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THE CONSUMER CHAPTER 2
THE CONSUMER A consumer is the person who uses the product. A customer is the person who buys the product. BMI 3 C Slide • Wouldn’t this be the same person? Some examples when they are not?
THE CONSUMER In the case of a parent or guardian of a child, the parent is considered a gatekeeper—a person who oversees the care of another. BMI 3 C Slide • Marketers attempt to appeal to the gatekeeper as well as the consumer. Why?
NEEDS AND WANTS self-actualization/fulfillment esteem belonging safety BMI 3 C Maslow’s Heirarchy of Needs Slide physiological
NEEDS AND WANTS In our society, most people do not have difficulty satisfying needs. BMI 3 C Slide Wants are items not necessary for survival, but add pleasure and comfort to our lives.
NEEDS AND WANTS Marketers need to make a clear distinction between needs and wants. BMI 3 C Slide why?
NEEDS AND WANTS BMI 3 C Slide In places with poverty, war, or oppression basic needs may not be met. Marketing focuses on meeting needs.
NEEDS AND WANTS BMI 3 C Slide In developed countries, demand is more driven by wants. Marketing presents alternatives, and helps customers set up value equations for each.
CONSUMER DEMAND Consumer demand changes based on economic shifts and availability of new products. economy is stable economy is in a slump unemployment down unemployment up people will only buy things they want need BMI 3 C Slide demandfor forgoods&and services DOWN UP
Demand also changes based on wants, needs, or changes in perceived value. Marketers need to make decisions based on: • educated guess, research, historic trends BMI 3 C Slide CONSUMER DEMAND
CONSUMER DEMAND Demand changes as retailers enter/exit the marketplace. BMI 3 C Slide • Too many sellers of a product = demand • As some close, less product available = demand
Understanding fluctuations in consumer demand is essential to marketing. Because of this, marketers also use product life-cycle models to predict the life of new products. BMI 3 C Slide CONSUMER DEMAND
PRODUCT LIFE CYCLES
PRODUCT LIFE CYCLES A PLC shows changes in consumer demand over time. BMI 3 C Slide • no product can be in demand forever • trends, technology and lifestyles change, affect consumer demand
PRODUCT LIFE CYCLES maturity decline growth introduction decision point BMI 3 C Slide The traditional PLC consists of five stages.
PRODUCT LIFE CYCLES Homework BMI 3 C Slide In your notebook summarize the five steps of the traditional Product Life Cycle.
PRODUCT LIFE CYCLES Introduction Stage • product is first introduced, “product launch” • initial price is high to help recover costs • costs include: BMI 3 C Slide • machinery, set-up, training, storage, promotion, packaging, research, etc.
PRODUCT LIFE CYCLES Introduction Stage BMI 3 C Slide • Who buys? Curious people, those who want new things first: early adopters, or trendsetters
PRODUCT LIFE CYCLES Introduction Stage • marketing: BMI 3 C Slide • informs the consumer about product • quickly establishes value equation
PRODUCT LIFE CYCLES Introduction Stage BMI 3 C Slide • some businesses arrange consignment deals: allow retailer to return unsold product after a period of time • some manufacturers pay a shelf allowance for prime shelf space
PRODUCT LIFE CYCLES Growth Stage BMI 3 C Slide • others start to buy product • reputation spreads • manufacturers advertise heavily
PRODUCT LIFE CYCLES Growth Stage BMI 3 C 22 Slide - starts where costs have been recovered - start making profit
PRODUCT LIFE CYCLES Growth Stage • the faster a product reaches the growth stage, the sooner it makes profit • product may be scrapped if unsuccessful BMI 3 C Slide • if it is and it has lost money, it is called a bust
PRODUCT LIFE CYCLES Growth Stage BMI 3 C Slide • first company to enter a market pays the most for R&D and advertising, but has no competition • as competitors enter, they fight for market share: percentage of the total market
PRODUCT LIFE CYCLES Market Share Example Coca Cola $ 47. 0 M Pepsi Cola $ 46. 5 M PC Cola $ 4. 5 M MC Cola $ 2. 0 M Total BMI 3 C Revenue $ 100. 0 M Slide Company Coca-Cola owns 47% of the market share (47/100)
PRODUCT LIFE CYCLES Growth Stage • factors preventing companies from realizing profit are called barriers to entry BMI 3 C Slide • may include: small market size, cost of R&D, advertising, equipment. . .
