UNIT II

ANALYZING MARKETING OPPORTUNITIES, CUSTOMER VALUE AND

MARKETING MIX

CONSUMER DECISION-MAKING

Consumer Decision Making is the process of choosing products and services for consumption
among various alternatives

Consumer decision making process involves the consumers to identify their needs, gather
information, evaluate alternatives and then make their buying decision.

Consumer Decision-Making Process is one through which a consumer goes through for
satisfying their needs by making appropriate buying decisions. It is a complex process which
ranges from the recognition of needs, searching and collecting information, evaluating
alternatives, purchasing the best product out of alternatives and post-purchase activities

 Need Recognition- Process of consumer decision making starts with the identification of
need or problem. It is a stage where consumer found out that they are missing something
and look for means for filling such a gap. The consumer determines his wants that
motivate him to search for opportunities for satisfaction of his needs.
 Information Search- Once the problem is identified by a consumer, he searches for
information regarding distinct products available in the market. Consumer gathers data
regarding various products and services that can satisfy his want. He uses both personal
 as well as a commercial source for this purpose. Personal source involves family, friends,
peers etc. and commercial sources involve newspapers, T.V., radio and the internet.
 Evaluation of Alternatives- After gathering information from all sources, consumers
checks various product alternatives for selecting the most appropriate one. He evaluates
the advantages and disadvantages of different available alternatives. The consumer will
develop a set of choices with regard to attributes of product, brand etc. that meet his
want, preferences, taste, personality and lifestyle.
 Selection and Trial- Consumer here make his first purchase for the trial of products
keeping his set of choices in mind. He purchases several products in small quantities or
uses them for a short span of time for developing an opinion towards product.
 Purchase decision- Once the consumer is fully satisfied with the quality of product after
taking a trial, he finally buys the product for fulfilling his needs. Here consumer has
acquired all of the required knowledge after evaluating all facts and arrive at final
conclusion to buy a product.
 Post-purchase behaviour- It refers to post-purchase behaviour of consumer where he
evaluates whether the product has met his expectations or not. He will find out that a
product is either useful or not.
Levels of Consumer Decision Making

• Extensive Problem Solving- Buyer has a very little information about products and
brands, therefore is highly involved with products for their critical evaluation.
• Limited Problem Solving-. Consumer has moderate involvement with products for
choosing the suitable one.
• Routine Response Behaviour- Here, consumers have a very low involvement with
products and do a little evaluation of alternatives

Models of Consumer Decision Making

 Economic Model- Economic Model is a model that assumes a consumer to be rational
person and all decision are taken by him on rational basis. He has an ability of doing a
comparison of variety of products, performing analysis of their advantages and
disadvantages which provides them efficient information for taking appropriate purchase
decision.
 Passive Model- Passive model believes that promotional campaigns of marketers
influences the decision making process of consumers. They respond directly to
advertisement appeal made by brands in market. This model is opposite of economic
model, as it believes that evaluation of products will be done by consumer as per their
market position and how they are being promoted in the market decision.
 Cognitive Model- This one of the best model out of all 4 consumer decision process
model. Cognitive model assumes that all purchase decisions are taken by consumer
according to their interest and market understandability.
 Emotional Model- Emotional model of consumer decision making assumes that
emotions of individual plays a major role in influencing their buying decisions.
Consumers are believed to be emotional who acts as per their emotions. They associate
themselves with goods and services which results in impulsive

BUILDING CUSTOMER VALUE

 Customer Value is the level of satisfaction of your customer towards product or service
Customer value measures a product or service's worth and compares it to its possible
alternatives. This determines whether the customer feels like they received enough value for
the price they paid for the product/service.

