MARKETING MANAGEMENT

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• MARKETING MANAGEMENT
• WEEK 3
• Buyer Behaviour
• Segmentation
• Positioning

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PREVIOUS WEEKS

• VisionWhat do we want to be?
• Mission statement What is our business? / why
  does our business exist? SWOT
• How can I describe this market in terms of
  whether it will get me where I want to go?
• Need to understand the marketing environment (the
  uncontrollable forces).
• Need to discover and understand customer
  needs/wants.
• Developing sustainable competitive advantage
  using the 4Ps and other company strengths the
  controllable forces
• Who should we target?
• What should we offer?
• What is a fair price?
• How can we influence where they buy?
• How can we predict behaviour in 2 5 years time?
  

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• AGENDA FOR THIS WEEK
• Marketing and consumer behaviour
• The wheel of consumer analysis

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Buyer behaviour

• It is behaviour involved in searching for,
  purchasing, using, evaluating and disposing of
  products and services that they expect will
  satisfy their needs
• Schiffman Kanuk

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Buyer behaviour

• Your Turn
• Who is a
• buyer
• Breakfast Cereals
• Prescription Medicines
• New Labour (current party in power in UK)

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Buyer behaviour

• A buyer is anyone who gives consideration for
  a product or service
• Money
• Recommendation
• Votes
• Time

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Buyers Impact onMarketing Strategy

• Market Segmentation
• Identifies groups of consumers who are similar to
  one another in one or more ways and then devises
  marketing strategies that appeal to one or more
  groups
• Demographics
• Statistics that measure observable aspects of a
  population
• Ex. Age, Gender, Family Structure, Social Class
  and Income, Race and Ethnicity, Lifestyle, and
  Geography

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Buyers Impact onMarketing Strategy (cont.)

• Relationship Marketing Building Bonds with
  Consumers
• Relationship marketing
• The strategic perspective that stresses the
  long-term, human side of buyer-seller
  interactions
• Database marketing
• Tracking consumers buying habits very closely,
  and then crafting products and messages tailored
  precisely to peoples wants and needs based on
  this information

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Marketings Impact on Consumers

• Marketing and Culture
• Popular Culture
• Music, movies, sports, books, celebrities, and
  other forms of entertainment consumed by the mass
  market.
• Marketers play a significant role in our view of
  the world and how we live in it.

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Marketings Impact on Consumers The Meaning of
Consumption

• The Meaning of Consumption
• People often buy products not for what they do,
  but for what they mean.
• Types of relationships a person may have with a
  product
• Self-concept attachment
• Nostalgic attachment
• Interdependence
• Love

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Marketings Impact on Consumers The Meaning of
Consumption (cont.)

• Consumption includes intangible experiences,
  ideas and services in addition to tangible
  objects.
• Four types of Consumption Activities
• Consuming as experience
• Consuming as integration
• Consuming as classification
• Consuming as play

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Marketings Impact on Consumers Virtual
Consumption

• The Digital Revolution is one of the most
  significant influences on Buyer behavior.
• Electronic marketing increases convenience by
  breaking down the barriers of time and location.
• U-commerce
• The use of ubiquitous networks that will slowly
  but surely become part of us (i.e., wearable
  computers, customized advertisements beamed to
  cell phones, etc.)
• Cyberspace has created a revolution in C2C
  (consumer-to-consumer) activity.

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Who are the experts?

• Psychologists
• Freud
• Maslow
• Skinner
• Social cultural anthropologists
• Observation
• In-depth/projective techniques
• Marketing scientists
• E.g. Ehrenberg

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Who are the experts?Freud

• Psychoanalysis

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Who are the experts?Skinner

• Behaviourism

• If behaviour can be predicted, it can be
  controlled if behaviour can be controlled, life
  can be improved
• Legacy
• Some therapeutic techniques
• Concept of conditioning

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Who are the experts?Maslow
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Social Cultural Anthropologists

• The search for meaning
• Products
• Services
• Messages
• Influence on marketing research strategy

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Who are the experts?Marketing Scientists

