Chapter 6 Marketing
Microcultures
are groups of individuals who identify based on a common activity or art form, for instance: -American Idol fans -Candy Crush players
Heuristics
are rules of thumb used by individuals to arrive at good decision with less mental effort: -Price equals quality -Brand loyalty -Country of origin
Mainstream economic theory
has long assumed that consumers carefully collect information about competing products, determine which products possess the characteristics or product attributes important to their needs, weigh the pluses and minuses of each alternative, and arrive at a satisfactory decision.
Subcultures
is a societal group who share a distinctive set of beliefs, characteristics, or common experiences E.g.,, members of a religious or ethnic group
Motivation
is an internal state that drives us to satisfy needs by activating goal-oriented behavior
Cognitive Dissonance
is common following a major purchase, even in instances where consumers are satisfied with their purchase. Cognitive dissonance refers to the anxiety or regret that a consumer may feel after choosing from among several similar attractive choices. Essentially, consumers become nervous and second guess the choice they made.
Time
is one consumers' most limited resources and this sense of time poverty makes consumers more likely to respond to marketing services and products that offer to save time (1 hour film processing, music downloads over the web vs. ordering a CD for delivery, etc.).
Social Class
is the overall rank or social standing of groups of people within a society, according to factors such as: -Family background, -Occupation, -Education -Income -Luxury products are status symbols that allow people to signal social class
Perception
is the process by which we select, organize, and interpret information from the outside world
Consumer Behavior
is the process individuals or groups go through to select, purchase, use and dispose of products in order to satisfy their wants and needs.
Personality
is the set of unique psychological characteristics that consistently influence the way a person responds to situations in the environment -Self concept -Self Esteem
Fluctuating Demand
is when small changes in consumer demand create large changes in business demand Life expectancy of the product can also create fluctuating demand
Joint demand
occurs for two or more goods that are used together to create a product
Sensory Marketing
occurs when a direct sensory experience, such as a unique fragrance, is linked with a particular product or service.
Inelastic demand
occurs when changes in price have little or no effect on quantity sought
Problem Recognition (step 1)
occurs whenever consumer sees different between current state and desired/ideal state. marketers can develop ads that stimulate problem recognition.
The Consumer Decision-Making Process
problem recognition, information search, evaluation of alternatives, product choice, and post purchase evaluation.
Three components of attitude:
-Affect (feeling): emotional response -Cognition (knowing): beliefs or knowledge -Behavior (doing): intention to do something
B2B and Social Media
-Games generate buzz and increase brand awareness -B2B marketers use social media sites to promote themselves and their businesses -LinkedIn is the most prominent social networking site for B2B marketers and offers several advantages
Business to business (B2B) include:
-Manufacturers and other product producers -Wholesalers -Retailers -Other organizations such as hospitals, universities, and governmental agencies.
Roles in the Buyer Center
As mentioned earlier, several people may work together in certain buying situations, such as new task buys, in order to reach a decision. Buying centers include all people in an organization who participate in a purchasing decision. Buying centers typically include people other than "professional buyers" - line workers, engineers, or even administrative assistants may be part of the buying center. This is because people in a buying center each play one or more roles. The primary roles that these individuals may play are shown in the slide: Initiator: recognizes the problem and begins the buying process Users: individual(s) who actually need and use the product Gatekeeper: controls the flow of information to other buying center members Influencer: this person's expertise and advice may influence the decision, though they may never use the product Decider: individual who makes the final buying decision Buyer: person who is responsible for executing the purchase For example, the administrative assistant to the purchasing agent may be both a user of a copy machine and the gatekeeper who controls the purchasing agents' schedule and incoming phone calls from vendor reps. In some situations, the administrative assistant may also be the initiator who first notices problems with a copier, and begins "working on the boss" to get it replaced.
Consumerism: An Emerging Lifestyle Trend
Many consumers are more aware of the social and environmental consequences of their purchases And make decisions accordingly! In today's connected world, criticism from consumer sources can be damaging
Key Differences in Business versus Consumer Markets cont.
