Chapt

erOne
AnOv
erv
iewofMar
ket
ingandMar
ket
ingManagement
1.
0. I
ntr
oduc
tion
Bus inessfi
rmsandnon- profi
torganizati
onsengagei nmarketi
ng.Productsmar keted
i
nc ludedgoodsaswel lass er
vic
es,ideas,people,andplaces.Marketi
ngacti
vit
iesar e
target edatmarketconsist
ingofpr oductspurchasersandalsoindi
vidual
sandgr oups
thati nfl
uencet
hes uccessofanor ganizati
on.
Thefoundati
onofmar ket
ingisexchangeinwhichonepartypr
ovidestoanot
herparty
somethingofval
ueinr et
urnforsomet hi
ngels
eofv al
ue.Inabroadsense,market
ing
consi
stsofallact
ivi
ti
esdes i
gnedt ogenerat
eorf aci
li
tat
eanexc hangeint
endedt o
sat
isf
yhumanneeds .
The conceptofmar ketisv er
yi mpor
tantin mar
ket
ing.The Ameri
can Market
ing
Associ
ati
ondefinesamar ketas Theaggregat
edemandoft hepot
entialbuy
ersfor
productoraproductorservi
ces.
”
Phil
ipKot
lerdefi
nes Amarketasanar
eaofpotenti
alexc
hanges
.”Thusamarketi
sa
groupofbuyersandsel
ler
sinter
est
edinnegot
iati
ngthetermsofpurchas
e/s
alefor
goodsorserv
ices.
Thenegotiat
ionworkmaybec onduc
tedf ace-
to-
fac
eatacert
ainplaceoritmaybe
donethroughothermeansofc
ommuni cati
on,suchasc
orr
espondence,phone,c
abl
e,
oritmaybedonet hr
oughbusi
nessmiddlemen.

1.
1. Meani
ngandSc
opeofMar
ket
ing

Market
ingcanocc
uranyti
mewhenones oc
ialuni
t(pers
onoror
gani
zat
ion)s
tri
vest
o
exc
hangesomethi
ngofval
ueswi
thanot
hersoci
alunit
.
Thus,thees
s enceofmarketi
ngisat ransac
tionorexchange.I
nt hisbroadsense,
marketi
ng c
ons ist
s ofact
ivi
ti
es des
igned to gener
ate and fac
ili
tat
es exc
hange
int
endedtosatis
fyhumanneedsorwant s
.
Market
inghasbeen def
ined i
nvar
iousway
s.Thedef
ini
ti
on t
hatbes
tser
vesour
pur
poseisasf
oll
ows:
-
Ø Mar ket
ing-isas oc
ialandmanager i
alprocessbywhichanindi
vidualorgr oup
obtainwhatt heyneedandwantt hroughc r
eat
ing,of
fer
ingandexc hangi
ngof
productofval
ueswithother
s(Phi
li
pKot l
er)
.
Ø Marketi
ng-i sthetotalbusi
nes
sacti
vit
ydesi
gnedtoplan,pri
ce,promoteand
dis
tri
butewantsati
sfy
ingproduc
tst
otargetmar
kett
oachieveor
ganiz
ati
onalgoal
(Wil
li
am J.St
ant
on).

1|Page
Ø Mar
ket
ing -i
sthec
reat
ion and del
iver
yofs
tandar
d ofl
ivi
ngt
osoc
iet
y(Paul
Maz
or)
.
Ø Mar keti
ngmanagement-istheproc
essofplanningandexecuti
ng,theconcepti
on,
pri
cing,pr omoti
ngand dis
tri
but
ingofi deas,goodsand servi
cest ocreatean
exchange t hat s
ati
sfyi
ndivi
dual or group object
ives (
Amer i
can Mar ket
ing
Associati
on).
Theabov edef
init
ionsofmar keti
ngr eset
son thef ol
lowingc or
ec oncepts
:needs ,
wantsanddemands ;pr
oducts(Goods,Servi
cesandIdea),v
alue,costandsati
sfact
ion:
exchangeandtransact
ion;Rel
ations
hipandNet works
;mar ket;andmar ketersand
prospect
s.

1.
2.Mar
ket
ingManagementPhi
los
ophi
es

Itist hepr oces

sofappl yi
ngthediff
erentapproach ofmanagement
. Thereare
dif
ferent mar keti
ng management c oncept
s that are fol
lowed by dif
fer
ent
organizat
ions.Mar ket
ingmanagementcanoc curi
nanor gani
z at
ioni
nconnect
ion
withanyofi tsmarkets

Marketi
ngmanagementc anbedef i
nedast heanal
ysi
s,planning,i
mpl ementati
onand
contr
olofprogramsdesi
gnedt ocreat
e,buildandmaintainbenefi
cialexchangeswi
th
tar
getbuy er
sf orthe purpose ofac hi
eving or
gani
zationalobjectiv
es.Butwhat
phil
osophyshouldgui
demar ket
ingeff
orts
?

Phil
osophyi
sapr i
nciple,whichisguidedbyal ogi
calreasoning.Andthediff
erent
Marketi
ngmanagementphi l
osophieshavethei
rownbel ieforpr i
nci
pletosel
ltheir
product
stocust
omer s.Therearef i
vealt
ernat
iveconceptsunderwhi c
hbus i
nesses
andotheror
gani
zat
ionsc anconductthei
rmarketi
ngact
ivit
ies.
i
)ThePr
oduc
tionConc
ept
Thisconceptbeli
evesthatc onsumerswil
lpref
erproductsthatarewi del
yav ai
labl
e
and aff
ordabl
e.Di str
ibuti
on and producti
on ar
e giv
en hi gh pr
iori
ty undert hi
s
concept
.Thisconceptisappli
cablewhendemandsaregreaterthansuppli
es.
Asl ongast hereareenough v
olunteer
sand capabl
ebuy erst heorgani
zati
on i
s
expec t
edtoc oncent
rat
eonproducti
onanddistr
ibut
ioneff
ici
ency.Agoodexampl ei
s
petroleum Company ,wherei
tsdemandi shighandt heonlythingexpectedfrom
petroleum refi
ningcompanyi
stopr oduceasmuc haspos s
ibl
eandt oi nt
ensi
fyit
s
dis
tributi
onc hannel
s.
Thepr
oduc
tionc
onc
epti
sal
soappl
icabl
efort
hos
econs
umer
swhoar
epr
ices
ens
iti
ve

2|Page
(who pref
erlow pric
ed pr
oduc
ts)
.Chi
nes
e pr
oduc
ts(
clot
hsand s
hoes
)sol
ed i
n
Ethi
opiaaregoodexampl
es.
i
i)Thepr
oduc
tConc
ept
Thi
sc onceptgivespri
ori
tytoquali
ty,perfor
manc eandinnov
ati
on.Theyassumet hat
aslongasapr oducthasgoodqualitythereissomeonewhowi l
lbuyit.Thatmeans
buyersadmi r
ewel l
-madepr oduc
ts,canappr ai
seproductqual
it
yandper formance,
andar ewil
li
ngt opaymoreforproduc t
.
Forexampl
e;El
ect
roni
csc
ompani
ess
uchasSonyandPhi
li
psf
oll
owt
hisappr
oac
h.

i
ii
)Thes
ell
ingConc
ept
Thi
sconc
eptass
umesthatcons
umer
swi
llnotbuyenoughofac
ert
ainpr
oduc
tunl
ess
ast
rongpromot
ioni
sused.
I
n aperfec
tc ompetit
ivemarket(wheretherear emanybuy er
sand sel
ler
s),f
or
c
onsumergoods(soaps,f
ooditemsetc
.)orforunsoughtgoods(wher
epeopledonot
t
hinkofmuchsuchasinsuranc
e)arewellmarket
edbyt hi
sconcept
.
Thebas i
cc onceptoft
hisappr oac
histosellwhatt heyproducerathert
hant omake
whatt he mar ketwant .They use a pushs t
rat
egy (s
t r
ong promoti
on s uch as
adver
tisement).Thisc
onc eptalsoass
umest hatsell
ingi
st heendofmar keti
ng.It
foc
usesonc reati
ngsalesv ol
umeandt ransacti
ont hanbuildi
nglong-t
ermr el
ati
on
wit
hc ustomers.
i
v)Mar
ket
ingConc
ept
Thisconceptputscustomersatitsc
enter
; Cus t
omerisaki
ng .Market
ingc oncept
tr
iestoi dent
ifytheneed and wantofc ustomersbef
oreproduc
ing/del
iveringa
product/serv
ice.Whilesell
ingconceptstar
tsfrom pr
oduc
ing,market
ingc oncept
st
artsfr
om themar ket
.i.
etargetc
ust
omers.
Andt
hecorpor
atemis
sionofthisputcust
omersatt
hecent
er.F
orexampl
e,Et
hiopi
an
Ai
rLi
nesputsi
tspr
omotionals
tatementas Goi
ngtogr
eatl
engtht
opleas
eyou.

v
)Soc
iet
alMar
ket
ingConc
ept
Thes oc
ietalmar
ket
ingconceptholdst hatt heor gani
zati
on shoul
d deter
minet he
needs,wantsand i
nter
estsoftargetmar ket s
.I tshouldthen del
iverthedesired
sat
isf
acti
onsmoreeff
ect
ivel
yandeffic
ientl
yt hanc ompetit
orsinawayt hatmaint
ains
orimprovesthec
onsumersandthesociety’
swel l
-being.

Thes
oci
etalmar
ket
ingc
onc
epthol
dst
hatt
heor
gani
zat
ion’
stas
kist
odet
ermi
net
he
3|Page
needs,want,andint
erest
soft argetmarket
sandtodel
iverthedesi
redsat
isf
act
ions
moreeffect
ivel
yandeffi
cientl
ythanc ompet
it
orsi
nawayt hatpr
eser
vesorenhances
theconsumersandthesoc i
ety’
swellbei
ng.

Thes oci
etalmar ket
ingc onceptques ti
onswhet herthepur emar ketingc onceptis
adequateinanageofenv ironment alproblems,resourceshortages,rapidpopul ati
on
growth,wor l
dwideec onomi cproblems ,andnegl ect
eds oci
als erv
ices .Itasksifthe
fi
rmt hatsenses
,s er
v esands ati
sfi
esindividualwantsisalway sdoingwhat ’
sbes tf
or
consumersands oci
etyinthel ongr un.Acc or
dingtot hesocietalmar keti
ngc oncept,
thepuremar ket
ingc onceptov er
lookspos sibl
econfli
ctsbetweens hort-runc onsumer
wantsandl ongrunc onsumerwel fare.

Thr
eec
ons
ider
ati
onsunder
lyi
ngt
hes
oci
etalmar
ket
ingc
onc
ept

Soc
iet
y
(
Humanwel
far
e)

Societal
Cons
umer s Mar keti
ng
(
Wantssat
isf
acti
on) Conc ept Company
(
Prof
it
s)

I
nadditi
ontoser
vingtheinteres
tofc ust
omer
s,thisconceptgoesones
tepf
orwar
dto
t
hinkaboutt
hewellbeingofthes oc
ietyi
nwhichitfunct
ions.
Themai
nbel
iefors
tandofeac
hconc
eptorphi
los
ophyi
ssummar
izedasf
oll
ows
.
m Mkt
.Mgmt
.Phi
los
ophy (Conc
ept

i
.Pr
oduct
ionConcept -Pr
ovi
dingofgoodsi
nawi
deandaf
for
dabl
eway
i
i.Pr
oductConcept -Pr
ovi
dingofqual
it
y,i
nnov
ati
veandgoodper
for
ming
pr
oduc
ts.
i
ii
.Sel
li
ngConcept -Us
ingofpus
hst
rat
egyors
trongpr
omot
iont
oinc
reas
e

4|Page
 s
ales
.
i
v.Mar
ket
ingConcept -I
dentif
yingtotheneedandwantofcust
omer(customer
center
ed)
v.Soci
etalMar
ket
ingConcept-Inaddi t
iontosat
isf
yingc
ust
omersitt
hinksaboutthe
wellbei ngofs
ociet
y

1.
3.Cor
eMar
ket
ingConc
ept
sandTas
ks
1.
3.1.
Cor
eConc
ept
sinMar
ket
ing
Thef
oll
owi
ngar
esomeoft
hemos
timpor
tantmar
ket
ingt
ermst
hatmar
ket
ersus
e
r
egul
arl
y.
Need-Iti
sageneraldriveorfel
tdepri
vat
iont hatpeopl
erequi
ref
orsurvi
val
.Need
forclot
h,saf
ety,f
ood,soci
al,bel
ongingnessetcaresomeofthebasi
cneeds
thatpeopl
erequir
e.
Want-Iti
sas peci
ficneedshapedbyindividualc
ult
ureandper sonal
it
y,ort
hedeeper
par
tofneedi swant.Forexample:i
fy ouneedfood,y oumaywanttoeat
,bread
orbis
cuitetc.I
fyouneeddr i
nk,youmaywantt odrinkwaterorAmbowateror
CocaorMi r
anda,dependingupony ourint
ernalfeel
ing.
Demand-I tistheabil
it
yandwi ll
ingnesstobuyapr oduct.Demandi stherewhenan
indi
vidualhasbot ht he capacit
y and wil
li
ngnesst o buy the produc t
sor
servi
ces.Demanddependsupont hefinanc
ialcapac
ityofindivi
duals
.Aspeopl e
getmor emoney ,theydemandmor egoodsors er
v i
cestos ati
sfytheirneeds
and want s
.Therefore,business
personsmus tmeas urenotonl yhow many
peoplewantt hei
rpr oduct
,butal sohow manywoul dac tuall
ybewi l
li
ngand
abletobuyi t
.

Pr
oduc
t-isany t
hingthatcanbeof f
eredtoamar ket,whi
chdoeshav edemand,by
cons
umer s.Peoplesati
sfythei
rneedsand want swith produc
t.I
tincl
udes
phys
icalobjec
ts,s
erv
ice,per
son,pl
ace,or
ganizat
ionandidea.
Peoplesati
sfyt
heirneedsandwant
swithproduc
ts.Aproductisanythi
ngthatcanbe
off
ered tos at
isf
y a need orwant.Produc
ts br
oadl
yc lass
ify as t
angi
bil
it
y and
i
ntangibi
li
ty.
● Tangibl
epr oduct
s(Goods
)-ar et
hos
eproduc
ts,whic
hc anbes
een,touc
hed,f
elt
etc.
● Intangi
ble product
s(ser
vices
)-arethose product
s whi
chcannotbe seen,
touched,fel
tetc.
5|Page
I
ngeneral
,aproduc
tcanc
ons
ist
sofasmanyast
hreec
omponent
s;phy
sic
algoods
,
s
erv
ices
,andi
deas.
Cus t
omerv alue-i tist hediffer
encebet ween thev al
uet hecustomergai nsfrom
owni ngandus i
ngapr oductandt hecostofobtai
ningthatproduct
.Ac ustomermakes
ac ostbenefi
tanal ysi
sandgi vesv al
uetoapr oduc ti
fthebenefi
tisgr eaterthant he
costorgivesnov al
uet oapr oductifthecostofobtai
ningtheproductisgr eatert
han
thebenefitt
hatt hecus t
omerget s.
Cust
omerSat i
sfac
tion-Acustomeri ssat
isfi
edwhenpurchaseoruseofaproduc
t
gi
vesposi
ti
v ef
eeli
ngt ot
heus er.Andacustomeri
sdi
ssat
isf
iedwhenpur
chas
eoruse
ofaproductgi
vesnegati
vefeeli
ngtotheuser.
Exchange-I tistheac tofobt ai
ningades ired obj
ectfrom someonebyof f
eri
ng
somet hinginretur
n.Foranexchanget otakeplac
eatleasttwoparti
esshoul
dint
eract
andt heys houl
dhav esomethi
ngofv al
uet ooneanother.Anditisbas
edont hefree
wil
l(wi l
li
ngness)ofthet
woparties.
Transac
tion-atradebetweentwopart
iest
hatinv
olvesatleastt
wothingsofv
alue,
agreeduponcondit
ions
,atimeofagr
eementandaplaceofagreement
.
Market-Itisasetofactualandpotent
ialbuyersofaproduct
.Andtheseindi
vidual
s
orgroupsshar
eapar t
icularneedorwantthatcanbesat
isf
iedthr
oughexchange.

1.
3.2.
Mar
ket
ingManagementTas
ks
Mar
ket
ing management ac
cor
ding t
o Kot
ler i
s t
he anal
ysi
s, pl
anni
ng,
i
mpl
ement
ati
on,andc
ont
rolofpr
ogr
amst
ocr
eat
e,bui
ld,andmai
ntai
nmut
ual
ly
benef
ici
alexc
hanges and r
elat
ions
hips wi
tht
argetmar
ket
sfort
he pur
pos
e of
ac
hiev
ingor
gani
zat
ionalobj
ect
ives .Anal
ysi
sin mar
ket
ingmanagementr
efer
sto
maki
ngar
esear
chont
hepr
efer
enc
es,at
ti
tude,t
estanddemandofc
ust
omer
;int
his
c
asei
deasmayc
omef
rom c
ust
omer
s,wor
ker
s,manager
s,et
c.

Bas
edont
her
esul
toft
heanal
ysi
soft
hec
ust
omerandt
heenv
ironment
,mar
ket
ers
pl
ananddev
eloppr
oduc
ts,pr
ices
,pr
omot
ion,anddi
str
ibut
ionandgof
orexec
uti
on
byas
sumi
ngac
ert
aindes
iredl
evelofdemand.Atanypoi
nti
nti
me,t
her
emaybeno
demand,adequat
edemand,i
rregul
ardemand,ort
oomuc
hdemand,andmar
ket
ing
managementmus
tfi
ndway
stodealwi
tht
hes
edi
ff
erentdemands
tat
es.Mar
ket
ing

6|Page
managementi
sconc
ernednotonl
ywi
thf
indi
ngandi
ncr
eas
ingdemand,butal
sowi
th
c
hangi
ngorr
educ
ingi
t.Thusmar
ket
ingmanagements
eekst
oaf
fec
tthel
evel
,ti
ming,
andnat
ureofdemandi
nawayt
hatwi
llhel
ptheor
gani
zat
ionac
hiev
eit
sgoal
s.
Si
mpl
yput
,mar
ket
ingmanagementi
sdemandmanagement
.

Mar
ket
ingmanager
sindi
ff
erentor
gani
zat
ionsmi
ghtf
aceanyoft
hef
oll
owi
ngs
tat
es
ofdemand.Themar
ket
ingt
aski
stomanagedemandef
fec
tiv
ely
.Thev
ari
ouss
tat
esof
demandandt
hec
orr
espondi
ngmar
ket
ingmanagementt
askac
cor
dingt
oP.Kot
ler
ar
ethef
oll
owi
ng:

1.Negat
ivedemand:Thi
sisas
tat
einwhi
chal
lort
hemaj
orpar
tsoft
hes
oci
ety
,
di
sl
ikest
hepr
oduc
tandmayev
enpayapr
icet
oav
oidi
t.Exampl
esar
evac
cinat
ion,
al
cohol
icempl
oyees
,dent
alwor
k,ands
eatbel
ts.Thec
orr
espondi
ngmar
ket
ingt
ask
i
stoanal
yzewhyt
hemar
ketdi
sl
ikest
hepr
oduc
t.Thi
smar
ket
ingt
askorac
tiv
ityi
s
knownasCONVERSI
ONALmar
ket
ingwhi
cht
riest
ochangepeopl
e’
swantr
athert
han
s
erv
ethei
rwant
s.

2.Nodemand:Thi
sisac
asewher
etar
getc
ust
omer
smaybeuni
nter
est
edi
nor
i
ndi
ff
erentt
oapar
tic
ularpr
oduc
t.F
orexampl
e,f
armer
smaynotknowaboutanew
f
armi
ngmet
hod;c
oll
eges
tudent
smaynotbei
nter
est
edi
ntaki
ngf
orei
gnl
anguage
c
our
ses
.Mar
ket
ing manager
s ar
econc
erned wi
thf
indi
ng way
stoc
onnec
tthe
pr
oduc
t’
sbenef
it
swi
tht
heus
er’
sneedsandi
nter
est
s.Thi
smar
ket
ingt
aski
sknownas
STI
MUL
ATI
ONALmar
ket
ing;i
ttr
iest
ost
imul
ateawantf
oranobj
ecti
npeopl
ewho
i
nit
ial
lyhav
enoknowl
edgeori
nter
esti
nthepr
oduc
t.

3.L
atentdemand:Cons
umer
shav
eawantt
hati
snots
ati
sfi
ed byanyexi
sti
ng
pr
oduc
tors
erv
ice.Thi
sisas
tat
eofdemandwher
emanyc
ust
omer
sshar
eas
trong
need f
ors
omet
hingt
hatdoesnotexi
sti
nthef
orm ofac
tualpr
oduc
t.Exampl
es
i
ncl
udet
heneedf
orhar
mles
sci
gar
ett
es,mor
efuel
-ef
fi
cientc
ars
,et
c.I
nthi
scas
e,t
he
mar
ket
ingt
aski
scal
ledDEVEL
OPMENTALmar
ket
ingandi
tst
aski
stomeas
uret
he

7|Page
s
izeoft
hepot
ent
ialmar
ketandt
ryi
ngt
odev
elopanewpr
oduc
tors
erv
icet
hatwoul
d
s
ati
sfyt
hedemand.
4.F
all
ingdemand:Soonerorl
ater
,ev
eryor
gani
zat
ionf
acesf
all
ingdemandf
orone
ormor
eofi
tspr
oduc
ts.F
orexampl
e,chur
cheshav
eseent
hei
rmember
shi
pdec
line,
andpr
ivat
ecol
legeshav
eseenf
ewerappl
icat
ions
.Themar
ket
ermus
tfi
ndt
hec
aus
es
ofmar
ketdec
lineandr
e-s
timul
atedemandbyf
indi
ngnewmar
ket
s,c
hangi
ngpr
oduc
t
f
eat
ures
,orc
reat
ing mor
e ef
fec
tiv
ecommuni
cat
ion and t
he mar
ket
ing t
aski
s
REMARKETI
NG.
5.I
rregul
ardemand:I
tisas
tat
einwhi
cht
het
imi
ngpat
ter
nofdemandi
smar
kedby
s
eas
onalandv
olat
il
efl
uct
uat
ionsc
aus
ingpr
obl
emsofi
dlec
apac
ityandov
erwor
ked.
Forexampl
emus
eumsar
eunder
-vi
si
teddur
ingweekday
sandov
erwor
keddur
ing
weekends
.Thec
orr
espondi
ngmar
ket
ingt
aski
sSYNCHROMARKETI
NG,i
.e.
,tof
ind
way
stoal
tert
het
imepat
ter
nofdemandt
hroughf
lexi
blepr
ici
ng,pr
omot
ionand
ot
heri
ncent
ives
.

6.F
ulldemand:Theor
gani
zat
ionhasj
ustt
heamountofdemandi
twant
sandc
an
handl
e.I
tisas
tat
ewher
ethec
urr
entl
evelandt
imi
ngofdemandi
sequalt
othe
des
iredl
evelandt
imi
ngofdemand.Themar
ket
ingt
aski
sMAI
NTENANCEmar
ket
ing
andi
sdes
ignedt
omai
ntai
nthec
urr
entl
evelofdemandagai
nstc
hangi
ngc
ons
umer
pr
efer
enc
es. The or
gani
zat
ion mai
ntai
ns qual
it
y, and c
ont
inual
ly meas
ures
s
ati
sfac
tiont
omakes
urei
tisdoi
ngagoodj
ob.

7.Ov
erf
ulldemand:I
tisas
tat
einwhi
chdemandi
shi
ghert
hant
hec
ompanyc
anor
want
stohandl
e.Themar
ket
ingt
aski
scal
ledDEMARKETI
NG andi
tst
aski
sfi
ndi
ng
way
stor
educ
ethedemandt
empor
ari
ly,orper
manent
ly.De-
mar
ket
ingi
nvol
vess
uch
ac
tionsasr
ais
ingpr
icesandr
educ
ingpr
omot
ionands
erv
ice. I
tdoesnotai
mto
des
troydemand,butonl
ytor
educ
eit
.

