Marketing test 2

  1. What is consumer behavior?
    Process in which we select, process, use and dispose of goods and services, ideas or experiences to satisfy wants and needs.
  2. The 5-step Consumer Decision-Making Process
    • 1.Problem recognition
    • 2.Information search
    • 3.Evaluation of alternatives
      4.Purchase decision
      5.Post-purchase behavior
  3. 3 Types of buying decision behavior
    • -Complex buying behavior
    • -Dissonance reducing buying behavior


    • -Habitual buying behavior
    • -Variety seeking buying behavior
  4. 2 types of extended decision behavior

    2 types of Extended problem solving
    • Complex
    • •High level of consumer involvement
    • •Products tend to be expensive
    • •Products that are purchased infrequently
    • •Products can reflect ones social image
    • •Products may be risky
    • •Tends to be SIGNIFICANT differences among the brands
    • •Tends to be goods like cars.

    • Dissonance Reducing Problem Solving:
    • •High level of consumer involvement
    • •Products tend to be expensive
    • •Products that are purchased infrequently
    • •Products can reflect ones social image
    • •Products may be risky
    • •Tends to be FEW differences among the brands
    • •Think of services. Ie:paint contractor. They look the same on the outside.
  5. Characteristics of the consumer purchase decision process
    Image Upload 1
  6. 2 types of Routine problem solving
    Decisions are easy, don’t take much thought

    • Habitual buying behavior:
    • •Low consumer involvement
    • •FEW perceived brand differences
    • •As a consumer you tend to buy the same brand over and over again because you are
    • familiar with the product, NOT because you are brand loyal.
    • •Ie:staple goods like Bread, milk, tylenol

    • Variety seeking buying behavior
    • •Low consumer involvement
    • •SIGNIFICANT perceived brand differences
    • •Consumers tend to switch brands, not due to dissatisfaction, just because you want to try
    • something new
    • •Ie: snack food, cookies, crackers
  7. 2 major influences on consumer purchases
    • Socio-cultural factors
    • -culture
    • -subculture
    • -social class

    psychological factors
  8. 3 types of Socio-Cultural Influences
    • Culture
    • •The values, beliefs, customs, tastes of the larger society influence our purchase process.

    • Subculture
    • •Smaller groups that exist within the larger culture
    • •Ie: regional, religious, ethnic groups

    • Social class
    • •Ones rank in a society is determined by 4 factors
    •    •Income
    •    •Education
    •    •Occupation
    •    •Wealth
  9. Psychologial influences - CHART
    Motivation is an internal state that drives us to satisfy our needs.

    Image Upload 2
  10. Psychological Influences
    • Perception:The process by which people select , organize, & interpret information rom the
    • outside world.

    • •Can influence the purchase process
    • •Different ways to perceive information
    •      •Selective attention: There are so many  messages out there, how do we pay attention to any of them. (It must be important to us in
    • order to get through ie: bought new house…you will notice home depot ads)
    •     •Selective distortion: tendency to interpret information in a way that supports what you already believe to be true (ie: toyota brake problems…at first people figured that all cars have problems)
    •      •Selective retention: How much information do we remember after seeing or hearing the message. So we must leave something with the consumer. (ie: jingles work great here)

    • Learning: As we become more familiar with the product, and learn to use it, it reinforces
    • our loyalty to the brand. (ie: PC vs. Mac)

    • Beliefs & Attitudes: A belief my knowledge or opinion about a product. It can easily change with new information. An attitude is a
    • deep ceded belief about a product or an issue. They are much harder to change.
  11. Psychological influences - VALS
    • More complex.
    • Looks at how you live
    • •One’s activities
    • •Interest & opinions
    • •In addition to age, income & other factors.

    • VALS-> Values & Lifestyles segmentation tool.
    • •Uses psychology to segment consumers into 1 of 8 groups.
    • •Concerned with
    •     •What is your motivation?
    •          •Ideals (knowledge)
    •          •Achievement (social status)
    •          •Self expression (physical and                 social activity  –can include a lot of creative types)

    •      •What is the extent of your resources?
    •            •High
    •            •Average
    •            •Low
  12. Psychological influences - VALS Chart
    Image Upload 3
  13. Business marketing
    Business marketing is the marketing of good & services that businesses and organizations buy for purposes other than personal consumption
  14. Classifying Business Markets
    Producers: purchase products for production of other goods and services that they sell.

    • •1st Group: Producers
    •     •Raw Materials Industry, Manufacturers, Service Industry
    •      •About 7.7 million firms
    •      •About 75% of the firms are in the service industry

    • •2nd Group: Resellers
    •      •Purchased the finished goods from the producers & resell, rent , or lease to other
    • businesses.
    •      •2 millions firms
    •      •About 1.5 million of the firms are retailers.

    •3rd Group: Organizations
  15. How exactly does the business market differ from the Consumer Market?
    How is it different & more complex?

