Transcript No Slide Title - Indian Institute of Management Bangalore

The slides are in the following order
1.`
2.
3.
Consumer Behavior
Industrial Buying Behavior
Marketing Strategies
Consumer Buying Behavior
Analyzing Consumer Markets and Buying
Behavior
Interest in examining aggregate market response to firm
specific decision variables
 understanding
 explaining
 predicting
Method
 analyze individual level behavior
 analyse aggregate market behavior
Analysing Consumer Markets and
Buying Behavior
Translation of individual level behavioral analysis to
aggregate level market response is faced with the issues of
aggregation bias and consumer heterogeneity
A prime characteristic of consumers is their variation in
preferences, tastes, likes, dislikes, purchase behavior
patterns. Meaning thereby that markets are heterogenous
and consumers exhibit heterogeneity
Object of consumer behavior analysis - buyer or user ?
 answer - both with emphasis on decision maker
Behavioral processes of consumers
An integrative conceptual framework
Communication
sensitivity
Accultured
individuality
Rational and
Economic
Decision making
Society and
Market
Environment
() – Behavioral
Process of
Consumers
Behavioral Processes of ConsumersCommunication Sensitivity
Within Market
Within
Market
Communication sensitivity
Firm To
Market
Word of Mouth
Diffusion Processes
Firm to Market
-Consumer Behaviour Concepts
-One way/Two way.
Behavioral Processes of ConsumersCommunication sensitivity
Consumer Behaviour Concepts – Endogenous
Factors
Selectivity
Involvement
Persuasion
Selectivity
Selective attention – Marketers have to work hard to get consumer’s notice –
consumers are more likely to notice stimuli of current need, stimuli
they anticipate, stimuli whose deviations are large e.g. $25 off $100
rather than $5
Selective distortion – tendency to twist information into personal meanings that
will fit our preconceptions e.g. A customer of LG may interpret an
advertisement saying that they are No. 1 company in Microelectronics to
be No.1 company in all of consumer durables
Selective Retention – consumers likely to remember good points of products they
like and forget good points of competing products e.g. a user may
remember that Pears soap is the only soap good for dry skin though
in the market Dove and Mysore Sandal Gold is also good for dry skin
Involvement
Krugman proposed the concept of level of involvement influencing
buyer behavior. Products purchased are either low involvement
Or high involvement. Assael has classified types of buying behavior
based on involvement – See slide next
Persuasion
Low Involvement products use the peripheral route to persuasion
e.g. celebrity endorsements
High Involvement products use both the central route (cognitive reason)
to persuasion and the peripheral route to persuasion.
Assael’s Classification of types of
Buying Behaviour
High Involvement
Significant
Difference
Between
Brands
Few
Difference
Between
Brands
Complex Buying
Behaviour
Dissonance
Reducing
Behaviour
Low Involvement
Variety-Seeking’
Buying
Behaviour
Habitual
Buying
Behaviour
Assael’s Classification of types of
Buying Behaviour
Complex: First develop beliefs about product.
Then develop attitudes and then make a
choice
Dissonance: First Act, then develop beliefs.
Then end up with attitudes
Habitual: salt- out of habit, beliefs from
passive learning-choice- evaluation/attitudes
Variety seeking- lot of brand switchingchocolates (Low involvement)-Beliefs-ChoiceAttitudes.
Behavioral Processes of ConsumersAccultured Individuality
Culture
Sub Culture
Social Class
Personal
- Age and Life cycle
- Occupation
- Economic
Circumstances
Accultured
Individuality
Consumer Behaviour
Concepts
•Personality and Self
concept
•Life style
•Motivation
Social
-Reference groups
-Family
-Roles and Status
Independent Factors
1.
Culture –
a) Cultural factors exert the deepest and broadest influence on
buyer behavior. Culture is fundamental determinant of a person’s wants
and behavior
b) Subculture – countries, regions, races, religions
c) Social class
2.
Social factors
a.
Reference groups – primary (family, coworkers), secondary
(religious groups)
b.
Reference groups – aspirational groups and disassociative groups
c.
Three influences of reference groups –
1. individual exposed to new behaviors, lifestyle
2. create pressures for conformity (affects choice thereby)
3. influence attitudes and self concept
2.
Social Factors
- Family
- Family of orientation – influences beliefs, values, attitudes
- Family of procreation – influences day-to-day living and
purchases
3.
People buy products that communicate their role and status in society
Endogenous Factors – Accultured Individuality
Lifestyle
A lifestyle is a person’s pattern of living in the world as expressed in
activities, interests, opinions. Lifestyle portrays the ‘whole person’.
