1. Chapter 6 Consumers and Competition
Part 2 Reaching Your Market
Chapter 6 Consumers and Competition
Ch6

2. Learning Goals
identify the three categories of influences on consumers
explain Maslow’s hierarchy of needs in order
analyze how marketers use needs to develop products and promotions
outline six buying motives and the basis for each one
explain the four levels of consumer buying decisions

3. Learning Goals
describe market structures, such as competition and monopoly
identify examples of three direct competitors for a variety of businesses
calculate market share and explain why it is important
demonstrate how to use a competition grid

4. Marketing Terms routine buying decision psychological influences
buying motive
social influences
social media
reference group
situational influences
impulse purchase
routine buying decision
limited decision making
extensive decision making
competitor
monopoly
(Continued)

5. Marketing Terms market share direct competitors market size
competitive edge
price competition
nonprice competition
market share
market size
competition grid

6. Understanding Consumer Behaviour
Influences on consumer buying behaviour
psychological
social
situational

7. Psychological Influences
Psychological influences are the influences that come from within a person.
needs such as hunger and thirst
wants such as a hamburger or coffee
(Continued)

8. Psychological Influences
A need is a lack within a person
needs must be filled
e.g., lack of food, water, or shelter
If the need is not satisfied, it turns into to a drive. A drive is an internal force that leads to action. The purpose of the action is to fulfill the need.

9. Hierarchy of Needs Maslow’s hierarchy of needs
states that basic physical needs must be satisfied before others

11. Needs into Wants The human mind usually turns needs into wants.
Marketers try to turn those wants into buying motives.
Buying motive
the reason that a customer seeks a product

12. Types of Buying Motives

13. Wants into Buying Motives
Salespeople try to understand a customer's buying motives so that they can do a better job of encouraging the customer to buy the product.
(Continued)

14. Wants into Buying Motives
Salespeople often organize buying motives into pairs.
physical vs. psychological
rational vs. emotional
product vs. patronage

15. Social Influences Social influences
influences from the people around you, rather than from within yourself
Three categories
culture
family
friends and coworkers

16. Culture Culture affects every aspect of a person’s life. Examples
food, buying behaviour, and values

17. Family Family can influence buying behaviour.
Children often buy the same brands as their parents.

18. Friends and Coworkers If you buy a product that your friends admire
you might feel more self-confident
your self-esteem might increase
To have the same things as others satisfies the human need for belonging and acceptance.
(Continued)

19. Friends and Coworkers Word-of-mouth publicity
informal conversations people have about their experience with a business and its products
(Continued)

20. Friends and Coworkers Reference group
group of people who influence a consumer’s buying decisions
Examples
peers, celebrities, experts, and people television
(Continued)

21. Friends and Coworkers Peer pressure
social influence from the people your age with whom you interact daily
can influence buying decisions because most people have a strong need to fit in and be accepted by their peer group

22. Situational Influences
influences that come from the environment
weather
store location
time of day
advertising
Buyer’s mood, physical condition, and financial condition can also be considered situational influences.

23. The Consumer Decision Process
How does a consumer make the decision to buy?
Marketers think that many consumers use a six-step decision-making process.
(Continued)

24. The Consumer Decision Process
Awareness of need or problem
Information search
Evaluation of options
Decision to buy
Purchase
Post-purchase evaluation
(Continued)

25. The Consumer Decision Process
Four levels of consumer purchase decisions
impulse
routine
limited
extensive

26. Impulse Decision Impulse purchase made with no planning or research
To encourage impulse purchases, marketers display products near checkout counters.

27. Routine Decision Routine buying decision
made quickly without much thought
Consumers make routine buying decisions when they have
previous experience with the product
brand loyalty

28. Limited Decision Limited decision making
involves some research and planning
usually for a more expensive or complex product

29. Extensive Decision Extensive decision making
involves a great deal of research and planning
used for purchases that will greatly impact your daily life, safety, and finances
(Continued)

30. Extensive Decision Example: steps in buying a car
researching cars on the Internet
test-driving at several dealerships
analyzing your finances
arranging for financing
getting the license plate(s) and insurance
buying the car

31. Monopoly vs. Competition
contest between two or more businesses for customers
Competitor
one of the businesses that compete for customers
competitors are usually in the same type of business
(Continued)

32. Monopoly vs. Competition
exclusive control of a product by one company
Where there is a monopoly, there is no competition.
Example: in many areas, only one company provides cable service

33. Competition in a Market Economy
Competition is key in a market economy because
consumers and the economy benefit
businesses that do not meet customers’ needs fail
businesses that meet customers’ needs thrive
A command economy has no competition.

34. Direct Competitors Direct competitors
businesses that sell similar products
Marketers are most concerned about their direct competitors.

