Marketing 100

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Welcome Day 2

• Marketing 100
• October 2009
• Markets, consumer behaviour
• Product strategy
• Lecturer - Ms Jodie Hanson

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Review
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Lecture 4 Mkt segmentation Positioning

• What are markets?
• Why we segment the market
• Segmentation, target marketing, positioning
• 4. Product Growth opportunity matrix

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1. What are Markets?

• Total Market
• An aggregate/group of people who have needs for
  products or services and who have the ability,
  willingness, and authority to make a purchase
• Target market
• A group, or segment, at which a particular
  product is aimed is referred to as the target
  market or the target segment.
• Note the group must have similar
  characteristics and/or needs. Known as an
  homogenous group.

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2. Why we segment the market

• The total market can be too broad
• The total market is often not homogenous
  difficult to target with a core message or offer
• Difficult to be all things to all people
• Need to narrow our focus to be competitive
• Target our marketing effort and our offer to
  smaller homogenous groups of consumers on the
  basis of a need or want

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3. Market Segmentation, Targeting, and
Positioning
Divide a market into smaller groups of buyers
with distinct needs, characteristics, or
behaviors who might require separate products or
marketing mixes
Market Segmentation a. Identify basis for
segmenting the market b. Develop segment profiles
Market Targeting c. Develop measures of
segment attractiveness d. Select target segments
Positioning e. Develop positioning for
target segments f. Develop a marketing mix
for each segment
Most marketers have moved away from mass
marketing and toward market segmentation and
targeting (rifle approach vs shotgun)
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3 a. Segmentation - Identify the variables and
basis on which you will segment the market

• These are characteristics of individuals. groups
  or organisations used to divide a market into
  segments.
• This can be done using the following groups of
  characteristics
• Demographic, Geographic, Psychographic,
  Behavioural

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• Demographic variables - ie age, gender, income,
  ethnicity, social class etc. Based on the
  buyers rational behaviour

• Demographic most popular (easiest often
  meaningful differences) Dividing the market into
  groups based on population characteristics such
  as
• Age group Gender
• Family size or life-cycle stage
• Income Occupation
• Education Religion
• Race Nationality

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• Geographic variables - regional differences in
  population, climate socio-economic status etc.
  Retailers decide on store location based on where
  their target segment reside

• Geographic
• Country or region
• City or metro size
• Population density (e.g., urban, suburban,
  rural)
• Climate

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• Psychographic variables - using personality and
  life style dimensions to segment the market. This
  approach recognises that some types of purchases
  are more emotional-oriented.

• Psychographic beyond demographics
• Lifestyle
• Personality
• Social class

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• Behavioural Variables - based on the customers
  behaviour towards the product, or specific
  purchase situation and include benefit sought,
  usage rate, loyalty etc.

• Behavioral may be best starting point
• Dividing the market into groups based on
  knowledge, attitudes, uses, or responses to a
  product very direct specific
• Occasions purchase or usage occasion
• Benefits sought
• User status nonusers, potential users,
  first-time users, regular users, ex-users
• Usage rate heavy, medium, light users
• Loyalty status

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3 b Develop segmentation profiles

• Segmentation profiles describes the similarities
  among potential customers within a segment and
  explains the differences among people and
  organisations in different segments

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Popular Target Market Acronyms

• S.W.E.L.L.s - Single Women Earning Lots and Lots
  (exclusive apartments, upmarket personal care
  products, health club memberships, etc)
• Y.U.P.P.I.E.S - Young Urban Professionals (inner
  city living, BMWs, exclusive clubs, mobile
  phones)
• S.N.A.G.s - Sensitive New Age Guys (sharing,
  caring, sensitive, home body, equality etc)
• D.I.N.K.s - Double Income, No Kids (exclusive
  homes, entertainment home theatre systems, dining
  out, night entertainment etc)

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Class Activity

• These acronyms are western concepts. Can you see
  them working in China?
• Can you create any of your own?

• What would you do?

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3 c Measures of an attractive/effective Segment
Measurable
Accessible
Substantial

• Can size, purchasing power, and segment profiles
  be measured?

Differentiable

• Can segments can be effectively reached and
  served?

Actionable

• Are segments large or profitable enough to serve?

• Do segments respond differently to
  different marketing mix elements and programs?

• Can effective programs be designed to attract
  and serve the segments?

