module 3 mm notes

8/8/2019 Module 3 Mm Notes

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MODULE-3 IDENTIFYING & SELECTING MARKETS, CONSUMER

BUYING BEHAVIOR, CONSUMER DECISION MAKING PROCESS,

MARKET SEGMENTATION, TARGETING, SEGMENTING CONSUMER

MARKETS AND BUSINESS MARKETS AND POSITIONING

1. What constitutes the Niche marketing?- 5 marksAns: Marketing segments are normally- large identifiable groups within a market. For eg,nonsmokers, occasional smokers, regular smokers and heavy smokers.A niche is a more narrowly defined group, typically a small market whose needs are not being well served. Marketers usually identify niches by dividing a segment into subsegments or a group with a distinctive set of traits who may seek a special combination ofbenefits. For eg, the heavy smoker segment may include sub segments of heavy smokerswith emphysema, heavy smokers with emphysema who are overweight.While segments are fairly large and thus normally attract several competitors, niches arefairly small and normally attract only one or a few competitors. Niches typically attractsmaller companies. Niche marketers presumably understand theirs niches needs so well

that their costumers willingly pay a price premium.For eg., Ferrari gets a high price for its cars because its loyal buyers feel that no otherautomobile comes close to offering the product-service-membership benefit bundle thatFerrari does.2. What is Brand equity?-5 marksAns: Brands vary in the amount of power and value they have in the marketplace. At oneextreme are brands that are not known by most buyers in the marketplace.Brand equity is highly related to how many of a brands costumers are in classes 3, 4, or5. It is related, according to Aaker, to the degree of brand-name recognition, perceivedbrand quality, strong mental and emotional associations, and other assets such as patents,trademarks, and relationships.

Certain companies are basing their growth on acquiring and building rich brandportfolios.Eg: Grand Metropolitan acquired various Pillsbury brands, Green Giant vegetable,Haagen-Dazs ice cream, and Burger King.

3. Construct a simple model of consumer buyer behavior ( 5 or 10 marks)


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Ans: The stages of consumer buying decision process are1. Need recognition: The consumer is moved to action by a need or desire.Need may be internal or external.

Eg: feeling hungry.2. Identification of alternatives: the consumer identifies alternative products and brandsand collects in information about them. eg: there may be many food items available forthe people.3. Evaluation of alternatives: The consumer weighs the pros & cons. of the alternativesidentified. eg: among the available food items buyer will think about each n every item.4. Decisions: The consumer decides to buy or not to buy, and makes other decisionsrelated to the purchase. eg: here buyer purchases the best possible alternative or fooditem.5. Post Purchase Behavior: The consumer seeks reassurance that the choice made wascorrect one. Eg: In this stage, buyer will repeat the same buying behavior if he is satisfied

with that product if not he will switch over to other items.Although the model is a useful starting point for examining purchase decisions, the process is not always as straightforward as it may appear consider this possiblevariations.1. Consumer can withdraw at any stage prior to the actual purchase of if the needdiminishes or no satisfactory alternatives are available.2. The stages are of usually different lengths, may overlap, and some may be even orskipped.


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3. The consumer is often involved in several different buying decisions simultaneouslyand the out come of one can affect the others.4. Explain the buyer decision process with an example (5 marks)

The Buying decision process is sequence of five steps. Assume that the Hershey FoodsCorporation responding to increase concerns about diet and nutrition, is considering to

introduce a line of confectionary goods using a sugar substitute:Need Recognition: Hersheys marketing research has found that a growing number ofconsumers are concerned about sugar and calories in the diet. The opportunity to producehigh quality, good tasting confections without sugar or fewer calories is, therefore, veryattractive, but finding right sugar substitutes is the challenge.Identification of alternatives: Hersheys marketing, production, and research anddevelopment managers drop a list of products-performance specifications for the sugarfree goods. To appeal to consumers they must taste good, be competitively priced, meettheir dietary needs and have the texture for mouth feel of sugar based products.Evaluation of alternatives: Hershey discovers that some sugar substitutes cannotwithstand high temperatures, there are differences in how well they stimulate the taste

and texture of sugar, and the approval from the Food and Drug administration restrictshow others can be used and must be labeled. The evaluation goes beyond performanceand price to consider the suppliers ability to meet delivery schedules and provideconsistent quality.Purchase decisions: Hershey managers decide on a specific ingredient and supplier.Next, the purchasing dept negotiates the contract.Post purchase behavior: Hershey managers continue to evaluate the performance of sugarsubstitute and the selected supplier to ensure that both meet expectations. Future dealingswith the supplier will depend on this performance evaluation and on how well thesupplier handles any problem that may arise involving its products.5. What is market segmentation? What are its variables? Also discuss the threemarket coverage strategies a firm should consider after evaluating different

segments (10 marks)

