JUN JUHAIZI BINTI JUHARI 51 2) Evaluation of Alternatives: ❖ The stage of the buyer decision process in which the consumer uses information to evaluate alternative brands in the choice set. ❖ Example : Farhana has narrowed her choices to four computers and she is interested in several attribute ; ease of use, price, etc ❖ Marketers should study buyers to find out how they evaluate brand alternatives. If they know what evaluative processes go on, marketers can take steps to influence the buyer’s decision. ❖ By now the consumer has done enough research about the kind of product that can solve his problem. The next step is to evaluate alternative products that can solve his problem. Various points of information gathered from different sources are used in evaluating alternatives. ❖ Generally, consumers evaluate the alternatives based on a number of attributes of the product. Looks, durability, quality, price, service, popularity, brand, social media reviews are some to the factors that consumers consider. ❖ The market offers many products that can solve the problem of a consumer. Hence the consumer must make a choice after evaluating the various alternatives available. ❖ At the end of this stage, the consumer will rank his choices and pick a product that best matches his needs and wants.
JUN JUHAIZI BINTI JUHARI 52 3) Purchase Decision: ❖ The buyer’s decision about which brand to purchase. ❖ Generally, the consumer’s purchase decision will be to buy the most preferred brands, but two factors can come between the purchase intention and the purchase decision. ❖ Example: if Farhana’s father feels strongly that Farhana should buy the lowest-prices computer, then the chances of Farhana’s buying a more expensive computer will be reduced. ❖ Philip Kotler (2009) says, the final purchase decision may be ‘interrupted’ by two factors. Customer may get a negative feedback from friends or other customers who bought it. For example, a customer shortlisted a laptop, but his friend gave a negative feedback. This will make him to change his decision. Furthermore, the decision might also change. Sudden change in business plans, financial crunch, unexpected higher prices, etc. might lead the consumer to drop the idea of buying the laptop. ❖ The Consumer chooses the product that he wants to buy, but many times, he may not actually buy it for various reasons. At this stage, a marketer should find out the various reasons due to which the consumer is hesitating to buy. The reasons could be price, value, and change in the needs of the consumer. ❖ Marketer needs to step up the game. Start by reminding the customers of the reason behind their decision to buy the product. Furthermore, give as much information regarding your brand reiterating that you are the best provider of the product that can fulfill his needs.
JUN JUHAIZI BINTI JUHARI 53 4) Postpurchase Behavior: ❖ The stage of the buyer decision process in which consumers take further action after purchase, based on their satisfaction or dissatisfaction. ❖ If the product falls short of expectation, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectation, the consumer is delighted. ❖ This is the last stage and most often ignored by marketers. ❖ After buying the product, customers compare products with their expectations. There can be two outcomes: Either satisfied or dissatisfied. Consumers will be happy after buying the product if it has satisfied their needs. But in case the product was not up to his expectations, the consumer will be dissatisfied. A consumer can be lost even at this stage. ❖ A dissatisfied customer might feel as though he took an incorrect decision. This will result in returns! Offering an exchange will be a straightforward action. However, even when a customer is satisfied, there is no guarantee that the customer might be a repeat customer. ❖ Customers, either satisfied or dissatisfied, can take actions to distribute their experience in the form of customer reviews. This may be done through reviews on customer forums, website, social media conversations or word of mouth. ❖ A marketer must make sure that the consumer will be satisfied with the product so that his experience will lead to repeat customers. Brands need to careful to create positive post-purchase experience. (Clootrack, 2021)
JUN JUHAIZI BINTI JUHARI 54 FACTORS AFFECTING CONSUMER BUYER BEHAVIOUR Source from: Google image 1. Cultural Factors The marketer needs to understand the role played by the buyer’s culture, subculture and social class. A) Culture ❖ the set of basic values, perceptions, wants and behaviors learned by a member of society from family and other important institutions. ❖ Culture is the most basic cause of a person’s wants and behavior. Human behavior is largely learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviors from the family and other important institutions. ❖ A person normally learns or is exposed to the following values: achievement and success, activity and involvement, efficiency and practicality, progress, material comfort, individualism, freedom, humanitarianism, youthfulness, and fitness and health
JUN JUHAIZI BINTI JUHARI 55 ❖ For example, business representatives of a U.S. community trying to market itself in Taiwan found this out the hard way. Seeking more foreign trade, they arrived in Taiwan bearing gifts of green baseball caps. It turned out that the trip was scheduled a month before Taiwan elections, and that green was the color of the political opposition party. Worse yet, the visitors learned after the fact that according to Taiwan culture, a man wears green to signify that his wife has been unfaithful. The head of the community delegation later noted, “I don’t know whatever happened to those green hats, but the trip gave us an understanding of the extreme differences in our cultures.” International marketers must understand the culture in each international market and adapt their marketing strategies accordingly. B) Subculture ❖ a group of people with shared value systems based on common life experiences and situations. ❖ Each culture contains smaller subcultures or groups of people with shared value systems based on common life experiences and situations. ❖ Subcultures include nationalities, religions, racial groups, and geographic regions. ❖ Many subcultures make up important market segments, and marketers often design products and marketing programs tailored to their needs. C) Social class ❖ relatively permanent and ordered divisions in a society whose members share similar values, interest and behaviors. ❖ Social class is not determined by a single factor, such as income, but is measured as a combination of occupation, income, education, wealth, and other variables. ❖ Marketers are interested in social class because people within a given social class tend to exhibit similar buying behavior. ❖ Social classes show distinct product and brand preferences in areas