• Consumers Are Actors on the Marketplace Stage
• Role Theory
• Consumers Are Manipulated by big corporations
• Commodification Theory
• Consumer Behavior is a Process
• Exchange Theory

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Buyer behaviour

• Buyers are
• Inconsistent
• Illogical
• And therefore, ultimately
• UNPREDICTABLE

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Buyer Behaviour
The Wheel of Consumer Analysis
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The Wheel of Consumer Analysis
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Three categories within the wheel of consumer
analysis
Internal characteristics of consumer beliefs,
attitudes, goals, knowledge, prejudices
Overt behaviourshopping, buying, consuming,
changing patterns of behaviour
Environmental factors
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The Wheel of Consumer AnalysisAffect - Feeling

• Emotions
• Feelings
• Moods
• Evaluations
• Largely reactive
• Little direct control
• - Felt physically
• - Responds to stimuli
• - Responds to cognitive process
• - Responses are learned

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The Wheel of Consumer Analysis -Cognition -
Thinking

• Understanding
• Evaluating
• Planning
• Deciding

• The amount of cognitive activity will vary
  considerably from situation to situation
• Consumers do not process information in an
  intensive, controlled manner
• Considerable cognitive activity is automatic,
  taking place at an unconscious level

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The Wheel of Consumer Analysis -Cognition -
Thinking

• Interprets and makes sense of the environment
• Manipulates, combines, transforms to create
  meaning, evaluations and choice
• Sense-making is highly personal and will vary
  greatly depending on knowledge, meaning and
  beliefs

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Consumer Decision Process
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Problem Recognition
Desired State To be more in control of my
mobility by owning a car
Current Actual State Travelling from anywhere
takes ages public transport is so unreliable
Gap
Problem recognition
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Problem Recognition
Search
Involvement
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Purchase categories
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Problem RecognitionMarketing Implications

• Opportunities to influence the perceptions of
  current statee.g. by drawing attention to
  problems not previously recognised
• Opportunities to influence the desired statee.g.
  stressing the positives
• Build bridge between current and desired state to
  reduce complexity of decision making

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Information Search Evaluation

• Amount of activity- costs benefits
• Where/how will search takes place
• What criteria will be used to evaluate how will
  it be done

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Search Activity

• Costs Benefits

• Time
• Emotional wear tear
• Financial (phone calls, travel)
• Opportunity (to do other things with
  spare time)

• Positive feelings gaining knowledge/expertise
• Greater comfort from informed decision making
• Increased chance of post purchase satisfaction
• Financial benefits/cost savings

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Typical Sources

• Personal contacts- friends, family, colleagues
• Neutral sources- consumer testing reports,
  independent advisors
• Marketing sources- ads, literature, sales staff

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Search Activity

• Research suggests the majority of consumers
  engage in LIMITED amounts of EXTERNAL SEARCH
• Information seekers tend to be higher demographic
  profile (higher education level , income,
  occupation etc.)
• Risk can be reduced in other ways- rely on
  previous experience- buy into major
  brands- spend more top of the range

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Evaluation
Range of options needs to be manageable
Evoked set Brands the consumer is willing to
consider vs.
Inert set Consumers not aware of any reasons to
consider
Inept set Consumer has actively
rejected(perceptions or experience)
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Evaluation

• High involvement products
• High significance, high risk, high complexity

Evaluation criteria more extensive
Evaluation process more thorough
Evaluation process slower
But may change over time with experience
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Information Search EvaluationMarketing
Implications

• Understanding if possible influencing
  evaluation criteria
• Understanding sources of information used and
  their importance/effectiveness
• Improving access to/quality of information
• Influencing the consumers evoked set

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The Purchase Process

• Impulse Item brand chosen in store
• Partially planned Intention to buy item
  brand/store choice deferred until shopping'
  visit
• Fully planned Item/Brand chosen before
  shopping visit

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The Purchase Process Marketing Implications

• Benefits of Retail Theatre choice
• Vs.
• Benefits of speed convenience

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Post Purchase Evaluation

• Satisfaction
• Performance vs. Expectation
• Satisfied customers
• Have more favourable attitudes
• Higher purchase intentions
• Higher brand loyalty
• Dissatisfied customers will tell 5/20 more people
  than
• satisfied ones

