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How Business Categorizes Consumers

In society, people belong to groups of all sorts and affiliate themselves with others in numerous ways; American, Male, Black, Adult, Progressive, Democrat, Hiphoppa, Teacher, Writer, Whovian etc. We even let the stereotypical characterizations of these groups become part of our own identity. We identify with many groups or just some specific groups which we feel define us best. Throughout society, these definitions allow or prevent us from walking through unfamiliar doors more easily. People think the best definitions of how they are perceived by themselves or others, are based on their outward characteristics like race or societal status. Some people even think that the ‘powers that be’ link them to these groups in order to keep them in certain categories. These groups, and the perceived conflicts between them, make it possible for certain doors to open or close only where appropriate. This simplification helps enable us to get through our day without having to process too much complex information so often. We use stereotypes to categorize situations, people, places and things almost like a reflex.

It’s one thing for people to define themselves or voluntarily become part of a stereotyped group, but often-times we are forced into groups by birth. Chief among all these group affiliations seems to be race. It is a category which we are born into and depending on where you live in the World, may be very significant in the society in which you reside. It even seems that the so-called ‘powers that be’ use this category above most others to maintain power. However, after studying business marketing, it seems that the most important categories are ones that most people have never heard of. These classifications are the main ones of concern to those who make money or want to maintain political power. All of the other groups are secondary to these affiliations. The secondary groups like race, nationality, ethnicity etc. are maintained by the power brokers of business, but only in reference to the primary categories which are defined beyond all cultural affiliations. This classification is known as the 4C’s or Cross Cultural Consumer Characterization, developed by one of the largest advertising firms in the World, Young and Rubicam founded in 1923. The firm, now known as Y&R, made some of the first color television commercials in the 1960’s and today boasts revenue of $907 million per year.

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The 4C’s model is based on seven stereotyped classifications of  psychological behavior which Y&R felt people fall into regardless of race, gender, nationality or group affiliation. This model is what business is built on today. For as long as there has been a class known as mainstream, this model has been in effect. For generations, business has sought to place people in the category of mainstream, because it is their biggest and most lucrative market. The other categories exist as markets while also helping to define the mainstream market and keep it distinct from the others. In business, the core motivations and buying habits of the members of each classification are manipulated by secondary categories to push them towards a purchase of whatever product or service the business is selling. For instance, the Mainstreamer’s core motivation for security can be manipulated by their fear of other races, ethnicities, cultures etc. to make them purchase a burglar alarm system or a gun.

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In recent decades, the Succeeder has been indulged by big business to emphasize the high-priced lifestyle of first, Young Urban Professionals (Yuppies) in the 1980’s, then Black Urban Professionals (Buppies) in the 1990’s and the Wall Street/Real Estate Investors of the 2000’s. These Succeeders also include Sports and Entertainment Elite who promote the products of a high-priced lifestyle for the Aspirer class to emulate. For some, the path of life flows through stages from the Explorer to the Resigned. At each stage, there are different product options which fit the stage of life, psychological motivation and income level.

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At any point however, due to economic situations, a person can become a Struggler, whose core motivation is escape which becomes a viable source of income for many businesses that depend on the revenue from this group (i.e. junk food, alcohol, and lottery). The contrast which is set-up between these groups defines each category and is sometimes helped by cultural characteristics like physical appearance even beyond race, such as manner of dress/fashion and hairstyles. Dressing like a Hipster can define one as being from the Aspirer class. Certain premium business attire can define one as a Succeeder. Other fashion choices make one fit into an Explorer, Mainstreamer or Resigned category. Probably the smallest class of individuals, includes the least materialistic and hardest to please niches called the Reformers, who are not so easily defined by fashion and appearance. Although they can support or develop new market areas in technology and information, their core motivation is enlightenment instead of control (Succeeder), status (Aspirer) or discovery (Explorer).

Reformers are the ones who brought us innovations such as the internet and social media, and before that, new forms of art and culture like Jazz and Hip Hop, which later became a business that the other six categories still utilize. Yet Reformers remain hidden in society. They may appear to be a Mainstreamer, Struggler, Succeeder etc., but instead be a Reformer who disavows the normal path of consumer development.

