The Value Proposition

Why should a consumer buy from you?

Competitive Advantages

What makes you better than your competition?

Choosing A Differentiation Strategy

You chose a target market, now what?

Monday, October 21, 2013

Marketing 101: Choosing the Right Competitive Advantages

Previously I explored the concept of Market Differentiation which involves Product Positioning through a Value Proposition.  Recall that a Value Proposition is not a "mystical" marketing term, but in fact is an essential marketing principle.  A Value Proposition consists of two parts: a differentiated value, and a position.  The differentiated value refers to the ways our products and services stand out from the competition inside a chosen market segment.  The Value Proposition helps us develop a Differentiation Strategy which effectively focuses and communicates our intended position to the selected target market, and gives us sources of competitive advantages.

Evaluating Brand Differences
The truth is some differentiators are not meaningful or worthwhile to consumers - they won't "speak" to them in your messaging.  The other often overlooked reality is that each differentiator used in your marketing strategy creates costs for the company (your marketing budget), as well as benefits for the consumer.  Therefore each differentiator we choose must be evaluated according to the following criteria:

1) Importance: Does the difference deliver a highily valued benefit to the target customer?
2) Distinctiveness: Do your competitors also offer the difference? Can you offer it to customers in a more distintive and meaningful way?
3) Superiority: Is the difference superior to other ways that customers can obtain the same "benefit"?
4) Communicable: Can the difference be easily communicated and also visible to consumers?
5) Preemptive: Is it difficult for your competitors to copy the difference?
6) Affordable: Can consumers afford to pay for the difference?
7) Profitable: Are you able to introduce the difference profitably?

The ideal differentiators are the ones that meet all 7 of the above criteria fairly well.  If you are entering a target segment that has very little competition, this is entirely possible.  However if there are already a few well established products in the segment, then you will need to position yourself via multiple differentiators, and your differentiators may have a more difficult time being truly distinctive, preemptive, and important.

Monday, August 5, 2013

Marketing 101: The First Step of Market Differentiation

In our previous discussion we defined a Target Market as a set of buyers that share a set of common needs or characteristics that we decide to serve.  When targeting a market segment we examine three factors: a segment's size and growth trends, a segment's structural attractiveness, and a company's long term objectives and available resources. Once we've defined the target market, and chosen one of four appropriate marketing methods, our eyes turn towards Market Differentiation and Product Positioning through a Value Proposition.

A Value Proposition is not a mystical marketing term, it is an essential marketing principle.  A Value Proposition consists of two parts: a differentiated value, and a position.  The differentiated value refers to ways our products and services stand out from the competition inside a market segment.  A position is the "place" the product occupies inside the consumer's mind relative to competing products in the market segment.  Let's address "position" first.

Depending on the product or service, the Buying Decision Process can be tough.  To simplify it, consumers will organize products and services into categories and "position" them inside their minds relative to others.  This position is built from the consumer's underlying sets of perceptions, impressions, and feelings about a product.  We all naturally do this, without any help from advertising.  It's human nature - we are chronic "judgers".  The painful reality for a marketer is that we cannot leave this natural act of positioning to chance - we MUST influence it.  A marketer must first define the positions we want our products and services to occupy, and then create the messaging that will influence consumers and give us a competitive advantage.  A great way to plan and visualize positioning is by using Position Maps.

Position Maps
Position Maps are great tools we can use to understand how consumers perceive us versus other competing products. A position map uses two axis.  Each axis represents a qualitative or quantitative attribute.  Usually using data acquired through primary or secondary sources, we can graph visually where each product is positioned according to the relationships between the two axis.

What you see in the map above is a visual plot of the positioning of common brands of candy.  If we were developing a new brand, or trying to reposition an existing one, we can use this map to help guide our differentiation and messaging strategies going forward.

Choosing Differentiation Strategies
The reality is that two or more firms will go after the same position in a targeted segment.  A Differentiation Strategy helps us effectively focus and communicate our intended position to the selected target market, and gives us a source of competitive advantage. Differentiation strategies help us describe the differences between our products and services versus our competition.  The result of successful differentiation is that categorization by the consumer becomes harder, which reduces comparisons of our products and services with our competition.

