Marketing Strategy PDF

Marketing Strategy Unit 1 Marketing scope ---------------------- - Marketing: needs, Wants and Demands - Goods, Services and Experiences - Value, Satisfaction and Loyalty - Transactions and Relations - The Marketing plan 1. **[Marketing]** Marketing itself was develop by Philip Ko...

Marketing Strategy Unit 1 Marketing scope ---------------------- - Marketing: needs, Wants and Demands - Goods, Services and Experiences - Value, Satisfaction and Loyalty - Transactions and Relations - The Marketing plan 1. **[Marketing]** Marketing itself was develop by Philip Kotler, so What is Marketing? Most people asked would say something like "it is the advertising in the TV" or "it\'s when they are trying to sell me something that I don't want". The most important words in this definition are "**Exchange and Value**". Marketing is a social process because there's different part that interacts with each other (When you are selling something both parts are interacting). And it is also a **managerial process** because you as a seller set up something with value to sell. Marketing starts at the moment the product is branded (First 1920). - **[The marketing process:]** The main thing is to **create value for costumers**, so in this way they will buy the products offered\ For *example*: BIC pen; people use them because they are convenient and takes a while to dry-out. **VALUE WE GIVE THEM.** The company creates [profit] by **capturing value**: Fountain 20 euros VS BIC pen 1 euro. The marketing process starts with a firm that looks into the needs of customers, e.g., Amazon notices a trend that many people are looking for a videogame chair; with this information, they may add one to the "Amazon basics". Another example: Zara looking in real time at what is being sold worldwide. Firms decide which segment they are targeting. They try to sell their product/service, and, sometimes, it becomes a relationship**. Brands have a target**. Everyone needs status sometimes (customers with status needs). Companies exist to create value for shareholders. The value of a company in the stock exchange depends on their future profits. The value of a brand depends on the number of sells that are going to be successful. VALUE OF A BRAND ---\> BRAND EQUITY. [Without the creation of value there is no brand, no business. ] A business only makes sense if you are able to sell and make a profit. - **A simplification of the market system:**  Environment: The company/ brand use intermediaries: Retailer, wholesaler, producer, consumer. All changes because of environmental forces. - Needs, Wants and Demands: - Be able and willing to pay for it. - Need to be sure that consumers can and want to pay for it. - Purchasing power. - Value position that consumers can buy/pay. *Discussion:* [- Is every want related to the same need?] Sometimes you buy a sweater because it is cold, and sometimes because of self-expression. No, a sweater can be sold because of need, or status, or personal realization. The same want can solve different needs, and vice versa. \- [Does every want mean there will be a demand?] No, it depends on the buying power of consumers, and their will to spend the money. E.g., for self-realization I want a Ferrari, but I don't have the money; but there are other products that I've always wanted to have, like a camera of 900€ → I have the money, but I don't want to spend that money on the camera. \- You need customers who have the money, but also the want to spend the money. 2. **[Goods, services and experiences]** Tangibilization of services → e.g., welcome packs Products also bring services nowadays → you buy a car, and you have a warranty service, etc. Services are not pure services, and products are not pure products. Selling an experience is different from saying that a product has an experiential side → haptics in Apple. E.g., Smell of new in cars---\> car sellers keep some smell in the car so that when you sit, you smell the smell of new; they are not selling an experience, but a product with an experiential side. 3. **[Value, satisfaction and loyalty]** - Companies make [VALUE PROPOSITION] as a reply to consumers\' demands. - Consumers [CHOOSE] amongst market offerings based on: - Expectations on customer value - Expectations on satisfaction Low cost is not the best strategy; what we actually need is companies offering a lot of value that someone would capture (offer something that customers really value). - What I'm I getting on this? - What satisfaction do I get? - Why apple can charge more than Samsung on their phones? - **Discussion:** - What's the conceptual difference between market offering and customers' expectations? - The difference is that consumers don't buy base on objective things. - Market offering: Is based on [OBJECTIVE] and [RATIONAL] - Customer Expectations: is based on [SUBJECTIVE] and [PERCEPTUAL.] - Shall a company set expectations High or Low for their market offering? If they set high expectations, it's more probable that the customer has a bad reaction to the service, so they'll tend to be more unsatisfied easily. Firms have to find a balance so that pros don't outnumber the cons. They shouldn't promise what they cannot really deliver. 1. Needs: Water 2. Market offering: sell a bottle of water 3. Expectations: based on my experiences for the same or other products of the same brand 4. Perceived costumer Value: How the costumer felt about the product 5. Exchange: Based on the value given 6. Satisfaction: if you liked the product based on your expectations 7. Loyalty: continue buying from the brand - **How is value created?