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CHAPTER- FOUR

MARKETING AND MARKETING STRATEGIES


4. 1. The concept of marketing
 Marketing is a human activity to satisfy needs and wants, through an exchange process. A
demand is a want for which the consumer is prepared to pay a price. A want is anything or
service the consumer desires or seeks. Wants become demands when backed purchasing
power. A need is anything the consumer feels to keep himself alive and healthy. A
transaction consists of a value between two parties. The aim of marketing is to make sales
in order to earn reasonable profit for the producer.

 Marketing is the creation and the delivery of standards of living; it is finding out what
customers want, then planning and developing a product or services that will satisfy those
wants; and then determining the best way to price, promote and distribute that product or
service. The purpose of business is to create a customer by which stress is laid on two
aspects: (an identification of consumer needs, and (b) organizing the business to meet
these needs The modern concept focuses on the consumers and their satisfaction. The
approach of
 The American Marketing Association (AMA) uses the following: “The process of
planning and executing the conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy individual and organizational
objectives.”

 Philip Kotler uses, “Marketing is the social process by which individuals and groups
obtain what they need and want through creating and exchanging products and value with
others.”

 The Chartered Institute of Marketing (CIM), “Marketing is the management process that
identifies, anticipates and satisfies customer requirements profitably.”

4.2. The marketing mix -Marketing mix is the set of marketing tools that the firm uses to pursue
its marketing objectives in the target market. There are a number of marketing mix tools. These
tools are known as 4P’s such as product, placement, (distribution), promotion and pricing.

Marketing mixes can also be defined as the mixture of controllable variables that can be
manipulated by the management of an organization.
Each marketing mix is discussed as follows.
4.2.1 Product: it includes a bundle of physical, service and symbolic attributes designed to
produce consumer want satisfaction. Product provides form utility to those individuals
who would purchase the product.

Products can be classified in different ways.


 One approach is to distinguish between goods and services.

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Goods are basically objects that can be touched, stored, transported and mass-produced.
Service is any activity or benefit that one party can offer to another and is essentially
intangible and not result in ownership of anything.
- Goods are tangible objects that can be perceived with sense. They can be depicted in
advertising. But services are often intangible involving actions and opposed to objects.
- Goods can be stored. If demand is weak, the producer can hold items in inventory until they
sold. But services are perishable. The provider must match supply to demand since unused
capability cannot be saved until later.
- Goods can be transferred from producer to seller and can pass through the hands of
intermediaries. But services cannot be transported through intermediaries. The provider must
interact directly with the buyer.
The other approach is to classify products into consumer products and industrial
products.
- Consumer products are products bought by final consumers for personal consumption.
There are different types of consumer products.
i. Convenient products.
These are consumer products and services that consumer buys frequently, immediately and
with a minimum comparison and buying efforts. They are low priced products and are readily
available when consumers need them. Examples, soap, sugar, candle, newspapers, batch box
etc.
ii. Shopping products
- They are less-frequently purchased consumer products and services that consumers compare
carefully on suitability, quality price and style. Here consumers spend relatively much time
and effort in gathering information and making comparison. Examples, Furniture, clothing,
hotel services, medical services, etc.
iii. Specialty goods
These are products and services with unique characteristics or brand identifications for which
a significant group of buyers are willing to make special purchase effort. Eg. Luxury items
like special brand cars, high priced photographic equipment, special watches etc.
iv. Unsought goods
There are consumer goods that the consumer either does not know or does not think of
buying. Example- a new product like the digital audiotape player is unsought until the
consumers become aware of it through advertising, encyclopedias etc. By their nature
unsought goods require a lot of advertising, personal selling and other marketing effort.

Industrial goods are those products purchased for further processing or for use in conducting
a business. Industrials products are grouped as raw materials and parts, capital items and
supplies and services.
Consumers and producers identify one product from the other using brands. To identify their
products from others marketers, create, maintain and products from others marketers create

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maintain and protect brands of their product and services. Brand is any name, term, symbol,
signs design or a unifying combination of these that identifies and distinguishes one product
from the other.

A brand name is the verbal part of the brand consisting of words or letters that contains the
name used to identify the firm’s product from other competitors.

A brand mark is a non-verbal of symbol or sign part of the brand.

