School of International Business

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School of International Business BA (HONS)
Business Studies with Specialisms MKT301 LECTURER
Lisa Smyth
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School of International Business BA (HONS)
Business Studies with Specialisms MKT301 LECTURE
3 Target Markets
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• Lecture Outline
• Definition of a Market
• Different types of Market
• Consumer Buying Behaviour and Process
• Organisation and Business-to-Business Buying
  Behaviour
• Market Segmentation
• Targeting Decisions in Markets
• Positioning Strategies.

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Understanding and Targeting Markets
Source Dibb et al 2001
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What Are Markets? A market is an aggregate of
people who, as individuals or as organisations,
have a need for certain products and the
ability, willingness and authority to purchase
such products. Requirements for a Market For a
group of people to be a market, the members of
the group must meet the following four
requirements They must need or want a
particular product or service They must have
the ability to purchase the product or service
They must be willing to use their buying power
They must have the authority to buy the
specific products or services.
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Types of Markets A consumer market consists of
purchasers and/or individuals in their households
who personally consume or benefit from the
purchased products and do not buy products
primarily to make a profit A business-to-busines
s market (also referred to as an organisational
or industrial market) consists of individuals or
groups that purchase a specific kind of product
to re-sell, use directly in producing other
products or use in general daily operations
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Buying behaviour is the term used to describe the
decision processes and actions of people involved
in buying and using products. Consumer buying
behaviour is the buying behaviour of people who
purchase products for personal or household use
it is not concerned with the purchase of items
for business use. To find out what satisfies
customers, marketers must examine the main
influences on what, where, when and how consumers
buy. Although marketers try to understand and
influence consumer buying behaviour, they cannot
control it.
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Consumer buying decision process and possible
influences on the process
Source Dibb et al 2001
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• The Consumer Buying Decision Process
• Problem Recognition
• Information Search
• Evaluation of Alternatives
• Purchase
• Post-purchase Evaluation

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• Stage 1 Problem Recognition
• Buyer becomes aware of a difference between a
  desired state and an actual condition
• Individual may be unaware of the problem or need
• Use of sales personnel, advertising, sales
  promotion and packaging to help trigger
  recognition of such needs or problems.
• Consumer problem recognition speed can be slow or
  fast, depending on the individual and the way in
  which need recognition was triggered.

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• Stage 2 Information Search
• Begins after the consumer becomes aware of the
  problem or need
• search for information about products will help
  resolve the problem or satisfy the need
• two aspects to information search internal
  search (memory) and external search (other
  sources).
• Repetition increases consumer learning of
  information.
• Depends on the level of involvement with purchase
• Information search yields an evoked set of
  products or a group of brands that the buyer
  views as possible alternatives.

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• Stage 3 Evaluation of Alternatives
• Consumer establishes criteria against which to
  compare the characteristics of the products in
  the evoked set.
• consumer rates and eventually ranks the brands in
  the evoked set, using the criteria and their
  relative importance, or salience.
• Marketers can influence consumers evaluation by
  framing the alternatives, that is, by the manner
  in which an alternative and its attributes are
  described

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• Stage 4 Purchase
• Consumer selects the product or brand to be
  purchased, is mainly the outcome of the
  consumers evaluation of alternatives
• The buyer picks the seller from whom the product
  will be purchased and finalises the terms of
  sale.
• The actual purchase is made, unless the process
  has been terminated earlier.

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• Stage 5 Post-Purchase Evaluation
• Buyer evaluates the product after purchase, based
  on many of the criteria used in the evaluation of
  alternatives stage.
• Determine whether the consumer is satisfied or
  dissatisfied.
• Cognitive dissonance is dissatisfaction that
  occurs when the buyer questions whether he or she
  made the right decision in purchasing the
  product.

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The nature of customer complaints
Source Dibb et al 2001
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• Personal Factors Influencing the Buying
• Decision Process
• Demographic Factors are individual
  characteristics such as age, sex, race, ethnic
  origin, income, family life cycle and occupation.
  