Choosing a differentiation strategy generally consists of three steps:
1) Identifying a set of possible customer value differences that provide competitive advatages upon which to build the position.
2) Selecting the best competitive advantages.
3) Creating the overall positioning strategy.

Step 1: Identifying A Set Of Value Differences
If we are able to position our products and services in a manner that sets them apart from our competition, then we have gained a competitive advantage and our position in the comsumer's mind will be higher than the alternatives available.  In order to gain this competitive advantage we can differentiate through products, services, channels, people, or image (brand).

Our ability to differentiate ourselves solely on the actual product is dependent on the "sliding scale" of product features.  At one end are products that have few real "features" to sell - such as beef, pencils or cartons of milk.  The other end is occupied by highly differentiated products, with abundant real "features", such as cars, computers and homes.

Services are defined as "what accompanies the product".  Let's use an automobile as an example.  When you buy a Ford, consumers can expect a fairly mainstream level of dealer service.  Lexus differentiates itself with a higher level of service: luxurious lounges and brand new Lexus loaner cars are the norm for owners of these automobiles. 

Differentiation through channels involves every touch point along the way to finally getting the product into the consumer's hands.  Companies enjoy competitive advantages via channel differentiation due to the way they design their channel's coverage, expertise, and execution. Companies such as Dell, Apple, and Amazon have created some of the most well executed direct to consumer channels in their industries.

Companies can use their own "people resources" as points of differentiation.  Grocery stores, retail outlets, call centers, theme parks, and even hospitals all use people as points of differentiation.  Where there is a customer touch point, you can differentiate via people.

Brand Image
In some ways, using brand as a point of differentiation seems the simplest to understand.  When you think about some of the most common brands in the marketplace, odds are you already have distinctly positioned them in your mind.  The caveat is that it is only "easy" to leverage a brand as a point of differentiation if it is well established in the marketplace.  If you are relatively new, or unknown, then it is much harder to differentiate solely on brand. In this case you can use brand as a smaller complementary component of your differentiation strategy.  The goal with brand differentiation is to convey your product's distinct benefits and positioning through brand messaging.  If you are going to use brand differentiation, you must remember that you cannot develop your image in the consumer's mind overnight; it takes long term commitment throughout all company micro-environments.  You literally must live and breathe the essence of your products and company.

Regardless of how you choose to differentiate your products and services, they key take-away is this: it is impossible to offer products and services that are built upon empty promises.  We must live according to our promises and slogans on a daily basis at all customer touch points.

Thursday, July 11, 2013

Marketing 101: Market Targeting

Recall that a customer driven marketing strategy consists of four distinct "steps".  Previously I focused on the first step: Segmentation.  I defined Market Segmentation as dividing a market into smaller groups that contain distinct needs, characteristics, or behaviors that may require distinct products, services and marketing mixes.  Because buyers have different wants, desires, needs, geographic locations, economic resources, buying attitudes, and buying practices, we use segmentation to divide markets into "pieces" that can be reached more effectively.  Market segmentation reveals our potential opportunities.  Once we have segmented the market, we must decide what parts of it to target.

Targeting the Market
We can define a Target Market as a set of buyers that share a set of common needs or characteristics that we can decide to serve.  When targeting a market segment we must look at three factors: a segment's size and growth trends, a segment's structural attractiveness, and our own company's long term objectives and available resources. The first factor consists of the type of research we have explored in the past when discussing Primary Data.  It is vitally important that we collect and analyze data on current segment sales, it's growth rates and potential profitability.  Once we have that data, we must compare it to the size and growth characteristics that our own company is seeking.

Next, we must investigate the segment's major structural factors that will determine how attractive our participation will be.  There are many reasons a segment may appear unattractive.  First, a segment is generally less attractive if it contains numerous strong and potentially aggressive competitors.  More competition usually results in many alternative products that create price competition and limit available profits.  Second, a segment is less attractive if buyers have more power, forcing participants to keep prices lower in order to increase market share, which also reduces  profits.  Third, a segment is less attractive if there are suppliers with strong influence in the micro-environments that actively try to hold material costs at a certain level, with increases our cost of goods, which also reduces potential profits.

Once we have produced a detailed evaluation of the target's structural factors, we must consider our own long term objectives and available resources.  Quite frankly, your company may not have the skills, knowledge, intellectual property and resources to succeed in a particular market segment.  A company should enter a segment only if they can offer outstanding value and can gain and retain competitive advantages over other companies in a given segment.