JUN JUHAIZI BINTI JUHARI 56 2. Social Factors A consumer’s behavior also is influenced by social factors, such as the consumer’s small groups, family, and social roles and status. A) Groups ❖ Groups that have a direct influence and to which a person belongs are called membership groups. ❖ In contrast, reference groups serve as direct (face to- face) or indirect points of comparison or reference in forming a person’s attitudes or behavior. Reference groups to which they do not belong often influence people. ❖ Marketers try to identify the reference groups of their target markets. Reference groups expose a person to new behaviors and lifestyles, influence the person’s attitudes and self-concept, and create pressures to conform that may affect the person’s product and brand choices. ❖ The importance of group influence varies across products and brands. It tends to be strongest when the product is visible to others whom the buyer respects. Manufacturers of products and brands subjected to strong group influence must figure out how to reach opinion leaders—people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert influence on others. ❖ Many marketers try to identify opinion leaders for their products and direct marketing efforts toward them. In other cases, advertisements can simulate opinion leadership, thereby reducing the need for consumers to seek advice from others. ❖ The importance of group influence varies across products and brands. It tends to be strongest when the product is visible to others whom the buyer respects. Purchases
JUN JUHAIZI BINTI JUHARI 57 of products that are bought and used privately are not much affected by group influences because neither the product nor the brand will be noticed by others. B) Family ❖ Family members can strongly influence buyer behavior. The family is the most important consumer buying organization in society, and it has been researched extensively. Marketers are interested in the roles and influence of the husband, wife, and children on the purchase of different products and services. ❖ Husband-wife involvement varies widely by product category and by stage in the buying process. Buying roles change with evolving consumer lifestyles. ❖ Such changes suggest that marketers who’ve typically sold their products to only women or only men are now courting the opposite sex. For example, with research revealing that women now account for nearly half of all hardware store purchases, home improvement retailers such as Home ❖ Depot and Builders Square have turned what once were intimidating warehouses into female friendly retail outlets. The new Builders Square II outlets feature decorator design centers at the front of the store. To attract more women, Builders Square runs ads targeting women in Home, House Beautiful, Woman’s Day, and Better Homes and Gardens. Home Depot even offers bridal registries. ❖ Similarly, after research indicated that women now make up 34 percent of the luxury car market, Cadillac has started paying more attention to this important segment. Male car designers at Cadillac are going about their work with paper clips on their fingers to simulate what it feels like to operate buttons, knobs, and other interior features with longer fingernails. The Cadillac Catera features an air-conditioned glove box to preserve such items as lipstick and film. Under the hood, yellow markings highlight where fluid fills go. ❖ Children may also have a strong influence on family buying decisions. For example, it ran ads to woo these “back-seat consumers” in Sports Illustrated for Kids, which attracts mostly 8- to 14- year-old boys. “We’re kidding ourselves when we think kids aren’t aware of brands,” says Venture’s brand manager, adding that even she was
JUN JUHAIZI BINTI JUHARI 58 surprised at how often parents told her that kids played a tie-breaking role in deciding which car to buy. In the case of expensive products and services, husbands and wives often make joint decisions. C) Roles and Status ❖ A person belongs to many groups—family, clubs, organizations. ❖ The person’s position in each group can be defined in terms of both role and status. ❖ A role consists of the activities people are expected to perform according to the persons around them. 3. Personal factors A buyer’s decisions also are influenced by personal characteristics such as the buyer’s age and lifecycle stage, occupation, economic situation, lifestyle, and personality and self-concept. A) Age and Family Life-Cycle Stage: ❖ People change the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle—the stages through which families might pass as they mature over time. ❖ Marketers often define their target markets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage. Traditional family life-cycle stages include young singles and married couples with children.
JUN JUHAIZI BINTI JUHARI 59 B) Occupation ❖ A person’s occupation affects the goods and services bought. Blue-collar workers tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. Marketers try to identify the occupational groups that have an above-average interest in their products and services. ❖ A company can even specialize in making products needed by a given occupational group. ❖ For example, computer software companies will design different products for brand managers, accountants, engineers, lawyers, and doctors. C) Economic Situation ❖ A person’s economic situation will affect product choice. Marketers of incomesensitive goods watch trends in personal income, savings, and interest rates. ❖ For instance, if economic indicators point to a recession, marketers can take steps to redesign, reposition, and reprice their products closely. D) Lifestyle ❖ People coming from the same subculture, social class, and occupation may have quite different lifestyles. ❖ Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It involves measuring consumers’ major AIO dimensions—activities (work, hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products). ❖ Lifestyle captures something more than the person’s social class or personality. It profiles a person’s whole pattern of acting and interacting in the world. ❖ Several research firms have developed lifestyle classifications. It divides consumers into eight groups based on two major dimensions: self-orientation and resources. Selforientation groups include principle-oriented consumers who buy based on their views of the world; status-oriented buyers who base their purchases on the actions
JUN JUHAIZI BINTI JUHARI 60 and opinions of others; and action-oriented buyers who are driven by their desire for activity, variety, and risk taking. ❖ Consumers within each orientation are further classified into those with abundant resources and those with minimal resources, depending on whether they have high or low levels of income, education, health, self-confidence, energy, and other factors. ❖ Consumers with either very high or very low levels of resources are classified without regard to their self-orientations (actualizers, strugglers). Actualizers are people with so many resources that they can indulge in any or all self-orientations. In contrast, strugglers are people with too few resources to be included in any consumer orientation. E) Personality and Self-Concept ❖ Each person’s distinct personality influences his or her buying behavior. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment. Personality is usually described in terms of traits such as self-confidence, dominance, sociability, autonomy, defensiveness, adaptability, and aggressiveness. ❖ Personality can be useful in analyzing consumer behavior for certain product or brand choices. For example, coffee marketers have discovered that heavy coffee drinkers tend to be high on sociability. Thus, to attract customers, Starbucks and other coffeehouses create environments in which people can relax and socialize over a cup of steaming coffee. ❖ Many marketers use a concept related to personality—a person’s self-concept (also called self-image). The basic self-concept premise is that people’s possessions contribute to and reflect their identities; that is, “we are what we have.” ❖ Thus, in order to understand consumer behavior, the marketer must first understand the relationship between consumer self-concept and possessions. For example, the founder and chief executive of Barnes & Noble, the nation’s leading bookseller, notes.
