Chapter: Marketing and

Buyer’s Behavior
Marketing and Buyer’s Behavior:
Companies today recognize that they cannot appeal to all
buyers in the marketplace—or at least not to all buyers in the
same way. Buyers are too numerous, widely scattered, and
varied in their needs and buying practices. Moreover, the
companies themselves vary widely in their abilities to serve
different segments of the market. Instead, like Best Buy, a
company must identify the parts of the market that it can
serve best and most profitably. It must design customer-driven
marketing strategies that build the right relationships with the
right customers.
Thus, most companies have moved away from mass marketing
and toward target marketing: identifying market segments,
selecting one or more of them, and developing products and
marketing programs tailored to each.
Figure shows the four major steps in designing a
customer-driven marketing strategy.
 Market Segmentation: Buyers in any market differ in their wants,
resources, locations, buying attitudes, and buying practices.
Market segmentation means dividing a market into smaller
segments of buyers with distinct needs, characteristics or
behaviors that might require separate marketing strategies.
Through market segmentation, companies divide large,
heterogeneous markets into smaller segments that can be
reached more efficiently and effectively with products and
services that match their unique needs.
• Four important segmentation issues are:
Segmenting consumer markets, segmenting business markets,
segmenting international markets, and the requirements for
effective segmentation.
 Cont.

Segmenting Consumer Markets: Major variables for segmenting

consumer markets:
1. Geographic,
2. Demographic,
3. Psychographic,
4. Behavioral variables.
 Cont.
Geographic Segmentation:
Geographic segmentation calls for dividing the market
into different geographical units, such as nations,
regions, states, countries, cities, or even
neighborhoods. A company may decide to operate in
one or a few geographical areas or operate in all areas
but pay attention to geographical differences in needs
and wants.
Many companies today are localizing their products,
advertising, promotion, and sales efforts to fit the needs
of individual regions, cities, and even neighborhoods.
For example, Walmart operates virtually everywhere but
has developed special formats tailored to specific types
of geographic locations.
Outdoor advertisement is in Dallas, Texas.
Summer temperatures here are consistently above
95°F so the ad works really well.
 Cont.

Demographic Segmentation: Demographic

segmentation divides the market into segments based
on variables such as age, gender, family size, family
life cycle, income, occupation, education, religion,
race, generation, and nationality. Demographic
factors are the most popular bases for segmenting
customer groups. One reason is that consumer needs,
wants, and usage rates often vary closely with
demographic variables.
 Cont.

Psychographic Segmentation:
Psychographic segmentation divides buyers into different segments
based on social class, lifestyle, or personality characteristics. People
in the same demographic group can have very different psychographic
characteristics. For example- Luxury brands for higher elite class
people. For clothing, every person wants dresses differently according
to their personality.
 Cont.
Behavioral Segmentation: Behavioral segmentation divides buyers into
segments based on their knowledge, attitudes, uses, or responses to a
product. Many marketers believe that behavior variables are the best
starting point for building market segments.
• Types
• Special occasion segmentation
• Benefits sought by experience (online or offline)
• User status
• Usage rate
• Loyalty status
• Buyer readiness stage
 Cont.
Segmenting Business Markets: Consumer and
business marketers use many of the same
variables to segment their markets. Business
buyers can be segmented geographically,
demographically (industry, company size), or by
benefits sought, user status, usage rate, and
loyalty status. Yet, business marketers also use
some additional variables, such as customer
operating characteristics, purchasing
approaches, situational factors, and personal
characteristics.
 Cont.

Segmenting International Markets:

Companies can segment international markets using
one or a combination of several variables. They can
segment by geographic location, grouping countries
by regions such as Western Europe, the Pacific Rim,
the Middle East, or Africa. Geographic segmentation
assumes that nations close to one another will have
many common traits and behaviors.

World markets can also be segmented on the basis of

economic factors. Countries might be grouped by
population income levels or by their overall level of
economic development.
 Cont.

Requirements for Effective

Segmentation
• Measurability
• Accessibility
• Substantiality
• Action ability
Requirements for Effective
Segmentation
• Size, purchasing power, profiles
Measurable
Measurable of segments can be measured.

