MB20103 - MBA

MARKETING MANAGEMENT
UNIT 2

- Dr.C.Senthil Nathan MBA, M.Phil, Ph.D(Marketing Area)

Faculty- MARKETING TEAM
SRM- College of Management
SRMIST
“MAKE THINGS HAPPEN”

(All students can refer Core Text Book and Class Notes along
with this Reference Material)
(FOR READING WITH CONCENTRATION TAKE PRINT OUTS or USE
DESKTOP/ LAPTOP)

CORE TEXT BOOKS-

1.MARKETING MANGEMENT- 15TH EDITION- PHILIP KOTLER, KEVIN LANE

KELLER- PEARSON PUBLICATIONS.

2. PRINCIPLES OF MARKETING-17TH EDITION- PHILIP KOTLER,GARY

AMSTRONG, PRAFULLA AGNIHOTRI- PEARSON PUBLICATIONS

3.MARKETING MANAGEMENT-15TH EDITION- KOTLER,

KELLER,KOSHY,JHA- PEARSON PUBLICATIONS
 UNIT 2

TOPIC-1- MARKETING INFORMATION SYSTEM

TOPIC- 2 -MARKETING METRICS

TOPIC 3 - CUSTOMER VALUE

TOPIC 4- TYPES OF MARKETS

TOPIC 5- CONSUMER BUYING BEHAVIOUR

TOPIC 6-MARKETING ENVIRONMENT

TOPIC1- MARKETING INFORMATION SYSTEM
A marketing information system (MIS) consists of people, equipment, and
procedures to gather, sort, analyse, evaluate, and distribute needed, timely, and
accurate information to marketing decision makers. It relies on internal
company records, marketing intelligence activities, and marketing research:
(a) an internal records system,
(b) a marketing intelligence system, and
(c) a marketing research system.
A. Internal Records
To spot important opportunities and potential problems, marketing managers rely
on internal reports of order, sales, prices, costs, inventory levels, receivables, and
payables.
A. Internal Records have 3 components:
(i)The Order-to-Payment Cycle
(ii)Sales Information Systems
(iii) Databases, Data Warehousing, and Data Mining.

(i)The Order-to-Payment Cycle

The heart of the internal records system is the order-to-payment cycle. Sales
representatives, dealers, and customers send orders to the firm. The sales
department prepares invoices, transmits copies to various departments, and back-
orders out-of-stock items. Shipped items generate shipping and billing documents
that go to various departments. Because customers favour firms that can promise
timely delivery, companies need to perform these steps quickly and accurately.

(ii)Sales Information Systems

Marketing managers need timely and accurate reports on current sales. Walmart
retail store operates a sales and inventory data warehouse that captures data on
every item for every customer, every store, every day and refreshes it every hour.
Companies that make good use of “cookies,” records of Web site usage stored
on personal browsers, are smart users of targeted marketing. Many consumers are
happy to cooperate: A recent survey showed that 49% of individuals agreed
cookies are important to them when using the internet.

