Download What is marketing?

Notes for MNM202-Y – Robyn Saul
Marketing Management
Topic 1: Introduction to marketing
The nature of marketing
What is marketing?
‘Marketing is the process of planning and executing the conception, pricing, marketing communication and distribution of ideas, products
and services to create exchanges that satisfy individual and organisational goods”
Exchange is the key term in the marketing process
For exchange to take place there must be:
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Two parties
Each party must have something the other values
Each party must be able to communicate with the other party and deliver the goods or services sought by the other
Each party must be free to accept or reject the other’s offer
Each party must want to deal with the other party
Gaps between production and consumption:
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Space gap – geographical distances between consumer and producer
Time gap – time difference between when product produced and when it’s consumed (apples all year round)
Information gap – Customers must be aware of a product to develop a need for it
Ownership gap – Customer can take possession of a good or service before they have fully paid for it
Value gap – value attached by buyer and seller must be the same, an acceptable exchange rate
Retail also contains two more gaps:
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Assortment gap – producers act according to economies of scale, but customers want assortment, therefore retailed purchase
from multiple producers to supply assortment to customers
Quantity gap – Consumers want to buy small amounts of products due to limited storage space and funds, but
producers/wholesalers sell cheapest in bulk thus retailers perform ‘break-in-bulk’ activities for consumers
Three kinds of intermediary:
Middle men – take title of the product to be sold on i.e. Edgars
Sales intermediaries – Do not take title, facilitate sales process and paid commission
Auxiliary enterprises – support services to the exchange and marketing process i.e. banks, advertising agencies, airlines
To bridge the gaps certain activities have evolved:
Primary activities – transport or movement of goods via air, sea or land
Auxiliary activities – activities aimed at bridging the gaps, i.e. advertising, cold-storage, financing
- Obtaining and supplying information, standardisation and grading (e.g. export quality, egg sizes), Storage, financing, risk-taking
(insurance)
Exchange activities – buying and selling, including that of intermediaries such as wholesalers
Retailer, definition: a business that sells 50% or more of its good’s to the general public for private or household consumption.
Orientation to markets
Production orientation
Focus on internal capabilities of the business, does not consider if the product meets the need of the market place
Sales orientation
Focus on aggressive sales techniques, either to consumers or to intermediaries; can’t convince people to by what they don’t want or need
Marketing orientation
Combines sales message and price with a focus on quality, packaging, distribution channels and supplying info through advertising;
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Notes for MNM202-Y – Robyn Saul
understanding that sales depend not on sales people, but on a customer’s decision to buy thus perceived value key; four core principal
- Long-term maximisation of profitability
- Consumer orientation
- The integration of all business activities directed at profitability and the satisfaction of consumer needs, demands and preferences
- Social responsibility
Profit orientation – Profit seeking enterprises focus on a long term rate of return on total assets rather than taking a short-term approach.
Non-profit-seeking organisations focus on effective, efficient use of resources and cost reduction.
Customer orientation – aims focuses at satisfying consumer wants and needs
Organisational integration – all divisions or departments must work together to achieve the organisation’s goals.
Social marketing orientation (Social responsibility)
Striving to maintain a balance between customer needs, profitability and the long-term good of society and the environment.
Relationship marketing
Relationship marketing is the shift from one-off sales to ongoing relationships – the sale is a beginning of the relationship, not the end.
Price, place, product, promotion expand to include people and processes. This includes relationships with suppliers, current and potential
employees - not just customers. TQM and organisational integration key to success.
The marketing process
Consists of the 4 P’s (product, price, place/distribution, promotion/marking communications) which must be combined into a strategy that
takes in the environmental and consumer variables. Consumers always look to gain the maximum satisfaction for their sacrifice – total
needs satisfaction vs maximisation of long-term profitability.