    • 1.Fewer but larger customers (larger
    • purchases) – 10 million businesses vs. 132 million consumer households

    • 2.More geographic concentration in the business market.
    •     a.Businesses tend to be concentrated in
    • cities, and in certain parts of the country where as consumers are spread
    • out.

    • 3.Derived demand: Business demand is derived from consumer demand for goods and services.
    • Meaning it is directly/indirectly related to consumer demand.

    • Consumer demand is driven by: price, availability of goods, consumer tastes,
    • discretionary income

    ie: if we are looking at the demand for paper & pulp industry -> it is driven by postal boxes, textbooks, papers, etc.

    • 4.Business market is inelastic demand.
    • Doesn’t matter (for the most part) if the price of the product goes up or down, the demand remains about the same. Often products is one of many needed to make the product.

    • 5.Fluctuating demand in the business market.
    • The business market is subject to greater fluctuations than consumer demand.

    • 6.Multiple buyers: The product must satisfy
    • many individual needs (think office printer)

    • 7.There is a more professional purchasing
    • effort: More folks involved

    8.The buying process is more formalized

    • 9.The buyers and sellers have more of a
    • working partnership. (Verses consumers where it is a transaction ie:supermaret)
  16. 3 types Business buying situations
    • Straight & rebuy:
    • •Requires the least amount of time and effort.
    • •Routine purchases for products the business regularly purchases
    • • ie: office supplies

    • Modified rebuy:
    • •Requires more time and effort.
    • •The firm has new needs for the product it already buys. (so they may look at quality, delivery, price, technical qualities)
    • •Ie: alumni magazine printers

    • New task buy:
    • •Requires the most effort & time
    • •Uncertainty & risk associated w/ the purchase
    • •First time purchase
    • •Ie: leo online system
  17. Who makes business purchases?
    • Trained professional buyers
    • -Work in purchasing office

    • Buying centers
    • -cross functional teams of decision makers that are involved in complex decisions
  18. Roles in the buying center
    • •User needs the product
    •    -marketing depts (since they will be using it)
    • •Influencer dispenses advice or shares expertise
    •      -Marketing research professors, it dept
    • •Gatekeeper controls the flow of information to other members
    •      -Dept Secretary
    • •Decider makes the final decision
    •      -Dean
    • •Buyer executes the purchase
    •      -University procurement officers
  19. 5 Step Business Buying Decision Process
    • 1.Problem Recognition
    •      1.Someone within the organization
    • identifies a problem and thinks that a purchase may resolve the problem.
    • 2.Information search
    •      1.Identify suppliers:
    •         1.Online
    •         2.Ask engineers
    •         3.Purchase database
    •         4.Tradeshow
    •         5.Place ad in trade journal
    • 3.Alternative evaluation
    •      a.Company identifies what they are looking
    • for via a formal proposal
    •          •How much product
    •          •When
    •          •Other specifications
    • 4.Purchase decision
    •      a.Buying center that begins to assess
    • proposals.
    •      b.Look at many factors
    •         •Price
    •         •Quality
    •         •Delivery
    •         •Technical capabilities
    •      c.Look at additional factors
    •         •Just in time: an inventory management system that reduces to very low levels & orders as needed
    •         •Single sourcing: This may be needed for specialized products
    •         •Multiple sourcing: several suppliers that provide the product to contain costs.
    • 5.Post purchase behavior
    •      a.Organizational buyers & buying center
    • that assess the performance of the product/service
    •          -Did it meet expectations?
    •          -Are we satisfied/dissatisfied?
    •      b.More formal
    •      c.More complex
  20. NAICS
    North American Industry Classification System

    • •Helps
    • us to measure economic activity in North America

    • •6 digit system
    • 1 & 2 : Industry Sector
    • 3: subsector
    • 4: industry group
    • 5: industry
    • 6: US industry

    Ie: How do we get to the NAICS code of 517212 for Cellular?

    • •517 =Telecommunications
    • •21 = Wireless telecommunications carriers
    • •2 = Cellular and other wireless telecommunications

    • These numbers act as a tool for the industries. You can search and find out how many
    • people are in any given industry, even broken down by state…
  21. Target Marketing involves 4 steps:
    • Segmentation
    • •Aggregating (identifying & describing the various market segments)

    • Targeting
    • •Evaluating and selecting the most attractive market segment(s)

    • Differentiation
    • •Creating the unique product that fits the needs of the target market(s)

    • Positioning
    • •Placing that product in the mind of the consumer so they understand how the company’s offerings fits with the competitors offerings.
  22. 4 ways to Segmenting Consumer Markets
    The #1 way to segment the market is by geography

    • Geographic:88%
    • Behavorial: 65%
    • Demographic: 53%
    • Psychographic: 43%

    • As you can see the total is well over 100% which means that companies use more
    • that one way to segment the market
  23. Segmenting by Psychographics
    Psychographics: Considers factors such as age, and income, but also more complex factors like opinions, activities, and life styles

    • Useful for understanding differences among consumers who may appear similar but have
    • different  wants and needs.

