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Chapter 01
What Is Marketing?
 Marketing is about identifying and meeting human and social needs.
 Meeting needs profitably.
 Marketing is an organizational function and a set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit the organization and its
 Marketing is a societal process by which individuals and groups obtain what they need and want through
creating, offering, and freely exchanging products and services of value with others.
 Marketing management as the art and science of choosing target markets and getting, keeping, and growing
customers through creating, delivering, and communicating superior customer value.
Scope of marketing (10 Types of Entities)
1. Goods: Physical goods constitute the bulk of most countries’ production and marketing effort. Examples are:
refrigerators, television sets, food products, machines etc.
2. Services: As economies advance, a growing proportion of their activities are focused on the production of services.
Examples are: services include the work of airlines, hotels, car rental firms, barbers, beauticians etc. and professionals
such as, Accountants, bankers, lawyers, engineers, doctors etc.
3. Experiences: By orchestrating several services and goods, a firm creates stage and market experiences. For
examples: travels, climbing Mount Everest etc.
4. Events: Marketers promote time-based events, such as trade-shows, artistic performance, Asian Games, Sportevents etc.
5. Persons: Celebrity marketing is a major business. To-day, every major film star has an agent, a personal manager
and ties to a public relations agency. For Examples: - artists, musicians, physician etc.
6. Places: Cities, states, regions and whole nations compete actively to attract tourists, factories, company
headquarters and new residents. Further examples: commercial banks, local business associations, real estate agents,
Economic development specialists etc.
7. Properties: Properties are intangible rights of ownership of either real property (real estate) or financial property
(stocks, bonds etc.). Properties are bought and sold, and this requires marketing.
8. Organizations’: Organizations’ actively work to build a strong, favorable and unique image in the minds of their
target publics. Universities, museums, performing arts organizations and non-profits all use marketing to boost their
public images and to compete for audiences and funds.
9. Information: Information can be produced and marketed as a product. This is essentially what schools and
universities produce and distribute at a price to parents, students and communities. For examples, magazines,
encyclopedias, news-papers etc. supply information.
10. Ideas: Every market offering includes a basic idea. Charles Revson of Revlon once observed: “In the factory we
make cosmetics; in the drugstore we sell hope.” Products and services are platforms for delivering some idea or
benefit. Social marketers are busy promoting such ideas as “Friends Don’t Let Friends Drive Drunk” and “A Mind Is a
Terrible Thing to Waste.”
 Traditionally, a “market” was a physical place where buyers and sellers gathered to buy and sell goods.
 Economists describe a market as a collection of buyers and sellers who transact over a particular product or product
class (such as the housing market or the grain market).
figure 1.1
Manufacturers go to resource markets (raw material markets, labor markets, money markets), buy resources and turn them
into goods and services, and sell finished products to intermediaries, who sell them to consumers. Consumers sell their labor
and receive money with which they pay for goods and services. The government collects tax revenues to buy goods from
resource Manufacturer and intermediary markets and uses these goods and services to provide public services.
figure 1.2
Each nation’s economy, and the global economy, consists of interacting sets of markets linked through exchange processes.
Marketers view sellers as the industry and use the term market to describe customer groups. They talk about need markets
(the diet-seeking market), product markets (the shoe market), demographic markets (the “millennium” youth market),
geographic markets (the Chinese market), or voter markets, labor markets, and donor markets. Figure 1.2 shows how sellers
and buyers are connected by four flows. Sellers send goods and services and communications such as ads and direct mail to
the market; in return they receive money and information such as customer attitudes and sales data. The inner loop shows an
exchange of money for goods and services; the outer loop shows an exchange of information
Key Customer Markets Consider the following
Consumer Markets Companies selling mass consumer goods and services such as juices, cosmetics, athletic shoes, and air
travel establish a strong brand image by developing a superior product or service, ensuring its availability, and backing it
with engaging communications and reliable performance.
Business Markets Companies selling business goods and services often face well-informed professional buyers skilled at
evaluating competitive offerings. Advertising and Web sites can play a role, but the sales force, the price, and the seller’s
reputation may play a greater one.
Global Markets Companies in the global marketplace navigate cultural, language, legal, and political differences while
deciding which countries to enter, how to enter each (as exporter, licenser, joint venture partner, contract manufacturer, or
solo manufacturer), how to adapt product and service features to each country, how to set prices, and how to communicate
in different cultures.
Nonprofit and Governmental Markets Companies selling to nonprofit organizations with limited purchasing power such
as churches, universities, charitable organizations, and government agencies need to price carefully. Much government
purchasing requires bids; buyers often focus on practical solutions and favor the lowest bid, other things equal.
Top Five Core Concepts of Marketing
Marketing is a management process. Marketing creates the value for customers. For this reason, the marketers
need to find, anticipate and satisfy the customer requirements at profit. Marketing is the name of large task like
create ideas, brand, how to communicate with customers, how to design, research of consumer behavior etc all
count as part of marketing.
1. Needs, Wants and Demands
A. Needs: Identifying of unfulfilled needs is the pre-condition of making successful of marketing activities.
Marketers try to satisfy the needs of customers. Human needs are the one kind of deprivation of one thing of
basic satisfaction. A need is a thinking of mind that reflects the lack of something. Actually, needs are felt of
deprivation. Marketers normally did not create these needs but they find these needs. So, needs are the
deprivation and satisfaction. For example, needs are food, clothing, warmth, safety, shelter etc.
B. Wants: Wants are the options of satisfying needs that shaped by culture and individual personality. Human
beings must require food but what type of food they will take that is depended on cultural and social of
individually. One person may like a burger but another person might like rich food. Maximum satisfaction of
customers need depends on the quality of a product. Our assets are limited but our wants are many, for the reason
marketers try to fulfill on creating satisfying of unlimited wants by limited assets.
C. Demands: When needs arise, wants became for specific products that are backed by the ability and
willingness of consumers to buy the products that is call demands. In demand, there is a vital relation with time.
Not all wants are transfer into demand. The wants become demand when the wants are supported by ability and
willingness to buy. Need is a one kind of wish, want is a selected process of need and the selected thing when it
fulfill the ability and willingness then it became the demand.
Thus, a rich man has demand for a Mercedes Car. In addition, rich man will buy it next month. It is a demand for
rich man. But it is need for middle class person and want for poor man. All are actually classified by Money,
ability, and willingness.
2. Marketing Offerings
Marketing Offering is that making ensuring of consumers satisfaction. Marketing offer is one kind of offer that
marketer makes as per requirements of a consumer. The marker try to offer standard product that satisfy the need
of a consumer in terms of quality, quantity, price etc. Marketing offering can be ‘tangible’ or intangible’. The
marketing offering is explaining below.
A. Products: Product is a thing that gives the satisfaction of customers. It is provided the satisfaction of physical
and psychological both. Actual, product features are color, branding, packaging, labeling etc. There are two kinds
of product is available that are tangible and intangible. Marketing consider product benefits and services.
Therefore, product is very important for marketing offering because marketing offering is fully dependent on
B. Services: All kind of things that is offered to a market to satisfy human needs or human wants or consumers
that is called Services. Service is a work or benefit that is given to one party to other party. Service is intangible.
For example service of doctor, lawyer, mason, tailor, hotel service, training service, security service,
entertainment service, beauty parlor service etc.