Marketers search for relationships between their products and lifestyle
groups. If it is found that most computer buyers for home purpose are
achievement oriented, then the marketer may aim his brand at
achiever lifestyle
Psychographics is a way of using psychology and demographics for
understanding consumers. VALS of SRI consulting is a useful framework
Accultured Individuality – Endogenous factors
Personality and Self Concept
Personality is a set of distinguishing human psychological traits that lead to
Consistent responses to environmental stimuli. E.g. Self Confidence, dominance
Autonomy, sociability, defensiveness
Brand Personality is a specific mix of human traits attributable to a particular brand
Consumers choose brands which have a personality similar to that of their own.
Self Concept
- Actual self concept – how he/she views him/herself
- ideal self-concept – how she/he likes to view her/himself
- others self concept – how he/she thinks others see him/her
A marketer has to judge the form of self concept from the above to market his brand
Endogenous Factors – Accultured Individuality
Motivation
A person has many needs (biogenic, psychogenic). A need becomes a motive
When it is aroused to a sufficient level of intensity. In other words a motive
is a need that is sufficiently pressing to drive the person to act.
Freud’s Theory
Motivation Theories
Maslow’s Theory
Herzberg Theory
H
e
r
z
b
Freud’s Theory
Consumers’ behavior is shaped largely by unconscious psychological forces.
A technique called LADDERING is used to trace the person’s motivation
From the stated ones to the terminal ones. The marketer can then decide to
Target his appeal to the most appropriate level.
Motivation researchers also use projective techniques such as word association
Sentence completion, picture interpretation etc.
Maslow’s Theory
Self Actualization Needs
Esteem Needs
S
Social Needs
o
c Safety Needs
i
Physiological
Needs
a
l
This helps how various products fit into lives, goals and plans of consumers.
Consumers fill their needs starting from lowest to highest. So it is not of much use
to target a high end need product to a person who is still satisfying his lower
end need.
Endogenous Factors – Accultured Individuality – Motivation
Herzberg Theory
Factors for buyer motivation are of two types – hygiene factors (or
Dissatisfier removers) and motivators (satisfiers). It is not enough if hygiene
Factors are present. Motivators must be present for a purchase.
Behavioral Processes of Consumers- Beliefs
and Attitudes
Communicati Accultured
on
Individuality
sensitivity
Beliefs/Values
Experience & usage
In Decision making
For consumption
Society & Mkt. Environment
Attitudes
Inputs from rational and Economic
Decision Making
Beliefs / Values and Attitudes
A Belief is a descriptive thought that a person holds about something. On Blind
Test Diet Coke and Diet Pepsi are equally preferred. But on revealing brand
Names Diet Coke was preferred by 65% of consumers and Diet Pepsi by 35%.
This is an illustration of role of beliefs.
An attitude is a person’s enduring favorable or unfavorable evaluations,
emotional feelings and action tendencies toward some object or idea.
A marketer is well advised to fit his product into existing attitudes rather than try
To change attitudes, which take a long time. Sometimes it pays to change
Attitudes
1. Buying New in exchange for old – pays to change attitude as market
is going to be large
2. These days food brands should have a diet variety as there is
health consciousness in the market – pays to fit product
Behavioral Processes of ConsumersRational and Economic Decision making
Decision making process
- Need Recognition
- Information Search
- Evaluation (perception)
- Purchase (Preference)
- Post-Purchase
Behavioral Processes of ConsumersRational and Economic Decision Making
Consumer Behaviour
Processes/Concepts
Individual constraints
Budget constraints
Situational factors
Beliefs and values
Attitudes
Market environment
Store Environment
Firm decision variable
Competitor decision variable
Rational and
Economic
Decision making
Post Purchase
Feelings
-Cognitive
Dissonance
-Contrast Theory
Behavioral Outcomes of Rational and
Economic Decision making Process
Evoked set
Consideration set
Rational and
Economic
Decision making
Post purchase feelings
Purchase intention
Purchase preference
Purchase Behaviour
Purchase behaviour decisions
What to Buy (Basket of goods decision)
Where to Buy (Store choice)
Which brands to buy (Brand choice)
How much to Buy (purchase quantity)
How often to Buy (Purchase timing)
Industrial Buying Behavior
Issues in Industrial Markets
Institutional
markets
Large
organizational
Organizational
markets
markets
Government markets
Small
business
market
1.
