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CHAPTER 3

CONSUMER AND BUSINESS MARKET

Lesson Learning Outcome:

At the end of the topic students should be able to:
• Explain consumer and business market
• Examine the characteristic between consumer and business
market.

3.1 CONSUMER AND BUSINESS MARKET

3.1.1 CONSUMER MARKET

Consumer markets comprise all individuals and households that buy or acquire a product or
service for personal consumption. The purchased products and services are selected not only to
satisfy their psychological needs, but also their sociological needs. The final consumers combine
to make up the consumer market.

Whenever a person buys a product, then he/she becomes a part of the consumer market.
Buyers usually make their own decisions whenever they want to buy something in the market.

Marketing and advertising play a very significant role in influencing the buying decision of the
consumers; it tells them which product to choose by educating them about the product. When
it comes to choosing the product, people prefer brand products because of the loyal. Brand
loyalty doesn’t just happen; marketers do a lot of research to find relevant information about
their market and then target them through TV ads and other promotional activities.

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STAGE IN BUYER DECISION PROCESS

Figure 3.2 Buyer Decision Process

1. NEED RECOGNITION

The consumer recognizes a problem or need. Needs realized through:

• Internal stimuli - when one of the person’s normal needs rises to a level that is high
enough to become a drive. Such as hunger and thirst, young adult need education
and golden age look for health supplement.

• External stimuli – need can be triggered by an advertisement or a discussion with a

friend might get you thinking about buying the product.

At this stage, the marketer should research consumers to find out what kinds of needs
or problems arise, what brought them about, and how they led the consumer to this
particular product.

2. INFORMATION SEARCH

Customer searches the information about the product to satisfy their wants. The
consumer may simply have heightened attention or may go into active information
search. The consumer can obtain information from any of several sources such as:

• Personal sources (family, friends, and neighbors),

• Commercial sources (advertising sales people’s dealers, packaging, and displays).
• Public sources (mass media, customer-rating organization, etc.),

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• Experiential sources (handling, examining, and using the product).

For example, once you’ve decided you need a new car, you will probably pay more
attention to car ads, cars owned by friends and car conversations.

3. EVALUATION OF ALTERNATIVES

The consumer uses information to evaluate alternative bounds in the choice set. There
are several measures involved in evaluating the alternatives:

• Benefits of the products

• Degree of importance of each benefits
• Brand beliefs
• Utility function of the product
• Level of satisfaction
• Cost of the product

The evaluating process depends on individual customers and the specific buying
position.

4. PURCHASE DECISION

At this stage, the consumer decides which product to buy or not to buy the product at
all. After a consumer makes a decision, sometimes at the purchasing location they may
make changes to the original choice decision if they are affected by other’s influence.
Two factors can come between the purchase intention and the purchase decision:

• Attitudes of others - If someone important to you thinks that you should buy the
lowest-priced car, then the chances of your buying a more expensive car are
reduced. Another example is; Ain decided to by A’s handphone, but while waiting for
the salesperson she overhears a customer’s complaining about brand A’s
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handphone to the salesperson. Ain might change her perception about brand A and
purchase her second choice at different retail outlet on the next day.

• Unexpected situational factor - unexpected income, unexpected price and

unexpected product benefits, sales of a competitive brands, and closure of the
selected store.

5. POST PURCHASE BEHAVIOR

The consumers take further action after purchase based on their satisfaction or
dissatisfaction.
• If product’s perceived performance < consumer’s expectation dissatisfied buyer
• If product’s perceived performance = consumer’s expectation satisfied buyers
• If product’s perceived performance > consumer’s expectation delighted buyers

Cognitive dissonance means the discomfort caused by post purchase conflict. Every
purchase involves compromise, so consumer feel uneasy about the acquiring the
drawbacks of the chosen brand and about losing the benefits of the brands not
purchase No matter what choice they make, consumers feel at least some post purchase
dissonance for every decision.

