Marketing 100 October 2009 Markets, consumer behaviour Product strategy Lecturer - Ms Jodie Hanson

1. Welcome – Day 2 Marketing 100 October 2009 Markets, consumer behaviour Product strategy Lecturer - Ms Jodie Hanson

2. Review

3. Lecture 4 – Mkt segmentation & Positioning • What are markets? • Why we segment the market • Segmentation, target marketing, positioning 4. Product Growth opportunity matrix

4. 1. What are Markets? • Total Market An aggregate/group of people who have needs for products or services and who have the ability, willingness, and authority to make a purchase • Target market A group, or segment, at which a particular product is aimed is referred to as the target market or the target segment. Note: the group must have similar characteristics and/or needs. Known as an homogenous group.

5. 2. Why we segment the market • The total market can be too broad • The total market is often not homogenous – difficult to target with a core message or offer • Difficult to be all things to all people • Need to narrow our focus to be competitive • Target our marketing effort and our offer to smaller homogenous groups of consumers on the basis of a need or want

6. 3. Market Segmentation, Targeting, and Positioning Divide a market into smaller groups of buyers with distinct needs, characteristics, or behaviors who might require separate products or marketing mixes Market Segmentation a. Identify basis for segmenting the market b. Develop segment profiles Market Targeting c. Develop measures of segment attractiveness d. Select target segments Positioning e. Develop positioning for target segments f. Develop a marketing mix for each segment Most marketers have moved away from mass marketing and toward market segmentation and targeting (“rifle approach” vs “shotgun”)

7. 3 a.Segmentation - Identify the variables and basis on which you will segment the market • These are characteristics of individuals. groups or organisations used to divide a market into segments. • This can be done using the following groups of characteristics Demographic, Geographic, Psychographic, Behavioural

8. Demographic variables: - ie age, gender, income, ethnicity, social class etc. Based on the buyer’s rational behaviour Demographic – most popular (easiest & often meaningful differences) Dividing the market into groups based on population characteristics such as: • Age group Gender • Family size or life-cycle stage • Income Occupation • Education Religion • Race Nationality

9. Geographic variables: - regional differences in population, climate socio-economic status etc. Retailers decide on store location based on where their target segment reside • Geographic – • Country or region • City or metro size • Population density (e.g., urban, suburban, rural) • Climate

10. Psychographic variables: - using personality and life style dimensions to segment the market. This approach recognises that some types of purchases are more emotional-oriented. • Psychographic – beyond demographics • Lifestyle • Personality • Social class

11. Behavioural Variables: - based on the customers’ behaviour towards the product, or specific purchase situation and include benefit sought, usage rate, loyalty etc. Behavioral – may be best starting point Dividing the market into groups based on knowledge, attitudes, uses, or responses to a product – very direct & specific • Occasions – purchase or usage occasion • Benefits sought • User status – nonusers, potential users, first-time users, regular users, ex-users • Usage rate – heavy, medium, light users • Loyalty status

12. 3 b Develop segmentation profiles • Segmentation profiles describes the similarities among potential customers within a segment and explains the differences among people and organisations in different segments

13. Popular Target Market Acronyms • S.W.E.L.L.s :- Single Women Earning Lots and Lots (exclusive apartments, upmarket personal care products, health club memberships, etc) • Y.U.P.P.I.E.S :- Young Urban Professionals (inner city living, BMWs, exclusive clubs, mobile phones) • S.N.A.G.s :- Sensitive New Age Guys (sharing, caring, sensitive, home body, equality etc) • D.I.N.K.s :- Double Income, No Kids (exclusive homes, entertainment home theatre systems, dining out, night entertainment etc)

14. These acronyms are western concepts. Can you see them working in China? Can you create any of your own? What would you do? Class Activity

15. Measurable 3 c Measures of an attractive/effective Segment Accessible Substantial • Can size, purchasing power, and segment profiles be measured? Differentiable • Can segments can be effectively reached and served? Actionable • Are segments large or profitable enough to serve? • Do segments respond differently to different marketing mix elements and programs? • Can effective programs be designed to attract and serve the segments?

16. Evaluate Relevant Market Segments • Several important factors, including sales estimates, competition, and estimated costs associated with each segment should be determined and analysed • Sales estimates: - market potential, company sales potential, Breakdown approach, Buildup approach • Competitive Assessment: - who are our competitors • Cost Estimates: - can we keep our costs equal to or below our competitors? • Company Objectives and Resources • Skills and resources needed to succeed in the segment(s) ? • Competitive advantages ?

