Part-Three: Connecting With Customers

PART-THREE
CONNECTING WITH CUSTOMERS
12/5/16
Prepared by Temesgen B. (PhD)
Chapter Questions
How do consumer characteristics influence buying
behavior?
How do consumers make purchasing decisions?
How do marketers analyze consumer decision
making?
What is the business market, and how does it
differ from the consumer market?
Who participates in the business-to-business
buying process?
How do business buyers make their decisions?
How can companies build strong relationships
with business customers?
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CUSTOMER ANALYSIS
To develop effective marketing strategies, it
requires to be almost obsessive about
understanding the needs of customers
The success of any customer-focused
program will involve
imaginative product development,
integrated distribution methods,
well calibrated pricing and
state of the art communications.
Customer analysis involves analysis of
Consumer buying behavior
Organizational buying behavior
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Analyzing the Consumer

Market
Consumer behaviour is the study of how individuals,
groups, and organizations select, buy, use, and dispose

of goods, services, ideas, or experiences to satisfy their
needs and wants.
Consumer is the customer who buys goods and services
of all types for personal as well as household usage.
Consumers behavior is described as an investigation into
the way individuals make decisions on how to spend
their available resources (time, money, effort) on
personal and household products.
A study of consumer behavior need to consider
what occurs before people consume something,
what goes on during the consumption period itself and
how consumers handle the disposal of what they have
consumed.
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What Influences
Consumer Behavior?
Cultural factors
Social factors
Personal factors
Psychological factors
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Factors affecting the buying

behaviour
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Cultural Factors
Culture, subculture, and social
class
are important influences on
consumer buying behavior.
Culture
is
the
fundamental
determinant of a persons wants and
behaviors.
Each culture consists of smaller
subcultures that provide more specific
identification and socialization for
their members.
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Subcultures
Nationalities ( in USA population-we
can find Asians, Europeans, Africans,
Latino and many more..) (in Ethiopia
many nations with their own
subculture)
Religions ( Christian, Muslim, )
Racial groups (black, white,
Hispanics
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Social Classes
Upper uppers
Upper middles
Lower uppers
Middle
Working
Upper lowers
Lower lowers
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Characteristics of Social Classes

Within a class, people tend to
behave alike
Class may be indicated by a
cluster
of
variables
(occupation, income, wealth)
Class designation is not fixed
over time
Social class members show
distinct product
And brand
preferences in many areas,
including clothing,
home
furnishing, leisure activities,
and automobiles etc
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10
Social Factors
In addition to cultural factors ,
such as
Reference groups
Family
Social roles
Status
Affect our buying behavior
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11
Reference Groups
Membership groups
Primary groups
Secondary groups
Aspirational groups
Dissociative groups
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Dir
ect
ind
or
i r ec
infl
uen t
the
ir b ce on
beh
uyi
ng
avi
or
12
Membership groups
1) Groups having a direct influence are called
membership groups.
a. Some membership groups are primary groups
such as family, friends, neighbors, and coworkers with whom the person interacts fairly
continuously and informally.
b. Some membership groups are secondary
groups such as religious, professional groups
that tend to be more formal.
2) Reference groups expose an individual to new
behaviors and lifestyles, influencing attitudes and
self-concept.
3) They create pressures for conformity that
may affect actual product and brand choices.
4) People are also influenced by groups to which
they do not belong:
a. Aspiration groups are those a person hopes to
join.
b. Dissociative groups are those whose values or
behavior an individual rejects.
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13
Action of marketers
B)
Where reference group influence is strong,

marketers must determine how to reach and
influence the groups opinion leaders.
C) An opinion leader is the person in informal, productrelated communications who offers advice or
information about a specific product or product
category.
D) Marketers try to reach opinion leaders by identifying
demographic and psychographic characteristics
associated with opinion leadership, identifying the
media read by opinion leaders, and d irecting
messages at opinion leaders.