Choosing a Marketing Method
Once you have selected an attractive market segment, it's time to determine the marketing mix through a targeted marketing method.  Targeted Marketing is generally conducted at four distinct levels.  These levels are based on the relative size of the targeted segment.  In order of large to small, these levels are: Undifferentiated Mass Marketing > Differentiated Segmented Marketing > Concentrated Niche Marketing > Micro-marketing at a local or individual level.

Undifferentiated Mass Marketing
Undifferentiated Mass Marketing is a marketing strategy where a company chooses to ignore market segment differences (presented by their Primary and Secondary Data) and go after the whole market with one distinct product offering.  This type of strategy focuses on the most common needs of consumers, rather than on what is distinctly different between them.  This is a classic strategy from the early to mid-1900's, with the goal of appealing to the largest group of buyers possible in order to create as many sales as possible.  This is the classic volume-based tactic.  Product margins are low, and the value given to the customer is marginal as well.  Most modern marketers do not believe this strategy is very effective.  Today it is very difficult to make a product that appeals to mass-markets due to extreme competition from more focused niche products.

Differentiated Targeted Marketing
Differentiated Targeted Marketing is a strategy where we select several market segments, and design focused products and marketing mixes for each one, with the goal of higher sales and a relatively stronger position within each segment.  The advantage of Differentiated Targeted Marketing is that it typically gives a company higher gross sales across segments.  However increased sales also bring increased costs, because it can be more expensive to develop and produce 10 units of 10 different products (versions that are focused towards specific types of buyers) than 100 units of one product (for mass appeal or niche segments).  It also costs more to market for multiple segments, because each segment requires separate marketing research, analysis, planning, and channel management.  Due to these disadvantages, a marketer must weigh the prospects of increased sales versus the potential increased cost of business when choosing a differentiated marketing strategy.

Concentrated Marketing
Concentrated Marketing is a marketing strategy where a firm chooses to pursue a large share of one distinct segment or a few segments or niches.  Concentrated Marketing allows a company to achieve a stronger market position within a segment due to their greater knowledge of consumer needs and desires within that segment, fine tuning product features and prices over time in responsive to changing trends.  Concentrated Marketing is very appealing for companies that have relatively limited resources for product development and marketing.   Concentrated Marketing is also attractive, because segments are generally smaller and usually attract very few competitors, allowing for higher margins.  However Concentrated Marketing comes with higher than normal risks.  Because most of your business is focused within one or few segments, you may suffer large financial losses a segment turns sour at any time. 

Micro-Marketing is a strategy where companies tailor products and marketing mixes to the needs and wants of specific individuals or local consumer groups.  Micro-Marketing generally involves consumers in all phases of product development, giving consumers opportunities to practice self-marketing during the buying decision process.  Micro-Marketing can give consumers extraordinary value, and can give the companies extraordinary value and consumer equity in return.  However Micro-Marketing tends to increase product development and marketing costs by reducing natural economies of scale inherent in manufacturing.  Micro-Marketing is also logistically complicated due to the numerous requirements of executing different regional and local marketing mixes.

Once you have evaluated and chosen a segment to target, we must work on Differentiation: differentiating the market offering (ie: the product) and thereby creating superior customer value.  I will explore this topic in my next post.

Tuesday, June 4, 2013

Marketing 101: Market Segmentation

In my overview of Customer Driven Targeted Marketing, I stated that no human being is like another. Two people may be very similar, but they will always be different consumers, influenced by different attitudes and beliefs. As marketers we have to accept the fact that we can't appeal to all types of buyers in the marketplace, and there is just no way to appeal to any two buyers in the exact same way.  I also stated that in order to achieve maximum value from consumers according to our working definition of marketing, we need to focus on the right target customers that will give us the right relationships that achieve maximum customer value and equity.  To do this we use Customer Drive Targeted Marketing.

