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Week 4 Handout

Overview
Now that you’ve learned how marketing environments and marketing information are being analyzed and used
to develop actionable customer insights and aid marketing decisions, it’s time to take a closer look at the most
important element of the marketplace – the customers, i.e. both the final consumers and business customers.
In this module, you’ll learn how essential it is to understand and affect not just buying behaviors, but also
buying influences and processes. As competition in different industries get tougher, customers are faced with
numerous alternatives, hence tougher buying decisions as well. For that reason, companies are challenged to
win, keep, and grow their customers by analyzing and outperforming their competitors, and creating greater
customer value and satisfaction than competitors do. This module will discuss not only customer buying
behaviors, but also competitive marketing strategies to influence buying behaviors and decisions, effectively
engage customers, and build stronger customer relationships.

Learning Objectives
Below are the learning objectives for Module 4:
1. Define the consumer market and the characteristics affecting consumer buyer behavior (01 Consumer
Markets and Consumer Buyer Behavior)
2. Identify the major types of buying decision behavior and the stages in the buyer decision process as well
as the buyer decision process for new products (02 Consumer Buying Decision Behavior and Process)
3. Define the business market and the major factors influencing business buyer behavior (03 Business
Markets and Business Buyer Behavior)
4. Identify the steps in the business buying decision process and the impact of new information
technologies on business-to-business marketing (04 Business Buying Decision Process and Business-to-
Business Marketing Advances)
5. Understand customers and competitors through competitor analysis (05 Competitor Analysis)
6. Define the fundamentals of competitive marketing strategies and the need for balancing customer and
competitor company orientations (06 Competitive Marketing Strategies)
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01 Consumer Markets and Consumer

Buyer Behavior
Introduction
Consumer markets consist of all the individuals and households that buy or acquire goods and services for
personal consumption – they are what we call the final consumers. Consumers vary in demographics no matter
where they are in the world, and they buy an incredible variety of goods and services. As such, several elements
affect their buying behaviors and preferences among various products, services and companies.

Model of Consumer Behavior

The buying decision of consumers is the focal point of marketing efforts; hence, it is essential for companies to
thoroughly study consumer buying decisions by looking into what, where, how, how much, when and why they
buy. Although actual consumer purchases reveal the what, where and how much, understanding the whys
behind consumer buying behavior is very difficult because the answers are often locked deep within the
consumer’s mind.

The stimulus-response model of consumer behavior, as illustrated above, explains that consumers respond to
various marketing efforts/stimuli based on the output of the consumer’s black box, where stimuli enter and
produce certain responses. Understanding how the stimuli are changed into responses inside the consumer’s
black box entails identifying (1) the buyer’s characteristics, which influence the buyer’s perception and reaction
to the stimuli, and (2) the buyer’s decision process, which also affects buying behavior.
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Characteristics Affecting Consumer Buyer Behavior

Consumer purchases are strongly affected by the four major factors below, which are often uncontrollable, yet
still need to be highly considered by marketers.

Additional Sources:
• To simply sum up the importance of understanding consumer behavior, you may watch this video:
https://www.youtube.com/watch?v=v1q1nnPCcKw
• You may watch this video, expounding on the four major factors influencing buyer behavior:
https://www.youtube.com/watch?v=2gIWSW8ikNA
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02 Consumer Buying Decision Behavior

and Process
Types of Buying Decision Behavior
Buying behaviors differ based on the degree of buyer involvement/participation and the degree of differences
among brands as illustrated in the diagram below.
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The Buyer Decision Process

The buying process starts long before the actual purchase and continues long after; thus, it is important for
marketers to focus on and be involved in the entire buying process rather than on the purchase decision only.
The following steps must all be considered when analyzing a buyer’s decision process.