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14
Family Affecting Buying Decisions
A more direct influence on everyday buying

behavior is the family members
the persons spouse and
children.
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15
Personal Factors
Personal characteristics that influence a buyers
decision include
Age
Life cycle stage and economic circumstances
Occupation
Wealth
Personality
Values
Lifestyle
Self-concept
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16
Age and Stage in the Life Cycle
A) Our taste in food, clothes, furniture, and

recreation is often related to our age.
B) Consumption is also shaped by the
family-life cycle and the number, age,
and gender, of people in the household
at any point in time.
C) In addition, psychological life-cycles
may matter.
D) Marketers should also consider critical
life events or transitions as giving rise to
new needs. Prepared by Temesgen B. (PhD)
12/5/16
17
Marketers also consider critical life events or transitions
Marriage,
Child Birth
Illness
Relocation
Divorce
Career change
Widowhood
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These should
alert service
providers
Banks, lawyers,
And marriage
and
bereavement
counselors
18
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19
Occupation and Economic Circumstances
Occupation influences consumption patterns

and economic circumstances influence
product. Product choice is greatly affected
by economic circumstances including:
A) Spendable income (level, stability, and time
pattern)
B) Savings and assets
C) Debts
D) Borrowing power
E) Attitudes toward spending and saving
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20
Personality and Self-Concept

Each person has personality characteristics that
influence his or her buying behavior.
Personality: A set of distinguishing human
psychological traits that lead to relatively consistent
and enduring responses to environmental stimuli.
A) Brands also have personalities, and consumers are
likely to choose brands whose personalities match
their own.
B) Consumers often choose and use brands consistent
with their actual self-concept (how we view ourselves).
C) Others self-concept (how we think others see us).
12/5/16
21
Lifestyles and Value
People from the same subculture, social class, and

occupation may lead quite different lifestyles.
A) A lifestyle is a persons pattern of living in the world as
expressed in activities, interests, and opinions. It portrays
the whole person interacting with his or her environment.
B) Marketers search for relationships between their products
and lifestyle groups.
C) LOHAS is an acronym standing for: Lifestyles of health and
sustainability.
Consumers who worry about the environment, want
products to be produced in a sustainable way, and spend
money to advance their personal health, development,
appliances such
as Solar panels, alternative medicine, etc
Ex: organic food, energy-efficient
12/5/16
22
Psychological Factors
A person's buying choices are further
influenced by four important
psychological factors:
motivation,
perception,
learning, and
beliefs and attitudes.
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23
Maslow's hierarchy of
needs
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24
Perception
A motivated person is ready to act. How the
person acts is influenced by his or her
perception of the situation.
perception is the process by which people
select, organize and interpret information to
form a meaningful picture of the world.
People can form different perceptions of the
same stimulus because of three perceptual
processes:
selective
attention,
selective
distortion and selective retention.
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25
THE BUYING DECISION PROCESS:

THE FIVE-STAGE MODEL
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26
Contd...
The consumer's choice results from
the complex interplay of cultural,
social, personal and psychological
factors. Although the marketer
cannot influence many of these
factors, they can be useful in
identifying interested buyers and in
shaping products and appeals to
serve their needs better.
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27
Problem Recognition
The buying process starts when the buyer
recognizes a problem or need.
The need can be triggered by internal or external
stimuli.
Marketers need to identify the circumstances that
trigger a particular need by gathering information
from a number of consumers.
Marketers Role
Identify the drives

Develop marketing strategies to
trigger the thoughts about the
possibility of making purchase.
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28
Marketers need to do some research

Who buys product or services?
Who makes the decision to buy the
product?
Who influences the decision to buy
product ?
How is the purchase decision made?
Why do customers buy certain
product?
How is our product is perceived by
customer?
12/5/16
29
Information Sources
1) Personal (family,
friends)
2) Commercial (advertising, Web sites, salespeople)