The marketing function of the business
Important functions within the business/organisation are:
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Operations
Human resources
Finance
Purchasing/procurement
Public relations
Informational
Marketing
General management
Each organisation will have its own structure by the majority of these functions will be housed within them
Management tasks in marketing
Marking management is responsible for a variety of tasks including the following:
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Identifying opportunities and threats in the environment, and determining how to handle them in the light of the organisations
strengths and weaknesses
Compiling data for decision making
Selecting the distribution channels
Segmenting and selecting the target markets
The management tasks also need to be followed within the context of marketing:
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Planning – examine the ways in which the marketing opportunities and variables can be best utilised, with the organisations goals
in mind
− Identify opportunities and threats
− Set marketing objectives according to business objectives
− Decide on marketing instruments
− Consider all internal strong and weak points
Implementation – Organising and co-ordinating
Leading – Provide leadership in planning and implementation of strategies
Control – evaluating if the marketing activities have achieved the goals set out, any difference in performance must be analysed
in case corrective measures need to be taken
Notes for MNM202-Y – Robyn Saul
Marketing challenges that lie ahead
Identified future trends include:
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Growth of non-profit marketing
Globalisation
Changing world economy (!)
Call for a more ethically and socially responsible approach to marketing
Retail specific challenges include:
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Rise of single person household (including single parents)
Shifting social values and shopping behaviour (violence pressuring shopping developers to provide customers with a sense of
safety)
Urban retail renaissance (urbanisation on the rise, renewed interest in inner cities)
Changing needs of the middle-aged (due to increasing number and the cost of living and raising children, this group will have less
retail and leisure spending money)
Youth, more fashion, more violence (teen fashion, alcohol consumption, entry level workers, petty crime and shoplifting)
Topic 2: The marketing environment
Composition and functioning of the market environment
The marketing environment consists of three sub environments, the micro-environment, the market environment and the macro
environment.
The micro-environment
Comprises the internal environment of the business, and largely consist of variable the organisation controls
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Mission and objectives of the business
− Mission statement is important and should consider the following: Should describe the business and the customer
domains of the business; should include the retailers responsibilities to its stakeholders; should describe how goals will
be achieved; how a business interacts with the marketplace – competitors and suppliers; should be realistic and
acknowledge how capital and resources will be used; mention sustainable competitive advantage.
The business and its management e.g. marketing operations
Resources e.g. human resources, capital, know-how
Top management (executive) has four basic decisions:
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Basic line of business (product or service)
− Product/service category (manufacturing, distributor, wholesaler)
− Technology category (Tourism, fast food, clothing, hotel industry)
− Geographic category (Neighbourhood, city, region, province, national international
− Ownership category (sole proprietor, partnership, company)
− Specific business category (e.g. Retail, city, clothing)
Overall goals
− Sales targets (increase in turnover or market share)
− Profit (Rate of return on investment, gross profit margin on sales, margins per product)
− Customer acceptance (Environmentally friendly standards, socially responsible products)
The role of marketing management
− Importance in business (line or staff functions, budget and resources, role in strategy formation)
− Functions (research, planning, distribution, franchising)
− Integration ( integrated or decentralised)
The role of other management functions
− Human resources management
− Financial management
− Operations management
− Purchasing management
Notes for MNM202-Y – Robyn Saul
The market environment
The market environment is the environment that lies just outside the organisation that affects the organisation directly.
The four key variables of this environment are:
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Consumers – their buying power and behaviour determine the number of entrants to the market
Competitors – who are established in the market and wish to maintain or improve their position, including existing, new and
potential competitors
Intermediaries – who compete against each other to handle the business’ products, or wish to handle only those of competitors
Suppliers – who provide or do not wish to provide products, raw materials and services, including financing to the business
Consumers
The market consists of people (consumers) with specific needs that have to be satisfied and who have the financial ability to satisfy them.
Five consumer market groups:
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Consumer markets – individual buyers or households; buying power represented by personal disposable income; also covers
market for durable products, semi-durable products, non-durable products, and services
Industrial markets – manufacturing organisations buy products or services, involved capital goods, investment and inventory,
and the consumption of raw materials
Government markets – in SA refers to general government, provincial and municipal authorities, marketing plan here differes
and government frequently run off tenders
Resale markets – refer to businesses that purchase products and services to resell at a profit e.g. wholesale, retail
International markets – refers to all foreign buyers including all of the above types
Competitors
Businesses compete in the market for a share of the consumers, as well as supplier relationships, labour, capital, entrepreneurship and
material.
