OCMT
Principles of
Ch. I & II ANALYSING MARKETING OPPORTUNITIES
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Contents
1.
2.
3.
4.
Pricing strategies
Marketing environment
Target market and market segmentation
Buyer behavior: meaning and factors influencing
buyer behavior
5. Buying decision process: buying roles
6. Stages of buying decision process
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WHAT IS PRICING?
• Pricing is the process of determining what a
company will receive in exchange for its
product.
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Pricing Strategies
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Penetration Pricing
• Penetration pricing is a pricing
strategy in which the price is set
low to ‘penetrate the market’ to
secure high volume. It is typical
in mass market products like
chocolate bars, food stuffs,
household goods, etc.
• Penetration pricing strategy is
suitable for products with long
anticipated life cycles. It is useful
for launching a product into a
new market.
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Market Skimming
• Market skimming is a pricing
strategy in which high price is set
to skim the profit from the
market. It may generate low
volume of sales.
• Skimming strategy is suitable for
products that have short life
cycles or which will face
competition at some point in the
future (e.g. after a patent runs
out)
• Examples include: Play-station,
jewellery, digital technology, new
DVDs, etc.
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Value Pricing
• Value pricing is a pricing
strategy where price is set in
accordance with customer
perceptions about the value
of the product.
• Examples include status
products/exclusive products
like premium cars.
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Loss Leader
• Loss leader is a pricing
strategy where goods or
services are deliberately
sold below cost to
encourage sales
elsewhere.
• Loss leader pricing
strategy is typical in
supermarkets, e.g. at
Christmas, selling bottles
of gin at £3 in the hope
that people will be
attracted to the store and
buy other things.
• Purchases of other items
more than covers ‘loss’ on
item sold e.g. ‘Free’
mobile phone when
taking on contract
package
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Psychological Pricing
• Psychological pricing is a
pricing strategy that is used to
play on consumer perceptions.
For example the goods are
priced at £9.99 instead of £10!
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Tender Pricing
• Many contracts awarded
on a tender basis
• Firm (or firms) submit
their price for carrying out
the work
• Purchaser then chooses
which represents best
value
• Mostly done in secret
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Price Discrimination
• Charging a different price
for the same good/service
in different markets
• Requires each market to
be impenetrable
• Requires different price
elasticity of demand in
each market
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Destroyer Pricing/Predatory Pricing
• Deliberate price cutting or
offer of ‘free
gifts/products’ to force
rivals (normally smaller
and weaker) out of
business or prevent new
entrants
• Anti-competitive and
illegal if it can be proved
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Cost-Plus Pricing
• Calculation of the average cost (AC) plus a mark up
• AC = Total Cost/Output
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MARKETING ENVIRONMENT
• The forces that directly and indirectly influence an
organization’s capability to undertake its business.
Components of Marketing Environment
• Internal environment : Forces and actions inside the firm
that affect the marketing operation composed of internal
stake holders and the other functional areas within the
business organization.
• External environment
• Micro environment - The factors in the immediate environment
• Macro environment - Broad forces which shape the character of
opportunities and threats.
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Marketing Environment
Macro environment
Micro environment
Cultural
Public
Internal environment
Competitors
Men
Money
Machinery
Materials
Markets
Company
Suppliers
Political
Intermediaries
Technological
Demographic
Customers
Economic
Natural
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THE INTERNAL ENVIRONMENT
All factors that are internal to the organization are known as the
'internal environment'. They are generally audited by applying
the 'Five Ms' which are Men, Money, Machinery, Materials and
Markets. The internal environment is as important for managing
change as the external. As marketers we call the process of
managing internal change 'internal marketing’.
THE EXTERNALL ENVIRONMENT
All factors that are external to the organization are
known as the ‘external environment'. They are broad
forces which shape the character of opportunities and
threats. The external environment comprises
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Micro environment
•
•
•
1.
2.
3.
4.
5.
The forces close to the
company that affects its
ability to serve.
It comprises all those
organizations and
individuals who directly
affect the activities of a
company.
All factors which impact
directly on a firm and its
activities in relation to a
particular market.
Suppliers
The marketing channel
Customers.
Competitors
Public
Macro environment
Macro environment refers to
those factors which are external
to company’s activities and do
not concern the immediate
environment.
