Consumer buying behavior, pricing, and advertising

CONSUMER BUYING BEHAVIOR,PRICING, AND ADVERTISING

CONSUMER BUYING BEHAVIORS

It is beneficial for marketers to find what influences consumer purchasing

What consumers buy Why they buy the things they buy Where they buy When they buy How they buy

CONSUMER BUYING BEHAVIORS

Cultures The behaviors and beliefs characteristic of a particular

social, ethnic, or age group An important factor for influencing a person's wants

and needs Society, Family shapes our values, perceptions,

expectations, and material wants Every society has its own culture, those wants, needs,

and buying behaviors differ from those in other cultures

Subcultures Groups of people who share specific value systems

based on their common life experiences and situations Nationalities, religions, racial groups

CONSUMER BUYING BEHAVIORSSocial Class The division of groups in society based upon certain kinds of

similarities Measured by income, occupation, education, wealth

A luxury car company will most likely only market to those in a high level economic class due to affordability and the pressures and desires of people in that class

Groups and Networks Shared interests, work in the same industry, shared common

goals A casual soccer team may influence you on health interests, new

sports gear, diet, new apps for your phone Marketers may pick people who play casual sports as their target

market based on these type of influences Social Networks (online)

Introduction to movies, bands, restaurants your friends like Allows marketers to advertise to consumers based on their interests and

likes

CONSUMER BUYING BEHAVIORSFamily Can be considered a subculture Shape who we are

Parents frugalness Parents work ethics Economic rough times or high times

Directly influence our spending power, resources and immediate and long-term needs

A new baby changes your buying behavior, less nights out to dinner, saving up for a mini van, more advil!

Personal Factors Age, stage in life, job, economic situation, lifestyle, personality

Body Media Monitor versus Video Games Dress shirts and ties versus t-shirts Manicures

CONSUMER BUYING BEHAVIORS

Motive A need that is pressing enough to direct

us to seek satisfaction of that need Biological - hunger, thirst Psychological - self-esteem, desire for

recognition

CONSUMER BUYING BEHAVIORSMaslow’s Hierarchy of Needs Some people are driven more by basic needs like personal safety

while others are motivated by esteem or social recognition 5 Categories of Human Needs

1. Physiological needs - like hunger, thirst2. Safety needs - security, protection3. Social needs - sense of belonging, love4. Esteem needs - self-esteem, social status5. Self-actualization - self-improvement and self-realization

We are first motivated by our most basic of needs physiological needs for food and drink

Once that level of need has been satisfied, we look to fulfill the next level of need

Our safety and protecting ourselves and those we care about, etc

THE BUYER DECISION PROCESS

THE BUYER DECISION PROCESS

THE BUYER DECISION PROCESSStage 1: Need Recognition An individual recognizes a need or desire for the value

offered by a product or service Can be stimulated by something internal

Hunger, taste Can be stimulated by something external

An ad on TV

Stage 2: Information search Once a need is recognized a consumer may buy the

product immediately but if it is a higher priced product, they may search for further information before buying Talking to family or friends Paying closer attention to ads for such products Extensive research

THE BUYER DECISION PROCESSStage 3: Evaluation of Alternatives Information has been gathered and a choices are to be

evaluated The consumer's perception of a brand can influences his/her buying

decisions If it is well known or has a good/bad reputation

Stage 4: Purchase Decision Once alternatives are evaluated a consumer usually makes the

purchase Something can change a consumers mind at the last minute

A recent conversation Something in the news A good or bad day

A raise may push to the more expensive alternative A job loss can cancel the purchase altogether or change it to a less expensive

alternative

THE BUYER DECISION PROCESSStage 5: Post Purchase Behavior Consumer buying behavior doesn't end with the

purchase Marketers need to keep customers happy with CRM For major purchases, buyers can feel discomfort

caused by post-purchase conflict Did they make the right choice ?

Feelings of excitement and regret can happen at the same time

Companies try to make consumer post-purchase experiences for these purchases favorable Customer support, product support, quality-assurance

NEW PRODUCTSDifferent types of consumers behave differently in their willingness to purchase a new product

Innovators Somewhat adventurous in their decision making Want to be the amongst the first to try and use

new products

Laggards Conservative about adopting new products Wait to make purchases until after the product

has been tested by other consumers

NEW PRODUCT DEVELOPMENT

Original products and improved and modified versions of existing products

Development of new products follow 8 steps:1. Idea Generation2. Idea Screening3. Concept Development and Testing4. Marketing Strategy Development5. Business Analysis6. Product Development7. Test Marketing8. Commercialization

NEW PRODUCT DEVELOPMENT

1. Idea Generation The systematic search for new product ideas To generate a large number of ideas, typically without

imposing significant restrictions on which ideas might be most acceptable, plausible, or profitable