Competition is defined as ‘a situation in the market environment in which several businesses with more or less the same products or
services compete for the support of the same consumers.’
Competition results in: excessive profits being kept in check; incentive for higher productivity; and encourages technological innovation.
Five factors affecting competition in a market:
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The possibility of new entrants or departures (mobility)
The bargaining power of clients and consumers
The bargaining power of suppliers
Availability or lack of substitute products or services
The number of existing competitors
Retailers face two basic types of completion:
Intratype – competition between two (or more) organisations that use the same business format e.g. Pick’n Pay and Checkers
Intertype – competition between two (or more) organisations that use different retail formats e.g. Pick’n Pay hyper selling clothes, with
Edgars fashion retail
Intermediaries
Intermediaries bridge gaps between production and consumption, and include financial services
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Intermediaries are dynamic and ever changing affected by societal trends i.e. extended shopping hours, power of retail groups
E-commerce, growth of black retailers, increased advertising by shopping centres
Intermediaries need to be cultivated as long-term allies
Suppliers
Businesses have a high degree of dependence on suppliers. If a business cannot obtain the necessary inputs of the required quality in the
right quantity and at the right price for the achievement of its objectives, it cannot hope to achieve success in a competitive market
environment.
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Notes for MNM202-Y – Robyn Saul
Opportunities and threats in the market environment
Opportunity is a favourable condition or tendency in the market environment which can be utilised to the benefit of the organisation by
means of a deliberate, managed effort.
A thread is an unfavourable tendency in the market environment that can, in the absence of a deliberate effort by management lead to the
failure of the business, its product or its service
The Macro-environment
The macro-environment is the wider environment that an organisation operates in, and trends and actions within it can affect the business
either directly or indirectly, over which the business has little or no control. Megatrends are uncontrollable forces in the environment.
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Technological environment – new process and technology constantly change the way we do business, open new markets and
give competitive advantages. Marketing has three points of involvement:
− Promoting technological innovation when if identified new consumer needs and wants, increasing satisfaction
− Marketing tracks down and commercialises new tech there by distributing it
− Marketing must scan/research the technological environment for opps. and threats.
Economic environment – this covers economic factors such as the inflation rate, economic growth rate, consumer income, fiscal
and monetary policy
Social environment – highly influenced by the other variables, culture is not static and changes over time, demographic change
(e.g. urbanisation, aging population, increasing power of women, increased number of small households), HIV/AIDs is a huge
social factor in SA, also consumerism is key – the increasing power of consumer demand on organisations and the pressure they
exert.
Physical environment – includes physical terrain, raw materials, and pollution (waste disposal); current factors include:
increasingly scare or expensive resources; increasing cost of energy; pollution and its cost to society and the costs to a business to
control it; environmentalism trend ‘green’ through citizens and government institutions.
Political and governmental environment – Government policy as well as political trends exert pressure on businesses, annual
budget, taxation, exchange controls, import and export tariffs, price control and health regulations are just some of the ways
government effects business. Government can also be a customer and a producer
International environment – all the above variables can be found in the international field and increasing globalisation is a major
trend, the exchange rate can heavily affect businesses that trade internationally
Methods of environmental scanning
The importance of environmental scanning is clear from the following:
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Environments constantly change so business needs to keep abreast of these changes
It is necessary to determine business threats and opportunities
A business that scans will be more successful than one that does not
Environmental scanning depends on the nature of the business and it’s industry, and the source and scope of the changes occurring
Methods include:
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Reading relevant secondary or published information
Primary information or special studies on aspects of the environment
Establishment of a unit in the organisation that scans relevant variables and makes forecasts
SWOT analysis
Strengths and weaknesses
Strengths and weaknesses are internal (micro-environmental) qualities. Strengths can include specialised management skills, productive
and well-trained workforce, capital etc. Weaknesses include, obsolete product range, internal theft by staff or a lack of capital.