** - [Production concept] - [Product concept:] - [Selling concept] - [Marketing Concept]: - **Economies of scale**: sell a lot of products with a low variable cost - Brands try to sell a **value proposition available and affordable**: FORD (T concepts) - [Social and Sustainable concept]: Make/do things which doesn't harm the environment. Is all about QUALITY and PERFORMANCE, Apple has tactile screens, adds\... [Selling concept]: You can put more sellers, advertising to sell more. A brand has to be known, you can trick buyers but not forever, if the company isn't good enough people are gonna find out. Solving customers\' NEEDS and WANTS: Zara has a production process very quick, so they can change their shops very quickly. 4. **EXCHANGES, TRANSACTIONS AND RELATIONS** - Exchange is the act of obtaining a desired object from someone by offering something in return - Exchange shouldn't be lucrative. Is the core concept in Marketing - [Conditions] that make exchange possible: - At least two parties must participate - Each must have something of value to offer the other - Each party must also want to deal with the other party - Each party is free to accept or reject the other's offer Example: - Marketing theory is concerned with two questions: - Why do people and organizations engage in exchange relationships? - How are exchanges created, resolved, or avoided? 1. **Lucrative-Non lucrative** 2. **Restricted -- Generalized -- Complex**  **Transactions and relations** - **[Transactional exchange]**: One in which there are not social elements, no further communication (if you\'re talking about a bottle of water, you only talk about quantity, composition, etc., nothing apart. No expectations for the future: the brand is irrelevant, you haven\'t tasted the brand before, you don\'t commit to anything in the future. - One time exchange with no social elements: - No further communication - Not expectations for the future. Only relevant thing is what I am getting for my contribution to the exchange - Money as a convention? - [**Relational exchange**:] the communication goes beyond the product\'s characteristics. Example: - Includes communication beyond basic characteristics of the exchanged values. - Considers future expected returns. Discussion - Can exchanges be other thing but pure transactions or relations? We define it for the limit, but most are in between. - Propose a pure transactional exchange. Vending machines, changes in currencies, buying unbranded petrol in a road you don\'t plan to go to again. Pure relationship: you partner with a supplier\... - Is a relational exchange always better than a transactional exchange? No, it depends on what the customer wants. - When a customer buys repeatedly from a company, can we say that a relational exchange is happening? It is difficult to have a relation before having a few transactions. Maybe it is not sufficient, but it is necessary. After transactions maybe you start to feel attached to the brand. - B2C: many customers with low margins - B2B: less customers with margins (interested in having a good relationship with businesses. - B2C: lot of customers but only sell once. **CUSTOMER EQUITY** - Customer delight - Loyalty - Share of wallet - Engagement **Customer -- engagement marketing:** **Are all customers worth our dedication?** Not all customers are the same, therefore, not all customers are equally profitable. - **Butterflies**: good fit with needs. They hunt a lot and always look for the best deal. We try to capture as much value from them on s/t, it is not profitable to invest in customer relationships. - **Strangers**: little fit with their needs. Shouldn't invest in a relationship. Jut make money at every transaction. - **Barnacles**: very loyal but not profitable. Fire them! They keep coming to the business, they give you a lot of work but buys very little: E.g., client who tries lots of clothes but then buys nothing. - **True friend**: Strong fit with their needs. Invest in the relationship until they become endorsers of the brand- High engagement in b2c, partnership in B2C. They are good customers, they trust you... You need to know what customer you are dealing with to know how to treat them. You should try to [push away only barnacles]. E,g., Banks with bank fees they set up fees to push away barnacles because they are not profitable (they "fire" them). 5. **THE MARKETING PLAN:** No one strategy is best for all companies; [Each company must find the way that makes more sense given:] - Its situation - Opportunities - Objectives - Resources There are **3 stages of Marketing planning:** 1. The Strategic Plan 2. The Marketing Process 3. Ways of putting the Plan into action. **The Strategic Plan (corporate level)** A diagram of a company Description automatically generated Corporate level (Which is above marketing) It is the consequence of decisions happening at the corporate level. **The Marketing Process** It starts with an analysis: What tools and resources do we have? What are the company's objectives? Do we need to use all our resources in order to obtain our goals?  E.g., Massimo duty analysis. Planning: you want to increase the average ticket, but not by increasing prices because we don't want to alter them (not profitable). B\) Develop: marketing plan: offer accessories at check-out. Cross-selling: when you go to the supermarket and next to the chips there is a soda; they put products which go well together, which are complements. C). Implementation: which accessories? We put socks at 9€ at the counter, and the cashier will offer them to clients. Place: displays. Promotion: "why don't you add a pair of socks to your order? They are great and at such a good price...". D). Control: \- Measuring results: we make an average ticket comparison some months later \- Evaluation: was it profitable? If so, how can we make it even more? If not, what can we change? \- Corrective action: correcting or improving the plan. All this plan costs money, so you need an investment. You do marketing actions to get something: they are an investment A diagram of a marketing strategy Description automatically generated Marketing policies are a consequence of marketing strategies. **What does a marketing plan look like?