Consumer Behavior The process and activities people engage in when searching for, selecting, purchasing, using, evaluating,

and disposing of products and services so as to satisfy their needs and wants. Problem Recognition InformationSearch Evaluation of alternatives Purchase decision Post purchase behavior Problem Recognition Customer perceives a need and becomes motivated to solve the problem. Is the difference between the customers ideal state and actual state. Sources of Problem Recognition Out of stock ( Replenish the stock, resolved by choosing a familiar brand) Dissatisfaction (with the current state of affairs) New needs or wants ( changes in ones demography may create new needs and trigger new problem) Related product purchase (stimulated by purchase of a product) Market-induced recognition (marketers action that encourage customer dissatisfaction with current state, take advantage of consumers tendency of novelty seeking behaviour) New products (innovative products brought to the attention of the consumers)

Consumer Motivations Problem recognition is often a basic, simple process, the way a consumer perceives a problem and becomes motivated to solve it will influence the remainder of the decision process. Maslows Hierarchy of Needs Freuds Psychoanalytic Theory Market research methods: In-depth interviews

Projective techniques Association tests Focus groups Information Search Internal Search External Search Consumer Perception The process by which an individual receives, selects, organizes and interprets information. Depends on: Internal factors : personal beliefs experiences, needs, moods and expectations. Characteristics of the stimuli Stages in the perception process: Sensation ( Is the direct response of the senses like taste, smell, touch, sight to a stimulus like ad, package, POP) Selecting information (Relevant to his or her needs) Interpreting information (Categorization influenced by internal psychological factors. Straightforward ads and ambiguous ads) Responding to information Selective Perception Occur at the exposure, attention, comprehension, or retention stage of perception. Subliminal Perception Print/ TV Ad Black and white

In Expensive/ Not for me Symbols, colours, images, etc. Alternative Evaluation The consumer compares various brands or products. Evoked Set-Subset of all the brands of which the consumer is aware. -Top of the mind awareness. -Reminder advertising. Evaluation criteria on the basis of different attributes Functional and Psychosocial attributes. Consumer Attitudes Learned predispositions to respond toward an objectan individuals overall feelings toward or evaluation of an object. Consumers may hold attitudes towards: Individuals Brands Companies Organizations Product categories Retailers Advertisements Media Purchase Decision Customer stops searching for information and evaluating of information about alternative brands in the evoked set. Purchase for High Involvement and Low involvement products Integration processes

The way product knowledge, meaning, and beliefs are combined to evaluate alternatives Post Purchase Evaluation The customer compares the level of performance with expectations and is either satisfied or dissatisfied. Advertising and other promotion should not create unreasonable expectations that the company products cannot meet. Post-purchase communication is important: To reassure buyers and reinforce the wisdom of their decision. Toll free no. and email addresses Communications need to be there to keep the brand in the evoked set.(Reminder advertisements, SP, Position in the Retail outlets)

Market segmentation Mass Marketing: The seller engages in mass production, mass distribution ,and mass promotion of one product for all buyer. Segment Marketing: A market segment consists of a group of customers who share a similar set of needs and wants. Sector and a segment.

Benefits of Segment marketing: Better design, price, disclose and deliver the product or service to satisfy the target market. Niche Marketing Niche is more narrowly defined customer group seeking a distinctive mix of benefits. Markets identify the niches buy dividing a segment into sub-segments. Local Marketing Marketing programs tailored to the needs and wants of local customer groups. Grassroots Marketing: Marketing activities concentrate on getting as close and personally relevant to individual customers as possible. Customerization Customized marketing or one to one marketing.Mass customerization Eg: Asian Paints.

Segmenting Consumer Market

The major variables used in segmentation are Geographic, Demographic, Psychographic and Behaviour variables. Geographic Segmentation Dividing a market into different geographical units such as nations, states, regions, counties, cities, or neighborhood. Indian context: Rural and Urban Variation in population Availability of infrastructure Products, packaging , usage pattern etc. Vary in product requirements

Demographic Segmentation Consists of dividing the market into groups based on variables like age, sex, family life cycle, income, occupation, education, religion, race, generation, nationality, and social class. Age and Life-Cycle Stage Segmentation

Dividing the market based on different age and life-cycle groups. Consumers wants and abilities change with age. Life Stage

Defines a persons major concern such as getting married, buying a house etc. Gender Segmentation

Men and women tend to have different attitudinal orientations. Income Segmentation

Dividing the market on the basis of different income group. Basic segmentation variable. Social Class

Social class is influenced by the caste system in India. It may even transcends the income level

Psychographic Segmentation Dividing into different groups on the basis of psychological / personality traits, lifestyle, or values. Values and lifestyles affects the product and brand choices of consumers.

Behavioural Segmentation Dividing a market into groups based on consumer knowledge of , attitude, use, or response to a product. Behavioural variables are occasions, benefits, user status, usage rate, loyalty status, buyer- readiness stage and attitude. User status -nonusers, ex-users, potential users, first time users, and regular users of product. Usage Rate Light, medium and heavy user. Buyer-Readiness Stage Unaware, aware, of the product, interested , have desire of the product, intending to by the product. Loyalty Status- Hard core loyals, Split loyals, Shifting loyals, Switchers. Attitude- Enthusiastic, positive, indifferent, negative, and hostile.