(iii)Databases, Data Warehousing, and Data Mining

Companies organize their information into customer, product, and salesperson
databases – and then combine their data. The customer database will contain
every customer’s name, address, past transactions, and sometimes even
demographics and psychographics (activities, interests, and opinions). Instead of
sending a mass “carpet bombing” mailing on a new offer to every customer in its
database, a company will rank its customers according to factors such as purchase
recency, frequency, and monetary value ( RFM ) and send the offer to only the
highest-scoring customers.
• Data Warehousing- It stores all the databases of organization in organized
way yearly, monthly that can be retrieved and generate the report when
needed by marketing department. The data will be constant.
• (Past 5 years sales report for a bike or car or laptop brand)
• Datamining- It is analyzing data using statistical tools to arrive at a pattern
in sales report or marketing report. It will give future prediction and also
understanding relationship between factors.
B. Marketing Intelligence
(i)The marketing Intelligence System
(ii)CRM & Big Data and Marketing Analytics
A marketing intelligence system is a set of procedures and sources that
managers use to obtain everyday information about developments in the
marketing environment. The internal records system supplies results data, but the
marketing intelligence system supplies happenings data. Marketing managers
collect marketing intelligence in a variety of different ways, such as by reading
books, newspapers, and trade publications; talking to customers, company
managers.
A company can take eight possible actions to improve the quantity of its
marketing intelligence gatherers. After describing the first seven, we devote
special attention to the eighth, collecting marketing intelligence on the Internet.
(i)Train and motivate the sales force to spot and report new developments :
The company must “sell” its sales force on their importance as intelligence
gatherers. Many companies in South Asia encourage their sales force to give
suggestions for improving existing offerings and identifying opportunities for
new offerings.
(ii)Motivate distributors, retailers, and other intermediaries to pass along
importance intelligence : Marketing intermediaries are often closer to the
customer and competition and can offer helpful insights.
(iii)Hire external experts to collect intelligence : Many companies hire
specialists to gather marketing intelligence. Service providers and retailers send
mystery shoppers to their stores to assess cleanliness of facilities, product quality,
and the way employees treat customers.
(iv)Network internally and externally : The firm can purchase competitors’
products, attend open houses and trade shows, read competitors’ published
reports, attend stockholders’ meetings, talk to employees, collect competitors’
ads, consult with suppliers, and look up news stories about competitors.
(v)Set up a customer advisory panel : Members of advisory panels might
include the company’s largest, most outspoken, most sophisticated, or most
representative customers.
(vi)Take advantage of government data resources : Government agencies in
South Asia provide detailed data pertaining to population trends, demographic
characteristics, agricultural production, and a host of useful data. Population
census conducted by governments is an important data source.
(vii)Purchase information from outside suppliers : Companies can also make
use of data that is purchased from other agencies. Such data is available from a
number of firms that specialize in these jobs.
(viii)Collecting Marketing Intelligence on the Internet :
Independent customer goods and service review forums : Independent forums
include Websites such as Epinions.com, RateItAll.com, MouthShut.com, and
Bizrate.com.
Distributor or sales agent feedback sites : Feedback sites offer positive and
negative product or service reviews, but the stores or distributors have built the
sites themselves. Amazon.com offers an interactive feedback opportunity through
which buyers, readers, editors, and others can review all products on the site,
especially books.
Combo sites offering customer reviews and expert opinions : Combination
sites are concentrated in financial services and high-tech products that require
professional knowledge.
Customer complaint sites : Customer complaint forums are designed mainly for
dissatisfied customers. PlanetFeedback.com allows customers to voice
unfavourable experiences with specific companies.
Public blogs : Tens of millions of blogs and social networks exists online,
offering personal opinions, reviews, ratings, and recommendations on virtually
any topic – and their numbers continue to grow.
Social media sites- Facebook, LinkedIn, Twitter, Instagram( Positive and
negative buzzes about the brands)
(ii)CRM- Customer relationship management is managing detailed information
about individual customers and carefully managing customer touch points to
maximize customer loyalty
(iii)Big Data and Marketing Analytics- Consist of analytical tools, technologies
and process by which marketers dig out meaningful patterns to gain consumer
insights and gauge marketing performance. Marketers apply marketing analytics
to large and complex set of data they collect from web, mobile, social media
tracking, customer transactions, engagements and other big data sources
The success of Marketing information system for marketing department and
organization depends on how that marketing manager or chief marketing officer
uses the internal records, marketing intelligence system understanding marketing
environment factors affecting the market and using marketing research system
for finding solutions to marketing problems and achieving future marketing goals
of the department.
C.MARKETING RESEARCH

Define the problem and

research objectives

Develop the research plan

Collect the information

Analyze the information

Present the findings

Make the Decision

MARKETING RESEARCH

Step 1 : Define the problem, the Decision Alternatives, and the Research
Objectives :

Problems should not be defined either too broadly or too narrowly. A very broad
or vague definition leads to excessive wastage of resources.

Research objectives- Marketing research project will have any of the following 3
objectives:

Exploratory research- Problem will be identified and defined at the end of

research. It will be used when the organization is not sure of the problem

Descriptive research- This approach is used to find solution to marketing

problem that is well defined. This approach is used when organization is sure of
the problem

Causal research- This approach is used for cause and effect research. For
laboratory research, test marketing this research approach will be used.

Step 2 : Develop the Research Plan : The second stage of marketing research
requires developing the most efficient plan for gathering, the required
information. This involves decisions on data sources, approaches, research
instruments, sampling plan, and contact methods.

RESEARCH APPROACHES : Primary data can be collected in five ways:

through observation, focus groups, surveys, behavioural data, and experiments.

1. Observational Research : Researchers can gather fresh data by observing the

relevant actors and settings, unobtrusively observing as they shop or as they
consume products
 Ethnographic research is a particular observational research approach that
uses concepts and tools from anthropology and other social science disciplines to
provide deep understanding of how people live and work. The goal is to immense
the researcher into customers’ lives to uncover unarticulated desires that might
not surface in any other form of research.

2.Focus Group Research : A focus group is a gathering of six to ten people who
are invited to spend a few hours with a skilled moderator in order to discuss a
product, service, organisation, or any other marketing entity. The moderator
needs to be objective, knowledgeable, and skilled in group dynamics. Participants
are normally offered some gifts or incentives for attending the meeting.

3.Survey Research : Surveys are best suited for descriptive research. Companies
undertake surveys to learn about people’s knowledge, beliefs, preferences, and
satisfaction. It requires development of a survey instrument, usually a
questionnaire, which the respondents are asked to fill up.

4.Behavioural Data : Customers’ actual purchases reflect preferences and are

normally more reliable than memory-based statements made in surveys. It is
understanding behaviour using sales data and other relevant data from database.
Observations on studying behaviour of consumers have shown that many high-
income-group customers do not buy expensive consumer goods, while some low-
income consumers end up buying expensive products.

5.Experimental Research The most scientifically valid research is

experimental research. The purpose of experimental research is to capture
cause-and-effect relationships by eliminating competing explanations of the
observed findings. To the extent that the design and execution of the experiment
eliminate alternative hypotheses that might explain the results, research and
marketing managers can have confidence in the conclusions.
Research Instruments : Marketing researchers have a choice of three main
research instructions in collecting primary data: questionnaires, qualitative
measures, and technological devices.