C. Experiences: Experience is acquired real knowledge about anything. Experience is to do, to see, to feel
something by acquired knowledge or skilled. The company wants his experience to do better in future. By using
experience company ordered to manager to make marketing process. Experience in marketing has an
experimental value. Normally in business, experience is very important. Some kind of business organization does
not want to appoint their employee without having experience of this job. A company provides more facility or
increase salary or gives promotion of manager or other employee only for experience.
3. Value and Satisfaction
A. Value: Value is the capacity of a product or service. Normally value is determined by the level of satisfaction
of customers. If satisfaction level is low, it means the value of the product is low and consumer will leave this
product. Customers always think about value of a product when they go to buy this product. It is ever-present in
their minds about value of a product. Actual, value is the difference between consume of a product and the cost
of buy this product. Customers spend money, give time, power and mental labor for buying a product. For this
reason, the consumer wants the best value of a product.
B. Satisfaction: Satisfaction is like a desire of mind that cannot be measured or it cannot be quantified. Actual,
the purpose of marketing is the satisfaction of customers by creating value of a product and make a long-term
relationship to customers. The satisfaction of customer is also depended on quality of the product or the quality
of the service provided. You have to be careful as a marker in setting your costumers satisfaction level too low.
Then your customers will go to your competitors. On the other hand, if you set your satisfaction level too high
that you cannot achieve then also your customers will go to your competitors. So, you have to determine the level
of satisfaction as middle or normal so that the customers come back and buy your product again.
4. Exchanges and Relationships
A. Exchanges: Exchange is very basic concept of marketing. In fact, another name of marketing is exchange.
Producers and manufactures are trying to make available all sorts of goods that are needed by the society.
Exchange is one kind of activity that creates value and this value is provided to other party. In exchange money
is always needed. Without money the exchange process is not possible. Every company products are exchange
for money. Marketers provide product, service and idea to the customers in exchange of money.
B. Relationship Marketing: Customer is the king in the business. If you want to grow up your business, you
have to create a good relationship to customer. You have to keep always busy to make happy of customers by
satisfying his or her needs in terms of quality, price, time, quantity, regularly in supplying. In relationship, the
quality of product is very important. If the customer understands the quality, value or facilities of your product he
will build the goodwill for your company by telling his friends and relatives because of which this way customers
increase. This think has also negative side and that is customer will be dissatisfied for boring, inequality product.
So, if you want to run your business in long-term you have to create a good and long-term relationship to
customers for longer lasting loyalty.
5. Market
Marketing follows market. Market is a set of present and future buyer. Market is a place where buyers and sellers
are come in touch with detailed information about what sellers are offer and what buyers are ready to buy. Some
people do not say that in market a place should stay. But a market is where different types of transactions happen
that is also call market. In market, the goods flow from the sellers to the buyers and money flow from buyer to
reach sellers to complete the exchange.
AMA- American Marketing Association.
It defines marketing management as the process of planning & executing the conception of pricing, promotion,
distribution of goods, services, ideas to create exchanges that satisfy individual and organizational goals. Task of
marketing management is to influence the level, timing, composition of demand in a way that will help the
organization to achieve its objective. Hence, marketing management is essentially demand management. States
of “DEMAND” could be:
Negative demand – Major market dislikes product, hence try to avoid. eg.- injections.
No Demand – Constant unaware and uninterested in product. eg.- segway.
Latent Demand – Need exists, not fulfilled by current products. eg.- ATM, mobile.
Declining demand – Demand decreases over period of time. eg.- pagers, scooters.
Irregular Demand – Seasonally. eg.- fans, raincoat.
Full Demand – Good volume of business. eg.- tooth paste, most of FMCG items.
Overfull Demand – Demand greater than ability to handle. eg.- VSNL sim card.
Unwholesome Demand – Unwholesome product. eg.- cigarettes, narcotic drugs.
Developing Marketing Concepts
Market concept focuses on achieving organizational goal by creating a company that is more effective and efficient
than competitors by creating, delivering, and communicating customer value to its selected target markets.
Production Concept: According to production concept, consumers prefer to buy those products that are widely
available and inexpensive. Executives of production-oriented businesses usually concentrate on achieving high
production efficiency, low cost, and mass distribution for effective results. Consumers are interested more in product
availability and low prices. This type of business orientation is effective in developing countries. Example − Local
mobile companies in developing countries provide cell phones at much cheaper cost than the branded companies and
due to this, people in these countries prefer to purchase cell phones from them.
Product Concept: According to product concept of business, consumers favor those products that provide them better
quality, performance and innovative features. Managers in product-oriented organizations mainly focus on making
superior products and improving them time to time. In product concept, it is considered that the consumers are aware
of the quality of the products and they have an ability to evaluate good quality and performance.
Selling Concept: According to the selling concept, consumers, if left on their own, will usually not buy enough. An
organization must therefore integrate an aggressive selling and promotional effort to get a competitive edge in the
market. According to this concept, the company constitutes effective selling and promotion tools in order to encourage
more buying. The purpose of marketing is to sell more things to more people, more regularly, in order to make more
Customer Concept: According to the customer concept, companies focus on individual customers. They provide
individual offers, services, and establish direct channels of communication with them. These companies collect
information on each customer's past transactions, demographics, media and supply preferences. They believe in
profitable growth by capturing a large share of each customer’s expenditure by building high customer loyalty and
customer lifetime value.
The Four P Components of the Marketing Mix
Holistic marketing concept
Holistic marketing concept is a part of the series on concepts of marketing and it can be defined as a marketing
strategy which considers the business as a whole and not as an entity with various different parts. The holistic
marketing concept is based on the development, design, and implementation of marketing programs, processes, and
activities that recognize their breadth and interdependencies. Holistic marketing acknowledges that everything matters
in marketing—and that a broad, integrated perspective is often necessary.
Internal marketing – Marketing between all the departments in an organization. Internal marketing, an element of
holistic marketing, is the task of hiring, training, and motivating able employees who want to serve customers well. It
ensures that everyone in the organization embraces appropriate marketing principles, especially senior management.
Relationship marketing – Building a better relationship with your customers, internal as well as end customers is
beneficial for holistic marketing. Relationship marketing aims to build mutually satisfying long-term relationships
with key constituents in order to earn and retain their business.
Performance marketing – Driving the sales and revenue growth of an organization holistically by reducing costs and
increasing sales. Performance marketing requires understanding the financial and nonfinancial returns to business and
society from marketing activities and programs.
Integrated marketing – Products, services and marketing should work hand in hand towards to growth of the
organization. Integrated marketing occurs when the marketer devises marketing activities and assembles marketing
programs to create, communicate, and deliver value for consumers such that “the whole is greater than the sum of its
parts.” Two key themes are that (1) many different marketing activities can create, communicate, and deliver value
and (2) marketers should design and implement any one marketing activity with all other activities in mind
The major tasks of marketing management are:
Developing Marketing Strategies & Plans.
Capturing Marketing Insights
Connecting with Customers
Building Strong Brands
Shaping the Market Offerings
Delivering Value Communicating
Value Creating
Long Term Growth
Duties of the Marketing Manager include:
Managing all marketing for the company and activities within the marketing department.
Developing the marketing strategy for the company in line with company objectives.
Coordinating marketing campaigns with sales activities.
Overseeing the company’s marketing budget.
Creation and publication of all marketing material in line with marketing plans.
Planning and implementing promotional campaigns.
Manage and improve lead generation campaigns, measuring results.
Overall responsibility for brand management and corporate identity
Preparing online and print marketing campaigns.
Monitor and report on effectiveness of marketing communications.