Customer satisfaction after purchase is very important in building profitable relationships with customers.
Because of this, many marketers go beyond merely meeting customer expectations, as they now aim to delight
customers.
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The Buyer Decision Process for New Products

A new product is a good, service or idea that is
perceived by potential customers as new. To understand
better how consumers learn about products for the first
time and make decisions on whether to adopt them, we
take a look at the stages of the mental process individuals
undergo called the adoption process, as described in the
diagram.

We also look at the diffusion process for new products,

which explains how people can be classified into adopter
categories with differing values and adoption rates based
on the new product’s characteristics. The curve below
illustrates a slow start (Innovators), then increasing in
number of people adopting the new product (Early
Adopters), eventually reaching a cumulative saturation
level (Lagging Adopters) after successive larger groups
of consumers adopt the innovation (Early & Late
Mainstream).

The innovation’s rate of adoption greatly relies on the characteristics of the new product. Such factors
enumerated in the diagram below are important when developing new products and their marketing programs.
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Here are some examples of successful innovations that positively disrupted today’s online market. What
characteristics do these innovations have that made them succeed?
https://www.youtube.com/watch?v=avWVPaJFgFk

Additional Sources:
• To expound more on the Adoption Curve, you may watch this video:
https://www.youtube.com/watch?v=9QnfWhtujPA
• Watch this video to learn more about the attributes of innovation:
https://www.youtube.com/watch?v=Yxcon-jPtak
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03 Business Markets and Business Buyer

Behavior
Introduction
Business markets/customers are those organizations that buy goods and services for use in producing their own
products and services or for resale to other businesses. The business buying process involves business buyers
determining which products and services their organizations need to purchase and then find, evaluate, and
choose among alternative suppliers and brands. Just the same, the main objective of business-to-business (B2B)
marketing is still to engage business customers and build profitable relationships with them by creating superior
customer value.

Business Markets
Business markets operate “behind the scenes” to most consumers, as most of the things you buy involve many
sets of business purchases before you see them. Although business markets have some similarities with
consumer markets in terms of buying roles and purchase decisions, the diagram below shows the main
differences in business markets.
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Model of Business Buyer Behavior

The model of business buyer behavior shows that the buying organization responds to various marketing and
other stimuli based on the output of the buying center (i.e. the people/participants involved in the buying
decision-making process) and the buying decision process, which are both influenced by internal organizational,
interpersonal & individual factors as well as external environmental factors.

With this model, below questions are put forward regarding business buyer behavior:

What buying decisions do business buyers make? (Major Types of Buying Situations)
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Who participates in the business buying process? (Participants in the Buying Center)
The buying center (i.e. all the individuals and units that play a role in the purchase decision-making process) is
not a fixed and formally identified unit within the buying organization because it is a set of the five buying roles
below assumed by different people for different purchases.

What are the major influences on business buyers?

Business buyers are subject to various influences when making buying decisions. Their buying decisions do not
only get affected by economic factors, but by other internal organizational and even personal factors as well,
which are all summed up in the diagram below.
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04 Business Buying Decision Process and

Business-to-Business Marketing
Advances
The Business Buyer Decision Process
The last question that the model of business buyer behavior suggests is how business buyers make their buying
decisions. Just like final consumers, business buyers also undergo a buying decision process, yet with more
stages given a more professional purchasing effort. Buyers facing a new task buying situation usually go
through all 8 stages, but buyers making straight or modified rebuys may skip some steps.
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Impact of Technological Advances in Business-to-Business Marketing

The explosion of information technologies in today’s marketplace has changed the face of the business-to-
business (B2B) buying and marketing process through the following important advancements.

Additional Sources:
• To learn more about how e-procurement simplifies the business buying process, you may watch this
video: https://www.youtube.com/watch?v=Sz6cYxBtFfs
• You may watch this video, expounding on the importance of digital marketing:
https://www.youtube.com/watch?v=_PWqIMQux-g
• Watch this video to see the benefits of social media marketing for both consumer and business markets.
There are firms who now offer businesses social media marketing management:
https://www.youtube.com/watch?v=9m45nVsvvEY

05 Competitor Analysis
Introduction
In the face of determined competition and a difficult marketing environment, companies must focus their efforts
not just in managing products but also in managing customer relationships in order to win in today’s
marketplace. Although it is essential to understand customers and their buying behaviors, it is also crucial to
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analyze competitors and gain competitive advantage by creating greater value and satisfaction versus
competitors and developing winning competitive marketing strategies for stronger customer engagements and
relationships.

