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Term Project Musaed Al-Mahfouz 200901354 Muhannad Al-Mathami 200800809 Nasser Al-Anizan 200700264 Principles of Marketing Section: 102 Dr. Richard Maguire 1 Table of Content: Introduction Business Market and Business Buyer Behavior Customers-Driven Marketing Strategy Products, Services, and Brands New Product Development Conclusion 2 Introduction: Marketing is equal to promotion. Marketing generally is what you want to explain or deliver on how your product is valuable, and why should people get your product. Marketing is an ad. Marketing first aim is to know and understand the customer. Business Market and Business Buyer Behavior: For a start, what is business market? Business market is all the organization that buy goods and services to use in the production of other products and services that are sold, rented, or supplied to other. Business Market split into different characteristics, each model has it own characteristics. First characteristic, market structure and demand, the business marketer normally deals with far fewer but far larger buyers than the consumer marketer do. Business markets are also more geographically concentrated. Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes, especially in the short run. Finally, business markets have more fluctuating demand. The demand for many business goods and services tends to change more—and more quickly—than the demand for consumer goods and services does. 3 Second Characteristic, is nature of buying unit. Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Often, trained purchasing agents who spend their working lives learning how to buy better do business buying, the more complex the purchase, the more likely that several people will participate in the decision-making process. A decision in marketing is so difficult. Business buyers usually face more complex buying decisions than do consumer buyers. Purchases often involve large sums of money, complex technical and economic considerations, and interactions among many people at many levels of the buyer's organization. Because the purchases are more complex, business buyers may take longer to make their decisions. The business buying process tends to be more formalized than the consumer buying process. Finally, in the business buying process, buyer and seller are often much more dependent on each other. Consumer marketers are often at a distance from their customers. In contrast, business marketers may roll up their sleeves and work closely with their customers during all stages of the buying process—from helping customers define problems, to finding solutions, to supporting after-sale operation. At the most basic level, marketers want to know how business buyers will respond to various marketing stimuli. Figure 1 shows a model of business buyer behavior. In this model, marketing and other stimuli affect the buying organization and produce certain buyer responses. As with consumer buying, the marketing stimuli for business buying consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces in the environment: economic, technological, political, cultural, and competitive. These stimuli enter the organization and are 4 turned into buyer responses: product or service choice; supplier choice; order quantities; and delivery, service, and payment terms. In order to design good marketing mix strategies, the marketer must understand what happens within the organization to turn stimuli into purchase responses. Figure 1 Within the organization, buying activity consists of two major parts: the buying center, made up of all the people involved in the buying decision, and the buying decision process. The model shows that the buying center and the buying decision process are influenced by internal organizational, interpersonal, and individual factors as well as by external environmental factors. The model in Figure 1 suggests four questions about business buyer behavior: What buying decisions do business buyers make? Who participates in the buying process? What are the major influences on buyers? How do business buyers make their buying decisions? 5 Customers-Driven Marketing Strategy: Most companies have moved away from mass marketing and toward target marketing—identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each. Figure 7.1 (pg.216) shows the four major steps in designing a customerdriven marketing strategy. Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes. Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter. Differentiation involves actually differentiating the firm’s market offering to create superior customer value. Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Segmenting Consumer Markets Table 7.1 (pg.217) outlines the 4 major variables that might be used in segmenting consumer markets. A marketer has to try different segmentation variables, on its own and in combination, to find the best way to view the market structure. Segmenting Business Markets Consumer and business marketers use many of the same variables to segment their markets. Business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal characteristics. Many 6 marketers believe that buying behavior and benefits provide the best basis for segmenting business markets. Segmenting International Markets Companies can segment international markets using one or a combination of several variables. Geographic factors: Nations close to one another will have many common traits and behaviors. Economic factors: Countries may be grouped by population income levels or by their overall level of economic development. Political and legal factors: Type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy. Cultural factors: Grouping markets according to common languages, religions, values and attitudes, customs, and behavioral patterns. Inter market segmentation is segmenting of consumers who have similar needs and buying behavior even though they are located in different countries e.g. IKEA targets the aspiring global middle class. Evaluating Market Segments: In evaluating different market segments, a firm must look at three factors: Segment size and growth, Segment structural attractiveness, and Company objectives and resources. 7 Segment size & growth: The largest, fastest-growing segments are not always the most attractive ones for every company. Smaller companies may find these segments too competitive. Segment structural attractiveness: The Company also needs to examine major structural factors that affect long-run segment attractiveness. A segment is less attractive if it already contains many strong and aggressive competitors. The existence of many actual or potential substitute products may limit prices and the profits. The relative power of buyers also affects segment attractiveness. A segment may be less attractive if it contains powerful suppliers who can control prices. Company objectives and resources: Some attractive segments may not align with the company’s objectives and resources. Or, the company may lack the skills & resources. Micromarketing Local marketing: Tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, specific stores. Individual marketing Is Tailoring products and marketing programs to the needs and preferences of individual customer. 