Marketing Management Unit 2 PDF

Bachelor of Business Administration Marketing Management Unit 2 Introduction to Consumer Behavior Consumer behavior involves actions and choices in selecting, purchasing, utilizing, and discarding products or services. Influenced by psychological, sociological, and cultural f...

Bachelor of Business Administration Marketing Management Unit 2 Introduction to Consumer Behavior Consumer behavior involves actions and choices in selecting, purchasing, utilizing, and discarding products or services. Influenced by psychological, sociological, and cultural factors. Progresses through stages: needs identification, data gathering, exploration of alternatives, purchase decisions, and post-consumption evaluation. Influences include personal beliefs, societal norms, marketing efforts, product attributes, and environmental circumstances. Understanding consumer behavior is crucial for businesses. Helps devise effective marketing strategies aligned with customer desires. Analysis of consumer behavior data aids in trend identification, demand forecasting, and informed decision-making for product development, pricing, promotion, and distribution channels. Consumer behavior in marketing Consumer behavior informs decision-making processes in product selection, purchase timing, and vendor choice. Understanding consumer behavior enables tailored marketing strategies targeting specific demographics with precise messaging. Examples of consumer behavior's impact on marketing: Segmentation: Behavior research helps segment markets, allowing tailored marketing approaches for each demographic. Product Design: Insights refine offerings to better match consumer needs and preferences, enhancing sales and satisfaction. Pricing Strategies: Data guides optimal price points and strategies, catering to varying customer willingness to pay. Branding: Analysis shapes branding strategies, fostering loyalty by resonating with consumer attitudes and perceptions. Consumer buying behavior Consumer buying behavior: Process and activities individuals or households undertake when making purchasing decisions. Factors influencing consumer buying behavior: Internal factors: Personal preferences, psychological factors (motivation, perception, attitudes). External factors: Social influences (family, culture, reference groups), marketing efforts (advertising, branding, promotions), situational factors (time constraints, financial considerations). Importance for businesses: Effective marketing: Understanding factors to meet consumer needs and preference. Meeting consumer demands: Tailoring products and services accordingly.  Example: Launch of a New Smartphone Market Research: Conduct surveys and focus groups to understand consumer preferences (e.g., desired features, price range). Analyze competitor products and market trends to identify gaps. Segmentation: Divide the market into segments based on demographics (e.g., age, income), psychographics (e.g., lifestyle, values), and behavior (e.g., usage rate, brand loyalty). Targeting: Identify the most profitable segments to target (e.g., tech-savvy millennials, business professionals). Positioning: Develop a unique selling proposition (USP) that differentiates the smartphone from competitors (e.g., superior camera quality, long battery life). Marketing Mix (4 Ps): Product: Design and develop the smartphone with features that meet consumer needs (e.g., high-resolution camera, fast processor). Price: Set a competitive price point based on market research and perceived value (e.g., premium pricing for high-end features). Place: Distribute the smartphone through various channels (e.g., online stores, retail outlets, carrier partnerships). Promotion: Create an integrated marketing campaign to generate awareness and interest (e.g., social media ads, influencer partnerships, launch events). Consumer Feedback: Collect and analyze consumer feedback post-launch to make necessary adjustments (e.g., software updates, customer service improvements). Factors affecting consumer buying decision Psychological factors Social factors Personal factors Economical factors Factors affecting consumer buying decision Psychological factors: Human psychology plays a major role in understanding consumer behavior. Difficult to measure, but psychological factors are powerful enough to influence a buying decision. Some of the important psychological factors are as follows − 1. Motivation 2. Perception 3. Learning 4. Attitude and beliefs Factors affecting consumer buying decision Social factors: Humans are social beings, and the society or the people they live around influence their buying behaviour. Human beings try to imitate other humans and nurture a desire to be socially accepted. Hence, their buying behaviour is influenced by other people around them. These factors are considered as social factors. Some of the social factors are as follows − 1. Family 2. Reference groups 3. Roles and status 4. Cultural factors. Factors affecting consumer buying decision Personal factors: Factors that are personal to the consumers influence their buying behaviour. These personal factors vary from person to person, thereby producing different perceptions and consumer behaviour. Some of the personal factors include − 1. Age 2. Income 3. Occupation 4. Lifestyle Factors affecting consumer buying decision Economic Factors: Consumer buying habits greatly depend on the economic situation of a country or a market. When a nation’s economy is strong, it leads to a greater money supply in the market and higher purchasing power for consumers. Whereas a weak economy reflects a struggling market that is impacted by unemployment and lower purchasing power. Some of the important economic factors are as follows − 1. Personal income 2. Family income 