Recall that a customer driven marketing strategy consists of four distinct "steps".  Let's focus on the first step: Segmentation.  Market Segmentation is defined as dividing a market into smaller groups that contain distinct needs, characteristics, or behaviors that may require distinct products, services and marketing mixes.  Because buyers have different wants, desires, needs, geographic locations, economic resources, buying attitudes, and buying practices, we use segmentation to divide markets into "pieces" that can be reached more effectively.  However, there is no one standard way to segment a market.  Marketers have to segment using multiple combinations of variables in order to find the best way to view the target market.

Marketers use many variables to segment a market.  The major variables we use can be divided into standard categories such as:

1) Geographic - includes world region or country, city or metro size, density, climate
2) Demographic - includes age, gender, family size, famliy life cycle, income level, occupation, education, religion, race, generation, nationality
3) Psychographic - includes social class, lifestyle, personality
4) Behavioral - includes special occassions, benefits, user status, user rates, lotalty status, purchase readiness stage, attitude towards products and brands

With so many variables available to marketers for the purposes of segmentation, it would be so easy just to pick on or two variables and "call it a day".  However, what experienced marketers know is that we rarely limit our segmentation analysis to one, two, or even a few variables.  Marketers are using more segmentation bases today than in the past in an effort to identify more focused groups of consumers.

However, using more variables does NOT guarantee that our segmentation base is effective.  In order for a segmentation to be effective, it must meet the following criteria:

Be Measurable
Be Accessible - The targeted customers can be actively reached and served.
Be Substantial - The targeted group is large enough and profitable enough size-wise to serve.
Be Differentiable - The targeted group is conceptually distinguishable and responds differently to different markeing mix elements and programs.
Be Actionable - The targeted group can be designed for attracting and servicing the segments.

Once we have defined and chosen our market segment, we can work on targeting the segment.  My next post will discuss targeting.

Friday, May 10, 2013

Marketing 101: Overview of Customer Driven Marketing Strategies

One thing is for sure, no human being is like another. Two people may be very similar, but they will always be different consumers, influenced by different attitudes and beliefs. As marketers we have to accept the fact that we can't appeal to all types of buyers in the marketplace, and there is just no way to appeal to any two buyers in the exact same way.

In order to achieve maximum value from consumers according to our working definition of marketing, we need to focus on the right target customers that will give us the right relationships that achieve maximum customer value and equity. Stop for a moment and notice that I wrote the word "target". This was not a coincidence.

Decades ago, most marketing money was allocated towards mass marketing efforts. Products and services were created to attract and serve as many customers as possible. It was thought that the best way to make as much money as a possible was to sell as many products as possible to as many people as possible. The concept of customer equity wasn't even a part of the mindset of the marketer.

Mass Marketing (also known as undifferentiated marketing) is a marketing strategy that originated in the 1920's as a way of appealing to as many potential buyers in the marketplace as possible. Mass Marketers choose to ignore market segment differences and try to appeal to as large of a customer base as possible with a single product offering. The marketer is assuming that their product meets the needs of an entire population of consumers, and that they can appeal to those consumers in the same way. Mass Marketers aim to broadcast their messaging to as many people as possible, as often as possible. Traditionally mass marketing has focused on the mediums of radio, television and print due to their reach. The marketer assumes that by reaching the largest audience possible, exposure to the product is maximized and sales will be at their maximum.

However there are clear disadvantages to mass marketing practices.  First, we know now that consumers don’t all think alike; so what works well for one group of consumers does not always translate well for another. Second, consumers are becoming less and less interested in "standardized" products (think canned soup), and are very willing to pay higher prices for products that cater to their needs and desires.  Third, mass marketing usually involves much higher costs, especially for the corresponding media buys.  For smaller companies with smaller marketing budgets, mass marketing just isn't possible.  A more focused, budget-effective method of marketing is required: Customer Driven Targeted Marketing.

Customer Driven Targeted Marketing
Because of its advantages and the reality that all companies differ in their abilities to serve different market segments, most marketers have shifted over to customer driven targeted marketing.  In the process of creating a targeted marketing plan we identify one or more marketing segments, and then develop products and marketing programs that are "targeted" to each type of consumer we are pursuing.  A customer driven marketing strategy consists of four distinct "steps", typically grouped into two groups:

1) Selecting The Right Customers To Serve:
-Via segmentation: by dividing the total mass market into smaller segments
-Via targeting: by selecting the right segment or segments of the marketplace to enter

2) Deciding On a Unique Value Proposition:
- Via differentiation: differentiating the market offering (ie: the product) and thereby creating superior customer value
- Via positioning: placing the product offering in the minds of the target consumer with the right messaging

These four steps create value for the target consumer, and allow us to receive value from them.  Over the next few posts I will be diving in further to the Customer Drive Targeted Marketing process.