8.Unwhol
esomedemand:Unwhol
esomepr
oduc
tss
uchasc
igar
ett
es,al
cohol
,and

8|Page
har
ddr
ugswi
llat
trac
tor
gani
zedef
for
ttodes
troyt
hedemandori
nter
esti
npar
tic
ular
pr
oduc
t or s
erv
ice. The c
orr
espondi
ng mar
ket
ing t
ask i
s known as
COUNTERMARKETI
NG.I
tisadi
ff
icul
ttas
kint
hatt
heai
mist
ogetpeopl
ewhol
ike
s
omet
hingt
ogi
vei
tup.Mar
ket
ingmanagerc
opewi
tht
hes
etas
ksbyc
arr
yingout
mar
ket
ingr
esear
ch,pl
anni
ng,i
mpl
ement
ati
onandc
ont
rol
.
Thedemandl
evel
sandc
orr
espondi
ngmar
ket
ingt
asksar
esummar
izedasf
oll
ows
:
Stateofdemand Mar ket
ingt
ask FormalName
1. Negativedemand Disabusedemand Conver si
onalmar keti
ng
2. Nodemand Createdemand Sti
mul ati
onMar keti
ng
3. Latentdemand Dev el
opdemand Development al
mar keti
ng
4. Fall
ingdemand Revi
taliz
eddemand Remar keti
ngmar keti
ng
5. I
r r
egulardemand Synchroniz
edemand Synchro-mar keti
ng
6. Fulldemand Maintain Maintenanc emar keti
ng
7. Over f
ulldemand Reduc edemand Demar ketingmar ket
ing
8. Unwhol esome Destroydemand Countermar keti
ng
demand

Chapt
erTwo
Mar
ket
ingEnv
ironmentandMar
ket
ingI
nfor
mat
ion
Ac ompany '
s mar keti
ng env ir
onmentc ons i
sts oft he act
ors and forces outsi
de
marketing t
hataf fectmar keting management 's abili
tyto develop and mai ntai
n
succ
es sf
ultransactionswi t
hi tstar
getcus tomers.Themar keti
ngenv i
ronmentof fer
s
bothoppor t
uni t
iesandt hreats.Compani esmus tus et hei
rmar keti
ngr esear
chand
i
ntel
ligences yst
ems t o wat c
ht he changi ng envir
onmentand mus tadaptt hei
r
marketingst
r at
egiest oenvironmentaltr
endsanddev elopments.
9|Page
 Themar keti
ngenv i
ronmentconsist
sofi nt
ernal(micro)envi
ronmentandex ter
nal
(macro)env i
ronment.Themicr
o-envir
onmentc ons
ist
soff or
cescloset
ot hec
ompany
thataffectitsabil
it
yt oser
vei tscustomers t hec ompany,s uppl
ier
s,market
ing
channelfirms,cus
tomermarkets,competi
torsandpublics
.

Themac ro-
envir
onmentc
ons i
stsofthel ar
gersoc
iet
alforcesthataff
ectthewhole
micro-envir
onment demogr aphic
,ec onomic
,natural
,technologi
cal
,pol
iti
caland
cul
turalf or
ces.Welookfi
rstatthec ompany'smicr
o-envi
ronmentandt henati t
s
macro- envi
ronment
.

2.
1. THECOMPANY’
SMACROENVI
RONMENT

Mac r
o-environmentsaref orcesthatshapeoppor t
uniti
esand posethreatstothe
company .Thesef orc
esar eunc ont
roll
ableanddet erminantf
orit
sexistence.I
tis
l
argers oci
etalforc
esthataffectmacroenvi
ronments uchasdemographi
c,economic
,
natural
,technologi
cal
,poli
tic
al,andcult
uralfor
ces
.

i
.Demogr
aphi
cEnvi
ronment
:-demogr
aphyi
sthes
tudyofhuman popul
ati
on i
n
ter
msofs iz
e,densi
ty,l
ocat
ion,age,gender,rac
e,oc
cupati
on,andotherst
ati
sti
cs.
Demographicenvi
ronmentisofmaj ori nt
eresttomarket
ersbecaus
ei ti
nvolv
es
peopl
e,andpeoplemakeupmar ket
s.
i
i.Economi
cEnvi
ronment
:-mar
ketr
equi
resbuy
ingpoweraswel
laspeopl
e.The
economi cenvir
onmentc onsi
stsoffactor
st hataff
ectconsumerpurchas
ingpower
ands pendingpatt
ern.Changesinmajorec onomicvari
abl
ess uc
hasincome,costof
li
ving,int
erestrat
e,ands avi
ngsandbower i
ngpattershaveimpactonthemar ket
place.Companiesshouldwatchthes
ev ari
ablesbyus i
ngeconomicf
orecas
ting.
i
ii
.Nat
uralEnvi
ronment
:-i
tinv
olv
eswi
tht
henat
uralr
esour
cest
hatar
eneededas
i
nputsbymarketersorthatareaf f
ec t
edbymar ketingacti
vit
ies
.Market
ersshoul
d
beawareoff
ourtrendsinthenaturalenv i
ronments
:-
a.Shortageofmater i
als
b. Inc
reasedcostofener gy
c.I nc
reasedpol
lution
d. Governmenti
nt erventi
oninnaturalres
ourcesmanagement

i
v.Technol
ogi
calEnvi
ronment
:-i
saf
orc
ethatc
reat
esnewt
echnol
ogi
es,c
reat
ingnew
productandmarketopport
uniti
es.I
tisthemostdramati
cf or
cenow shapi
ngour
desti
ny.Ever
ynew technologyrepl
acesan ol
dertechnology
.New technologi
es
creat
enew marketsandoppor t
unit
ies
.Themarket
ers houldwat
chthef ol
lowing

10|Page
 t
rendsi
ntec
hnol
ogy :
a) Fastpac eoftec
hnology
b) Conc entrat
iononmi nori
mpr
ovement
s
c)I ncreasedregulat
ion

v.Pol
it
icalenvi
ronment
:-
itc
ons
ist
sofl
aws
,gov
ernmentagenc
iesandpr
ess
uregr
oups
thatinf
luenceandli
mitorganizat
ionsandindi
vidual
sinagivensoc
iety
.Thepol
it
ics
ofac ountryar
einevi
tabl
ylinkedwi t
hgovernmentatti
tudestobus
inessandt
othe
freedom wit
hwhichtheyareall
owedt ooperat
e.

vi
.Cul
tur
alenvi
ronment
:-
is made up ofi
nst
it
uti
ons and ot
herf
orc
es t
hataf
fec
t
soc
iety’
sbasi
cvaluest
hatexpressedi
npeople’
sviewsoft
hemselv
esandot
her
sas
wellasi
ntheirv
iewoforgani
zati
ons,s
oci
ety
,natur
e,anduniv
ers
e.

2.
2.THECOMPANY’
SMI
CROENVI
RONMENT

I
tcons
istsoffor
cesthatcl
oset othecompanyt hataff
ectit
sabi
li
tytos
erv
ei ts
c
ust
omersi .
e.company,suppl
ier
s,mar ket
ing c
hannelfir
ms,cus
tomermarket
s,
c
ompeti
tors
,andpubl
ics
.Iti
scontr
oll
abl
ebymanagement .

A.TheCompany :-i
ndes i
gningmarketi
ngplans,mar ket
ingmanagementt akesot her
companygr oupi ntoac c
ountsuchasTopManagement ,Finance,R&D,andot her
depar t
ments.Theeffec
tofeac hdepartmenti smaxi maliftheaut onomyt heyar e
delegatedisli
ne.Undert hemarketi
ngc oncept,allofthesef unct
ionsmustt hink
consumer andt heyshouldworkinharmonyt opr ovi
des uppli
ercustomervalueand
sat
isfacti
on.

B.Suppliers:-theypr ovideresourcesneededbyt hec ompany’ssys

tem toproduceits
goodsands erv
ices.Thes uppliersbargai
ningpowermi ghtadvers
elyorfruit
full
yaff
ect
acompany .Mar keti
ngmanagementmus twatchalsosupplyavai
labil
it
yands uppli
ers
rel
iabil
it
y.The f inancial,storage,and ot her fact
orss hould be c onsi
dered in
determiningthes upplier.

C.Market
ingIntermedi
ari
es:-ar
efi
rmst
hathel
ptopr
omot
e,s
ell
,anddi
str
ibut
eit
s
goodstof
inalbuyers
.Iti
ncl
udes:

.Res
i eller
s:-ar e di
stri
but i
on channelfirmsthathel
pthe companytofind f
inal
customer s.E.
gwhol esalersandretai
ler
s
i
i. Physicaldistri
buti
onf irms :-helptos toc
kandmov egoodsfrom t
hei
rpointof
ori
gint otheirdesti
nation.
11|Page
i
i.F
i inancialintermediar i
es:-incl
ude banks,c r
editassoc
iati
ons and c
ompani es
,
insurancec ompanies ,andotherbusi
nessthathelpfi
nancet r
ans
acti
onsorinsure
againstther i
skassociatedwit
hthebuyingands el
li
ngproc
es s
.
Thec ompanymus teffecti
vel
ywor kwit
hs uppl
iersandmar keti
ngint
ermedi
ari
est o
optimizetheper for
manc eoft
heentir
esystems.

D.Mar ket
ing servi
ces agent
s:-t hey ar
e marketi
ng res
earchf i
rms,adver
tis
ing
agenci
es ,mediafir
ms ,andmarket
ingconsult
ingf
irm whi
chdif
ferbasedoncr
eativ
ity
,
quali
ty,servi
ce,andpr i
ce.

E.Customers:-thes
egroupsi nf
luencethecompany’seff
ort.Themagnitudeoft
heir
inf
luencedependsupont heirnature.Highdi
ssat
isf
act
ionmi ghtoutc
omeexpensiv
e
consequencefrom i
nsi
gnif
icancebadmout hi
ngupt opr ess
inglegaldeali
ngs
.Ther
e
arefiv
etypesofcust
omers:

F Consumermarket:-consi
stsofindi
vidual
sandhous
ehol
dst
hatbuygoods
&ser
v i
cesf
orper
sonalcons
umption.
F Busi
ness mar
ket
:- i s a market whi
ch buy
sfor f
urt
her pr
oces
s or
compoundint
heproduc
tionpr
ocess
.
F Res
ell
ermar
ket
:-
whi
chbuy
sgoodst
ores
ellatpr
ofi
t.
F Governmentmarket
:-ar
emadeupofgov er
nmentagenci
esthatbuygoodst
o
producepubl
ics
ervi
ceortr
ans
fert
othos
ewhoneedt heproduct
.
FI
nter
nationalmarket
:-isamar ketwhichcompris
esoft hos
ebuy
ers(
indi
vidual
ororganizat
ions
)outs
ideoft
hes el
ler
’scount
ryborder
.

F
.Compet
it
ors:-acompanymustprovi
degreaterc
ust
omerv
alueands
ati
sfac
tion
t
hanc
ompeti
tors
.Managi
ngcompet
it
or’
shol
dsitsownst
eps
:
a)I
dent
if
yingc
ompet
it
ors
,
b)Thei
robj
ect
ives
,
c
)Thei
rst
rat
egi
es,and
d)Meas
uri
ngt
hei
rreac
tionpat
ter
n
G.Publ
ics
:-i
sanygroupthathasanact
ualorpotent
iali
nteres
tinorimpactonan
or
ganiz
ati
on’
sabi
li
tyt
oachievei
tsobj
ect
ives
.Ther
eares eventypesofpubl
ic.Thes
e
ar
e:-

i
)F i
nanci
alpubl
ic:-i
tinf
luencet
heco`sabi
li
tyt
oobt ai
nfund.Devel
opmentbanks,
i
nvest
menthous es
,andpr i
vat
ebankswhic
hfaci
li
tatethefi
rm’sabil
it
ytoobtai
n
12|Page
 fundsaret
akenasf i
nanci
alpubl
ic.Theirdif
ferencewithf
inanci
ali
ntermedi
ari
esis
thatl
att
erfaci
li
tat
estrans
acti
onswhi lefi
nancialpubli
csgrantl
oans.Butbot
hc an
happenatthesamet i
mewi t
htheexc epti
ont oinsur
anceagents
.

i
i)Mediapublic
s:-carrynews ,featur
es,and edi
tor
ialopi
nion.Example:For
tune
newspaper,magaz
ines,FMr adio,ETV,etc
.Here,whil
emedi apubli
csaff
ectthe
publi
cit
yoffir
msandi tsoff
er,mediafir
mspr omoteone’
sproductonpaidterms
.Li
kethatoffi
nanc
ialpubli
csandi nt
ermediar
y

i
ii
)Bot
hmedi
apubl
icsandf
irmsmi
ghtbef
oundatt
hes
amet
ime.

i
v)Gov ernmentpubli
cs:-companiesmustanadv i
seons af
etyandot hermat
ter
sof
theirproductswhichthegov er
nmentmi ghtrel
easelegis
lat
ion.Exampl
e:The
Ethiopi
ans t
andardi
zat
ionauthori
tychec
koutwhet hertheproductisuptot he
standard.

v
) Citi
zenacti
onpublic
:-ac ompany’smar keti
ngdec i
sionsmaybeques t
ionedby
consumer’
sorgani
zations
,envir
onment algr oups,mi nori
tygroups,andot her
s.
Example:Dawn ofhope,f or i
nstanc
e,f i
ghtsf or HIV/AIDS v
ict
ims sot hat
marketi
ngfi
rmsconsiderthevi
cti
msi ntheirmar keti
ngdec i
si
ons.

v
i)Localpubl
ics
:-i
nc l
udeneighborhoodresi
dentsandcommuni tyor
gani
zati
ons.As
t
heyarethefir
stt obeaf
fectedphysi
call
y,t
heyalwaysquest
ionhowac ompanyis
c
onsider
atei
nt reati
ngi
tswas t
eandithelpsthesoc
iet
yatlarge.

v
ii)Generalpubl
ic:
-ac
ompanys houl
dthinkaboutthegeneralpubli
c’
satti
tudetowar
d
it
s pr oduct
s and ac t
ivi
ti
es. Peopl
e buy pr oducts by t heir fr
iends
`
recommendat i
on.I
ffr
iendbadmouths,buyerr
everseit
sbuy i
ngdecisi
on.

v
iii
)Int
ernalpubl
ics
:-i
ncl
ude wor
ker
s,manager
s,v
olunt
eer
s,and t
he boar
d of
di
rec
tor
s.I
nsi
dermi
ghtkeepc
ompanys
ecr
etandt
hri
vet
otheac
compl
is
hment
ofi
tsmar
ket
ingobj
ect
ives
.

2.
3.MARKETI
NGI
NFORMATI
ONSYSTEM ANDMARKETI
NGRESEARCH(
MIS)
2.
3.1.
Meani
ngofMar
ket
ingI
nfor
mat
ionSy
stem

13|Page
Ev
eryf
irm mus
tor
gani
zet
he f
low ofi
nfor
mat
ion t
oit
s mar
ket
ing manager
s.
Compani
esar
est
udy
ingt
hei
rmanager
’si
nfor
mat
ion’
sneedsanddes
igni
ngmar
ket
ing
i
nfor
mat
ions
yst
em t
omeett
hes
eneeds
.
A mar
ket
ingi
nfor
mat
ion s
yst
em c
ons
ist
sofpeopl
e,equi
pmentand pr
ocedur
eto
gat
hers
ort
,anal
yze,ev
aluat
eanddi
str
ibut
eneededt
imel
yandac
cur
atei
nfor
mat
ion
t
omar
ket
ingdec
isi
onmaker
s.
Themar
ket
ingmanager
stoc
arr
youtt
hei
ranal
ysi
s,pl
anni
ng,i
mpl
ement
ati
on,and
c
ont
rolr
espons
ibi
li
ti
es,t
heyneedi
nfor
mat
ionaboutdev
elopmenti
nthemar
ket
ing
env
ironment
.
Ther
oleoft
hei
nfor
mat
ions
yst
em i
stoas
ses
sthemanager
’si
nfor
mat
ionneeds
,
dev
elopt
heneededi
nfor
mat
ion,anddi
str
ibut
ethei
nfor
mat
ioni
sat
imel
yfas
hiont
o
t
hemar
ket
ingmanager
s.
Theneededi
nfor
mat
ioni
sdev
elopedt
hroughi
nter
nalc
ompanyr
ecor
ds,mar
ket
ing
i
ntel
li
genc
eac
tiv
iti
es,mar
ket
ingr
esear
ch,andmar
ket
ingdec
isi
ons
uppor
tanal
ysi
s.

2.
3.2.
1.Component
sofmar
ket
ingi
nfor
mat
ions
yst
em

Thec
omponent
sofmar
ket
ingi
nfor
mat
ions
yst
em ar
edes
cri
bedasf
oll
ows
:
1.I
nter
nalRec
ordSy
stem
Themos
tbas
ici
nfor
mat
ion s
yst
em us
ed bymar
ket
ingmanager
sist
hei
nter
nal
r
ecor
dss
yst
em t
hati
ncl
uded i
nthes
yst
em ar
erepor
tson or
der
s,s
ales
,pr
ices
,
i
nvent
oryl
evel
s,r
ecei
vabl
es,pay
abl
esand s
o on.Byanal
yzi
ng t
hisi
nfor
mat
ion,
mar
ket
ingmanager
scans
poti
mpor
tantoppor
tuni
ti
esandpr
obl
ems
.

2.Mar
ket
ingI
ntel
li
genc
eSy
stem
Thei
nter
nalr
ecor
dss
yst
em s
uppl
iesr
esul
tdat
a,t
hemar
ket
ingi
ntel
li
genc
esy
stem
s
uppl
ieshappeni
ngdat
a.MI
Scanbedef
inedasf
oll
ows
:

14|Page
Amar
ket
ingi
ntel
li
genc
esy
stem i
ssetofpr
ocedur
esands
our
cesus
edbymanger
sto
obt
aint
hei
rev
erydayi
nfor
mat
ionaboutper
tinentdev
elopmentar
ethemar
ket
ing
env
ironment
.
Mar
ket
ing manager
s of
ten c
arr
y on mar
ket
ing i
ntel
li
genc
e by r
eadi
ng books
,
news
paper
s,andt
radepubl
icat
ion:t
alki
ngt
ocus
tomer
s,s
uppl
ier
s,di
str
ibut
ors
,and
ot
herout
sider
s;andt
alki
ngwi
thot
hermanager
sandper
sonnelwi
thi
nthec
ompany
.

3.Mar
ket
ingRes
ear
chSy
stem
Mar
ket
ingmanager
sof
tenc
ommi
ssi
onmar
ket
ingr
esear
chf
ormals
tudi
esofs
pec
ifi
c
pr
obl
emsandoppor
tuni
ti
es.Theymayr
eques
tamar
kets
urv
ey,apr
oduc
tpr
efer
enc
e
t
est
,as
alesf
orec
astbyr
egi
on,orr
esear
chonadv
ert
isi
ngef
fec
tiv
enes
s.

2.
3.2.Mar
ket
ingRes
ear
ch
Mar
ket
ingr
esear
chc
anbedef
inedast
hes
yst
emat
icdes
ign,c
oll
ect
ion,anal
ysi
s,and
r
epor
tingofdat
aandf
indi
ngsr
elev
antt
oas
pec
ifi
cmar
ket
ings
ituat
ionf
aci
ngt
he
c
ompany
.
2.
3.2.
1.St
epsI
nvol
vedI
nMar
ket
ingRes
ear
ch
Themar
ket
ingr
esear
cht
akest
hef
oll
owi
ngs
eri
esofs
teps
:
1.Def
ini
ngt
hepr
obl
em andr
esear
chobj
ect
ives
2.Dev
elopt
her
esear
chpl
an
3.Col
lec
tthei
nfor
mat
ion
4.Anal
yzet
hei
nfor
mat
ion
5.Pr
esentt
hef
indi
ngs
1.Def
inet
hepr
obl
em andr
esear
chObj
ect
ives
Thef
irs
tst
epc
all
sfort
hemar
ket
ingmanagert
odef
inet
hepr
obl
em c
aref
ull
yand
agr
eeoft
her
esear
chobj
ect
ives
.Ther
eisas
ayi
ng; Apr
obl
em wel
ldef
inedi
shal
f
s
olv
ed .
Managementmus
twor
katdef
ini
ngt
hepr
obl
em nei
thert
oobr
oadl
ynornar
rowl
y.
Notal
lres
ear
ch pr
ojec
tsc
an be s
pec
ifi
cint
hei
robj
ect
ives
.Some r
esear
chi
s

15|Page
expl
orat
ory
;it
sgoali
stogat
herpr
eli
minar
ydat
atos
hedl
ightont
her
ealnat
ureof
t
he pr
obl
em and t
osugges
tpos
sibl
esol
uti
onsornew i
deas
.Some r
esear
chi
s
des
cri
pti
ve i
tseekst
oas
cer
tai
nmagni
tudes
.Somer
esear
chi
scas
ual i
tspur
pos
e
i
stot
estac
aus
eandef
fec
trel
ati
ons
hip

2.Dev
elopt
heRes
ear
chPl
an
Thes
econds
tageofmar
ket
ingr
esear
chc
all
sfordev
elopi
ngt
hemos
tef
fi
cientpl
an
f
orgat
her
ingt
heneededi
nfor
mat
ion.
Themar
ket
ingmangerneedst
oknowt
hec
ostoft
her
esear
chpl
anbef
oreappr
ovi
ng
i
t.Des
igni
ng a r
esear
ch pl
an c
all
sfordec
isi
on on t
he dat
asour
ces
,res
ear
ch
appr
oac
hes
,res
ear
chi
nst
rument
s,s
ampl
ingpl
anandc
ont
actmet
hods
.
v Sour
cesofDat
a
The r
esear
ch pl
an c
an c
allf
orgat
her
ings
econdar
ydat
a,pr
imar
ydat
a orbot
h.
Sec
ondar
ydat
aar
edat
athatwer
ecol
lec
tedf
oranot
herpur
pos
eandal
readyexi
st
s
omewher
e.
Pr
imar
ydat
aar
edat
agat
her
ed f
oras
pec
ifi
cpur
pos
eorf
oras
pec
ifi
cres
ear
ch
pr
otec
t.I
tcan be c
oll
ect
ed i
nf s Obs
ourway ervat
ion,f
ocusgr
oup,s
urveyand
exper
iment
s.

3.Col
lec
ttheI
nfor
mat
ion
Thedat
acol
lec
tionphas
eofmar
ket
ingr
esear
chi
sgener
all
ythemos
texpens
iveand
t
hemos
tpr
onet
oer
ror
.Int
hec
aseofs
urv
eys
,fourmaj
orpr
obl
emsar
ises
ome
r
espondent
swi
llnotbe athome and mus
tbe r
e-c
ont
act
ed orr
epl
aced.Ot
her
r
espondent
swi
llr
efus
etoc
ooper
ate.St
il
lot
her
swi
llgi
ve bi
ased ordi
shones
t
ans
wer
s.F
inal
ly,s
omei
nter
viewswi
llbi
asedordi
shones
t.

4.Anal
yzet
heI
nfor
mat
ion
Thenextt
olas
tst
epi
nthemar
ket
ingr
esear
chpr
oces
sist
oext
rac
tper
tinentf
indi
ngs
f
rom t
hec
oll
ect
eddat
a.