• Segments can be effectively

Accessible
Accessible reached and served.

• Segments are large or profitable

Substantial
Substantial enough to serve.

• Effective programs can be designed to

attract and serve the segments.
Actionable
Actionable
Market Targeting:
Market segmentation reveals the firm’s market
segment opportunities. The firm now has to evaluate
the various segments and decide how many and
which segments it can serve best.
1. Evaluating Market Segments
2. Selecting Market Segments
3. Choosing a Market-Coverage Strategy
 Cont.

Evaluating Market Segments

• A. Segment Size and Growth:

• B. Segment Structural Attractiveness
• C. Company Objectives and Resources
 Cont.
A. Segment Size and Growth: The company must first collect and
analyze data on current segment sales, growth rates, and the
expected profitability for various segments. It will be interested
in segments that have the right size and growth characteristics.
But “right size and growth” is a relative matter. The largest,
fastest-growing segments are not always the most attractive
ones for every company. Smaller companies may lack the skills
and resources needed to serve larger segments. Or they may find
these segments too competitive. Such companies may target
segments that are smaller and less attractive, in an absolute
sense, but that are potentially more profitable for them.
 Cont.
B. Segment Structural Attractiveness:
The company also needs to examine major structural
factors that affect long-run segment attractiveness.
For example, a segment is less attractive if it already
contains many strong and aggressive competitors. The
existence of many actual or potential substitute
products may limit prices and the profits that can be
earned in a segment. The relative power of buyers
also affects segment attractiveness. Buyers with
strong bargaining power relative to sellers will try to
force prices down, demand more services, and set
competitors against one another—all at the expense
of seller profitability.
 Cont.
C. Company Objectives and Resources: Some
attractive segments can be dismissed quickly because
they do not mesh with the company’s long-run
objectives .Or the company may lack the skills and
resources needed to succeed in an attractive
segment. For example, given the current economic
conditions, the economy segment of the automobile
market is large and growing. But given its objectives
and resources, it would make little sense for luxury
performance car maker BMW to enter this segment.
A company should enter only segments in which it
can create superior customer value and gain
advantages over its competitors.
 Cont.