JUN JUHAIZI BINTI JUHARI 61 4. Psychological Factors A person’s buying choices are further influenced by four major psychological factors: motivation, perception, learning and beliefs and attitudes. a. Motivation ❖ A person has many needs at any given time. Some are biological, arising from states of tension such as hunger, thirst, or discomfort. Others are psychological, arising from the need for recognition, esteem, or belonging. ❖ Most of these needs will not be strong enough to motivate the person to act at a given point in time. A need becomes a motive when it is aroused to a sufficient level of intensity. ❖ A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. Psychologists have developed theories of human motivation. Two of the most popular—the theories of Sigmund Freud and Abraham Maslow—have quite different meanings for consumer analysis and marketing.
JUN JUHAIZI BINTI JUHARI 62 Source from: Google image Maslow’s Theory of Motivation Maslow’s answer is that human needs are arranged in a hierarchy, from the most pressing to the least pressing. In order of importance, they are physiological needs, safety needs, social needs, esteem needs, and self-actualization needs. A person tries to satisfy the most important need first. When that need is satisfied, it will stop being a motivator and the person will then try to satisfy the next most important need. For example, starving people (physiological need) will not take an interest in the latest happenings in the art world (self-actualization needs), nor in how they are seen or esteemed by others (social or esteem needs), nor even in whether they are breathing clean air (safety needs). But as each important need is satisfied, the next most important need will come into play.
JUN JUHAIZI BINTI JUHARI 63 b. Perception ❖ A motivated person is ready to act. How the person acts is influenced by his or her own perception of the situation. All of us learn by the flow of information through our five senses: sight, hearing, smell, touch, and taste. However, each of us receives, organizes, and interprets this sensory information in an individual way. ❖ Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. ❖ People can form different perceptions of the same stimulus because of three perceptual processes: selective attention, selective distortion, and selective retention. People are exposed to a great amount of stimuli every day. For example, the average person may be exposed to more than 1,500 ads in a single day. It is impossible for a person to pay attention to all these stimuli. Selective attention—the tendency for people to screen out most of the information to which they are exposed—means that marketers have to work especially hard to attract the consumer’s attention. ❖ Even noted stimuli do not always come across in the intended way. Each person fits incoming information into an existing mind-set. Selective distortion describes the tendency of people to interpret information in a way that will support what they already believe. Selective distortion means that marketers must try to understand the mind-sets of consumers and how these will affect interpretations of advertising and sales information. c. Learning ❖ When people act, they learn. Learning describes changes in an individual’s behavior arising from experience. ❖ Learning theorists say that most human behavior is learned. Learning occurs through the interplay of drives, stimuli, cues, responses, and reinforcement.
JUN JUHAIZI BINTI JUHARI 64 d. Beliefs and Attitudes ❖ Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence their buying behavior. ❖ A belief is a descriptive thought that a person has about something. ❖ Buying behavior differs greatly for a tube of toothpaste, a tennis racket, an expensive camera, and a new car. More complex decisions usually involve more buying participants and more buyer deliberation.
JUN JUHAIZI BINTI JUHARI 65 CHAPTER 5: Segmentation, Targeting and Positioning LEARNING OBJECTIVES: 1. Define the three steps of target marketing: market segmentation, target marketing and market positioning. 2. Discuss the major bases for segmenting the consumer market. 3. Explain how companies identify attractive market segments and choose a target marketing strategy. 4. Discuss how companies position their products for maximum competitive advantage in the marketplace. STEPS OF TARGET MARKETING Three main activities of target marketing are segmenting, targeting and positioning. These three steps make up what is commonly referred to as the S-T-P marketing process. Source from : Google image
JUN JUHAIZI BINTI JUHARI 66 STEP 1 : MARKET SEGMENTATION Dividing a market into distinct groups with distinct needs, characteristics, or behavior who might require separate products or marketing mixes. STEP 2 : TARGET MARKETING The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter. STEP 3 : MARKET POSITIONING Arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. MARKET SEGMENTATION “The act of dividing the markets into specific groups of consumers/buyers who share common needs and who might require separate products/and or marketing mixes” (Kotler, 2016). Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs. There are major variables (bases of segmentation) that might be used in segmenting consumer market: Geographic, demographic, psychographic and behavioral variables.
JUN JUHAIZI BINTI JUHARI 67 Bases for Segmentation 1) Demographic segmentation Demographic segmentation divides the markets into groups based on variables such as age, gender, family size, income, occupation, education, religion, race and nationality. Demographic factors are the most popular bases for segmenting the consumer group. One reason is that consumer needs, wants, and usage rates often vary closely with the demographic variables. Moreover, demographic factors are easier to measure than most other type of variables. a) Age: It is one of the most common demographic variables used to segment markets. Some com-panies offer different products, or use different marketing approaches for different age groups. For example, McDonald’s targets children, teens, adults and seniors with different ads and media. Markets that are commonly segmented by age includes clothing, toys, music, automobiles, soaps, shampoos and foods
JUN JUHAIZI BINTI JUHARI 68 b) Gender: Dividing a market into different groups based on gender: male or female Gender segmentation is used in clothing, cosmetics and magazines. c) Income: Markets are also segmented on the basis of income. Income is used to divide the markets because it influences the people’s product purchase. It affects a consumer’s buying power and style of living. Income includes housing, furniture, automobile, clothing, alcoholic, beverages, food, sporting goods, luxury goods, financial services and travel. d) Family lifecycle: Product needs vary according to age, number of persons in the household, marital status, and number and age of children. These variables can be combined into a single variable called family life cycle. Housing, home appliances, furniture, food and automobile are few of the numerous product markets segmented by the family cycle stages. e) Religion Businesses may divide markets by religion or religious groups such as Muslim, Jewish, Hindu, Buddhist, etc. Example : Al-Quran is selling for Muslims. f) Occupation Divide markets by occupations. Example : professional and technical managers, officials and proprietors, clerical, sales, students, unemployed. g) Education Businesses may divide markets by education system Example : Selling Textbook for Primary and Secondary School Education.
