quiet bell work

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Quiet Bell WorkQuiet Bell Work1. Read “The Pet Hotel”, page

36• Answer questions• List the 4 Ps, 2 Cs

2. Skim chapter 2, note unfamilar terms

3. Prepare to submit homework assignment (article)

THE CONSUMERTHE CONSUMER

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The ConsumerThe ConsumerA consumer is the person who uses the product.A customer is the person who buys the product.

•Wouldn’t this be the same person? Some examples when they are not?

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The ConsumerThe ConsumerIn the case of a parent or guardian of a child, the parent is considered a gatekeeper—a person who oversees the care of another.

•Marketers attempt to appeal to the gatekeeper as well as the consumer. Why?

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Needs and WantsNeeds and Wants

self-actualization/fulfillment

esteem

belonging

safety

physiological

Maslow’s Heirarchy of Needs

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Needs and WantsNeeds and WantsIn our society, most people do not have difficulty satisfying needs.Wants are items not necessary for survival, but add pleasure and comfort to our lives.

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Needs and WantsNeeds and WantsMarketers need to make a clear distinction between needs and wants.

why?

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In places with poverty, war, or oppression basic needs may not be met. Marketing focuses on meeting needs.

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In developed countries, demand is more driven by wants. Marketing presents alternatives, and helps customers set up value equations for each.

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Consumer DemandConsumer DemandConsumer demand changes based on economic shifts and availability of new products.

economy is stable unemployment down

demand for goods and services UPpeople will buy things they want

economy is in a slump unemployment up

demand for goods & services DOWNpeople will only buy things they need

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Consumer DemandConsumer DemandDemand also changes based on wants, needs, or changes in perceived value. Marketers need to make decisions based on:

•educated guess, research, historic trends

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Consumer DemandConsumer DemandDemand changes as retailers enter/exit the marketplace.

•Too many sellers of a product = demand

•As some close, less product available = demand

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Consumer DemandConsumer DemandUnderstanding fluctuations in consumer demand is essential to marketing. Because of this, marketers also use product life-cycle models to predict the life of new products.

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HOMEWORKHOMEWORK1. Page 40

Questions: 1. (b), (c)2. (b), (c)3. (a), (b)

2. Read section 2.2

Work on this quietly until the bell!

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BELL WORKBELL WORK1. Read 2.22. Show Mr. M yesterday’s

homework

Product Life CyclesProduct Life Cycles

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Product Life CyclesProduct Life CyclesA PLC shows changes in consumer demand over time.

•no product can be in demand forever

•trends, technology and lifestyles change, affect consumer demand

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The traditional PLC consists of five stages.

Sa

les

Time

introduction

growth

maturity

decline

decisionpoint

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HomeworkIn your notebook summarize the five steps of the traditional Product Life Cycle.

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Product Life CyclesProduct Life CyclesIntroduction Stage

•product is first introduced, “product launch”

•initial price is high to help recover costs•costs include:

–machinery, set-up, training, storage, promotion, packaging, research, etc.

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•Who buys? Curious people, those who want new things first: early adopters, or trendsetters

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•marketing:• informs the consumer about

product•quickly establishes value

equation

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•some businesses arrange consignment deals: allow retailer to return unsold product after a period of time

•some manufacturers pay a shelf allowance for prime shelf space

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Product Life CyclesProduct Life CyclesGrowth Stage

•others start to buy product•reputation spreads•manufacturers advertise

heavily

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Sa

les

Pro

fits

Time

Product Life CyclesProduct Life CyclesGrowth Stagestarts where costs have been recovered, start making profit

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•the faster a product reaches the growth stage, the sooner it makes profit

•product may be scrapped if unsuccessful• if it is and it has lost money,

it is called a bust

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•first company to enter a market pays the most for R&D and advertising, but has no competition

•as competitors enter, they fight for market share: percentage of the total market

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Product Life CyclesProduct Life CyclesMarket Share Example

Coca-Cola owns

47% of the

market share

(47/100)

Company Revenue

Coca Cola $ 47.0 M

Pepsi Cola $ 46.5 M

PC Cola $ 4.5 M

MC Cola $ 2.0 M

Total $ 100.0 M

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•factors preventing companies from realizing profit are called barriers to entry•may include: small market

size, cost of R&D, advertising, equipment...

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•eventually only the most competitive products remain on the market

How do you compete?

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•a company may produce low-end products to establish minimum prices and validate expensive products

•not sold under a well-known brand name (ie. Panasonic makes Techniks and Quasar)

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Product Life CyclesProduct Life CyclesMaturity StageThe period when sales start to

level off Sal

es

Time

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Product Life CyclesProduct Life CyclesMaturity Stage

•marketers keep the brand name in front of consumers

•success and longevity of the product is highlighted

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•since major costs have been recuperated and costs are low, products usually make large profits during this stage

•company takes this profit to develop new products

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EXAMPLES: • Sony took the money from

producing Walkmans and put it into developing Discmans.