2. Selecting Target Market Segments: After

evaluating different segments, the company must
decide which and how many segments it will target. A
target market consists of a set of buyers who share
common needs or characteristics that the company
decides to serve. Market targeting can be carried out
at several different levels.
• Figure shows that companies can target very broadly
(undifferentiated marketing), very narrowly
(micromarketing), or somewhere in between
(differentiated or concentrated marketing).
• Market Targeting Strategies:
I) Undifferentiated Marketing: Using an
undifferentiated marketing (or mass marketing)
strategy, a firm might decide to ignore market
segment differences and target the whole market
with one offer. Such a strategy focuses on what is
common in the needs of consumers rather than on
what is different. The company designs a product and
a marketing program that will appeal to the largest
number of buyers.
Undifferentiated Marketing
(Cont.)
• In advertising, undifferentiated marketing often
involves mass media like newspapers, billboards, radio
and television Whenever consumers have similar needs
for a product, it's a good candidate for undifferentiated
marketing. Sugar, flour, toothpaste, dish soap, and
fruits and vegetables are just a few of the many
undifferentiated product examples that just about
everyone buys, regardless of demographics.
II) Differentiated Marketing: Using a differentiated
marketing (or segmented marketing) strategy, a firm
decides to target several market segments and designs
separate offers for each.
Toyota Corporation produces several different brands of
cars—from Scion to Toyota to Lexus—each targeting its
own segments of car buyers.
P&G markets six different laundry detergent brands in
the United States, which compete with each other on
supermarket shelves. And VF Corporation offers a closet
full of more than thirty premium lifestyle brands, which
“fit the lives of consumers the world over” in well-
defined segments—“from commuters to cowboys,
surfers to soccer moms, sports fans to rock bands.”
III) Concentrated Marketing: Using a concentrated
marketing (or niche marketing) strategy, instead of going
after a small share of a large market, a firm goes after a
large share of one or a few smaller segments or niches.
Through concentrated marketing, the firm achieves a
strong market position because of its greater knowledge
of consumer needs in the niches it serves and the special
reputation it acquires. It can market more effectively by
fine-tuning its products, prices, and programs to the
needs of carefully defined segments. It can also market
more efficiently, targeting its products or services,
channels, and communications programs toward only
consumers that it can serve best and most profitably.
Example –pet owners, organic food buyers etc.
IV) Micromarketing: Differentiated and concentrated
marketers tailor their offers and marketing programs to
meet the needs of various market segments and niches.
At the same time, however, they do not customize
their offers to each individual customer.
Micromarketing is the practice of tailoring products and
marketing programs to suit the tastes of specific
individuals and locations. Rather than seeing a
customer in every individual, micro marketers see the
individual in every customer. Micromarketing includes
local marketing and individual marketing.
Micro marketing
• Local marketing
Tailoring brands and promotions to the
needs and wants of local customer
segments—cities, neighborhoods, and
even specific stores.
Individual marketing
Tailoring products and marketing
programs to the needs and preferences of
individual customers—also called one-to one marketing, customized
marketing,
and markets-of-one marketing.
3. Choosing a Targeting Strategy:
Companies need to consider many factors when
choosing a market-targeting strategy. Which strategy
is best depends on the company’s resources. When
the firm’s resources are limited, concentrated
marketing makes the most sense. The best strategy
also depends on the degree of product variability.
Undifferentiated marketing is more suited for
uniform products, such as grapefruit or steel.
Products that can vary in design, such as cameras
and cars, are more suited to differentiation or
concentration.
Another factor is market variability. If most buyers
have the same tastes, buy the same amounts, and
react the same way to marketing efforts,
undifferentiated marketing is appropriate.
Finally, competitors’ marketing strategies are
important. When competitors use differentiated or
concentrated marketing, undifferentiated marketing
can be suicidal. Conversely, when competitors use
undifferentiated marketing, a firm can gain an
advantage by using differentiated or concentrated
marketing, focusing on the needs of buyers in specific
segments.
Differentiation and Positioning
• Differentiation: Beyond deciding which segments of the market it will target, the
company must decide on a value proposition—how it will create differentiated
value for targeted segments and what positions it wants to occupy in those
segments.
Product Differentiation:
Physical Attribute Differentiation
Service Differentiation
Personnel Differentiation
Location Differentiation
Image Differentiation
Product Position: A product’s position is the way the product is
defined by consumers on important attributes—the place the product
occupies in consumers’ minds relative to competing products. Products
are made in factories, but brands happen in the minds of consumers.
Consumers are overloaded with information about products and
services. They cannot reevaluate products every time they make a buying
decision. To simplify the buying process, consumers organize products,
services, and companies into categories and “position” them in their
minds. A product’s position is the complex set of perceptions,
impressions, and feelings that consumers have for the product compared
with competing products.
 Choosing and Implementing a Positioning Strategy

1. Identifying Possible Value Differences and Competitive Advantages:

To build profitable relationships with target customers, marketers must
understand customer needs better than competitors do and deliver more
customer value. To the extent that a company can differentiate and
position itself as providing superior customer value, it gains
competitive advantage.
If a company positions its product as offering the best quality and
service, it must actually differentiate the product so that it delivers the
promised quality and service.
 2. Choosing the Right Competitive Advantages:
Suppose a company is fortunate enough to discover several potential
differentiations that provide competitive advantages. It now must choose
the ones on which it will build its positioning strategy. It must decide
how many differences to promote and which ones.
• How Many Differences to Promote?: Many marketers think that
companies should aggressively promote only one benefit to the target
market.
Eg.Walmart promotes its unbeatable low prices, and Burger King
promotes personal choice—“have it your way.
Which Differences to Promote?: Not all brand differences are meaningful or worthwhile; not ever
difference makes a good differentiator. Each difference has the potential to create company costs
well as customer benefits. A difference is worth establishing to the extent that it satisfies the
following criteria:
• Important: The difference delivers a highly valued benefit to target buyers.
• Distinctive: Competitors do not offer the difference, or the company can offer it in a more
distinctive way.
• Superior: The difference is superior to other ways that customers might obtain the same
benefit.
• Communicable: The difference is communicable and visible to
buyers.
• Preemptive: Competitors cannot easily copy the difference.
• Affordable: Buyers can afford to pay for the difference.
• Profitable: The company can introduce the difference profitably.
• 3. Selecting an Overall Positioning Strategy:
The full positioning of a brand is called the brand’s value proposition—
the full mix of benefits on which a brand is differentiated and
positioned.
• Green cells : winning value proposition
• Yellow cells : marginal value proposition
• Red cells : losing value proposition
 Consumer Buying Behavior

