Marketing Management

Unit II
 Unit II
 Analyzing consumer markets & buyer
behavior,
 Analyzing business markets and business
buying behavior,
 Market segmentation, positioning and
targeting;
 Tools of product differentiation;
 Marketing strategies in the different stage
of the product life cycle.
 Consumer Behaviour
 Influenced by three factors
1. Cultural ( Culture, subculture and social class)
2. Social (Reference groups, family and social roles and
statuses)
3.Personal ( Age, stage in life cycle, occupation, economic
circumstances, lifestyle, personality and self concept)

Research into all these factors can provide marketers with

clues to reach and serve consumers more effectively.
 Markets
 Consumer Markets -
 Business Market
 Global Markets
 Non Profit and Government Market
 Consumer Behaviour
 Four main Psychological Processes affect
consumer behaviour
1. Motivation
2. Perception
3. Learning
4. Memory
 Consumer Behaviour – Buying Decisions
 Marketers must identify who makes and
who has input into the buying decision,
 People can be initiators, influencers,
deciders, buyers or users
 Different marketing campaigns might be
targeted to each type of person.
 Buying Process –Sequence of Events
1.Problem Recognition’
2.Information search
3.Evaluation of alternatives
4.Purchase decision
5.Post Purchase behaviour
 Other Factors
Marketers job is to understand the behaviour at each stage.
1. The attitude of others,
2. Unanticipated situational factors
3. Perceived risk
may all affect the decision to buy, as will
1.Consumer’s level of post purchase satisfaction and
2 Post purchase actions on the part of the company
 Analyzing Consumer Markets & Buyer
Behaviour
 Cultural Factors
 Social Factors
 Personal Factors
 Key Psychological Processes
 Buying decision process –Five stage Model
 Other Theories of Consumer Decision
Making
 Analyzing Business Markets and Business
Buying Behaviour
 Cultural Factors
 Sub cultures
 Multi cultural marketing
 Social class
 Social Factors – Reference Groups –Primary
and secondary groups, aspirational groups,
Disassociative groups ,Opinion leader
 Analyzing Business Markets and Business
Buying Behaviour
 Family
 Roles and Statuses –Personal factors, Age and stage in the
life cycle, occupation and economic circumstances
 Personality and self concept – brand personality
 Life style and Values
 Key Psychological processes- Motivation –Freud ,Maslow,
Herzberg, Perception, Selective attention, Selective
Distortion ,Selective retention- learning, memory, memory
processes , encoding.
 Memory Process retrieval
 Buying Decision Process-Five Stage Model
 Problem Recognition
 Information Search
 Evaluation of Alternatives
 Purchase Decisions
 Post Purchase Behaviour
 Other Theories of Consumer Decision
Making
 Level of consumer involvement
 Decision Heuristics (rules of thumb or mental
shortcuts in decision process) and biases
 Mental Accounting- way consumer code,
categorise and evaluate financial outcomes of
choices
 Profiling the Customer Buying Decision
Process
 Analysing Business Markets
 Organisational buying is the decision making process by
which formal organisations establish the need for
purchased products and services, then identify, evaluate
and choose among alternative brands and suppliers.
 Business markets consists of all the organisations that
acquire goods and services used in the production of other
products or services that are sold/rented or supplied to
others
 Business Markets
 Compared to consumer markets, business
markets generally have
1. fewer and larger buyers
2. Closer customer –supplier relationship
3. Professional purchasing
4. Several Buying influences
5. Multiple sales call
6. Derived demand from consumer goods
 Business Markets
1. Inelastic demand – not effected by price changes
2. Fluctuating Demand –acceleration effect
3. More geographically concentrated buyers
4. Direct Purchasing
Demand in the business market is derived from demand in the consumer
market and fluctuates with the business cycle.
Total demand for business goods and services is quite price inelastic.
Role of professional purchasers and their influencers have to be
understood and the need for multiple sales calls as well as
importance of direct purchasing, reciprocity and leasing
 Buying Situations
 Straight Rebuy – routine ,choice among suppliers, maintain product
and service quality. Can use automatic e reordering systems to save
time.
 Modified Rebuy – modify product , price ,delivery more participants
on both sides
 New task – first time , greater cost or risk longer the decision time –
awareness, interest, evaluation trial and adoption. Buyer has to give
product specifications, price limits, order quantities, acceptable
suppliers and selected supplier
 Customer’s reference program so that sales team get’s facilitated by
using them as references, site visit,
 Systems Buying and Selling
 Total Solution Approach
 Prime contractors
 Second tier contractors
 Systems Contractor – single supplier provides buyer with
with his or her entire requirement of MRO (maintenance,
repair, operating) e.g oil inventory
 Compete on price quality, relaibility and other attributes
like service , minimum down time
 Business Markets
 Buying Center is the decision making unit
of a buying organisation.
 Consists of initiators, users, influencers,
deciders, approvers, buyers and gatekeepers
 To influence these parties, marketers must
be aware of environmental, organisational,
interpersonal and individual factors.
 Participants in Business Buying Process
 Buying Center –decision making unit –initiators, users, Influencers,
deciders, approvers, buyers, gatekeepers . Based on this sales
personnel and budget constraints to place. May include people from
outside the organisation
 Buying Center Influences – different interests, authority, status and
persuasiveness giving priority to different decision area. Buyers
influences –age, income, education, job position, personality, attitudes
towards risk and culture. Keep it simple , want the best, want
everything done. Some do rigourous analysis group. Ultimately
individuals make buying decisions.
 Buying Center Targeting – major decision participants ,What
decisions do they influence, group dynamics not known. Small sellers
reach out to key buying influences .Large ones go for multi level
indepth selling
 Business Customers
 Price Oriented Customers- Transactional selling (Price is
everything)
 Solution Oriented Customers – (Consultative
selling).Lower toatla cost or more dependable supply or
service
 Gold Standard Customers (Quality selling) Best
performance in terms of product quality, assistance
 Strategic Value Customers (Enterprise selling)
 Solution s to enhance customer revenues, decrease
customer risks, reduce customer costs
Purchasing Procurement Process
 Purchasing Orientations- increase in importance of
procurement functions- seek best value from fewer and
better suppliers. Can be buying orientation, Procurement
orientation ,Supply chain management orientation
 Types of Purchasing Processes –Routine products,
Leveraged products, Strategic products, Bottleneck
products
 Purchasing Organisation and Administration –Purchasing
is doing more cross functional work than ever before
 Stages in the Buying Process
Buy phase Buy Classes
New Task Modified rebuy Straight Rebuy
Problem Recognition Yes Maybe No