JUN JUHAIZI BINTI JUHARI 69 h) Race Businesses may divide markets by races such as Asian, Hispanic, Black, White. Example : Maybelline focus on Asian skin tone in selling their cosmetics products. i) Generation Businesses may divide markets by generation such as Baby boomer, generation X, Generation Y, Millennial. Example : Medical equipment for old folks. j) Nationality Businesses may divide markets by nationality or country of origin such as Malaysia, British, France, China, etc, Example: Made in China products. 2) Geographic segmentation Geographic segmentation refers to dividing a market into different geographical units such as nations, states, regions, cities, or neighbourhoods. For example, national newspapers are published and distrib-uted to different cities in different languages to cater to the needs of the consumers Geographic variables such as climate, terrain, natural resources, and population density also influence consumer product needs. Companies may divide markets into regions because the differences in geographic variables can cause consumer needs and wants to differ from one region to another. E.g. rural,semi-rural, urban or suburban.
JUN JUHAIZI BINTI JUHARI 70 3) Psychographic segmentation Psychographic segmentation is dividing groups based on social class, lifestyle and personality traits @ characteristics. In the case of certain products, buying behaviour predominantly depends on social class, lifestyle and personality characteristics. a) Social Class Social class can be divided into upper class, middle class and lower class. Many companies deal in clothing, home furnishing, leisure activities, design products and services for specific social classes. b) Personality characteristics: It refers to a person’s individual character traits, attitudes and habits. Here markets are segmented according to competitiveness, introvert, extrovert, ambitious, aggressiveness, etc. This type of segmentation is used when a product is similar to many compet-ing products, and consumer needs for products are not affected by other segmentation variables. c) Lifestyle: It is the manner in which people live and spend their time and money. Lifestyle analysis provides marketers with a broad view of consumers because it segments the markets into groups on the basis of activities, interests, beliefs and opinions. Companies making cosmetics, alcoholic beverages and furniture’s segment market according to the lifestyle.
JUN JUHAIZI BINTI JUHARI 71 4) Behavioral segmentation In behavioural segmentation, buyers are divided into groups on the basis of their knowledge of, attitude towards, use of, or response to a product. Behavioural segmentation includes segmentation on the basis of occasions, user status, usage rate loyalty status, buyer-readiness stage and attitude. a) Occasion Buyers can be distinguished according to the occasions when they purchase a product, use a product, or develop a need to use a product. It helps the firm expand the product usage. For example, Cadbury’s advertising to promote the product during wedding season is an example of occasion segmentation. b) User status: Sometimes the markets are segmented on the basis of user status, that is, on the basis of non-user, ex-user, potential user, first-time user and regular user of the product. Large compa-nies usually target potential users, whereas smaller firms focus on current users. c) Usage rate: Markets can be distinguished on the basis of usage rate, that is, on the basis of light, medium and heavy users. Heavy users are often a small percentage of the market, but account for a high percentage of the total consumption. Marketers usually prefer to attract a heavy user rather than several light users, and vary their promotional efforts accordingly. d) Loyalty status: Buyers can be divided on the basis of their loyalty status—hardcore loyal (con-sumer who buy one brand all the time), split loyal (consumers who are loyal to two or three brands), shifting loyal (consumers who shift from one brand to another), and switchers (consum-ers who show no loyalty to any brand).
JUN JUHAIZI BINTI JUHARI 72 e) Buyer readiness stage: The six psychological stages through which a person passes when deciding to purchase a product. The six stages are awareness of the product, knowledge of what it does, interest in the product, preference over competing products, conviction of the product’s suitability, and purchase. Marketing campaigns exist in large part to move the target audience through the buyer readiness stages. f) Benefits Sought: Dividing the market into groups according to the different benefits that consumers seek from the product. MARKET TARGETING The firm now has to evaluate the various segments and decide how many and which ones to target. a) Evaluating market segments The firm must look into 3 factors: 1) segment size and growth. 2) segment structural attractiveness and 3) company objectives and resources: 1) Segment size and growth: the company must collect and analyze data on current segment sales, growth rates and expected profitability for various segments such companies may select segments that are smaller and less attractive but that are potentially more profitable for them 2) Segments structural attractiveness Need to examine major structural factors that affect long run segment attractiveness A segment is less attractive if it already contains many strong and aggressive competitors The existence of many actual or potential substitute products may limit prices and profits that can be earned in a segment
JUN JUHAIZI BINTI JUHARI 73 The relative power of buyers also affects segments attractiveness Buyers with strong bargaining power try to force prices down, demand more services and set competitors against one another A segment may be less attractive if it contains powerful suppliers who can control prices or reduce the quality or quantity of ordered goods and services 3) Company objectives and resources Some attractive segment could be dismissed quickly because the strength needed to compete successfully in a segment and cannot readily obtain them, it should not enter the segments The company should enter only segments in which it can offer superior value and gain advantages over competitors b) Selecting target market segments Then the company must decide which and how many segments it will target A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. Because buyers have unique needs and wants, a seller could potentially view each buyer as a separate target market. Then, the seller might design a separate marketing program for each buyer. They can target in many ways as below:
JUN JUHAIZI BINTI JUHARI 74 1) Undifferentiated (mass) marketing A market coverage strategy in which a firm decides to ignore market segments differences and go after the whole market with one offer It focuses on what is common in the needs of consumers rather than on what is different Designs product to the largest number of buyers. It aims is to give the product a superior image in people’s minds. 2) Differentiated (segmented) marketing A market coverage strategy in which a firm decides to target several market segments and designs separate offers for each By offering product and marketing variations to segments, companies hope for higher sales and a stronger position within each market segments But differentiated marketing also increases the costs of doing business. It is more expensive to develop and produce products Developing separate marketing plans for separate segments requires extra marketing research, forecasting, sales analysis, promotion planning and channel management Source : Google Image
JUN JUHAIZI BINTI JUHARI 75 3) Concentrated marketing A market coverage strategy in which a firm goes after a large share of one or few segments or niches The company have a limited resource The firm goes after a large share of one or few segments or niches It is smaller and may attract only one or few competitors. 4) Micro marketing The practice of tailoring products and marketing programs to the needs and wants of specific individuals and local customer groups –includes local marketing and individual marketing Local marketing: tailoring brands and promotions to the needs and wants of local customer groups –cities, neighborhood and even specific stores Individual marketing – tailoring products and marketing programs to the needs and preferences of individual customers-also labeled “market-of one marketing”, customized marketing” and one to one marketing
JUN JUHAIZI BINTI JUHARI 76 Summary of market targeting strategies as follows: Factors to be considered when choosing a target marketing strategy. Companies need to consider several factors when choosing a target marketing: 1. Company resources – if resources limited, concentrated marketing makes the most sense 2. Degree of Product variability – undifferentiated marketing is suited for uniform products, products that can vary in design are more suited to differentiated or concentration marketing 3. Product’s life cycle stage – when a firm introduce a new product, it may be practical to launch only one version and undifferentiated marketing or concentrated marketing may make the most sense 4. Market variability – if most buyers have the same taste, buy the same amounts and react the same way to marketing efforts, undifferentiated marketing is appropriate 5. Competitor’s marketing strategies – when competitors use differentiated or concentrated marketing, a firm can gain an advantage by using differentiated or concentrated marketing.
