MARKETING MANAGEMENT

WEEK 9 CONSUMER AND BUSINESS BUYING BEHAVIOR (2)

Lesson Proper
Title: Prospecting in Sales and Consumer & Business Buying Behavior
I. Consumer and Business Buying Behavior
A. Issues in Establishing Distribution Channels
Distribution channels refer to the paths products take from producers to consumers or
businesses. The selection of appropriate channels is crucial as it impacts product availability,
pricing, and customer satisfaction. Common issues in establishing distribution channels include:
1. Market Access: Reaching the desired market segment can be challenging due to
geographic, economic, or social barriers. For instance, in rural areas, reaching
consumers through traditional channels might not be feasible.
2. Channel Costs: Managing distribution costs is essential, including transportation,
warehousing, and channel member commissions. Businesses must balance between
offering competitive pricing and maintaining profitability.
3. Channel Conflict: Misalignment between channel members, such as wholesalers and
retailers, can create conflicts. For example, a manufacturer selling directly to consumers
while supplying products to retailers may face pushback from retailers, feeling they’re
competing with the manufacturer.
4. Customer Preferences: Consumer or business buyers may prefer particular channels,
such as online or in-person shopping. Businesses must understand these preferences to
avoid misallocating resources.
Example: A startup offering handmade furniture may initially sell directly to consumers via its
website. However, as it grows, it may need to consider wholesale partnerships with furniture
retailers to increase reach.
B. Deciding for the Distribution Channels
Choosing the right distribution channels requires an in-depth analysis of market needs, product
nature, and cost considerations. The following factors influence the decision:
1. Product Type: Perishable products may need direct and quick channels, such as direct
delivery, while durable goods might benefit from longer distribution chains involving
wholesalers and retailers.
2. Target Market: Consumer preferences for shopping channels (e.g., online versus brick-
and-mortar) significantly influence channel selection. Business buyers may prefer
specific procurement methods, like bulk purchasing or just-in-time deliveries.
3. Geographic Coverage: Businesses may need regional distributors to cover larger
geographic markets efficiently, ensuring product availability in different areas.
 4. Profit Margins: Businesses must consider how many intermediaries to involve in the
channel to ensure profit margins aren’t diluted by commissions or markups at each
stage.
Example: A tech company selling high-end smartphones might choose both direct sales (online
store) and partnerships with telecom providers (indirect channel) to ensure wide market
coverage.
C. Supply Chain Management
Supply chain management (SCM) is the process of overseeing the production flow of goods and
services, ensuring they move efficiently from suppliers to end customers. SCM covers
everything from raw material procurement to product delivery.
Key components of SCM include:
1. Planning: Determining product demand and creating production schedules that align
with customer needs.
2. Sourcing: Selecting suppliers that offer quality inputs at competitive prices.
3. Manufacturing: Managing the production process to meet demand efficiently while
maintaining product quality.
4. Logistics: Coordinating transportation, warehousing, and distribution of finished
products to consumers.
Example: A fashion retailer must ensure that fabric suppliers deliver materials on time to
manufacturing facilities, while finished clothing is transported to retail stores or directly to
customers through e-commerce.
D. Supply Management Process
The supply management process focuses on the acquisition of goods and services from
external sources. The process generally follows these stages:
1. Identification of Needs: The company identifies what products or services are required,
whether raw materials or finished goods.
2. Supplier Selection: The organization evaluates potential suppliers based on criteria like
cost, quality, reliability, and location.
3. Negotiation: Contracts are negotiated with selected suppliers to ensure favorable
terms.
4. Order Management: Placing and managing orders to ensure they are delivered
according to agreed terms.
5. Evaluation and Improvement: Continuously monitoring supplier performance and
seeking opportunities to improve the supply management process.
Example: A food manufacturer must identify suppliers that provide high-quality ingredients like
wheat and sugar. After evaluating potential suppliers, the company negotiates long-term
contracts to lock in favorable pricing and ensures delivery schedules are met.
E. Supply Management Models
Several models guide how businesses manage their supply chains. Key models include:
1. Just-in-Time (JIT): This model aims to reduce waste by receiving goods only when they
are needed in the production process. This method requires highly efficient logistics and
strong relationships with suppliers.
2. Vendor-Managed Inventory (VMI): The supplier takes responsibility for managing the
inventory of their products at the customer’s location, helping ensure availability while
minimizing excess stock.
3. Lean Supply Chain: Focuses on reducing waste and improving efficiency by
streamlining operations and using fewer resources.
4. Agile Supply Chain: Prioritizes flexibility and responsiveness, allowing businesses to
quickly adjust to changes in demand or supply disruptions.
Example: Toyota’s famous use of the JIT model ensures that car parts arrive at assembly plants
only when needed, minimizing inventory costs and reducing waste.