It comprises general forces that
affect all business activities in
market. They are cultural,
political, technological, natural,
economic and demographic.
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MARKET SEGMENTATION
Market segmentation is
a marketing strategy that
involves dividing a broad target
market into subsets
of consumers who have
common needs, and then
designing and implementing
strategies to target their needs
and desires using media
channels and other touchpoints that best allow reaching
them.
TARGET MARKET
A target market is a group of
customers that the business has
decided to aim
its marketing efforts and
ultimately
its merchandise towards.
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BUYER BEHAVIOR
• Buyer behavior is the study of individuals, groups, or
organizations and the processes they use to select, secure,
and dispose of products, services, experiences, or ideas to
satisfy needs and the impacts that these processes have on
the consumer and society.
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Factors influencing Consumer Behavior
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Factors Affecting Consumer Behavior
Membership groups have a direct
influence and to which a person
belongs. Aspirational groups are
groups to which an individual
wishes to belong. Reference groups
are groups that form a comparison
or reference in forming attitudes or
behavior. Opinion leaders are
people within a reference group
with special skills, knowledge,
personality, or other characteristics
that can exert social influence on
others. Family is the most
important consumer-buying
organization in society. Social roles
and status are the groups, family,
clubs, and organizations to which a
person belongs that can define role
and social status.
Culture is a shared set of beliefs, values and
patterns of behaviour common to a group of
people.
Subcultures are groups of people within a
culture with shared value systems based on
common life experiences and situations. For
example: Chinese, Indians, Malays, Eurasians
Social classes are society’s relatively
permanent and ordered divisions whose
members share similar values, interests, and
behaviors. Social classes are measured by a
combination of occupation, income, education,
wealth, and other variables. The major social
classes are upper upper class, upper middle
class, middle class, upper lower class, lower
lower class.
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Factors Affecting Consumer Behavior
Personality refers to the unique psychological characteristics that
lead to consistent and lasting responses to the consumer’s
environment. Brand personality refers to the specific mix of human
traits that may be attributed to a particular brand. Self-concept
refers to people’s possessions that contribute to and reflect their
identities.
Psychological Factors
Motivation: A motive is a need that is sufficiently pressing to direct
the person to seek satisfaction.
Abraham Maslow’s Hierarchy of Needs
• People are driven by particular needs at particular times.
• Human needs are arranged in a hierarchy from most
pressing to least pressing.
• Perception is the process by which people select, organize,
and interpret information to form a meaningful picture of
the world.
• Learning is the changes in an individual’s behavior arising
from experience.
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Factors Affecting Consumer Behavior
Beliefs and Attitudes
• Belief is a descriptive thought that a person has about
something based on knowledge, opinion and faith.
• Attitude describes a person’s relatively consistent
evaluations, feelings, and tendencies toward an object or
idea.
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BUYING ROLES
Five roles people might play in a buying decision
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Initiator
A person who first suggests the idea of buying the product
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Influencer
A person whose view or advice influences the decision
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Decider
A person who decides on any component of a buying decision:
whether to buy, what to buy, how to buy, or where to buy
4
Buyer
The person who makes the actual purchase
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User
A person who consumes or uses the product or service
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Buying Decision Process
Five stages in the buyer decision process
1. Need recognition
2. Information search
3. Evaluation of alternatives
4. Purchase decision
5. Post-purchase behavior
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The Buyer Decision Process
3. Evaluation of Alternatives
1. Need Recognition
• Need recognition occurs when the
buyer recognizes a problem or need
triggered by internal stimuli and
external stimuli
Evaluation of alternatives is how the
consumer processes information to arrive at
brand choices.
2. Information Search
consumer to buy the most preferred brand.
Information search is the amount of
The purchase decision can be affected by
information needed in the buying
attitudes of others and unexpected
process and depends on the strength of
situational factors
the drive, the amount of information you
5. Post-Purchase behavior
The post-purchase behavior is the
start with, the ease of obtaining the
information, the value placed on the
additional information, and the
satisfaction from searching.
4. Purchase Decision
The purchase decision is the act by the
satisfaction or dissatisfaction the
consumer feels about the purchase.
It is the relationship between
consumer’s expectations and product’s
perceived performance
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