Fewer, Larger Buyers – Tire manufacturers have OEM contracts with few
automobile manufacturers.
2.
Close supplier customer relationship – as there are fewer customers, suppliers
tend to develop a closer customer relationship. WIPRO’s close relationship
with IIMB, for the sale of computers
3.
Professional purchasing – use of buying instruments such as quotations,
proposals and purchasing contracts; buyers guided by firm’s purchasing
policies, constraints and requirements
4.
Several buying influences – the buying committee may consist of technical
experts, senior management, gatekeepers from consultancies etc. Thus the seller
should send trained sales people.
5.
Multiple sales calls – sales cycles extends from few days to few years; thus seller
needs to make multiple sales calls to win orders.
6.
Derived demand – The demand for industrial goods is driven by the
demand for consumer goods. The boom in the construction industry is
driving the demand for cement and steel.
7.
Inelastic demand – Demand for many business goods and services is inelastic
- that is not much affected by price changes. For example the demand for
batteries is not going to change much with price as the demand of batteries
is driven by the demand for automobiles.
8.
Fluctuating demand – A small increase in the consumer demand can give rise
to a significantly large increase in industrial demand – this effect is called the
acceleration effect. Similarly a 10% fall in consumer demand can cause a
significant decrease of the industrial demand.
9.
Geographically concentrated buyers – there is clustering to rationalize
production – software in Bangalore; hosiery in Coimbatore; auto-ancillaries
in Pune and Nasik etc.
10. Direct Purchasing – Firms buy direct mostly rather than thru intermediaries
Key Elements of Industrial Buying Behavior
Buy Situations
Buying Process
Straight Re-buy – routine order –
consumables, office supplies; outside
Suppliers tend to get in on dissatisfac
tion of existing supplier
Modified Rebuy – Modify specs,
Prices, delivery requirements. InSuppliers have to protect an account;
Out-suppliers try for an opportunity
e.g. computers
New Task – Buy for first time; greater the cost / risk –longer it takes to decide
Pass through stages – awareness, interest, evaluation, trial, adoption.
Includes setting specs, price limits, delivery terms, order qty, acceptable
Suppliers and selected supplier(s). Because of complex selling use of
Dedicated missionary sales force.
Systems Buying and Selling – also called turnkey solutions – key industrial
Marketing strategy in bidding large projects – dams, steel factories etc.
Buying Centre - Includes all members of the organization who play any of seven
roles in the purchase decision process
1.
Initiators – those who put up the request
2.
Users - Those who use the product; many times the user is
the initiator
3.
Influencers – help define specs, provide info for evaluating
alternatives, technical people are good influencers
4.
Deciders – those who decide on requirements.
5.
Approvers – those who authorize deciders and buyers
6.
Buyers – members authorized to select supplier and decide terms
7.
Gatekeepers – Members who are info conduits to other
members of buy center e.g. receptionists , agents
Characteristics of BUY CENTER
 Several individuals can occupy a given role (e.g. many users / influencers) and
one individual can occupy multiple roles.
 The buying center may include people outside the organization such as
government officials, consultants, technical advisors and other members of the
marketing channel.
 Different members of the buy centre have different influences, for e.g. the
engineering department may be concerned with actual performance of the
product, whereas production may be more interested in ease of use and reliability
of supply.
 Members of buy centre – different personal motivations, perceptions and
Preferences which in turn are dependent on - age, income, education, job position,
personality, attitudes towards risk and culture
Characteristics of BUY CENTER ……….. Cont…….
Small sellers are advised to concentrate on key buying influencers. Large sellers
Go for multilevel in-depth selling
Sellers are advised to periodically question or revise their assumptions about the
Buy center to adapt to organizational changes
Purchasing / Buying Orientations
1. Buying Orientation – Buy at lowest price given a quality level . Use two
Techniques (a) commoditization – regard the product is only a commodity and
care only about price (b) multisourcing to bring in competition among vendors
2. Procurement Orientation – look for collaborative relationships and seek
savings through better management – such as material requirements
planning, just-in-time management and even product design.
3. Supply Chain Management Orientation – purchasing is a strategic value
adding operation and purchase department betters its role as a part of the value
chain from raw materials to finished goods
BUYGRID FRAMEWORK
BUYCLASSES
New Modified
Task Rebuy
1.
2.
BUY
PHASES 3.
4.
5.
6.
7.
8.