16|Page
5.Pr
esentt
heF
indi
ngs
Att
hel
asts
tepi
nmar
ket
ingr
esear
ch,t
her
esear
cher
spr
esenthi
sorherf
indi
ngst
o
t
her
elev
antpar
ties
.
Ther
esear
cher
spr
esentmaj
orf
indi
ngst
hatar
eper
tinentt
othemaj
ormar
ket
ing
dec
isi
onsf
aci
ngmanagement
.
v Mar
ket
ingDec
isi
onSuppor
tSy
stem (
MDSS)
Agr
oupi
ngnumberofor
gani
zat
ionsar
eus
ingamar
ket
ingdec
isi
onss
uppor
tsy
stem
t
ohel
pthei
rmar
ket
ingmanager
smakebet
terdec
isi
ons
.MDSSc
anbedef
inedas
f
oll
ows
:

A mar
ket
ingdec
isi
onss
uppor
tsy
stem (
MDSS)i
sac
oor
dinat
ed c
oll
ect
orofdat
a,
s
yst
emst
ool
s,andt
echni
queswi
ths
uppor
tings
oft
war
eandhar
dwar
ebywhi
chan
or
gani
zat
ion gat
her
s and i
nter
pret
srel
evant i
nfor
mat
ion f
rom bus
ines
s and
env
ironmentandt
urnsi
tint
oabas
isf
ormar
ket
ingac
tion.
Her
eishow MDSSwor
ks.Themanager
sputques
tionst
otheappr
opr
iat
emodel
l
ocat
edi
ntheMDSS.Themodeldr
awsupdat
a,whi
char
ethenanal
yzeds
tat
ist
ical
ly.

17|Page
 Chapt
erThr
ee
Anal
yzi
ngCons
umerandBus
ines
sMar
ket
s
I
ntr
oduc
tion
Manager
sinanor
gani
zat
ions
pendagr
eatdealoft
imet
hinki
ngaboutc
ust
omer
s.
Theywantt
oknowwhot
hei
rcus
tomer
sar
e,whatt
heyt
hinkandhowt
heyf
eel
,and
whyc
ust
omer
sbuyt
hei
rpr
oduc
trat
hert
hanc
ompet
it
ors
'owner
sthems
elv
esdonot
knowexac
tlywhatmot
ivat
est
hei
rbuy
ing.Butmanagementneedst
oputt
oppr
ior
ity
onunder
standi
ngc
ust
omer
sandwhatmakest
hem t
ick.
Thus
,under
standi
ngbuy
ers
’behav
iori
sanes
sent
ialbutdi
ff
icul
ttas
k t
hec
ompany
mus
tcar
eful
lypr
oduc
eit
spr
oduc
tandi
tsi
maget
omat
chbuy
erneedsanddes
ires
.
Butbuy
ersar
emov
ed byac
ompl
exs
etofdeep and s
ubt
lemot
ivat
ions
.Buy
er
behav
iors
pri
ngsf
rom deepl
yhel
dval
uesand at
ti
tudes
,fr
om whatt
heyt
hinkof
t
hems
elv
esandwhatt
heywantot
her
stot
hinkoft
hem,f
rom r
ati
onal
it
yandc
ommon
s
ens
e.

3.
1.Cons
umerBuy
ingBehav
ior

Cons
umer buy
ing behav
ior r
efer
stot
he buy
ing behav
ior off
inalc
ons
umer
,
i
ndi
vidual
sandhous
ehol
dswhobuygoodsands
erv
icesf
orper
sonalc
ons
umpt
ion.I
t
i
sal
loft
hes
efi
nalc
ons
umer
sthatmakeupt
hec
ons
umermar
ket
.

Cons
umer
sar
oundt
hewor
ldv
aryt
remendous
lyi
nage,i
ncome,educ
ati
onall
evel
,

18|Page
andt
ast
es.Ther
efor
e,mar
ket
ersneedt
osat
isf
ycons
umerneeds
.Andi
nor
dert
odo
t
his
,theyneedt
ounder
standt
hec
ons
umer
sorbuy
ersbehav
ior
.Ifc
ust
omer
sar
e
s
ati
sfi
ed:
∙ Theywi
llbuymor
eofac
ompani
es’
produc
ts
∙ Theyadv
ocat
eort
alkf
avor
abl
yaboutt
hec
ompani
esandc
ompany
'spr
oduc
t
∙ Theymayadv
icet
hec
ompanyf
ori
mpr
ovement
∙ Theygi
vel
it
tl
eat
tent
iont
oot
herc
ompani
esandt
hei
rgoods
∙ Theymaybuynewpr
oduc
tsoft
hec
ompany
.

Cons
umer
s orbuy
ers behav
iori
nvol
ves t
he ac
tiv
iti
es ofpeopl
e engaged when
s
elec
ting,pur
chas
ingandus
ingpr
oduc
ts,s
oast
osat
isf
ytheneedanddes
ire.I
tal
so
i
nvol
vest
hes
tudyof
:
F Whomakesupt
hemar
ket
?
∙ Cons
umerori
ndi
vidualorf
inalorul
ti
mat
eus
ersorbuyer
s-ar
ethos
egr
oups
thatpurchas
e produc
ts( goods & s
erv
ices
)for t
hei
r own per
sonalor
househol
duseconsumpti
onpur pos
e.

∙ Or
gani
zat
ionalorbus
ines
sori
ndus
tri
albuyer
s–ar
ethos
egr
oupsofbuy
ers
t
hatpurc haseproducts(goods&s ervi
ces
)foruseinmaki ngot herproducts
,
f
orresale,orf orday-t
o-dayoper at
ionpurpose.Thes
ei nc l
udegov ernment
i
nst
it
utions ,manufact
uringc ompanies
,resel
ler
s(wholes
aler s,ret
ail
ers)and
s
o on.Eac h oft hes
emar ketgroupshass peci
fi
cbehav iorsthatmus tbe
s
tudi
edbymar keters
.
F Pos
sibl
ereas
onsf
orpur
chas
ing?
∙ Tosolvespec i
fi
cpr oblems
∙ Topreventapr obl em fr
om occurri
ng
∙ Forsymbolicpur pose:emotionalandps
ychol
ogi
cals
ati
sfac
tion
∙ Outofahabi t
∙ Becauseofper suas i
on
∙ Becauseofc oercion.

19|Page
 F Whatki
ndofbuy
ingdec
isi
onsar
emade?
Hi
gh-i
nvolvementpur
chas
e oc
cas
ions t
ypi
cal
ly hav
e atl
eas
tone oft
he t
hree
charac
teri
sti
cs.
Thei
tem t
obepur chased;
∙ Isexpensi
ve,
∙ Canhav eseri
ousper
sonalcons
equenc
esor
,
∙ Couldrefl
ectonone'
ssoci
alimage.
F Whatar
ethekeypr
oces
sesi
npur
chas
ing?
Numberofbr
ands
,Numberofs
ell
ersc
ons
ider
ed,Numberofpr
oduc
tat
tri
but
es
ev
aluat
ed,Numberofext
ernali
nfor
mat
ions
our
ces
,inf
ormat
ions
our
cesus
ed,
Ti
mes
pents
ear
chi
ng
F Whati
nfl
uenc
est
hebuy
ingdec
isi
on?
Butt
hec
ent
ralques
tion i
n mar
ket
ingi
s:how do c
ons
umer
sres
pond t
ovar
ious
mar
ket
ingef
for
tst
hec
ompanymi
ghtus
e?Thec
ompanyt
hatr
eal
lyunder
standshow
c
ons
umer
swi
llr
espondt
odi
ff
erentpr
oduc
tfeat
ures
,pr
icesandadv
ert
isi
ngappeal
s
hasagr
eatadv
ant
ageov
eri
tsc
ompet
it
ors
.

Mar
ket
ing&other Buy
er'
sBlac
k Buyer
's
st
imul
i Box r
esponses

Productchoi
ce
Pr
oduct Poli
ti
cal Buyi
ng Brandchoice
Pr
ice Economic Buyer
Deci
sion Dealerchoi
ce
Pl
ace Soci
o-cul
tur charac
ter
ist
ic
Proc
es s Purchaseti
ming
Pr
omoti
on al Purchaseamount

F
ig.5.
1Modelofbuy
erbehav
ior

Thef
igur
eshowst
hatmar
ket
ingandot
hers
timul
ient
ert
hec
ons
umer
's"
blac
kbox"
andpr
oduc
ecer
tai
nres
pons
est
hatmar
ket
ersmus
tfi
gur
eoutwhati
sint
hebuy
er'
s
bl
ackbox.

20|Page
Mar
ket
ings
timul
icons
istoft
he4(
four
)Ps
:Pr
oduc
t,Pr
ice,Pl
aceandPr
omot
ion.
Ot
her s
timul
iinc
lude maj
or f
orc
es and ev
ent
sin t
he buy
er'
s env
ironment
:
Pol
it
ical
-l
egal
,Soc
io-
Cul
tur
al,Ec
onomi
cand Tec
hnol
ogi
calf
act
ors
.Al
lthes
einput
s
ent
ert
hebuy
er'
sbl
ackbox,wher
etheyar
etur
nedi
ntoobs
erv
abl
ebuy
err
espons
es:
Pr
oduc
tchoi
ce,Br
anc
hoi
ce,Deal
erc
hoi
ce,Pur
chas
eti
mingandPur
chas
eamount
.

Themar
ket
erwant
stounder
standhowt
hes
timul
iar
echangedi
ntor
espons
esi
nsi
de
t
he c
ons
umer
'sbl
ack box,whi
ch hast
wo par
ts.F
irs
t,t
he buy
erc
har
act
eri
sti
cs
i
nfl
uenc
ehowhe/
sheper
cei
vesandr
eac
tst
othes
timul
i.Sec
ond,t
hebuy
er'
sdec
isi
on
pr
oces
sit
sel
faf
fec
tst
hebuy
erbehav
ior
.

3.
2.F
act
orsAf
fec
tingCons
umerBehav
ior
Consumerpurchasesareinfl
uencedstr
ongl
ybyc ult
ure,s
oc i
algr
oups,pers
onaland
psyc
hologi
calc
haracter
ist
ics
.Forthemostpartmarket
erscannotcont
rols
uchfact
ors
,
buttheymusttakethem i
ntoaccount
.
1.Cul
tur
alF
act
ors
Cul
turalfactor
sexer
tthebroades
tanddeepes
tinf
luenc
eonconsumerbehavior
.The
marketerneedstounders
tandtherol
epl
ayedbythebuyer
'sc
ult
ure,s
ub-cul
tureand
soc
ialclass
.
m Cul
tur
e
Everygroupors ocietyhasac ult
ure,andc ult
uralinf
luencesonbuy ingbehavi
ormay
varygreatl
yfrom count r
yt ocountr
y.F ai
lur
et oadjusttothesediff
erencescanresul
t
ininef
fect
ivemar ketingorembar r
assi
ngmi stakes.Hencemar ket
ersarealwaystry
ing
tospotcultur
alshiftsinordertoimaginenewpr oductsthatmightbewant ed.
2.Soc
ialF
act
ors
Ac ons
umerbehav ioralsoisinf
luencedbys oci
alfac
tor
s,suc
hasc onsumer
'ssmall
groups
,fami l
yands oci
alrol
esands t
atus
.Becausethes
esocialf
actor
scanstr
ongl
y
aff
ectconsumerresponses,companiesmus tt
akethem i
ntoaccountwhendesi
gni
ng
thei
rmar ket
ings
trategi
es.
m Gr
oups

21|Page
Aper son'
sbehaviorisinfl
uenc edbymanys mallgroups.Groupswhi chhaveadi rect
inf
luenceandt owhi chaper s
onbel ongsar ecal
ledmember shi
pgr oups.Somear e
primarygroupswi thwhom t her eisr egul
arbutinformalinteracti
onsuchasf ami l
y,
fri
ends,neighborsand c o-wor kers.Somear esecondarygr oups,which aremor e
formalandhav el essregularint er
action.Theseincl
udeor ganizat
ionsli
ker el
igi
ous
groups,prof
essi
onalassociati
onsandt radeunions.
m F
ami
ly
Fami l
ymember scanstrongl
yi nfl
uenc ebuy erbehav i
or.Wec andi sti
nguishbetween
twof ami l
iesinthebuyer'
slif
e.Thebuy er'
spar entsmakeupt hef ami l
yofor i
ent
ation.
Par entsprovideapersonwi t
hanor ientat
iont owardr el
igi
on,pol iti
cs,andeconomi cs
andas enseofpersonalambi ti
on,s el
f-worth,andl ove.Ev enifthebuy ernolonger
interactsv erymuchwi t
hpar ents,theyc ans t
il
lsignif
icantl
yi nfluencet hebuyer's
behav ior.I ncountr
ieswher e par entsc onti
nue tol i
ve witht heirc hi
ldr
en their
infl
uenc ec anbecruci
al
m Rol
esandSt
atus
Aper s
onbel ongst omanygr oups f amil
y,cl
ubs,andorgani
zati
ons.Theper son'
s
posi
tionineac hgr oupcanbedef i
nedintermsofbothroleandstat
us.Fori
ns t
ance,a
pers
onpl aysther oleofac hildwithhis/
herparents
.Inhis/
herfamily
,he/shepl ay
s
theroleofmar ket
ingmanager .Ar ol
econsist
softheact
ivi
ti
espeopleareexpectedto
perf
or m accordingtotheper s
onsar oundthem.Eachofaperson'
sroleswil
linfl
uence
someofhi s
/herbuy ingbehavior.
Eachrolecar
riesast
atusref
lecti
ngt hegenerales
teem giventoi tbysoci
ety
.Peopl
e
oft
enc hooseproduc
tsthats how theirstat
usins oci
ety.Forexampl e,therol
eof
marketi
ngmanagerhasmor es t
atusi nours oci
etythant her oleofac hi
ld.Asa
marketi
ngmanager,apersonwi llbuyt hekindofclot
hingt hatrefl
ect
shis/
herrol
e
andstatus
.
3.Per
sonalF
act
ors
Abuyer'
sdecisi
onsals
oareinf
luencedbypers
onalcharac
ter
ist
icssuchast
hebuyer
's
ageandl i
fe-
cycl
estage,oc
cupati
on,economicsi
tuati
on,li
fes
tyles
,andpers
onali
ty
andsel
f-
concept.
m AgeandL
ifec
ycl
eSt
age
Peoplechangethegoodsandser
vicest
heybuyovert hei
rlif
eti
mes.Tas
tesinf
ood,
cl
othes,f
urnit
ureandrecr
eat
ionareoft
enagerel
ated.Buyingisal
soshapedbythe

22|Page
st
ageofthefamilyl
if
ec ycl
e t hes t
agesthr
oughwhi c
hf amili
esmightpassast
hey
matur
eov er
time.Marketer
softendef i
nethei
rtargetmar ket
sintermsoflif
ecycl
e
st
ageanddevelopappropri
ateproductsandmarket
ingplansforeac
hs t
age.
m Oc
cupat
ion
Aper son'soccupati
onaf fect
sthegoodsands ervi
cesbought.Bl
ue-col
larworkerstend
tobuymor ewor kc l
othes,whereaswhi te coll
arwor ker
sbuymor es uit
sandt ies
.
Market erstr
yt oidentif
yt heoc cupationalgroupsthathav ean above av erage
int
eresti ntheirpr oductsands ervi
ces.A companyc anevenspecial
izeinmaki ng
produc tsneeded byagi veoc cupati
onalgroup.F orexample,comput ersoftware
compani es willdes i
gn differ
entpr oduc t
sf ormar keti
ng managers,accountants
,
engineers,l
awy ersanddoc tors.
m Ec
onomi
cSi
tuat
ion
A per s
on'seconomics it
uati
on willaf fec
tpr oductchoice.A pers on can consider
buy i
nganexpens i
veproduct(brand)ifhe/shehasenoughs pendabl
ei ncome,s av
ings,
orbor rowingpower.Mar keter
sofi ncomes ensiti
vegoodsc l
osel
ywat cht r
endsi n
personalincome,s av
ingsand i nter es
tr at
es .Ifeconomi cindicator
spoi ntt oa
recessi
on,mar ket
ersc an take steps t oredesign,reposit
ion,and r e-pr
icet heir
produc t
s.
m L
ifeSt
yle
Peoplecomingf rom thesamesubcul
ture,soci
alclass
,andoc cupati
onmayhav equite
dif
ferentli
fest
yle.L i
fest
yleisaperson'spattern ofliv
ingasexpr essed i
n his/her
act
ivi
ties
,inter
es tandopi ni
ons
.Li
fes
tylecapturessomet hi
ngmor ethantheper son's
soci
alc l
ass orper sonal
ity
.Itprof
iles a person's whole patt
ern ofacting and
int
eracti
nginthewor l
d.

4.Ps
ychol
ogi
calF
act
ors
Aperson'
sbuyingchoicesarefurtherinf
luenc
edbyf ourmaj
orps
ychol
ogi
calf
act
ors
:
Mot
ivati
on,Per
c ept
ion,Lear
ning,Beli
efsandatti
tudes
.
m Mot
ivat
ion
Aper s
onhasmanyneedsatanygi ventime.Somear ebiologi
cal,ari
si
ngfrom s
tates
oftensi
onsuc
hashunger,t
hirstordis
comf ort
.Othersarepsychologi
cal
,ar
isi
ngfrom
theneedforrec
ogni
ti
on,esteem orbelongingnes
s.Mos toftheseneedswi l
lnotbe
str
ongenoughtomoti
vat
etheper sontoactatagi venpointi
nt i
me.Aneedbec omes
23|Page
amoti
vewhenitisarousedtoasuff
ici
entl
evelofi
ntensi
ty.Amot i
ve(
dri
ve)i
saneed
t
hati
ssuf
fi
cient
lypress
ingtodi
rectt
hepersontoseeksati
sfac
tion.
m Per
cept
ion
Amot
ivat
edper
soni
sreadyt
oac
t.How t
heper
sonac
tsi
sinf
luenc
edbyhi
s/her
per
cept
ionoft
hes
ituat
ion.Twopeopl
ewi
tht
hes
amemot
ivat
ionandi
nthes
ame
s
ituat
ionmayac
tqui
tedi
ff
erent
lybec
aus
etheyper
cei
vet
hes
ituat
iondi
ff
erent
ly.

Whydopeopl
eper
cei
vet
hes
ames
ituat
iondi
ff
erent
ly?Al
lofusl
ear
nbyt
hef
lowof
i
nfor
mat
iont
hroughourf
ives
ens
es:s
ight
,hear
ing,s
mel
l,t
ouc
handt
ast
e.Howev
er,
eac
hofusr
ecei
ves
,or
gani
zes
,andi
nter
pret
sthi
ssens
oryi
nfor
mat
ioni
nani
ndi
vidual
way
.Per
cept
ion i
sthe pr
oces
s by whi
ch peopl
esel
ect
,or
gani
ze and i
nter
pret
i
nfor
mat
ion t
ofor
m meani
ngf
ulpi
ctur
eoft
hewor
ld.Peopl
ecan f
orm di
ff
erent
per
cept
ionsoft
hes
ames
timul
usbec
aus
eoft
hreeper
cept
ualpr
oces
ses
:sel
ect
ive
at
tent
ion,s
elec
tiv
edi
stor
tionands
elec
tiv
eret
ent
ion.
m L
ear
ning
Whenpeopl
eac
t,t
heyl
ear
n.L
ear
ningdes
cri
besc
hangesi
nani
ndi
vidual
'
sbehav
ior
ar
isi
ngf
rom exper
ienc
e.L
ear
ningt
heor
ist
ssayt
hatmos
thumanbehav
iori
slear
ned.
L
ear
ningoc
cur
sthr
ought
hei
nter
playofdr
ives
,st
imul
i,r
espons
esandr
einf
orc
ement
.

Thepr
act
icals
igni
fi
canc
eofl
ear
ningt
heor
yformar
ket
ersi
sthatt
heyc
anbui
ldup
demandf
orapr
oduc
tbyas
soc
iat
ingi
twi
ths
trongdr
ives
,us
ingmot
ivat
ingc
ues
,and
pr
ovi
dingpos
iti
ver
einf
orc
ement
.

m Bel
ief
sandAt
ti
tudes
Thr
oughdoi
ngandl
ear
ning,peopl
eac
qui
ret
hei
rbel
ief
sandat
ti
tudes
.Thes
e,i
ntur
n,
i
nfl
uenc
ethei
rbuy
ingbehav
ior
.Abel
iefi
sades
cri
pti
vet
houghtt
hataper
sonhas
abouts
omet
hing.

24|Page
Mar
ket
ersar
eint
eres
tedi
nthebel
ief
sthatpeopl
efor
mul
ateabouts
pec
ifi
cpr
oduc
ts
ands
erv
ices
,bec
aus
ether
ebel
ief
smakeuppr
oduc
tandbr
andi
magest
hataf
fec
t
buy
ingbehav
ior
.Ifs
omeoft
hebel
ief
sar
ewr
ongandpr
eventpur
chas
e,t
hemar
ket
er
wi
llwantt
olaunc
hac
ampai
gnt
ocor
rec
tthem.

Peopl
ehav
eat
ti
tudesr
egar
dingr
eli
gion,pol
it
ics
,cl
othes
,mus
ic,f
oodandal
mos
t
ev
ery
thi
ngel
se.An at
ti
tudedes
cri
besaper
son'
srel
ati
vel
ycons
ist
entev
aluat
ions
,
f
eel
ingsandt
endenc
iest
owar
danobj
ectori
dea.At
ti
tudesputpeopl
eint
oaf
rameof
mi
ndofl
iki
ngordi
sl
iki
ngt
hings
,ofmov
ingt
owar
dorawayf
rom t
hem.

At
ti
tudesar
edi
ff
icul
ttoc
hange.Aper
son'
sat
ti
tudesf
iti
ntoapat
ter
n,andt
ochange
oneat
ti
tudemayr
equi
redi
ff
icul
tadj
ust
ment
sin manyot
her
s.Thus
,ac
ompany
s
houl
dus
ual
lyt
ryt
ofi
tit
spr
oduc
tsi
ntoexi
sti
ngat
ti
tudesr
athert
hant
ryt
ochange
at
ti
tudes
.Ofc
our
se,t
her
ear
eexpec
tat
ionsi
nwhi
cht
hegr
eatc
ostoft
ryi
ngt
ochange
at
ti
tudesmaypayof
f.

3.
3.TheBuy
ingDec
isi
onPr
oces
s
The c
ons
umerpas
sest
hrough f
ives
tages
:need r
ecogni
ti
on,i
nfor
mat
ion s
ear
ch,
ev
aluat
ionofal
ter
nat
ives
,pur
chas
edec
isi
on,andpos
tpur
chas
ebehav
ior
.Cl
ear
lyt
he
buy
ingpr
oces
sst
art
slongbef
oreac
tualpur
chas
eandc
ont
inuesl
ongaf
ter
.Mar
ket
ers
needt
ofoc
usont
heent
irebuy
ingpr
oces
srat
hert
hanonj
ustt
hepur
chas
edec
isi
on.

Cons
umer
spas
sthr
oughal
lthef
ives
tageswi
thev
erypur
chas
e.Buti
nmor
erout
ine
pur
chas
es,t
heyof
tens
kiporr
ever
ses
omeoft
hes
tages
.Howev
er,weus
ethemodel
i
nthe f
igur
e bel
ow bec
aus
eits
howsal
lthe c
ons
ider
ati
onst
hatar
ise when a
c
ons
umerf
aceanextandc
ompl
expur
chas
esi
tuat
ions
.