Opportunities and threats
These are found in the market and macro-environment. Opportunities can be found in trends such as: the increase of women in the work
place means that families are time-poor and there is more demand for convenience and take-away food. Threats can be found in events
such as a dramatic increase in the exchange rate hurts import businesses (but the same event is an opportunity for export businesses).
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Notes for MNM202-Y – Robyn Saul
Topic 3: Market information
Information needed for decision making
Successful companies make use of marketing information in order to keep up with changing consumer demands, and to keep ahead of
their competition
The role of marketing research in decision making
Marketing research can be defined at “the process of gathering, analysing and reporting information that may be used to solve a specific
marketing problem.”
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Marketing mix – research determines what combination of the 4P’s will best take advantage of existing marketing opportunities
Needs and marketing opportunities of the target market
Macro-marketing environment – research consists of constant scanning of the environment to spot new opportunities, threats
and trends in the social and cultural environment, technological environment, economic environment and political environment
Identifies and defines marketing opportunities and problems
Monitor’s marketing performance – feedback on existing marketing strategy is required to judge goal achievement
Expands basic knowledge of marketing - e.g. studies into the optimal return on promotional expenditure
Marketing information system
Marketers must gather data (raw facts) and analyse this into information. A Marketing Information System (MIS) is a planned combination
of methods for the continuous gathering, filtering, storing and flow of relevant information for the purposes of marketing decision making.
An MIS has various characteristics, which include the following:
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An MIS can be complex as it can address a wide range for marketing issues
And MIS can draw on a variety of data sources
The contents of an MIS are subject to cost-benefit considerations
A simple MIS consists of the following:
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Routine data component – Internal environment (sales, stock, debt, creditors) + external environment (local population growth,
competitive activities, trade association statistics)
Special purpose data component – Internal marketing research (CSI surveys) + external marketing research (external feasibility
survey)
Components of an extensive MIS
Internal reporting subsystem
Information generated from existing internal data and reports. It can include: Financial records; Expense accounts; Inventory systems.
Focuses on results.
Marketing intelligence subsystem
A set of procedures and sources that manager use to obtain everyday information about pertinent developments in the marketing
environment. Focuses on happenings. Formal and informal information gathering procedures may be used – formal done by dedicated
staff, informal gathering including scanning newspapers, magazines and trade publications.
Statistical subsystem
A statistical subsystem is and integrated system of data, statistical analysis, modelling and display formats that uses an IT infrastructure
(database and querying software) to provide information for the marketing decision making process – regular standard reports can be
pulled. It is frequently used to analyse happenings, but also to focus on the ‘what if’ questions.
Marketing research subsystem
Marketing research is ad hoc research that is conducted for a specific situation. It is project based and has a beginning, an end and a goal
to achieve, or a problem to solve.
All these components operate interactively – each component needs the others to perform properly.
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Notes for MNM202-Y – Robyn Saul
Marketing research
Marketing research projects can include the following
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Consumer attitudes to retailers and/or marketers and their efforts
Consumer purchase motives and preferences
Demographic and psychographic profiles of both customers and non-customers
Buyer behaviour patterns and their relationship to the retailer’s mode of operation
Service and performance records of suppliers, price and cost comparisons between suppliers
Merchandising and operational strengths and weaknesses of competitors
Employee perceptions of the store and its dealings with them (internal employee engagement)
The marketing research process
The preliminary marketing investigation
Step 1.
Identify and define the problem
The process begins when a marketing problem or opportunity is identifies. There are four broad categories that researchers can
investigate:
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Step 2.
Unanticipated chance – what is happening in the market environment, and why?