Dissatisfied customer:
• bad word of mouth
• Damage consumer attitudes about a company and its product
• Consumer will not buy a product again

Satisfied customer:
• Glad to avoide the drawbacks of the brands not bought
• Consumer will buy a product again
• Talk favorably to others about the product

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• Pay less attention to competing brand and advertising

• Buy the other products from the same company

FACTORS THAT INFLUENCE CONSUMER BUYER BEHAVIOUR

CONSUMER BUYER BEHAVIOUR

Consumer buyer behavior refers to the buying behavior of final consumers - individuals
and households who buy goods and services for personal consumption. In other words
consumer buying means the day to day purchases by individuals to satisfy
their daily needs.

There are various other factors influencing the purchases of consumer such as cultural,
social, personal and psychological. The explanation of these factors is given below:

Characteristics Affecting Consumer Behavior

Consumer behavior refers to the selection, purchase and consumption of goods and services for
the satisfaction of their wants. There are different processes involved in the consumer
behavior.
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Initially the consumer tries to find what commodities he would like to consume, then he selects
only those commodities that promise greater utility. After selecting the commodities, the
consumer makes an estimate of the available money which he can spend.
Lastly, the consumer analyzes the prevailing prices of commodities and takes the decision about
the commodities he should consume. Meanwhile, there are various other factors influencing
the purchases of consumer such as social, cultural, personal and psychological. The explanation
of these factors is given below:

CULTURAL FACTORS
Consumer behavior is deeply influenced by cultural factors such as: buyer culture, subculture,
and social class.

a) Culture
 The set of basic values, perceptions, wants and behaviors learned by a member of
society from family and other important institutions.
 Basically, culture is the part of every society and is the important cause of person wants
and behavior.
 The influence of culture on buying behavior varies from country to country therefore
marketers have to be very careful in analyzing the culture of different groups, regions or
even countries.
 Example: - The idea of product packaging different greatly across Asian market. In Japan,
a product’s package is both a part of the product as well as an important proxy for its
quality. Hence in Japanese cultural, product packaging is usually regarded as an art.

b) Subculture
 A group of people with shared value system based on common life experiences and
situations.
 Each culture contains different subcultures such as religions, nationalities, geographic
regions, racial groups etc.

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 Marketers can use these groups by segmenting the market into various small portions.
For example marketers can design products according to the needs of a particular
geographic group.
 Example: - In China, there are common cultural tradition such as “ai mian zi” (sensitivity
to face). Shanghainese tend to treat Westerners more equally and conform to
international standards more readily than more others parts of China.

c) Social Class
 Relatively permanent and ordered division in a society whose members share similar
values, interest and behaviors.
 Every society possesses some form of social class which is important to the marketers
because the buying behavior of people in a given social class is similar.
 In this way marketing activities could be tailored according to different social classes.
 Here we should note that social class is not only determined by income but there are
various other factors as well such as: wealth, education, occupation etc.
 Example: Those in the upper middle prefer red wine and patronize Western restaurants
while those in the working class may drink local beer and dine at sidewalk footstalls.

 
SOCIAL FACTORS
Social factors also impact the buying behavior of consumers. The important social factors are:
reference groups, family, role and status.

a) Groups
 Two or more people who interact to accomplish individual or mutual goals.
 A person’s behavior is influenced by many small groups.
 There are several types of group such as:
i. Membership group have a direct influence and to which a person belongs.

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ii. Reference group serve as direct or indirect points of comparison or reference

in forming a person’s attitudes or behavior. Reference groups also include
opinion leader (a person who influences other because of his special skill,
knowledge or other characteristics)
iii. Aspirational group is one to which the individual wishes to belong.

