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CHAPTER 11 MARKETING PROCESSES AND CONSUMER BEHAVIOR © 2007 Prentice Hall, Inc. All rights reserved.11–1 B U S 1 0 0
© 2007 Prentice Hall, Inc. All rights reserved.11–2 L E A R N I N G O B J E C T I V E S After reading this chapter, you should be able to: 1. Explain the concept of marketing and identify the five forces that constitute the external marketing environment. 2. Explain the purpose of a marketing plan and identify the four components of the marketing mix. 3. Explain market segmentation and how it is used in target marketing. 4. Describe the key factors that influence the consumer buying process. 5. Discuss the three categories of organizational markets.
© 2007 Prentice Hall, Inc. All rights reserved.11–3 L E A R N I N G O B J E C T I V E S (cont’d) After reading this chapter, you should be able to: 6. Explain the definition of a product as a value package and classify goods and services. 7. Describe the key considerations in the new product development process. 8. Explain the importance of branding and packaging. 9. Discuss the challenges that arise in adopting an international marketing mix. 10. Identify the ways that small businesses can benefit from an understanding of the marketing mix.
© 2007 Prentice Hall, Inc. All rights reserved.11–4 What’s in It for Me? Why does marketing matter to you? By grasping this chapter’s presentation of marketing methods and ideas, you’ll benefit in two ways: You’ll be better prepared to use marketing in your career as both employee and manager You’ll be a more informed consumer with greater awareness of how businesses use marketing to gain your purchases
© 2007 Prentice Hall, Inc. All rights reserved.11–5 What Is Marketing? Marketing “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” (AMA) Finding a need and fulfilling it Providing Value and Satisfaction Consumers buy products that offer the best value when it comes to meeting their needs and wants
© 2007 Prentice Hall, Inc. All rights reserved.11–6 What Is Marketing? (cont’d) Value and Benefits Value compares a product’s 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. Value and Utility Form utility Time utility Place utility Ownership utility
© 2007 Prentice Hall, Inc. All rights reserved.11–7 What Is Marketing? (cont’d) Goods, Services, and Ideas Consumer goods: Tangible goods that consumers may buy for personal use Consumer marketing Industrial goods: Physical items used by companies to produce other products Industrial marketing Services: Products with intangible (nonphysical) features Service marketing Relationship Marketing Emphasizes building lasting relationships with customers and suppliers
© 2007 Prentice Hall, Inc. All rights reserved.11–8 What Is Marketing? (cont’d) Data Warehousing and Data Mining for Building Customer Relationships Data warehousing: The compiling and storage of consumer data Data mining: Automating the massive analysis of data by using computers to sift, sort, and search for previously undiscovered clues about what customers look at, react to, and how they might be influenced
© 2007 Prentice Hall, Inc. All rights reserved.11–9 What Is Marketing? (cont’d) The Marketing Environment Political-legal environment Sociocultural environment Technological environment Economic environment Competitive environment Substitute products Brand competition International competition
© 2007 Prentice Hall, Inc. All rights reserved.11–10 FIGURE 11.1The External Marketing Environment
© 2007 Prentice Hall, Inc. All rights reserved.11–11 What Is Marketing? (cont’d) Strategy: The Marketing Mix Marketing Plan A detailed strategy for focusing marketing efforts on consumer needs and wants Marketing Mix Product –Differentiating a product: pricing, place, and promotion Pricing –Selecting the best price at which to sell a product Place –Distributing a product through the proper channels Promotion –Communicating information about a product
© 2007 Prentice Hall, Inc. All rights reserved.11–12 Target Marketing and Market Segmentation Target Markets Groups of people with similar wants and needs and who can be expected to show interest in the same products Market Segmentation Dividing a market into categories of customer types or “segments” Geographic Demographic Psychographic
© 2007 Prentice Hall, Inc. All rights reserved.11–13 Target Marketing and Market Segmentation (cont’d) Psychographic Variables Geographic Variables Demographic Variables Identifying Market Segments
© 2007 Prentice Hall, Inc. All rights reserved.11–14 TABLE 11.1Demographic Variables Age Under 5, 5–11, 12–19, 20–34, 35–49, 50–64, 65+ Education Grade school or less, some high school, graduated high school, some college, college degree, advanced degree Family life cycle Young single, young married without children, young married with children, older married with children under 18, older married without children under 18, older single, other Family size 1, 2–3, 4–5, 6+ Income Under $9,000, $9,000–$14,999, $15,000–$24,999, $25,000– $34,999, $35,000–$45,000, over $45,000 Nationality African, American, Asian, British, Eastern European, French, German, Irish, Italian, Latin American, Middle Eastern, Scandinavian Race Native American, Asian, African American, Caucasian Religion Buddhist, Catholic, Hindu, Jewish, Muslim, Protestant Sex Male, female
© 2007 Prentice Hall, Inc. All rights reserved.11–15 Understanding Consumer Behavior Influences on Consumer Behavior Psychological influences Personal influences Social influence Cultural influence Brand Loyalty Consumers who regularly purchase products because they are satisfied with their performance
© 2007 Prentice Hall, Inc. All rights reserved.11–16 FIGURE 11.2 The Consumer Buying Process
© 2007 Prentice Hall, Inc. All rights reserved.11–17 Organizational Marketing and Buying Behavior Organizational Markets Industrial Markets Businesses that buy goods to be converted into other products or that are used up during production Reseller Markets Intermediaries, including wholesalers and retailers, that buy and resell finished goods Government and Institutional markets Federal and state governments Nongovernmental organizations
