimuli
• Normal needs become strong enough to drive behavior
– External stimuli
• Advertisements
• Friends of friends
The Buyer Decision Process
• Need recognition
Information search
• Consumers exhibit
heightened attention or
actively search for
information.
StagesStages
• Information search
• Evaluation of
alternatives
• Purchase decision
• Postpurchase behavior
information.
• Sources of information:
– Personal
– Commercial
– Public
– Experiential
• Word-of-mouth
The Buyer Decision Process
• Need recognition
Information search
• Evaluation procedure depends on the consumer and the buying situation.
• Most buyers evaluate
StagesStages
• Information search
• Evaluation of
alternatives
• Purchase decision
• Postpurchase behavior
• Most buyers evaluate multiple attributes, each of which is weighted differently.
• At the end of the evaluation stage, purchase intentions are formed.
The Buyer Decision Process
• Need recognition
Information search
• Two factors intercede
between purchase
intentions and the
StagesStages
• Information search
• Evaluation of
alternatives
• Purchase decision
• Postpurchase behavior
intentions and the
actual decision:
– Attitudes of others
– Unexpected situational
factors
The Buyer Decision Process
• Need recognition
Information search
• Satisfaction is key:
– Delighted consumers engage in positive word-of-mouth.
StagesStages
• Information search
• Evaluation of
alternatives
• Purchase decision
• Postpurchase behavior
of-mouth.
– Unhappy customers tell on average 11 other people.
– It costs more to attract a new customer than it does to retain an existing customer.
• Cognitive dissonance
Buyer Decision Process for New
Products
• New Products
– Good, service or idea – Good, service or idea
that is perceived by
customers as new.
Buyer Decision Process for New
Products
• Stages in the Adoption
ProcessProcess
– Marketers should help
consumers move from
awareness to adoption.
Analyzing Business Markets Analyzing Business Markets and Buyer Behaviorand Buyer Behavior
ObjectivesObjectives
• Understand the nature of the business market
and how it differs from the consumer market.
• Learn how institutions and government • Learn how institutions and government
agencies buy.
• Identify the different buying situations faced
by organizational buyers.
ObjectivesObjectives
• Identify the participants in the business
buying process and the various influences
impacting business buying decisions.impacting business buying decisions.
• Understand how business buyers make their
decisions.
Which economy is this?Which economy is this?
• Has the lowest unit labour cost among all developed countries.
• The world`s second largest exporter about €188 billion p.a• Accounts for 8.7% of global export trade.• Accounts for 8.7% of global export trade.• Trade surplus of €188 billion, or 7% of GDP, the world’s
biggest in absolute terms. • Unemployment : 5.4%• Life Expectancy : 79 years• Population : 83 Million
Source: The Economist 15 th July 2013
Business MarketsBusiness MarketsGermanyGermany
• Buying behaviour of a business market
• Germany’s big companies are world beaters.
• Even smaller firms dominate niche-markets in the industrial sectors like pharmaceuticals and machinerypharmaceuticals and machinery
Organizational BuyingOrganizational Buying
•• Organizational buyingOrganizational buying is:
“the decision-making process by which formal
organizations establish the need for purchased organizations establish the need for purchased
products and services and identify, evaluate, and
choose among alternative brands and suppliers.”
Business Markets :
Selling goods and services used in the production of other products and services.
Buy goods in order to make or resell a product to others at a profit or to add value to a service or product.to add value to a service or product.Also known as organizational buyers
Business marketers must demonstrate how the goods or serviceswill help the buyers achieve their objectives –profit, revenue,profit, revenue,excellent service, cost savings etcexcellent service, cost savings etc
Organizational BuyingOrganizational Buying
• Compared to Consumer Markets, Business
Markets have . . .
– Fewer buyersFewer buyers
– Larger buyers
– Geographically concentrated buyers
– Close relationships with their supplier-customers
• Buying behaviour of a business market
Individual Behaviour and Buying MotivationsIndividual Behaviour and Buying MotivationsCharacteristics of the Business Market.Characteristics of the Business Market.
