for e-learning - session 3 marketing management mba year 2

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.


• 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


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


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.


Consumer Behavior

within 25 years.

– Mature consumers control 50% of all discretionary income.

– Attractive market for travel, restaurant, and cosmetics products, among others.


Behavior• Groups

– Membership

– Reference

• Aspiration

Key FactorsKey Factors

• Aspiration groups

– Opinion leaders

• Buzz marketing

• Family

– Kids can influence

• Roles and Status



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


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?


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?


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


Maslow’s Hierarchy

6 - 24

The Buyer Decision Process

6 - 25


• 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



Information search

• Consumers exhibit

heightened attention or

actively search for

information.

StagesStages


• Evaluation of

alternatives



information.

• Sources of information:

– Personal

– Commercial

– Public

– Experiential

• Word-of-mouth



Information search

• Evaluation procedure depends on the consumer and the buying situation.

• Most buyers evaluate

StagesStages


• Evaluation of

alternatives



• Most buyers evaluate multiple attributes, each of which is weighted differently.

• At the end of the evaluation stage, purchase intentions are formed.



Information search

• Two factors intercede

between purchase

intentions and the

StagesStages


• Evaluation of

alternatives



intentions and the

actual decision:

– Attitudes of others

– Unexpected situational

factors



Information search

• Satisfaction is key:

– Delighted consumers engage in positive word-of-mouth.

StagesStages


• Evaluation of

alternatives



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


• 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.


• 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


• 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


• Derived demand

• Inelastic demand

• Professional

purchasing

influences

• Multiple sales calls

• Direct purchasing

• Reciprocity

• Leasing


• 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


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


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


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


• 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


Major Influences

• Environmental

• Objectives

• Policies

• Procedures• Environmental

•• OrganizationalOrganizational

• Interpersonal

• Individual

• Procedures

• Organizational

structures

• Systems


Major Influences

• Environmental

• Interests

• Authority

• Status• Environmental

• Organizational

•• InterpersonalInterpersonal

• Individual

• Status

• Empathy

• Persuasiveness


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

for e-learning - session 3 marketing management mba year 2

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