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Topic Name Summary

1 Unit-01-Introduction to Marketing

2 Unit-02-Strategic Marketing Process

3 Unit-03-Marketing Environment

4 Unit-04-Understanding the Marketing Information Systems (MIS)

5 Unit-05-Consumer Buyer Behavior

6 Unit-06-Business Buyer Behavior Introduction

7 Unit-07-Segmentation Targeting and Positioning

8 Unit-08-Product Management Decisions Development And

9 Unit-09-Product Management Services and Branding Strategy

10 Unit-10-Pricing

11 Unit-11-Distribution Management

12 Unit-12-Promotion Management Managing Non Personal

13 Unit-13-Personal Communication Channels

14 Unit-14-Customer Relationship Management?An Overview
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15 Unit-15-International Marketing ManagementCopyrights @ 2009 Sikkim Manipal UniversityHomeAnnouncementsBlogsDashboardFeedbackHelp

Introduction to Marketing Management

Market and Marketing

What is Market?

Originally, a Market was a public place in a town or village, where household provisions andother objects were available for sale. The definition of market has expanded in this globalizedworld. The traders may be spread over a whole town, or city or region or a country and yet forma market. For example, stock market, Oil & Oilseeds market, Steel or Metals market etc wherepeople across the countries can participate in the business. The essentials of a market are (i) acommodity / item which is dealt with, (ii) the existence of buyers and sellers, (iii) a place; be it acertain region, a country or the entire world and (iv) interactions between buyers & sellers tofacilitate transactions.

(1) On the basis of Geographic Area

Local Market is the place where the purchase and sale of goods / services involve buyers andsellers of a small local area. The example of local market is a village or a town, market. In thismarket day to day requirement like vegetable, fruits, meat and fish are sold.

Regional Market

When the purchase and sale of goods involve buyers and sellers of a region, such as a large townmarket catering to needs of a group of villages or towns, such a market is common in case of

wholesale / retail sale of food grains.

National Market

When the purchase and sale of goods involve both buyers and sellers of the entire nation then itis called as national market. This type of market in the case of commodities such as Cotton &Textiles Market located in Mumbai, Tea and Jute Markets located in Kolkata. With the advent of
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internet, this concept is also getting obsolete, as you can operate in any market, sitting in yourtown orcity.

(2) Global or World Market

When the purchase and sale of goods involve buyers and sellers of many nations, there is said tobe a World or Global Market. Many commodities such as Gold, Silver, Tea, Coffee, Spices aresold in such global markets. Many manufactured products and specialized services are also soldacross the globe by many companies. Producers of Coca-cola and Sony brand sell their productsin the global market in almost all countries. Indian companies like TCS, Infosys, and WIPROsell and provide their IT enabled services to many companies in different parts of the world.They operate in a Global Market.

(3) Perfect Market

It refers to a market or market situation where there is perfect competition. Competition is said to

be perfect when (a) the sellers & buyers of a particular product are so many that none of themhave to sell or buy at a single uniform price. (b) Price is determined by the market forces ofsupply & demand.

(4) Imperfect Market

In contrast to the perfect competition, the imperfect market will have imbalance between numberof buyers and sellers. This market is further divided into three parts. They are Monopoly,Monopolistic and oligopoly. In case of monopoly, single seller dominates the entire marketwhere as in oligopoly few sellers dominate the market. The details of these types of markets willbe discussed in the pricing unit.

(5) Consumer Goods Market

This is a market, where the buyers who are individuals and households purchase a variety of products and services to satisfy their needs and wants. For example, an individual buys achocolate for his personal consumption whereas a family buys a refrigerator for household orfamily consumption. Products sold in consumer goods market are classified as Non-Durables,such which are frequently purchased such as bathing soap, detergent etc. and Durables such asrefrigerator, TV Set, Washing Machine, Car, Clothing etc. Non-Durables are also known asFMCG Fast Moving Consumer Goods e.g. Soap, detergent etc

(6) Industrial Goods Market

This market is also known as organizational or B 2 B market. It is made up of organizationsincluding manufacturing units, service firms, government departments and other businessenterprise. The products which are sold in the industrial goods market are typically, rawmaterials, machines, machine tools, equipments, components and spares etc. Generally, thebuyers of industrial goods, purchase products and services either for producing other productsand services which can be sold in the consumer markets or for using them to facilitate the


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operation of business enterprise. In many such cases, the buyer is an organization whoseconsumption will depend on how the end users demand will change. Hence, in businessmarkets, the demand is a derived demand. Demand for steel will depend on the consumption ofsteel equipments, rods and other accessories in the construction and real estate sector.

(7) Non-Profit and Government Markets

This market which consists of Non-Profit organizations such as social-service agencies,educational organizations, charitable organizations and Government Departments and agenciesneeds special skills to sell to them. These buyers have limited purchasing power which is whypricing to this market needs to be planned carefully. Government, which is a large buyer, makespurchases on the basis of tenders, bids and negotiation.

What is Marketing?

Marketing is a set of business activities that facilitate movement of goods and services from

producer to consumer. It is an ongoing process of discovering and translating consumer needsinto products and services, creating demands for them, serving the customer and his demandthrough a marketing programme of promotion and distribution to fulfill the companys marketinggoals in a competitive environment.

It is evident that customer, his needs and wants are very important aspects of todays marketing.Customer focus is the very essence of marketing and his viewpoints should be taken into accountwhile making marketing decisions.

In this era of rapid changes, it is marketing which keeps the business in close contact with itseconomic, political, social and technological environment and informs it of events and changes

that can influence its activities.

American Marketing Association (AMA) offers the following definition of Marketing.( AMA2004)

Definition: Marketing is an organization function and a set of process for creating,communications and delivering value to customers and for managing customer relationships inways that benefit the organization and its stake holders.

The Chartered Institute of Marketing defines Marketing as:

Marketing is the management process responsible for identifying, anticipating and satisfyingcustomer requirements, profitably.

Having understood what a Market is and what is Marketing, we will now look what is anexchange and the exchange process.

The Exchange Process


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Todays marketing system has evolved from the time of a simple barter of goods through thestage of a money economy to todays complex marketing. Throughout all these stages,exchanges have been taking place. In small town and villages there were artisans such ascarpenters, weavers, potters blacksmiths, barbers and others such service providers whoproduced goods and services not only for their own consumption but also for exchanging with

others what they could not produce but needed. This was barter system of exchange. For atransaction to take place between two parties, it was necessary that there be needs and wants onboth sides. The development of money came to act as a common medium, and the exchangeprocess became very easy and convenient.Fig.1.1. below shows the exchange process undermoney economy in which products and services flow to the market from the producers andsellers and money, the value of the products and services, flow from the buyers to the sellers.

Figure 1.1

Thus, exchange is an act of obtaining a desired product or service from someone by offeringsomething in return. This exchange process will continue as long as human society existsbecause satisfying ones needs is the basic instinct of human beings and no one can produceeverything that he /she needs. For an exchange process to take place, between two or moreparties, few conditions have to be met. They are:

Each party has something that could be of value to other party. Each party has desire, willingness and ability to exchange. Each party is capable of communicating and delivering. Each party has the freedom to accept or reject the offer.

Learning Objective 2- Understand the concepts and functions of marketing.