35. Ways to Compete
Marketers are always looking for their competitive edge.
The feature of their product that will make it
stand out from all the others
meet more customers’ needs
sell better than competing products
A product’s competitive edge is usually the focus of advertising.
(Continued)

36. Ways to Compete The basis for competition is often one of the Four Ps.
product, price, place, or promotion
However, competition is usually categorized into two groups.
price competition
nonprice competition

37. Price vs. Nonprice Competition
competing on the basis of price only
trying to charge the lowest price and still make a profit
Nonprice competition
competing on a basis other than price
competing on the basis of product, place, or promotion

38. Nonprice Competition Product-based competition may focus on quality
features
benefits
size
(Continued)

39. Nonprice Competition Place-based competition may focus on
convenient location and hours
delivery services
ability to order by phone
TV and Internet shopping
(Continued)

40. Nonprice Competition Promotion-based competition may focus on
advertising
visual merchandising
store environment
customer services

41. Market Share
Q: How can a business tell how well it is doing compared with its competitors?
A: By looking at its market share.
Market share
one competitor’s percentage of the total sales in a specific market
based on market size
(Continued)
Ch6

42. Market Share Market size total sales per year for a specific product
Sales can be measured in several ways.
value of products sold
expressed in dollars
total number of items sold
can be expressed in single units
or grouped units (such as a case)
(Continued)

43. Market Share x = To calculate market share
take the company sales for a year, then
divide it by market sales for a year, and
multiply the result by 100, to get a percentage x
100 =
Percent Market Share
Company Sales
Total Sales
in Market

44. Calculating Market Share
Hypothetical Data for One Year Total Sales in Market: $100 million Total Company Sales: $75 million
Company Sales
Total Sales in Market x
100
Percent Market Share =
$75 million
$100 million x
100
75% Market Share =

45. Why Is Market Share Important?
Market share is an easy way to
evaluate the success of a business
If market share increases, the business is doing well.
compare businesses
Market share leaders
are companies with the largest market shares
may have more than 70% of the market in a specific industry

46. Comparing Market Share
Market Share of Snack Companies
Rank
Company
Annual Sales
Market Share 1
Big
$75 million
75% 2
Medium
$20 million
20% 3
Small
$5 million 5%
Total
(market size)
$100 million
100%
Comparison of market shares for hypothetical snack companies: Big Snack Company, Medium Snack Company, and Small Snack Company
(Continued)

47. Comparing Market Share
Small 5%
Pie charts are useful for showing market share.

48. Why Is Market Share Important?
Market share leaders compete to gain more market share. Smaller companies in the industry compete among each other, but not with the market share leaders.
(Continued)

49. Why Is Market Share Important?
Smaller businesses often define success in terms other than market share.
Smaller businesses often do not have a chance of being market share leaders.
Smaller businesses focus on meeting their personal, business, financial, and marketing goals.

50. Competition Research
Q: How does a business figure out the best way to compete?
A: Study the competitors’ marketing mixes.
What products do they make or sell?
What are the product features and benefits?
What are the prices?
Where are they selling their products?
How are they promoting their products?
(Continued)

51. Competition Research
Organize competitors’ information into a competition grid (a chart used for organizing and comparing the information). Study the competition grid, then decide the best way to compete.

52. Review
List the three categories of influences on consumers and give an example of each.
Describe Maslow’s hierarchy of needs.
Why are salespeople interested in buying motives?
List the four levels of purchase decisions and describe when you would use each.
(Continued)

53. Review How does a monopoly interfere with a market economy?
How does competition benefit consumers?
What is the difference between price and nonprice competition?
How is market share calculated?
Why is knowing a business’s market share useful?

54. Glossary buying motive. Reason that a consumer seeks a product.
Back
buying motive. Reason that a consumer seeks a product.
competition grid. Chart used for recording information about competitors.
competitive edge. The special feature or aspect of a product that makes it different from and better than the others.

55. Glossary competitor. One of the businesses that compete for customers.
Back
competitor. One of the businesses that compete for customers.
direct competitors. Businesses that sell similar products.
extensive decision making. Consumer buying decision that involves a great deal of research and planning.

56. Glossary
Back
impulse purchase. Consumer buying decision made with no planning or research.
limited decision making. Consumer buying decision that is made with some research and planning.
market share. One competitor’s percentage of the total sales in a specific market.

57. Glossary market size. Total sales per year for a specific product.
Back
market size. Total sales per year for a specific product.
monopoly. Exclusive control of a product by one company.
nonprice competition. Competition that is based on something other than price, such as product quality or customer service.

58. Glossary price competition. Competing on the basis of price.
Back
price competition. Competing on the basis of price.
psychological influences. Influences that come from within a person.
reference group. Group of people who influence a consumer’s buying decisions.

59. Glossary
Back
routine buying decision. Consumer buying decision that is made quickly and without much thought.
situational influences. Influences that come from the environment.
social influences. Influences that come from the society in which you live.

60. Glossary
Back
social media. Interactive forms of media that let users communicate with each other.