1.

Types of consumer buying decision behaviour

● Complex buying behavior
The consumer is highly involved in the buying and there is significant differences
between brands. Consumers are highly involved when the product is expensive,
bought infrequently, risky and highly self-expressive. Typically the consumer does
not know much about the product category and has much to learn. So in this case the
consumer must collect proper information about the product features and the marketer
must provide detailed information regarding the product attributes. For example,
when buying a mobile or laptop, both are expensive and variety of brands.

● Dissonance reducing buying behaviour

The consumer is highly involved in the purchase but there are few differences
between brands. The high involvement is based on the fact that the purchase is
expensive, infrequent, and risky. In this case, the buyer will shop around to learn what
is, available but will buy fairly quickly because brand differences are not pronounced.
The buyer may respond primarily to a good price or to purchase convenience. Like
consumer while buying a floor tiles buy them quickly as there are few differences
between brands.

● Habitual buying behaviour

The consumer involvement is low as well as low is no significance among brands
names. They just go for it and purchase it, there is no brand loyalty. Consumers do not
need information regarding brand purchase, characteristics. The consumer buys the
product quickly. For example, buying a match box or toothpaste.

● Variety seeking buying behaviour

The consumer involvement is low while buying the product but there are significant
differences between brands. Consumers generally buy different products not due to
dissatisfaction from the earlier product but due to seek variety. Like every time they
buy different washing detergent just for variety. So it is the duty of the marketer to
encourage the consumer to buy the product by offering them discounts, free samples
and by advertising the product a lot.

2. Major types of buying situations of organization that buy goods and

services
There are four main types of buying situation namely;

1. Straight rebuy
An industrial buying situation in which the buyer routinely reorders something
without modifications (e.g.,office supplies, bulk chemicals). It is usually
handed on a routine basis by the purchasing department. The “in” suppliers
make an effort to maintain product and service quality and often piopose
 automatic reordering systems to save time. “Out” suppliers try to find new
ways to add value or exploit dissatisfaction so that buyer will consider them.

2. Modified rebuy
An industrial buying situation in which the buyer wants to modify product
specifications, prices, terms or suppliers’. The in-suppliers become nervous
and have to protect the account. The out-suppliers see an opportunity to
propose a better offer to gain some business.

3. New task
An industrial buying situation in which the buyer purchases a product or
service for the first time’(e.g., office building, new security system). The need
for such a product may not have occurred previously. For a new task, a new
set up and new items are necessary, which may not have been purchased
before. The greater the cost or risk, the larger the number of participants and
the greater their information gathering-and therefore the longer the time to
collect information.

4. Systems selling
Buying a packaged solution to a problem from a single seller, thus avoiding all
the separate decisions involved in a complex buying situation. This is often a
key business marketing strategy for winning and holding accounts.

3. Major steps involved in designing a customer value-driven marketing

strategy
Designing a true customer-driven marketing strategy involves:

● market segmentation is the act of dividing a market into distinct segments of buyers
with different needs, characteristics, or behaviors who might require separate products
or marketing mixes.
● market targeting evaluates each market segment’s attractiveness and selects one or
more segments to serve.
● Differentiation involves actually differentiating the market offering to create superior
customer value.
● Positioning consists of positioning the market offering in the minds of target
customers. A customer-driven marketing strategy seeks to build the right relationships
with the right customer

4. The requirements for an effective segmentation

● Measurable
The size, purchasing power, and profiles of the segments can be measured.
Certain segmentation variables are difficult to measure. Some form of data should be
 available to measure the size of the market segment. Measurements are very
important to be able to evaluate the overall attractiveness of each segment.
○ For example, there are approximately 30.5 million left handed people in the
United States, which is nearly the entire population of Canada. Yet few
products are targeted toward this left-handed segment. The major problem
may be that the segment is hard to identify and measure. There are no data on
the demographics of lefties, and the U.S. Census Bureau does not keep track
of left handedness in its surveys.

● Accessible
The market segment should be reachable, particularly in terms of distribution
and communication. Each segment needs to be able to be reached and communicated
with on an efficient basis.
○ Suppose a fragrance company finds that heavy users of its brand are single
men and women who stay out late and socialize a lot. Unless this group lives
or shops at certain places and is exposed to certain media, its members will be
difficult to reach.

● Substantial
The market segments are large or profitable enough to serve. Each firm will
have minimum requirements for the financial return from their investment in a
market, so it is necessary to only consider segments that are substantial enough to be
of interest. A segment should be the largest possible homogeneous group worth
pursuing with a tailored marketing program.
○ It would not pay, for example, for an automobile manufacturer to develop cars
especially for people whose height is greater than seven feet.

