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Kent State University College of Business Administration K-31 Introduction to Consumer Behavior and Product Lecture 2 Dr. Lawrence J. Marks I. Introduction of Consumer Behavior “Setting up” an understanding of the topic “Demonstrating” how it is important to Marketing Showing its complexities II. Consumers in the Context of: A. B. C. D. The Marketing Environment Marketing Strategy The Marketing System A “Simple” Example A. The Marketing Environment A. The Marketing Environment Competitive Lega l Technology Economic Political Social A. The Marketing Environment Economic Competitive Promotion Lega l Place Product Political Price Technology Social A. The Marketing Environment Economic Competitive Promotion Lega l Product Consumer Place Political Price Technology Social B. Marketing Strategy “THE MARKET” B. Marketing Strategy “THE MARKET” B. Marketing Strategy “THE MARKET” Market Segmentation & Target Marketing C. The Marketing System II. Consumers in the Context of D. A “SIMPLE” Example A Model of Consumer Behavior (Engle, Blackwell, & Miniard) Exposure Stimuli --Marketer --Other Problem/Need Recognition Internal Search Search Attention Comprehension Acceptance Retention M e m o r y Alternative Evaluation Purchase Outcomes External Search Dissatisfaction Satisfaction Environmental Influences Culture Subculture Social Class Family Other People Situation Individual Differences Consumer Resources Motivation Involvement Knowledge Attitudes Personality, Values, and Lifestyle A Model of Organizational Buying Behavior (adapted from J. Sheth) Sources of Information Salesperson Trade Show Direct Mail Press Journal Ad Conference Trade News WOM Internet Others Information Search Individual’s Background Expectations of Buying Center Members --Purchasing Agents --Engineers --Users --Others Industrial Buying Processes Situational Factors Satisfaction with Purchase Individual Decisions Choice of Supplier or Brand Joint Decisions Product Factors Time Pressure Perceived Risk Firm Factors Type of Purchase Firm Orientation Firm Size Conflict Resolution Approaches Degree of Centralization IIII. Product Development A. The development of new products B. The continuous improvement of existing products C. WHY bother? 15 IV. The Product Life CycleInnovate, Total Market Sales D o l l a r s Stage: Emphasis in Marketing Mix Redesign Drop Product Introduction Growth Maturity Promotion Distribution Price Decline Time Cost Reduction 16 IV. Product Life Cycle Note the NEGATIVE Must increase profits. Sales advertising & selling are needed to efforts & cut prices in offset product face of competition development costs PLC and profit curves varies from product category to another, but above is the basic shape that we often see. Aggregate demand over an extended period of time for all 17 Decidingbrands when comprising to enter a amarket IMPACT Profitability genericcan product category. IV. PLC Characteristics and Implications PLC STAGE Characteristics Customers Competition Sales Profits Introduction Innovators Profits fall more Little, if any resources are needed Low levels, rising to attract customers None from other away offers. Marketing Implications Overall Strategy Costs Product Strategy Pricing Strategy Distribution Strategy Promotional Strategy Growth Mass Market Increasing Stimulate Rapid Growthdemand for the entire product category rather than a single brand Strong then peak Market Development Market Penetration High per unit Declining Undifferentiated Improved Items Most likely high Lower over time Scattered Intensive Category Awareness Brand Preference 18 PLC Characteristics and Implications Pink Flamingo Characteristics PLC STAGE Maturity Customers Mass market Competition Intense Board Games Sales Slow/no annual growth Most Profits Declining annually competitors abandon the Marketing Implications market, Defensive positioning Overall Strategy Some Stable or increasing Costs develop Differentiated Product Strategy small Lowest Pricing Strategy successful Intensive Distribution Strategy niche! Promotional Strategy Brand loyalty Decline Loyal customers Why? Decreasing 1.Declining Better or less Firms attempt to Low/none expensive product differentiate meets same themselves need. 2.Efficiency Need or forexit Lowproduct Pruned line disappears due to Increasing product Selective development. 