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MKT 201
Smita Kulkarni

CHAPTER 5 CONSUMER DECISION PROCESS 1. Need Recognition  The greater the discrepancy between the actual needy state and the desired state, the greater the need recognition  Functional Needs - Related to the performance of a product or service.  Psychological Needs - Pertain to the personal gratification consumers associate with a product or service 2. Search for Info  Internal Search – The buyer examines his or her own memory and knowledge about the product or service, gathered through past experiences  External Search – The buyer seeks info outside his or her personal knowledge base to help make the buying decision  Factors Affecting Consumers’ Search Process  Perceived benefits versus Perceived Costs of Search  Locus of Control  Internal Locus of Control – Believe having control over the outcomes of their actions  engage in more search activity  External Locus of Control – Believe fate or other external factors control all outcomes  Wise decision, not their credits but poor decision, not their fault  Actual or Perceived Risk  Performance – Involves the perceived danger inherent in a poorly performing product or service  Financial – Associated with a monetary outlay and includes the initial cost of the purchase & of using the item or service  Social – Involves the fears that consumers suffer when they worry others might not regard their purchases positively  Physiological = Safety Risk – Refers to the fear of an actual harm should the product not perform properly  Psychological – Associated with the way people will feel if the product or service does not convey the right image 3. Evaluation of Alternatives  Attribute Sets  Universal Sets – Include all possible choices for a product category  Retrieval Sets – Brands or stores that can be readily brought forth from memory  Evoked Set – Comprises the alternative brands or stores that the consumer states he or she would probably consider when making a purchase decision  Evaluative Criteria – Consists of important attributes about a particular product  Determinant Attributes – Product or service features that are important to the buyer and on which competing brands or stores are perceived to differ  Consumer Decision Rules  The set of criteria that consumer use consciously or subconsciously to quickly and efficiently select from among several alternatives  Compensatory Decision Rule – Assume that the consumer, when evaluating alternatives, trades off 1 characteristics against another  Multi-attribute model  Non-compensatory – Consumers choose product or service on the basis of 1 characteristic or 1 subset of a characteristic, regardless of the values of its other attributes  Decision Heuristics – Mental shortcuts that help a consumer narrow down choices (Price, Brand, Product Presentation) 4. Purchase & Consumption  Conversion Rate – Retailers use to measure how well they convert purchase intentions into actual purchases Post-purchase Outcomes  Customer Satisfaction  Post purchase Cognitive Dissonance – An internal conflict that arises from an inconsistency between 2 beliefs, or between belief & behavior  Customer Loyalty  Undesirable Consumer Behavior (Negative word of mouth)  Firm’s attempt to reduce dissonance by reinforcing the decision  Thank you letters, congratulations letters, quality ratings build customer confidence INVOLVEMENT & CONSUMER NUYING DECISIONS 1. Involvement = The consumer’s degree of interest in or concern about the product or service 2. Extended Problem Solving  Common when the consumer perceives that the purchase decision entails a lot of risk 3. Limited Problem Solving  Occurs during a purchase decision that calls for a moderate amount of effort & time  Usually relies on past experience more than on external search  Impulse Buying – A buying decision made by customers on the spot when they see the merchandise  Habitual Decision Making – A purchase decision process in which consumers engage in little conscious effort CHAPTER 8 SEGMENTATION, TARGETING & POSITIONING PROCESS Step 1: Establish Overall Strategy or Objectives  Derived from mission, objectives & current situation (SWOT) Step 2: Segmentation Methods  Geographic Segmentation – Organizes customers into groups on the basis of where they live  Demographic – Groups consumers according to easily measured, objective characteristics (age, gender, income, education)  Psychographic – Delves into how consumers actually describe themselves  Self-value – Goals for life, overrides desire  Self-concept – Self-image  Lifestyle – The way we live, how we live to achieve goals  Geodemographic – Combination of geographic, demographic & lifestyle characteristics to classify customers  Benefit – Groups consumers on the basis of the benefits they derive from products or services  Behavioral – Divides customers into groups based on how they use the product or service  Occasion – When product or service is purchased  Loyalty – Feel strongly that the firm can meet their relevant needs best, most profitable customers  Multiple Segmentation Methods Step 3: Evaluate Segment Attractiveness  Identifiable  Who is within the market to design products or services to meet their needs  Substantial  The size of customers’ population  Reachable  Accessible through pervasive communication & product distribution  Responsive  React similarly & positively to the firm’s offering  Profitable  Marketers must focus on potential profitability of each segment, both current and future. Some key factors are market growth, market competitiveness, and market access Step 4: Select Target Market  Undifferentiated Targeting Strategy (Mass Strategy) – Focuses on the similarities in needs of the customers  Differentiated – Target several market segments with a different offering for each  Concentrated – Selects a single, primary target market & focuses all its energies on providing a product to fit that market’s needs  Micromarketing (one-to-one) – Tailors a product or service to suit an individual customer’s wants or needs Step 5: Develop Positioning Strategy  Positioning Methods  Value Proposition – The unique value that a product or service provides to its customers & how it is better and different from competitors’  Salient Product Attributes  Symbol  Competition  Positioning Using Perceptual Mapping  Perceptual Map – Displays, in 2 or more dimensions, the position of products or brand in consumer’s mind  Ideal Points – Where a particular segment’s ideal product would lie on the map  Determine consumers’ perceptions and evaluations in relation to competitors’.  