Creating a wide range of different marketing materials.
Working closely with design agencies and assisting with new product launches.
Maintain effective internal communications to ensure that all relevant company functions are kept informed of
marketing objectives.
Analyzing potential strategic partner relationships for company marketing.
Importance of marketing
(1) Marketing Helps in Transfer, Exchange and Movement of Goods:
Marketing is very helpful in transfer, exchange and movement of goods. Goods and services are made available to
customers through various intermediaries’ viz., wholesalers and retailers etc. Marketing is helpful to both producers
and consumers.
(2) Marketing Is Helpful In Raising And Maintaining The Standard Of Living Of The Community:
Marketing is above all the giving of a standard of living to the community. Paul Mazur states, “Marketing is the
delivery of standard of living”. Professor Malcolm McNair has further added that “Marketing is the creation and
delivery of standard of living to the society”.
(3) Marketing Creates Employment:
Marketing is complex mechanism involving many people in one form or the other. The major marketing functions are
buying, selling, financing, transport, warehousing, risk bearing and standardisation, etc. In each such function different
activities are performed by a large number of individuals and bodies.
(4) Marketing as a Source of Income and Revenue:
The performance of marketing function is all important, because it is the only way through which the concern could
generate revenue or income and bring in profits. Buskirk has pointed out that, “Any activity connected with obtaining
income is a marketing action. It is all too easy for the accountant, engineer, etc., to operate under the broad assumption
that the Company will realise many dollars in total sales volume.
(5) Marketing Acts as a Basis for Making Decisions:
A businessman is confronted with many problems in the form of what, how, when, how much and for whom to
produce? In the past problems was less on account of local markets. There was a direct link between producer and
(6) Marketing Acts as a Source of New Ideas:
The concept of marketing is a dynamic concept. It has changed altogether with the passage of time. Such changes have
far reaching effects on production and distribution. With the rapid change in tastes and preference of people,
marketing has to come up with the same.
Marketing as an instrument of measurement, gives scope for understanding this new demand pattern and thereby
produce and make available the goods accordingly.
(7) Marketing Is Helpful In Development Of An Economy:
Adam Smith has remarked that “nothing happens in our country until somebody sells something”. Marketing is the
kingpin that sets the economy revolving. The marketing organisation, more scientifically organised, makes the
economy strong and stable, the lesser the stress on the marketing function, the weaker will be the economy.
Five types of needs:
1. Stated needs (The customer wants an inexpensive car.)
2. Real needs (The customer wants a car whose operating cost, not initial price, is low.)
3. Unstated needs (The customer expects good service from the dealer.)
4. Delight needs (The customer would like the dealer to include an onboard GPS navigation system.)
5. Secret needs (The customer wants friends to see him or her as a savvy consumer.)
Chapter 02
Elements in Porter's Value Chain
Rather than looking at departments or accounting cost types, Porter's Value Chain focuses on systems, and how inputs
are changed into the outputs purchased by consumers. Using this viewpoint, Porter described a chain of activities
common to all businesses, and he divided them into primary and support activities, as shown below.
Primary Activities
Primary activities relate directly to the physical creation, sale, maintenance and support of a product or service. They
consist of the following:
Inbound logistics – These are all the processes related to receiving, storing, and distributing inputs internally.
Your supplier relationships are a key factor in creating value here.
Operations – These are the transformation activities that change inputs into outputs that are sold to
customers. Here, your operational systems create value.
Outbound logistics – These activities deliver your product or service to your customer. These are things like
collection, storage, and distribution systems, and they may be internal or external to your organization.
Marketing and sales – These are the processes you use to persuade clients to purchase from you instead of
your competitors. The benefits you offer, and how well you communicate them, are sources of value here.
Service – These are the activities related to maintaining the value of your product or service to your
customers, once it's been purchased.
Support Activities
These activities support the primary functions above. In our diagram, the dotted lines show that each support, or
secondary, activity can play a role in each primary activity. For example, procurement supports operations with certain
activities, but it also supports marketing and sales with other activities.
Procurement (purchasing) – This is what the organization does to get the resources it needs to operate. This
includes finding vendors and negotiating best prices.
Human resource management – This is how well a company recruits, hires, trains, motivates, rewards, and
retains its workers. People are a significant source of value, so businesses can create a clear advantage with
good HR practices.
Technological development – These activities relate to managing and processing information, as well as
protecting a company's knowledge base. Minimizing information technology costs, staying current with
technological advances, and maintaining technical excellence are sources of value creation.
Infrastructure – These are a company's support systems, and the functions that allow it to maintain daily
operations. Accounting, legal, administrative, and general management are examples of necessary
infrastructure that businesses can use to their advantage.
Companies use these primary and support activities as "building blocks" to create a valuable product or service.
Core Business Process:
Core business process means that a business's success depends not only on how well each department performs its
work, but also on how well the company manages to coordinate departmental activities to conduct the core business
process, which is;
1. The market-sensing process meaning all activities in gathering marketing intelligence and acting on the
2. The new-offering realization process Covering all activities in research, development and launching new quality
offerings quickly and within budget.
3. The customer acquisition process all the activities defining the target market and prospecting for new customers
4. The customer relationship management processes all the activities covering building deeper understanding,
relationships and offerings to individual customers.
5. The fulfillment management processes all the activities in receiving and approving orders, shipping out on time
and collecting payment.
To be successful, a business needs to look for competitive advantages beyond its own operations. The business needs
to look at the competitiveness value chain of suppliers, distributors and customers. Many companies today have
partnered with specific suppliers and distributors to create a superir value delivery network.
Core competency has three characteristics:
(1) It is a source of competitive advantage and makes a significant contribution to perceived customer benefits.
(2) It has applications in a wide variety of markets.
(3) It is difficult for competitors to imitate.
Competitive advantage also accrues to companies that possess distinctive capabilities or excellence in
broader business processes. Competitive advantage ultimately derives from how well the company has
fitted its core competencies and distinctive capabilities into tightly interlocking “activity systems.” Business
realignment may be necessary to maximize core competencies. It has three steps:
(1) (re)defining the business concept or “big idea”,
(2) (re)shaping the business scope, and
(3) (re)positioning the company’s brand identity. Consider what Kodak is doing to realign its business.
Holistic Marketing Framework
This process is a framework to create, renew and maintain customer value through interaction between
pertinent marketing players such as customers, company and collaborators and value based activities such as
value exploration, value creation and value delivery.
Value exploration: Value exploration means how organizations can identify new value opportunities. This
requires an understanding of customer's cognitive space, existing and latent needs and dimensions such as
need for participation, stability, freedom and change.
Value creation: In holistic marketing, company must develop value-creation skills to exploit a value
opportunity. Marketers must make efforts to recognize the new customer benefits from the customer's
perspective, use key competencies from its business field and choose and manage business collaborators
from its combined networks. Marketers must recognize the thinking of customer thinks. Marketers must also
monitor who the customer admires, who they interact with and who influences them.
Business change is needed to exploit core competencies. It engages three steps:
1. Defining the business concept
2. Determining the business scope
3. Positioning the company's brand identity
Value delivery: Delivery value denotes extensive investment in infrastructure and capabilities. The
company must become capable at customer relationship management, internal resources management, and
business partnership management. Customer relationship management enables the company to determine
who its customers are, how they behave, and what they need or want. It also facilitates the company to
respond properly, logically, and promptly to different customer opportunities. To respond effectively, the
company requires internal resources management to incorporate major business processes like order
processing, general ledger, payroll, and production within a single family. At last, business partnership
management enables the company to manage complex relationships with all its business contacts.