JUN JUHAIZI BINTI JUHARI 77 MARKET POSITIONING FOR COMPETITIVE Then the company must decide what position it wants to occupy in those segments Product position – the way the product is defined by consumers on important attributes-the place the product occupies in consumer’s minds relative to competing products Positioning involves implanting the brand’s unique benefits and differentiation in consumers’ mind Example, Mercedez on luxury , and Porsche and BMW on performance After the organisation has selected its target market, the next stage is to decide how it wants to position itself within that chosen segment. Positioning refers to ‘how organisations want their consumers to see their product’. They must plan position that will give their products the greatest advantage in selected target markets, and they must design marketing mixes to create these planned positions. It refers to what message about the product or service is the company trying to put across? For instance, Car manufacturer Daewoo in the UK, has successfully positioned themselves as the family value model. The UK car Skoda brand which has been taken over by Volkswagen has been re-positioned as a vehicle which had negative brand associations, to one which regularly wins car of the year awards. The positive comments from the industry and attributes of this vehicle is has changed the perception of consumers about the Skoda brand. Choosing A Positioning Strategy Some firms find it easy to choose their positioning strategy. For example, a firm well known for quality in certain segments will go for this position in a new segment if there are enough buyers seeking quality. The positioning task consists of three steps: 1) identifying a set of possible competitive advantage upon which to build a position. 2) choosing the right competitive advantaged 3) selecting an overall positioning strategy.
JUN JUHAIZI BINTI JUHARI 78 1) Identifying a set of possible competitive advantage upon which to build a position. Competitive advantage : an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. A company or market offer can be differentiated along the lines of products, services, people and image. Positioning Strategies: 1) Product Differentiation : Products that can be differentiated its physical products on features, performance, or style and design. The company can differentiate their products on such attributes as consistency, durability, reliability, or repairability. Example, Volvo provides new and better safety features. 2) Service Differentiation Companies gain services differentiation through speedy, convenient or careful delivery. For example, delivery is a major marketing tactic to differentiate your services. Just look at the popularity of Pizza Hut or Dominos and the only reason these 2 brands are popular because of their claim of “30 minutes delivery or free”. 3) People Differentiation hiring and training better people than their competitors do. People differentiation requires that a company select its customer-contact people carefully and train them well. Disney people are known to be friendly and upbeat. For example, IBM offers people who make sure that the solution customers want is the solution they get.
JUN JUHAIZI BINTI JUHARI 79 4) Image Differentiation A company or brand image should convey product’s distinctive benefits and positioning. Example, Intel inside logo can provide strong company or brand recognition and image differentiation. 2. Choosing the right competitive advantages It now must choose the ones on which it will build its positioning strategy. It must decide how many differences to promote and which ones. How many differences to promote? Many marketers think that companies should aggressively promote only one benefit to the target market Example : Unilever introduced the first three in one bar soap –Lever 2000- Offering cleansing, deodorizing and moisturizing benefits A company needs to avoid three major positioning errors : 1. Underpositioning : failing ever to really position the company at all they do not really know anthing special about it. 2. Overpositioning : giving buyers too narrow a picture of the company 3. Confused positioning : leaving buyers with a confused image of a company. Which Differences to promote? The company must follow the following criteria:- 1) Important : the difference delivers a highly valued benefit to target buyers 2) Distinctive : Competitors do not offer the difference,or the company can offer it in more distinctive way 3) Superior : The difference is superior to other ways that customers might obtain the same benfit 4) Communicable : The difference is communicable and visible to buyers 5) Preemptive : Competitors cannot easily copy the difference 6) Affordable : Buyers can afford to pay for the difference 7) Profitable: The Company can introduce the difference profitably.
JUN JUHAIZI BINTI JUHARI 80 3) Selecting an overall positioning strategy Consumers typically choose products and services that give them the greatest value Thus, marketer want to position their brands on the key benefits that they offer relative to competing brands The full positioning of a brand is called the brand’s value proposition – the full mix of benefits upon which the brand is positioned Below is the figure that shows possible value proposition: Price More the Same Less More for more More for the same More for less The same for less Less for much less More for more : - providing the most upscale product or service and charging a higher price to cover the higher costs - Example: Mercedes Benz automobiles offer superior quality, performance, style and change a price to match prestige to buyer - Seller offer “only the best” can be found in every product category. More for the same: - companies can attack a competitor’s more for more positioning by introducing a brand offering comparable quality but at a lower price. - Example : Toyota introduced its Lexus line with a “more for the same” value proposition More The Same Less
JUN JUHAIZI BINTI JUHARI 81 The same for less: - Offering “the same for less” can be a powerful value proposition-everyone likes a good deal. - Example: Dell Computer offers equivalent quality computers at a lower price for performance. They offer many brands as department stores but deep discounts Less for much less : - a market almost always exists for products that offer less and therefore cost less - Meeting consumer’s lower performance @ quality requirement at a much lower price. More for less: - The Company will offer better products and lower prices for a given level of performance. Developing a Positioning Statement Positioning statement is a statement that summarizes company or brand positioning It takes this form: To (target segment and need) our ( brand ) is (concept) that ( point-of difference) For example ; “To busy professionals who need to stay organized, Palm Pilot is ab electronic organizer that allows you to back up files on your PC more easily and reliably than competitive products”.
