MODULE 2

CONSUMER BEHAVIOUR DEFINED –

 Consumer behaviour is a study of how individual customers or organisations select, buy, use, and
dispose ideas, goods and services to satisfy their needs and wants. Consumer behaviour is a action
and decision processes of people who purchase goods for their final consumption.
 Consumer behaviour focuses on how individuals make decisions to spend their available resources
(time, money, effort) on consumption-related items.
 That include what they buy, why they buy, when they buy it, where they buy it, how often the buy it,
how often they use it, how they evaluate it after the purchase, the impact of such evaluations on
future purchases, ad how they dispose of it.
DEFINITIONS –
According to American Marketing Association, consumer behaviour can be defined as "the dynamic
interaction of affect and cognition, behaviour, and environmental events by which human beings conduct the
exchange aspects of their lives."
Consumer behaviour is the study of how individuals, groups and organisations select, buy, use and dispose
of goods, services, ideas, or experiences to satisfy their needs and wants (Kotler and Keller, 2006).

Significance of consumer behaviour –

 Before launching a product, it is important to study consumer behaviour as it will help them to know
how consumers respond to a particular product or services.
 As every consumer has different attitude, beliefs, views, mindsets, so it is very important aspects to
study consumer behaviour.
 Consumer behaviour covers a broad variety of consumers based on diversity in age, sex, culture,
taste, preference, educational level, income level, etc. Consumer behaviour can be defined as “the
decision process and physical activity engaged in evaluating, acquiring, using or disposing of goods
and services.”
 Understanding consumer behaviour helps in identifying whom to target, how to target, when to reach
them, and what message is to be given to them to reach the target audience to buy the product.
 The study of Consumer Behaviour helps in understanding how individuals make decisions to spend
their available resources like time, money, and effort while purchasing goods and services. It is a
subject that explains the basic questions that a normal consumer faces − what to buy, why to buy,
when to buy, where to buy from, how often to buy, and how they use it.
 Consumer behaviour is a complex and multidimensional process that reflects the totality of consumer
decisions with respect to acquisition, consumption, and disposal of goods and services.
Meaning of Consumer Buying Behaviour

Consumer Buying Behaviour is a complex and dynamic decision process; and physical activity of
evaluating, acquiring, using, or disposing of products and services. Developing an effective marketing
strategy requires in-dept knowledge of target consumers and how they behave and make their buying
decision. Proper study of consumer behaviour is important as all marketing decisions are based on
assumptions about consumer behaviour.

Consumer buying behaviour has two aspects - final purchase behaviour and decision making process.
Purchase behaviour is visible to us, but the decision making process involves number of complex variables
which are not visible to us. Purchase behaviour is the end result of long decision making process. Study of
consumer behaviour attempt to understand the decision making processes of buyers.

Consumer buying behavior refers to the selection, purchase and consumption of goods and services for the
satisfaction of their wants. There are different processes involved in the consumer behavior. Many factors,
specificity and characteristics influence the individual in what he is and the consumer in his decision making
process, shopping habits, purchasing behavior, the brands he buys or the retailers he goes. A purchase
decision is the result of each and every one of these factors. Initially the consumer tries to find what
commodities he would like to consume, then he selects only those commodities that promise greater utility.
After selecting the commodities, the consumer makes an estimate of the available money which he can
spend. Lastly, the consumer analyzes the prevailing prices of commodities and takes the decision about the
commodities he should consume. Meanwhile, there are various other factors influencing the purchases of
consumer such as social, cultural, economic, personal and psychological.

FACTORS INFLUENCING CONSUMER BEHAVIOUR –

There are many factors affecting consumer behaviour. These all factors jointly shape consumer behaviour.
Due to impact of various factors, consumers react or respond to marketing programme differently. For the
same product, price, promotion, and distribution, their responses differ significantly. The factors do not
affect equally to all the buyers; they have varying effect on their behaviour. However, some factors are more
effective, while others have negligible effect on consumer behaviour.

Figure 2 shows an outline of factors affecting consumer behaviour.

(A) Cultural Factors:

Cultural factors have the broadest and deepest impact on consumer behaviour. This set of factors mainly
includes broad culture, sub-culture, and culture of social classes.

1. Broad Culture:

Culture is a powerful and dominant determinant of personal needs and wants. Culture can be broadly
defined as: The way of living, way of doing, and way of worshiping. Culture determines the total patter of
life. Culture has a tremendous effect on needs and preference. People react according to the culture to which
they belong.

Every culture has its values, customs, traditions, and beliefs, which determine needs, preference, and overall
behaviour. The child acquires a set of values, perception, attitudes, interest, preference, and behaviour from
family and other key social institutions that control his/her behaviour. Every member is bound to follow
cultural values to which he belongs. These cultural factors determine the way of reacting toward product and
marketing strategies.

Culture is reflected in terms of followings:

i. Family life/social system
ii. Role of women
iii. Woman education
iv. Approach to work and leisure
v. Approach to life
vi. Ethics in economic dealings
vii. Residence pattern
viii. Geographic factors
ix. Impact of other cultures, and so on.

These all factors affect what, when, where, how much, from whom, and how many times the product should
be purchased and used. Marketer must be aware of the relevant cultural aspects, and marketing programme
should be designed accordingly.

2. Subcultures:

Each culture consists of smaller subcultures. Each subculture provides more specific identification of
members belong to it. Product and marketing programme should be prepared in light of subcultures to tailor
their needs.

Subculture includes:

i. Nationality:

Every nation has its own unique culture that shapes and controls behaviour its citizens. For example, Indian
culture, American culture, Japanese culture, Chinese culture, African culture, etc. Consumers of different
nations hold different behaviour toward the company’s products and strategies. The company can
concentrate on one or more nations to serve.

ii. Religion:

It is a powerful determinant of consumer needs and wants. Every religion has its culture in terms of rules,
values, rituals, and procedures that have impact on its followers. Commonly, consumer behaviour is directly
affected by religion in terms of products that are symbolically and ritualistically associated with the
celebration of various religious events and festivals/holidays.
Religious requirements or practices, sometimes, take on an expanded meaning beyond their original
purpose. For example, Christians, Hindus, Muslims, Buddhists, etc., influence food preference, clothing
choice, career aspiration, and overall pattern of life.

Even, in each religion, there are several sub-religions. For example, Hindu Religion includes Vaishnav,
Swaminarayan, Shivpanthi, Swadhiyai, and likewise; Christian Religion includes Protestants and Catholics;
and similar is the case with Muslim and Jain.

iii. Racial Groups:

In each culture, we find various racial groups; each of them tends to be different in terms of needs, roles,
professions, habits, preference, and use of products. Each group responds differently to marketing offers due
to different cultural backgrounds.

For example, in our country, we find a number of racial groups like Kshatriya, Banya, Patel, Brahmin,
Scheduled Caste, Scheduled Tribe, Shepherded, and so forth. These racial groups have their cultural values,
norms, standards, habits, etc., that govern their overall response toward the company’s products.

iv. Geographical Regions:

Each geographic region represents specific culture and differs in terms of needs, preference, habits, usage
rates, and uses of products. Clothing, residence, food, vehicle, etc., are determined by regional climate and
culture.

3. Culture of Social Classes:

Philip Kotler defines: “Social classes are relatively homogeneous and enduring divisions in a society, which
are hierarchically ordered and whose members share similar values, interest, and behaviour.” In many cases,
social classes are based on caste system. Members of different castes have their cultures and, accordingly,
they perform certain roles.

Social classes reflect differences in income, occupation, education, their roles in society, and so on. Every
social class has its culture that affects behaviour of its members. Social classes differ in their dress, speech
patterns, recreational preferences, social status, value orientation, etc.

They show distinct product and brand preferences in many areas like clothing, home furniture, education,
leisure activities, and automobiles. Kotler identifies following social classes, each of them differs
significantly in term of income, skills, needs, habits, preference, career orientation, approach toward life, etc.
i. Upper-upper
ii. Lower upper
iii. Upper middle
iv. Middle class
v. Working class
vi. Upper lower
vii. Lower-lower

Normally, with reference to India, on the basis of income level, or status in society, we can identity three
social classes like upper class, middle class, and lower class. In every society, percentage of each of these
classes is subject to differ. Marketer should design his marketing programme to cater the needs of specific
social classes.

(B) Social Factors:

Here, we examine the effect of social factors on consumer needs and preferences (behaviour). Social factors
affect consumer behaviour. Consumer response to product, brand, and company is notably influenced by a
number of social factors – family, reference groups, and roles and statuses. Marketer needs to analyze these
social factors of his target market to cater its needs effectively.

