local marketing and individual marketing.

local marketing and individual marketing.

Local marketing involves tailoring brands and promotions to the needs and wants of local customer groups—cities, neighborhoods, and even specific stores. Local marketing has drawbacks.
• It can drive up manufacturing and marketing costs by reducing economies of scale.
• It can create logistics problems.

Individual marketing is the tailoring of products and marketing programs to the needs and preferences of individual customers. Individual marketing has also been labeled one-to-one marketing, mass customization, and markets-of-one marketing.

Choosing a Targeting Strategy

Which strategy is best depends on:
• Company resources
• Product variability
• Product’s life-cycle stage
• Market variability
• Competitors’ marketing strategies

Socially Responsible Target Marketing: Target marketing sometimes generates controversy and concern. Issues usually involve the targeting of vulnerable or disadvantaged consumers with controversial or potentially harmful products. Marketers of a wide range of industries have been criticized for their marketing efforts directed toward children. Problems arise when marketing adult products to kids, whether intentionally or unintentionally. The growth of the Internet and other carefully targeted direct media has raised new concerns about potential targeting abuses. The issue is not so much who is targeted, but how and for what. Controversies arise when marketers attempt to profit by unfairly targeting vulnerable segments or target them with questionable products or tactics. Socially responsible marketing calls for segmentation and targeting that serve not just the interests of the company, but also the interests of those targeted.

DIFFERENTIATION AND POSITIONING

Value proposition: How a company will create differentiated value for targeted segments and what positions it wants to occupy in those segments. A product position is the way the product is defined by consumers on important attributes.

Positioning Maps: Perceptual positioning maps show consumer perceptions of their brands versus competing products on important buying dimensions.

Choosing a Differentiation and Positioning Strategy: The differentiation and positioning task consists of three steps:

1. Identifying a set of differentiating competitive advantages upon which to build a position
2. Choosing the right competitive advantages
3. Selecting an overall positioning strategy

Identifying Possible Value Differences and Competitive Advantages

To the extent that a company can differentiate and position itself as providing superior customer value, it gains competitive advantage. It can differentiate along the lines of product, service, channel, people, or image. Choosing the Right Competitive Advantages

How Many Differences to Promote: Ad man Rosser Reeves believes a company should develop a unique selling proposition (USP) for each brand and stick to it. Other marketers think that companies should position themselves on more than one differentiator.

Which Differences to Promote: A difference is worth establishing to the extent that it satisfies the following criteria:
Important: The difference delivers a highly valued benefit to target buyers.
Distinctive: Competitors do not offer the difference, or the company can offer it in a more distinctive way.
Superior: The difference is superior to other ways that customers might obtain the same benefit.
Communicable: The difference is communicable and visible to buyers.
Preemptive: Competitors cannot easily copy the difference.
Affordable: Buyers can afford to pay for the difference.
Profitable: The company can introduce the difference profitably.
Selecting an Overall Positioning Strategy

The full positioning of a brand is called the brand’s value proposition.
More for More positioning involves providing the most upscale product or service and charging a higher price to cover the higher costs.
More for the Same positioning involves introducing a brand offering comparable quality but at a lower price.
The Same for Less positioning can be a powerful value proposition—everyone likes a good deal.
Less for Much Less positioning is offering products that offer less and therefore cost less. This involves meeting consumers’ lower performance or quality requirements at a much lower price.
More for Less positioning is the winning value proposition.

In the long run, companies will find it very difficult to sustain such best-of-both positioning.
Developing a Positioning Statement: Company and brand positioning should be summed up in a positioning statement. The statement should follow the form: To (target segment and need) our (brand) is (concept) that (point of difference).

Segmenting Business Markets

Segmenting Business Markets

Consumer and business marketers use many of the same vari¬ables to segment their markets.  Business marketers also use some additional variables, such as customer operating characteristics, purchasing approaches, situational factors, and personal character¬istics.

Segmenting International Markets
Companies can segment international markets using one or a combination of several variables.
• Geographic location: Nations close to one another will have many common traits and behaviors.
• Economic factors: Countries may be grouped by population income levels, or by their overall level of economic development.
• Political and legal factors: Type and stability of government, receptivity to foreign firms, monetary regulations, and the amount of bureaucracy.
• Cultural factors: Grouping markets according to common languages, religions, values and attitudes, customs, and behavioral patterns.

