BBA 225

Marketing Management

F2F - II
November 23, 2019

Dr. Nuresh Eranda

 Defining Consumer Behavior
• The behavior that consumers display in searching for,
purchasing, using, evaluating, and disposing products
and services that they expect will satisfy their needs

• Two kinds of consuming entities:

– Personal consumer: buys goods and services for his/her
own use, for the use of household, or as a gift for someone
– Organizational consumer: profit and non-profit businesses,
government agencies, and institutions buy products,
equipment, and services to run their organizations
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 Factors influence on consumer
behavior
• Cultural factors
• Social factors
• Personal factors
• Psychological factors
4
 Buying Roles
• Initiator: A person who first suggest the idea of
buying the product or service
• Influencer: A person whose view influences the
decision
• Decider: A person who decides on any
component of a buying decision
• Buyer: The person who makes the actual
purchase
• User: A person who consumes or uses the
product or service
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 Types of buying decisions

Buyer involvement
High Low

Significant Complex buying Variety-seeking

differences behavior buying behavior
between brands

Few differences Dissonance-reducing Habitual buying

between brands buying behavior behavior

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Consumer buying decision process
Problem (need)
Recognition

Information search

Evaluation of
alternatives

Purchase decision

Post purchase
behavior 7
 Steps in Segmentation, Targeting, and
Positioning
6. Develop Marketing
Mix for Each Target Segment Market
5. Develop Positioning Positioning
for Each Target Segment
4. Select Target
Segment(s) Market
3. Develop Measures Targeting
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
Market Segmentation
1. Identify Bases
for Segmenting the Market
 What is Market Segmentation?
• Division of the total market into smaller, relatively
homogeneous groups
• A market segment consists of a group of customers
who share a similar set of needs and wants
• Importance of market segmentation
– Markets have a variety of product needs and
preferences.
– Marketers can better define customer needs.
– Decision makers can define objectives and allocate
resources more accurately 9
Bases for Segmenting Consumer
Markets

Geographic Demographic

Psychographic Behavioral

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 Market Targeting
• Once the firm has identified its market-
segment opportunities it must decide
– How many segments to target?
– Which segments to target?

Segment’s overall
attractiveness Company’s objectives &
(Size, growth, profitability, resources
scale economies, & low
risk)

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 Market Targeting Strategies
Undifferentiated Marketing (Mass marketing)
Company
Marketing Market
Mix

Differentiated Marketing
Company
Marketing Mix 1 Segment 1
Company
Segment 2
Marketing Mix 2
Company
Segment 3
Marketing Mix 3
Concentrated Marketing

Segment 1
Company
Marketing Segment 2
Mix
Segment 3
 Positioning Strategy
• Positioning is the act of designing the company’s
offering and image to occupy a distinctive place in
the minds of the consumer
• The goal of positioning is to locate the brand in the
minds of consumers to maximize the potential
benefit to the firm
• A good brand positioning helps guide marketing
strategy by clarifying the brand’s essence
• A good positioning should be somewhat aspirational
where the brand has room to grow and improve
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 Positioning Strategy
• The role of a good positioning:
 Guide the company’s marketing strategy
 Help the consumer to identify what goals to achieve
 Guide the consumer to achieve the goals in a unique way

• Positioning should create customer-focused value

propositions (the cogent reason why the target market should
buy a product or service)

• Value proposition should convey the product or service’s key

benefits which need to create value for customers by
satisfying their needs
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 Examples of Value Propositions
Brand, product, & Target customers Benefits Value proposition
company
Scorpio, SUV, Life-style oriented Ruggedness, luxury, A vehicle that
Mahindra & customers & comfort provides the luxury &
Mahindra comfort of a car, &
the adventure &
thrill of an SUV

Indica, Car, Tata Small-car consumers Spaciousness A spacious, small car

Motors who want a more without extra costs
spacious vehicle

Domino’s、Pizza Convenience-minded Delivery, speed, & A good, hot pizza

pizza lovers good quality delivered to your
door within 30
minutes of ordering

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 POD and POP
Apple Sony

Powerful in terms of online Powerful in retail stores

distribution
Point of
difference (POD) Design oriented Quality oriented

Powerful in terms of Sony is a reader than media

communication device

Point of Communication tools

parity (POP) E-book content
Online and retail distribution
 What is a product?
“A product is anything that can be offered to a
market to satisfy a want or need including
physical goods, services, experiences, events,
persons, places, properties, organizations,
information and ideas.”
(Kotler 2016)
 Product Levels:
Customer value hierarchy
Core benefit

