1 Marketing Processes and Consumer Behavior11

2 Explain the concept of marketing and identify the five forces that constitute the external marketing environment Explain the purpose of a marketing plan and identify its main components Explain market segmentation and how it is used in target marketing Discuss the purpose of marketing research, and compare the four marketing research methods

3 Describe the consumer buying process and the key factors that influence that process.Discuss the four categories of organizational markets, and the characteristics of Business-to-Business (B2B) buying behavior Discuss the marketing mix as it applies to small business

4 Marketing What Is Marketing?organizational function and a set of processes for creating, communicating, and delivering value to customers, and for managing customer relationships in ways that benefit the organization and its stakeholders Most of us think of marketing as advertisements for detergents and soft drinks. Marketing, however, encompasses a much wider range of activities. The American Marketing Association defines marketing as “activities, a set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

5 Value Delivering Valuerelative comparison of a product’s benefits versus its costs The value of a product compares its benefits with its costs. Benefits include not only the functions of the product, but also the emotional satisfaction associated with owning, experiencing, or possessing it. But every product has costs, including sales price, the expenditure of the buyer’s time, and even the emotional costs of making a purchase decision. A satisfied customer perceives the benefits derived from the purchase to be greater than its costs.

6 Delivering Value (cont.)A company may: develop an entirely new product that performs better than existing products keep a store open longer hours during a busy season offer price reductions offer information that explains how a product can be used in new ways To satisfy customers, a company may: Develop an entirely new product that performs better (provides greater performance benefits) than existing products. Keep a store open longer hours during a busy season (adding the benefit of greater shopping convenience); Offer price reductions (the benefit of lower costs); Offer information that explains how a product can be used in new ways (the benefit of new uses at no added cost).

7 Goods, Services, and IdeasConsumer Goods physical products purchased by consumers for personal use Industrial Goods physical products purchased by companies to produce other products Services products having nonphysical features, such as information, expertise, or an activity that can be purchased In a department store, an employee may ask if you’d like to try a new cologne. A pharmaceutical company proclaims the virtues of its new cold medicine. Your local auto dealer offers an economy car at an economy price. These products are all consumer goods, tangible goods that you, the consumer, may buy for personal use. Firms that sell goods to consumers for personal consumption are engaged in consumer marketing, also known as business-to-consumer (B2C) marketing. Marketing also applies to industrial goods, physical items used by companies to produce other products. Surgical instruments and bulldozers are industrial goods, as are components and raw materials such as integrated circuits, steel, coffee beans, and plastic. Firms that sell goods to other companies are engaged in industrial marketing, also known as business-to-business (B2B) marketing. But marketing techniques are also applied to services, products with intangible (nonphysical) features, such as professional advice, timely information for decisions, or arrangements for a vacation. Service marketing, the application of marketing for services, continues to be a major growth area in the United States.

8 The External Marketing EnvironmentMarketing strategies are not determined unilaterally by any business—rather, they are strongly influenced by powerful outside forces. As you see in Figure 11.1, every marketing program must recognize the factors in a company’s external environment, which is everything outside an organization’s boundaries that might affect it.

9 The Marketing EnvironmentPolitical-Legal Environment the relationship between business and government, usually in the form of government regulation of business Sociocultural Environment the customs, mores, values, and demographic characteristics of the society in which an organization functions The political-legal environment, both global and domestic, have profound effects on marketing. For example, environmental legislation has determined the destinies of entire industries. The sociocultural environment also impacts marketing. Changing social values force companies to develop and promote new products, such as poultry and meat without antibiotics and growth hormones, for both individual consumers and industrial customers.

10 The Marketing Environment (cont.)Technological Environment all the ways by which firms create value for their constituents Economic Environment relevant conditions that exist in the economic system in which a company operates The technological environment creates new goods and services. New products make existing products obsolete, and many products change our values and lifestyles. In turn, lifestyle changes often stimulate new products not directly related to the new technologies themselves. Mobile devices, the availability of a vast array of apps, and social media, for example, facilitate business communication just as prepackaged meals provide convenience for busy household cooks. Because they determine spending patterns by consumers, businesses, and governments, the economic environment influences marketing plans for product offerings, pricing, and promotional strategies. Marketers are concerned with such economic variables as inflation, interest rates, and recession. Thus, they monitor the general business cycle to anticipate trends in consumer and business spending.