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Post Purchase EvaluationMarketing Implications

• Do not set unrealistic expectations
• Re-inforce consumers choice via advertising /or
  direct correspondence
• If performance is difficult to judge, continue
  positive messages to reduce post-purchase
  dissonance
• Make it easy for dissatisfied customers to let
  you know- properly managed they can be turned
  into advocates

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Consumer Decision Process
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Maslows Hierarchy of Needs
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Needs

• Autonomy
• Competence
• Relation
• Meaning, self-realization
• Physical Well-being
• Safety
• Pleasure, stimuli
• Self-esteem
• Popularity, influence
• Money, Physical possession

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A Customer Value Hierarchy

• Desired End States
• Describes the goals of the person/organization
• Consequences
• Describes the user/product interaction
• Attributes
• Describes the product/service

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The Means End Chain
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Levels of Product Knowledge

• Product Class
• Coffee, Beer
• Product Form
• Ground/Instant,
• Bottled/Draught
• Brand
• Nescafe
• Budweiser
• Model/Feature
• Decaffeinated
• Bud Light

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Consumer Product Knowledge
Attributes
Values
Benefits

• Decaffeinated
• 100 NutraSweet

• Permits sleep
• Non-fattening

• Well-being
• Self esteem

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Consumer Product Knowledge Attributes or
Features
Attributes/ Features
Attributes
Values
Benefits

• Understand consumers hierarchy of importance and
  role of attributes/features in decision making

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Consumer Product Knowledge Benefits
Attributes
Values
Benefits
Benefits
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Consumer Product Knowledge Benefits

• American Express Card
• Benefits

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Consumer Product Knowledge Risk

• Perceived Risk
• Physical Risk
• Financial Risk
• Functional Risk
• Psychosocial Risk

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Consumer Product Knowledge Values
Attributes
Attributes
Values
Values
Benefits
Benefits
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Consumer Product Knowledge -Instrumental
Terminal Value

• Preferred Mode of Conduct
• Ambitious
• Independent
• Capable
• Logical
• Courageous
• Clean
• Reliable

• Preferred End State
• World Peace
• Equality
• Sense of Accomplishment
• Inner harmony
• Security
• Happiness

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Consumer Product Knowledge American Express Card

• Makes me feel secure

• Self Reliant
• Independent

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Consumer Product Knowledge The Means End Chain
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Consumer Product Knowledge Involvement

• Consumer perception of importance
• Personal relevance of product

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Involvement Means - End Chains

• High Involvement
• Product attributes linked to personal
  goals/values
• Medium Involvement
• Product attributes only marginally linked to
  personal goals/values
• Low Involvement
• Product attributes lead only to functional
  consequences

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Marketing Implications Means - End Chains

• Understand key reason for purchase
• Understand consumer/product relationship
• Influencing personal involvement
• Influencing situational involvement

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Marketing Implications Who owns the Brand?

• Four Categories of Brand users-
• Brand Loyalists
• Strong ties with high self relevance
• Routine Brand Buyers
• Low self relevance but favourite brand bought
  regularly not usually based on means-end chain
  analysis
• Information Seekers
• High means-end chain analysis, knowledgeable
  about the category but no brand stands out
• Brand Switchers
• Low personal self-relevance, not important
  category for them, buy on price, special offers,
  availability

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The Means End ChainGroup exercise
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The Wheel of Consumer Analysis -Buyer Behaviour

• Observable Measureable
• Shopping
• Purchasing
• Consuming
• Disposing

Behaviour
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Three Theoretical Schools of Learning
1 Classical Conditioning 2 Instrumental or
Operant Conditioning 3 Vicarious Learning
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Classical Conditioning

• A non conscious process in which a previously
  neutral stimulus elicits a desired response
• After a number of pairings a conditioned response
  is elicited by a previously neutral stimulus
  which now becomes the conditioned stimulus

