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CHAPTER 5 Buyer Behavior in Consumer

Markets

Customers,' •  Five stage process

•  Strong brand loyalty can move
Segmenta5on,' consumers directly from need to
purchase.
and'Target' •  Many possible influences
Marke5ng' •  Often irrational and unpredictable

2
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Consumer Buying Factors'Affec5ng'the'

Consumer'Buying'Process'
Process (Exhibit 5.1)
•  Decision=Making'Complexity'
•  Need Recognition – High/Low'Complexity'
•  Information Search •  Individual'Differences'
•  Evaluation of Alternatives – Demographics,'percep5ons,'mo5ves,'interests,'
aItudes,'opinions,'lifestyles,'etc.''
•  Purchase Decision •  Social'Influences'
•  Postpurchase Evaluation – Culture,'subculture,'social'class,'reference'
groups,'opinion'leaders,'etc.'
•  Situa5onal'Influences'(Exhibit'5.2)'
3

Understanding'Business' Steps'in'Market'Segmenta5on,'Targe5ng,'and'
Buying'Behavior' Posi5oning'
Market Market Market
•  Four'types'of'Business'Markets:' Segmentation Targeting Positioning
–  Producer'markets'(a.k.a.'commercial'markets)'
1. Identify 3. Evaluate 5. Identify
–  Reseller'markets' segmentation attractiveness possible
–  Government'markets' positioning
variables and of each concepts for
–  Ins5tu5onal'markets' segment the segment each target
market segment
•  Unique'Characteris5cs'of'Business'Markets' 4. Select the
–  The'Buying'Center' 2. Develop target 6. Select,
profiles of segment(s) develop, and
–  Hard'and'So['Costs'(e.g.,'down5me,'opportunity)' communicate
resulting the chosen
–  Reciprocity' segments positioning
–  Mutual'Dependence' concept

1'

Successful'Segmenta5on'
•  Market'segments'that'are…'
–  Iden5fiable'&'Measurable'
–  Substan5al'
–  Accessible'
–  Responsive'
–  Viable'&'Sustainable'
Benefit Segmentation of the
Snack Food Market (Exhibit 5.4)
Target'Market'Approaches'
•  Mass'Marke5ng'–'no'adapta5ons'
•  Differen5ated'Marke5ng'–'adapt'marke5ng'
mix'for'each'segment'of'the'market'
•  Niche'Marke5ng'–'focus'on'specific'needs'of'
one'well=defined'market'segment'(usually'
small)'
•  One=to=One'Marke5ng'–'customize'a'
marke5ng'mix'for'every'customer'
•  Mass'Customiza5on'–'produce'on'a'mass'
scale'while'making'customer'adapta5ons'
8/27/16'
Bases'for'Segmen5ng'
Consumer'Markets'(Exhibit'5.3)'
•  Behavioral'Segmenta5on'
–  Segments'based'on'actual'behavior'or'product'usage'
•  Demographic'Segmenta5on'
–  Segments'based'on'demographic'factors'(e.g.,'gender,'
age,'income,'educa5on,'etc.)'
•  Psychographic'Segmenta5on'
–  Segments'based'on'state=of=mind'issues'(e.g.,'mo5ves,'
aItudes,'opinions,'values,'lifestyles,'interests,'
personality,'etc.)'
•  Geographic'Segmenta5on'
–  Segments'based'on'geographic'loca5on'
Bases'for'Segmen5ng'
Business'Markets'
•  Type'of'Organiza5on'
•  Organiza5onal'Characteris5cs'
•  Benefits'Sought'or'Buying'Processes'
•  Personal'and'Psychological'
•  Rela5onship'Intensity'
Notes'on'STP'
•  Segmenta5on'is'helpful'when'there'are'discernable'
differences'in'preferences'or'buying'paeerns'among'
poten5al'customers.'
•  The'Marke5ng'Mix'can'be'modified'for'the'unique'
needs'of'each'different'segment.'
•  Marketers'can'focus'on'the'segments'that'offer'the'
most'poten5al'or'best'match'for'their'offerings.'
•  'The'“posi5oning”'is'about'the'image'customers'
should'have'of'your'product/brand.''This'might'be'
adjusted'somewhat'for'different'market'segments.'
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CHAPTER 6 The Marketing Program

•  Marke5ng'Program'
–  The'strategic'combina5on'of'the'four'marke5ng'mix'
elements'

The' –  The'product'is'most'responsible'for'fulfilling'the'customers’'
needs'and'wants.'
'
Marke5ng' •  Differen5ate'in'commodi5zed'market'by:'
–  Beeer'service'or'symbolic'elements'of'the'product'
Program' –  Changing'price,'distribu5on,'or'promo5on.'