    Social class is a type of psychographic segmentation.

    • It is a function of 4 factors:
    • 1.Income
    • 2.Education
    • 3.Occupation
    • 4.Wealth
  24. Segmenting by behavior
    • Segmenting by Behavior slices consumers on the basis of how they feel toward, act toward,
    • or use a product.
    • User status
    •     -Are you a user or non user
    •         -if user: first time or regular user?
    •         -If non: never used or ex-user

    • •80/20 rule: 20% of purchasers
    • account for 80% of the companies profits. So if you can determine who these 20%
    • are we can increase revenue.

    • Loyalty:
    • •how loyal are consumers to your product?

    • Usage occassions:
    • •are there certain times of the year or events that drive up usage of the product?
  25. PRIZMne
    • PRIZM ne(new evolution)
    • •Geographic toll classifies each zip code into 66 segments

    • •1-> most affluent to 66-> least affluent
    •     •Factors:
    •           •Age
    •           •Income
    •           •Education
    •           •Occupation
    •           •Ethnicity
    •           •Housing
    •           •Family compisition
    •           •Social groups: Where you live & level of affluence
    •           •Lifestyle (age & kids)
  26. Segmenting Industrial Markets
    • Geographic:
    • -Global region/country
    • -Statistical area
    • -Density

    • Demographic
    • -NAICS code & sector
    • -# of employees
    • -Annual Sales

    • Behavioral
    • -# of locations
    • -Kind of product/service
    • -Who buys it?
    • -Type of buy – new buy, modified rebuy, straight rebuy
  27. Target marketing process step 2
    • •Evaluate the ATTRACTIVENESS of the Market Segments
           1.Looking at Market size & growth
    •          1.(if a market is large a small firm could
    • not go after it)
    •           2.(lots of growth means there could be lots of competition)
    •      2.Examine major structural factors
    •           1.# of competitors
    •           2.# of products
    •      3.Look at the cost of reaching a segment
    •      4.Compatibility with company objectives and
    • resources.
    • •Select which of the MARKETS a business should invest IT’S RESOURCES against.
  28. 4 approaches of target marketing
    • Undifferentiated marketing:
    • •you go after the entire market because you have the type of product that almost
    • everyone likes/needs, but you need to be a large firm to do so.
    • •You target the entire market with one offer
    • •There must be similar needs/differences that are trivial
    • •Appeals to a wide spectrum of people
    • •Ie: Walmart

    • Differentiated Marketing
    • •Target several market segments with a separate & distinct market offering for each.
    • •Each brand will have a distinctive image.
    • •Helps brands to capture as much marketshare as possible
    • •Ie: L’Oreal –L’oreal(cheaper brand-drug stores) & Lancome (dept. stores)

    • Concentrated marketing
    • •Niche marketing
    • •Focus my marketing efforts on a small market segment of niche & develop 1 or more products to reach the niche
    • •Ie: used by specialty retailers

    • Micromarketing
    • •Offer products/services that exactly meet the unique needs of an individual or a location
    • •Individual marketing -> one to one marketing: fits the needs of the individual
    • •Some companies can achieve this through mass customization
    • •Local marketing-> targeting based on the needs/wants of a specific store, location, or region
    • •Ie: McDonalds (custom menus for specific countries)
  29. Value proposition chart
    Image Upload 4
  30. Layers of the Tangible Product
    • Tangible products are made up of:
    • Core product
    • •Basic benefits that the product provides
    • •Ie: Lands end: comfort and a sense of style
    • Actual product
    • •Unique features of the product
    • •Appearance
    • •Styling
    • •Brand name
    • •Packaging
    • •Ie:colors, sizes
    • Augmented product
    • •Actual product
    • •Supporting features
    • •Delivery
    • •Credit
    • •Warranty
    • •Installation Repair service
    • Image Upload 5
  31. Classifying Consumer Products
    -By how long they last
    -By how consumers buy them
    • Durable:
    • •Contains benefits that are designed to last months to years
    • •High level of consumer involvement
    • •Requires a great deal of information in terms of purchase process
    • •Ie: Car, furniture, appliances

    • Non Durable:
    • •Consumed in the short term
    • •Low level of consumer involvement
    • •Requires little information in terms of purchase process
    • •Ie:Food, Newspaper

    • You can also classify consumer products
    • by how consumers use them

    • Convenience:
    • •Non durable product that consumers purchase frequently with a minimum of comparison
    • and effort
    • •Low priced & widely available
    • •Several types of convenience products
    • •Staple goods-basic or necessary items such as milk, bread, gasoline
    • •Emergency product-such as Drano
    • •Impulse products –
    • such as candy, magazines, gum & etc. near the checkout line