Basic product

Expected product

Augmented product

Potential product

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 Packaging
• All the activities of designing and producing the
container for a product

• Three layers of packages: primary package,

secondary package & shipping package

• Growing use of packaging as a marketing tool

Self-service
Consumer affluence
Company & brand image
Innovation opportunity
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 Objectives of Packaging

• Identify the brand

• Convey descriptive and persuasive information

• Facilitate product transportation & protection

• Assist at-home storage

• Aid product consumption

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 What is a Brand?
• Brand is a name, term, sign, symbol, or
design, or a combination of them,
intended to identify the goods or services
of one seller or group of sellers and to
differentiate them from those of
competitors.

Source: American Marketing Association

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 Role of a Brand
• Identify the maker
• Simplify product identification and handling
• Offer legal protection
• Signify quality
• Create barriers to entry
• Serve as a competitive advantage
• Secure price premium
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 What is brand identity?
• This is the brand concept from the brand owner’s
perspective
• Foundation of any good brand building program
• Companies should have clear brand identity with depth
to develop proper marketing communication programs
• Effective brand identity has a buy-in throughout the
organization and it is linked to the vision, corporate
culture and values
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 Brand Equity
• Brand equity is the added value endowed on
products and services
• The differential effect that knowing the brand name
has on customer response to the product or its
marketing
• Brand’s ability to capture consumer preference and
loyalty
• How does the brand equity reflect?
 Consumer thinking, Consumer feelings, Consumer act with respect to
brand, Prices, Market share and Profitability of the brand for the
company
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Brand Development Strategies

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 Why do firms create new products?
• Changing customer needs
• Market saturation
• Managing risk through diversity
• Short product life cycles
• Improve business relationships
• Source of competitive advantage

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 Reasons for new product failure
• Social, economic and governmental
constraints
• Higher cost of development
• Capital shortages
• Shorter required development time
• Poor launch timing
• Shorter product life cycles
• Lack of organizational support and weak
culture

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 New product development (NPD)
process
1. Idea generation
2. Idea screening
3. Concept development & testing
4. Marketing strategy development
5. Business analysis
6. Product development
7. Market testing
8. Commercialization

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 Product Life Cycle (PLC) marketing
strategies
Product has a lifecycle to assert 4 things:

1. Products have a limited life

2. Product sales pass through distinct stages, and posing

different challenges, opportunities & problems to the seller

3. Profits rise & fall at different stages of the PLC

4. Products require different strategies in each PLC stage

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Sales and profit life cycles

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 Product life cycles
• Introduction:
– A period of slow growth as the product is introduced in the
market. Profits are nonexistent because of the heavy
expenses of product introduction
• Growth
– A period of rapid market acceptance and substantial profit
improvement
• Maturity
– A slowdown in sales growth because the product has
achieved acceptance by most potential buyers. Profits
stabilize or decline because of increased competition
• Decline
– Sales show a downward drift and profits erode
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 PLC: Characteristics
Characteristics Introduction Growth Maturity Decline

Sales Low sales Rapidly rising Peak sales Declining sales

sales

Costs High cost per Average cost Low cost per Low cost per
customer per customer customer customer

Profits Negative Rising profits High profits Declining profits

Customers Innovators Early adopters Middle majority Laggards

Competitors Few Growing Stable number Declining

number starting to number
decline
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 PLC: Marketing Objectives
Introductio Growth Maturity Decline
n
Create Maximize Maximize Reduce
product market profit while expenditur
awareness share defending e and milk
and trial market the brand
share

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 PLC: Strategies
Strategies Introduction Growth Maturity Decline
Product Offer a basic Offer product Diversity brands Phase out weak
product extensions, and items products
service, warranty models

Price Charge cost-plus Price to penetrate Price to match Cut price

market or best
competitors’
Distribution Build selective Build intensive Build more Go selective:
distribution distribution intensive phase out
distribution unprofitable
outlets
Communicati Build product Build awareness Stress brand Reduce to
ons awareness and and interest in the differences and minimal level
trial among early mass market encourage needed to
adopters and brand switching retain loyal
dealers customers

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 Pricing strategy
• This is a way of finding a competitive price for a product or

service

• Pricing should match with other marketing mix strategies

• Marketers need to identify the unmet customer needs along

with an appropriate price

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 Pricing objectives

Competitor
Profit oriented Sales oriented
oriented
• Target return • Rupee or unit • Meeting
• Maximize sales growth competition
profits • Growth in • Non price
market share competition