• Customer value is the perception of what a product or service is worth to a customer

versus the possible alternatives.
• Worth means whether the customer feels that he or she received benefits and services
over what was paid.
Customer Value = Benefits – Cost

Steps to Creating Customer Value

 Understand what drives value for your customers

 Understand your value proposition

 Identify the customers and segments where are you can create more value relative to
competitors

 Create a win-win price

 Focus investments on your most valuable customers

Customer Value Parameters

Strategies that Increase Customer Value

ANALYZING CONSUMER MARKETS

The consumer market is the one in which the buyers of the product are the consumers
themselves. It may seem obvious, but the reality is that not everyone who buys an item does so
for their own use.
We can therefore say that this is the basic level of any market and that we find it in
establishments as simple as supermarkets, grocery stores, car sales…

Types of consumer markets

1. B2B
First of all, there is the famous Business to Business.
This is a model in which companies sell to companies, not to individual customers.
2. Professional services
Businesses need not only raw materials, they also need training or consulting in multiple areas to
achieve their goals.
This is where professional services come in. We are talking about companies that provide
services to other companies in interesting areas such as marketing, technology, sales, human
resources training and more.

3. Industrial sales
These are the sales of all the equipment that is permanent over time and has a fairly long
useful life. This includes working machinery, chemical products, raw materials, office
equipment, plastic materials and much more.
4. B2C
B2C is the model called Business to Consumer. As you can guess, these are companies that sell
their products and services to individuals, not to companies.

5. Consumer products
Consumer products are used on a massive scale. They are characterized by fairly voracious
competition, so you must constantly work to gain the loyalty of your customers.
.
6. Food and Beverage
All those products that are intended for consumption by the body. They usually have multiple
regulations to ensure that the person acquires high quality items, since at the end of the day it is
something that goes directly to your body.

CONSUMER BEHAVIOR
• Consumer behavior is the study of individuals, groups, or organizations and all the
activities associated with the purchase, use and disposal of goods and services.
• Consumer behavior is the study of the elements that influence individuals’ purchasing
decisions, including environmental, psychological, and societal factors.
• Consumer behaviour consists of how the consumer's emotions, attitudes,
and preferences affect buying behaviour.

Importance of Consumer Behavior

• Consumer Differentiation
• Retention of Consumers
• Design Relevant Marketing Program
• Predicting Market Trend
• Competition
• Innovate New Products
• Improve Customer Service
Factors Influencing Consumer Behaviour
The consumer decision process explains the internal process as well as individual behaviour
for making product or service decisions.

1. Cultural Factors
2. Social Factors
3. Personal Factors
4. Psychological Factors
5. Economic Factors

Cultural Factors
Culture: The set of basic values, perceptions, wants, and behaviours learned by a member of
society from family and other important institutions.
Consumers live in a complex social and cultural environment. The types of products and
services they buy can be influenced by the overall cultural context in which they grow up to
become individuals.
Below are some of the important cultural factors given:
 Culture
 Subculture
 Social Class
Social Factors
Social factors, in turn, reflect a constant and dynamic influx through which individuals learn
different consumption meanings. Below are some of the important social factors given:
 Family
 Reference Groups
 Roles and status
Personal Factors
A person’s consumption behaviour is shaped by his personal characteristics. Below are
some of the important personal Factors given:

Age
Income
Personality
Self-concept
Occupation
Lifestyle
Gender
Psychological Factors
Psychological factors also influenced consumers. Internal psychological factors also direct
the decision-making process. These factors influence the reason or ‘why’ of buying.
 Below are some of the important psychological factors given:
 Motivation
 Learning
 Attitudes and Beliefs
 Perception
Economic Factors
Economic factor also has a significant influence on buying decision of consumer behavior.
Below are some of the important economic factors given:

 Personal and Family Income

 Income Expectations
 Consumer Credit
 Liquid Assets

PRODUCT
In marketing, a product is anything that can be offered to a market that might satisfy a want or
need.

According to Philip Kotler - A product is more than physical. A product is anything that can be
offered to a market for attention, acquisition, or use, or something that can satisfy a need or want.
Therefore, a product can be a physical good, a service, a retail store, a person, an organisation, a
place or even an idea.

