Chapter 1: Marketing

Faculty Name: Mrs. Rupali Kalekar

CONSUMER BEHAVIOUR

The term consumer behaviour, individual buyer behaviour, end user behaviour and consumer
buying behaviour all stands for the same. Consumer behaviour is the study of how
individuals, groups and Organisation select buy, use and dispose of goods and services, ideas
or experiences to satisfy their needs and wants.

Consumer behaviour may be defined as the decision process and physical activity individuals
engage in when evaluating, acquiring, using or disposing of goods and services.

According to Belch and Belch "consumer behaviour is the process and activities people
engage in when searching for, selecting, purchasing, using, evaluating and disposing of
products and services so as to satisfy their needs and desires".

Nature of Consumer Behaviour:

Systematic process: Consumer behaviour is a systematic process relating to buying decisions

of the customers. The buying process consists of the following steps:

 Need identification to buy the product

 Information search relating to the product
 Listining and evaluating the alternative
 Purchase decision
 Post purchase evaluation by the marketer

Influenced by various factors : Consumer behaviour is influenced by a number of factors

the factors that influence consumers include marketing, personal, psychological, situational,
social and cultural etc.

Different for different customers : All consumers do not behave in the same manner.
Different consumers behave differently. The different in consumer behaviour is due to
individual factors such as nature of the consumer's lifestyle, culture etc.

Different for different products: Consumer behaviour is different for different products
there are some consumers who may buy more quantity of certain items and very low quantity
of some other items.

Vary across regions: The consumer behaviour vary across States, regions and countries. For
instance, the behaviour of urban consumers is different from that of rural
consumers. Normally rural consumers are conservative (traditional) in their buying
behaviour.

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Vital for marketers : Marketers need to have a good knowledge of consumer behaviour
they need to study the various factors that influence consumer behaviour of the target
customers. The knowledge of consumer behaviour enables marketers to take appropriate
marketing decisions.

Reflect status : Consumer buying behaviour is not only influenced by status of a consumer
coma but it also reflect it. Those consumers who owned luxury cars, watches and other items
are considered by others as persons of higher status.

Result in spread effect : Consumer behaviour as a spread effect. The buying behaviour of
one person may influence the buying behaviour of another person. For instance, a customer
may always prefer to buy premium brands of clothing, watches and other items etc. This may
influence some of his friends, neighbours and colleagues. This is one of the reasons why
marketers use celebrities like Shahrukh Khan, sachin to endorse their brands.

Undergoes a change : The consumer behaviour undergoes a change over a period of time
depending upon changes in age , education and income level etc, for example, kids may
prefer colourful dresses but as they grow up as teenagers and young adults, they may prefer
trendy clothes.

Information search : Search for information is a common consumer behaviour. Consumers

cannot purchase goods and services if they are unaware that a good or service exists. When a
consumer decides to buy a certain item, his decision must be based on the information he has
gethered about what products our services are available to fulfill his needs. There might be a
product available that would be better suited to the consumers needs, but if he is an aware of
product, he will not buy it.

Brand loyalty : Brand loyalty is another characteristic of consumer behaviour. Brand loyalty
is the tendency of a consumer to buy product products or services from a certain company
that one likes or equates with having high quality goods and services. For example, if Naina's
first car was a Honda as a teenager and the car lasted 200,000 miles, she might have a
tendency to buy hondas again in the future due to her previous positive experience. This
brand loyalty may be so strong that she forgoes the information search all together when
considering for next vehicle.

Scope of Consumer Behaviour:

1) Consumer behaviour and marketing management :
Effective business managers realise the importance of marketing to the success of
their firm. A sound understanding of consumer behaviour is essential to the long run success
of any marketing program. In fact, it is seen as a comerstone of the Marketing concept, an
important orientation of philosophy of many marketing managers. The essence of the
Marketing concept is captured in three interrelated orientations consumers needs and wants,
company integrated strategy.

2) Consumer behaviour and non-profit and social marketing :

In today's world even the non-profit organisations like government agencies, religious
sects, universities and charitable institutions have to market their services for ideas to the

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"target group of consumers or institution." At other times these groups are required to appeal
to the general public for support of certain causes or ideas. Also they make their contribution
towards eradication of the problems of the society. Thus a clear understanding of the
consumer behaviour and decision making process will assist these efforts.

3) Consumer behaviour and government decision making :

In recent years the relevance of consumer behaviour principles to government
decision making. Two major areas of activities have been affected:
i) Government services: It is increasingly and that government provision of public services
can benefit significantly from an understanding of the consumers, or users, of these services.

ii) Consumer protection:

Many Agencies at all levels of government are involved with regulating business
practices for the purpose of protecting consumers welfare.