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Evaluate Relevant Market Segments

• Several important factors, including sales
  estimates, competition, and estimated costs
  associated with each segment should be determined
  and analysed
• Sales estimates - market potential, company
  sales potential, Breakdown approach, Buildup
  approach
• Competitive Assessment - who are our competitors
• Cost Estimates - can we keep our costs equal to
  or below our competitors?
• Company Objectives and Resources
• Skills and resources needed to succeed in the
  segment(s) ?
• Competitive advantages ?

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3c Choosing Target Market Strategy
Marketing Mix
Mass Market

• Undifferentiated Marketing

Marketing Mix 1
Segment 1
Segment 2
Marketing Mix 2
Marketing Mix 3

• Differentiated Marketing

Segment 3
Segment 1
Marketing Mix
Segment 2
Segment 3

• Concentrated (Niche) Marketing

• MicroMarketing
• Local Marketing, Individual Marketing

Subgroups of a segment or small segments
Consider Company objectives company
resources competitors strategies product
variability product life-cycle stage market
variability
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Popular Target Market Approaches

• Undifferentiated Target Market (almost mass
  marketing)
• Looks for commonalities and combines several
  segments into one marketing mix attempting to
  satisfy the majority of buyers
• Ie most brands of mainstream supermarket products
• Unlikely for a brand to be all things to all
  people. Invites competition
• Differentiated - Multiple Target Market
  (generalist)
• Two or more segments each with own marketing mix
  (ie most large companies with multiple products
  and brands within the same product category
• High marketing and operating costs
• Niche - Single Target Market (specialist/niche)
  
• Concentrates resources (marketing mix) on a
  single segment
• Ie LandRover, Bang Olufsen
• But risky as all eggs are in one basket

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Class Activity

• Are there enough differences in customers needs
  to warrant the use of market segmentation in all
  cases? Is there a case where we may not need
  market segmentation?

• Example of a mass market

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3d. Positioning for Competitive Advantage

• Products Position
• the way the product is defined by consumers
• the place the product occupies in customers
  minds, relative to competing products (based on
  perceptions)
• The position represents a complex set of
  perceptions, impressions, feelings in
  simplified form

• IMPORTANT
• Consumers will position products with or without
  the help of marketers

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Cont.

• Marketers must
• Plan positions to give their products the
  greatest competitive advantage in selected target
  markets
• Design marketing mixes to create these planned
  positions (not empty promises)
• What makes this product unique and
  superior?
• Implant the brands unique benefits and
  differentiation in customers minds

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Cont.

• Positions that are meaningful/worthwhile
• Important target customers value the
  difference as a meaningful benefit
• Distinctive competitors dont already position
  on it
• Superior better than competitors
• Communicable difference can be communicated,
  made visible and understandable
• Preemptive first, and competitors cannot
  easily copy
• Affordable target market can afford to pay for
  it
• Profitable the company can deliver it
  profitably

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• Use the marketing mix to create a unique
  proposition relative to competitors
• Product attributes
• Price value
• Place Easy access, select or mass
• Promotion unique message channel

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4. Product Growth Strategies
Existing Markets/clients
New Markets/clients
Existing Products
Market Penetration
Market Development
New Products
Product Development
Diversification
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Optional Review

• List and discuss the major bases for segmenting
  consumer markets
• Explain how companies identify attractive market
  segments to target and choose a target marketing
  strategy
• Discuss how companies can position their products
  for maximum competitive advantage in the
  marketplace

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Lecture 5 Consumer behaviour

1. Consumer behaviour defined
2. Buying Decision Process
3. Factors influencing the buying decision
4. Consumer problem solving
5. Types of buying decision behaviour
6. Purchase situation

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1. A Definition

• The decision processes and acts of ultimate
  consumers involved in buying and using products
• A consumer will try to acquire and maintain an
  assortment of products that satisfy his or her
  current and future needs.
• When making different purchases, consumers engage
  in different types of problem solving processes.
• Marketers who understand the consumer buying
  cycle can utilise their marketing mix to help
  them solve problems at the various stages of the
  cycle

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2. Buyer Decision Process
Client Journey
4 Purchase Decision
2 Information Search
1 Need Recognition
5 Postpurchase Behavior
3 Evaluation of Alternatives
Actual state vs. desired state Triggered by
internal or external stimuli
Marketers Journey
Demonstrate differentiation
Easy access, sales support
After sale service/product guarantee
Build awareness
Promote product attributes to solve need
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Evaluation of Alternatives
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Post purchase Behavior