Business Vs Consumer Markets- Fewer Buyers - Many buyers - Large Volume Buyers - Low Volume buyers - Large Volume Buyers - Low Volume buyers - Strong Customer Relations - Sparse customer relations- Geographic Concentration - Sparse distribution- Derived demand–from Customers - Direct demand- Professional trained buyers - Anyone can buy
• Fluctuating demand
• Derived demand
• Multiple buying
influences
Other Business Market Characteristics
Organizational BuyingOrganizational Buying
• Derived demand
• Inelastic demand
• Professional
purchasing
influences
• Multiple sales calls
• Direct purchasing
• Reciprocity
• Leasing
Organizational BuyingOrganizational Buying
• The Business Market Includes For-Profit
Companies and Two Specialized Groups:
– The institutional market– The institutional market
• Schools, hospitals, prisons, etc. with captive
audiences
• Cost and quality standards drive purchases
– The government market
• Bidding process awards contracts
Organizational BuyingOrganizational Buying
Buying Situations
•• Straight rebuyStraight rebuy
• Routine reorders from
approved vendor list
• Low involvement,
minimal time •• Straight rebuyStraight rebuy
• Modified rebuy
• New task
minimal time
commitment
• Example: copier paper
Organizational BuyingOrganizational Buying
Buying Situations
• Straight rebuy
• Specifications, prices, delivery terms or other aspects require modification • Straight rebuy
•• Modified rebuyModified rebuy
• New task
modification
• Moderate level of involvement and time commitment
• Example: desktop computers
Organizational BuyingOrganizational Buying
Buying Situations
• Straight rebuy
• Purchasing a product or service for the first
time
• High level of • Straight rebuy
• Modified rebuy
•• New taskNew task
• High level of involvement and time commitment; multiple influences
• Example: selecting a web site design firm or consultant
Organizational BuyingOrganizational Buying
• Systems Buying
– A single provider provides the total package for the buyer’s needs
– May involve turnkey solutions
• Systems Selling
– Manufacturers sell entire systems
– Supplier provides all MRO items
• Initiators • Deciders
Buying center members are involved in one or more roles in the purchase
decision process:
Participants in Business BuyingParticipants in Business Buying
• Initiators• Users• Influencers
• Deciders• Approvers• Buyers
�Gatekeepers
Influences on Business BuyersInfluences on Business Buyers
Major Influences
•• EnvironmentalEnvironmental
• Demand level
• Economic outlook
• Interest rates
• Technological change•• EnvironmentalEnvironmental
• Organizational
• Interpersonal
• Individual
• Technological change
• Politics/regulations
• Competition
• Concerns for social responsibility
Influences on Business BuyersInfluences on Business Buyers
Major Influences
• Environmental
• Objectives
• Policies
• Procedures• Environmental
•• OrganizationalOrganizational
• Interpersonal
• Individual
• Procedures
• Organizational
structures
• Systems
Influences on Business BuyersInfluences on Business Buyers
Major Influences
• Environmental
• Interests
• Authority
• Status• Environmental
• Organizational
•• InterpersonalInterpersonal
• Individual
• Status
• Empathy
• Persuasiveness
Influences on Business BuyersInfluences on Business Buyers
Major Influences
• Environmental
• Age
• Income
• Education• Environmental
• Organizational
• Interpersonal
•• IndividualIndividual
• Education
• Job position
• Personality
• Risk attitudes
• Culture
• Problem recognition
• General need
• Proposal solicitation
• Supplier selection
Eight Buyer phases of Industrial Buying
Purchasing/Procurement ProcessPurchasing/Procurement Process
• General need description
• Product specification
• Supplier search
• Supplier selection
• Order-routine specification
• Performance review
Targeting And PositioningTargeting And Positioning
IntroductionIntroduction-- Segmentation ProcessSegmentation Process-- Bases for SegmentationBases for Segmentation
Targeting ProcessTargeting ProcessTargeting ProcessTargeting Process
Differentiation as a basis for PositioningDifferentiation as a basis for Positioning-- Bases for PositioningBases for Positioning
Market Segmentation defined:
The process of dividing the total market for a good or service into several smaller groups such that the members of each group are similar each group are similar with respect to the factors that influence demand.
Market SegmentationMarket Segmentation
that influence demand.