• Disney took profits from its amusement parks to launch a cruise ship line. This also expands their brand name into a new market.

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Product Life CyclesProduct Life CyclesDecline Stage

•company cannot find new consumers for their product

•profits decrease; marketers try to find the reason for decline

• if it is a temporary decline, it may be reversed by a small price change, or new ad

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Product Life CyclesProduct Life CyclesDecline Stage

•other methods to reverse a decline: redesigning, reformulating, repackaging

•may decide to remove the product from the market altogether

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Product Life CyclesProduct Life CyclesDecision Point Stage

•the final stage of the PLC•marketers must make

important decisions regarding a product’s future

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•product may be reformulated, repackaged, and reintroduced

•most often maintenance of a product involves new promotion and new pricing

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•if there is little hope for more profit–due to market saturation, decreased demand, or otherwise–product may be abandoned

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Today’s AgendaToday’s Agenda

•MITRW•Activity sheet•Note•A little friendly competition

Nontraditional Nontraditional Product Life CyclesProduct Life Cycles

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Nontraditional Product Life CyclesNontraditional Product Life Cycles

In the textbook, read pages 46 to 49 and make a summary note on Fads, Trends, Niche Markets, and Seasonal Markets. Include in your notes the diagrams on page 46.Think of additional examples for each type of life cycle.

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Fads

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FadsA product which is extremely popular for a very brief period of time, and loses popularity just as quickly.

Rubik’s cube, Cabbage Patch Kids, tamagotchi, Pet rock, “whatever”, “yadda yadda”

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FadsFads are unpredictable, and high-risk. Companies try to get out of the market just as the fad peaks. If they wait too long, they get stuck with excess inventory.

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Trends

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TrendsA trend has a more lasting effect on the market than a fad. A trend is usually a movement towards a style of product.

Organic foods, Beanie babies, the Simpsons, cell phones

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Niche Markets

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Niche MarketsA small section of the market dominated by a small group of products.Short growth, level maturity.

The Pet Hotel, The Cambridge Times, ethnic products

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Seasonal Markets

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Seasonal MarketsConsumer demand changes and is effected by the weather. Marketers anticipate periods of high and low demand, and work to create off-season opportunities.Ice cream parlours, resorts, lawn mowers, snow shovels, ice skates

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ACTIVITYACTIVITYMy FivesAt your tables, try to identify five specific products which follow each of the non-traditional PLCs. (The ones presented in class do not count!)

PRIZES FOR BEST TABLE!

The Consumer MarketThe Consumer Market

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The Consumer MarketThe Consumer MarketConsumer Profiles

- the kind of people most likely to be attracted to a specific product

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The Consumer MarketThe Consumer MarketConsumer Profilescohort: a group that shares common characteristics and buying habits, also called a consumer segment

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The Consumer MarketThe Consumer MarketConsumer Profilesprimary market: the most likely consumerssecondary market: other, occasional consumers

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The Consumer MarketThe Consumer MarketConsumer Profiles

Knowledge of consumer profiles affects distribution, advertising, product design, media, international markets

PRODUCTCONSUMER

PROFILEADVERTISING

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The Consumer MarketThe Consumer MarketDemographics- the study of obvious

characteristicts that categorize people- age, gender, family life cycle, income level, ethnicity, culture

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The Consumer MarketThe Consumer MarketDemographicsAge

•generally broken down into six groups: 0-14, 15-24, 25-44, 45-64, 65-74, 75 and over

•Different researchers use different breakdowns

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Five Major GenerationsFive Major Generations

Mature 60+

Baby Boomers 41-59

Generation X 27-40

Generation Y 11-26

Millennium Kids

0-10

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The Consumer MarketThe Consumer MarketDemographicsAge

Baby boomers are the most important group to most businesses.... why?

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The Consumer MarketThe Consumer MarketDemographics

Save ½ a page of space in your notes for a chart summarizing pages 52-53

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The Consumer MarketThe Consumer MarketDemographicsGender

•Today very few products are marketed exclusively to one gender; gender roles have changed, many products are successfully marketed to both.

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The Consumer MarketThe Consumer MarketDemographicsFamily Life Cycle

•A business may sell its products to various groups, but it will adjust marketing strategies for each.

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The Consumer MarketThe Consumer MarketDemographics

Save ½ a page of space in your notes to copy table from page 57

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The Consumer MarketThe Consumer MarketDemographicsIncome Level

•Businesses use this to determine whom to market to. Upper-income group can/will buy more expensive items.

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The Consumer MarketThe Consumer MarketDemographicsIncome Level

•Most businesses target customers of average income and compete for customers’ discretionary income.