14
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

The Product Portfolio Benefits'of'a'Porjolio'

•  Product Line •  Economies'of'Scale'(efficient)'
–  A group of closely related product items •  Package'Uniformity'(recognizable)'
•  Product Mix or Portfolio •  Standardiza5on'(shared'parts)'
–  The total group of products offered by
•  Sales'and'Distribu5on'Efficiency'
the firm
•  Equivalent'Quality'Beliefs'
•  Strategic Decisions
–  Halo'effect'of'the'shared'brand/company'
–  Variety – number of product lines offered
–  Assortment – depth of each product line

15

Characteris5cs'of'Services' Characteris5cs'of'Services'
•  Intangibility'(cannot'see'“quality”)'
–  associate'with'something'tangible'(e.g.,'“piece'of'the' •  Heterogeneity'(inconsistent)'
rock”)' –  standardize'the'service'and'its'delivery'(e.g.,'Pro=Cuts)'–'
–  use'prominent'brand'name'or'logo' training'is'important'
–  provide'tangible'evidence'(e.g.,'membership'card;'bank' –  customize'service'
statement)' •  Perishability'(no'storage)'
–  use'visible'clues'(e.g.,'clean'facili5es)' –  use'demand'management'(e.g.,'reserva5ons)'to'improve'
forecas5ng'accuracy'
–  pricing'based'on'usage'rates'(e.g.,'long'distance,'tourism,'
• '''Inseparability'(from'provider)' restaurants)'
–  loca5on'is'important'

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Managing'Service'Quality'
•  Iden5fy'customer'expecta5ons'and'
percep5ons'of'service'quality.'
•  Set'specified'performance'standards'that'can'
be'measured'to'some'degree.'
•  Focus'on'Internal(Marke+ng((training'and'
mo5va5ng'service'providers).'
•  Promo5on'should'give'realis5c'expecta5ons'
of'service'quality.'
New'Product'Development'
•  Innova5on'is'cri5cal'
–  Heavy'compe55on'
–  Short'product'life'cycles'
•  Innova5on'defined'by'whether'a'par5cular'
audience'perceives'the'product'as'new'
•  “New'Products”'can'include'anything'from'
totally'new'to'minor'changes,'reposi5oning,'
or'cost'reduc5ons'

New'Product'Development'' The'Role'of'Pricing'in'
Process' Marke5ng'Strategy'
Marketing &
Production
Development
•  Five'key'issues'(5'C’s):'
Idea
Screening – (1)'Costs'
& Test
Evaluation Marketing – (2)'Company'objec5ves'
– (3)'Customers'
•  'Price'Elas5city'of'Demand'
•  'Perceived'Value'
Idea
Generation Commercialization – (4)'Compe5tors’'prices'
– (5)'Condi5ons'

The Firm’s Cost Structure Common'Pricing'Objec5ves'

•  Breakeven in Units

''''Total'Fixed'Costs ''
Unit'Price''=''Unit'Variable'Costs'

23
Exhibit 6.4

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Price'Elas5city'of'Demand'(1'of'2)' Price'Elas5city'of'Demand'(2'of'2)'

•  Formula'for'calcula5ng'price'elas5city:'
•  Situa5ons'That'Decrease'Price'Sensi5vity'
–  Lack'of'product'subs5tutes'
–  Product'differen5a5on'
–  Real'or'perceived'necessi5es'
•  Situa5ons'That'Increase'Price'Sensi5vity' –  Complementary'products'
–  Availability'of'product'subs5tutes' –  Perceived'product'benefits'
–  Situa5onal'influences'(e.g.,'amusement'park)'
–  Higher'total'expenditure'
–  No5ceable'differences'in'price'
–  Easy'price'comparison'

Perceived Value Pricing'Strategies'

•  Value is a customer’s subjective
evaluation of benefits relative to costs to •  Base=Pricing'
determine the worth of a firm’s product –  Introduc5on:''skimming'vs.'penetra5on'
offering relative to other product –  Pres5ge'
offerings. –  Value=based'
–  Benefits – everything the customer obtains
from the offering
–  Compe55ve'matching'
–  Costs – everything the customer must give –  Non=price'strategies'(emphasize'other'elements)'
up
•  Value is intricately tied to every element
in the marketing program.
27