Intermarket segmentation is segmenting of consumers who have similar needs and buying behavior even though they are located in different countries.

Requirements for Effective Segmentation

To be useful, market segments must be:
• Measurable: The size, purchasing power, and profiles of the segments can be measured.
• Accessible: The market segments can be effectively reached and served.
• Substantial: The market segments are large or profitable enough to serve.
• Differentiable: The segments are conceptually distinguishable and respond differently to different marketing mix elements and programs.
• Actionable: Effective programs can be designed for attracting and serving the segments.
MARKET TARGETING
Evaluating Market Segments
In evaluating different market segments, a firm must look at three factors:
1. Segment size and growth
2. Segment structu¬ral attractiveness
3. Company objectives and resources
The largest, fastest-growing segments are not always the most attractive ones for every company.
The company also needs to examine major structural factors that affect long-run segment attractiveness.
• A segment is less attractive if it already contains many strong and aggressive competitors.
• The existence of many actual or potential substitute products may limit prices and the profits.
• The relative power of buyers also affects segment attractiveness.
A segment may be less attractive if it contains powerful suppliers who can control prices.

Selecting Target Market Segments
A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve.
Undifferentiated Marketing: Using an undifferentiated marketing (or mass-marketing) strategy, a firm might decide to ignore market segment differences and target the whole market with one offer. This mass-marketing strategy focuses on what is common in the needs of consumers rather than on what is different.
Differentiated Marketing: Using a differentiated marketing (or segmented market¬ing) strategy, a firm decides to target several market segments and designs separate offers for each.
Concentrated Marketing: Using a concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market, the firm goes after a large share of one or a few smaller segments or niches. It can market more effectively by fine-tuning its products, prices, and programs to the needs of carefully defined segments.  It can market more efficiently, targeting its products or services, channels, and communications programs toward only consumers that it can serve best and most profitably.

Micromarketing: Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations. Micromarketing includes

Institutional Markets

Institutional Markets:

The institutional market consists of schools, hospitals, nursing homes, prisons, and other institutions that provide goods and services to people in their care. Institutions differ from one another in their sponsors and in their objectives. Many institutional markets are characterized by low budgets and captive patrons. Many marketers set up separate divisions to meet the special characteristics and needs of institutional buyers.

Government Markets: The government market offers large opportunities for many companies, both big and small. In most countries, government organizations are major buyers of goods and services. Government organizations typically require suppliers to submit bids, and normally they award the contract to the lowest bidder. In some cases, the government unit will make allowance for the supplier’s superior quality or reputation for completing contracts on time. Government organizations tend to favor domestic suppliers over foreign suppliers. Government buyers are affected by environmental, organizational, interpersonal, and individual factors. One unique thing about government buying is that it is carefully watched by outside publics, ranging from Congress to a variety of private groups interested in how the government spends taxpayers’ money. Because their spending decisions are subject to public review, government organizations require considerable paperwork from suppliers, who often complain about excessive paperwork, bureaucracy, regulations, decision-making delays, and frequent shifts in procurement personnel. Most governments provide would-be suppliers with detailed guides describing how to sell to the government. Non-economic criteria also play a growing role in government buying.
• Government buyers are asked to favor depressed business firms and areas; small business firms; minority-owned firms; and business firms that avoid race, gender, or age discrimination.
• Many firms that sell to the government have not been marketing oriented.
• Total government spending is determined by elected officials rather than by any marketing effort to develop this market.
• Government buying has emphasized price, making suppliers invest their effort in technology to bring costs down.
• When the product’s characteristics are specified carefully, product differentiation is not a marketing factor.
• Nor do advertising or personal selling much matter in winning bids on an open-bid basis.

Several companies have established separate government marketing departments.

These companies anticipate government needs and projects, participate in the product specification phase, gather competitive intelligence, prepare bids carefully, and produce stronger communications to describe and enhance their companies’ reputations.

LN 06: Target Marketing

This chapter looks further into key customer-driven marketing strategy decisions—how to divide up markets into meaningful customer groups (segmentation), choose which customer groups to serve (targeting), create market offerings that best serve targeted customers (differentiation), and position the offerings in the minds of consumers (positioning).
Most companies have moved away from mass marketing and toward target marketing—identifying market segments, selecting one or more of them, and developing products and marketing programs tailored to each.
Market segmentation involves dividing a market into smaller groups of buyers with distinct needs, characteristics, or behaviors that might require separate marketing strategies or mixes.
Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting one or more market segments to enter.
Differentiation involves actually differentiating the firm’s market offering to create superior customer value.
Positioning consists of arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers.