Planned chance – aimed at the future e.g. research into how to improve products
Serendipity in the form of new ideas – listen to staff or customer’s ideas and complaints
Research and development – by following findings of previous research projects, problems or opportunities may be identified
Formulate hypotheses
A possible answer to the stated research question needs to be formulated, which helps to focus the specific aims and directions of the
research. The hypotheses is unproved. Researches may attempt to create more than one hypothesis.
Step 3.
Determine the research objective
The objective needs to be a specific and unambiguous as possible, they must state the precise information required to solve the problem.
When determining the objectives of the research study, the researchers should use the following questions as a broad guidelines:
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Is there additional background information necessary before research objectives can be determined?
What information is needed to make decisions or solve the marketing problem?
How will the information gathered be used?
In general there are four basic research objectives:
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Step 4.
To explore – often informal research aimed at gaining more information about the problem, often used to create new
hypotheses
To describe – used when knowledge about a particular market or marketing aspect is vague. Provide answers to the who, how,
what and when of a topic
To test hypotheses (causal research) – obtain evidence of cause-and-effect relationships between two or more variables(
(independent and dependent), and the extent of the changes caused
To predict – to forecast future values e.g. sales forecasts, market shares, retail orders
Determine the data needs
Objectives must be translated into specific data needs.
Secondary data is existing data, which is cheaper and faster to collect as it either exists in the MIS or in external suppliers’ systems.
Primary data are data that are collected through original research for a specific purpose. It relates to the specific problem at hand, but it is
costly and time-consuming to collect.
If the secondary data is sufficient to confirm or reject the hypothesis there may be no need to collect primary data.
The formal marketing investigation
Step 5.
Selecting the method of collecting primary data
Research methods include:
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Notes for MNM202-Y – Robyn Saul
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Step 6.
Observational research – research respondents actions are monitored without direct interaction from the researcher. It can be
time consuming, and does not address the underlying cause of behaviour, but the results are objective
Focus groups – A small number of people are interviewed under the direction of a moderator. An unstructured discussion about
a topic in encourage in order to draw out ideas, feelings and experiences that a more formal method would stifle. Group
dynamics make people feel comfortable to share.
Experimentation – involves testing something in controlled conditions by changing a variable – although often a field setting. Can
be used to test change in prices, advertising campaigns effectively.
Survey research – the gathering of primary data from respondents via mail, phone or in person. Can be highly structured or
unstructured. Three types of data usually sought: facts, opinions and motives.
Purchase intercept technique – in-store information gathering technique that capitalised on the observation technique, but
includes interviewing customers on the spot about their purchase or shopping behaviour.
Design the questionnaire
This is the most common method of gathering primary data.
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Step 7.
Questions – question content and phrasing is important. Wording must be kept simple, leading questions avoided, the sequence
of questions considered (move from the general and easy to the particular and/or sensitive)
Validity and reliability – does the questionnaire measure what it’s supposed to measure, and does it produce accurate results on
repeat use
Pretesting – test the questionnaire on a small sample (similar to one to be used later) of respondents to identify and eliminate
potential problems.
Contact methods –
− Mail – flexible, low cost, but non-response error high and no guarantee who in the household will respond. Good for
hard to reach areas. Email survey’s gaining ground, but only reach those with email
− Telephone – medium cost and reduced potential for bias, however data that can be obtained is limited
− Personal survey – best response, but can be bias in the answers and most expensive method
− Online contact – effective and highly adaptive, online is a good way to test response (experimentation) and to obtain
quick responses (especially if the survey is incentivised)
Sampling plan
Sampling involves selecting representative units from the total population; this is the design of the sampling plan. The group the marketer
wants to know about is called a population or universe – sometimes this group is small enough that all members can be studied. If the
population is large it may only be convenient or possible to research a subset or sample.
Census – when the survey includes all members of the population
Sample – when the survey only includes a representative selection
Probability (or random) sampling – each unit of the population has a known chance of being included in the survey through strict
statistical procedures
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Simple random sampling – same as taking numbers from a hat, units assigned numbers and selected randomly
Stratified random sampling – population divided into mutually exclusive sub-groups (strata) on the basis of common
characteristics (e.g. age, occupation, gender)
Cluster sampling – groups the population into clusters and only some clusters will be randomly selected. Groups should be
different within subgroups, but the externally similar
Non-probability (or non-random) sampling – where not every unit of the know population has a chance of being involved
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Step 8.