(i)Questionnaires -A questionnaire consists of a set questions presented to

respondents. Because of its flexibility, it is by far the most common instrument
used to collect primary data. Researchers need to carefully develop, test, and
debug questionnaires before administering them on a large scale. The form,
wording, and sequence of the questions can all influence the responses.

(ii)Qualitative research techniques are relatively unstructured measurement

approaches that permit a range of possible responses.

(a)Word associations

(b)Projective techniques

(c)Visualization : Visualization requires people to create a collage from

magazine photos or drawings to depict their perceptions.

(iii) Technological Devices: (iii) Technological Devices: Google forms, soft

ware packages etc

SAMPLING PLAN : After deciding on the research approach and instruments,

the marketing researcher must design a sampling plan. This calls for three
decisions :

Sampling unit : Whom should we survey ?

Sample size : How many people should we survey?

Sampling procedure : How should we choose the respondents ?

CONTACT METHODS : Now the marketing researcher must decide how to

contact the subjects: by mail, by telephone, in person, or online.
Step 3: Collect the Information

The data collection phase of marketing research is generally the most expensive
and most prone to error. Marketers may conduct surveys in homes, over the
phones, via the Internet, or at a central interviewing location like a shopping mall.
Four major problems arise in surveys. Some respondents will be away from home
or otherwise inaccessible and must be contacted again or replaced. Other
respondents will refuse to cooperate. Still others will give biased or dishonest
answers. Finally, some interviewers will be biased or dishonest.

Sometimes the solution may be as simple as ensuring the right language is used.

Step 4: Analyse the Information

The next-to-last step in the process is to extract findings by tabulating the data
and developing summary measures. The researchers now compute averages and
measures of dispersion for the major variables and apply some advanced
statistical techniques and decision models in the hope of discovering additional
findings.

Step 5: Present the Findings

As the last step, the researcher presents findings relevant to the major marketing
decisions facing management. Researchers increasingly are being asked to play a
more proactive, consulting role in translating data and information into insights
and recommendations. They’re also considering ways to present research
findings in as understandable and compelling a fashion as possible.

Step 6: Make the Decision

Research findings only provide additional information and insight to managers.

Depending on their confidence in the findings, managers decide to use it, discard
it, or carry out more research.
A marketing decision support system ( MDSS) as a coordinated collection of
data, systems, tools, and techniques, with supporting software and hardware, by
which an organization gathers and intercepts relevant information from business
and environment and turns it into basis for marketing action.

TOPIC- 2 -MARKETING METRICS

Marketers are facing increased pressure to provide clear, quantifiable evidence to

senior management has to how their marketing expenditures help the firm to
achieve its goals and financial objectives. Although we can quantify marketing
expenses and investments has inputs in the short run , the resulting outputs such
as broader brand awareness , enhanced brand image, greater customer loyalty ,
improved new product prospects may take months or even years to manifest
themselves . Moreover , a whole host of internal changes within the organisation
and external changes in the marketing environment may coincide with the
marketing expenditures , making it hard to isolate the effects of any particular
marketing activity.

Nevertheless, an important task of marketing research is to assess the

efficiency and the effectiveness of marketing activities .

Marketing metrices is the set of measures that helps them , quantify ,

compare , and interpret their marketing performance.

Four long term brand strength metrices- market awareness, consideration,

trial , and regular purchase of the brand as well as a number of short term program
– specific metrics like ad impressions , website traffic, and purchase conversion.

A broad set of online metrics-cost per acquisition, cost per click and cost
per thousand page impression(CPM). Mobile services market, uses average
revenue per use (ARPU), realisations per minute, and retention of customers as
key metrics to measure performance in its industry.
 London business school’s Tim ambler suggest that if firms think they are
already measuring marketing performance adequately , they should ask
themselves five questions.

1.Do you routinely research consumer behaviour (retention, acquisition, usage)

and why consumers behave that way(awareness, satisfaction, perceived quality).

2. Do you routinely report the results of this research to the board in a format
integrated with financial marketing metrics ?.

3. In those reports, do you compare the results with the levels, previously
forecasted in the business plans ?

4. Do you also compare them with the levels achieved by your key competitor
using the same indicators ?

5. Do you adjust short-term performance according to the change in your

marketing –based asset.?

Ambler says firms must give priority to measuring and reporting marketing
performance through marketing metrics. He believes they can split evaluation
into two parts short-term, and (2). Changes in brand equity. Short term results
often reflect profit-and –loss concern measures could include customer awareness
, attitudes, and behaviours; market share; relative price premium; number of
complaints ; distribution and availability; total number of customers perceived
quality, and loyalty and retention.

Companies can also monitor an extensive set of internal metrics, such as

innovation. For example, 3M tracks the proportion of sales resulting from its
recent innovations.

Marketing-Mix Modelling : Marketing accountability also means that marketers

must more precisely estimate the effects of different marketing investments.
Marketing-mix models analyse data from a variety of sources such as retailer
scanner data, company shipment data, pricing, media and promotion spending
data, to understand more precisely the effects of specific marketing activities. To
deepen understanding, marketers can conduct multivariate analyses, such as
regression analysis, to sort through how each marketing element influences
marketing outcomes such as brand sales or market share.