Aside from the fact that purchases are made for some purpose other than personal consumption, business to business markets differ from consumer markets in several key ways: Decisions are frequently made by multiple buyers, called buying groups, and the final decision maker is typically someone other than the user of the product. The decision making process also differs, as it is made after careful weighing of alternatives based on rational criteria, according to precise technical specifications based on product expertise. There are also a limited number of large buyers; in fact, products are frequently purchased directly from the producer. Once a decision has been made, long-term relationships typically develop between buyers and sellers unless dissatisfaction occurs. A third key difference is that unlike consumers who are literally spread out through the U.S. organizational buyers are often geographically concentrated in certain areas. Finally, purchases frequently involve high risk and high cost. The process may involve competitive bidding, price negotiations, and complex financial arrangements. This, and the fact that buyers are geographically concentrated makes personal selling the best marketing communications choice. Indeed, the vast majority of B2B marketers emphasize personal selling over advertising.
B2B E-Commerce
B2B e-commerce refers to internet exchanges of information, goods, services, and payments between two or more organizations Creates efficiencies by allowing marketers to link directly to value chain partners Intranets link a firm's departments, employees and databases Extranets allow authorized suppliers, customers, and other outsiders to access the firm's intranet
Business-to-Business Demand
Business-to-business demand differs from consumer demand Demand is: -Derived -Inelastic -Fluctuating -Joint
Postpurchase Evaluation
Consumer satisfaction following purchase of product is critical -Level of satisfaction is influenced y whether or not expectations of quality are met or exceeded -Marketing communications must create accurate expectations for the product -Cognitive dissonance is common
Lifestyle
Lifestyle reflects a pattern of living Marketers seeks to describe people according to activities, interests, and opinions Psychographics groups people according to psychological and behavioral similarities
Step 2: Information Search
Consumers need adequate information to make good decisions Consumers search memory and environment for information If information is inadequate, consumers seek out additional sources
Step 4: Product Choice
Consumers often rely on mental shortcuts, or heuristics, in making decisions Decisions are often difficult to make though, because different products may offer differ features or benefits in varying degrees. Weighing the relative value of each product, especially when prices differ, can be very challenging.
Consumer Decisions
Decision-making effort varies based on levels of perceived importance and risk Marketing can trigger problem recognition and facilitate consumer progression through decision process
Derived Demand
Demand for Education, Derived demand for textbooks, derived demand for paper, derived demand for pulp, derived demand for forestry products. -Demand for B2B products also differs from demand for consumers demands. One of the most important differences is the fact that B2B demand is derived, meaning that it stems directly or indirectly for consumer demand for another good or service.
Three factors are necessary for perception to occur
Exposure: capable of registering a stimulus Attention: mental processing activity Interpretation: assigning meaning
Not All Decisions are the Same, Amount of effort expended in decision-making varies according to nature of the task:
Extended problem-solving Limited problem-solving Habitual problem-solving
Situation and Social Influences on Buying Decisions
External Influences: Situational Influences- Physical environment, Time Social Influences-Culture, Subculture, Social Class, Group memberships, Opinion Leaders, Gender Roles
Ethical/Sustainable Decisions in the Real World
Gamification is a rising business trend Enables customers to participate in loyalty programs and promote favorite products in a fun and entertaining way Participants earn badges, rewards, points
Age
Goods and services often appeal to individuals within a certain age group Purchases are often associated with a particular stage in the family life cycle
Step 3: Evaluation of Alternatives
Identifying a small number or products for closer consideration Compare alternatives based upon evaluative criteria
Decision-making behaviors are influenced by a variety of factors
Internal, situational, and social factors influence consumer behavior
Online Search
Internet search engines, portals and shopbots are being increasingly relied upon. (google.com)
Learning
Learning is a relatively permanent change in behavior caused by information or experience -Behavioral theories of learning -Cognitive theories of learning -Behaviorally based theories assume that learning takes place as a result of connections we form between events. In classical conditioning, a person perceives two stimuli at about the same time. After a while, the person transfers his response from one stimulus to the other. For example, an ad shows a product and a breathtakingly beautiful scene so that (the marketer hopes) you will transfer the positive feelings you get when you look at the scene to the advertised product.
Behavioral targeting:
Marketers deliver targeted ads to consumers for specific products by watching what they do online
Perception (cont.)
Marketers work hard to achieve exposure for their products, for example, by placing marketing communications in a variety of media and contexts. While some consumers have been concerned that marketers can manipulate them into buying things they don't need or want via subliminal advertising - hidden messages that supposedly influence our ID and thus work below the conscious threshold - no evidence of subliminal advertising's effectiveness exists. Multi-tasking by consumers and the large number of communications to which consumers are exposed make attracting attention very difficult, though various creative tactics, such as the use of humor and celebrities, can be helpful. Finally, marketers must make certain that the words, pictures, and other symbols used in their marketing communications efforts are within the realm of consumer's past experience - cultural, educational, and geographic differences are among the many reasons why a message may not be properly perceived. We are bombarded by thousands of marketing communications messages daily
Key Differences in Business versus Consumer Markets
Multiple Buyers, Size of Purchases, Number of Customers, Geographic Concentration
Step 1: Problem Recognition
Occurs whenever consumer sees difference between current state and desired/ideal state Marketers can develop ads that stimulate problem recognition.
