UNIT II - Marketing Strategy

Marketing Strategy:

 Marketing strategy is the complete and unbeatable plan, designed specifically

for attaining the marketing objectives of the firm/business unit.

 The marketing objectives indicate what the firm wants to achieve; the
marketing strategy provides the design for achieving them.

What position does the unit seek in the industry?

 The business unit has to clarify the position it seeks in its industry. Does it
want to be the market leader in the long term? Or, is it satisfied with a less
aggressive profile?

 Ex: When GE Capital entered the Indian consumer finance market in the early
1990s, its strategic intent was to become the leader in the consumer finance
business. GE set up three consumer finance companies as JVs in collaboration
with Godrej, HDFC and Maruti Udyog.

What market segments to serve? And what product?

 The business unit has to clarify what market segments it will serve and what
product offers it will make. It has to state its product-market scope.

 Strategy should decide whom to serve and whom to exclude.

 Ex: When ICICI Bank commenced its activities, it decided to serve

exclusively the urban markets of India. It set up offices in the major cities. It
also decided to offer value-added banking products. Its target market
consisted of corporate and high net worth individuals. It chose not to target
the rural markets.
The growth path:

Ansoff Matrix

 Market penetration: It is defined as the number of people who buy a specific

brand or a category of goods at least once in a given period, divided by the
size of the relevant market population. Market penetration occurs when a
company penetrates a market in which current or similar products already
exist. Ex: Maruti Udyog.

 Market development (new markets, existing products): It is a growth

strategy that identifies and develops new market segments for current
products. It targets non-buying customers in currently targeted segments. Ex:
Apple introduced the iPhone, in a developed cell phone market.

 Product development (existing markets, new products): is the process of

designing, creating and marketing new products or services to benefit
customers. Ex: McDonalds is always within the fast-food industry, but
frequently markets new burgers. Microsoft, always chooses the product
development route. It consistently brings out new software programmers.

 Diversification - the firm grows by diversifying into new businesses by

developing new products for new markets. Ex: Apple moved from PCs to
mobile devices.
Who are my competitors? Whom to compete? Whom to avoid?

Ex: When the US car major, Ford, entered the Indian car market, Maruti was the
dominant player here, with its Maruti 800 model holding a 70% plus share. Ford
decided to cultivate the higher priced, semi-luxury segment, with models like Ford
Ikon. Ford was thus opting to compete with players like GM. GM was operating in
the semi-luxury segment, with its models like Opel Astra and Corsa. Ford chose not
to compete with Maruti in small/compact car segment.

On what differentiation strength to compete?

 Product superiority?

 Brand power?

 Distribution strength?

 Better service?

 Ex: FACT(The Fertilizers and Chemicals Travancore Limited), Cochin, an

established manufacturer and marketer of chemical fertilizers, banks heavily
on its distribution strength. It its home state Kerala, it has a network of 4,000
odd retailers. The company claims that in no case, a farmer has to travel more
than 3km to buy its fertilizers.

On what competitive advantages will the fight be based?

 A competitive advantage is an advantage over competitors gained by offering

consumers greater value, either by means of lower prices or by providing
greater benefits and service that justifies higher prices.

 Ex: For marketing its TVs, Videocon relied heavily on its integrated
manufacturing facilities. Videocon makes all components of its TV in-house,
and uses this facility to offer a quality product at competitive prices.

What are the resources?

 The firm has to also assess the resources available to it for putting the strategy
into action and for developing the intended competencies and facilities.

 Formulation of marketing strategy involves sorting out all such issues.

  The answers for all the above mentioned questions will by themselves shape
the strategy.

Formulating the marketing strategy

 It consists of three main tasks:

1. Selecting the target market.

2. Positioning the offer.

3. Assembling the marketing mix.

1.Selecting the target market:

Ex: Reliance Textiles, part of the Reliance group, entered the Indian textile market
in 1967, and found that this market consisted of many distinct segments, with Rs
5,000 crore market, with cotton textiles taking more than 70% and the rest taken up
by silks and synthetics.

Reliance was coming out with a premium product: high quality synthetic fabrics-
sarees, suiting's, shirting's and dress materials.Reliance targeted the well-to-do and
fashion loving upper middle class of urban India as its target market.

2. Positioning the offer:

The firm has to clarify what it proposes to do with its offering, how it wants the offer
to be perceived by the customer, what position it seeks and what image it proposes
to build for its offer.“Hi-fashion and hi-tech fabric for the elite consumer”.

3. Assembling the marketing mix:

It means assembling the 4Ps of marketing in the best possible combination. Ex:
Lifebuoy and Lux, two brands of HLL in bath soap.
Deciding the weight age for each P:

Ex: Godrej store well

It gave maximum weight age to product. Using quality steel, more steel per sq inch,
and a design that gave convenient inside space. It offered a superior product. Godrej
explained the proposition to the consumer like this:

You are paying just a little extra for

all these extras….

 Extra strength

 Extra security

 Extra options

 Extra life………

Ex: Asian paints

Placed high emphasis on distribution.Asian paints bypassed the wholesale trade and
went retail. Asian paints went national, serving the semi-urban and rural markets
through its nationwide retail marketing set-up consisting of 14,000 retailers.

Marketing strategies- categories

1. The price-oriented strategies.

2. The differentiation-oriented strategies.

The price-oriented strategies: Also known as a competition-based strategy,
market-oriented pricing compares similar products being offered on the market.
Then, the seller sets the price higher or lower than their competitors depending on
how well their own product matches up.

The differentiation oriented strategy: Approach under which a firm aims to

develop and market unique products for different customer segments. Usually
employed where a firm has clear competitive advantages, and can sustain an
expensive advertising campaign.

Marketing strategies-Example: Nirma entered the detergent market of India at a

time when Hindustan Lever Limited (HLL), an FMCG giant, with its Surf, had
established a near monopoly in the business. Nirma succeeded through its price-led
strategy. HLL marketed Surf, taking to the differentiation route; the differentiation
theme was “Surf washes white”.

Nirma had built cost leadership right from the beginning. Taking advantage of the
concessions as an SSI unit and choosing the price conscious segment as its market,
Nirma Chemicals offered a low price brand and promoted it aggressively. Surf was
sold at a price of over Rs. 32 per kg. Nirma priced its detergent at Rs. 10.50 per kg.
It relied on low cost technology, process and raw materials. Nirma kept growing in
both volume and market share. HLL had to defend Surf with all its might.