Need I
nformati
on Ev
aluati
onof Pur
chase Post
Rec
ogni
ti
on Sear
ch Alt
ernati
ves Deci
si
on Purchase
Behavior

25|Page
 F
ig.5.
2Buy
erDec
isi
onPr
oces
s
i
.NeedRec
ogni
ti
on
The buy
ing pr
oces
sst
art
swi
th need r
ecogni
ti
on wher
ethe buy
err
ecogni
zesa
pr
obl
em orneed.Thebuy
ers
ens
eshi
s/herac
tuals
tat
eands
omedes
ireds
tat
e.The
needc
anbet
rigger
edbyi
nter
nals
timul
iwhenoneoft
heper
son’
snor
malneeds
,
hunger
,thi
rst r
isest
oal
evelhi
ghenought
obec
omeadr
ive.Aneedc
anal
sobe
t
rigger
edbyext
ernals
timul
i.Att
hiss
taget
hemar
ket
ers
houl
dres
ear
chc
ons
umer
sto
f
indoutwhatki
ndsofneedsorpr
obl
emsar
ise,whatbr
oughtt
hem about
,andhow
t
heyl
edt
hec
ons
umert
othi
spar
tic
ularpr
oduc
t.
i
i.I
nfor
mat
ionSear
ch
Anar
ous
edc
ons
umermayormaynots
ear
chf
ormor
einf
ormat
ion.I
fthec
ons
umer
's
dr
ivei
sst
rongandas
ati
sfy
ingpr
oduc
tisnearathand,t
hec
ons
umeri
sli
kel
ytobuyi
t
t
hen.I
fnott
hec
ons
umermaynots
tor
etheneed i
n memor
yorunder
takean
i
nfor
mat
ions
ear
chr
elat
edt
otheneed.
Thec
ons
umerc
anobt
aini
nfor
mat
ionf
rom anyofs
ever
als
our
ces
:
∙ Per
sonalSour
ce:f
ami
ly,f
riends
,nei
ghbor
s,ac
quai
ntanc
es.
∙ Commer
cialSour
ces
:adv
ert
isi
ng,s
ales
per
sons
,deal
ers
,pac
kages
,di
spl
ays
∙ Publ
icSour
ces
:mas
smedi
a,c
ons
umer
-rat
ingor
gani
zat
ions
.
Asmor
einf
ormat
ioni
sobt
ained,t
hec
ons
umer
s'awar
enes
sandknowl
edgeoft
he
av
ail
abl
ebr
andsandf
eat
uresi
ncr
eas
e.Ac
ompanymus
tdes
ignamar
ket
ingmi
xto
makepr
ospec
tsawar
eofandknowl
edgeabl
eabouti
tsbr
and.Cons
umer
sshoul
dbe
as
kedhow t
heyf
irs
thear
daboutt
hebr
and,whati
nfor
mat
iont
heyr
ecei
ved,and
whati
mpor
tanc
etheypl
acedondi
ff
erenti
nfor
mat
ions
our
ces
.
i
ii
.Ev
aluat
ionofAl
ter
nat
ives
Howdoest
hec
ons
umerc
hoos
eamongt
heal
ter
nat
ivebr
ands
?Themar
ket
erneedst
o
knowaboutal
ter
nat
iveev
aluat
iont
hati
s,howt
hec
ons
umerpr
oces
sesi
nfor
mat
iont
o
ar
riv
eatbr
andc
hoi
ces
.

26|Page
Cer
tai
nbas
icc
onc
ept
shel
pexpl
ainc
ons
umerev
aluat
ionpr
oces
s:
i
) Weas
sumet
hateac
hcons
umers
eesapr
oduc
tasabundl
eofpr
oduc
tat
tri
but
es.
Theypayt
hemos
tat
tent
iont
othos
eat
tri
but
esc
onnec
tedwi
tht
hei
rneeds
.
i
i)Thec
ons
umerwi
llat
tac
hdi
ff
erentdegr
eesofi
mpor
tanc
etodi
ff
erentat
tri
but
es
ac
cor
dingt
ohi
s/herneedsandwant
s.
i
ii
)Thec
ons
umeri
sli
kel
ytodev
elopas
etofbr
andbel
ief
saboutwher
eeac
hbr
and
s
tandst
oeac
h at
tri
but
e.Thes
etofbel
ief
shel
d aboutapar
tic
ularbr
and i
s
knownast
hebr
andi
mage.
i
v)The c
ons
umer
'sexpec
ted t
otalpr
oduc
tsat
isf
act
ion wi
llv
ary wi
thl
evel
sof
di
ff
erentat
tri
but
es.
v
)Thec
ons
umerar
riv
esatat
ti
tudest
owar
d(t
hrough)t
hedi
ff
erentbr
andst
hrough
s
omeev
aluat
ionpr
ocedur
e.
Mar
ket
erss
houl
dst
udy buy
erst
ofi
nd outhow t
hey ac
tual
ly ev
aluat
e br
and
al
ter
nat
ives
.
i
v.Pur
chas
eDec
isi
ons
I
ntheev
aluat
ions
tage,t
hec
ons
umerr
anksbr
andsandf
ormspur
chas
eint
ent
ions
.
Gener
all
y,t
hec
ons
umer
'spur
chas
edec
isi
onwi
llbet
obuymos
tpr
epar
edbr
and,but
t
wof
act
orsc
anc
omebet
weent
hepur
chas
eint
ent
ionandt
hepur
chas
edec
isi
on.The
f
irs
tfac
tori
stheat
ti
tudeofot
her
s.Thes
econd f
act
ori
sunexpec
ted s
ituat
ional
f
act
ors
.Thec
ons
umermayf
orm apur
chas
eint
ent
ion bas
ed on f
act
orss
uch as
expec
tedi
ncome,expec
tedpr
ice,andexpec
tedpr
oduc
tbenef
it
s.

v
.Pos
tPur
chas
eBehav
ior
Themar
ket
er'
sjobdoes
n'tendwhent
hepr
oduc
tisbought
.Af
terpur
chas
ingt
he
pr
oduc
t,t
he c
ons
umerwi
llbe s
ati
sfi
ed ordi
ssat
isf
ied and wi
llengage i
n pos
t
pur
chas
ebehav
iorofi
nter
estt
othemar
ket
er.Thenegat
ivef
eel
ingt
hatmayoc
cur

27|Page
af
ter a c
ommi
tment pur
chas
e has been made i
s c
all
ed ©®©®c
ogni
ti
ve
di
ssonanc
e©®©®.Whatdet
ermi
neswhet
hert
hebuy
eri
ssat
isf
iedordi
ssat
isf
ied
wi
th a pur
chas
e?The ans
werl
ies i
nthe r
elat
ions
hip bet
ween t
he c
ons
umer
's
expec
tat
ionsandt
hepr
oduc
t'sper
cei
vedper
for
manc
e.
I
fthepr
oduc
tfal
lss
hor
tofexpec
tat
ions
,thec
ons
umeri
sdi
sappoi
nted,i
fitmeet
s
expec
tat
ions
,the c
ons
umer i
s s
ati
sfi
ed, i
f pr
oduc
t's per
for
manc
e exc
eeds
expec
tat
ions
,thec
ons
umeri
sdel
ight
ed.

3.
4.Bus
ines
sBuy
ingBehav
ior
Bus
ines
sor
gani
zat
ionsdonotonl
ysel
l.Theyal
sobuyv
astquant
it
iesofr
awmat
eri
als
,
manuf
act
ured c
omponent
s,pl
antand equi
pment
,suppl
iesand bus
ines
sser
vic
es.
Ther
e ar
elar
ge number
s ofbuy
ing or
gani
zat
ions i
n Et
hiopi
a.Sel
ler
s need t
o
under
standt
hes
eor
gani
zat
ions
'needs
,res
our
ces
,pol
ici
esandbuy
ingpr
ocedur
es.
Webs
terandWi
nddef
inedor
gani
zat
ionalbuy
ingasf
oll
ows
:Or
gani
zat
ionalbuy
ingi
s
t
hedec
isi
onmaki
ngpr
oces
sbywhi
chf
ormalor
gani
zat
ionses
tabl
is
htheneedf
or
pur
chas
edpr
oduc
tsands
erv
icesandi
dent
if
y,ev
aluat
eandc
hoos
eamongal
ter
nat
ive
br
andsands
uppl
ies
.
Al
thoughnot
woc
ompani
esbuyi
nthes
ameway
,thes
ell
erhopest
oident
if
ycl
ust
ers
ofbus
ines
sfi
rmst
hatbuyi
nsi
mil
arway
stoper
mitmar
ket
ings
trat
egyt
arget
ing.

3.
5.I
nfl
uenc
esonOr
gani
zat
ionalBuy
ingDec
isi
on
Bus
ines
sbuy
ersr
espondt
omanyi
nfl
uenc
eswhent
heymaket
hei
rdec
isi
ons
.When
s
uppl
ier
s'of
fer
ings ar
e s
imi
lar
, bus
ines
s buy
ersc
an s
ati
sfyt
he pur
chas
ing
r
equi
rement
s wi
th any s
uppl
ier
,and t
hey pl
ace mor
e wei
ghti
nthe per
sonal
t
reat
mentt
heyr
ecei
ve.Wher
esuppl
ierof
fer
ingsdi
ff
ers
ubs
tant
ial
ly,bus
ines
sbuy
ers
ar
emor
eac
count
abl
efort
hei
rchoi
cesandpaymor
eat
tent
iont
oec
onomi
cfac
tor
s.
Bus
ines
sbuy
ersr
espond t
ofourmai
ninf
luenc
es,env
ironment
al,or
gani
zat
ional
,
i
nter
per
sonalandi
ndi
vidualf
act
ors
.

28|Page
1.Env
ironment
alF
act
ors
Bus
ines
sbuy
erspayc
los
eat
tent
iont
ocur
rentandexpec
tedec
onomi
cfac
tor
s,s
uch
ast
hel
evelofpr
oduc
tioni
nves
tment
,cons
umers
pendi
ngandt
hei
nter
estr
ate.I
na
r
eces
sion,bus
ines
s buy
ersr
educ
ethei
rinv
est
ment i
n pl
ant equi
pment and
i
nvent
ori
es.Bus
ines
smar
ket
ersc
an do l
it
tl
etos
timul
atet
otaldemand i
nthi
s
env
ironment
.Theyc
an onl
yfi
ghthar
dert
oinc
reas
e ormai
ntai
nthei
rshar
e of
demand.
Compani
est
hatf
earas
hor
tageofkeymat
eri
alsar
ewi
ll
ingt
obuyandhol
dlar
ge
i
nvent
ori
es.Theywi
lls
ignl
ong-
ter
mcont
rac
tswi
ths
uppl
ier
stoens
ureas
teadyf
low
ofmat
eri
als
.Bus
ines
sbuy
ersac
tiv
elymoni
tort
echnol
ogi
cal
,pol
it
icalr
egul
ator
yand
c
ompet
it
ivedev
elopment
s.F
orexampl
e,env
ironment
alc
onc
ernsc
aus
echangesi
n
bus
ines
sbuy
erbehav
ior
.Apr
int
ingf
irm mi
ghtf
avorpapers
uppl
ier
sthatc
arr
yawi
de
s
elec
tionofr
ecy
cledpaper
sori
nkv
endor
swhous
eenv
ironment
all
ysaf
eink.

2.Or
gani
zat
ionalF
act
ors
Ev
ery or
gani
zat
ion has s
pec
ifi
c pur
chas
ing obj
ect
ives
, pol
ici
es, pr
ocedur
es,
or
gani
zat
ionals
truc
tur
esands
yst
ems
.Bus
ines
smar
ket
ersneedt
obeawar
eoft
he
f
oll
owi
ngor
gani
zat
ionalt
rendsi
nthepur
chas
ingar
ea.
Pur
chas
ingdepar
tment
: pur
chas
ingdepar
tment
sint
hepas
toc
cupi
ed i
n al
ow
pos
iti
oni
nthemanagementhi
erar
chy
,ins
pit
eofmanagi
ngof
tenmor
ethanhal
fof
t
hec
ompany
’sc
ost
s.A t
ypi
calf
irm s
pendsabout60per
centofi
tsnets
aleson
pur
chas
edgoodsands
erv
ices
.Howev
er,r
ecentc
ompet
it
ivepr
ess
ureshav
eledmany
c
ompani
est
oupgr
adet
hei
rpur
chas
ingdepar
tment
sandel
evat
ethei
radmi
nis
trat
ors
.

3.I
nter
per
sonalF
act
ors
Buy
ingc
ent
ersus
ual
lyi
ncl
udes
ever
alpar
tic
ipant
swi
thdi
ff
eri
ngi
nter
est
s,aut
hor
ity
,
s
tat
us,empat
hyandper
suas
ivenes
s.Thebus
ines
smar
ket
eri
snotl
ikel
ytoknowwhat

29|Page
ki
nd ofgr
oup dy
nami
cst
akepl
acedur
ingt
hebuy
ingdec
isi
on pr
oces
s,al
though
what
everi
nfor
mat
ionheors
hec
andi
scov
eraboutper
sonal
it
iesandi
nter
per
sonal
f
act
orswoul
dbeus
eful
.

4.I
ndi
vidualF
act
ors
Eac
hbuy
erc
arr
iesper
sonalmot
ivat
ions
,per
cept
ionsandpr
efer
enc
esasi
nfl
uenc
ed
byt
hebuy
er’
sage,i
ncome,educ
ati
on,j
obpos
iti
on,per
sonal
it
y,at
ti
tudest
owar
ds
r
isk,andc
ult
ure.Buy
ersdef
ini
tel
yexhi
bitdi
ff
erentbuy
ings
tyl
es.Ther
ear
e keep i
t
s
impl
e buy
ers
, own exper
ts buy
ers
, want t
he bes
t buy
ers
,and want
ev
ery
thi
ng done buy
ers
.Somey
ounger
,hi
ghl
yeduc
ated buy
ersar
ecomput
er
exper
tswhoc
onduc
tri
gor
ousanal
ysesofc
ompet
it
ivepr
opos
alsbef
orec
hoos
inga
s
uppl
ier
.Ot
herbuy
ersar
e t
oughi
es f
rom t
heol
dsc
hoolandpi
tthec
ompet
ing
s
ell
ersagai
nstoneanot
her
.

3.
6.TheBus
ines
sBuy
ingDec
isi
onPr
oces
s
Bus
ines
sor
gani
zat
ionsdonotonl
ysel
l.Theyal
sobuyv
astquant
it
iesofr
awmat
eri
als
,
manuf
act
ured c
omponent
s,pl
antand equi
pment
,suppl
iesand bus
ines
sser
vic
es.
Ther
e ar
elar
ge number
s ofbuy
ing or
gani
zat
ions i
n Et
hiopi
a.Sel
ler
s need t
o
under
standt
hes
eor
gani
zat
ions
'needs
,res
our
ces
,pol
ici
esandbuy
ingpr
ocedur
es.
Webs
terandWi
nddef
inedor
gani
zat
ionalbuy
ingasf
oll
ows
:Or
gani
zat
ionalbuy
ingi
s
t
hedec
isi
onmaki
ngpr
oces
sbywhi
chf
ormalor
gani
zat
ionses
tabl
is
htheneedf
or
pur
chas
edpr
oduc
tsands
erv
icesandi
dent
if
y,ev
aluat
eandc
hoos
eamongal
ter
nat
ive
br
andsands
uppl
ies
.
Al
thoughnot
woc
ompani
esbuyi
nthes
ameway
,thes
ell
erhopest
oident
if
ycl
ust
ers
ofbus
ines
sfi
rmst
hatbuyi
nsi
mil
arway
stoper
mitmar
ket
ings
trat
egyt
arget
ing.
3.
6.1.Buy
ingSi
tuat
ionsi
nBus
ines
sBuy
ing
Thebus
ines
sbuy
erf
acesmanydec
isi
onsi
n maki
ngapur
chas
e.Thenumberof

30|Page
dec
isi
onsdependsont
het
ypeofbuy
ings
ituat
ion.Robi
nsonandot
her
sdi
sti
ngui
sh
t
hreet
ypesofbuy
ings
ituat
ions
:thes
trai
ghtr
e-buy
,modi
fi
edr
e-buy
,andnewt
ask.
i
.St
rai
ghtRe-
buy
The s
trai
ghtr
e-buy i
s a buy
ing s
ituat
ion i
n whi
cht
he pur
chas
ing depar
tment
r
e-or
der
sonar
out
ingbas
is(
e.g.of
fi
ces
uppl
ies
,bul
kchemi
cal
s).Thebuy
erc
hoos
es
f
rom s
uppl
ier
sonan"
appr
ovedl
is
t".Thes
esuppl
ier
smakeanef
for
ttomai
ntai
n
pr
oduc
tands
erv
icequal
it
y.Theyof
tenpr
opos
eaut
omat
icr
eor
der
ings
yst
emss
othat
t
hepur
chas
ingagentwi
lls
aver
eor
der
ingt
ime.Theout
-suppl
ier
sat
temptt
oof
fer
s
omet
hingnewort
oex
ploi
tdi
ssat
isf
act
ionwi
thac
urr
ents
uppl
ier
.Out
-suppl
ier
str
y
t
ogetas
mal
lor
derandt
henenl
arget
hei
rpur
chas
eshar
eov
ert
ime.
i
i.Modi
fi
edRe-
buy
Themodi
fi
ed r
e-buyi
sas
ituat
ion i
n whi
cht
hebuy
erwant
sto modi
fypr
oduc
t
s
pec
ifi
cat
ions
,pr
ices
,del
iver
yrequi
rement
sorot
herr
elat
ed i
tems
.Themodi
fi
ed
r
e-buyus
ual
lyi
nvol
vesaddi
ti
onaldec
isi
onpar
tic
ipantonbot
hsi
des
.Thei
n-s
uppl
ier
s
bec
ome ner
vous and hav
eto pr
otec
tthe ac
count
.The out
-suppl
ier
ssee an
oppor
tuni
tyt
opr
opos
eabet
terof
fert
ogai
nsomebus
ines
s.
i
ii
.NewTas
kBuy
ing
I
tisabuy
ings
ituat
ioni
nwhi
chapur
chas
erbuy
sapr
oduc
tors
erv
icef
ort
hef
irs
t
t
ime(
exampl
ecoul
dbeof
fi
cebui
ldi
ng,new s
ecur
itys
yst
em)
.Thegr
eat
ert
her
iskor
t
he c
ost
,the l
argert
he numberofdec
isi
on par
tic
ipant
sand t
he gr
eat
ert
hei
r
i
nfor
mat
iongat
her
ingandt
her
efor
ethel
ongert
het
imet
odec
isi
onc
ompl
eti
on.
New t
askbuy
ingpas
sest
hroughs
ever
als
tages
;awar
enes
s,i
nter
est
,ev
aluat
ion,t
rial
andadopt
ion.Communi
cat
iont
ool
sef
fec
tiv
enes
svar
iesateac
hst
age;s
alespeopl
e
hav
ethei
rgr
eat
esti
mpac
tatt
hei
nter
ests
tage;andt
echni
cals
our
cesar
ethemos
t
i
mpor
tantdur
ingt
heev
aluat
ions
tage.
3.
6.2.Dec
isi
onMaki
ngPr
oces
sinBus
ines
sBuy
ing
Bus
ines
sbuy
ersbuygoodsands
erv
icest
omak
emoneyort
oreduc
eoper
ati
ngc
ost
s

31|Page
ort
osat
isf
ysoc
ialorl
egalobl
igat
ions
.Manyf
irmshav
emov
edt
oapr
ocur
ement
or
ient
ati
on,i
n whi
cht
hey s
imul
taneous
lys
eek qual
it
yimpr
ovement
s and c
ost
r
educ
tions
.
Rat
hert
hanf
orc
ingl
owers
uppl
ierpr
icest
oac
hiev
ecos
treduc
tions
,pr
ocur
ement
or
ient
edbuy
ersdev
elopmor
ecol
labor
ati
ver
elat
ions
hipswi
thas
mal
lernumberof
s
uppl
ier
sands
eeks
avi
ngt
hroughbet
termanagementofac
qui
si
ti
on,c
onv
ers
ion,and
di
spos
alc
ost
s.Theywor
kcl
osel
ywi
tht
hei
rsuppl
ier
sinear
lys
uppl
ieri
nvol
vement
pr
ogr
amsonmat
eri
alshandl
ing,i
nvent
oryl
evel
s,j
ust i
n t
imemanagement
,and
ev
en pr
oduc
tco des
ign.Pr
ocur
ementbuy
ersf
ocust
hei
ref
for
tson negot
iat
ing
l
ong-
ter
mcont
rac
tswi
thmaj
ors
uppl
ier
stoens
uret
het
imel
yfl
owofmat
eri
als
.Thei
r
goali
stoes
tabl
is
hwi
n wi
nrel
ati
ons
hipswi
ths
uppl
ier
sandt
oshar
eanys
avi
ngs
equi
tabl
y. Wi
thi
n t
he f
irm, t
he pr
ocur
ement peopl
e wor
kcl
osel
y wi
th t
he
manuf
act
uri
nggr
ouponmat
eri
alsr
equi
rementpl
anni
ngt
omakes
uret
hats
uppl
ies
ar
riv
eont
ime.
As
uppl
ymanagementor
ient
ati
oni
nvol
vesaf
urt
herbr
oadeni
ngofpur
chas
ingr
ole
wher
epur
chas
ingi
sles
sofadepar
tmentand mor
eofs
trat
egi
cval
ue addi
ng
oper
ati
on.Thef
irm f
ocus
eson how t
oimpr
ovet
hewhol
eval
uec
hai
nfr
om r
aw
mat
eri
alst
oend-
user
s.
Robi
nsonandas
soc
iat
eshav
eident
if
iedei
ghts
tagesoft
hei
ndus
tri
albuy
ingpr
oces
s
andc
all
edt
hem buyphas
es.Theei
ghts
tepsf
ort
het
ypi
calnewt
ask-
buy
ings
ituat
ion
ar
easf
oll
ows
:

1.Pr
obl
em Rec
ogni
ti
on
Thebuy
ingpr
oces
sbei
ngswhens
omeonei
nthec
ompanyr
ecogni
zesapr
obl
em or
needt
hatc
anbemetbyac
qui
ri
ngagoodors
erv
ice.Ther
ecogni
ti
onc
anbet
rigger
ed
by i
nter
nalorext
ernals
timul
i.I
nter
nal
ly,t
he mos
tcommon ev
ent
sleadi
ng t
o
pr
obl
em r
ecogni
ti
onar
ethef
oll
owi
ng:

32|Page
 ∙ Thec
ompanydec
idest
odev
elopanewpr
oduc
tandneedsnewequi
pmentand
mat
eri
als
∙ Amac
hinebr
eaksdownandr
equi
resnewpar
ts
∙ Pur
chas
edmat
eri
alt
urnsoutt
obeuns
ati
sfac
tor
y,andt
hec
ompanys
ear
ches
f
oranot
hers
uppl
ier
.
∙ Apur
chas
ingmanagers
ens
esanoppor
tuni
tyt
oobt
ainl
owerpr
icesorbet
ter
qual
it
y.
Ext
ernal
ly,t
hebuy
ermaygetnewi
deasatat
rades
how,s
eeadv
ert
isi
ngorr
ecei
vea
c
allf
rom s
alesr
epr
esent
ati
veswhoof
fer
sabet
terpr
oduc
toral
owerpr
ice.Bus
ines
s
mar
ket
ersc
ans
timul
atepr
obl
em r
ecogni
ti
onbydi
rec
tmai
l;t
elemar
ket
ingandc
all
ing
onpr
ospec
ts.
2.Gener
alNeedDes
cri
pti
on
Her
ethebuy
erdet
ermi
nest
heneededi
tem’
sgener
alc
har
act
eri
sti
csandr
equi
red
quant
it
y.F
ors
tandar
dit
ems
,thi
sisnotv
eryi
nvol
vedpr
oces
s.F
orc
ompl
exi
tems
,the
buy
erwi
llwor
kwi
thot
her
s-engi
neer
s,us
ers
,et
c,t
odef
inet
heneededc
har
act
eri
sti
cs.
Thes
emayi
ncl
uder
eli
abi
li
ty,dur
abi
li
ty,pr
iceorot
herat
tri
but
es.Bus
ines
smar
ket
ers
c
anas
sis
tbuy
ersbydes
cri
binghowt
hei
rpr
oduc
tswoul
dmeett
hebuy
ers
’needs
.
3.Pr
oduc
tSpec
ifi
cat
ion
Thebuy
ingor
gani
zat
ionnow dev
elopst
hei
temst
echni
cals
pec
ifi
cat
ions
.Of
ten,t
he
c
ompanywi
llas
signapr
oduc
t-v
alue-
anal
ysi
s(PVA)engi
neer
ingt
eam t
othepr
ojec
t.
∙ Pr
oduc
tval
ueanal
ysi
sisanappr
oac
htoc
ostr
educ
tioni
nwhi
chc
omponent
s
ar
ecar
eful
lys
tudi
edt
odet
ermi
nei
ftheyc
anber
edes
ignedors
tandar
diz
edor
madebyc
heapermet
hodsofpr
oduc
tion.

