Consumers 1 Individuals 2 Organizations Individuals Consumer

Consumers 1. Individuals 2. Organizations

Individuals (Consumer markets)

Consumer behavior is influenced by four factors: • cultural (culture, subculture, and social class), • social (reference groups, family, and social roles and statuses), • personal (age, stage in the life cycle, occupation, economic circumstances, lifestyle, personality, and self-concept), • psychological (motivation, perception, learning, beliefs, and attitudes)

Cultural factors • Culture is the most fundamental determinant of a person’s wants and behavior. • Subcultures provide more specific identification and socialization for their members. • Social classes are homogeneous and enduring divisions in a society.

Social factors • Reference groups - all of the groups that have a direct (face-to-face) or indirect influence on a person’s attitudes or behavior. • Social role consists of the activities that a person is expected to perform. Each role carries a status.

Personal factors • A lifestyle is a person’s pattern of living in thr world as expressed in activities, interests, and opinions. • Personality refers to the distinguishing psychological characteristics that lead to relatively consistent and enduring responses to environment.

Psychological factors • A motive is a need that is sufficiently pressing to drive the person to act. • Perception is the process by which an individual selects, organizes, and interprets information inputs to create a meaningful picture of the world. • Learning involves changes in an individual’s behavior that arise from experience. • A belief is a descriptive thought that a person holds about something. • An attitude is a person’s enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea.

Buying roles • • • initiator, influencer, decider, buyer, user.

The stages of buying decision process • • • problem recognition, information search, evaluation of alternatives, purchase decision, postpurchase behavior

Organizations (Business markets)

Business market consists of all the organizations that acquire goods and services used in the production of other products or services that are sold, rented, or supplied to others: profit-seeking companies, institutions, and government agencies.

Characteristics of business markets • Compared to consumer markets, business markets generally have fewer and larger buyers, a closer customer-supplier relationship, and more geographically concentrated buyers. • Demand in the business market is derived from demand in the consumer market and fluctuates with the business cycle. • The total demand for many business goods and services is quite price-inelastic.

Types of buying situations • the straight rebuy is a buying situation in which the purchasing department reorders on a routine basis • the modified rebuy is a buying situation in which the buyer wants to modify product specifications, prices, delivery requirements, or other items • the new task is a buying situation in which the purchaser buys a product or service for the first time

The buying center includes organizational members who play any of seven roles in the purchase decision process: • • Initiators. People who request that something be purchased, including users or others. Users. Those who will use the product or service; often, users initiate the buying proposal and help define product requirements. Influencers. People who influence the buying decision, including technical personnel. They often help define specifications and provide information for evaluating alternatives. Deciders. Those who decide on product requirements or on suppliers. Approvers. People who authorize the proposed actions of deciders or buyers. Buyers. People who have formal authority to select the supplier and arrange the purchase terms, including high-level managers. Buyers may help shape product specifications, but their major role is selecting vendors and negotiating. Gatekeepers. People who have the power to prevent sellers or information from reaching members of the buying center; examples are purchasing agents, receptionists, and telephone operators.

The stages of buying process (1) problem recognition, (2) general need description, (3) product specification, (4) supplier search, (5) proposal solicitation, (6) supplier selection, (7) order-routine specification, (8) performance review.

Competition

Five Forces That Determine Market Attractiveness (Michael Porter’s model) potential entrants suppliers industry competitors substitutes buyers

1. Industry competitors (threat of intense segment rivalry) A segment is unattractive if it already contains numerous, strong, or aggressive competitors. It is even more unattractive if the segment is stable or declining, if a great deal of plant capacity is being added, if fixed costs are high, if exit barriers are high, or if competitors have high stakes in staying in the segment. These conditions will lead to frequent price wars, advertising battles, and new-product introductions – making competition more expensive

2. Threat of new entrants The most attractive segment has high entry barriers and low exit barriers, so few new firms can enter, while poor-performing firms can exit easily. Profit potential is high when both entry and exit barriers are high, but firms face more risk because poorerperforming firms stay in and fight it out. When entry and exit barriers are both low, firms enter and leave the industry easily, and the returns are stable and low. The worst case is when entry barriers are low and exit barriers are high: firms can enter during good times but find it hard to leave during bad times. The result is chronic overcapacity and depressed earnings for all.