Perception of Product Performance -
Expectations Customer Satisfaction
Cognitive Dissonance
- Dissatisfied Customer
Satisfied Customer !
Lost customer Negative w-o-m (tells 11)
Retention g more profit Positive w-o-m (tells 3)

• Create moderately high expectations (realistic,
  not exaggerated) and exceed them
• Encourage complaints care, respond (it exceeds
  expectations)

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3. Factors Influencing Consumer Behaviour
Uncontrollable Factors
Culture Subculture Social class
Social Reference groups Family Roles and Stat
us Culture
Personal Age and life-cycle Occupation Economi
c situation Lifestyle Personality and self-conce
pt
Cultural
Psycho- logical Motivation Perception Learning
Beliefs and attitudes
Buyer
Most specific Most individual
Most basic influences Broadest, deepest
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Cultural Factors

• Culture - the most basic cause of a person's
  wants and behavior
• set of values, perceptions, wants behavior
  learned by a member of society (learned from
  family social institutions)
• achievement success, activity involvement,
  efficiency practicality, progress, material
  comfort, individualism, freedom, humanitarianism,
  youthfulness, fitness health

• Subculture - groups of people with shared value
  systems based on common life experiences and
  situations (e.g., based on nationality, religion,
  race, geographic location, age, etc.)
• represent important market segments
• e.g., Hispanic, African-American, Asian-American
  
• e.g., Gen Y, Gen X, Baby Boomers, Mature Market

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Cultural Factors cont.

• Social Class - Societys relatively permanent and
  ordered divisions, where members share similar
  values, interests, and behaviors (including
  buying behavior)
• Based on resources, power, prestige
• Measured by
• Occupation
• Wealth and income (both amount and source)
• Education
• Housing, neighborhood, possessions, values

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Social Factors

• Reference Groups - most influential for purchase
  and use of
• products that are visible to others
• Reference Groups direct or indirect influence
• Membership groups direct influence (e.g.,
  friends,
• family)
• Aspirational groups does not belong but
  influenced by
• Opinion leaders influential individuals
• Skills, knowledge, personality often
  product/category
• specific
• Buzz marketing

• Family - most important consumer buying
  organization in
• society, and an influential reference group
• Consumption roles decider, buyer, user,
  influencer
• Changing roles and changing family structures

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Personal Factors
Personal Influences
Age and life cycle stage
Occupation
Personality self-concept
Economic situation
Family life cycle transition g changes buyer
behavior Single Honeymoon Full Nest 1,2,3
Empty Nest Retired Divorced, etc.
Brand personality
Lifestyle Psychographics
Activities
Interests
Opinions
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Psychological Factors

• Motivation driving force behind behavior,
  resulting from tension
• Motive a need that is sufficiently pressing to
  direct a person to
• seek satisfaction
• Maslow hierarchy of needs

• Perception process by which people select,
  organize, and interpret information to form a
  meaningful picture of the world
• Selective attention screen out most of what we
  are exposed to
• Selective distortion misinterpret information
  to support existing beliefs and
• attitudes
• Selective retention forget much of what is
  learned

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Psychological factors affecting behaviour
Maslows Heirarchy of Needs
So it costs a bit more. But Im worth it.
Loreal
When you care enough to send the very best.
Hallmark
Because so much is riding on your tyres. Michelin
It really quenches your thirst. Gatorade
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4. Types of Consumer ProblemSolving Processes

• Level of Involvements
• Enduring Involvement A persons interest in a
  product category is ongoing and long-term
• Situational Involvement temporary and dynamic
  resulting from a particular set of circumstances

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Types of Consumer Problem-Solving Processes

• Routinised Response Behaviour Used when buying
  frequently, low-cost items that require very
  little search-and-decision effort
• Limited Problem Solving Buyers engage in this
  when they purchase products occasionally and need
  to obtain information about an unfamiliar brand
  in a familiar product category
• Extended problem solving Process employed when
  unfamiliar, expensive, or infrequently bought
  products are purchased
• Impulse Buying An unplanned buying behaviour
  involving a powerful urge to buy something
  immediately.

