June 3, 2012

MK0011 [Consumer Behaviour] Set1 Q1

1. Why is it important to consider the behaviour of consumers while deciding on the marketing mix of the company?  Elaborate with suitable examples.


Ans:
Marketing concept evolved in late 1950s and the field of consumer behaviour is deeply rooted in this concept.

After World War II, there was great demand for almost all sorts of products and the marketing philosophy was to produce cheap goods and make them available at as many places as possible. This approach suited the marketers because demand exceeded supply and consumers were more interested in obtaining the product rather than in any specific features.

This approach is called a production orientation and is based on the assumption that consumers will buy what is available and would not wait for what they really want. The marketer does not really care to know what consumer preferences are.

The next stage has been product orientation, which assumes that consumers will buy the product that offers them the highest quality in terms of performance and features. The company makes all efforts to improve product quality. The focus is on the product rather than on what the consumers need or want. Professor Levitt has called this excessive focus on product quality as “marketing myopia.” This we see happen in highly competitive markets where some companies keep on adding unnecessary features, passing their cost on to the consumers, in hopes of attracting them.

Selling orientation evolved as a natural consequence of production orientation and product orientation. The marketer is primarily focused on selling the product that it unilaterally decided to produce. The assumption of this approach is that consumers would not buy enough of this product unless they are actively and aggressively persuaded to do so. This approach is known as “hard-sell” and consumers are induced to buy what they do not want or need. The problem with this approach is that it does not take consumer satisfaction into account. This often leads to dissatisfaction and unhappiness in consumers and is likely to be communicated by word-of-mouth to other potential consumers, discouraging them to buy the product.

Soon marketers realised that they could easily sell more goods if they produced only those goods that they had first confirmed consumers would buy. Thus, consumer needs and wants became the marketer’s primary focus. This consumer-oriented marketing approach came to be called as the marketing concept. The important assumption underlying marketing concept is that a company must determine the needs and wants of its target markets and deliver the desired satisfactions more efficiently and effectively than the competition. This is the key to successful marketing.

Consumer behaviour principles are applied in many areas of marketing as discussed below:

1. Analysing market opportunity: Consumer behaviour study helps in identifying the unfulfilled needs and wants of consumers. This requires examining the trends and conditions operating in the marketplace, consumers’ lifestyles, income levels and emerging influences. This may reveal unsatisfied needs and wants. For example, mosquito repellents have been marketed in response to a genuine and unfulfilled consumer need.

2. Selecting target market: A review of market opportunities often helps in identifying distinct consumer segments with very distinct and unique wants and needs. Identifying these groups, learning how they behave and how they make purchase decisions enables the marketer to design and market products or services particularly suited to their wants and needs. For example, consumer studies revealed that many existing and potential shampoo users did not want to buy shampoo packs priced at Rs. 60 or more and would rather prefer a low priced sachet containing enough quantity for one or two washes. This finding led companies to introduce the shampoo sachet which became a good seller.

3. Marketing-mix decisions: Once unsatisfied needs and wants are identified, the marketer has to determine the right mix of product, price, distribution and promotion. Here too, consumer behaviour study is very helpful in finding answers to many perplexing questions.

a) Product: The marketer designs the product or service that would satisfy unfulfilled needs or wants. Further decisions regarding the product concern to size, shape and features. The marketer has also to decide about packaging, important aspects of service, warranties and accessories etc.

Example: Nestle first introduced Maggi noodles in masala and capsicum flavours. Subsequently, keeping in view the consumer preferences in some regions, the company introduced garlic, sambar and other flavours.

b) Price: The second important component of marketing mix is price. Marketers must decide what price to charge for the product or service. These decisions will influence the flow of revenue to the company. Should the marketer charge the same, higher, or lower price in comparison to competition? Is the consumer price sensitive and would a lower price stimulate sales?

To answer such questions, the marketer must understand the way the company’s product is perceived by consumers, the importance of price as a purchase decision variable and how different price levels would affect sales. It is only through consumer behaviour study in actual buying situations that the marketer can hope to find answers to these important issues.

c) Distribution: The next decision relates to the distribution channel, that is, where and how to offer products and services for sale. Should the products be sold through all the retail outlets or only through selected ones? Should the marketer use only the existing outlets, which also sell competing brands, or should new exclusive outlets selling only the marketer’s brands be created? Is the location of retail outlets important from consumers’ point of view? Should the company think of direct marketing?

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