4) Consumer behaviour and demarketing:

It has become increasingly clear that consumers are entering an era of scarcity in
terms of some natural gas and water. These scarcities have led to promotions stressing
conservation rather than consumption. In other circumstances, consumers have been
encouraged to decrease or stop their use of particular goods believed to have harmful effects.
Programs designed to reduce drug abuse, gambling, and similar types of conception
examples. These actions have been undertaken by government agencies non-profit
organisations, and other private groups. The term "demarketing" refers to all such efforts to
encourage consumers to reduce their consumption of a particular product or services.

5) Consumer behaviour and consumer education:

Consumer also stands to benefit directly from orderly investigations of their own
behaviour. This can occur on an individual basis or as part of more formal educational
programs. For example, when consumers learn that a large proportion of the billions spent
annually on grocery products is used for impulse purchases and not spend according to pre-
planned shopping list, consumers may be more willing to plan effort to save money. In
general, as marketers that can influence consumers' purchases, consumers have the
opportunity to understand better how they affect their own behaviour.

Importance of consumer behaviour:

Understanding consumer behaviour is important for any organization before launching a
product. If the organization failed to analyse how a customer will respond to a particular
product, the company will face losses. Consumer behaviour is very complex because each
consumer has different mind and attitude towards purchase, consumption and disposal of
product (Solomon, 2009). Understanding the theories and concepts of consumer behaviour
helps to market the product or services successfully. Moreover, studying consumer behaviour
helps in many aspects. As there is constant change in the living standards, trend, fashion and
change in technology; consumer’s attitude towards the purchase of product varies (Kumar,
2004). Understanding these factors is of utmost importance because the marketing of product
are largely dependent on these factors. Thus, consumer behaviour serves as a successful tool
for marketers in meeting their sales objectives.

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Consumer Behaviour
Consumer Behaviour or the Buyer Behaviour is referred to the behaviour that is displayed by
the individual while they are buying, consuming or disposing any particular product or
services. These behaviours can be affected by multiple factors. Moreover, it also involves
search for a product, evaluation of product where the consumer evaluate different features,
purchase and consumption of product. Later the post purchase behaviour of product is studied
which shows the consumer satisfaction or dissatisfaction where it involves disposal of
product (Solomon, 2009).

The customers while buying a product goes through many steps. The study of consumer
behaviour helps to understand how the buying decision is made and how they look for a
product. Moreover, the understanding consumer behaviour also helps marketers to know the
what, where, when, how and why of the consumption of product consumption (Kumar,
2004). These help marketers or organizations to know the reason behind the purchase of
product by consumers and how it satisfies them. Among other factors, the basic needs like
shelter and hunger along with craving for psychological fulfilment tends consumer to buy a
certain product or services.

Importance of Consumer Behaviour to business managers

The main purpose behind marketing a product is to satisfy demands and wants of the
Consumers. Study of consumer behaviour helps to achieve this purpose. As consumers are
the most important person for marketer or sales person, therefore it is important for them to
consider the likes and dislikes the consumers so that they can provide them with the goods
and services accordingly (Solomon, 2009). The more careful analysis helps in more exact
prediction about the behaviour of consumers of any product or services. The study of
consumer behaviours helps business manager, sales person and marketers in the following
way.

 To design the best possible product or service that fully satisfies consumer’s needs
and demands.
 To decide where the service or product would be made available for easy access of
consumers.
 To decide the price at which the consumers would be ready to buy that product or
service.
 To find out the best method of promotion that will prove to be effective to attract
customers to buy a product.
 To understand why, when, how, what and other factors that influence buying decision
of the consumers.

Importance of Consumer Behaviour to Marketers

It is important for marketers to study consumer behaviour. It is important for them to know
consumers as individual or groups opt for, purchase, consumer or dispose products and
services and how they share their experience to satisfy their wants or needs (Solomon, 2009).
This helps marketers to investigate and understand the way in which consumers behave so
that they can position their products to specific group of people or targeted individuals.

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In regard to the marketer’s view point, they assume that the basic purpose of marketing is to
sell goods and services to more people so that more profit could be made. This principle of
making profits is heavily applied by almost all marketers. Earlier, the marketers were
successful in accomplishing their purpose. However, today, as the consumers are more aware
about the use of product and other information of the product, it is not easy to sell or attract
customer to buy the product (Kumar, 2004). Thus, in order to sell a product or service or to
convince consumers to buy product, the marketers have to undergo through proper research
to win them over.

The following are some of the points discussed that explains the value to marketers of
understanding and applying consumer behaviour concepts and theories.