Core Concepts

There are certain fundamental concepts and tasks which one needs to know to fully understandthe marketing function. These concepts provide foundation for a marketing orientation and tomanage the marketing function.

1. Needs and Wants

The marketers task lies in satisfying human needs and wants through the exchange process. It isalleged that marketing creates needs and makes people buy things they do not actually need. In


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reality, marketing or marketers do not create needs, but they create wants. Needs are thebasic human requirements of food, clothing shelter water and air. When we desire certainspecific objects or items to fulfill these needs, they are called wants. For example, when a personis hungry, he can satisfy his hunger by taking a simple meal at home. Instead, if he wants to eat aPizza or a Hamburger or a 5-Star Hotel meal, it is not a need but a want.

1. Demand

Human wants are unlimited, but their resources are limited. When a want for an object is backedor supported by buying ability, willingness to spend and desire to acquire a product / service, itbecomes a potential demand. The task of assessing or estimating demand is very crucial for amarketer. He should understand the relationship of the demand for his product with its price.Demand forecasting is essential for allocation of resources in a company.

1. Product and Services

Product is a generic term used to describe what is being offered by a seller or marketer. It maybe a good, a service or idea, which can be marketed by offering a set of benefits it offers tocustomers to satisfy their needs. However, there is a distinction between products and services.When we say product we mean a physical or a tangible product such as a tooth paste, arefrigerator or a mobile phone, whereas service refers to an act, performance, a benefit andindicates intangibility and absence of ownership or possession. Services can include bankingservice, hospitality service, airlines service, health service, entertainment service etc.

Target Market

Very few products can satisfy everyone in the market. Therefore, marketers divide the market

into distinct groups of buyers who have similar preferences. These groups are called segmentswith their own specific demographic, psychographic and behavioral characteristics. The marketerdecides as to which of these segment or segments offer highest opportunity for his company. Foreach of these target markets, the firm develops a product / service suited to their needs. TATAgroup has recently designed an economy car called NANO is priced around Rs.1 Lakh. Thetarget market for this car is all aspirants who dream of owning a car but cannot afford cars whichare now available for minimum Rs.2.5 Lakh. A Target Market is the group of people at whom amarketer targets his marketing efforts to sell his goods and services.

1. Marketing Management

Marketing Management which is also the title of this course refers to all the activities which themarketing managers, executives and personnel have to undertake to carry out the marketingfunction of the firm. It involves (i) analyzing the market opportunities by under taking consumerneeds and changes taking place in the marketing environment, (ii) planning the marketingactivities, and (iii) implementing marketing plans and settings control mechanism to ensuresmooth and successful accomplishment of the organizations goals. Marketing Management is acritical function, especially in highly competitive markets. It provides competitive edge to anorganization through strategic analysis and planning.


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1. Values and Satisfaction

In developed and developing economies, consumers have several products or brands to choose tosatisfy his/her need. Consumers perceptions about value that they can expect from differentproducts or services depend upon several factors. Sources that build the customer expectations

include own experience with products, friends, family members, consumers reports andmarketing communications. Customer value is the difference between total benefits received andtotal costs incurred by him in acquiring the product or services. The types of benefits could beproducts functional value, or its brand related image value and any accompanying service value.The types of costs a customer can incur may be monetary cost and energy cost.

Functions Of Marketing

The delivery of goods and services from producers to their ultimate consumers or users includesmany different activities. These different activities are known as marketing functions. Differentthinkers have described these functions in different ways. Some of the most important functions

of marketing are briefly discussed below:-

1. Marketing Research and Information Management

Marketers need to take decisions scientifically. Marketing research function is concerned withgathering, analyzing and interpreting data in a systematic and scientific manner. The types ofmarket information could be analysis of market size and characteristics, consumer tastes andpreferences and changes in them from time to time, channels of distribution and communicationand their effectiveness, economic, social, political and technological environment and changestherein. A company can procure such information from specialized market research agencies,government or can decide to collect themselves.

1. Advertising and Sales Promotion Advertising is a mass media tool used to inform,persuade or remind customers about products or services. It is an impersonal messagetargeted at a chosen group through paid space or time.

2. Sales Promotion is a short-term incentive given to customers or intermediaries to promotesales. It supplements advertising and personal selling and can be used at the time oflaunching a new product or even during its maturity period.

3. Product Planning and Management A Marketer should identify the needs and wantsof consumers, develop suitable products / services and make them available. Marketer isalso required to maintain the product and its variations in size, weight, package and pricerange according to the changing needs and requirements of his customers. Information

available through Market Research helps product management in taking appropriatedecisions while planning the marketing efforts.4. Selling This function of marketing is concerned with transferring of products to the

customer. An important part of this function is organizing sales force and managing theiractivities. Sales force management includes recruitment, training, supervision,compensation and evaluation of salesmen. They need to be assigned targets andterritories where they can operate. The salesmen interact with prospective purchasers


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face-to-face in order to sell the goods. The purchaser may be end customer or anintermediary, such as a retailer or a dealer.

5. Physical Distribution Moving and handling of products from factory to consumerscome under this function. Order processing, inventory, management, warehousing andtransportation are the key activities in the physical distribution system.

6. Pricing This is perhaps the most important decision taken by marketer, as it is the onlyrevenue fetching function and success and failure of the product may depend upon thisdecision. Therefore, the decision regarding how much to charge should be taken such thatthe price is acceptable to the prospective buyers and at the same time fetches profits forthe company. While deciding on the price, the factors to be considered are competition,competitive prices, companys marketing policy, government policy, and the buyingcapacity of target market etc.

Importance Of Marketing.

Peter Drucker, the famous management thinker in one of his classic articles has said Marketing

is everything. All other activities in the organization are support services to the marketingstrategy that the company pursues. Marketing is important not only to the company but to theconsumers and society and to the economy.

Consumer stands to benefit from marketing activities. He has more alternatives to choose from,improved and better quality products are available and he is able to buy goods at convenientlocations. Thanks to much improved customer service, a consumer is able to complain andexpects his complaint to be attended in reasonable time. He can now buy with credit or debit cardor cash or on installments.

For the society as a whole, marketing is important because it acts as a change agent making

people use latest products and improves the standard of living of the people. As we know, themain objective of marketing is to produce products and services for the society as per their needsand tastes, and while doing so it creates demand for these goods and services, encourages themto use them, thus leading to higher demand and sales. This higher demand allows the company toachieve economies of scale in both production and distribution resulting in decrease inproduction and distribution costs which can be used to reduce prices to consumers.

Successful operation of marketing activities creates, maintains and increases the demand forgoods and services in the economy. It results in the increased level of production. This, in turn,increases the national income, which is beneficial to the economy. Marketing operations requirethe services of intermediaries such as wholesalers, retailers, transporters, and service provides forstorage, finance, insurance and advertising. These services provide employment in largenumbers.

Unit 2-Strategic Marketing Process
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Marketing strategies and programs in the organizations are derived from the companywidestrategic planning. Thus, you have to understand how organizations develop their strategic plans.After analyzing the strategic plan, you should be able to relate these plans role in guiding themarketers, and their application in serving the customers with the help of companys employeesas well as intermediaries.

Describe the companywide strategic planning.

Strategic Planning

Strategic planning is the process of defining the company mission, setting the long term andshort term objectives, designing an appropriate business portfolio and coordinating functionalstrategies of the company.