General need Yes Maybe No

recognition
Product Yes Yes Yes
Specification
Supplier Search Yes May be No
Proposal Solicitation Yes May be No

Supplier Selection Yes Maybe No

Order –Routine Yes May be No

Specification
Performance Review Yes Yes Yes
 E-Procurement

 Direct extranet links to suppliers

 Buying Alliances –Transora by Coke and
Pepsi
 Company Buying Sites –RFP’s are posted
 Supplier Selection
 Price
 Supplier Reputation
 Product reliability
 Service reliability
 Supplier Flexibility
 Total Score
 Order –Routine Specification
 Negotiate final order
 Technical specifications’
 Quantity needed
 Expected time of delivery
 Return policies
 Warranty
 Leasing
 Stockless purchase plans- blanket contract –resupply at agreed price
 Vendor managed inventory
 OTIFNE – On time in full no error
 Managing Business to Business Customer
Relationships
 Benefits of Vertical Coordination – partner
independence , environment uncertainty
 Availability of alternatives
 Importance of supply
 Complexity of supply
 Supply market dynamism
 Risk and Opportunism –safeguarding and
adaptation
 Buyer Supplier Relationships

 Basic Buying and Selling

 Bare bones
 Contractual transaction
 Customer supply
 Cooperative systems
 Collaborative
 Mutually Adaptive
 Customer is king
 Buying Process -8 Stages
 Problem Recognition
 General need description
 Product specification
 Supplier search
 Proposal solicitation
 Supplier selection
 Order routine specification
 Performance review
 Market Segmentation, Positioning and
Targeting
 A marketer can rarely satisfy every one in the market as
everyone tastes and preference are different.
 Market is divided into segments.
 Company needs to identify which market segments it can
serve effectively.
 Identifying and profiling distinct groups of buyers who
might prefer or require varying product and services mixes
by examining demographic, psychographic and
behavioural differences among buyers
 Market Segmentation, Positioning and
Targeting
 Marketer then decides which segments presents the
greatest opportunity –called Target Markets.
 For each chosen target market , there is an market
offering( a value proposition which is a set of benefits that
are offered to customers to satisfy their needs. It can be
combination of products, services, information and
experiences.
 The offering is POSITIONED in the minds of the target
buyers as delivering some central benefit – e.g. King fisher
for class in air travel, Platinum Card for the HNI.
 Levels of Market Segementation
 Mass marketing
 Micromarketing
1. Segments
2. Niches
3. Local areas
4. Individuals
 Market Segmentation, Target Markets and
Positioning
 Concepts
 Process
 Basis
 Target market Strategies – Aggregation,
single segment and multiple segment
 Steps in developing a positioning strategy.
 Frequently used methods of forecasting
demand in market segments.
 Market Segments and Target Markets
 Needs, spending power, willingness to spend
 Diversity among buyers
 Groups of customers with similar needs clubbed as
segments (homogenity within a segment )and heterogenity
(between segments)
 Market segments –different wants, buying preferences, or
product use behaviour
 Segment targeted differently with different marketing
mixes
 Market Segmentation
 Benefits of Market Segmentation
 Process of Market Segmentation
Process of Market Segmentation
 Identify current and potential wants that
exist within a market
 Identify characteristics that distinguish
among the segments
 Determine the size of segments and how
well they are being satisfied
 Market Segments
 A group that shares a want distinguishable from the rest of
the market is a market segment
 Basis for segmenting –