1. To understand Buying Behaviour of consumers

2. To create and retain customers though online stores
3. To Understand the factors influencing Consumer’s buying Behaviour
4. To understand the consumer’s decision to dispose a product or services
5. To increase the knowledge of sales person influence consumer to buy product
6. To help marketers to sale of product and create focused marketing strategies

1. To understand Buying Behaviour of consumers

The study of consumer behaviour helps marketers to recognize and forecast the purchase
behaviour of the consumers while they are purchasing a product. The study of consumer
behaviour helps the marketers not only to understand what consumer’s purchase, but helps to
understand why they purchase it (Kumar, 2004). Moreover, other questions like how, where
and when they purchase it are also answered. The consumption and the reasons behind
disposition of that particular product or services help marketers to be fully aware of the
product that is marketed. The consumer behaviour studies also help marketers to understand
the post purchase behaviour of the consumers. Thus, the marketers become fully aware about
every phase of consumption process i.e., pre-purchase behaviour, behaviour during purchase
and post purchase behaviour. Many studies in the past shows that each consumer behaves
differently for a product i.e., they buy the product for different reasons, pays different prices,
used the product differently and have different emotional attachments with the product
(Solomon, 2009).

2. To create and retain customers though online stores

Professor Theodore Levitt says that consumer behaviour is of most importance to marketers
in business studies as the main aim is to create and retain customers (Kumar, 2004). If the
consumers are satisfied with the product, he or she will buy the same product again.
Therefore, the product should be marketed by markers in such a way that convince customer
to buy the product. Thus, creating customer and the retaining those customers are important.
These can be done through understanding and paying close attention towards the consumer’s
behaviour while making purchase decision or buying a product in market place. Moreover,
the information published on the websites largely influence the customer’s buying behaviour.
Such information on published sources arouse consumer to buy a product or service.
Moreover, updating such information will help the consumer to retain to a product or re try
the product if the product has dissatisfied them (Solomon, 2009).

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3. To understand the factors influencing Consumer’s buying
Behaviour
It is important for marketers to consider the factors that affect the buying behaviour of
consumer before entering the market. There are many factors that can influence the purchase
decision of consumers such as social influence, cultural influences, psychological factors and
personal factors (Super Professeur, 2011). Understanding these factors helps marketers to
market the product on right time to the right consumers. For example, if marketer is
marketing a product which is Halal. The marketers first consider all the factors that can
influence consumers to buy Halal products, where they can target specific areas where Halal
food is more sold.

The marketers need to pay attention to cultural influences such as religion, values and norms
of the people or societies targeted and lifestyle of the targeted consumers. The marketers can
propose different strategies that convince the targeted consumers to buy marketed products or
services.

Moreover, the marketers should be ascertain the factors that influence and affects purchase
decision of consumers (Solomon, 2009). If the marketers failed to understand the factors that
might influence consumers, they will fail to convince the consumer to purchase that product
or will fail to meet the demands of consumers. Some variables cannot be directly observed
(Super Professeur, 2011). In such case, thorough understanding of concepts and theories of
consumer behaviour helps marketers to predict the consumer’s buying behaviour to a
reasonable extent. Thus, understanding consumer’s behaviour to buy a product is complex
and requires marketers to continuously understand and apply various concepts and theories
for successful marketing.

4. To increase the knowledge of sales person influence consumer

to buy product
All the products and services marketed revolve around the behaviour of consumers that how
they will respond to them. Effective marketing of a product by sales people may help to
deliver right product to right people. Consumer behaviour deals with the knowledge of what
the consumers need and want to buy and what goods and services are available to satisfy their
needs. Thus, consumer behaviour deals with particularly with the behaviour of people i.e.,
consumers. It is important for sales person to be fully aware of the customer’s requirement
so that he or she could clearly communicate the benefits of the product to the customers.
Moreover, the sales person by understanding consumer’s demand and need for a product can
sell goods that are most closely related to their requirement. Besides understanding consumer
behaviour, the sales person should also have command over their spoken language. This is
because any miscommunication could harm brand reputation. Moreover, if the consumers
have more knowledge about the product than the sales person, the sales might fail to meet
their targets. Thus, analysing consumer’s behaviour and knowledge for effective marketing of
products by sales people are important. The sales people must be fully aware of the
consumer’s behaviour in different situations so that they could help them in meeting their
demands and satisfaction (Solomon, 2009).

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5. To understand the consumer’s decision to dispose a product or
services
Disposal of product involves throwing away of products by the consumers (Solomon, 2009).
This behaviour of consumer is very complex and requires more importance by the marketers.
Understanding the consumer’s behaviour about how and when consumers dispose a product,
the marketers or the companies can position themselves so that this behaviour could be
limited (Raghavan, 2010).

If the product or services that have failed to deliver required or expected satisfaction by the
consumers, the product is disposed by the customers. For this, some marketers track the
follow up from the consumers so that they can gauge the reason behind failure of the product.
Moreover, in order to retain customers, some marketers or organizations offer customers with
services like exchange of product, money back guarantee etc. Although, these tools are
helpful to influence post purchase behaviour of consumers to some extent.

