Download Products

BOOK FOUR
AN INTRODUCTION TO
MARKETING IN BUSINESS
Session Three
Understanding customers
and consumption
AIMS & OBJECTIVES OF SESSION
THREE
 Outline
the different types of buyer behavior;
 Explain
the complex buying decision process;
 Discuss
the differences between consumer and
business buying behavior;
 Compare
the rational approach to understanding
customers and a social and cultural understanding
of consumption
 Describe
three main aspects of cultural and social
functions of consumption
THE RATIONAL APPROACH TO UNDERSTANDING
CUSTOMERS

There are two types of marketing
1.
Consumer marketing
2.
Business-to-business marketing
CONSUMER BUYING BEHAVIOR



According to Belk (1995), a rational approach has
been most influential in marketing.
It assumes that consumers tend to make
rational choices about the products and
services they buy and use.
This approach is concerned with understanding
how individual consumers evaluate and choose
products, so that marketers can tailor their
offerings more effectively to consumer needs and
expectations.
CONSUMER BUYING BEHAVIOR (CONT’D)
Figure 3.1 Model of Consumer Behavior by Kotler (2001)
Marketing
Stimuli
Product
Price
Place
Promotion
Other
Stimuli
Economic
Technological
Political
Cultural
Buyer’s
Black box
Buyer
Characteristics
Buyer’s
responses
Buyer Decision
process
Product Choice
Brand Choice
Dealer Choice
Purchase Timing
Purchase Amount
CONSUMER BUYING BEHAVIOR (CONT’D)



The figure represents a simple model of consumer
behavior, depicting influences on consumer buying
behavior, buyer decision processes and buyer responses.
The model does not go into detail on what goes inside
the buyer’s mind- it treats this as a ‘black box’;
something which is known to exist but the internal
workings of which are unknown.
The model assumes that there are two main types of
external influence on consumers:
1)
Market stimuli (market offerings of different
businesses)
2)
Elements of the business environment as stated
in the STEEP model
TYPES OF CONSUMER BUYING BEHAVIOR

1)
2)
3)
4)
There are four types of consumer buying
behavior:
Complex buying behavior
Dissonance- reducing buying behavior
Habitual buying behavior
Variety-seeking buying behavior
TYPES OF CONSUMER
BUYING BEHAVIOR
High Involvement
Significant
Difference
between
brands
Few
Differences
between
brands
Complex Buying
Behavior
Dissonance Reducing Buying
Behaviour
Low Involvement
Variety- Seeking
Buying Behavior
Habitual Buying
Behaviour
TYPES OF CONSUMER
BUYING BEHAVIOR
Type of Consumer
Buying Behavior
Description
Complex Buying
Behavior
It is characterized by high consumer involvement and significant
differences between brands. It happens when a purchase is
expensive, risky or purchased infrequently or when consumers
use the product to express themselves (e.g. cars, houses, etc.)
Dissonance-Reducing
Buying Behavior
Consumers here are highly involved in the purchase but have
difficulties determining the differences between brands.
Dissonance can result from a purchase if consumers worry
afterwards that they may have made the wrong choice(e.g.
financial services such as insurance)
Habitual Buying
Behavior
It is the most common type of buying behavior and it happens
when consumers are not very involved in the purchase perhaps
because the item is bought very frequently and/or does not cost
much money and when they perceive few significant differences
between brands (e.g. household detergents, soap, etc.)
Variety Seeking
Behavior
It happens when consumers perceive significant differences
between brands but are not involved in the purchase.(e.g. icecream, biscuit, etc.)
THE BUYER DECISION PROCESS

Stages in the Buying Decision Process by
Kotler 2001
Stage One: Need Recognition
Stage Two: Information Search :
a) Personal Sources: Family, friends, neighbors;
b) Commercial Sources: Advertising, salespeople, the
Internet, packaging, displays
c) Public Sources: Mass media, consumer -rating
organizations.
d) Experiential Sources: handling, examining, using the
product
Stage Three: Evaluation of Alternatives
Stage Four: Purchase Decisions
Stage Five: Post Purchase Behavior: complain, not to
buy again, tell friends about problems.
BUSINESS BUYING BEHAVIOR