Looking at the definition, you will be able to identify four important factors of the strategicplanning. They are

1. Defining the company mission.

2. Formulating the objectives

3. Designing an appropriate business portfolio

4. Coordination at business levels.

Now, we will discuss the above points and their relevance to the marketing plans.

Defining the company mission:

An organization mission explains who its customers are, how it satisfies their needs and whattype of products it offers.

Let me explain this concept by taking a mission statement of the Trends in Vogue, a familybeauty saloons chain from Cavin Kare, a well known fast moving consumer goods (FMCG)company in India. The mission statement is

1. To provide the customer an unparalleled service experience

2. To provide the customer the largest range of natural products and services

3. To be the first to introduce sub-formats and value-added services

4. To be the most preferred family beauty salon chain for customers, employees and


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Alliance partners.

5. To provide consistent profits to all stakeholders

Trends in Vogue mission statement analysis:

a. Who its customer is? Mission statement 4 states family who are going to beauty

saloons as their customers.

b. How it satisfy their needs? Mission statement 1 and 2 describes the needs as unparalleled

service experience and offering largest range of natural products and services

c. What type of products it offers? The company offers natural products in their beauty

saloons.

Formulating the objectives.

Mission statement provides a general view of the companys products and its method ofsatisfying the customer. Mission statement is once again divided into specific objectives whichare stated in writing, can be measured quantitatively and fixed for particular time. Objectivesmay be business oriented or market oriented. They help marketers to develop strategies andprograms. You will come to know how organizations deduce their mission into differentobjectives form the following example of Bharat Electronics Limited (BEL), a public sectorenterprise in the electronic field.

Mission: To be a customer focused globally competitive company in defence electronics and inother chosen areas of professional electronics, through quality, technology and innovation.

Designing an appropriate business portfolio.

After setting mission and objectives, management will develop its business portfolio.

Business portfolio is the right mix of businesses that company operates and products that offersto customers.

Portfolio analysis is the process by which company analyze its products and businesses.

Company develops their business portfolio in two steps

a. Analyze the existing business portfolio and decide which business should receive more, less orno investment.


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b. Developing the new business portfolio for future to meet growth opportunities and eliminatingthe unprofitable portfolios.

Analyzing the existing business portfolio:

The current business portfolio of the company is analyzed by the businesses in which it operates.To make it clearer, let me take an example of ITC group. The company operates in FMCG,hotels, paper boards, specialty papers and packaging and agribusiness. These businesses areindependent from each other and have their mission and objectives separately. These subsidiariesof organizations are called as Strategic business units (SBU)Strategic business unit: The unit of the company that has separate mission and objectives andthat can be planned independently from other businesses.

Characteristics of SBU.

1. It may be brand, or a product line or separate division of the company.

2. It is having distinct mission and objectives.

3. It is managed by separate executive team.

Strategic planning models used in assessing the existing businesses:

1. BCG matrix ( Boston Consultancy Group)

2. GE matrix ( General electric)

BCG matrix: This model is used to identify companys SBUs position in the market. This modelidentifies the SBUs strength, weaknesses, opportunities and threats on the basis of marketgrowth rate and relative market share. This model is also known as growth share matrix.

Figure 2.1.


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High Low

Relative Market Share

Axis components:

1. Market growth rate: The rate at which market is growing

2. Relative market share: Market share of the SBU divided by the market share of the largestcompetitor.

Model components:

Star: This category represents the high market share and high industry growth. SBUs in thiscategory require large investment to defend their position. SBU will turn as cash cow after sometime.

Cash cows: This category represents the low growth rate and high market share which is thecharacteristic of SBU operating in mature industry. Here company needs less investment to hold

their position. Hence it generates more cash or in management terms we say cash cow can bemilked.

Question Mark: This category represents high market growth and low market share. SBUs inthis category has two options, either to invest heavily and bring them to star position or divest /liquidate from that position.


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Dogs: SBUs in this category generates less cash for the company as it operates in low growthand low market share. Usually companies will not invest in this category and try to liquidate ordivest.

BCG matrix for ITC

1. SBU: FMCG

Industry growth rate: 24% (AC Nielson retail audit report 2007)

Company growth rate: 50% (the Hindu business line 19th January 2008)

Companys market share : 8% (outlook business)

Largest competitor share: HUL: 54% (outlook business)

Relative market share= 0.14

2. SBU: Paper board

Industry growth rate: 7.2% (the Hindu business line 27th May 2007)

Company growth rate: 11% (the Hindu business line 19th January 2008)

Companys market share: 55%

Largest competitors share: BILT 35%

ITCs FMCG segment analysis shows that though it is market leader in some categories theiroverall relative market share is 0.14. Company is in the high growth low relative market sharearea i.e. question mark position. ITC should invest heavily to convert its SBU position into star.

ITCs Paperboard industry is in low growth and high market share category i.e. in cash cowsegment. It should plan for investing the cash generated from this position into other businesses.

GE matrix:

1 Management can use the GE business matrix to classify SBUs on the basis of two factors

a. Market attractiveness: Market size, entry barriers, competitors, technology and

profit margin are some factors used to analyze the market attractiveness.

b. Business position can be determined on the basis of market share, SBU size, R&D capabilitiesand cost controls


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Each cell in the model represented by the particular strategy namely, invest strategy, protectstrategy, harvest strategy and divest strategy

2 Invest strategy: In this position SBU

a. Should receive ample resources

b. Should support by well financed marketing efforts.

3 Protect strategy: SBUs in this position should

a. Allocate the resources selectively.

b. Develop strategies which help in maintain its market position.

c. Generate cash needed by other SBUs.

Business position

High Medium Low

Figure 2.2

4. Harvest strategy: SBUs should not receive substantial new resources and if required, sell them.

5. Divest strategy: SBUs which falls into this category should not receive any resources and sell ior shut it as early as possible.

Ansoffs model of product/ market expansion.


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Figure 2.3.

a. Market penetration: A strategy used in increasing the sales of companys existing productswithout modifying it in the existing market.

Characteristics of market penetration.

1. Serve customer with existing products by opening new stores.

2. Increase the promotion activities to increase the consumption.

3. Improve the service offerings.

Caf- coffee day a reputed coffee chain in south India, started its operation in brigade road,Bangalore, in the year 1996. It offers different varieties of the coffee to its existing customers.Today it is having 100 stores in Bangalore.

b. Market development: In this strategy company identifies the new markets to sell their existingproducts.

In case of market development company identifies and develops new markets for its existingproducts

Caf coffee day, enthused by the success of offering a world-class coffee experience, has opened

a Caf in Vienna, Austria and is planning to open other Cafes in the Middle East, EasternEurope, Eurasia, Egypt and South East Asia in the coming months.

(Source: www.cafcoffeeday.com)

c. Product development: In this strategy, company identifies new product and sells them existingmarkets.


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Caf coffee day added quick bites and ice-cream in their menu to cater to the needs of customers.

d. Diversification: A strategy for company growth through starting up or acquiring businessesoutside the companys current products and markets.

Caf coffee day started offering tea and cold drinks in its highway caf retail outlets. Thesehighway caf outlets offer excellent service to the travelers on the high way.

