Chapter 6 Consumers and Competition

1. Part 2 Reaching Your Market Chapter 6 Consumers and Competition

2. Learning Goals • identify the three categories of influences on consumers • explain Maslow’s hierarchy of needs in order • analyze how marketers use needs to develop products and promotions • outline six buying motives and the basis for each one • explain the four levels of consumer buying decisions

3. Learning Goals • describe market structures, such as competition and monopoly • identify examples of three direct competitors for a variety of businesses • calculate market share and explain why it is important • demonstrate how to use a competition grid

4. Marketing Terms • routine buying decision • limited decision making • extensive decision making • competitor • monopoly • psychological influences • buying motive • social influences • social media • reference group • situational influences • impulse purchase (Continued)

5. Marketing Terms • market share • market size • competition grid • direct competitors • competitive edge • price competition • nonprice competition

6. Understanding Consumer Behaviour Influences on consumer buying behaviour psychological social situational

7. Psychological Influences Psychological influences are the influences that come from within a person. needs such as hunger and thirst wants such as a hamburger or coffee (Continued)

8. Psychological Influences A need is a lack within a person needs must be filled e.g., lack of food, water, or shelter If the need is not satisfied, it turns into to a drive. A drive is an internal force that leads to action. The purpose of the action is to fulfill the need.

9. Hierarchy of Needs Maslow’s hierarchy of needs states that basic physical needs must be satisfied before others

11. Needs into Wants The human mind usually turns needs into wants. Marketers try to turn those wants into buying motives. Buying motive the reason that a customer seeks a product

12. Types of Buying Motives

13. Wants into Buying Motives Salespeople try to understand a customer's buying motives so that they can do a better job of encouraging the customer to buy the product. (Continued)

14. Wants into Buying Motives Salespeople often organize buying motives into pairs. physical vs. psychological rational vs. emotional product vs. patronage

15. Social Influences Social influences • influences from the people around you, rather than from within yourself Three categories • culture • family • friends and coworkers

16. Culture Culture affects every aspect of a person’s life. Examples food, buying behaviour, and values

17. Family Family can influence buying behaviour. Children often buy the same brands as their parents.

18. Friends and Coworkers If you buy a product that your friends admire • you might feel more self-confident • your self-esteem might increase To have the same things as others satisfies the human need for belonging and acceptance. (Continued)

19. Friends and Coworkers Word-of-mouth publicity informal conversations people have about their experience with a business and its products (Continued)

20. Friends and Coworkers Reference group group of people who influence a consumer’s buying decisions Examples peers, celebrities, experts, and people television (Continued)

21. Friends and Coworkers Peer pressure social influence from the people your age with whom you interact daily can influence buying decisions because most people have a strong need to fit in and be accepted by their peer group

22. Situational Influences Situational influences • influences that come from the environment • weather • store location • time of day • advertising Buyer’s mood, physical condition, and financial condition can also be considered situational influences.

23. The Consumer Decision Process How does a consumer make the decision to buy? Marketers think that many consumers use a six-step decision-making process. (Continued)

24. The Consumer Decision Process Awareness of need or problem Information search Evaluation of options Decision to buy Purchase Post-purchase evaluation (Continued)

25. The Consumer Decision Process Four levels of consumer purchase decisions impulse routine limited extensive

26. Impulse Decision Impulse purchase • made with no planning or research To encourage impulse purchases, marketers display products near checkout counters.

27. Routine Decision Routine buying decision made quickly without much thought Consumers make routine buying decisions when they have previous experience with the product brand loyalty

28. Limited Decision Limited decision making involves some research and planning usually for a more expensive or complex product

29. Extensive Decision Extensive decision making involves a great deal of research and planning used for purchases that will greatly impact your daily life, safety, and finances (Continued)

30. Extensive Decision Example: steps in buying a car researching cars on the Internet test-driving at several dealerships analyzing your finances arranging for financing getting the license plate(s) and insurance buying the car

31. Monopoly vs. Competition Competition contest between two or more businesses for customers Competitor one of the businesses that compete for customers competitors are usually in the same type of business (Continued)

32. Monopoly vs. Competition Monopoly exclusive control of a product by one company Where there is a monopoly, there is no competition. Example: in many areas, only one company provides cable service

33. Competition in a Market Economy Competition is key in a market economy because consumers and the economy benefit businesses that do not meet customers’ needs fail businesses that meet customers’ needs thrive A command economy has no competition.

34. Direct Competitors Direct competitors businesses that sell similar products Marketers are most concerned about their direct competitors.

35. Ways to Compete Marketers are always looking for their competitive edge. • The feature of their product that will make it • stand out from all the others • meet more customers’ needs • sell better than competing products A product’s competitive edge is usually the focus of advertising. (Continued)

36. Ways to Compete The basis for competition is often one of the Four Ps. product, price, place, or promotion However, competition is usually categorized into two groups. price competition nonprice competition

37. Price vs. Nonprice Competition Price competition competing on the basis of price only trying to charge the lowest price and still make a profit Nonprice competition competing on a basis other than price competing on the basis of product, place, or promotion

38. Nonprice Competition Product-based competition may focus on quality features benefits size (Continued)

39. Nonprice Competition Place-based competition may focus on convenient location and hours delivery services ability to order by phone TV and Internet shopping (Continued)

40. Nonprice Competition Promotion-based competition may focus on advertising visual merchandising store environment customer services

41. Market Share Q: How can a business tell how well it is doing compared with its competitors? A: By looking at its market share. Market share one competitor’s percentage of the total sales in a specific market based on market size (Continued)

42. Market Share Market size • total sales per year for a specific product Sales can be measured in several ways. • value of products sold • expressed in dollars • total number of items sold • can be expressed in single units • or grouped units (such as a case) (Continued)

43. Market Share To calculate market share take the company sales for a year, then divide it by market sales for a year, and multiply the result by 100, to get a percentage Percent Market Share Company Sales x = 100 Total Sales in Market

44. Calculating Market Share Hypothetical Data for One Year Total Sales in Market: $100 million Total Company Sales: $75 million Company Sales Percent Market Share x = 100 Total Sales in Market $75 million 75% Market Share x = 100 $100 million

45. Why Is Market Share Important? Market share is an easy way to • evaluate the success of a business • If market share increases, the business is doing well. • compare businesses Market share leaders • are companies with the largest market shares • may have more than 70% of the market in a specific industry

46. Comparing Market Share Comparison of market shares for hypothetical snack companies: Big Snack Company, Medium Snack Company, and Small Snack Company (Continued)

47. Small5% Comparing Market Share Pie charts are useful for showing market share.

48. Why Is Market Share Important? Market share leaders compete to gain more market share. Smaller companies in the industry compete among each other, but not with the market share leaders. (Continued)

49. Why Is Market Share Important? Smaller businesses often define success in terms other than market share. Smaller businesses often do not have a chance of being market share leaders. Smaller businesses focus on meeting their personal, business, financial, and marketing goals.

50. Competition Research Q: How does a business figure out the best way to compete? A: Study the competitors’ marketing mixes. What products do they make or sell? What are the product features and benefits? What are the prices? Where are they selling their products? How are they promoting their products? (Continued)