When thinking about marketing, people often think first of consumer
marketing, but actually business-to-business markets is much larger
than that of consumer markets.
The most important differences between the consumer market and the
business market is:
(1) The market structure and demand
There are fewer buying businesses than there are
consumers, but each business is likely to buy much larger
quantities of a product than a single consumer would.
(2) The nature of the buying unit
- Business-to-business marketers tend to rely on personal
selling directly to customers.
(3) Types of buying behaviour
- New task: something a business buys for the first time.
- Straight re-buys: A simple repeat order for something that
the business buys regularly.
- Modified re-buy: The business buys something it has bought
before but wants some modifications to the new purchase.
SOCIAL AND CULTURAL ASPECTS OF CONSUMPTION
Points to
Consider
Explanation
Consumer
Society
Consumer society is characterized by the fact that a large portion
of the population has access to a wide variety of consumer goods.
Consumer society has only been made possible by industrialization
which has facilitated the mass production of large numbers of
consumer goods.
Some concern is evident regarding the materialism of consumer
culture and the damage done to the natural environment.
Hedonistic
Consumption
Many people enjoy the act of shopping itself.
Buying products and services allows customers to show off their
style and taste to others.
Consumption &
Identity
This is a second aspect of consumption and is concerned in the
way in which consumption can become a means to help people
communicate their psychological identity, tastes and preferences,
and economic and social status
Consumption as
Communication
Many consumption activities take place in social settings, most
frequently the family but also within circles of friends, work groups
and others. Consumption becomes a kind of language through
which people show their status and tastes.
ETHICAL ISSUES IN CUSTOMER
RELATIONS

Businesses have the responsibility to keep the
justified interests of their customers in mind,
even where there are no specific laws.
BOOK FOUR
AN INTRODUCTION TO
MARKETING IN BUSINESS
Session Four
The marketing mix
AIMS & OBJECTIVES OF SESSION FOUR
Explain the concept and the elements of the marketing
mix;
 Contrast different types of products, including physical
goods and services;
 Explain the key features of the product life cycle and new
product development;
 Contrast different approaches to pricing and explain n
some typical methods of pricing for strategic effect;
 Explain distribution channels and who their members are;
 Explain
the
different
elements
of
marketing
communications and how they are commonly used;
 Consider some common ethical issues related to elements
of the marketing mix;
 Explain why services marketing is different from goods
marketing and the marketing mix for services.

WHY ARE WE STUDYING THE MARKETING MIX?
 Marketing
mix is more than just a set of
techniques employed by marketing managers.
However, these techniques are important in
that marketers must try to design an offering
which will appeal to customers. This offering
is the marketing mix.
ELEMENTS OF THE MARKETING MIX
The marketing mix includes the
following elements:
1.
2.
3.
4.
Product
Pricing
Distribution (Place)
Marketing Communications
(Promotion)
PRODUCTS
 Products
can be described as a ‘bundle of
benefits’. This means that it is not usually the
actual product itself which is important to
customers but what it will do for them (e.g. a
mobile phone is a means of staying in touch with
others).
PRODUCTS (CONT’D)
 There
are three levels of
product benefits:
The Three Levels of
product by Kotler 2001
Core Benefit

Level One: The core benefit
is the main benefit of the
product.

Level Two:
The actual
product has product features
and characteristics in addition to
the core benefit. For example,
packaging, features, styling,
quality, brand name.

