ESSAY Questions
Identify and explain the five stages of the consumer buying process. Give examples of marketing activities designed to influence each stage.
1-Need Recognition
The buying process begins when consumers recognize that they have an unmet need. This occurs when consumers realize that there is a difference between their existing situation and their desired situation. Consumers can recognize needs in a variety of settings and situations. Some needs have their basis in internal stimuli such as hunger, thirst, and fatigue. Other needs have their basis in external stimuli such as advertising, interacting with salespeople, or talking with friends and family.
2-Information Search
When done correctly, marketing stimuli can prompt consumers to become interested in a product, leading to a desire to seek out additional information. This desire can be passive or active. In a passive information search, the consumer becomes more attentive and receptive to information, such as noticing and paying attention to automobile advertisements if the customer has a want for a specific car brand. A consumer engages in active information search when he or she purposely seeks additional information, such as surfing the Internet, asking friends, or visiting dealer showrooms. The amount of time, effort, and expense dedicated to the search for information depends on a number of issues. The most important is the degree of risk involved in the purchase.
3-Evaluation of Alternatives
In evaluating the alternative product or brand choices among the members of the evoked set, the consumer essentially translates his or her need into a want for a specific product or brand. Consumers evaluate products as bundles of attributes that have varying abilities to satisfy their needs. The most important consideration for marketers during the evaluation stage is that the marketer's products must be in the evoked set of potential alternatives. For this reason, marketers must constantly remind consumers of their company and its product offerings.
4-Purchase Decision
After the consumer has evaluated each alternative in the evoked set, he or she forms an intention to purchase a particular product or brand. However, a purchase intention and the actual act of buying are distinct concepts. The customer may postpone the purchase due to unforeseen circumstances. Marketers can often reduce or eliminate these problems by reducing the risk of purchase through warranties or guarantees, making the purchase stage as easy as possible, or by finding creative solutions to unexpected problems. The key issues for marketers during the purchase stage are product availability and possession utility.
5-Postpurchase Evaluation
In the context of attracting and retaining buyers, postpurchase evaluation is the connection between the buying process and the development of long-term customer relationships. In the postpurchase stage, buyers will experience one of these four outcomes:
Ÿ Delight - The product's performance greatly exceeds the buyer's expectations.
Ÿ Satisfaction - The product's performance matches the buyer's expectations.
Ÿ Dissatisfaction - The product's performance falls short of the buyer's expectations.
Ÿ Cognitive Dissonance (Postpurchase Doubt) - The buyer is unsure of the product's
performance relative to his or her expectations.
Although the stages of the consumer buying process are typically discussed in a linear fashion, consumers do not always follow the stages in sequence. Explain why this often occurs.
The consumer buying process involves five stages of activities that consumers may go through in buying goods and services. The process begins with the recognition of a need and then passes through the stages of information search, evaluation of alternatives, purchase decision, and postpurchase evaluation. The buying process depicts the possible range of activities that may occur in making purchase decisions. Consumers, however, do not always follow these stages in sequence and may even skip stages en route to making a purchase. Likewise, consumers who are loyal to a product or brand will skip some stages and are most likely to simply purchase the same product they bought last time. Consequently, marketers have a difficult time promoting brand switching because they must convince these customers to break tradition and take a look at what their products have to offer.
The buying process often involves a parallel sequence of activities associated with finding the most suitable merchant of the product in question. That is, while consumers consider which product to buy, they also consider where they might buy it. In the case of name brand products, this selection process may focus on the product's price and availability at different stores or online merchants. Conversely, in the case of private-label merchandise, the choice of product and merchant are made simultaneously. The choice of a suitable merchant may actually take precedence over the choice of a specific product. In some cases, customers are so loyal to a particular merchant that they will not consider looking elsewhere.
Consumers may spend relatively more or less time in certain stages, they may follow the stages in or out of sequence, or they may even skip stages entirely. This variation in the buying process occurs because consumers are different, the products that they buy are different, and the situations in which consumers make purchase decisions are different. A number of factors affect the consumer buying process, including the complexity of the purchase and decision, individual influences, social influences, and situational influences.