PRODUCT LIFE CYCLES Growth Stage • eventually only the most competitive products remain on the market BMI 3 C Slide How do you compete?
PRODUCT LIFE CYCLES Growth Stage BMI 3 C Slide • a company may produce low-end products to establish minimum prices and validate expensive products • not sold under a well-known brand name (ie. Panasonic makes Techniks and Quasar)
PRODUCT LIFE CYCLES Maturity Stage The period when sales start to level off
PRODUCT LIFE CYCLES Maturity Stage BMI 3 C Slide • marketers keep the brand name in front of consumers • success and longevity of the product is highlighted
PRODUCT LIFE CYCLES Maturity Stage BMI 3 C Slide • since major costs have been recuperated and costs are low, products usually make large profits during this stage • company takes this profit to develop new products
PRODUCT LIFE CYCLES Maturity Stage EXAMPLES: BMI 3 C Slide • Sony took the money from producing Walkmans and put it into developing Discmans. • Disney took profits from its amusement parks to launch a cruise ship line. This also expands their brand name into a new market.
PRODUCT LIFE CYCLES Decline Stage BMI 3 C Slide • company cannot find new consumers for their product • profits decrease; marketers try to find the reason for decline • if it is a temporary decline, it may be reversed by a small price change, or new ad
PRODUCT LIFE CYCLES Decline Stage BMI 3 C Slide • other methods to reverse a decline: redesigning, reformulating, repackaging • may decide to remove the product from the market altogether
PRODUCT LIFE CYCLES Decision Point Stage BMI 3 C Slide • the final stage of the PLC • marketers must make important decisions regarding a product’s future
PRODUCT LIFE CYCLES Decision Point Stage BMI 3 C Slide • product may be reformulated, repackaged, and reintroduced • most often maintenance of a product involves new promotion and new pricing
PRODUCT LIFE CYCLES Decision Point Stage BMI 3 C Slide • if there is little hope for more profit–due to market saturation, decreased demand, or otherwise–product may be abandoned
• MITRW • Activity sheet • Note • A little friendly competition BMI 3 C Slide TODAY’S AGENDA
NONTRADITIONAL PRODUCT LIFE CYCLES
NONTRADITIONAL PRODUCT LIFE CYCLES In the textbook, read pages 46 to 49 and make a summary note on Fads, Trends, Niche Markets, and Seasonal Markets. Include in your notes the diagrams on page 46. BMI 3 C Slide Think of additional examples for each type of life cycle.
NONTRADITIONAL PRODUCT LIFE CYCLES BMI 3 C Slide Fads
NONTRADITIONAL PRODUCT LIFE CYCLES Fads Rubik’s cube, Cabbage Patch Kids, tamagotchi, Pet rock, “whatever”, “yadda” BMI 3 C Slide A product which is extremely popular for a very brief period of time, and loses popularity just as quickly.
NONTRADITIONAL PRODUCT LIFE CYCLES Fads BMI 3 C Slide Fads are unpredictable, and high-risk. Companies try to get out of the market just as the fad peaks. If they wait too long, they get stuck with excess inventory.
NONTRADITIONAL PRODUCT LIFE CYCLES BMI 3 C Slide Trends
NONTRADITIONAL PRODUCT LIFE CYCLES Trends Organic foods, Beanie babies, the Simpsons, cell phones BMI 3 C Slide A trend has a more lasting effect on the market than a fad. A trend is usually a movement towards a style of product.
NONTRADITIONAL PRODUCT LIFE CYCLES BMI 3 C Slide Niche Markets
NONTRADITIONAL PRODUCT LIFE CYCLES Niche Markets A small section of the market dominated by a small group of products. Short growth, level maturity. BMI 3 C Slide The Pet Hotel, The Cambridge Times, ethnic products
NONTRADITIONAL PRODUCT LIFE CYCLES BMI 3 C Slide Seasonal Markets
NONTRADITIONAL PRODUCT LIFE CYCLES Seasonal Markets Consumer demand changes and is effected by the weather. Marketers anticipate periods of high and low demand, and work to create off-season opportunities. BMI 3 C Slide Ice cream parlours, resorts, lawn mowers, snow shovels, ice skates
ACTIVITY My Fives At your tables, try to identify five specific products which follow each of the non-traditional PLCs. (The ones presented in class do not count!) BMI 3 C Slide PRIZES FOR BEST TABLE!