PRODUCT LEVELS

Customers will choose a product based on their perceived value of it. Satisfaction is the degree to
which the actual use of a product matches the perceived value at the time of the purchase. A
customer is satisfied only if the actual value is the same or exceeds the perceived value.

Kotler defined five levels to a product:

1. Core Product
This is the basic product and the focus is on the purpose for which the product is intended.
For example, a warm coat will protect from the cold and the rain.
2. Generic Product
This represents all the qualities of the product. For a warm coat this is about fit, material, rain
repellent ability, high-quality fasteners, etc.
3. Expected Product
This is about all aspects the consumer expects to get when they purchase a product. That coat
should be really warm and protect from the weather and the wind and be comfortable when
riding a bicycle.
4. Augmented Product
This refers to all additional factors which sets the product apart from that of the competition.
And this particularly involves brand identity and image.
EXAMPLE- The warm coat is in style, its colour trendy and made by a well-known fashion
brand . But factors like service, warranty and good value for money play a major role in this.
5. Potential Product
This is about augmentations and transformations that the product may undergo in the future.
EXAMPLE- A warm coat that is made of a fabric that is as thin as paper and therefore light as a
feather that allows rain to automatically slide down.

PRODUCT CLASSIFICATION
I.CONSUMER PRODUCTS :

Products which are purchased by the ultimate final consumer for personal consumption and
satisfying their needs and desires.

A. BASED ON SHOPPING EFFORTS :

1. Convenience Goods

Those products customers buy often and without much thought or planning are classified as
convenience goods.
Consumers typically make a choice once on their brand preference for these products and repeat
that choice over many purchases.

EXAMPLES -
Soap, condiments and toothpaste , Medicines , Toothpaste.

2 .Shopping Goods

• The products in which consumers devote considerable effort and time in shopping are
known as Shopping Products.

• For these products, the buyer first compares the price, style, quality, etc., of different
brands at different stores before making the final decision of purchase.

• Example:shoes, clothes, mobile phones, jewellery, etc.

3. Specialty Products

• The products with some special features for which the consumers make special efforts,
while purchasing them are known as Speciality Products.

• Demand for speciality products is relatively inelastic. It means that even though the
price of speciality products rises, their demand does not reduce.

Example: antique paintings, exotic perfumes, expensive watches, branded sneakers, etc

4. Unsought Goods

• An unsought product is a product of which consumers are unaware or are not that
interested in actively pursuing for purchase.

• A high degree of marketing, including heavy advertising and aggressive sales techniques,
is often necessary due to consumer unawareness of the product or no real desire to
purchase it.

• Life Insurance Policy,Accidental insurance

B. BASED ON DURABILITY OF PRODUCTS :

1. Durable goods
A category of consumer products that do not need to be purchased frequently because they are
made to last for a long time . They are also called consumer durables or durables.
Durables have an extended product life and are not typically worn out or consumed quickly
when you use them.
EXAMPLES -
Refrigerator , Kitchen equipments , Cars , TV etc .

CHARACTERISTICS :
1.More expensive than non-durable goods .
2. Higher per unit margin .
3. Require greater personal selling efforts , after sales services.

2. Non Durable Goods :

They may be defined either as goods that are immediately consumed in one use or ones that have
a lifespan of less than 3 years.
EXAMPLES- Soaps , Detergents , Toothpaste , stationary products .
CHARACTERISTICS :
1. Small margin .
2. Made available in many locations .
3. Needs heavy advertising .

II. INDUSTRIAL PRODUCTS:

 • The products used by the organisations as inputs for the production of other products are
known as Industrial Products. Industrial Products can be classified into three categories;

• Materials and Parts

• Capital Items
• Supplies and Business Services

1. Materials and parts:

Raw materials are the basic materials that actually become part of the product and that
enter the manufacturer’s product completely.
They are provided form mines, forests, oceans, farms and recycled solid wastes.
It has two types:-

a). Raw materials- Includes farm products like cotton , sugar cane , oil seed and natural
products like minerals (Iron ore , Crude petroleum ) .
b). Manufactured materials and parts - Includes
Component materials : grass , iron , plastic .
Component Parts : Tyre Bulb , Steering , Battery .