Trademark is a legally protected brand name or brand mark. The owners of the trademarks
have exclusive rights to their use.

Branding enables consumers to identity and distinguishes the product they like form the ones
they do not like.

Product Life Cycle


A product, like a human being, passes through different stages. At each stage of a product life
cycle a markets should use different strategies in the introduction, growth, maturity and decline.

Maturity

Growth Decline
Sales

Introduction

Time

Product Life Cycle

Each stage of the product life cycle is discussed below.


1) Introduction Stage- in this stage the product is new to a certain market and the main duty of
the business is to stimulate demand. Promotional campaign should give information about the
new product.
The basic features of this stage are listed below: -
 Customers are hesitant in buying the product
 Productivity is low since demand is low
 Sales volume is low.
 High amount of money for promotion i.e high expense

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 It is the least profitable stage.
So during this stage a company should try as much as possible to promote its product and
get known by customers.

2, Growth stage- Sales volume increases in this stage as new customers make purchase (use the
product) of a certain business. A product, which gets an acceptance by customers, is lucky enough
if it reaches this stage.
The basic characteristics of this stage are: -
 high growth rate in sales and profit
 customers are aware of the product/service
 competitors might enter to the market to share the profit gained by the growing business.
Promotion is still high in this stage but a reminding type of advertisement should be used.
So the company should capitalize this stage by increasing its distribution channels and provide the
product on time for customers who are showing a positive response to the product or service.

3. Maturity Stage- This is a stage where sales and profit reach climax (the maximum) level. This
stage is characterized by: -
 large number of competitors in a market
 available products exceed customer demand
 sales and profits are at their highest growth.
 Reduction in price may occur so as not to slip to a declining stage.
At this stage promotion should be used but the advertisement shown should be a reminding type
of advertisement. The company should develop a strategy to maintain sales and profit of the
business before it goes down to a declining stage.

4. Decline Stage- Consumers shift to other products and sales and profit show a negative trend.
The characteristics of this stage are: -
 Sales is low,
 Profit is declining and could be negative
 There should be a differentiation of a product (modification) or a total change of model or
product.
So depending on the different life cycle of a product, a marketer should be alert enough to take
the appropriate measure in order to maintain the acceptability of the product, satisfaction of
customers and the profitability of the business.

The product life cycle assumes that profit and sales go in a certain pattern. The length of the life
cycle is different for different products.

While a new fashion may have a total life span of one calendar year, with an introductory stage of
two months but the automobile has been in maturity stage for more than twenty years.

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4.2.2. Placement (distribution)
The second marketing mix that solves the problem of supply with transportation and warehouse
by providing a product at the right time and place is distribution.
There are a number of possible ways of distribution channels. These channels help to deliver a
product from center of production to customers. The common channels of distribution are the
following:
1) Producer Customer: - a producer may sell its product directly to customers with out any
intermediaries.
2) Producer Retailer Consumer: - there is one intermediary (middle person) in order to
provide the product produced to customers.
3) Producer Wholesaler Retailer Consumer: - the marketing of many products is used
under this channel. For example, Wonji sugar factory may sell (auction) its sugar to wholesalers
who may bring it to ‘Merkato’ or bulk. And this whole seller would sale to retailers who would
provide the sugar in local shops and stores to customers.
4) Producer Agent (Broker) Wholesaler retailer consumer
Here agent entered the distribution channel. The different between agents and wholesalers is that
i) The agent does not take the title of the product while the wholesaler does
ii) Agents take commission from the produces while wholesalers generate profit of their own.
Retailer is a businessperson who sales to the ultimate (final) consumer.
Whole seller is a businessperson who by products for resale purpose to other whole sellers or
retailers but not to final users.
Factors that affect choice of channels of distribution
In choosing intermediaries a business should make sure that intermediaries are capable of taking
the responsibility of delivering the good to consumers
Physical distribution is a key in terms of delivering a product to consumers at the right time and at
the right place. So the following key issues should be taken into account in choosing choice of
channel.
 Product consideration- the type (nature) of a product determines whether to have a long or
short channel of distribution. For example, fast transport and short channel of distribution is
essential for a perishable product to avoid delays and too much handling.
 Company Consideration-A companies’ strength in financial capabilities would determine
whether to narrow elongate, increase or decrease its distribution channel & out lets. A
company’s product mix influences its channel pattern. The wider the companies’ products mix
the greater the ability of the company to deal with its customers directly. A Toyota car
producing company, for example has a long
 channel of distribution that goes to the extent of providing after sales service such as
maintenance, and this is because of the fact that it is producing (product mix), the different
brand cars.