The complexity of the purchase and decision-making process is the primary reason why the buying process will vary across consumers and with the same consumer in different situations. For example, highly complex decisions, like buying a first home, a first car, selecting the right college, or choosing elective surgery, are very involving for most consumers. These purchases are often characterized by high personal, social, or financial risk; strong emotional involvement; and the lack of experience with the product or purchase situation. In these instances, consumers will spend a great deal of time, effort, and even money to help ensure that they make the right decision. In contrast, purchase tasks that are low in complexity are relatively noninvolving for most consumers. In some cases, these purchase tasks can become routine in nature. For example, many consumers buy groceries by selecting familiar items from the shelf and placing them in their carts without considering alternative products.
Explain the five different target-marketing strategies and give examples of firms that use each one. Also, discuss how firms might approach the targeting of noncustomers.
Once the firm has completed segmenting a market, it must then evaluate each segment to determine its attractiveness and whether it offers opportunities that match the firm's capabilities and resources. Just because a market segment meets all criteria for viability does not mean the firm should pursue it. Attractive segments might be dropped for several reasons including a lack of resources, no synergy with the firm's mission, overwhelming competition in the segment, an impending technology shift, or ethical and legal concerns over targeting a particular segment. Based on its analysis of each segment, the firm's current and anticipated situation, and a comprehensive SWOT analysis, a firm might consider five basic strategies for target market selection.
Single Segment Targeting - Firms use single segment targeting when
their capabilities are intrinsically tied to the needs of a specific market
segment. Many consider the firms using this targeting strategy to be true
specialists in a particular product category. Good examples include New
Belgium Brewing (craft beer), Porsche, and Ray-Ban. These and other
firms using single segment targeting are successful because they fully
understand their customers' needs, preferences, and lifestyles. These firms
also constantly strive to improve quality and customer satisfaction by
continuously refining their products to meet changing customer preferences.
Selective Targeting - Firms that have multiple capabilities in many
different product categories use selective targeting successfully. This
strategy has several advantages including diversification of the firm's risk
and the ability to "cherry pick" only the most attractive market segment
opportunities. Procter & Gamble (P&G) uses selective targeting to offer
customers many different products in the family care, household care, and
personal care markets. Besides the familiar deodorants, laundry detergents,
and hair care products, P&G also sells products in the cosmetics, snack
food and beverages, cologne, and prescription drug markets.
Mass Market Targeting - Only the largest firms have the capability to
execute mass market targeting, which involves the development of multiple
marketing programs to serve all customer segments simultaneously. For
example, Coca-Cola offers roughly 400 branded beverages across many
segments that fulfill different consumer needs in over 200 countries around
the world. Likewise, Frito-Lay sells hundreds of different varieties of snack
foods around the world.
Product Specialization - Firms engage in product specialization when their
expertise in a product category can be leveraged across many different
market segments. These firms can adapt product specifications to match the
different needs of individual customer groups. For example, many consider
Littmann Stethoscopes, a division of 3M, as the worldwide leader in
auscultation technology. Littmann offers high-performance electronic
stethoscopes for cardiologists, specially designed stethoscopes for
pediatric/infant use, lightweight stethoscopes for simple physical assessment,
and a line of stethoscopes for nursing and medical students. The company
also offers a line of veterinary stethoscopes.
Market Specialization - Firms engage in market specialization when their
intimate knowledge and expertise in one market allows them to offer
customized marketing programs that not only deliver needed products but
also provide needed solutions to customers' problems. The Follett
Corporation is a prime example. Follett specializes in the education market
by serving over 760 schools, colleges, and universities in the United States
and Canada. The company's slogan "Powering education. Worldwide." is
based on the firm's goal to be the leading provider of educational solutions,
services, and products to schools, libraries, colleges, students, and lifelong
learners.
