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CHAPTER 15 Understanding Marketing Processes and Consumer Behaviour Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. Learning Objectives Explain the concept of marketing and describe the five forces that constitute the external marketing environment. Explain the purpose of a marketing plan and identify the four components of the marketing mix. Explain market segmentation and show how it is used in target marketing. Explain the purpose and value of market research. Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-2 More Learning Objectives Describe the key factors that influence the consumer buying process. Discuss three categories of organizational markets and explain how organizational buying behaviour differs from consumer buying behaviour. Describe the international and small business marketing mixes. Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-3 Marketing Consumer marketing provides goods to individuals for their personal use Industrial marketing provides products to businesses to use directly, or indirectly, to produce other products Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-4 Products and Services Marketing can be directed to Products: tangible goods (food, clothing) Services: intangible products to serve users’ needs (insurance, health care) Ideas: thoughts or philosophies (“Participaction” as a symbol for healthy living) Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-5 Relationship Marketing A type of marketing that emphasizes lasting relationships with customers and suppliers Stronger relationships can result in greater long-term customer satisfaction and client retention Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-6 The Marketing Environment Competitive Environment Political & Legal Environment Economic Environment The Firm’s Marketing Plan Social & Cultural Environment Technological Environment Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-7 Political and Legal Environment Foreign and domestic politics influence business through legislation and government programs designed to support business ventures (exporting) Companies influence legislation by embarking on lobbying activities Companies also make political contributions, within legal restrictions, to influence government policy Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-8 Social and Cultural Environment Growth in the number of single parent families Focus on reduce, re-use, and recycle Move toward healthy lifestyles Women entering the work force Aging of the baby boomers Increase in violent crime Growing cultural and ethic diversity Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-9 Technological Environment Science and technology lead to new ways of doing everyday things Consumers can use direct pay systems instead of carrying cash, or buy using the Internet new goods continue to emerge (like satellite dishes and cell phones) trends create new goods and cause others to become obsolete Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-10 Economic Environment Economic conditions affect the spending patterns of businesses and individuals The Canadian Dollar Inflation Interest Rates Trends affect price strategy and the growth of markets Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-11 Competitive Environment Brand competition:similar products (Coke vs. Pepsi) Substitute products dissimilar products that can meet the same need (juice vs. Pepsi) International competition Marketing domestic products against foreign products (Oldsmobile vs. Honda) Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-12 Marketing Plan A detailed, focused strategy for gearing the marketing mix to meet consumer needs and wants Marketing Mix Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-13 Choosing the Marketing Mix Product Price The basic design of the product How much consumer pays Place Where and when the product is + Promotion = Product image and visibility Customer Satisfaction Business Profitability Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-14 Product Strategy Offering a good, service, or idea that satisfies the buyers’ needs is the goal of the firm Product differentiation creating a product that has a different image than existing products on the market to attract consumers May involve changing existing products by responding to trends or improving current offerings adding new products Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-15 Pricing Strategy Choosing the right price to attract consumers and meet the firm’s profit goals May be low price strategy (salt) or high price strategy (mink coat Price must consider all costs operation and administration marketing research advertising Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-16 Promotion Strategy Choosing the right method of selling the product to the consumer choice of promotional technique and media determination of product image development of promotional campaigns and budgets Communicating the product image to “position” the product in the minds of consumers Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-17 Promotional Techniques Sales Promotion Personal Selling Publicity Advertising Public Relations Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-18 Promotional Techniques (1of 2) Advertising any paid form of non-personal communication by a sponsor persuading or informing customers about the product via various media Personal Selling Selling using sales representatives Commonly used for industrial marketing Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-19 Promotional Techniques (2of 2) Sales Promotion using specialty items & methods to promote the product (Gifts, coupons, package inserts, samples) Public Relations Used to build good relations with buyers, suppliers and other stakeholders May involve “good deeds” such as charitable donations and sponsorship Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-20 Publicity Any non-paid communication about a firm and/or its products outside the control of the firm Includes press articles by the initiative of the firm (through press releases) or by reporting news agencies at their own initiative Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-21 Place (Distribution Strategy) The part of the marketing mix concerned with Getting the product from producer to buyer Physical transportation Choice of sales outlets Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-22 Target Market and Segmentation Target market a group of potential customers who have similar wants and needs Segmentation dividing a consumer market into categories selecting specific market segment(s) to pursue Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-23 Identifying Market Segments • Search for common traits between