Highlighting the distinctive merits of Surf as a detergent and marketing it as

premium product, HLL was successful for two decades, and it had to change its
strategies. It has decided to enter the low priced segment, Wheel which is positioned
against Nirma. Wheel was priced at Rs. 11 per kg. In just about 10 years, Nirma
became a Rs. 1,000 crore business.

The conclusion is that Nirma’s price-led strategy was so successful that even the
market leader, who was all along following the differentiation-led route, was forced
to review its strategy. Ex: Garden silks, Eureka Forbes, Citibank- differentiation
oriented strategy.

KEY DRIVERS OF MARKETING STRATEGIES

  Competition.

 Economic Growth and Stability.

 Political Trends.

 Legal and regulatory Issues.

 Technological advancements.

 Socio-cultural trends.

Competition: Most firms face four basic types of competition:

 Brand competitors: They are market products with similar features and
benefits to the same customers at similar prices. Ex: BMW and Audi
 Product competitors: They compete in the same product class but with
products that are different in features, benefits and price. Ex: Samsung and
Iphone.
 Generic competitors: They market very different products that solve the
same problem or satisfy the same basic customer need. Ex: Audio cassettes
and CDs.
 Total Budget competitors: They compete for the limited financial resources
of the same customers. Ex: Korean cell phones.

Economic Growth and stability: A thorough examination of economic factors such

as inflation, employment and income levels, interest rates, taxes, trade restrictions,
tariffs is required. Equally important economic factors include consumers overall
impressions of the economy and their ability and willingness to spend. Consumer
confidence can greatly affect what the firm can or cannot do in the market place. In
times of low confidence, consumers may not be willing to pay higher prices for
premium products.

Political Trends: Organizations should track political trends and attempt to

maintain good relations with elected officials. Ex: Production plant of TATA NANO
in Singur, West Bengal, because local farmers began protesting the forced
acquisition of their land for the new factory.
Legal and Regulatory Issues: Numerous laws and regulations have the potential to
influence marketing decisions and activities.Ex: Most firms comply with pro-
competitive legislation rather than face the penalties of non-compliance.

Consumer protection legislation: deals with consumer safety, hazardous materials,

information disclosure.

Regulatory agencies: Federal trade commission (FTC) influences the marketing

activities the most false advertising, misleading pricing. Self-regulatory forces:
National advertising review board(NARB)

Technological Advancements: Many changes in technology assume a front stage

presence in creating new marketing opportunities. By front stage technology, it
means those advances that are most noticeable to customers.

Socio-Cultural Trends: Socio-cultural factors are those social and cultural

influences that cause changes in attitudes, beliefs, norms, customs and lifestyles.
These forces profoundly affect the way that people live and help determine what,
where, how and when customers buy a firm’s products.

Industrial marketing
The business market consists of all the organizations that acquire goods and
services used in the production of other products or services that are sold, rented, or
supplied to others. The major industries making up the business market are
agriculture, forestry, and fisheries; mining; manufacturing; construction;
transportation; communication; public utilities; banking, finance, and insurance;
distribution; and services.

 Ex: Consider the process of producing and selling a simple pair of shoes. Hide
dealers must sell hides to tanners, who sell leather to shoe manufacturers, who
sell shoes to wholesalers, who sell shoes to retailers, who finally sell them to
consumers. Each party in the supply chain also buys many other goods and
services to support its operations.
Characteristics of Industrial Market:
1. Fewer, larger buyers: The business marketer normally deals with far fewer,
much larger buyers, particularly in such industries as aircraft engines and defense
weapons. Ex: The fortunes of Goodyear tires, and other automotive part suppliers
depends on getting big contracts from just a handful of major automakers.

2. Close supplier–customer relationship: Because of the smaller customer base

and the importance and power of the larger customers, suppliers are frequently
expected to customize their offerings to individual business customer needs.

3. Professional purchasing: Business goods are often purchased by trained

purchasing agents, who must follow their organizations’ purchasing policies,
constraints, and requirements. Many of the buying instruments—for example,
requests for quotations, proposals, and purchase contracts. This means business
marketers must provide greater technical data about their product and its advantages
over competitors products.

4. Multiple buying influences: Buying committees consisting of technical experts

and even senior management are common in the purchase of major goods. Business
marketers need to send well-trained sales representatives and sales teams to deal
with the well-trained buyers.

5. Multiple sales calls: In the case of capital equipment sales for large projects, it
may take many attempts to fund a project, and the sales cycle—between quoting a
job and delivering the product—is often measured in years.

6. Derived demand: The demand for business goods is ultimately derived from the
demand for consumer goods. For this reason, the business marketer must closely
monitor the buying patterns of ultimate consumers. Ex: Coal India’s business largely
depends on orders from steel companies, which in turn depend on broader economic
demand from consumers for electricity and steel-based products such as
automobiles, machines and appliances.

7. Inelastic demand: The total demand for many business goods and services is
inelastic—that is, not much affected by price changes. Ex: Shoe manufactures are
not going to but much more leather if the price of leather falls, nor will they buy
much less leather if the price rises.
8. Fluctuating demand: The demand for business goods and services tends to be
more volatile. A given percentage increase in consumer demand can lead to a much
larger percentage increase in the demand for plant and equipment necessary to
produce the additional output. Economists refer to this as the acceleration effect.

9. Geographically concentrated buyers: The geographical concentration of

producers helps to reduce selling costs. At the same time, business marketers need
to monitor regional shifts of certain industries.

10. Direct purchasing: Business buyers often buy directly from manufacturers
rather than through intermediaries, especially items that are technically complex or
expensive such as aircraft.

Major types of buying situations

The business buyer faces many decisions in making a purchase. How many depends
on the complexity of the problem being solved, newness of the buying requirement,
number of people involved, and time required. Three types of buying situations are
the straight rebuy, modified rebuy, and new task.