3) Public (mass media, consumer organizations)
4) Experiential (handling, examining, using the product)
Generally speaking, consumers receive the greatest amount
of information about a product from commercial sources.
The most effective information often comes from personal

sources or public sources that are independent authorities
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30
Successive Sets involved in consumer Decision

Making
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31
Evaluation of Alternatives
No single process is used by all consumers, or

by one consumer in all buying situations. The
most current models see the consumer
forming judgments largely on a conscious and
rational basis.
A) First, the consumer is trying to satisfy a need.
B) Second, the consumer is looking for certain
benefits from the product solution.
C) Third, the consumer sees each product as a
bundle of attributes with varying abilities for
delivering the benefits.
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32
Purchase decision
In executing a purchase intention, the
consumer may make up to five sub
decisions:
Brand ( what)
Dealer ( where)
Quantity (No.)
Timing ( weekend)
Payment method (credit card)
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33
Post purchase Behavior

Post purchase satisfaction ( satisfied,
dissatisfied, delighted)
Post purchase action ( re-purchase,
good talk)
Post purchase use and disposal
(safety use)
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34
Business Markets and Business Buyer

Behaviour
Organization buyers are customers that
comprised of various organizations such as
industrial firms,
commercial businesses, or
governmental organizations and institutions
It is also known by the Business-to- Business

Marketing (B2B marketing)
B2B markets have fewer buyers that can be
communicated through personal selling than
mass advertising
12/5/16
35
What is Organizational
Buying?
Organizational buying refers to
the decision-making process by
which
formal
organizations
establish the need for purchased
products
and
services,
and
identify, evaluate, and choose
among alternative brands and
suppliers.
12/5/16
36
Characteristics
It is concerned with the marketing of
products and services from one
organization to another.
The customer is an organization with
organizational goals
Business to business marketing is the
process of trying to match a
companys products and services to
the organizational goals of its target
customers.
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37
Continued
38
Dimension
Characteristics of
business market
Explanation
Nature of Demand
Derived Demand
The demand from a business is

derived from its own sales volume
Buying influences
Many influences
There are often many interested

parties who influence the buying
decision (bid committee, experts,
etc)
Market structure
Often concentrated
demand
A small number of large customers

often make up a substantial share
of the market
Purchasing motives
organizational, rational
Products purchased for the

achievements of organizational
goals
Purchasing decision
process
Often complex and

lengthy
Decisions can involve long and

complex analysis and negotiation
Purchasing skills
Professional, trained
12/5/16
Buyers are often professionally

qualified in purchasing
Example
Coal = Electricity thermal power generators

Sugar cane = sugar factories
Rubber= tire manufacturers
Tires = car /truck manufacturers
Train coaches/ rails etc: railways
Buses : Transportation companies
Water bottles + plastic bottles
Military : Govt bid for food and cloth suppliers
Dam and Road constructions: Govt. bid.
To create and capture value, sellers need to
understand
these organizations needs, resources,
policies, and buying procedures.
12/5/16
39
The Business markets

The
business
markets
consists
of
all
organizations that acquire goods and services
used in the production of other products or
services that are sold or supplied to others.
Ex:
Major
Industries
business markets.
making
up
Agriculture,
forestry,
fisheries,
mining,
finance, insurance; distribution and services.
12/5/16
40
Hide venders sell to hide tanners

Tanners sell to shoes manufacturers
Manufacturers to whole sellers
Whole sellers to retailers
Retailers to customers
su
pp
ly
ch
ai
n
Example of leather industry
Each party in the supply chain also

buy many other goods and services
in support of their operations.
12/5/16
41
Characteristics of Business Markets