MARKET SEGMENTATION
Through market segmentation, companies divide large, heterogeneous markets into smaller segments that can be reached more efficiently and effectively with products and services that match their unique needs.

Segmenting Consumer Markets

Geographic Segmentation: Geographic segmentation calls for dividing the market into different geographical units such as nations, regions, states, counties, cities, or even neighborhoods.

Demographic Segmentation: divides the market into groups based on variables such as age, gender, family size, family life cycle, income, occupation, education, religion, race, generation, and nationality. Demographic factors are the most popular bases for segmenting customer groups.

Age and Life Cycle Stage means offering different products or using different marketing approaches for different age and life cycle groups.
Gender segmentation has long been used in clothing, cosmetics, toiletries, and magazines.
Income segmentation has long been used by the marketers of products and services such as automobiles, clothing, cosmetics, financial services, and travel.

Psychographic Segmentation

Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or personality characteristics.
Marketers also use personality variables to segment markets.

Behavioral Segmentation: Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses to a product.
Occasion segmentation means grouping buyers according to occasions when they get the idea to buy, actually make their purchase, or use the purchased item.
Benefit segmentation means grouping buyers according to the different benefits that they seek from the product.
User Status means segmenting markets into nonusers, ex-users, potential users, first-time users, and regular users of a product.
Usage Rate means grouping markets into light, medium, and heavy product users.
Loyalty Status means dividing buyers into groups according to their degree of loyalty.

Using Multiple Segmentation Bases

Marketers rarely limit their segmentation analysis to only one or a few variables.

The Business Buying Process

The Business Buying Process

Buyers who face a new task buying situation usually go through all stages of the buying process. Buyers making modified or straight rebuys may skip some of the stages.

Problem Recognition: Problem recognition can result from internal or external stimuli. Internally, the company may decide to launch a new product that requires new production equipment and materials. Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from a salesperson who offers a better product or a lower price.

General Need Description: The buyer next prepares a general need description that describes the characteristics and quantity of the needed item. For standard items, this process presents few problems. For complex items, however, the buyer may have to work with others—engineers, users, and consultants—to define the item.

Product Specification: The buying organization next develops the item’s technical product specifications, often with the help of a value analysis engineering team. Product value analysis is an approach to cost reduction in which components are studied carefully to determine if they can be redesigned, standardized, or made by less costly methods of production. The team decides on the best product characteristics and specifies them accordingly.

Supplier Search: The buyer now conducts a supplier search to find the best vendors. The buyer can compile a small list of qualified suppliers by reviewing trade directories, doing a computer search, or phoning other companies for recommendations. Today, more and more companies are turning to the Internet to find suppliers. The newer the buying task, the more complex and costly the item, and the greater the amount of time the buyer will spend searching for suppliers.

Proposal Solicitation: In the proposal solicitation stage of the business buying process, the buyer invites qualified suppliers to submit proposals. When the item is complex or expensive, the buyer will usually require detailed written proposals or formal presentations from each potential supplier.

Supplier Selection: During supplier selection, the buying center often will draw up a list of the desired supplier attributes and their relative importance. Buyers may attempt to negotiate with preferred suppliers for better prices and terms before making the final selections. In the end, they may select a single supplier or a few suppliers. Many buyers prefer multiple sources of suppliers to avoid being totally dependent on one supplier and to allow comparisons of prices and performance of several suppliers over time.

Order-Routine Specification: The buyer now prepares an order-routine specification. It includes the final order with the chosen supplier or suppliers and lists items such as technical specifications, quantity needed, expected time of delivery, return policies, and warranties. In the case of maintenance, repair, and operating items, buyers may use blanket contracts rather than periodic purchase orders. A blanket contract creates a long-term relationship in which the supplier promises to resupply the buyer as needed at agreed prices for a set time period.

Performance Review: The performance review may lead the buyer to continue, modify, or drop the arrangement. The eight-stage model provides a simple view of the business buying-decision process. The actual process is usually much more complex.

Institutional and Government Markets: Much of this discussion also applies to the buying practices of institutional and government organizations. However, these two non-business markets have additional character¬istics and needs.