Holistic marketing framework.
All corporate headquarters undertake four planning activities:
Defining the corporate mission
Establishing strategic business units
Assigning resources to each strategic business unit
Assessing growth opportunities
1. Defining the corporate mission:
Mission statement includes the mission of an organization which it needs to achieve through careful marketing
research by carefully analyzing the needs and wants of what customer wants and providing him with the same. They
have some characteristics such as a good mission statement should be: Firstly, should be limited to few goals.
Secondly, it should be such that there should enough individual discretion to be acted upon the company’s major rules
and policies.
Thirdly, it should be defining the competitive spheres(Industry like one industry or, Products and applications,
Competence like the kind of use of technology being used or if it is having the capacity to use it, market segment,
Vertical like distribution channels and geographical) in which the company would be operating. Fourthly, it should be
take a long term view and lastly, it should short, memorable and meaningful.
Good mission statements have five major characteristics:
 They focus on a limited number of goals: The statement “We want to produce the highest quality
products, offer the most service, achieve the widest distribution, and sell at the lowest prices” claims
too much.
 They stress the company’s major policies and values: They narrow the range of individual
discretion so employees act consistently on important issues.
 They define the major competitive spheres within which the company will operate: summarizes
some key competitive dimensions for mission statements.
 They take a long-term view: Management should change the mission only when it ceases to be
 They are as short, memorable, and meaningful as possible: Marketing consultant Guy Kawasaki
advocates developing three- to four-word corporate mantras rather than mission Statements, like
“Enriching Women’s Lives” for Mary Kay rather than mission statement.
2. Establishing SBU’s
It talks about how market oriented definitions are stronger than product oriented definitions due to various factors. It
tells us that if as a company u are giving the definition which is making u a company operating in a particular product
line in a particular segment basically a product oriented definition but if we use a market oriented definition it helps us
in diversification in the same segment and in product lines. E.g. IBM redefined itself from a hardware and software
manufacturer to a builder of networks , another example for target market definition is of Pepsi which defined that the
target market for coca cola is the same i.e. only drinks is its but did not realize when it is giving the market definition
other drinks. Juices and water also comes under its product line. Each SBU has several characteristics: 1.
If it is a single business or a collection of businesses it can be planned separately from the business.
It has own set of competitors
One manger is responsible for the strategic planning and profit performance, which controls most of
the factors affecting profit.
3. Assigning resources to SBU’s
It basically focuses on the investing decisions or to allocate corporate resources. It basically focuses on the working of
BCG Matrix Model.
4. Assessing Growth opportunities
It means adding, downsizing or terminating the older businesses. It focuses on filing the gap between future desired
sales and projected sales by adding new businesses. It tells us that lowest curve of the gap is expected sales over the
period and highest curve depicts the sales over the same period and how fast company will grow.
1. market-penetration strategy The company first considers whether it could gain more market share with its
current products in their current markets .
2. market-development strategy the company considers whether it can find or develop new markets for its
current products.
3. product-development strategy the company considers whether it can develop new products of potential
interest to its current markets
4. diversification strategy the company will also review opportunities to develop new products for new markets
Strategic planning process within business units
Definition: Strategic business unit (SBU)
An ideal strategic planning process within a business unit is presented below. It consists of several steps and
is based on the business mission (derived from a wider company or corporate mission).
1. Corporate/business mission
A company's mission constitutes the future picture of how you want the company to develop. The mission is
the management's view of what the company wants to achieve in the future and sometimes it is developed
with the entire organization participating in order to establish it. The purpose of the mission is to motivate
and involve all employees and managers, while setting out a framework for the formation of goals and
strategies. It is the 'soul' or 'spirit' behind the image that a company wants to present to its stakeholders.
Figure 3: Strategic planning process within a business unit (adapted from Kotler &
Keller, 2009).
2. SWOT analysis
A successful business activity is built on the company's core competences. The SWOT analysis is a popular
concept to conduct an overall evaluation of a company's strengths (S), weaknesses (W) - the internal
environment - and opportunities (O) and threats (T) - the external environment. Based on contrasting the
company's strengths and weaknesses with market opportunities and (potential) threats, it gives
recommendations for actions in the resulting cells.
Figure 4: SWOT analysis.
3. Goal and strategy formulation
Goals are set to define what is important to achieve. Within an organization there is a series of goals of
different kinds and on different levels. The goals that concern the most important company relations, or the
company as a whole, are strategic goals and they are usually developed over several years.
Examples of (generic) goals: maximize sales revenue; maximize market share; maximize market value
of the company's products (in their segments); maximize brand loyalty.
All companies have ways of working to achieve a particular goal. Sometimes, this goal arises from the
company's historical operations; sometimes it is a goal that someone has decided upon and directs the
When conducting management by objectives, there are four relevant criteria:
Objectives must be arranged hierarchically, from the most to the least important.
Objectives should be quantitative whenever possible.
Goals should be realistic.
Objectives must be consistent (for example, sales and profit cannot be maximized simultaneously).
Strategy formulation: The next step is to form a strategy that will provide methods of achieving particular
goals. A strategy is a framework for action; it channels all program and activities according to the defined
goals, often in the form of a plan. A well-developed strategy works as both a guide and an aid for the
distribution of resources, identification of needs, changes in the organization etc. At this level you define the
company's basic orientation and create guidelines for implementing what you want to do.
The content of a strategy is also decided by its relationship with its environment. Competitive strategies are
influenced by factors such as current competition, access to different markets, trade barriers, power
relations, legal and institutional standards and laws etc. The dynamic nature of the company environment
requires strategies to be reviewed continuously to see whether they remain appropriate for achieving
specific goals.
In summary, a strategy describes how the organization will act on a general level in order to handle these
factors and to achieve its long-term goals. As you can see, there is a causal relationship between goals and
strategies. Put simply, one could also say that every company should focus on strategic planning, because
'failing to plan means planning to fail'.
Another perspective is given by comparing your company with your most important competitors. In
principle, there are three basic strategies to follow:
Cost leadership - 'being cheaper than ...'
Differentiation - 'being different from ...'
Concentration/focus - 'being narrower/more specialized than ...'.
Figure 5. Porter's generic strategies (adapted from Porter, 1980, 1985; in Kotler &
Keller, 2009).
The core difference lies between having cost superiority and one of the other two strategies. Concentration
is built on the same basic elements as differentiation, but focuses on specific niche markets or segments as
compared to a whole industry. Thus, the company's products target only a small number of segments within
a few sectors or markets.
4. Program formulation and implementation
Strategies only work if they are implemented appropriately. Practicable programmes must be therefore
formulated. If the strategy is to attain technological leadership for the development of specific products,
then programme must be devised to strengthen research and development (R&D), production, and
processing units in the company. Similar requirements apply to marketing programmes in which the
effectiveness of its tools (product, price, place, promotion) needs to be evaluated and adjusted if necessary.
Programmes can be related to several elements. One example is provided by Peters and Waterman (former
employees at McKinsey & Company) who distinguished between a company's 'hardware' elements (the
'bones': strategy, (organizational) structure, and (information and communication) systems), and 'software'
elements (the 'blood': (leadership) style, skills (competencies), staff, and shared values (culture)).
5. Feedback and control
This final aspect emphasizes the need for constant evaluation of the company's strategic fit with the market
and further environmental dynamics.
