POM 2012 Exam Revision

PowerPoint to accompany
EXAM REVISION
Date: June 13 2012 (pm) Time: 2 hour closed book exam l Exam format & Focus
l l Section 1: 10 Word finding (20 marks) Section 2: 15 MCQs (30 marks) w Section 3: 5 Written answers (50 marks) w Chapters to be examined 5, 7, 8, 9, 10, 12, 13
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Philip Kotler, Stewart Adam, Linden Brown & Gary Armstrong

Kotler, Brown, Adam & Armstrong: International Marketing 3e 2006 Pearson Education Australia Kotler, Adam, Brown & Armstrong: International Marketing 3e 2006 Pearson Education Australia
Chapter 5
A Model of Consumer Behaviour

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Consumer market behaviour
Consumers make buying decisions every day. And they make many different types of purchases. Most marketers undertake consumer research to try to learn more about: what consumers buy, who buys, how they buy, when they buy, where they buy and, most importantly, why they buy. The central question is:
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How do consumers respond to the various marketing stimuli the marketing organisation might use?
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Figure 5.1: A Model of Buyer Behaviour
Figure 5.2: Factors Influencing Consumer Behaviour

Psychological Motivation Perception Learning (memory) Beliefs & attitudes Personality & self-concept Personal Age & lifecycle stage Occupation Education Economic situation Social Household type Reference groups Roles & status
Consumer BUYER DECISION PROCESS
Marketing programs Marketing objectives Marketing strategy Marketing mix
Lifestyle
Buyers responses Product service & category selection Brand selection Reseller selection Experiences Purchase timing & repurchase intervals Purchase amount
Environmental influences Economic Technological Political

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Kotler, Adam, Brown & Armstrong: International Marketing 3e 2006 Pearson Education Australia
Cultural Culture Subculture Social Class

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Psychological Factors: Motivation

l When consumers express interest in buying a
Personal Influences
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product there are a number of questions we might ask. w Why? w What is the person really seeking? w What needs is he or she trying to satisfy? A person has many needs at any given time.
A buyer's decisions are also influenced by personal characteristics such as:

w w w w w w
Age and life-cycle stage Occupation Education Economic situation Personality & Self Concept Consumer lifestyle
Social influences
A consumer's behaviour is also influenced by social factors, such as the consumer's household type and reference groups, as well as social roles and status. l These social factors can strongly affect consumer responses, companies must take them into account when designing their marketing strategies.
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Social influences
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Household types: changing lifestyles and buying roles affect marketing decisions Groups
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Membership groups Reference groups
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Opinion leaders Roles and Status
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Figure 5.7: The Buyer Decision Process

Need Recognition
Stages in the Adoption Process

Awareness
Information Search
Interest
Evaluation of Alternatives
Evaluation
Purchase Decision Post-purchase Behaviour

Trial
Adoption
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Chapter 7
Stages in Market Orientation

Mass Mass Marketing Marketing
Market segmentation, targeting and positioning
Product-Variety Product-Variety Marketing Marketing
Target Target Marketing Marketing
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Stages in Market Orientation

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Three Major Steps in Target Marketing

1. Market segmentation
Mass marketing.
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In mass marketing, the seller mass produces, mass distributes and mass promotes one product to all buyers Here, the seller produces two or more products that have different features, styles, quality, sizes and so on Here, the seller identifies market segments, selects one or more of them, and develops products and marketing mixes tailored to each
Product-variety marketing.
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dividing a market into distinct groups of buyers with different needs, characteristics or behaviour who might require separate products or marketing mixes. evaluating each market segments attractiveness and selecting one or more of the market segments to enter. setting the competitive positioning for the product and creating a detailed marketing mix.
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2. Market targeting
Target marketing.
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3. Market positioning
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Market Segmentation
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Figure 7.1: Steps in Segmentation, Targeting, and Positioning
Markets consist of buyers, and buyers differ in one or more ways.