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 Steps in Setting Price
1. Selecting the price objective
2. Determining demand
3. Estimating costs
4. Analyzing competitor’s costs, prices & offers
5. Selecting pricing method
6. Selecting the final price
 New-Offering Pricing Strategies

• Skimming pricing strategy

• Penetration pricing strategy

• Intermediate pricing strategy

 Common Pricing Mistakes
• Determine costs and take traditional industry margins

• Failure to revise price to capitalize on market changes

• Setting price independently of the rest of the marketing

mix

• Failure to vary price by product item, market segment,

distribution channels, and purchase occasion
 What are Marketing Channels?
• Marketing channels are set of interdependent
organizations involved in the process of
making a product or service available for use
or consumption.

• Who are included in marketing channels?

Merchants
Agents
Facilitators

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Push Vs Pull Marketing

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 Functions of Channel Members
• Gather information

• Develop and disseminate persuasive communications

• Reach agreements on price and terms

• Acquire funds to finance inventories

• Assume risks

• Provide for storage

• Provide for buyers’ payment of their bills

• Oversee actual transfer of ownership

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 Channel-Design Decisions
1. Analyzing customer needs and wants
Channels produce five service outputs:
Lot size, waiting & delivery time, spatial convenience, product
variety, service back-up

2. Establishing objectives and constraints

 Channel objectives vary with product characteristics
 Consider strengths and weaknesses of different types of
intermediaries

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 Channel-Design Decisions Contd.
3. Identifying & evaluating major channel
alternatives
 Types of intermediaries:
 sales forces, to agents, distributors, dealers, direct mail,
telemarketing, and the Internet.
 Number of intermediaries:
 exclusive distribution, selective distribution, and intensive
distribution
 Terms and responsibilities of channel members:
 price policy, conditions of sale, distributors’ territorial rights,
mutual services and responsibilities

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 Channel-Design Decisions Contd.

4. Evaluating the major alternatives

Criteria for evaluation:
 Economic: level of sales & costs
 Control and adaptive criteria

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 Channel Management Decisions
1. Selecting channel members
Evaluation should based on following criteria.
Number of years in business, other lines carried,
growth and profit records, Financial strength,
Cooperativeness, Service reputation

2. Training and motivating channel members

 Provide training programs and to improve intermediaries’
performance
 Constant communication
 Use channel power to change the channel members’
behavior

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 Channel Management Decisions
contd.

3. Evaluating channel members

 Producers must periodically evaluate
intermediaries’ performance against standards
such as:
sales quota, attainment, average inventory levels, customer
delivery times, treatment of damaged and lost goods

 Under performers need to be counseled,

retrained, motivated, or terminated
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 Channel Management Decisions
contd.

4. Modifying channel design and arrangements

 Modification becomes necessary when the
distribution channel is not working as planned
 Change in consumer-buying patterns
 Expansion of market
 Arising new competition
 Emergence of innovative distribution channels
 Product moves into the later stages in the product life cycle

 Change could involve:

 Adding or dropping individual channel members
 Adding or dropping particular market channels
 Developing a totally new way to sell goods
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Levels of Distribution Intensity
Intensity Number of
Objective
Level Intermediaries

Achieve mass market

Intensive selling. Many
Convenience goods.

Work with selected

intermediaries.
Selective Shopping and some
Several
specialty goods.

Work with single

intermediary. Specialty
Exclusive goods and industrial
One
equipment.
 What are Marketing Communications?

• Marketing communications are the means by which firms

attempt to inform, persuade, and remind consumers,

directly or indirectly, about the products and brands they

sell.

• This represents the voice of the company and its brands

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 Functions of Marketing Communications
• Tell consumers
 How and why a product is used?
 What kind of person use the product?
 Where and when to use the product?
• Consumers can learn about the product, company and for
what the brand stand for
• Consumers can get an incentive or reward for trials
• Allow companies to link their brands to other people,
places, events, brands, experiences, feelings, and things
• Contribute to develop brand equity
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 Marketing Communications Mix
• Advertising • Online and social

• Sales promotion media marketing

• Events and experiences • Mobile marketing

• Public relations and • Direct and database

publicity marketing

• Personal selling

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Developing Effective Communications
Identify target audience

Determine objectives

Design communications

Select communications channels

Establish budget
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