In addition to targeting a subset of current customers within the product/market, firms can also take steps to target noncustomers. There are many reasons why noncustomers do not purchase a firm's products. These reasons can include unique customer needs, better competing alternatives, high switching costs, lack of product awareness, or the existence of long-held assumptions about a product. The key to targeting noncustomers lies in understanding the reasons why they do not buy and then finding ways to remove these obstacles. Removing obstacles to purchase, whether they exist in product design, affordability, distribution convenience, or product awareness, is a major strategic issue in developing an effective marketing program.
Identify and discuss the three traditional market segmentation strategies. Include in your answer a discussion of the relative advantages and disadvantages of each strategy.
Mass Marketing
Mass marketing involves no segmentation whatsoever. Companies aim mass-marketing campaigns at the total (whole) market for a particular product. Companies that adopt mass marketing take an undifferentiated approach that assumes that all customers in the market have similar needs and wants that can be reasonably satisfied with a single marketing program. Mass marketing works best when the needs of an entire market are relatively homogeneous. Mass marketing is also advantageous in terms of production efficiency and lower marketing costs. However, the strategy is inherently risky. By offering a standard product to all customers, the organization becomes vulnerable to competitors that offer specialized products that better match customers' needs. In industries where barriers to entry are low, mass marketing runs the risk of being seen as too generic. This situation is very inviting for competitors who use more targeted approaches. Mass marketing is also very risky in global markets where even global brands like Coca-Cola must be adapted to match local tastes and customs.
Differentiated Marketing
Most firms use some form of market segmentation by (1) dividing the total market into groups of customers having relatively common or homogeneous needs and (2) attempting to develop a marketing program that appeals to one or more of these groups. Within the differentiated approach, there are two options: the multisegment approach and the market concentration approach. Firms using the multisegment approach seek to attract buyers in more than one market segment by offering a variety of products that appeal to different needs. Firms using this option can increase their share of the market by responding to the heterogeneous needs of different segments. The multisegment approach is the most widely used segmentation strategy in medium- to large-sized firms. It is extremely common in packaged goods and grocery products. Firms using the market concentration approach focus on a single market segment. These firms often find it most efficient to seek a maximum share in one segment of the market. The main advantage of market concentration is specialization because it allows the firm to focus all its resources toward understanding and serving a single segment. Specialization is also the major disadvantage of this approach. By "putting all of its eggs in one basket," the firm can be vulnerable to changes in its market segment, such as economic downturns and demographic shifts.
Niche Marketing
Some companies narrow the market concentration approach even more and focus their marketing efforts on one small, well-defined market segment, or niche, that has a unique, specific set of needs. Customers in niche markets will typically pay higher prices for products that match their specialized needs. The key to successful niche marketing is to understand and meet the needs of target customers so completely that, despite the small size of the niche, the firm's substantial share makes the segment highly profitable. An attractive market niche is one that has growth and profit potential but is not so appealing that it attracts competitors.
Compare and contrast brand loyalty and brand equity, as well as how these concepts are related. Must a brand possess high brand loyalty in order to possess high brand equity? Explain.
Brand loyalty is a positive attitude toward a brand that causes customers to have a consistent preference for that brand over all other competing brands in a product category. There are three degrees of brand loyalty: brand recognition, brand preference, and brand insistence. Brand recognition exists when a customer knows about the brand and is considering it as one of several alternatives in the evoked set. This is the lowest form of brand loyalty and exists mainly due to the awareness of the brand rather than a strong desire to buy the brand. Brand preference is a stronger degree of brand loyalty where a customer prefers one brand to competitive brands and will usually purchase this brand if it is available. Brand insistence, the strongest degree of brand loyalty, occurs when customers will go out of their way to find the brand and will accept no substitute. Customers who are brand insistent will expend a great deal of time and effort to locate and purchase their favorite brand.