Monday, April 8, 2013

Marketing 101: Post-Purchase Behavior

So far I've examined four of the five stages of the Buyer Decision Process: Need Recognition, Information Search, Evaluation of Alternatives, and the actual Purchase Decision.  We've discovered that each stage is complicated, and that marketers will need to understand their customer's journey as they construct meaningful campaigns and messaging.  These statements are even more important to reckon with in the last stage of the Buyer Decision Process: Post-Purchase Behavior.

What is Post-Purchase Behavior?
Simply defined, Post-Purchase Behavior is the stage of the Buyer Decision Process when a consumer will take additional action, based purely on their satisfaction or dissatisfaction.  The consumer's level of satisfaction or dissatisfaction is directly related to the varying relationship between their initial expectations of the product (pre-purchase), and their perception of the actual performance of the product (post-purchase) in their hands.

If after the purchase the consumer perceives the product's performance as matching their expectations, or even exceeding them, they will be "satisfied".  If their perception of the product's performance is less than their expectations, then the consumer will feel "dissatisfied".  The larger the gap between their expectations and the product's performance, the more dissatisfaction.  This dissatisfaction leads to Cognitive Dissonance.

Cognitive Dissonance is buyer discomfort caused by post-purchase conflict resulting from dissatisfaction.  The reality is that all purchases, big and small, will result in some degree of Cognitive Dissonance.  This is always the case, because every purchase a consumer makes involves some sort of compromise, however small or minute.  Since consumers form beliefs and attitudes early in the Buyer Decision Process, at some point they will be concerned about having a negative experience with the product they may chose, or potentially missing the perceived benefits of other competing brands.

The issue of Cognitive Dissonance raises an important question: Why is it so important to satisfy the consumer?  It all comes back to our basic definition of marketing: Managing profitable customer relationships.  The goal is to attract new customers through superior value, and to keep growing customers by delivering customer satisfaction.  If we are doing these things, then we will be able to capture value from customers to create profits and build customer equity.  So, if our customers are satisfied they will begin to develop brand loyalty.  This brand loyalty will help us develop profitable relationships.  Our satisfied customers will buy from us again. They will become influencers in their cultural and social groups.  They will pay less attention to competitors, and buy more of our products. 

Dissatisfaction breeds the opposite.  Consumers that perceive poor product performance will not create profits and will erode customer equity.  They will not be loyal, and they will become negative influencers in their cultural and social groups, leading others away from our brands.  What should we do with dissatisfied customers?  We should pursue them.  Even if they do not want to buy our products, we can still target them with dedicated messaging.  We can directly reach out to them, and we can figure out ways to repair the relationship.  These consumers can provide us with a wealth of primary data that can be used to improve our offerings and create focused marketing campaigns.  Dissatisfied consumers are just as valuable as satisfied ones.

The conclusion is clear: Our job is not done once the consumer buys our product.  Once a consumer buys a product they will enter some degree of post-purchase behavior.  These behaviors, based on their satisfaction or dissatisfaction, will either build customer equity and brand loyalty, or lead to eroding sales and brand image issues.  This all is related to their relationship between their expectations and the perceivced performance of the products in their hands.  As marketers, we must have messaging ready for this specific part of the Buyer Decision Process.  It is our job to encourage happy consumers to share their experiences and dive deeper into brand offerings.  It is also our job to be brand advocates by reaching out to dissatisfied consumers and transforming their experience into one that leads to a profitable relationship.

Monday, March 25, 2013

Marketing 101: Purchase Decision

In my examination of the Buyer Decision Process I've explored the first three steps: Need Recognition, Information Search, and the Evaluation of Alternatives. Generally the completion of alternative evaluation will lead to our fourth step, the Purchase Decision.

The Purchase Decision
We can define the Purchase Decision simply as the consumer's choice of which brand to purchase.  Once the consumer forms their beliefs and attitudes about a product segment's brands, the consumer will usually purchase the most preferred brand.  Notice that I said usually.  Sometimes two factors can come between the purchase intention and the purchase decision: the attitudes of others, and unexpected situations.

