Principles of Marketing: Customer Behavior | PDF

Principles of Marketing BAMK1205/BSMK1102 Semester 2 AY 2024 - 2025 Chapter Two: Customer Behavior Topic 2: Customer Decision Making WEEK 3 Chapter 2 Contents (Part One): 1. Customer needs and wants  Functional vs Emotional Benefits  Phy...

Principles of Marketing BAMK1205/BSMK1102 Semester 2 AY 2024 - 2025 Chapter Two: Customer Behavior Topic 2: Customer Decision Making WEEK 3 Chapter 2 Contents (Part One): 1. Customer needs and wants  Functional vs Emotional Benefits  Physiological needs  Social and cultural forces  Luxury vs Necessary 2. Factors influencing the customer decision-making process: 1. Cultural 2. Social 3. Personal 4. Psychological 3. Consumer Buying Process:  Consumer Needs :  This is where human psychology and behavior come into play, which focuses on the premise that every human has a need.  Needs can be a basic physical need critical to our survival, such as food, drink, shelter, and sleep. People also have social and emotional needs that are critical to one’s happiness and mental health, such as belonging, security, esteem, love, and self- fulfillment.  Needs are what motivates the behavior of people to make a decision to find a solution, which in many cases is “consumption behavior”.  Having needs fulfilled do not come from marketers or social forces; they come from the basic biological and psychological aspects of human existence. https://proechosolutions.com/understanding-your-customers/  Consumer Wants:  A consumer’s wants usually reflect the desired preferences for specific ways of satisfying a need. Thus, people usually want particular products, brands, or services that satisfy their needs in a specific way. Eg. A person is thirsty but wants something sweet, so perhaps they choose a Coke. Someone may need a new car, but they want a pickup truck because they live on a farm (a truck will best fit their needs) but they want Ford because “they’re tough” or perceived a dependable.  Usually, needs are relatively few, but wants are shaped by social influences (celebrity or influencer endorsements), past history (recalls or awesome charitable work), and consumption behavior (the product or service is practical, functional, and effectively solves a problem).  https://proechosolutions.com/understanding-your-customers/  Buying Decision: Functional Benefits, Emotional Benefits, Psychological Benefits Types of Benefits  Functional benefits are based on a product attribute that provides the customer with functional utility.  Emotional benefits provide customers with a positive feeling when they purchase or use a particular brand. They add richness and depth to the experience of owning and using the brand.  Psychological Benefits: These are perceived benefits the customer he/she gain when using the product. These benefits address psychological needs, such as status within a group, risk reduction, sense of independence, and happiness. https://learn.marsdd.com/article/elements-of-a-products-value-proposition-functional-self-expressive-and-emotional  Factors Influencing Buyer Behavior - Cultural  Cultural Factors: Culture is the basic determinant of a person’s wants. It refers to a set of learned beliefs, values, attitudes, morals, customs, habits and forms of behavior that are shared by a society. a. Sub-culture: each culture consists of smaller sub-cultures that provide more specific identification and socialization for its members. There are four types of sub-culture (Nationality groups, Religious groups, racial groups, geographical groups). b. Social classes: these are divisions in the society which are hierarchically ordered and whose members share similar values, interests and  Factors Influencing Buyer Behavior - Social  Social Factors: a. Reference Groups: are the social, economic, or professional groups that have a direct or indirect influence on the person’s attitudes or behaviors. b. Family: constitute the most influential group on one’s attitudes. c. Roles and Status: are factors which also influence decision making. Roles are the activities of the person in a group. Each role carries a statues. People will choose products that will communicate their status to the society. (a woman plays the role of wife, mother, sister in a family, and an employee in an organization).  Factors Influencing Buyer Behavior - Personal  Personal Factors: A buyer’s decisions are also influenced by personal characteristics including: age, life-cycle stage, occupation, economic circumstances, lifestyle, personality, and self concept.  A person’s behavior depends upon his/her occupation.  Occupation gives rise to the economic situation.  Life-style may be defined as the pattern or way of living of a person which will be indicated through the person’s activities, interests and opinions.  Personality is defined as the person’s distinguishing psychological characteristics that lead to relatively consistent and enduring responses to his/her environment.  