1. Straight rebuy: In a straight rebuy, the purchasing department reorders

supplies such as office supplies and bulk chemicals on a routine basis and
chooses from suppliers on an approved list. The suppliers make an effort to
maintain product and service quality and often propose automatic reordering
systems to save time.
2. Modified rebuy: The buyer in a modified rebuy wants to change product
specifications, prices, delivery requirements, or other terms. This usually
requires additional participants on both sides. The in-suppliers become
nervous and want to protect the account. The out-suppliers see an opportunity
to propose a better offer to gain some business.
3. New task: A new-task purchaser buys a product or service for the first time
(an office building, a new security system). The greater the cost or risk, the
larger the number of participants, and the greater their information
gathering—the longer the time to a decision.
4. Systems Buying and Selling: Many business buyers prefer to buy a total
problem solution from one seller. Called systems buying, this practice
originated with government purchases of major weapons and communications
systems. The government solicited bids from prime contractors.
Participants in the business buying process
Buying Center: All the individuals and units that participate in the business buying-
decision process.

1. Initiators—Users or others in the organization who request that something be

purchased.

2. Users—Those who will use the product or service. In many cases, the users
initiate the buying proposal and help define the product requirements.

3. Influencers—People who influence the buying decision, often by helping define

specifications and providing information for evaluating alternatives. Technical
personnel are particularly important influencers.

4. Deciders—People who decide on product requirements or on suppliers.

5. Approvers—People who authorize the proposed actions of deciders or buyers.

6. Buyers—People who have formal authority to select the supplier and arrange the
purchase terms. Buyers may help shape product specifications, but they play their
major role in selecting vendors and negotiating. In more complex purchases, buyers
might include high-level managers.

7. Gatekeepers—People who have the power to prevent sellers or information from

reaching members of the buying center. For example, purchasing agents,
receptionists, and telephone operators may prevent salespersons from contacting
users or deciders.

Influencing factors of industrial buyer behavior

1. Environmental factors:
  Business buyers are influenced heavily by factors in the current and expected
economic environment, such as the level of primary demand, the economic
outlook, and the cost of money.

 As economic uncertainty rises, business buyers cut back on new investments

and attempt to reduce their inventories.

 An increasingly important environmental factor is shortages in key materials.

Many companies now are more willing to buy and hold larger inventories of
scarce materials to ensure adequate supply.

 Business buyers are also affected by technological, political and competitive

developments in the environment.

 Culture and customs can strongly influence business buyer reactions to the
marketer’s behavior and strategies. The business marketer must watch these
factors, and try to turn these challenges into opportunities

2. Organizational factors:

 Each buying organization has its own objectives, policies, procedures,

structure and systems, and the business marketer must understand these
factors well.

 Questions such as these arise: How many people are involved in the buying
decision? Who are they? What are their evaluative criteria? What are the
company’s policies and limits on its buyers?

3. Interpersonal factors:

 The buying center usually includes many participants who influence each
other, so interpersonal factors also influence the business buying process.

 Participants may influence the buying decision because they control rewards
and punishments, are well liked, have special expertise, or have a special
relationship with other important participants.

 Interpersonal factors are often very subtle.

  Business marketers must try to understand these factors and design strategies
that take them into account.

4. Individual factors:

 The individual factors are affected by personal characteristics such as age,

income, education, professional identification, personality and attitudes
toward risk.

 Buyers have different buying styles.

 Some may be technical types who make in-depth analyses of competitive

proposals before choosing a supplier.

 Other buyers may be intuitive negotiators who are adept at pitting the sellers
against one another for the best deal.

Strategies for industrial marketing

Marketing strategies in industrial marketing consist of following aspects:

1. Product.

2. Price.

3. Place.

4. Promotion.

5. Target market.

1. Product: Products will often be adapted to meet the needs of the buyer, this
adaptation may mean simple labeling, or is could go as far as changing technical
specifications. Component suppliers may be required to change product design, or
produce products to fit with the production methods of buyers. Business customers
are focused on cost-saving or revenue producing benefits of products and services
throughout the product development and marketing cycles.

2. Place: A marketing channel is composed of outlets through which a

manufacturer’s goods flow to the market. The types of outlets available are:
  Industrial distributors: They are identified as middlemen who buy and sell
products for industrial uses. They offer manufacturers the services of taking
title to and stocking products and maintaining reasonably close contact with
buyers. Some distributors stock a wide variety of supplies and small
equipment and sell to a diversified group of customers. They are called as
general line distributors. Others specialize either in the products they handle
or the customers they serve.

 Sales agents: They operate on a commission basis and represent the sellers.
They don’t take title to the goods they handle. The maker of a single industrial
good item, with limited sales volume in the average market area, faces a
difficult problem in marketing his output. He has to take over all the
managerial headaches that go with being a industrial distributor.

 Manufacturer’s branch office: If the company is operating on a very large

scale, they may have their own branch offices where the customers are
concentrated. Highly technical products, such as bulk chemicals and bulky
materials such as metals are marketed largely through manufacturer’s sales
branches. He accomplishes a direct contact with the customers. By operating
well trained technical specializes from the branch, the technical goods maker
can offer his customers expert information, help and advice. The chief
drawback of the branch house system is its expense, creating its own overhead
costs.

3. Price: Management usually has two broad strategy options:

a. To price the new product at a very high level with a substantial gross margin
or

b. To price it at or near the level to which its price would be expected to settle
after competition has developed, i.e., a low price.

4. Promotion: Key promotion measures in B2B marketing are:

 Personal Selling: It is a direct, face to face, seller to buyer conversation which

can communicate relevant facts about the product and the firm to the prospect
so that he or she may take buying decision.
  Business/Industrial advertising: It is the strategy of attracting the attention
of another business and convincing that company to purchase the goods and
services offered by another business. Placement of print ads in appropriate
periodicals, direct mail campaigns, and any other means that is likely to
produce the desired sales.

 Trade shows: These are designed to let exhibitors meet many potential
customers face-to-face in a brief period of time inexpensively. Exhibitors
usually try to present a large proportion of their range of products/services at
these trade shows, gaining in two ways. The first gain is advertising and brand
promotion. The second gain is through the direct sales that happen at these
trade shows. Buyers get a good discount during the course of such business
events.

5. Target Market: The target market for a business product or service is smaller
and has more specialized needs reflective of specific industry or niche. A B2B
niche, a segment of the market, can be described in terms of firmographics
which requires marketers to have good business intelligence in order to
increase response rates.