Chapter 04
Marketing Research
Definition: The Marketing Research is the systematic collection, analysis, and interpretation of data
pertaining to the marketing conditions.
The basic reason for carrying out the marketing research is to find out the change in the consumer behavior
due to the change in the elements of the marketing mix (product, price, place, promotion).
The marketers need to know about the changing trends in the market viz. Changes in the customer’s tastes
and preferences, the new products launched in the market, prices of the competitor’s product, the close
substitutes of the product, etc.
Marketing Research Process
1. Define the Problem-The foremost decision that every firm has to undertake is to find out the problem for which the
research is to be conducted. The problem must be defined adequately because if it is too vague, then it may result in
the wastage of scarce resources and if it is too narrow, then the exact conclusion cannot be drawn.In order to define
the problem appropriately, each firm must have a clear answer to the questions viz. What is to be researched
(content and the scope)? And Why the research is to be done (decisions that are to be made)?
2. Develop the Research Plan– This step involves gathering the information relevant to the research objective. It
Data Sources: The researcher can collect the data pertaining to the research problem from either the primary
source or the secondary source or both the sources of information. The primary source is the first-hand data that
does not exist in any books or research reports whereas the secondary data is the second-hand data which is
available in the books, journals, reports, etc.
Research Approaches: The Secondary data are readily available in books, journals, magazines, reports, online,
etc. But the primary data have to be collected and to do so, the following research can be conducted:
Observational Research: The researcher can collect the information by just observing the happenings in the
market and sometimes having a friendly conversation with the customers to know about their purchase
Ethnographic Research: It is one of the forms of an observation research where the researcher studies an
individual in the real life situation and not under any market setup or a lab.The purpose of this research is to
know the way people live (their lifestyles), What they do to earn their livelihood, how they consume goods
and services, what they need in their personal and professional lives etc.
Focus Group Research: It is a form of group discussion wherein six to ten people gather and discuss the
common topic given by the moderator. A moderator is a person who conducts the group discussion and is
skilled in group dynamics. He also keeps the discussion focused on the topic so that relevant information can
be obtained from the group members.
Survey Research: These are the descriptive research generally conducted to know the about the customer’s
knowledge about the product, their preferences, and satisfaction level. The best way to conduct surveys is
through the Questionnaires.
Behavioral Data: The customer’s actual purchases at the store reflects its behavior and the choice of products.
Thus observing what customers are buying gives more accurate information about the customer rather than
the planned answers given by them in the surveys.
Experimental research: This is done to find out the cause and effect relationships. This research is undertaken
to study the effects of change in the customer’s behavior due to the change in the product’s attributes.
Sampling plan: Once the research approach is decided, the researcher has to design a sampling plan and have to
decide on the following:
The sampling Unit i.e. whom, shall we survey?
The sample size, i.e., How many units in the population shall be surveyed?
The sampling procedure, i.e. How the respondents shall be chosen?
Contact Methods: The researcher has to choose the medium through which the respondents can be contacted.
The respondents can be reached via emails, telephone, in person or online.
3. Collect the Information: This is one of the most expensive methods of marketing research. At this stage, the
researcher has to adopt the methods to collect the information, he may find it difficult to gather the correct
information because of the respondent’s biasedness, unwillingness to give answers or not at home.
4. Analyze the Information: Once the information is collected the next step is to organize it in such a way that some
analysis can be obtained. The researchers apply several statistical techniques to perform the analysis, such as they
compute averages and measures of dispersion. Also, some advanced decision models are used to analyze the data.
5. Present the Findings: Finally, all the findings and the research are shown to the top management level viz. Managing
director, CEO, or board of directors to make the marketing decisions in line with the research.
6. Make the Decision: This is the last step of the marketing research, once the findings are presented to the top level
management it is up to them either to rely on the findings and take decisions or discard the findings as unsuitable.
Thus, marketing research is done to gather all the relevant information about the market and design the
marketing strategies accordingly.
Chapter 06
5 Factors Influencing Consumer Behavior
The consumer behaviour or buyer behaviour is influenced by several factors or forces. They are: 1. Internal
or Psychological factors 2. Social factors 3. Cultural factors 4. Economic factors 5. Personal factors!
1. Internal or psychological factors:
The buying behaviour of consumers is influenced by a number of internal or psychological factors. The most
important ones Motivation and Perception.
a) Motivation:
A need becomes a motive when it is aroused to a sufficient level of intensity. A motive is a need that is
sufficiently pressing to drive the person to act. There can be of types of needs:
1. Biogenic needs:
They arise from physiological states of tension such as thirst, hunger
2. Psychogenic needs:
They arise from psychological states of tension such as needs for recognition, esteem
b) Perception:
Human beings have considerably more than five senses. Apart from the basic five (touch, taste, smell, sight,
hearing) there are senses of direction, the sense of balance, a clear knowledge of which way is down, and so
forth. Each sense is feeding information to the brain constantly, and the amount of information being
collected would seriously overload the system if one took it all in. The brain therefore selects from the
environment around the individual and cuts out the extraneous noise.
In effect, the brain makes automatic decisions as to what is relevant and what is not. Even though there may
be many things happening around you, you are unaware of most of them; in fact, experiments have shown
that some information is filtered out by the optic nerve even before it gets to the brain. People quickly learn
to ignore extraneous noises: for example, as a visitor to someone else’s home you may be sharply aware of a
loudly ticking clock, whereas your host may be entirely used to it, and unaware of it except when making a
conscious effort to check that the clock is still running.
Therefore the information entering the brain does not provide a complete view of the world around you.
When the individual constructs a world-view, she then assembles the remaining information to map what is
happening in the outside world. Any gaps (and there will, of course, be plenty of these) will be filled in with
imagination and experience. The cognitive map is therefore not a ‘photograph’; it is a construct of the
imagination. This mapping will be affected by the following factors:
1. Subjectivity:
This is the existing world-view within the individual, and is unique to that individual.
2. Categorisation:
This is the ‘pigeonholing’ of information, and the pre-judging of events and products. This can happen
through a process known as chunking, whereby the individual organises information into chunks of related
items. For example, a picture seen while a particular piece of music is playing might be chunked as one item
in the memory, so that sight of the picture evokes the music and vice versa.
3. Selectivity:
This is the degree to which the brain is selecting from the environment. It is a function of how much is going
on around the individual, and also of how selective (concentrated) the individual is on the current task.
Selectivity is also subjective: some people are a great deal more selective than others.
4. Expectation:
These lead individuals to interpret later information in a specific way. For example, look at this series of
numbers and letters
In fact, the number 13 appears in both series, but in the first series it would be interpreted as a В because that
is what the brain is being led to expect, (The В in Matura Ml Script looks like this. B)
5. Past experience:
This leads us to interpret later experience in the light of what we already know. Psychologists call this the
law of primacy, Sometimes sights, smells or sounds from our past will trigger off inappropriate responses:
the smell of bread baking may recall a village bakery from twenty years ago, but in fact the smell could have
been artificially generated by an aerosol spray near the supermarket bread counter.
An example of cognitive mapping as applied to perception of product quality might run as follows.
The consumer uses the input selector to select clues and assign values to them. For quality, the cues are
typically price, brand name and retailer name. There are strong positive relationships between price and
quality in most consumers’ perceptions, and brand name and quality; although the retailer name is less
significant, it still carries some weight.