1.Measurable
2.Obtainable ,
3.Accessible,
4. Large enough to be profitable
5. Even micro marketing in consumer marketing like
customer loan, home design
 Market Segementation
 Groups of customers with different wants,
buying preferences or product use behaviour,
 Process of dividing the total market for a
good or service into several smaller,
internally homogenous groups
 Members of each group are similar with
respect to to factors that influence demand
 Target Market
 A specific market segment (people or
organisations) for which the seller designs a
particular marketing mix is a target market
 Benefits
 Customer oriented -tailored to want of
customers
 Efficient use of resources
 Firms can compete in selected segments
 Ultimate Consumers and Business Users
 Ultimate consumers
 business users
 Segmenting Consumer Markets
 Segmentation Basis
 Geographic
 Demographic
 Psychographic
 Behavioural
 Geographic

 Regions, districts ,cities, metros, tier II

cities, semi urban, rural , North East South,
west, State wise, hilly areas, coastal areas
 Regional Population distribution
 Demographic
 Age
 Gender
 Family life style , income, education
 Social class
 Clusters of similar characteristics
 Psychographic Segmentation
 Examining Attributes related to how person thinks ,feels
and behaves- personality dimensions (compulsive vs
cautious, quiet vs outgoing not easy to measure) life style
characteristics, consumer values
 Personality Characteristics
 Lifestyle
 Values- Self respect ,Fun and enjoyment, Sense of
belonging, Security, Having warm relationships, Sense of
accomplishments, Excitement,Being well respected
 Behavioral Segmentation

 Based on product related behaviour

 Benefits desired
 Usage rate
 Segmenting Business Markets
 Customer Location _Region,Location
 Customer type- industry, size, org.
structure, purchase criteria
 Transaction conditions –buying
situation(new , modify rebuy, Usage rate,
purchase procedure
 Target Market Strategies
 Aggregation Strategy- mass market strategy
,undifferentiated market strategy toatl
m,arket as sisngle segment –enjoy primary
benefit and disregard frills-single product
for mass audience- customers likely to
respond well to a single marketing
mix.Objective is cost minimisation.
 Single Segment Strategy
 Concentration strategy involves selecting one segment
from within the total market as the target market
 One marketing mix to reach this single segment
 Niche markets – penetrate one market in depth and acquire
reputation as specialist in relatively small markets
 Risks and limitations- all eggs in one basket
 Multiple Segment Strategy
 Tow or More different groups of potential
customers are identified as target marketers
 A separate mix is developed to reach each
target ed segment
 Guidelines in Selecting Target Markets
 Positioning
 Select the positioniong Concept
 Design the dimension or feature that most
effectively conveys a consistent position
 Forecasting Market Demand
 Demand forecasting
 Basic forecasting terms
 Market share
 Market factor – no of cars three years and above older –
relates to replacement demand for tyres. Population, per
capita income, no of people served by a store are market
factors to get an idea of how many retail stores RIL needs
 Methods for forecasting sales
 Market Factor Analysis- select the best market factors and
minimise the number of market factors. Direct derivation
method correlation analysis
 Survey of Buyer Intentions – intend to actual
 Test Marketing
 Past Sales and Trend Analysis
 Sales –Force Composite
 Executive Judgement – Delphi Technique
 Segment Marketing
 Market segment consists of a group of customers who share a similar
set of needs and wants. Car buyers who just need transportation versus
sports car lovers
 Difference in segment( small medium or large car segment) and
sector (young middle income car buyers)
 Segment s not created but identified
 Segment marketing can fine tune attributes to meet customer
requirements like flexible market offering (naked solutions with
discretionary options at additional charge)
 Market Segments
 Can be defined in different ways
 Preference segments based on proportion of attributes that
customer prefer -say in Ice cream sweetness and creaminess. They
can be categorised as
1. Homogenous preferences -Same
2. Diffused preferences- Scattered in space. First may be in the center
and other may be in corner catching those dissatisfied
3. Clustered preferences – reveal distinct preference clusters called
natural market segment. First firm may position in center or to
largest group (concentrated marketing or could develop several
brands positioned in different segments.
 Niche marketing
 A niche is a narrowly defined customer
group seeking a distinctive mix of benefits.
Marketers usually identify niches by
dividing a segment into sub segments.
Those with bad credit history can be
targeted by high risk credit card providers
who will take a hefty premium for such
services
 Attractive Niche
 Customers in a niche have distinct set of
needs
 They will pay a premium for the needs.
 Product Differentiation
Central themes in marketing strategy are