19 Reinforcement As the cycle turns….. THE PRODUCT LIFE CYCLE AT WORK!! February 13, 2008, Polaroid Ends Instant Film Production 20 V. Length of Product Life-Cycle a) The PLC diagram suggests that stages are of EQUAL length (this may not be accurate) BUT, certainly its overall length may vary! i. Consider Fashion vs. ii. The telephone 21 V. Length of Product Life-Cycle Product lifecycle variations b. An Extended Introduction Stage: In 1947, the first commercial microwave oven hit the market. These primitive units where gigantic and enormously expensive, standing 5 1/2 feet tall, weighing over 750 pounds, and costing about $5000 each. The magnetron tube had to be water-cooled, so plumbing installations were also required. It was not until 1975 that sales of microwave ovens, for the first time, exceeded that of gas ranges! 28 years after their introduction. 22 V. Length of Product Life-Cycle Product lifecycle variations Product lifecycle variations c. Fad – Bungee Balls: March of 2003, broke after 4 – 7 hours of play, concern about… 23 V. Length of Product Life-Cycle Anime – 2000s Beanie babies – 1990s Product Bungee Balls –life2003 cycle variations Badger Badger Badger – 2003 Product lifeCabbage dolls – 1980s cyclePatch variations Calculator wristwatches – 1980s Cargo pants – late 1990s Celebrity Air; 2005 Chia Pets – 1980s Clackers – 1980s Coonskin caps – 1950s Crazy Frog Designer jeans – 1980s Devil sticks Digimon Disco – 1970's Droodles – 1950s Flash mobs – 2000s Furby Garbage Pail Kids Hair Metal – 1980's Homestar Runner Hula hoop – 1950s Hypercolor Internet music downloading – 2000s JNCOs/ultra wide-leg jeans – 1990s Kirk's Khan scream from Macarena – 1996 Machinima – 2003 present Mood ring – 1970s MP3 players – 2000s Nerf; 1990s Numa numa – 2005 Office olympics; 2004 - Pacifiers for teens – 1990s Pet rocks – 1970s Pogo Balls – 1980s Pogs Pokemon – 1990s2000s Puka Shell Necklace – 1970s Quiff Razor (scooter) 24 Rubik's Cube – 1980s V. Length of Product Life-Cycle Product lifecycle variations Product lifecycle variations d. And some products seem to have an Indefinitely Long Maturity State 25 V. Length of Product Life-Cycle e. The Product Life Cycle seems to be getting shorter for most products. This is because of: i. “Me-Too” Products, and ii. Rapid Technological Advances 26 VI. Product Life-Cycle Management Marketing Success: a) Predicting the shape and the timing of the PLC, and b) Stage Recognition & Adaptation 27 VI. Product Life-Cycle Management 3) Issues: A. When to Enter? • To Realize a Pioneering Advantage? Entry Strategies Introduction Growth Maturity Decline 28 VI. Product Life-Cycle Management 3) Issues: A. When to Enter? • An Imitation Strategy may be better Entry Strategies Introduction Growth Maturity Decline 29 VI. Product Life-Cycle Management Differentiation Entry Strategies Introduction Managing on the Rise Growth -Technological Leap Frog – More video, audio and graphics capacity while controlling prices Maturity Decline 30 VI. Product Life-Cycle Management Entry Strategies Introduction Managing on the Rise Managing during Maturity Growth Maturity Decline 31 Managing During Maturity Innovative Packaging Dutch Boy’s packaging innovation offers paint in plastic containers with twist-off tops. The paint container is easy to carry, doesn’t need a screwdriver to pry open, doesn’t dribble when poured, and doesn’t take a hammer to bang the lid shut. 32 VI. Product Life-Cycle Management Surviving the Decline Might be the greatest PLC stage challenge! Strategy: Promoting as a key ingredient During the declineitstage firms may: in