Problem recognition
General need description
Product specification
Supplier Search
Proposal Solicitation
Supplier selection
Order-routine specification
Performance review
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Maybe
Maybe
Yes
Maybe
Maybe
Maybe
Maybe
Yes
Straight
Rebuy
No
No
Yes
No
No
No
No
Yes
Marketer stimulates problem recognition by
Direct mail, telemarketing, calling on prospects
Internal stimuli – new product development
for which parts are needed, breakdown of
equipment, existing suppliers unsatisfactory
Problem recognition
Buyer attends a trade show
Purchase Manager senses an opportunity to
get lower prices or better quality
Standard items – go as per internal records or
as per specs laid out in ISI documents
Complex items – collaborate with engineers,
users; else sit with marketer’s application
engineers who do consultative selling and
work out specs and likely price
General need description
and product specification
Certain buying organizations attach a PVA or
product value analysis team to the project
who will conduct extensive analysis to arrive
at specs that will lead to minimum cost
Supplier Search
Identify suppliers
- trade directories, hunt online catalogs for suppliers
- trade shows
- trade advertisements
- Internet search – Websites have two types of e-hubs
Vertical hubs centered on industries
-plastics, steel, paper
Functional hubs centered on logistics
media buying, advertising
-Direct extranet links to major suppliers
(WalMart – P&G)
-Buying alliances to get best price.
Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette
P&G, have joined to form alliance – Transora
-Company buying sites – Firms like GE have their
own site where it places Requests for Proposal,
negotiate terms, place orders
Invite suppliers to make detailed proposals
Set up quality standards if any e.g ISO 9000 or
ISI etc.
Proposal Solicitation
Large technology systems need a detailed
Techno-Commercial proposal. The technical
quote will be cleared first and after that only
qualified technical bidders will be called for
commercial negotiation
Buyers can invite suppliers to make presentations.
A supplier rating list is made by some companies
based on relative importance given to a select set
of attributes.
For routine order products the factors are : price,
supplier reputation, delivery .
Supplier Selection
For procedural problem products such as copiers the
important attributes are : technical service, supplier
flexibility, reliability and price
For political problem products such as choice of a
set of computers the factors are price, reputation,
reliability and flexibility
One way to encounter price factor from supplier side
is to talk of total cost of product or life cycle cost.
Buyers negotiate the final order with the selected
suppliers, and details the tech. specs., the quantity
the delivery time, return policies, warranties etc.
For maintenance and repair items , firms are moving
towards a blanket contract that establishes a long run
relation. Such contracts are called stockless
purchase plans as the stock is held by the supplier
Order routine
specification
Long run contracts are also agreed upon in case of
shortage raw materials / inputs so that there is a
steady flow of material. In many cases the supplier
locates his factory near the buyer for bringing down
inventory and transport costs.
Vendor managed inventory is when the responsibility
rests with the vendor for maintaining inventory
Important parameters to see are OT – deliver on time
IF – in full, NE – No error
Three methods of review
1
2
3.
Performance Review
4.
Ask for evaluation from buyers
Buyer rates supplier on weighted score
method
Based on drawbacks of performance the
buyer may come up with adjusted cost
of purchase including price
Managers are rewarded for good buying
performance
Institutional and Government Markets
1.
2.
3.
4.
5.
6.
7.
Institutional Markets are – schools, colleges, universities, hospitals,
nursing homes.
Institutions normally ask for lowest price given a minimum quality
In government organizations the normal process is bidding with the
order going to the lowest bidder(s)
Negotiated contracts are applicable where the project is complex and
risky.
Governments tend to favor domestic suppliers
Government decisions are subject to review, so there is lot of paperwork
in contracting
Director General of Supplies and Disposals is the central purchasing unit of
Indian Government.