JUN JUHAIZI BINTI JUHARI 82 CHAPTER 6: Products LEARNING OBJECTIVES: 1. Defining Products and Services 2. Explain the characteristics that distinguish between products and services. 3. Describe the levels of product and services. 4. Explain the products and services classifications. 5. Discuss the products and service decisions. DEFINITION OF PRODUCTS AND SERVICES ❑ Product is anything that can be offered to a market for attention, acquisition, use, or consumptions that might satisfy a want or need. Products include more than just tangible goods such as soap, toothpaste, etc. ❑ Service is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the ownership of anything. For example, banking, airlines, retail and home repair services. THE CHARACTERISTICS THAT DISTINGUISH BETWEEN PRODUCTS AND SERVICES ▪ People require different services and products to satisfy various needs and wants. ▪ In this regard, it can be observed that the marketers play a pivotal role in marketing different products and services to various targeted customers. ▪ The major difference between the two concepts is that a product is tangible while a service is intangible. ▪ More details about the differences between a product and service are clearly outlined below.
JUN JUHAIZI BINTI JUHARI 83 What is a Product? A product is an item for sale. Most importantly, it is a physical item that is tangible. We can sell, buy, store, and transport products. When the sale is complete, we can move the product, return it, or even replace it for another product. If you look around you, you’ll see many products around you. Some examples of products include mobile phones, laptops, vehicles, furniture, and food items. In manufacturing, the manufactures procure products as raw materials and sell their products as finished goods. They make each product at a cost and sell it at a price.
JUN JUHAIZI BINTI JUHARI 84 Moreover, the price of a product can vary depending on the quality, the marketing, and the market. Source : Google image What is a Service? We can define a service as a transaction that does not involve transfer of physical goods from the seller to the buyer. It is basically a work that a person/persons do for another individual. These are activities other people, companies, the government do for you. Education, health care, banking, insurance, and transportation are some examples of services. Services are intangible and non-physical, unlike goods, which have a physical existence. For example, when you a book a holiday, the booking agent is providing you with a service; the booking itself is abstract – you cannot touch it, store it or transport it. The government of a country also provides various public services for its citizens. For example, it ensures citizens’ security via security services (army, police, paramedics, fire brigade, etc.) Healthcare, urban planning, waste management, and public broadcasting are some other government services.
JUN JUHAIZI BINTI JUHARI 85 Difference Between Product and Service Definition Products are objects or systems made available for consumer use while services are transactions where no physical goods are transferred from the seller to the buyer Tangibility While products are tangible, services are intangible. Production Products are manufactured, stored, and transported while services cannot be manufactured, stored, or transported. Examples Electronic devices, furniture, food items, and vehicles are some examples of products while cleaning, car repair, medical check-ups, haircuts, etc. are some examples of services. Return Moreover, we can return or replace the products, but not so with services. Inconsistency Products sold can be identical, but each delivery of a particular service is never exactly the same as the previous services or future services. (Source from https://economictimes.indiatimes.com/)
JUN JUHAIZI BINTI JUHARI 86 LEVELS OF PRODUCT Consumers often think that a product is simply the physical item that he or she buys. There are three different products level– the CORE product, the ACTUAL product, and finally the AUGMENTED product. This concept is known as the Three Levels of a Product. The CORE product ❑ is NOT the tangible physical product. You can’t touch it. ❑ That’s because the core product is the BENEFIT of the product that makes it valuable to you. ❑ So with the car example, the benefit is convenience i.e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly. The ACTUAL product ❑ is the tangible, physical product. You can get some use out of it. ❑ Again with the car, it is the vehicle that you test drive, buy and then collect. You can touch it. ❑ The actual product is what the average person would think of under the generic banner of product. The AUGMENTED product ❑ is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium. ❑ So when you buy a car, part of the augmented product would be the warranty, the customer service support offered by the car’s manufacturer and any aftersales service. ❑ The augmented product is an important way to tailor the core or actual product to the needs of an individual customer. The features of augmented products can be converted in to benefits for individuals.
JUN JUHAIZI BINTI JUHARI 87 PRODUCTS CLASSIFICATIONS ❑ Products and services fall into two broad classes based on the types of consumers that use them: consumer products and industrial products. ❑ Broadly defined, products also include other marketable entities such as experiences, organizations, persons, places, and ideas CONSUMER PRODUCT ❑ Consumer products are products and services bought by final consumers for personal consumption. ❑ Marketers usually classify these products and services further based on how consumers go about buying them. ❑ Consumer products include convenience products, shopping products, specialty products, and unsought products. ❑ These products differ in the ways consumers buy them and, therefore, in how they are marketed. 1) Convenience Products ❑ Convenience products are frequently purchased by customers. There are required very little buying efforts when drawing a comparison to buying these products. These consumer products are low priced. Due to widespread distribution, these are available in different convenience locations according to consumer wants and needs. Producers adopt mass promotion strategies. ❑ Convenience Products Examples. Newspapers, matchbox, Soups, Toothpastes etc. 2) Shopping Products ❑ Shopping Products are those consumer products that are less frequently purchase. Consumers need shopping efforts and planning to decide and compare this type of consumer products. ❑ In the selecting and purchasing process, customers keep in mind the attributes like product quality price and design. Consumers spend more of their time and efforts to gather information and compare available alternatives.
