Consumer buying behavior, pricing, and advertising

1. Consumer buying behavior,pricing, and advertising

2. It is beneficial for marketers to find what influences consumer purchasing What consumers buy Why they buy the things they buy Where they buy When they buy How they buy Consumer Buying Behaviors

3. Cultures • The behaviors and beliefs characteristic of a particular social, ethnic, or age group • An important factor for influencing a person's wants and needs • Society, Family shapes our values, perceptions, expectations, and material wants • Every society has its own culture, those wants, needs, and buying behaviors differ from those in other cultures Subcultures • Groups of people who share specific value systems based on their common life experiences and situations • Nationalities, religions, racial groups Consumer Buying Behaviors

4. Social Class • The division of groups in society based upon certain kinds of similarities • Measured by income, occupation, education, wealth • A luxury car company will most likely only market to those in a high level economic class due to affordability and the pressures and desires of people in that class Groups and Networks • Shared interests, work in the same industry, shared common goals • A casual soccer team may influence you on health interests, new sports gear, diet, new apps for your phone • Marketers may pick people who play casual sports as their target market based on these type of influences • Social Networks (online) • Introduction to movies, bands, restaurants your friends like • Allows marketers to advertise to consumers based on their interests and likes Consumer Buying Behaviors

5. Family • Can be considered a subculture • Shape who we are • Parents frugalness • Parents work ethics • Economic rough times or high times • Directly influence our spending power, resources and immediate and long-term needs • A new baby changes your buying behavior, less nights out to dinner, saving up for a mini van, more advil! Personal Factors • Age, stage in life, job, economic situation, lifestyle, personality • Body Media Monitor versus Video Games • Dress shirts and ties versus t-shirts • Manicures Consumer Buying Behaviors

6. Motive • A need that is pressing enough to direct us to seek satisfaction of that need • Biological - hunger, thirst • Psychological- self-esteem, desire for recognition Consumer Buying Behaviors

7. Maslow’s Hierarchy of Needs • Some people are driven more by basic needs like personal safety while others are motivated by esteem or social recognition • 5 Categories of Human Needs • Physiological needs - like hunger, thirst • Safety needs - security, protection • Social needs - sense of belonging, love • Esteem needs - self-esteem, social status • Self-actualization - self-improvement and self-realization • We are first motivated by our most basic of needs • physiological needs for food and drink • Once that level of need has been satisfied, we look to fulfill the next level of need • Our safety and protecting ourselves and those we care about, etc Consumer Buying Behaviors

8. The Buyer Decision Process

9. The Buyer Decision Process

10. Stage 1: Need Recognition • An individual recognizes a need or desire for the value offered by a product or service • Can be stimulated by something internal • Hunger, taste • Can be stimulated by something external • An ad on TV Stage 2: Information search • Once a need is recognized a consumer may buy the product immediately but if it is a higher priced product, they may search for further information before buying • Talking to family or friends • Paying closer attention to ads for such products • Extensive research The Buyer Decision Process

11. Stage 3: Evaluation of Alternatives • Information has been gathered and a choices are to be evaluated • The consumer's perception of a brand can influences his/her buying decisions • If it is well known or has a good/bad reputation Stage 4: Purchase Decision • Once alternatives are evaluated a consumer usually makes the purchase • Something can change a consumers mind at the last minute • A recent conversation • Something in the news • A good or bad day • A raise may push to the more expensive alternative • A job loss can cancel the purchase altogether or change it to a less expensive alternative The Buyer Decision Process

12. Stage 5: Post Purchase Behavior • Consumer buying behavior doesn't end with the purchase • Marketers need to keep customers happy with CRM • For major purchases, buyers can feel discomfort caused by post-purchase conflict • Did they make the right choice ? • Feelings of excitement and regret can happen at the same time • Companies try to make consumer post-purchase experiences for these purchases favorable • Customer support, product support, quality-assurance The Buyer Decision Process

13. Different types of consumers behave differently in their willingness to purchase a new product • Innovators • Somewhat adventurous in their decision making • Want to be the amongst the first to try and use new products • Laggards • Conservative about adopting new products • Wait to make purchases until after the product has been tested by other consumers New Products

14. Original products and improved and modified versions of existing products Development of new products follow 8 steps: 1. Idea Generation 2. Idea Screening 3. Concept Development and Testing 4. Marketing Strategy Development 5. Business Analysis 6. Product Development 7. Test Marketing 8. Commercialization New Product Development