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Classical Conditioning

• Occurs with unconditioned stimulus and
  previously conditioned responsee.g. fire
  alarm/siren
• Classically conditioned behaviours controlled by
  stimuli before the behaviour - the bell and meat
  powder precede salivation
• Classically conditioned behaviour under control
  of autonomic nervous system- involuntary, not
  under conscious control
• Affect/feelings follow principles of classical
  conditioning

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Classical Conditioning

• Ivan Pavlovs Dogs
• Unconditioned stimulus (UCS) Naturally capable
  of causing a response.
• Conditioned stimulus (CS) Does not initially
  cause a response
• Conditioned response (CR) Response generated by
  repeated paired exposures to UCS and CS.
  Eventually, through learned association and
  repetition, the CS will cause the CR.

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Classical Conditioning in Advertising

• This American Airlines ad points to classical
  conditioning as an explanation for why their
  AAdvantage Marketing Programs will work.
• Can you identify the UCS, CS, and the CR in this
  example?

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Classical Conditioning in Marketing
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Instrumental/Operant Conditioning

• Instrumental conditioning occurs as the
  individual learns to perform behaviours that
  produce positive outcomes and to avoid those that
  produce negative outcomes
• While responses in classical conditioning are
  involuntary, responses in instrumental
  conditioning are deliberate in view of specific
  goals

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Burrhus F. Skinner

• Worked with rats in boxes Skinner Boxes to
  measure strength of animal desires
• Food was provided at the push of a lever rats
  learned to push the levers
• Skinner discovered rats would push the levers
  for hours if the ritual was occasionally and
  unpredictably rewarded with food

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Skinner

• Behaviourism

• If behaviour can be predicted, it can be
  controlled if behaviour can be controlled, life
  can be improved
• Legacy
• Some therapeutic techniques
• Concept of conditioning

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Instrumental/Operant Conditioning (cont.)

• Three ways-
• When the environment produces
• Positive ResponsesThe response is strengthened
  and appropriate behaviour is learned
• Negative reinforcementStrengthens responses
  that avoid outcomes
• PunishmentOccurs when behaviour is followed by
  unpleasant events we learn not to repeat these
  behaviours

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Instrumental/Operant Conditioning (cont.)

• Extinction When a positive outcome is no longer
  received, the learned stimulus-response
  connection will not be maintained.
• Reinforcement Schedules
• Continuous ReinforcementThe offer of a reward
  after every desired behaviour Loyalty points
• Fixed Ratio ScheduleEvery x times that a
  behaviour is performed a reward is given Buy 2
  get 1 free
• Variable Ratio ScheduleA reinforcer on an
  average or random of x times scratch cards,
  instant wins

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Reinforcement SchedulesYour turn

• Continuous Reinforcement
• Fixed Ratio Schedule
• Variable Ratio Schedule
• Give some examples of re-enforcement schedules in
  marketing

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Applications of Instrumental Conditioning
Principles

• Reinforcement of Consumption
• Thank you
• Rebates
• Follow-up phone calls
• Frequency Marketing
• Reinforces regular purchases by giving them
  rewards with values that increase along with the
  amount purchased
• Frequent flyer miles

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Behavioural Theory vs. Cognitive Theory

• A considerable amount of learning takes place in
  the absence of direct reinforcement - negative or
  positive
• Individuals also learn through modelling or
  observational learning- They observe the
  behaviour of others, remember it and imitate it

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Vicarious Learning

• Also called modelling, observational learning or
  imitative learning
• It refers to people changing their behaviour
  because they observe the behaviour of others and
  its consequences

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Vicarious Learning - Modelling

• Acquire new responses
• Decrease/inhibit undesired responses
• Response facilitation

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Vicarious Learning - Modelling
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The Wheel of Consumer Analysis - Environment

• All sources of stimuli in the
• external world of the buyer
• Social
• Political, economy, culture, subculture, social
  group, family, reference group
• Physical environment
• Store layout, climate, time of day, time of year
• Marketing environment
• 4 Ps