Ans: Market segmentation is a process of dividing the total market for a good or serviceinto several smaller, internally homogeneous groups. The essence of segmentation is thatthe members of each group are similar with respect to the factors that influence demand.A major element in a companys success is the ability to segment its market effectively.Eg: The Hain Celestial Group Inc. is focusing on various segments of the U.S andinternational markets for organic and natural products.There are four bases for segmenting consumer markets. They are:1. Geographic.2. Demographic.3. Psychographic.4. Behavioral.Geographic Segmentation:Subdividing markets into segments based on location- the regions, countries, cities andtowns where people live and work-is Geographic segmentation.Regional population distribution:


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Many firms market their products in a limited number of geographic regions, or they maymarket nationally but prepare a separate marketing mix for each region. People within agiven region generally tend to share similar values, attitudes, style preferences.Eg: Campbell Soup Company has altered some of its soup and bean recipes to suitregional taste, and Fridays restaurants with 345 units nation wide, allows each outlet to

offer up to 30 regional items on its menu.Demographic SegmentationSubdividing markets into segments based on age, gender, family life cycle stage, income

and education-is Demographic segmentation.For Example, The average age of new Toyota buyers is 44yrs. This is in large part due tothepopularity of the Camry among consumers over 50. However, as a result Toyota isdeveloping a reputation as a brand for middle aged consumers. To dispel that image andattract younger customers, Toyota has developed models specifically for drivers in theirtwenties and thirties: M2Spyder, a mini SUV.Psychographic Segmentation

Psychographic segmentation involves examining attributes related to how a person

thinks, feels and behaves.Personal characteristics: An individuals personality is usually described in terms of traitsthat influence behavior.Lifestyles: Lifestyle relates to activities, interests and options. You lifestyles reflects howyou spend your time and what your beliefs are on various social, economic and politicalissues.Values: Values are a reflections of our needs adjusted for the realities of the world inwhich we live. For eg : people who place a high value of fun and enjoyment are morelikely to enjoy skiing, dancing, bicycling and backpacking whereas people who havevalue for warm relationships tend to give gifts for no particular reason.Behavioral Segmentation: It consists of two of these approaches:The benefits desired from a product and the rate at which the consumer uses the product:

- Benefits desired : From a customer-oriented perspective, the ideal method forsegmenting a market is on the basis of customers desired benefits. To illustrate,Forester Research Inc., surveyed 131,000 consumers about their motivations, buying habits and financial ability to purchase technology products. The resultproduces 10 segments, including the career-minded fast forwards, new agenurtures, digital hopefuls and media junkies.

- Usage Rates : Another basis for markets segmentation is the rate at which peopleconsume a product. For example, customer service representatives at First UnionCorp.s Charlotte, North California, offices can look at their computer screens atthe beginning of each call to see the customers banking profile. The rankings aregenerated from a customer database that tracks account balances, number ofbranch visits, services purchased and other information.

Three marketing strategies are market aggregation, single segment concentration, ormultiple-segment targeting.

1. Aggregation strategy:By adopting a market- aggregation strategy also known as a mass-marketstrategy or an undifferentiated market strategy- a seller treats its total market as asingle segment. An aggregate markets members are considered to be alike with


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respect to demand for the product. That is, customers are willing to make somecompromises on less important dimensions in order to enjoy the primary benefitthe product offers.2. Single segment concentration- focusing on providing products and services fora single market- eg- Johnson and Johnson- Baby care products

3. Multiple-segment strategy- Focusing on providing products and services formore than one segment. Targeting different products for different segment- HLLprovides different soap brands for different market segments.

6. How is business market different from consumer market? (5 marks)Ans: Any good or service purchased for a reason other than personal or householdconsumption is part of the business market, and each buyer within this market is termeda business user.The activity of marketing goods and services to business users, rather than to ultimate

consumers, is business marketing and a firm performing the activity is a businessmarketer.Ultimate consumers buy goods and services for their own personal or household use. The

consumer market is not only large, it is dynamic.The distinction of whether a good or service is a consumer or business product dependson the reason it is purchased, not on the item itself.Eg: a PC purchased from Dell by a small business to keep track of its orders, inventory,and accounts receivable would be a business good. The same PC (with differentsoftware), also purchased from Dell but as a family Christmas gift for educational andentertainment use at home, would be a consumer good.7. Name various adopter categories. (5 marks)Ans: The likelihood of achieving success with a new product, especially a reallyinnovative product, is increased if management understands the adoption and diffusionprocesses of that product.Different adopter categories are as follows:

1. Innovators : representing about 3% of the market, innovators are venturesomeconsumers who are the first to adopt an innovation.

2. Early adopters : comprising about 13% of the market, early adopters purchase anew product after innovators but sooner than other consumers. Unlike innovators,who have broad involvements outside a local community, early adopters tend toinvolved socially within a local community.