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5. Types of Buying-Decision Behavior

• Influences the buyers decision process
• Suggests appropriate marketing strategy

Complex buying behavior
Variety- seeking behavior
High Consumer Involvement
Low Consumer Involvement
Significant perceived differences between brands
Dissonance- reducing buying behavior
Habitual buying behavior
Few perceived differences between brands
Cognitive dissonance (buyers remorse)
expensive, infrequently purchased, important,
risky, self-expressive, etc.
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6. Purchase decision influences

• Purchase outcomes are affected by the clients
  reason for the purchase
• Who would pay XX for a bunch of flowers
• What if it was your mothers birthday and you
  forgot to buy her a gift. It was 5 minutes
  before closing time and its the last bunch of
  flowers available.
• Now who would pay XX.

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Discussion

• Discuss a specific major purchase you made
  recently
• What type of buying decision was it
• Discuss your buyer decision process and the
  factors that influenced your decision

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Class Activity

• List the ways that your family, your friends, and
  the media influence your buying decision making
  process. Explain your answers

• What would you do?

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Optional Review

• Describe the four major categories of factors
  that influence consumer buyer behavior, and the
  major influences within each factor
• Understand the stages in the buyer decision
  process and how marketers can use this knowledge
  to develop their marketing strategy

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Lecture 6 Product strategy

• Product classification Services Marketing
• What is a product
• Product service attributes
• Classification of products
• Services Marketing

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1. What is a Product?

• Product anything tangible or intangible that
  can be offered to a market for attention,
  acquisition, use, or consumption that might
  satisfy a consumers want or need
• Physical Goods A tangible physical entity
• Service An intangible result of the application
  of human and mechanical efforts to people or
  objects
• Events
• Persons
• Places
• Organizations
• Ideas Concepts, philosophies, images,
  experiences or issues

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Products, Services, and Experiences
Service with accompanying minor goods
Tangible good with accompanying services
Hybrid offer
Pure tangible good
Pure service
Product Service Continuum
Automobile with accompanying repair services
Soap
Doctors exam
Flight with meal
Restaurant

• Delivering an experience
• personal, takes place in the minds of customers
• increasingly used to differentiate offers
• consumers buy what products will do for them

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Benefits vs features

• Because consumers purchase a product that will
  solve a problem or satisfy a need or want
• effective marketers should focus on selling the
  benefits of the product, not the features.

Feature - Cars Benefit
ABS brakes Dual airbags Safety - security
Small size Fuel efficient Easy to park Economical Convenient
Exercise
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Levels of Product and Services
3. Augmented Product Additional (unexpected)
services benefits to provide the most
satisfying customer experience
Product is a complex bundle of benefits
Installation
Packaging
Brand name
Features
Delivery credit
After- sale service
Quality level
Design
Core benefit or service
1. Core product What the consumer is really
buying (addresses underlying need or problem )
Warranty
2. Actual Product The physical product or service
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Class Activity

• Nominate one product/service and identify the
  core product, actual product, and augmented
  product characteristics.

• ?

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Class Activity

• Customer Value

Give examples of the features, benefits or costs
that might contribute to the customer value of
each of the following products. a) wrist watch,
b) a weight-loss diet supplement, c) a cruise on
a luxury liner, d) checking account from bank.
List each under one or other of the 4 Ps.
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2. Product and Services Attributes
Marketings role represent the voice of the
customer Developing a product or service
involves defining the benefits that it will offer
such as
Define in terms of customer satisfaction -
Ability of product to perform its functions
(performance quality) - Consistency (conformance
quality)
Product quality
Product features
Can differentiate the product from the
competition
Product style design
Style appearance Design performance /
function (as well as appearance)
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3. Product classification

• Consumer Product Products purchased to satisfy
  personal and family needs
• Organisational Products Products bought to use
  in a firms operations, to resell, or to make
  other products
• A product can be both a consumer and an
  organisational product

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Consumer Product/Services Classification
Based on buying behavior g influences strategy
Also based on the level of involvement in the
purchase

• Shopping Products - med - high
• Buy less frequently, planned, carefully compare
  alternatives
• Selective distribution
• Promotion by producer retailers
• E.g., clothing, cars, appliances

• Convenience Products - low
• Buy frequently immediately
• with minimum purchase effort
• Intensive/widespread distribution
• Mass promotion by producer
• E,g., candy, laundry detergent