A major element in a company`s success is the ability to segment its market segment its market effectively effectively
Segmentation BasesSegmentation BasesSegment Marketing:Large identifiable group within a market with similar wants, purchasing powergeographical location and buying habits.
Characteristics:Creation of a more fine-tuned offeringCreation of a more fine-tuned offeringChoice of distribution & communication channels is easierFew competitors.
Segmentation BasesSegmentation BasesNiche Marketing;Narrow market/sub segment seeking to offer a distinctive set of benefits.Normally is small and attracts few players.
Characteristics:Characteristics:•Customers have a distinctive set of needs•Customers will pay a premium price to meet their needs•The segment not likely to attract several competitors•There is a gain of economies of scale due to specialization•Has good size, profit and growth potential
Local Segmentation;Seeks to satisfy needs and wants of local customer groups i.e. trading areas,neighbourhoods, individual stores etc – banking (Riadha account).This results in different marketing programs
Segmentation BasesSegmentation Bases
Individual Marketing;Seeks to serve customers as individuals i.e. tailored to the individual e.g. clothing linesThis is common in B2B
Geographic Segmentation:Dividing the market into different geographic units – continent, countries, provincesregions, districts
Segmentation BasesSegmentation BasesDemographic Segmentation;Dividing the market into groups on the basis of demographic factors- age, family, age, family, life cycle, gender, income, occupation ,education, race, religion, generation, life cycle, gender, income, occupation ,education, race, religion, generation, nationality nationality
Psychographic segmentation;Psychographic segmentation;Dividing the market according to the lifestyle, personality, valueslifestyle, personality, values
Behavioral Segmentation;Dividing the market on the basis of their knowledge of attitude towards behavioural variables including- occasions, benefits they seek, user status, usage r ate, occasions, benefits they seek, user status, usage r ate, loyalty status, buyer readiness stageloyalty status, buyer readiness stage
Segmentation Segmentation -- LSMLSMLiving Standards Measurement.
“ Living Standards Measures (LSMs) are a way of segmenting or classifying the adult population (or population of domestic household units) of a country based on access to and use of a wide range of goods and services.”
Source : Kenya Advertising Research Foundation.Source : Kenya Advertising Research Foundation.
Segmentation – looking at the lifestyles in Kenya as a means for target decisions among the marketing mix sub elements including:
- target marketing- Communication development.- Branding- Packaging
Target MarketingTarget Marketing
Targeting Process;Targeting Process;
This the process of identifying and then selecting one or more market segments or sub-segments and then developing goods or services that are aimed at meeting specific needs of these segments
Market segmentation is therefore used as a basis for target marketing
Target marketing -- provides the bridge between segment selection and product positioning. provides the bridge between segment selection and product positioning.
- It is the opposite of undifferentiated marketing
Targeting And PositioningTargeting And PositioningDifferentiation as a basis for PositioningDifferentiation as a basis for Positioning
Product/Service Differentiation : Product/Service Differentiation :
• the incorporation of attributes, such as quality or price, into a product or service to encourage the intended customers to perceive it as different and desirable as compared to the competitor or substitutessubstitutes
• This is driven by innovation and entrepreneurial spirit
Product/Service Positioning : Product/Service Positioning :
• Positioning is how you provide your product or service brand identification as enter or go to market. In marketing strategy it is the natural next step you have determined how to differentiate your product or service.
Targeting And PositioningTargeting And PositioningDifferentiation as a basis for PositioningDifferentiation as a basis for Positioning
-- Bases for PositioningBases for Positioning
Attribute Positioning Attribute Positioning –– based on an attribute e.g. size, number of years etc.
Benefit Positioning Benefit Positioning –– leadership leadership based on certain benefits i.e. best experience park
User/Application Positioning User/Application Positioning ---- best for some use or application e.g. portabilityUser/Application Positioning User/Application Positioning ---- best for some use or application e.g. portability
Competitor PositioningCompetitor Positioning---- claiming to be best in some way than the competition e.g. best in claims settlement
Product Category PositioningProduct Category Positioning---- leader in a certain product category
Quality or Price PositioningQuality or Price Positioning---- offering the best value for money