The value of a brand is often referred to as brand equity. Another way of looking at brand equity is the marketing and financial value associated with a brand's position in the marketplace. Brand equity stems from four elements: brand awareness, brand loyalty, brand quality, and brand associations. Brand awareness and brand loyalty increase customer familiarity with a brand. Customers familiar or comfortable with a specific brand are more likely to consider the brand when making a purchase. When this familiarity is combined with a high degree of brand quality, the inherent risk in purchasing the brand decreases dramatically. Brand associations include the brand's image, attributes, or benefits that either directly or indirectly give the brand a certain personality.
Although brand loyalty is only one part of brand equity, it is hard to imagine that a brand could have high equity without high brand loyalty. This is especially true with respect to brands that enjoy high brand insistence. These brands are so vital to customers that they will expend great time and effort to acquire them. As a result, the marketing and financial value associated with these brands is likely to be very high-resulting in high brand equity.
- Discuss the benefits associated with offering a large portfolio of products. What are some of the key issues involved in managing the product portfolio?
Although offering a large portfolio of products can make the coordination of marketing activities more challenging and expensive, it also creates a number of important benefits:
Economies of Scale - Offering many different product lines can create
economies of scale in production, bulk buying, and promotion. Many
firms advertise using an umbrella theme for all products in the line.
Nike's "Just Do It" and Maxwell House's "Good to the Last Drop" are
examples of this. The single theme covering the entire product line saves
considerably on promotional expenses. Identify and discuss the three traditional market segmentation strategies. Include in your answer a discussion of the relative advantages and disadvantages of each strategy.
Package Uniformity - When all packages in a product line have the
same look and feel, customers can locate the firm's products more
quickly. It also becomes easier for the firm to coordinate and integrate
promotion and distribution. For example, Duracell batteries all have the
same copper look with black and copper packaging.
Standardization - Product lines often use the same component parts.
For example, Toyota's Camry and Highlander use many of the same
chassis and engine components. This greatly reduces Toyota's
manufacturing and inventory handling costs.
Sales and Distribution Efficiency - When a firm offers many
different product lines, sales personnel can offer a full range of choices
and options to customers. For the same reason, channel intermediaries
are more accepting of a product line than they are of individual
products.
Equivalent Quality Beliefs - Customers typically expect and believe
that all products in a product line are about equal in terms of quality and
performance. This is a major advantage for a firm that offers a
well-known and respected line of products. For example, Crest's
portfolio of oral care products all enjoys the same reputation for high
quality.
A firm's product portfolio must be carefully managed to reflect changes in customers' preferences and the introduction of competitive products. Product offerings may be modified to change one or more characteristics that enhance quality and/or style, or lower the product's price. Firms may introduce product line extensions that allow it to compete more broadly in an industry. Sometimes, a firm may decide that a product or product line has become obsolete or is just not competitive against other products. When this happens, the firm can decide to contract the product line.
Why is the product life cycle an important consideration in selecting and developing a marketing strategy? What are the core differences among the PLC stages that force marketers to alter their marketing programs over time?
Managing the entire portfolio of products and brands over time is a major strategic issue. To address this issue, we use the traditional product life cycle to discuss product strategy from a product's conception, through its growth and maturity, and to its ultimate death. It is important for product managers to consider the stage of their market's life cycle with respect to planning in the current period as well as planning for the future. Using the product life cycle as a framework has the distinct advantage of forcing managers to consider the future of their industry and their brand.
Development Stage
A firm has no sales revenue during the product development stage. In fact, the firm experiences a net cash outflow due to the expenses involved in product innovation and development. The development stage usually begins with a product concept, which has several components: (1) an understanding of the specific uses and benefits that target customers seek in a new product; (2) a description of the product, including its potential uses and benefits; (3) the potential for creating a complete product line that can create synergy in sales, distribution, and promotion; and (4) an analysis of the feasibility of the product concept including such issues as anticipated sales, required return on investment, time of market introduction, and length of time to recoup the investment.