● Differentiable
The segments are conceptually distinguishable and respond differently to
different marketing mix elements and programs. Each segment of consumers should
be relatively unique, as compared to the other segments that have been constructed.
This demonstrates that the consumers in the overall market have been effectively
divided into sets of differing needs.
○ If men and women respond similarly to marketing efforts for soft drinks, they
do not constitute separate segments.

● Actionable
Effective programs can be designed for attracting and serving the segments.
Organizations should be able to design and implement the marketing mix to serve the
chosen segment.
○ For example, although one small airline identified seven market segments, its
staff was too small to develop separate marketing programs for each segment
5. Different types of consumer products and compare them based on
customer buying behaviour, price and distribution

These 4 types of consumer products:

1. Convenience products
Convenience products are bought the most frequently by consumers. They are bought
immediately and without great comparison between other options. Convenience products
are typically low-priced, not-differentiated among other products, and placed in locations
where consumers can easily purchase them. The products are widely distributed, require
mass promotion, and are placed in convenient locations.

Characteristics:
● Purchased frequently
● At a low price point
● Easily available
● Not commonly compared with other products

For example, sugar, laundry detergent, pencils, pens, and papers are examples all of
convenience products.

2. Shopping products

Shopping products are bought less frequently by consumers. Consumers

usually compare attributes of shopping products such as quality, price, and style
between other products. Therefore, shopping products are more carefully compared
against, and consumers spend considerably more time, as opposed to convenience
 products, comparing alternatives. Shopping products require personal selling and
advertising and are located in fewer outlets (compared to convenience products) and
selectively distributed.

Characteristics:
● Purchased less frequently
● At a medium price point
● Commonly compared among other products

For example, Airline tickets, furniture, electronics, clothing, and phones are all examples of
shopping products.

3. Speciality products

Speciality products are consumer products and services with unique characteristics or
brand identification for which a significant group of consumers is willing to make a special
purchase effort. Specialty products are typically high priced, and buyers do not use much
time to compare against other products. Rather, buyers typically spend more effort into
buying specialty products compared to other types of products.

Characteristics:
● With unique characteristics or brand perception
● Purchased less frequently
● At a high price point
● Seldom compared between other products
● Only available at select/special places

Examples include specific cars, professional and high-prices photographic equipment,

designer clothes etc. A perfect example for these types of consumer products is a
Lamborghini. In order to buy one, a certain group of buyers would make a special effort, for
instance by travelling great distances to buy one. The one who wants one is immediately
convinced of the choice for a Lamborghini and would not compare it that much against 10
other brands.

4. Unsought products

Unsought products are those consumer products that a consumer either does not know
about or knows about but does not consider buying under normal conditions. Thus, these
types of consumer products consumers do not think about normally, at least not until they
need them. Most new innovations are unsought until consumers become aware of them. The
price of unsought products varies. As a consequence of their nature, unsought products
require much more advertising, selling and marketing efforts than other types of consumer
products.

Characteristics:
● Not top-of-mind of consumers
● Requires extensive advertising and marketing efforts

For example, Diamond rings, pre-planned funeral services, and life insurance.

6. Strategic choices that a company has in developing its brands

a. Brand Positioning

A brand must be positioned clearly in target customers’ minds. Brand positioning can be
done at any of three levels:

● on product attributes

At the lowest level, marketers can position a brand on product attributes. Marketing
for a car brand may focus on attributes such as large engines, fancy colours and sportive
design. However, attributes are generally the least desirable level for brand positioning. The
reason is that competitors can easily copy these attributes, taking away the uniqueness of the
brand. Also, customers are not interested in attributes as such. Rather, they are interested in
what these attributes will do for them. That leads us to the next level: Benefits.

● on product attributes
A brand can be better positioned on basis of a desirable benefit. The car brand could go
beyond the technical product attributes and promote the resulting benefits for the customer:
quick transportation, lifestyle and so further.

● on product attributes

Yet, the strongest brands go beyond product attributes and benefits. They are
positioned on beliefs and values. Successful brands engage customers on a deep, emotional
level. Examples include brands such as Mini and Aston Martin. These brands rely less on
products’ tangible attributes, but more on creating passion, surprise and excitement
surrounding the brand. They have become “cool” brands.