4.Suppl
ierSear
ch
The buy
ernow t
riest
oident
if
ythe mos
tappr
opr
iat
esuppl
ier
s.The buy
erc
an
exami
ne t
rade di
rec
tor
ies
,do a c
omput
ers
ear
ch,phone or
derc
ompani
es f
or

33|Page
r
ecommendat
ions
,wat
cht
radeadv
ert
isement
s,andat
tendt
rades
hows
.Howev
er,
t
hes
eday
sthemos
tli
kel
ypl
acet
olooki
sont
hei
nter
net
.Fors
uppl
ier
s,t
hismeans
t
hatt
hepl
ayi
ngf
iel
disl
evel
ed.Smal
lers
uppl
ier
shav
ethes
ameadv
ant
agesasl
arger
onesandar
eli
stedi
nthes
ameon-
li
nec
atal
ogsf
oranomi
nalf
ee.
Thes
uppl
ier
'st
aski
stogetl
is
tedi
nmaj
oron-
li
nec
atal
ogsors
erv
ices
,dev
elopa
s
trongadv
ert
isi
ngandpr
omot
ionpr
ogr
am,andbui
ldagoodr
eput
ati
oni
nthemar
ket
pl
ace.Suppl
ier
swhol
ackt
her
equi
redpr
oduc
tionc
apac
ityors
uff
erf
rom apoor
r
eput
ati
onwi
llber
ejec
ted.Thos
ewhoqual
if
ymaybev
isi
tedbyt
hebuy
er’
sagent
s,
whowi
llexami
net
hes
uppl
ier
smanuf
act
uri
ngf
aci
li
ti
esandmeett
hei
rper
sonnel
.
Af
terev
aluat
ingeac
hcompany
,thebuy
erwi
llendupwi
thas
hor
tli
stofqual
if
ied
s
uppl
ier
s.
5.Pr
opos
alSol
ici
tat
ion
Thebuy
erwi
llnow i
nvi
tequal
if
ieds
uppl
ier
stos
ubmi
tpr
opos
als
.Wher
ethei
tem i
s
c
ompl
exorexpens
ivet
hebuy
erwi
llr
equi
readef
il
edwr
itt
enpr
opos
alf
rom eac
h
qual
if
ieds
uppl
ier
.Af
terev
aluat
ingt
hepr
opos
als
,thebuy
erwi
lli
nvi
teaf
ews
uppl
ier
s
t
omakef
ormalpr
esent
ati
ons
.
Bus
ines
smar
ket
ersmus
tthusbe s
kil
led i
nres
ear
chi
ng wr
iti
ng and pr
esent
ing
pr
opos
als
.Thei
rwr
itt
enpr
opos
alss
houl
dbemar
ket
ingdoc
ument
s,notj
ustt
echni
cal
doc
ument
s.Thei
ror
alpr
esent
ati
onss
houl
dins
pir
econf
idenc
e,pos
iti
oni
ng t
hei
r
c
ompany
’sc
apabi
li
ti
esandr
esour
cess
othatt
heys
tandoutf
rom t
hec
ompet
it
ion.
6.Suppl
ierSel
ect
ion
Bef
ores
elec
tingas
uppl
ier
,thebuy
ingc
ent
erwi
lls
pec
ifydes
ireds
uppl
ierat
tri
but
es
andi
ndi
cat
ethei
rrel
ati
vei
mpor
tanc
e.I
twi
llt
henr
ates
uppl
ier
sont
hes
eat
tri
but
es
andi
dent
if
iest
hemos
tac
tiv
esuppl
ier
s.
I
n pr
act
ice,bus
ines
sbuy
ersus
eav
ari
etyofmet
hodst
o as
ses
ssuppl
ierv
alue.
Bus
ines
smar
ket
ersneedt
odoabet
terj
obofunder
standi
nghow bus
ines
sbuy
ers
ar
riv
eatt
hei
rval
uat
ions
.

34|Page
7.Or
der
-Rout
ineSpec
ifi
cat
ion
Af
ters
elec
tingt
hes
uppl
ier
s,t
hebuy
ernegot
iat
est
hef
inalor
der
,li
sti
ngt
het
echni
cal
s
pec
ifi
cat
ions
;thequal
it
yneeded,t
heexpec
ted t
imeofdel
iver
y,r
etur
n pol
ici
es,
war
rant
iesands
oon.I
nthec
aseofmai
ntenanc
e,r
epai
randoper
ati
ngi
tems
,buy
ers
ar
emov
ingt
owar
dbl
anketc
ont
rac
tsr
athert
hanper
iodi
cpur
chas
eor
der
s.Abl
anket
c
ont
rac
tes
tabl
is
hesa l
ong-
ter
m r
elat
ions
hipi
n whi
cht
he s
uppl
ierpr
omi
sest
o
r
esuppl
ythebuy
erasneededatagr
eed-
uponpr
icesov
eras
pec
ifi
edper
iodoft
ime.
Bec
aus
ethe s
toc
kishel
d byt
he s
ell
er,bl
anketc
ont
rac
tsar
esomet
imesc
all
ed
s
toc
k-l
esspur
chas
epl
ans
.Thebuy
er’
scomput
eraut
omat
ical
lys
endsanor
dert
othe
s
ell
erwhens
toc
kisneeded.
8.Per
for
manc
eRev
iew
Thebuy
erper
iodi
cal
lyr
evi
ewst
heper
for
manc
eoft
hec
hos
en s
uppl
ier
(s)
.Thr
ee
met
hodsar
ecommonl
yus
ed.Thebuy
ermayc
ont
actt
heendus
ersandas
kfort
hei
r
ev
aluat
ionsort
hebuy
ermayr
atet
hes
uppl
ierons
ever
alc
rit
eri
aus
ingawei
ght
ed
s
cor
emet
hod.Ort
hebuy
ermi
ghtaggr
egat
ethec
ostofpoors
uppl
ierper
for
manc
eto
c
omeupwi
thadj
ust
edc
ost
sofpur
chas
e,i
ncl
udi
ngpr
ice.Theper
for
manc
erev
iew
mayl
eadt
hebuy
ert
ocont
inue,modi
fyorendt
her
elat
ions
hipwi
tht
hes
uppl
ier
.The
s
uppl
iers
houl
dmoni
tort
hes
amev
ari
abl
est
hatar
emoni
tor
edbyt
hepr
oduc
tbuy
ers
andendus
ers
.
Wehav
edes
cri
bedt
hebuy
ings
tagesi
nvol
vedi
nanew t
askbuy
ings
ituat
ion.I
n
modi
fi
ed-
rebuyors
trai
ghtr
e-buys
ituat
ions
,somes
tageswoul
dbec
ompr
ess
ed.F
or
exampl
e,i
nas
trai
ghtr
e-buys
ituat
ion,t
hebuy
ernor
mal
lyhasaf
avor
ites
uppl
ierora
r
ankedl
is
tofs
uppl
ier
s.Thust
hes
uppl
iers
ear
chandpr
opos
als
oli
cit
ati
ons
tages
woul
dbes
kipped.

3.
6.3.Par
tic
ipant
sint
heBus
ines
sBuy
ing TheBuy
ingCent
er
Whodoest
hebuy
ingoft
hous
andsofbi
rrwor
thofgoodsands
erv
icesneededby
bus
ines
sor
gani
zat
ions
?Pur
chas
ing agent
sar
einf
luent
iali
nst
rai
ghtr
e-buy and

35|Page
modi
fi
edr
e-buys
ituat
ions
,wher
easot
herdepar
tmentper
sonnelar
emor
einf
luent
ial
i
nnew-
buys
ituat
ions
.Engi
neer
ingper
sonnelus
ual
lyhav
emaj
ori
nfl
uenc
eins
elec
ting
pr
oduc
tcomponent
sandpur
chas
ingagent
sdomi
nat
eins
elec
tings
uppl
ier
s.

3.
6.3.
1.TheBuy
ingCent
er
Webs
terandWi
ndc
allt
hedec
isi
on-
maki
nguni
tofabuy
ingor
gani
zat
iont
hebuy
ing
c
ent
er.Thebuy
ingc
ent
eri
scompos
ed ofal
lthos
eindi
vidual
sand gr
oupswho
par
tic
ipat
eint
hepur
chas
ingdec
isi
on maki
ngpr
oces
s,whos
har
esomec
ommon
goal
sandt
her
isksar
isi
ngf
rom t
hedec
isi
ons
.Thebuy
ingc
ent
eri
ncl
udesal
lmember
s
oft
heor
gani
zat
ionwhopl
ayanyofs
ix(
6)r
olesi
nthepur
chas
edec
isi
onpr
oces
s.

; I
nit
iat
ors-t
hos
ewhor
eques
tthats
omet
hingbepur
chas
edt
hemaybeus
ersor
ot
her
sint
heor
gani
zat
ion.
; Us
ers-t
hos
ewhowi
llus
ethepr
oduc
tors
erv
ice.I
nmanyc
asest
heus
ersi
nit
iat
e
t
hebuy
ingpr
opos
alandhel
pdef
inet
hepr
oduc
trequi
rement
s.
; Deci
der
s-peopl
ewhodec
ideonpr
oduc
trequi
rement
sorons
uppl
ier
s.
; Appr
over
s-peopl
ewhoaut
hor
izet
hepr
opos
edac
tionsofdec
ider
sorbuy
ers
.
; Buyer
s-peopl
ewhohav
efor
malaut
hor
ityt
osel
ectt
hes
uppl
ierandar
ranget
he
pur
chas
eter
ms.Buy
ersmayhel
pshapepr
oduc
tspec
ifi
cat
ions
,butt
heypl
ayt
hei
r
maj
orr
olei
nsel
ect
ingv
endor
sandnegot
iat
ing.I
nmor
ecompl
expur
chas
es,t
he
buy
ermi
ghti
ncl
udehi
ghl
evelmanager
spar
tic
ipat
ingi
nthenegot
iat
ions
.
; Gat
ekeeper
s-peopl
ewhohav
ethepowert
opr
events
ell
ersori
nfor
mat
ionf
rom
r
eac
hing member
s oft
he buy
ing c
ent
er.F
or exampl
e,pur
chas
ing agent
s,
r
ecept
ioni
sts
,andt
elephoneoper
ator
smaypr
events
alesper
sonsf
rom c
ont
act
ing
us
ersordec
ider
s.
Theav
eragenumberofpeopl
einv
olv
edi
nabuy
ingdec
isi
onr
angesf
rom aboutt
hree
(
fors
erv
icesand i
temsus
ed i
n day
-to-
dayoper
ati
ons
)to al
mos
tfi
ve(
fors
uch
hi
gh-
ti
cketpur
chas
esasc
ons
truc
tionwor
kandmac
hiner
y).Ther
eisal
soat
rend

36|Page
t
owar
dteam bas
edbuy
ing.
Tot
argett
hei
ref
for
tspr
oper
ly,bus
ines
smar
ket
ershav
etof
igur
eout
:whoar
ethe
maj
ordec
isi
onpar
tic
ipant
s?Whatdec
isi
onsdot
heyi
nfl
uenc
e?Whatt
hei
rlev
elof
i
nfl
uenc
e?Whatev
aluat
ionc
rit
eri
adot
heyus
e?
Whenabuy
ingc
ent
eri
ncl
udesmanypar
tic
ipant
s,t
hebus
ines
smar
ket
erwi
llnothav
e
t
het
imeorr
esour
cest
oreac
hal
loft
hem.Smal
lsel
ler
sconc
ent
rat
eonr
eac
hingt
he
keybuy
ingi
nfl
uenc
ers
.Lar
ges
ell
ersgof
ormul
ti
lev
eli
n-dept
hsel
li
ngt
oreac
has
manypar
tic
ipant
saspos
sibl
e.Thei
rsal
espeopl
evi
rtual
lyl
ivewi
tht
hei
rhi
ghv
olume
c
ust
omer
s.Compani
eswi
llhav
etor
ely mor
e heav
ily on t
hei
rcommuni
cat
ions
pr
ogr
am t
oreac
hhi
ddenbuy
ingi
nfl
uenc
esandkeept
hei
rcur
rentc
ust
omer
ssol
d.

Chapt
erF
our
Tar
getMar
ket
ing:Mar
ketSegment
ati
on,Tar
get
ing&Pos
iti
oni
ng
4.
1.Mar
ketSegment
ati
on
Ac
ompanyc
annots
erv
eal
lcus
tomer
sinabr
oadmar
ket
.Thec
ust
omer
sar
etoo
numer
ousanddi
ver
sei
nthei
rbuy
ingr
equi
rement
s.Thec
ompanyneedst
oident
if
y
t
hemar
kets
egment
sthati
tcans
erv
emor
eef
fi
cient
ly.
Manyc
ompani
esar
eembr
aci
ngt
argetmar
ket
ing.Her
esel
ler
sdi
sti
ngui
sht
hemaj
or
mar
kets
egment
s,t
argetoneormor
eoft
hes
esegment
s,anddev
eloppr
oduc
tsand
mar
ket
ingpr
ogr
amst
ail
oredt
oeac
h.
Tar
getmar
ket
ingr
equi
resmar
ket
erst
otaket
hreemaj
ors
teps
:
1.I
dent
if
yand pr
ofi
le di
sti
nctgr
oup ofbuy
erswho mi
ghtr
equi
res
epar
ate
pr
oduc
tsormar
ket
ingmi
xes
.(Mar
ketSegment
ati
on)

37|Page
 2.Sel
ectoneormor
emar
kets
egment
stoent
er(
Mar
ketTar
get
ing)
3.Es
tabl
is
handc
ommuni
cat
ethepr
oduc
tskeydi
sti
nct
ivebenef
it
sint
hemar
ket
(
Mar
ketPos
iti
oni
ng)
Mar
ketSegment
ati
on i
sthepr
oces
sofi
dent
if
yingand pr
ofi
li
ngdi
sti
nctgr
oup of
buy
erswhomi
ghtr
equi
res
epar
atepr
oduc
tsormar
ket
ingmi
xes
.

4.
1.1.
Mar
ketSegment
ati
onPr
ocedur
e
Thet
hrees
tepspr
ocedur
efori
dent
if
yingmar
kets
egment
s:s
urv
ey,Anal
ysi
s,and
pr
ofi
li
ng.
St
epOne:Sur
veys
tage
Ther
esear
cherc
onduc
tsexpl
orat
oryi
nter
viewsandf
ocusgr
oupst
ogai
nins
ighti
nto
c
ons
umermot
ivat
ions
,at
ti
tudes
,and behav
ior
.Then t
he r
esear
cherpr
epar
esa
ques
tionnai
reandc
oll
ect
sdat
aonat
tri
but
esandt
hei
rimpor
tanc
erat
ings
;br
and
awar
enes
sandbr
andr
ati
ngs
;pr
oduc
tus
agepat
ter
ns,at
ti
tudest
owar
dthepr
oduc
t
c
ategor
y;anddemogr
aphi
cs,geogr
aphi
c,ps
ychogr
aphi
cs,andmedi
agr
aphi
csoft
he
r
espondent
s.
St
epTwo:Anal
ysi
sSt
age
Ther
esear
chesappl
yfac
toranal
ysi
stot
hedat
ator
emov
ehi
ghl
ycor
rel
atedv
ari
abl
es,
andt
henappl
ycl
ust
eranal
ysi
stoc
reat
eas
pec
ifi
ednumberofmaxi
mal
lydi
ff
erent
s
egment
s.

St
epThr
ee:-Pr
ofi
li
ngSt
age
Eac
hcl
ust
erpr
ofi
ledi
nter
msofi
tsdi
sti
ngui
shi
ngat
ti
tudes
,behav
ior
,demogr
aphi
cs,
ps
ychogr
aphi
cs,andmedi
apat
ter
ns.Eac
hsegmenti
sgi
venanamebas
edoni
ts
det
ermi
nantc
har
act
eri
sti
cs.

4.
1.2.
Lev
elsofMar
ketSegment
ati
on

38|Page
Mar
kets
egment
ati
oni
sanef
for
ttoi
ncr
eas
eac
ompany
’spr
eci
si
onmar
ket
ing.The
s
tar
tingpoi
ntofanys
egment
ati
ondi
scus
sioni
smas
smar
ket
ing.I
nmas
smar
ket
ing,
t
hes
ell
erengagesi
nthemas
spr
oduc
tion,andmas
spr
omot
ionofonepr
oduc
tforal
l
buy
ers
.
Thear
gument
sofmas
smar
ket
ingi
sthati
tcr
eat
est
hel
arges
tpot
ent
ialmar
ket
,whi
ch
l
eadst
othel
owes
tcos
ts,whi
chi
ntur
ncanl
eadt
olowerpr
icesorhi
ghermar
gins
.
1.SegmentMar
ket
ing
Amar
kets
egmentc
ons
ist
sofal
argei
dent
if
iabl
egr
oupwi
thi
namar
ketwi
ths
imi
lar
want
s,pur
chas
ingpower
,geogr
aphi
call
ocat
ion,buy
ingat
ti
tudes
,orbuy
inghabi
ts.
i
.e.Anaut
ocompanymayi
dent
if
yfourbr
oads
egment
s:c
arbuy
erswhoar
epr
imar
il
y
s
eeki
ngbas
ict
rans
por
tat
ionorhi
ghper
for
manc
eorl
uxur
yors
afet
y.
Segment
ati
on i
s an appr
oac
h mi
dway bet
ween mas
s mar
ket
ing and i
ndi
vidual
mar
ket
ing.Eac
hsegment
’sbuy
ersar
eas
sumed t
o bequi
tes
imi
lari
n want
sand
needs
,yetnot
wobuy
ersar
ereal
lyal
ike.Segmentmar
ket
ingof
fer
ssev
eralbenef
it
s
ov
ermas
smar
ket
ing.Thec
ompanyc
anc
reat
eamor
efi
ne-
tunedpr
oduc
tors
erv
ice
of
fer
ingandpr
icei
tappr
opr
iat
elyf
ort
het
argetaudi
enc
e.Thec
hoi
ceofdi
str
ibut
ion
c
hannel
sandc
ommuni
cat
ionsc
hannel
sbec
omesmuc
heas
ier
.Thec
ompanyal
so
mayf
acef
ewerc
ompet
it
orsi
nthepar
tic
ulars
egment
.
2.Ni
cheMar
ket
ing
Ani
chei
samor
enar
rowl
ydef
inedgr
oup,t
ypi
cal
lyas
mal
lmar
ketwhos
eneedsar
e
notwel
lser
ved.Mar
ket
ersus
ual
lyi
dent
if
yni
chesbydi
vidi
ngas
egmenti
ntos
ub
s
egment
sorbydef
ini
ng a gr
oup s
eeki
ng a di
str
act
ive mi
xofbenef
it
s.I
.e.t
he
s
egment
sofheav
ysmoker
sinc
ludet
hes
ewhoar
etr
yingt
ost
ops
moki
ngandt
hos
e
whodon’
tcar
e.
Wher
eass
egment
sar
efai
rl
ylar
geandnor
mal
lyat
trac
tsev
eralc
ompet
it
ors
,ni
ches
ar
efai
rl
ysmal
landnor
mal
lyat
trac
tonl
yoneort
wo.L
argec
ompani
esl
osepi
ecesof
t
hei
rmar
kett
oni
cher
s.

39|Page
Ni
chemar
ket
erspr
esumabl
yunder
stand t
hei
rcus
tomer
s’needss
o wel
lthatt
he
c
ust
omer
swi
ll
ingl
ypayapr
emi
um.
Eg.F
err
ariget
sahi
ghpr
icef
ori
tsc
arsbec
aus
eloy
albuy
ersf
eelnoot
heraut
omobi
le
c
omesc
los
etoof
fer
ingt
hepr
oduc
t-s
erv
ice-
member
shi
pbenef
it
shandl
ethatF
err
ari
does
.
Anat
trac
tiv
eni
chei
schar
act
eri
zedasf
oll
ows
:
Thec
ust
omer
sint
heni
chehav
eadi
sti
ncts
etofneeds
;theywi
llpayapr
emi
um t
o
t
hef
ir
mst
hatbes
tsat
isf
iest
hei
rneeds
;theni
chei
snotl
ikel
yto at
trac
tot
her
c
ompet
it
ors
;theni
chergai
nsc
ert
ainec
onomi
est
hroughs
pec
ial
iz
ati
on;andt
heni
che
hass
ize,pr
ofi
tandgr
owt
hpot
ent
ial
.
3.L
ocalMar
ket
ing
Tar
getmar
ket
ingi
sleadi
ngt
omar
ket
ingpr
ogr
amsbei
ngt
ail
oredt
otheneedsand
want
s ofl
ocalc
ust
omergr
oups (
tradi
ng ar
eas
,nei
ghbor
hoods
,ev
en i
ndi
vidual
s
tor
es)
.
Thos
efav
ori
ngl
ocal
iz
ingac
ompany
’smar
ket
ings
eenat
ionaladv
ert
isi
ngaswas
tef
ul
bec
aus
eitf
ail
stoaddr
essl
ocalneeds
.Thos
eagai
nstl
ocalmar
ket
ingar
guet
hati
t
dr
ivesupmanuf
act
uri
ngandmar
ket
ingc
ost
sbyr
educ
ingec
onomi
esofs
cal
e.
L
ogi
sti
calpr
obl
emsbec
omemagni
fi
ed when c
ompani
est
ryt
omeetv
ary
ingl
ocal
s
egment
s.
Abr
andov
eral
limagemi
ghtbedi
lut
edi
fthepr
oduc
tandmes
sagedi
ff
eri
ndi
ff
erent
l
ocal
it
ies
.
4.I
ndi
vidualMar
ket
ing
The ul
ti
mat
elev
elofs
egment
ati
on l
eads t
o Segment
s ofOne c
ust
omi
zed
mar
ket
ing, or
’one-
to-
one mar
ket
ing.F
orc
ount
ries
,cons
umer
swer
eser
ved as
i
ndi
vidual
s:The t
ail
ormade t
he s
uitand t
he c
obbl
erdes
igned s
hoes f
ort
he
i
ndi
vidual
.Muc
h bus
ines
s-t
o-bus
ines
s mar
ket
ing t
oday i
scus
tomi
zed,i
nthata
manuf
act
ure'
swi
llc
ust
omi
zet
heof
fer
,logi
sti
cs,c
ommuni
cat
ions
,andf
inanc
ialt
erms

40|Page
f
oreac
hmaj
orac
count
s,newt
echnol
ogi
esc
omput
ers
,dat
abas
es,r
obot
icpr
oduc
tion,
e-
mai
l,andf
ax-
per
mitc
ompani
est
oret
urnt
ocus
tomi
zedmar
ket
ing,orwhati
scal
led
Mas
scus
tomi
zat
ion .
Mas
scus
tomi
zat
ioni
stheabi
li
tyt
opr
epar
eonamas
sbas
isi
ndi
vidual
lydes
igned
pr
oduc
tsandc
ommuni
cat
ionst
omeeteac
hcus
tomer
’sr
equi
rement
s.
Todayc
ust
omer
sar
etaki
ngmor
eindi
viduali
nit
iat
ivei
ndet
ermi
ningwhatandhowt
o
t
ry.Theyl
ogont
othei
nter
net
;lookupi
nfor
mat
ionandev
aluat
orsofpr
oduc
tor
s
erv
icesof
fer
s;di
alogwi
ths
uppl
ier
s,us
ers
,andpr
oduc
tcr
iti
cs;andmakeupt
hei
r
ownmi
ndsaboutt
hebes
tof
fer
s.Mar
ket
erswi
lls
til
linf
luenc
ethepr
oces
sbuti
nnew
way
s.