Fewer, larger
buyers
Close suppliercustomer
relationships
Professional
purchasing
Many buying
influences
12/5/16
Derived demand
Inelastic demand
Fluctuating
demand
Geographically
concentrated
buyers
Direct
purchasing
42
Major influences on
business buyer behavior
Environmental
Organisational
Interpersonal
Individual
12/5/16
43
Major Influences on Business Buyers
Key Factors
Environmental
Organizational
Interpersonal
Individual
12/5/16
Economic trends
Supply conditions
Technological change
Regulatory and
political environments
Competitive
developments
Culture and customs
44
Key Factors
Environmental
Organizational
Interpersonal
Individual
12/5/16
Objectives
Policies
Procedures
Organizational
structure
Systems
45
Key Factors
Environmental
Organizational
Interpersonal
Individual
12/5/16
Authority
Status
Persuasiveness
7 - 46
Key Factors
Environmental
Organizational
Interpersonal
Individual
12/5/16
Authority
Age
Education
Job position
Personality
Risk attitudes
7 - 47
Stages in the Buying Process: Buy

phases
Problem recognition
General need description and
product specification
Supplier search
Proposal solicitation
Supplier selection
Order-routine specification
Performance review
12/5/16
48
Factors Affecting
Buyer-Supplier Relationships
Availability of alternatives
Importance of supply
Complexity of supply
Supply market dynamism
12/5/16
49
Market Segmentation, Targeting and Positioning
12/5/16
50
Segmentation, Targeting, and

Positioning
6. Develop Marketing
Mix for Each Target Segment
5. Develop Positioning
for Each Target Segment
4. Select Target
Segment(s)
Market
Targeting
3. Develop Measures
of Segment Attractiveness
2. Develop Profiles
of Resulting Segments
1. Identify Bases
for Segmenting the Market
12/5/16
Market
Positioning
Market Segmentation
51
5.1 Market Segmentation

In market aggregation, the total market is
viewed as a single unit as one mass,
aggregate market.
To the contrary, there is an approach that
views a market as being composed of
many smaller, homogenous units.
Markets consist of buyers with different
12/5/16
wants,
resources,
geographical locations,
buying attitudes, and
buying practices.
52
Continued
Market segmentation is the process of dividing the
total, heterogeneous market for a product in to
distinct and meaningful groups of buyers, each of
which tends to be homogenous in all significant
aspects.
Management then selects one or more of these
market groups or segments as the organization's
target market.
The objective of aggregation is to fit the market to the
product;
whereas the objective of segmentation is an attempt to fit
the product to the market believing that each segment calls
for a different product, promotional appeal, or other
element in the marketing mix.
The focus of segmentation is enhancing a separate

program in a pin pointed market.
12/5/16
53
Why Segmentation?
Market segmentation is a customer - oriented
philosophy.
Specifically, it has the following benefits
Investing money and effort to most profitable
market.
Designing and developing products, which
match with the market demand as it focuses
on selected target markets;
Choosing the best promotional activity and
channel of distribution at a relatively lower
cost
It helps to determine an appropriate
marketing mix strategy for a segment.
Flexibility of organizational resources and
12/5/16
programs in the
time of fierce competition can54
12/5/16
55
Micromarketing
Micromarketing
Products
Productsto
tosuit
suitthe
thetastes
tastesof
ofindividuals
individualsor
orlocations
locations
(complete
(completesegmentation)
segmentation)
Niche
Niche Marketing
Marketing
Different
Differentproducts
productsto
tosubgroups
subgroupswithin
withinsegments
segments
((more
moresegmentation)
segmentation)
Segment
Segment Marketing
Marketing
Different
Differentproducts
productsto
toone
oneor
ormore
moresegments
segments
(some
(somesegmentation)
segmentation)
Mass
Mass Marketing
Marketing
Same
Sameproduct
productto
toall
allconsumers
consumers
(no
(nosegmentation)
segmentation)
Levels of Market Segmentation
Bases for Segmenting Consumer Markets