They may differ in their wants, resources, locations, buying attitudes and buying practices and preferences for buying channels such as ordering by mail, phone, the Internet or from a physical location. w Because buyers have unique needs and wants, each buyer is potentially a separate market. Ideally, then, a seller might design a separate marketing program for each buyer.
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Bases for Segmenting Consumer Markets

C H A R A C T E R I S T I C S
Bases for Segmenting Consumer Markets: Geographic

l Geographic segmentation calls for dividing the
1. Demographic
3. Behavioural
market into different geographical units such as:

w w w
2. Geographic
4. Psychographic
w w w
Nations Regions States Municipalities Cities Neighbourhoods.
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l Psychographic segmentation buyers are
Demographic segmentation consists of dividing the market into groups based on variables such as:
w w w w w w w
divided into different groups based on:

Socioeconomic status Lifestyle w Personality characteristics
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Age Gender Family size Family life cycle Income occupation, education Race and nationality Religion
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l Behavioural segmentation divides buyers into groups based on their knowledge of the product, their attitude towards it, the way they use it, their responses to it :
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Selecting Market Segments

After evaluating different segments, a company hopes to find one or more market segments worth entering. It must then decide which and how many segments to serve. l A target market consists of a set of buyers sharing common needs or characteristics that the company decides to serve. The company can adopt one of three market-coverage strategies:
l undifferentiated marketing, differentiated marketing or w concentrated marketing.
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Occasions Benefits sought User status Usage rate Loyalty status Buyer-readiness stage Attitude
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Selecting Market Segments

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Figure 7.3: Alternative market-coverage strategies

Company Company Marketing Marketing Mix Mix
A. Undifferentiated Marketing
Undifferentiated marketing
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a company might decide to ignore market segment differences and go after the whole market with one market offer. It focuses on what is common in the needs of consumers rather than on what is different. a company decides to target several market segments, and designs separate offers for each. By offering product and marketing variations, it hopes for higher sales and a stronger position within each market segment is especially appealing when company resources are limited. Instead of going after a small share of a large market, the company goes after a large share of one or a few sub-markets.
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Market Market
Differentiated marketing
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Company Mix 1 Company Mix 1 Company Mix 2 Company Mix 2 Company Mix 3 Company Mix 3
B. Differentiated Marketing
Segment 1 Segment 1 Segment 2 Segment 2 Segment 3 Segment 3 Segment 1 Segment 1 Segment 2 Segment 2 Segment 3 Segment 3
Concentrated marketing
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Company Company Marketing Marketing Mix Mix

C. Concentrated Marketing
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Market Positioning
Once a company has decided which segments of the market it will enter, it must decide which positions it wants to occupy in those segments. Product position is the way the product is defined by consumers on important attributesthe place the product occupies in consumers minds relative to competing products
Positioning Strategies
Product Product Class Class Away from Away from Competitors Competitors Against a Against a Competitor Competitor
E E
Product Product Attributes Attributes Benefits Benefits Offered Offered Usage Usage Occasions Occasions
H H
G G C C A A D D B B FF
Users Users
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Identifying Possible Competitive Advantage

Product Product Service Service
Chapter 8
Products: goods, services and experiences
Areas for Competitive Areas for Competitive Differentiation Differentiation
Personnel Personnel
Image Image
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Kotler, Brown, Adam & Armstrong: International Marketing 3e 2006 Pearson Education Australia
Figure 8.2: Three Levels of Product
Figure 8.3: Illustrating three levels of product
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Consumer Product Classifications

Convenience Types of Consumer Products Unsought Goods Specialty Shopping
Characteristics of Services
l Intangibility l High involvement and personal nature l Variability l Synchronous delivery and
consumption
l Perishability
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Service Quality Measures

l Service consumption mostly involves
Extending the Classification of Goods and Services

l Event marketing w Special w Sporting w Cause-related w Experience l Person marketing l Political marketing l Cause marketing l Non-profit marketing l Experiences marketing
people in service encounters, services are experiential in nature and often require special measures to assess quality such as mystery shoppers
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Figure 8.5: Individual Product Decisions