Sometimes the attitudes of others can change our minds before the sales transaction. For example, someone in a family group or social group might think that you should get an Apple iPad instead of a comparable competitor's tablet device.  If this person is important enough in your life, they may exert enough "peer" pressure to cause you to suddenly alter your attitudes and beliefs, greatly reducing the chances of you buying another brand of tablet.

Your tablet purchasing decision may also be altered by our second factor: unexpected situations.  Consumers will usually form their purchase decisions based on factors such as their current income level, expected prices, and assumed product benefits.  However unexpected events often will change their original purchase intention.  Some examples of purchase altering situations are unexpected sales, competitors dropping their prices, a sudden economic downturn, or a sudden change in employment.

Marketers need to understand that their work is not done once a consumer reaches the point of making a purchase.  Because consumers can, and often will change their minds, consistent messaging needs to be placed in front of the consumer all the way up to the actual sales transaction.  Even then our job is not done.  In my next post I will explore Post-Purchase Behavior.

Tuesday, March 5, 2013

Marketing 101: The Buyer Decision Process: Evaluation of Alternatives

In my examination of the Buyer Decision Process, I've started by exploring the first two stages: Need Recognition and Information SearchNeed Recognition refers to the instance when a consumer recognizes that a need, or problem exists that needs to be satisfied, ie: I need a new refrigerator.  If the need is strong enough, an Information Search is usually initiated.  As a consumer does more research they will inevitably become aware of competing brands and products that are available for purchase.  It is at this point that the Evaluation of Alternatives begins.  An Evaluation of Alternatives is the stage of the buyer decision process in where a consumer uses the information gathered in the Information Search to evaluate alternative brands in the product category.

So how does a consumer choose among these alternatives?  The truth is that there are several processes at work inside the consumer's mind, forming beliefs and attitudes about all of the products to choose from.  However these processes all "evolve" based on the individual's buying situation.  The situation evolves from the set of attributes the consumer is choosing to evaluate products by.

Let's say a consumer is evaluating the attributes of a groups of computers. They have identified four attributes: performance, design, price, and value.  During the evaluation the consumer will place different levels of importance with each attribute based off of what is most important to them.  The consumer will "evaluate" each brand and form beliefs on how each brand rates on each attribute.  The consumer may turn to friends and family, consult consumer reviews, or discuss their situation with sales people during the Information Search.

We know that all brands vary in their degree of appeal to each consumer.  A consumer may buy a brand based on a single attribute, or a number of them.   If during the Information Search you were able to deduce how a consumer assigned value to each attribute you could predict the buying behavior more accurately.  Marketers must study buyers to discover how they actually evaluate brand alternatives.  If you know how your target customer's evaluation process occurs, you can take steps to influence the buying decision early on and lead the buyer to purchase much faster.

Monday, February 25, 2013

Marketing 101: The Buyer Decision Process - Information Search

In my last posted I started to discuss the Buyer Decision Process.  Simply defined, it's conducted by a consumer before, during, and after the purchase of products and services. The process consists of five defined steps or stages that typically occur in a certain order: Need recognition > Information Search > Evaluation of Alternatives > Purchase Decision > Post-Purchase Behavior.

Need Recognition refers to the instance where a consumer recognizes that a need or problem exists that needs to be satisfied.  Need Recognition is usually triggered by an internal stimuli when a particular need, such as hunger or thirst, rises to a high enough level to become a drive.  Once the need has been identified and has become a drive, the pursuit of information begins.

Information Search
Information Search is the second stage of the buyer decision process.  In this stage consumers are driven (by their drive) to search for more information related to their need.  If the drive is strong and a satisfying product is near at hand, the consumer is likely to buy it then, barely collecting any information, or skipping this stage altogether.  If the drive is not strong, the consumer will usually store their need in memory and begin an information search.  As a consumer does more research they will inevitably become aware of competing brands and products that are available for purchase. 

Appliances are a product category where consumers conduct lots of research and there is ample competition.  Let's say a consumer needs to replace their refrigerator.  Because the most effective sources of information tend to be personal in nature, a consumer might start their information search by asking members of their friends and family social and cultural groups what refrigerators they would recommend.  Next, the consumer will typically begin to use commercial sources of information to "fill in the blanks", such as advertisements, editorial reviews, and in-store sales staff.