Brand positioning lays the foundation for the three other branding decisions.
Therefore, brand positioning should also involve establishing a mission for the brand and a
vision of what the brand should be and do. The brand’s promise must be simple and honest.

b. Brand Name Selection

A good name can add greatly to a product’s success. However, finding the best brand
name is a difficult task. It begins with a careful review of the product and its benefits, the
target market, and proposed marketing strategies. After that, naming a brand becomes part
science, part art, and a measure of instinct. Today’s style is to build brands around names that
carry real meaning.
Choosing a brand name is not enough. It also needs to be protected. Many firms
attempt to build a brand name that will eventually become identified with a product category.
Examples for these names include Kleenex, Tip-ex and Jeep. However, their success can also
quickly threaten the company’s rights to the name. Once a trademark becomes part of the
normal language (called “genericization”), it is not protected anymore. For that reason many
originally protected brand names, such as aspirin, Walkman (by Sony) and many other names
are not protected anymore.

c. Brand Sponsorship
A manufacturer has four sponsorship options. A manufacturer has four brand sponsorship
options:
● A product may be launched as a manufacturer’s brand. This is also called national
brand.
○ Examples, Kellogg selling its output under the own brand name (Kellog’s
Frosties, for instance) or Sony (Sony Bravia HDTV).
 ● The manufacturer could also sell to resellers who give the product a private brand.
This is also called a store brand, a distributor brand or an own-label. Recent tougher
economic times have created a real store-brand boom. As consumers become more
price-conscious, they also become less brand-conscious, and are willing to choose
private brands instead of established and often more expensive manufacturer’s brands.

● Also, manufacturers can choose licensed brands. Instead of spending millions to

create own brand names, some companies license names or symbols previously
created by other manufacturers. This can also involve names of well-known
celebrities or characters from popular movies and books. For a fee, they can provide
an instant and proven brand name.
○ Examples, sellers of children’s products often attach character names to
clothing, toys and so on. Examples, Disney, Star Wars, Hello Kitty and many
more.

● Finally, two companies can join forces and co-brand a product. Co-branding is the
practice of using the established brand names of two different companies on the same
product. This can offer many advantages, such as the fact that the combined brands
create broader consumer appeal and larger brand equity.
○ For instance, Nestlé uses co-branding for its Nespresso coffee machines,
which carry the brand names of well-known kitchen equipment manufacturers
such as Krups, DeLonghi and Siemens.

d. Brand Development
For developing brands, a company has four choices:
● Line extension
○ refers to extending an existing brand name to new forms, sizes, colours,
ingredients or flavours of an existing product category. This is a low-cost,
low-risk way to introduce new products. However, there are the risks that the
brand name becomes overextended and loses its specific meaning. This may
confuse consumers.
○ An example for line extension is when Coca-Cola introduces a new flavour,
such as diet cola with vanilla, under the existing brand name.

● Brand extension
○ Assumes an existing brand name, but combines it with a new product
category. Thus, an existing brand name is extended to a new product category.
This gives the new product instant recognition and faster acceptance and can
save substantial advertising costs for establishing a new brand. However, the
risk that the extension may confuse the image of the main brand should be
kept in mind. Also, if the extension fails, it may harm consumer attitudes
toward other products carrying the same brand name. For this reason, a brand
 extension such as Heinz pet food cannot survive. But other brand extensions
work well.
○ For instance, Kellog’s has extended its Special K healthy breakfast cereal
brand into a complete line of cereals plus a line of biscuits, snacks and
nutrition bars.

● Multibrands
○ means marketing many different brands in a given product category. P&G
(Procter & Gamble) and Unilever are the best examples for this. In the USA,
P&G sells six brands of laundry detergent, five brands of shampoo and four
brands of dishwashing detergent. Why? Multibranding offers a way to
establish distinct features that appeal to different customer segments. Thereby,
the company can capture a larger market share. However, each brand might
obtain only a very small market share and none may be very profitable.

● New brands
○ are needed when the power of existing brand names is waning. Also, a new
brand name is appropriate when the company enters a new product category
for which none of its current brand names are appropriate

7. There are five distinct product life cycle stages, what marketing activity
options (4Ps) are opened to a business at each stage of their products or
services lifecycle

Product Development.
When the company finds and develops a new product idea, product development starts.
During product development, sales are zero, and the company’s investment costs increase.
● The marketing mix for this stage includes ways to bring awareness of the product to
potential customers through marketing campaigns and special promotions.

Introduction
Sales slowly grow as the product is introduced in the market. Because it is a new product that
customers are not yet aware of, the product sales during the introduction stage are generally
low. At this time, marketing expenses are generally high because it requires a lot of effort to
bring awareness to the product.
● Launch new product.
● Promotional materials are developed to inform and gain awareness, understanding
and acceptance of the product. Focus on an audience that likes to be an early adopter.
● Consider the pricing strategy also, should it be a low price to quickly gain market
share or a high price if limited competition and high cost to bring to market.
● Target Marketing distribution should be considered, place or location based on your
market research: target the easiest market to enter first; you want to have early and
fast wins.