Brainstorms internally Company wide or specific groups

External resources Competitors, suppliers, distributors

2. Idea Screening The first idea-reducing step in new product development. Companies identify which of the ideas from the idea-

generation step are the most promising

NEW PRODUCT DEVELOPMENT3. Concept Development and Testing

Product concepts are developed after the screening process A detailed version of a new product idea Multiple concepts are chosen

Concepts are tested with select target consumers See how each concept resonates with the target consumer to

determine which concept will be most successful

Example:Patagonia wants to expand into the health/fitness market, in order to find what is most appealing to these consumers they develop the following concepts and then test each concept against their target consumers

Patagonia power bars Patagonia weights Patagonia fitness monitors Patagonia yoga line

NEW PRODUCT DEVELOPMENT4. Marketing Strategy DevelopmentPart 1 - Forecasts early revenue potential for the product Description of the target market Value proposition Sales Market share Profit goals for the first several years

Part 2 – Determines the initial costs of bringing the new product to market The planned price Distribution Marketing budget for the first year Design and Features

Part 3 – Determines the long-term profit potential of the product The planned long-term sale Long term profit goal Marketing mix strategy

NEW PRODUCT DEVELOPMENT5. Business Analysis Conducted to understand the required resource investment

needed to successfully introduce a new product to market Sales forecasts

based on sales history of similar products Based on market surveys

Related costs are evaluated within the company Marketing Research and development (R&D) Operations Accounting finance functions of the organization

6. Product Development Development of the actual product Different versions may be created Testing on the actual product is performed internally

NEW PRODUCT DEVELOPMENT7. Test Marketing The product and marketing program are introduced into a

limited market setting Marketers test the product and its entire marketing program

before going through the expense of a full introduction in the market Targeting and positioning strategies Advertising Distribution Pricing Branding Packaging Budget levels

8. Commercialization The introduction of a new product into the market

PRICE AND PRICING

PRICE AND PRICING

Price What buyers must give up in order to

gain the benefits of having or using a product or service

The amount of money that customers must pay in order to acquire a product

Price is the only part of the marketing mix that produces revenue All others parts represent costs

COST AND PROFITABILITY

Cost What must be given up in order to run a

business or to develop, produce, distribute, promote, and sell a product or service

In order to be profitable the revenue generated by a product must exceed the costs incurred to provide it

Businesses incur two kinds of costs Fixed Variable

COST AND PROFITABILITY

Fixed Costs Overhead Does not vary with production or sales levels, these costs

will stay the same regardless of how much a company produces or sells Rent, heat, interest on loans, and executive salaries

Variable Costs Will fluctuate directly with the level of production

If demand increases the variable costs will increase in order to satisfy demand

Total Costs The sum of fixed costs plus variable costs

PRICE AND PRICINGCustomer’s Perception of Value

A customer’s understanding of the benefits a product or service offers

The value gained by purchasing the product must be more than the price paid for the product

If the price for a product exceeds the idea of value, customers are not going to buy it

Customer perception is critical in influencing a product's price and “price ceiling” The highest price level a product will reach at any

given time Marketing helps out with pricing by influencing a

favorable view on a customer’s perceived value

PRICING STRATEGIES

Cost-Based Pricing Prices are set based on the costs for

producing, distributing, and selling the product

These costs help set the “price floor” The lowest price a product is available at

any given time

1. Cost-Plus Pricing2. Target Profit Pricing3. Break Even Pricing

PRICING STRATEGIES

Cost-Plus Pricing Adding a standard markup to the cost of

producing a product A lemonade stand adds $.25 to each glass as

lemonade A shoemaker adds a standard $20 to each pair

of shoes Popular strategy with many companies

The focus is on controllable factors like costs This strategy ignores demand and competitor

pricing Demand is an uncontrollable factor

PRICING STRATEGIES

Target-Profit Pricing The business tries to determine the price of a product/service in

a way so they hit their target profit Analysis of total cost and total revenue at different sales volume

levels The company decides how much profit it hopes to make and

sets its production and sales goals at that level Companies test different pricing scenarios and target profit

levels This strategy fails to consider both the customer's perception of

value and the relationship between price and demand

Break Even Pricing A variation of target-profit pricing The target is set at the company breaking even on the cost vs.

revenue

HOMEWORK Group

Combine everyone’s SWOT analysis for one group SWOT Hand in by end of class

What is your positioning Statement? Hand in by end of class

Each person to do 1 company goal and at least 2 objectives for your goal

Hand in next Monday

Individual How are you going to price your boat service?

What strategy will you use? What is the actual price?

Goals and Objectives for your business unit At least 3 goals, at least 2 objectives for each goal