** - [Executive summary]: Quick overview for quick reading: main goals and recommendations in the plan. WE WRITE IT THE LAST. - [Marketing audit]: Background data on the market, product, competition, and distribution - [SWOT analysis] - [Objectives and Issues]: Which are the objectives to attain during the plan's term? What issues from two previous steps may affect them? - [Marketing strategy]: Broad marketing Approach. Customer analysis, segmenting, differentiating, positioning. - [Marketing mix]: Product, place, promotion, price. - [Budgets:] Resources needed to implement the plan. Expected outcomes - [Controls:] How will the Marketing Plan be monitored?  With investments you try to create marketing returns. E.g., a customer goes to buy trousers and he finds socks that go well, so he ends up even happier. BONUS TRACK: LATEST MARKETING TRENDS Latest upon latest: - [Emotional marketing]: Classify the brand by how much we respect. - [Online Marketing]: Commercial TV (google ads). They need to balance because they are very transactional, and it doesn't make brand image. - [Viral marketing:] Word of mouth. Influencers - [Geo-Marketing]: Taking advantage of location of customers - [Neuro- Marketing]: set of tools which looks for the part where the brain activity takes place. In order to study pleasure and losses. The part that activates when we feel pleasure is the nucleus account. The amygdala is related with fear, losses, prices. You can track neutral activity signalling pleasure and losses. **CONCLUSION** Share of customer = Share of wallet. Customer equity = Value that you are capturing from your potential customers for the future. Aggregation of customer lifetime value from potential customers. A diagram of customer relationship Description automatically generated UNIT 2: Marketing environment ============================= - Microenvironment - Macroenvironment - Environment 1. **Environment** 2. **Microenvironment** - **Internal environment** - Top management: sets the company's mission, objectives, broad strategies and policies - Finance: Finds and allocates funds to implement the marketing plan. Finance is important - R&D: designs Safe and attractive products. Research and development, You need the product to be good, and it does that. - Purchasing: gets supplies and materials. Important for companies that are just resellers: E.g. Samsung buying products for their phones such as batteries. - Operations: produces the desired quality and quantity of products. The better the op department is, the better the brand would be - Accounting: Provides measures of costs and revenues. Cost of the product - **Suppliers:** - Provides resources needed to produce goods and services. - Important to watch out for supply availability, shortages or delays. - Monitoring price trends of key inputs. E.g. Iberia sells airplane tickets without knowing the price of the fuel in the future. - **Intermediaries:** firms that help promoting, selling and distributing to final buyers - Resellers: Wholesalers and retailers - Physical distribution firms: Warehousing and transportation. - Marketing services agencies: market research, advertising, promotion... - Financial intermediaries: Banks, credit companies, insurance. There is no place where you can go and touch a tesla car, like a dealer No distribution network, that is the problem. Resellers contribute to your image. It's not the same being available in El Corte Inglés gourmet than in Día, even if you are selling just water. Premium brands only sell in official resellers, for which you have to pass an exam (Street, policies, windows, promotions,...) **Physical distributions**: At the time a brand wants to distribute their products in a massive way, they need to take care of how their products is set in the stores, because depending on it the client will take it or not. - **Customers:** - Consumer markets: B2C - Business markets: B2B - Reseller markets: The store buys the water and resells it as it is - Institutional/Government markets: The public administration buys to incorporate in the production of public services. - International markets: Most part B2B, importers that distributes in a specific country. - **Competitors:** - Analysis of competitors is one of the keys to understand the success of a company. - Positionings against competitors' offerings. It is important to analyse competition, anything that competitors do, is likely to affect you. - **Publics:** - Financial Publics: banks, investment houses, stockholders. Brands have financial needs. - Media publics: newspaper, radio, magazines, TV. Publicity is important. - Government publics: Lawyers and officials - Citizen action publics: Consumer organisations, environmental groups... - Local publics: neighbourhood residents, community organisations. - General publics: Public image - Internal publics: Workers, managers, volunteers, board of directors. **Internal Marketing:** How to have good relationships with your employees. Happy employees produce more and better. 3. Macroenvironment:  - **Demographic environment:** - Markets are made up of people - Important to track: - Population growth trends: Europe is decreasing - Changing age structure: Births, life quality and expectancy - Changes on the family composition - **Economic environment**: affects the money you have and how willing you are to spend the money. - Factors affecting purchasing power and spending patterns. - Europe is a single market for more than 20 years (Euro introduction) - Income: - Consumers spend more rationally during recessions - Consumers spend more liberally during expansive periods - Income distribution (moderator): - Upper segments are less susceptive to economic downturns - Upper segments are the target for luxury products - Middle segments can afford good life some of the time - Lower segments stick to basics: food, clothing, and shelter. - Changing consumer spending patterns: Engel's law: Every time your rent goes up, you spend less on basic goods. - **Natural environment:** - Growing shortages of raw materials - Increased cost of energy - Increased pollution and climate change - Government intervention in natural resource management - **Technological environment:** - One of the most dramatic forces shaping our destiny. - Fast pace of technology change - Increased regulation Originally, music was played live, you needed to go to a concert; then vinyl could be made → you could sell copies. Then you had tapes (problem, record a vinyl in a tape, so market went down). Then CD (better sound). Then Internet (Napster,) that is a problem for musicians. 