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Culturally, the Reformer is who everyone follows. They lead to new paths and opportunities for both business and consumers. Most businesses don’t spring out of true necessity like food, shelter and clothing, but instead, luxury, preference and trendiness. Businesses follow trends. Reformers on the other hand, create trends by definition. This doesn’t mean that Succeeders, who want to increase their bottom line, can’t create new trends, because they do. Those trends, to Reformers, are considered manufactured or commercial trends forced on the masses through calculated marketing techniques. So many times, businesses capitalize on the trends and innovations left in the path of Reformers to set up lucrative business models that sell to Explorers, Aspirers, Mainstreamers, Suceeders, Strugglers and the Resigned.

Discussing the Purchase Decision

The purchase decision making process comes in four stages; needs recognition, internal/external search, purchase, post-purchase satisfaction. Different products have varying degrees of emphasis in each stage, which require different levels of financial commitment. Some products are purchased out of habit and have very little consideration of their attributes when purchasing them, like toothpaste. Branding works on products like this by promotion that keeps the name of brand as part of the consumer “evoked set.” These are the brand names that will come to mind when a consumer decides to fill the need for the type of product. Much of peoples purchases are repeated over and over so advertisers try to maintain brand loyalty to the 60% of their purchases which are habitual.

(definition) evoked set – is a list of brands that come to mind when a need arises. A person may not have ever previously required the use of a certain product, but because of continuous marketing, they might already be familiar with a range of different brands that may satisfy the need.

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Other purchases are infrequent, like the purchase of a house or a car. These will take more consideration and research before any commitment to the purchase is made. Normally in the first stage of decision making, a need is identified. Virtually all sales are made to satisfy some need the consumer feels, whether actual or perceived. Some products are chosen for their functional benefits such as reliability, durability, convenience and performance. Other times products are purchased to satisfy emotional or intangible needs like prestige, pleasure, pride or conformity. Products and brand names in particular can instill a sense of emotional satisfaction that makes the product worth the sale.

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A person’s socio-economic status may have a lot to do with the choices they make for products, but may not always dictate the type of purchase a person will make. Maslow’s Hierarchy of needs says that people will tend to satisfy basic physiological needs before they try to satisfy emotional needs like prestige. However, in the consumer culture we live in, brand recognition is a source of status to those rich and poor. A need arises when one’s actual state of affairs differs from their desired state of affairs. People sometimes seek brands to alter their perceived feelings about their actual state of affairs. Dissatisfaction with their actual state of affairs may cause them to seek satisfaction elsewhere, like in the consumption of products. The purchase of a car to many is a status symbol to be used as a source of pride and self-esteem. When someone is purchasing a used car, they may still look to fulfill this status requirement or look to fulfill the functional need of getting back and forth to work.

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At the point of need recognition, a person will draw on their personal knowledge about the products to start analyzing a way to solve their problem. The internal search is the beginning of step two in the purchase process. A consumer will use the evoked set of products they have already heard of, to try and make a match with their current need. They will rely on their attitudes about products they like, as well as ones they wish to avoid. From there, they might do more external searching to find out more of what’s available. They can use consumer reports, advice from friends, and information from retailers to generate a set of evaluative criteria. The list might include the price, service history, available warranties, color, class rating or similar features to judge one product from the other.

The next step is to make the purchase. The retailer can make this step easier by offering alternate methods of payment or extended payment options and rebates. After the purchase is made, a feeling of satisfaction or it’s opposite, cognitive dissonance, will arise in the mind of the consumer. The advertiser can help the feelings of satisfaction by being involved in the post-purchase process with their consumers. The advertiser can send thank you messages, welcome letters and promotional offers which are only available to customers. Since most purchases of small items are repeated, it is in the interest of the retailer to concentrate on the post-purchase process.

