Module 3 Consumer & Buyer Behaviour: Understanding Consumer Behaviour
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Questions and Answers

What are the 4 criteria that segments must be evaluated against to ensure they are worthwhile pursuing?

Measurability, Accessibility, Substantiality, Practicability

What is the purpose of profiling market segments?

To describe the potential customers in each market segment, the common features they share, and how they differ between segments.

What 3 factors are involved in the market targeting process?

Potential sales of each segment, potential revenue, and the ability to satisfy the expectations of each segment.

Why is it important to understand competitors when selecting target markets?

<p>To understand how their offerings are seen by the target segments.</p> Signup and view all the answers

What 4 factors are involved in evaluating potential market segments?

<p>Sales potential, competitive situation, cost structure, and SWOT analysis.</p> Signup and view all the answers

What is the heart of the marketing concept when selecting target markets?

<p>Selecting particular market segments.</p> Signup and view all the answers

What must be estimated when selecting target markets?

<p>The market potential in each segment to determine sales volumes and if profitability is sustainable.</p> Signup and view all the answers

What are the 4 segmentation variables typically used to describe segment profiles?

<p>The text does not specify the 4 segmentation variables used to describe segment profiles.</p> Signup and view all the answers

Why is it important that no company can satisfy everything when selecting target markets?

<p>To understand the limitations and trade-offs involved in targeting specific market segments.</p> Signup and view all the answers

What is the relationship between the marketing concept and selecting target markets?

<p>When selecting target markets, the organization is no longer referring to individual buyers or the mass market, but rather to specific market segments.</p> Signup and view all the answers

Explain the concept of penetration pricing and its main objectives.

<p>Penetration pricing involves setting a low launch price below market price to gain maximum sales volume, rapid market share, and turnover of a new product.</p> Signup and view all the answers

What is price skimming and how does it work?

<p>Price skimming involves charging the highest price that customers who most desire the product are willing to pay. Over time, the price is gradually lowered to attract more buyers while maintaining the highest price that these consumers are willing to pay.</p> Signup and view all the answers

Describe the concept of differential pricing and provide an example.

<p>Differential pricing refers to charging different buyers different prices for the same product. An example could be offering student discounts or senior citizen discounts on the same product.</p> Signup and view all the answers

What is special-event pricing and how does it relate to promotional pricing?

<p>Special-event pricing links discounted prices across an organization’s entire product range with special or seasonal events to increase total sales volumes. This strategy must be combined with promotional pricing.</p> Signup and view all the answers

Explain the importance of monitoring the final price after implementation.

<p>Price must be monitored after implementation as external factors can evolve over time. Pricing is the most flexible and dynamic element of the marketing mix, affected by factors like competition and customer demand.</p> Signup and view all the answers

What is the purpose of pricing transparency laws like the Australian Consumer Law?

<p>The purpose is to ensure that consumers are not subject to deception or discrimination, and that the total price is clear before purchasing.</p> Signup and view all the answers

What is demand-based pricing and how does it relate to consumer demand?

<p>Demand-based pricing is when prices are set according to the level of aggregate or individual consumer demand in the market. Demand exists when consumers are willing and able to buy a product that fulfills an unsatisfied want or need.</p> Signup and view all the answers

How do an organization's costs and customer value influence pricing decisions?

<p>An organization's costs place a price floor, or minimum price, on what they can charge. The customer's perceived value of the product places a price ceiling, or maximum price, that customers are willing to pay.</p> Signup and view all the answers

Why is it important for pricing to keep a product competitive in the marketplace?

<p>Pricing must be set so that the product remains competitive compared to alternatives or substitutes in the marketplace. If priced too high, customers may choose a competitor's product instead.</p> Signup and view all the answers

How does price elasticity of demand relate to an organization's pricing objectives?

<p>Price elasticity measures how sensitive demand is to changes in price. Organizations need to consider elasticity when pricing to meet objectives like revenue maximization or market penetration.</p> Signup and view all the answers

Explain the concept of price elasticity of demand (PEoD) and how it varies across different products and industries.

<p>Price elasticity of demand (PEoD) refers to how the quantity demanded of a product changes in response to a change in its price. PEoD varies across different products and industries:- Demand is said to be price elastic or price sensitive if PEoD is greater than 1, meaning a change in price leads to a larger change in quantity demanded.- Demand is said to be price inelastic or price insensitive if PEoD is less than 1, meaning a change in price leads to a smaller change in quantity demanded.- The PEoD can differ greatly between products - for example, demand for luxury/prestige goods is often price inelastic, while demand for basic necessities is typically price elastic.- The PEoD also varies by industry - industries with many substitutes tend to have more price elastic demand compared to industries with few substitutes.</p> Signup and view all the answers

Discuss the ethical issues associated with demand-based pricing strategies.