Downsizing: Eliminating the unprofitable products of the company from its product line

In the year 2000 M.S. Banga then chairman of Hindustan Unilever limited (HUL), used powerbranding strategy to improve the sales and productivity. He reduced HULs number of productsfrom 110 to 35.

Coordination at business levels

1. Organizations strategies exist in three different levels. They are corporate level, businesslevel and operation level.

2. Corporate level:

a. High risk and greater profit

b. Greater need for flexibility exists.

c. Long term planning

d. Choice of businesses, dividend policies, sources of long-term financing, and priorities forgrowth

3. Operation level strategies

a. Implement the overall strategy formulated at the corporate and business levels

b. Involve action-oriented and operational issues

c. Relatively short range and low risk

d. Modest costs: depend upon available resources

e. Relatively concrete and quantifiable

4. Business level strategies

a. Acts as a bridge between decisions at the corporate and functional levels


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b.Less costly, risky, and potentially profitable than corporate-level decisions

c. More costly, risky, and potentially profitable than functional-level decisions

d. Include decisions on plant location, marketing segmentation, and distribution

In the strategic plan, company brings the synergy between all the three levels. To make it moreclearer, companys marketing strategy are different from HR strategies but it should bringcoordination between both to meet organizations objectives. Company should bring thecoordination between its growth plans and segmentation then only the operation strategy workswell.

Developing the marketing mix.

Marketing mix: The product, its price, promotion and distribution blended together to getfavorable response from the customer.

This is also called as 4Ps of Marketing or Market assortment.

1. Product: It is a good, service, idea, place or person that offered to customer to satisfy his/herneed. The attributes of product are variety, quality, warranty, design, packaging, and service

For example, Marico, a FMCG company offers hair oil in two brand names i.e. parachute andnihar. The brand nihar, offered in two types of packaging i.e. Sachets and bottles and offered intwo qualities i.e. coconut oil and perfumed hair oil.

2. Price: the value at which customer is willing to purchase the product.

For example, BSNL offers prepaid service recharge coupons in Rs175, Rs335, Rs500, Rs 1000,Rs2000 and Rs 5000 denominations.

Figure 2.4.

The marketing mix


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3. Place: Distribution of goods from the factory to the target customer. It includes distributors,stockiest and retailers. To illustrate, Zenith computers uses authorized distributor to sell laptopsand desktops to the target customers.

4. Promotion: communicating product features and its uses to target customers through differentMedias. For example, Bharati group promotes its cellular services (AIRTEL) through TV, Radioand news paper.

Unit 3-Marketing Environment

Introduction.
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A marketing oriented company always keeps tab on its external environment carefully to analyzeopportunities and threats. This external environment influences companys strategies in twolevels i.e. external macro environment and external micro environment. The macro environmentinvolves political and legal, economic and natural, social and cultural and technologyenvironment. The micro environment consists of supply chain, customer and competitor. These

factors are uncontrollable by the organization. Even the best company faces threat if one of theexternal environments is adverse to it. A moderate company will be successful if the externalenvironment favors it. Hence marketing companies should monitor the external environmentcarefully and continuously.

Environmental scanning

This is the process of gathering, analyzing and forecasting of external environments informationto identify opportunity and threats that company faces.

Need for environmental scanning:

It helps in

1. Identifying the opportunities that company has in immediate future.

2. Identifying the threats faced by the company.

3. Demand forecasting

4. Developing appropriate business plans.

5. Adjusting the company strategy in changing competitive environment.

Learning Objective 2:Analyze the influence of micro environment on companys strategies.

Analyzing the organizations micro environment

Marketing department let alone can not satisfy all the needs of customer. Therefore it is essentialto integrate the functions of suppliers, publics, company departments and intermediaries increating the value to the customer. These forces are known as organizations micro environment.

Microenvironment: The forces which are very close to company and have impact on value

creation and customer service

Figure 3.1

Forces in the micro environment


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The company

Remember in the previous unit we discussed about the strategic and marketing planning.Deducing a strategic plan in to specific marketing plan require coordination of other functionslike finance, Human resource, production, and research and development. For example, SafeExpress, a leader in the supply chain management solution wants to hold its position in the US $90 billion Indian logistics market. Company plans to expand its service areas in the comingmonths. To meet the targets of the marketing plan, other departments of safe express alsoexpanding their horizon..

Intermediaries

Marketing intermediaries: The firms which distribute and sell the goods of the company to theconsumer.

Marketing intermediaries plays an important role in the distribution, selling and promoting thegoods and services. Stocking and delivering, bulk breaking, and selling the goods and services tocustomer are some of the major functions carried out by the middlemen. Retailers, wholesalers,agents, brokers, jobbers and carry and forward agents are few intermediaries to name. Retailersare final link between company and customers. Their role in the marketing of product isincreasing every day.

Publics


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These are microenvironment groups, which helps company to generate the financial resources,creating the image, examining the companies policy and developing the attitude towards theproduct.

We can identify six types of publics

1. Financial publics influence the companys ability to obtain funds. For example, Banks,investment houses and stockholders are the major financial publics.

2. Media publics carry news and features about the company e.g. Deccan Herald

3. Advertisement regulation agencies, telecom regulation agency( TRAI), and insuranceregulation agency(IRDA) of the government

4. Citizen action groups: Formed by the consumer or environmental groups. For example,people for ethical treatment of animals (PETA) or Greenpeace.

5. General publics: a company should be concerned towards general publics attitude towardsits products and services.

6. Internal publics: Employees who help in creating proper image for the company throughword of mouth.

Competitors

A company should monitor its immediate competitor. The product should be positioneddifferently and able to provide better services.

Suppliers

Suppliers are the first link in the entire supply chain of the company. Hence any problems or costescalation in this stage will have direct effect on the company. Many companies adopted supplierrelation management system to manage them well.

Customers

A company may sell their products directly to the customer or use marketing intermediaries toreach them. Direct or indirect marketing depends on what type of markets Company serves.

Generally we can divide the markets into five different categories. They are

a. Consumer market.

b. Business market

c. Reseller market


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d. Government market and

e. International market

You will come to know about these five different markets from the following example.

MRF a tyre company sells its product directly to consumer (in case of urgency, customerpurchases directly from showroom) i.e. operates in consumer market. It operates in businessmarkets by selling tyres to companies like Maruti Udyog limited. MRF also sells TYREs toBMTC and KSRTC, transport organizations of Karnataka government. If MRF sells tyre inAfrican or American countries then it is operating in the international market. If MRF buys theold tyres, retreads it and sells it to the consumer at a profit then company is operating in thereseller market.

Unit 4-Understanding the Marketing

Information Systems (MIS)Understanding the Marketing Information Systems (MIS)

Introduction

In the earlier chapter, we saw how marketing environment is changing and presenting newopportunities and threats to an organization. The main responsibility for identifying significantchanges in the market place falls on the marketing department. They are better placed and haveadvantages in undertaking this task because they are regularly interacting with customers and

observing competition.

The Marketing Departments need to develop Marketing Information Systems that providethem information about buyer wants, preferences, behavior and also about competition. They areable to do this by setting up systems and marketing related research methods to collect thisvaluable information which is ultimately used to help make marketing decisions.

A Marketing Information System is a set of procedures to collect, analyze and distributeaccurate, prompt and appropriate information to different levels of marketing decision makers.

