MARK2051 Personal Study Notes For Whole Course [FINAL EXAM] PDF

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Personal Study Notes (HD) for content covered for the entire course (Week 2 - Week 12). Contains required and necessary information from the textbook that is needed for the exam, with additional material from some lectures and personal information for a more precise and detailed answer. ...

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Mehrab Abdullah MARK2051

CHAPTER 1: CONSUMER BEHAVIOUR AND MARKETING STRATEGY Consumer behaviour: ● A discipline dealing with how and why consumers purchase (or do not purchase) goods and services. ● It includes observable behaviour such as the amount purchased and when, by whom and with whom, and how the purchase is consumed. ● It also includes non-observable variables such as consumers' values, personal needs and perceptions, what information consumers have in their memories

WHAT IS MARKETING STRATEGY? Marketing strategy: It is the process of matching the organisations’ strengths to the customer needs, with the aim of achieving a competitive advantage in the market. It is the combination of product, price, distribution and promotion most suited to a particular group of consumers. Customer value: ● The difference between all the customer benefits derived from the total product and all the costs of acquiring these benefits. ● Requires the organisation to anticipate and react to customer needs faster and better than its competitors. The emergence of new information sources used by consumers, such as online sources suggests 3 important aspects of our current knowledge of consumer behaviour: ● If commercial firms, NFPs, and government agencies are to make successful marketing decisions, they require extensive information on current consumer behaviour. ● The need for information about the specific types of consumers involved in the marketing decision at hand. ● Consumer behaviour is a complex, multi-dimensional process. ○ E.g. Despite consumers' stated demand for more products to be available online, their perceptions of the risk involved in online payment may still require substantial investment in 'bricks and mortar' retail space. Key aspects of marketing strategy: 1. Organisation ● An organisation is a collection of resources (human, capital, intangible) and capabilities, which result in certain strengths and weaknesses in the market. 1. Consumer need: ● Human need is the potential demand in the market. It is the difference between what the consumer desires and what the consumer already has.

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Mehrab Abdullah MARK2051

1. Sustainable advantage ● Competitive advantage is the ability to satisfy the consumer need better than the competition. It is sustainable if this advantage is difficult to imitate or copy by the competition. The goal of marketing strategy: COMPETITIVE ADVANTAGE -> Limits competition, leads to supernormal profits Competitive advantage: ● Utility: does it satisfy a need or help in the achievement of a goal? ● Uniqueness: is it different to what is already in the market? ● No imitation: is it hard to copy?

ELEMENTS OF MARKETING STRATEGY Marketing strategy process: 1. Segmentation: consumers are heterogeneous, understand the differences and the similarities between consumers. It is the basis of most marketing strategies. It involves identifying consumer groups with unique needs and/or purchasing processes, and developing specific marketing programs targeted at individual groups. (UNDERSTAND CONSUMERS). 2. Targeting: choose a market segment that most closely matches your organisation’s strengths (CHOOSE CONSUMERS). 3. Positioning: Position in that segment to achieve competitive advantage. It is the way a product or brand compares to its competitors, as perceived by consumers (OFFER UTILITY, DIFFERENTIATE, PREVENT COPY). Segmentation: ● Determine the dimensions according to which you can describe customers in the market; E.g.: demographics (age, geography, subculture), psychographics (personality, lifestyle). ● Determine the heterogeneity along each dimension. ● Define the needs and goals of each segment. ● Understand how these will change over time. Targeting: ● Evaluate each segment in relation to organisational strengths and weaknesses. ● Choose the segment with the highest potential for strategic match (i.e.: fit between the organisation’s strengths and customer needs)

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Positioning: Key aspects:-

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○ Customer's minds': network of associations. ○ Meaningful: offering utility ○ Distinct: being unique Other requirements: ○ No imitation ○ In order to achieve positioning we need to know: ■ How consumers perceive and construct brand images? ■ Can these be influenced? ■ What are mental associations and how are they formed? ■ What is utility? ■ How do consumers differentiate between products? ○ Example: VISA Credit card ads: ■ What is the target segment? ■ What is the positioning in that segment? ● What is the utility proposition? ● How is it different? ● Can it be easily copied? ○ Positioning is implemented by using 4 main marketing-mix levers: ■ Product (attributes, utility) ■ Communication (branding, image) ■ Price (signaling v. the value proposition) ■ Distribution (channels of exchange)

MARKETING FUNDAMENTALS Marketing fundamentals: 1. 2. 3. 4. 5.

Understand the consumer . Provide utility (not products). Understand that consumers are heterogeneous. Understand that consumers are always changing. Compete in segments where you can establish competitive advantage.

Consumer behaviour: ● "The dynamic interaction of cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives” (American Marketing Association). ● Consumer behaviour investigates: ○ The dynamic interaction of cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives” ○ Sociological (group dynamics, culture, and subculture) aspects that influence the market decision process. ● Why is consumer behaviour important?