Opinion Leaders
Opinion leaders frequently influence the attitudes and behaviors of others Such individuals typically share several characteristics: -High interest in a given product category -Update product category knowledge by reading, talking with salespeople, etc. -Impart both positive and negative information -Are among the first to buy goods -Now, an important thing to understand is that a true opinion leader is an expert in only one or two product categories at the most. No single person can provide informed opinions on every single product category.
Internal Influences on Consumers' Decisions
Perception Motivation Learning Attitudes Personality Age Groups Lifestyle
Situational Influences on Consumers' Decisions
Situational factors often shape purchase behaviors -Time Poverty -Physical environment and sensory marketing
Steps in the Business Buying Decision Process
Step 1: Problem recognition - As in consumer buying, the first step in the business buying decision process occurs when someone sees that a purchase can solve a problem. However, the trigger may differ markedly for straight rebuy/modified rebuy/new task decisions. Two events may occur in the problem-recognition step. First, a firm makes a request or requisition, usually in writing. Then, depending on the complexity of the purchase, the firm may form a buying center. Step 2: Search for Information: In the second step of the decision process (for purchases other than straight rebuys), the buying center searches for information about products and suppliers. Members of the buying center may individually or collectively refer to reports in trade magazines and journals, seek advice from outside consultants, and pay close attention to marketing communications from different manufacturers and suppliers. Step 3: Evaluate Alternatives - In this stage of the business buying decision process, the buying center assesses the proposals it receives. Although a firm often selects a bidder because it offers the lowest price, there are times when it bases the buying decision on other factors. For example, in its lucrative B2B market, American Express wins bids for its travel agency business because it offers extra services other agencies don't or can't, such as a corporate credit card, monthly reports that detail the company's total travel expenses, and perks tied to the company's customer loyalty program. Step 4: Select Product and Supplier - The next step in the buying process is the purchase decision when the group selects the best product and supplier to meet the organization's needs. One of the most important decisions a buyer makes is how many suppliers can best serve the firm's needs. Single sourcing, in which a buyer and seller work quite closely, is particularly important when a firm needs frequent deliveries or specialized products. In contrast, multiple sourcing means suppliers are more likely to remain price competitive. And if one supplier has problems with delivery, the firm has others to fall back on. Step 5: Just as consumers evaluate purchases, an organizational buyer assesses whether the performance of the product and the supplier lives up to expectations. The buyer surveys the users to determine their satisfaction with the product as well as with the installation, delivery, and service that the supplier provides.
Elements of the Buyclass Framework
The Buy Class framework identifies the degree of effort a firm needs to collect information and make a business related purchasing decision Three buy classes exist: Straight rebuy: Routine purchases of items bought on a regular basis fall within this class. Little time is spent on the decision, as the business merely reorders items from their existing suppliers. Supplies, such as paper or toner for the copy machine, generally fall within this class. Marketers should devote sufficient attention to cultivating and maintaining relationships with individuals who are in charge of ordering supplies on a regular basis, and immediately respond to any problems that might crop up. The goal is to never give the customer a reason to search for an alternative provider. Modified rebuy: Modified rebuys occur when a firm decides to shop around for a new supplier, often because they are looking for a better price, better quality, improved delivery time, or some other improvement. Products that are technological in nature often fall within this category (cell phone service, computers, etc.). Modified rebuys take more time to complete and typically involve the evaluation of more than one supplier, or even multiple product options from a given supplier. However, the buyer usually has a good idea of the general requirements they are looking for, and may limit the search to a few providers. Buyers may search B2B websites for information, and request presentations from salespeople New-Task Buys: New task buys are more complex, and both risk and uncertainty are high. New task buys are considered to be those in which the buyer has no previous experience. As one would expect, this means that new-task buys can be very time-consuming - multiple individuals are typically involved, and multiple vendors are evaluated. Very often the buyer needs to gather information that will help the buying teach to understand what product specifications they should be looking for, and how those specs should be evaluated. Personal selling is critical. Testimonials from other satisfied customers can also be helpful.