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Consumers Do it in Groups

• Deindividuation
• A process in which individual identities become
  submerged within a group.
• Social Loafing
• People do not devote as much to a task when their
  contribution is part of a larger group effort
• Risky Shift
• Group members are willing to consider riskier
  alternatives subsequent to group discussion
• Diffusion of Responsibility
• As more people are involved in a decision, each
  individual is less accountable for the outcome

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Reference Groups

• A group is a collection of people who have a
  similar set of needs or goals over time
• A reference group is one or more people who
  individuals compare themselves with
• Reference groups influence whether we buy or use
  certain products or brands

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Types of Reference Groups

• Formal/InformalFormal reference groups have
  clear structures, informal groups do not
• Primary/SecondaryPrimary groups involve direct
  face to face contact, secondary groups do not and
  may not actually meet
• AssociativeGroups you have actually joined
• AspirationalAdmired groups you respect and
  admire but do not belong to
• DisassociativeGroups whose attitudes, values and
  behaviours you disapprove of and reject

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When Reference GroupsAre Important

• Social Power
• The capacity to alter the actions of others
• Referent Power
• When consumers imitate qualities by copying
  behaviors of a prominent person they admire.
• Information Power
• Able to influence consumer opinion by virtue of
  their (assumed) access to the truth
• Legitimate Power
• Granted to people by virtue of social
  agreements, sometimes conferred by a uniform

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When Reference GroupsAre Important (cont.)

• Expert Power
• Derived from possessing specific knowledge about
  a content area
• Reward Power
• When a person or group has the means to provide
  positive reinforcement
• Coercive Power
• Influencing a person by social or physical
  intimidation

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What makes normative influence strong or weak

• Product Characteristics
• Reference groups tend to influence- Whether to
  buy a product within a category- What brand to
  buy
• Reference groups tend to influence- Product
  category choice for luxury but not
  necessities- Brand choice for public
  consumption products but less so for private
  consumption

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Reference Group Influence for Products and Brands
Types of Products Necessity Luxuries
Reference Group Influence On Brand High Low
Where Consumed Private Public
Low High Reference Group Influence on Product
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Reference Group Influence for Products and Brands
Types of Products Necessity Luxuries
clothing watches car shoes
camera mountain bike skis jewellery
Reference Group Influence On Brand High Low
Where Consumed Private Public
mattress washing machine toilet paper
Jacuzzi water bed
Low High Reference Group Influence on Product
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Word-of-Mouth Communication

• Word-of-Mouth (WOM)
• Product/service information transmitted by
  individuals to individuals.

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The Importance of Opinion Leaders in Reference
Groups
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Identifying Opinion Leaders

• Self-designated Opinion Leaders
• Sociometric Methods
• Trace Communication patterns among members of a
  group.
• Referral Behavior
• Network Analysis Focuses on communication in
  social systems
• Referral Network
• Tie Strength The nature of the bond between
  people.
• Bridging Function Allows a consumer access
  between subgroups.
• Cliques Subgroups

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Types of sub-cultures
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Youth Tribes

• Youth Tribes
• Tribal phenomenon most pronounced among young
  consumers
• Products and services reinforce the notion of
  belonging
• Tribal phenomenon most pronounced in Japan
• Techno-cultural suppleness A willingness to grab
  something new and use it for their own ends

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Generation X

• Baby Busters Generation X
• Generation X The cohort of consumers born
  between 1966 and 1976.
• Stereotyped inaccurately as alienated, cynical,
  and lazy
• Advertising campaigns that tried to appeal to the
  stereotype failed
• Actually an entrepreneurial generation
• Desire stable families after being latchkey
  children

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Baby Boomers

• Baby Boomers
• People born between 1946 and 1965
• Sheer size of this generation has made it the
  source of many cultural and economic changes
• More active and physically fit than previous
  generations
• Baby boomlet The new upsurge in the number of
  children born in comparison to that of the
  original baby boom.

96
The Gray Market

• Gray Power Seniors Economic Clout
• Gray Market Seniors impact the market place
• Account for more than half of all discretionary
  spending in the U.S.
• In many product categories, seniors outspend
  other age groups
• Understanding Seniors
• Autonomy Leading active lives and being
  self-sufficient
• Connectedness Bonds with friends and family
• Altruism Giving something back to the world

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The Gray Market (cont.)