Product Attributes Branding Packaging Labelling Product Support Services
Product Attribute Decisions

l Product quality: the ability of a product to
perform its functions; it includes the products durability, reliability, precision, ease of operation and repair, and other valued attributes l Strategic quality involves gaining an edge over competitors by consistently offering products and services that give customers better quality l quality is not a problem to be solved; it is a competitive opportunity
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Product Attribute Decisions

l Product feature: a product can be
Branding
l Branding is a major strategic decision l Branding requires long-term marketing
offered with varying features. From a basic model to a higher level e.g. car industry l Product design: the process of designing a products style and function
investment, especially for advertising, promotion and packaging l Powerful brands gain brand recognition and can command consumer loyalty l Companies that develop brands with strong consumer franchise are protected against competitors strategies. Such companies have high brand equity
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Major Brand Decisions

To Brand or Not to Brand To Brand or Not to Brand Brand Brand No Brand No Brand Brand Name Selection Brand Name Selection Selection Selection Protection Protection Brand Sponsor Brand Sponsor Manufacturers Brand Manufacturers Brand Private Brand Private Brand Licensed Brand Licensed Brand Brand Strategy Brand Strategy New Brands New Brands Line/Brand Extensions Multibrands Line/Brand Extensions Multibrands Brand Repositioning Brand Repositioning Brand Repositioning Brand Repositioning No Brand Repositioning No Brand Repositioning
Figure 8.7: Four Brand Strategies

Product Category Existing Brand Name Existing Line Extension New Brand Extension New Brands
New
Multibrands
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Chapter 9
The Product Lifecycle (PLC)

After launching the new product, management wants the product to enjoy a long and happy life. l Although it does not expect the product to sell forever, management wants to earn a decent profit to cover all the effort and risk that went into it. l Management is aware that each product will have a life cycle, although the exact shape and length is not known in advance.
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New products
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The Product Lifecycle (PLC)

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Figure 9.3 - Product Life Cycle (PLC)
Product Development
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Maturity
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Begins when the company finds and develops a new product ideas. A period of slow sales growth as the product is being introduced to the market Period of rapid market acceptance and sales growth l
Introduction
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A period of slowdown in sales growth as the product gained acceptance by most of buyers. Period of drop in sales and profits as customers switch to new products
Decline
Growth
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Chapter 10
What is Price?
Price is the amount of money charged for a product or service, or the sum of values consumers exchange for the benefits of having or using the product or service l Price is the only element of the marketing mix that produces revenue-all other elements represent costs l A company does not usually set a single price, but rather a pricing structure that covers different items in its product line l The company adjusts product prices to reflect changing costs and demand and to account for variations in buyers and situations
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Pricing considerations and approaches
Figure 10.1: Factors affecting price decisions
Factors to Consider When Setting Prices

l Marketing objectives w Survival w Current profit maximisation w Market share leadership w Product quality leadership w Other objectives l Marketing mix Strategy l Costs w Variable costs w Total costs w Production levels costs w Experience curve costs w Organisational Considerations
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General Pricing Approaches

The price the company charges will be between one that is too low to produce a profit and one that is too high to produce any demand l Product costs set a floor to the price; consumer perceptions of the products value set the ceiling. l The company must consider competitors prices and other external and internal factors to find the best price between these two extremes.
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Figure 10.8: Major considerations in setting price
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General Pricing Approaches
Cost-Plus Pricing
The simplest pricing method is cost-plus pricing adding a standard mark-up to the cost of the product. Construction companies, for example, submit job bids by estimating the total project cost and adding a standard mark-up for profit.
Cost-based pricing:
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Cost-Plus Pricing Breakeven Analysis and Target Profit Pricing
Value Based Pricing Competitor Based Pricing

Economic Value Pricing Going-rate Pricing w Sealed-bid Pricing
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Relationship Pricing
Special Relationship Enrichment w Shared Risk and Reward
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Value-Based Pricing
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Cost Vs Value Based Pricing