Convenience sampling – used in ‘on the street’ interviews, or asking people in a supermarket their opinions
Judgement sampling – units are chosen on the basis of the researcher’s opinion of their representativeness
Selecting, training and controlling the interviews
The complexity and demands of the questionnaire as well as the sample group chosen will determine the selection of the interviewers.
Interviewers need to be trained to ensure they can administer the questionnaire in the same manner so that all the data can be collected
uniformly. Control of the interviewers must be exercised continuously – researcher must monitor data that is being returned and verify
veracity.
Step 9.
Fieldwork
At this stage the interviewers are out in the field and the data is being obtained.
Errors that can occur include:
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Non-response error – caused by respondents who are not available when contacted, or who refuse to participate, follow-up calls
should be made and reluctant parties encouraged
Notes for MNM202-Y – Robyn Saul
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Respondent bias – some respondent may pre-empt the interviewer by providing answers that they think the interviewer is
looking for
Interviewer bias – the interviewers tone, voice, age, gender and manner of interviewing may unconsciously result in bias. In
some instances interviewers may also complete questionnaires themselves. This can be limited through thorough training,
motivated interviewers and through strict control of fieldwork.
Step 10. Data processing
Data processing entails editing and coding the collected data to facilitate analysis. Editors check questionnaires to eliminate those
answered by wrong respondent and check legibility. Data is coded and entered into computers (databases).
Data analysis done next using processed and statistical techniques that would have been designed as a part of the original research design
– complex queries can be designed to answer existing and new questions.
Step 11. Communicating information to the decision maker
The final step involved interpreting the findings and reporting them to the marketing manager. Care needs to be taken to produce a highquality report document (define problem, analyse findings from primary and secondary sources, make conclusions and recommendations).
Marketing potential and sales forecasting
Marketers and organisations as a whole are often faces with the problem of predicting how much consumers will buy in total.
Market potential = consumer population + consumer requirements + consumption potential
Sales forecasting looks are the future market situation.
Levels of market measurement
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Consumer level – most popular level used as it provided info on the number of final consumers defined in the different market
segments e.g. demand for coke in schools, at sports events.
Product level – measurement of consumer demand for one brand or all brands in a given product category e.g. sales of all soft
drinks in SA.
Geographic level – total market divided into geographic segments e.g. sales in the Cape metropolitan area
Time level – sales/demand over a time period e.g. monthly sales, seasonal sales and annual sales
Relevant markets for measurement
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Total market – (market potential) all actual and potential buyers of a product type
Available market – refers only to those actual and potential buyers with the interest, income and ability to buy the product at a
particular point in time
Target market – the part of the available market to which the company has chosen to direct its marketing activities
Penetrated market – the number of consumers who have already bought the product
Market and sales potential
Market potential is defined as “the maximum possible sales of a specific product in a specific market over a specific period for all sellers in
the industry”.
Sales potential is defined as “the upper limit of sales that a firm could possibly reach for a specific product in a specific market over a
specific time period”. Sales potential can be used to plan sales territories, quotas, sales force compensation and targets for prospecting.
Estimating market and sales potential
Methods used for estimating the market and sales potential depend on how new or innovative the product or service is:
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Breakdown methods – taking total market potential, breaking it down to market segment level and finally, to a company’s own
sales potential. This method relies on the availability of data on industry sales volume and consumption but complete, detailed
data is rarely available. Potential often estimated from what is available. Sales potential derived by subtracting competitor’s
market shares and then adding possible results from expected actions or promotions.
Build-up methods – there are three main build-up methods:
− Census – a detailed consideration of every potential and actual buyer, difficult in consumer markets, but more feasible
in industrial situations
− Survey method – widely used in consumer markets, results from a sample can be used as a basis of calculating total
market or sales potential. The trouble is respondents aren’t always truthful.