3. Threat of substitute products A segment is unattractive when there actual or potential substitutes for the product. Substitutes place a limit on prices and on the profits that a segment can earn. The company has to monitor the price trends in substitutes closely. If technology advances or competition increases in these substitute industries, prices and profits in the segment are likely to fall.

4. Threat of buyers' growing bargaining power A segment is unattractive if the buyers possess strong or growing bargaining power. Buyers' bargaining power grows when they become more concentrated or organized, when the product represents a significant fraction of the buyers' costs, when the product is undifferentiated, when the buyers' switching costs are low, when buyers are price sensitive, or when buyers can integrate upstream.

5. Threat of suppliers' growing bargaining power A segment is unattractive if the company's suppliers are able to raise prices or reduce quantity supplied. Suppliers tend to be powerful when they are concentrated or organized, when there are few substitutes, when the supplied product is an important input, when the costs of switching suppliers are high, and when suppliers can integrate downstream. The best defenses are to build win-win relations with suppliers or use multiple supply sources.

Competitors

The closest competitors are those seeking to satisfy the same customers and needs and making similar offers; Latent competitors are those who may offer new or other ways to satisfy the same needs

Competitor analysis • • • strategies, objectives, strengths, weaknesses, reaction patterns.

SWOT Analysis • Internal environment analysis – Strengths – Weaknesses • External environment analysis – Opportunities – Threats

SWOT matrix Opportunities O 1 O 2 … Threats T 1 T 2 … S 1 Strengths S 2 SO ST WO WT … W 1 Weaknesses W 2 …

Market roles • • market leader, challenger, follower, nicher.

Market-leader strategies • Expanding the total market • Defending market share, • Expanding market share

Market-challenger strategies • General attack strategy (frontal, flank, encirclement, bypass, guerrilla) • Specific attack strategy

General attack strategies • • • In a frontal attack, the attacker matches its opponents product, advertising, price, and distribution. A flank attack can be directed along two strategic dimensions. In a geographical attack, the challenger spots areas where the opponent is underperforming. Another flanking strategy is to serve uncovered market needs. The encirclement maneuver is an attempt to capture a wide slice of the enemy's territory through a "blitz"—launching a grand offensive on several fronts. Bypass involves bypassing the enemy and attacking easier markets to broaden one's resource base. This strategy offers three lines of approach: diversifying into unrelated products, diversifying into new geographical markets, and leapfrogging into new technologies to supplant existing products. Guerrilla warfare consists of waging small, intermittent attacks to harass and demoralize the opponent and eventually secure permanent footholds. The guerrilla challenger uses both conventional and unconventional means of attack, such as selective price cuts, intense promotional blitzes, and attention-getting activities.

Specific Attack Strategies • Price-discount, The challenger can offer a comparable product at a lower price. This works if (1) the challenger can convince buyers that its product and service are comparable to the leader's; (2) buyers are price-sensitive; and (3) the leader refuses to cut price despite the competitor's attack. • Lower-price goods. The challenger can offer an averageor low-quality product at a much lower price. • Prestige goods. A challenger can launch a higher-quality product and charge more than the leader. • Product proliferation. The challenger can attack the leader by offering more product variety, giving buyers more choice. • Product innovation. The challenger can pursue product innovation.

Market-follower strategies • Counterfeiter, The counterfeiter duplicates the leader's product and package and sells it on the black market or through disreputable dealers. • Cloner. The cloner emulates the leader's products, name, and packaging, with slight variations. • Imitator. The imitator copies some things from the leader but maintains differentiation in terms of packaging, advertising, pricing, and so on. The leader does not respond as long as the imitator does not attack the leader aggressively. • Adapter. The adapter adapts or improves the leader's products, perhaps for different markets.

Market-nicher strategies A market nicher serves small market segments that are not being served by larger firms. The key to nichemanship is specialization.