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 Middle person consideration- choosing of a middle person that could work on behalf of the
company and just like the company is another factor that affects choice of channel. A
company would be forced by political factor, for example, not to have an outlet in a certain
country. In this case it should find an agent who would market its product in that region or
country. For instance, Glorious is an agent chosen by Sony to distribute its product in
Ethiopia.
 Cost is another factor that has effect in choosing a suitable distribution channel. Internal cost
of a company, competitors cost on channel of distribution, environmental conditions such as
legal and economic factors have impact on choice of distribution of channel.
So, depending on the estuation a company could use selective distribution channel (extensive)
or more distribution channel.

4.2.3 Promotion
Promotion is a persuasive communication designed to sale products services or ideas to actual or
potential customers. It is a part of marketing mix concerned with selecting appropriate technique
or tool for selling a product to a customer.
Promotion as a communication tool and a marketing mix has its own sub. Promotional mixes.
Those are Advertisement, Sales promotion, Personal selling and publicity. Each one will be
discussed below:
a. Advertisement
Advertisement is the process of using written, visual, and oral or the combination of the above in
order to inform or remind customers about a product or service using a certain media
The main objectives of advertisement are: -
 To provide information- when a product is new to a market (at the introduction stage of
the product life cycle)
 To increase demand
 To differentiate a product- by telling the unique features of a certain product
 To maintain current sales volume
 To counteract competitor’s promotion- when competitors show an advertisement to sale
a product similar to the business. The business should develop new advertisement system
to counteract to neutrals the effect of competitor.
 To remind customers. Mainly when a product is on the growth and maturity stage of the
product life cycle.
Advertisement could use different medias of channels of communication to transmit its message.
Some of the possible ways of sending information to customers are: - newspapers, magazines,
television, radio; Internet, billboard, banners etc. But the main point is to use a channel that is
accessible by front line customers. For example, advertising of soap for rural population using
television in Ethiopian might not get the customers intended. So the appropriate type of channel
accessible by customers should be used.

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b. Personal Selling
A promotional technique involving use of person to person to communication to sell the product.
In the case of advertisement, it advantage is the marketers can interact with a large number of
audiences at a single instance. But the communication is one way (not interactive). In the case of
personal selling the customer and the seller are face to face and they can exchange information on
an immediate, two way and interactive manner. The disadvantage of personal selling is that it is
the most expensive form of promotional mix.
Steps in personal selling
1. Prospecting- identification of potential customers.
- Distinguishing of those customers that are true buyers and those who do not.
2. Approach- Contact with sales person and potential customers.
- Finding of possible information about customers.
3. Presentation- describing of a products feature to a customer.
- Presentation should be clear, short and positive.
4. Demonstration- showing how the product operates functions etc. If it is an electronic
item, for example show by planning it or using who operates it.
5. Objection- receiving the opinion, answer of the customer about the product being
demonstrated.
6. Closing- initiating of purchase order. This is a stage where the sales person influences
the customer to buy or use the product shown.
7. Follow up- After the goods are to customers, soled the sales person should make sure that
the customer will make repeated purchase by providing after sales service or by giving gifts etc.
since ‘selling is not the end of marketing but rather it is the beginning.’
c. Sales Promotion- Is a promotional technique involving short-term incentives to encourage
purchase goods and services. Sales promotion is very important mix because it increases the
chance that the customer will try the product. It also enhanced the recognition of the product.
Examples of sales promotions.
Giving of free samples, sale discount, showing of trade series, giving of warranty, after sales
service, lottery (like the one done by coke, Pepsi and beer Companies on the corky) etc. are
examples of sales promotion. While advertisement and personal selling provide reasons to buy
a product or service, sales promotion offers reasons to buy now, for example a company may
give a free Compact Disk (CD) for a customer who buys the CD player or TV.

d. Publicity: - Offers several unique qualities which is very believable, more real news story to
consumers than advertising. This promotional technique is unpaid media coverage of news
and a source of free advertisement. But the message transmitted is not the control of the
organization. Example ‘Siket programe’ transmitted in Ethiopian Television. These are
activities done by the public relation officer in order to provide information about the
performance, nature and overall performance of a business to a public.