Major Types of Buying Situations

Major Types of Buying Situations

There are three major types of buying situations:
In a straight rebuy, the buyer reorders something without any modifications. It is usually handled on a routine basis by the purchasing department.
In a modified rebuy, the buyer wants to modify the product specifications, prices, terms, or suppliers. The modified rebuy usually involves more decision participants than does the straight rebuy.
A company buying a product or service for the first time faces a new task situation. In such cases, the greater the cost or risk, the larger the number of decision participants and the greater their efforts to collect information will be.

Many business buyers prefer to buy a complete solution to a problem from a single seller. Instead of buying and putting all the components together, the buyer may ask sellers to supply the components and assemble the package or system. Thus, systems selling is often a key business marketing strategy for winning and holding accounts.

Participants in the Business Buying Process

The decision-making unit of a buying organization is called its buying center: all the individuals and units that participate in the business decision-making process. The buying center includes all members of the organization who play any of five roles in the purchase decision process.

• Users are members of the organization who will use the product or service.
• Influencers often help define specifications and also provide information for evaluating alternatives.
• Buyers have formal authority to select the supplier and arrange terms of purchase.
• Deciders have formal or informal power to select or approve the final suppliers.
• Gatekeepers control the flow of information to others.

The buying center is not a fixed and formally identified unit within the buying organization. It is a set of buying roles assumed by different people for different purchases. Within the organization, the size and makeup of the buying center will vary for different products and for different buying situations. The buying center concept presents a major marketing challenge. The business marketer must learn who participates in the decision, each participant’s relative influence, and what evaluation criteria each decision participant uses. The buying center usually includes some obvious participants who are involved formally in the buying process. It may also involve less obvious, informal participants, some of whom may actually make or strongly affect the buying decision. Sometimes, even the people in the buying center are not aware of all the buying participants.


Major Influencers on Business Buyers

Business buyers are subject to many influences when they make their buying decisions. Business buyers respond to both economic and personal factors. They react to both reason and emotion. When suppliers’ offers are very similar, business buyers have little basis for strictly rational choice. Because they can meet organizational goals with any supplier, buyers can allow personal factors to play a larger role in their decisions. When competing products differ greatly, business buyers are more accountable for their choice and tend to pay more attention to economic factors. Business buyers are heavily influenced by factors in the current and expected economic environment, such as the level of primary demand, the economic outlook, and the cost of money. An increasingly important environmental factor is supply of key materials. Many companies are now more willing to buy and hold larger inventories of scarce materials to ensure adequate supply. Business buyers also are affected by technological, political, and competitive developments in the environment. Culture and customs can strongly influence business buyer reactions to the marketer’s behavior and strategies, especially in the international marketing environment. Organizational factors are also important. Each buying organization has its own objectives, policies, procedures, structure, and systems, and the business marketer must understand those factors as well.

The buying center usually includes many participants who influence each other; so interpersonal factors also influence the business buying process. It is often difficult to assess such interpersonal factors and group dynamics. Each participant in the business buying-decision process brings in personal motives, perceptions, and preferences. These individual factors are affected by personal characteristics such as age, income, education, professional identification, personality, and attitudes toward risk.

LN 05 BUSINESS BUYER BEHAVIOUR

LN 05 BUSINESS BUYER BEHAVIOUR

This chapter examines business customers—those that buy goods and services for use in producing their own products and services or for resale to others. As with firms selling to final buyers, firms marketing to business customers must build profitable relationships with business customers by creating superior customer value.

Business buyer behavior refers to the buying behavior of the organizations that buy goods and services for use in the production of other products and services that are sold, rented, or supplied to others. It also includes the behavior of retailing and wholesaling firms that acquire goods for the purpose of reselling or renting them to others at a profit.
In the business buying process, business buyers determine which products and services their organizations need to purchase, and then find, evaluate, and choose among alternative suppliers and brands.
Business-to-business (B-to-B) marketers must do their best to understand business markets and business buyer behavior.


Business Markets: The business market is huge. In fact, business markets involve far more dollars and items than do consumer markets. The main differences between consumer and business markets are in market structure and demand, the nature of the buying unit, and the types of decisions and the decision process involved.

Market Structure and Demand: The business marketer normally deals with far fewer but far larger buyers than the consumer marketer does. Even in large business markets, a few buyers often account for most of the purchasing.