The method of disposition varies transversely from product to product. Some of the factors
that lead to consumer’s behaviour to dispose a product include psychological characteristics,
situational factors or the intrinsic factors of product. The psychological characteristics include
attitude, mood, emotion, social class, social conscience, perception etc. The situational
factors such as urgency, functional use, fashion change etc. and intrinsic factors such as
product style, durability, reliability, adaptability, replacement cost, colour, size etc. can lead
to consumer’s decision to dispose a product (Rao, 2011).

For example, the personal computers sold previously were largely demanded by consumers.
However, due to change in size, advancing technology, affordability, convenience; most
people have switched to laptops and mobiles with operating systems have disposed personal
computers to a greater extent.

6. To help marketers to optimize sale of product and create

focused marketing strategies
The theories and concepts of Consumer behaviour help marketers to optimize their sales and
to create efficient marketing strategies. Moreover, these theories provides marketers with
information on the consumer’s behaviour to spend money, likely causes that incline them to
spend more money on a product, and these two information help to plan strategies that should
be practiced by the marketers for successful marketing of a product (Goessl, 2011). Studying
different consumer behaviour theories helps to understand the different choices that
consumers make to buy a product. There are some factors that need to be carefully analysed
by the marketers which help them to increase their sales and develop effective marketing
strategies. These factors are discussed as follows:

Consumer’s rational behaviour: It is foremost important for a marketer to understand the

situations where consumers behave rationally. Many consumer behaviour theories suggest
that the consumers want to get maximum benefit and satisfaction from the product by
spending minimum amount of money. This shows that consumers do not spend all their
money to buy a product and keeps a certain amount of money as their savings. However, on
the other hand, the consumers having limited money spend all their money on purchase of

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their basic needs such as shelter, food and clothing. Thus, the marketer must carefully analyse
these two situations of consumers before marketing a product or services (WiseGEEK, n.d.).

Consumer’s taste and preferences: Understanding consumer taste and preferences helps
marketers to revamp their product so that they could meet customer satisfaction. These
factors may change from time to time. The change in consumer’s behaviour affecting by
these factors should be carefully monitored. The marketers need carefully understand the
consumer’s interest in the products by breaking down the targeted consumers into
demographics, like age, occupation and location as they contribute investigating information
about consumer preferences.

Price of Products: Prices of products are a widely discussed factor in consumer behavior
theories. The theories suggest that marketers should keep their prices low without affecting
the quality to attract consumers. This is because consumers go mostly for products that are of
low price but satisfies their demand (Open Learning World, 2011).

Features of Product: Increased number of features offered by the product tends to increase the
price of products. In such case, consumers go for added features in a product at affordable
price. Therefore, the markers design their products in such a way that the product gives
maximum value or features to consumers at affordable price (Goessl, 2011)

Consumer’s knowledge about a product: The marketer must know to what extent the
consumers have knowledge about a product. Mostly, consumers select products with which
they are familiar with. For example, if the consumers are aware of the health effects of eating
high fat food or fast food, marketing of such a product to health conscious consumer will end
up in failure.

1) Production policies:
The study of consumer behaviour effects production policies of enterprise. Consumer
behaviour discovers the habits, tastes and preferences of consumers and such discovery
enables and enterprise to plan and develop its products according to these specifications. It is
necessary for an enterprise to be in continuous touch with the changes in consumer behaviour
so that necessary changes in products may be made.

2) Price policies:
The buyer behaviour is equally important in having price policies. The buyers of some
products purchase only because particular articles are cheaper than the competitive articles
available in the market.

3) Decision regarding channels of distribution:

The goods, which are sold and solely on the basis of low price mast and economical
distribution channels. In case of those articles, which week T.V. sets, refrigerators etc. Must
have different channels of distribution. Thus, decisions regarding channels of distribution are
taken on the basis of consumer behaviour.

4) Decision regarding sales promotion:

Study of consumer behaviour is also vital in making decisions regarding sales
promotion. It enables the producer to know what motive prompt consumer to make purchase
and the same are utilised in promotional campaigns to awaken desire to purchase.

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5) Exploiting marketing opportunities:
Study of consumer behaviour helps the marketers to understand the consumer’s
needs, aspirations, expectations, problems etc. This knowledge will be useful to the marketers
in exploiting marketing opportunities and meeting the challenges of the market.

6) Consumer does not always act or react predictably:

The consumers of the past used to react to price levels as if price and quality had
positive relation. Today, week value for money, lesser price but with superior features. The
consumer’s response indicates that the shift had occurred.

7) Highly diversified consumer preferences:

This shift has occurred due to availability of more choice now. Thus study of
consumer behaviour is important to understand the changes.

8) Rapid introduction of new products:

Rapid introduction of new product with technological advancement has made the job
of studying consumer behaviour more imperative. For example, the information Technologies
are changing very fast in personal computer industry.