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The Consumer MarketThe Consumer MarketDemographicsEthnicity and Culture

•especially important to a company wanting to get involved in international trade; must know what is acceptable by others.

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HOMEWORKHOMEWORK1. Copy charts from pages

52-53 and page 57 into your notes in the appropriate spots.

BELL WORKBELL WORK

Read “Info Tech”, page 55, answer questions

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The Consumer MarketThe Consumer MarketPsychographics

•a system for measuring consumer’s beliefs, opinions, and interests

•group consumers by religion, taste, lifestyles, attitudes, personality – psychological factors

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The Consumer MarketThe Consumer MarketGeographics

Marketers are also interested in where consumers live.

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The Consumer MarketThe Consumer MarketGeographicsUrban consumer

• live within the boundaries of a city

• live in apartments, condos, houses with small yards

• spend on cultural events, restaurants, public transport

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The Consumer MarketThe Consumer MarketGeographicsSuburban consumer

• lives on the outskirts of the city

• needs at least one car• spends money on gardens,

barbecues, home furnishings• almost always commutes

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The Consumer MarketThe Consumer MarketGeographicsRural consumer

• usually need a truck to carry items

• often has large parcels of land and needs riding mower, tractor, other farm equipment

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The Consumer MarketThe Consumer MarketGeographicsBrand Development Index (BDI)

•used to see how well a product is selling in one region in comparison to the total market

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The Consumer MarketThe Consumer MarketGeographicsBrand Development Index (BDI)

If BDI < 1, brand is underdeveloped in this area. If BDI > 1, brand is developed better than average.

per capita sales in region

per capita sales across entire market

= BDI

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Brand Development Index (BDI)Brand Development Index (BDI)ExampleHostess Potato Chips

Pop. of Canada: 30MSales nationwide: $120MPop. of Cambridge: 100KSales in Cambridge: 350K

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350 ÷ 100

120 ÷ 30= = .875

Brand Development Index (BDI)Brand Development Index (BDI)Example

A value under 1 means the brand is not fully developed in this area.

3.5

4

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Brand Development Index (BDI)Brand Development Index (BDI)ExampleHostess Potato Chips

Pop. of Canada: 30MSales nationwide: $120MPop. of Toronto: 4MSales in Toronto: 18M

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18 ÷ 4

120 ÷ 30= = 1.125

Brand Development Index (BDI)Brand Development Index (BDI)Example

A value greater than 1 means the brand is fully developed in this area.

4.5

4

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WARM-UP TASKWARM-UP TASK1. Grab a magazine2. Find an ad3. Identify—in as much

detail as possible—the target market for the advertised item

Product Use StatisticsProduct Use Statistics

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Product Use StatisticsProduct Use StatisticsGroups consumers based on frequency of use:

–heavy user–medium user–light user–non-user

often grouped together

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Non-usersGroup #1: those entering the market category for the first time.

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Product Use StatisticsProduct Use StatisticsMarketers try to attract this point-of-entry target by identifying who will enter the market and when, and then promote their brand.

•diapers to expectant parents

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Product Use StatisticsProduct Use StatisticsGroup #2: individuals who do not plan to use products in this category.

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Product Use StatisticsProduct Use StatisticsMarketers must create a value equation to change consumers’ habits and opinions, and convince consumers to purchase product.

•cell phone industry

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TOTAL BENEFITSmust be greater than

TOTAL COSTSto create

VALUE

Purchase Decision Purchase Decision Making ProcessMaking Process

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Purchase Decision Making ProcessPurchase Decision Making Process

Discover the need or want.

I’m hungry

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Set criteria for what will satisfy your need or want.

•quick, no prep work, something to munch on, can eat on couch

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Search for products which match your criteria.

popcorn chipsbread carrotsapple peanuts

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Make your decision based on your criteria.

popcorn chipsbread carrotsapple peanuts

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Purchase the product.

Go to the kitchen, grab some chips.

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Evaluate your purchase decision.

Was I satisfied with my decision?

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The process takes longer the more expensive the product because

a)more money → bigger risk

b)less experience with more expensive items

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Motivation•biological need•emotional need•rational forces•social forces

→ peer pressure→ celebrity

endorsements

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In groups of 2-3, go through the purchase decision making process for an item costing between $200 and $500. Start with a need/want and your solution is to buy one product.Have someone write it out; be prepared to share with class.

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ASSIGNMENTASSIGNMENTRead article on page 66-67, answer questions on page 67 in full and complete sentences, hand in before end of class.

Test review:Section 2.1, 2.2., 2.3, 2.4 (not Thorndike or Alderfer), 2.5, handouts, assignments

quiet bell work

Documents

consumerbmi3cunit 2bmi3cunit

needbmi3cunit 2bmi3cunit

product life cycleshomeworkin

product available

traditional product

product life cyclesa

product lifecycle models

meeting needs