Geographic
Nations, states,
regions or cities
Demographic
Age, gender,
family size and life
cycle,
or income
Psychographic
Social class, lifestyle,
or personality
Behavioral
Occasions, benefits,
uses, or responses
12/5/16
56
Psycho-graphic
Segmentation
In psycho-graphic segmentation consumer markets
can be divided in to different groups on the basis of
social class, life style or personality characteristics.
Even if consumers are on the same demographic

characteristics, they can have different psychographic profiles.
These social class, life style and personality
characteristics result from psychological and
sociological aspects of the individual;
12/5/16
57
Geographic Segmentation
Many organizations segment their market on some
geographic basis such as nations, states, regions,
countries, cities, urban-suburban-rural, topography or
climate depending on the notion that consumer needs
or responses vary geographically.
Here it should be considered that the marketing costs
and potentiality of each segment varies depending on
the geographic needs and preferences.
A firm can decide to operate in one or a few
geographic areas or operate in all but pay attention to
variations in needs and preferences of the specific
location.
12/5/16
58
Demographic Segmentation
Probably the most widely used basis for segmenting

consumer market is demographic characteristics.
In demographic segmentation, the market is divided into
different customer groups on the basis of demographic
variables such as age, sex, family size, family life, cycle,
education, occupation, religion ethnic background, income
and nationality.
Demographic variables have long been the most popular
bases for distinguishing customer needs and preferences
for certain reasons.
customer wants, preferences and usage rates are highly
associated with demographic variables.
they are easily quantifiable and accessible than most
other types of variables.
Even when the target market is described in nondemographic factors, the link to demographic variables is
vital to know the size of the target market and how to reach
it efficiently.
12/5/16
59
Behavioral Segmentation
Some organizations try to segment their consumer markets on

the basis of a consumer behavioral characteristics related to
the product.
The variables used in behavioral segmentation include the
consumer's knowledge, attitude, use or response to an actual
product or its attributes.
Behavioral segmentation can be done with respect to the
following factors:
Purchase occasion with regard to time such as regular and
special occasion. For example, air traveler for vacation,
family or business.
Benefits sought from the product in relation to individual
interest such as low price, durability, general product
quality and so on.
User status with respect to the existence and potentiality
of customers such as non-users, ex-users, potential and
regular users of a product.
Usage rate with respect to the size of purchase such as
light users, medium users or heavy users.
Readiness stage of the customers to buy a product
depending on their information, interest, intention and
degree of awareness of a product.
12/5/16
60
Segmentation of organizational
markets
Organizational size
Industry sector
Geographical location
12/5/16
61
Organizational size
Annual sales turn over
Number of employees
Volume of production
12/5/16
62
Industry sector
Banking (service)
Manufacturing
Mining
Assembly
Government
others
12/5/16
63
Geographical location
Domestic and
Export markets
Each can also be further subdivided
12/5/16
64
Requirements for Effective Segmentation

Measurable
Measurable
Accessible
Accessible
Substantial
Substantial
Differential
Differential
Actionable
Actionable
12/5/16
Size, purchasing power, profiles

of segments can be measured.
Segments must be effectively
reached and served.
Segments must be large

or
profitable
enough to serve.
Segments must respond
differently to different
marketing mix elements &
actions.
Must be able to attract and
serve
the
segments.
65
5.2 Targeting and

Positioning
Targeting is the process of assessing the relative worth of

different market segments and selecting one or more
segments in which to compete- these become the target
segment
Positioning is the identification of a particular appeal that
the firm can make to customers in each target segment,
which is designed to convenience customers to choose that
firm over its rivals
Target market
A group of customers at which the seller directed the
marketing programs
Marketing for the targeted market
Marketing strategy (positioning)

Marketing mix (Product, Promotion, Price, Distribution)
12/5/16
66
Evaluating Market Segments
Segment Size and Growth

Analyze sales, growth rates and expected
profitability.
Segment Structural Attractiveness

Consider effects of: Competitors, Availability of
Substitute Products and, the Power of Buyers &
Suppliers.
Company Objectives and Resources