10.15 years to realize that musicians need to play live again to make money. Technology changed the way of making the business. - **Cultural environment:** - Persistence of cultural values - Shifts in secondary cultural values Coffee and tea. They are difficult to change. Years ago, people paid more for something you used for many years; nowadays: fast fashion. - **Political environment:** - Laws, government agencies and pressure groups that influence and limit various organizations and individuals in a given society. - Types of influence: - Legislation that affects business - Increased emphasis on ethics and socially responsible actions 4. **CONSLUSION** The marketing environment is not uncontrollable A proactive approach is of interest: - Trying to influence legislation - Trying to get press coverage - Keeping competitors in line - Partnering to better control distribution channels. UNIT 3 Consumer markets ======================= - Characteristics affecting consumers behaviour - The buyer decision process - Types of buying decision behaviour - Two preliminary questions - What is a consumer market? - All the personal consumption of final consumers. Personal consumption is when someone that buys whatever to use for its own value and without incorporating It to any production process. - Difference with an industrial/institutional/organisational marketing. In those business marketing, what is bought goes into a production process to make something you can buy. - What is a consumer purchase behaviour? - The buying behaviour of final consumers, individuals, and households, who buy goods and services for personal consumption. Metrics online: how do you get users? Organic search: you search in google for it. Paid search: When you search in google and there are ads. At what time? If you send a newsletter, or a push notification, or something similar, you might find that information quite interesting. 1. **Characteristics affecting consumers behaviour** - [CULTURAL FACTORS]: Culture, subculture and social class - Cultural: - [Culture]: The learned values, perceptions, wants and behaviour from family and other important institutions. E.g. Spain drinks coffee and in UK tea. - [Subculture]: Groups of people within a culture with shared values based on common life experiences and situations. Very small level, such as urban tribes (sporty, gothic, etc.) - [Social class:] Society's relatively permanent and ordered divisions whose members share similar values, interest, and behaviours. Discussion: how can we determine social class? Occupation, income, neighbourhood, education level, wealth. Social classes spend their money in different hobbies (golf), brands sell their products to different social classes (Red Bull VS Monster) - Social factors: - [Reference groups]: They influence our behaviour, they are Primary or secondary (Depends on how often we are in goth groups), Also they are formal (rules are known and even written) or informal (Rules which aren't written but known). - Reference (skills, Knowledge, personality) on a reference group - They influence our behaviour - Brands try to get them as ambassadors - [Family:] it is the most important consumer-buying organization in society Individual purchase: I buy a sweater; I am all the roles; if I go with my boyfriend and he says he likes it, he is the influencer. When you buy a present, you are solving your own need, it is a social need, maybe you are obligated to. This affects what you buy because you are trying to show appreciation, so you'll buy something different from what you want. The fact that you are giving something that is useful, doesn't mean that it resolves their need. You start the process, you recognize the need, so it's your need being resolved. - Personal factors: Age and life cycle stage, Occupation, Economic situation, Lifestyle, personality and Self-concept. - Age and life cycle stage: We don't behave the same at every age. - Young, middle age and elder (they all behave differently) - Occupation: Blue collar- White collar. - Economic situation: - Lifestyle: A person's pattern of living as expressed in his/her activities, interest and opinions. - SRI VALS (values and lifestyle) (9 categories) - SINUS GmbH - Basic orientation: Traditional (to preserve) - Basic orientation: Materialist (To have) - Changing Values: hedonism (To indulge) - Changing values: post materialism (to be) - Changing values: postmodernism (to have, to be and to indulge). - Personality: Unique psychological characteristics that lead to relatively consistent and lasting responses to one's own environment: - Self-confidence - Dominance - Sociability - Autonomy - Defensiveness - Adaptability - Aggressiveness - Etc. - Self-concept: How do we see ourselves (actual self-concept); How would we like to be seen by others (ideal self-concept). PSYCHOLOGICAL FACTORS: Motivation, perception, learning, beliefs, attitudes - Motivation: a need becomes a motive when we become aware of them to a sufficient level of intensity. [There are more important needs than other] (Maslow Pyramid) - Perception: Process by which people select, organize, and interpret information to form a meaningful picture of