• Situational Factors are the external
  circumstances or conditions that exist when a
  consumer is making a purchase decision
• Level of Involvement refers to the level of
  interest, emotional commitment and time spent
  searching for a product in a particular
  situation.

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• Psychological Factors Influencing the Buying
• Decision Process
• Psychological factors operating within
  individuals partly determine
• peoples general behaviour and thus influence
  their behaviour as
• consumers.
• Perception - is the process of selecting,
  organising and interpreting
  information inputs to produce
  meaning.
• Motives - is an internal, energy giving
  force that directs a persons
  activities towards satisfying a need or
  achieving a goal.
• Learning - Learning refers to changes in a
  persons behaviour caused by
  information and experience.

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• Psychological Factors Influencing the Buying
• Decision Process
• Psychological factors (contin)
• Attitudes - An attitude refers to an
  individuals enduring evaluation,
  feelings and behavioural
  tendencies towards an object or
  activity.
• Personality- Personality includes all the
  internal traits and behaviours that
  make a person unique.

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• Social Factors Influencing the
• Buying Decision Process
• Roles and Family
• Reference Groups
• Social Classes
• Culture and Sub-cultures

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Roles that people might play in a buying
decision Initiator the person who first
suggests or thinks of the idea of buying the
particular product / service Influencer the
person whose views/advice carries some weight in
making the final decision Decider is the
person who ultimately determines the buying
decision or any part of it whether to buy, what
to buy, how to buy, or where to buy Buyer is
the person who makes the actual purchase User
is the person who consumes or uses the product or
service.
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Example A First Childs Toy Initiator
Parent/Child Influencer Grandparents, Friends,
Colleagues, Shop Assistant etc Decider
Parent Buyer Parent User Child.
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How does these roles affect marketing? Implication
s for designing the product, determining messages
and allocating or directing the promotional
budget. Example Childs Toy Parents Keep the
child occupied (QUIET) A toy that doesnt make
more noise than the crying child Message
Endless hours of peace and quiet Promotion
Directed at parents.
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Types of Buying Decision Making? Consumer
Decision Making varies with the type of buying
decision. Differences between toothpaste, cans
of mineral, an expensive television, camera, new
car etc More complex the decision (less familiar
with) are likely to involve more buying
participants and more buyer deliberations.
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Routine response behaviour generally occurs when
buying frequently purchased, low cost, low risk
items. Buyers have few decisions to make
therefore are well acquainted with the product
class, know the major brands, and have fairly
clear preferences among the brands. Do not give
much thought, search, or time to purchase. These
goods are known as low involvement
goods Examples Mineral Drinks, toothpaste,
cornflakes etc Task for Marketers Maintain
positive satisfaction for current customers and
attract new buyers by heightening
attention.product displays, price promotions etc
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Buyers engage in limited decision-making when
buying products that are purchased only
occasionally and when they need to obtain
information about an unfamiliar brand in a
familiar product category. Hence consumers may
ask more questions and watch adverts to find out
more about the brand and its features Consumers
are trying to reduce the risk by gathering
information Task for Marketers To design a
communications programme that will increase the
buyers brand comprehension and confidence.
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Buyers engage in extensive decision-making when
a purchase involves unfamiliar, expensive, high
risk or infrequently bought products, such as
cars, homes, holidays or personal
pensions. Buying reaches its greatest complexity
when buyers face unfamiliar products. Task for
Marketers Must educate the potential customers,
must understand, information gathering and
evaluation activities of perspective buyers. By
contrast, impulse buying involves no conscious
planning but a powerful, persistent urge to buy
something immediately.
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Understanding Consumer Behaviour Marketers try
to understand consumer buying behaviour so that
they can offer consumers greater
satisfaction. An appreciation of how and why
individuals buy products and services helps
marketers design more appealing marketing
programmes. Consumer expectations are now
rising, making it more important than ever for
marketers to focus on the marketing concept and
to be consumer oriented.
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• Types of Organisational Market
• Producer markets consist of individuals and
  organisations that purchase products for the
  purpose of making a profit by using them to
  produce other products or by using them in their
  operations. (Buyers of Raw Materials, Industries
  etc)
• Reseller markets consist of intermediaries that
  buy finished goods and re-sell them to make a
  profit. (Retailer, Wholeslr)
• Government markets include national and local
  governments
• Organisations with charitable, educational,
  community or other non-business goals constitute
  institutional markets.