Let’s briefly comment on some dominant social factors influencing consumer behaviour:

1. Family:

Family is one of the most powerful social factors affecting consumer behaviour. This is more significant
where there is joint family system, in which children use to live with family for longer time. Values,
traditions, and preferences are transmitted from parents to children inherently.

Family members constitute the most influential primary reference group. From family, its member acquires
an orientation toward religion, politics, ambition, self-worth, love, respect, and so on. Need, preference,
buying habits, consumption rate, and many other aspects determined by family affect one’s behaviour.

In every family, elders, husband-wife, other members, and children have varying degree of influence on
purchase decision, which is the matter of interest for the marker to appeal them. Some products are children
dominant; some products are husband dominant; some products are wife dominant; while some products are
equal dominant.

2. Reference Groups:

Philip Kotler states: “A person’s reference group consists of all the groups that have a direct (face-to-face)
or indirect influence on the person’s attitudes or behaviour.” Groups having a direct influence on the person
are called membership groups.

Normally, following reference groups affect behaviour of their members:

i. Primary Reference Groups:

They are informal groups such as family members, friends, neighbors, relatives, and co-workers with whom
the person interact fairly continuously. Habits, life-style, and opinions of these groups have direct impact on
the person.

ii. Secondary Reference Groups:

They tend to be more formal groups such as religious groups, professional groups, trade unions or
associations, etc., that affect buying decisions of an individual buyer.

iii. Aspiration (Aspired) Groups:

A person is not the member of such groups. But, he likes to belong to those groups. He imitates habits,
preference and buying pattern of such groups. For example, college students imitate/like to belong to film
stars, sportsmen, or professional groups.

iv. Dissociative (Disliked) Groups:

Theses reference groups include such groups whose values or behaviour a person rejects or dislikes. He
tends to behave differently than those groups. A marketer should identify reference groups of his target
market and should try to influence those groups. In case of television, automobile, clothing, home furniture,
books and magazines, cigarettes, etc., the reference groups have more direct impact on buyers’ purchase
decision.

3. Roles and Statuses:

A person plays various roles in many groups throughout his life. He has to play different roles in family,
club, office, or social organisation. A role consists of the activities that a person is expected to perform. For
example, a person is father for his children, husband for his wife, son for his parents, friend for his friends,
boss for his department, and a member of social organisation.

Each role carries status. For example, sales manager has more status than sales officer. People choose those
products that communicate or represent their roles and statuses in society. Therefore, marketer must be
aware of the status symbol potential of products and brands. The marketer should also try to associate
products and brands with specific roles and status.

4. Social Customs and Traditions:

Social customs, beliefs or traditions can be associated with religion, caste, or economic aspects. Such
customs determine needs and preference of products in different occasions and, hence, affect consumer
behaviour.

5. Income Level:

Income affects needs and wants of consumers. Preference of the rich consumers and the poor consumers
differ notably. In case of quality, brand image, novelty, and costs, there is wide difference between the rich
and the poor buyers. Marketer must be aware of expectations of different income groups of his target
market.

(C) Personal Factors:

Along with cultural and social factors, personal factors also affect one’s buying decision. Personal factors
are related to the buyer himself. These factors mainly include age and stage in life cycle, occupation,
economic circumstances, life style, personality, and self-concept. Let us briefly examine the effect of
personal factors on consumer behaviour.

i. Age and Stage in Life Cycle:

A man passes through various stages of his life cycle, such as infant, child, teenager, young, adult, and old.
Need and preference vary as one passes through different stages of life cycle. For example, child and adult
differ to a great extent in terms of needs and preference. Marketer may concentrate on one or more stages of
his target consumers’ life cycle. Use of different product depends on age and stage of buyers’ life cycle.

ii. Occupation:

Buying and using pattern of consumer, to a large extent, is affected by a person’s occupation. For example,
industrialist, teacher, artist, scientist, manager, doctor, supervisor, worker, trader, etc., differ significantly in
term of need, preference, and overall buying pattern. Company can specialize its products according to
needs and wants of special professional groups.

iii. Economic Circumstances:

Product preference, frequency of buying, quality, and quantity are largely affected by consumers’ economic
circumstances. Economic circumstances consist of spendable income, income stability, level of savings,
assets, debts, borrowing power, and attitudes toward saving versus spending. People buy products keeping in
mind these economic circumstances.

iv. Life Style:

People with the same culture, social class, and occupation may differ in term of their life style. Knowledge
of life style of the target market is essential for marketer to design more relevant marketing programme.
Kotler defines: “Life style is the person’s pattern of living in the world as expressed in the person’s
activities, interest, and opinions.”

Life style portrayed the “whole person” interacting with his/her environment. It is generally reflected in
terms of activities, interest, clothing patterns, status consciousness, spending and savings, helping others,
achievements, working style, etc. Every product has potential to suit different life styles.

v. Personality:

Personality is a distinguished set of physical and psychotically characteristics that lead to relatively
consistent and enduring response to one’s environment. Personality characteristics, such as individualism,
difference, self-confidence, courage, firmness, sociability, mental balance, patience, etc., have a strong
influence on needs and preferences. Every person buys that product which suits his personality. In case of
clothing, automobiles, shoes, perfumes, etc., products are influenced by users’ personality characteristics.

vi. Self-concept:

It is also referred as self-image. It is what person believes of him. There can be actual self-concept, how he
views himself; ideal self-concept, how he would like to view himself; and others-self-concept, how he thinks
other see him. Person purchases such product that matches with his/her self-image. Marker must identify
self-concept of his target buyers and must try to match the products with them.

vii. Gender:

Gender or sex affects buying behaviour. Some products are male-dominated while some are female-
dominated. Male customers react to those products which are closely suit their needs and styles. Cosmetics
products are more closely related to female customers than male. Marketer must be aware of gender-effect
on buying behaviour of the market.

viii. Education:

Education makes the difference. Highly educated, moderately educated, less educated, and illiterates differ
considerably in terms of their needs and preferences. In the same way, stage of education (like primary,
secondary, college, etc.) affects buyers’ behaviour.

Education factor seems more relevant to academic institutes, book publishers, magazines, and newspapers.
Education affects one’s mindset. Buyers’ colour choice, quality-orientation, services, and other aspects have
more or less educational significance.

(D) Psychological Factors:

Buying behaviour is influenced by several psychological factors. The dominants among them include
motivation, perception, learning, and beliefs and attitudes. It is difficult to measure the impact of
psychological factors as they are internal, but are much powerful to control persons’ buying choice.
Manager must try to understand probable role the factors play in making buying decisions.

i. Motivation:

It has a significant impact on consumer behaviour. Motivation is closely related to human needs. One has
many needs at a given time. Some needs are biogenic or physiological in nature arising from physiological
states of tension, such as hunger, thirst, or discomfort.
Other needs are psychogenic or psychological in nature arising from psychological state of tension, such as
recognition, esteem, or belonging. Motivation comes from motive; motive is expression of needs; or
intensified need become a motive. Thus, a motive is the need that is sufficiently pressing to drive the person
to act. Satisfying the need reduces the felt tension.

People hold one or more of following motives to buy:

i. To satisfy basic needs like hunger, thirst, or love
ii. To protect from economic, physical or mental hazards
iii. To get social status
iv. To be recognized or appreciated
v. To be respected
vi. To be self-actualized
vii. To avoid physical or mental stress

Motivation is, thus, a driving force that makes the individual to act to release the tension aroused from
unmet needs. A motivated person is ready to act/react. Marketer should identify why people buy the
products. What are the motives to purchase the products? If product is connected with their motives, they
definitely respond positively.

In fact, the product is a source of satisfying unmet needs. So, product is presented as a solution of tension
resulted from unsatisfied needs. Several theories are available to understand motivation aspect.

Most popular theories include Maslow Need Hierarchy, Herzberg’s Two-Factor Theory, Stacy Adam’s
Equity Theory, Vroom’s Expectancy Theory, Porter-Lawler Theory, McClelland’s Achievement Theory,
etc. Knowledge of these theories assists the manager to understand deeper motives the people hold for
buying different products.

ii. Perception:

Person’s motivation to act depends on his perception of situation. It is one of the strongest factors affecting
behaviour. The stimuli – product, advertising appeal, incentives, or anything – are perceived differently by
different people due to difference in perception. Marketer should know how people perceive marketing
offers.

Bernard and Gary define:

“Perception is a process by which an individual select, organize, and interpret information inputs to create a
meaningful picture of the world.” Perception depends on physical stimuli and stimuli’s relation to
surrounding field, too. People perceive the same stimulus differently due to selective attention, selective
distortion, and selective retention. So, all consumers may not see the product or message in a way the
marketer wants.

