Marketing Principles.

February 27th, 2009

End of year Exam:2 of 35

Sample Paper (August 2007)3 of 35

Consumer Decision making

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Step 1: Problem Recognition Step 2: Information Search Step 3: Alternative Evaluation Step 4: Purchase Step 5: Post purchase Experience

Chap 5 of Book

Consumer Decision making

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Step 1: Problem Recognition

Book Page 150 (Chap 5 Consumer behaviour)Problem Recognition occurs when consumers realize that they need to do something to get back to a normal state of comfort.

Internal stimuli are perceived states of discomfort – hunger or boredom (physical or psychological)

External stimuli are informational cues from the marketplace that lead the consumer to realize the problem

Consumer Decision making

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Step 2: Information Search

This stage can be as simple as just scanning one’s memory.

But usually we actively search through brands, or at least a subset of brands which feature:

*The awareness set consists of brands of which a consumer is aware

*An evoked set consists of the brands in a product category that the consumer remembers at the time of decision making

* Some brands in the evoked set will be eliminated straight away and just the consideration set will remain

Consumer Decision making

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Step 3: Alternative Evaluation

Consumers use 1 of 2 different choice models when evaluating alternatives:

- Compensatory- Non Compensatory

Compensatory; - considers all the attributes of a product, gives each a score and adds up the results

Non Compensatory Evaluation Methods; - conjunctive, disjunctive, lexicographic & elimination by aspects model.

Consumer Decision making

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Step 4: Purchase

In most cases, this is a straight forward process. The buyer arranges for the terms of the transaction and seeks transfer of ownership.

Pg. 153 book

Consumer Decision making

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Step 5: Post Purchase Evaluation

This is a very important time for the marketer. Consumer can be either satisfied or dissatisfied.

They may get “Cognitive Dissonance”….a feeling of post purchase doubt

Q2 (August 2007)

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Customer Research & the Research ProcessCustomer Research & the Research Process

Presentation of results

Data analysis and interpretation

Datacollection

Researchdesign

Problemdefinition

The market research process:

Feedback

Feedback

Copyright ©2005 by South-Western, a division of Thomson Learning. All rights reserved.

More details of this process on pg. 102 of book, Fig 4.1

MIS

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It is made up of intelligence gathered about the market environment….ie. The PEST forces, from internal and external sources

An MIS is different to basic internal records in that an MIS seeks to priorities the information that is critical to decision making.

Internal records actually become intelligence?

Quantative vs Qualitative Research

Q3 (August 2007)

Consumer Segmentation Bases

1. Geographic

3.Geo-demographic

6. Multi-variable

5. Behaviour 4. Psychographic

2. Demographic

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Example: Positioning - Computers

Which consumer segment buys which type of computer? Look Pg 427 of the book (Imprint brand message in mind of consumer)

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Positioning Strategies

On the basis of: • Specific features• Specific usage occasions• Specific user groups• Head to head with key competition• Service superiority

• Note: that you might have to engage in repositioning your product regularly.

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Q4 (August 2007)

Managing Products through their Life Cycles

Introductory strategies Rapid Skimming. Slow Skimming. Rapid Penetration. Slow Penetration.

Introductory Stage

Competitive and market conditions in the introductory stage

Sales – low. Costs- substantial Profits – negligible – even negative. Cash flow – negative. Customers – innovative – early adopters. Competitors – few or non-existent.

Introductory Stage

Growth

Characterised by rapidly increasing product demand, new market entrants rapidly increasing profits Early adopters & additional customers are

purchasing Price stabilises or falls Promotional expenditure remains

constant with eventual decline due to offset against increased sales

Growth Strategies: Improve product quality and features Adds new models, sizes, flavours.. Enters new market segments Increases distribution &/ new distribution Advertising shift from awareness to

features Lowers prices to attract new customers

Growth

Maturity Sales initially increase but at a slower rate

as market becomes saturated and as competitive pressures reach their peak.

Sales and profits typically decline in the latter half of the maturity stage.

Even if new users are found and usage rates are increased, product sales may eventually start a long-term decline, as when a substitute product that offers a superior set of benefits displaces the “old” product.

Competitive and Market Conditions in Maturity Stage:

Sales slows. There are 3 phases of maturity: growth,

stable and decline. Sales possible only by population growth The longest stage of the life cycle. Majority of products are in this stage. Greatest numbers of competitors. Intense rivalry and overcapacity. Marketing effort - focused on early

majority and late majority customers.

Maturity

Decline

Sales decline happens due to: Technological advances (word processor,

Polaroid) Shifts in consumer tastes (Ovaltine,

Yardley Cosmetics) Increased competition These factors = increased price cuts and

profit erosion Decline can be slow (sewing machines) or

fast (floppy disks)

Decline can be reversed – VW Beetle, Lucozade (Medicinal to Sport)

Kodak are currently trying to boost sales – filming processing business is losing sales due to digital cameras – will Kodak survive!

Decline

Limitations of PLC

Usually difficult to attribute an accurate timescale to the PLC

How can you tell with 100% certainty that a product is in decline

Cannot predict the future

For Exam

Stick to 1 hour limit for each question

Only attempt 2 questions!

Use real examples to back up your answers.