Cost-Based Pricing Value-Based Pricing
Value-based pricing uses buyers perceptions of value, not the sellers cost, as the key to pricing. The company uses the non-price variables in the marketing mix to build up perceived value in the buyers minds. Price is set to match the perceived value.
Product Cost Price Value Customers
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Customer Value Price Cost
Product
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New-product pricing strategies: Pricing and innovative product

l Market-skimming pricing: setting a high price
Product/Service-mix pricing strategies

Product/Service Line Pricing
Setting Price Steps Between Product Line Items
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
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Optional-Product Pricing
Pricing Optional Products Sold With The Main Product
Market penetration pricing: setting a low price for a new product in order to attract a large number of buyers and a large market share
Captive-Product Pricing
Pricing Products That Must Be Used With The Main Product
By-Product Pricing
Pricing Low-Value By-Products To Get Rid of Them
Product-Bundle Pricing
Pricing Bundles Of Products Sold Together
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Price-adjustment strategies
l Discount pricing and allowances: cash
Price-adjustment strategies
l Promotional pricing: loss leader pricing,
discounts, quantity discounts, functional discounts, seasonal discounts and allowances l Segmented pricing: setting different prices for different clients, product forms, places or times l Psychological pricing: adjusting the price to communicate the products intended competitive position
special and psychological discounting

l Value pricing: right combination of quality at
fair prices
l Geographic pricing: different pricing for
distant customers, zone pricing, basing point pricing and freight absorption pricing l International pricing: the company adjusts its price to meet different conditions and expectation in different world markets
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Chapter 12
Integrated Marketing Communication (IMC)

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IMC: advertising and public relations
IMC entails co-ordinating the organisations promotional efforts using such major communication elements as:
w w w w w
advertising, sales promotion, public relations, direct and online marketing, and personal selling.
An organisations integrated marketing communication program consists of a specific blend of the above mentioned elements that will most effectively meet objectives such as to inform, persuade, and remind consumers as well as to reinforce their attitudes and perceptions.
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Classification of IMC Tools

Mass Media
Elements in the communications process

1. Sender: The party sending the message to another party 2. Encoding: The process of putting thought into symbolic
form Targeted
3. Message: The set of symbols that the sender transmits-
Integrated Communication media
the actual advertisement. In-store

4. Media: The communication channels through which the
message moves from sender to receiver

5. Decoding: The process by which the receiver assigns
One-to-one
meaning to the symbols encoded by the sender-a consumer watches the ad and interprets the words and illustrations it contains.
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Elements in the communications process

6. Receiver: The party receiving the message sent by
Figure 12.2: Elements in the Communication Process
another party-the consumer who watches the ad.

7. Response: The reactions of the receiver after being
exposed to the message-any of hundreds of possible responses.

8. Feedback: That part of the receiver's response
communicated back to the sender- research shows that consumers like and remember the ad.
9. Noise: The unplanned static or distortion during the
communication process that results in the receiver getting a different message from the one which the sender sent
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Decisions in Developing IMC

1. Identifying The Target Audience 2. Determine Response Sought 3. Selecting a Message 4. Selecting a Media 5. Selecting a Message Source 6. Collecting Feedback
Decisions in developing IMC

1. Identifying The Target Audience A marketing communicator starts with a clear target audience in mind. The audience may be potential buyers or current users, those who make the buying decision or those who influence it. The audience may be individuals, groups, special publics or the general public
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2. Determine Response Sought Awareness Knowledge Liking preference Conviction Purchase
Figure 12.3: Buyer Readiness States

Awareness Knowledge Liking
Preference
Conviction
Purchase
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Selecting a message
l Ideally the message should:
w Get Attention w Hold Interest w Arouse Desires w Obtain Action

3. Selecting a Message Rational Appeals Emotional Appeals Moral Appeals Message Structure Message Format
( A framework known as the AIDA model)
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Selecting Media
Word of Mouth Personal Media Non-personal Media Opinion Leaders

5. Selecting the message source The messages impact on the audience is also affected by how the audience views the sender. Messages delivered by highly credible sources are more persuasive
Major Media
Events
Atmospheres
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6. Collecting Feedback w After sending the message, the communicator must gauge its effect on the target audience w This involves asking the target audience whether they remember the message, how many times they saw it, what points they recall, how they felt about the message, and their past and present attitudes towards the product and company
Setting the IMC budget

l Four common methods used to set
the total budget for advertising:

1. affordable method, 2. percentage-of-sales method, 3. competitive-parity method 4. objective-and-task method
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PUSH and PULL Strategies

1. PUSH STRATEGIES Retailer Manufacturer & Wholesaler Marketing Activities Demand Demand Consumer
Message Execution
Testimonial Testimonial Evidence Evidence Scientific Scientific Evidence Evidence Technical Technical Expertise Expertise Slice of Life Slice of Life
Lifestyle Lifestyle
2. PULL STRATEGIES Demand Retailer & Wholesaler Demand Personality Personality Symbol Symbol Consumer
Typical Message Execution Styles
Fantasy Fantasy Mood or Mood or Image Image
Manufacturer
Marketing Activities
Musical Musical
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Message Execution
Message Execution
Slice-of-life: This style shows one or more people using the product in a normal setting Lifestyle: This style shows how a product fits in with a lifestyle Fantasy: This style creates a fantasy around the product or its use Mood or image: This style builds a mood or image around the product, such as beauty, love or serenity Musical: This style shows one or more people or cartoon characters singing a song about the product
Personality symbol: This style creates a character that represents the product. Technical expertise: This style shows the companys expertise in making the product. Scientific evidence: This style presents survey or scientific evidence that the brand is better or better liked than one or more other brands. Testimonial evidence: This style features a highly believable or likeable source endorsing the product.
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Public Relations Decisions

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Chapter 13
Another major mass-communication tool is public relations it aims at building good relations with the companys various publics using different tools: PENCILS
IMC: Sales promotion and personal selling
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Kotler, Brown, Adam & Armstrong: International Marketing 3e 2006 Pearson Education Australia
Sales Promotion
l Sales promotion is the act of influencing
Sales Promotion
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customer/consumer perception and behaviour to build market share and sales which reinforces brand image
1. Sales promotion is a term that is closely linked with direct
The main tools falling into this category include:

1. samples 2. redeemable coupons 3. cash-back offers 4. cents-off deals or price packs 5. premium offers 6. advertising specialties 7. patronage rewards 8. point-of-purchase (POP) promotions 9. contests and games of chance and skill
and online marketing, but has its origins in FMCG.

2. Although the term has as many confused meanings as the
term direct marketing itself, nearly all marketing scientists and practitioners agree on what sales promotion tools do.
3. The term covers a range of incentives that are used with products promoted via either mass media advertising or by direct and online methods.
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Purpose of Sales Promotion

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Setting Sales Promotion Objectives

l Sales promotion objectives are as varied as the
Sellers use sales promotions to attract new triers, to reward brand-loyal customers and thereby retain them, to reduce the time between purchases, and even to turn light users into medium or heavy users. The aim might also be to regain past purchasers who have ceased buying. New triers of a product category fall into one of three groups: w non-users w loyal users of another brand w brand switchers.
methods used. Sellers may use consumer promotions to increase short-term sales or to help build long-term market share.
l The objective may be one of the following: 1. to entice consumers to try a new product or brand 2. to lure consumers away from competitors products or
brands
3. to get consumers to load up on a mature product 4. to hold and reward loyal customers.
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Selecting Sales Promotion Tools

Contests and games of skill and chance Point-ofPurchase Patronage Rewards Advertising Specialties Premiums
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Developing sales promotion programs

l A number of decisions must be made in order
Samples Redeemable coupons Cash-back offers Cents-off deals or Price Packs
to define the full sales promotion program:

Size of the incentive How to promote and distribute the program w The length of the promotion w Sales promotion budgeting
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Sales Promotion tools
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The Role of Personal Selling