3. Early majority : representing about 34% of the market, includes more deliberateconsumers who accept an innovation just before the average adopter in a socialsystem.

4. Late majority: another 34% of the market, is a skeptical group of consumers whousually adopt an innovation to save money or in response to social pressure fromtheir peers.

5. Laggards : they comprise about 16% of the market. Laggards are suspicious ofinnovations and innovators.

8. Distinguish industrial and consumer products market segmentation with examples?(5 marks)


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Ans: Industrial products refer to products, which are used in an industry for producing aproduct. They are not meant for direct consumption.

Where as consumer products refer to products, which are used or consumed by theconsumers.The bases for segmenting the consumer markets are socio-economic factors, geographical

factors, personality factors, consumer behavior products.Where as the bases for segmenting the markets for industrial goods are kinds of business,size of the buyer, geographical location of the buyers, purchasing procedure of the buyer.For example in case of the business of an insurance co. can be divided into fireinsurance, accident insurance, marine insurance etc. different marketing policies z`and programmes may be prepared for these different segments to suit the needs of thecustomers.

9. What are the buying characteristics influencing consumer behavior? (10 marks)Ans: Characteristics influencing Consumer Behavior:

Consumer behavior has certain characteristic features. They are:!. Consumer behavior or buyer behavior is the process by which individuals decidewhether, what, when, and where and how much to buy.2. Consumer behavior comprises both mental and physical activities of a consumer, whenhe wants to buy goods or services to satisfy his needs.3. It covers both visible and invisible activities of a buyer. The visible activities refer tophysical activities like going to the market place, buying the product and consuming it.The invisible activities refer to mental activities like thinking about the product, decidingto buy or not buy the product, deciding to buy one brand instead of another brand, and soon.

1. Buyer behavior is very complex.2. Buyer behavior is dynamic. That is, it is constantly changing, So, the marketing

management is required to adjust the marketing mix with changes in buyerbehavior.

3. An individuals behavior is influenced by internal factors like needs, habits,instincts, motives, attitudes, etc., and also by external or environmental factorslike family, social groups, culture, status, position, economic and businessconditions, etc.

4. Consumer behavior is integral part of human behavior, and so, it cannot beseparated from human behavior. (The human behavior refers to the total processby which individuals interact with their environment. Every attitude, every actionand every motivation of the people are a part of the human behavior.

5. In many cases, the buying behavior is the sum total of the behavior of number ofpersons. For instance, the decision to buy a car for a family is made by all themembers of the family jointly. This makes the study of consumer behaviorcomplex.

6. In some cases, the decision to buy is taken not by the consumer himself, but by athird party. For instance, in the case of a patient, the decision regarding themedicine to be purchased is taken by the doctor, the purchase is made by the


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relatives of the patient, and the medicine is actually consumed by the patient. Thisalso makes the study of consumer behavior complex.

7. Consumer behavior is influenced by a number of marketing stimuli offered by themarketer. So, consumer behavior is considered as stimulus response. It may benoted that the response on the part of a buyer may be positive or negative.

8. Buyer behavior involves both individual (i.e., psychological) process and group.9. Consumer behavior is basically social in nature. So social environment plays animportant role in shaping buyer behavior.

10. What is the need to understand consumer behavior?i) It helps the producers to produce only those goods that are needed by the

consumers.ii) It is helpful to the marketers to plan the marketing activities.iii) It is helpful to the marketers to select the best method of advertising.iv) It helps the marketers to understand the successful sales promotion measures.

v) If a marketer understands the intellectual or emotional process that makes apotential customer to accept or reject a particular product. he (i.e., themarketer) could adopt those marketing strategies that would make hispromotional investments more productive.

vi) A knowledge of buying motives will be useful to a marketer when he isdissatisfied with specified techniques and is seeking to make innovations inhis product or promotional instruments.

11. What are the benefits of market segmentation?Importance and Benefits of Market Segmentation:Market segmentation. If properly done, is advantageous to the marketer, the consumersand the community.

1. Understanding the needs of consumers :Market segmentation helps the marketer to understand the needs, behavior andexpectations of the consumers of different segments. When information iscollected segment wise, the information becomes more precise and clear andbecomes easily and effectively usable. Decisions made on the basis of suchprecise and clear information will certainly be more effective.

2. Better position to spot marketing opportunities:Market segmentation helps the producer to make a fair estimate of marketingopportunities, (i.e., the volume of his sales). On the basis of marketing researchinvolved in market segmentation, the habits, tastes, nature, etc, of consumers ofdifferent markets can be understood deeply to harness marketing opportunities.This would be helpful to the producer to re-adjust the strategy of approachsuitably in regions where the response of the customers is poor.