For example, many consumers would feel confident that Big Bazaar would sell higher-quality items than the
local corner shop, but might be less able to distinguish between Food Bazaar and Giant hyper store. The
information is subjective in that the consumer will base decisions on the selected information. Each of us
selects differently from the environment and each of us has differing views. Information about quality will
be pigeonholed, or categorised: the individual may put Scoda Octavia in the same category as Mercedes
Benz or perhaps put Sony in the same slot as Aiwa.
2. Social factors:
Man is a social animal. Hence, our behaviour patterns, likes and dislikes are influenced by the people around
us to a great extent. We always seek confirmation from the people around us and seldom do things that are
not socially acceptable. The social factors influencing consumer behaviour are a) Family, b) Reference
Groups, c) Roles and status.
a) Family:
There are two types of families in the buyer’s life viz. nuclear family and Joint family. Nuclear family is that
where the family size is small and individuals have higher liberty to take decisions whereas in joint families,
the family size is large and group decision-making gets more preference than individual. Family members
can strongly influence the buyer behaviour, particularly in the Indian contest. The tastes, likes, dislikes, life
styles etc. of the members are rooted in the family buying behaviour.
The family influence on the buying behaviour of a member may be found in two ways
i) The family influence on the individual personality, characteristics, attitudes and evaluation criteria and
ii) The influence on the decision-making process involved in the purchase of goods and services. In India,
the head of the family may alone or jointly with his wife decides the purchase. So marketers should study
the role and the relative influence of the husband, wife and children in the purchase of goods and services.
An individual normally lives through two families:
Family of orientation:
This is the family in which a person takes birth. The influences of parents and individual’s upbringing have
a strong effect on the buying habits. For instance, an individual coming form an orthodox Tamil or Gujarati
vegetarian family may not consume meat or egg even though she may appreciate its nutritional values.
Family of procreation:
This is the family formed by an individual with his or her spouse and children. Normally, after marriage, an
individual’s purchasing habits and priorities change under the influence of spouse. As the marriage gets
older, the people usually settle in certain roles. For instance, a father normally takes decisions on investment
whereas the mother takes decision on health of children.
From a marketing viewpoint, the level of demand for many products is dictated more by the number of
households than by the number of families. The relevance of families to marketing is therefore much more
about consumer behaviour than about consumer demand levels .In terms of its function as a reference group,
the family is distinguished by the following characteristics:
i. Face-to-face contact:
Family members see each other every day and interact as advisers, information providers and sometimes
deciders. Other reference groups rarely have this level of contact.
ii. Shared consumption:
Durables such as refrigerators, washing machines, televisions and furniture are shared, and food is
collectively purchased and cooked. Purchase of these items is often collective; children even participate in
decision making on such major purchases as cars and houses.
iii. Subordination of individual nee:
Because consumption is shared, some family members will find that the solution chosen is not one that fully
meets their needs.
iv. Purchasing agent:
Because of the shared consumption, most families will have one member who does most, or all of the
shopping. Traditionally, this has been the mother of the family, but increasingly the purchasing agents are
the older children of the family and even pre-teens are sometimes taking over this role.
The reason for this is the increase in the number of working mothers who have less time for shopping. This
has major implications for marketers, since pre-teens and young teens generally watch more TV than adults
and are therefore more open to marketing communications.
Role specialization is critical in family decision making because of the sheer number of different products
that must be bought each year in order to keep the family supplied. What this means in practice is that, for
example, the family member responsible for doing the cooking is also likely to take the main responsibility
for shopping for food. The family member who does the most driving is likely to make the main decision
about the car and its accessories, servicing, fuelling and so forth; the family gardener buys the gardening
products, and so on.
Culture has a marked effect on family decision-making styles. Religion and nationality will often affect the
way decisions are made. Indian cultures tend to be male dominated in decision-making, whereas European
and North American cultures show a more egalitarian pattern of decision-making.
There are two issues here for the marketer: first, what is the effect on the marketing mix of the multiethnic
society like in India; and secondly, what is the effect when dealing internationally? This is a somewhat
sensitive area and the marketers are still getting to grips with.
Social class creates patterns of decision-making. Among very wealthy families, there appears to be a greater
tendency for the husbands to make the decisions, but at the same time the norms of purchase tend to be well
established and therefore discussion is unnecessary.
Lower-class families, with low incomes, tend to be more matriarchal, with the wives often handling the
financial decisions about rent, insurance, grocery and food bills without reference to the husbands. Middleclass families tend to show greater democratic involvement in decision-making. These social class
distinctions are gradually breaking down, however, as a result of increasing wealth and mass education.
The family may well adopt different roles according to the decision-making stage. At the problem
recognition stage of, for example, the need for new shoes for the children, the children themselves may be
the main contributors. The mother may then decide what type of shoes should be bought, and the father may
be the one who takes the children to buy the shoes. It is reasonable to suppose that the main user of the
product might be important in the initial stages, with perhaps joint decision making at the final purchase.
Other determinants might include such factors as whether both parents are earning. The double income
families generally take decisions jointly because each has a financial stake in the outcome. Gender role
orientation is clearly crucial to decision making. Husbands (and wives) with conservative views about
gender roles will tend towards the assumption that most decisions about expenditure will be made by the
husband. Even within this type of decision-making system, however, husbands will usually adjust their own
views to take account of their wife’s attitudes and needs.
Influence of children on buying decisions:
First-born children generate more economic impact than higher-order babies. First-born and only children
have a higher achievement rate than their siblings, and since the birth rate is falling, there are more of them
proportionally. More and more couples are choosing to have only one child and families larger than two
children are becoming a rarity. Childlessness is also more common now than it was 30 years ago.
Children also have a role in applying pressure to their parents to make particular purchasing decisions. The
level of ‘pester power’ generated can be overwhelming, and parents will frequently give in to the child’s
demands. This is substantiated by the spurt of cartoon channels like Cartoon Network, Pogo, Nick, Animax,
Hungama or Splash, all of which depend on the advertisements of all possible products in which children
have their influence over their parents. Although the number of children is steadily declining, their
importance as consumers is not. Apart from the direct purchases of things that children need, they influence
decision making to a marked extent. Children’s development as consumers goes through five stages:
1. Observing
2. Making requests
3. Making selections
4. Making assisted purchases
5. Making independent purchases
Recent research has shown that pre-teens and young teens have a greater influence on family shopping
choices than do the parents themselves, for these reasons:
i. Often they do the shopping anyway, because both parents are working and the children have the available
time to go to the shops.
ii. They watch more TV, so are more influenced by advertising and more knowledgeable about products.
iii. They tend to be more attuned to consumer issues, and have the time to shop around tor.
b) Reference group:
A group is two or more persons who share a set of norms and whose relationship makes their behaviour
interdependent. A reference group is a group of people with whom an individual associates. It is a group of
people who strongly influence a person’s attitudes values and behaviour directly or indirectly. Reference
groups fall into many possible grouping, which are not necessarily to be exhaustive (i.e. non over-lapping).