Theywi
llneedt
osetupt
oll
-f
reephonenumber
sande-
mai
laddr
ess
est
oenabl
e
buy
erst
oreac
hthem wi
thques
tions
,sugges
tions
,andc
ompl
aint
s.Theywi
lli
nvol
ve
c
ust
omer
smor
eint
hepr
oduc
t-s
pec
ifi
cat
ionpr
oces
s.Theywi
lls
pons
orani
nter
net
homepaget
hatpr
ovi
desf
ulli
nfor
mat
ionaboutt
hec
ompany
’spr
oduc
ts,guar
ant
ees
,
andl
ocat
ions
.

4.
1.3.
Pat
ter
nofMar
ketSegment
ati
on
Mar
kets
egment
scan bebui
lti
n manyway
s.Onewayi
stoi
dent
if
ypr
efer
enc
e
s
egment
s.Suppos
eic
ecr
eam buy
ersar
eas
kedhowmuc
htheyv
alues
weet
nes
sand
c
reami
nes
sast
hepr
oduc
tat
tri
but
es.Thr
eedi
ff
erentpat
ter
nsc
anemer
ge.
v HomogeneousPr
efer
enc
es
Thi
spr
efer
enc
eshowsamar
ketwher
eal
lthec
ust
omer
shav
eroughl
ythes
ame
pr
efer
enc
e.Themar
kets
howsnonat
urals
egment
s.Wewoul
dpr
edi
ctt
hatexi
sti
ng
br
andswoul
dbes
imi
larandc
lus
terar
oundt
hemi
ddl
eoft
hes
cal
einbot
hsweet
nes
s
andc
reami
nes
s.
v Di
ff
usedPr
efer
enc
es
Att
heot
herext
reme,c
ons
umerpr
efer
enc
esmaybes
cat
ter
edt
hroughoutt
hes
pac
e;

41|Page
i
ndi
cat
ingt
hatc
ons
umer
svar
ygr
eat
lyi
nthei
rpr
efer
enc
es.Thef
irs
tbr
andt
oent
er
t
hemar
keti
sli
kel
ytopos
iti
onc
ent
ert
oappealt
othemos
tpeopl
e.Abr
andi
nthe
c
ent
ermi
nimi
zest
hes
um oft
otalc
ust
omsdi
ssat
isf
act
ion.As
econdc
ompet
it
orc
oul
d
l
ocat
enextt
othef
irs
tbr
andandf
ightf
ormar
kets
har
e.Ori
tcl
earl
ocat
eisac
orner
t
oat
trac
tac
ust
omsgr
oupt
hatwasnots
ati
sfi
edwi
tht
hec
lus
terbr
and.I
fsev
eral
br
andsar
eint
hemar
ket
,theyar
eli
kel
ytopos
iti
ont
hroughatt
hes
pac
eands
how
r
ealdi
ff
erenc
est
omat
chc
ons
umer
-pr
efer
enc
edi
ff
erenc
es.
v Cl
ust
eredPr
efer
enc
es
Themar
ketmi
ghtr
evealdi
sti
nctpr
efer
enc
ecl
ust
ers
,cal
lednat
uralmar
kets
egment
s.
Thef
irmi
nthi
smar
kethast
hreeopt
ions
.Itmi
ghtpos
iti
oni
nthec
ent
er,hopi
ngt
o
appealt
oal
lgr
oups
.Itmi
ghtpos
iti
oni
nthel
arges
tmar
kets
egment(
conc
ent
rat
ed
mar
ket
ing)
.Itmi
ghtdev
elops
ever
albr
ands
,eac
hpos
iti
onedi
nadi
ff
erents
egmentof
t
hef
irs
tfi
rm dev
eloped onl
yonebr
and,c
ompet
it
orswoul
d ent
erand i
ntr
oduc
e
br
andsi
ntheot
her
ssegment
s.
4.
1.4.
Bas
isf
orSegment
ati
on
Di
vidi
ngt
het
otalmar
keti
ntoul
ti
mat
econs
umerandbus
ines
sus
ers
egment
s,r
esul
ts
i
nsegment
sthatar
est
il
lbr
oadandv
ari
edf
ormos
tpr
oduc
ts.

Thec
ust
omermar
ketmaybedi
videdi
ntof
urt
hers
egment
sbas
edont
hef
oll
owi
ng
c
har
act
eri
sti
cs.
i
) Geogr
aphi
c
i
i)Demogr
aphi
c
i
ii
)Ps
ychogr
aphi
cs
i
v)Buy
ingBehav
ior
i
.Geogr
aphi
cSegment
ati
on
Subdi
vidi
ngmar
ket
sint
osegment
sbas
edongeogr
aphi
cdi
str
ibut
ion t
her
egi
ons
,

42|Page
c
ount
ries
,ci
ti
es,andt
ownswher
epeopl
eli
veandwor
k i
sus
ual
lyus
ed.Ther
eas
on
f
ort
hisi
ssi
mpl
ythatc
ons
umer
swant
sandpr
oduc
tsus
ageof
tenar
erel
atedt
oone
ormor
eoft
hes
esubc
ategor
ies
.Geogr
aphi
cchar
act
eri
sti
csar
eal
someas
urabl
eand
ac
ces
sibl
e t
wooft
hec
ondi
ti
onsf
oref
fec
tiv
esegment
ati
ons
.i.
e.Manyf
irmsmar
ket
t
hispr
oduc
tsi
n al
imi
ted numberofgeogr
aphi
cregi
ons
,ort
hey may mar
ket
nat
ional
lybutpr
epar
eas
epar
atemar
ket
ingmi
xforeac
hregi
on.
v Geogr
aphi
calbas
esofs
egment
ati
on
F Region(Regi
on1 14
F Cit
y(A.A.Dir
edawa,Awassa,Nat hr
eth.
F Urban-Rur
al(Urban,SubUr ban,Rural
F Cli
mate(Hot,col
d,sunny,rainy,cl
oudy

i
i.Demogr
aphi
cSegment
ati
on
I
n demogr
aphi
csegment
ati
on,t
hemar
keti
sdi
vided i
ntogr
oupson t
hebas
isof
v
ari
abl
esuc
h as age,f
ami
lys
ize,f
ami
lyl
if
ecy
cle,gender
,inc
ome,oc
cupat
ion,
educ
ati
on,r
eli
gion,r
ace,gener
ati
on,nat
ional
it
y,s
oci
alc
las
s.
Demogr
aphi
cvar
iabl
esar
ethe mos
tpopul
arbas
esf
ordi
sti
ngui
shi
ng c
ust
omer
gr
oups
.Oner
eas
ons
othatc
ons
umerwant
s,pr
efer
enc
esandus
ager
atesar
eof
ten
as
soc
iat
edwi
thdemogr
aphi
cvar
iabl
es.Anot
heri
sthatdemogr
aphi
cvar
iabl
esar
e
eas
iert
omeas
ure.
v Demogr
aphi
calbas
esofs
egment
ati
on
F Income(Under$1000,$1000- $2500,ov er$2500
F Age(Under5,5- 10,10-19,20-34,35+
F Gender(Mal e,F emale
F Fami l
ylifecycle(Young,s ingl
e,married,noc hildren
F Socialclass(Uppercl ass,mi ddl
ec l
ass,lowerc lass
F Education(Hi ghs chool,Di pl
oma,Degr ee
F Occupat ion(Pr ofess
ional,manager s,cl
erical
,empl oyee
F Reli
gion(Or thodox,Mus lim,cathol
ic,protestant,etc
F EthnicBackgr ound(Af rican,Asi
an,Eur opean

43|Page
i
ii
.Behav
ior
alSegment
ati
on
Somemar
ket
ersr
egul
arl
yat
temptt
osegmentt
hei
rmar
ket
sont
hebas
isofpr
oduc
t
r
elat
ed behav
ior t
heyut
il
iz
ebehav
ior
als
egment
ati
on.I
nthi
ssec
tion webr
ief
ly
c
ons
idert
wooft
hes
ethebenef
itdes
iredf
rom apr
oduc
t,andt
her
ateatwhi
cht
he
c
ons
umerus
est
hepr
oduc
t.
Bas
esofBehav
ior
alSegment
ati
on:-
∙ Benef
it
sdes
ired:-Cos
t,qual
it
y,oper
ati
ngl
if
e
Occas
ions:-Regul
aroc
casi
ons,speci
aloccas
ions
Userst
atus:-Non-
user
,potent
ialus
er,fi
rstt
imeused
∙ Us
ager
ate:-nonus
er,l
ightus
er,heav
yus
er.
Loyal
tys
tat
us:-None,medium,strong,abs
olut
e
Readi
nessst
age:-unaware-awar
e,informed,i
nter
est
eddes
irous
,int
endi
ngt
o
buy
At
ti
tudet
owar
dpr
oduct
s:-Ent
hus
ias
tic
,pos
iti
ve,i
ndi
ff
erent
,negat
ivehos
til
e

i
v.Ps
ychogr
aphi
csSegment
ati
on
I
n ps
ychogr
aphi
css
egment
ati
on,buy
ersar
edi
vided i
nto di
ff
erentgr
oupson t
he
bas
esofl
if
est
yleorper
sonal
it
yandv
alues
.Peopl
ewi
tht
hes
amedemogr
aphi
cgr
oup
c
anexhi
bitv
erydi
ff
erentps
ychogr
aphi
cspr
ofi
les
.
Li
fes
tyl
e:-Peopl
eexhi
bitmanymor
eli
fes
tyl
ethanar
esugges
tedbyt
hes
evens
oci
al
c
las
ses
.Thegoodst
heyc
ons
umeexpr
esst
hei
rli
fes
tyl
e.
Compani
esmaki
ngc
osmet
ics
,al
cohol
icbev
eragesandf
urni
tur
ear
eal
way
sseeki
ng
oppor
tuni
ti
esi
nli
fes
tyl
esegment
ati
on.Butl
if
est
yles
egment
ati
ondoesnotal
way
s
wor
k.
Per
sonal
it
y:-Mar
ket
ershav
eus
edper
sonal
it
yvar
iabl
etos
egment
s.Theyendowt
hei
r
pr
oduc
tswi
thbr
andper
sonal
it
iest
hatc
orr
espondt
ocons
umer
’sper
sonal
it
ies
.Int
he
l
ate1950,F
ordsandChev
rol
etswer
epr
omot
edashav
ingdi
ff
erentper
sonal
it
ies
.For
d
buy
erswer
eident
if
ied asi
ndependent
,impul
si
ve,mus
cul
ar,al
ertt
ochangeand
s
elf
-conf
ident
.

44|Page
Val
ues
:-Somemar
ket
erss
egmentbyc
orev
alues
,goodst
hatar
enor
mal
lyus
edor
c
ons
umed qui
ckl
y.Cor
eval
uesgo muc
h deepert
han behav
iororat
ti
tude,and
det
ermi
neatabas
icl
evel
,peopl
e’
schoi
cesanddes
iresov
ert
hel
ongt
erm.
Mar
ket
erst
hats
egmentbyv
aluesbehav
ethatbyappeal
ingt
opeopl
e’
sinners
elv
esi
t
i
spos
sibl
etoi
nfl
uenc
ethi
sout
ers
elv
est
hei
rpur
chas
ebehav
ior
.
4.
2.Mar
kett
arget
ing
Mar
ketTar
get
ingi
sthepr
oces
sofs
elec
tingoneormor
emar
kets
egment
stoent
er
4.
2.1.
Tar
getMar
ketSt
rat
egi
es
L
et’
sas
sumet
hatac
ompanyhass
egment
edt
het
otalmar
ketf
ori
tspr
oduc
t.Now
managementi
sinapos
iti
ont
osel
ectoneormor
esegment
sasi
tst
argetmar
ket
s.The
c
ompanyc
an f
oll
ow oneoft
hrees
trat
egi
es mar
ketaggr
egat
ion,s
ingl
e-s
egment
c
onc
ent
rat
ion,or mul
ti
ple s
egmentt
arget
ing.F
our gui
del
ines gov
ern how t
o
det
ermi
newhi
chs
egment
sshoul
d bet
het
argetmar
ket
s.Thef
irs
tist
hatt
arget
mar
ket
sshoul
dbec
ompat
ibl
ewi
tht
heor
gani
zat
ionsgoalandi
mage.Thes
econdi
sto
mat
cht
hemar
ketoppor
tuni
tyr
epr
esent
edi
nthet
argetmar
ket
swi
tht
hec
ompany
’s
r
esour
ces
.
Ov
ert
hel
ongr
un,abus
ines
smus
tgener
ateapr
ofi
ttos
urv
ive.Thi
srat
herobv
ious
s
tat
ementt
rans
lat
esi
ntoourt
hir
dmar
ket s
elec
tion gr
idl
ine.F
our
th,ac
ompany
or
der
ings
houl
dseekamar
ketmor
ether
ear
ethel
eas
tands
mal
les
tcompet
it
ors
.
As
ell
ers
houl
dnotent
eramar
kett
hati
sal
readys
atur
atedwi
thc
ompet
it
ioni
nter
sit
hass
aveov
err
idi
ngdi
ff
erent
ialadv
ant
aget
hatwi
llenabl
eitt
otakec
ust
omer
sfr
om
exi
sti
ngf
irms
.

1.Aggr
egat
ionSt
rat
egy

By adopt
ing a mar
ketaggr
egat
ion s
trat
egy al
so known as a mas
s-mar
ketor
un-
dif
fer
ent
iat
edmar
kets
trat
egy as
ell
ert
reat
sit
stot
almar
ketasas
ingl
esegment
.

Si
ngl
eMar
ket
ingmi
x One mass
undi
ff
erent
iat
edmar
ket 45|Page
Anaggr
egat
edmar
ketnumber
sar
econs
ider
edt
obeal
ikewi
thr
espec
ttodemandf
or
t
hepr
oduc
t.Ther
efor
emanagementc
andev
elopas
ingl
emar
ket
ingmi
xandr
eac
h
mos
toft
hec
ust
omer
sint
heent
iremar
ket
.Thati
sthec
ompanydev
elopas
ingl
e
pr
oduc
tfort
hismas
saudi
enc
e.I
tdev
elopsonepr
ici
ngs
truc
tur
eandonedi
str
ibut
ion
s
yst
em ofi
tspr
oduc
t.Andi
tus
esas
ingl
epr
omot
ionalpr
ogr
am ai
medatt
heent
ire
mar
ket
.

Thi
sst
rat
egywoul
dbeappr
opr
iat
eforf
irmst
hatar
emar
ket
inganundi
ff
erent
iat
ed,
s
tapl
epr
oduc
tsuc
hass
altors
ugar
.Int
heey
esofmanypeopl
e,s
ugari
ssugar
.
Regar
dles
soft
hebr
and,andal
lbr
andsoft
abl
esal
tar
epr
ett
ymuc
hal
ike.

Thes
trengt
hofamar
ketaggr
egat
ioni
sini
tsc
ostmi
nimi
zat
ion.I
tenabl
esac
ompany
t
o pr
oduc
e,di
str
ibut
e,and pr
omot
eit
spr
oduc
tver
y ef
fi
cient
ly.Pr
oduc
ing and
mar
ket
ingonepr
oduc
tfort
heent
iremar
ketmeansl
ongerpr
oduc
tionr
unsatl
ower
uni
tcos
ts.I
nvent
oryc
ost
sar
emi
nimi
zedwhent
her
eisno(
orv
eryl
imi
ted)v
ari
etyof
c
olor
sands
izeofpr
oduc
ts.War
ehous
ingandt
rans
por
tat
ionar
emos
tef
fi
cientwhen
onepr
oduc
tisgoi
ngt
oonemar
ket
.Pr
omot
ionc
ost
sar
emi
nimi
zedwhent
hes
ame
mes
sagei
str
ans
mit
tedt
oal
lcus
tomer
s.
2.Si
ngl
eSegmentSt
rat
egy
As
ingl
e-s
egment(
orc
onc
ent
rat
ion)s
trat
egyi
nvol
vess
elec
tingones
egmentf
rom
wi
thi
nthet
otalmar
ketast
het
argetmar
ket
.Onemar
ket
ingmi
xisdev
elopedt
oreac
h
t
hiss
ingl
esegment
.Ac
ompanymaywantt
oconc
ent
rat
eonas
ingl
emar
kets
egment
r
athert
hant
otakeont
hec
ompet
it
orsi
nthebr
oadermar
ket
.
As
ingl
e-s
egments
trat
egyenabl
esas
ell
ert
o penet
rat
eonemar
keti
n dept
hto
ac
qui
rear
epet
it
ionasas
pec
ial
is
toranexper
tint
hisl
imi
tedmar
ket
.Ac
ompanyc
an

46|Page
i
mit
ateas
ingl
e-s
egments
trat
egywi
thl
imi
tedr
esour
ces
.Andasl
ongast
hes
ingl
e
s
egmentr
emai
nsa s
mal
lmar
ket
,lar
ge c
ompet
it
orsar
eli
kel
ytol
eav
eital
one.
Howev
er,i
fthes
mal
lmar
kets
houl
dshows
ignsofbec
omi
ngal
argemar
ket
,bi
gboy
s
j
umpi
n.
Si
ngl
eMar
ket
ingMi
x(MarketSegmentA
(Mar
ketSegmentB
(Mar
ketSegmentC
Ther
iskandl
imi
tat
ionofas
impl
e-s
egments
trat
egyi
sthatt
hes
ell
erhasal
lit
seggsi
n
onebas
ket
.Ift
hemar
ketpot
ent
ialoft
hats
ingl
esegmentdec
lines
,thes
ell
erc
an
s
uff
erc
ons
ider
abl
y.Al
soas
ell
erwi
thas
trongnameandr
eput
ati
oni
nones
egment
mayf
indi
tver
ydi
ff
erentt
oexpandi
ntoanot
hers
egment
.

3.Mul
ti
ple-
SegmentSt
rat
egy
Underamul
ti
ple-
segments
trat
egyt
woormor
edi
ff
icul
tgr
oupsofpot
ent
ialc
ust
omer
onei
dent
if
iedast
argetmar
ket
s.As
epar
atemar
ket
ingmi
xisdev
elopedt
oreac
h
s
egment
.
v Mar
ket
ingmi
xA(Mar
kets
egmentA
v Mar
ket
ingmi
xB(Mar
kets
egmentB
v Mar
ket
ingmi
xC(Mar
kets
egmentC
I
namul
ti
ple-
segments
trat
egy
,as
ell
erf
requent
lywi
lldev
elopadi
ff
erentv
ers
ionof
t
hebas
icpr
oduc
tforeac
hsegment
.Howev
er,mar
kets
egment
ati
on c
an al
so be
ac
compl
is
hedwi
thnoc
hangei
nthepr
oduc
t,butr
atherwi
ths
epar
atedi
str
ibut
ion
c
hannel
sorpr
omot
ionalappeal
s,eac
htai
lor
edt
oagi
venmar
kets
egment
.
Amul
ti
ples
egments
trat
egynor
mal
lyr
esul
tsi
nagr
eat
ers
alesv
olumet
hanas
ingl
e

47|Page
s
egments
trat
egy
.Ital
soi
sus
efulf
orac
ompanyf
aci
ngs
eas
onaldemand.Af
irm wi
th
exc
esspr
oduc
tionc
apac
itymaywel
lseekaddi
ti
onalmar
kets
egmentt
oabs
orbt
his
c
apac
ity
.
Mul
ti
ples
egment
scanpr
ovi
debenef
it
stoanor
gani
zat
ion,butt
hes
trat
egyhass
ome
dr
awbac
kswi
thr
espec
ttoc
ost
sandmar
ketc
over
age.I
nthef
irs
tpl
ace,mar
ket
ingt
o
mul
ti
ples
egment
scan be expens
ivei
n bot
hthe pr
oduc
tion and mar
ket
ing of
pr
oduc
ts.Andamul
ti
ple-
segment
sst
rat
egyi
ncr
eas
esmar
ket
ingexpens
esi
nsev
eral
way
s.Tot
ali
nvent
oryc
ost
sgoup,bec
aus
eadequat
einv
ent
ori
esofeac
hst
yle,c
olor
,
andt
hel
ikemus
tbemai
ntai
ned.Adv
ert
isi
ngc
ost
sgoup,bec
aus
edi
ff
erentadsmay
ber
equi
redf
oreac
hmar
kets
egment
s.Di
str
ibut
ionc
ost
sar
eli
kel
ytoi
ncr
eas
eas
ef
for
tsar
emadet
omakepr
oduc
tsav
ail
abl
etov
ari
ouss
egment
s.F
inal
ly,gener
al
admi
nis
trat
iveexpens
esgoupwhenmanagementmus
tpl
anandi
mpl
ements
ever
al
di
ff
erentmar
ket
ingpr
ogr
ams
.

4.
3.Mar
ketPos
iti
oni
ng
Pos
iti
oni
ngi
stheac
tofdes
igni
ngt
hec
ompany
’sof
fer
ingandi
mages
othatt
hey
oc
cupyameani
ngf
ulanddi
str
ictc
ompet
it
ivepos
iti
onsi
nthet
argetc
ust
omer
smi
nd.
Pos
iti
oni
ngi
sthedev
elopmentofas
erv
iceandamar
ket
ingmi
xtooc
cupyas
pec
ifi
c
pl
acei
nthemi
ndsofc
ust
omer
swi
thi
ntar
getmar
ket
s.
Es
tabl
is
h and c
ommuni
cat
ethe pr
oduc
tskey di
sti
nct
ive benef
it
sint
he mar
ket
(
Mar
ketPos
iti
oni
ng)

v Reas
onsf
orI
ncr
eas
edI
mpor
tanc
eofPos
iti
oni
ng
1.Per
cept
ualpr
oces
sesofc
ust
omer
s-Theys
creenoutmos
tinf
ormat
ion
2.Gr
eat
erc
ompet
it
ion-Mor
eor
gani
zat
ionsc
ompet
ingf
ors
har
eofmi
nd
3.Gr
owi
ngv
olumeofc
ommer
cialmes
sages- Adv
ert
isi
ng and pr
omot
ion
c
lut
ter

48|Page
v St
epsRequi
redf
orEf
fec
tiv
epos
iti
oni
ng(
thef
iveDs
)
(
1)Document i
ng
(
2)Decidi ng
(
3)Dif
fer entiat
ing
(
4)Designi ng
(
5)Deli
v er i
ng

v The5DsofPos
iti
oni
ng
Document
ing-Whatbenef
it
sar
ethemos
timpor
tantt
oyourc
urr
entandpot
ent
ial
c
ust
omer
s?
Deci
ding-Whati
magedoy
ouwanty
ourc
urr
entandpot
ent
ialc
ust
omer
stohav
eof
y
ouror
gani
zat
ion?
Di
ff
erent
iat
ion-Whi
chc
ompet
it
orsdoy
ouwantt
oappeardi
ff
erentf
rom,andwhat
ar
ethef
act
orst
haty
ouwi
llus
etomakey
ouror
gani
zat
iondi
ff
erentf
rom t
hem?
Des
igni
ng-Howwi
lly
oudev
elopandc
ommuni
cat
ethes
edi
ff
erenc
es?
Del
iver
ing-Howwi
lly
oumakegoodonwhaty
ou’
vepr
omi
sed,andhowdoy
oumake
s
uret
haty
ouhav
e del
iver
ed?

v Pos
iti
oni
ngAppr
oac
hes
:Si
xMaj
orAl
ter
nat
ives
(
1)Spec
ifi
cpr
oduc
tfeat
ures
(
2)Benef
it
s,pr
obl
em s
olut
ion,orneeds
(
3)Spec
ifi
cus
ageoc
cas
ions
(
4)Us
erc
ategor
y
(
5)Agai
nstanot
her pr
oduc
t
(
6)Pr
oduc
tcl
ass

49|Page
 Chapt
erF
ive
Pr
oduc
t
5.
1.Meani
ngofPr
oduc
t
Apr
oduc
tmaybedef
inedasas
etoft
angi
bleandi
ntangi
bleat
tri
but
es,i
ncl
udi
ng
c
olor
, pac
kagi
ng, pr
ice, manuf
act
urer
's pr
est
ige, r
etai
ler
's pr
est
ige, and
manuf
act
urer
's and r
etai
ler
'ss
erv
ices whi
chs
ati
sfyt
he needs and want
s of
c
ust
omer
s.
Thekeyi
deai
nthi
sdef
ini
ti
oni
sthatt
hec
ons
umer
sar
ebuy
ingmor
ethanas
etof
phy
sic
alat
tri
but
es.F
undament
all
y,t
heyar
ebuy
ingwants
ati
sfac
tion.Thusawi
sef
irm
s
ell
spr
oduc
tbenef
it
srat
hert
hanj
ustpr
oduc
ts.I
nfac
tal
thought
hepr
oduc
tfeat
ures
s
uchaspac
kagi
ng,br
andi
ng,c
oloret
c.addnewdi
mens
ionst
othepr
oduc
t,t
hec
ore
ofapr
oduc
tist
hebenef
itofbas
ics
erv
ice.
Apr
oduc
tisany
thi
ngt
hatc
anbeof
fer
edt
oamar
ketf
orat
tent
ion,ac
qui
si
ti
on,us
eor
c
ons
umpt
iont
hatmi
ghts
ati
sfyaneed.I
tinc
ludesphy
sic
alobj
ect
s,s
erv
ices
,per
sons
,
pl
aces
,or
gani
zat
ionsandi
deas
.Ot
hernamesf
orapr
oduc
twoul
dbet
heof
fer
,val
ue
pac
kage,orbenef
itbundl
e.Thebus
ines
seduc
ati
onbei
nggi
veni
nourc
oll
egei
sa
pr
oduc
t(s
erv
ice)
.Af
amousf
ootbal
lpl
ayerl
ikeMes
si,i
sapr
oduc
t(per
son)boughtby
manyc
ount
ries
’cl
ubs
.Tos
um upapr
oduc
tisi
tsbenef
it
s.