The Business buying process

The stages of the business buying process includes the following:

 1. Problem recognition
 2. General need description
 3. Product specification
 4. Supplier search
 5. Proposal solicitation
 6. Supplier selection
 7. Order-routine specification
 8. Performance review
Buyers who face a new task buying situation usually go through all stages of the
buying process. Buyers making modified or straight rebuys may skip some of the
stages.

1. Problem recognition: The buying process begins when someone in the company
recognizes a problem or need that can be met by acquiring a good or service. The
recognition can be triggered by internal or external stimuli. The internal stimulus
might be a decision to develop a new product that requires new equipment and
materials, or a machine that breaks down and requires new parts. Or purchased
material turns out to be unsatisfactory and the company searches for another
supplier, or lower prices or better quality. Externally, the buyer may get new ideas
at a trade show, see an ad, or receive a call from a sales representative who offers a
better product or a lower price. Business marketers can stimulate problem
recognition by direct mail, telemarketing, and calling on prospects.

2. General Need Description: Next, the buyer determines the needed item’s general
characteristics and required quantity. For standard items, this is simple. For complex
items, the buyer will work with others—engineers, users—to define characteristics
such as reliability, durability, or price. Business marketers can help by describing
how their products meet or even exceed the buyer’s needs.

3. Product Specification: The buying organization now develops the item’s

technical specifications. Often, the company will assign a product-value-analysis
engineering team to the project. Product value analysis (PVA) is an approach to cost
reduction that studies whether components can be redesigned or standardized or
made by cheaper methods of production without adversely impacting product
performance. The PVA team will identify overdesigned components, for instance,
that last longer than the product itself. Tightly written specifications allow the buyer
to refuse components that are too expensive or that fail to meet specified standards.

4. Supplier Search: The buyer next tries to identify the most appropriate suppliers
through trade directories, contacts with other companies, trade advertisements, trade
shows, and the Internet. The move to Internet purchasing has far-reaching
implications for suppliers and will change the shape of purchasing for years to come.
The newer the buying task, and the more complex and costly the item, the greater
the amount of time the buyer will spend searching for suppliers. The suppliers task
is to get listed in major directories and build a good reputation in the marketplace.

5. Proposal Solicitation: The buyer next invites qualified suppliers to submit

proposals. If the item is complex or expensive, the proposal will be written and
detailed. After evaluating the proposals, the buyer will invite a few suppliers to make
formal presentations. Business marketers must be skilled in researching, writing, and
presenting proposals. Written proposals should be marketing documents that
describe value and benefits in customer terms. Oral presentations must inspire
confidence and position the company’s capabilities and resources so they stand out
from the competition. Proposals and selling are often team efforts.

6. Supplier Selection: Before selecting a supplier, the buying center will specify
and rank desired supplier attributes, often using a supplier-evaluation model. The
choice of attributes and their relative importance varies with the buying situation.
Delivery reliability, price, and supplier reputation are important for routine-order
products. For procedural-problem products, such as a copying machine, the three
most important attributes are technical service, supplier flexibility, and product
reliability. Buyers may attempt to negotiate with preferred suppliers for better prices
and terms before making the final selections. In the end, they may select a single
supplier or a few suppliers. Many buyers prefer multiple sources of supplies to avoid
being totally dependent on one supplier and to allow comparisons of prices and
performance of several suppliers over time.

7. Order-Routine Specification: After selecting suppliers, the buyer negotiates the

final order, listing the technical specifications, the quantity needed, the expected
time of delivery, return policies, warranties, and so on. Many industrial buyers lease
heavy equipment such as machinery and trucks. The lessee gains a number of
advantages: the latest products, better service, the conservation of capital, and some
tax advantages. Companies that fear a shortage of key materials are willing to buy
and hold large inventories. They will sign long-term contracts with suppliers to
ensure a steady flow of materials. In the case of maintenance, repair, and operating
items, buyers are moving toward blanket contracts rather than periodic purchase
orders.

A blanket contract establishes a long-term relationship in which the supplier

promises to resupply the buyer as needed, at agreed-upon prices, over a specified
period of time. Because the seller holds the stock, blanket contracts are sometimes
called stockless purchase plans. The buyer’s computer automatically sends an order
to the seller when stock is needed.This system locks suppliers in tighter with the
buyer.Some companies go further and shift the ordering responsibility to their
suppliers in systems called vendor-managed inventory (VMI). These suppliers are
privy to the customer’s inventory levels and take responsibility for replenishing
automatically through continuous replenishment programs.

8. Performance Review: The buyer periodically reviews the performance of the

chosen supplier(s) using one of three methods. The buyer may contact end users and
ask for their evaluations, rate the supplier on several criteria using a weighted-score
method, or aggregate the cost of poor performance to come up with adjusted costs
of purchase, including price. The performance review may lead the buyer to
continue, modify, or end a supplier relationship. Many companies have set up
incentive systems to reward purchasing managers for good buying performance, in
much the same way sales personnel receive bonuses for good selling performance.
These systems lead purchasing managers to increase pressure on sellers for the best
terms.

Industrial buyer behavior models

1. Sheth model

2. Webster and Wind model

Sheth model: This model of the industrial buying process was elaborated by Jagdish
N. Sheth.

Aspects of Sheth Model: This model discusses organizational buying behavior on

the basis of three distinct aspects.

1. Psychological world of individuals.

2. Factors affecting joint-decision making.

3. Process of joint decision-making.

Psychological world of individuals:

As the participants in the organizational buying decision process are personnel from
different departments such as purchase, manufacturing, quality control, etc., each
has his/her own individual/departmental expectations. In addition, there are five
variables that determine the expectations of these participants in the decision
process. These variables are individual background (education, role orientation and
lifestyle), information sources, active search, perceptual distortion of the information
based on their prior knowledge and satisfaction with the past purchase.
Factors affecting Joint-decision making:

The decisions taken in the buying process can be of two types:

 a. Autonomous decisions: These decisions are those taken by only one

individual in the firm like, say, purchase officer.

 b. Joint decisions: These are taken by experts representing different

departments in the firm.

