Tag: Marketing Environment

The buying decision process, also known as the consumer decision-making process, is a series of steps that individuals go through when making purchasing choices. Understanding this process is crucial for retailers as it helps them tailor their marketing strategies, enhance customer experiences, and influence consumers at each stage of the journey.

The buying decision process typically involves five stages: Problem recognition, Information search, Evaluation of alternatives, Purchase decision, and Post-purchase behavior.

Understanding the intricacies of the buying decision process is fundamental for retailers aiming to succeed in a competitive marketplace. By aligning marketing strategies, product offerings, and customer experiences with the various stages of consumer decision-making, retailers can enhance their appeal, build customer loyalty, and drive sustainable business growth. The integration of technology, the emphasis on personalization, and a commitment to ethical practices further contribute to a positive and impactful retailing experience.

1. Problem Recognition

This is the initial stage where consumers recognize a need or problem that can be satisfied by making a purchase. It could be triggered by internal stimuli (e.g., running out of a product) or external stimuli (e.g., advertising).

Implications for Retailing:

• Retailers must understand the factors influencing problem recognition and identify triggers that prompt consumers to consider a purchase.
• Effective advertising, promotions, and product displays can stimulate the recognition of needs.

2. Information Search

Once the need is recognized, consumers seek information to find possible solutions. This can involve internal sources (memory, past experiences) and external sources (friends, family, online reviews).

Implications for Retailing:

• Retailers should provide accessible and relevant information through multiple channels, including websites, social media, and in-store displays.
• Reviews and recommendations play a crucial role, so encouraging and showcasing positive customer feedback is beneficial.

3. Evaluation of Alternatives

Consumers evaluate various product options based on attributes such as quality, price, brand reputation, and features. They create a consideration set of alternatives.

Implications for Retailing:

• Retailers need to ensure their products or services stand out in terms of quality, value, and uniqueness.
• Creating product bundles, offering discounts, or providing personalized recommendations can influence the evaluation process.

4. Purchase Decision

At this stage, the consumer makes the final decision and selects a particular product or service. Factors like pricing, availability, and promotions influence this decision.

Implications for Retailing:

• Retailers should optimize pricing strategies, provide transparent information about costs, and offer convenient purchasing options (online, in-store, mobile).
• Promotions, discounts, and loyalty programs can be effective in nudging consumers towards a purchase.

 

5. Post-Purchase Behavior

After the purchase, consumers assess their satisfaction. If expectations are met or exceeded, it leads to positive post-purchase behavior; otherwise, dissatisfaction may occur.

Implications for Retailing:

• Ensuring a positive post-purchase experience is critical for customer loyalty and repeat business.
• Effective customer service, easy returns, and follow-up communication can enhance customer satisfaction.

Additional Considerations:

Digital and Omnichannel Influences:

• The digital landscape has transformed the buying decision process. Consumers often use online channels for information search, reviews, and comparisons.
• Retailers must have a strong online presence, ensuring that their websites are user-friendly and mobile-optimized.

Social Media Influence:

• Social media platforms play a significant role in shaping consumer perceptions and decisions.
• Retailers should engage with customers on social media, use influencers, and leverage user-generated content to enhance brand image.

Personalization and Customer Relationship Management (CRM):

• Personalized experiences cater to individual preferences, enhancing the overall customer journey.
• Retailers can use CRM systems to track customer interactions, personalize marketing messages, and offer targeted promotions.

Supply Chain and Inventory Management:

• An efficient supply chain ensures product availability, reducing the likelihood of consumers choosing alternatives due to stockouts.
• Retailers need robust inventory management systems to optimize stock levels and fulfill customer demands promptly.

Post-Purchase Communication:

• Continued communication post-purchase, through newsletters or loyalty programs, can reinforce the customer’s decision.
• Retailers should encourage customer feedback and address any concerns promptly to build trust.

Customer Reviews and Ratings:

• Online reviews heavily influence the evaluation stage of the buying process.
• Retailers should actively manage and respond to customer reviews, showcasing a commitment to customer satisfaction.

Sustainability and Ethical Considerations:

• Growing consumer awareness about sustainability and ethical practices impacts purchasing decisions.
• Retailers adopting sustainable practices and communicating these efforts can appeal to environmentally conscious consumers.

Challenges and Opportunities for Retailers:

• Increased Consumer Empowerment

Consumers now have access to vast information and options, making it challenging for retailers to influence decisions. However, it also provides opportunities to engage and educate consumers through effective marketing and communication.

• Rise of E-commerce

The growing prominence of online shopping has altered traditional retail dynamics. Retailers must invest in seamless online experiences and omnichannel strategies to remain competitive.

• Data Privacy Concerns

While personalized experiences can enhance the buying process, concerns about data privacy and security are on the rise. Retailers need to be transparent about data usage and implement robust security measures.

• Globalization and Cultural Sensitivity

Retailers expanding internationally must be mindful of cultural differences and adapt their strategies to resonate with diverse consumer preferences.

• Dynamic Consumer Trends

Rapid changes in consumer preferences and trends require retailers to stay agile and responsive. Regular market research and monitoring of industry trends are essential.