Luxury vs Necessary Needs:  A luxury item is not necessary to live, but it is deemed highly desirable within a culture or society.  Demand for luxury goods increases when a person's wealth or income increases.  Since luxury goods are expensive, wealthy people are disproportionate consumers of luxury goods.  Luxury goods can be considered conspicuous consumption, which is the purchase of goods mainly or solely to show off one's wealth.  Luxury items are the opposite of necessity goods or need expenses, which are the goods that people buy regardless of their income level or wealth. Eg.Food, water, and utilities used to live in a house. Luxury Item By WILL KENTON Updated February 13, 2021 Reviewed by MARGUERITA CHENG : https://www.investopedia.com/terms/l/luxury-item.asp  Characteristics of a luxury good  The intrinsic characteristics of a luxury good are: Uniqueness / rarity: The uniqueness is given by the quality of the raw materials used and by the peculiar skills required in its production; Scarcity: it does not identify products linked to mass production and consumption; High quality: it is found in the exclusivity of the materials used and in the care of production processes. Innovative design: luxury goods must convey emotions, strike the senses, be considered as a work of art Elevated price: it is certainly motivated by the high quality. The elasticity of demand in the luxury market and Gucci’s case study: http://tesi.luiss.it/26177/1/212501_GILI_GIORGIA.pdf (p: 7-8) Buying Process  For marketing management the most important behavior on the part of a prospective buyer is the process of deciding whether to buy or not to buy: 1. Need Recognition 2. Information Search 3. Evaluation of Alternatives 4. Purchase Decision 5. Post-Purchase Experience and behavior https://www.knowthis.com/consumer-buying-behavior/the-consumer-decision-making-process/ Buying Process 1. Need Recognition : Buying process begins when a person begins to feel that a certain need or desire has arisen. 2. Information Search: when it is not clear what type or brand of the product can offer the best satisfaction, the person will have 'to search for information. 3. Evaluation of Alternatives: This is the critical stage in the process of buying. There are several important elements in the process of evaluation: -A product is viewed as a bundle of attributes such as quality, price, distinctiveness, availability etc. -Brand images and brand concepts can help in the evaluation of alternatives. 4. Purchase Decision: While the consumer is evaluating the alternatives, she/he will develop some likes and dislikes about the alternatives brands. This attitude towards the brand influences the intention to buy. Thus the prospective buyer heads towards final selection. 5. Post-Purchase Experience and behavior :The brand purchase and the product use provides feedback i.e., satisfaction or dissatisfaction and form attitudes. https://www.knowthis.com/consumer-buying-behavior/the-consumer-decision-making-process/ In-Class Activity 1 2  Chapter 2 Contents (Part Two): 6. Organizational decision-making process -- Characteristics -- Steps 7. Segmentation, targeting, Positioning (STP) -- Variables of Segmentation -- Types Targeting -- Positioning  Organizational decision- making process: B2B  Step 1: Problem Recognition The process begins when someone in the organization recognizes a problem or need that can be met by acquiring a good or service.  Step 2: Need Description Once they recognize that a need exists, the buyers must describe it thoroughly to make sure that everyone understands both the need and the nature of solution the organization should seek.  Step 3: Product Specification Technical specifications come next in the process. This is usually the responsibility of the engineering department. Step 4: Supplier Search The buyer now tries to identify the most appropriate supplier. The buyer conducts a standard search to identify which providers offer what they need, and which ones have a reputation for good quality, good partnership, and good value for the money.. Source: https://courses.lumenlearning.com/clinton-marketing/chapter/reading-the-organizational-buying-process/  Organizational decision- making process: B2B  Step 5: Proposal Solicitation Qualified suppliers are invited to submit proposals. Depending on the nature of the purchase suppliers send a catalog or a sales representative to submit a detailed proposal outlining the offer to address the buyer’s needs, along with product specifications, timing, and pricing. Step 6: Supplier Selection The buyer screens the proposals and makes a choice. The selection process involves thorough review of the proposals submitted, as well as consideration of vendor capabilities, reputation, customer references, warranties, and so on.  Step 7: Order-Routine Specification The buyer now writes the final order with the chosen supplier, listing the technical specifications, the quantity needed, the warranty, and so on.  