TOPIC 3 - CUSTOMER VALUE

• TOTAL CUSTOMER VALUE

• CUSTOMER VALUE ANALYSIS

• VALUE PROPOSITION

• DELIVERING VALUE PROPOSITION

• CUSTOMER SATISFACTION

• BRAND LOYALTY

• CUSTOMER PROFITABILITY ANALYSIS( 2 METHODS)

• MAXIMIZING CUSTOMER VALUE

• CUSTOMER RELATIONSHIP MANAGEMENT

• ENHANCING CUSTOMER RELATIONSHIP

• CUSTOMER DEVELOPMENT PROCESS

• BUILDING BRAND LOYALTY

(i)CUSTOMER VALUE:

Kotler & Keller(2012) defines Total customer value is the perceived monetary
value of the bundle of economic, functional and emotional benefits customer
expect from a given market offering because of product, service, personal and
image value involved. Total customer cost is perceived bundle of cost that
customer expects to incur in buying, using, disposing the monetary offering
including monetary, time, energy and psychic costs.
BENEFITS- Image Benefit, Personal Benefit, Services Benefit, Product Benefit
All This Leads To Total Customer Benefit
COST- Psychological Cost(For Image Benefit), Energy Cost(Personal Benefit),
Time Cost(Services Benefit), Monitory Cost(Product Benefit), Total Customer
Cost(Total Customer Benefit)
(ii)Creating Customer Value
Emotional Benefits: Emotional benefits of a marketing offer as it creates ‘good
feeling’ when it is delivered with the customer experience that will have high
impact.
Functional Benefits: Functional benefits of a marketing offering is it’s
performance, durability and satisfying the indented purpose of purchase of the
product.
Economic Benefits: Economic benefits of marketing offering is its ability to
save cost and give monetary benefit for the customers.
Customer value is created by above benefits for the costs paid by customers.

(iii)CUSTOMER VALUE ANALYSIS

• Identify the major attributes and benefits that customer value

• Assess the quantitative importance of the different attributes and benefits

• Assess the company’s and competitor’s performances on the different

customer value against their importance

• Examine how customers in a specific segment rate the company’s

performance against a specific major competitor on an individual attribute
or benefit basis

• Monitor customer values over time

Customer value analysis helps to reveal the company's strengths and weakness
relative to those of competitors.

(IV)DELIVERING HIGH CUSTOMER VALUE

• CUSTOMER LOYALTY
Oliver defines loyalty as “ A deeply held commitment to rebuy or patronize a
preferred product or service in future despite situational influences and marketing
efforts having the potential to cause switching behaviour
VALUE PROPOSITION: consist of whole cluster of benefits the company
promises to deliver to customers to satisfy their needs.
VALUE DELIVERY SYSTEM
Includes all the experiences the customer will have on the way to obtaining and
using the offering. At the heart of good value delivery system is set of core
business process that help to deliver distinctive customer value.
DELIVERING HIGH CUSTOMER VALUE
Delivering high customer value is by creating value proposition, value delivery
system and leads to development of customer satisfaction and developing brand
loyalty

(V)TOTAL CUSTOMER SATISFACTION

• Satisfaction is a persons feeling of pleasure or disappointment that result
from comparing a product’s perceived performance to their expectations.
• Customer satisfaction- If the product’s perceived performance by customer
meets the expectation of customer it is called Customer satisfaction.
• Customer dissatisfaction-- If the product’s perceived performance by
customer did not meets the expectation of customer it is called Customer
satisfaction.
• Customer delight- If the product’s perceived performance by customer
exceeds the expectation of customer it is called Customer satisfaction.
CUSTOMER SATISFACTION TO ALL PARTNERS
 Increasing customer satisfaction by lowering costs or increasing the
services reduce profitability . It will affect other stakeholders of company
employees, suppliers, distributers etc. customer satisfaction without
affecting the profitability is important for consistent performance and long-
term growth.
MONITORING & MEASURING CUSTOMER SATISFACTION
IMPORTANCE

• Loyal For Longer Time

• Buy Up Gradation And New Varieties

• Word Of Mouth

• Less Attention To Competitor Brands

• Less Sensitive To Prices, Offers

• Cost Less Than Acquiring New Customers

INFLUENCING CUSTOMER SATISFACTION-

INTERNET ROLE

• Role of social media

• Website’s role is getting feedback and grievances

• High customer satisfaction should be made known to target audience

• -JD power’s customer satisfaction rating

(VI)MAXIMIZING CUSTOMER LIFETIME VALUE(CLV)

20-80 RULE

• 20% Of Customers Generate 80% Or More Of Company’s Profits

• 20% Customer’s -150%-300% Profit

• 60%-70% Customers-Break Even

 • 10%-20% Customer- Reduce Profit By 100%-200%

CUSTOMER PROFITABILITY:

• Profitable customers- Customers revenue streams that exceed

acceptable amount of company’s cost streams for attracting selling and
servicing that customers

• Revenue stream- life stream of revenue and cost not on the profit from
particular transaction

CUSTOMER PROFITABILITY ANALYSIS CUSTOMER-PRODUCT

PROFITABILITY ANALYSIS:

Above picture shows highly profitable customers and profitable customers and Highly
profitable products and profitable products.
CUSTOMER PROFITABILITY ANALYSIS ACTIVITY BASED
COSTING(ABC)
• Platinum Customers-Most Profitable
• Gold Customers- Profitable
• Iron Customers- Low Profitability For Desired Volume
• Lead Customers- Unprofitable Customers
ABC Analysis-Estimate All Revenue From Customers Less Costs(Making,
Distributing Product, Servicing Cost, Tele-Calls, Travelling Cost Etc)

MAXIMIZING CUSTOMER VALUE

CRM- Customer Relationship Management is the process of carefully
managing detailed information about individual customers and all customer
“touch points” to maximize customer loyalty
CUSTOMER TOUCH POINT-is any occasion on which a customer encounter
brand and product- from personal experience, mass communication or casual
observation.
INCREASING VALUE OF CUSTOMER BASE FOR ENHANCING
CUSTOMER RELATIONSHIP:
1. Reducing Rate Of Customer Defection Or Churn- selecting training
employees to be knowledgeable and friendly increases the likelihood that the
inevitable shopping questions will be answered satisfactorily.
2. . Increasing The Longevity Of Customer Relationship- Making the
customers involved with the company leads to customer stick around the
company
3. Increasing Value Of Customer Base For Enhancing Customer
Relationship- Enhancing growth potential of each customer through “share of
wallet”, cross selling and up selling.
4. Increasing Value Of Customer Base For Enhancing Customer
Relationship- making low-profitable customers more profitable or terminating
them. Focusing disproportionate effort on high-value customers
(VII)CUSTOMER DEVELOPMENT PROCESS

Potentials, Prospects, First Time Customers, Repeat Customers, Clients(Very

Special & Knowledgeable Treatment),Members, Advocates & Partners.

BUILDING CUSTOMER LOYALTY

• Interacting with customers- rural relations, senior managers in front line

desk

• Developing loyalty programs- frequency programs(fps), club marketing

programs(for who willing to pay a small fee) apple user groups, harley
owners groups(h.o.g)

Personalized marketing- dell computers

TOPIC 4- TYPES OF MARKETS

I.TYPES OF MARKET

(1) Consumer Market

(2) Business Market

- Commercial market

- Institutional Market

-Government Market
CONSUMER MARKET vs BUSINESS MARKET
SNo DIFFERENTIATING CONSUMER MARKET BUSINESS MARKET
FACTORS
1 PRICE AND COST All price ranges but low priced Higher price when
when compared to Industrial compared to consumer
goods goods
2 BUYERS Many buyers Fewer and larger
buyers
3 Relation ship Not Close supplier-customer Close supplier-
relationship customer relationship
4 PURCHASING Novice ,Expert purchasing but not Professional
professional Purchasing
5 Influence Single or Fewer buying influence Multiple buying
influence
6 Sales calls Fewer sales calls Multiple sales calls
from initial stage to
final purchase decision
7 Demand Not derived demand Derived Demand- The
demand for Industrial
goods is derived from
Consumer goods
Elastic Demand- Demand for
product is affected by changes in Inelastic demand-
prices Demand for product
will not be affected by
changes in prices
8 Concentration of Geographically dispersed buyers Geographically
Buyers concentrated buyers
9 Purchasing Type Purchased through intermediary Purchased Directly
channels such as retailers, from manufacturers.
wholesalers, Agents

Consumer Market- are markets for products and services from local to
international market bought by consumers for personal use, personal
consumption, family use and family consumption
Business markets- are markets for products and services from local to
international market bought by business organizations, government bodies
and institutions for following purposes:

FOR INCORPORATION(Ingredient materials or components)

FOR CONSUMPTION( Process material, consulting, office supply)

FOR USE(Installation and Equipment)

FOR RESALE

In Business Marketing customers are organizations. Business markets do NOT

deal with products or services directed at personal use or personal consumption.

The factors that distinguishes Business marketing from consumer marketing is

Nature of customer and how that customer uses the product.

II TYPES OF BUSINESS MARKET:

1. COMMERCIAL MARKET

2. INSTITUTIONAL MARKET

3. GOVERNMENT MARKET

1. COMMERCIAL CUSTOMERS

• Manufacturers

• Construction companies
• Service firms

• Transportation companies

• Selected Professional groups

• Wholesalers and Retailers

Manufacturers are most important among above. The 100 largest companies
purchases more than 50 lakh crore annually

2. INSTITUTIONAL MARKET

• Schools , Colleges and Universities

• Health care organizations
• Libraries
• Foundations
• Art galleries
• Clinics

Institutional markets are characterized by low budgets and captive

patrons. They have manage their buying within the budget. They will
look for products with good quality at a price that gives value

3. GOVERNMENTAL CUSTOMERS
1.Federal/ Central government
o Non-defence
o Defence
2. State Government
3.Local Corporations
o City corporations/Panchayat boards

Government market offers large opportunities for many companies both big and
small. In India government buying involves bidding method and tender
methods. To succeed in government market sellers must identify factors that
will make them eligible for government tenders, understand buying decision
process, and key decision makers. They should know technical parameters,
quality parameters that will be essential for qualifying for tenders and then
quote for the lowest price to get the government orders. Today various
government department websites give details and procedures for tenders and
bids as many governments are using online methods for tenders and bidding.