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It can be used to: ■ Predict choice ■ Influence decision making ■ Intelligently guide production towards creation of utility.

Global marketing: A form of international marketing that aims to target particular consumer segments, regardless of where they are located in the world, using standardized marketing mixes. Consumer behaviour audit: ● A systematic review of all important aspects of human behaviour. ● It is organised around key decisions that marketing managers have to make: ○ The selection of target market(s) to be served. ○ The determination of a viable product position for each target market. ○ The marketing mix elements (4 Ps) must be structured in a manner consistent with the desired position. ● The audit process will reveal where there are gaps from within the information not obtained or answered satisfactorily from the process. This points to further necessary research to be undertaken.

Consumerism: The activities of governments, businesses, independent organisations and concerned consumers aimed at protecting and enhancing the rights of consumers.

THE CONSUMER DECISION PROCESS Problem recognition ● Recognition that a problem exists ● A consumer problem is the difference between an existing state and a desired one. ● Habitual decision making: I f the consumer resolves the problem by recalling one satisfactory solution (i.e. a good or service) and purchasing that good or service without evaluation.  roblems that require thorough information searches, ● Extended decision making: P whether internal and external, the evaluation of several alternatives along several dimensions and considerable post-purchase evaluation. Information search ● Undertaken to isolate an effective solution. ● Information search may be very brief, extensive or somewhere in between.

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Evaluation of alternatives ● Consumer determines and compares relevant and feasible alternatives from information gathered to make a decision. ● The evaluative criteria will be examined along with questions such as: ○ Do consumers consider all goods and service attributes equally important, or are some more critical than others? ○ How is this information evaluated? ○ How is a brand choice made? Store choice and purchase ● Selection of the retail outlet and actual purchase of good or service. ● The attributes that influence store choice are examined and related to the needs of particular consumer groups. ● The actual acquisition of the product is analysed, with particular attention given to retailers' efforts to attract and satisfy consumers in the exchange process. ● Technological developments can considerably change the context in which purchases are made. Post-purchase activities ● 4 areas of particular concern to marketing managers are examined. ● These relate to what occurs after purchase or acquisition: use, evaluation, disposal and repurchase behaviour. ● Use of existing products is examined by marketing managers for clues on possible product improvements or themes for promotional campaigns. ● Consumer satisfaction is influenced by product performance, the purchasing process and consumer expectations. ● The disposal of products is an area of increasing concern for both government policymakers and marketing managers.

INTERNAL INFLUENCES

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Perception The means by which consumers process information while they are being influenced by a variety of groups, situations and marketing efforts. Information processing is the mechanism that makes the consumer behaviour model function. Individual development and individual characteristics are determinants in the decision process, while at the same time subject to influence from information received from culture, social class, reference groups and households. Perception, the initial activity in information processing, includes exposure, attention and interpretation.

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All these activities are driven by individual, stimulus and situational factors. Learning and memory Wants, tastes and preferences are all learned, as are consumers' perceptions of price-quality relationships. As purchase experience increases, consumers learn the most effective sources of information, the best places to shop, the brand names on which to rely and which to avoid. It is important for marketers to understand how people learn and what can be done to affect their learning. E.g. if positive feelings can be acquired through exposure (increased familiarity), it follows that the marketer can exert some direct influence on taste preferences through the amount and timing of promotional efforts as well as the design and characteristics of the goods and services offered. The result of learning is memory, and memory also has an influence on the learning process. Motives, personality and emotion Analyse those individual characteristics that energise, direct and shape a particular pattern of purchase and consumption behaviour. Motives, the forces that initiate and direct consumer behaviour, are examined first. Motives may be physiologically or psychologically based; however in developed economies, most consumer behaviour is guided by psychological motives. While motives direct behaviour towards objectives, personality relates to characteristic patterns of behaviour- personality is generally considered to reflect a consistent pattern of responses to a variety of situations, although the role played by the situation itself must also be recognised. Emotions are the feelings or affective responses to situations, products, advertisements, etc. They affect information processing and preferences. Attitudes Attitude is an individual's basic orientation for or against some object (good, service, retail outlet, etc.) Attitudes are formed out of the interrelationships between personal experience and lifestyle and the external factors that help shape lifestyle. Attitudes are made up of 3 components which tend to be consistent with one another: ○ Cognitive (beliefs) ○ Affective (feelings) ○ Behavioural (response tendencies) Marketing strategies are often based on influencing a single component of attitude, with the expectation that success in this endeavour will influence the remaining of the 2 components.