 Product Differentiation
 Product positioning
 Product
 A set of tangible and intangible attributes
which may be a good service, place, person
or ideas which results in a want satisfaction
of a consumer.
 It may include packaging, color price,
quality and brand, plus the seller’s services
and reputation
 Types

 Based on who will use them and how they

will be used
 Consumer Products
 Business Products
 Consumer Products
Classification
 Convenience good – item bought without gathering much
additional information like comparing price and quality –
food items, drugs, toothpaste, bulbs batteries- low unit
price, not bulky
 not affected by changes in fad and fashion
 accessible when demand arises so distributed widely and
inventory maintained.
 Retailers stock several brands of same item.
 Retailers do not advertise convenience goods
 Shopping Goods
 A tangible good for which a consumer wants to compare
quality, price, and perhaps style in several POS before
making a purchase is considered a shopping good-
designer wear, furniture, major appliances, cars/scooters
 Buying habits effect distribution and promotion strategies
of both manufacturers and middlemen- fewer retail outlets
 Manufacturers dependent on retailers as retailers image
more important than manufacturers. E.g
 Speciality Goods
 A tangible product for which a consumer has s
strong brand preference and is willing to
expend substantial time and effort in locating
the desired brand is called a specialty good.
Expensive men’s suiting ,stereo sound
equipment, HDTV,photographic equipment.
 Fewer retail outlets as brand preference exists
 Advertisement is high
 Unsought Goods
 A new product that the consumer is not yet
aware of or a product that the consumer is
aware of but does not want it right now. A
battery powered car or one person scooter
 Difficult and impossible advertising task
and personal selling job when marketing
unsought goods
 Business Goods
 Raw materials- goods from nature –forest
mines, minerals or agri produce/livestock
and animal products
 Prices by supply and demand
 Transportation major consideration
 Natural resources marketed directly from
producer to user
 Not much scope in product differntiation
 Business goods-Fabricating materials and
Parts

