Part 2 Reaching Your Market
Chapter 6
Consumers and
Competition
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
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
Marketing Terms
 psychological
influences
 buying motive
 social influences
 social media
 reference group
 situational
influences
 impulse purchase
 routine buying
decision
 limited decision
making
 extensive decision
making
 competitor
 monopoly
(Continued)
Marketing Terms
 direct competitors
 competitive edge
 price competition
 nonprice
competition
 market share
 market size
 competition grid
Understanding Consumer
Behaviour
Influences on
consumer buying
behaviour
 psychological
 social
 situational
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)
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.
Hierarchy of Needs
Maslow’s hierarchy of needs
 states that basic physical needs must be
satisfied before others
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
Types of Buying Motives
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)
Wants into Buying Motives
Salespeople often organize buying motives
into pairs.
 physical vs. psychological
 rational vs. emotional
 product vs. patronage
Social Influences
Social influences
 influences from the people around you,
rather than from within yourself
Three categories
 culture
 family
 friends and coworkers
Culture
Culture affects every aspect of a person’s life.
Examples
 food, buying behaviour, and values
Family
Family can influence buying behaviour.
 Children often buy the same brands as their
parents.
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)
Friends and Coworkers
Word-of-mouth publicity
 informal conversations people have about
their experience with a business and its
products
(Continued)
Friends and Coworkers
Reference group
 group of people who influence a consumer’s
buying decisions
Examples
 peers, celebrities, experts, and people
television
(Continued)
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
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.
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)
The Consumer
Decision Process
1. Awareness of need or problem
2. Information search
3. Evaluation of options
4. Decision to buy
5. Purchase
6. Post-purchase evaluation
(Continued)
The Consumer
Decision Process
Four levels of consumer purchase decisions
 impulse
 routine
 limited
 extensive
Impulse Decision
Impulse purchase
 made with no planning or research
To encourage impulse purchases, marketers
display products near checkout counters.
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
Limited Decision
Limited decision making
 involves some research and planning
 usually for a more expensive or complex
product
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)
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
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)
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
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.
Direct Competitors
Direct competitors
 businesses that sell similar products
Marketers are most concerned about their
direct competitors.
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)
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
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
Nonprice Competition
Product-based
competition may
focus on
 quality
 features
 benefits
 size
(Continued)
Nonprice Competition
Place-based competition may focus on
 convenient location and hours
 delivery services
 ability to order by phone
 TV and Internet shopping
(Continued)
Nonprice Competition
Promotion-based competition may focus on
 advertising
 visual merchandising
 store environment
 customer services
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)
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)
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
Company Sales
Total Sales
in Market
x
100
=
Percent
Market
Share
Calculating Market Share
Hypothetical Data for One Year
Total Sales in Market: $100 million
Total Company Sales: $75 million
Company Sales
Total Sales in
Market
$75 million
$100 million
x
100
x
100
=
Percent
Market Share
=
75% Market
Share
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
Comparing Market Share
Market Share of Snack Companies
Rank Company
Annual Sales Market Share
1
Big
$75 million
75%
2
Medium
$20 million
20%
3
Small
$5 million
5%
Total
$100 million
(market size)
100%
Comparison of market shares for hypothetical snack
companies: Big Snack Company, Medium Snack
Company, and Small Snack Company
(Continued)
Comparing Market Share
Small
5%
Medium
20%
Big
75%
Pie charts are useful for showing market share.
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)
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.
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)
Competition Research
Organize competitors’ information into a
competition grid (a chart used for organizing
and comparing the information).
Study the competition grid, then decide the
best way to compete.
Review
 List the three categories of influences on
consumers and give an example of each.
 Describe Maslow’s hierarchy of needs.
 Why are salespeople interested in buying
motives?
 List the four levels of purchase decisions
and describe when you would use each.
(Continued)
Review
 How does a monopoly interfere with a
market economy?
 How does competition benefit consumers?
 What is the difference between price and
nonprice competition?
 How is market share calculated?
 Why is knowing a business’s market share
useful?
Glossary
 buying motive. Reason that a consumer
seeks a product.
 competition grid. Chart used for recording
information about competitors.
 competitive edge. The special feature or
aspect of a product that makes it different
from and better than the others.
Back
Glossary
Back
 competitor. One of the businesses that
compete for customers.
 direct competitors. Businesses that sell
similar products.
 extensive decision making. Consumer
buying decision that involves a great deal of
research and planning.
Glossary
Back
 impulse purchase. Consumer buying
decision made with no planning or research.
 limited decision making. Consumer buying
decision that is made with some research
and planning.
 market share. One competitor’s percentage
of the total sales in a specific market.
Glossary
Back
 market size. Total sales per year for a
specific product.
 monopoly. Exclusive control of a product by
one company.
 nonprice competition. Competition that is
based on something other than price, such
as product quality or customer service.
Glossary
Back
 price competition. Competing on the basis of
price.
 psychological influences. Influences that
come from within a person.
 reference group. Group of people who
influence a consumer’s buying decisions.
Glossary
Back
 routine buying decision. Consumer buying
decision that is made quickly and without
much thought.
 situational influences. Influences that come
from the environment.
 social influences. Influences that come from
the society in which you live.
Glossary
Back
 social media. Interactive forms of media that
let users communicate with each other.