Competitor Analysis
The first step in developing competitive marketing strategies is identifying, assessing, and selecting key
competitors through competitor analysis. In order to plan effective marketing strategies, a company needs to
identify first its competitors, find out everything about them by understanding and comparing their strategies,
and then find areas of potential competitive advantage and disadvantage. Let’s take a closer look at each step of
the process in the diagram below.
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In assessing competitor strengths and weaknesses, companies conduct customer value analysis in order to
determine the major attributes/benefits target customers value and how customers rate the relative value of
various competitors’ offers. Companies use this analysis tool to assess its performance against competitors on
those valued attributes, which in turn reveals who the company’s strong and weak competitors are.

Designing a Competitive Intelligence System

After defining the types of information that companies need about their competitors, companies must design a
cost-effective competitive intelligence system in order to efficiently collect, interpret and distribute timely
information about competitors to managers and other decision-makers. With such intelligence, managers are
able to interpret a competitor’s sudden move, find out a competitor’s strengths and weaknesses, and even assess
how a competitor will respond to the company’s planned next move. The diagram below shows the process the
competitive intelligence system should go through.

Here’s an example of how a company lost to its latent competitors and how it still managed to recover its
company’s glory. What did Fujifilm do to bounce back its company that Kodak might have failed to do? As you
watch this video, take note of the importance of how companies must monitor its competitors as well as the
changing behaviors and needs of customers in order to stay relevant and profitable.
https://www.youtube.com/watch?v=7yuudKKoC5o

Additional Sources:
• Watch this video and learn how Amazon identify its competitors and dominated the market:
https://www.youtube.com/watch?v=UyohSu-Ft_U
• Watch how Cirque du Soleil used the blue ocean strategy in finding uncontested new market space that
made existing competitors irrelevant: https://www.youtube.com/watch?v=sYdaa02CS5E
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06 Competitive Marketing Strategies

Introduction
After identifying and evaluating its competitors, a company is now ready to design broad marketing strategies
for gaining competitive advantage. Then again, given the many industries and the different types of companies
and products present in today’s marketplace, there is no one strategy that fits best for all companies and
products. In fact, there are various kinds of marketing strategies and even approaches to planning and designing
such. Let’s look at some of the approaches and common strategies that companies can use.

Approaches to Marketing Strategy

Companies differ in how they approach the strategy-planning process, depending on their position in the
industry as well as their objectives, opportunities and resources. Many large firms develop formal competitive
marketing strategies, conducting expensive marketing research, implementing elaborate strategies, and spending
a lot on advertising. Conversely, other companies develop strategies in a less formal and systematic way,
drafting strategies on the fly, stretching limited resources, even living close to their customers, and creating
satisfying solutions to customer needs.
Approaches to marketing strategy and practice often pass through these stages:
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There will be a constant tension between the formulated side of marketing and the creative side. Then again, the
balance between both sides, conducting in-depth market research and analysis while injecting marketing
creativity and passion, will help companies build and maintain success in the marketplace. With this in mind,
let’s now examine the broad competitive marketing strategies companies can use.

Basic Competitive Strategies

Michael Porter suggested four basic competitive positioning strategies, wherein three of which are the winning
strategies discussed in the diagram below. Companies pursuing a clear strategy, focusing on only one of the
strategies below, will likely perform well. However, companies that do not pursue a clear strategy (i.e. middle-
of-the-roaders) and try to be good on all strategic counts end up being not very good at anything and do the
worst.