New Product Development (NPD) is the process of bringing a new product to market, involving a series of stages from idea generation to commercialization. It includes researching customer needs, creating innovative product concepts, designing and testing prototypes, and launching the final product. NPD is crucial for companies to stay competitive, meet changing customer demands, and drive growth. The process ensures that the product is technically feasible, financially viable, and well-suited to the market. By following structured stages like idea screening, concept development, and market testing, businesses can minimize risks and enhance the chances of a successful launch.

Stages of New Product Development:

• Idea Generation

This stage involves systematically searching for new product ideas. A company must generate a wide range of ideas to find those worth pursuing. Major sources include internal sources, customers, competitors, distributors, and suppliers. Approximately 55% of new product ideas come from internal sources, where employees are encouraged to contribute ideas through incentive programs. Around 28% come from customers, often through observing or engaging with them. For example, Pillsbury’s Bake-Off has provided several new product ideas that became part of their cake mix line.

• Idea Screening

The purpose of idea screening is to filter out ideas generated in the first stage, retaining only those with genuine potential. Companies may use product review committees or formal market research for this process. A checklist can help evaluate each idea based on key success factors. This ensures management can assess how well each idea aligns with the company’s capabilities and resources before moving forward with the most promising options.

• Concept Development and Testing

An attractive idea must be developed into a product concept. While a product idea is an initial notion, a product concept presents it in detailed terms that are meaningful to consumers. Once concepts are developed, they are tested with consumers through symbolic or physical presentations. Companies gather consumer feedback, asking them to respond to the concept and project potential market sales based on this input.

• Marketing Strategy Development

The next step involves developing a marketing strategy. This strategy is typically divided into three parts: first, the target market and product positioning along with sales, market share, and profit goals; second, the planned product price, distribution, and marketing budget; and third, long-term goals and marketing mix strategies to ensure the product’s success over time.

• Business Analysis

After developing a marketing strategy, business analysis reviews projected sales, costs, and profits to evaluate the business potential of the product. If these financial projections meet the company’s objectives, the product proceeds to development. This analysis helps the company gauge the overall viability of the product.

• Product Development

In this stage, R&D or engineering teams develop the concept into a physical product. This involves significant investment and tests whether the product idea can become a practical, marketable solution. Prototypes are created and tested for safety, functionality, and consumer appeal. Laboratory and field testing ensures the product performs effectively before moving forward.

• Test Marketing

Once the product passes development tests, it enters test marketing, where the product and marketing strategy are tested in real market settings. Test marketing helps refine the marketing mix before a full launch. While test marketing can be expensive, it provides valuable insights. However, some companies bypass this stage to avoid competitor intervention or reduce costs.

• Commercialization

The final stage is commercialization, where the product is officially launched in the market. High costs are associated with manufacturing, advertising, and promotion. The company decides on the timing and location of the launch based on market readiness and distribution capabilities. Many companies now use a simultaneous development approach, where different departments collaborate to speed up the process, enhancing flexibility and effectiveness in product development.

Market Segmentation is the process of dividing a broad consumer base into smaller, more manageable groups based on shared characteristics like demographics, behavior, geography, or psychographics. This helps businesses tailor products, messaging, and strategies to meet specific customer needs, improving targeting, efficiency, and customer satisfaction. Effective segmentation enhances marketing ROI and competitive advantage.

Market Segmentation

• Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference.
• A market segment is a small unit within a large market comprising of like minded individuals.
• One market segment is totally distinct from the other segment.
• A market segment comprises of individuals who think on the same lines and have similar interests.
• The individuals from the same segment respond in a similar way to the fluctuations in the market.

Basis of Market Segmentation

1. Gender

• The marketers divide the market into smaller segments based on gender. Both men and women have different interests and preferences, and thus the need for segmentation.
• Organizations need to have different marketing strategies for men which would obviously not work in case of females.
• A woman would not purchase a product meant for males and vice a versa.
• The segmentation of the market as per the gender is important in many industries like cosmetics, footwear, jewellery and apparel industries.

2. Age Group

Division on the basis of age group of the target audience is also one of the ways of market segmentation.

The products and marketing strategies for teenagers would obviously be different than kids.

• Age group (0 – 10 years) – Toys, Nappies, Baby Food, Prams
• Age Group (10 – 20 years) – Toys, Apparels, Books, School Bags
• Age group (20 years and above) – Cosmetics, Anti-Ageing Products, Magazines, apparels and so on

3. Income

Marketers divide the consumers into small segments as per their income. Individuals are classified into segments according to their monthly earnings.

The three categories are:

• High income Group
• Mid Income Group
• Low Income Group

Stores catering to the higher income group would have different range of products and strategies as compared to stores which target the lower income group.

Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to Vishal Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to the lower income segment.

4. Marital Status

Market segmentation can also be as per the marital status of the individuals. Travel agencies would not have similar holiday packages for bachelors and married couples.

5. Occupation

Office goers would have different needs as compared to school / college students.

A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters specifically to the professionals.

