Download Customer Needs

BA 590
Module 2
Customer Needs
Key Terms
• Model of Buyer Behavior
• PSSP Pyramid
• Problem Solving
• Purchase Situation
• Organizational Buyer Needs
Key Terms
• Pricing
• Pricing Objectives
• Discount Pricing
• Allowances
• Geographic Pricing
• Value Pricing
• Types of Cost
• Demand Curve
• Break-Even Analysis
A Model of Buyer Behavior
Marketing Mixes
All Other Stimuli
Psychological
Variables
Social
Influence
Purchase
Situation
Motivation
Perception
Learning
Attitude
Personality/Lifestyle
Family
Social Class
Reference Groups
Culture
Purchase Reason
Time
Surroundings
Person
Making
Decision
Problem-Solving Process
Exhibit 5-2
5-5
Person Does or Does Not Purchase (Response)
The Adoption Process
Awareness
Interest
Evaluation
Trial
Decision
Confirmation
5-15
The Learning Process
Drive
Cues
Reinforcement
Response
Exhibit 5-5
5-7
Relating the Processes
Problem-solving steps Adoption process steps
1. Becoming aware of
or interested in the
problem
Awareness and interest
2. Gathering
information about
possible solutions
Interest and evaluation
Drive
3. Evaluating alterative Evaluation, maybe trial
solutions
4. Deciding on the
appropriate solution
Decision
5. Evaluating the
decision
Confirmation
5-16
Learning steps
Cues
Reinforcement
Response
The PSSP Hierarchy of Needs
Personal
Needs
Social Needs
Safety Needs
Physiological Needs
Exhibit 5-4
5-6
Levels of Problem Solving
High involvement
Infrequently purchased
Expensive
High risk
Much information desired
Low involvement
Frequently purchased
Inexpensive
Little risk
Little information needed
Routinized
Response
Behavior
Limited
Problem
Solving
Low Involvement
High Involvement
Involvement Continuum
Exhibit 5-11
5-14
Extensive
Problem
Solving
Purchase Situation
• Activity-Interest-Opinion
• Situation Influences
• Social Class
Lifestyle Dimensions
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5-8
Activities
Interests
Opinions
Purchase Situation Influences
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5-12
Purchase Reason
Time
Surroundings
Social Class Dimensions
Upper-class
1.5%
Upper-middle class
12.5%
32%
38%
15%
Exhibit 5-8
5-10
Lower-middle class
Upper-lower
(“working”) class
Lower-lower class
Relating the Processes
Problem-solving steps Adoption process steps
1. Becoming aware of
or interested in the
problem
Awareness and interest
2. Gathering
information about
possible solutions
Interest and evaluation
Drive
3. Evaluating alterative Evaluation, maybe trial
solutions
4. Deciding on the
appropriate solution
Decision
5. Evaluating the
decision
Confirmation
5-16
Learning steps
Cues
Reinforcement
Response
Organization Buyer Needs
• Buying Centers
• Buyer Seller Relationships
Buying Centers
Buyers
Users
Buying
Center
Gatekeepers
Exhibit 6-2
6-4
Influencers
Deciders
Buyer-Seller Relationships
Information sharing
Linkages
R&D
Quality
Salesperson
Supplier
Cooperation
Exhibit 6-5
6-8
Quality
R&D
Purchasing manager
Relationship
Customer
Accounting
Marketing
Accounting
Production
Finance
Production
Engineering
Legal bonds
Adaptations
Pricing
• Strategy Planning Elements
• Objectives
• Flexibility
• Skim
• Penetration Pricing
• Discounts
• Allowances
Pricing
• Geographic Pricing
• Value Pricing
• Mark-ups
• Types of Cost
• Breakeven Analysis
Strategy Planning for Price
Target
Market
Product
Place
Promotion
Price
Pricing
objectives
Price
flexibility
Exhibit 16-1
16-3
Price levels
over product
life cycle
Discounts and
allowances—
to whom and
when
Geographic
term —
who pays
transportation
and how
Pricing Objectives
Profit
Oriented
Pricing
Objectives
Sales
Oriented
Status Quo
Oriented
Exhibit 16-4
16-4
Target
Return
Maximize
Profits
Dollar or Unit
Sales Growth
Growth in
Market Share
Meeting
Competition
Nonprice
Competition
Price Flexibility Policies
• One-price policy
• The same price to all customers who purchase products
under essentially the same conditions and quantities
•
Exchange rate changes may make this difficult in international
markets
• Flexible pricing (e.g., in channels, business
markets, expensive consumer shopping products)
• Issues:
•
•
•
•
•
16-5
Use is increasing because of impact of information technology,
customer databases, scanners, etc.