• People often are influenced by reference groups to which they do not belong.
• Example: A young girl learning squash hopes to someday emulate Nicol David and be a
famous player.
b) Family
• Buyer behavior is strongly influenced by the member of a family. Therefore marketers
are trying to find the roles and influence of the husband, wife and children.
• If the buying decision of a particular product is influenced by wife then the marketers
will try to target the women in their advertisement. Here we should note that buying roles
change with change in consumer lifestyles.
• Example: Teenagers significantly influence family decision about where they take
vacations and what cars and mobile phone they buy.
 
c) Roles and Status
• Each person possesses different roles and status in the society depending upon the
groups, clubs, family, organization etc. to which he belongs.
• A role consists of the activities people are expected to perform according to the persons
around them. People usually choose products appropriate to their roles and status.
• Example: A woman is working in an organization as finance manager. Now she is playing
two roles, one of finance manager and other of mother. Therefore her buying decisions will be
influenced by her role and status.

PERSONAL FACTORS

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Personal factors can also affect the consumer behavior. Some of the important personal factors
that influence the buying behavior are: lifestyle, economic situation, occupation, age,
personality and self-concept.

a) Age
• Age and life-cycle have potential impact on the consumer buying behavior. It is obvious
that the consumers change the purchase of goods and services with the passage of time.
• Family life-cycle consists of different stages such young singles, married couples,
unmarried couples etc which help marketers to develop appropriate products for each stage.
• Example: Cimb Bank has identified their product for specialty accounts by life-stage
segments such as clicks trader, junior saving account, teenage saving account and senior saving
account.
b) Occupation
• The occupation of a person has significant impact on his buying behavior.
• Example: A marketing manager of an organization will try to purchase business suits,
whereas a low level worker in the same organization will purchase rugged work clothes.
c) Economic Situation
• Consumer economic situation has great influence on his buying behavior.
• If the income and savings of a customer is high then he will purchase more expensive
products. On the other hand, a person with low income and savings will purchase inexpensive
products.
• Example: Rolex positions its luxury watches as “a tribute to elegance an object of
passion, a symbol for all time”
d) Lifestyle
• Lifestyle refers to the way a person lives in a society and is expressed by the things in
his/her surroundings.
• It is determined by customer interests, opinions, activities etc and shapes his whole
pattern of acting and interacting in the world.
• Example: The billboard in Hong Kong illustrates how ads are positioned to appeal to
sporty young women as well as youths seeking individual expression and creativity.
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e) Personality
• The unique psychological characteristic that lead to relatively consistent and lasting
responses to one’s own environment.
• Personality changes from person to person, time to time and place to place. Therefore it
can greatly influence the buying behavior of customers.
• Actually, Personality is not what one wears; rather it is the totality of behavior of a man
in different circumstances. It has different characteristics such as: dominance, aggressiveness,
self-confidence etc which can be useful to determine the consumer behavior for particular
product or service.
• Example: A study among Chinese youths found that Nike was perceived as having the
“coolest” personality followed by Sony and Adidas.
 
PSYCHOLOGICAL FACTORS
There are four important psychological factors affecting the consumer buying behavior. These
are: perception, motivation, learning, beliefs and attitudes.

a) Motivation
• The level of motivation also affects the buying behavior of customers. Every person has
different needs such as physiological needs, biological needs, social needs etc.
• A need becomes a motive when it is more pressing to direct the person to seek
satisfaction.
• Example:

b) Perception
• Selecting, organizing and interpreting information in a way to produce a meaningful
experience of the world is called perception.
• There are three different perceptual processes which are selective attention, selective
distortion and selective retention.
• In case of selective attention, marketers try to attract the customer attention. Whereas,
in case of selective distortion, customers try to interpret the information in a way that will
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support what the customers already believe. Similarly, in case of selective retention, marketers
try to retain information that supports their beliefs.
• Example: This explains why marketers use so much drama and repetition in sending
massage to their market.
 