the world from three perceptual processes. The final decision would depend on how the customer perceives the product. - Key concepts: - Selective attention: It is difficult to perceive something that you are not paying attention to. We select to what we pay attention. - Selective distortion: "tendency to interpret information according to the beliefs or perceptions that you have rooted" how do we know we all see the same blue? When our brain identifies strawberries, it sees it red, despite it is actually green. When you engage with a brand, the perception will be distortion. Attitudes towards brands act as a filter. That is why many brands do public relations. - Selective retention: "tendency to remember information that best connects with our needs, beliefs, interests and values". If you see a trailer about a film about dogs, you will remember it better if you like dogs than if you prefer cats. - Learning: change in an individual's behaviour arising from experience and occurs through interplay of drives, stimuli, cues, responses, reinforcement a. A friend invited us for dinner at his/her place o b. While reading the newspaper: c. In the shop: d. You purchase: e. You provide - Beliefs: a descriptive thought that a person has about something based on knowledge, opinion, or faith. Some knowledge that you associate with an object (a brand, a product, a class). Beliefs connect very well with attitudes. Many consumers think that Apple is cool, (what is cool? How can a device be cool?) but many people think that, so that's enough. Attitudes simplify. - Attitudes: They describe a person's relatively consistent evaluations, feelings, and tendencies toward an object or idea. 2. **THE BUYER DECISSION PROCESS**: if we have a buyer we have a process. - Need recognition: the buyer senses a difference between an actual state and some desired state, triggered by internal and external stimuli - Internal: You decide by yourself, E.g. You become angry because you are hungry. - External: You perceive the smell of food, and you become hungry, can also happen with an ad. Markets want to understand the factors and situations that usually trigger consumer need recognition. - Information search: When the consumer has a need, there are 3 possible outcomes: 1. Strong drive: satisfying product at hand...just purchase it. If your iPhone gets stolen, you're going to buy another one. 2. Just store the need in memory (heightened attention). You start thinking about buying something. When you want to buy something, you start seeing it everywhere, so you pay attention at the people who's using it. After that, you decide if it suits your style. (Toyota Yaris, clothes) 3. Let's search for information on how to solve my need (active search). You want to change car: you start going to car dealers, buying magazines, getting info online...to buy the car. - Sources for information: - Personal sources: family, friends, neighbours... - Commercial: Advertising, salespeople, internet, packaging, displays. Configuring, interaction with the product: I want this and this, this equipment, this colour, and the price would be this. - Public sources: mass media, consumer-rating organizations - Experiential sources: Handling, examining, and using the product. Going to the car dealer and try the car. Marketers want to understand where consumers get their information and how they trust it depending on the source. - Evaluation of alternatives: - How do consumers process information to arrive at brand choices? - Certain needs take consumers to value certain product benefits. - Consumers attach different degrees of importance to each attribute. It's important to understand how consumers think. - The difference between "importance" and "saliency" - Consumers develop brands beliefs. German cars are safe and reliable. - Consumers have a utility function for each attribute. Not every attribute of car will have the same value for every customer, because we all have different utility values. - Models: - Expectancy value model of consumer choice. Consumers make some kind of calculations on their minds. - Conjunctive models: my choice must have this attribute. It's like a filter, we won't consider things that doesn't have x attribute. - Disjunctive model: my choice should rank high in this attribute. I want a car that is large, so I want the trunk to be like that. [Marketers want to understand how consumers evaluate alternatives.] - Purchase decision: After evaluation the preferred brand is most likely to be purchased, but it can also be postponed. The decision can be influences by other people or situational determinants (friends, family, influencers...). Perceived risk poses several threats in this stage. If you start a complex buying behaviour, and you couldn't make your mind clear, maybe you just abandon because it is too risky. [Marketers want to understand why consumers engage in exchange, and how those exchanges are created, resolved, or avoided]. - Post Purchase behaviour: comparison between expectations and perceived performance. The size of the gap determines levels of satisfaction and dissatisfaction. [Cognitive dissonance]: discomfort caused by post-purchase conflict. When I buy a car, maybe I start regretting it when I buy it. Money risk, social risk. This is independent of the consumer using the product: it can happen before they buy the product. Eventually, you will use the car. And then it could happen that you like it or not (mouth to mouth or bad word of mouth). We don't want to live with the feeling that you made a mistake, so we can try to convince ourselves by telling others how good our purchase was. A lot of things happen after you buy (not only satisfaction). The double speed magnitude: WOM If consumers are not buying a product because they don't perceive a need for it, Marketing might launch advertising messages that trigger the need and show how the product solves customer's problems. If customers know about the product but are not buying because they hold unfavourable attitudes towards the brand, the marketer must find ways either to change the product or to change consumers perceptions. 