Process of joint decision-making:

The choice of the supplier or brand is the outcome of a systematic decision-making

process in an organizational setting. When the decisions are taken jointly,
interdepartmental conflicts are difficult to avoid. They become part of the decision
making process. When there are disagreements on “expectations”, the problem-
solving technique is used to collect additional information that will help resolve the
conflict. When there is a disagreement over the specifics of the evaluation criteria
and their relative importance, the persuasion technique is used to influence the
opinions of the members in conflict. From these three aspects, it is evident that
organizational buying decisions are influenced by group dynamics and that group
dynamics evolves from various psychological behaviors of the members of the
group.

Implications of the Sheth Model:

1. According to Sheth model, an organization has got different departments, such as

purchase, manufacturing, quality control, etc., and each has his/own individual
departmental expectation which demand the marketers to concentrate on each of the
departmental demands in an effective manner.

2. The individual background information sources, active search, perceptual

distortion of the information based on their past knowledge, satisfaction, and paid
purchase are all the key points that a marketers must evaluate in order to catch the
pulse of the organization/industrial market or buyer.
Webster and Wind model

 A more comprehensive model of the organizational buying decision-making

process has been developed by Webster and Wind.

 According to their view, a buying situation is created when some member of

the organization perceives a problem that can be solved through purchasing
action.

 According to them, a buying center is been created by the organization

consisting of those members of the organization (users, deciders, influencer,
buyer and gatekeeper) who will be involved in the buying decision process.

Variables of Webster and Wind model:

1. Environmental Variables: These are external to the firm. Such variables are:
Physical, Technological, Economic, Political, Legal and Cultural factors.

2. Organizational Variables: These which influence buying behavior include the

goals and objectives of the firm, structure of the firm, technology, policies and
procedures followed, and the human resources at the firm’s disposal.
3. Social Variables: Interpersonal relationships between the members of the buying
centre also play a vital role in the decision-making process. Some members tend to
dominate while some choose to remain passive listeners.

4. Individual characteristics: Every member in the buying center has different

aspirations. These personal and psychological characteristics will influence the
negotiations within the buying center and the final buying decision.

Implications of Webster and Wind model:

1. This model emphasizes on the fact that there are several variables that influences
the buying decisions in an organization.

2. The organizational variable influences the buying behavior of the organization

which also includes the objectives, structure, policies, technologies policies and
procedure.

3. The social variable focuses on the interpersonal relationships between the

members of the buying center.

4. Individual people of the buying centre have their own background, attitudes, needs
to be satisfied motivational levels and access to information.

Consumer marketing
Consumer marketing refers to the business focusing its marketing strategies
directly on the consumers who buy the products or services the business sells.

For example, Whirlpool’s staff anthropologists go into people’s homes, observe

how they use appliances, and talk with household members. Whirlpool has found
that in busy families, women are not the only ones doing the laundry. Knowing this,
the company’s engineers developed color-coded washer and dryer controls to make
it easier for kids and men to pitch in.

Consumer market: All the individuals and households who buy or acquire goods
and services for personal consumption.

Characteristics:
1. It requires less capital and window dressing to attract customers.

2. Retail marketers sell goods directly to the ultimate consumers and maintain
personal contact with them.

3. The key aspect of retail marketing is an attitude of mind, in making retail

marketing decisions; retailers must consider the needs of the customers.

4. It is a philosophy and is all about satisfying the customers.

5. consumer marketing is stimulating, quick-packed and influential. It encompasses

a wide range of activities including environmental analysis, market research,
consumer analysis and product planning etc.

Strategies of consumer marketing

A consumer marketing strategy is a kind of plan that business pursue to try to
maximize profit by matching their products with the individuals who are most likely
to buy or use them.

1. Marketing product or service: Marketing the product or service to fulfill a need

or fix a problem that already exists for consumers. Consumer marketing is product
driven, has a very large target market potential.

2. Identifying appropriate pricing: Consumer marketing often work well with a

discount structure, consumers thrive on feeling like they are getting a ‘bargain’, so
coupons or two-for-one offers could work well.

3. Create place strategy: A crucial decision is to correctly identify the distribution

channels. Getting the right product to the right place at the right time involves the
distribution system. It will be more convenient for some manufacturers to sell to
wholesalers who then sell to retailers, while others will prefer to sell directly to
retailers or customers.

4. Develop promotion strategy: Promotion is any activity to raise awareness of a

product or to encourage customers to purchase a product. Develop a promotion
strategy involves a combination of the following marketing activities:
 a. Advertising: Advertising campaigns are a big part of most business-to-
consumer marketing plans. Regular reinforcement is the key with repetition
and imagery which clearly stands for the brand’s look and feel.

b. Public relations: It helps reduce ‘buyers remorse’ after customers have

spent with marketer, good PR ensures their positive feelings for the product
are reinforced in a way that appears impartial. (e.g. positive new items in print
media).

c. Events: Events can bring the customers into as a ‘family’ and encourage
brand loyalty and security when spending money.

d. Direct marketing: Here, marketer knows exactly who is making the

buying decision and when marketer have a database of self selected
customers, sending them direct marketing material is personal, relationship
building and develops trust.

e. Internet marketing: It facilities the most extreme short sales cycle which
is a hallmark of consumer marketing. A great website, well described product
portal and a simple, safe checkout all aid consumer market sales.

f. Word of mouth: Word-of-mouth communication spreads through social

and business networks and communities, and is regarded as a particularly
influential, cost-effective, and speedy means of disseminating information
about an organization’s product.

g. Affiliate marketing and alliances: If a product is affiliated with another

brand which already has a strong following, one will gain some of that trust
by association and reduce the purchase risk.

h. Publicity campaigns: Big businesses that target nationwide audiences may

require national television campaigns that put their product in front of
millions.

5. Extraordinary USP: B2C marketing has wider target market as it deals with
consumer-based products, but there is also more business competition. The key to
effective B2C marketing strategy is to have an edge over the competitors and to
clearly emphasize the same in the USP tag line and to create an impression that the
competitors cannot give anyone what others can.

The unique selling proposition (USP) or unique selling point is a marketing

concept first proposed as a theory to explain a pattern in successful advertising
campaigns of the early 1940s. The USP states that such campaigns made unique
propositions to customers that convinced them to switch brands.

Ex: Domino’s “30 minutes or it’s free” promise.

FedEx’s “When it absolutely, positively has to be there overnight.”

Southwest’s claim to be the lowest-priced airline.

