Intro. to Marketing – Test #2

Business Buyer Behavior
the buying behavior of the organizations that buy goods and services for use in production of other products and services that are sold, rented, or supplied to others.
Business Buying Process
process where business buyers determine which products and services are needed to purchase, and then find, evaluate, and choose among alternative brands; COMPLETELY different from the consumer buying process; MORE EXPENSIVE = COMPLEX
Consumer Market v. Business Market
Consumer – all of the personal consumption of final consumers
Business – more people involved
Business Markets Decision Process
More complex; more decision participants, more people involved; more professional purchasing effort
Supplier Development
systematic development of networks of supplier-partners to ensure an appropriate and dependable supply of products and materials that why will use in making their own products or resell – “when we need supply, we have!”
Straight Rebuy
routine purchase decision such as reorder without any modification
Modified Rebuy
purchase decision that requires some research where the buyer wants to modify the product specification, price, terms, or suppliers
New Task
purchase decision that requires thorough research such as a new product
Systems Selling
the purchase of a packaged solution from a single seller
Buying Center
all of the individual and units that participate in the business decision-making process, ex: users, influencers, buyers, deciders, gatekeepers; this is also known as the Purchasing Department
Importance of Influencers & Deciders
two catalyst people that are a part of the decision-making process – both of these people are who you want to spend the MOST time with convincing in acquiring YOUR product
Users
those that will use the product or service
Influencers
help define specifications and provide information for evaluating alternatives
Buyers
have formal authority to select the supplier and arrange terms of purchase
Deciders
have formal or informal power to select and approve final suppliers
Gatekeepers
control the flow of information
Major Influences on Business Buyers
Economic, Personal, Environment, Organizational, and Individual Factors
Economic Factors
Price & Service
Personal Factor
Emotion
Environmental Factors
Demand for Product, Economic Outlook, Cost of Money, Supply of Materials, Technology, Culture, Politics, and Competition
Organizational Factors
Objectives, Policies, Procedures, Structure, Systems
Individual Factors
Motives, Perceptions, Preferences, Age, Income, Education, Attitude toward Risk
Problem recognition occurs when…
someone in the company recognizes a problem or need
General Need
part of the buying process; describes the characteristics and quantity of the item
Product Specification
part of the buying process; describes the technical criteria
Value Analysis
part of the buying process; an approach to cost reduction where components are studied to determine if the can be redesigned, standardized, or made with less costly methods of production
Supplier Search
part of the buying process; involves compiling a list of qualified suppliers
Proposal Solicitation
part of the buying process; the process of requesting proposals from qualified suppliers
Supplier Selection
part of the buying process; the process when the buying center creates a list of desired supplier attributes and negotiates with preferred suppliers for favorable terms and conditions
Order-Routine Specifications
part of the buying process; the final order with the chosen supplier and lists all of the specification and terms of the purchase
Performance Process
involves a critique of supplier performance to the purchase terms
E-Procurement
– Online purchasing
– Company buying sites
– Extranets
Advantages of E-Procurement
– access to new suppliers
– lower costs
– speeds order processing and delivery
– shares information
– sales
– service and support
Disadvantages of E-Procurement
– Can erode relationships as buyers search for new suppliers
– Security
Institutional Markets
consists of hospitals, nursing homes, and prisons that provide goods and services to people in their care; characteristics – low budgets, “captive” audience
Government Markets
tend to favor domestic suppliers and require suppliers to submit bids and normally award to the lower bidder; affected by environmental factors, non-econimic factors considered; LARGEST CONSUMER MARKET
Marketing Segmentation
dividing a market into smaller segments with distinct needs, characteristics, or behavior, that might require separate marketing strategies or mixes; segmenting consumer, business, international markets = requirements for effective segmentation
Consumer Markets
Geographic, Demographic, Psychographic, Behavioral
Geographic Segmentation
divides the market into difference geographical units such as nations, regions, states, counties, or cities
Demographic Segmentation
divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality
Age & Life-Cycle Stage Segmentation
the process of offering different products or using different marketing approaches for different age and life-sycle groups
Gender Segmentation
divides the market based on sex (male of female)
Income Segmentation
divides the market into affluent, middle-income or low-income consumers
Psychographic Segmentation
divides buyers into different groups based on social class, lifestyle, or personality traits
Behavioral Segmentation
divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product – occasions, benefits sought, user status, usage rate, loyalty status
Multiple Segmentation
is used to identify smaller, better-defined target groups
Using Multiple Segmentation Bases
these bases segment people and locations into marketable groups of like-minded consumers that exhibit unique characteristics and buying behavior based on a host of demographic factors
Segmenting International Markets
Geographic location, Economic Factors, Political-legal Factors, Cultural Factors
Intermarket Segmentation
divides consumers into groups with similar needs and buying behaviors even though they are located in different countries
To be useful, market segments must be:
Measurable, Accessible, Substantial, Differentiable, Actionable
Target Market consists of a set of….