Level Three:
Augmented
product benefits may include
after sales services, installation,
delivery
and
credit,
and
warranty
Actual
Product
Augmented
Product
PRODUCTS (CONT’D) – THE PRODUCT
LIFE CYCLE
 Products
go through a life cycle. This means
that they are launched at some point and
after a time of growth and maturity they
eventually decline and become obsolete.
 The
product life cycle has the following
five phases:
1.
2.
3.
4.
5.
Product development,
Introduction,
Growth,
Maturity and
Eventual decline
Products (cont’d) – the product
life cycle
23
PRODUCTS (CONT’D) – THE PRODUCT
LIFE CYCLE
 After
a new product has been developed and is
first introduced to the market, sales may grow
slowly initially as not many people know about
the product.
 As
the product becomes better known, sales
may grow rapidly until they tend to level off
during the maturity phase, when many
potential target customers have already
bought it and more competitors introduce
similar products.
 Eventually,
the sales of many products decline
as most customers already have them and new
substitute products are introduced.
PRODUCTS (CONT’D) – NEW
PRODUCT DEVELOPMENT

The concept of the product life cycle suggests that most
products will eventually decline.

This is a strong reason why businesses constantly want
to develop new products.

Crawford (1991) proposed a model of the new product
development process. This model includes a number of
steps in the following sequence:
Step One: New Product Planning
 Step Two: Idea Generation
 Step Three: Idea Screening & Evaluation
 Step Four: Technical Development
 Step Five: Market Appraisal
 Step Six: Launch

PRODUCTS (CONT’D) – NEW PRODUCT
DEVELOPMENT
1)
New product planning: a business looks at the current
products, how well they are performing, and where the
marketing environment poses threats to existing products
and opportunities for new products.
2)
Idea generation: specific ideas for new products are
generated and collected, perhaps through group discussion
techniques such as brainstorming.
3)
Idea screening and evaluation: the ideas generated in
the previous step are examined for their feasibility and
marketability.
4)
Technical development: the technical aspects of the
product are investigated and a prototype is developed.
5)
Market appraisal: Market research is carried out to assess
whether the product would be successful in the market.
6)
Launch: the product is produced and offered in the market
PRICING
The difference between
getting the price right
and getting it wrong
can be the difference
between being
successful and going
out of business.
PRICING (CONT’D)– APPROACHES TO
PRICING

1.
2.
3.
There are three main approaches to setting
prices:
Cost-based pricing
Customer-based pricing
Competition-based pricing
PRICING (CONT’D)– APPROACHES TO
PRICING
1)Cost-based pricing:
It is the least customer-oriented pricing method
and thus is not compatible with the marketing
orientation. It is still used by many companies as
costs are relatively easy to work out and more
straightforward than customer-based pricing. It
works by adding up all the costs of manufacturing
and selling a product and then adding a fixed profit
percentage.
PRICING (CONT’D)– APPROACHES TO
PRICING
2)Customer-based pricing

It is more in-line with a marketing orientation as it
starts with the customer’s willingness to pay. It
does not necessarily mean offering the product at
the lowest possible price, but at a price that the
customer considers good value taking into
account quality and other product features.
PRICING (CONT’D)– APPROACHES TO
PRICING
3) Competition-based pricing
It involves comparing the prices of all competing
products and then setting the price of one's
own product.
This maybe lower than the
competition if the business is competing on price. It
may also be more expensive than the competition if
the business is competing on quality, style and
some other product features and wants to express
the superiority of its products through the price.
PRICING (CONT’D)–
PRICING FOR
STRATEGIC EFFECT


Product line pricing: refers to the setting of prices
within linked product groups. Sometimes sales of one
product are directly linked to sales of another product.
Thus, it may be possible to sell one product cheaply in
order to encourage more purchases of another product
and hence achieve a higher sales volume.
Psychological pricing: involves setting prices in
such a way that they capture or encourage particular
psychological effects in consumers.
PRICING (CONT’D)– ETHICAL ISSUES
IN PRICING
 Unethical
pricing practice: arises
from the power difference between
producers and consumers.
 Predatory
pricing
DISTRIBUTION (PLACE)
 It
is the third element in the marketing mix is
the distribution channel (relating to the place
where the product is sold).
 Distribution
channels are the channels by
which products are made available to their final
customers. At one level this relates to the
physical transportation and storage of goods.
They also transfer ownership of the goods , offer
advice to customers and provide after-sale
services.
DISTRIBUTION (CONT’D)-
MEMBERS
OF THE DISTRIBUTION CHANNEL