• Unsought Products
• Innovations (little awareness) products
  consumers dont want to think about (no initial
  desire)
• Require much promotion
• (usually personal selling)
• E.g., life insurance, blood donation

• Specialty Products - high
• Special purchase effort, but little comparison
  of brands
• Exclusive distribution
• Carefully targeted promotions
• by producer retailer
• E.g., Lamborghini, Rolex, Prada

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Organisational Products

• Raw Materials
• Major Equipment
• Accessory Equipment
• Component Parts
• Process Materials
• Consumable Supplies
• Organisational Services

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Product Marketing mix
Product/service attributes
Price
Place/distribution
Promotion
CUSTOMER
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Example Marketing Strategies
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4. Services Marketing

• Examples
• Profession Tradespeople, lawyers, consultants
• Education Private and public Colleges,
  universities
• Financial-insurance Banks and financial
  institutions, insurance and investment firms
• Tourism destination, packaged tours, hotels and
  resorts
• Travel airlines, public transport (trains,
  buses)
• Food and Entertainment Restaurants (partial
  service), theatres

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Services MarketingDramatic growth additional
challenges
Intangibility
Inseparability
Cant be seen, tasted, felt, heard, or smelled
before purchase (provide signals,
tangibilize) Cant be separated from service
providers (internal marketing company to
employees) (interactive marketing employees to
customers) Quality depends on who provides
service, when, and how Cant be stored for
later sale or use (match supply demand)
Variability
Perishability
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Services Marketing

• 1. Intangibility
• Most services are experienced during or after
  consumption, but not before. Services cannot be
  owned like goods
• Problems
• Difficult for marketer to demonstrate/display
  service before consumption
• Difficult for customer to evaluate before
  consumption

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Services Marketing

• Solutions
• Use tangible indicators of service quality (make
  it easier for the customer to check out quality
  before consumption)
• Brand name, logo, brand image association
  appearance of premises, location staff
  presentation price charged year of
  establishment testimonies/past clients
• Trial use (if possible) ie first hour free
• Emphasise benefits (end results) rather than
  features

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Services Marketing

• 2. Variability (and Inseparability)
• Service quality depends on WHO the provider is,
  WHEN (time of year or day) and to WHOM (the
  customer)
• Problems
• Difficult for marketer to ensure quality in
  advance
• Difficult for customer to determine quality in
  advance

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Services Marketing

• Solutions
• Regular customer feedback (Use questionnaires and
  improve weak areas)
• Staff training (for high and consistent service
  quality)
• Standardise some operating procedures
  (standardised operating and admin procedures)
• As with intangibility

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Services Marketing

• 3.Perishability
• Cannot be stored since most services are produced
  and consumed at the same time
• Problems
• Difficult to match demand and supply since an
  unused service (Supply but no demand) is usually
  income lost forever. Potential income Is lost
  when a classroom is not filled to capacity, an
  aeroplane leaves with empty seats or when a
  dental appointment is missed.

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Services Marketing

• Solutions
• Regulate supply (when demand is given)
• Increase-decrease staff (supply) to match
  seasonal demand)
• Increase-decrease capacity (opening times,
  frequencies, etc) to match seasonal demand
• Automation (ATMs etc) to match seasonal or
  unpredictable demand
• Multiple services to provide steady income. Ie
  cobblers today repair shoes, cut keys, laminate,
  engrave etc
• (Need to be aware of quantity-quality trade off.
  When increasing supply (Capacity) the service
  quality may decrease)

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Services Marketing

• Solutions
• Regulate demand (when supply is given)
• Pricing Discounts for low seasons and full price
  for high seasons
• Cultivate non-peak demand. Increase demand
  without discounting price. A hotel etc can offer
  special attractions/events during low seasons
  without having to substantially discount prices.
• Reservation/booking

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Services Marketing mix
Product/service attributes
Price
Place/distribution
Promotion
CUSTOMER
Physical evidence
Process/operations
People
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Class Activity

• Select an existing service. Name and describe
  briefly, then write down the strategies you think
  the marketing team have used in each of the 7
  elements of the marketing mix.

• What would you do?

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Optional Review

• Define product, product levels (core, actual,
  augmented), and the consumer products
  classification
• Discuss the differences between product and
  services marketing
• Discuss how marketers can use their extended
  marketing mix strategies to address the various
  challenges of services marketing