Learning Objective 1: Understand the concept of Marketing Information System, as well as its

characteristics & benefits.

Characteristics of MIS

Philip Kotler defines MIS as a system that consists of people, equipment and procedures togather, sort, analyze, evaluate and distribute needed, timely and accurate information tomarketing decision makers.
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Its characteristics are as follows:

1. It is a planned system developed to facilitate smooth and continuous flow of information.

2. It provides pertinent information, collected from sources both internal and external to the

company, for use as the basis of marketing decision making.

3. It provides right information at the right time to the right person.

A well designed MIS serves as a companys nerve centre, continuously monitoring the marketenvironment both inside and outside the organization. In the process, it collects lot of data andstores in the form of a database which is maintained in an organized manner. Marketers classifyand analyze this data from the database as needed.

With the advent of Computer Technology, MIS has taken a step further to provide managersdirect access to the databases. This system called Marketing

Decision Support System (MDSS) links a decision maker to relevant databases and analysistools, thereby allowing him to gain deep insights into needs and trends of customers with thehelp of sophisticated statistical analysis.

Today companies organize the information in databases such as customer database, productdatabase, and field sales database and combine them to be stored in a huge database called DataWarehouse. The process of searching through information in data warehouse to identifymeaningful patterns that guide decision making is called Data Mining.

Benefits of MIS

Various benefits of having a MIS and resultant flow of marketing information are given below:

1. It allows marketing managers to carry out their analysis, planning implementation and controlresponsibilities more effectively.

2. It ensures effective tapping of marketing opportunities and enables the company to developeffective safeguard against emerging marketing threats.

3. It provides marketing intelligence to the firm and helps in early spotting of changing trends.

4. It helps the firm adapt its products and services to the needs and tastes of the customers.

5. By providing quality marketing information to the decision maker, MIS helps in improving thequality of decision making.

Types of Marketing Information

A Marketing Information System supplies three types of information.


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1. Recurrent Information is the data that MIS supplies periodically at a weekly, monthly,quarterly, or annual interval. This includes data such as sales, Market Share, sales call reports,inventory levels, payables, and receivables etc. which are made available regularly. Informationon customer awareness of companys brands, advertising campaigns and similar data on closecompetitors can also be provided.

2. Monitoring Information is the data obtained from regular scanning of certain sources such astrade journals and other publications. Here relevant data from external environment is capturedto monitor changes and trends related to marketing situation. Data about competitors can also bepart of this category. Some of these data can be purchased at a price from commercial sourcessuch as Market Research agencies or from Government sources.

3. Problem related or customized information is developed in response to some specificrequirement related to a marketing problem or any particular data requested by a manager.Primary Data or Secondary Data (or both) are collected through survey Research in response tospecific need. For example, if the company has developed a new product, the marketing manager

may want to find out the opinion of the target customers before launching the product in themarket. Such data is generated by conducting a market research study with adequate sample size,and the findings obtained are used to help decide whether the product is accepted and can belaunched.

Components of MIS

The following diagram shows a typical Marketing Information System with its components.Which are?

1. Internal Records System

2. Marketing Intelligence System

3. Marketing Research System

4. Analytical Marketing System

Fig 4.1 The Marketing Information System


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Internal Records System

This includes information on (i) Order to payment cycle and (ii) sales information systems.

Order to payment cycle has a system which records, the timing and size of orders placed byconsumers, the payment cycle followed by consumers and the time taken to fulfill the orders, inthe shortest possible time. Customers place order through sales people and companies dispatchthe goods and receive payments directly or through bank. A proper record system pertaining toorder to payment cycle management helps mangers to decide on production and dispatchschedule, inventory and accounts receivable schedule and also logistics and distributionmanagement schedules,

Sales Information Systems record everything in the sales Department, starting from Sales CallReports to prospects history to Sales territory and quota information for better sales planning andforecasting purpose.

Marketing Intelligence System

This is a set of procedures and sources used by managers to obtain everyday information aboutdevelopments in the marketing environment. This system supplies happenings data unlikeInternal Records System which supplies results data. Marketing managers collect data frompublished sources like books, magazines and journals; by talking to customers, intermediariesand sales personnel. Some companies appoint specialists to gather consumer and competitorinformation, who does mystery shopping to monitor the performance of their own orcompetitors dealers. Competitor information can also be obtained by buying their product,attending their press conferences, trade shows and reading their annual reports. Companiespurchase commercial information from outside suppliers and market research agencies likeIMRB, ORG MARG to obtain competitive data on their sales, advertising expenditures etc.,besides their own.


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Marketing Research System

This is the third component of MIS. Marketing Research provides information to marketingmanager when he/she encounters marketing problems. This may involve conducting MarketingResearch survey by collecting primary data. These surveys may be conducted by the marketing

department itself or a it can hire services of an external marketing research agency.

Analytical Marketing Systems

Also known as Marketing Decision Support systems (MDSS), this is a co-ordinate collection ofdata, systems, tools and techniques with supporting software and hardware by which anorganization gathers and interprets relevant information from business and environment andturns it into a basis for marketing action. All the data which is generated through the other threesystems described above are stored in a data base. The storage and retrieval capability ofdecision support system allows the collection and use of a wide variety of data throughout thecompany. Senior managers can access the data base and continually and monitor sales, markets,

performance of the sales people and other marketing systems as well.

Learning objective 2:Understand the role and scope of Marketing Research in making Marketing decisions.

Marketing Research

Earlier we saw that Marketing Research is an important component of the Marketing InformationSystem. Marketers need to acquire good understanding of their own markets to monitor thechanging environment. They need information to assess their own past performance as well as toprepare future marketing plans. Hence they require timely and accurate information on their

consumers and competitors as well as on the performance of their products. In todays highlycompetitive and complex environment consumer needs are changing at a fast pace. Hencedecision making is very challenging.

Marketing Research performs the task of collecting, recording and analyzing relevant data. Thus,it has emerged as one of the important activities of the marketing function.

American Marketing Association (AMA) defines Marketing Research as

Definition: Marketing Research is the function which links the consumer, customers andpublic to the marketer through information information used to identify and define marketing

opportunities and problems; generate, refine and evaluate marketing actions; monitor marketingperformance; and improve understanding of marketing as a process.

Philip Kotler defines Marketing Research as the systematic design, collection, analysis andreporting of data findings relevant to a specific marketing situation facing the company.

Features of Marketing Research


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1. It is a systematic process It has to be carried out in a stepwise and systematic manner andthe whole process needs to be planned with a clear objective.

2. It should be objective It is important that the methods employed and interpretations areobjective. The research should not be carried out to establish an opinion nor should it be

intentionally suited towards predetermined results.

3. It is multi-disciplinary Marketing Research draws concepts from other disciplines such asStatistics for obtaining reliable data and from Economics, Psychology and sociology for betterunderstanding of buyers.

Learning objective 3:

Define the objectives of a typical marketing research study

Objectives of Marketing Research

Marketing Research may be conducted for different purposes. Based on how organizations useMarketing Research, objectives of Marketing Research can be summarized as follows:

1. To understand why customers buy a product

2. To forecast the probable volume of future sales or expected market share

3. To assess competitive strengths and strategies

4. To evaluate the effectiveness of marketing action already taken

5. To assess customer satisfaction of companys products/services

Learning Objective 4:Outline and explain the steps involved in Marketing Research process

Marketing Research Process

Every marketing research problem is different requiring a special approach or emphasis. Stillthere is a sequence of steps, called the research process which can be followed in all themarketing research studies and projects. Each step in this research process in independent but itis closely related to other steps, because the result of the preceding step is the basis for the

succeeding step.