Maslow's Hierarchy of Needs and Related Products
The hierarchy of needs categorizes motivation as being related to five different types of needs. Need types include physiological, safety, belongingness, ego, and self-actualization. Products and services related to each need level are also shown on the slide. The basic premise behind the hierarchy of needs is that consumers will seek to satisfy lower level needs (e.g., physiological) before progressing to higher level needs. When marketers understand the level of need most relevant to their consumer target, they can tailor their product and messages to match. High to low: Self Actualization, Ego Needs, Belongingness, Safety, Physiological
The Business Marketplace
Three major classes of B2B customers include producers, resellers, and organizations. Producers are individuals or firms that purchase products for use in the production of other goods and services. The goods purchased may be raw materials, component parts, semi-finished goods, or services. Examples: A) Dell buys RAM chips from Intel for integration into their PCs; B) General Mills buys grains to be used in the manufacture of cereals from ; C) A travel incentive provider purchases hotel rooms, tickets to entertainment venues, and flights, then creates incentive packages that are sold to business corporations looking to reward employees who performed well. Resellers are individuals or firms that buy finished goods for reselling, renting, or leasing. Resellers include wholesalers, distributors, and of course retailers. Examples: A) Wholesalers/distributors: Sysco supplies hospitals, educational institutions, and other organizations with a variety of paper goods (napkins, toilet paper, etc.), ingredients (salt, sugar, etc.) and other items. B) Students should be able to come up with a variety of retailer examples quite easily. The Organizational market includes all levels of government and not-for-profit institutions. Federal, state, county, and local governments that buy goods and services to carry out public objectives and to support their operations. Organizations with charitable, educational, community, and other public service goals that buy goods and services to support their functions and to attract and serve their members. Dealing with government markets is very different than dealing with other types of organizations, and for that reason many large firms maintain separate divisions that are tasked with dealing only with Government buyers. Some of the key differences include the fact that government purchasing often is restricted to a list of approved vendors, and even those vendors may need to bid for projects, or agree to a contract in which a fixed price is guaranteed over a given period of time, usually a year. Although the size of the government market is attractive, unanticipated changes such as drastic increases in the cost of fuel can limit the profit potential of the market, and come back to haunt suppliers who are required by contract to fill orders at a predetermined price (if that price includes delivery). Another key difference is that government purchasing agents are not allowed to accept gifts—accepting even the must mundane promotional item (such as pen, cap, or mouse pad) is illegal, and salespeople who (knowingly or unknowingly) offer such items to government buyers run the risk of being thrown out the door, being accused of bribery, or perceived as an unethical. Examples: A) The federal government purchases military weapons systems, furniture for offices, copy machines, supplies, and services such as construction. State and local governments purchase many of the same items (with the exception of the cruise missile and other major military weapons). B) Not-for-profits purchase printing services to create educational brochures, supplies and products for distribution to charity recipients, and items to be used at their place of business.
Professional Buyers and Buying Centers
Trained professional buyers typically carry out buying in business organizations -Procurement officers -Buying agents -Directors of Materials Management -In many business buying situations, cross-functional teams of individuals - known as a buying center - work together to reach a decision
Social Influences on Consumer Decisions
We are all individuals ... But we are also members of many groups that influence our purchasing behavior Many social influences on consumer decision-making, for instance: -Family and friends -Culture and social trends -Reference groups and opinion leaders
Self-esteem
refers to how positive a person's self-concept is, and marketers often attempt to show consumers how the purchase of certain product's (clothing, jewelry, deodorant) or services (massage, hair styling) can make them feel better about themselves, thereby enhancing their self-esteem.
Self-concept
refers to the attitude that an individual has toward himself. A person's self-concept can influence the products he or she purchases.
Gender Roles
relate to society's expectations regarding appropriate attitudes, behaviors, and opportunities for men and women -Consumers often associate sex-typed products with one gender or the other -Sex roles are constantly evolving
Attitudes
represent lasting evaluations of a person, object, or issue
Culture
represents the shared values, beliefs, customs, and tastes produced or practiced by a group of people Includes rituals such as weddings and funerals Marketers tailor products to cultural values. Despite the fact that we are all individuals, consumers are also members of groups that in turn exert influence over our buying decisions. These social influences include culture, subculture, social class, group memberships, opinion leaders, and gender roles.
Meterosexual
term being used to refer to straight, urban males who are keenly interested in fashion, home design, gourmet cooking, and personal care.