− Secondary data – secondary data such as internal sales records can be used to predict customers purchasing based off
past behaviour. Sales potentials produced first and market potential is then derived.
Notes for MNM202-Y – Robyn Saul
Market and sales forecasting
Market forecast is defined as “an estimate of the expected sales of a specific product in a specific market over a specific time period for all
sellers in the industry.” It is the portion of the potential market that is expected to be realised.
Sales forecast is “an estimate of the number of units a firm expects to reach for a specific product in a specific market over a specific time
period.”
Forecasting methods
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Salesforce surveys – can provide a wealth of information as sales people have an expert opinion of their clients dealings, but
affected by bias and naivety
Expert surveys – bringing in outside expertise, involved the participation of people outside the firm who have special knowledge
and experience in the market under consideration
Time series analysis – using historical data to predict the future, including cycles, trends and seasonality. A forecast must also
make allowances for random factors such as strikes, riots and civil commotion.
Topic 4: Consumer and Business behaviour
Types of purchase decision
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Complex purchasing behaviour – used when consumers are highly involved in a purchased and aware of significant difference
among brands. Usually for infrequent, expensive, invoves risk and is self-expressive e.g. motorcars, clothes, furniture and
electronic equipment.)
Dissonance-reducing behaviour – high level of involvement, but believe there are few differences between brands, consumers
shop around but buy quickly e.g. carpets, lawnmowers
Habitual purchasing behaviour – low involvement and significant brands are absent e.g. salt, bread. Products low cost and
bought frequently
Variety-seeking purchasing behaviour – low consumer involvement but significant brand differences e.g. fast-food, restaurants,
ice-cream, entertainment).
Routine decision making – consistently purchases the same product without considering it. Usually the result of prior extended
decision making and can be indicative of brand-loyalty e.g. tea and coffee, toiletries etc.
Impulsive decision making – unplanned action made at the point of purchase (decision making process is mostly followed, but
within a moment)
Factors influencing consumer behaviour
Individual factors
Motivation
All behaviour starts with wants and needs. Needs are basic forces that motivate and individual to do something. Wants are needs that are
learned during an individual’s lifetime. A motive is a need or a want strong enough to stimulate an action to seek satisfaction.
Three different levels of motives:
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Conscious level – consumers know their motives and are quite willing to talk about them
Preconscious level – consumers are aware of their motives but will not reveal them to others
Unconscious need level – consumers cannot explain the factors motivating their buying actions because they are unconscious or
subconscious motives.
Maslow’s hierarchy: Basic physiological needs – Safety needs – Social needs – Ego needs – Self-actualisation needs
Perception
Sensory stimuli: Seeing; Hearing; Feeling; Tasting; Smelling
Perceptual defence mechanisms protect a person against undesirable stimuli and include the following:
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Selective exposure – people selectively choose what they expose themselves to e.g. turning down the radio during ads, quickly
paging through a magazine
Selective attention – does not pay full attention to stimuli, causes a person not to comprehend the content of the message
(Overcome by: Larger stimuli, higher frequency, colour and movement, centre of vision/eye-level)
Selective interpretation – stimuli are perceived, but message is not interpreted as intended – meaning distorted or
misunderstood (Overcome by: pre-test message, determine how cultural differences influence ad components, don’t set
unrealistic expectations)
Notes for MNM202-Y – Robyn Saul
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Selective recall – ability to remember only certain stimuli and to forget others which may have been important. (Overcome by:
Remind consumers at point of purchase of message, demonstrations, repetition and use of customer’s ability to learn)
Learning ability
Learning can be described as the result of a combination of motivation, attention, experience and repetition. Required is: motivation, full
attention, effective repetition.