making various treats easily and through out the year Managing 1) Ensure that marketing and production Managing programs are efficient ason possible, during the Maturity Entry 2) Prune unprofitable sizes and models which Rise Strategies decreases sales but increases profits, 3) Run out the product to squeeze out final profits, or Introduction Growth Maturity 4) Revitalize it (best and toughest route) Civil War Innovation! Surviving the Decline Decline 33 VII. The “Total Product” A. Defined: Broad spectrum [bundle] of tangible and intangible benefits B. Primary Characteristics: basic features of the core product C. Auxiliary Dimensions: supplementary benefits 34 Core and Augmented Product Example Core Product-Close Up Toothpaste 35 Core and Augmented Product Example Primary Characteristics: basic features of the core product Core Product-Close Up Toothpaste ESSENTIAL BENEFITS •Clean Teeth •Prevent Tooth Decay 36 Augmented Product -- Auxiliary Dimensions Flip top package Brand Name-Close Up 800 help phone line Core Product-Close Up Toothpaste Flavor Tartar Control Fluoride 37 Benefits of the Augmented Product Convenient Storage Social Confidence; Romance; White Teeth Safety Flip top package Brand Name-Close Up 800 help phone line Core Product-Close Up Toothpaste Flavor Good Taste Fresh Breath Tartar Control Cleaner Teeth Fluoride Lower Dental Bills 38 VIII. Classifying Products A. End Use Market 1. Agricultural Products & Raw Materials 2. Organizational Goods 3. Consumer Goods 39 Agricultural & Raw Materials For example: Ingredients (zinc, pig iron, cotton) – Rather Homogeneous – Sold in bulk – Low value per unit 40 Organizational Products 1. Manufactured materials and component parts: (electrical resistors, screws, electric motors) 2. Process materials: used in production, not part of finished product (chemicals) 3. Installations: primary production equipment and major capital items (buildings, computer hardware, assembly lines) 41 Organizational Products 4. Accessory equipment: (word processors, trucks) 5. Operating Supplies: facilitate routine operations (writing paper, hand tools) 6. Services: work provided by others (maintenance, repairs) 42 Consumer Goods 1. Based on Durability/Tangibility Classification SHOVEL GOOD RESTAURANT GOOD/SERVICE EMPLOYMENT AGENCY SERVICE 43 Consumer Goods 2. Based on CONSUMER’S Interest LOW Willingness to Expend Effort for Product CONVENIENCE PRODUCT SHOPPING PRODUCT HIGH SPECIALTY PRODUCT 44 CONVENIENCE PRODUCTS CHARACTERISTICS: 1. Relatively Inexpensive 2. Purchase is regular and recurring 3. Little Thinking Involved 4. Minimal Shopping Effort 5. Bought a most convenient location 6. Bought on impulse STRATEGY: 1. Make available in every possible place 2. Must be visible inside the store 3. Distribution is a major marketing mix factor 4. Easy substitution by similar brands 5. Extensive advertising is used 45 Shopping Products CHARACTERISTICS: 1. Product comparisons occur 2. Consumer seek information 3. Decisions are based on thought 4. Relatively higher prices 5. Often fashion oriented 6. Monetary & social risks 7. Brand loyalty may be found STRATEGY: 1. Selective distribution 2. Consumers will seek products in less visible locations 3. Quality is important 4. Product differentiation is possible 46 Specialty Products CHARACTERISTICS: 1. Substitutes are not accepted 2. Infrequently purchased 3. Extensive Search 4. Brand loyalty may be strong 5. Loyalty to retailer may be as important as brand selection 6. May travel great distances to acquire STRATEGY: 1. Limited distribution 2. Consumers will seek products regardless of location 3. Extensive product and price differentiation 4. Strong brand image 47 IX. Does your product offer Quality or Value? QUALITY---degree of excellence or superiority your product has (or service provides) --CUSTOMER’S perception of quality is key --TQM and ISO 9000 VALUE---what the customer gets in exchange for what the customer gives. --”Am I satisfied?” “How much did it cost?” 48 Muller on Timken—Industries & Focus Growth for Timken Focused on Heavy Industries Steel Power Generation Cement Production Aggregate Wind Energy We can deliver value AND they are growing! e.g., Iron Ore, Coal, Oil vs. Automotive! 