15. 1. Idea Generation • The systematic search for new product ideas • To generate a large number of ideas, typically without imposing significant restrictions on which ideas might be most acceptable, plausible, or profitable • Brainstorms internally • Company wide or specific groups • External resources • Competitors, suppliers, distributors 2. Idea Screening • The first idea-reducing step in new product development. • Companies identify which of the ideas from the idea-generation step are the most promising New Product Development

16. 3. Concept Development and Testing • Product concepts are developed after the screening process • A detailed version of a new product idea • Multiple concepts are chosen • Concepts are tested with select target consumers • See how each concept resonates with the target consumer to determine which concept will be most successful Example: Patagonia wants to expand into the health/fitness market, in order to find what is most appealing to these consumers they develop the following concepts and then test each concept against their target consumers • Patagonia power bars • Patagonia weights • Patagonia fitness monitors • Patagonia yoga line New Product Development

17. 4. Marketing Strategy Development Part 1 - Forecasts early revenue potential for the product Description of the target market Value proposition Sales Market share Profit goals for the first several years Part 2 – Determines the initial costs of bringing the new product to market The planned price Distribution Marketing budget for the first year Design and Features Part 3 – Determines the long-term profit potential of the product The planned long-term sale Long term profit goal Marketing mix strategy New Product Development

18. 5. Business Analysis • Conducted to understand the required resource investment needed to successfully introduce a new product to market • Sales forecasts • based on sales history of similar products • Based on market surveys • Related costs are evaluated within the company • Marketing • Research and development (R&D) • Operations • Accounting • finance functions of the organization 6. Product Development • Development of the actual product • Different versions may be created • Testing on the actual product is performed internally New Product Development

19. 7. Test Marketing • The product and marketing program are introduced into a limited market setting • Marketers test the product and its entire marketing program before going through the expense of a full introduction in the market • Targeting and positioning strategies • Advertising • Distribution • Pricing • Branding • Packaging • Budget levels 8. Commercialization • The introduction of a new product into the market New Product Development

20. Price and Pricing

21. Price • What buyers must give up in order to gain the benefits of having or using a product or service • The amount of money that customers must pay in order to acquire a product • Price is the only part of the marketing mix that produces revenue • All others parts represent costs Price and Pricing

22. Cost • What must be given up in order to run a business or to develop, produce, distribute, promote, and sell a product or service • In order to be profitable the revenue generated by a product must exceed the costs incurred to provide it • Businesses incur two kinds of costs • Fixed • Variable Cost and Profitability

23. Fixed Costs • Overhead • Does not vary with production or sales levels, these costs will stay the same regardless of how much a company produces or sells • Rent, heat, interest on loans, and executive salaries Variable Costs • Will fluctuate directly with the level of production • If demand increases the variable costs will increase in order to satisfy demand Total Costs • The sum of fixed costs plus variable costs Cost and Profitability

24. Customer’s Perception of Value • A customer’s understanding of the benefits a product or service offers • The value gained by purchasing the product must be more than the price paid for the product • If the price for a product exceeds the idea of value, customers are not going to buy it • Customer perception is critical in influencing a product's price and “price ceiling” • The highest price level a product will reach at any given time • Marketing helps out with pricing by influencing a favorable view on a customer’s perceived value Price and Pricing

25. Cost-Based Pricing • Prices are set based on the costs for producing, distributing, and selling the product • These costs help set the “price floor” • The lowest price a product is available at any given time • Cost-Plus Pricing • Target Profit Pricing • Break Even Pricing Pricing Strategies

26. Cost-Plus Pricing • Adding a standard markup to the cost of producing a product • A lemonade stand adds $.25 to each glass as lemonade • A shoemaker adds a standard $20 to each pair of shoes • Popular strategy with many companies • The focus is on controllable factors like costs • This strategy ignores demand and competitor pricing • Demand is an uncontrollable factor Pricing Strategies

27. Target-Profit Pricing • The business tries to determine the price of a product/service in a way so they hit their target profit • Analysis of total cost and total revenue at different sales volume levels • The company decides how much profit it hopes to make and sets its production and sales goals at that level • Companies test different pricing scenarios and target profit levels • This strategy fails to consider both the customer's perception of value and the relationship between price and demand Break Even Pricing • A variation of target-profit pricing • The target is set at the company breaking even on the cost vs. revenue Pricing Strategies

28. Group • Combine everyone’s SWOT analysis for one group SWOT • Hand in by end of class • What is your positioning Statement? • Hand in by end of class • Each person to do 1 company goal and at least 2 objectives for your goal • Hand in next Monday • Individual • How are you going to price your boat service? • What strategy will you use? • What is the actual price? • Goals and Objectives for your business unit • At least 3 goals, at least 2 objectives for each goal homework