3. **TYPES OF BUYING DECISION BEHAVIOUR**: If we have a buyer, we have a process. Complex decision involves more buying participants and more buyer deliberation. Classification: Purchase involvement means that consumers will devote some time and effort to look for info, process it and get it right. **You involve when you perceive risk** (if you don't perceive risk at all, why would you bother). There are markets in which we don't know the difference between brands. - Complex buying behaviour: High involvement in a purchase, and significant differences among brands. The product is expensive, risky, purchased infrequently, and high self-expensive. Computer or cars, - Dissonance-reducing buying behaviour: high involvement and few differences between brands. The products is expensive, infrequent to purchase, there's no big difference among brands (ceramics). [Important drives:] good price (if you think they are all the same, you'll chose the cheapest), convenience (I need water, I buy whatever is available), brand recognition reduces dissonance. Porcelanosa is more expensive because it is the one that people know; the fact that the only one you know is the most expensive reinforces the thought of the tiles being good. - Habitual buying behaviour: Low involvement and little brand difference. The brand choice can be a habit more than a preference. It is more about familiarly than a brand conviction. Price and sale promotion are very strong drives. The one I usually buy is good enough, I'll keep buying what I know. - Variety-seeking behaviour: low involvement and significant perceived differences between brands. Consumers do a lot of brand-switching because of boredom, and/or for the fun of trying something different. I will use one or the other. Change just for the fun of it. Books, movies. Is it better to have many variety or non? Mercadona strategy is selling their own brand. **TYPICALL STRATEGIES:** - Brand leaders try to promote habitual behaviour by dominating shelf-space, advertising and avoiding out-of-stock conditions. If you want my Doritos and my lays, you have to take all these products, and I want 10 meters of shelf. Using power in distribution channels. Advertising: Reconfirming customers that they are buying right. Out of stock opens the possibility to discover something new, which can even be better than the one that you habitually buy. - Brand challengers will encourage variety seeking by offering lower prices, deals, coupons, free samples and advertising centering on the fun of trying something new. UNIT 4 Consumer Behaviour: Industrial Markets --------------------------------------------- 1. Characteristics of business markets 2. The business buying process 3. Types of buying situation and participants in the business buying process 1. **CHARACTERISTICS OF BUSINESS MARKETS** A business market comprises all the organizations that buy goods and services to use them in the production of other products and services, or for the purpose of reselling or renting them to others at a profit. You are using what you buy to sell to others. Europe cars rent to businessmen to sell, which is a business exchange. The difference between business or consumer exchange: Who is buying and for what. Tires sell to companies and tire shops (business) and then they sell to customers (consumers). [Similarities] to consumer markets: - Both involve people assuming buying roles. - Needs are needed. There is always some psychology and there's always a need. Typical need in business exchanges: Economic (you buy something to provide a VP to others with profit). [Differences] to consumer markets - Market structure and demand - Nature of the buying unit - Types of decisions - Decision process **Market structure and demand** - **Fewer but larger buyers**: Example Tires markets has millions of customers (Renault), that is why businesses are better for relationship marketing; it is difficult to invest in relational marketing with individual consumers because the money you make from individual customers is so small. - **Geographically concentrated**: Luxury firms are concentrated in NY, Paris, or Milano. Petrochemicals are in Rotterdam and Amsterdam. - **Derived demand**: Tyre manufacturers buy rubber depending on how many tires they are selling which depends on how many cars the dealers are expecting to sell. - **Inelastic demand**: A drop in rubber's price will not shift Michelin's demand for it. You don't buy just because the price went down; very different than in consumer market. - **Fluctuating demand:** In many cases, the stocks accumulate and every time there's a little disturbance in sells, it goes back and back and the accumulation gets bigger and bigger. **Nature of the buying unit** - Business purchase involves: - More decision participants - More professional purchasing effort - The more complex the purchase, the more likely is that several people will participate in the decision-making process. - Buying committees with: - Technical experts - Top management **Types of decisions:** - More complex. If I don't like a bottle of water, the risk is 1€, but if I buy a machine, it\'s very risky. - Large sums of money - Complex technical and economic considerations - Interactions among many people - More formalized - Detailed product specifications - Written purchase orders - Supplier approval PO (purchase order)/hoja de pedido: Order number, price, date of payment, quantity, items, shipping, address... **Buying process:** If you are buying water bottles you and the brand are not dependent from each other. But if it's an important customer, the brand is dependent. - Buyer and seller are much more dependent on each