2.Capital Items:

Capital items consist goods that are used in the production of finished goods like office
accessories and operating materials.
It has two types:
a). Accessory equipment
b). Installations

3. Supplies:
Supplies facilitate productions, but they do not become part of he finished product.
EXAMPLES -Paper, pencils, oils, cleaning agents and paints
.
4. Industrial Services:
Industrial services include maintenance and repair services such as machinery repair and
business advisory services such as legal, management, consulting, advertising, marketing
research services.
These services can be acquire internally as well as externally .

PRODUCT RANGE
A Product range is the set of all types and kinds of products offered to customers by
the company or any of its units. It can also be understood as a set of products offered by the
entire industry.

This range can be more or less specialized or generic. It is described by width, length, depth and
consistency (described below in detail).

Range of offered products should correspond to the expectations of target market of the
company.

For example, a department store would have a wide product range as they offer a variety of
products such as clothing, electronics, home goods, toys, and more. On the other hand, a
specialty store that only sells one type of product such as clothing or electronics would have a
narrow product range.

Another example is a fast food chain that offers a wide product range by having multiple items
on the menu such as burgers, chicken, sandwiches, salads and deserts.

PRODUCT LINE

Product line is a group of related products under a single brand sold by the same company.

A product line is a range of similar products or services that are introduced and sold by the same
company, with different features and different prices.

• According to Philip Kotler, a product line can be defined as “a group of products that
are closely related because they function in a similar manner, and sold to the same
customer groups, are marketed through these same types of outlets, fall within given
price range.”

Product line Decisions

• Line Stretching Decision. Product line stretching means to lengthen the current product
line.

 Downward Stretching

 Upward Stretching
  Two-way Stretching

• Line Filling Decisions means adding new products to the same product range

• Line Pruning Decision means to reduce the depth of a product line by removing
unprofitable products from the existing lines.

PRODUCT MIX

• A product mix is the total number of product lines and individual products or services
offered by a company.

• Product mix, also known as product assortment, refers to the total number of product
lines a company offers to its customers. For example, your company may sell multiple
lines of products.

• Product mix refers to the complete set of products or services offered by a business.
These products or services are usually grouped within product lines, representing the
different types of products offered

Dimensions of a Product Mix

• Width- The number of product lines offered by a company.

• Length- The total number of products in a firm’s product mix.

• Depth- The number of variations within a product line

• Consistency- How closely related product lines are to each other

PRODUCT LIFE CYCLE

The product life cycle is the process a product goes through from when it is first introduced into
the market until it declines or is removed from the market.

The Product Life Cycle is a management tool that makes it possible to analyze how a product
behaves from its development to its withdrawal from the market.

Introduction
Once a product has been developed, it begins the introduction stage of the PLC. In this stage, the
product is released into the market for the first time. During the introduction stage, marketing
and promotion are at a high, and the company often invests quite a bit of effort and capital in
promoting the product and getting it into the hands of consumers.

Growth
During the growth stage, consumers start taking to the product and buying it. The product
concept is proven as it becomes more popular, and sales increase.
Other companies become aware of the product and its space in the market as it begins to draw
more attention and pull in more revenue. If competition for the product is especially high, the
company may still heavily invest in advertising and promotion of the product to beat out
competitors.
Maturity
When a product reaches maturity, its sales tend to slow, signaling a largely saturated market. At
this point, sales may start to drop. Pricing at this stage tends to get competitive, so profit margins
shrink as prices begin to fall due to the weight of outside pressures like increased competition
and lower demand.