JUN JUHAIZI BINTI JUHARI 88 ❑ Examples of consumer products include television, clothing, furniture, airline services. ❑ These shopping products have higher prices and distribute through fewer outlets. Marketers promote these products through personal selling and different advertisement campaigns. 3) Specialty Products ❑ Specialty Products are those consumer goods having distinctive characteristics and brand identification for which a significant group of buyers is ready to make a specific purchase effort. This type of consumer products, consumers make efforts in the decision-making process. ❑ Specialty products need serious efforts to make a purchase. Specific consumers are involved in purchasing efforts. ❑ Specialty products examples include legal and professional services, luxury goods and cars, designer clothes and many more. ❑ Another good example of specialty products is Mercedes-Benz Maybach Exelero and Bugatti Veyron these are one of the world most expensive cars. If a certain consumer wants to buy one, he can even travel from one country to another. These types of products are less comparable with each other. Those willing to buy these cars invest their time to reach dealers who carrying their desired product. ❑ These products are highly priced and follow exclusive distribution and available in fewer outlets. For example, Bugatti is available in 17 countries throughout the world. Promotional strategies are carefully targeted to reach the targeted consumers. 4) Unsought Products ❑ Unsought products are types of consumer products that consumers don’t know and even if they know about it they don’t buy these products under normal circumstances. Consumers don’t care about these types of product and think about it when they need it. ❑ Unsought Products Examples include Life Insurance, Smoke detectors, Home alarms and pre-planned funnel service. ❑ Unsought product pricing and distribution varies, and promotion strategies need aggressive marketing efforts i.e. more advertising and personal selling than other types of products.
JUN JUHAIZI BINTI JUHARI 89 PRODUCTS DECISIONS Marketers make product and service decisions at three levels: 1. Individual product decisions 2. Product line decisions 3. Product mix decisions 1) Individual Product Decisions ❑ Individual product decisions required can be sorted into five categories or stages. ❑ Firstly, we look at product attributes. Branding and packaging follow. The individual product decisions are completed by labelling and product support services.
JUN JUHAIZI BINTI JUHARI 90 Product Attributes ❑ Individual product decisions start by deciding on product attributes. ❑ This means that the development of a product starts by defining the benefits it will offer to consumers. ❑ These benefits are communicated as well as delivered by the product attributes. ❑ Thus, in stage one of the individual product decisions, we define the product attributes, such as quality, features, style and design. 1. Product Quality ❑ One element of the product attributes is the quality of the product. ❑ Quality can define it as the characteristics of a product or service that determine its ability to satisfy the customer needs. ❑ Therefore, the quality is one of the most important individual product decisions. It has a direct impact on the product’s (or service’s) performance. It is directly linked to customer value and satisfaction. So, we could say: Quality is when the customer is satisfied and will come back, while the product does not (come back). ❑ To be more specific, defining the product’s quality involves two levels or dimensions. These are Quality Level and Quality Consistency. ❑ Firstly, we need to choose a quality level which will support the product’s positioning. At this level, the quality can be understood as performance quality: the ability of the product to perform its functions. ❑ To give an example, a Mercedes-Benz car provides a higher performance quality than a Dacia Logan: it has a smoother ride, offers more luxury, comfort, lasts longer etc. The quality level should be chosen so as to meet the target market needs and the quality levels of competing products. ❑ The second level is the Quality Consistency. Here, the product quality means conformance quality. Thus, we refer to freedom from defects and the consistency in delivering the targeted quality level (level of performance). At this level, the Dacia Logan can have as much quality as the Mercedes. Although it does not perform at the same level as the Mercedes (Quality Level), it can deliver the quality that customers pay for and expect (Quality Consistency).
JUN JUHAIZI BINTI JUHARI 91 2. Product Features ❑ Another product attribute that is highly important for the individual product decisions is that of the product features. ❑ By features, we can differentiate our product from competitors’ products. ❑ However, just adding features is not the right way to enhance customer value. ❑ A remote control does not provide additional value to a customer if it has 250 buttons and vibrates while playing music. The company always has to assess each feature’s value to customers first. 3. Product Style and Design ❑ Individual product decisions also include the product style and design. ❑ Clearly, we can add customer value by means of a distinctive product style and design. ❑ While style describes the appearance of the product, design goes deeper. Good design does not only contribute to the product’s look, but also to its usefulness. ❑ In order to find the right product design, marketers should investigate how customers will use and benefit from the product. Branding ❑ Branding is one of the most crucial individual product decisions. ❑ Today, people do not buy a product – they buy a brand. ❑ A brand is a name, term, sign, symbol, design or a combination of these elements that identifies the products or services of one seller and differentiates them from those of competitors. ❑ To give an example, look at Coca-Cola. If you buy a bottle of coke, you do not only buy the pure beverage, you buy the brand. You buy it because you know and value the worldwide-known brand. ❑ For clothing, brands are even more important. Many people do not buy a sweatshirt because of its features – they buy it because there is a label on it showing the brand. They become part of the brand, show that they have this brand, that they can afford this brand and so on. Thus, a brand is much more than only the product, it is the whole identity around the offerings of a seller.
JUN JUHAIZI BINTI JUHARI 92 ❑ Therefore, branding adds significant value to a product : i. In short, a brand is so crucial because customers can attach meanings to brands and develop brand relationships. ii. Branding also consumers identify products that might benefit them. iii. The brand says something about the product’s quality and consistency. And you probably know yourself that buyers who always buy the same brand know that they will get the same benefits, features and quality each time. iv. The brand is the basis on which a whole story can be built about the product’s special qualities. The product gets an identity with which consumers can identify each time they buy a product of that brand. Types of Branding 1) Manufacturer-brand – a brand created, used and owned by the manufacturer. 2) Private-brand (retailer or wholesaler brands) – a brand created, used and owned by resellers. 3) Licensed-brand - The leasing of a brand name to a company other than the owner of that particular brand. 4) Co-brand – occurs when two established brand names of different companies are used on the same product.
JUN JUHAIZI BINTI JUHARI 93 Branding Development/ Brand Strategy 1) Line Extension – company adds new features to its existing brands in the same categories. E.g. F&N Tonic Water, F&N Soda Water 2) Brand Extension – marketers extend existing brand name into new product categories. E.g. MAS, MAS Cargo, MAS Golden Holidays, MAS Academy, MAS Aerotechnologies.