other - B2C keeps a distance - B2B distance is arm's length (close between buyer and seller, but not so much), but still may require close working together: - Customizing: Adapt to the needs of consumers when the business is relevant, e.g., use screwcaps instead of cork for a certain customer. The size of the business makes the possibility to collaboration (this is why relational business happens mostly B2B). - Helping customer to solve their needs - Providing ad-hoc after sale support - B2B is the perfect ambient to let relationship marketing building. If you're selling to someone that is reselling, you have to charge a price so that the buyer is able to make profit, so sells have to be for everyone in order to stay in the long run. **2. The business buying process** Business buyer behaviour refers to the buying behaviour of the organizations that buy goods and services for its use in the production of other products and services that are sold, rented, or supplied to others.  **PROBLEM RECOGNITION** - Someone in the company recognizes a problem or need that can be met by acquiring a specific product or service. - [Internal stimuli]: we are about to launch a new product, which means a new machine, or raw material. - [External stimuli]: we have been to a trade show, and we could improve our offer by adding a new feature by means of this new component. **GENERAL NEED DESCRIPTION** - Buyer prepares a document in which the characteristics and quantity of the needed item are listed - Checking with production department. Sellers in a retailer company - Checking with accountancy department. Can we afford selling it? **PRODUCT SPECIFICATIONS** - The buying organization develops the item's product specifications: value analysis. - I want a projector with some specifications, so you prepare a document and then search suppliers. **SUPPLIER SEARCH:** Who can sell projectors? Maybe you have from the past or look for new ones in Websites, magazines... - Finding the best vendors for the required item. - The newer the buying task - The more complex and costly the item -...The grater the amount of effort that would be put in finding the right supplier. **PROPOSAL SOLICITATION** - Buyer invites qualified suppliers to submit proposals, ranging from: - Price lists, catalogues (simple) - Ad-hoc propositions **SUPPLIER SELECTION** You choose one supplier - Buying department will rank suppliers by: - Quality products and services - On-time deliveries - Ethical corporate behaviour - Honest communication and prices - Repair and servicing capabilities - Technical aid and advice - Performance history and reputation **ORDER ROUTINE SPECIFICATION** - Preparing the final order (PO): - Listing items, tech specifications, quantities - Expected time of delivery - Returns and warranties **PERFORMANCE REVIEW** - Buying department will contact users (within the company): - Asses their satisfaction - Decide whether to go on with the purchase or not - Monitor the usefulness of the purchased items. **3.TYPES OF BUYIN SITUATIONS AND PARTICIPANTS IN BUSINESS PURCHASING** If something works, you buy it again, if not, you modify it. **Straight rebuy**: reordering something without any modifications **Modified rebuy**: Buyer wants to modify: - Product specifications - Prices - Terms - Suppliers **New task situation**: the greater the cost or risk the larger the number of decisions participants and the greater the effort to collect information. PARTICIPANTS IN THE BUSINESS BUYING PROCESS **Major influences on business buyers**: Business buyers are human and social as well. UNIT 5 Segmentation and positioning =================================== 5.1. Introduction 5.2. Market segmentation 5.3. Market targeting 5.4. Differentiation and positioning **1.INTRODUCTION** Why do brands segment the market? It is difficult to serve a whole market, buyers may be: - Too numerous - Too widely scattered. You can not cover all the world because it's not efficient - Too varied in their needs and buying practice. Customers are very different not all the consumers are the same, want the same things or behave the same way, etc. You have to identify which are the customers you can provide better. A company must identify the parts of the market that it can serve best and most profitably. STP. A diagram of a company Description automatically generated **2. MARKET SEGMENTATION** Dividing a market into smaller segments with distinct needs, characteristics or behaviour that might require separate marketing strategies or mixes. Consumers differ in: - Wants - Resources - Locations - Buying attitudes - Buying practices **CONSUMER MARKETS** Segmenting consumer markets: There is no single way to segment a market; there are several variables to segment: - Geopgraphic - Demographic - Psychographic - Behavioral - Tesco Metro: city centres and high streets - Tesco Express: food with an emphasis on higher-margin products and everyday essentials (and a petrol station). - One Stop: Very small stores that do not even carry the Tesco name. **Demographic segmentation**: Dividing the market into groups based on age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. **Psychographic segmentation:** dividing buyers into different groups based on: Social class, lifestyle, personality characteristics. **Product expressive for value**: product that says things about you, like cars, motorbike, phone, tablet or ipad, clothes, where do you live... **Behavioural segmentation:** dividing buyers into groups based on their knowledge, attitudes, uses or responses to a product: - Occasions: Samsonite - User status: non-users, ex-users, first-time users, regular users. - User rate: light users, medium or heavy users. - Loyalty status: high, medium or non loyal **BUSINESS MARKETS** Primary segmentation variables for a business markets: A diagram of a diagram Description automatically generated **3.Market targeting** Target