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• Dimensions of Business-to-Business Buying
• Characteristics of Business-to-Business
  Transactions
• Attributes of Business-to-Business Buyers
• Primary Concerns of Business-to-Business Buyers
• Methods of Business-to-Business Buying
• Types of Business-to-Business Purchases

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• Dimensions of Business-to-Business
• Buying (continued)
• Demand for Industrial Products
• Derived Demand (as a result of a demand for
  consumer products)
• Inelastic Demand (a price increase or decrease
  will not significantly alter demand for the item)
  
• Joint Demand (two or more items are used in
  combination to produce a product).
• Fluctuating Demand (fluctuates according to
  consumer demand, causing producers to buy large
  quantities of raw materials and components when
  consumer demand is high, and conversely causing
  producers to cut purchases when consumer demand
  is low).

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• Business-to-Business Buying Decisions
• The Buying Centre
• group of people within an organisation who are
  involved in making business-to-business purchase
  decisions, including users, influencers, buyers,
  deciders and gatekeepers
• Relationship Marketing and Managing Exchange
  Relationships
• Instead of being concerned with individual
  transactions, relationship marketing emphasises
  the whole relationship between the parties.

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Figure 5.4Business-to-business buying decision
process and factors that may influence it
Source Adapted from Frederick E. Webster, Jr,
and Yoram Wind, Organisational Buying Behavior
(Englewood Cliffs, N.J. Prentice-Hall, 1972),
pp. 33-37. Adapted by permission.
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• Business-to-Business Buying Decisions (continued)
  
• Influences on Business-to-Business Buying
• Environmental factors
• Organisational factors
• Interpersonal factors
• Individual factors

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Influences on Business to Business
Buying Environmental factors are uncontrollable
forces such as politics, laws, regulations and
regulatory agencies, activities of Interest
groups, changes in the economy, competitors
actions And technological changes. Organisational
factors include the buyers objectives, purchasin
g policies and resources, as well as the size
and composition of its buying centre.
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Influences on Business to Business
Buying Interpersonal factors refer to the
relationships among the people in the buying
centre, where the use of power and the level
of conflict influence organisational buying
decisions. Individual factors are the personal
characteristics of individuals in the buying
centre, such as age, education, personality,
position In the organisation and income level.
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• Selection and Analysis of Business-to
• Business Markets
• Identifying Potential Customers
• based on the Standard Industrial Classification
  (SIC) system, administered in the UK by the
  Central Statistical Office. 10 broad divisions
  agriculture, forestry and fishing, to banking,
  finance, insurance, business services and
  leasing.
• Locating Industrial Customers
• Internet or business-to-business directories,
  marketing research agency
• Estimating Purchase Potential
• find a relationship between the size of
  potential customers purchases and a variable
  available in SIC data, such as the number of
  employees.

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• Selecting Target Markets
• Total Market Approach or Market Segmentation?
• Total Market Approach - all customers have
  similar needs and wants and can be served with a
  single marketing mix.
• Appropriate only under two conditions
• There must be little variation in the needs of
  customers for a single product.
• The company must develop and sustain one
  marketing mix that satisfies everyone.

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Selecting Target Markets Total Market Approach or
Market Segmentation? Market Segmentation -
involves identifying groups of customers in
markets who share similar buying needs and
characteristics By identifying and
understanding such groups, marketers are better
able to develop product or service benefits that
are appropriate for them.