c) Beliefs and Attitudes
• Belief – Is a descriptive thought that a person has about something.
• Attitudes – Describe a person’s relatively consistent evaluations, feeling tendencies
toward an object or idea.
• Customer possesses specific belief and attitude towards various products.
• Since such beliefs and attitudes make up brand image and affect consumer buying
behavior therefore marketers are interested in them.
• Marketers can change the beliefs and attitudes of customers by launching special
campaigns in this regard.
• Example: By 1994, milk consumption had been in decline for 20 years. The general
perception was that milk was unhealthy, outdated, just for kids or good only with cookies and
cake. To counter this issue, Milk Processors Education Program in the US began an ad campaign
– Got Milk? The campaign has not only

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3.1.2 BUSINESS MARKET

Business market is all organizations that buy goods and services for further production of other
goods and services, reselling, renting or supplying to others. (Kotler & Armstrong, 2010)

CHARACTERISTICS OF BUSINESS MARKET

MARKETING STRUCTUTER and DEMAND

a) Derived demand occurs for organizational consumers because the quantity of items they
purchase is often based on the anticipated demand of their final consumers for specific finished
goods and services; therefore, organizational consumers are less sensitive to price changes. As
long as final consumers are willing to pay higher prices, organizational consumers will not object to
price increases.

b) Business market contain fewer but larger buyer.

c) Demand in many business markets is more inelastic. (Inelastic demand)
d) Demand in business markets fluctuating more (fluctuating demand)- the demand for many
business goods and services tends to change more and quickly than demand for consumer goods.
NATURE OF THE BUYING UNIT
a) Business purchases involve more buyers/ more decision participants.
b) Business buying involves a more professional purchasing effort.

TYPES OF DECISIONS AND THE DECISION PROCESS

a) Business buyer usually faces more complex buying decisions.
b) The business buying process is more formalized.
c) In business buying, buyer and sellers work closely together and build long term relationship.

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3.2 DIFFERENCE BETWEEN CONSUMER AND BUSINESS MARKET

NATURE OF THE BUYING UNIT

Consumer markets contain of many small scale buyers whereas business markets consist of few
large buyers. As an example consumer market for clothing would be every individual who
purchases their clothing needs at a small scale and business market for clothing would
be retailers who purchase cloths from manufacturers for reselling at a large scale.

MARKETING STRUCTUTER AND DEMAND

In a consumer market, consumers demand for goods when they recognize their needs. As a
result the demand for a good created in large scale. The demand for goods in business market is
derived from the summation of the demand for goods in the consumer market. As an example
the business market demand for clothes (the quantity purchased by the clothing retailer)
depends of the quantity demanded by the final consumer of clothing.

Demand for goods in consumer markets is heavily affected by the changes in the prices where it
can be concluded that consumer market demand is price elastic. Demand for goods in business
markets are not affected by the price changes in short run where it can be concluded that
demand for goods in business market is price inelastic.

TYPES OF DECISIONS AND THE DECISION PROCESS

The purchasing behavior in the consumer market is highly personal and varies from person to
person. The purchasing behavior in business market carries a lot of professional behavior where
everyone would behave in a standardized manner.

Buying decisions of a consumer market is simple where it purely depends on the wish of
consumer. But business buyers face complicated buying process where they have to adhere to
purchasing standards and involve approval of many people.

Consumer buying is generally short term focused where they conclude the relationship with
seller upon the transaction is completed. Business buying process focuses on long term where
they build long lasting relationships with suppliers.

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Consumers buy goods from retailers where business buyers usually buy goods straight away
from the manufacturer.

Additionally, business markets practices reciprocity where they buy goods from a supplier and
the same supplier again purchase goods from them. In other words they buy and sell to same
organization.

Organization market versus consumer market

Characteristics Organizational Market Consumer Market
Demand Organizational Individual
Distribution Structure More direct More direct
Nature of buying unit More professional More personal
Type of decisions and decision
process More complex and formalized Simpler and informal
Use of reciprocity Yes No
Use of leasing Greater Lesser

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