6. Scarcity and Undercover marketing: Scarcity marketing creates a perception of

a shortage which aims to entice customers to purchase out of fear that they may not
be able to get it in the future.

Ex: Amazon- Today’s deal, Amazon also has daily deals, which cover a wide
variety of items, from kitchenware to ebooks.

Undercover marketing, also known as stealth marketing, involves marketing to

consumers in a way that do not realize they are being marketed to.

Ex: In 2002, Sony Ericsson was one of the first companies to produce a cellular
phone with a digital camera peripheral, called the T68i. The company wanted to
generate buzz on a large scale for the T68i. Using 60 actors in 10 major cities, Sony
Ericsson instigated a viral effect. The actors, posing as tourists, couples, and other
regular people, asked strangers on the street to help them take a picture. Instead of
handing those strangers a camera, they handed them their new camera-phone by
Sony Ericsson. They talked enthusiastically about the device's features and taught
the helpful passers-by how to use it. The aim of the campaign was to get as many
people as possible to talk about their unique experience with a new and innovative
camera-phone. The campaign was largely considered a success, with the T68i rising
to become one of the best selling phones of the year in several countries.

7. Relationship marketing: It is the process of building long term, trusting, and

win-win relationship with customers, distributors, dealers and suppliers. Over time,
relationship marketing promises and delivers high quality, efficient service and fair
prices to the other party.

Ex: Sending birthday cards to clients, offering reward plans to customers.

Factors affecting consumer behavior

Consumer purchases are influenced strongly by cultural, social, personal and
psychological characteristics, as shown in diagram. For the most part, marketers
cannot control such factors, but they must take them into account.

1. Cultural Factors:
Cultural factors exert the broadest and deepest influence on consumer behaviour.
The marketer needs to understand the role played by the buyer's culture,
subculture and social class.

Culture: Culture is the most basic cause of a person's wants and behaviour. Human
behaviour is largely learned. Growing up in a society, a child learns basic values,
perceptions, wants and behaviors through a process of socialization. Marketers are
always trying to spot cultural shifts in order to imagine new products that might be
wanted. For example, the cultural shift towards greater concern about health and
fitness has created a huge industry for exercise equipment and clothing, lower-
calorie and more natural foods, and health and fitness services.
Subculture: Each culture contains smaller subcultures or groups of people with
shared value systems based on common life experiences and situations. Subcultures
include nationalities, religions, racial groups and geographic regions. Many
subcultures make up important market segments and marketers often design
products and marketing programmes tailored to their needs .

 Ex: Asian American Consumers: Asian consumers shop frequently and are
the most brand conscious of all the ethnic groups. They can be fiercely brand
loyal. McDonald’s has built a special Web site for this segment
(www.myinspirasian.com), offered in both English and Asian languages. The
fun and involving, community-oriented site highlights how McDonald’s is
working with and serving the Asian American community.

Social class: They are social stratifications where members share similar values,
interest and behavior. It is determined by occupation, income and education.
Marketers are interested in social class because people within a given social class
tend to exhibit similar buying behavior

2. Social factors: A consumer's behaviour is also influenced by social factors, such

as the consumer's small groups, family, and social roles and status.

Groups: Groups influence a person's behaviour.

Reference groups are groups that serve as direct (face-to-face) or indirect

points of comparison or reference in forming a person's attitudes or behaviour.
Reference groups influence a person in at least three ways. They expose the
person to new behaviors and lifestyles. They influence the person's attitudes
and self-concept because he or she wants to 'fit in'. They also create pressures
to conform that may affect the person's product and brand choices.

Membership groups are groups that have a direct influence and to which a
person belongs. Some are primary groups with whom there is regular but
informal interaction - such as family, friends, neighbors and fellow workers.
Some are secondary groups, which are more formal and have less regular
interaction. These include organizations like religious groups, professional
associations and trade unions.

Aspirational group is one to which the individual wishes to belong.

 Dissociative group: Groups whose values and behavior individual rejects.

In the case of products and brands with strong group influence marketers must
seek the help of opinion leaders who will exert influence on others because of
their personality, knowledge, special skills etc., Members of the group watch
their leader’s style and behavior and try to emulate them.

Family: Family members can strongly influence buyer behaviour.

Family of Orientation: Consists of parents and siblings.

Family of Procreation: the buyer's spouse and children have a more direct
influence on everyday buying behavior.

Marketers are usually interested in the roles and influence of the husband, wife
and children on buying decisions.

Decision makers in case of goods and services will be husband oriented, wife
oriented and equal.

CONSUMERS' BUYING ROLES:

Initiator: The person who first suggests or thinks of the idea of buying a
particular product or service.

Influencer: A person whose view or advice influences the buying decision.

Decider: The person who ultimately makes a buying decision or any part of
it - whether to buy, what to buy, how to buy or where to buy.

Buyer: The person who makes an actual purchase. Once the buying decision
is made, someone else could make the purchase for the decider.

User: The person who consumes or uses a product or service.

Roles and statuses: A role consists of the activities a person is expected to perform.
Each role carries a status. A buyer may belong to many groups at the same time like
family, club, associations or organizations. His position in each group will be
determined by his role and status.
 Ex: Consider the various roles a working mother plays. In her company, she
plays the role of a brand manager; in her family, she plays the role of wife and
mother; at her favorite sporting events, she plays the role of avid fan. As a
brand manager, she will buy the kind of clothing that reflects her role and
status in her company.

3. Personal factors: A buyer's decisions are also influenced by personal

characteristics such as the buyer's age and life-cycle stage, occupation, economic
situation, lifestyle, and personality and self-concept.

 Age and Life-Cycle Stage: The needs, wants and demand for goods and
services changes in the buyer’s life time. Buyer’s taste in food, clothes,
furniture and recreation are all related and are likely to change. Family life
cycle consists of stages like young singles, newly married, married with
children, elderly couple living alone. Consumption is decided by the stage in
which the buyer is in currently.

 Occupation: A person's occupation affects the goods and services bought.

Blue-collar workers tend to buy more work clothes, whereas white-collar
workers buy more suits and ties. Marketers try to identify the occupational
groups that have Life style: Lifestyle is a person's pattern of living as
expressed in his or her activities, interests and opinions. People coming from
the same subculture, social class and occupation may have quite different
lifestyles. It profiles a person's whole pattern of acting and interacting in the
world.