11 Strategy: The Marketing MixProduct good, service, or idea that is marketed to fill consumers’ needs and wants Product Differentiation creation of a product feature or product image that differs enough from existing products to attract customers Marketing begins with a product, a good, a service, or an idea designed to fill a customer’s need or want. Product differentiation is the creation of a feature or image that makes a product differ enough from existing products to attract customers.

12 Strategy: The Marketing Mix (cont.)Pricing process of determining the best price at which to sell a product Place (Distribution) part of the marketing mix concerned with getting products from producers to consumers Promotion aspect of the marketing mix concerned with the most effective techniques for communicating information about products The pricing of a product, selecting the best price at which to sell it, is often a balancing act. On the one hand, prices must support a variety of costs, such as operating, administrative, research costs, and marketing costs. On the other hand, prices can’t be so high that customers turn to competitors. In the marketing mix, place (or distribution) refers to where and how customers get access to the products they buy. When products are created, they must become available to customers at some location (place) such as a retail store, or on the Internet, or by direct delivery to the customer. The most visible component of the marketing mix is no doubt promotion, which is a set of techniques for communicating information about products. The most important promotional tools include advertising, personal selling, sales promotions, publicity/public relations, and direct or interactive marketing.

13 Advertising Personal SellingPromotion Advertising any form of paid non-personal communication used by an identified sponsor to persuade or inform potential buyers about a product Personal Selling person-to person sales Advertising is any form of paid non-personal communication used by an identified sponsor to persuade or inform potential buyers about a product. For example, financial advisory companies that provide investment and securities products reach their customer audience by advertising in Fortune magazine and on the Bloomberg television network. Many products (such as insurance, custom-designed clothing, and real estate) are best promoted through personal selling, person-to-person sales. Industrial goods and services rely significantly on personal selling.

14 Sales Promotion Public Relations Promotion (cont.)direct inducements such as premiums, coupons, and package inserts to tempt consumers to buy products Public Relations communication efforts directed at building goodwill and favorable attitudes in the minds of the public toward the organization and its products Historically, relatively inexpensive items have often been marketed through sales promotions, which involve one-time direct inducements to buyers. Premiums (usually free gifts), coupons, and package inserts are all sales promotions meant to tempt consumers to buy products. Public relations includes all communication efforts directed at building goodwill. It seeks to build favorable attitudes in the minds of the public toward the organization and its products.

15 Integrated Marketing StrategyIntegrated Strategy Integrated Marketing Strategy strategy that blends together the Four Ps of marketing to ensure their compatibility with one another, as well as with the company’s non-marketing activities An integrated marketing strategy ensures that the Four Ps blend together so that they are compatible with one another and with the company’s non-marketing activities.

16 Target Marketing and Market Segmentationgroup of people who have similar wants and needs and can be expected to show interest in the same products Market Segmentation process of dividing a market into categories of customer types, or “segments” The emergence of the marketing concept and the recognition of customers’ needs and wants led marketers to think in terms of target markets—the particular groups of people or organizations on which a firm’s marketing efforts are focused. Selecting target markets is usually the first step in the marketing strategy. Target marketing requires market segmentation, dividing a market into categories of customer types or “segments” having similar wants and needs and who can be expected to show interest in the same products. Once they have identified segments, companies may adopt a variety of strategies.

17 Target Marketing and Market Segmentation (cont.)Product Positioning process of fixing, adapting, and communicating the nature of a product Once marketers identify a target segment, they can begin marketing products for that segment. The process of fixing, adapting, and communicating the nature of the product itself is called product positioning.

18 Marketing Research Marketing Researchthe study of what customers need and want and how best to meet those needs and wants Marketing research, the study of what customers need and want and how best to meet those needs and wants, is a powerful tool for gaining decision-making information.