• Consumer Buying Behavior refers to the buying

behavior of final consumers (individuals &
households) who buy goods and services for
personal consumption.
• Study consumer behavior to answer:
“How do consumers respond to marketing efforts
the company might use?”
Model of Consumer Behavior
Product Marketing
Marketingand
and Economic
Other
OtherStimuli
Stimuli
Price Technological
Place Political
Promotion Cultural

Buyer’s Characteristics
Decision Buyer’s
Buyer’s Black
Black Box
Box Affecting
Process Consumer
Behavior

Product Choice Purchase

Buyer’s
Buyer’s Response
Response Timing
Brand Choice
Purchase
Dealer Choice Amount
Model of Buyer Behavior
Characteristics Affecting
Consumer Behavior

Culture
Social
Personal
Psychological
Buyer
Buyer
Factors Affecting Consumer Behavior:
Culture

•• Most
Most basic
basic cause
cause of
of aa person's
person's wants
wants and
and
behavior.
behavior.
•• Values
Values
•• Perceptions
Perceptions
Subculture
Subculture Social
SocialClass
Class
••Groups
Groupsofofpeople
peoplewith
withshared
shared ••People
Peoplewithin
withinaasocial
socialclass
class
value
valuesystems
systemsbased
basedon
on tend
tendto
toexhibit
exhibitsimilar
similarbuying
buying
common
commonlife
lifeexperiences.
experiences. behavior.
behavior.
••Hispanic
HispanicConsumers
Consumers ••Occupation
Occupation
••African
AfricanAmerican
AmericanConsumers
Consumers ••Income
Income
••Asian
AsianAmerican
AmericanConsumers
Consumers ••Education
Education
••Mature
MatureConsumers
Consumers ••Wealth
Wealth
Factors Affecting Consumer Behavior:
Social

Groups
Groups
••Membership
Membership
••Reference
Reference

Family
Family
••Husband,
Husband,wife,
wife,kids
••Influencer,
Influencer,buyer,
kids
buyer,user
user
Social
Social Factors
Factors

Roles
Rolesand
andStatus
Status
Factors Affecting Consumer Behavior:
Personal

Personal
Personal Influences
Influences
Age
Ageand
andFamily
FamilyLife
LifeCycle
Cycle Occupation
Occupation
Stage
Stage

Economic
EconomicSituation
Situation Personality
Personality&& Self-Concept
Self-Concept

Lifestyle
Lifestyle Identification
Identification

Activities
Activities Opinions
Opinions

Interests
Interests
VALS 2
Actualizers
Actualizers Abundant
Abundant Resources
Resources

Principle Oriented Status Oriented Action Oriented

Fulfilleds
Fulfilleds Achievers
Achievers Experiencers
Experiencers

Believers
Believers Strivers
Strivers Makers
Makers

Strugglers
Strugglers
Minimal
Minimal Resources
Resources
Factors
Factors Affecting
Affecting Consumer
Consumer Behavior:
Behavior:
Psychological
Psychological

Motivation
Motivation

Beliefs
Beliefs and
and Psychological
Factors PPerception
erception
Attitudes
Attitudes

Learning
Learning
Maslow’s Hierarchy of Needs

Self
Actualization
(Self-development)

Esteem Needs
(self-esteem, status)
Social Needs
(sense of belonging, love)

Safety Needs
(security, protection)