Pricing'Strategies' Pricing Service Products

•  Price may be the only cue to quality in
•  Adjus5ng'Prices' advance of service purchase.
–  Consumer'Markets:' •  Service pricing becomes more important and
•  promo5onal'discoun5ng' difficult when:
•  reference'prices' –  Service quality is hard to detect prior to purchase
•  odd'pricing' –  Costs are difficult to determine
•  price'bundling' –  Customers are unfamiliar with the service
process
–  Business'Markets:''trade'discounts;'allowances;' –  Brand names are not well established
geographic'pricing;'transfer'pricing;'barter'and' –  Customers can perform the service themselves
countertrade' –  Advertising within the service category is limited
–  The total price of the service is difficult to state
beforehand 30

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Distribu5on'and' Logis5cs'Systems'
Supply'Chain'Concepts'
Costs Order Processing
•  Marke5ng'Channels' Minimize Costs of Submitted
Attaining Logistics Processed
–  “An'organized'system'of'marke5ng'ins5tu5ons' Objectives Shipped
through'which'products,'resources,'
informa5on,'funds,'and/or'product'ownership'
flow'from'the'point'of'produc5on'to'the'final' Logistics
user.”' Functions
Transportation Warehousing
•  Physical'Distribu5on' Water, Truck, Rail, Storage
Pipeline & Air Distribution
–  “Coordina5ng'the'flow'of'informa5on'and'
products'among'members'of'the'channel'to' Inventory
ensure'that'products'are'available'in'the'right' When to order
How much to order
places,'in'the'right'quan55es,'at'the'right'5mes,' Just-in-time
and'in'a'cost=efficient'manner.”'

Channel'Func5ons' Channel'Structure'
•  Sor5ng' •  Strive'for'Efficiency'and'Effec5veness'
•  Breaking'Bulk'
•  Maintaining'Inventories'
•  Maintaining'Convenient'Loca5ons' •  Exclusive'distribu5on'
•  Providing'Services' •  Selec5ve'distribu5on'
•  Carrying'Risk'and'Financing' •  Intensive'distribu5on'

•  Func+ons(must(be(performed(by(someone,(even(if(
you(“cut(out(the(middleman.”( •  Note:((Not(covering(p.(174((Power)(

Channel'Considera5ons:' Trends'in'Marke5ng'Channels'(1'of'2)'
•  Advancing'Technology'
•  Customer'characteris5cs' –  Growth'of'Internet'and'e=commerce'
•  Product'characteris5cs' –  Radio'frequency'iden5fica5on'(RFID)'
•  Company'strengths'and'weaknesses' •  Shi[ing'Power'in'the'Channel'
•  Strengths'and'weaknesses'of' –  Discount'mass'merchandise'retailers'
intermediaries' •  Wal=Mart,'Kmart,'and'Target'
•  Compe5tors’'channels,'strengths,'and' –  Category'focused'retailers'(category'killers)'
•  Toys'“R”'Us,'Lowe’s,'Office'Depot,'AutoZone,''''and'
weaknesses' Best'Buy'
•  Environmental'characteris5cs/changes' •  Outsourcing'Channel'Func5ons'
–  Outsourcing'is'growing'rapidly'

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Integrated Marketing
Trends'in'Marke5ng'Channels'(2'of'2)'
Communications
•  Integrated Marketing Communications
•  The'Growth'of'Direct'Distribu5on'and' (IMC)
Nonstore'Retailing' –  The strategic, coordinated use of promotion
to create one consistent message across
–  Examples'of'Nonstore'Channels' multiple channels to ensure maximum
•  Catalog'and'Direct'Marke5ng' persuasive impact on the firm’s current and
potential customers
•  Direct'Selling'/'E=Commerce'
•  The Importance of IMC
•  Home'Shopping'Networks' –  Fosters long-term relationships
•  Vending' –  Reduces or eliminates promotional
•  Direct'Response'Adver5sing' redundancies
–  Technology allows better targeting of
customers
38

Promo5on'Goals'&'Strategies' CHAPTER 7
•  Goals:''AIDA'
•  Promo5on'Mix'
–  Adver5sing'
•  Ins5tu5onal'or'product;'compara5ve;'reminder'

Branding'and'
•  Budge5ng'(objec5ve'and'task'vs.'top=down'methods)'
–  Public'Rela5ons'
•  All'stakeholders;'publicity;'nega5ve/reac5ve'
–  Personal'Selling'(no(sales(management)'
–  Sales'Promo5on'
•  Incen5ves'to'act'(coupons,'rebates,'samples,'etc.)'
Posi5oning'
–  Direct'Marke5ng'
•  Telephone,'Mail,'Internet'

© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Why'Package'is'Crucial'as'a'Marke5ng'
Branding'Strategy'
Tool'