The various reference groups are:
i) Membership or contractual groups:
They are those groups to which the person belongs, and interacts. These groups have a direct influence on
their member’s behaviour.
ii) Primary or normative groups:
They refer to groups of friends, family members, neighbours co-workers etc whom we see most often. In
this case, there is fairly continuous or regular, but informal interaction with cohesiveness and mutual
participation, which result in similar beliefs and behaviour within the group.
iii) Secondary groups:
They include religious groups, professional groups etc, which are composed of people whom we see
occasionally. These groups are less influential in shaping attitudes and controlling behaviour but can exert
influence on behaviour within the purview of the subject of mutual interest. For example, you can be
member of a philately or literary club where you can discuss on mutually interesting subjects.
iv) Aspiration group:
These are group to which a person would like to join as member. These groups can be very powerful in
influencing behaviour because the individual will often adopt the behaviour of the aspirational group in the
hopes of being accepted as a member. Sometimes the aspirational groups are better off financially, or will be
more powerful; the desire join such groups is usually classed as ambition.
For example, a humble office worker may dream of one day having the designation to be present in the
company boardroom. Advertising commonly uses images of aspirational groups, implying that the use of a
particular product will move the individual a little closer to being a member of an aspirational group. Just
consider Nokia 6230 ad campaign where an young man with Nokia mobile is shown to be capable to go the
top position in the company, thus instigating you to use the same model in order to join the same aspirational
v) Dissociative or avoidance groups:
These are groups whose value an individual rejects and the individual does not want to be associated with.
For example, a senior corporate executive does not want to be taken as a teenager. Hence, the individual will
try to avoid certain products or behaviours rather than be taken for somebody from the dissociative group. In
the just given example, the executive may not use cigarette, perfume or car, which are very much teenageroriented. Like aspirational groups, the definition of a group as dissociative is purely subjective and it varies
from one individual to the next.
vi) Formal groups:
These groups have a known list of members, very often recorded somewhere. An example might be a
professional association, or a club. Usually the rules and structure of the group are laid down in writing.
There are rules for membership and members’ behaviour is constrained while they remain part of the group.
However, the constraints usually apply only to fairly limited areas of behaviour; for example, the association
of Chartered Accountants (CA) or the Cost Accountants have laid down the codes of practice for their
members in their professional dealings, but has no interest in what its members do as private citizens.
Membership of such groups may confer special privileges, such as job advancement or use of club facilities,
or may only lead to responsibilities in the furtherance of the group’s aims.
vii) Informal groups:
These are less structured, and are typically based on friendship. An example would be an individual’s circle
of friends, which only exists for mutual moral support, company and sharing experiences. Although there
can be even greater pressure to conform than would be the case to a formal group, there is nothing in
Often informal groups expect a more rigorous standard of behaviour across a wider range of activities that
would a formal group; such circles of friends are likely to develop rules of behaviour and traditions that are
more binding than written rules.
viii) Automatic groups:
These are those groups, to which one belongs by virtue of age, gender, culture or education. These are
sometimes also called category groups. Although at first sight it would appear that these groups would not
exert much influence on the members’ behaviour, because they are groups, which have not been joined
voluntarily, it seems that people are influenced by group pressure to conform. For example, when buying
clothes, older people are reluctant to look like a teenager and hence they normally do not buy jeans.
ix) Indirect groups:
In this case, the customers are not in direct contact with the influencers. For example, a film star like Shah
Rukh Khan pitches for Santro car, it obviously has a deep influence over the blind fans.
x) Comparative groups:
The members of this group are those with whom you compare yourself. For example, you may compare
yourself with your brother or sister (sibling rivalry) or the colleagues and try to emulate by possessing some
unique products or brands like Modava watch or Christian Dior perfume.
xi) Contactual group:
The group with which we are in regular contacts like college friends, office colleagues.
c) Roles and status:
A person participates in many groups like family, clubs, and organisations. The person’s position in each
group can be defined in tern of role and status. A role consists of the activities that a person is expected to
perform. Each role carries a status. People choose products that communicate their role and status in society.
Marketers must be aware of the status symbol potential of products and brands.
3. Cultural factors:
Kotler observed that human behaviour is largely the result of a learning process and as such individuals
grow up learning a set of values, perceptions, preferences and behaviour patterns as the result of
socialization both within the family and a series of other key institutions. From this we develop a set of
values, which determine and drive behavioural patterns to a very large extent.
Cultural factors consist of a) Culture, b) Sub culture and c) Social class.
a) Culture:
Culture is the most fundamental determinant of a person’s want and behaviour. The growing child acquires a
set of values, perception preferences and behaviours through his or her family and other key institutions.
Culture influences considerably the pattern of consumption and the pattern of decision-making. Marketers
have to explore the cultural forces and have to frame marketing strategies for each category of culture
separately to push up the sales of their products or services. But culture is not permanent and changes
gradually and such changes are progressively assimilated within society.
Culture is a set of beliefs and values that are shared by most people within a group. The groupings
considered under culture are usually relatively large, but at least in theory a culture can be shared by a few
people. Culture is passed on from one group member to another, and in particular is usually passed down
from one generation to the next; it is learned, and is therefore both subjective and arbitrary.
For example, food is strongly linked to culture. While fish is regarded as a delicacy in Bengal, and the
Bengalis boast of several hundred different varieties, in Gujarat. Rajastan or Tamil Naru, fish is regarded as
mostly unacceptable food item. These differences in tastes are explained by the culture rather than by some
random differences in taste between individuals; the behaviours are shared by people from a particular
cultural background.
Language is also particularly culturally based. Even when a language is shared across cultures, there will be
differences according to the local culture; differences between Hindi accents and choice of words of various
places like Mumbai, Delhi or Bihar are clearly understandable.
While cultural generalities such as these are interesting and useful, it would be dangerous to make
assumptions about individuals from other countries based on the kind of general findings in Hofstede’s
work. Individuals from within a culture differ more than do the cultures from each other: in other words, the
most individualistic Indian is a great deal more individualistic than the most conformist American. Having
said that, such generalizations are useful when approaching mass markets and are widely used when
planning mass advertising campaigns such as TV commercials.
Culture can change over a period of time, although such changes tend to be slow, since culture is deeply
built into people’s behavior. From a marketing viewpoint, therefore, it is probably much easier to work
within a given culture than to try to change it.
b) Sub-Culture:
Each culture consists of smaller sub-cultures that provide more specific identification and socialisation for
their members. Sub-culture refers to a set of beliefs shared by a subgroup of the main culture, which include
nationalities, religions, racial groups and geographic regions. Many sub-Cultures make up important market
segments and marketers have to design products and marketing programs tailored to their needs.
Although this subgroup will share most of the beliefs of the main culture, they share among themselves
another set of beliefs, which may be at odds with those held by the main group. For example, Indians are
normally seen as orthodox, conservative people, but rich, up-market youths do not hesitate to enjoy night
parties with liquor and women. Another example is that, the urban educated or upper class exhibits more
trace of individualism although Indian culture is mostly collective in nature.
c) Social class:
Consumer behaviour is determined by the social class to which they belong. The classification of
socioeconomic groups is known as Socio-Economic Classification (SEC). Social class is relatively a
permanent and ordered division in a society whose members share similar value, interest and behaviour.
Social class is not determined by a single factor, such as income but it is measured as a combination of
various factors, such as income, occupation, education, authority, power, property, ownership, life styles,
consumption, pattern etc.
There are three different social classes in our society. They are upper class, middle class and lower class.
These three social classes differ in their buying behaviour. Upper class consumers want high-class goods to
maintain their status in the society. Middle class consumers purchase carefully and collect information to
compare different producers in the same line and lower class consumers buy on impulse.
Again there could be education considerations. A rich but not so educated people will not normally buy a
computer. We should consider another factor of social mobility where a person gets up in the social ladder
(for example, poor can become middle class and middle class become rich or the children of uneducated
family can attain higher education) or down in the social ladder (for example, rich can become poor or the
children of a highly educated family may not continue study).