9) Implementing the "Marketing concept":

This call for studying the consumer behaviour, all customers need have to be given
priority. Thus identification of target market before production becomes essential to deliver
the desired customer satisfaction and delight.

Applications of consumer behaviour:

1) Analysing market opportunity:
Consumer behaviour study help in identifying the unfulfilled needs and wants of
consumers. This requires examining the friends and conditions operating in the Marketplace,
consumers lifestyle, income levels and energy influences. This may reveal unsatisfied needs
and wants. Mosquito repellents have been marketed in response to a genuine and unfulfilled
consumer need.

2) Selecting target market:

Review of market opportunities often helps in identifying district consumer segments
with very distinct and unique wants and needs. Identifying these groups, behave and how
they make purchase decisions enable the marketer to design and market products or services
particularly suited to their wants and needs. For example, please sleep revealed that many
existing and potential shampoo users did not want to buy shampoo fax price at rate 60 for
more and would rather prefer a low price package containing enough quantity for one or two
washers. This finding LED companies to introduce the shampoos sachet, which become a
good seller.

3) Marketing-mix decisions:
Once unsatisfied needs and wants are identified, the marketer has to determine the
right mix of product, price, distribution and promotion. Where too, consumer behaviour study
is very helpful in finding answers too many perplexing questions. The factors of marketing
mix decisions are:
i) product ii) price iii) promotion iv) distribution

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4) Use in social and non-profits marketing:
Consumer behaviour studies are useful to design marketing strategies by social,
governmental and not for profit organisations to make their programmes more effective such
as family planning, awareness about AIDS.

Need for studying consumer behaviour

Buyer behavior is studied to predict buyers’ reaction in markets. If a firm understands its
customers, it becomes successful in the market place. The success of any business is based on
understanding the consumer and providing the kind of products that the consumer wants.

The consumer decides what to buy, when to buy and also what not to buy. One cannot thrust
a product on a consumer. A marketer sells what the consumer wants. So, emphasis is placed
on knowing what the consumers’ wants are.

Studying consumer behavior is very much emphasized for the following reasons.

1. To satisfy need of customers

Consumers respond favorably while evaluating the products that best satisfy their needs. A
marketer studies how consumers spend their available resources on the consumption of
related items. It includes the study of what they buy, when they buy it, where they buy it and
how often they use it. So, a knowledge of consumer behavior will be of immense help to the
marketer which will help to satisfy their needs.

He can understand the consumer’s reaction to a firm’s marketing strategies. It would help in
planning and implementing marketing strategies.

2.Helps to understand consumer psychology

The study of consumer behavior enables the marketer to understand the psychology of
consumers. Consumer psychology is based on his knowledge, attitude, intention and motive.

The psychology of customer develops on the basis of knowledge he has. Sales promotion
plays an important role to provide the knowledge of the product to consumers.

Attitude is a state of mind or feeling. Attitude explains behavior. Intention means a desire to
do something. A marketing programme is formulated only after understanding the intention
of consumers. Motive is the integral state which directs the behavior of a person.

3. Helps to understand consumer motives

A study of the behavior of a consumer is essential to understand his/her buying motives. A

motive is an urge for which an individual seeks satisfaction. In the words of R.S. Davar

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Consumers have several motives. All these motives may not have the same intensity of
purchase. Only a few motives prompt the consumer to buy a product or service. The study of
consumer behavior involves both motives and purchases.

4. Helps to understand consumer choices

It is important for the marketer to understand how consumers make their choices. Human
beings are usually very rational. They make systematic use of information available to them
before they buy. A marketer studies the behavior of the customer and accordingly alter his
presentation, enticing the customer to go for the product.

5. Helps to understand consumer preferences

A business firm which is ignorant of consumer preferences cannot succeed in the market
place. According to Peter F. Drucker

Adam Smith has stated that consumption is the sole end and purpose of all production. So, a
firm must plan its production and distribution to suit the needs of consumers. Thus, the extent
of consumer understanding determines the effectiveness of marketing mechanism.

To conclude
The study of consumer behavior helps the marketer to

1. Satisfy need of customers

2. Understand consumer psychology
3. Understand consumer motives
4. Understand consumer choices
5. Understand consumer preferences

1.2 Buyer Decision Process:

5 Stages of Consumer Buying Decision Process

Buyer decision process (or customer buying process) helps markets to identify how consumer
complete the journey from knowing about a product to making the purchase decision.

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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.

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 confidential.

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.

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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.”

Consumers go through the 5 stages of the buyer decision process in taking the decision to purchase
any goods or services.