Segmentation for Industrial Markets

Demographic variables are the most important in the industrial markets, then Operating Variables, Purchasing approaches, Situational Factors and Personal Characteristics. Sequential Segmentation Business buyers segmented on the basis of type of selling: Price- oriented customers Solution- oriented customers Strategic- value customers Criteria for effective segmentation Measurable Substantial Accessible

Differentiable Actionable Market Targeting

The process of evaluating each market segments attractiveness and selecting one or more segments to enter. Evaluating and Selecting Market Segments After evaluation, the company can consider five patterns of target markets for selection Target Market: A set of buyers sharing common needs or characteristics that the company decides to serve. Single Segment Concentration Selective Specialization Product Specialization Market Specialization Full Market Coverage

Large organizations cover the market through Undifferentiated marketing Differentiated marketing Market Positioning Product Position A product position is the way the product is defined in consumers mind / the place the product occupies in consumers minds relative to competing products. Product Positioning is the act of designing the companies offering and image to occupy a distinctive place in the mind of target market Point of Difference (PODs) Are attributes or benefits consumers strongly associate with a brand, positively evaluate, and believe that they could not find the same extent with competitive brand. Point of Parity ( POPs) Are associations that are not necessary unique to the brand but may in fact be shared with other brands.

Positioning Strategies Marketers can position the products on different criteria such as product attributes, benefits, usage occasions , classes users, against a competitor, away from competitor, product classes, combination.

Choosing and Implementing Positioning Strategy

Positioning task consists of three tasks: Identifying Possible Competitive Advantages Selecting the Right Competitive Advantage Effectively communicating and Delivering the Chosen Position.

1.Identifying Possible Competitive Advantages Competitive Advantage: An advantage over competitors, gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices. Positioning begins actually with differentiating the companys marketing offer so that it will give consumers more value than competitors. Market offer can be differentiated along the lines of product, services, personnel, or image. Product Differentiation -In standardized products. -Highly differentiable products. Offer a variety of standard or optional features not provided by competitors. On the basis of performance. Style and Design. Durability, reliability, consistency, repairability. Services Differentiation Gain competitive advantage through speedy, reliable or careful delivery. Installation Repair Services. Customer training.

Consulting Services. Personnel Differentiation Competitive advantage through hiring and training better people than competitors.

Image Differentiation Buyers may perceive a difference based on company and brand image.

Image Symbols Colours Brand around some famous person. 2.Selecting the Right Competitive Advantage How many differences to promote and which one?

How many differences to promote? USP More than one differentiating factor. Positioning Errors Increasing the number of claims for brands, increases risk and disbelief and a loss of clear positioning..

Under- positioning Over- positioning Confused-positioning Which Difference to Promote? Important Distinctive Superior Communicable

Preemptive Affordable Profitable

3.Communicationg and delivering the Chosen Position. Marketing Mix efforts must support the positioning strategy. The promised position has to be delivered. Product Life Cycle (PLC) The course of a products sales and profits over its lifetime. It involves five distinct stages: Product Development Introduction Growth Maturity Decline Not all products follow the S shaped PLC. PLC can describe a product class, product form, or brand. Common PLC pattern:

Growth-Slump-Maturity Pattern Cycle-Recycle Pattern Scalloped PLC Style, Fashion and Fads

Stages of PLC 1. Introduction Stage New product is first launched Low sales growth. Promotional expenditure are at the highest ratio to the sales. Goals are to inform consumers of the new product and get them try it.

Company focus on ready to buy customers, usually higher income groups. Competition is almost non-existent. Prices tend to be high.

2. Growth Stage Sales start climbing quickly and profit increases. Early adopters will continue to buy, followed by Early Majority. New competitors will enter the market. Competitors introduce new product features and increase distribution. Price remain same or fall slightly. Promotional expenditure same or slightly higher level to meet competition along with educating about the product. Improves product quality and adds new product features, models.

3 Maturity Stage Sales growth slows or level off. This stage last longer than previous stages. Growth, Stable and Decaying Maturity. Overcapacity in the industry, intensive competition. Price cuts for products, Increase in advertising and sales promotion expenses. Increasing the R&D budgets to find better versions of product. Weaker competitors drop out, only well established competitors will be in the market. Marketers try to modify the market, product and marketing mix.

4.Declining Stage Sales decline Due to technological advances, shifts in consumer tastes and increased competition. Firms try to reduce their product offerings. Drop smaller market.

Cut prices and promotion. Weak products are withdrawn from the market.

Maintain, harvest or drop the declining product

4ps Price Price is the amount of money charged for a product or service , or the sum of the values that consumers exchange for the benefit of having or using the product. Factors to consider while setting prices A. Internal Factors B. External Factors Factors Affecting Pricing Decision

Internal Factors 1. Marketing Objectives Pricing strategy largely determined by past decisions on market positioning.