When buying food, which is a habitual purchase, the advertisement of certain brands can be informative and still have no effect. In a store I frequent, Aldi’s supermarket, there are no commercials or advertisements for their products. The company is based overseas and consequently doesn’t promote in my area at all. However because of prices and familiar packaging that is always similar to the widely-promoted American brands, Aldi’s does a good job capitalizing on the promotion of others. Long ago, off-brands learned the technique of creating a similar product with similar packaging which they didn’t have to promote

References

(Kerin, Hartley, Rudelius, Marketing the Core, 5th Ed., McGraw-Hill/Irwin, 2013)

Assessing Buyer Needs Chapter 3

A business market is one “composed of firms, institutions and governments who acquire goods and services to use as inputs into their own manufacturing processes, for use in their day-to-day operations, or for resale to their own customers. (Ingram, 2013)” The main distinction between business and consumer markets is that businesses are not usually the end-users of the good or service. The product the business purchases may be for use in their own business objectives aimed at consumers.

Business markets have a concentrated demand which allows for large purchases from a small number of buyers. Sales may have to navigate their way through a small number of the same purchasers and make comparative bids to get contracts. Sales may have to have detailed information about competitors and how the sale product is more beneficial than the competition.

Derived demand buyers mimic the needs of the consumer market in terms of demand. If a demand in the consumer market rises or falls, the related manufacturer will have a demand that reflects the change. Sales will have to become a source of intuitive information that predicts the fluctuations in the consumer market. This will add value to the buyers they service.

Purchasing professionals will have a more in-depth knowledge about their buying criteria and capabilities. For this market, “salespeople must possess increased levels of knowledge and expertise to provide customers with a richer assortment of application, performance and technical data (Ingram, 2013).” Of these types of business buyers, the purchasing professional might be the most challenging because they will encompass aspects of the first two categories. The buyer may be one of few purchasers of the product and may be experiencing the acceleration principle where demand increases or decreases due to consumer demand. In addition, this buyer will be more knowledgeable about all aspects related to the purchase decision, and therefore harder to convince about a new product or service.

The business buying decision is an eight phase process that starts with the recognition of a need. A need arises when a needs gap is perceived in the distance between the desired state and the actual state. The need may then spark an interest in seeking out information to lessen the needs gap. Next the buyer determines a set of characteristics that will have to be addressed to map out the specifications of the problem. These criteria will be used to analyze which solutions will be appropriate. The buyers will then search for sources that can provide the solution to the problem. The buyer will then solicit and evaluate proposals from prospective suppliers. The buyer will then begin negotiations with suppliers to finalize terms of the purchase. Once a buyer has been chosen, terms of ordering must be finalized. This will include shipping details such as quantities, locations for distribution etc. The last phase is the feedback and evaluation of performance. Communication is key in this phase to ensure customer satisfaction and loyalty.

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The most challenging phase for sales may be the negotiation of terms to finalize a deal. Even after the prospective companies are chosen, terms of the final deal may include extending credit, handling large orders and the distribution details of the purchase. These details may cause major conflict and will affect profit as well as future interactions with the customer.

Reference:

Ingram, LaForge, Avila, Schwepker, Williams, SELL, 3rd ed., South-Western, Cengage Learning, 2013

Building Trust with Buyers Chapter 2

*Following based on Chapter 2 Continuing Case in Sell – Building Trust and Sales Ethics

Expertise – ex. offer to train salespeople on a system designed to work with the client’s business. They can offer to work with managers and financial officers to develop the proper training program.

Dependability – ex. They can devote a certain portion of training to understanding and pursuing the goals of the company.

Candor – ex. Let him know that the old relationship is over if they would be willing to start with a new salesperson.

Custom Orientation – ex. They could do research on the needs of the company and propose ways to solve those problems. Brenda can find out what problems might occur along the market chain which affects the use of the product, whether it is delivery time or application and training on the product. Follow-up service could include a number of hours of training on the use of the product.
What should Brenda do? Brenda should make herself accessible to the client in order to understand fully their needs. Brenda needs to make her goals compatible with those of the client in terms of performance, service and return on investment. She should plan on offering promotions that fit the buyer’s needs. These planned promotions could be a way of introducing the product to the client. Brenda must know how much is to be spent on the promotion, as well as the terms and conditions of the promotion.

The sales methods Brenda uses should build trust with the client. The salesperson should exhibit an extensive knowledge of the company’s products and their specifications or capabilities. They should also be able to relate their products with industry standards and show how they rank on dependability and service.