TOPIC 5- CONSUMER BUYING BEHAVIOUR

(I) FACTORS INFLUENCING CONSUMER BUYING BEHAVIOUR

EXTERNAL FACTORS

(1)Cultural- Culture, Sub-culture and Social Class – Lower-lower, Upper-

Lower, Working Class, Middle Class, Upper Middle, Lower Upper, Upper
Upper

(2)Social Factors- Reference Group-(1) Primary Group (2)Secondary Group(3)

Aspirational Group (4)Dissociative Group

(3)Personal Factors- Age & Stage in Life cycle, Occupation and Economic
circumstances, Personality and Self Concept

INTERNAL FACTORS

(1)Motivation-: A need that is sufficiently pressing to direct the person to seek

satisfaction of the need.

(2)Perception- The process by which people select, organise, and interpret

information to form a meaningful picture of the word.

(3)Learning- Changes in an individual’s behaviour arising from experience.

(4) Memory- STM- Short Term Memory & LTM- Long-Term Memory

(5)Belief : A descriptive thought that a person holds about something.

(6)Attitude : A person’s consistently favourable or unfavourable evaluations,
feelings, and tendencies toward an object or idea.

BUYING BEHAVIOUR:
4 Types of Buying Decision Behaviour :
Complex buying behaviour : Consumer buying behaviour in situations
characterised by high consumer involvement in a purchase and significant
perceived differences among brands.
Consumers may be highly involved when the product is expensive. Typically,
the consumer has much to learn about the product category. For example,
someone buying a new car might not know what models, attributes, and
accessories to consider or what prices to expect.
Dissonance – Reducing Buying Behaviour
Dissonance –Reducing Buying Behaviour occurs when consumers are highly
involved with an expensive, infrequent, or risky purchase but see little
difference among brands. For example, consumers buying carpeting may face a
high-involvement decision because carpeting is expensive and self-expressive.
Yet buyers may consider most carpet brands in a given price range to be the
same.
Variety seeking buying behaviour : Consumer buying behaviour in situations
characterised by low consumer involvement and few significant perceived
brand differences. This behaviour is when buying a shampoo or bathing soap
that have significant difference in brands
Habitual buying behaviour : Consumer buying behaviour occurs under
conditions of low – consumer involvement and little significant brand
difference. For example, take table salt. Consumers have little involvement in
this product category – they simply go to the store and reach for a brand.
. Buying At the other
behaviour extreme, for
High Low
varies greatly low –

between brands
Involvement Involvement

differences
Significant
for different involvement
types of Complex Variety – products,
products. For buying seeking buying consumers may
example, behaviour behaviour simply select a
someone familiar brand
buying a new out of habit.
between brands
Few differences

car might Dissonance – For example,

reducing Habitual
undertake a what brand of
buying buying
full salt do you buy
behaviour behaviour
information – and why?
gathering &
brand
evaluation
process

FOUR TYPES OF BUYING BEHAVIOUR

(II) CONSUMER BUYING BEHAVIOUR PROCESS

1. PROBLEM RECOGNITION

2. INFORMATION SEARCH

3. EVALUATION OF ALTERNATIVES

4. PURCHASE DECISION

5. POST PURCHASE BEHAVIOUR

CONSUMER BUYING DECISION PROCESS

The buying process starts long before the actual

purchase and continues long after. Therefore,
marketers must focus on the entire buying process,
not just the purchase decision.

Need
recognition
Information
search
Evaluation of
alternatives
Purchase
decision
Post purchase
behaviour
BUYER DECISION PROCESS

Figure 5.5 shows that the buyer decision process consists of five stages : need
recognition, information search, evaluation of alternatives, the purchase
decision, and post purchase behaviour.
Clearly, the buying process starts long before the actual purchase and
continues long after. Marketers need to focus on the entire buying process
rather than on the purchase decision only.
STAGE 1-Need Recognition -The buying process starts with need
recognition – the buyer recognizes a problem or need. The need can be
triggered by internal stimuli when one of the person’s normal needs – for
example, hunger or thirst – rises to a level high enough to become a drive. A
need can also be triggered by external stimuli. For example, an advertisement
or a discussion with a friend might get you thinking about buying a new car.
STAGE 2-Information Search -An interested consumer may or may not
search for more information. If the consumer’s drive is strong and a
satisfying product is near at hand, he or she is likely to buy it then. If not, the
consumer may store the need in memory or undertake an information research
related to the need.
Consumers can obtain information from any of several sources. These include
personal sources (family, friends, neighbours, acquaintances), commercial
sources (advertising, salespeople, dealer and manufacturer web and mobile
sites, packaging, displays), public sources (mass media, consumer rating
organisations, social media, online searches and peer reviews), and
experimental sources (examining and using the product). The relative
influence of these information sources varies with the product and the buyer.
As more information is obtained. A company must design its marketing mix
to make prospects aware of and knowledgeable about its brand. It should
carefully identify consumers’ sources of information and the importance of
each source.