Some common objectives are: Survival Current profit maximization Market-Share Leadership Product-Quality Leadership 2. Marketing Mix Strategy 3.Costs A companys cost take two forms, fixed and variable. Fixed Costs: Cost that do not vary with production or sales level. Variable cost: Cost that vary directly with the level of production. Total Cost: The sum of variable cost and fixed cost for any given level of production. Management wants to charge a price which will atleast cover the total cost. 4. Organizational Consideration External Factors 1.Market and Demand Cost sets the lower limit of price , market and demand sets the upper limit. Pricing in different type of Markets a. Pure Competition The market consists of many buyers and sellers trading in a uniform commodityNo single buyer or seller has much effect on the going market price. b. Monopolistic Competition

A market in which many buyers and sellers trade over a range of prices rather than a single market price. Sellers can differentiate their offer. c. Oligopolistic Competition A market in which there are a few sellers who are highly sensitive to each others pricing and marketing strategies. There can be uniform and non uniform products. d. Pure Monopoly A market in which there is a single seller- it may be a govt monopoly, a pvt regulated monopoly, or a pvt non regulated monopoly.

Consumer Perceptions of price and value. Company should understand how the customer perception affect the buying decision. Buyer oriented pricing- setting a price that fits the customer value. 2.Competitors Prices and Offers 3. Other External Factors Economic Conditions Other parties reactions: Resellers, Govt, Social Concern General Pricing Approaches 1.Cost Based Pricing Approach a. Cost Plus Pricing. Sellers are more certain about cost than demand. Price tend to be similar and price competition minimized.

 Cost plus pricing is fairer for both buyers and sellers. b. Breakeven / target profit pricing The firm will determine the price at which it will break even or make the target profit it is seeking. 2.Buyer-based Pricing Approach a. Perceived value pricing Setting price based on buyers perceptions of value rather than on the sellers cost. 3.Competition Based Pricing a. Going rate pricing b. Sealed bid pricing- Setting price based on how the firm thinks competitors will price rather than on its own costs or demand used when company bids for jobs New Product Pricing Strategies a) Market Skimming Pricing Setting a high price for a new product to skim maximum revenue from the segments willing to pay the high price ; the company makes fewer but more profitable sales. b) Market Penetrating Pricing Setting a low price for a new product in order to attract a large number of buyers and a large market share.

Product Mix Pricing a. Product- Line Pricing Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors prices. b. Optional- Product Pricing The pricing of optional or accessory products along with a main product. c. By-Product Pricing Setting a price for by-products in order to make the main products price more competitive. d. Captive Product Pricing Setting a price for product that must be used along with a main product, such as blades for razor, film for a camera, computer software, etc.

Two-part pricing for services: A strategy for pricing services in which price is broken into a fixed fee plus a variable usage rate. e. Product Bundling Pricing Combining several products and offering the bundle at a reduced price. Price Adjustment Strategies 1.Discount Pricing and Allowances a. Cash Discounts A price reduction to buyers who pay their bills promptly. b. Quantity Discounts A price reduction to buyers who buy large volumes. c. Functional Discounts A price reduction offered by seller to trade channel members who perform certain functions such as selling, sorting, and record keeping. d. Seasonal Discounts A price reduction to buyers who buy merchandise or services out of season. e. Allowances Trade in allowances- A price reduction given for turning in an old item when buying a new one. Promotional allowances- A payment or price reduction to reward dealers for participation in advertising and sales-support programs. 2. Discriminatory Pricing

Selling a product or service at two or more prices, where the difference in prices is not based on differences in cost. Customer segmentation Pricing Product Form Pricing Location Pricing Time Pricing 3.Pyschological Pricing A pricing approach that considers the psychology of prices and not simply the economics. 4. Promotional Pricing Temporarily pricing products below the list price, and sometimes even below cost , to increase short-run sales. 5.Geographical Pricing a. FOB pricing A geographical pricing strategy in which goods are placed free on board a carrier, and the customer pays the freight from the factory to the destination. b. Uniform Delivered Pricing A geographic pricing strategy in which the company charges the same price plus freight to all customers, regardless of their location. c. Zone Pricing A geographic pricing strategy in which the company sets up two or more zone. All customers within a given zone pay the same total price, and this price is higher in the more distant zones. d. Basing-Point Pricing

A geographic pricing strategy in which the seller designates some city as a basing point and charges all customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped. e. Freight Absorption A geographic pricing strategy in which the company absorbs all or part of the actual freight charges in order to get the business. 5.International Pricing Strategy Setting the Price 1.Selecting the Pricing Objectives 2. Determining the Demand 3. Estimating Cost 4. Analyzing the Competitors Costs, Prices, and Offers 5. Selecting a Pricing Method 6. Selecting the Final Price Price Changes Initiating Price Changes Initiating Price Cuts Initiating Price Increases Buyer Reaction to Price Changes Competitor Reaction to Price Changes Price Changes Initiating Price Changes Initiating Price Cuts

 Initiating Price Increases Buyer Reaction to Price Changes Competitor Reaction to Price Changes Product Anything that can be offered to a market for attention, acquisition, use, or consumption and that might satisfy a want or need.