Another set of basic strategies are called value disciplines, proposed by Michael Treacy and Fred Wiersema,
offering a more customer-centered classification of competitive marketing strategies. These strategies shown in
the diagram below are geared toward delivering superior customer value in order to gain leadership positions.
Again, those companies that try to pursue more than one value discipline and try to be good at all rarely succeed
and usually end up being best at none. Excellent companies focus on and excel at a single value discipline,
while meeting industry standards on the other two.
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Classifying competitive strategies as value disciplines is appealing, as we define marketing strategies in terms
of the goal of providing superior customer value, which in turn enables companies to build strong and lasting
customer relationships.

Competitive Positions
Companies occupy different competitive positions in their respective target markets depending on their
objectives and resources. Competitive strategies can also be classified based on the roles companies play in the
target market in a specific industry, which depend on their share of the market (i.e. leader, challenger,
follower, or nicher). The market leader has the largest market share, followed by the market challenger, who is
fighting hard to increase its market share; and then comes the market follower, who wants to hold its share
without rocking the boat; and finally, the market nicher, who serves small segments usually overlooked or
ignored by other firms.
Large companies often use different strategies for different business units or products given the different
competitive situations of each. As such, each market position calls for a different competitive strategy, which is
expounded on the diagram below.
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Balancing Customer and Competitor Orientations

Regardless of a company’s competitive position, it must monitor its competitors closely and continually adapt
its strategies to the fast-changing competitive environment. Then again, a company can become too
competitor-centered to the point where it may already lose touch of what’s more important – developing and
sustaining profitable customer relationships, hence the importance of being market-centered to survive in
today’s marketplace.

The diagram above shows how companies may evolve into four orientations. Companies may start off to be
product oriented, with little thought given to either customers or competitors. As they progress and give more
interest into understanding their customers, they become customer oriented. Gaining more market share may
initiate the need to analyze competitors and become competitor oriented. But as mentioned earlier, to succeed
in today’s tough marketing environment, companies must evolve to become market oriented, balancing the
efforts exerted to both customers and competitors, in order to find innovative ways to develop stronger
customer relationships by providing greater customer value versus competitors.
Here’s an example close to home, showing how being market oriented pays off. While watching this video,
identify the competitive marketing strategies that Jollibee successfully implemented. Try to reflect on these
questions as well: Why is McDonald’s falling short in the Philippine market in competition against Jollibee?
How did Jollibee influence the Filipinos’ buying behavior, which McDonald’s might have failed to win over?
https://www.youtube.com/watch?v=kpHeXMbIy2s
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Week 4: Wrap-up and Looking Ahead

Wrap-up
Regardless of the type of market, be it a consumer or a business market, marketing efforts should be geared
towards influencing their respective buying behaviors in order to get positive responses that will fulfill the main
goal of marketing to engage customers and develop sustainable and profitable customer relationships.

Then again, in today’s marketplace, where competition gets tougher and customers are faced with numerous
alternatives, it is essential to analyze competitors and monitor their activities in order for companies to develop
effective competitive marketing strategies and gain competitive advantage. The right balance of customer and
competitor orientations, i.e. being market oriented, enables companies to win over their target customer groups
by providing greater customer value and satisfaction than competitors do. This kind of orientation will help
companies create more successful customer value-driven marketing strategies and integrated marketing
programs as they move along the marketing process.

Looking Ahead
Understanding not only the customers in terms of their buying behaviors and their decision process, but also the
competitors and their potential moves will help create more fitting marketing strategies and tactics, which will
be further elaborated in the succeeding modules and helpful in constructing your marketing plan. This module
will help you in the market and competitive reviews for your partner company for the first progress report. Keep
in mind the various influences of customer behaviors and their buying decision process to better analyze the
target market of your partner company as well as the different competitive marketing strategies that your partner
company may already be using or can potentially utilize to match or even overtake their existing competitors’
efforts.
We are now more and more equipped to delve deeper into designing customer-value driven marketing strategies
in the next module, which will take us closer and closer to the ultimate goal of creating greater value to
effectively engage customers and build profitable customer relationships.