49 X. Product Mix Terminology Product Mix All of the products we offer for sale Product Line A group of closely related products Width of Product Mix The number of product lines carried Depth of Product Mix Average Number of Products in each line Consistency of Product Mix How similar are our product lines? 50 Product Mix Example Width (Number of Product Lines) Hair Care Depth # of Items Shampoo Salty Snacks Chips Dental Soft Care Drinks Toothbrush Colas Conditioner Nuts Toothpaste Ginger Ale Hair Spray Crackers Dental Root Beer Floss Comb 51 XI. Brand Equity A. Branding identifies and distinguishes one marketer’s product from another's – Customers use brand information as important buying cues. 1. A BRAND is any name, term, symbol, sign, design, or unifying combination of these that identifies a product. 52 XI. Brand Equity a. A BRAND NAME is the verbal part of the brand. b. A BRAND MARK is a unique symbol that is part of the brand. c. A logo, or logotype, is a brand name or company name written in a distinctive style. 53 XI. Brand Equity 2. Brand equity is the “value” of the brand caused by goodwill and brand reputation. – It is a valuable asset that must be managed! – Strong equity makes market position easier to defend. – Strong equity makes new products easier to introduce. 54 55 PROTECT your product!! Polaroid was awarded damages of $909,457,567!! Polaroid Square Shooter 2 Camera Champ Kodamatic 56 Of course, the PLC STILL Holds Polaroid may have defeated Kodak in the instant camera business, but it can't beat a sagging economy. Polaroid (or Polaroid Corp to be precise) just filed for Chapter 11 bankruptcy protection for the second time in 7 years. “Impossible” to make Polaroid film (maybe) http://www.the-impossible-project.com/ (or http://blog.makezine.com/archive/2009/01/the_impossible_project_the_reinvent.html?CMP=OTC-0D6B48984890 Polaroid’s PoGo Instant Digital Camera 57 XII. Family Branding A. Family branding is a strategy that uses a single brand name for different items in a product line – e.g., Heinz, Del Monte, General Electric 58 XIII. Individual Brands A. Use of Separate Brand Names for each product. Example: --Goodyear --Dunlop --Springfield 59 Goodyear Target Markets Goodyear Cust. Dunlop Kelly Euro-cool Age Family Centered Mirror of Active America 34-54 24-34 ?? Price High end Mid-range Lower end Slogan Serious Point of Technology. Departure Freedom from worry Audience Blue collar On the way Taking Care up of Basics Honest tires, Honest Prices 60 Proctor & Gamble’s Portfolio Brand TIDE CHEER BOLD GAIN ERA DASH OXYDOL SOLO DREFT IVORY SNOW ARIEL Positioning Share Tough, powerful cleaning 31.1% Tough cleaning, color safe 8.2 Detergent + Fabric Softener 2.9 Sunshine scent & odor protection 2.6 Stain removal 2.2 Value priced 1.8 Whitening 1.4 Liquid detergent & softener 1.2 For baby clothes & tender skin 1.0 Simple, basic, no frills soap Safe for fine fabrics & babies .7 Tough cleaner, Hispanic market .1 61 XIV. Warranties A. A product warranty provides a written guarantee of a product’s integrity and the manufacturer’s responsibility for repairing or replacing defective parts. B. Warranties reduce customers’ perceived risk by suggesting product quality. C. HONOR THY WARRANTY to create customer satisfaction! 62 XV. Packaging A. Packaging contains the product and protects it, aids in usage, identification, promotion, and ecology. B. Packaging involves decisions about labeling, inserts, instructions, design, and sizes. C. Packages serve as cues to customers as they purchase. 63 XVII. The Product Audit Think Product Portfolio Management, ala the Boston Consulting Group Matrix: --Review products to determine whether they should be continued as is, improved, modified, or deleted. 64