1.3 Market Segmentation

Types of Markets

1. Physical Markets - Physical market is a set up where buyers can physically meet the
sellers and purchase the desired merchandise from them in exchange of money.
Shopping malls, department stores, retail stores are examples of physical markets.
2. Non Physical Markets/Virtual markets - In such markets, buyers purchase goods
and services through internet. In such a market the buyers and sellers do not meet or
interact physically, instead the transaction is done through internet. Examples - Rediff
shopping, eBay etc.
3. Auction Market - In an auction market the seller sells his goods to one who is the
highest bidder.
4. Market for Intermediate Goods - Such markets sell raw materials (goods) required
for the final production of other goods.
5. Black Market - A black market is a setup where illegal goods like drugs and
weapons are sold.
6. Knowledge Market - Knowledge market is a set up which deals in the exchange of
information and knowledge based products.
7. Financial Market - Market dealing with the exchange of liquid assets (money) is
called a financial market.

Financial markets are of following types:

1. Stock Market - A form of market where sellers and buyers exchange shares is called a
stock market.
2. Bond Market - A market place where buyers and sellers are engaged in the exchange
of debt securities, usually in the form of bonds is called a bond market. A bond is a
contract signed by both the parties where one party promises to return money with
interest at fixed intervals.
3. Foreign Exchange Market - In such type of market, parties are involved in trading of
currency. In a foreign exchange market (also called currency market), one party
exchanges one country’s currency with equivalent quantity of another currency.

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 4. Predictive Markets - Predictive market is a set up where exchange of good or service
takes place for future. The buyer benefits when the market goes up and is at a loss
when the market crashes.

Market Size

The market size is directly proportional to two factors:

 Number of sellers and Buyers

 Total money involved annually

Market Segmentation

Defination:

Market segmentation is the process brands use to divide their target market into smaller segments of
people that share common characteristics to optimize their marketing, advertising and sales efforts.

What is market segmentation?

Market segmentation is a business practice relying on research that leads the direction of how
a business divides its target market into smaller, more manageable groups based on common
ground they share. Simply put, customers of each market segment have similar characteristics
that businesses can leverage to optimize their marketing, advertising, and sales efforts.

The purpose of segmentation is that you are able to introduce a more tailored message that
will be received successfully. This is advantageous for companies who may have a product or
service in the marketplace that boasts multiple benefits or uses for different types of
customers.

Have you ever heard the phrase: “You can’t be everything for everybody”? The same proves
true with one marketing solution. As a marketer, you can’t solve everyone’s problem or
appeal to every single person, which is why market segmentation can be such an effective
strategy to implement.

Basis of Market Segmentation

 Gender

The marketers divide the market into smaller segments based on gender. Both men
and women have different interests and preferences, and thus the need for
segmentation.

Organizations need to have different marketing strategies for men which would
obviously not work in case of females.

A woman would not purchase a product meant for males and vice a versa.

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 The segmentation of the market as per the gender is important in many industries like
cosmetics, footwear, jewellery and apparel industries.

 Age Group

Division on the basis of age group of the target audience is also one of the ways of
market segmentation.

The products and marketing strategies for teenagers would obviously be different than
kids.

Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams

Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products,
Magazines, apparels and so on

 Income

Marketers divide the consumers into small segments as per their income. Individuals
are classified into segments according to their monthly earnings.

The three categories are:

High income Group

Mid Income Group
Low Income Group

Stores catering to the higher income group would have different range of products and
strategies as compared to stores which target the lower income group.

Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to
Vishal Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to
the lower income segment.

 Marital Status

Market segmentation can also be as per the marital status of the individuals. Travel
agencies would not have similar holiday packages for bachelors and married couples.

 Occupation

Office goers would have different needs as compared to school / college students.

A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it
caters specifically to the professionals.

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Four types of market segmentation

Geographic segmentation

Geographic segmentation targets customers based on a predefined geographic border.

Differences in interests, values, and preferences vary dramatically throughout cities, states,
and countries, so it is important for marketers to recognize these differences and advertise
accordingly.

Think about products such as parkas and bathing suits. Parkas will be sold for most of the
year in the colder, northern half of the country, whereas southern areas may only be able to
find parkas in specialty stores during the winter. Bathing suits, on the other hand, are sold
year-round in the warmer states but only sold during spring and summer in the cooler states.

Demographic segmentation

Demographic segmentation divides a market through variables such as age, gender, education
level, family size, occupation, income, and more. This form of segmentation is a widely used
strategy due to specific products catering to obvious individual needs relating to at least one
demographic element.

Perhaps the most obvious variable of them all, age is incredibly important for marketers to
understand and advertise accordingly due to the fast-paced nature of preference changes
within the various stages of life. Even media consumption differs greatly between each
generation, so it’s important to recognize what your target age range is and which channels
they use to consume information.

Psychographic segmentation

Unlike geographic segmentation and demographic segmentation, psychographic

segmentation focuses on the intrinsic traits your target customer possesses. Psychographic
traits can range from values, personalities, interests, attitudes, conscious and subconscious
motivators, lifestyles, and opinions. To understand your target customers on this level,
methods such as focus groups, surveys, interviews, and case studies can all prove successful
in compiling this type of conclusion.