Decline
In the decline stage, product sales drop significantly, and consumer behavior changes, as there is
less demand for the product. The company's product loses more and more market share, and
competition tends to cause sales to deteriorate.
NEW PRODUCT DEVELOPMENT

New Product Development refers to the complete process of bringing a new product to market.
This can apply to developing an entirely new product, improving an existing one to keep it
attractive and competitive, or introducing an old product to a new market.
Reasons why new product development

• Changing consumer
• Increasing competition
• Technological advancement
• New opportunities (growth and development)
• Risk diversification
• To increase company & brand reputation
• To utilise excess capacity

STAGES OF PRODUCT/ SERVICE INNOVATION DEVELOPMENT

Stage 1: Idea Generation
New product ideas have to come from somewhere. But where do organisations get their ideas for
NPD? Sources include:
 Market Research
 Employees
 Consultants
 Competitors
 Customers
 Distributors and Suppliers

Stage 2: Idea Screening

This process involves shifting through the ideas generated above and selecting ones which are
feasible and practical to develop. Pursing impractical ideas is expensive and a waste of resources.
Stage 3: Concept Development and Testing
The organisation may have come across what they believe to be a feasible idea, however, the
idea needs to be taken to the target audience. What do they think about the idea? Will it offer the
benefit that the organisation hopes it will? or have they overlooked certain issues? Will there be a
demand for the product?
Stage 4: Marketing Strategy and Development
How will the product/service idea be launched within the market? A proposed marketing strategy
will be written laying out the marketing mix strategy of the product, the segmentation, targeting
and positioning strategy and expected sales and profits.
Stage 5: Business Analysis
The company has a great idea, the marketing strategy seems feasible, but will the product be
financially worth while in the long run? The business analysis stage looks more deeply into the
Cashflow the product could generate, what the cost will be, likely market share and the expected
life of the product.
Stage 6: Product Development
At this stage the prototype is produced. The prototype will undergo a serious tests, and will be
presented to a selection of people made up of the the target market segment to see if changes
need to be made.

Stage 7: Test Marketing

Test marketing means testing the product within a specific geographic area. The product will be
launched within a particular region so the marketing mix strategy can be monitored and if needed
modified before national launch.
Stage 8: Commercialization
If test marketing is successful the product is ready for national launch. The following decisions
regarding the launch need to be made
 Timing of the launch

 How the product will be launched

 Where the product will be launched

 Will there be a national roll out or will it be region by region?

THE PROCESS OF ADOPTION

The marketing adoption process is based around the idea that consumers go through several key
stages on their way to ultimately choosing to buy a product or service.
There are five different product adoption stages that consumers go through before ultimately
choosing to proceed with a purchase. These are:

 Awareness
 Interest
 Evaluation
 Trial
 Adoption
Now, we will take a look at each in turn to explain just why they could affect the marketing
efforts of your business.
1. Awareness
This is simply the step where consumers discover that a product or service exists and is being
offered by your business or organization.
2. Interest
Once people know about your offering, they may then look to gather more information on it and
develop their interest further.
3. Evaluation
Next up, consumers will take all of the detail they have acquired and make a judgment on
whether the product or service suits them.

4. Trial
This is where consumers may then seek to sample a product or service in order to get a feel for
whether it is suitable. The trial might come in the form of a literal free trial or it may simply
involve the first purchase of the product in question.
5. Adoption
Adoption is arguably the most critical of the product adoption stages. This is when a consumer
chooses to “adopt” or stick with a product or service, while alternatively they may simply reject
it and look elsewhere

BRANDING
• A brand is a name, term, design, symbol, or any other feature that identifies one seller’s
good or service as distinct from those of other sellers
• Branding refers to the process of creating a company name & image in the market.
• It involves activities concerned with creating business good name & reputation in the
market.
• Branding is the process of creating a strong, positive perception of a company, its
products or services in the customer’s mind by combining such elements as logo,
design, mission statement, and a consistent theme throughout all marketing
communications.
• Branding provides distinguished identity to the business. It helps them in differentiating
them from others in the market.