5.
2.L
evel
sofPr
oduc
t
I
npl
anni
ng,t
hemar
ket
erneedst
othi
nkt
hrought
hel
evel
sofpr
oduc
ts.Eac
hlev
el
addsmor
ecus
tomerv
alue,andi
tcons
tit
utesac
ust
omerv
aluehi
erar
chy
.
Ty
pic
all
y,apr
oduc
tisdi
videdi
ntot
hreebas
icl
evel
s.Thef
irs
tlev
eli
sof
tenc
all
edt
he
c
orepr
oduc
t,whatt
hec
ons
umerac
tual
lybuy
sint
ermsofbenef
it
s.F
orexampl
e,
c
ons
umer
sdon'
tjus
tbuyt
ruc
ks.Rat
her
,cons
umer
sbuyt
hebenef
itt
hatt
ruc
ksof
fer
,
l
ikebei
ngabl
etogetar
oundi
ndeeps
nowi
nthewi
nter
.Nexti
sthes
econdl
evel
,or
ac
tualpr
oduc
t,t
hati
sbui
ltar
oundt
hec
orepr
oduc
t.Theac
tualpr
oduc
tcons
ist
sof
t
hebr
andname,f
eat
ures
,pac
kagi
ng,par
ts,ands
tyl
ing.Thes
ecomponent
spr
ovi
ded

50|Page
t
hebenef
it
stoc
ons
umer
sthatt
heys
eekatt
hef
irs
tlev
el.Thef
inal
,ort
hir
d,l
evelof
t
he pr
oduc
tist
he augment
ed c
omponent
.The augment
ed c
omponenti
ncl
udes
addi
ti
onals
erv
icesandbenef
it
sthats
urr
oundt
hef
irs
ttwol
evel
soft
hepr
oduc
t.
Exampl
esofaugment
edpr
oduc
tcomponent
sar
etec
hni
calas
sis
tanc
einoper
ati
ng
t
hepr
oduc
tands
erv
iceagr
eement
s.
Ev
eni
fthemai
nlev
elsofpr
oduc
tsar
ethr
ee,t
her
ear
efi
vegener
all
evel
sofpr
oduc
ts
whi
chi
sst
atedbys
omewr
iter
s.Thes e:-c
ear orebenef
it
,bas
icpr
oduct
,expect
ed
pr
oduct
s,augment
ed pr
oduct
s,and pot
ent
ialpr
oduct
s.(
You need t
oread t
he
expl
anat
ionofeac
hfr
om t
her
efer
enc
e).

Pot
ent
ialpr
oduct
s

Augment
edpr
oduct
s

Expect
edpr
oduct
s

Bas
icpr
oduct
s
Cor
e

Fi
gur
e1:Level
sofpr
oduct
s

5.
3.Cl
ass
ifi
cat
ionofPr
oduc
ts
Mar
ket
ersc
las
sic
all
ydi
sti
ngui
sht
woes
sent
ialf
act
orst
obr
oadl
ycat
egor
izepr
oduc
ts
i
ntov
ary
ingt
ypes
:(Dur
abi
li
ty&Tangi
bil
it
yandUs
es)
.
A.Dur
abi
li
tyandTangi
bil
it
y
Pr
oduc
tsar
ecl
ass
ifi
edbyhowl
ongt
heyc
anbeus
ed dur
abi
li
ty andt
hei
rtangi
bil
it
y.

51|Page
Pr
oduc
tst
hatc
anbeus
edr
epeat
edl
yov
eral
ongper
iodoft
imear
ecal
leddur
abl
e
goods
.Exampl
esofdur
abl
egoodsi
ncl
udeaut
omobi
les
,fur
nit
ure,andhous
es.By
c
ont
ras
t,goodst
hatar
enor
mal
lyus
edorc
ons
umedqui
ckl
yar
ecal
lednondur
abl
e
goods
.Someexampl
esofnondur
abl
egoodsar
efood,s
oap,ands
oftdr
inks
.In
addi
ti
on,s
erv
icesar
eac
tiv
iti
esandbenef
it
sthatar
eal
soi
nvol
vedi
ntheexc
hange
pr
oces
sbutar
eint
angi
blebec
aus
etheyc
annotbehel
dort
ouc
hed.Exampl
esof
i
ntangi
bles
erv
icesi
ncl
udedey
eexamsandaut
omobi
ler
epai
r.
B.Ul
ti
mat
eUs
e
Anot
herwayt
ocat
egor
izepr
oduc
tsi
sbyt
hei
rus
ers
.Pr
oduc
tsar
ecl
ass
ifi
edasei
ther
c
ons
umerori
ndus
tri
algoods
.
1.Cons
umergoods
Theyar
ethet
ypesofgoodspur
chas
edbyt
heul
ti
mat
econs
umer
sfort
hei
rfi
nal
c
ons
umpt
ionpur
pos
e.Thes
hoppi
ngpat
ter
nsofc
ons
umer
sar
eal
sous
edt
ocl
ass
ify
pr
oduc
ts.Pr
oduc
tss
oldt
othef
inalc
ons
umerar
ear
rangedasf
oll :c
ows onveni
ence
goods
,shoppi
ng,s
peci
alt
y,anduns
oughtgoods
.
i
.Conv
eni
enc
egoods-pr
oduc
tsands
erv
icest
hatc
ons
umer
sbuyf
requent
lyandwi
th
l
it
tl
eef
for
t.Mos
tconv
eni
enc
egoodsar
eeas
il
yobt
ainabl
eandl
ow-
pri
ced,i
temss
uch
asbr
ead,c
andy
,mi
lk,ands
hampoo.Conv
eni
enc
egoodsc
anbef
urt
herdi
videdi
nto
s
tapl
e,i
mpul
se,andemer
genc
ygoods
.St
apl
egoodsar
epr
oduc
ts,s
uchasbr
eadand
mi
lkt
hatc
ons
umer
sbuy on a c
ons
ist
entbas
is.I
mpul
se goodsl
ike c
andy and
magaz
inesar
epr
oduc
tst
hatr
equi
rel
it
tl
epl
anni
ngors
ear
chef
for
tbec
aus
etheyar
e
nor
mal
lyav
ail
abl
einmanypl
aces
.Emer
genc
ygoodsar
eboughtwhenc
ons
umer
s
hav
eapr
ess
ingneed.Anexampl
eofanemer
genc
ygoodwoul
dbeas
hov
eldur
ing
t
hef
irs
tsnows
tor
m oft
hewi
nter
.
i
i.Shoppi
nggoods-t
hos
epr
oduc
tst
hatc
ons
umer
scompar
edur
ingt
hes
elec
tionand
pur
chas
epr
oces
s.Ty
pic
all
y,f
act
orss
uchaspr
ice,qual
it
y,s
tyl
e,ands
uit
abi
li
tyar
e
us
ed as bas
es ofc
ompar
ison.Wi
ths
hoppi
ng goods
,cons
umer
s us
ual
lyt
ake

52|Page
c
ons
ider
abl
eti
me and ef
for
tin gat
her
ing i
nfor
mat
ion and maki
ng c
ompar
isons
amongpr
oduc
ts.Maj
orappl
ianc
ess
uchasr
efr
iger
ator
sandt
elev
isi
onsar
ety
pic
al
s
hoppi
nggoods
.Shoppi
nggoodsar
efur
therdi
videdi
ntouni
for
m(homogeneous
)and
nonuni
for
m(het
erogeneous
)cat
egor
ies
.Uni
for
mshoppi
nggoodsar
ethos
egoods
t
hatar
esi
mil
ari
n qual
it
ybutdi
ff
eri
n pr
ice.Cons
umer
swi
llt
ryt
ojus
tif
ypr
ice
di
ff
erenc
esbyf
ocus
ingonpr
oduc
tfeat
ures
.Nonuni
for
m goodsar
ethos
egoodst
hat
di
ff
eri
nbot
hqual
it
yandpr
ice.
i
ii
.Spec
ial
tygoods-pr
oduc
tswi
thdi
sti
nct
ivec
har
act
eri
sti
csorbr
andi
dent
if
icat
ion
f
orwhi
chc
ons
umer
sexpend exc
ept
ionalbuy
ing ef
for
t.Spec
ial
ty goodsi
ncl
ude
s
pec
ifi
cbr
andsandt
ypesofpr
oduc
ts.Ty
pic
all
y,buy
ersdonotc
ompar
espec
ial
ty
goodswi
thot
hers
imi
larpr
oduc
tsbec
aus
ethepr
oduc
tsar
euni
que.
i
v.Uns
oughtgoods-t
hos
epr
oduc
tsors
erv
icest
hatc
ons
umer
sar
enotr
eadi
lyawar
e
ofordonotnor
mal
lyc
ons
iderbuy
ing.L
ifei
nsur
anc
epol
ici
esandbur
ialpl
otsar
e
exampl
es of uns
ought goods
. Of
ten, uns
ought goods r
equi
re c
ons
ider
abl
e
pr
omot
ionalef
for
tson t
hepar
toft
hes
ell
eri
n or
dert
o at
trac
tthei
nter
estof
c
ons
umer
s.
2.I
ndus
tri
algoods
Thes
ear
egoodst
hatpur
chas
edf
ort
hepur
pos
eoff
urt
herpr
oces
sing,c
onduc
ting
bus
ines
sorr
esel
li
ng.Exampl
esofi
ndus
tri
algoodsi
ncl
udeac
ces
sor
yequi
pment
,
c
omponentpar
ts,i
nst
all
ati
ons
,oper
ati
ngs
uppl
ies
,rawmat
eri
als
,ands
erv
ices
.
i
.Ac
ces
sor
yequi
pmentr
efer
stomov
abl
eit
emsands
mal
lof
fi
ceequi
pmenti
tems
t
hatnev
erbec
omepar
tofaf
inalpr
oduc
t.Of
fi
cef
urni
tur
eandf
axmac
hinesar
e
exampl
esofac
ces
sor
yequi
pment
.
i
i.Componentpar
ts–t
hes
ear
epr
oduc
tst
hatar
etur
nedi
ntoac
omponentoft
he
f
inalpr
oduc
tthatdoesnotr
equi
ref
urt
herpr
oces
sing.Componentpar
tsar
e
f
requent
lyc
ust
om-
madef
ort
hef
inalpr
oduc
tofwhi
cht
heywi
llbec
omeapar
t.F
or
exampl
e,ac
omput
erc
hipc
oul
d bepr
oduc
ed byonemanuf
act
urerf
orus
ein

53|Page
 c
omput
ersofot
hermanuf
act
urer
s.
i
ii
.Ins
tal
lat
ions-ar
ecapi
talgoodst
hatar
eus
ual
lyv
eryexpens
ivebuthav
eal
ong
us
efull
if
e.Tr
ucks
,powergener
ator
s,andmai
nfr
amec
omput
ersar
eexampl
esof
i
nst
all
ati
ons
.
i
v.Oper
ati
ngs
uppl
ies-ar
esi
mil
art
o ac
ces
sor
yequi
pmenti
nthatt
heydo not
bec
omepar
toft
hef
ini
shedpr
oduc
t.Oper
ati
ngs
uppl
iesi
ncl
udei
temsnec
ess
ary
t
omai
ntai
nandoper
atet
heov
eral
lfi
rm,s
uchasc
leaner
s,f
il
efol
der
s,paper
,and
pens
.
v
.Raw mat
eri
als-ar
egoodss
oldi
nthei
ror
igi
nalf
orm bef
orebei
ngpr
oces
sedf
or
us
einot
herpr
oduc
ts.Cr
ops
,cr
udeoi
l,i
ronor
e,andl
ogsar
eexampl
esofr
aw
mat
eri
alsi
nneedoff
urt
herpr
oces
singbef
orebei
ngus
edi
npr
oduc
ts.
v
i.Ser
vic
es.Or
gani
zat
ionss
omet
imesr
equi
ret
heus
eofs
erv
ices
,jus
tasi
ndi
vidual
s
do.Exampl
esofs
erv
icess
oughtbyor
gani
zat
ionsi
ncl
udemai
ntenanc
eandr
epai
r
andl
egalc
ouns
el.
Bas
edoni
tsat
tri
but
ion,t
hei
ndus
tri
alpr
oduc
tsc
anbec
las
sif
iedi
nto:mat
eri
aland
par
ts i
tinc
ludesr
aw mat
eri
al(
nat
urals
tat
e& agr
icul
tur
alpr
oduc
ts,manuf
) act
ured
(
fabr
icat
ed)mat
eri
als(
li
key
arnofc
ott
on)
,andmanuf
act
ured(
fabr
icat
ed)c
omponent
s
(
wheel
,mot
ors
,&ot
her
s),c
api
tali
tems i
tinc
ludesheav
yequi
pment
s(i
nst
all
ati
ons
)
&l
ightequi
pment
s(ac
ces
sor
ies
),oper
ati
ngs
uppl
iesandbus
ines
sser
vices
.

5.
4.Pr
oduc
tMi
xandPr
oduc
tLi
ne
A br
oad gr
oup pr
oduc
tint
ended f
or es
sent
ial
lys
imi
lar us
es and pos
ses
sing
r
eas
onabl
ysi
mil
arphy
sic
alc
har
act
eri
sti
cs,c
ons
tit
utes a pr
oduc
tli
ne.Wear
ying
appar
eli
soneexampl
eofapr
oduc
tli
ne.Buti
nadi
ff
erentc
ont
ext
,say
,inas
mal
l

54|Page
s
pec
ial
lys
hop,men’
sfur
nis
hing(
shi
rts
,ti
es,andunder
wear
)andmen’
sready
-to-
wear
(
sui
ts,s
por
tjac
ket
s,t
opc
oat
s,ands
lac
ks)woul
deac
hcons
tit
uteal
ine,I
nanot
her
c
ont
ext
,men’
sappar
eli
sonel
ine,asc
ont
ras
tedwi
thwomen’
sappar
el,f
urni
tur
e,or
s
por
tinggoods
.
Thepr
oduc
tmi
xist
hef
ulll
is
tofal
lpr
oduc
tsof
fer
edf
ors
alebyac
ompany
.The
s
truc
tur
eoft
hepr
oduc
tmi
xhasdi
mens
ionsofbot
hbr
eadt
handdept
h.I
tsbr
eadt
his
meas
uredbyt
henumberofpr
oduc
tli
nesc
arr
ied,i
tsdept
h,byt
heas
sor
tmentof
s
izes
,col
or,andmodel
sof
fer
edwi
thi
neac
hpr
oduc
tli
ne.
Maj
orPr
oduc
t-Mi
xSt
rat
egi
es
Sev
eralmaj
orpr
oduc
t-mi
xst
rat
egi
esar
eus
edbymanuf
act
uresandmi
ddl
emeni
n
mar
ket
ingt
hei
rpr
oduc
ts.
Expans
ionofPr
oduc
tMi
x:-Af
irm mayel
ectt
oexpandi
tspr
esentpr
oduc
tmi
xby
i
ncr
eas
ingt
henumberofl
inesand/
ort
hedept
hwi
thi
nal
ine.New l
inesmaybe
r
elat
edorunr
elat
edt
othepr
esentpr
oduc
ts.Hal
lmar
ksc
ardsbr
oadenedi
tspr
oduc
t
mi
xwi
thc
andl
es,bat
h pr
oduc
ts(
shampoo,s
oaps
,lot
ion)
,and pewt
erf
igur
ines
.
Car
nat
ionc
ompanyi
ncr
eas
edt
hedept
hofi
tsgod-
foodl
inewi
thabi
rth-
cont
roldog
f
ood.Af
termor
ethan100y
ear
sofbr
ewi
ngonl
yonet
ypeofbeer
,Coor
saddeda
l
ow-
cal
ori
ebeer(
Coor
sLi
te)t
omeett
hel
ightbeerc
ompet
it
ionf
rom ot
herbr
ewer
s.
Cont
rac
tionofPr
oduc
tMi
x:Apr
oduc
tst
rat
egywast
othi
noutt
hepr
oduc
tmi
x,ei
ther
byel
imi
nat
inganent
irel
ineorbys
impl
if
yingt
heas
sor
tmentwi
thi
nal
ine.Thes
hif
t
f
rom f
atandl
ogl
inesands
hor
tli
nesi
sdes
ignedt
oel
imi
nat
elow-
prof
itpr
oduc
tsand
t
ogetmor
epr
ofi
tfr
om f
ewerpr
oduc
ts.Xer
ox,RCA,andgener
alel
ect
rical
ldr
opped
t
hei
rli
nesofc
omput
ers
.Gi
ll
ett
edr
oppeddi
git
alwat
chesf
rom i
tspr
oduc
tmi
xas
pr
icec
ompet
it
ioner
odedt
hepr
ofi
tabi
li
tyoft
hispr
oduc
t.

Al
ter
ati
on ofexi
sti
ngpr
oduc
ts:Asan al
ter
nat
ivet
odev
elopi
ngac
ompl
etel
ynew

55|Page
pr
oduc
t,managements
houl
dtakeaf
res
hlookatt
hec
ompany
’sexi
sti
ngpr
oduc
ts.
Of
ten,i
mpr
ovi
nganes
tabl
is
hedpr
oduc
tcanbemor
epr
ofi
tabl
eandl
essRi
ckyt
han
dev
elopi
ngac
ompl
etel
ynewone.
Pac
kagi
ng has been a v
ery popul
arar
ea f
orpr
oduc
tal
ter
ati
on,par
tic
ular
lyi
n
c
ons
umerpr
oduc
ts.
Pr
oduc
tPos
iti
oni
ng:Apr
oduc
t’
spos
iti
oni
sthei
maget
hatt
hepr
oduc
tpr
ojec
tsi
n
r
elat
iont
ocompet
it
ivepr
oduc
tsandot
herpr
oduc
tsmar
ket
edbyt
hec
ompany
.
Tr
adi
ngupandTr
adi
ngDown: Tr
adi
ngupmeansaddi
ngahi
gherpr
ice,pr
est
ige
pr
oduc
ttoal
inei
nthehopeofi
ncr
eas
ingt
hes
alesofexi
sti
ngl
ower
-pr
icedpr
oduc
ts.
Whoac
ompanyembar
ksuponapol
icyoft
radi
ngup,atl
eas
ttwoav
enuesar
eopen
wi
thr
espec
ttopr
omot
ionalemphas
is:(
1)Us
ual
lyt
hes
ell
erc
ont
inuest
odepend
upon t
he ol
der
,lower
-pr
iced pr
oduc
tfort
he bul
k oft
he s
alesv
olume,or(
2)
ev
ent
ual
lyt
hes
ell
ermays
hif
tpr
omot
ionalemphas
ist
othenewpr
oduc
tandex
pec
tit
t
opr
oduc
ethemaj
ors
har
eofs
alesv
olume.I
nfac
t,t
hel
ower
-pr
icedl
inemaybe
dr
oppedal
toget
heraf
terat
rans
iti
onper
iod.Manydepar
tments
tor
eshav
efol
lowed
t
hispol
icyi
ntr
adi
ngupf
rom al
ow-
inc
omemar
kett
oanew,l
argermi
ddl
e-i
ncome
mar
ket
.
Ac
ompanyi
ssai
dtobet
radi
ngdownwheni
taddsal
ower
-pr
icedi
tem t
oit
sli
neof
pr
est
igepr
oduc
ts.Thec
ompanyexpec
tst
hatpeopl
ewhoc
annotaf
for
dtheor
igi
nal
pr
oduc
twi
llwantt
obuyt
henew one,bec
aus
eitc
arr
iess
omeoft
hes
tat
usoft
he
hi
gher
-pr
icedgood.
When t
radi
ng down i
s us
ed t
he new ar
tic
le may per
manent
ly hur
tthe f
irm’
s
r
eput
ati
onandt
hatofi
tses
tabl
is
hedhi
ghqual
it
ypr
oduc
ts.I
ntr
adi
ngup,ont
he
ot
herhand,t
hes
ell
er’
smaj
orpr
obl
em i
stoc
hanget
hef
irm’
simageenoughs
othat
t
hemar
ketwi
llac
ceptt
henew,hi
gher
-pr
icedpr
oduc
t.

5.
5.NewPr
oduc
tDev
elopment
I
thasbeens
aidt
hatnot
hinghappensunt
ils
omebodys
ell
ssomet
hing.Thi
sisnot

56|Page
ent
irel
ytr
ue.F
irs
t,t
her
emus
tbes
omet
hingt
osel
lapr
oduc
t,as
erv
ice,orani
dea.
F
rom i
nsi
deorout
sidet
hef
irm mus
tbet
heger
m ofapr
oduc
tidea.