STAGE-3-Evaluation of Alternatives
Next, marketers need to know about Alternative Evaluation, that is how
consumers do not use a simple and single evaluation process in all buying
situations. Instead, several evaluation processes are at work.
Go about evaluating purchase alternatives depends on the individual
consumer and specific buying situation. In some cases, consumers use careful
calculations and logical thinking. At other times, the same consumers do little
or no evaluating. Instead, they buy on impulse and rely on intuition.
Sometimes consumers make buying decisions on their own; sometimes they
turn to friends, online reviews, or salespeople for buying advice.
Marketers should study buyers to find out how they actually evaluate brand
alternatives. If marketers know what evaluative processes go on, they can take
steps to influence the buyer’s decision.
STAGE 4-Purchase Decision In the evaluation stage, the consumer ranks
brands and forms purchase intensions. Generally, the consumer’s Purchase
decision will be to buy the most preferred brand, but two factors can come
between the purchase intention and the purchase decision. The first factor is
the attitudes of others.
The second factor is unexpected situational factors. The consumer may form a
purchase intention based on factors such as expected income, expected price,
and expected product benefits. However, unexpected events may change the
purchase intention. For example, the economy might take a turn for the worse,
a close competitor might drop its price, or a friend might report being
disappointed in your preferred car.
STAGE 5-Post purchase Behaviour
The answer lies in the relationship between the consumer’s and the product’s
perceived performance. If the product falls short of expectations, the
consumer is disappointed; if it meets expectations, the consumer is satisfied; if
it exceeds expectations, the consumer is delighted. The larger the negative gap
between expectations and performance, the greater the consumer’s
dissatisfaction. This suggests that sellers should promise only what their
brands can deliver so that buyers are satisfied.
Almost all major purchases, however, result in cognitive dissonance, or
discomfort caused by post purchase conflict. After the purchase, consumers
are satisfied with the benefits of the chosen brand and are glad to avoid the
drawbacks of the brands not bought. However, every purchase involves
compromise. So consumers feel uneasy about acquiring the drawbacks of the
chosen brand and about losing the benefits of the brands not purchased. Thus,
consumers feel atleast some post purchase dissonance for every purchase.
The Buyer Decision Process for New Products
A new product is a good, service, or idea that is perceived by some potential
customers as new. It may have been around for a while, but our interest is in
how consumers learn about products for the first time and make decisions on
whether to adopt them. We define the adoption process as the mental process
through which an individual passes from first learning about an innovation to
final adoption. Adoption is the decision by an individual to become a regular
user of the product.
Stages in the Adoption Process Consumers go through five stages in the
process of adopting a new product:
Awareness :The consumer becomes aware of the new product but lacks
information about it.
Interest : The consumer seeks information about the new product.
Evaluation : The consumer considers whether trying the new product makes
sense.
Trial Value : The consumer tries the new product on a small scale to improve
his or her estimate of its value.
Adoption : The consumer decides to make full and regular use of the new
product.
This model suggests that marketers should think about how to help consumers
move through these stages.

ORGANIZATION BUYING BEHAVIOUR PROCESS

1. Problem Recognition

2. General Need Description And Product specification

3. Supplier search
 4. Proposal Solicitation

5. Supplier Selection

6. Order-Routine Specification

7. Performance Review

6A.ORGANIZATIONAL BUYING SITUATION

1. New Task 2. Straight Rebuy 3. Modified Rebuy

TOPIC 6-MARKETING ENVIRONMENT

MARKETING ENVIRONMENT

Analyzing the Marketing Environment for Needs:

FAD: This is short-term opportunities provided by Market. Short lived(IPL

Players hairstyle, Jersy etc)

Trend: Reveals shape of future and provide future direction( SMS based
communication, Whatsapp based communication)

Megatrend: Slow to form once in place it will be there for 7 to 10 years (Face
book, E-Mail etc)

Task Environment: This environment includes the actors who

are manufacturing, distribution and promoting the product.- Company,
distributers, dealers, target customers and suppliers( material suppliers and
service suppliers-marketing research agencies, ad agencies, bank and insurance)
Broad Environment: Demographic, Economic, Physical,
Technological, Political legal and Social-cultural environment. Marketers
should pay close attention to the trends developing in this environment.

(A)Mega/Macro Environment:

(i) Political Environment,

(ii)Demographic Environment

(iii) Natural Environment,

(iv) Legal Environment,

(v)Technology Environment,

(vi)Socio-cultural and

(Vii) Economic Environment

(a)Demographic Environment:

Population size: 76% percentage of world population are in less developed

countries and growing at 2% per year whereas population in most developed
country are growing at 0.6%
Population Growth rate: China world’s largest population, Followed by
India(16.7% of world population- In 2030 there will be 1.53 billion people in
India out of which 590 million will stay in Indian cities.
Population Age Mix: Average age in India-28, Pakistan-23, Bangladesh-23.8,
Srilanka-31. Japan, US aged population. Marketers are targeting young Age
group-15 to 25 Years.
Population in Rural India- Population in rural India is 906 million by 2015.
The demand in rural India is expected to grow at annual compounded rate of
5.1%
Religious composition: Hindus, Muslims, Christians, Buddhism
Literacy level: School dropouts, Diploma holders, UG, PG,Doctorat es etc.
Workforce composition: Workers, Engineers, Doctors, Lawyers, Managers,
Faculty etc
Household Patterns: Single, Married without kids, Married with kids, Joint
family, Divorced, Widowed.
Household Pattern had changed in India with many nuclear families and in
many families both husband and wife is working.
Changing role of women
Regional characteristics: Asian, European, Middle east.
Increasing diversity- Within-India- North, East, South, West. Urban, Semi-
urban and Rural areas. People in every state such as Tamil nadu, kerela,
Telungana, Maharashtra will have different language, cultures and life styles
and perception of brands will vary.
(b)Economic Environment:
Economic environment factors will affect consumer purchasing power and
spending patterns
Economic environment comprises the following:
GDP of the country: Gross Domestic product of the country will be studied
by companies. It is the value of total volume of goods and services produced in
a country during a year or particular period of time.
Prices, Savings, Debt and credit availability should be studied in India.
Foreign Exchange Reserve: In a strict sense, foreign-exchange reserves should
only include foreign banknotes, foreign bank deposits, foreign treasury bills,
and short and long-term foreign government securities held by Reserve Bank of
India(RBI). However, the term in popular usage commonly also adds gold
reserves, special drawing rights (SDRs), and International Monetary
Fund (IMF) reserve positions.
Inflation: Inflation is the percentage change in the value of the Wholesale
Price Index (WPI) on a year-on year basis. It effectively measures the change in
the prices of a basket of goods and services in a year. In India, inflation is
calculated by taking the WPI as base.
Consumer Phycology- It is consumer spending habits on the disposable
income, socio economic profile, aspirations and expectations from the future.
When the inflation is high consumers will become choosy, bargain for better
deals, buy bulk and economy packs and post pone their discretionary purchases.
Income classification of Indian Consumers:(McKinsey Report 2007)
Annual Income Classification in India (per Annum):
Global Indians- > have Rs.10 Lakhs annual disposable income
Stivers- have Rs.5,00,000 –Rs.10,00,000 annual disposable income
Seekers- have Rs.2,00,000-Rs.5,00,000 annual disposable income
Aspires have-Rs.90,000- Rs.2,00,000 annual disposable income
Deprived- have Less than Rs.90,000 annual disposable income

(c) Socio-cultural Environment:

Consumer belief, values and norms largely define consumer tastes and
preferences. Belief, value and norms are influenced by happening in society.
Six major faiths in India- Hindu, Christian, Muslim etc
Languages-1600 out of this 22 languages are officially recognized
Dress code and Food habits vary from state to state
Education is given utmost importance by all Indians.
Shift in secondary cultural values- The primary value of Indian remains same,
but secondary cultural values are changed due to influence of movies, music,
celebrities changing the clothing patterns and hairstyle etc
Cultural values in society is expressed by people view of themselves, people
view of others, people view of organization, people view of nature and people
view of society.
All above affect product design, variety, packaging and promoting the products.
(d) Natural Environment:
Preserving environment and reducing pollution is given utmost
priority by government considering global warming and climate change scenario.
Companies are incorporating environment policy in overall company policy so
wastage of resources such as power, water is practiced.
Recycling, renewable energy source are coming into practice. Eco-friendly
packaging, discouraging use of plastic covers also encouraged by companies.
Private sector behemoths such as Reliance and Adani groups are making huge
investment in solar power generation. Electric battery for automobiles for eco-
friendly transportation will be reality in future.
Natural resources are needed as inputs by marketers or that are affected by
marketing activities. Marketers are aware of issues such as shortage in natural
resources such as water, increased air pollution, frequent flooding in cities such
as Chennai and Mumbai, Covid-19 Pandemic and it’s impact. All marketers are
working towards sustainable business that was facilitated and regulated by
Ministry of Environment, Forest and climate change through Central pollution
control board of India.
(e)Technological Environment:
New technology in every product category is making old products
obsolete.
Mobile phone, Smart phone, Smart watches, Smart eyewear, Tabs are replacing
are reducing sales of product category such as Landline phones, walkman,
Personal computers. Blackberry had become obsolete because of smart phones
introduced by prominent players such as apple, Samsung, Nokia etc. Radio-
Frequency Identification(RFID), GPS and Blue tooth are used in business and
Marketing.
Technological changes affect sales of product and their life period forcing
marketers to introduce upgraded products.
(f) Political- Legal Environment:
Government agencies and pressure groups that influence and limit various
organizations and individuals in society
Government Policies: Changes in political scenario formulation of new
government in centre as well as state leads to new policies. The policies will
affect marketing of products.
Government Laws: Laws were enacted to protect companies, protect
customers, protect interest of society. Mobile phone without harmful
materials. Food items without harmful ingredients that affect the health are laws
prevailing in country. Marketers should understand the law and it’s implications
for successful marketing. Covid-19 impact had made government to enforce
regulations such cleanliness and hygiene in restaurants and religious place.
Crowd management regulations were in force in malls. There are various
regulatory bodies such TRAI, FSSAI for regulation of various sectors.
MRP(Maximum Retail Price) in packaging is essential as per Indian law.
Six Rights of Indian Consumers: Safety, Information, Choice, Representation
and Redressal.
All government policies and laws of land should be understood and monitored
carefully by companies to modify their marketing strategies to suit new
developments