Growth
The growth stage is a period of rapid market acceptance and increasing profits.
● Increase brand preference: focus on product features, advantages and benefits.
● stabilize pricing and ensure that the cost/price relationship is valid AND also
supported by the market.
● Increase brand preference: focus on product features, advantages and benefits.
● Enter additional markets (Place). Your product, and its brand, will be gaining
recognition and will receive easier acceptance. Demand will increase.
● Promotional materials are focused on the broader, more expanded market (and
audience).

Maturity
In the maturity stage, sales growth slows down because the product has achieved acceptance
by most potential buyers. Profits level off or decline because marketing outlays need to be
increased to defend the product against competition.
● Define and refine what is unique about your product: unique value proposition and
strong product differentiation and product positioning (or re-positioning). If possible,
and/or necessary, add new, different and unique features and benefits to your product.
● Pricing may be impacted by competitive activity. Develop alternative competitive
strategy to cutting price for as long as possible.
● Distance to market may begin to cost in time and money. Look for alternatives
(Places): open a branch closer to the big markets, or the smaller less competitive
markets; can the product be sold online? Expand your market reach.
● Promotional materials are focused on the unique value proposition, new features and
benefits and other product differentiation.

Decline
Finally, sales fall off and profits drop.
 ● Look at ways to improve or change the product. The focus is generally on reinforcing
the brand image of the product to stay in a positive light in the eyes of the product's
loyal customers.

8. Value based pricing strategy and how it is applied

When customers buy a product, they exchange something of value (the price) to get
something of value (the benefits of having or using the product). Effective customer-oriented
pricing involves understanding how much value consumers place on the benefits they receive
from the product and setting a price that captures that value. It uses buyers’ perceptions of
value as the key to pricing. Value-based pricing means that the marketer cannot design a
product and marketing program and then set the price. Price is considered along with all other
marketing mix variables before the marketing program is set.
The company first assesses customer needs and value perceptions. It then sets its
target price based on customer perceptions of value. The targeted value and price drive
decisions about what costs can be incurred and the resulting product design. As a result,
pricing begins with analyzing consumer needs and value perceptions, and the price is set to
match perceived value.
Sometimes, companies ask consumers how much they would pay for a basic product
and for each benefit added to the offer. Or a company might conduct experiments to test the
perceived value of different product offers.

Examples
Arguably the business sector most heavily influenced by the value-based pricing
methodology is the fashion industry, where this type of price determination mechanism is
standard practice. After all, popular name-brand designers command higher prices based on
consumers' perceptions of how the brand affects their image. And if a designer can persuade
an A-list celebrity to wear his or her look to a red-carpet event, the perceived value of the
associated brand can suddenly skyrocket. On the other hand, when a brand's image
diminishes for any reason, the pricing strategy tends to reconform to a cost-based pricing
principle. Other industries subject to value-based pricing models include name-brand
pharmaceuticals, cosmetics, and personal care.

9. Different types of market that a company must consider in determining

its pricing strategy

● Under pure competition

the market consists of many buyers and sellers trading in a uniform commodity, such
as wheat, copper, or financial securities. No single buyer or seller has much effect on
the going market price. In a purely competitive market, marketing research, product
development, pricing, advertising, and sales promotion play little or no role. Thus,
sellers in these markets do not spend much time on marketing strategy.

● Under monopolistic competition

 the market consists of many buyers and sellers trading over a range of prices
rather than a single market price. A range of prices occurs because sellers can
differentiate their offers to buyers. Because there are many competitors, each firm is
less affected by competitors’ pricing strategies than in oligopolistic markets. Sellers
try to develop differentiated offers for different customer segments and, in addition to
price, freely use branding, advertising, and personal selling to set their offers apart.
Thus, Wrigley sets its Skittles candy brand apart from the profusion of other candy
brands not by price but by brand building—clever “Taste the Rainbow” positioning
built through quirky advertising and a heavy presence in social media such as Tumblr,
Instagram, YouTube, Facebook, and Twitter. The social media–savvy brand boasts
more than 24 million Facebook Likes and 334,000 Twitter followers.

● Under oligopolistic competition

the market consists of only a few large sellers. For example, only a handful of
providers Comcast, Time Warner, AT&T, and Dish Network control a lion’s share of
the cable/ satellite television market. Because there are few sellers, each seller is alert
and responsive to competitors’ pricing strategies and marketing moves. In the battle
for subscribers, price becomes a major competitive tool.
For example, to woo customers away from Comcast, TimeWarner, and other
cable companies, AT&T’s DirecTV unit offers low-price “Cable Crusher” offers,
lock-in prices, and free HD.

● In a pure monopoly
the market is dominated by one seller. The seller may be a government monopoly (the
U.S. Postal Service), a private regulated monopoly (a power company), or a private
unregulated monopoly (De Beers and diamonds). Pricing is handled differently in
each case.