consumer behavior ch.2

CHAPTER 2

HOW CONSUMER ANALYSIS AFFECTS BUSINESS STRATEGY

CHAPTER OUTLINE

I. Market Analysis

A. Market analysis is the process of analyzing:

1.          Consumers

2.          Trends

3.          Current and potential competitors

4.          Company strategies and resources

5.          The technologies, legal, and economic environments

B. Consumer insight and product development

1.          Most new products fail because they do not satisfy customer’s needs, wants, and expectations.

2.          Many firms do not understand how targeted customers are likely to react to new products.

3.          Most new products would never be introduced if they were tested against consumer insight.

4.          Consumer insight is an understanding of consumers’ expressed and unspoken needs and realities that affect life, brand, and product choices.

C. Consumer environment

1. Studying the consumer environment looks at:

a. Demographic trends

b. Changing consumer needs and wants

c. Consumption patterns

d. Consumer lifestyles

D. Corporate strengths and resources

1. Analyzing corporate strengths and resources looks at:

a. Financial stability and resources

b. Personnel

c. Production

d. Research

e. Marketing abilities

E. Current and potential competitors

1.          Competitor analysis focuses strategic thinking on staying ahead of competition.

2.          Innovative firms focus on making competitors irrelevant through innovation.

3.          Firms must anticipate competitor’s reactions to advertising blitzes, price cuts, product giveaways, sales, and promotion strategies.

F. Market environment

1.          Analysis of the market environment includes looking at the state of the economy, government regulations, physical conditions, and technology.

II. Market Segmentation

A. Market segmentation is the process of identifying a group of people similar in one or more ways based on a variety of characteristics and behaviors.

B. A market segment is a group of consumers with similar needs and behavior that differ from those of the entire mass market.

C. The need for segmentation results from the differences between people.

D. By identifying segments that are similar, products can be developed that are closely matched to those group preferences.

E. Market aggregation or mass marketing, is the opposite of market segmentation.

F. The size of market segments is based on:

1.          Affluence

2.          Consumer databases

3.          Manufacturing technology

4.          Multiple distribution channels

G. Segmentation is based on identifying and appealing to consumers with similar behavior, not similar characteristics.

H. Since customers are more sophisticated and demanding of more customized products to fit their individual needs, preferences, and tastes marketers must be more critical in addressing the needs of market segments.

I. Mass customization is one way for firms to offer unique value to customers with efficiency.

1.          Creating and marketing to segments of one is the ultimate form of market segmentation and customization.

J. The ultimate goal of segmentation is increased customer satisfaction and profitability.

1.          Adding value by identifying profitable segments can increase

2.          Segmentation can increase profits by decreasing marketing expenses

K. Four criteria for choosing market segments:

1.          Measurability

2.          Accessibility

3.          Substantiality

4.          Congruity

L. Segmentation strategies and methods must continually be refined.

III. Marketing Mix Strategies

A. Consumer research is critical to developing segmentation strategy and formulating the marketing mix.

B. The marketing mix consists of:

1.          Product

2.          Price

3.          Promotion

4.          Place (or distribution)

C. Brand strategy defines a promise to consumers that the attributes they desire the most will be obtained when buy a preferred brand.

IV. Implementation

A. The best strategies are worthless if they are not executed well in the marketplace.

V. The Seven R’s of the Marketing Mix

A. Marketers are expanding the Four P’s to include the Seven R’s:

1.          Research

2.          Rate

3.          Resources

4.          Retailing

5.          Reliability

6.          Reward

7.          Relationship

VI. Customer Loyalty and Retention Strategies

A. Customer loyalty programs assist in customer retention by rewarding customer’s loyalty toward a brand, service, retailer, or organization.

B. Loyalty programs can:

1.          Provide rewards to customers

2.          Provide information to retailers

3.          Identify customer segments that can be targeted with special offers

C. Loyalty programs can strengthen customer relations by:

1.          Making individualized marketing a reality

2.          Instituting a total quality policy

3.          Introducing early warning systems to identify problems

4.          Building realistic expectations

5.          Providing guarantees

6.          Providing information on product use

7.          Soliciting customer feedback

8.          Acknowledging, addressing and rectifying customer complaints

9.          Reinforcing customer loyalty

VII. Global Marketing Strategy

A. Thinking globally involves the ability to understand markets beyond one’s own country with respect to:

1.          Sources of demand

2.          Sources of demand

3.          Methods of effective management and marketing

B. Growth-oriented firms, striving for enhanced shareholder value (ESV) have looked to global expansion to achieve growth objectives.

C. Globalization is not limited to large firms, small firms with specialized “niches” can transcend national boundaries and be successful.

D. Global market analysis start with understanding markets on a global basis in terms of people:

1.          What are their needs?

2.          What is their ability and authority to buy?

3.          What is their willingness to spend?

4.          How do they differ from current customers?

E. Can marketing be standardized?

1.          Is it possible to use one marketing program for all target countries?

2.          Must marketing programs be modified for each country?

3.          Marketers must determine what is greater, the differences between or similarities among customers of different countries and different cultures.

4.          The reality is that there are inherent cultural differences between consumers from different cultures that must be addressed in the marketing plan.

5.          Marketers must have cultural empathy to predict how consumers will buy and use products and to avoid “blunders” when entering a new market.

6.          Ethnographics can help analyze the subtle ways buyers and sellers interact in the marketplace and can be useful in negotiations.

F. Intermarket segmentation is the identification of groups of customers who transcend traditional market or geographic boundaries and is useful in understanding similarities and differences between consumers and counties that become the foundation of global marketing standardization. The challenge is to build the core of marketing strategy on universals rather than differences.

G. Localization of marketing strategies takes the position that different products and ads should be used in every country.

H. Global advertising effectiveness is attained through either globalized or localized advertising campaigns.

1.          Global campaigns send the same message to all consumers.

2.          Localized campaigns adapt messages to the cultural norms of particular markets.

3.          Advertising and product characteristics suited to globalized advertising include:

a. The communication message is based on similar lifestyles

b. The appeal of the ad is to basic human needs and emotions

c. The product satisfies universal needs and desires

I. Overcoming language problems is critical to standardizing marketing programs and avoiding communications blunders

1.          Back-translation is a useful technique for overcoming potential language problems.

J. Brand names

1.          Brand names should be evaluated from a cross-cultural perspective even if only used in domestic markets.

2.          Coined names (EXXON, Xerox) are increasing in use because they do not need to be translated.

3.          Several key questions need to be answered before using an English brand name:

a. Does the English name of the product have another meaning?

b. Can the English name be pronounced everywhere?

c. Is the name close to that of a foreign brand, or does it duplicate another product sold in English-speaking countries?

d. If the product is distinctly American, will national pride and prejudice work against the acceptance of the products?

4.          Global brands can have substantial advantages for creating awareness for a product or brand worldwide.

5.          Country-of-origin association and advantage is created if a country has the perception in the consumer’s mind to provide the best product in a specific category.

6.          There are many parts to brand, but not all parts of the brand are global.