market: consist of a set of buyers who share common needs or characteristics that the company decides to serve. [Evaluating market segments:] - Segment size and growth - Big companies can target larger and fastest growing segments-they have the size and resources. - Smaller companies smaller companies - Segment structural attractiveness - Number of competitors - Power of customers in the segment - Power of suppliers needed to serve the segment - Company objectives and resources - Segments of the right size and structural attractive can be beyond a company's long-term strategy. [Selecting market segments:] why don't we view every buyer as a separate target? The trade-off (punto de equilibrio): - **Economies of scale**: if you cover every customer, you'll lose economies of scale, and you become less competitive. - **Value creation**: segmenting and targeting's aim is creating value.  Mass Marketing (Undifferentiated marketing): Zara - Centering on what is common amongst consumers - Targeting the whole market with one offer - Problem: It is difficult to compete with more focused firms. Schewps: 30 years ago, tonic water was dominated by it; 2 needs: gin-tonic, digestive. Using the needs to make the segments (behavioural segmentation). Same product. - Centering on different needs and wants of several segments - Mean several Marketing plans, Marketing Research, Advertising programs and brand building. Schweeps launched premium tonic waters. Covering both segments with different value propositions, 2 segments with 2 different marketing mixes. Also coca-cola diet VS zero product level and also brand level like loreal group. Different brand depending on the type of consumer Concentrated Marketing (niche marketing): - Centering on needs and wants of one segment - Useful when companies' resources are limited - Internet has opened a door for Niche marketing companies targeting long tailers. New tonic water brand, perfect for mixing (low carbonation, 100% natural). it was more than double the price. it was specific for one segment (gin-tonic). It was a success because there was a segment that wanted something good for their drink. Just go for 1 segment (specific) Q tonic → only make tonic water. Even if the segment is really small, it can be profitable with online shopping (e.g., books). Micromarketing: - Tailoring offers to meet the needs of specific individuals and locations concentrating in a very small segment. - Local marketing: local food products, alimerka - Individual marketing/One to one Marketing, Cocreation because customer involves in the creation of the product. How to choose a targeting strategy: - Company resources: If resources are low, strat concentrated. - Product variability: uniform products call for undifferentation. - Products life-cycle: - Undifferentiation on introduction - Differentiation and micromarketing on maturity - Market variability: if consumers are alike: undifferentiation - Competitor's strategy: if competition is differentiated, undifferentiation can be suicidal. **5.4. Differentiation and positioning** Worst situation for a brand: perfect competition because there are infinite number of buyers and sellers, no entry bounders, homogeneous products (no differences). When the products are not perceived different, you go for the cheapest. **Product position**: Brand try to be perceived different (prices, communication, packaging, channels...). - The way the product is defined by consumers on important attributes - The place the product occupies in consumers' minds relative to competing products. - "Products are created in the factory; brands are created in the mind" a brand is only what it means to consumers, compared to competition. The three steps: A diagram of different types of performance Description automatically generated Identify sources of differentiation: infinite - PRODUCT: Trina: no carbonation. - SERVICES: Ikea. No services: best price, but nobody helps you. - CHANNELS: Lacoste. Selects carefully who is their retailer. La Roche posse, bought at pharmacies. - PEOPLE (that delivers the service): El Corte ingles. Having people helping the customers. - IMAGE: Pepsi. We perceive it different than Coca-Cola. It's an image thing because nothing in the product is different. - How many: - The unique selling proposition (USP) (Rosser Reeves). Identify what makes your brand special, only one thing. - Examples: El corte inglesGreat service, people, sophisticated. - Those that are: - Important - Distinctive - Superior - Communicable - Not easy to copy - Affordable - Profitable Choose the best one. If there's already a brand there attack the brand, or go for second... Position is an attribute that no one positions into, and then upload it. Select and overall positioning strategy:  - Less for much less: low cost. Basic product, very affordable price. difficult to be profitable. Only if you are very cost effective. Aliada (line of affordable products in Supercor?) - The same for less: AMD manufacturer of microprocessors. If you are able to do the same performance, why charge cheaper? Contrary to nature of marketing. - More for less: so difficult. Hacendado. Not about the status. That is the success of mercadona. - More for the same: lexus (luxury division of Toyota). Lexus will have all the equipment, not as BMW of instance. Depends on how you define the competition. Lexus is premium compared to the rest of the brands, and more for the same compared to the premium category. - More for more: premium. ≠ luxury. Luxury doesn't invent, you need a tradition, a heritage, a craftmanship... you become a luxury brand over time. Developing a positioning statement: e.g., to busy, mobile professionals who need to always be in the loop, BlackBerry is a wireless connectivity solution that allows you to stay connected to data, people, and resources while on the go, easily and reliably, more so than competing technologies.