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Fig 4.2 Marketing Research Process

Unit-5-Consumer Buyer Behavior

Introduction

Consumers are individuals, households or businesses who use the products. In this unit we arelimiting our study to individual and households use of products for personal consumption.Consumer characteristics vary from country to country. Therefore it has become challenging taskfor marketer to understand the need, buying behavior of consumer before developing product andmarketing it. In this section we will discuss consumer buying behavior and his/her decisionmaking process. We will also look into the decision process of buyer for the new product.Consumer motives and behavior models are analyzed to identify the buying environment.

Characteristics affecting consumer behavior

Cultural, Social, Personal and Psychological factors influence the consumer behavior. These areexternal to the company and cannot be controlled. Marketer would like to understand the impactof these factors on his/her organization

I. Cultural factors:

1. Culture is the combination of customs, beliefs and values of consumers in a particular nation.Majority Indians are vegetarians and a company which sells non vegetarian items should analyzethese values of the consumer. For example, KFC which sells chicken dishes all over the worldadded vegetarian burgers in their menu to serve vegetarian consumers. Another multinationalMcDonald, whose majority of sales comes form selling beef lets, didnt include in the Indianmenu as cow is a sacred animal.
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2. Subcultures are part of culture comprising, geographic regions, religions, nationalities andracial groups. The value system of these groups differs from others. For example, Hindus innorth India eat special vegetarian food during the Navaratra festival. They prefer to spend theirtime with their family. During this time restaurants will have lesser traffic. To attract thecustomers, restaurants started offering the authentic Navaratra dish. This helped the restaurant to

attract the family who dont have time, bachelors and people want to spend their time withfamily without allotting much time for food preparation and so on.

3. Social class these are permanent groups in the society whose members have common likings.According to Mckinsey consumer report, Indian consumers can be classifies into five differentcategories. They are,

a. Deprived

b. Aspires

c. Seekers

d. Strivers and

e. Global Indians.

1. Deprived are the people who earn less than Rs 90,000 annually. This group is also known asbelow poverty line. They are the poorest people in the country. They wont get continuousemployment and they earn their lively hood from seasonal work. People in this category will doless skilled or semi skilled work.

2. Aspires belongs to the families who earn between Rs90, 000 to Rs 2, 00,000. This groupconsist small shop keepers, industrial workers, and small land holding farmers. Though they earnmore than deprived class, but half of their money goes for basic amenities and food.

3. Seekers earn between Rs 200,000 to 500,000. This class varies largely. The group containsfresh workers, middle level employees, government employees and business people. The classvaries widely on the age, attitude and other factors.

4. Strivers belong to the group who earn between Rs 500,000 to 1,000,000. People in thiscategory are considered very successful. The group contains business people, large farmers,senior government officials and professionals. Their earnings are enough to fill their apatite of

materials. They are leading the consumption led growth in India.

5. Global Indians are earning more than Rs 1,000,000. This group is comprised of seniorgovernment officials, professionals, business people and top business executives. India iswitnessing the growth in this class. They are truly global; they purchase international brands andhave international cuisine.

II. Social factors


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Human beings are social animals. They live and interact with other people. Therefore there is achance of influence by others on their opinions. Marketers like to identify such influentialpersons or groups of consumer. Generally such groups are classified into two major groupsnamely reference groups and family.

Reference groups are used in order to evaluate and determine the nature of a given individual orother groups characteristics and sociological attributes. Reference groups provide thebenchmarks and contrast needed for comparison and evaluation of group and personalcharacteristics. Reference groups are groups that people refer to when evaluating their ownqualities, circumstances, attitudes, values and behaviors. William Thompson & JosephHickey, Society in Focus, 2005. Reference groups act as a frame of reference to which peoplealways refer to evaluate their achievements, their role performance, aspirations and ambitions

Family: Indian culture gives utmost importance to the family. People discuss with their familybefore purchasing the valuable items. Wife, children and parents influence the decisions of thefamily. Therefore many companies use either whole family or kids in their promotional

programs.

Godrej introduced memory back up auto washing machine. They have shown the family in theadvertisement who are enjoying without any problems of washing clothes. In the secondadvertisement Dabur chyavanprash uses kids in their advertisements. The target customers areused with celebrity to provide necessary image and convey the attributes of the product.

III. Personal factors:

Individual factors like age, occupation, lifestyle and personality influence the consumer decisionmaking. We discussed age and occupation factors and their application earlier in the marketing


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environment unit. We will discuss lifestyle and its influence on the consumer in the segmentationunit. In this section we will focus on the personality and its influence on the consumer decisionmaking process. Personality is the image of peoples traits. Traits include Self confidence,Dominance, autonomy, defensiveness, adaptability and aggressiveness. Many companies usedthese concepts in their marketing communications. Bajaj pulsar used muscularity to highlight its

image (definitely male). Fair and lovely and stay free tried to highlight 21st

century Indian girland their aspirations in their communications.

IV Psychological factors:

Motivation:

Abraham Maslows Need Hierarchy Theory:

One of the most widely mentioned theories of motivation is the hierarchy of needs put forth bypsychologist Abraham Maslow. Maslow saw human needs in the form of a hierarchy, ascendingfrom the lowest to the highest, and he concluded that when one set of needs is satisfied, this kindof need ceases to be a motivator. As per his theory these needs are:

(i) Physiological needs: These are important needs for sustaining the human life. Food, water,warmth, shelter, sleep, medicine and education are the basic physiological needs which fall in the

primary list of need satisfaction. Maslow was of an opinion that until these needs were satisfiedto a degree to maintain life, no other motivating factors will work.

(ii) Security or Safety needs: These are the needs to be free of physical danger and of the fearof losing a job, property, food or shelter. It also includes protection against any emotional harm.

(iii) Social needs: Human beings are social animals. They strive to be in the society. In this typeof needs people will try to satisfy their needs for affection, acceptance and friendship.


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(iv)Esteem needs: According to Maslow, once the people satisfied with social needs. Theywould like to have esteem needs. This category includes power, prestige status and self-confidence needs. It includes both internal esteem factors like self-respect, autonomy andachievements and external esteem factors such as states, recognition and attention.

(v) Need for self-actualization: Maslow regards this as the highest need in his hierarchy. It isthe drive to become what one is capable of becoming; it includes growth, achieving onespotential and self-fulfillment. It is to maximize ones potential and to accomplish something

Marketer is interested in finding what state of need hierarchy the consumer is in and what type ofproduct to be developed to suit his or her needs. If person needs security for his car than themileage then auto companies should highlight that benefit in their marketing communications.

Perception:

It is the process of acquiring, interpreting, selecting and organizing sensory information.

Explanation of the definition: stimulus is generated by hearing, smelling, seeing, touching, andtasting. People develop stimulus about product or services through any of the above themes andcreates an image in the mind.