•  Key'Issues'In'Branding' •  Company'&'brand'image'
–  Manufacturer'vs.'Private'Brands'
•  Opportunity'for'innova5on'
–  Brand'Loyalty' •  Protec5on/containment'of'product'
–  Brand'Equity' •  Protec5on'from'shopli[ing'
–  Brand'Alliances'(cobranding,'licensing)' •  Promo5on/aeen5on=geIng'
•  Facilitate'storage'or'use'
•  Label'requirements'(UPC;'ingredients…)'
•  The'Nutri5onal'Labeling'and'Educa5on'Act'of'1990'
'

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Differen5a5on'&'Posi5oning' Strategies'
•  Differen5a5on'–'create'differences'that'set' •  Differen5ate'on…'
you'apart'from'compe5tors' –  Features,'Advantages,'Benefits'

•  Posi5oning'–'create'the'differen5ated'image' •  Posi5on'by…'
–  Aeribute,'Benefit,'Use/Applica5on,'User,'
in'the'minds'of'customers' Compe5tor,'Product'category,'Quality/Price'
•  May'promote'only'one'key'difference'='unique( ! Posi+oning(must(be(communicated!(
selling(proposi+on((USP)' •  Perceptual'Maps'
•  If'you'posi5on'yourself'as'“best”'at'several' •  Strengthen'current'posi5on;'Reposi5on;'
things,'you'may'lose'some'credibility.' Reposi5on'the'compe55on'

Perceptual'Map'Example'–'Cars'
Numbered(circles(represent(customer(segments.( Posi5oning'Errors'
Luxury
Mercedes' Lexus' Porsche' •  Underposi5oning'='customers'don’t'recognize'
Buick' 2' Cadillac' Jaguar' 1'
Corveee'
anything'dis5nct'or'special'
4' BMW'
•  Overposi5oning'='leads'to'too'narrow'image'
Infini5'
Camaro' of'brand'
3'
Conservative
Accord' 8'
Sporty
•  Confused'Posi5oning'='too'many'claims'or'
Ford' 5' PT'Cruiser' frequent'changes'
Taurus'
Note: If your brand does not
come close in “position” to Impala' Honda'
VW' Scion' •  Doubjul'Posi5oning'='hard'to'believe'brand'
Civic'
one of the target markets
(TM’s), you might need to
Beetle'
7'
claims'
6' Honda'
reposition or communicate
Fit'
your position better.
Economy
*'Brands'and'segments'are'for'illustra5on'only'–'not'based'on'actual'research.'

Stages'of'the'Product'Life'Cycle' CHAPTER 10
Developing'and'
Maintaining'Long=
Term'Customer'
Rela5onships'
Exhibit 7.2 © 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

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 8/27/16'

Shift from Acquiring Customers to

Customer Relationship
Maintaining Clients (Exhibit 10.1)
Management (CRM)
•  A business philosophy aimed at defining
and increasing customer value in ways
that motivate customers to remain loyal
•  CRM is about retaining the “right”
customers.
•  CRM Stakeholders
–  Customers
–  Employees
–  Supply chain partners
–  External stakeholders (government, media,
advocacy groups)
49 50

Developing'Rela5onships'
in'Consumer'Markets'
Important'Concepts'
•  Quality'
•  Increase'share'of'customer'rather'than'just'
market'share' •  Value'
•  Customer'Sa5sfac5on'
•  Serve'current'customers'rather'than'focus'
just'on'acquiring'new'customers'
•  The'80/20'Rule:'
– 20%'of'the'customers'provide'80%'of'the'
profit'(different'value'for'different'customers)'

Customer'Sa5sfac5on'Metrics'
•  Life5me'Value'of'a'Customer'(LTV)'
•  Average'Order'Value'(AOV)'
•  Customer'Acquisi5on/Reten5on'Costs'
•  Customer'Conversion'Rate'
•  Customer'Reten5on'Rate'
•  Customer'Aeri5on'(Churn)'Rate'
•  Customer'Recovery'Rate'
•  Referrals'
•  Viral'Marke5ng'(online'chat);'Social'Communica5on'
Technology'–'Too'Smart?'
•  Smart'Pricing'–'possible'to'make'constant'
adjustments'based'on'demand,'weather,'etc.'
–  Too'much'price'discrimina5on?'
–  Customers'upset'at'inconsistent'prices?'
•  Smart'Segmenta5on'–'classify'customers'
according'to'life5me'value'
–  Beeer'service'to'“good'customers”'
–  Cheaper'alterna5ves'for'low=margin'customers'

9'