Company skills & resources relative to the
segment(s).
Look for Competitive Advantages.
12/5/16
67
C. Concentrated Marketing
68
Segment
Segment 33
12/5/16
Company
Company
Marketing
Marketing
Mix
Mix
Segment
Segment 22
Segment
Segment 11
B. Differentiated Marketing
Company
Company
Marketing
Marketing Mix
Mix 33
Company
Company
Marketing
Marketing Mix
Mix 22
Company
Company
Marketing
Marketing Mix
Mix 11
Segment
Segment 33
Segment
Segment 22
Segment
Segment 11
A. Undifferentiated Marketing
Company
Company
Marketing
Marketing
Mix
Mix
Market
Market
Market Coverage Strategies
Choosing a Market-Coverage Strategy
Company
Resources
Product
Variability
Products Stage
in the Product Life Cycle
Market
Variability
12/5/16
Competitors
Marketing Strategies
69
Positioning the Product

Products Position - the place the
product occupies in consumers minds
relative to competing products; i.e.
Volvo positions on safety.
Marketers must:
Plan positions to give products the greatest
advantage
Develop marketing mixes to create planned
positions
12/5/16
70
12/5/16
71
Users
Users
F
F
D
D
Usage
Usage
Occasions
Occasions
B
B
E
E
Against
Againstaa
Competitor
Competitor
A
A
C
C
Benefits
Benefits
Offered
Offered
H
H
G
G
Away
Awayfrom
from
Competitors
Competitors
Product
Product
Attributes
Attributes
Product
Product
Class
Class
Positioning for Competitive Advantage:

Strategies
Steps to Choosing and Implementing

a Positioning Strategy
Step 1. Identifying a set of possible

competitive advantages: Competitive
Differentiation.
Step 2. Selecting the right competitive
advantage.
Step 3. Effectively communicating and
delivering the chosen position to the
market.
12/5/16
72
73
Image
Image
12/5/16
Personnel
Personnel
Areas
Areas for
for Competitive
Competitive
Differentiation
Differentiation
Service
Service
Product
Product
Developing Competitive
Differentiation
74
Communicable
Communicable
Superior
Superior
Distinctive
Distinctive
12/5/16
Preemptive
Preemptive
Criteria
for
Determining
Which
Differences
to
Promote
Affordable
Affordable
Profitable
Profitable
Important
Important
Selecting the Right Competitive

Advantages
Generic product Positioning map
High
Q
u
a
l
i
t
y
Exceptional Brands
Premium Brands
Standard Brand
Budget Brands
Cowboy Brands
Low
Low
High
Price
12/5/16
75

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Part-Three: Connecting With Customers

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PART-THREE

CONNECTING WITH CUSTOMERS

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Analyzing the Consumer

groups, and organizations select, buy, use, and dispose

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Factors affecting the buying

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Characteristics of Social Classes

Prepared by Temesgen B. (PhD)

Affect our buying behavior

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Where reference group influence is strong,

messages at opinion leaders.

Prepared by Temesgen B. (PhD)

Family Affecting Buying Decisions

A more direct influence on everyday buying

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Age and Stage in the Life Cycle

A) Our taste in food, clothes, furniture, and

Marketers also consider critical life events or transitions

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Occupation and Economic Circumstances

Occupation influences consumption patterns

Prepared by Temesgen B. (PhD)

Personality and Self-Concept

Prepared by Temesgen B. (PhD)

Lifestyles and Value

People from the same subculture, social class, and

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

THE BUYING DECISION PROCESS:

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Identify the drives

Prepared by Temesgen B. (PhD)

Marketers need to do some research

Prepared by Temesgen B. (PhD)

2) Commercial (advertising, Web sites, salespeople)

The most effective information often comes from personal

Prepared by Temesgen B. (PhD)

Successive Sets involved in consumer Decision

Prepared by Temesgen B. (PhD)

No single process is used by all consumers, or

Prepared by Temesgen B. (PhD)

Prepared by Temesgen B. (PhD)

Post purchase Behavior

Prepared by Temesgen B. (PhD)

Business Markets and Business Buyer

It is also known by the Business-to- Business

Prepared by Temesgen B. (PhD)