<p>Demand-based pricing strategies, such as surge pricing, can raise ethical concerns:- High profits generated through demand-based pricing may be seen as unethical if the cost to produce the product is significantly below the inflated price.- Surge pricing during times of high demand (e.g. natural disasters, holidays) can be viewed as taking advantage of consumers who have limited options, leading to accusations of price gouging.- Demand-based pricing can disproportionately impact low-income consumers who may not be able to afford the higher prices during peak demand periods.- There are concerns that demand-based pricing reduces transparency and fairness in the marketplace, favoring companies over consumers.</p> Signup and view all the answers

Explain the concept of cost-based pricing and how it differs from demand-based pricing.

<p>Cost-based pricing is a pricing strategy where the selling organization adds a percentage or dollar amount to the cost of producing a product to determine the final selling price. This differs from demand-based pricing in the following ways:- Cost-based pricing focuses on the internal costs of the organization, while demand-based pricing focuses on the external market demand for the product.- Cost-based pricing is used when it is difficult or impossible to determine the exact costs of producing a product until it has been made, such as for custom or made-to-order items.- Cost-based pricing, such as markup pricing used by wholesalers and retailers, is more transparent than demand-based pricing, which can be less predictable for consumers.- Cost-based pricing does not necessarily account for the price sensitivity of consumers or competitive market factors, unlike demand-based pricing.</p> Signup and view all the answers

Discuss the concept of competitive pricing and how it relates to break-even analysis.

<p>Competitive pricing refers to setting prices in relation to competitor pricing in the market. This relates to break-even analysis in the following ways:- If a product is priced near the cost of production, it is known as a price leader, as the company is setting the baseline price in the market.- If a product is priced below cost, it is known as a loss leader, used to drive traffic and sales of other products.- Break-even analysis determines the volume of units that must be sold for total revenue to equal total costs. This is an important consideration when setting competitive prices, especially for loss leaders.- Governments may introduce price floors to prevent prices from falling below a certain level, which impacts the break-even point and competitive pricing strategies.</p> Signup and view all the answers

Explain the concept of pricing transparency and how it differs between demand-based pricing and cost-based pricing.

<p>Pricing transparency refers to the degree to which pricing information is clear and accessible to consumers. There are differences in pricing transparency between demand-based pricing and cost-based pricing:- Demand-based pricing, such as surge pricing, can be less transparent as prices can fluctuate rapidly based on real-time market conditions, making it harder for consumers to predict final costs.- Cost-based pricing, such as markup pricing used by retailers, is generally more transparent as the final price is a straightforward markup on the known production costs.- Lack of pricing transparency in demand-based strategies can lead to accusations of price gouging and taking advantage of consumers, especially during times of high demand.- Cost-based pricing provides consumers with a clearer understanding of how the final price is determined, promoting a sense of fairness in the marketplace.</p> Signup and view all the answers

What are the three premises of Target Marketing?

<p>Individual buyers or groups can be identified, Sellers understand the need of buyers, Sellers seek to have their offer to meet the needs of target buyers</p> Signup and view all the answers

Explain the characteristics of Mass Marketing and provide an example of a product that fits this strategy.

<p>Buyers have common needs, wants, demands. Single product offerings are created, communicated, delivered to meet needs of most in market. Example: salt</p> Signup and view all the answers

Describe the concept of One-to-One Marketing and give examples of industries that typically use this approach.

<p>Buyers have unique needs, wants, demands. Appeals to each customer by providing customized offering to meet individual needs. Examples: haircut, accountant, advisory</p> Signup and view all the answers

What factors does an organization consider when choosing target markets in a differentiated targeting strategy?

<p>Own resources, Market demand, Competition</p> Signup and view all the answers

How does Target Marketing use differentiated targeting strategies and what is the purpose of tailoring a unique marketing mix?

<p>An organization identifies a range of market segments which cover the majority of the total market. For each segment, a unique marketing mix is tailored to appeal to different groups of buyers.</p> Signup and view all the answers

Study Notes

Evaluating Market Segments

  • Measurable: Are the segments defined well enough that their size and purchasing power can be measured?
  • Accessible: Can the segments be reached and served effectively?
  • Substantial: Are the segments large and profitable enough to be worthwhile?
  • Differentiable: Are the segments sufficiently different from other segments that they can be targeted with different marketing mixes?

Purpose of Market Segment Profiling

  • Better understand customer needs and behaviors
  • Develop more effective marketing messages and campaigns
  • Identify opportunities for new products or services

Market Targeting Process

  • Segmentation: Dividing the market into groups based on their shared characteristics.
  • Targeting: Choosing the most promising segments to target with marketing efforts.
  • Positioning: Creating a clear and unique image for the product or service in the minds of consumers.

Competitors' Importance

  • Identify potential threats and opportunities
  • Understand competitive pricing strategies
  • Develop strategies to differentiate from competitors

Evaluating Potential Market Segments

  • Segment size and growth rate - How large is the segment and how fast is it growing?
  • Segment profitability - How profitable is the segment?
  • Segment accessibility - Can the segment be reached with marketing efforts?
  • Segment responsiveness - How likely is the segment to respond to marketing efforts?