    • Shopping
    • •A good or service that the consumer will spend some time and effort comparing the product (ie: quality, price & attributes)
    • •Represents a limited problem solving decision
    • •2 characteristics
    • •Price based shopping product:The focus is on price and we will shop multiple stores to get the best price. ie textbooks
    • •Attribute based shopping product: Focus is on selection. We will compare multiple store, multiple brands. Ie: dresses

    • Specialty
    • •Product contains unique characteristics that are important to consumers want at any price
    • •This is an extended problem solving decision
    • •We are Brand loyal

    • Unsought
    • •Consumers have little awareness or interest until a need for the product or service arises
    • •There may need to be a lot of marketing involved to get you interested
    • •Ie: Insurance
  32. Classifying Business Products
    By how organizational customers use them:

    • Production Goods: Raw materials and parts
    • Support Goods:
    • •Installations:Buildings & machinery
    • •Accessory equipment: Office equip. & Tools
    • •Supplies:Includes a range of products from light bulbs to paper
    • •Services: Technical-Machinery services NonTechnical: Accounting,legal & Etc.
  33. The PLC as it applies to Basic Products,
    Fashion Products and Fad Products
    Image Upload 6
  34. 4 P's
    Image Upload 7
  35. Product Mix
    Product Mix (The width of the company’s offerings): The entire range of product that the company makes

    Ie: Lazboy: includes, Sofas, chairs, recliners, & etc.

    Each listed is a product line: Sofa is a line
  36. Product Line
    Product Line: The total product offerings to satisfy a specific need

    Ie: Lazyboy chair

    • A product line can be a:
    • FULL LINE: Wide variety of variations within the product line

    LIMITED LINE: Very limited number of variations within the product line (more of a specialty company)
  37. Product line extensions
    Image Upload 8

    • Stretching
    • •Downward: Add lower priced items to the product line

    •Upward: add higher priced items to the product line

    •Two-Way: Add both lower and higher priced items to the product line
  38. What is considered a NEW Product?
    A new product in marketing terms depends on the amount of learning required by the consumer.

    Continuous innovation: NO new learning from consumer. Ie: new features, new ingredients

    Dynamically continuous innovation: Requires SOME new learning ie: downward ketchup bottle

    Discontinuous innovation: MAJOR learning by consumers. New to world product
  39. New product Development
    • New product strategy development
    • •Preproduct development: includes environmental scanning & monitoring to see what’s out there as well as SWOT analysis

    • Idea Generation
    • •Both inside and outside of the company
    • •Ie from: sales people, research and development labs, customers, suppliers &
    • distributors, universities, smaller firms

    • Screening and evaluation:
    • •Process to begin weeding out the less profitable ideas and those with out merit
    • •Internally: is this product idea technically feasible?
    • •Externally:Will people even use it? How will they use it?

    • Business analysis:
    • •Starting to develop product features
    • •Consider cost such as R&D, marketing, production,  & etc.

    • Development:
    • •Engineers work with marketers to develop a prototype of the product.

    • Market testing: (want to see of the product is viable)
    • •Test marketing: Offer the product in small geographic areas that are considered representative of the U.S.
    • •Simulated test market: Simulates a test market on a much smaller scale. Done in malls or another location. Problem is that your rivals can find out about your products and the results are much smaller and not as reliable.

    • Commercialization:
    • •Rolling out the product (regional, nationwide or globally)

    Image Upload 9
  40. Adopter Categories - Consumers
    • Adopter categories: Addresses the diffusion rate or the rate at which consumers adopt a
    • new product

    • •Willing to take risk
    • •Higher level of income & education
    • •Younger
    • •2.5% of the population

    • •Share similar characteristics to the innovators: higher levels of income and
    • education
    • •Opinion leaders – Valued by the company and consumers
    • •13.5% of the consumer population

    • •34% of the consumer population
    • •Your typical middle class consumer
    • •Neither the first nor the last to adopt the product
    • •When they adopt the product it is no longer considered new or different.

    • •Older
    • •More conservative
    • •Will not adopt the product until there are no perceived risks
    • •Below average social status
    • •34% of the consumer population

    • •Almost never adopt the product
    • •16% of the consumer population

    Image Upload 10
  41. Factors Affecting the Rate of Adoption
    • Relative Advantage:
    • •The degree to which the consumer
    • perceives new benefits with a new product.

    • Compatibility
    • •The extent to which the product is
    • consistent with cultural norms, practices, & values

    • Complexity
    • •How difficult is the product to understand?

    • Divisibility
    • •How easily can this product be shared, tried on a limited basis?

    • Communicability
    • •How easily can the consumer talk about the new product?
Card Set
Marketing test 2
This set is for ODU MKTG 311