Marketer should take these perceptual processes carefully while designing marketing programme. It is
necessary that the product or marketing offer must be perceived in a way the market wants to be perceived.
Marketer is also required to know the factors that affect people’s perception. Tactful interview or
questionnaire can help to measure perception of target groups.

iii. Learning:

Most human behaviour is learned. Learning is basically concerned with experience of an individual.
Learning can be defined as: Relatively permanent changes arising from experience. If an individual has
satisfactory experience of buying and using the products, he is more likely to talk favourably or repeat the
same.
Most of purchase decisions depend on self-experience or experience of others, whose opinion carry value in
buying decisions. Learning is produced through the interplay of drives, stimuli, cues, responses, and
reinforcement. Learning theories help marketer to build up demand for the product by associating it with
strong drives, using motivating cues, and providing positive reinforcement.

New company can enter the market by using competitions’ drives, cues and reinforcement. Sufficient
knowledge of learning is an important input for the marketer to design the meaningful marketing
programme.

iv. Beliefs:

People hold beliefs about company, company’s goods or services, and they act accordingly. Beliefs of the
buyers affect product and brand image. We can define the term as: Belief is a descriptive thought that a
person holds about something. Beliefs may be based on knowledge, opinion, or faith.

Note that beliefs have nothing to do with facts or reality. People may have wrong beliefs for the superior
product, or they hold positive beliefs for inferior product. Positive and negative beliefs have their impact on
purchase decisions. Marketer can create positive belief by associating strong aspects related to product and
brand, or can correct wrong beliefs by proper campaign.

It is clear that people buy only if they believe it is worthwhile to buy. So, beliefs play decisive role in the
buying decision. Marketer must try to know what type of beliefs people hold about company, products, and
brands. Such knowledge must be incorporated in preparing an effective marketing programme.

v. Attitudes:

An attitude is a person’s enduring favourable or unfavorable evaluations, emotional feelings, and action
tendencies toward some object or idea. These emotional feelings are usually evaluative in nature. People
hold attitudes toward almost everything, such as religion, politics, clothes, music, food, product, company,
and so on.

Attitudes decide liking or disliking of object. People can judge good or bad, beautiful or ugly, rich or poor,
or desirable or undesirable about an object, a product, or a person. Attitudes play a vital role in accepting or
rejecting, appreciating or criticizing the product or brand. People do not react to every object in a fresh way.
Object is evaluated by attitudes.

So, it is imperative that marketer must know what type of attitudes people hold about the company,
products, and brands. Attitudes can be learned or developed. Learning plays an important role in developing
attitudes. Even unfavorable attitudes can be changed into favourable ones by systematic campaign. Mostly,
beliefs and attitudes are taken simultaneously.

https://bbamantra.com/determinants-factors-influencing-consumer-behaviour/

ADOPTION PROCESS –
The consumer adoption process is constant. Marketing tools may change, the way consumers discover
products may change, and consumer behaviours may change, but the 5 stages that make up the consumer
adoption process will always remain the same.
In my years of business, my days in business school, and my experience at Weblink and AT&T, I have
learned about numerous companies and how they market their products. I have witnessed many failures and
witness many successes. What is interesting to me is how important it is for businesses to truly understand
the 5 stages of the consumer adoption process and the important role this process plays to the success of the
business. The 5 stages are: product awareness, product interest, product evaluation, product trial, and
product adoption. Companies work hard to create a product, but in order to sustain and succeed in the
market, organizations also need to create a process that successfully walks their consumers through the
stages of the consumer adoption process.
The 5 Stages to Consumer Adoption Process
Stage 1 – Product Awareness
This first stage is about creating awareness that your product is in the market.  It is important that your
company develops a successful avenue for your consumers to become aware of your product. If consumers
do not know your product exists, then it might as well not exist!  Create marketing material.  These can be
one-sheets, video teasers, images, and landing pages.  Make these marketing materials easily accessible.
Utilizing creativity and wit is a great way to engage consumers in this awareness stage.  I recommend
creating a strong social presence for said product. In the era of social media, many tools are available in the
market that provide companies with the techniques and methods to increase product awareness through
social channels – enabling them to reach a large number of customers at a low cost!
Case Example – Movie Teasers and Tesla Model D
As an example, movie teasers are designed to inform the audience and customers that a movie will be
released soon, but it doesn’t provide them in-depth information about the movie. Another great example
includes Tesla’s Model D. Prior to its launch and release, Elon Musk published the below image on his
Twitter in order to build momentum and awareness of their upcoming launch. What’s amazing about this
picture is the way it has been strategically designed to make consumers aware of the product without
exposing too much about the product. The viewer is left wanting to learn more.

Stage 2 – Product Interest

In this stage consumers are ready to learn more about your company’s product and / or service. Your
organization must guide the consumer through the interest stage by providing easily accessible information
on your product. Among the methods used in the todays business landscape include a website describing the
product, blog posts, tutorial or instructional videos, white papers, and other sources of info that the potential
consumer can discover and review.
Case Example – Apple
Apple utilizes its product launch to provide information and insight into its latest product. With well-
designed and organized speech, scripted presentation, and balanced use of technical and non-technical
vocabulary, Apple delivers information eloquently and successfully to broad range of customers. With the
information now available in multiple mediums and comprehensible by both technical and non-technical
individuals, Apple gains the interest of their potential customers and builds strong momentum of interested
buyers.
Stage 3 – Product Evaluation
Prior to purchasing, consumers examine, compare and evaluate the product. Such behaviour increases in
intensity and need once the item in question is more expensive, sophisticated and complex, or critical.
Consumers are searching for information. We are now finding that consumers go online and utilize social
media channels to ask other individuals about your product or service. In addition, they find online reviews
and recommendations. In order to simplify a customer’s search and evaluation of your product, I suggest
creating information that outlines the difference between your product and other similar products, or
differences within the different products and services you sell. Outline what separates your product from
others, and emphasize on strength. Another great system to utilize is the  webinar. This platform allows you
to communicate with potential customer in depth information about your product and provides time for
Q&A.
Case Example – PCMag
PCMag is a world-renowned website for comparing gadgets and computers. They are notable for their
reliable reporting, comprehensive evaluation editorials, and categorization of different gadgets based on
their qualities. For example, in order to maintain fairness, PCMag categorizes laptops differently (such as
work laptop, ultra-notebooks, …etc) in order to provide a more reasonable evaluation that fits the needs of
the customer. PCMag is a great tool for consumers to evaluate products. Product manufactures can contact
PCMag and request to get their products included in the magazine.
Stage 4 – Product Trial
This is the stage where the consumer “kicks the tires”.  Nothing helps a consumer make a decision about
your product more than actually trying your product out! There are many ways this is accomplished. For
example, your company can provide your consumer with a free trial or a proof of concept campaign. In this
stage it is very important to set the customer expectations correctly and deliver on said expectations.
Case Example – Costco
Costco is known for their free samples. I have heard that some customers piecemeal an entire lunch just
from bouncing around the free sample tables during a visit to a Costco location. This “free sample” approach
is very smart. In some cases, Costco has seen this strategy increase sales of a product over 1000 percent.
There are additional psychological effects from this, which include consumer loyalty and consumer
reciprocity. Consumers feel that if they receive something for free, they owe something in return.