3. Consumer credit 4. Liquid assets 5. Savings Consumer buying process 1. Need recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase behavior Consumer buying process Let us look into the journey of a customer - Sam - who is planning to buy a laptop. Problem recognition: Sam realizes the need for a new laptop when he notices that his current laptop's battery is weak and causing him inconvenience. Information search: Sam collects information about various laptop brands by reading specs, reviews, and talking to friends and colleagues. Evaluation of alternatives: Sam shortlists a few alternatives and evaluates their pros and cons to make the best logical decision considering other benefits and his budget. Purchase decision: Sam may be influenced by people's attitudes and unexpected situational factors while making the final purchase decision. Post-purchase evaluation: Sam engages with the brand based on his experience with the product. If the product meets his needs or exceeds expectations, he will be satisfied, but if it falls short, he will be disappointed. Consumer buying and industrial buying What are Consumer Products? The products which directly satisfy the wants and needs of a consumer are known as Consumer Products. For instance, soap, clothes, bread, jam, butter, etc. Consumer products are used by consumers for their personal needs. These products can be further classified into two categories: On the Basis of Durability (Non-Durable Products, Durable Products, and Services) and On the Basis of Shopping Efforts (Convenience Products, Shopping Products, and Specialty Products). Consumer buying and industrial buying What are Industrial Products? The products used by the organizations as inputs for the production of other products are known as Industrial Products. For example, lubricants, tools, equipment, machines, etc. Industrial Products can be classified into three categories; namely, Materials and Parts, Capital Items, and Supplies and Business Services. Difference between Consumer buying and industrial buying Meaning: Consumer Products: Directly satisfy consumer wants and needs. Industrial Products: Used as inputs for production of other goods. Buying Motive: Consumer Products: Personal consumption. Industrial Products: Manufacturing other products. Nature of Buyers: Consumer Products: Impulsive, less comparison. Industrial Products: Rational, more comparison. Factors Affecting Purchase Decision: Consumer Products: Ads, sales promotions. Industrial Products: Technical aspects, cost, supplier goodwill. Difference between Consumer buying and industrial buying Number of Buyers: Consumer Products: Large. Industrial Products: Limited. Nature of Demand: Consumer Products: Direct demand. Industrial Products: Derived demand (from consumer product demand). Geographic Distribution: Consumer Products: Widely spread. Industrial Products: Concentrated at fixed locations. Channel Levels: Consumer Products: Longer distribution channels. Industrial Products: Shorter distribution channels. Segmentation Segmentation in marketing refers to the process of dividing a larger market into smaller, distinct groups or segments based on specific criteria. This allows businesses to better understand and target different groups of consumers with tailored marketing strategies and offerings that are more relevant to their needs, preferences, and characteristics. Segmenting is a strategic approach in marketing that involves breaking down a broader market into smaller, more manageable segments. The concept acknowledges that not all consumers are alike and that targeting specific groups with tailored marketing efforts can be more effective than trying to appeal to everyone uniformly. Process of Segmentation Market Analysis: Understand market characteristics: size, growth, trends, competition. Identifying Segmentation Variables: Determine criteria: demographic, psychographic, behavioural, geographic, socioeconomic. Segmentation: Divide market into distinct, measurable, accessible, substantial, actionable segments. Targeting: Evaluate segment attractiveness. Select based on size, growth, competition, resource alignment. Positioning: Develop unique value proposition. Differentiate offerings to resonate with segments. Importance and bases of Segmentation Effective and Efficient Marketing: Tailored offers for each segment's needs. Higher success rates with customized messaging. Maximizes advertising dollars by targeting specific segments. Targeted Advertising Campaigns: Relevant targeting criteria to reach specific users. Avoids wasting budget on a broad, non-segmented audience. Increases response rates by focusing on the right audience. Advantages Over Generic Campaigns: Segmented campaigns drive better engagement. More efficient use of marketing resources. Reduces costs by avoiding irrelevant audience segments. Factors affecting Segmentation Demographic Segmentation: Variables: Age, gender, income, education, occupation, family size, ethnicity. Psychographic Segmentation: Characteristics: Lifestyles, values, beliefs, attitudes, interests, personality traits. Behavioral Segmentation: Behaviors: Purchasing patterns, usage rate, brand loyalty, benefits sought, occasion or timing of purchase, readiness to buy. Geographic Segmentation: Factors: Location, region, climate, population density, urban or rural areas, country. Socioeconomic Segmentation: Status: Social class, income level, occupation. Targeting and positioning Targeting involves selecting one or more specific segments from the overall market to focus on with your marketing efforts. These segments are chosen based on factors such as their size, growth potential, profitability, accessibility, and compatibility with your company's resources and objectives. Targeting allows you to