© 2007 Prentice Hall, Inc. All rights reserved.11–18 Organizational Marketing and Buying Behavior (cont’d) Organizational Buying Behavior Differences in Buyers Organizational buyers are professionals who negotiate the buyer-seller agreement (purchase terms) –Specialists in purchasing a line of items –Experts about the products purchased Differences in the Buyer-Seller Relationship Frequent purchases Enduring long-term relationships Buyers and sellers may work closely Emphasis is on personal selling
© 2007 Prentice Hall, Inc. All rights reserved.11–19 What Is a Product? Product Defined A value package that provides a bundle of benefits and features to satisfy the needs and wants of customers Product Features Tangible and intangible qualities built into a product Benefits The tangible and intangible outcomes associated with acquisition or use of a product
© 2007 Prentice Hall, Inc. All rights reserved.11–20 FIGURE 11.3The Product: Features and Benefits
© 2007 Prentice Hall, Inc. All rights reserved.11–21 Classifying Goods and Services Classifying Consumer Products Convenience goods and services Frequent purchase, inexpensive, immediate consumption, and little search and consideration Shopping goods and services Less frequent purchase, more expensive, and more search and comparison of products Specialty goods and services Infrequent (or one-time) purchase, most expensive, and an extensive search effort for specific product
© 2007 Prentice Hall, Inc. All rights reserved.11–22 Classifying Goods and Services (cont’d) Classifying Industrial Products Expense items Goods or services that are consumed within a year by firms producing other goods or supplying other services Capital items Permanent (expensive and long-lasting) goods and services that have expected lives of more than a year and, typically, of several years –Capital goods –Capital services
© 2007 Prentice Hall, Inc. All rights reserved.11–23 The Product Mix Product Mix The group of products (consumer, industrial, or both) that a company makes available for sale Product Line A group of products that are closely related because they function in a similar manner or are sold to the same customer group who will use them in similar ways Multiple (or Diversified) Product Lines Allow a company to grow rapidly and can help to offset the consequences of slow sales in any one product line
© 2007 Prentice Hall, Inc. All rights reserved.11–24 Developing New Products The New Product Development Process Research and Development (R&D) Departments for exploring new product possibilities Product mortality rates Few product ideas (1 in 50) actually reach the market Speed to market Responding to customer demand or market changes by introducing new products to the market ahead of competitors
© 2007 Prentice Hall, Inc. All rights reserved.11–25 Developing New Products (cont’d) Product Life Cycle Introduction Growth Maturity Decline
© 2007 Prentice Hall, Inc. All rights reserved.11–26 Identifying Products Branding Products Branding A process of using symbols to communicate the qualities of a particular product made by a particular producer –Signals uniform quality and stimulates consumer recall Brand loyalty Consumer preference for a particular product Brand awareness The brand name that comes first to mind when consumers consider a particular product category
© 2007 Prentice Hall, Inc. All rights reserved.11–27 Identifying Products (cont’d) Gaining Brand Awareness Product placement A promotional tactic for brand exposure in which characters in television, film, music, magazines, or video games use a real product that is visible to viewers Viral marketing Relying on word-of-mouth and the Internet to spread information like a “virus” from person-to-person about products and ideas
© 2007 Prentice Hall, Inc. All rights reserved.11–28 Identifying Products (cont’d) Types of Brand Names National brands Products that are produced by, widely distributed by, and carry the name of the manufacturer Licensed brands Companies (and even personalities) license (sell the rights to) other companies to put their names on products Private (or private label) brands Carry the brand name that a wholesaler or retailer develops and has a manufacturer put it on a product
© 2007 Prentice Hall, Inc. All rights reserved.11–29 Identifying Products (cont’d) Packaging Products Purposes of packaging Reduce the risk of damage, breakage, or spoilage Increase the difficulty of stealing small products Serves as an in-store advertisement that makes the product attractive Displays the brand name Identifies features and benefits Enhances the utility of the product features and benefits
© 2007 Prentice Hall, Inc. All rights reserved.11–30 The International Marketing Mix International Products Need to adapt product to foreign markets International Pricing Higher transportation and selling costs abroad International Distribution Distribution network access in foreign markets International Promotion Cultural sensitivity requires adjustments to the marketing mix
© 2007 Prentice Hall, Inc. All rights reserved.11–31 Small Business and the Marketing Mix Small-Business Products Product failures due to lack of market potential for products or marketing to the wrong target market segments Small-Business Pricing Losses due to pricing errors resulting from underestimating operating expenses Small Business Distribution Poor location choice fails to attract customers Small-Business Promotion Careful promotion can reduce expenses
© 2007 Prentice Hall, Inc. All rights reserved.11–32 K E Y T E R M S brand awareness brand competition brand loyalty branding capital item consumer behavior consumer goods convenience good/convenience service demographic variables distribution emotional motives expense item geographic variables industrial goods industrial market institutional market international competition licensed brand market segmentation marketing marketing manager marketing mix marketing plan national brand packaging private brand (or private label) product
© 2007 Prentice Hall, Inc. All rights reserved.11–33 K E Y T E R M S (cont’d) product differentiation product feature product life cycle (PLC) product line product mix product placement psychographic variables rational motives relationship marketing reseller market services shopping good/shopping service specialty good/specialty service speed to market substitute product target market utilityvalue value package viral marketing
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