Identify competitors’ positions  Determine consumer preferences  Select the position  Monitor the positioning strategy CHAPTER 10 COMPLEXITY OF PRODUCTS & TYPES OF PRODUCTS Complexity of Products  Core Customer Value – The basic problem-solving benefits that consumers seek  Marketers convert Core Customer Value into Actual Product & important attributes (Brand name, packaging, features, design, quality level) depend on the product  Associated Services (Augmented Product) – Include nonphysical aspects of the product (product warranties, financing, product support) Types of Products  Specialty Products/Services – Customers show such a strong preference that they will expend considerable effort to search for the best suppliers  Shopping – Customers will spend a fair amount of time comparing alternatives  Convenience – Consumer is not willing to spend any effort to evaluate prior to purchase  Unsought – Consumers either do not normally think of buying or do not know about PRODUCT MIX & PRODUCT LINE DECISIONS  Product Mix – The complete set of all product offered by a firm  Product Lines – Groups of associated items that consumers tend to use together or think of as a part of similar products  Breadth – Number of product lines  Depth – Number of categories within a product line Change Product Mix Breadth  Increase Breadth – Add new product lines to capture new or evolving markets and increase sales  Decrease Breadth – Delete entire product lines to address changing market conditions or meet internal strategic priorities Change of Product Line Depth  Increase Depth – Add items to address changing consumer preferences or preempt competitors while boosting sales  Decrease Depth – Delete product within a product line to realign the firm’s resources BRANDING  Brand name, URLs, Logos and symbols, Characters, Slogans, Jingles/Sounds Value of Branding for the Customer and the Marketer  Brands Facilitate Purchase  Brand are easily recognized because they signify a certain quality level & familiar attributes  Quick Purchase Decision  Brands Establish Loyalty – Trust, affinity  Brands Protect from Competition  More established in the market and more loyal customer base  Brands can Reduce Marketing Costs – Brands sell itself  Brands are Assets  That can be legally protected through trademarks and copyrights  Constitute a unique form of ownership  Brands Impact Market Value Brand Equity  The set of assets and liabilities linked to a brand that add or subtract from the value provided by the product or service.  Brand Awareness: Measures how many consumer in a market are familiar with the brand and what it stands for and have an opinion about that brand  Perceived Value: The relationship between a product or service’s benefits and its cost  Green Product – Ecologically safer products  Cost more but willing to buy because of greater perceived value by consumers  Brand Associations: Reflect the mental link that consumers make between a brand and its key product attributes such as a logo, slogan or famous personality  Brand Personality – A set of human characteristics associated with a brand which has symbolic or self-expressive meanings for consumers  Brand Loyalty: Occurs when a consumer buys the same brand’s product or service repeatedly over time rather than buy from multiple suppliers within the same category  Consumers are often less sensitive to price  Marketing costs are much lower because the firm does not have to spend money on advertising and promotion  Loyal Customers tend to praise the virtues of their favorite products/services to others  More potential consumers  Firm insulated from the competition because loyal customers do not switch to competitors’ brands BRANDING STRATEGIES Brand Ownership  Manufacturer brands or national brands – Owned and managed by the manufacturer  Private-label brands (Store Brands, House Brands, Own Brands) – developed by the retailers  Premium – Comparable or Superior to a manufacturer’s brand quality, sometimes with modest price savings (Kroger’s Private Selection, Loblaw’s President’s Choice (Canada), Tesco Finest (UK) )  Generic – Target a price-sensitive segment by offering a no-frills product at a discount price (milk, eggs in grocery stores)  Copycat – Imitate the manufacturer’s brand in appearance and packaging, generally are perceived as lower quality and are offered at lower prices (CVS, Walgreen)  Exclusive co-branded – A brand that is developed by a national brand manufacturer, often in conjunction with a retailer and is sold exclusively by the retailer (Macy’s Martha Stewart, Donald Trump, Tommy Hilfiger; Kohl’s Estee Lauder’s American Beauty, Flirt!, Good Skin) Naming Brands and Product Lines  Corporate or family brand – Use firm’s corporate name to brand all its product lines and products (Kellogg’s)  The individual brand benefits from the overall brand awareness associated with the family name  In
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