2.3 Consumer Mkt.

2.1 CONSUMER DEMAND

Definitions:

Consumer – a person who uses a product (not necessarily a customer)

Customer – person who buys a product

Gatekeeper – a person who oversee the care of another

Need and Wants

Needs – are essential for survival (i.e. food, protection, affiliation)

Wants – add pleasure and comfort to our lives, but not necessary for survival

In developed markets such as Canada, consumer demand is driven more by wants than needs, so marketing is directed towards presenting choices to customers. Want is a function of the value equation.

Changes in Consumer Demand

Changes can occur for the following reasons:

1)Economic Shifts (affects disposable income and what consumers value as necessities)

2)Changes in spending patterns and personal tastes

Business must be able to gauge fluctuations in consumer demand, thus they rely on product life cycle models.

2.2Product Life Cycle

Product Life Cycle (PLC) – describes the changes in consumer demand over time, and is used to alert marketers of when changes in demand may occur

Traditional Product Life Cycle

Consists of 5 Stages:

1)Introduction Stage

-Product Launch – the moment a new product is introduced into the marketplace

-Very expensive process since new machinery and training costs, promotional activities and a great deal of uncertainty, therefore initial price of product high

-Focus is to market to Early adopters (trendsetters)

-A need to establish the value equation early

-Very little competition at this time – product can reach growth stage quicker

-Important to use a pull strategy since consumer has little information about the product, so consumers must be given incentives to buy it

-Manufacturers will pay a shelf allowance to retailer to provide space for new product

2)Growth Stage

-At this point, product visible, new consumers, and time where product will catch on or fail

-Most crucial time for advertising since product will either catch or fail

-Product considered a “bust” if it is removed from market before costs have been recouped

-Products reputation spread by word of mouth and advertising

-The faster a product can reach this stage, the faster profits can be made

-Must monitor market share(sales as a % of the total sales of market)

-Competitors modify their products to compete

-Competitors may face high barriers to entry (costs of R&D, design costs, advertising and raw materials)

-Only competitive products last through this stage

-Market growth stimulated by advertisement

-Companies usually use a “push” strategy in this stage

3)Maturity Stage

-Sales of product are minimal or increase slowly

-Advertising must be directed towards keeping brand in front of customers mind

-Marketing highlights history of product and benefits

-Most costs recovered and newer costs are lower

-Profits used to develop new products and fund new product launches, relying on brand name to promote other products

4)Decline Stage

-Unable to find new customers for the products

-Profits decrease, and company must either redesign, repackage or try to reverse decline

5)Decision Point Stage

-Final stage where future of product must be decide

-Research conducted to decide if product is to be reformulated, repackaged or reintroduced as ”new and improved”

-Involves new promotion and new pricing

NON TRADITIONAL PRODUCT LIFE CYCLES

Fads

-A product, service or idea that is popular for a very short period of time

-Fads can be books, activities, songs, phrases, gestures

-Most commonly toys and games

-Marketers can make or lose a lot of money, thus fads are a high risk venture since demand is hard to predict

-Fads die very quickly, and the key is to get out before it does

Trends

-A product that is more lasting, and is a mass movement toward a particular style or value

-Marketers can predict growth of markets by looking at trends

Niche Market

-Small section of the market that have little competition since there are not enough consumers to make the market attractive to competitors, but large enough to be profitable for one company

Seasonal Markets

- Seasonal fits do not align with the traditional product life cycle, thus it is important to anticipate periods of high and low demand

2.3THE CONSUMER MARKET

Consumer Profiles

-Every customer is different, the key is to be able to anticipate or influence their buying decision

-Consumer Profile – a description of the people most likely to be attracted to a specific product, putting consumers into cohorts (similar habits).

  • Primary market – most likely consumers
  • Secondary market – occasional consumers

-Consumer Segment – groups of consumers with common characteristics and buying habits, which helps direct marketing efforts

Demographics

-Study of distinct characteristics of people (age, gender, family life cycle, income level, culture and ethnicity)

-Used to develop consumer profiles

Age – there are 6 different age groups, according to the government, each of which is different

  • 0-9 Pre-customer
  • 10-15 Allowance customers
  • 16-19 Youth market
  • 20-25 Postsecondary market
  • 25-20 Family Formation
  • 40-55 Establishment
  • 55+ Mature Market
OTHER IMPORTANT FACTORS WITH DEMOGRAPHICS

Baby Boomers (1946-1963) – most important group right now, which means future opportunities

Gender - products are marketed exclusively to a gender, but there are changing gender roles, so advertising must reflect that

Family Life Cycle – a persons stage in the life cycle will determine wants, needs and purchasing patterns, thus marketing must be tailored to match the needs of various stages

Income Level – determines what people can afford and where to markets

Ethnicity and Culture - important to research the culture of the target market, to avoid offending them

(i.e. colours mean different things in various cultures)

Psychographics

-This is a system for measuring consumer’s beliefs, opinions, and interests

-It profiles consumers according to religious beliefs, tastes in music, lifestyle, attitudes toward health, personality traits and other psychological factors

-Can design the marketing mix and develops specific marketing strategies and plans to the targets, but it is difficult to measure (See list of samples)

Geographic

-Consumers living in different geographic regions have different wants and needs, and could create sales opportunities

-There are three main categories:

  • Urban – within boundaries of a city
  • Money spent on cultural events, parking, restaurants, public transportation
  • Suburban – lives just outside the city
  • Needs one car, spends money on gardens, BBQ’s, furnishings
  • Rural – Farmers, live on large pieces of land
  • Riding mowers, tractors, farm equipment, trucks, snow removal equipment

-Brand Development Index - indicates the potential for brand development

Calculated as:

Per Capita Sales/ Brand in Region

Per capita Sales/Brand in Country* 100

If greater than 100 – brand fully developed in area

If less than 100 – brand has developmental potential

Statistics

Can also categorize consumers by how often they use a product:

  • Heavy user - try to create brand loyalty
  • Advertising, coupons, loyalty cards, sampling, push strategy
  • Medium user – try to convert
  • Use many of the same techniques as heavy users
  • Light user
  • Non-user
  • First time users – want to attract this point of entry, by identifying when people will enter the market (i.e. new mothers)
  • Don’t plan to use – must create a new value equation for consumer to demonstrate benefits of using product, since you must change brand habits, and show solution to some problem to encourage use

BMI – THE CONSUMER