17. 3c Choosing Target Market Strategy Mass Market Marketing Mix • Undifferentiated Marketing Marketing Mix 1 Segment 1 Segment 2 Marketing Mix 2 Marketing Mix 3 • Differentiated Marketing Segment 3 Segment 1 Marketing Mix Segment 2 Segment 3 • Concentrated (Niche) Marketing • MicroMarketing – • Local Marketing, Individual Marketing Subgroups of a segment or small segments Consider: Company objectives company resources competitors’ strategies product variability product life-cycle stage market variability

18. Popular Target Market Approaches • Undifferentiated Target Market (“almost mass marketing”): • Looks for commonalities and combines several segments into one marketing mix attempting to satisfy the majority of buyers • Ie most brands of mainstream supermarket products • Unlikely for a brand to be all things to all people. Invites competition • Differentiated - Multiple Target Market (“generalist”): • Two or more segments each with own marketing mix (ie most large companies with multiple products and brands within the same product category • High marketing and operating costs • Niche - Single Target Market (“specialist/niche”): • Concentrates resources (marketing mix) on a single segment • Ie LandRover, Bang & Olufsen • But risky as all eggs are in one basket

19. Are there enough differences in customers’ needs to warrant the use of market segmentation in all cases? Is there a case where we may not need market segmentation? Example of a mass market Class Activity

20. 3d. Positioning for Competitive Advantage IMPORTANT: • Consumers will position products with or without the help of marketers • Product’s Position • the way the product is defined by consumers • the place the product occupies in customers’ minds, relative to competing products (based on perceptions) • The position represents a complex set of perceptions, impressions, feelings – in simplified form

21. Cont. Marketers must • Plan positions to give their products the greatest competitive advantage in selected target markets • Design marketing mixes to create these planned positions (not empty promises) • What makes this product unique and superior? • Implant the brand’s unique benefits and differentiation in customers’ minds

22. Cont. • Positions that are meaningful/worthwhile: • Important –target customers value the difference as a meaningful benefit • Distinctive – competitors don’t already position on it • Superior – better than competitors • Communicable – difference can be communicated, made visible and understandable • Preemptive – first, and competitors cannot easily copy • Affordable – target market can afford to pay for it • Profitable – the company can deliver it profitably

23. Use the marketing mix to create a unique proposition relative to competitors • Product – attributes • Price – value • Place – Easy access, select or mass • Promotion – unique message & channel

24. 4. Product Growth Strategies Existing Markets/clients New Markets/clients Existing Products Market Penetration Market Development New Products Product Development Diversification

25. Optional Review • List and discuss the major bases for segmenting consumer markets • Explain how companies identify attractive market segments to target and choose a target marketing strategy • Discuss how companies can position their products for maximum competitive advantage in the marketplace

26. Lecture 5 – Consumer behaviour • Consumer behaviour defined • Buying Decision Process • Factors influencing the buying decision • Consumer problem solving • Types of buying decision behaviour • Purchase situation

27. 1. A Definition • The decision processes and acts of ultimate consumers involved in buying and using products • A consumer will try to acquire and maintain an assortment of products that satisfy his or her current and future needs. • When making different purchases, consumers engage in different types of problem solving processes. • Marketers who understand the consumer buying cycle can utilise their marketing mix to help them solve problems at the various stages of the cycle

28. 2. Buyer Decision Process Client Journey 1Need Recognition 2 Information Search 4Purchase Decision 5 Postpurchase Behavior 3Evaluation of Alternatives Actual state vs. desired state Triggered by internal or external stimuli Marketers Journey Demonstrate differentiation Easy access, sales support After sale service/product guarantee Build awareness Promote product attributes to solve need

29. Evaluation of Alternatives

30. Post purchase Behavior Perception of Product Performance - Expectations Customer Satisfaction Cognitive Dissonance + Satisfied Customer ! - Dissatisfied Customer Lost customer Negative w-o-m (tells 11+) Retention g more profit Positive w-o-m (tells 3+) • Create moderately high expectations (realistic, not exaggerated) and exceed them • Encourage complaints – care, respond (it exceeds expectations)

31. 3. Factors Influencing Consumer Behaviour Uncontrollable Factors Culture Subculture Social class Social Reference groups Family Roles and Status Culture Cultural Personal Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Psycho- logical Motivation Perception Learning Beliefs and attitudes Buyer Most specific Most individual Most basic influences Broadest, deepest

32. Cultural Factors • Culture - the most basic cause of a person's wants and behavior • set of values, perceptions, wants & behavior learned by a member of society (learned from family & social institutions) • achievement & success, activity & involvement, efficiency & practicality, progress, material comfort, individualism, freedom, humanitarianism, youthfulness, fitness & health • Subculture - groups of people with shared value systems based on common life experiences and situations (e.g., based on nationality, religion, race, geographic location, age, etc.) • represent important market segments • e.g., Hispanic, African-American, Asian-American • e.g., Gen Y, Gen X, Baby Boomers, Mature Market

33. Cultural Factors cont. Social Class- Society’s relatively permanent and ordered divisions,where members share similar values, interests, and behaviors (including buying behavior) • Based on resources, power, prestige • Measured by • Occupation • Wealth and income (both amount and source) • Education • Housing, neighborhood, possessions, values