Stage 5 – Product Adoption

When the consumer enters the product adoption phase, he/she is ready to purchase your company’s product.
This is the critical stage that businesses
need to get their consumers to. When the
customer is here, you need to make the
payment process simple, intuitive, and
pain free. In addition, you need to ensure
that the consumer can easily obtain the
product. If you make it to and through this
last phase successfully, then you can take
money to the bank – A job well done!
BUYING DECISION MAKING PROCESS –
Consumer buying decision process –
Stage 1 − Needs / Requirements
It is the first stage of the buying process where the consumer recognizes a problem or a requirement that
needs to be fulfilled. The requirements can be generated either by internal stimuli or external stimuli. In this
stage, the marketer should study and understand the consumers to find out what kinds of needs arise, what
brought them about, and how they led the consumer towards a particular product.
Stage 2 − Information Search
In this stage, the consumer seeks more information. The consumer may have keen attention or may go into
active information search. The consumer can obtain information from any of the several sources. This
include personal sources (family, friends, neighbours, and acquaintances), industrial sources (advertising,
sales people, dealers, packaging), public sources (mass media, consumer-rating and organization), and
experiential sources (handling, examining, using the product). The relative influence of these information
sources varies with the product and the buyer.
Stage 3 − Evaluation of Alternatives
In this stage, the consumer uses information to evaluate alternative brands from different alternatives. How
consumers go about evaluating purchase alternatives depends on the individual consumer and the specific
buying situation. In some cases, consumers use logical thinking, whereas in other cases, consumers do little
or no evaluating; instead they buy on aspiration and rely on intuition. Sometimes consumers make buying
decisions on their own; sometimes they depend on friends, relatives, consumer guides, or sales persons.
Stage 4 − Purchase Decision
In this stage, the consumer actually buys the product. Generally, a consumer will buy the most favourite
brand, but there can be two factors, i.e., purchase intentions and purchase decision. The first factor is the
attitude of others and the second is unforeseen situational factors. The consumer may form a purchase
intention based on factors such as usual income, usual price, and usual product benefits.
Stage 5 − Post-Purchase Behaviour
In this stage, the consumers take further steps after purchase based on their satisfaction and dissatisfaction.
The satisfaction and dissatisfaction depend on the relationship between consumer’s expectations and the
product’s performance. If a product is short of expectations, the consumer is disappointed. On the other
hand, if it meets their expectations, the consumer is satisfied. And if it exceeds their expectations, the
consumer is delighted.
The larger the gap between the consumers’ expectations and the product’s performance, the greater will be
the consumer’s dissatisfaction. This suggests that the seller should make product claims that faithfully
represent the product’s performance so that the buyers are satisfied.
Consumer satisfaction is important because the company’s sales come from two basic groups, i.e., new
customers and retained customers. It usually costs more to attract new customers than to retain existing
customers and the best way to retain them is to get them satisfied with the product.
Levels of Consumer Decision Making-
 Extensive Problem Solving – Consumers are highly involved in the product and critically evaluate
the product on the basis of established product criteria that will fulfil his/her need.
 Limited Problem Solving – Consumer conducts a general search for a product that will satisfy his/her
basic product criteria from a selected group of brands.
 Routine Response Behaviour – The consumer has very low involvement in the product and he selects
any product or brand that fulfils the basic need.
Models of consumer decision making
1) Economic View or Model –
This model assumes that a consumer is rational person and he takes rational decisions. He compares
various products, evaluates its benefits and disadvantages, and then makes a purchase decision on the
basis of information collected. He is aware of all product alternatives and is capable of ranking
products in terms of benefits and disadvantages. However, this model is considered unrealistic as
people are limited by skills, habits, existing values and perceptions and they are not always rational
when making a purchase decision.
2) Passive View or Model –
This model assumes that the consumers take decisions according to the promotional efforts of the
marketers and respond directly to the sales and advertisement appeals offered by the marketers. It is
opposite to the economic model, as it assumes people will evaluate a product depending upon how it
is promoted and positioned in the market. However, this model is also unrealistic as the consumers
are capable of collecting and evaluating information about product alternatives and then making a
purchase.
3) Cognitive View or Model –
The cognitive view is the best of the four models of consumer decision making. This model states
that the consumers make decisions on the basis of their own interests and understanding of the
market demand and not according to their rational needs or promotional efforts of the marketers.
Every marketer must help consumers to develop a short-cut decision rules that shorten the decision-
making process and lead to instant purchases.
4) Emotional View or Model –
The Emotional model states that all consumers are emotional and act upon their emotions while
making a purchase decision. Consumers make more impulsive purchases when they relate
themselves with a product or service. They take less time to think whether the product is necessary
for them or not, but develops negative or positive emotions related with the product. Hence products
that bring negative emotions are avoided and products that bring positive emotions in a consumer are
bought by him.
Consumer decision making process (with example) -
Above figure outlines the buying stages consumers go through. At any given time, you’re probably in some
sort of buying stage. You’re thinking about the different types of things you want or need to eventually buy,
how you are going to find the best ones at the best price, and where and how will you buy them. Meanwhile,
there are other products you have already purchased that you’re evaluating. Some might be better than
others. Will you discard them, and if so, how? Then what will you buy? Where does that process start?

Stage 1. Need Recognition

Perhaps you’re planning to backpack around the country after you graduate, but you don’t have a
particularly good backpack. Marketers often try to stimulate consumers into realizing they have a need for a
product. Do you think it’s a coincidence that Gatorade, Powerade, and other beverage makers locate their
machines in gymnasiums so you see them after a long, tiring workout? Previews at movie theatres are
another example. How many times have you have heard about a movie and had no interest in it—until you
saw the preview? Afterward, you felt like had to see it.
Stage 2. Search for Information
Maybe you have owned several backpacks and know what you like and don’t like about them. Or, there
might be a particular brand that you’ve purchased in the past that you liked and want to purchase in the
future. This is a great position for the company that owns the brand to be in—something firms strive for.
Why? Because it often means you will limit your search and simply buy their brand again.
If what you already know about backpacks doesn’t provide you with enough information, you’ll probably
continue to gather information from various sources. Frequently people ask friends, family, and neighbours
about their experiences with products. Magazines such as Consumer Reports or Backpacker Magazine might
also help you.
Internet shopping sites such as Amazon.com have become a common source of information about products.
Epinions.com is an example of consumer-generated review site. The site offers product ratings, buying tips,
and price information. Amazon.com also offers product reviews written by consumers. People prefer
“independent” sources such as this when they are looking for product information. However, they also often
consult nonneutral sources of information, such advertisements, brochures, company Web sites, and
salespeople.
Stage 3. Product Evaluation
Obviously, there are hundreds of different backpacks available to choose from. It’s not possible for you to
examine all of them. (In fact, good salespeople and marketing professionals know that providing you with
too many choices can be so overwhelming, you might not buy anything at all.) Consequently, you develop
what’s called evaluative criteria to help you narrow down your choices.
Evaluative criteria are certain characteristics that are important to you such as the price of the backpack, the
size, the number of compartments, and colour. Some of these characteristics are more important than others.
For example, the size of the backpack and the price might be more important to you than the colour—unless,
say, the colour is hot pink and you hate pink.
Marketing professionals want to convince you that the evaluative criteria you are considering reflect the
strengths of their products. For example, you might not have thought about the weight or durability of the
backpack you want to buy. However, a backpack manufacturer such as Osprey might remind you through
magazine ads, packaging information, and its Web site that you should pay attention to these features—
features that happen to be key selling points of its backpacks.
Stage 4. Product Choice and Purchase
Stage 4 is the point at which you decide what backpack to purchase. However, in addition to the backpack,
you are probably also making other decisions at this stage, including where and how to purchase the
backpack and on what terms. Maybe the backpack was cheaper at one store than another, but the salesperson
there was rude. Or maybe you decide to order online because you’re too busy to go to the mall. Other
decisions, particularly those related to big ticket items, are made at this point. If you’re buying a high-
definition television, you might look for a store that will offer you credit or a warranty.
Stage 5. Post purchase Use and Evaluation
At this point in the process you decide whether the backpack you purchased is everything it was cracked up
to be. Hopefully it is. If it’s not, you’re likely to suffer what’s called post purchase dissonance. You might
call it buyer’s remorse. You want to feel good about your purchase, but you don’t. You begin to wonder
whether you should have waited to get a better price, purchased something else, or gathered more
information first. Consumers commonly feel this way, which is a problem for sellers. If you don’t feel good
about what you’ve purchased from them, you might return the item and never purchase anything from them
again. Or, worse yet, you might tell everyone you know how bad the product was.
Companies do various things to try to prevent buyer’s remorse. For smaller items, they might offer a money
back guarantee. Or, they might encourage their salespeople to tell you what a great purchase you made. How
many times have you heard a salesperson say, “That outfit looks so great on you!”? For larger items,
companies might offer a warranty, along with instruction booklets, and a toll-free troubleshooting line to
call. Or they might have a salesperson call you to see if you need help with product.
Stage 6. Disposal of the Product
There was a time when neither manufacturers nor consumers thought much about how products got disposed
of, so long as people bought them. But that’s changed. How products are being disposed is becoming
extremely important to consumers and society in general. Computers and batteries, which leech chemicals
into landfills, are a huge problem. Consumers don’t want to degrade the environment if they don’t have to,
and companies are becoming more aware of the fact.
Take for example, Crystal Light, a water-based beverage that’s sold in grocery stores. You can buy it in a
bottle. However, many people buy a concentrated form of it, put it in reusable pitchers or bottles, and add
water. That way, they don’t have to buy and dispose of plastic bottle after plastic bottle, damaging the
environment in the process. Windex has done something similar with its window cleaner. Instead of buying
new bottles of it all the time, you can purchase a concentrate and add water. You have probably noticed that
most grocery stores now sell cloth bags consumers can reuse instead of continually using and discarding of
new plastic or paper bags.
Other companies are less concerned about conservation than they are about planned obsolescence. Planned
obsolescence is a deliberate effort by companies to make their products obsolete, or unusable, after a period
of time. The goal is to improve a company’s sales by reducing the amount of time between the repeat
purchases consumers make of products. When a software developer introduces a new version of product,
older versions of it are usually designed to be incompatible with it. For example, not all the formatting
features are the same in Microsoft Word 2003 and 2007. Sometimes documents do not translate properly
when opened in the newer version. Consequently, you will be more inclined to upgrade to the new version
so you can open all Word documents you receive.
Products that are disposable are another way in which firms have managed to reduce the amount of time
between purchases. Disposable lighters are an example. Do you know anyone today that owns a no
disposable lighter? Believe it or not, prior to the 1960s, scarcely anyone could have imagined using a cheap
disposable lighter. There are many more disposable products today than there were in years past—including
everything from bottled water and individually wrapped snacks to single-use eye drops and cell phones.
6. Post Adoption Behaviour Stage:

This is the last stage of consumer adoption. If a consumer satisfies with a new product and related services,
he continues buying it frequently, and vice-versa. He becomes a regular user of innovation and also talks
favourable to others. This is a crucial step for a marketer.