Think about the lifestyle of someone who lives in a small, beach town and surfs for a living
versus someone who lives in a big city working in corporate America. Each of their wants
and needs on a daily basis are incredibly different, and marketers must recognize those
differences to be successful.

Behavioural segmentation

Behavioral segmentation has similar measurements to psychographic segmentation but

focuses on specific reactions and the way customers go through their decision making and
buying processes. Attitudes towards your brand, the way they use it, and their knowledge
base are all examples of behavioral segmentation. Collecting this type of data is similar to the
way you would find psychographic data. Review websites can also be a helpful tool when
searching for this information.

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Brand loyalty is an excellent example of behavioural segmentation. I bet while reading this
article you can think of one brand that you consistently buy and trust enough to purchase its
new line without even reading the reviews. This type of brand loyalty produces a consistent
buying pattern, which is categorized as a behavioural trait. Marketers work hard to get
consumers to love and stay loyal to their brand for a consistent purchase cycle.

Advantages of Market Segmentation:

Market segmentation can have many benefits for companies which can benefit their business.
Some are discussed below:

1. Segmenting a market gives focus to company as it helps to understand the market better

2. Unnecessary costs are avoided by efficient market segmentation as only the required
population can be tapped

3. Segmentation can help companies identify newer markets where existing products can be
launched

4. If certain overlapping markets are identified, companies can create new products to capture
them

5. Once proper market segmentation is done, after identifying target groups accurately,
advertising & marketing can be more effective rather than having loosely created ad
campaigns

6. Homogeneous groups can themselves promote the products or services even more if they
like it

7. Systematic market segmentation helps in market expansion and also helps in customer
retention

Disadvantages of Market Segmentation:

Apart from the several advantages, there are also certain drawbacks of market segmentation.
Some disadvantages are:

1. A company having multiple segments would have to cater to them separately i.e. more
costs

2. Giving products/ services to multiple segments can be a time-consuming process for

companies

3. If a company selects a wrong segment, their entire business can collapse

4. Smaller clusters/ niche markets often get neglected in the bigger scheme of things

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Marketing Mix Definition
Marketing mix is the set of tactics a business use to promote and sell its products in the
market. These tactics range from developing the product, deciding its price and places where
it will be sold, to deciding its communication and promotional strategies.

Product mix

Product is an item produced or procured by the business to satisfy the needs of the customer.
It is the actual item which is held for sale in the market. The product can be tangible or
intangible (it can be a good or a service). It is not necessary that the business produce the
product. It can also procure it from somewhere else.

Product mix refers to the mix of all the products present in the company for sale. (Just like
the coca cola example above. All the 3500+ products constitute the product mix of the
company.)

Every product has a definite life cycle. A life cycle of the product constitute different stages a
product undergoes from the time it was first thought to the time it is finally removed from the
market.

A business keeps all this in mind while creating a product mix of the marketing mix.

In developing the right product, you have to answer the following questions:

 What does the client want from the service or product?

 How will the customer use it?
 Where will the client use it?
 What features must the product have to meet the client’s needs?
 Are there any necessary features that you missed out?

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  Are you creating features that are not needed by the client?
 What’s the name of the product?
 Does it have a catchy name?
 What are the sizes or colors available?
 How is the product different from the products of your competitors?
 What does the product look like?

Price Mix
The price of the product is basically the amount that a customer pays for to enjoy it. Price is a
very important component of the marketing mix definition.

It is also a very important component of a marketing plan as it determines your firm’s profit
and survival. Adjusting the price of the product has a big impact on the entire marketing
strategy as well as greatly affecting the sales and demand of the product.

This is inherently a touchy area though. If a company is new to the market and has not made
a name for themselves yet, it is unlikely that your target market will be willing to pay a high
price.

Although they may be willing in the future to hand over large sums of money, it is inevitably
harder to get them to do so during the birth of a business.

Pricing always help shape the perception of your product in consumers eyes. Always
remember that a low price usually means an inferior good in the consumers eyes as they
compare your good to a competitor.

Consequently, prices too high will make the costs outweigh the benefits in customers eyes,
and they will therefore value their money over your product. Be sure to examine competitors
pricing and price accordingly.

When setting the product price, marketers should consider the perceived value that the
product offers. There are three major pricing strategies, and these are:

 Market penetration pricing

 Market skimming pricing
 Neutral pricing

Here are some of the important questions that you should ask yourself when you are setting
the product price:

 How much did it cost you to produce the product?

 What is the customers’ perceived product value?
 Do you think that the slight price decrease could significantly increase your market
share?
 Can the current price of the product keep up with the price of the product’s
competitors?