buyers who share common needs or characteristics that the company decides to serve
How do you evaluate market segments?
by segment size and growth, structural attractiveness, and company objectives/resources
Undifferentiated Marketing
targets the WHOLE market with ONE offer; mass marketing; focuses on common needs rather than what’s different; ex: gas, water
Differentiated Marketing
targets SEVERAL different market segments and designs SEPARATE offers for each; goal is to achieve higher sales and stronger position; MORE EXPENSIVE than undifferentiated marketing
Target Market Strategies
– concentrated marketing targets a small share of a large market
– limited company resources
– knowledge of the market
– more effective and efficient
Micromarketing
type of target market strategy; the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations; local marketing, individual marketing
Local Marketing
type of target market strategy; involves tailoring brands and promotion to the needs and wants of local customers groups; cities, neighborhoods, stories
Individual Marketing
type of target market strategy; involved tailoring products and marketing programs to the needs and preferences of individual customers; also known as “one-to-one marketing,” mass customization
When choosing a targeting marketing strategy, it depends on…
– company resources
– product variability
– product life-cycle stage
– market variability
– competitor’s marketing strategies
Socially Responsible Target Marketing
– benefits customers with specific needs
– concern for vulnerable segments
– children (alcohol, cigarettes, internet abuses, etc)
Product Position
the way the product is defined by CONSUMERS on important attributes – the place the product occupies in CONSUMER’S MIND relative to competing products; perceptions, impressions, feelings
Positioning
maps that show consumer perceptions of their brands versus competing products on important buying dimensions
Choosing a Differentiation and Positioning Strategy
– identifying a set of possible competitive advantages to build a position
– choosing the right competitive advantages
– selecting an overall position strategy
– communicating and delivering the chosen position to the market
Competitive Advantages
an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices
Identifying a set of possible competitive advantages to build a position by providing superior value from:
1. Product Differentiation (unique)
2. Services Differentiation (customer service, etc)
3. Channel Differentiation (selling DIRECTLY)
4. People Differentiation (variety of help)
5. Image Differentiation
Choosing the right competitive advantage….
difference to promote should be: important, distinctive, superior, communicable, preemptive, affordable, profitable
Value Proposition
the full mix of benefits upon which brand is positioned
Developing Positioning Statement
” To (target segment and need) our (brand) is (concept) that (point of difference).”
Product
anything that can be offered in a market for attention, acquisition, use, or consumption that satisfy a need or want
Service
a product that consists of activities, benefits or satisfaction that is essentially intangible and does not result in the ownership of anything
Experiences
represent what buying the product or service will do for the customer
Consumer Products
products and services for PERSONAL consumption; classified by how consumers buy them – convenience products, shopping products, speciality products, unsought products
Convenience Products
consumer products and services that the customer usually buys frequently, immediately, and with a minimum comparison and buying effort – ex: newspapers, candy, fast food, toothpaste, shampoo, etc
Shopping Products
consumer products and services that the customer compares carefully on suitability, quality, price, and style – ex: furniture, cars, appliances, etc
Speciality Products
consumer products and services with unique characteristics or brand identification for which a significant group of buyers is willing to make a special purchase effort – ex: medical services, designer clothes, high-end electronics, makeup, special cookware, gluten products, etc
Unsought Products
consumer products that the consumer does not know about or knows about but does not normally think of buying – ex: life insurance, funeral services, blood donations, etc.
Industrial Products
products purchased for further processing or for use in conducting a business; classified by the purpose for which the product is purchased – ex: materials and parts, capital, raw materials
Capital Items
industrial products that aid in the buyer’s production or operations
Materials and Parts
include raw materials and manufactured materials and parts usually sold directly to industrial users (EXTERNAL)
Supplies and Services
including operating supplies, repair and maintenance items, and business services (INTERNAL)
Organization Marketing
consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward an ORGANIZATION – ex: sports
Person Marketing
consists of activities undertaken to create, maintain, or change attitudes and behavior of target consumers toward PARTICULAR PEOPLE – ex: Martha Steward, Rachel Ray
Place Marketing
consists of activities undertaken to create, maintain, or change the attitudes and behavior of target consumers toward PARTICULAR PLACES – ex: Las Vegas
Social Marketing
the use of commercial marketing concepts and tools in programs designed to influence individuals’ behavior to improve their well-being and that of society
Product or Service Attributes
Communicate and deliver the benefits – quality, features, style and design
Product Quality includes ______ and __________.