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The Role of the Salesforce

Personal selling is the interpersonal arm of the promotion mix.
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There are many types of personal selling jobs, and the role of personal selling can vary greatly from one industry to another and from one company to another. l The people who do the selling go by many names:
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Salespeople Sales representatives Account executives/representatives Agents District mangers Marketing representatives
Advertising consists of one-way, non-personal communication with target consumer groups. In contrast, personal selling involves two-way, personal communication between salespeople and individual customerswhether m face-to-face, m by telephone, m through video conferences, m or by other means. This means that personal selling can be more effective than advertising in complex selling situations
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The Role of the Salesforce

l The sales-force serves as a critical link
Figure 13.1: Managing the Salesforce
between a company and its customers

l The sales-force represents the company to
the customers
l The sales-force represents the customers to
the company
l Sales people are concerned with producing
sales but should also be concerned with customer satisfaction and profit
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Recruiting and selecting sales people

Good sales people are committed to sales as a way of life and have a strong customer orientation l One study suggests good sales people have a lot of enthusiasm, persistence, initiative, selfconfidence and job commitment l Another study suggests good sales people are independent, self motivated and excellent listeners l They must be internally motivated, disciplined, hardworking and able to build strong relationships with customers
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Training Salespeople
The Company The Company The Product The Product
Training Training Program Program Goals Goals
The Customer The Customer
The Competition The Competition Presentation Skills Presentation Skills
Field Procedures Field Procedures

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Compensating Salespeople
Salary
Supervising sales people

l Directing sales people l Developing customer targets and call
Benefits
Components of Compensation
Bonus
norms
l Using sales time efficiently
Commission
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Motivating sales people

l Organisational climate l Sales quotas l Positive incentives
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PowerPoint to accompany

Philip Kotler, Stewart Adam, Linden Brown & Gary Armstrong

A Model of Consumer Behaviour

Consumer market behaviour

Figure 5.1: A Model of Buyer Behaviour

Figure 5.2: Factors Influencing Consumer Behaviour

Consumer BUYER DECISION PROCESS

Marketing programs Marketing objectives Marketing strategy Marketing mix

Environmental influences Economic Technological Political

Cultural Culture Subculture Social Class

Psychological Factors: Motivation

A buyer's decisions are also influenced by personal characteristics such as:

Membership groups Reference groups

Opinion leaders Roles and Status

Figure 5.7: The Buyer Decision Process

Stages in the Adoption Process

Purchase Decision Post-purchase Behaviour

Stages in Market Orientation

Market segmentation, targeting and positioning

Product-Variety Product-Variety Marketing Marketing

Target Target Marketing Marketing

Stages in Market Orientation

Three Major Steps in Target Marketing

Figure 7.1: Steps in Segmentation, Targeting, and Positioning

Markets consist of buyers, and buyers differ in one or more ways.

Bases for Segmenting Consumer Markets

Bases for Segmenting Consumer Markets: Geographic

market into different geographical units such as:

Nations Regions States Municipalities Cities Neighbourhoods.

Bases for Segmenting Consumer Markets

Bases for Segmenting Consumer Markets

divided into different groups based on:

Bases for Segmenting Consumer Markets

Selecting Market Segments

Selecting Market Segments

Figure 7.3: Alternative market-coverage strategies

Company Company Marketing Marketing Mix Mix

Identifying Possible Competitive Advantage

Products: goods, services and experiences

Areas for Competitive Areas for Competitive Differentiation Differentiation

Figure 8.2: Three Levels of Product

Figure 8.3: Illustrating three levels of product

Consumer Product Classifications

Service Quality Measures

Extending the Classification of Goods and Services

Figure 8.5: Individual Product Decisions

Product Attribute Decisions

Product Attribute Decisions

Major Brand Decisions

Figure 8.7: Four Brand Strategies

The Product Lifecycle (PLC)

The Product Lifecycle (PLC)

Figure 9.3 - Product Life Cycle (PLC)

Pricing considerations and approaches

Figure 10.1: Factors affecting price decisions

Factors to Consider When Setting Prices

General Pricing Approaches

Figure 10.8: Major considerations in setting price

General Pricing Approaches

Cost-Plus Pricing Breakeven Analysis and Target Profit Pricing

Value Based Pricing Competitor Based Pricing

Cost Vs Value Based Pricing

Product Cost Price Value Customers