Marketing Concept's Heart

  • Focus on customer needs and wants
  • Develop products and services that meet those needs
  • Deliver value to customers at a profit

Estimated Factors

  • Market demand
  • Competitor strategies
  • Company resources and capabilities

Segmentation Variables

  • Geographic: Region, climate, population density
  • Demographic: Age, gender, income, education
  • Psychographic: Lifestyle, values, interests
  • Behavioral: Usage rate, buying behavior, brand loyalty

Satisfying Everything

  • No company can offer everything to every customer
  • It is important to focus on specific customer segments
  • Targeting allows efficiency and specialization

Marketing Concept and Target Markets

  • Choosing target markets is a critical aspect of the marketing concept
  • Understanding and meeting the needs of the chosen segments is essential for achieving success

Penetration Pricing

  • Goal: Achieve high sales volume and market share quickly
  • Strategy: Setting a low price to attract customers and discourage competition
  • Example: New products entering a market.

Price Skimming

  • Goal: Maximize profits early in the product life cycle
  • Strategy: Setting a high price for a new product, then gradually lowering it over time
  • Example: New technology products

Differential Pricing

  • Goal: Charge different prices for the same product based on factors like time, location, or customer segment
  • Strategy: Companies can cater to different needs and preferences with different price points
  • Example: Airline tickets, movie tickets

Special-Event Pricing

  • Goal: Stimulate demand during specific periods
  • Strategy: Offering discounts or promotions during holidays, seasons or special events
  • Example: Black Friday sales

Monitoring Final Price Implementation

  • Ensuring the price is competitive and profitable
  • Adjusting pricing based on market conditions and competitor actions
  • Example: Watching competitor price changes and responding accordingly

Pricing Transparency Laws (Australian Consumer Law)

  • Protect consumers from misleading price information
  • Ensure fair and transparent pricing practices
  • Promote competition in the marketplace

Demand-Based Pricing

  • Goal: Set prices based on customer demand
  • Strategy: Prices are adjusted based on fluctuations in demand
  • Example: Peak season pricing for hotels

Costs and Customer Value

  • Costs: Determine the minimum price needed to cover expenses and earn a profit
  • Customer Value: Factors in the perceived value of the product or service and what customers are willing to pay

Maintaining Competitiveness

  • Prices must be competitive to attract customers in a crowded marketplace
  • Monitoring competitor pricing and offering comparable value is crucial for continued success

Price Elasticity of Demand (PEoD)

  • Measures the responsiveness of demand to changes in price
  • Elastic demand: Large changes in demand occur with small price changes
  • Inelastic demand: Small changes in demand occur with large price changes

Price Elasticity of Demand's Impact

  • Elastic demand: Companies can use price changes to significantly impact demand
  • Inelastic demand: Price changes have a smaller impact on demand, allowing for higher prices

Ethical Issues in Demand-Based Pricing

  • Exploitation of customers: Companies may charge higher prices during times of high demand, regardless of cost.
  • Market manipulation: Companies may manipulate demand to justify price increases.

Cost-Based Pricing

  • Goal: Set prices based on the cost of producing and delivering a good or service
  • Strategy: Price is based on the cost of the product plus markup.
  • Example: Manufacturing companies with set material costs and labor costs.

Competitive Pricing

  • Goal: Set prices based on the prices of competitors
  • Strategy: Using competitor analysis to determine optimal pricing to gain market share
  • Example: Matching competitor's prices to remain competitive

Pricing Transparency in Demand-Based and Cost-Based Pricing

  • Demand-Based: Prices are not transparent to consumers, as prices fluctuate based on demand.
  • Cost-Based: Prices are more transparent, as they are based on costs plus markup.

Target Marketing Premise

  • Segmentation: Divide the market into groups with common characteristics
  • Targeting: Choose which segments to focus marketing efforts on
  • Positioning: Create a unique and memorable image for your product within the chosen segments

Mass Marketing

  • Goal: Reach the broadest possible audience
  • Strategy: Using a single marketing mix to appeal to the entire market
  • Example: Coca-Cola, targeting a wide variety of people with one consistent approach.

One-to-One Marketing

  • Goal: Develop a marketing campaign tailored specifically to each individual customer
  • Strategy: This requires a lot of data collection and analysis to create personalized marketing messages
  • Example: Financial advisors, healthcare providers, and insurance companies

Differentiated Targeting Strategy

  • Goal: Customize the marketing mix to each segment
  • Strategy: Companies choose multiple segments and develop unique marketing plans to appeal to each segment's distinct needs
  • Example: A clothing store might have separate lines for men, women, and children, each targeting different needs and preferences.

Target Marketing with Differentiated Targeting

  • Purpose: Reach more customers effectively and increase market share by creating marketing mixes that are tailored to appeal to specific customer groups.

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Related Documents

Lecture Notes 3&4 PDF
Lecture Notes 5 & 6 PDF

Description

Explore the importance of consumer behaviour and its impact on marketing decisions. Learn about the analysis of individuals and households who purchase goods or services for personal consumption, and how it influences the marketing mix.

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