level, consistency
Quality Level
the level of quality that supports the products positioning
Conformance Quality
the product’s freedom from defects and consistency in delivering a targeted level of performance
Product Features
competitive tool for differentiating a product from competitors’ products; they are assessed based on the value to the customer versus the cost to the company
Style v. Design
Style: the appearance of the product
Design: product’s usefulness as well as to its looks
Brand
the name, term, sign, or design – or a combination of these – identifies the maker or seller of a product or service
Packaging
involves designing and producing the container or wrapper for a product
Labels
identify the product or brand, describe attributes, and provide promotion
Product Line
group of products that are closely related because they function in a similar manner; are sold to the SAME customer groups; marketed through the same types of outlets, or fall within the given price ranges
Product Line Length
the number of items in the product line; line stretching, line filling
Product Mix
consists of all the products and items that a particular seller offers for sale; width, length, depth, consistency
Types of Service Industries
– Government
– Private non-profit organizations
– Business services
Internal Marketing
means that the service firm must orient and motivate its customer contact employees and supporting service people to work as a team to provide customer satisfaction; must PRECEDE external marketing
Interactive Marketing
means that service quality depends heavily on the quality of the buyer-seller interaction during the service encounter; service differentiation, service quality, service productivity
Managing Service Differentiation….
creates a competitive advantages from the offer, delivery, and image of the service; offer can include distinctive features, delivery includes more able and reliable customer contact people, and image can include symbols and branding
Managing Service Quality…..
provides a competitive advantage by delivering consistently higher quality than its competitors; always varies depending on interactions between employees and customers
Managing service productivity refers to the cost side of…..
marketing strategies for service firms.
Brand Equity
the differential effect that knowing the brand name has on customer response to the product or its marketing
Brand Strategy decisions include….
– product attributes
– product benefits
– product beliefs and values
Price
the amount of money charged for a product or service; sum of all the values that consumers give in order to gain the benefits of having or using a product or service; ONLY “P” THAT IS REVENUE GENERATING
Value-Based Pricing
the buyers’ PERCEPTIONS OF VALUE, not the sellers cost, as the KEY TO PRICING; customer driven
Good-Value Pricing
offers the right combination of quality and good service at a FAIR PRICE; existing brands are being redesigned to offer more quality for a given price or the same quality for less price
Everyday Low-Pricing
involves the charging a constant everyday low price with few or no temporary price discounts – ex: Walmart
High – Low Pricing
involves charging higher prices on an everyday basis, but running frequent promotions to lower prices temporarily on selected items
Value-Added Pricing
attaches value-added features and services to differentiate offers, support higher prices, and build pricing power
Cost-Based Pricing
setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for effort and risk; adds a standard markup to the cost of the product = “buy products, but need to make profit”
Types of Costs
– Fixed
– Variable
– Total
Fixed Cost
the costs that DO NOT vary with production or sales level – ex: rent, heat, interest, executive salaries
Variable Cost
the costs that vary with the level of production – ex: packaging, raw materials
Total Cost
the sum of the fixed AND variable costs for ANY give level of production; TOTAL FOR EVERYTHING
Experience or learning curve is when…..
average costs FALLS as production INCREASES because fixed costs are spread over more units
Benefits of Cost-Plus Pricing
– adds a standard markup to the cost of the product
– sellers are certain about costs
– prices are similar in industry and price competition is minimized
– consumers feel it is fair
Disadvantages of Cost-Plus Pricing
– ignores demand AND competitor prices
Break-Even Pricing
the price at which total costs are EQUAL to TOTAL REVENUE and there is no profit
Target Profit Pricing
the price at which the firm will break even or make the profit it’s seeking
Competition-Based Pricing
setting prices based on competitors’ strategies, costs, prices, and market offerings; consumers will base their judgments of a product’s value on the prices that a competitors charge for similar products
Target Costing
starts with an ideal selling price based on consumer value considerations and then targets costs that will ensure that the price is met
Before setting prices, the marketer must understand the…..
relationship between PRICE and DEMAND for its products
Types of Competition
Pure, Monopolistic, Oligopolistic, Pure Monopoly
Pure Competition
a lot of sellers, but not too much of a difference in product – ex: wheat, salt, fruit
Monopolistic Competition
a lot of sellers, a lot of differences in prices in product
Oligopolistic Competition
few sellers, very in-tune with prices – ex: gas
Pure Monopoly
one company owns all – ex: government
Price Elasticity of Demand
illustrates the response of demand to a change in price; inelastic and elastic
Inelastic Demand
occurs when demand hardly changes when there is a small change in price
Elastic Demand
occurs when demand changes greatly for a small change in price
Factors to consider when setting prices….
– Economic Conditions
– Reseller’s Response to Price
– Government
– Social Concerns