In every stage of consumer adoption, a marketer is required to facilitate consumers. He must take all
possible actions to make them try, buy, and repeat buy the innovation. Be clear that every type of consumer
(innovators, early adopters, early majority, late majority, or laggards) follows all the stages of adoption
process, but takes different amount of time to adopt the innovation.

Consumer Adoption Process is for All!

Whether you have a new business or an existing business, a product built for the enterprise or a product built
for a consumer; the consumer adoption process is the same. It is important to create a strategy and the
necessary tools to successfully take your consumers through these 5 stages. If you can nail this, then you are
in business. Last piece of advice; Marketing your product is as important, if not more important, than
creating your product.
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LEVELS OF MARKET SEGMENTATION –

Marketers subdivide markets into segments, so they can do focus on marketing plans. Each Level of market
segmentation determines the strategy a company will follow to promote, distribute and position its product
in the market and respectively target audience or its customers. Before developing a marketing plan, one
must know the what are the levels of market segmentation.

Mass Marketing

In Segemetation, Mass marketing refers to the strategy of targeting the entire potential customer
market by means of a single marketing message. The marketing strategy used in this segmentation does not
target the specific requirements or needs of customers. Mass marketing strategy, instead of focusing on a
subset of customers, focuses on the entire market segment that can be a probable customer of a product.

An example of mass marketing strategy is of Baygon cockroach spray or Mortein mosquito repellent coils
that target all its potential customers through a single marketing message.

Segment Marketing

Segment marketing refers to a strategy where the company divides its target audience into different
segments based on their unique needs and requirements. This way the company targets different messages to
different segments, appealing them towards the unique features the product offers. This strategy creates
product differentiation for customers with similar needs and preferences, based on their gender, age, income
and location.

The example of segment marketing within clothing industry may be men, women, casual, fashionable and
business clothing segments.

Niche Marketing

This strategy of marketing focuses on a narrower customer segmentation. Customers may want or desire a
product that is not met completely by the products offered in a market. When companies move forward and
develop highly specialized products to offer these customers their specific needs, they offer distinct products
in a market that caters to specific customer segments only.

Mountain bikes are an example of a niche marketing segment. where the market segmentation will be
individuals interested in mountain biking only. Since not every bike manufacturing company caters to
mountain bikers, it is a niche segment. Companies that produce mountain bikes target the niche segment of
mountain bikers and cater to their specific needs, preferences and requirements.

Micro Marketing

Micro marketing follows an even narrower segmentation marketing strategy, catering to the attribute of a
much-defined subset of potential customers such as catering to individuals of a specific geographical
location or a very specific lifestyle.

An example of niche marketing is luxury cars that are very high priced and offer exceptional features such
as high speed, customized look, etc. Since these cars are very expensive and limited in number, the niche
market for these vehicles target rich, car lovers that are interested in the unique features and has the financial
capability to buy them.

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PATTERNS OF MARKET SEGMENTS –
There are five patterns of target market selection, which was first put forward by D F Abell:
1. Single Segment Concentration
2. Selective Segment Specialisation
3. Market Specialisation
4. Product Specialisation
5. Full Coverage

Let us try to understand this taking example of a company X in electric appliances market.

The company can consider 5 patterns of target market selection as described below:

1. Single Segment Concentration:

In this case, the marketer prefers to go for single segment. In our hypothetical example, the company X uses
this strategy when it produces a typical product for a single type of market like plasma TV. In real life,
companies like Allahabad Law Agency (only law books) and BPB publications (only Computer books) are
good examples. The company may adopt this strategy if it has strong market position, greater knowledge
about segment-specific-needs, specified reputation and probable leadership position.

2. Selective Segment Specialisation:

This is known as multistage coverage because different segments are sought to be captured by the company.
The company selects a number of segments each of which is attractive, potential and appropriate. There may
be little or no synergy among the segments, but this strategy has the advantage of diversifying the firm’s
risk.

In our example, if the company X produces plasma TV as well as Walkman, the two different types of
products obviously for two different types of markets, then it can be cited as an example of Selective
Segment Specialisation strategy. Bata shoes were mostly in the popular segment until beginning of 1990s.
Then, it turned itself into premium segment while still retaining the appeal of popular segment. The taking
of select segments of shoe market could not help Bata to gain full control of market. After 1995, it has come
back again to the popular segment.

3. Market Specialisation:
Here the company takes up a particular market segment for supplying all relevant products to the target
group. In our example, the company X can implement Market Specialisation strategy by producing all sorts
of home appliances like TV, washing machine, refrigerator and micro oven for middle class people.

Here the chosen segment is the middle class and the firm specializes in that market only. Sudha Publications
Pvt. Ltd. publishes and sells books for the students and job-hunters that include competition books (CAT,
IIT-JEE, IAS), general knowledge books and personality development books.

4. Product Specialisation:

Product specialisation occurs when a company sells certain products to several different types of potential
customers. In our example, if the company X produces only a particular type of gizmo like toaster that is
consumed by all type of people, they we can say that the company uses Product Specialisation strategy.
Product specialisation promises strong recognition of customer within the product areas. Super Precision
Components supply small nuts and screws for use in military, industry and daily use.

5. Full Coverage:

The company attempts to serve all customer groups with all the products they might need. Only very large
firms can undertake a full market coverage strategy that can be done in 2 ways:

i. Undifferentiated marketing or convergence:

The company ignores market segment differences and goes after the whole market with one market offer. It
focuses on a basic buyer need rather than on differences among buyers.

ii. Differentiated marketing or divergence:

The company operates in several market segments and designs different programmes for each segment. It
creates more total sales than the former. But the following costs would be higher:
a) Product modification cost
b) Manufacturing cost
c) Administrative cost
d) Inventory cost
e) Promotion cost

As both the sales and the costs are higher, the profitability for this strategy cannot be ascertained.
Companies should be cautious about over segmenting the market. If it happens, the company must seek
counter segmentation to broaden the customer base. Johnson & Johnson broadened its target market for its
baby shampoo to include adults. It is very difficult to serve all segments of the market. Big companies can
go for full market coverage.

In our example, the company can use Full Coverage strategy if it has all sorts of electric appliance products
for all types of people. In carbonated soft drink market, Coca-Cola follows Full Market Coverage approach
to their product-market matrix. They have Thums-Up, Coca-Cola, Limca, Sprite, Fanta that are different
tastes and are consumed by different types of people. The company even made its entry into other drinks
segments like mineral water (Kinley) and tea (Georgia).

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PROCEDURE OF SEGMENTATION –
1) Determine the need of the segment

What are the needs of the customers and how can you group customers based on their needs? You have to
think of this in terms of consumption by customers or what would each of your customer like to have.

For example – In a region, there are many normal restaurants but there is no Italian restaurant or there is no
fast food chain. So, you came to know the NEED of consumers in that specific region.

2) Identifying the segment

Once you know the need of the customers, you need to identify that “who” will be the customers to choose
your product over other offerings. Quite simply, you have to decide which type of segmentation you are
going to use in this case. Is it going to be geographic, demographic, psychographic or what? The 1st step
gives you a mass of crowd, and in the 2nd step, you have to differentiate the people from within that crowd.

Taking the same above example of Italian restaurant – The target will be children, youngsters and middle
aged people. Italian food is generally not preferred by old age people who prefer food which can be easily
chewed (that’s what I feel at least. Lets see if I have teeth by the time I am 60). So you know the segment
now.
3) Which segment is most attractive?