The marketing implication of the definition; Marketer researches his consumer profile andcommunicates the product or service messages either through radio, demo, or television. Byseeing, hearing or experiencing the product or service consumer will develop an image in themind. The message given by company may pass through three different selection procedures.

a. Selective attention: The habit of the people to analyze the information completely and

interpreting it. They develop the perception about the product or service only after completeanalysis. This is very difficult group to handle as they request for more information.

b. Selective distortion: the phenomena in which consumer will have predispositions andinterpret the organizations information as they like it. This type of perception is both effectiveand non effective for the company. If consumer understands the wrong message in a right way itis advantageous but if he understand right message in wrong way then company will be undertrouble.

c. Selective retention: consumer will not remember all the points informed by the company.He/she may remember the good points of company and forget the negative points of the

company.

Learning objective 2:Explain different types of buyer behavior.

Consumer buying decision process.


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After discussing the factors those influence the buying behavior, now, we will discuss theconsumer decision making process. Consumer passes through five different stages whilepurchasing the product.

Figure 5.4

1. Need recognition: customer posses two type of stimuli at this juncture. One is driven by theinternal stimuli and another is external stimuli. The examples of internal stimuli are customersdesire, attitude or perception and external stimuli are advertising etcFrom both stimuli

customer understand the need for the product. Here marketer should understand what customersneeds have that drew customers towards the product and should highlight those in thecommunication strategy.

2. Information search: In this stage customer wants to find out the information about theproduct, place, price and point of purchase. Customer collects the information from differentsources like


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a. Personal sources: Family, friends and neighbors

b. Commercial sources: Advertising, sales people, dealers, packaging and displays.

c. Public sources: mass media and consumer rating agencies.

d. Experiential sources: Demonstration, examining the product.

In this stage marketer should give detailed information about the product. The communicationshould highlight the attributes and advantages of the product in this stage so that he created thepositive image about the product.

3.Evaluation of alternatives : After collecting the information, consumers arrive at someconclusion about the product. In this stage he will compare different brands on set parameterswhich he or she thinks required in the product. The evaluation process varies from person toperson. In general Indian consumer evaluate on the following parameters

a. Price

b. Features

c. Availability

d. Quality

e. Durability

At this stage marketer should provide comparative advertisements to evaluate the differentbrands. The advertisement should be different for different segments and highlight the attributeaccording to the segment.

4. Purchase decision

In this stage consumer buy the most preferred brand. In India affordability plays an importantrole at this stage. Organizations bring many varieties of the products to cater to the needs ofcustomers.

5. Post purchase behavior

After purchasing the product the consumer will experience some level of satisfaction anddissatisfaction. The consumer will also engage in post purchase actions and product uses ofinterest to the marketer. The marketers job does not end when the product is bought butcontinues into the post purchase period. Customer would like to see the performance of theproduct as he perceived before purchase. If the performance of the product is not as he expectedthen he develops dissatisfactions. Marketer should keep an eye on how consumer uses and


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disposes the product. In some durable goods Indian consumer want resale value also. Manyautomobile brands that not able to get resale value lost their market positions.

Learning Objective 4: Discuss consumer decision process for new products.

Buyer decision process for new products.

The buyers decision for existing products and new products varies. You already seen in theexisting product buying decision process consumers have the option to search for the informationand evaluate them. In the new product such options dont exist. Therefore we should understandhow consumer comes to know about the product. Kotler defined this process as adoption process.According to Philip Kotler Adoption is The mental process through which an individual passesfrom first hearing about an innovation to final adoption

Adoption process

Figure 5.5

1. Awareness: the consumer became aware of the product but lacks information about it.

2. Interest: As know previous information available consumer shows interest to get the

information about the product.

3. Evaluation: After receiving the information consumer analyzes the benefits of new productsover any existing products or substitutes and decides whether to buy or not.

4. Trial: The consumer tries the new product on a small scale to improve his or her estimate ofits value.

5. Adoption: In this stage consumer decides to make full and regular use of the product.

Adoption rate:

Figure 5.6


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The adoption of new product varies from individual to individual.

1. 2.5% of the consumers adopt any new product that enters to the market. These consumers arestatus conscious people. Marketer should highlight how the new product will bring the esteem tothe consumer.

2. 13.5% of the customers fall into the early adopter categories. In this categories customer

observed the advantage of the new product and the moment the price of the product falls into theaffordable category they buy the product.

3. The next group is the biggest one in the adoption process. These group customers are attractedtowards the benefits of the product. They make sure that there are no technical or generalproblems associated with the product. This group contains 34% of the total customers.

4. This group consist 34% of customers. The group looks for the quality product at the affordableprices

5. The final group is called as laggards. These are traditional and price conscious people. They

often take lot of time to adoption of the product.

Learning Objective 5:Examine the buying motives and behavioral models.

Buying Motives


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The thoughts, feelings, emotions and instincts that induces customer to buy a product are calledas buying motives

According to Prof D.J. Duncan buying motives are those influences or considerations whichprovide the impulse to buy, induce action and determine choice in the purchase of goods and

services.

Classification of buying motives:

Figure 5.7

1 Product buying motives are those influences and reasons which prompt a buyer to choose aparticular product in preference to others. It may be design, shape, dimension, size, color,package etc

Product buying motives are further classified as

a. Emotional product buying motive and


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b. Rational product buying motive

2 Emotional product buying motives in which buyer decides to purchase a product withoutthinking over the matter logically and carefully. Buyer takes the decisions on the emotions.Following factors provides the list that influence the emotional product buying motives

1. Customer attaches the pride with the product.

2. Customer try to imitate form others

3. Purchase d the goods for affection on any family member.

4. Products that provide comfort are usually purchased on the emotions.

5. Sexual appeal products are brought on emotional product motives

6. The product those used as recreation, hunger or habit products are usually bought emotionally.

7. Products those provide distinctiveness or individuality.

3 Rational product buying motives: when buyer examines pros and cons of purchasing a productand takes decisions then the behavior is called as rational product buying motives. Buyers will belooking for any of the following factors before taking rational decisions

1. The safety or security features provided by the product.

2. The value for money provided by the product.

3. Suitability and utility of the product.

4. Durability of the product.

5. Convenience of the product.

4 Patronage buying motives are those considerations or reasons that make a buyer patronage aparticular shop in preference to other shops while buying a product.

Patronage buying motives are classified into two categories. They are

a. Emotional patronage buying motives.

b. Rational patronage buying motives.

b. Emotional patronage buying motives are patronizing the particular shop without logicalthinking or reasoning. Emotional patronize buying motives include the following decisions


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1. Appearance of the shop

2. Visual merchandising in the shop.

3. Reference groups influence about one particular shop.

4. Shopping in a big mall is a prestige issue.

5. Imitating the other reference groups members.

5 Rational patronage buying motive will arises after buyer analyzing the shop carefully andproviding the information to reference group members. Rational patronage buying motivesinclude the following

1. Convenience of the shop to the buyers.

2. Value for money provided by the shops.

3. Financial schemes and facilities provided by the shop.

4. Availability of wide range of goods.

5. Reputation of the shop in the area.

6. Sales force efficiency to convince the customer.

7. Services provided by the sales executives.

Buyer behavior models.

The influence of social sciences on buyer behavior has prompted marketing experts to propoundcertain models for explaining buyer behavior. Broadly, they include the economic model, thelearning model, the psychoanalytical model and the sociological model.