Introduction Stage
The introduction stage begins when development is complete and ends when sales indicate that target customers widely accept the product. Marketing strategy goals common to the introduction stage include (1) attracting customers, (2) inducing customers to try and buy the product, (3) engaging in customer education activities, (4) strengthening or expanding channel and supply chain relationships, (5) building on the availability and visibility of the product through trade promotion activities, and (6) setting pricing objectives that will balance the firm's need to recoup investment with the competitive realities of the market.
Growth Stage
The firm should be ready for the growth stage because sustained sales increases may begin quickly. The product's upward sales curve may be steep, and profits should rapidly increase, then decline, toward the end of the growth stage. Regardless of the length of the growth stage, the firm has two main priorities: (1) establishing a strong, defensible market position and (2) achieving financial objectives that repay investment and earn enough profit to justify a long-term commitment to the product. During the growth stage, the overall strategy shifts from acquisition to retention, from stimulating product trial to generating repeat purchases and building brand loyalty.
Maturity Stage
After the shakeout occurs at the end of the growth stage, the strategic window of opportunity will all but close for the market, and it will enter the maturity stage. No more firms will enter the market unless they have found some product innovation significant enough to attract large numbers of customers. The window of opportunity often remains open, however, for new product features and variations. These variations can be important as firms attempt to gain market share. In the face of limited or no growth within the market, one of the few ways for a firm to gain market share is to steal it from a competitor. Such theft often comes only with significant promotional investments or cuts in gross margin because of the lowering of prices. The stakes in this chess match are often very high. Typically, a firm has four general goals that can be pursued during the maturity stage: (1) generate cash flow, (2) hold market share, (3) steal market share, and (4) increase share of customer.
Decline Stage
A product's sales plateau will not last forever, and eventually a persistent decline in revenue begins. A firm has two basic options during the decline stage: (1) attempt to postpone the decline or (2) accept its inevitability. Should the firm attempt to postpone the decline, the product's demand must be renewed through repositioning, developing new uses or features for the product, or applying new technology. Many firms, however, do not have the resources or opportunity to renew a product's demand and must accept the inevitability of decline. In such instances, the firm can either harvest profits from the product while demand declines or divest the product, taking steps to abandon it or sell it to another firm.
Throughout the product life cycle, it is imperative that the firm stays focused on changes in the market, not on the firm's products. Products have life cycles only because markets and customers change. By focusing on changing markets, the firm can attempt to create new and better quality products to match customers' needs. Only in this way can a firm grow, prosper, remain competitive, and continue to be seen as a source of solutions by the target market.
-Identify the unique characteristics of services (relative to tangible goods) and list the marketing challenges created by each characteristic.
Intangibility
- It is difficult for customers to evaluate quality, especially before purchase and
consumption.
- It is difficult to convey service characteristics and benefits in promotion. As a result,
the firm is forced to sell a promise.
- Many services have few standardized units of measurement. Therefore, service
prices are difficult to set and justify.
- Customers cannot take possession of a service.
Simultaneous Production and Consumption
- Customers or their possessions must be present during service delivery.
- Other customers can affect service outcomes including service quality and customer
satisfaction.
- Service employees are critical because they must interact with customers to deliver
service.
- Converting high-contact services to low-contact services will lower costs but may
reduce service quality.
- Services are often difficult to distribute.
Perishability
- Services cannot be inventoried for later use. Therefore, unused service capacity is
lost forever.
- Service demand is very time-and-place sensitive. As a result, it is difficult to balance
supply and demand, especially during periods of peak demand.
- Service facilities and equipment sit idle during periods of off-peak demand.
Heterogeneity
- Service quality varies across people, time, and place, making it very difficult to
deliver good service consistently.
- There are limited opportunities to standardize service delivery.
- Many services are customizable by nature. However, customization can
dramatically increase the costs of providing the service.
Client-based Relationships
- Most services live or die by maintaining a satisfied clientele over the long term.
- Generating repeat business is crucial for the service firm's success.