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It aims on building good relation with customers and public, creating of good image and
handling of unfavorable rumors (word of mouths), stories and events are the duty of the public
relation officer. The major functions of public relation are press relations, product publicity,
public affairs relation, and development of good image.
So in general promotional mixes are way of contacting with customers in order to promote the
purchase / use of the deferent promotional mixes, the appropriate choosing of media, timing
and related issue are some of the factors that need to be considered well during promotional
activities.

4.2.4 Pricing- Price is the only marketing mix element that generate revenue while the rest
(product, placement and promotion) are costs. Price is the value given to a product or service. It
may go by many names; rent of a house, tuition for education, fee for dentist or doctor, etc. are all
values attached to the use / purchase of a service / product. It is simply the amount of money
charged to a product or service.
 Price is the value which a seller receives in exchange of a good or a service.
 It is a process of determining what a company will receive in exchange for its products

Objectives of Pricing
 Maximization of profit.
 Increasing market share.
 Psychological advantage.
 Get rid of stock.

Price is not only a revenue-generating item but it is the most flexible marketing mix. Since it is
flexible and the only revenue generating item during setting of a certain price to a product or
service different factors should be taken in to account.

Factors to be considered when setting prices


There are internal factors (within the company) and external factors (beyond the business) that
affect the pricing decision of a certain firm.

1) Internal factors. These are factors in the company itself that include cost of the organization,
objective of the business or marketing mix strategy
i) Marketing objectives- companies have different objectives depending on their position
and interest. Survival, current profit maximization, market share leadership product quality
leadership are the possible marketing objectives that a firm could have.

Some companies want to get a reasonable profit and wish to stay long in a market so they will
set an average or reasonable price while others want to set a high price and take what they
could take in short period of time. So depending on the objective of a firm price could change
as well.

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ii) Cost- Cost set the floor or lower limit for the price that the company can charge for its
product or service. For a business to stay competitively, at least it needs to cover its
fixed and variable costs. A business charges a price higher than its cost to stay
competitive in a market. And this is why cost is internal factor in setting price.
iii) Organizational Consideration- management decides who within an organization should set
price. Depending on the size of a company, price could be set at differential levels. Sales or
marketing department might set price in loyal companies while price is also find by top level
management in small companies still in very large companies pricing design is given to
divisional or product line managers.

2) External factors- these are factors, which are outside the boundaries of the organization
market demands, competition, macro-environmental issues, customer perceptions of value etc are
some of the common factors that could set upper price limits.
i) Market and demand- while cost selects the lower limit, demand (market) sets the upper limit
of price. If a market is willing and able to buyer use a product, then the price of that item would
be higher as well. The supplier as to sets scarce items like petroleum, with high demand by how
much price they would be sold. Whereas goods with little demand will have low price as well.
ii) Competitors Price- a marketing intelligence is needed to know about the cost and pricing
strategy of competitors. Mainly for a new product entering the market, it necessary to evaluate the
existing price of competitors than setting new price. For example, when Shewps entered to the
soft drink producing marketing Ethiopia, it followed in Ethiopia it’s had followed the already
existing price of coca and Pepsi, so as to avoid any price user. So the pricing strategy of
competitors is another factor that should be examined carefully before selecting a certain price.
iii. Consumer Value and Perception- consumers are the final people that use a product. So
they decide at what price they should by an item. A marketer should make a research to know
how consumers regard this service/product and set a parallel price.
The company should also consider consumers’ perception of price and how their perceptions
affect consumer’s buying decisions.

iv) The political & economic situation of a country is also important in selling a product.
For example, coca is being sold at a price of eight to ten Birr in Europe and North America
while it is sold at less than two Birr in Ethiopia. The economic condition of a country has effect
on a pricing strategy as it has seen in the above example.
 Imported products are usually discouraged by government by imposing high tax (tariff) on
them & this will how a direct relation on the price set by a company.
 Therefore, different internal and external factors should be considered before setting a certain
specific price.
 In the coming part different pricing strategies that could be used by business will be
discussed.
Approaches in Pricing