Types of Market Segmentation

• Psychographic segmentation

The basis of such segmentation is the lifestyle of the individuals. The individual’s attitude, interest, value help the marketers to classify them into small groups.

• Behaviouralistic Segmentation

The loyalties of the customers towards a particular brand help the marketers to classify them into smaller groups, each group comprising of individuals loyal towards a particular brand.

• Geographic Segmentation

Geographic segmentation refers to the classification of market into various geographical areas. A marketer can’t have similar strategies for individuals living at different places.

Nestle promotes Nescafe all through the year in cold states of the country as compared to places which have well defined summer and winter season.

McDonald’s in India does not sell beef products as it is strictly against the religious beliefs of the countrymen, whereas McDonald’s in US freely sells and promotes beef products.

Not all individuals have similar needs. A male and a female would have varied interests and liking towards different products. A kid would not require something which an adult needs. A school kid would have a different requirement than an office goer. Market Segmentation helps the marketers to bring together individuals with similar choices and interests on a common platform.

• Market Segmentation helps the marketers to devise appropriate marketing strategies and promotional schemes according to the tastes of the individuals of a particular market segment. A male model would look out of place in an advertisement promoting female products. The marketers must be able to relate their products to the target segments.
• Market segmentation helps the marketers to understand the needs of the target audience and adopt specific marketing plans accordingly. Organizations can adopt a more focussed approach as a result of market segmentation.
• Market segmentation also gives the customers a clear view of what to buy and what not to buy. A Rado or Omega watch would have no takers amongst the lower income group as they cater to the premium segment. College students seldom go to a Zodiac or Van Heusen store as the merchandise offered by these stores are meant mostly for the professionals. Individuals from the lower income group never use a Blackberry. In simpler words, the segmentation process goes a long way in influencing the buying decision of the consumers.

An individual with low income would obviously prefer a Nano or Alto instead of Mercedes or BMW.

• Market segmentation helps the organizations to target the right product to the right customers at the right time. Geographical segmentation classifies consumers according to their locations. A grocery store in colder states of the country would stock coffee all through the year as compared to places which have defined winter and summer seasons.
• Segmentation helps the organizations to know and understand their customers better. Organizations can now reach a wider audience and promote their products more effectively. It helps the organizations to concentrate their hard work on the target audience and get suitable results.

Steps in Market Segmentation

1. Identify the target market

The first and foremost step is to identify the target market. The marketers must be very clear about who all should be included in a common segment. Make sure the individuals have something in common. A male and a female can’t be included in one segment as they have different needs and expectations.

Burberry stocks separate merchandise for both men and women. The management is very clear on the target market and has separate strategies for product promotion amongst both the segments.

A Garnier men’s deodorant would obviously not sell if the company uses a female model to create awareness.

Segmentation helps the organizations decide on the marketing strategies and promotional schemes.

Maruti Suzuki has adopted a focused approach and wisely created segments within a large market to promote their cars.

• Lower Income Group – Maruti 800, Alto.
• Middle Income Group – Wagon R, Swift, Swift Dzire, Ritz.
• High Income Group – Maruti Suzuki Kizashi, Suzuki Grand Vitara.

Suzuki Grand Vitara would obviously have no takers amongst the lower income group.

The target market for Rado, Omega or Tag Heuer is the premium segment as compared to Maxima or a Sonata watch.

2. Identify expectations of Target Audience

Once the target market is decided, it is essential to find out the needs of the target audience. The product must meet the expectations of the individuals. The marketer must interact with the target audience to know more about their interests and demands.

Kellogg’s K special was launched specifically for the individuals who wanted to cut down on their calorie intake.

Marketing professionals or individuals exposed to sun rays for a long duration need something which would protect their skin from the harmful effects of sun rays. Keeping this in mind, many organizations came with the concept of sunscreen lotions and creams with a sun protection factor especially for men.

3. Create Subgroups

The organizations should ensure their target market is well defined. Create subgroups within groups for effective results.

Cosmetics for females now come in various categories.

• Creams and Lotions for girls between 20-25 years would focus more on fairness.
• Creams and lotions for girls between 25 to 35 years promise to reduce the signs of ageing.

4. Review the needs of the target audience

It is essential for the marketer to review the needs and preferences of individuals belonging to each segment and sub-segment. The consumers of a particular segment must respond to similar fluctuations in the market and similar marketing strategies.

5. Name your market Segment

Give an appropriate name to each segment. It makes implementation of strategies easier.

A kids section can have various segments namely new born, infants, toddlers and so on.

6. Marketing Strategies

Devise relevant strategies to promote brands amongst each segment. Remember you can’t afford to have same strategies for all the segments. Make sure there is a connect between the product and the target audience. Advertisements promoting female toiletries can’t afford to have a male model, else the purpose gets nullified.

A model promoting a sunscreen lotion has to be shown roaming or working in sun for the desired impact.

7. Review the behavior

Review the behavior of the target audience frequently. It is not necessary individuals would have the same requirement (demand) all through the year. Demands vary, perceptions change and interests differ. A detailed study of the target audience is essential.

8. Size of the Target Market

It is essential to know the target market size. Collect necessary data for the same. It helps in sales planning and forecasting.