JUN JUHAIZI BINTI JUHARI 94 3) Multi-Branding – introduce new brands into an already existing categories. E.g. Viva, Myvi, Alza, Axia. 4) New Brands – launch new brand into a new product category. E.g. Nestle introduced new brands each time they launch a new product. E.g Mountain Wash and After Eight
JUN JUHAIZI BINTI JUHARI 95 Packaging ❑ It refers to activities of designing and producing the wrapper or container for a product. ❑ Traditionally, the primary function of a package was to hold and protect the product. ❑ However, packaging is nowadays an important marketing tool, too. This is a result of increased competition and offer of products. Packaging must now perform many tasks, which include attracting attention, describing the product, and even making the sale. ❑ To illustrate the importance of packaging, we will look at the highly competitive environment in supermarkets. A normal shopper passes by some 300 items per minute. Therefore, the package may be the seller’s best and last chance to influence the buyer. It has become, in fact, a significant promotional tool. ❑ In addition, poorly designed packages can harm a lot. For instance, hard-to-open packages such as DVD cases with sticky labels or sealed plastic clamshell containers do not contribute to the buyer’s satisfaction. Indeed, customer frustration is often the result. ❑ Finally, in making packaging decisions, companies should also have environmental considerations. “Green” packaging, meaning the use of environmentally responsible packaging materials, becomes more and more important and adds value to many products. Levels of packaging 1) First-level package – this is the packaging that holds the actual product. 2) Second-level package – in some cases, the first level package is protected by one or more outer packages. 3) Third-level package – this packaging is used to transport the customer package through the supply chain. Importance of Packaging ➢ Promotion/ ➢ attraction ➢ Instant recognition ➢ Functionality ➢ Safety ➢ Environmental advantage
JUN JUHAIZI BINTI JUHARI 96 Labelling ❑ Labels perform several functions and are therefore one of the important individual product decisions. ❑ The most straight-forward function is to identify the product or brand. But the label can also describe several things about the product: who made it, where and when was it made, the contents, how it is to be used etc. Finally, the label can promote a brand. It supports the brand’s positioning and may help to connect with customers. By a brand logo, the label can add personality to a brand and contribute to the brand identity. ❑ However, a label should only show and state what is true and what the customer can rely upon. Misleading or deceptive labels must be seen as unfair competition. If labels mislead customers, fail to describe important ingredients or even fail to mention required safety warnings, legal consequences are likely to follow. ❑ Labelling has also been affected recently by unit pricing (the price per unit of standard measure must be stated), open dating (the expected shelf life of the
JUN JUHAIZI BINTI JUHARI 97 product must be mentioned) and nutritional labelling (the nutritional values in the product must be shown). These elements are required by law. Product Support Services ❑ Individual product decisions also include product support services. ❑ Usually, the company’s offer includes some form of customer service, of product support services. ❑ This can be a minor part of the product or a major part of the total offering. ❑ Product support services contribute to the augmented product, as defined by the three levels of product. Without doubt, support services do also belong to the significant individual product decisions because they contribute to the customer’s overall brand experience. ❑ The key is to keep customers happy after the sale to build lasting relationships.
JUN JUHAIZI BINTI JUHARI 98 2) Product Line Decisions ❑ Product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets or fall within given price ranges. ❑ For example, Nike produces several lines of athletic shoes and apparel. Toyota produces several lines of cars. Colgate Palmolive produces several lines of toiletries. ❑ The major product line decision involves product line length – the number of items in the product line. ❑ A product line is too short if profits can be increased by adding items; the line is too long if profits can be increased by dropping items. ❑ A company cane expands its product line in two ways: 1) by line filling: A company may decide to lengthen the existing product line Decisions(s) by adding more items. 2) by line stretching: Product lines tend to lengthen over the years for different reasons such as excess manufacturing capacity, new market opportunities, demand from sales force and resellers for a richer product line to satisfy customers with varied preferences, and competitive compulsions.
JUN JUHAIZI BINTI JUHARI 99 3) Product Mix Decisions ❑ A product Mix or product assortments consists of all the product lines and items that a particular seller offers for sale. ❑ For example, Avon’s product mix consists of four major product lines: beauty products, wellness products, jewelry and accessories, and inspirational product. ❑ The product mix, also called product portfolio, is the set of all product lines and items that a company offers for sale. ❑ For instance, the product mix of Colgate consists of three product lines: oral care, personal care and pet nutrition. ❑ Each of these product lines, in turn, consists of several sub-lines. A vehicle manufacturer may have two product lines: motorbikes and cars. ❑ Product mix decisions need to be taken for the whole product mix and affect each line.
JUN JUHAIZI BINTI JUHARI 100 4 Dimensions of the Product Mix Decisions ▪ Four important dimensions of a product mix can be identified. ▪ These are: width, length, depth, and consistency. 1) The Product Mix Width. ▪ The width is all about the number of different product lines the company carries. ▪ As mentioned in the previous example, Colgate has 3 product lines. Thus, it has a rather limited width. 2) The Product Mix Length ▪ It refers to the total number of items a company carries within the product lines. ▪ For instance, Colgate carries several different brands within each line. In Colgate’s oral care product line, several different categories of toothpastes can be identified. ▪ A car manufacturer may have several series in its car product line, such as 3-series, 5- series, and 7-series. 3) The Product Mix Depth. ▪ It refers to the number of versions offered for each product in the product line. ▪ For instance, Colgate toothpastes come in several tastes and variations. ▪ The vehicle manufacturer’s 3-series in the car product line may be offered in several versions: convertible, coupé, sedan, and so further. 4) The Consistency of a Product Mix ▪ Consistency refers to how closely related the product lines are in terms of end use, production requirements, distribution channels or any other way. ▪ In Colgate’s case, we can observe a rather strong consistency, which is based on the fact that all product lines constitute consumer products and go through the same distribution channels. ▪ The vehicle manufacturer also has a relatively consistent product mix, since both product lines contain consumer-vehicles, can be sold in the same way etc.