Physiological Needs
(hunger, thirst)
Types of Buying Decisions

High Low
Involvement Involvement
Significant Complex Variety-
differences Buying Seeking
between Behavior Behavior
brands
Few Dissonance- Habitual
differences Reducing Buying Buying
between Behavior Behavior
brands
• Complex buying behavior: Consumer buying behavior in situations
characterized by high consumer involvement in a purchase and significant
perceived differences among brands.Ex- PC buyers.
• Dissonance reducing buying behavior: Consumer buying behavior in situations
characterized by high consumer involvement but few perceived differences
among brands. Ex- Carpeting.
• Habitual buying behavior: Consumer buying behavior in situations
characterized by low consumer in a purchase and few significant perceived
brand differences.
• Variety-seeking buying behavior: Consumer buying behavior in situations
characterized by low consumer involvement in a purchase and few significant
perceived brand differences. Ex-cookies.
The Buyer Decision Process

Need
Need Recognition
Recognition

Information
Information Search
Search

Evaluation
Evaluation of
of Alternatives
Alternatives

Purchase
Purchase Decision
Decision

Postpurchase
Postpurchase Behavior
Behavior
 The
The Buyer
Buyer Decision
Decision Process
Process
Step
Step 1.
1. Need
Need Recognition
Recognition

Need recognition
Consumer recognizes a problem or need. The need can be triggered by
internal or external stimuli.
Internal
Internal Stimuli
Stimuli External
External Stimuli
Stimuli
•• Hunger
Hunger ••TV advertising
TV advertising
••Thirst
Thirst ••Magazine
Magazinead
ad
••AAperson’s
person’snormal
normal ••Radio
Radioslogan
slogan
needs
needs
••Stimuli
Stimuliin
inthe
the
environment
environment
The Buyer Decision Process
Step 2. Information Search
Consumer is motivated to search more
information
•Family, friends, neighbors
Personal
Personal Sources
Sources •Most influential source of
information
•Advertising, salespeople
Commercial
Commercial Sources
Sources •Receives most information
from these sources

Public
Public Sources
Sources •Mass Media,Consumer-rating
groups

•Handling the product

Experiential
Experiential Sources
Sources •Examining the product
•Using the product
The
The Buyer
Buyer Decision
Decision Process
Process
Step
Step 3.
3. Evaluation
Evaluation ofof Alternatives
Alternatives
Consumer
Consumer uses
uses information
information to to evaluate
evaluate
alternative
alternative brands
brands inin the
the choice
choice set.
set.
Product
ProductAttributes
Attributes
Evaluation
Evaluationof
ofQuality,
Quality,Price,
Price,&&Features
Features
Degree
Degreeof
ofImportance
Importance
Which
Whichattributes
attributesmatter
mattermost
mostto
tome?
me?
Brand
BrandBeliefs
Beliefs
What
Whatdo
doIIbelieve
believeabout
abouteach
eachavailable
availablebrand?
brand?
Total
TotalProduct
ProductSatisfaction
Satisfaction
Based
Basedon
onwhat
whatI’m
I’mlooking
lookingfor,
for,how
howsatisfied
satisfied
would
wouldIIbe
bewith
witheach
eachproduct?
product?
Evaluation
EvaluationProcedures
Procedures
Choosing
Choosingaaproduct
product(and
(andbrand)
brand)based
basedon
onone
one
or
ormore
moreattributes.
attributes.
The Buyer Decision Process
Step 4. Purchase Decision
Buyer decision about which brand to purchase. Two factors come between purchase decision and purchase intention- attitude of others and unexpected situational factors.

Purchase
Purchase Intention
Intention
Desire
Desire to
to buy
buy the
the most
most preferred
preferred brand
brand

Attitudes Unexpected
of others situational
factors

Purchase
Purchase Decision
Decision
The
The Buyer
Buyer Decision
Decision Process
Process
Step
Step 5.
5. Postpurchase
Postpurchase Behavior
Behavior
Consumer’s
Consumer’s Expectations
Expectations of
of
Product’s
Product’s Performance
Performance
Product’s Perceived
Performance

Satisfied
Satisfied Dissatisfied
Dissatisfied
Customer!
Customer! Customer
Customer
Cognitive Dissonance