Therefore marketing managers are required to study carefully the relationship between social classes and
their consumption pattern and take appropriate measures to appeal to the people of those social classes for
whom their products are meant.
4. Economic Factors:
Consumer behaviour is influenced largely by economic factors. Economic factors that influence consumer
behaviour are
a) Personal Income,
b) Family income,
c) Income expectations,
d) Savings,
e) Liquid assets of the Consumer,
f) Consumer credit,
g) Other economic factors.
a) Personal Income:
The personal income of a person is determinant of his buying behaviour. The gross personal income of a
person consists of disposable income and discretionary income. The disposable personal income refers to the
actual income (i.e. money balance) remaining at the disposal of a person after deducting taxes and
compulsorily deductible items from the gross income. An increase in the disposable income leads to an
increase in the expenditure on various items. A fall in the disposable income, on the other hand, leads to a
fall in the expenditure on various items.
The discretionary personal income refers to the balance remaining after meeting basic necessaries of life.
This income is available for the purchase of shopping goods, durable goods and luxuries. An increase in the
discretionary income leads to an increase in the expenditure on shopping goods, luxuries etc. which
improves the standard of living of a person.
b) Family income:
Family income refers to the aggregate income of all the members of a family.
Family income influences the buying behaviour of the family. The surplus family income, remaining after
the expenditure on the basic needs of the family, is made available for buying shopping goods, durables and
c) Income Expectations:
Income expectations are one of the important determinants of the buying behaviour of an individual. If he
expects any increase in his income, he is tempted to spend more on shopping goods, durable goods and
luxuries. On the other hand, if he expects any fall in his future income, he will curtail his expenditure on
comforts and luxuries and restrict his expenditure to bare necessities.
d) Savings:
Savings also influence the buying behaviour of an individual. A change in the amount of savings leads to a
change in the expenditure of an individual. If a person decides to save more out of his present income, he
will spend less on comforts and luxuries.
e) Liquid assets:
Liquid assets refer to those assets, which can be converted into cash quickly without any loss. Liquid assets
include cash in hand, bank balance, marketable securities etc If an individual has more liquid assets, he goes
in for buying comforts and luxuries. On the other hand, if he has less liquid assets, he cannot spend more on
buying comforts and luxuries.
f) Consumer credit:
Consumer credit refers to the credit facility available to the consumers desirous of purchasing durable
comforts and luxuries. It is made available by the sellers, either directly or indirect у through banks and
other financial institutions. Hire purchase, installment purchase, direct bank loans etc are the ways by which
credit is made available to the consumers.
Consumer credit influences consumer behaviour. If more consumer credit is available on liberal terms,
expenditure on comforts and luxuries increases, as it induces consumers to purchase these goods, and raise
their living standard.
g) Other economic factor:
Other economic factors like business cycles, inflation, etc. also influence the consumer behaviour.
5. Personal factor:
Personal factors also influence buyer behaviour. The important personal factors, which influence buyer
behaviour, are a) Age, b) Occupation, c) Income and d) Life Style
a) Age:
Age of a person is one of the important personal factors influencing buyer behaviour. People buy different
products at their different stages of cycle. Their taste, preference, etc also change with change in life cycle.
b) Occupation:
Occupation or profession of a person influences his buying behaviour. The life styles and buying
considerations and decisions differ widely according to the nature of the occupation. For instance, the
buying of a doctor can be easily differentiated from that of a lawyer, teacher, clerk businessman, landlord,
etc. So, the marketing managers have to design different marketing strategies suit the buying motives of
different occupational groups.
c) Income:
Income level of people is another factor which can exert influence in shaping the consumption pattern.
Income is an important source of purchasing power. So, buying pattern of people differs with different levels
of income.
d) Life Style:
Life style to a person’s pattern or way of living as expressed in his activity, interests and opinions that
portrays the “whole person” interacting with the environment. Marketing managers have to design different
marketing strategies to suit the life styles of the consumers.
Buyer Decision Process: 5 Stages of Consumer Buying Decision Process
Buyer decision process (or customer buying process) helps markets to identify how consumer completes the
journey from knowing about a product to making the purchase decision.
Understanding the customer’s buying process is essential for marketing and sales.
The buyer decision process will enable to set a marketing plan that convinces them to purchase the product
or service for fulfilling the buyer’s or consumer’s problem.
Consumers go through 5 stages in taking the decision to purchase any goods or services.
Buyer Decision Process - 5 Stages of consumer buying decision process
Problem Recognition.
Information Search.
Evaluation of Alternatives.
Purchase Decision.
Post-Purchase Evaluation.
When making a purchase, the buyer goes through a decision process consisting of 5 stages.
Clearly, the buying process starts long before the actual purchase and continues long after.
The marketer’s job is to understand the buyer’s behavior at each stage and the influences that are operating.
The figure implies that consumers pass through all five Stages with every purchase.
Let’s explain all 5 stages of the buyer decision process.
1. Need or Problem Recognition
During need or problem recognition, the consumer recognizes a problem or need that could be satisfied by a
product or service in the market.
Problem Recognition is the first stage of the buyer decision process.
At this stage, the consumer recognizes a need or problem. The buyer feels a difference between his or her
actual state and some desired state.
This could be a simple as “I’m hungry, I need food.”
The need may have been triggered by internal stimuli (such as hunger or thirst) or external stimuli (such as
advertising or word of mouth).
2. Information Search
Once the need is recognized, the consumer is aroused to seek more information and moves into the
information search stage.
The second stage of the purchasing process is searching for information.
After the recognition of needs, the consumers try to find goods for satisfying such needs. They search for
information about the goods they want. Consumers can get information about goods from different sources.
Personal sources: This includes family, friends, neighbors, acquaintance etc.
Commercial source: This includes advertising, salespeople, dealers, packaging, display etc.
Public sources: This includes mass media, consumer rating organizations etc. they also become confidential
to provide information.
Experimental sources: This includes handling, examining, using etc. Such information becomes decisive and
3. Evaluation of Alternatives
With the information in hand, the consumer proceeds to alternative evaluation, during which the information
is used to evaluate” brands in the choice set.
Evaluation of alternatives is the third stage of ‘ buying process. Various points of information collected from
different sources are used in evaluating different alternatives and their attractiveness.
While evaluating goods and services, different consumers use different bases.
Generally, the consumers evaluate the alternatives on the basis of attributes of the product, the degree of
importance, belief in the brand, satisfaction etc. to choose correctly.
4. Purchase Decision
After the alternatives have been evaluated, consumers take the decision to purchase products and services.
They decide to buy the best brand. But their decision is influenced by others’ attitude and situational factors.
5. Post-Purchase Evaluation
In the final stage of the buyer decision process, postpurchase behavior, the consumer takes action based on
satisfaction or dissatisfaction. In this stage, the consumer determines if they are satisfied or dissatisfied with
the purchasing outcome. Here is where cognitive dissonance occurs, “Did I make the right decision.”
In brief, customers will compare products with their previous expectations and will be either satisfied or
dissatisfied. Therefore, these stages are critical in retaining customers. This can greatly affect the decision
process for similar purchases from the same company in the future, having a knock-on effect at the
information search stage and evaluation of alternatives stage. If your customer is satisfied, this will result in
brand loyalty, and the Information search and Evaluation of alternative stages will often be fast-tracked or
skipped altogether.
Chapter 07