 Personality and Self-Concept: Personality refers to the unique psychological

characteristics that lead to relatively consistent and lasting responses to one's
own environment. Personality is usually described in terms of traits such as
self-confidence, dominance, sociability, autonomy, defensive ness,
adaptability and aggressiveness."' Personality can be useful in analyzing
consumer behavior or certain product or brand choices.

For example, coffee makers have discovered that heavy coffee drinkers tend
to be high on sociability. Thus Nescafe ads show people coming together over
a cup of coffee.
 Marketer’s sometimes use buyers self-concept and self image to match brand
images.

4. Psychological factors: A person's buying choices are further influenced by four

important psychological factors: motivation, perception, learning, and beliefs and
attitudes.

 Motivation: A person has many needs at any given time. Some are biological,
arising from states of tension such as hunger, thirst or discomfort. Others are
psychological, arising from the need for recognition, esteem or belonging.
Most of these needs will not be strong enough to motivate the person to act at
a given point in time. A need becomes a motive when it is aroused to a
sufficient level of intensity. A motive (or drive) is a need that is sufficiently
pressing to direct the person to seek satisfaction.

Three of the best known theories of human motivation- Sigmund Freud,

Abraham Maslow and Fredrick Herzberg- carry different implications for
consumer analysis and marketing strategy.

 Freud’s theory- He assumed that the psychological forces shaping people’s

behavior are largely unconscious and that a person cannot fully understand his
or her motivations. When a person examines specific brands she will react not
only to their stated capabilities but also to other less conscious cues such as
shape, size, color, materials and brand name. A technique called laddering is
usually used to trace a person’s motivations from the stated instrumental ones
to the more terminal ones. Then the marketer can decide on the level they have
to make an appeal. Motivation researchers often collect in-depth interviews
with a few dozen consumers to uncover association, sentence completion,
picture interpretation, role playing are also used.

 Maslow’s theory: He explained the driving forces of people’s needs as

consisting of a need hierarchy. Needs according to Maslow are satisfied by
their hierarchy. The buyer’s behavior will be influenced by all these motives.

 Herzberg’s theory: He developed a two factor theory that distinguishes

dissatisfiers from satisfiers. The absence of dissatisfiers is not enough to
motivate a purchase. Satisfiers must be present. Sellers therefore should
 concentrate to eliminate the dissatisfiers. These things will not sell a product,
but will easily unsell a product. The seller should identify the major satisfiers
or motivators of purchase in the market and supply them.

 Perception: A motivation person is ready to act. How he acts depends upon

how he perceives the product. Perception is the process by which we select,
organize and interpret information inputs to create a meaningful picture of the
world.

The key point is that it depends not only on the physical stimuli, but also on
the stimuli’s relationship to the surrounding field and on conditions within
each of us. Buyers can emerge with different perception of the same stimulus
because of three perceptual processes- selective exposure, selective distortion
and selective retention.

 Selective exposure: Consumers are exposed to tremendous stimuli everyday

in their lives.

 Selective distortion: Most of the stimuli will be screened out, only a few will
be selected by buyers, depending on the relation to a specific need.

 Selective retention: Buyers forget about some stimuli and retain only what
they want. Marketers therefore repetitively send messages to their target
markets.

 Beliefs & Attitudes: A belief is a descriptive thought that a person lias about
something. These beliefs may be based on real knowledge, opinion or faith,
and may or may not carry an emotional charge. Marketers are interested in the
beliefs that people formulate about specific products and services, because
these beliefs make up product and brand images that affect buying behavior.
If some of the beliefs are wrong and prevent purchase, the marketer will want
to launch a campaign to correct them.

 Attitude: An attitude describes a person’s relatively consistent evaluations,

feelings and tendencies towards an object or idea. Attitudes put people into a
frame of mind of liking or disliking things, of moving towards or away from
them. Marketers should try to fit their product offerings into the buyer’s
existing attitudes rather than trying to change their attitudes which is difficult.
  Learning: When people act, they learn. Learning describes changes in an
individual's behaviour arising from experience. Learning theorists say that
most human behaviour is learned. Learning occurs through the interplay of
drives, stimuli, cues, responses and reinforcement.

 Drive: Strong internal stimuli impelling action.

 Cues: Minor stimulus which determines when, where and how a person
responds.

 Discrimination: Customers learn to recognize differences in sets of stimuli

and can adjust responses accordingly.

Types of buying decision behavior

More complex decisions usually involves more buying participants and more buyer
deliberation. The dig shows types of consumer buyer behavior based on the degree
of buyer involvement and the degree of differences among brands.

1. Complex buying behavior.

2. Dissonance reducing buying behavior.

3. Habitual buying behavior.

4. Variety seeking buying behavior.

Complex buying behavior:

Consumers undertake complex buying behavior when they are highly involved in a
purchase and perceive significant differences among brands.Consumers may be
highly involved when the product is expensive, risky, purchased infrequently and
highly self-expressive. The consumer has much to learn about the product category.

Ex: a house, a first car, and a life insurance policy.

 The buyer will pass through a learning process, first developing beliefs about
the product, then attitudes, and then making a thoughtful purchase choice.

Dissonance-reducing buying behavior:

 It occurs when consumers are highly involved with an expensive, infrequent,

or risky purchase, but see little difference among brands.

 This situation occurs when a consumer uses each step in the purchase process
but does not spend a great deal of time on each of them. It requires less time
than extended-decision making since the person typically has some
experience with both ‘what’ and the ‘where’ of the purchase.

 In this category are items that have been purchased before, but nor regularly.
Risk if moderate.

Ex: A second car, clothing, a vacation and gifts.

Habitual buying behavior :

 It occurs under conditions of low consumer involvement and little significant

brand difference. Ex: salt. Consumers have little involvement in this product
category- they simply go to the store and reach for a brand. If they keep
reaching for the same brand, it is out of habit rather than strong brand loyalty.
Consumers appear to have low involvement with most low-cost, frequently
purchased products.

 Consumer behavior does not pass through the usual belief-attitude-behavior

sequence. Consumers do not search extensively for information about the
brands, evaluate brand characteristics, and make weighty decisions about
which brands to buy.
  Instead, they passively receive information as they watch television or read
magazines. They select the brand because of its familiarity.