MARKETING MANAGEMENT
WEEK 10 - Segmentation, Positioning, and Target Marketing (1)

Lesson Proper
I. SEGMENTATION, POSITIONING, AND TARGET MARKETING
Segmentation, positioning, and target marketing are fundamental concepts in marketing
that enable companies to focus their resources on specific groups of customers, ensuring that
their products and messages align with the needs of those segments. This section explores
these topics, starting with market segmentation and progressing to target market selection.
A. Market Segmentation Defined
Market segmentation is the process of dividing a broad consumer or business market into
smaller, more homogenous groups based on shared characteristics, needs, or behaviors. The
purpose of segmentation is to identify and reach more targeted customer groups effectively. By
understanding the differences within the market, businesses can develop more personalized
marketing strategies, enhance product development, and deliver tailored communication,
leading to better customer satisfaction and stronger brand loyalty.
In practice, segmentation helps companies avoid a one-size-fits-all approach, allowing for
more efficient use of resources and better market positioning. Segments can be based on
demographic, psychographic, geographic, or behavioral factors, among others, depending on
the specific market.
B. Criteria for Successful Segmentation
Not all segmentation efforts are effective. For segmentation to work well, certain criteria must be
met:
1. Measurable – The size, purchasing power, and characteristics of the segments should
be quantifiable and identifiable.
2. Accessible – The segments must be reachable and serviceable through marketing
channels, sales efforts, and product distribution.
3. Substantial – Each segment should be large enough or profitable enough to warrant
individual marketing attention.
4. Differentiable – The segments must be distinct in terms of their needs or responses to
marketing activities, meaning they should behave differently toward marketing stimuli.
5. Actionable – The organization must be able to design effective marketing strategies to
serve the segments.
C. Consumer Market Segmentation
In consumer markets, segmentation is often based on a range of factors that reflect how
different groups of individuals behave, purchase, and use products. These are some common
segmentation bases for consumer markets:
1. Demographic Segmentation – This involves dividing the market based on variables
such as age, gender, income, education, occupation, family size, and marital status. For
example, luxury brands often target high-income individuals.
2. Psychographic Segmentation – This focuses on lifestyle, social class, and personality
traits. It assumes that people’s decisions are influenced by their values, attitudes, and
beliefs. For example, a brand like Patagonia might appeal to environmentally conscious
consumers.
3. Geographic Segmentation – Markets are segmented based on geographical
boundaries such as countries, regions, cities, or neighborhoods. For example, a brand
might launch different products in tropical regions compared to colder areas.
4. Behavioral Segmentation – This considers consumer behaviors like product usage
rates, brand loyalty, and purchase patterns. For instance, customers who are frequent
users of a service may be offered loyalty rewards.
D. Business Market Segmentation
In business markets, segmentation focuses on firms or organizations, and the criteria for
segmenting are quite different from consumer markets. Common segmentation bases in
business markets include:
1. Demographic Segmentation – Firms can be segmented based on industry, company
size, and business structure. For instance, a software provider may target large
enterprises differently than small startups.
2. Geographic Segmentation – Similar to consumer markets, businesses may target
organizations based on their geographical location, whether they are operating locally,
regionally, or internationally.
3. Behavioral Segmentation – This looks at customer purchase behavior, such as the
frequency of orders, supplier loyalty, or the urgency of delivery needs.
4. Firmographic Segmentation – In business markets, characteristics like company size,
market share, or financial health can be used to create segments. For example,
companies offering high-end equipment might target well-funded corporations rather
than small businesses.
E. Selecting Target Markets
Once a company has segmented its market, the next step is to evaluate each segment
and select one or more to target. This decision hinges on the attractiveness of each segment
and the company’s ability to serve them effectively. The process of selecting target markets
typically involves the following:
1. Evaluating Segment Attractiveness – Marketers assess segments based on factors
such as size, growth potential, profitability, and the intensity of competition.
2. Matching the Segment with Company Objectives – The selected segment should
align with the company's overall goals and resources. For instance, a high-end car
manufacturer will target wealthy consumers rather than middle-income buyers.
3. Choosing a Targeting Strategy – There are several strategies a company might use to
target their selected segments:
o Undifferentiated Marketing (Mass Marketing) – This strategy involves treating
the entire market as a single segment, offering a uniform product.
o Differentiated Marketing – The company targets several segments, offering
different products and marketing strategies for each.
o Concentrated Marketing – Here, a company focuses on one segment and
develops a deep understanding and specialization in that market.
o Micromarketing – This strategy tailors products and marketing to suit the
preferences of individuals or very small segments, such as local marketing or
individual marketing.