Now, we approach the targeting phase in the steps of market segmentation. Out of the various segments you
have identified via demography, geography or psychography, you have to choose which is the most
attractive segment for you. This is a tough question to answer because one of them will be left out.

If you are using psychographic segmentation, then you need to target the psychology of consumers which
takes time. So you will not be able to expand faster. But if your product is basic, then you can use
demographic segmentation as the base, and expand much faster in surrounding regions. So this step involves
deciding on ALL the different types of segmentation that you can use.

Attractiveness of the firm also depends on the competition available in the segment. If the competition is too
much in a given segment, then it does not make sense to take that segment into consideration. In fact, that
segment is not attractive at all.

Taking the above example of an Italian restaurant, the restaurant owner realizes that he has more middle
aged people and youngsters in his vicinity. So it is better to market his store on weekends and malls where
this target group is likely to go. The middle aged people can bring children and elders as per their
convenience. So the 1st target is the middle aged group, and the 2nd target is youngsters. He is using a
combination of demographic and geographic segmentation to target middle aged people in his region.

4) Is the segment giving profit

So, now you have different types of segmentation being analysed for their attractiveness. Which segment do
you think will give you the maximum crowd has been decided in the 3rd step. But which of those segments
is most profitable is a decision to be taken in the 4th step. This is also one more targeting step in the process
of segmentation.

Example – The Italian restaurant owner above decides that he is getting fantastic profitability from the
middle aged group, but he is getting poor profitability from youngsters. Youngsters like fast food and they
like socializing. So they order very less, and spend a lot of time at the table, thereby reducing the
profitability. So what does the owner do? How does he change this mindset when one of the segments he has
identified is less profitable? Lets find out in the 5th step.
5) Positioning for the segment

Once you have identified the most profitable segments via the steps of market segmentation, then you need
to position your product in the mind of the consumers. I would not dive deep into positioning here as you
can read this quick guide to positioning. The basic concept is that the firm needs to place a value on its
products.

If the firm wants a customer to buy their product, what is the value being provided to the customer, and in
his mindset, where does the customer place the brand after purchasing the product? What was the value of
the product to the customer and how valuable does he think the brand is – that is the work of positioning.
And to complete the process of segmentation, you need to position your product in the mind of your
segments.

Example – In the above case we saw that the Italian restaurant owner was finding youngsters unprofitable.
So what does he do? How does he target that segment as well? Simple. He starts a fast food chain right next
to the Italian restaurant. What happens is, although the area has other fast food restaurants, his restaurant is
the only one which offers good Italian cuisine and a good fast food restaurant next door itself. So both, the
middle aged target group and the youngsters can enjoy. He has converted the profit earned from the middle
aged group, into more profit, and has achieved top of the mind positioning for all people in his region.
6) Expanding the segment

All segments need to be scalable. So, if you have found a segment, that segment should be such that the
business is able to expand with the type of segmentation chosen. If the segment is very niche, then the
business will run out of its course in due time. Hence the expansion of the segment is the second last step of
market segmentation.

In the above example, the Italian restaurant owner has the best process in his hand – an Italian restaurant
combined with a fast food chain. He was using both Demographic and geographic segmentation. Now he
starts looking at other geographic segments in other regions where he can establish the same concept and
expand his business. Naturally, with more expansion he will earn more profits.

7) Incorporating the segmentation into your marketing strategy

Once you have found a segment which is profitable and expandable, you need to incorporate that segment in
your marketing strategy. How do you think McDonalds or KFC became such big chains of fast food? They
had a very clear process of segmentation because of which it became easier to find regions to target.

With the steps of market segmentation, your segments become clear and then you can adapt other variables
of marketing strategy as per the segment being targeted. You can modify the products, keep the optimum
price, enhance the distribution and the place and finally promote clearly and crisply to your target audience.
Business becomes simpler due to the process of market segmentation.
REQUIREMENTS FOR EFFECTIVE MARKET SEGMENTS –
The requirements for effective market segmentation are as follows:

a) Measurable: The size, needs, purchasing power, and characteristics of the customers in the segment
should be measurable. Quantification should be possible.

b) Divisible: The segments should be differentiable. There must be clear-cut basis for dividing customers
into meaningful homogeneous groups. They should respond differently to different marketing mixes. There
should be differences in buyer's needs, characteristics and behaviour for dividing in groups.

c) Accessible: The segment should be reachable and serviceable. It should be accessible through existing
marketing institutions, such as distribution channels, advertising media and sales force. There should be
middlemen to distribute the products.

d) Substantial: The segment should be substantial. It should be large enough in terms of customers and
profit potential. IT should justify the costs of developing a separate marketing mix.

e) Actionable: It should be actionable for marketing purposes. Organizations should be able to design and
implement the marketing mix to serve the chosen segment.
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EVALUATING THE MARKET SEGMENTS –

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 SWOT ANALYSIS
 SWOT analysis is a tool for auditing an organization and its environment.
It is the first stage of planning and helps marketers to focus on key issues. 
 SWOT stands for strengths, weaknesses, opportunities, and threats.
 Strengths and weaknesses are internal factors. Opportunities and threats are
external factors.
  A strength is a positive internal factor. A weakness is a negative internal
factor. An opportunity is a positive external factor. A threat is a negative
external factor.
 SWOT analysis is especially important during strategic planning where in
the organization needs to decide the strategy which it has to take.

The main purpose of the analysis has to be to add value to our products and
services so that we can recruit new customers, retain loyal customers, and
extend products and services to customer segments over the long-term. If
undertaken successfully, we can then increase our Return on Investment
(ROI).

Strengths
 Your specialist marketing expertise.
 A new, innovative product or service.
 Location of your business.
 Quality processes and procedures.
 Any other aspect of your business that adds value to your product or
service.
 Is the industry demand increasing or decreasing?
 How is the marketing effort of the company?
 Examples of Strengths – brand equity, distribution, innovation,
customer loyalty.
Weaknesses
 Lack of marketing expertise.
 Undifferentiated products or services (i.e. in relation to your
competitors).
 Location of your business.
 Poor quality goods or services.
  Damaged reputation.

Opportunities
 Any innovation possible?
 Left out markets and geographical territories?
 Any niche markets to be covered?
 Mergers, joint ventures or strategic alliances.
 Moving into new market segments that offer improved profits.
 A new international market.

Threats
 Increase in competition
 Changes in pricing
 Rising bottom-line and dropping topline
 Credit control
 Outdated technologies
 Poor cost control
 Ineffective processes
 Political and environmental influence?

What is Marketing environment?

The actors and forces outside marketing that affect marketing management
ability to build and maintain successful relationships with the target customers.

Micro or internal environment –

The actors close to company that affect its ability to serve its customers – the
company, suppliers, marketing intermediaries, customer markets, competitors,
and publics.

 The company
 Group such as top management, finance, research and development,
purchasing, operations, and accounting.
 Top management sets the company’s mission, objectives, broad
strategies, and policies.
 Finance department finds the fund source and use it in most efficient
way, purchasing worries about getting supplies and materials.
  Accounting has to measure revenues and cost to help marketing know
how well its achieving objectives.
 Together all the departments have an impact on marketing
department’s plans and actions.

 Suppliers
 Suppliers form an important link in the company’s overall customer
value delivery system.
 They provide the resources needed by the company to produce its
goods and services.
 Marketing managers must watch supply shortages or delays.

 Marketing intermediaries
 Marketing intermediaries help company to promote, sell, and
distribute its goods and services to final buyers.
 They include resellers, physical distribution firms, marketing services
agencies and financial intermediaries.
 Resellers are distribution channel firms that help the company find
customers or make sells to them. Walmart and best buy.
 Physical distribution firm helps the company to stock and move goods
from the points to their destinations.
 Marketing service agencies are the advertising agencies, media firms,
etc.
 Thus, maintain good relations with marketing intermediaries is too
much important as maintain relationships with the suppliers.

 Customers
 The company need to study five types of customer markets closely.
 Consumer markets consist of individuals and households that buy
goods and services for personal consumption.
 Business markets that buy goods and services for further processing
or for use in production process
 Resellers market buy goods and services to resell at a profit.
 Government markets are made up of govt. agencies that buy goods
and services to produce public services or transfer the goods to others
who need them.
 Finally, international market consists of these buyers in other
countries, including consumers, producers, resellers, and
governments.
  Competitors
 To be successful A company must provide greater customer value and
satisfaction than its competitors do.
 They also must gain strategic advantage by positioning their offerings
strongly against competitor’s offerings in the mind of consumers.
 No single competitive marketing strategy is best for all companies.
Each company should consider its own size and industry position
compared with those of competitors.