HOMEWORK 1. 2. Page 40 Questions: 1. (b), (c) 2. (b), (c) 3. (a), (b) Read section 2. 2 BMI 3 C Slide Work on this quietly until the bell!
1. Read 2. 2 2. Show Mr. M yesterday’s homework BMI 3 C Slide BELL WORK
THE CONSUMER MARKET
THE CONSUMER MARKET Consumer Profiles BMI 3 C Slide - the kind of people most likely to be attracted to a specific product
THE CONSUMER MARKET Consumer Profiles BMI 3 C Slide cohort: a group that shares common characteristics and buying habits, also called a consumer segment
THE CONSUMER MARKET Consumer Profiles primary market: the most likely consumers BMI 3 C Slide secondary market: other, occasional consumers
THE CONSUMER MARKET Consumer Profiles Knowledge of consumer profiles affects distribution, advertising, product design, media, international markets BMI 3 C ADVERTISI NG Slide PRODUCT CONSUMER PROFILE
THE CONSUMER MARKET Demographics - the study of obvious characteristicts that categorize people BMI 3 C Slide - age, gender, family life cycle, income level, ethnicity, culture
THE CONSUMER MARKET Demographics Age BMI 3 C Slide • generally broken down into six groups: 0 -14, 15 -34, 35 -50, 51 -69, 70 -88, 88 and over • Different researchers use different breakdowns
SIX MAJOR GENERATIONS Generation Age Characteristics GI Generation 89+ Children of the WWI generation & fighters in WWII & young in the Great Depression 70 - 88 Radio; Big-Band/Swing music Korean and Vietnam War generation 51 - 69 Rock ‘n Roll; first TV generation; save-the-world 35 - 50 latch-key kids 15 -34 digital literacy as they grew up in a digital environment; 24/7 place; want fast and immediate processing Tweens: 10 -14 Toddler/Elementary never known a world without computers and cell phones 1901 -1926 Mature 1927 - 1945 Baby Boomers 1946 - 1964 Generation X Generation Y Millennium Kids 1981 -2000 Generation Z Born after 2001 BMI 3 C: www. marketingteacher. com/the-six-living-generations-in-america Slide 1965 -1980
THE CONSUMER MARKET Demographics Age BMI 3 C Slide Baby boomers are the most important group to most businesses. . why?
THE CONSUMER MARKET Demographics BMI 3 C Slide Save ½ a page of space in your notes for a chart summarizing pages 52 -53
THE CONSUMER MARKET Demographics Gender BMI 3 C Slide • Today very few products are marketed exclusively to one gender; gender roles have changed, many products are successfully marketed to both.
THE CONSUMER MARKET Demographics Family Life Cycle BMI 3 C Slide • A business may sell its products to various groups, but it will adjust marketing strategies for each.
THE CONSUMER MARKET Demographics BMI 3 C Slide Save ½ a page of space in your notes to copy table from page 57
THE CONSUMER MARKET Demographics Income Level BMI 3 C Slide • Businesses use this to determine whom to market to. Upperincome group can/will buy more expensive items.
THE CONSUMER MARKET Demographics Income Level BMI 3 C Slide • Most businesses target customers of average income and compete for customers’ discretionary income.
THE CONSUMER MARKET Demographics Ethnicity and Culture BMI 3 C Slide • especially important to a company wanting to get involved in international trade; must know what is acceptable by others.
HOMEWORK BMI 3 C Copy charts from pages 52 -53 and page 57 into your notes in the appropriate spots. Slide 1.
BELL WORK BMI 3 C Unit 2 Slide Read “Info Tech” page 55 answer questions
THE CONSUMER MARKET Psychographics BMI 3 C Slide • a system for measuring consumer’s beliefs, opinions, and interests • group consumers by religion, taste, lifestyles, attitudes, personality – psychological factors
THE CONSUMER MARKET Geographics BMI 3 C Slide Marketers are also interested in where consumers live.