 Consumers may not evaluate the choice even after purchase.

Variety-seeking buying behavior:

 Consumers undertake variety-seeking buying behavior in situations

characterized by low consumer involvement but significant perceived brand
differences. In such cases, consumers often do a lot of brand switching.

Ex: When buying cookies, a consumer may hold some beliefs, choose a cookie
brand without much evaluation, then evaluate that brand during consumption.
But the next time, the consumer might pick another brand out of boredom or
simply to try something different. Brand switching occurs for the sake of variety
rather than because of dissatisfaction.

 The market leader will try to encourage habitual buying behavior by

dominating shelf space, keeping shelves fully stocked, and running frequent
reminder advertising. Challenger firms will encourage variety seeking by
offering lower prices, special deals, coupons, free samples and advertising that
presents reasons for trying something new.

The buyer decision process

Generally, the purchaser passes through five distinct stages in taking a decision for
purchasing a particular commodity. The stages are:

 Need recognition

 Information search

 Evaluation of alternatives

 Purchase decision

 Post purchase behavior

1. Need recognition: The buying process starts with need recognition- the buyer
recognizes a problem or need. The need can be triggered by internal stimuli when
one of the person’s normal needs-hunger, thirst- rises to a level enough to become a
drive. A need can also be triggered by external stimuli. Ex: an advertisement or a
discussion with a friend might get you thinking about buying a new car. 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: An aroused consumer will be inclined to search for more

information. Consumer information sources fall into four categories:

 Personal sources: Family, friends, neighbors, acquaintances.

 Commercial sources: Advertising, salespersons, dealers, packaging,

displays.

 Public sources: Mass media, consumers, rating organizations.

 Experiential sources: Handling, examining, uses of the product.

3. Evaluation of alternatives: There are several decision evaluation processes the
most current models of, which see the process as cognitively-oriented. That is, they
see the consumer as framing judgment largely on a conscious and rational basis.

Evaluation may be thought of as a system as:

 Evaluative (choice) criteria: These are the dimensions used by consumers to

compose or evaluate products or brands. In the car ex, the relevant evaluative
criteria may be fuel economy, purchase price and reliability.

 Beliefs: These are the degrees to which, in the consumer’s mind, a product
possesses various characteristics.

 Attitudes: These are the degree of liking or disliking a product and are in turn
dependent on the evaluation criteria used to judge the products and the beliefs
about the product measured by those criteria.

 Intentions: These measure the probability that attitudes will be acted upon.
The assumption is that favorable attitudes will increase purchase intentions.

4. Purchase decision: The consumer’s purchase decision will be to buy the most
preferred brand, but two factors can come between the purchase intention and the
purchase decision.

The first factor is the 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.

The second factor is unexpected situational factors. The consumer may form a
purchase intention based on factors such as expected income, expected price, and
expected product benefits. However, unexpected events may change the purchase
intention. Ex: The economy might take a turn for the worse, a close competitor might
drop its price.

5. Post-purchase behavior: Marketers must monitor post purchase satisfaction,

post purchase actions and post purchase product uses.

 Post-purchase satisfaction: The buyer’s satisfaction is a function of the

closeness between the buyer’s expectations and the product’s perceived
 performance. If performance falls short f expectations, the consumer is
disappointed, if it meets expectations the customers is satisfied; if it is beyond
expectations the consumer is delighted. These feelings signify whether the
customer buys the product again and talks favorably about the product to
others.

 Post purchase actions: If the consumer is satisfied he or she will exhibit a

higher probability of purchasing the product again. Dissatisfied consumer
may abandon or return the product. They may seek information that confirms
its high value. They may take public action by complaining to the company,
going to a lawyer, or going to other groups.

 Post purchase use and disposal: Marketers should also monitor how buyers
use and dispose off the product. If consumers store the product in a closet, the
product is probably not very satisfying and word-of-mouth will not be strong.
Sale of new product will be depressed.

Buyer behavior models-Consumer

A model is very often referred to as an abstract representation of a process or
relationship. A model is a representation of consumer behavior.

The following models emphasize on the mental activity that occurs before, during
and after purchases are made.

1. Black box model.

2. Nicosia model.

Black box model: Consumers make many buying decisions every day. Most large
companies research consumer buying decisions.

 The starting point for understanding buying behavior is the stimulus-response

model of buyer behavior. This dig shows that marketing and other stimuli
enter the consumer’s “black-box” and produce certain responses. Marketers
must figure out what is in the buyer’s black box.
  Marketing stimuli consist of the four Ps- product, price, place and promotion.
Other stimuli include major forces and events in the buying environment-
economic, technological, political and cultural.

 All these input enter the buyer’s black-box, where they are turned into a set
of observable buyer responses: product choice, brand choice, dealer choice,
purchase timing and purchase amount.

 The marketer wants to understand how the stimuli are changed into responses
inside the consumer’s black-box, which has two parts.

 First, the buyer’s characteristics influence how he or she perceives and reacts
to the stimuli.

 Second, the buyer’s decision process itself affects the buyer’s behavior.

 The salesperson should understand the psychological aspects which includes

attitudes, perceptions, motivations and personality of buyer behavior.

Nicosia model:

The Nicosia model tries to explain buyer behavior by establishing a link between the
organization and its (prospective) consumer.

 He presented his model in flow-chart format, resembling the steps in a

computer program.
  The model suggests that messages from the firm first influences the
predisposition of the consumer towards the product or service. Based on the
situation, the consumer will have a certain attitude towards the product. This
may result in a search for the product or an evaluation of the product attributes
by the consumer.

 If the above step satisfies the consumer, it may result in a positive response,
with a decision to buy the product otherwise the reverse may occur.

Elements of Nicosia model:

 Field One: It has two sub areas- the consumers attribute and the firm’s
attributes. The advertising message sent from the company will reach the
consumer’s attributes. Depending on the way, the message is received by the
consumer, a certain attribute may develop. This becomes the input for area
two.
 Field Two: This is related to the search and evaluation, undertaken by the
consumer, of the advertised product and also to verify if other alternatives are
available. If this results in a motivation to buy the product/service, it becomes
the input for the third area.

 Field three: It explains how the consumer actually buys the product.

 Field four: It is related to the uses of the purchased items. It can also be used
as an output to receive feedback on sales results to the firm.