 Publics
 Any group that has an actual or potential interest in or impact on an
organization’s ability to achieve its objectives.
 We can identify seven types of public –
o Financial public influence the company’s ability to obtain funds.
Bank, investment houses, and stockholders are major financial
public.
o Media public carry news, features, and editorial opinion. They
include newspapers, magazines, and radio and television
stations.
o Government publics. Managers must often consult the
company’s lawyers on issues of product safety, truth in
advertising and other safety.
o Citizen action public. Consumer organizations, environmental
groups, minority groups, and others.
o Local publics include neighborhood residents and community
organizations. Large company appoints community relations
officer to deal with local publics.
o General public
o Internal public. Includes workers, managers, volunteers, and the
board of directors. Large company use newsletters and other
means to inform and motivate their internal public. When
employees feel good about their company, this positive attitude
spills over external public.

Macro or External environment – The larger societal force that affect the
microenvironment – demographic, economic, natural, technological, political,
and cultural forces.
 Demographic environment
 Is the study of human populations in term of size, density, location,
age, gender, race, occupation, and other statistics?
  The large and diverse demographics both offer opportunities but also
challenges for businesses.
 Marketers should keep a close eye on demographics.
 World population growth –
o The world population is growing at an explosive rate. Already in
2011, it reached 7 million, while being expected to reach 8
billion by the year 2030. By the end of the century, it is likely to
double.
o  This changes requirements for effective marketing strategies
and should be kept in mind.
 Changing age structure

 Changing family structure –

o Also, families are changing which means that the marketing
strategies aimed at them must undergo an adjustment. For
example, new household formats start emerging in many
countries. 
o  Together with further forces, changing family structures require
the marketing strategy to be changed.

 Geographic shift in population –

o One – and the most important – element of geographic shifts is
migration. By 2050, global migration is expected to double.
This has a major impact on both the location and the nature of
demand for products and services.

o The reason is that the place people can be reached has changed,
as have their needs because of the new situations.

 Economic forces
 The Economic forces relate to factors that affect consumer purchasing
power and spending patterns.
 For instance, a company should never start exporting to a country
before having examined how much people will be able to spend.
  Important criteria are: GDP, GDP real growth rate, GNI, Import Duty
rate and sales tax/ VAT, Unemployment, Inflation, Disposable
personal income, and Spending patterns.

 Natural environment
 Natural forces in the Macro Environment are important since they are
about the natural resources which are needed as inputs by marketers
or which are affected by their marketing activities. 
 For instance, world, air and water pollution are headlines every
marketer should be aware of. In other words, you should keep track of
the trends in the ecological environment.
 Important trends in the ecological environment are the growing
shortage of raw materials and the care for renewable resources. In
addition, increased pollution, but also increased intervention of
government in natural resource management is an issue.
 This means that they should contribute to supporting the environment,
for instance by using renewable energy sources. 
  Thereby, businesses do not only support the maintenance of a green
planet, but also respond to consumer demands for environmentally
friendly and responsible products

 Technological environment
 Technological forces form a crucial influence in the Macro
Environment. They relate to factors that create new technologies and
thereby create new product and market opportunities.
 Thus, marketers must watch the technological environment closely
and adapt in order to keep up. Otherwise, the products will soon be
outdated, and the company will miss new product and market
opportunities.
 EX. Tiny little transmitters implanted in all the products you buy that
would allow tracking products from their point of production though
use and disposal?

 Political environment –
 Every business is limited by the political environment. This involves
laws, government agencies and pressure groups. 
  These influences and restrict organizations and individuals in a
society.
 Therefore, marketing decisions are strongly influenced and affected
by developments in the political environment.
  Before entering a new market in a foreign country, the company
should know everything about the legal and political environment.
How will the legislation affect the business? What rules does it need
to obey? What laws may limit the company’s ability to be
successful? 
 For example, laws covering issues such as environmental protection,
product safety regulations, competition, pricing etc. might require the
firm to adapt certain aspects and strategies to the new market.

 Socio cultural environment –

 The Socio-Cultural forces link to factors that affect society’s basic
values, preferences and behavior. 
 The basis for these factors is formed by the fact that people are part of
a society and cultural group that shape their beliefs and values. 
  Many cultural blunders occur due to the failure of businesses in
understanding foreign cultures. 
 Peoples view of nature, society, universe, organization, others, and
themselves.
Significance of consumer behaviour –
 Before launching a product, it is important to study consumer behaviour as it will help them to know
how consumers respond to a particular product or services.
 As every consumer has different attitude, beliefs, views, mindsets, so it is very important aspects to
study consumer behaviour.
 Consumer behaviour covers a broad variety of consumers based on diversity in age, sex, culture,
taste, preference, educational level, income level, etc. Consumer behaviour can be defined as “the
decision process and physical activity engaged in evaluating, acquiring, using or disposing of goods
and services.”
 Understanding consumer behaviour helps in identifying whom to target, how to target, when to reach
them, and what message is to be given to them to reach the target audience to buy the product.
 The study of Consumer Behaviour helps in understanding how individuals make decisions to spend
their available resources like time, money, and effort while purchasing goods and services. It is a
subject that explains the basic questions that a normal consumer faces − what to buy, why to buy,
when to buy, where to buy from, how often to buy, and how they use it.
 Consumer behaviour is a complex and multidimensional process that reflects the totality of consumer
decisions with respect to acquisition, consumption, and disposal of goods and services.
Dimensions of consumer behaviour –
Consumer behaviour is multidimensional in nature and it is influenced by the following subjects −

 Psychology is a discipline that deals with the study of mind and behaviour. It helps in understanding
individuals and groups by establishing general principles and researching specific cases. Psychology
plays a vital role in understanding how consumers behave while making a purchase.

 Sociology is the study of groups. When individuals form groups, their actions are sometimes
relatively different from the actions of those individuals when they are operating individually.

 Social Psychology is a combination of sociology and psychology. It explains how an individual

operates in a group. Group dynamics play an important role in purchasing decisions. Opinions of
peers, reference groups, their families and opinion leaders influence individuals in their behavior.

 Cultural Anthropology is the study of human beings in society. It explores the development of
central beliefs, values and customs that individuals inherit from their parents, which influence their
purchasing patterns.
Individual and organisational consumer –
The term consumer behaviour describes two different kinds of consuming entities:
 Personal consumers
 Organisational consumers
1) Personal consumers –
 Personal consumers buy goods and services for his own use, for the use of household, or as a gift
for a friend.
 In each of these contexts, the products are bought for final use by individuals, who are referred to
as end users or ultimate consumers.
2) Organizational consumers –
 This includes profit and non-profit businesses, government agencies (local, state, and national),
and institutions (e.g. schools, hospitals, and prisons), all of which must buy products, equipment,
and services in order to run their organisation.

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Difference between individual buyer and organisational buyer –
The differences between consumer buying behaviour and organizational buying behaviour can be listed
as follows:

Bases Individual Buying Behaviour     Organizational Buying Behaviour

The individual consumers buy goods

The organizations buy goods and services for
and services for ultimate use or satisfy
Purpose of their business needs. The buying purpose of them is
their needs. The buying purpose of such
Buying to earn profit by using and reselling the goods and
consumers is not to earn profit by
services.
reselling the goods and services.

Organizational buying is done in large quantities.

Although consumers buy various kinds There are several reasons why organizations must buy
of goods, the quantity of goods remains the goods they need in bulk. In the first place, they
Quantity small. They buy only the necessary use large quantities of each item and must maintain
quantity of goods, which they need for inventories at a level high enough that they will not
regular use. run out of stock. Secondly, it is cheaper and more
efficient to make large-volume purchases.

Consumer buying takes decision by Organizational purchasing is a rational process

consumers themselves. Sometimes they because the purchasing behaviour of organizations is
Purchase
can consult with family members and guided by objective factors having to do with
Decision
friends. They need not fulfil any production and distribution. It takes long time than
formality like organizational buying. consumer buying.

Organizational purchase criteria are specifically

Most of the consumers may not have
defined. Organizational buyers usually have fewer
adequate knowledge and information
brands to choose from than do individuals, and their
Market about market situation, available goods
purchases must be evaluated on the basis of criteria
Knowledge and services, etc. The educated
that are specific to the overall needs of the
customers may be aware and have
organization. The organizational buyers have full
knowledge about market and goods.
knowledge of market and suppliers.

Types of Consumers buy many goods to use to Organizational buyers buy limited goods to use to
Goods satisfy personal or family needs. conduct business.