Business demand is derived demand. It ultimately derives from the demand for consumer goods. B-to-B marketers sometimes promote their products directly to final consumers to increase business demand. Many business markets have inelastic demand; that is, total demand for many business products is not affected much by price changes, especially in the short run. Business markets have more fluctuating demand. The demand for many business goods and services tends to change more—and more quickly—than the demand for consumer goods and services does.

Nature of the Buying Unit: Compared with consumer purchases, a business purchase usually involves more decision participants and a more professional purchasing effort. Often, business buying is done by trained purchasing agents who spend their working lives learning how to buy better. The more complex the purchase, the more likely that several people will participate in the decision-making process.

Types of Decisions and the Decision Process
Business buyers usually face more complex buying decisions than do consumer buyers. Purchases often involve large sums of money, complex technical and economic considerations, and interactions among many people at many levels of the buyer’s organization. The business buying process also tends to be longer and more formalized than the consumer buying process. In the business buying process, buyer and seller are often much more dependent on each other.

Many customer companies are now practicing supplier develop¬ment, systematically developing networks of supplier-partners to ensure an appropriate and dependable supply of products and materials that they will use in making their own products or reselling to others.

At the most basic level, marketers want to know how business buyers will respond to various marketing stimuli. Within the organization, buying activity consists of two major parts: the buying center and the buying decision process.

The Buyer Decision Process

The Buyer Decision Process 

The buyer decision process consists of five stages:
1. Need recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5.Postpurchase behavior

Need Recognition: The buyer recognizes a problem or need triggered by either an: Internal stimuli, or External stimuli

Information Search: Information search may or may not occur.  Consumers can obtain information from any of several sources.
1. Personal sources (family, friends, neighbors, acquaintances)
2. Commercial sources (advertising, salespeople, Web sites dealers, packaging, displays)
3. Public sources (mass media, consumer rating organizations, Internet searches)
4. Experiential sources (handling, examining, using the product)
5. Commercial sources inform the buyer.
Personal sources legitimize or evaluate products for the buyer.

Evaluation of Alternatives: Alternative evaluation is how the consumer processes information to arrive at brand choices. How consumers go about evaluating purchase alternatives depends on the individual consumer and the specific buying situation. In some cases, consumers use careful calculations and logical thinking. At other times, the same consumers do little or no evaluating; instead they buy on impulse and rely on intuition.

Purchase Decision: Generally, the consumer’s purchase decision will be to buy the most preferred brand.
Two factors can come between the purchase intention and the purchase decision. 1.Attitudes of others
2.Unexpected situational factors

Postpurchase Behavior: The difference between the consumer’s expectations and the perceived performance of the good purchased determines how satisfied the consumer is. If the product falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is said to be delighted. Cognitive dissonance, or discomfort caused by postpurchase conflict, occurs in most major purchases.

The Buyer Decision Process for New Products
A new product is a good, service, or idea that is perceived by some potential customers as new.
The adoption process is the mental process through which an individual passes from first learning about an innovation to final adoption. Adoption is the decision by an individual to become a regular user of the product.
Stages in the Adoption Process
Consumers go through five stages in the process of adopting a new product:
1. Awareness: The consumer becomes aware of the new product, but lacks information about it.
2. Interest: The consumer seeks information about the new product.
3. Evaluation: The consumer considers whether trying the new product makes sense.
4. Trial: The consumer tries the new product on a small scale to improve his or her estimate of its value.
5. Adoption: The consumer decides to make full and regular use of the new product.

Individual Differences in Innovativeness
People differ greatly in their readiness to try new products. People can be classified into the adopter categories. The five adopter groups have differing values.
1. Innovators are venturesome—they try new ideas at some risk.
2. Early adopters are guided by respect—they are opinion leaders in their communities and adopt new ideas early but carefully.
3. The early majority are deliberate—although they rarely are leaders, they adopt new ideas before the average person.
4. The late majority are skeptical—they adopt an innovation only after a majority of people have tried it.
5. Laggards are tradition bound—they are suspicious of changes and adopt the innovation only when it has become something of a tradition itself.

Influence of Product Characteristics on Rate of Adoption
Five characteristics are important in influencing an innovation’s rate of adoption.
1. Relative advantage: The degree to which the innovation appears superior to existing products.
2. Compatibility: The degree to which the innovation fits the values and experiences of potential consumers.
3. Complexity: The degree to which the innovation is difficult to understand or use.
4. Divisibility: The degree to which the innovation may be tried on a limited basis.
5. Communicability: The degree to which the results of using the innovation can be observed or described to others.