Step 8: Performance Review The company reviews the supplier’s performance and provides feedback. Source: https://courses.lumenlearning.com/clinton-marketing/chapter/reading-the-organizational-buying-process/  The major variables that are used in segmenting consumer markets are; 1. Geographic segmentation 2. Demographic segmentation 3. Psychographic segmentation 4. Behavioural segmentation 1. Geographic segmentation Dividing a market into different geographical units such as nations, provinces, regions, cities etc. A company may decide to operate in one or more geographical areas or operate in all areas but pay attention to geographical differences in needs and wants. Examples: Campbell Soup Company- Nacho cheese sauce was launched too spicy for Americans in the East. Non spicy for those in the West and South. Domino’s Pizza is marketed with less toppings and tomato sauce in Italy Organic food is most demanded in UK  Dividing a market into different groups based on social class, lifestyle, or personality characteristics. Example: Cruise line targets adventure seekers. Royal Caribbean cruise line appeals to high energy couples and families with activities such as rockwall climbing and ice skating. Dividing a market into groups based on consumer knowledge, attitudes, uses or responses to a product. Examples: Oman Air frequent flier program Sindbad- encourage passengers to use the same airline repeatedly to create loyal customers. In airlines, business class passenger gets luxury benefits in their travel Economy class passenger gets none of the luxury but travels in the same flight.  Market Targeting (Targeting)  It is the process of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.  A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.  Targeting can be carried out at different levels: 1. Undifferentiated marketing (Mass marketing) 2. Differentiated marketing (Segmented marketing) 3. Concentrated marketing (Niche marketing) 4. Micro marketing  1. Undifferentiated marketing (Mass marketing)  A firm ignore market segment differences and target the whole market with one offer.  selling goods and services to a broad spectrum of consumers  Focuses on what is common in the needs of consumers  Mass Marketing  FMCGs (Fast Moving Consumer Goods)  2. Differentiated marketing (Segmented marketing)  A firm decides to target several market segments and designs separate offers for each. Example Proctor & Gamble markets 6 different laundry detergent brands Tide: all purpose family detergent Cheer: Colour expert –Protect against fading Gain: excellent cleaning power and smell Era: tough on stains Ivory: mild cleaning benefits, gentle and pure Dreft: to help clean tough baby and toddler stains Hewlett Packard developed its product range and targets the user segments of computing equipment for: home office users, small and medium businesses, large businesses, health, education and government departments. Differentiated Marketing  3. Concentrated marketing (Niche marketing)  A market coverage strategy in which a firm goes after a large share of one or a few smaller segments or niches.  Positioning  It is the way the product is defined by consumers on important attributes- the place the product occupies in consumer’s mind relative to competitive products. Examples: Tide is positioned as powerful, all purpose family detergent Nissan and Honda are positioned on economy Mercedes and Cadillac on Luxury Porsche and BMW on performance Volvo positions on safety and dependability Toyota on fuel efficiency In-Class Activity  Stimulation Game: Ice Cream Segmentation We’ve been talking a lot about segmentation and targeting and discussing how they both work in real-life marketing. Now it’s time for you to give it a try. Remember the ice cream shop you ran in a simulation earlier in the course? We’re going back to that scenario: you are an entrepreneur working to building your house-made ice cream business. This time you’ll explore how to use segmentation, targeting, and the marketing mix to grow the business. Try the simulation a few times to see how different choices lead to different outcomes. In a simulation you should take the opportunity to try out choices you think are right and some you suspect are wrong, since you can learn from both. All simulations allow unlimited attempts so you can gain experience exploring and applying the concepts. Good luck!  Click the link to start the game: https://biz.libretexts.org/Bookshelves/Marketing/Book%3A_Principles_of_Marketing_(Lumen)/03%3A_S egmentation_and_Targeting/3.08%3A_Simulation-_Segmenting_the_Ice_Cream_Market 3.8: Simulation- Segmenting the Ice Cream Market - Business LibreTexts  References 1. Philip Kotler, Gary Armstrong, Principles of Marketing, Thirteenth edition, 2010, Pearson Education Inc, New Jersey. 2. Roger A. Kerin, Steven W. Hartley, William Rudelius, Marketing: The Core, Fourth Edition, 2011, Mc Graw Hill/Irwin, New York. 3. Paul Baines, Chris Fill, Kelly Page, Marketing, Second Edition, 2011, Oxford University Press Inc, New York.