To compete against those with long successful track record, Brenda must do several things. She must study their practices and what made them successful. Brenda must be able to “deliver complete comparative product information in a sales presentation. (Ingram, 2013)” She should understand the strengths and weaknesses which expose vulnerabilities. There may be gaps in technology, service time or delivery expenses. These vulnerabilities must be demonstrated as inferior when compared to Brenda’s products.

How to handle the rumor mill? Brenda should use candor in dealing with the situation. She should be forthcoming and honest with her client. She might want to prepare a statement that addresses each of the rumors. She could then use them to fortify and show examples of how the company excels on that area. She can use the rumors to explain why the company is not ‘in financial trouble’ and dependable for the future. This use can be used to emphasize reliability and trust. That also relates to the rumor about missing delivery deadlines. Brenda may want to produce delivery statements to show that their record is up to the industry standard or exceeds it in any category.

The rumor about the glitch in software will provide Brenda with an opportunity to discuss the superior technology used in her product. She can give a more detailed account into the time and research and history of the product while stressing their ethical standards for maintaining transparency with their clients. Likewise, Brenda can provide service staff records to show that they are not cutting staff. She can also demonstrate how their service department has maintained an outstanding record.

Reference:

Ingram, LaForge, Avila, Schwepker, Williams, SELL, 3rd ed., South-Western, Cengage Learning, 2013

Role Playing Sales Scenario Chapter 1

In role playing scenario 1, Rebecca Stanley advises Wilson to make his own strategy to deal with the Hypermart situation. In the trust-based strategy of selling, the salesperson (SP) strives to build a long-term relationship with the customer. This relationship will be built on generating customer value. In the scenario, Hypermart is interested only in gaining market share not profit. They see all retailers including Biomed itself and its retail website as competition. Wilson’s choice will be in providing customer value for new clients as well as existing ones and the possible conflict which will arise in the future when the Biomed website begins to offer more web-based retail services.

Role-play
Location – Stanley’s office 48 hours later. Wilson discloses his plan to deal with the Hypermart situation.

Stanley: Have you come up with a way to deal with the situation with Hypermart and Ed-Toys?

Wilson: Yes, however, I may need more detailed reports on the market share of existing businesses versus Hypermart ordering capability. Hypermart has the ability to disrupt future sales of the product to other companies. Because of this we will have to choose between selling to them and not selling much to others. Hypermart has a totally self-serving agenda that will discourage other firms from doing business in the market. Already Ed-Toys has voiced objection to them selling at a 20% discount. And Hypermart has voiced objection to our plans to make website friendly retail available to our future customers once the website is done. At this point we may have to determine if an account with Hypermart is worth any new business that may come in later for this product. Unless their impact is more important than any new business they should be dropped as a client. The possibility of generating new clients who will adhere to suggested retail pricing with the advent of the website modifications will generate less channel conflict in the future. It is already evident that Hypermart is trying to utilize a dominant power relationship to force its goals onto the rest of marketing channels. Satisfying this one client will generate continued problems in the future.

Stanley: After I confirm the numbers generated by Hypermart’s purchasing goals, I am sure I will come to agree with your decision. The stability of our market channels is more important the goals of one company.
A manger will want to avoid unfair power relationships that create dependence on one client or channel member. This conflict can be avoided by detaching from the channel which causes the conflict. In this case, it is Hypermart, which is only concerned with its own goals. They have the potential to discourage future clients and dominate too much of the revenue stream for the product. It is wise for Stanley to let Wilson figure this out on his own because it is his presentation of the purchasing terms which will generate the next situation like this. If Wilson doesn’t learn how to spot the channel conflict before it happens, Stanley will constantly have to manage the conflict later on.

If the initial terms required the use of suggested retail pricing for a certain number of months per year or if all retailers are informed of Biomed’s own retail capabilities on the website, this problem can be avoided before the sale. Having a schedule of pricing will help generate confidence in competitors who like Ed-Toys only wanted to know when Hypermart would resume normal pricing. If companies like Hypermart are unwilling to work within a comfortable channel structure for all the members, contracts with them should be discontinued or avoided altogether.

Reference
Ingram, LaForge, Avila, Schwepker, Williams, SELL, 3rd ed., South-Western, Cengage Learning, 2013
Palmatier, Stern, El-Ansary, Marketing Channel Strategy, 8th ed, Pearson, 2015