3. Allocation of marketing budget:It is on the basis of market segmentation that marketing budget is allocated for a

particular region or locality. In the regions where the sales opportunities arelimited, a huge budget allocation is of no use, and so, budget allocation will belimited. On the other hand, in regions where there are more sales opportunities,


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Social factors and psychological factors influence the buyer to buy the cosmetics.Reference groups like friends, neighbors, co-workers etc. may influence theindividual to buy cosmetics.Eg: co-worker may use a particular type of cosmetic, which may attract the attentionof the employee.

Personal factors like lifestyle may also influence the consumer behavior.b) Pizzas: pizzas even today is perceived as fancy food in India. Now the McDonaldshas priced its lowest price for its pizzas in India.So its a psychological factor that would influence the buyer to purchase a product.and most of the times its the question of prestige or status.Eg: giving party to a friend in pizza hut may be a question of pride to the employerthan giving the party in local hotels

13. Define Consumerism.Ans: consumerism is a relatively recent phenomenon, starting in the sixties in the affluentsocieties like USA. We now see it emerging in India as well. It is an organized movement

of the consumers a movement that seeks to protect the consumers from unfair practicesof the producers and marketers, and to enhance the right of the consumers in relation toproducers and marketers. In many cases, the Government of the societies concerned arealso on the side of the consumers in this raging battle.Drucker said that, consumerism is the shame of marketing. If marketing is practiced asper the Marketing Concept, the very motive for consumerism will disappear. A firmpracticing the marketing concept, would not only be sensitive to consumer attitudes, butwould also anticipate these attitudes and adjust its marketing accordingly; and it wouldproceed on assumption that what is good for the consumer is good for the firm. Such anapproach would evidently remove the very raison detre of consumerism.


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Distinguish between consumer market and business market?

Segmentationbasis

Possible market segmentConsumer market

Segmentationbasis

Possible market segmentBusiness market

Geographic

Region city ormetroArea size

Urban-ruralClimate

Demographicincome

Age

GenderFamily lifecycleSocial classEducationOccupation

EthnicbackgroundPsychographic personality

Life style

ValuesBehavioralbenefitsdesired

Usage rate

New England, Middle Atlantic,

and other census regions

Population under 25000, 25001-100000, 100001-500000, 500001-10000000Urban, suburban, rural.Hot, cold, sunny, rainy, cloudy

Under $25000, $25000-$50000,$50001-$75000,$75001-$100000,over $100000.

Under 6, 6-12, 13-19, 20-34, 35-49, 50-64, 65and overMale, femaleYoung, single, married, nochildren etc,.Upper class, upper-middle, lower-middle, upper-lower, etc.Grade school only, high schoolgraduate, collage graduates.Professionals, manager, clerical,sales, student, homemaker,

unemployed, etc.African, Asian, European,Hispanic, Middle Eastern, etc.Ambitious, self-confident,aggressive, introverted,extroverted, sociable, etc.Activities(golf, travel), interests(politics, modern art),opinions(conservation, capitalism)Values and lifestyles 2 (VALS2),list of values (LOV)

Examples very widely dependingon product, appliance-cost,quality, operating life, toothpaste-no cavities, plaque control, brightteeth, good taste, low priceNonuser, light user, heavy user.

Costumer

LocationRegion

SeaboardLocation

Costumer typeIndustry

Size

Organizationstructure

Purchasecriteria

TransactionConditions

Buyingsituations

Usage rate

Purchasingprocedure

Order size

Servicerequirement

Southeast Asia, Central America,Upper Midwest, Atlantic

Single buying site, multiple buyingsites

Selected NAICS codes

Sales volume, number of employees

Centralized or decentralized, group orindividual decisions

Quality, price, durability, lead time

Straight rebuy, modified rebuy, newbuy

Nonuser, light user, heavy user

Competitive bidding, lease, servicecontracts

Small, medium, large

Light, moderate, heavy


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What is VALS classification?

VA

The VALS classification is based on Values, attitudes and lifestyle of consumers.Consumers are classified considering two parameters- resources and motivation.Innovators- have highest resources and are highly motivated, try out new and innovative,

expensive products.Survivors- Have least resources and least motivation,. They struggle to make both endsmeet.Consumers are further classified on the basis of three factors- Ideals, Achievement or SelfexpressionIdealistic consumers- Thinkers and Believers- Thinkers are thoughtful, focus on a

particular philosophy of life, ask for good quality and innovative products. Believers alsolook for innovation, but have less purchasing power than thinkers, they prefer brandedproducts.Achievement oriented consumers- Achievers and strivers- Achievers feel the need toscale new heights. They prefer good brands and display their material wealth through

possessions. Strivers imitate the purchases of achievers, they buy products favored byachievers.Self- expression oriented consumers- Experiencers and makers- Experiencers are veryinnovative, and choose products, which can express their emotions, freedom etc.Makers are also innovative as they lack adequate resources they try to be creative in theirday-to-day life. Making paintings, decoration of home etc.

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