• Perceived Age Youre Only as Old as You Feel
• Chronological age Actual number of years lived
• Perceived Age How old a person feels
• Feel-age How old a person feels
• Look-age How old a person looks
• Many marketers emphasize product benefits rather
  than age appropriateness

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Segmenting Seniors

• Typical Segmentation Bases
• Chronological age
• Age cohort
• Current marital status
• Health
• Outlook on life
• Social Aging Theories
• Theories that try to understand how society
  assigns people to different roles across the life
  span.
• Gerontographics
• Divides the mature market into groups based on
  both levels of physical well-being and social
  conditions, such as becoming a grandparent or
  losing a spouse.

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Selling to Seniors

• Product Adaptations
• Packages sensitive to physical limitations
• Serving sizes
• Mature Marketing Messages
• Prefer ads that provide abundant information
• Not amused or persuaded by imagery-oriented ads
• Basic guidelines for advertising to the elderly
• Simple language
• Clear, bright pictures
• Action attracts attention
• Speak clearly, low word count
• Single sales message emphasizing brand extensions
  for familiarity
• Avoid extraneous stimuli

100
Importance of Family as a Reference Group

• Family is a fundamental social unit
• Effects of family attitudes likely to be lifelong
  in impact due to intensity and duration during
  formative years
• Individual buying decisions can be strongly
  influenced by family members

101
Who Determines the Buying Decisions?
102
What is Market Segmentation?

• Market segmentation is the process of dividing
  the market into groups of buyers with similar
  needs and characteristics
• Generally used in conjunction with targeting and
  positioning

103
Why do market Segmentation?

• To identify who might make up a new market
• To understand a market better before launching
  into it
• To develop strategies for increasing sales/share

104
How to Segment Markets
Analyse consumer /product relationships
105
How to Segment Markets

• Tools
• Qualitative- Observation- Simulation- Focus
  Groups
• Quantitative- Desk research- Surveys- Modelling
  - Proprietary Models (VALS, Acorn etc)

106
How to Segment Markets

• Basis for segmentation

107
Criteria for Effective Segmentation

• Measurable- marketers must be able to measure a
  segments size and characteristics
• Meaningful- a segment must have a sufficient
  number of people to warrant tailoring a product
  or promotional campaign
• Marketable- segments have to easy to reach with
  the marketing mix developed

108
Jaeger Womenswear Market Segmentation Process

• Focus Groups
• Regulars
• Occasionals
• Non-users

Quantitative Questionnaire to card holder database

• Bases for segmentation
• Age/lifestyle
• Style preferences
• Garment groupings

109
Your turn

• What might be the most useful bases for
  segmenting
• The retail market for wine?
• The market for business air travel?

110
Person/situation Benefit Segmentation
111
Positioning is relevant throughout the marketing
mix
Product performance
Place associations
112
What makes a good positioning?

• Being first- in the mind
• Being relevant- to a key leadership attribute
  over time
• Being focussed
• Being believable
• Being consistent

113
Developing a Positioning

• Key considerations
• Market development size- Functional vs.
  emotional- Scope for segmentation
• Quantity/Quality of competition- Positioning
  already owned- order effect
• Buyer involvement levels
• Company strategy, resources, capabilities

114
Developing a Positioning

• Tools
• Market mapping- macro/micro- where are the
  gaps?
• Intelligent naivety- ask basic questions
• Learn from different categories
• Think about who the company/brand is and what it
  is not

115
Market Mapping

• Mapping helps marketers to determine how their
  products or services appear to buyers in relation
  to competitive brands on one or more relevant
  characteristics
• It enables them to see all gaps in the
  positioning of all brands and to identify needs
  in areas in which buyers needs are not adequately
  met

116
Developing a Positioning

• Tools
• Market mapping- macro/micro- where are the
  gaps?
• Intelligent naivety- ask basic questions
• Learn from different categories
• Think about who the company/brand is and what it
  is not