consumers • Focus on traits that affect product need or purchase behaviour • Geographic region Customer demographics Customer psychographics Behavioural variables Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-24 Geographics Area of residence affects product consumption rainfall and umbrellas snowfall and snowmobiles or snow blowers hot summers and backyard pools Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-25 Demographics Age Gender Marital Status Religion Income Family Size Ethnicity Language Education Occupations Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-26 Psychographics Psychological traits: Attitudes Interests and hobbies Opinions Motivations Activities Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-27 Behavioural Variables Occasion for use Benefits Sought Reasons for Purchasing Loyalty Level Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-28 Market Research A systematic study of consumer needs Focuses on the marketing mix elements Leads to more effective marketing Increases the accuracy and effectiveness of market segmentation Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-29 The Research Process Study the Current Situation Select a Research Method Collect Data Analyze Data Focus Group Use Secondary Data Prepare Report Survey Use Primary Data Make Recommendations Observation Experimentation Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-30 Observation Viewing or monitoring human behaviour Useful for cases where actions occur automatically without thinking grocery shopping May be human observation or technological supermarket scanners Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-31 Survey Administration of a questionnaire, a list of questions, to prospective buyers Relies on a reliable random sample Administered in person, via phone, mail, or the Internet Key issues include choosing appropriate questions and ensuring honest answers Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-32 Focus Group A small discussion group of prospective customers or product users Allows in-depth discussion of complex or subjective issues regarding products or services Usually a blind research study where participants do not know who the sponsor of the group is Researchers analyze the results by searching for common themes in participants’ feedback Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-33 Experimentation A controlled research design allows the determination of how consumers react to specific situations or appeals The situations can be manipulated to compare responses to such things as shelf placement of products, package colours and design, advertising strategy Very costly Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-34 Consumer Behaviour The study of the processes by which customers come to purchase and consume a product or service Influenced by psychological factors personal factors social factors cultural factors Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-35 The Consumer Purchase Process Marketing Factors Purchase Process Personal & Environmental Factors Problem Recognition Product Information Seeking Price Evaluation of Alternatives Place Purchase Decision Promotion PostPurchase Evaluation Psychological Personal Social Cultural Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-36 The Consumer Buying Process (1 of 2) Problem Recognition Consumer becomes aware of a problem or need May be automatic (the need for food or sleep) Due to a lifestyle change (new parents, retirement) Information Seeking The information search may be long and detailed, or short and limited buying a car versus buying a candy bar Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-37 The Consumer Buying Process (2 of 2) Evaluation of Alternatives Products are compared to identify the best choice Purchase Decision choice may be made based upon rational or emotional motivations Rational motives include cost, quality, usefulness Emotional motives include fear, sociability, aesthetics, imitation of others Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-38 Post-Purchase Evaluation Marketers must market after the sale to ensure satisfaction & reduce purchase anxiety Purchase anxiety (buyer’s remorse) is fear on the part of purchasers that they have purchased the wrong product (especially crucial for expensive purchases) Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-39 Organizational Markets Organizations purchase goods and services to be used in the production of other goods and services Industrial Market Reseller Market Government & Institutional Market Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-40 Unique Aspects of Organizational Markets Differences in Buyers Differences in the Buyer-Seller Relationship Decision making is more rational Industrial buyers are usually product experts Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-41 Differences in Demand Derived demand demand for industrial products is derived from demand for consumer products Inelasticity of demand a price change for a product has little impact on demand because the product is needed in production and cannot be easily substituted Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-42 Differences in Buyers Professionals trained in arranging/negotiating purchase terms, usually dealing in formal contracts Specialists specialize in product lines Experts have a lot of knowledge about their purchases with which to make decisions Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-43 Differences in Decision-Making and Relationships Industrial purchase processes begin by developing product specifications detailed evaluation of alternatives systematic and detailed post-purchase evaluation Industrial buyer-seller relationships are longerlasting and have more frequent contact Sellers make suggestions for product and service improvement that will benefit their customers Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-44 International Marketing Mix Products may require substantial change before they can be marketed to different countries Pricing requires consideration of product manufacturing costs, transportation and delivery Promotion must accommodate cultural differences and social traditions Distribution may involve cooperation with other international firms and adherence to foreign packaging and labelling legislation Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-45 Small Business Marketing Mix Care must be taken to: offer products to markets substantial enough to support the organization do a complete analysis of costs prior to setting prices develop a comprehensive promotional program using more than personal selling choose a location that will attract and retain customers Business Fifth Canadian edition, Griffin, Ebert & Starke © 2005 Pearson Education Canada Inc. 15-46