1) The Economic Model: According to the economic model of buyer behavior, the buyer is arational man and his buying decisions are totally governed by the concept of utility. If he has acertain amount of purchasing power, a set of needs to be met and a set of products to choosefrom, he will allocate the amount over the set of products in a very rational manner with the

intention of maximizing the utility or benefits.

2) The Learning Model: According to the learning model which takes its cue from the Pavlovianstimulus response theory, buyer behavior can be influenced by manipulating the drives, stimuliand responses of the buyer. The model rests on mans ability at learning, forgetting anddiscriminating. The stimulus response learning theory states that there develops a bond betweenbehavior producing stimulus and a behavior response (S. R. Bond) on account of the


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conditioning of behavior and formation of habits. This theory may be traced to Pavlov and hisexperiments on salivating dogs. Pavlovs experiments brought out associations by conditioning.

In his well known research with dogs, a bell was rung every time food was served to a dog.Eventually, the dog started salivating each time upon hearing the bell though no food was served.

The dogs behavior is conditioned; it is related to behavior-producing stimulus (bell ringing) andbehavior response (salivation). The S.R. bond so established causes a set pattern of behaviorlearnt by the object dog. In terms of consumer behavior, an advertisement would be a stimuluswhereas purchase would be a response.

Learning Process: According to the stimulus-response theory, learning is dependent on drive, cue(stimulus), response and reinforcement.

Drive: Drive may be defined as any strong stimulus that impels action. It arouses an individualand keeps him prepared to respond. The drives may be classified as primary drives andsecondary drives. Primary drives are based upon innate physiological needs such as thirst,

hunger, pain avoidance, and sex. The secondary drives are based upon learning. They are notinnate and are derived from the primary drives. These include the desire for money, fear, pride,rivalry, etc.

Cue: Cue or stimulus may be defined as any object in the environment perceived by theindividual. The aim of the marketing man is to find out or create the cue of sufficient importancethat it becomes the drive stimulus or elicits other responses appropriate to his objective. Here, theobjective is to find out those conditions under which a stimulus will enhance the chances ofeliciting a particular kind of response.

Response: Response is an answer to a given drive or cue. When a man feels thirsty, he attempts

to get water at any cost. Here attempt to get water is a response to the primary drive of thirst.Response also includes attitudes, familiarity, perception and other complex phenomena.Responses may be generalized or discriminatory. Generalized response refers to a uniformresponse to similar though not identical stimuli. Discriminatory response refers to the selectiveresponse to similar stimuli. Undifferentiated products such as cigarettes and detergents normallyelicit generalized consumer responses but by huge advertising outlays companies try to induceconsumers to perceive differences in brands and to make discriminatory responses.

Reinforcement: Reinforcement or reward means reduction in drive and stimulus. It has beendefined as environmental events exhibiting the property of increasing the probability ofoccurrence of responses they accompany. Thus, when consumption of a product or a brand of

product leads to satisfaction of the initiating need (drive/stimulus) there is reinforcement. If atsome later date the same needs are aroused, the individual will tend to repeat the process ofselecting and getting the same product or brand of product. Each succeeding time that product orbrand brings satisfaction, further reinforcement takes place, thus, further increasing thepossibility that in future also, the same product or brand will be bought. This type of behavioralchange, increasing possibility that an act will be repeated, is called learning; reinforcementincreases the rapidity and vigor of learning.


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3) The Psychoanalytical Model: The psychoanalytical model draws from Freudian Psychology.According to this model, the individual consumer has a complex set of deep-seated motiveswhich drive him towards certain buying decisions. The buyer has a private world with all hishidden fears, suppressed desires and totally subjective longings. His buying action can beinfluenced by appealing to these desires and longings.

The psychoanalytical theory is attributed to the work of eminent psychologist Sigmund Freud.Freud introduced personality as a motivating force in human behavior. According to this theory,the mental framework of a human being is composed of three elements, namely,

1. The idor the instinctive, pleasure-seeking element. It is the reservoir of the instinctiveimpulses that a man is born with and whose processes are entirely subconscious. It includes theaggressive, destructive and sexual impulses of man.

2. The superego or the internal filter that presents to the individual the behavioral expectations ofsociety. It develops out of the id, dominates the ego and represents the inhibitions of instinctwhich is characteristic of man. It represents the moral and ethical elements, the conscience.

3. The ego or the control device that maintains a balance between the id and the superego. It isthe most superficial portion of the id. It is modified by the influence of the outside world. Itsprocesses are entirely conscious because it is concerned with the perception of the outside world.

The basic theme of the theory is the belief that a person is unable to satisfy all his needs withinthe bounds of society. Consequently, such unsatisfied needs create tension within an individualwhich have to be repressed. Such repressed tension is always said to exist in the sub-consciousand continues to influence consumer behavior.

4. The Sociological Model: According to the sociological model, the individual buyer is

influenced by society or intimate groups as well as social classes. His buying decisions are nottotally governed by utility; he has a desire to emulate, follow and fit in with his immediateenvironment.

5.The Nicosia Model: In recent years, some efforts have been made by marketing scholars tobuild buyer behavior models totally from the marketing mans standpoint. The Nicosia modeland the Howard and Sheth model are two important models in this category. Both of thembelong to the category called the systems model, where the human being is analyzed as a systemwith stimuli as the input to the system and behavior as the output of the system. FrancescoNicosia, an expert in consumer motivation and behavior put forward his model of buyer behaviorin 1966. The model tries to establish the linkages between a firm and its consumer how the

activities of the firm influence the consumer and result in his decision to buy. The messages fromthe firm first influence the pre-disposition of the consumer towards the product. Depending onthe situation, he develops a certain attitude towards the product. It may lead to a search for theproduct or an evaluation of the product. If these steps have a positive impact on him, it mayresult in a decision to buy. This is the sum and substance of the activity explanations in theNicosia Model. The Nicosia Model groups these activities into four basic fields. Field one hastwo sub-fields the firms attributes and the consumers attributes. An advertising message fromthe firm reaches the consumers attributes. Depending on the way the message is received by the


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consumer, a certain attribute may develop, and this becomes the input for Field Two. Field Twois the area of search and evaluation of the advertised product and other alternatives. If thisprocess results in a motivation to buy, it becomes the input for Field Three. Field Three consistsof the act of purchase. And Field Four consists of the use of the purchased item.

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MB0030- Unit 6-Business Buyer Behavior

Introduction

Unit 6 Business Buyer Behavior Introduction

Any market in which customer buys the product for other than personal consumption is calledbusiness market. This market includes organizational buying, institutional buying andgovernment buying. The market consist very few buyers but they purchase in a very big quantity.These customers are usually found in the industrial towns, tech parks and industrial area. Thedemand for the product in this market is derived i. e depend upon the final consumption of theproduct and service. For example, Demand for car engines will depend on the how manyconsumers will purchase the car. If the number of people who purchase car declines in aparticular month then demand for the engines also goes down. This shows how enginecompanies are depending on the final consumption. The fluctuation in the market is inelastic.

The product is purchased only after thorough examination. Therefore it includes more than onemember in the purchasing department. This has resulted in the complex buying behavior.

Learning Objective1:Differentiate between consumer behavior and organization behavior.

Difference between consumer and

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