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EXTERNAL INFLUENCES

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Australasian society: demographics and lifestyles Demographics of Australasia- particularly income and geographic or age shifts. A detailed analysis of changing values in Australasia with respect to gender roles. In most economically advanced countries, culturally defined gender roles continue to go through major changes and these affect marketing-management decisions. Traditionally husband and wife roles have substantially shifted, as have the types of goods and services purchased and used by each gender. Consumer lifestyle includes the goods and services we buy, how we use them, what we think about them and how we feel about them. Lifestyle is determined by both conscious and subconscious decisions. Marketers need to understand different consumer lifestyles and the factors that influence them. Basic factors that influence consumer lifestyle include the household, reference groups, social status, culture and values. The household The household is a very special and influential entity to which each consumer belongs. The household is the primary purchasing unit for most consumer goods. It is important for the marketing manager to be fully aware of who is influencing the decision making of the household so that an effective information campaign can be constructed, positioned and directed appropriately. Another important variable for marketers is the household cycle. The institution called the 'household' has a fairly regular and predictable life cycle of its own. Marketers can look at each stage of this cycle and develop accurate aggregate pictures of the purchase needs and desires of individuals in each stage. Reference groups Most consumers belong to a large number of groups- a group is defined as 'two or more people who have a purpose for interacting over some extended period of time'. A group serves both as a reference point for the individual and a source of specific information. Marketing managers are particularly interested in the flow of information to and through groups. The concept of opinion leaders within groups, group conformity and how group norms often prescribe aspects of lifestyle, such as clothing fashions or the purchase of specific brands. Analysis of how new products -innovations- spread through groups.

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Roles- the patterns of behaviour expected of a person occupying a certain position in a group, rather than those expected of an individual can be observed through their influence on purchasing patterns. Social class Major questions are: ○ To what extent do various societies structure and rank individuals? ○ On what characteristics is this social structure built? ○ In what ways does this structure influence consumer lifestyle and purchase decisions? Generally, individuals are ranked on a number of observable characteristics that represent underlying values that their culture holds to be worthwhile. Sociologists have been able to group occupations together with other important variables, use them to identify categories that comprise individuals holding similar jobs, values, attitudes or, when viewed as a whole, somewhat similar lifestyles. The variables that influence social status vary from country to country, although they are quite similar for most western countries. Culture Culture may be defined in the traditional sense as that complex whole that includes the knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by a person as a member of society. Consumer behaviour is often the product of a particular culture. One of the most important aspects of culture is its basic values- which provide guidelines as to what is right and wrong or good and bad in any given situation. Values vary across cultures and set broad boundaries within which lifestyles involve. Cultural variations in non-verbal communications must also be examined. Subcultures are smaller, homogenous segments of the dominant culture and are of interest to marketers when they require differential marketing activities because of their unique lifestyles.

CONSUMER BEHAVIOUR AND SOCIETY Injurious consumptions: ● Challenge faced by marketers, in which consumer behaviour that may be harmful to oneself and others occurs. E.g. abuse of products such as alcohol and cigarettes. ● Injurious consumption affects society as well as individuals. Modernism: ● The application of scientific principles to achieve progress.

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The philosophical and sociocultural ideas and conditions that have characterised Western societies for the past 400 years or so. With respect to gaining knowledge through research, modernism assumes the importance of reason and rational order, autonomous, self-determining investigators and subjects, the validity of science and scientific process, and the existence of a single objective reality.

Postmodernism: ● A varied set of views and philosophies that share the belief that scientific principles may not necessarily lead to more or better knowledge. ● Postmodernist researchers believe that all reality is constructed by the individual or group and is determined by that individual or group as much as or even more than it is determined by an external or objective reality; thus there are multiple realities. ● Postmodernists tend to view knowledge as being dependent on time, culture and context. They generally view consumption as a symbolic system as much as an economic one. ● Postmodernist researchers try to understand consumer behaviour using ethnography and participant/observer studies, content analysis of popular media and introspection. ● As postmodernism evolves, it will continue to enrich our understanding of consumer behaviour (and continue to emphasise that this understanding is neither universal nor permanent).

SUMMARY LO 1.1

Why is studying the consumer important for marketers?

Successful marketing decisions by both commercial firms and NFPs, as well as sound rules by regulatory agencies, require a thorough understanding of consumer behaviour. Many examples of actual practices make it clear that successful organisations can, and do, apply theories and information about consumer behaviour on a daily basis. LO 1.2

What are the implications of consumer behaviour for marketing strategy?

Knowledge of consumer behaviour provides the basis of many marketing strategies, such as product positioning, market segmentation, new product development, new market applications, global marketing, marketing mix decisions, and marketing actions and regulations by NFPs and government agencies. Each of these major marketing activities is more effective when based on knowledge of consumer behaviour.

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LO 1.3

What are the different components of a consumer behaviour audit?

A consumer behaviour audit is a set of questions dealing with all aspects of an organisation's marketing decision making, including market segmentation, product positioning and each of the components of the marketing mix. It should guide the development of a marketing strategy. LO 1.4

Is consumer behaviour also relevant to NFPs, government agencies and consumer groups?

Consumers engage daily in a range of activities and deal with organisations of different types, including businesses, NFPs, government agencies and consumer groups. In each instance, their motivation for doing so, their perception of the process and their overall evaluation of the value they derive from their in...