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There are three major approaches for setting price after taking into account the differed internal
and external factors of pricing. These are cost based, buyer based and competing-based pricing.
I. Cost Based Pricing
Cost plus pricing- it is a way of marking up or adding a certain value on the unit cost of a
company
 In cost based pricing cost of product is considered and amount of profit is added to it.
Break-even analysis & target profit Pricing-Setting price to a break even on the cost of making
selling a product. Break-even point is a point in a graph were total cost is equal with revenue. I.e.
the company is just on the point of covering its unit and variable cost. As long as the company
longer it does this, it could sustain for a certain period of time.
Breakeven analysis tells us that at what point the organization will be at no profit no loss point.
In order to calculate breakeven point, we need to consider:
• Fixed cost
• Variable cost
Fixed cost will remain fixed regardless of number of units produced.
Variable cost varies with the number of units produced.
Total Cost = Fixed cost + Variable cost
Concept of breakeven analysis is used in cost based pricing.
II. Value based pricing- this method takes into consideration the perception, value and
orientation of customers to a certain good/services to set price. This method starts from the
market to get information as to by how much would the customers want to purchase the
product/service.
III. Competitors based pricing- in this case; consumers compare the price of one product with
another and make decision to by that produce. In this case a firm should know the pricing strategy
of competitors and its pricing strategy accordingly.
Depending on the intensity of competition, there could be two common methods of pricing using
competition, going rate and sealed-bid pricing.
Going-Rate pricing- a firm bases its price largely on competitors’ price, with less attention paid
to its own costs or to demand. Firm might charge the same, more or less price than its competitors
depending on its strategy.
Sealed-Bid pricing- computation based pricing is also used when firms bid for jobs. Using
sealed-bid pricing a firm may fix its price on how it thinks competitors will price other than on its
own cost and demand. The bid is based on offering the lowest price that competitors.
IV. New Product Pricing
When marketers (business) center to a market, they might set different type of prices (higher or
lower) depending on internal & external factors.
Market-Skimming Pricing- if a company sets a higher price in the introduction stage of its
product life cycle it is known as price skimming. In this case the company may make very few

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sales but it is more profitable sales since products are old with high price more profitable sale.
This kind of strategy is done for skimming products (expensive) goods.
 It is a strategy through which a product is introduced in the market with higher price than the
market expectations.
Advantages of price skimming
o If there is any mistake in calculation of cost, price skimming strategy will absorb that mistake
due to initial higher price.
o Sometimes, customers value the quality of the product with its price.
Market Penetration Pricing- it focuses on setting lower price for a new product to attract a large
number of customers & market share. Higher sales volumes result in filing costs and even a
decline in price.
 Penetrating price is the initial lower price than the market expectations.
Advantages of Penetrating Pricing
• A larger market share can be captured through this pricing strategy.
• Pricing depends upon the objectives of the organization.
The 3 new P’s
Today, with the advent of services marketing, some different variables that are also key factors in
the marketing process have come to light. These are people, processes and physical evidence.
People
 This refers to the people who are involved in service delivery. This is particularly important
where services predominate and there is a high level of intangibility. Here, the building of
customer relationships over time is critical.
Processes
 These are important where the customer is involved in the consumption process. This is
highlighted in the hospitality industry where, if the customer is treated poorly or receives poor
service, they are likely to migrate to a competitor no matter what facilities or products are
offered, as the customer will perceive this process as poor value for money. It is important to
note that technology is also important in relation to conversion operations and service
delivery.
Physical evidence
 This will be analyzed by the customer in order to assess the value of a service. In hospitality
and tourism, physical evidence is important (i.e. ensuring that hygiene practices in an
establishment are maintained, and that staff are well presented, courteous and friendly).
4.3 Marketing research and information system
4.3.1. Marketing Research Is a Part of Marketing Strategy
 Marketing strategy involves implementing well-thought-out plans. The plans themselves
should involve a sequence of soundly informed and executed steps. Much of the information
used as a basis for the planning can be provided by marketing research. Here is a simplified
list of the steps involved in planning