 Fabricating material require further processing – steel, yarn, flour into

bread
 Fabricated parts can be used without any further change in form-
zipper in clothing
 Installations – Manufactured products major expensive and long
lived equipment – large generators in a dam/ thermal power station,
factory equipment. Each unit sold is high value and each
manufacturer has reputation
 Accessory Equipment- like fork lift with life shorter than installations
but not part of inventory or used up in production
 Operating Supplies- low value short life items not incorporated in the
product but gets used up in manufacture –lubricating oils, stationary,
heating oil. Distributed widely ,bought by many organisations
 Brand and Trade mark
 A name and /or mark intended to identify and
differentiate the product of one seller or a group of sellers
 Brand name/mark is part of a brand that can be vocalised
–words /letters or numbers. Mark is appears in the form of
symbols, design or distinctive cover or type of lettering
 Brand equity – is the value a brand adds to a product.
 Trademark is a legal term and is a brand that has been
adopted by a sellerand given legal protection.
 Product Differentiation -Max Scope in
Product Management
 Tangible Product attributes and functions
 Intangible characteristics and emotional
associations
 Tangible Product Attributes and Functions
 Ingredients/formula- Close Up with Gel, TTK with
Teflon, Promise with clove oil, Vatika with herbal mix
 Functional value- 3m Scotch tape –transparent, disappears
when applied, computer controlled fridge –Video con
 Additional features- Aristocrat suitcase with wheels and
suit compartment
 Packaging- Frooti in aesthetic hygienic tetra pack
 Design superiority – Kinetic Honda, Titan watches
 Product quality/technological/operational
efficiency/service – Maruti service
 Intangible characteristics and Emotional
Associations
 Prestige – “Take the world in your stride”,
“James Bond-the legend of a man” Reid
and Taylor
 Locate attributes that makes the product
distinct
 Enhancing value the aim , Product attributes
the tool
 Giving customer the value he seeks
 Identifying the Buying Motives of Target
Consumers
 Leading Customer Benefits and Product
attributes
 Value addition and product differentiation
are concurrent processes
 Condition for Differentiation to succeed
 The differentiation should be perceptible
 Should be routed in competitive advantage- chanel
technology, clout, unique production process flexible
production facilities, advanced R&D for product
innovation are competitive advantages- develop these
avenues
 Coco Cola fights on the power of its name
 Maruti uses service as differentiator
 Product Positioning
 Positioning is a platform for the brand and
acts as facilitator for the brand to get through
to the consumer
 Act of fixing the locus of the product offer in
the minds of the target consumers.
 Firm decides around what parameters the
product offer has to be placed before target
consumers
 Positioning
 Product cannot be Everything to Everyone –hence
positioning
 Attempt is to lodge the differntaited product in a particular
locus in the minds of the consumer
 Positioning means putting the product in a predetermined
orbit
 Positing connects product offering with target market
 Consumer’s mind is a geometric Perceptual space :
Product seeks a locus in the space through positioning
 Positioning
 While positioning reckon with (take into consideration)
competitiors’s especially leaders positioning
 Has to be monitored and adapted continually
 Product and Value Positioning
 Avenues for positioning are many
 Communicating the value proposition to Target consumer
 Product and Brand Positioning
 Product repositionoing
 Differentiation in Marketing
 Price - low cost position/cost leadership
 Differentiation- offer superior value to the customer
 Helps the firm fight on non price plank
 Can be achieved through multiple sourcing in multiple
ways – product , distribution methods or promotion. Also
firm collaboration, plant location, after sales can be made
to differentiate an offer to make it distinct. L& T in
Selecting HR with superiority in executing projects
 Business markets
 Must form strong bonds and relationships
with their customers and provide them
added value. Some customers, however
may prefer more of a transactional
relationship.
 Institutional Markets
 Consists of schools, hospitals, nursing homes, prisons, and
other institutions that provide goods and services to people
in their care.
 Buyers for government organisations tend to require a
great deal of paperwork from their vendors and to favour
open bidding and domestic companies.
 Suppliers must be prepared to adapt their offers to the
special needs and procedures found in institutional and
government markets
 Product Differentiation
 Allows firm o operate on a non price plank
 Marketing Strategies in the Different Stages
of the Product life Cycle
 Life Cycle consists of four stages
 Introduction
 Growth
 Maturity
 Decline
 Product Life Cycle
 Consists of the aggregate demand over an
extended period of time of all brands
comprising a generic product category.
 Shapes of PLC curves vary from one
product category to the other
 Characteristics –Stages of PLC
Stage
Characteristics Introduction Growth Maturity Decline

Customers Innovators Mass Mass Loyal

market Market customers
Competition Little ,if any Increasing Intense Decreasing

Sales Low levels, Rapid Slow/no Decreasing

then rising growth annual
growth
Profits None Strong Declining Low /none
,then peak Annually
 Marketing Implications of Different Product Life Cycle Stages
Stage Introduction Growth Maturity Decline

Overall Market Market Defensive Efficicency

Strategy Development Penetration positioning

Costs High per unit Declining Stable or Low

increasing

Product Strategy Undifferentiated Improved Differentiated Pruned Line

Items

Pricing Strategy Most likely high Lower over Lowest Increasing

time

Distribution Strategy Scattered Intensive Intensive Selective

Promotion strategy Category Brand Brand loyalty Reinforcement

awareness preference
 PLC Concept as Tool in Formulating and
Implementing Marketing Strategy
 Product has to pass through certain staes in its life
 Stage depends on market reaction, market behaviour and
response
 Duration of phase depends on newness,functions and
marketing strategy
 By manipulating market behaviour ,life cycle stages can be
manipulated.(can prolong/manipulate each phase)
 PLC Concept Helps Strategy Formulation
 Pre-Planning product launch
 Prolonging the profitable phase
 Facilitates investment decisions
 Facilitates choice of appropriate entry
strategy
 Helps to identify right time to exit
 Provides Useful clues for managing
customers
 Linkage in PLC and Entry
Strategy
 Innovator at introduction stage
 Early follower in early growth stage
 Segmenter in late growth stage
 Me –too in maturity stage
 PLC Operates at three levels
 Product level
 Product sub category level
 Brand level