19 Marketing Research (cont.)The relationship of research to the overall marketing process is shown in Figure 11.3.

20 Secondary Data Primary Data Research Datadata that are already available from previous research Primary Data new data that are collected from newly performed research Secondary data are already available from previous research. The Statistical Abstract of the United States offers data on geographic and demographic variables. Secondary data can save time, effort, and money. When secondary sources are unavailable or inadequate, researchers must obtain primary data, new data from newly performed research.

21 Understanding Consumer Behaviorstudy of the decision process by which people buy and consume products Psychological Influences include an individual’s motivations, perceptions, ability to learn, and attitudes that marketers use to study buying behavior Personal Influences include lifestyle, personality, and economic status that marketers use to study buying behavior What desire are consumers fulfilling? Is there a psychological or sociological explanation for why they purchase one product and not another? These questions and many others are addressed in the study of consumer behavior, the study of the decision process by which people buy and consume products. To understand consumer behavior, marketers draw heavily on such fields as psychology and sociology. The result is a focus on four major influences on consumer behavior: (1) psychological, (2) personal, (3) social, and (3) cultural. By identifying which influences are most active in certain circumstances, marketers try to explain consumer choices and predict future buying behavior.

22 Understanding Consumer Behavior (cont.)Social Influences include family, opinion leaders (people whose opinions are sought by others), and such reference groups as friends, coworkers, and professional associates that marketers use to study buying behavior Cultural Influences include culture, subculture, and social class influences that marketers use to study buying behavior

23 Understanding Consumer Behavior (cont.)Brand Loyalty pattern of regular consumer purchasing based on satisfaction with a product’s performance Although these factors can have a strong impact on a consumer’s choices, their effect on actual purchases is sometimes weak or negligible. Some consumers, for example, exhibit high brand loyalty, they regularly purchase products, such as McDonald’s foods, because they are satisfied with their performance

24 Business Marketing Services Companies Market Industrial Marketfirms engaged in the business of providing services to the purchasing public Industrial Market organizational market consisting of firms that buy goods that are either converted into products or used during production Reseller Market organizational market consisting of intermediaries that buy and resell finished goods The services companies market encompasses the many firms that provide services to the purchasing public. Imagine, for example, the materials and supplies Disney World need to provide exceptional experiences for visitors. Similar needs exist to operate Continental Airlines, MTV, and the accounting firm Ernst & Young. The industrial market includes businesses that buy goods to be converted into other products or that are used up during production. It includes farmers, manufacturers, and some retailers. Before products reach consumers, they pass through a reseller market consisting of intermediaries, including wholesalers and retailers, that buy and resell finished goods.

25 B2B Buying Behavior Industrial buyers buy in bulk or large quantitiesB2B buyers are trained in methods for negotiating purchase terms Industrial buyers are company specialists in a line of items and are often experts about the products they buy In some respects, organizational buying behavior bears little resemblance to consumer buying practices. Differences include the buyers’ purchasing skills and an emphasis on buyer-seller relationships.

26 Social Media and MarketingSocial Networking network of communications that flow among people and organizations interacting through an online platform Social Networking Media websites or access channels, such as Facebook, Twitter, LinkedIn, and YouTube, to which consumers go for information and discussions Social networking as used by marketers today refers to communications that flow among people and organizations interacting through an online platform that facilitates building social relations among its users. Social networking media are the websites or access channels, such as Facebook, Twitter, LinkedIn, and YouTube, to which millions of consumers go for information and discussions before making their purchase decisions.

27 Social Media and Marketing (cont.)Viral Marketing type of marketing that relies on the Internet to spread information like a “virus” from person to person about products and ideas Corporate Blogs comments and opinions published on the Web by or for an organization to promote its activities Viral marketing is a form marketing that relies on social networking and the Internet to spread information like a “virus” from person to person. The marketing purpose pay be to increase brand awareness, to promote new product ideas, or to foster excitement for stimulating sales. Marketers, including such giants as Bank of America, McDonald’s, eBay, and Cisco, are using corporate blogs increasingly for public relations, branding, and otherwise spreading messages that stimulate chat about products to target markets.