Following learning principals are important when formulating a marketing message:
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Repetition in important to reinforce the message
A unique message is best remembered
The law or primacy states that the aspect mentioned at the beginning of the message is best remembered, but the law of recency
states that the last-mentioned aspect is best remembered
Demonstrations facilitate learning (vicarious-learning)
Promise of rewards (or threat of punishment) facilitate learning
Serious fear-producing messages should be avoided, consumers then to distort such messages
Attitude
Attitude is a positive or negative feeling about an object that predisposes a person to behave in a particular way towards that object.
Attitudes have the following in common:
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Attitudes are learned through experience, which includes secondary experience such as word-of-mouth and reading reviews
Attitudes are about an object, and can vary from object to object
Attitudes have a directions and intensity
Attitudes tend to be stable, the longer they endure, the harder they are to change
Options to change attitudes include:
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Changing the consumers beliefs about the attributes of brands e.g. heart foundation campaign for red meat
Changing the importance of beliefs e.g. fibre always considered important in cereals, but cancer prevention due to high fibre
makes it more important
Add new beliefs e.g. toothpaste that fights decay and whitens; organic only really healthy food
Personality
Personality refers to those psychological characteristics of people which both determine and reflect their reaction to environmental
influences. Often quantified into traits.
Lifestyle
The way of living of individuals or families. Describes the behaviour and purchasing patterns of consumers especially how people spend
their time and money. Activies, interests and opinions (AIO) is one classification system.
Group factors
Humans need to be affiliated with other groups in the social environment. Group norms therefore influence individual’s behaviour
patterns. Sanctions (rewards or punishments) are used in formal or informal ways – ostracism is a powerful threat and is therefore often
used to advertise hygiene products or clothing. One individual can belong to multiple groups all with their own norm, which means that
individuals are under immense pressure from social needs.
Culture
Culture comprises a complex system of values, norms and symbols which have developed in society over a period of time and which all its
members share. Culture is transmitted via people, usually from parents to children, but schools, churches etc all play a part on
socialisation. Culture can be fragmented into subcultures, and those into further smaller subcultures.
Family
Closest ties are with family – family frequenty forms a decision making group, or a household.
Family life-cycle phases are:
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Newly wed
Phase of family growth
Maturity phase – children have reached adolescence and therefore have their own norms, preferences and lifestyles
Post-parental phase (empty nest)
Sole survivor
Notes for MNM202-Y – Robyn Saul
Roles in the family decision making process:
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Initiator – person who first identified the need and suggest products to be purchased
Influencer – person who explicitly or implicitly influences the final decision, their wishes reflected in final decision
Decision maker – person to makes the actual choice between alternatives
Purchaser – person who makes the transaction
User – the person who actually uses the product
Reference groups
Reference group involves one or more people that a consumer uses as a basis for comparison or ‘point of reference’ in forming responses
and performing behaviours.
Following are types of reference groups:
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Membership groups – formal or informal, e.g. friends or a social club
Automatic groups – groups to which a person belongs due to their demographics i.e. age, sex or occupation
Negative groups (dissociative) – group that a person does not want to be associated with e.g. bikers, smokers
Associative groups – those groups that a person aspires to belong to, e.g. higher status groups, celebrity, sports team
Reference groups can be shown in advertising to consumers the type of person who buys the product and how it’s used.
Reference groups affect consumer behaviour in three ways:
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Normative influence – norms of behaviour are laid down by the group and group members behave accordingly (e.g. wear same
type of clothing)
Value-expressive influence – behaviour portrays certain values, e.g. health consciousness, ‘green’
Informational influence – consumers often accept the opinions of group members as credible, especially when it is difficult to
assess a product or brand by observation.
The following situations are where strong reference group influence occurs:
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Publically consumed luxuries – strong influence on decision to buy product and the choice of brand
Privately consumed luxuries – strong influence on decision to buy, but not on brand
Publically consumed necessities – strong influence on brand choice
Privately consumed necessities – no reference group influence
Opinion leaders
Important in the purchasing of new high-risk products e.g. new fashion – gradual acceptance is known as diffusion. Opinion leaders affect
only their own groups.
Buying decision making process
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Need recognition
Information search
Evaluation of alternatives
Purchase decision
Post-purchase behaviour
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