Some distribution channels are very short, they have
few members whereas others are long and have many
members
Distribution Channels
Channel 1: From Manufacturer to Consumer
Channel 2: From Manufacturer to Retailer to
Consumer
Channel 3: From Manufacturer to Wholesaler to
Retailer to Consumer
Channel 4: From Manufacturer to Other
Intermediary to wholesaler to retailer to
consumer.
DISTRIBUTION (CONT’D)- MEMBERS
OF THE DISTRIBUTION CHANNEL

Wholesalers are businesses that buy products from
producers and sell them onto retailers. They perform
a number of actions in the distribution channel, such
as storage, transportation, information gathering and
some promotional activities.

Retailers are businesses that buy from producers or
wholesalers and sell onto consumers.

Successful retailing depends on:





The convenient location of a store
The right kind of goods offered in the right quantities
The right level of service for the type of good and outlet
The image of the store
The atmosphere of the shop.
MARKETING COMMUNICATIONS




Marketing Communications is not a straightforward, one
way process from marketers to potential customers.
Both the sender and the receiver of that message are
actively involved.
Marketers often follow the so-called AIDA approach,
which suggests that good marketing communication
should go through the sequence of stimulating
‘awareness’, ‘interest’, ‘desire’ and ‘action’ on the
part of consumers.
The promotional mix consists of :
 Advertising
 Sales Promotion
 Personal Selling
 Public Relations
MARKETING COMMUNICATIONS (CONT’D)
 Advertising
It is impersonal and communicates with a large number of people
through a paid media channel.
1. Pioneering advertising is used in the early stages of the
product life cycle, when businesses want to achieve consumer
awareness and interest.
2. Competitive advertising happens at a later stage in the
product life cycle when it is necessary for businesses to
distinguish their product from that offered by their competitors.
3. Reminder or reinforcement advertising: designed to
operate after consumers have already purchased the product
to reassure them of the product’s benefits and that they made
the right purchase decision.
4. Advertising attempting to improve the general image of
the organization
MARKETING COMMUNICATIONS (CONT’D)
 Sales
promotions
Refers to the specific element of the promotional
mix which tries to create a temporary increase in
sales by offering customers an incentive to buy the
product.
sales promotion come in different forms:
1. Money Based Promotion: Easy to implement, very
common, cash-back, immediate price reductions at point of
sale, coupons.
2. Product Based Promotion: less likely to cheapen product
image: X% extra free, buy one get one free, free samples.
3. Gift, Prize and Merchandise based Promotion: Gifts in
return for proof of purchase, competitions or sweepstakes.
MARKETING COMMUNICATIONS
(CONT’D)
Personal Selling
A sales person talks personally to a potential
customer, finds out about their needs and explains
the benefits of the product. It is a powerful marketing
communication tool. However, it tends to be th most
expensive.

MARKETING COMMUNICATIONS
(CONT’D)

•
Public relations (PR):
(PR) is about creating a good image for the
business in the minds of its stakeholders. It
involves creating and placing favorable news
stories. PR operates with word-of-mouth, press
and
TV
news
stories,
and
personal
recommendations.
•
Good public relations can be more effective than
advertising as it is free and thus saves on the
promotional budget.
•
It is more credible in the eyes of consumers .
MARKETING COMMUNICATIONS (CONT’D)-ETHICAL
ISSUES IN MARKETING COMMUNICATIONS



Marketers should not deceive consumers or make
misleading claims about any aspects of the
marketing mix.
Criticism
of
contemporary
marketing
communications are that they are often very
intrusive and that consumers find it difficult to
avoid them. (e.g. pop-up advertisements)
On a broader societal scale, marketing
communications have been criticized for creating
artificial wants and reinforcing materialistic
values.
MARKETING SERVICES

1)
2)
3)
4)
Differences between physical products and services:
Services are intangible,
Services are produced and consumed ate the same time,
The quality of services varies depending on the persons
providing them,
They can’t be produced in advance and stored for later sale
or use.
Thus, the marketing mix for services is extended by further
elements: people, processes, and physical evidence.
Session Five
Addressing Societal
and Environmental
Concerns in
Marketing
AIMS & OBJECTIVES OF SESSION FIVE
 Define
the societal marketing concept and outline
how it is used to address common social and
ethical concerns with marketing practice;
 Introduce
 Explore
the notion of ‘green’ marketing;
the extent to which ‘green’ marketing
practice addresses environmental concerns with
marketing.
THE SOCIETAL MARKETING CONCEPT

The Societal Marketing Concept:

It is an extension of the marketing orientation.