Marketing Strategies
Strategy
the art or skill of using stratagems in business, politics, courtship or like
(American Heritage Dictionary of the English Language, 1973, p 1273)
a plan of action resulting from the practice of this art or science
the set of strategic decisions for a particular marketing situation
guidelines for decision making in a contingent framework
apportionment of relative emphasis among the different elements of
the strategic decision set
Marketing Strategy
Business
Strategy
Technology Strategy
Sourcing Strategy
Other functional Strategies
Marketing
Conceptualization
Design
Build Up
of
Marketing
to
Programs
Identify and satisfy customer needs and wants
Through exchange processes simultaneously
Fulfilling organizational objectives
Execution
Monitor
Strategy
Long term implications
Huge Investments
Contingency Build Up
Market Orientation
=
Customer Orientation
+
Competitor Focus
+
Inter-Organization Orientation
Marketing Strategy
Integration of the elements of marketing into a marketing mix that includes :
Market entry / timing
Market selection encompassing segmentation
Differentiation and Positioning
Product planning
Pricing
Distribution systems
Marketing communications
Functionalities
Market exit
Evolution of marketing strategy as the market grows and matures Introduction - market development
Rapid growth - expansion of primary demand, product proliferation
Levelling - off - maximize market share as total demand has levelled
Market maturity - maintain mkt share, customer service / satisfaction
Marketing Strategy Formulation
Marketing Strategy
- STP
- Decisions in the Marketing Consideration set
as outlined in the previous slide
- Communication of the Value
Value Proposition
Positioning
Slogan Writing
Branding
Marketing Strategy Implementation
Intensive Growth Opportunities
Growth Opportunities
Integrative Growth Opportunities
Diversification Growth Opportunities
Intensive Growth Strategies – Ansoff’s Product-Market Expansion Grid
Current Products
Current
Markets
Market
Penetration Strategy
New
Markets
Market Development Strategy
New Products
Product Development Strategy
(Diversification Strategy)
Identification of Growth Opportunities … cont
Integrative growth opportunities
backward (acquiring suppliers) , forward (acquiring
channel members) and horizontal integration (acquiring
competitors)
Diversification growth opportunities
concentric – technological or marketing synergies to a new
group of consumers e.g. audio cassettes from
a firm making computer tape
Conglomerate – new opportunities which have no relation
to current technologies, products or markets
Reliance into Telecom
Horizontal diversification – Appeal to current customers
with new technologies e.g. Music company
produces CD / Cassette racks
The strategic square of marketing strategy
Market Leader
Market Nichers
Market Followers
Market Challengers
Expand the total Market
Market Leaders
Defend Market Share
Increase Market share if that is
profitable
Penetrate those who might use it but do not e.g.
mobile usage among housewives when they go shopping
New users
Those who have never used it – toothpowder among
hard rural
In another geographical market – use of paan in
western markets
Expand total market
New uses
Use product development – email for computer
Increase quantity of consumption e.g. Vicks originally
On nose, later on chest and back
More usage
Increase frequency of consumption e.g. Use
Pepsi / Coke as light user to medium and heavy user
Defend Market Share
Flanking Defense
ConFrontation
Strategy
Proactive
Reactive
Competitor
or
potential
competitor
Fortress
or Position
Defense
strategy
Leader
Pre emptive
defense
Counter
Offensive
defense
Mobile
Defense
Contraction
or
Strategic
withdrawal
Possibility of invoking dominant firm action as laid out in the
Competition Act of India
economic cost of obtaining market share may exceed the resulting
profit. The incremental customers’ conditions for adopting the firm’s
products may not be attractive – loyal to competitors, have unique
Needs. Sometimes profit can be improved by decreasing mkt. share
Expand Market Share
If profitable
Inappropriate marketing mix – as in excessive expenditures on advertising
System problems on high growth, effects on maintaining quality
Challenger Strategies
Leapfrog strategy
Flanking attack
Guerilla
attack
Target
Competitor
Frontal Challenger
attack
Encirclement Strategy
Specific attack strategies of Challengers
- Price discount – Big Bazaar
- Low Price Goods – Ruf and Tuf Jeans
- Value Priced goods – Nirma, Subhiksha
- Prestige goods – Challenger can offer higher quality product at higher price –
Apartment market in Bangalore, better amenity flats are coming up
- Product proliferation – Baskin-Robbins offered more flavors to beat competition
- Product Innovation – 3M enters new markets with an innovation
- Improved services – Avis vs Hertz
- Distribution Innovation – Avon vs leading cosmetic firms
- Intensive advertising promotion – HLL in toothpastes vs Colgate
Follower Strategies
Counterfeiter- duplicates product and sells in black market thru
Disreputable dealers – Apple Computer, Rolex watches
Cloner – emulates leader’s product – PC Market
Market Follower
Strategies
Imitator – copies but maintains differentiation in packaging, advertising
Pricing, location e.g. Matsushita in Japanese is ‘maneshita denki’ meaning
Electronics copied.
Adapter – adapts or improves leader’s products e.g. Sony
Innovates then LG, Samsung bring out improved versions
Nicher
Nicher – leader in a small market or niche. Better margin than mass marketer as end user needs
served better by nicher
Some useful Nicher roles
- end user specialist – software for banks
- vertical level specialist – copper company concentrates on producing finished goods
- Specific Customer specialist – P&G – WalMart
- Service specialist – banks take loan requests over phone and delivers money personally