Many individuals are involved in the buying process.

Within large organizations, rarely is one individual
Consumer buying behaviour is affected
solely responsible for the purchase of products for the
Effect by age, occupation, income level,
purchase of products or services. Instead, many
education, gender etc. of consumers.
individuals and departments may be involved and
departments may be involved in the buying process.

The consumer buying process is very

Buying simple. No need to fulfil any formality. Buyers and sellers in the organizational market must
Process There is also no need to maintain maintain extensive contact.
extensive contact with sellers.

What is market segmentation –

Market segmentation can be defined as the process of dividing a market into distinct subsets of consumers
with common needs or characteristics and selecting one or more segments to target with a distinct marketing
mix.
Segmentation studies are designed to discover the needs and wants of specific groups of consumers, so that
specialized goods and services can be developed and promoted to satisfy each group’s needs.
Lifestyle segmentation –
 Customer lifestyle segmentation is pretty much what the name implies: It's a business practice that
divides and categorizes information about customers into subgroups.
 These subgroups are based on how the customers live and what they like.
 It helps in identifying a different set of people who are interested in different products and look for
specific featured or prices in a product. This segmentation can further be understood and segregated
on the basis of various dividing identifiers like geographic, demographics, and many more.
 Among the various types of segmentation, lifestyle segmentation holds its value in a unique way.
As the word suggests, lifestyle means the way of living a consumer is pursuing and then based on
these ways of living they are grouped to form the lifestyle segment. The importance of lifestyle
segmentation comes at two very important phases of the lifecycle of a product.
 The study of the lifestyle of consumers helps the marketers understand the right need of customers so
making a decision about what product should be targeted to which customer set becomes easy. And
another significant phase is the product communication as it tells what communication
message needs to be portrayed in front of the target audience to ensure they can relate to it.
 Lifestyle segmentation helps in understanding the customer requirements better and based on which
marketers can take appropriate decisions of rightly placing the products in the right market segments.
 The lifestyle of consumers consists of many aspects and to do the segmentation on this basis, it is
important to understand these different aspects. These aspects help in delivering the customized
services and good quality products. These lifestyle aspects are majorly divided into below as per the
commonly used tool called AIO (Activities, Interests, and Opinions) :-
 Activities – What are the daily activities of the consumers in which they are spending their
time and money?
 Interests – What are the interest of consumers?
 Opinions – What do they think about various issues, people, and surroundings?
 Demographics – What category in terms of age groups, gender, income, and occupation they
belong to?
All the above aspects are important to define the lifestyle of consumers and finally to come up with the
lifestyle segmentation.
Demographic segmentation –
Demographic segmentation is market segmentation according to age, race, religion, gender, family size,
ethnicity, income, and education. Demographics can be segmented into several markets to help an
organization target its consumers more accurately. With this type of segmentation, an organization can
categorize the needs of consumers.
Demography refers to the vital and measurable statistics of a population.
Demographics helps to locate a target market. Demographic information is often the most accessible and
cost effective way to identify the target market.
Demographic variables reveal ongoing trends that signal business opportunities, such as shifts in age,
gender, and income distribution.
The 5 main types of variables used for Demographic segmentation are as below.
 Age
 Life cycle stage
 Gender
 income
 Religion race and nationality
Each of the above variable is discussed in detail below. Demographic segmentation is one of the most
commonly used forms of segmentation amongst the 4 types of segmentation. The variables used for
Demographic segmentation help divide a large population into specific customer groups.
Each and every individual has an age, gender, income etc. Thus for mass marketing, this becomes one of the
best ways to diversify individuals. This also helps in analyzing lots of data in shorter time for market
research as well as for promotions.

1) Age 
One of the first variable of demographic segmentation is age. This is because consumer needs and
wants change with their age. A youngster might want a mobile phone but an earning professional will want a
communicator with lots of extra features such as email and file editing support. Thus even though the basic
functionality of the product is same, the wants are different. This is the primary reason for using age as a
variable in demographic segmentation.
2) Life cycle stage
Closely connected to age, the life cycle stage of a consumer group defines what will be the need of that
particular customer. Example –  a toddler will need infant food, a child will need dolls and toys, a middle
age customer will need insurance and investment plans and finally an old age person might need retirement
plans. This demographic segment cannot be said as an “Age” segment because these customers are in
specific phase of their “Life”.
3) Gender
Men are from mars and women are from Venus. So naturally their preferences differ. Where men might
want the latest in technology, women might desire the latest in Fashion (point is debatable nowadays) There
are several products which are gender focused such as deodorants, clothing, accessories, footwear and
even automobiles. Women are gaining acceptance even in under developed economies and this has seen an
increasing focus on women along with men as customers.
4) Income
BMW, Mercedes, Ferrari, these cars have customers who are much more quality and luxury conscious then
others. So what would be the target group of such products? The high income customer. Similarly,
in FMCG, you will see many brands and products which are targeted towards the Sec B and Sec C
customers. Thus, income too can be used to define a customer group from a population. These customers are
generally divided as Sec, Sec B and Sec C customers depending on their income and purchasing power.
5) Religion, Race, Nationality
Ever seen the advertising of a mass brand like Coca cola or Pepsi. Although these two brands have their own
global advertising, but they also have specific advertising in each country which they enter. The messages of
these advertisements are completely different and are based on the local customs, religions as well as
nationality. With the tremendous increase in international business, there is also an increase in the usage of
demographic segmentation on the basis of religion, race and nationality.
Usage segmentation –
 Once marketing was customer oriented, it was important to understand the consumption pattern of
customers and thereby come out with unique ways to meet these usage patterns. And hence, usage
based segmentation was established.
 The concept of usage-based segmentation is simple. For any product, the need and consumption level
of customers will be different. Its like comparing the diesel consumed by a car vs the diesel
consumer by a truck or a bus.
 Some people like biscuits a lot and their consumption of biscuits is higher, whereas others might like
cookies equally. Hence the biscuit guy is unlikely to buy cookies and vice versa. For the company, it
becomes important to segment the guy who buys biscuits in large volume, otherwise they will land
up targeting a person who likes cookies instead of biscuits.
Here are some excellent examples of usage-based segmentation in action -
 Ultrabook’s (MacBook air) launched by Intel and Apple looking at the long sitting hours of some of
their customers.
 Robust packaging of oil and other such day to day items which are used heavily by customers.
 Maggi being packed in increasing sizes like 8 packs, 12 packs because of increasing consumption /
usage by customers.
 Production planning happening on the basis of usage by customers. The higher used items being
produced more than the lesser used ones.
Benefit segmentation –
 Benefit segmentation is dividing your market based upon the perceived value, benefit, or advantage
consumers perceive that they receive from a product or service. You can segment the market based
upon quality, performance, customer service, special features, or other benefits. Often, different
grades of the same product are offered to different market segments. Many different businesses use
this type of segmentation, including the auto, clothing, furniture, and consumer electronics
industries.
 The general benefits consumers expect from brand are – Functional (i.e. quality), value for it’s
money, social benefits, positive emotional benefits, and negative emotional benefits.
 Changing lifestyle also play a major role in determining the product benefits that are important to
consumers and provide marketers with opportunities for new products and services. For example,
microwave oven was the perfect solution to the needs of dual income households.
Benefit segmentation can be used to position various brand within the same product category.
Product positioning –
A good positioning makes a product unique and makes the users consider using it as a distinct benefit to
them. A good position gives the product a USP (Unique selling proposition). In a market place cluttered
with lots of products and brands offering similar benefits, a good positioning makes a brand or product stand
out from the rest, confers it the ability to charge a higher price and stave off competition from the others. A
good position in the market also allows a product and its company to ride out bad times more easily. A good
position is also one which allows flexibility to the brand or product in extensions, changes, distribution and
advertising. 
 Positioning defines where your product (item or service) stands in relation to others offering
similar products and services in the marketplace as well as the mind of the consumer. 
 Effective positioning is a unique position that the product occupies in the mind of the consumers.
 Most new products failed because they are perceived as me too offerings, and they do not offer
any advantages or unique benefits over competitive products.
Marketers of different brand in the same categories can effectively differentiate their offerings only if they
stress the benefits provides rather than their product’s physical features.
The benefits featured in a product positioning must reflect attributes that are important to the congruent with
the perception of the targeted consumer segment. For example – The two energy bars nutrigrain and balance
are probably quite similar in terms of their nutritional composition and their physical characteristics,
however each one of the two brands is clearly positioned to offer a distanced benefit. Nutrigram is
positioned as a alternative to unhealthy snack food in the morning and balance is positioned as an energy
pickup for the late after noon.