Marketers must design their marketing mix to make target customers aware of their brand in the midst of all of this "noise".  Ad messaging must address the typical needs, lifestyle aspirations and answer the common questions of their target demographics.  Sales staff must be properly trained and incentivized so that in-store touch points are as successful as possible.  If a marketing mix is properly created, it can help accelerate consumers quickly past the Evaluation of Alternatives stage and towards the Purchase Decision.

Monday, February 4, 2013

Marketing 101: The Buyer Decision Process - Need Recognition

Over the past few months we've spent the majority of our time exploring the many ways consumers are influenced throughout the buying process.  First was an overview of Consumer Buying Behavior, which we placed into the Model of Consumer Buyer Behavior.  We summarized that [1] Consumers "ingest" marketing and other stimuli, such as the four P's: Product, Price, Place and Promotion [2] the stimuli enters their "buyer black box" [3] the "black box" creates buyer responses.

Next we looked at Cultural Factors affecting consumer purchases, noting that Cultural Factors are some of the strongest influences of consumer buyer behavior, because they are the set of basic values, perceptions, wants and behaviors that are "learned" by a consumer from their families and other important social institutions.  Also recall the fact that we need to remember that every group or society has a culture influencing them in some form or degree.

Along with cultural factors, there are also Social Factors affecting consumer buyer behavior.  Human beings are social, and they need people around them to interact with and to discuss various issues in order to reach better solutions and ideas.  We learned that these social factors typically consist of the consumer's small groups, their family, and their social roles and status.  We also learned about social roles such as Initiators, Influencers, Deciders, Buyers, and Users.  These roles play a part within social groups consisting of friends and familes.  We also quickly examined how economic status enables or disables a person's abilties as a consumer.

On top of the social factors affecting consumer buyer behavior, we also have Psychological Factors.  The consumer's own personality is constructed by the unique psychological characteristics that create relatively consistent, lasting behavior in response to their own environment.  These characteristics include Self Concept, Motivation and the five motivational needs, Perception, Learning, and Beliefs and Attitudes.  In summary, all of these factors and stimuli illustrate an important point: consumers are complicated.  Now let's see how complicated reaching a buying decision can be.

Defining the Buyer Decision Process
The Buyer Decision Process is conducted by a consumer before, during, and after the purchase of products and services.  Purchasing decisions are usually considered to be psychological constructs, because although we never "see" a decision, usually we infer from observed behaviors that a decision has been made. Therefore we are able to conclude that a psychological event, the "decision", has occurred. This assumption of a process suggests a commitment to action; that commitment to buy.

The Buyer Decision Process is usually split up into 5 distinct stages that typically occur in a certain order: Need recognition > Information Search > Evaluation of Alternatives > Purchase Decision > Post-Purchase Behavior.  This order seems to suggest that a consumer will pass through all five stages, however this is not always the case. Often with habitual buying behavior a consumer will usually skip or reverse some of these steps in the Buyer Decision Process.  However one step, Need Recognition, is never skipped.

Need Recognition
The first stage of the buyer decision process is Need Recognition.  Need Recognition refers to the instance where a consumer recognizes that a need or problem exists that needs to be satfisfied.  Need Recognition is usually triggered by an internal stimuli when a particular need, such as hunger or thirst, rises to a high enough level to become a drive.

External stimuli can also create a need and lead to drives.  For example, advertisements that consumers hear and see, or discussions with other people can cause them to consider buying a particular product.

When preparing a campaign and settling on your target audience, you need to conduct research that helps you define the needs of the consumer, how the needs arose, what stimuli brought them about, and how that stimuli led the consumer to determine they needed your product.

Monday, January 14, 2013

Marketing 101: Variety Seeking Buying Behavior

In previous posts I examined Complex Buying Behavior, Dissonance-Reducing Buying Behavior, and Habitual Buying Behavior.  Finally, we will quickly define Variety Seeking Buying Behavior.