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Place Mix

A product, until it is well placed / distributed to reach the customer, is of no use to the
customer. Hence, Place Mix is important. Business should be clear about their target market
and how to reach the same. Place mix constitute strategies of where and how the product will
be available for the customers for the actual sale.

This comes with a deep understanding of your target market. Understand them inside out and
you will discover the most efficient positioning and distribution channels that directly speak
with your market.

There are many distribution strategies, including:

 Intensive distribution
 Exclusive distribution
 Selective distribution
 Franchising

Here are some of the questions that you should answer in developing your distribution
strategy:

 Where do your clients look for your service or product?

 What kind of stores do potential clients go to? Do they shop in a mall, in a regular
brick and mortar store, in the supermarket, or online?
 How do you access the different distribution channels?
 How is your distribution strategy different from your competitors?
 Do you need a strong sales force?
 Do you need to attend trade fairs?
 Do you need to sell in an online store?

Promotion Mix

Promotion is a very important component of marketing as it can boost brand recognition and
sales. Promotion is comprised of various elements like:

 Sales Organization
 Public Relations
 Advertising
 Sales Promotion

Advertising typically covers communication methods that are paid for like television
advertisements, radio commercials, print media, and internet advertisements. In
contemporary times, there seems to be a shift in focus offline to the online world.

Public relations, on the other hand, are communications that are typically not paid for. This
includes press releases, exhibitions, sponsorship deals, seminars, conferences, and events.

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Word of mouth is also a type of product promotion. Word of mouth is an informal
communication about the benefits of the product by satisfied customers and ordinary
individuals. The sales staff plays a very important role in public relations and word of mouth.

It is important to not take this literally. Word of mouth can also circulate on the internet.
Harnessed effectively and it has the potential to be one of the most valuable assets you have
in boosting your profits online. An extremely good example of this is online social media and
managing a firm’s online social media presence.

In creating an effective product promotion strategy, you need to answer the following
questions:

 How can you send marketing messages to your potential buyers?

 When is the best time to promote your product?
 Will you reach your potential audience and buyers through television ads?
 Is it best to use the social media in promoting the product?
 What is the promotion strategy of your competitors?

Your combination of promotional strategies and how you go about promotion will depend on
your budget, the message you want to communicate, and the target market you have defined
already in previous steps.

People:

Thorough research is important to discover whether there are enough people in your target
market that is in demand for certain types of products and services.

The company’s employees are important in marketing because they are the ones who deliver
the service. It is important to hire and train the right people to deliver superior service to the
clients, whether they run a support desk, customer service, copywriters, programmers…etc.

When a business finds people who genuinely believe in the products or services that the
particular business creates, it’s is highly likely that the employees will perform the best they
can.

Additionally, they’ll be more open to honest feedback about the business and input their own
thoughts and passions which can scale and grow the business.

This is a secret, “internal” competitive advantage a business can have over other competitors
which can inherently affect a business’s position in the marketplace.

Process:

The systems and processes of the organization affect the execution of the service.

So, you have to make sure that you have a well-tailored process in place to minimize costs.

It could be your entire sales funnel, a pay system, distribution system and other systematic
procedures and steps to ensure a working business that is running effectively.

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Tweaking and enhancements can come later to “tighten up” a business to minimize costs and
maximise profits.

Physical Evidence
In the service industries, there should be physical evidence that the service was delivered.
Additionally, physical evidence pertains also to how a business and it’s products are
perceived in the marketplace.

It is the physical evidence of a business’ presence and establishment. A concept of this is

branding. For example, when you think of “fast food”, you think of McDonalds

When you think of sports, the names Nike and Adidas come to mind.

You immediately know exactly what their presence is in the marketplace, as they are
generally market leaders and have established a physical evidence as well as psychological
evidence in their marketing.

They have manipulated their consumer perception so well to the point where their brands
appear first in line when an individual is asked to broadly “name a brand” in their niche or
industry.

Advantages of Marketing Mix

 Itsimplifies and brings together different concepts of Marketing into one, making
Marketing easier to do and manage
 Allows separation of marketing from other company activities and delegation of
marketing tasks to specialists
 Enables a company to vary its Marketing activities according to its resources, market
conditions and customer needs
 Decisions cannot be made on a Marketing Mix element without taking into account its
impact on other elements.

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 Disadvantages of Marketing Mix

 The Marketing Mix does not consider client behaviour, but it is internally oriented.
 The Marketing Mix considers clients as passive; does not allow interaction and cannot
capture relationships.
 The Marketing Mix does not take into account the unique elements of service
marketing.
 Product is indicated in the singular, but most companies do not sell a product in
isolation. Sellers sell products, product lines or brands, all interconnected in the
mind of the consumer
 The Marketing Mix does not mention building relationships with the consumer that
has become a major marketing focus, or the brand experiences that consumers buy.

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