8 Products, Services, and Brands What Is a Product? Product is anything that can be offered to a market that might satisfy a need or a want. Experiences represent what buying the product or service will do for the customer The most basic level of a product is called its core benefit Consumer products: Consumer products are products and services for personal consumption Classified by how consumers buy them 1. Convenience products 2. Shopping products 3. Specialty products 4. Unsought products Convenience products are consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort, Newspapers, Candy, Fast food. Shopping products are consumer products and services that the customer compares carefully on suitability, quality, price, and style, Furniture, Cars, Appliances. Specialty products are consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort, Medical services, Designer clothes High-end electronics. Unsought products are consumer products that the consumer does not know about or knows about but does not normally think of buying, Life insurance, Funeral services, and Blood donations. 9 Industrial products are products purchased for further processing or for use in conducting a business classified by the purpose for which the product is purchased: Materials and parts, Capital, Raw materials Capital items are industrial products that aid in the buyer’s production or operations materials and parts include raw materials and manufactured materials and parts usually sold directly to industrial users Supplies and services include operating supplies, repair and maintenance items, and business services. Organization marketing consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward an organization Product and Service Decisions Product attributes are the benefits of the product or service: Quality, Features, Style and design. Product quality includes level and consistency: Quality level is the level of quality that supports the product’s positioning. Conformance quality is the product’s freedom from defects and consistency in delivering a targeted level of performance. Product features are a competitive tool for differentiating a product from competitors’ products. Packaging involves designing and producing the container or wrapper for a product. Product mix consists of all the products and items that a particular seller offers for sale. 10 Desirable qualities: 1. Suggest benefits and qualities. 2. Easy to pronounce, recognize, and remember. 3. Distinctive. 4. Extendable. Internal marketing means that the service firm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction. Internal marketing must precede external marketing. Interactive marketing means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter, like Service quality. Managing service differentiation creates a competitive advantage from the offer, delivery, and image of the service, Offer can include distinctive features, Delivery can include more able and reliable customer contact people, environment, or process, Image can include symbols and branding. Managing service quality provides a competitive advantage by delivering consistently higher quality than its competitors. Managing service productivity refers to the cost side of marketing strategies for service firms, Employee recruiting, hiring, and training strategies, Service quantity and quality strategies. 11 New Product Development Development of original products, product improvements, product modifications, and new brands through the firm’s own R & D efforts. New Product Development Strategy: New products can be obtained via acquisition or development; new products suffer from high failure rates, several reasons account for failure. Major Stages in New-Product Development Stage 1: Idea Generation Internal idea sources: R & D External idea sources: Customers, competitors, distributors, suppliers. Stage 2: Idea Screening Product development costs increase dramatically in later stages. Ideas are evaluated against criteria; most are eliminated. Stage 3: Concept Development and Testing Product concepts provide detailed versions of new product ideas. Consumers evaluate ideas in concept tests. Stage 4: Marketing Strategy Development Strategy statements describe: The target market, product positioning, and sales, share, and profit goals for the first few years. Product price, distribution, and marketing budget for the first year. Long-run sales and profit goals and the marketing mix strategy. Stage 5: Business Analysis: Sales, cost, and profit projections Stage 6: Product Development: Prototype development and testing Stage 7: Test Marketing: Standard test markets, Controlled test markets, simulated test markets 12 Stage 8: Commercialization. Sales and Profits Over A Product’s Life The Typical Product Life Cycle (PLC) Has Five Stages Product Development, Introduction, Growth, Maturity, Decline Not all products follow this cycle: Fads, Styles, and Fashions. The product life cycle concept can be applied to a: Product class (soft drinks), Product form (diet colas), Brand (Diet Dr. Pepper) Product Life-Cycle PLC Stages 1-Product development: Begins when the company develops a newproduct idea, sales are zero, Investment costs are high, and profits are negative. 2-Introduction: Low sales, high cost per customer acquired, Negative profits, and Innovators are targeted, little competition. And for Introduction Stage: Product – Offer a basic product, Price – Use cost-plus basis to set, Distribution – Build selective distribution, advertising – Build awareness among early adopters and dealers/resellers, Sales Promotion – Heavy expenditures to create trial. 3- Growth: Rapidly rising sales, Average cost per customer, Rising profits, Early adopters are targeted, Growing competition. And for Growth Stage: Product – Offer product extensions, service, warranty, Price – Penetration pricing, Distribution – Build intensive distribution, 13 Advertising – Build awareness and interest in the mass market, Sales Promotion – Reduce expenditures to take advantage of consumer demand. 4-Maturity: Sales peak, Low cost per customer, High profits, Middle majority are targeted, Competition begins to decline. And for Maturity Stage: Product – Diversify brand and models Price – Set to match or beat competition, Distribution – Build more intensive distribution, Advertising – Stress brand differences and benefits, Sales Promotion – Increase to encourage brand switching. 5-Decline: Declining sales, Low cost per customer, declining profits, and laggards are targeted, declining competition. And for Decline Stage: Product – Phase out weak items, Price – Cut price, Distribution – Use selective distribution: phase out unprofitable outlets, Advertising – Reduce to level needed to retain hard-core loyalists, Sales Promotion – Reduce to minimal level. Conclusion In conclusion, in this report we’ve summarized the main part of business market and business buyer behavior, customer-driven marketing strategy, what is product, service, and brands, and finally the new product development. I hope this report is written in high manner and the way is should be. 14 References "Business Markets and Business Buyer Behavior." GMX. N.p., n.d. Web. 9 Dec. 2012. <gmx.xmu.edu.cn/ews/business/pmarketing/chapter06.htm >. "Combines.(Products, Brand Names & Services)." Implement & Tractor 15 Jan. 2004: 76. Web. Loch, C.. Handbook of new product development management. Amsterdam: Butterworth-Heinemann, 2008. Web. Sheth, Jagdish N., Banwari Mittal, and Bruce I. Newman. Customer behavior: consumer behavior & beyond. Fort Worth, TX: Dryden Press, 1999. Web. Walker, Orville C.. Marketing strategy: a decision-focused approach. 5th ed. Boston: McGraw-Hill Irvin, 2006. Web. Figures and Graphs were grabbed from the web. Thank You 15