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 Market research - investigates your business's market and industry to identify trends,
changes and customer or client demands.
 A systematic design, collection, analysis and reporting of data and findings relevant to a
specific marketing situation facing the company.
Objectives of marketing research
 To define his present market situation together with the long range trends which have
led up to it
 To discover what major and underlying factors are domination that situation and how
these factors can be influenced or controlled.
 To set up a plan for keeping in touch with the behavior of these domination factors and for
measuring the results of any efforts made to influence or control them.
Importance & benefits of marketing research:
 Production according to consumer’s demand
 Acceleration in sales
 Reduction in market expenses
 Discovery of new opportunities
 Minimizes the risk involved in decision making
 Provides knowledge of consumer’s preference, attitude & motivation
Market research for business planning
Market research is discovering what people want, need, or believe. It can also involve discovering
how they act. Once that research is complete it can be used to determine how to market your
specific product. Whenever possible, try to reduce risks at the earliest possible stage. For
example, you could carry out market research early on and not wait until you are almost ready to
enter the market.
Market information
Market information is making known the prices of the different commodities in the market, the supply
and the demand. Information about the markets can be obtained in several different varieties and
formats. The most basic form of market information is the best quotation and last sale data, including the
number of shares, with respect to a particular security at a given time. [Market research 2006]

Examples of market information questions are:


 Who are the customers?
 Where are they located and how can they be contacted?
 What quantity and quality do they want?
 What is the best time to sell?
 What is the long‐term or historical price data over a number of years?
 What is the expected production in the country?
 Is there more demand for one product or another? Etc.

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Marketing research process:
1) Define the objectives and identify the 5) Collection of data
problem. 6) Tabulating analyzing and interpreting
2) Conduct situation analysis the data
3) Determine the information needed. 7) Preparing research report
4) Develop the research design 8) Follow-up recommendation
Limitation
 Time
 Lack of qualified personnel
 Cost
 Inexactness
4.2.2 Information system (is)
 Gather the information & arrangement of information into a form that can be used for
decision making purposes
Information Management
 Arrangement of information into a form which is useful for management
Duties of Information Manager
 Information gathering
 Information organizing
 Information distribution
Users of Information: There are following users of information in an organization.
 Head of manufacturing department
 Marketing people
 Planning people
Data vs. Information
 Data is raw figures and facts.
 Meaningful shape of data is called information
. understanding consumer behavior
Marketers study consumer buying behavior to learn what makes individuals buy one product instead
of another. Consumer markets consist of individuals or households that purchase goods and services
for personal use. Issues to be considered are the differences between organizational and consumer
markets, the buyer’s decision process, and the factors that affect that decision process.
Influences on Consumer Behavior
Consumer behavior is essentially the study of why consumers purchase and consume products. Four
key factors influence consumer behavior:
i. Psychological: Motivations, perceptions, ability to learn, attitudes
ii. Personal: Lifestyle, personality, economic status
iii. Social: Family, opinion leaders, reference groups (e.g. friends, associates)

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iv. Cultural: Culture, subculture, social class
The Consumer Buying Process
One way to look at the psychology of buying is to understand the decision‐making process people go
through when making a purchase. Deciding what to buy is a problem‐solving process. Sometimes
consumers become
i. Problem/Need recognition: The consumer buying process begins with recognizing a problem
or need. Needs often arise when our personal circumstances change, creating windows of
opportunity for marketers (e.g. getting married, entering the workforce, etc.).
ii. Information seeking: Sources of information can range from personal sources, to marketing
sources, to public sources, to experience. Depending on the product, information seeking ranges
from superficial (e.g. "Where is the soft drink machine?") to extensive (e.g. library research).
iii. Evaluation of alternatives: This step is essentially a matching process: How do the attributes of
the products you are considering match with your needs and wants? Here, too, the evaluation
process can range from brief to protract.
iv. Purchase decision: Purchase decisions are typically based on a combination of rational and
emotional motives. Rational motives are based on logical evaluation of product attributes (e.g.
cost, quality, usefulness). Emotional motives are based on non‐objective factors (e.g. "All my
friends have 4‐inch high heel shoes!").
v. Post‐purchase evaluation: This includes everything that happens after the sale. Satisfied
customers are likely to repurchase products they have used and enjoyed, while unhappy
customers are not only unlikely to repurchase, but also are prone to broadcast their negative
experience to other potential consumer

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