concentrate your resources and attention on the most promising opportunities and ensures that your marketing efforts are directed towards those most likely to be interested in and responsive to your offerings. Process of Targeting Segment Identification: Identify distinct groups within the broader market. Based on demographics, psychographics, behaviors, or geographic location. Consumers in each segment share similar characteristics, needs, or behaviors. Segment Evaluation: Assess each segment's attractiveness. Criteria: Size, growth potential, profitability, competition, accessibility. Prioritize segments that offer the greatest potential for success and align with strategic goals. Target Selection: Select one or more segments to target. Consider segment size, growth potential, competitive intensity, and ability to serve effectively. Focus resources and tailor marketing strategies to the chosen audience's needs and preferences. Positioning Definition of Positioning: Perception of your brand, product, or service by the target audience relative to competitors. Create a unique and compelling identity in consumers' minds. Factors Shaping Positioning: Product features and benefits. Price and quality. Brand image. Positioning relative to competitors. Benefits of Effective Positioning: Differentiates your offering from competitors. Establishes a strong and favorable brand perception in the marketplace. Targeting vs. Positioning: Targeting: Selecting the right market segments to focus on. Positioning: Crafting a distinct and appealing identity for your offering within those segments. Together, they form the foundation of a successful marketing strategy. Process of Positioning Understanding Consumer Perceptions: Conduct market research to identify consumer perceptions, attitudes, and preferences. Understand how consumers view your brand relative to competitors. Identifying Points of Differentiation: Identify unique features, superior quality, innovative design, superior customer service, or compelling brand image. Determine what sets your offering apart from competitors. Crafting a Positioning Strategy: Develop a strategy that defines the desired perception of your offering. Create a distinct and compelling brand identity that resonates with consumers. Communicating the Positioning: Use various marketing channels to communicate the positioning strategy. Ensure consistent and targeted communication through advertising, branding, messaging, packaging, and customer interactions. Reinforce the desired brand image and build strong associations in consumers' minds. Product differentiation Product differentiation is the strategic approach to making the product stand out. It’s done by highlighting its unique features, superior quality, innovative design, or exceptional customer service. It's about delivering distinct value to customers in ways that are meaningful and visible to them. Thereby carving out a competitive niche and fostering brand loyalty. The aim is to ensure that when customers think of the product, they perceive it as the only one that meets their specific needs in the best way possible. Product differentiation is the strategic approach to making the product stand out. It’s done by highlighting its unique features, superior quality, innovative design, or exceptional customer service. It's about delivering distinct value to customers in ways that are meaningful and visible to them. Thereby carving out a competitive niche and fostering brand loyalty. The aim is to ensure that when customers think of the product, they perceive it as the only one that meets their specific needs in the best way possible. Product differentiation Definition: Product differentiation refers to the characteristics that make your product or service stand out to your target audience. It distinguishes your offering from competitors, increasing brand loyalty, sales, and growth. Examples of Differentiators: Customer Support: Offering customer support account managers when competitors do not. Customization: Providing customization options for athletic wear, unlike competitors. Benefits of Product Differentiation: Enhances brand loyalty. Drives higher sales. Fuels business growth. Types of Product differentiation Two Strict Forms: Horizontal Differentiation Vertical Differentiation Some purchases involve a mix of both. Vertical Differentiation: Customers rank products based on measurable factors like price or quality. Example: Restaurant choice based on low calories vs. cheaper meals. Objective measurements, but importance varies per customer. Horizontal Differentiation: Choices based on personal preference, not objective measurements. Example: Preference for vanilla, chocolate, or strawberry milkshake. Similar features and prices, decision based on subjective taste. Mixed Differentiation: Complex purchases involve both vertical and horizontal factors. Example: Car purchase considering safety (vertical) and color/brand image (horizontal). Different weights of importance on each criterion per consumer. Strategies of Product differentiation Price: Price can be used to differentiate a product in two ways. Companies can charge the lowest price compared to competitors to attract cost-conscious buyers—the retailer Costco is an example. However, companies can also charge high prices to imply quality and that a product is a luxury or high-end item, such as a Bugatti sports car. Performance and Reliability: Products can be differentiated based on their reliability and durability. Some batteries, for example, are reputed to have a longer life than others, and some consumers buy them based on this factor. Location and Service: Local businesses can differentiate themselves from their larger national competitors by emphasizing that they support the local community.