THE CONSUMER MARKET Geographics • live within the boundaries of a city • live in apartments, condos, houses with small yards • spend on cultural events, restaurants, public transport BMI 3 C Slide Urban consumer
THE CONSUMER MARKET Geographics Suburban consumer BMI 3 C Slide • lives on the outskirts of the city • needs at least one car • spends money on gardens, barbecues, home furnishings • almost always commutes
THE CONSUMER MARKET Geographics Rural consumer BMI 3 C Slide • usually need a truck to carry items • often has large parcels of land needs riding mower, tractor, other farm equipment
THE CONSUMER MARKET Geographics Brand Development Index (BDI) BMI 3 C Slide • used to see how well a product is selling in one region in comparison to the total market
THE CONSUMER MARKET Geographics Brand Development Index (BDI) per capita sales in region = BDI per capita sales across entire If BDI < 1, market brand is underdeveloped in this BMI 3 C Slide area. If BDI > 1, brand is developed better than average.
BRAND DEVELOPMENT INDEX (BDI) Example Hostess Potato Chips Pop. of Canada: 30 M Sales nationwide: $120 M Pop. of Cambridge: 100 K BMI 3 C Slide Sales in Cambridge: 350 K
BRAND DEVELOPMENT INDEX (BDI) Example 350 ÷ 100 120 ÷ 30 3. 5 = =. 875 4 BMI 3 C Slide A value under 1 means the brand is not fully developed in this area.
BRAND DEVELOPMENT INDEX (BDI) Example Hostess Potato Chips Pop. of Canada: 30 M Sales nationwide: $120 M Pop. of Toronto: 4 M BMI 3 C Slide Sales in Toronto: 18 M
BRAND DEVELOPMENT INDEX (BDI) Example 18 ÷ 4 4. 5 A value greater than 1 means the brand is fully developed in this area. BMI 3 C Slide = = 1. 125 120 ÷ 30 4
WARM-UP TASK BMI 3 C Slide 1. Grab a magazine 2. Find an ad 3. Identify—in as much detail as possible—the target market for the advertised item
PRODUCT USE STATISTICS
PRODUCT USE STATISTICS Groups consumers based on frequency of use: BMI 3 C often grouped together Slide • heavy user • medium user • light user • non-user
PRODUCT USE STATISTICS Non-users BMI 3 C Slide Group #1: those entering the market category for the first time.
PRODUCT USE STATISTICS Marketers try to attract this point-of-entry target by identifying who will enter the market and when, and then promote their brand. BMI 3 C Slide • diapers to expectant parents
PRODUCT USE STATISTICS BMI 3 C Slide Group #2: individuals who do not plan to use products in this category.
PRODUCT USE STATISTICS Marketers must create a value equation to change consumers’ habits and opinions, and convince consumers to purchase product. BMI 3 C Slide • cell phone industry
PRODUCT USE STATISTICS TOTAL BENEFITS must be greater than TOTAL COSTS VALUE BMI 3 C Slide to create
PURCHASE DECISION MAKING PROCESS
PURCHASE DECISION MAKING PROCESS Discover the need or want. BMI 3 C Slide I’m hungry
PURCHASE DECISION MAKING PROCESS Set criteria for what will satisfy your need or want. BMI 3 C Slide • quick, no prep work, something to munch on, can eat on couch
PURCHASE DECISION MAKING PROCESS BMI 3 C popcorn chips bread carrots apple peanuts Slide Search for products which match your criteria.
PURCHASE DECISION MAKING PROCESS Make your decision based on your criteria. BMI 3 C chips bread carrots apple peanuts Slide popcorn
PURCHASE DECISION MAKING PROCESS Purchase the product. BMI 3 C Slide Go to the kitchen, grab some chips.
PURCHASE DECISION MAKING PROCESS Evaluate your purchase decision. BMI 3 C Slide Was I satisfied with my decision?
PURCHASE DECISION MAKING PROCESS The process takes longer the more expensive the product because BMI 3 C more money → bigger risk less experience with more expensive items Slide a) b)
PURCHASE DECISION MAKING PROCESS Motivation • • biological need emotional need rational forces social forces → peer pressure BMI 3 C Slide → celebrity endorsements
PURCHASE DECISION MAKING PROCESS In groups of 2 -3, go through the purchase decision making process for an item costing between $200 and $500. Start with a need/want and your solution is to buy one product. BMI 3 C Slide Have someone write it out; be prepared to share with class.
ASSIGNMENT Read article on page 66 -67, answer questions on page 67 in full and complete sentences, hand in before end of class. Test review: BMI 3 C Slide Section 2. 1, 2. 2. , 2. 3, 2. 4 (not Thorndike or Alderfer), 2. 5, handouts, assignments