Variety Seeking Buying Behavior
Variety Seeking Buying Behavior refers to situations where there is low consumer involvement, but the consumer perceives significant differences between the brand options in front of them.  In variety seeking situations consumers tend to do a lot of brand switching.  There is no real brand loyalty.  Common variety seeking types of products are cookies and crackers.  Let's take a quick look at crackers.

Consumers may already have a few beliefs about crackers.  However most consumers will buy a particular brand with very little evaluation before the purchase.  In fact in product categories such as crackers, evaluation tends to happen during consumption of the product.  Beliefs and attitudes will come during the experience of eating them, or using them at parties.  The next time the consumer is ready to buy, they will sometimes buy the same brand if the experience was favorable.  However, they may also pick another brand purely out of boredom or to just try something different.  All of this happens for the sake of variety rather than any negative beliefs or attitudes about the cracker brand.
The marketing strategy might differ for the market leader versus the competitors trying to grab market share.  Leaders should encourage habitual buying - dominating shelf space and keeping shelves stocked, running frequent reminder advertising.

Marketers should encourage variety seekers to buy by using lower prices, special deals, coupons, samples, and ads that have messaging that give reasons for trying something new.

Monday, January 7, 2013

Marketing 101: Habitual Buying Behavior

So far we have examined Complex Buying Behavior and Dissonance-Reducing Buying Behavior.  Next, let's quickly look at Habitual Buying Behavior.

Habitual Buying Behavior
Habitual Buying Behavior refers to situations where a consumer has low involvement in a purchase, and is perceiving very few significant differences between brands in a given product category.  So many products fit into this scenario.  Most of them are everyday use products and commodities, such as toilet paper, salt and black pepper.  Let's consider black pepper.

There isn't much to ground black pepper.  Unless you are actively cooking as a hobby (or a profession), you just need some pepper to throw into your mac-and-cheese or season the mashed potatoes on your plate.  There is very little consumer involvement in this product category.  Typically a consumer will go to the store and reach for a brand.  If the consumer grabs the same brand repeatedly, this is almost always habitual buying, not brand loyalty.

In these scenarios the consumer's buyer behavior doesn't go through the normal belief-attitude-behavior sequence.  Instead, consumers passively learn about low involvement products and brands through passive consumption media - television, radio, and Hulu ads.  Because consumers are buying based on brand familiarity, marketers must use ad repetition to build brand familiarity instead of brand conviction.  In order to encourage sales, marketers will need to use tactics such as price and sales promotions to initiate product trial.

Marketers should create messaging that emphasizes only a few key points.  Marketers should also use more visual symbols and imagery within their advertising, because they can easily be remembered by the consumer and associated with the brand.  Ad campaigns should have high repetition rates and the  duration of messages should be short.

Wednesday, January 2, 2013

Marketing 101: Dissonance-Reducing Buying Behavior

In my last post I examined Complex Buying Behavior.  Next, let's quickly dig into Dissonance-Reducing Buying Behavior.

Dissonance-Reducing Buying Behavior
Just like Complex Buying Behavior, consumers with Dissonance-Reducing Buying Behavior have high amounts of involvement.  However, buyers in this behavioral situation are perceiving very few differences among the brands they are selecting products from.  The key word here is perceiving.  There may be many real differences between the different brands, however the buyer's beliefs about the other brands are that there are very similar or essentially the same.  Let's examine a common product such as paint.

Choosing paint for the interior of your house is an extremely expressive process.  The colors a person may choose are varied and will always vary from person to person depending on their highly personal tastes.  Paint can also be expensive, with some brands costing over $20 per gallon.  When a consumer finds a group of brands in a determined price range, their understanding of the difference between brands may be very low.  As a result, a consumer may do some research, but in the end, they may be swayed by price or convenience of purchase in the end.

Post-Purchase Dissonance
Post-Purchase Dissonance is another way to say "after the sale discomfort".  It's also the on-set of "buyer's remorse".  Post-Purchase Dissonance will begin once a consumer begins to "notice" any disadvantages of their purchase, and begin to hear "good" things about the other products they did not buy.  To counter these feelings, marketers should be running after-sale communication campaigns with focused targeted messaging.  These campaigns should give encouragement and help support consumers, convincing them to continue to "feel good" about their brand choice.  These marketing campaigns should also be encouraging additional purchases or referrals, offering discounts and incentives for additional purchasing.