Selling costs may be higher if prices are negotiated
“Signals” to competitors
Customer dissatisfaction may be a problem
“Gray channels” and cross-shipping
Price Level Policies
Skimming Pricing
Price
Initial
skimming
price
Sell at high
price before
reducing to
next price level
and repeat
Second
price
Final
price
Quantity
Exhibit 16-5A
16-6
“Skim the cream”
pricing involves
selling at a high
price to those who
are willing to pay
before aiming at
more price-sensitive
consumers.
Price Level Policies
Penetration Pricing
Price
Penetration pricing
involves selling the
whole market at
one low price.
Whole
market price
Quantity
Exhibit 16-5B
16-7
Discount Pricing
Quantity
Seasonal
Discount
Pricing
Sale
Cash
Trade
16-8
Allowances
Advertising
Allowance
Common Kinds
of
Allowances
Stocking
Allowance
Push Money
Allowance
Trade-In
Allowance
16-9
Geographic Pricing Policies
F.O.B.
Common
Geographic
Pricing
Policies
Zone
Uniform
Delivered
Freight
Absorption
16-10
Value Pricing
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16-11
Focus on Customer
Requirements
Target Market and
Competition
Fits with Strategy
Planning
Key Factors That Influence Price Setting
Pricing
objectives
Price of other
products in the line
Demand
Price flexibility
Price
settin
g
Cost
17-3
Legal
environment
Geographic
pricing terms
Competition
Exhibit 17-1
Discounts and
allowances
Markup chain
in channels
Questions
• Relate the Concept of Stock
Turnover to MassMerchandising. Use an Example
to Explain This
Markups
50.00
30.00
Markup = 20.00 = 40%
24.00
Markup = 6.00 = 20%
Markup = 2.40 = 10%
Cost = 30.00 = 60%
Cost = 24.00 = 80%
Cost = 21.60 = 90%
Producer
Exhibit 17-2
17-4
Wholesaler
Retailer
Six Types of Costs
Total Cost
Total Fixed
Cost
Total Variable
Cost
Average
Fixed Cost
Average
Variable Cost
Average Cost
17-5
Prices Along the Demand Curve
Total revenue = Price x Quantity
$30,000 = $3.00 x 10,000
$40,000 = $2.00 x 20,000
$57,000 = $1.90 x 30,000
$66,000 = $1.65 x 40,000
$75,000 = $1.50 x 50,000
$72,000 = $1.20 x 60,000
Price per unit
$3.00
2.00
1.90
1.65
1.50
1.20
10
Exhibit 17-6
17-6
20
30
40
Quantity (000)
50
60
70
Summary of Relationships
Affecting Price
?
Estimated quantity to
be sold
Quantity demanded
at selling price
Average fixed cost
per unit
Variable
cost per
unit
Cost-oriented selling
price per unit
Exhibit 17-7
17-7
Average total cost
per unit
Profit per
unit
Break-even Analysis
Total Revenue and Cost
Higher
Profit Area
Total Cost Curve
Break-Even Point
Loss Area
Total Variable Costs
Total Fixed Costs
0
More
Units of Production
Exhibit 17-8
17-8
Total Revenue Curve
Evaluating a Customer’s Price Sensitivity
• Are there substitute ways of meeting a
need?
• Is it easy to compare prices?
• Who pays the bill?
• How great is the total expenditure?
• How significant is the end benefit?
• Is there already a sunk investment
related to the purchase?
17-10
Demand-Oriented Pricing
Prestige
Demand Backward
Price Lining
Value-in-Use
Types of
Demand-Oriented
Pricing
Odd-Even
Leader
Bait
Psychological
17-11
Reference
Demand Oriented Pricing
• Value in Use - Priced on What
Consumers Will Save By Using
the Product
• Reference Price - Price Expected
• Leader Pricing - Bargain Price
• Bait Pricing - Low Price and
Then Switch
Demand Oriented Pricing
• Psychological Pricing - Ranges Have
the Same Appeal (Stair Function)
• Odd-Even - “99 Cents”
• Price Lining - A Few Price Levels,
Then Marking All At Those Prices
• Demand Backward - Work
Backward From Price Consumer is
Willing to Pay
Demand Oriented Pricing
• Prestige Pricing - High Price = High
Quality
Questions
• Distinguish Between Leader and
Bait Pricing
• What Do They Have In
Common?
• How Can Their Use Affect the
Marketing Mix?
Full-Line Pricing
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17-12
Market- or Firm
Oriented?
Complementary
Pricing?
Product-Bundling
Pricing?