34. Reference Groups- most influential for purchase and use of • products that are visible to others • Reference Groups – direct or indirect influence • Membership groups – direct influence (e.g., friends, family) • Aspirational groups – does not belong but influenced by • Opinion leaders – influential individuals • Skills, knowledge, personality – often product/category specific • Buzz marketing Social Factors • Family- most important consumer buying organization in • society, and an influential reference group • Consumption roles – decider, buyer, user, influencer • Changing roles and changing family structures

35. Personal Factors Personal Influences Age and life cycle stage Occupation Economic situation Personality & self-concept Family life cycle: transition g changes buyer behavior Single; Honeymoon; Full Nest 1,2,3; Empty Nest; Retired; Divorced, etc. Brandpersonality Lifestyle – Psychographics Activities Interests Opinions

36. Psychological Factors • Motivation– driving force behind behavior, resulting from tension • Motive = a need that is sufficiently pressing to direct a person to • seek satisfaction • Maslow – hierarchy of needs • Perception– process by which people select, organize, and interpret information to form a meaningful picture of the world • Selective attention – screen out most of what we are exposed to • Selective distortion – misinterpret information to support existing beliefs and • attitudes • Selective retention – forget much of what is learned

37. Psychological factors affecting behaviour Maslow’s Heirarchy of Needs So it costs a bit more. But I’m worth it. L’oreal When you care enough to send the very best. Hallmark Because so much is riding on your tyres. Michelin It really quenches your thirst. Gatorade

38. 4. Types of Consumer ProblemSolving Processes Level of Involvements: • Enduring Involvement: A person’s interest in a product category is ongoing and long-term • Situational Involvement: temporary and dynamic resulting from a particular set of circumstances

39. Types of Consumer Problem-Solving Processes • Routinised Response Behaviour: Used when buying frequently, low-cost items that require very little search-and-decision effort • Limited Problem Solving: Buyers engage in this when they purchase products occasionally and need to obtain information about an unfamiliar brand in a familiar product category • Extended problem solving: Process employed when unfamiliar, expensive, or infrequently bought products are purchased • Impulse Buying: An unplanned buying behaviour involving a powerful urge to buy something immediately.

40. 5. Types of Buying-Decision Behavior • Influences the buyer’s decision process • Suggests appropriate marketing strategy Complex buying behavior Variety- seeking behavior High Consumer Involvement * Low Consumer Involvement Significant perceived differences between brands Dissonance- reducing buying behavior Habitual buying behavior Few perceived differences between brands Cognitive dissonance (buyer’s remorse) * expensive, infrequently purchased, important, risky, self-expressive, etc.

41. 6. Purchase decision influences • Purchase outcomes are affected by the clients’ “reason” for the purchase • Who would pay $XX for a bunch of flowers • What if it was your mothers birthday and you forgot to buy her a gift. It was 5 minutes before closing time and it’s the last bunch of flowers available. • Now who would pay $XX.

42. Discussion • Discuss a specific major purchase you made recently • What type of buying decision was it • Discuss your “buyer decision process” and the factors that influenced your decision

43. List the ways that your family, your friends, and the media influence your buying decision making process. Explain your answers What would you do? Class Activity

44. Optional Review • Describe the four major categories of factors that influence consumer buyer behavior, and the major influences within each factor • Understand the stages in the buyer decision process and how marketers can use this knowledge to develop their marketing strategy

45. Lecture 6 – Product strategy Product classification & Services Marketing • What is a product • Product service attributes • Classification of products • Services Marketing

46. 1. What is a Product? • Product: anything tangible or intangible that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a consumers want or need • Physical Goods: A tangible physical entity • Service: An intangible result of the application of human and mechanical efforts to people or objects • Events • Persons • Places • Organizations • Ideas: Concepts, philosophies, images, experiences or issues

47. Products, Services, and Experiences Service with accompanying minor goods Tangible good with accompanying services Hybrid offer Pure tangible good Pure service Product – Service Continuum Automobile with accompanying repair services Soap Doctor’s exam Flight with meal Restaurant Delivering an “experience” – • personal, takes place in the minds of customers • increasingly used to differentiate offers • consumers buy what products will do for them

48. Benefits vs features • Because consumers purchase a product that will solve a problem or satisfya need orwant effective marketers should focus on selling the benefits of the product, not the features.

49. Levels of Product and Services 3. Augmented Product Additional (unexpected) services & benefits to provide the most satisfying customer experience Product is a complex bundle of benefits Installation Packaging Brand name Features Delivery & credit After- sale service Design Quality level Core benefit or service 1. Core product What the consumer is really buying (addresses underlying need or problem ) Warranty 2. Actual Product The physical product or service

50. Nominate one product/service and identify the core product, actual product, and augmented product characteristics. ? Class Activity