A business should work out what the needs,
wants, and expectations of its target customers
and markets are.

It should then satisfy these needs, wants, and
expectations better and more efficiently than
competing businesses in a way that maintains or
improves the consumer’s and society’s wellbeing.
THE SOCIETAL MARKETING CONCEPT (CONT’D)

Why do wee need a societal marketing concept

According to Kotler (2001),
a pure marketing
orientation may overlook the fact that what consumers
want in the short term is not the same as what is good
for them in the long term.

There is also a conflict between what individual
consumers desire and what is good either for society or
for the environment.

Businesses should think of the products they offer in two
dimensions:
(1) The immediate satisfaction they provided to
consumers;
(2) The long- term consumer welfare they provided.
THE SOCIETAL MARKETING CONCEPT (CONT’D)
Immediate Satisfaction
Low
Long- run
Consumer
welfare
High
High
Salutary Products
Desirable Products
Deficient Products
Pleasing Products
Low
• Salutary Products: They pose no moral problem but may be difficult to market if
consumers derive no immediate satisfaction from them.
• Desirable Products: They are desirable for the individual consumer, desirable
from a long term societal perspective and desirable for the business, which should be
able to sell these well and with a good conscience.
• Deficient Products are low in both immediate consumer satisfaction and long
run consumer welfare. They will not be successful for businesses, as there will be no
market for them.
•Pleasing Products are high in immediate satisfaction and low in long run
consumer welfare. Thus, businesses should not market them.
CRITICISM OF THE SOCIETAL MARKETING
CONCEPT
1)
It has not made much difference in practice
2)
It was not a good basis on which one might
make marketing practice and theory more
socially responsible. The reasons for this are:
a)
b)
c)
There was not enough explicit moral responsibility
in the societal marketing concept,
It was difficult to establish who should define what
the interests of the consumer and the wider society
were
There was too much emphasis on good or bad
products, with not enough consideration of how and
by whom these products were being used.
PRACTICES TO MAKE MARKETING MORE
SOCIALLY RESPONSIBLE

Two main practices:
1.
Cause-related marketing campaigns:
Consumers make purchase then, as a result, the
company makes a donation to the cause.
1.
Advocacy marketing- a company promotes a
social cause such as healthy eating.
GREEN MARKETING
Examples of Environmental Problems Caused by Businesses:
(1) Inadequate solid waste disposal capacity
(2) Air pollution
(3) Declining fish populations
(4) Topsoil erosion
(5) Ozone depletion
(6) Marine and fresh water pollution
(7) Toxic waste accumulation
(8) Species extinction and reduction of biodiversity
(9) Wetlands destruction
(10) Climate modifications
Marketing practice has been criticised for promoting excessive
consumption and materialism and thus over-exploitation of
natural resources for the production and use of consumer
products.
GREEN MARKETING (CONT’D)-DRIVING FORCES FOR
SUSTAINABLE MARKETING PRACTICES

Green marketing has been proposed as a solution to the
environmental issues connected with marketing.
 There is a rising consumer awareness of and concern about
environmental issues.
 Consumers
demand more environmentally responsible
products and production processes.
 Marketers should aim for more sustainable marketing
practices:
Driving forces for sustainable marketing practices
(1)Public opinion and changing societal values
(2)Green consumer demand and the opportunities of a growing
market for environmentally friendly goods and technologies.
(3)Internal and competitive pressures
(4)Legislation
(5)Green investment funds
(6)Interest from media and pressure groups
(7)The cost to business from environmental disasters.