St
epsi
ntheDev
elopmentPr
oces
s
Asanewpr
oduc
tisdev
eloped,i
tpr
ogr
ess
esf
rom t
hei
deas
taget
othepr
oduc
tand
mar
ket
ings
tages
.
I
ngener
al,t
hedev
elopmentpr
oces
sfol
lowst
hes
tepsout
li
nedbel
ow.I
neac
hst
age,
managementmus
tdec
ide whet
hert
o mov
e on t
othe nexts
tage,abandon t
he
pr
oduc
t,ors
eekaddi
ti
onali
nfor
mat
ion.
a.Gener
ati
onofNewPr
oduc
tIdeas
Newpr
oduc
tdev
elopments
tar
tswi
thani
dea.Thes
ear
chf
orpr
oduc
tideass
houl
dbe
s
yst
emat
ict
hats
timul
atesnew i
deast
hats
houl
d beac
knowl
edged and r
evi
ewed
pr
ompt
ly.Thes
our
ceofpr
oduc
tideasc
anbei
nter
nalt
otheor
gani
zat
ion,s
uchas
s
ales
men,mar
ket
ingexec
uti
vesandpr
oduc
tionper
sonnel
.Af
irmc
anal
soobt
ainnew
pr
oduc
tideasf
rom ext
ernals
our
ce,s
uch asc
ust
omer
s,c
ompet
it
ors
,mi
ddl
emen,
pr
ivat
eres
ear
chor
gani
zat
ions
,inv
ent
orandt
radeas
soc
iat
ions
.
b.Sc
reeni
ngofI
deas
Thepur
pos
eofi
deagener
ati
oni
stoc
oll
ectorc
reat
eanumberofgoodi
deas
.The
pur
pos
eofi
deas
creeni
ngi
stomakeapr
eli
minar
ysur
veyont
hei
deas
.Int
hiss
tage
t
hegener
atedi
deasar
esc
reenedandev
aluat
edt
odet
ermi
newhi
choneswar
rant
f
urt
hers
tudy
.Her
egr
eatc
ares
houl
dbet
akennott
oac
ceptwr
ongi
deasandr
ejec
t
t
her
ighti
deas
.Ot
her
wis
ewear
eaggr
avat
ingt
her
iskofi
nnov
ati
on.
c
.Anal
ysi
sofI
deasorBus
ines
sAnal
ysi
s
I
nbus
ines
sanal
ysi
s,t
hec
ompanyf
urt
hergoest
oanal
yzeandev
aluat
ether
ight
i
deas
.Int
hiss
tagemanagement
:
∙ ev
aluat
est
hei
deaswi
thr
espec
ttoc
ompanyr
esour
ces

57|Page
 ∙ i
dent
if
iespr
oduc
tfeat
ures
∙ es
timat
esmar
ketdemandandt
hepr
oduc
t'spr
ofi
tabi
li
ty
∙ es
tabl
is
hespr
ogr
am t
odev
elopt
hepr
oduc
t
Thes
efi
rstt
hrees
tagesar
eref
err
edt
oasc
onc
eptt
est
ing.Thi
sispr
e-t
est
ingoft
he
pr
oduc
tidea,asc
ont
ras
tedt
olat
erpr
e-t
est
ingoft
hepr
oduc
tit
sel
fandi
tsmar
ket
.

d.Pr
oduc
tDev
elopment
Att
hiss
taget
hepr
oduc
tideai
sconv
ert
edi
ntoac
tualphy
sic
alpr
oduc
t.Thepr
oduc
tis
notdi
rec
tlyt
obes
entt
othepr
oduc
tiondepar
tment
,rat
herpi
lotmodel
sors
mal
l
quant
it
iesar
emanuf
act
uredt
odes
ignat
eds
pec
ifi
cat
ions
.
L
abor
ator
ytes
tsandot
hernec
ess
aryt
echni
calev
aluat
ionsar
emadet
odet
ermi
net
he
pr
oduc
tionf
eas
ibi
li
tyoft
hear
tic
le.
e.Mar
ketTes
ting
Mar
kett
est
sandc
ommer
cialexper
iment
sar
econduc
tedi
nal
imi
tedgeogr
aphi
car
ea
t
oas
cer
tai
nthef
eas
ibi
li
tyoff
ull
-sc
alepr
oduc
tionandmar
ket
ingpr
ogr
am.Att
his
s
tageal
lnec
ess
aryadj
ust
ment
sar
emadeaf
terf
indi
ngs
.Thenmanagementmus
ttake
af
inaldec
isi
onr
egar
dingwhet
herornott
omar
kett
hepr
oduc
tcommer
cial
ly.
f
.Pr
oduc
tionandMar
ket
ingSt
ageorCommer
cial
iz
ati
on
Thepr
oduc
tiss
entt
othepr
oduc
tiondepar
tmentf
ormas
sorf
ull
-sc
alepr
oduc
tion.
Onc
ethe pr
oduc
tis bor
n and ent
ersi
tsl
if
ecy
cle,t
he ext
ernalc
ompet
it
ive
env
ironmentbec
omesamaj
ordet
ermi
nantofi
tsdes
tiny
.
Thef
irs
tthr
ees
tagesi
nthepr
oduc
tdev
elopmentar
esi
mpl
yideaorc
onc
epts
tages
;
andt
hel
astt
hrees
tagesar
econc
ernedwi
tht
hephy
sic
alpr
oduc
t.Andt
hec
onc
ept
s
tagesar
erel
ati
vel
yinexpens
ive and i
mpor
tant
,fort
heyar
ethe bas
esf
ort
he
pr
oduc
t.
5.
6.Pr
oduc
tLi
feCy
cleSt
ages

58|Page
Pr
oduc
tsar
ecr
eat
ed,t
heyl
iveandt
hent
heydi
e.Thi
sli
nki
scal
ledt
hepr
oduc
tli
fe
c
ycl
e.Thel
engt
hofdur
ati
oni
nthepr
oduc
tli
fec
ycl
eisnott
hes
amef
oral
lpr
oduc
ts.
The bas
icpr
oduc
tli
fec
ycl
econs
ist
soff
ourmaj
ors
tages
:int
roduc
tion,gr
owt
h,
mat
uri
ty,anddec
line.L
etal
onet
hepr
oduc
tli
fec
ycl
easawhol
e,as
ingl
est
agemay
al
sobedi
ff
erentf
ordi
ff
erentpr
oduc
ts.Howev
er,r
egar
dles
soft
het
ypeofpr
oduc
t,
t
hepr
oduc
tli
fec
ycl
eisappl
icabl
einal
lnewpr
oduc
ts.F
act
ors
,whi
chaf
fec
tthel
engt
h
ofapr
oduc
tli
fec
ycl
einc
ludec
ust
omerpr
efer
enc
es,s
eas
ons
,tec
hnol
ogi
calc
hanges
,
c
ompet
it
ion,andt
her
ateofac
cept
anc
eofc
ons
umer
sfornew i
deas
.Ac
cor
dingl
y,a
f
irm'
smar
ket
ings
ucc
essc
anbeaf
fec
tedc
ons
ider
abl
ybyi
tsabi
li
tyt
ounder
standand
managet
hel
if
ecy
cleofi
tspr
oduc
ts.
1.I
ntr
oduct
ionSt
age
I
nthi
sst
aget
hepr
oduc
tisl
aunc
hedi
ntot
hemar
keti
nful
l-
scal
epr
oduc
tionand
mar
ket
ingpr
ogr
am.I
thasgonet
hrought
heembr
yoni
cst
agesofi
deaev
aluat
ion,
pi
lot model
s,and mar
ket t
est
ing.Oper
ati
ons i
n t
he i
ntr
oduc
tor
yst
age ar
e
c
har
act
eri
zedbys
low s
alesgr
owt
h,hi
ghc
ost
,netl
oss
es,l
imi
teddi
str
ibut
ionout
let
andabs
enc
eofc
ompet
it
ion.Pr
oduc
tweaknes
sesandf
ail
uresc
anbei
dent
if
iedand
el
imi
nat
edatt
hiss
tage.Pr
omot
ionalac
tiv
iti
esemphas
izeont
het
ypeofpr
oduc
t
r
athert
hant
hebr
and.
2.Gr
owt
h(Mar
ketAccept
ance)St
age
Gr
owt
hismar
kedbyr
api
dsal
esandpr
ofi
tri
se.Ther
isei
nsal
esandpr
ofi
ttempt
sto
at
trac
tcompet
it
ors
.Asar
esul
t,di
str
ibut
ionout
let
sar
einc
reas
edwi
thexpec
tedpr
ice
r
educ
tion.Att
hiss
tage manuf
act
uri
ng and di
str
ibut
ion ef
fi
cienc
y ar
ethe key
el
ement
sfors
ucc
ess
.Sel
ect
iveadv
ert
isi
ngi
srequi
redemphas
izi
ngoni
tsownbr
and'
s
adv
ant
ages
.Pr
ofi
tsmayt
endt
odec
reas
eatt
heendoft
hegr
owt
hst
age.
3.Mat
uri
ty
Dur
ingt
hef
irs
tpar
toft
hisper
iod,s
alesc
ont
inuet
oinc
reas
ebutatadec
reas
ingr
ate.
Whi
les
alesar
elev
eli
ng,pr
ofi
tsar
edec
lini
ng.I
tismar
kedbys
tif
feni
ngc
ompet
it
ion

59|Page
ac
compani
edbyi
ncr
eas
edmar
ket
ingexpens
esus
edt
odef
endt
hepr
oduc
tagai
nst
f
ier
ce pr
icec
ompet
it
ion.Compet
it
orsheav
ilypr
omot
ethei
rbr
andsus
ing s
ubt
le
di
ff
erenc
esbec
aus
esuppl
yexc
eedsdemandmaki
ngdemands
imul
ati
ones
sent
ial
.
4.Decl
ineandPos
sibl
eAbandonment
Themar
ketdec
lines
tagei
smar
kedbyei
thert
hepr
oduc
tsgr
adualr
epl
acementbya
new pr
oduc
torbyanyev
olv
ingc
hangei
nthec
ons
umerbehav
ior
.Iti
saper
iodof
hi
ghl
yaggr
avat
eds
alesr
educ
tion,andpr
ofi
tdec
linesmor
ethanev
er.Cons
umer
s
s
hif
tthei
rat
tent
iont
oot
hernewl
yint
roduc
edpr
oduc
ts.Anumberofc
ompet
it
ors
wi
thdr
aw f
rom t
he mar
ketand pr
omot
ionalexpendi
tur
esdr
op of
f.Cos
tcont
rol
bec
omesani
mpor
tantmar
ket
ingt
ool
.Int
roduc
tionofanewpr
oduc
tisexpec
ted.

5.
7.Br
andi
ng
A br
and i
saname,t
erm,s
ymbol
,si
gn,des
ign orc
ombi
nat
ion oft
hes
e,us
ed t
o
i
dent
if
ythepr
oduc
tsofaf
irm anddi
ff
erent
iat
ethem f
rom t
hos
eofc
ompet
it
ors
.
Br
andi
ngi
sani
ntr
ins
icas
pec
tofpr
oduc
tst
rat
egy
,fori
taddsgr
eatv
aluet
oapr
oduc
t.
Br
andname-Thepar
tofabr
andt
hatc
ons
ist
sofwor
ds,l
ett
ersand/
ornumber
sthat
c
anbev
ocal
iz
ed.
Br
andmar
k-Thepar
tofabr
andwhi
chc
anber
ecogni
zedbutonec
annotut
teri
t.I
t
c
an appeari
nthe f
orm ofa s
ymbol
,des
ign,di
sti
nct
ivec
olor
ingor
l
ett
eri
ng.
Tr
ademar
k-Abr
andorpar
tofabr
andt
hathasbeengi
venl
egalpr
otec
tions
othat
t
heownerhasexc
lus
iver
ight
stoi
tsus
e.
I
mpor
tanc
eofaBr
and
∙ Thebr
andmakesi
teas
ierf
ort
hes
ell
ert
opr
oces
sor
der
sandt
rac
kdown
pr
obl
ems
.
∙ Thes
ell
er'
sbr
and nameand t
rademar
kpr
ovi
del
egalpr
otec
tion ofuni
que
pr
oduc
tfeat
ures
.
∙ Br
andi
nggi
vest
hes
ell
ert
heoppor
tuni
tyt
oat
trac
tal
oyalpr
ofi
tabl
esetof

60|Page
 c
ust
omer
sandhel
pst
oinc
reas
ethec
ont
rolands
har
eoft
hemar
ket
.
∙ Br
andi
nghel
pst
hes
ell
ert
osegmentmar
ket
sandexpandt
hepr
oduc
tmi
x.
∙ Good br
andshel
pto bui
ldt
hec
orpor
atei
magebec
aus
eitadv
ert
isest
he
qual
it
yands
izeoft
hec
ompany
.
∙ Br
andsmakei
teas
yforc
ust
omer
stoi
dent
if
ypr
oduc
tsors
erv
ices
.
Requi
rement
sofaGoodBr
and
Amongt
hedes
irabl
equal
it
iesf
orabr
andf
oll
owi
ngar
ever
yimpor
tant
.Agoodbr
and
s
houl
d:
∙ Shor
tands
impl
e
∙ Eas
ytos
pel
landr
ead
∙ Eas
ytor
ecogni
zeandr
emember
∙ Eas
ytopr
onounc
e
∙ Canbepr
onounc
edi
nonl
yoneway
∙ Canbepr
onounc
edi
nal
llanguages(
fori
nter
nat
ionalmar
ket
s)
∙ Sugges
tiv
eofpr
oduc
tbenef
it
s
∙ Adapt
abl
etopac
kagi
ng/
label
ingneeds
∙ Notof
fens
ive,obs
cene,ornegat
ive
∙ Al
way
sti
mel
y(doesnotgetoutofdat
e)
∙ Adapt
abl
etoanyadv
ert
isi
ngmedi
um
∙ L
egal
lyav
ail
abl
eforus
e(noti
nus
ebyanot
herf
irm)
5.
8.Pac
kagi
ng
Pac
kagi
ngi
samar
ket
ingpr
oces
sconc
ernedwi
tht
hedes
ignandpr
oduc
tionoft
he
c
ont
ainerorwr
apperf
orapr
oduc
t.Thec
ont
ainerorwr
apperi
scal
ledt
hepac
kage.I
n
r
ecentt
imespac
kagi
nghasbec
omeapot
ent
ialmar
ket
ingt
oolbec
aus
eitc
anc
reat
e
c
onv
eni
enc
eval
uef
ort
hec
ons
umerandpr
omot
ionalv
aluef
ort
hepr
oduc
erors
ell
er.
Pac
kagi
ngi
scl
osel
yrel
atedt
olabel
ingandbr
andi
ngbec
aus
elabelof
tenappear
son
t
hepac
kageandt
hebr
andt
ypi
cal
lyont
hel
abel
.

61|Page
5.
8.1.
Impor
tanc
eofPac
kagi
ng
Pac
kagi
ngwaspr
oduc
tion-
ori
ent
edac
tiv
ityi
nmos
tcompani
es,per
for
medmai
nlyt
o
obt
ain t
he benef
it
s of pr
otec
tion and c
onv
eni
enc
e. Cur
rent
ly, howev
er,t
he
i
mpor
tanc
eofpac
kagi
ngi
sgr
owi
ng.Gener
all
y,t
her
ear
ethr
eer
eas
onsf
orpac
kagi
ng.
Pac
kagi
ngs
erv
ess
ever
als
afet
yandut
il
it
ari
anpur
pos
es.I
tpr
otec
tsapr
oduc
toni
ts
r
out
efr
om t
hepr
oduc
ert
othef
inalc
ons
umer
,ev
en whi
lei
tisbei
ngs
tor
ed by
mi
ddl
emen and us
ed by t
he c
ust
omer
.Forl
iqui
d,gr
anul
arand ot
herdi
vis
ibl
e
pr
oduc
ts,pac
kagi
ngi
sneededt
osec
uret
hei
temsi
nagi
venquant
it
yandf
orm.
Compar
edwi
thbul
kit
ems
,pac
kagedgoodsar
egener
all
ymor
econv
eni
ent
,cl
eaner
,
andl
esss
usc
ept
ibl
etol
oss
ess
uchasev
apor
ati
on,s
pil
li
ngands
poi
lage.F
urt
her
mor
e,
mul
ti
plepac
kagi
ngi
nlar
ges
izesenc
our
agesi
ncr
eas
edpr
oduc
tus
agewhenpac
kages
ar
ereus
abl
e.
Pac
kagi
ng may i
mpl
ementa c
ompany
'smar
ket
ing pr
ogr
am.The pac
kage i
san
i
mpor
tantmet
hodofc
ommuni
cat
ionwi
tht
hec
ust
omerbyi
dent
if
yingt
hebr
andand
pr
ovi
ding i
ngr
edi
ent
s and di
rec
tions
,whi
chr
epr
esentan i
mage oft
he br
and.
Pac
kagi
ngmayal
sos
erv
easapr
omot
ionalt
ool
;andt
hepac
kagei
sthef
inalf
orm of
pr
omot
ion t
hec
ons
umers
eespr
iort
omaki
ngapur
chas
edec
isi
on.Thepac
kage
di
ff
erent
iat
esapr
oduc
tfr
om t
hatofc
ompet
it
orsbyi
tsdes
ign,c
olor
,shapeand
mat
eri
als
.Ther
efor
e,pac
kagi
ngc
anac
tasas
il
ents
alesman.
Wel
l-
pac
kaged pr
oduc
ts may i
ncr
eas
e pr
ofi
t pos
sibi
li
ti
es i
nthat i
tst
imul
ates
c
ust
omer
stopaymor
ejus
ttogett
hes
pec
ialpac
kage.Bes
ides
,ani
ncr
eas
eineas
eof
handl
ing or r
educ
tion i
n damages or l
oss
es agai
ninc
reas
es pr
ofi
tby c
utt
ing
mar
ket
ingc
ost
s.

62|Page
5.
9.L
abel
ing
L
abeli
spar
tofapac
kaget
hatc
arr
iesv
erbali
nfor
mat
ionaboutt
hepr
oduc
toft
he
s
ell
er.Thees
senc
eofl
abeli
sexpos
itor
ybynat
urebec
aus
eitexpr
ess
ess
omef
eat
ures
oft
hepr
oduc
tsuc
hasi
ngr
edi
ent
s,wei
ghtmeas
ure,us
e,war
ning,per
for
manc
e,et
c.
Somet
imesi
tal
soi
ncl
udesadv
ert
isi
ngmes
sage.Al
abelmaybepar
tofapac
kage,ori
t
maybeat
agat
tac
heddi
rec
tlyt
othepr
oduc
t.Ty
pic
all
y,t
her
ear
ethr
eeki
ndsof
l
abel
s.
Br
andl
abel
:-Si
mpl
ythebr
andal
oneappl
iedt
othepr
oduc
tort
othepac
kage.
Gr
andl
abel
:-Al
abelwhi
chi
dent
if
iest
hequal
it
ywi
thal
ett
er,numberorwor
d.
Des
cri
pti
vel
abel
:-I
tgi
vesobj
ect
ivei
nfor
mat
ionaboutt
heus
e,c
ons
truc
tion,c
are,
per
for
manc
eorot
herf
eat
uresoft
hepr
oduc
t.Somet
imesi
tisc
all
ed
i
nfor
mat
ivel
abel
.

63|Page
 Chapt
erSi
x
Pr
ici
ng
6.
1.Meani
ngofPr
ice
Amar
ket
ers
houl
dmakeas
ounddec
isi
onr
elat
edt
othepr
iceofi
tspr
oduc
tors
erv
ice
bec
aus
ethec
ons
umer
s’per
cept
ionofpr
icewi
llaf
fec
tthebus
ines
s.F
ori
nst
anc
eif
buy
ersper
cei
veapr
icet
obehi
gh,t
heymaypur
chas
ecompet
it
orsbr
and,l
eadi
ngt
oa
l
ossofs
ales
.Ifpr
icei
stool
ow,s
alesmi
ghti
ncr
eas
e,butpr
ofi
tmays
uff
er.
Pr
icei
stheamountofmoneyc
har
gedf
orapr
oduc
tors
erv
iceori
tist
hes
um oft
he
v
aluest
hatc
ons
umer
sexc
hangef
ort
hebenef
itofus
ingt
hepr
oduc
t/s
erv
ice.
Ther
efor
epr
ici
ngr
epr
esent
sthev
alueofagoodors
erv
icef
orbot
hthes
ell
erand
buy
ers
.Fr
om bus
ines
spoi
ntofv
iew pr
ici
ngi
simpor
tantbec
aus
eiti
stheonl
y
r
evenuegener
ati
ngel
ement
sofamar
ket
ingmi
x,ot
her
scons
umer
esour
ce.

6.
2.F
act
orsAf
fec
tingPr
ici
ngDec
isi
ons
Ac
ompany
’spr
ici
ngdec
isi
onsar
eaf
fec
tedbybot
hint
ernalc
ompany
’sf
act
orsand
ext
ernalenv
ironment
alf
act
ors
.
6.
2.1.I
nter
nalF
act
orsAf
fec
tingPr
ici
ngDec
isi
on
(
A)Mar
ket
ingObj
ect
ives
Thec
o’smar
ket
ingobj
ect
ivehasagr
eati
nfl
uenc
eont
hepr
ici
ngdec
isi
onoft
hef
irm.
Thes
eobj
ect
ivesmi
ghti
ncl
ude
∙ Sur
viv
al f
irmsus
ual
lyc
ons
iders
urv
ivalast
hei
rmaj
orobj
ect
ivewhent
heyar
e
t
roubl
edbyt
oomuc
hcapac
ity
,heav
ycompet
it
ionorc
hangi
ngc
ons
umerwant
s.
Her
einor
dert
okeept
hepl
antgoi
ng,ac
ompanymays
etal
ow pr
icehopi
ngt
o

64|Page
 i
ncr
eas
edemand.
∙ Cur
rentpr
ofi
tmaxi
miz
ati
on I
nthi
scas
ethec
ompanyc
hoos
est
hepr
icet
hatwi
ll
pr
oduc
ethemaxi
mum c
urr
entpr
ofi
torc
ashr
athert
hanl
ongr
unper
for
manc
e.
∙ Mar
kets
har
eleader
shi
p Compani
esmayal
so wantt
o obt
aint
hedomi
nant
mar
kets
har
e.Theybel
iev
ethatt
hec
ompanywi
thl
argemar
kets
har
ewi
llenj
oyt
he
l
owes
tcos
tsandhi
ghes
tlongerpr
ofi
t.I
nor
dert
obeamar
kets
har
eleader
,thes
e
f
irmss
etpr
iceasl
owaspos
sibl
e.
∙ Pr
oduc
tqual
it
yleader
shi
p Ac
ompanywi
tht
hisobj
ect
ivewant
stohav
ethe
hi
ghes
tqual
it
ypr
oduc
tont
hemar
ketwhi
chmayc
allf
orc
har
gingahi
ghpr
icet
o
c
overR&Dc
ost
s.
∙ Ot
herobj
ect
ives Ac
ompanymi
ghtal
so us
e pr
icet
o ac
hiev
e ot
hers
pec
ifi
c
obj
ect
ives
.Fori
nst
anc
e,i
tcans
etl
ow pr
icet
opr
eventc
ompet
it
orsf
rom ent
eri
ng
t
hemar
ketors
etpr
iceatc
ompet
it
ors
’lev
elt
ost
abi
li
zet
hemar
ket
.
(
B)Mar
ket
ingMi
xSt
rat
egy
Pr
icei
stheonl
ymar
ket
ingt
oolt
hatt
hec
ompanyus
est
o ac
hiev
eit
smar
ket
ing
obj
ect
ives
.Pr
icedec
isi
onmus
tbec
oor
dinat
edwi
thpr
oduc
tdes
ign,di
str
ibut
ionand
pr
omot
iondec
isi
ont
ofor
m ac
ons
ist
entandef
fec
tiv
emar
ket
ingpr
ogr
am.Dec
isi
on
madef
orot
hermar
ket
ingmi
xel
ement
smayaf
fec
tpr
ici
ngdec
isi
on.F
orexampl
e,t
he
dec
isi
ont
opos
iti
ont
hepr
oduc
tonhi
ghqual
it
ywi
llmeant
hatt
hes
ell
ermus
tchange
hi
gherpr
icet
ocov
eri
tshi
gherc
ost
s.
Thus
,themar
ket
ermus
tcons
idert
het
otalmar
ket
ingmi
xwhens
ett
ingpr
ices
.Ift
he
pr
oduc
tispos
iti
onedonnon-
pri
cef
act
ors
,thendec
isi
onaboutot
hermar
ket
ingmi
x
t
ool
swi
lls
trongl
yaf
fec
tpr
ice.I
fpr
icei
sac
ruc
ialpos
iti
oni
ngf
act
ort
henpr
icewi
ll
s
trongl
yaf
fec
tthedec
isi
onofot
hermar
ket
ingmi
xel
ement
s.
(
C)Cos
ts
Cos
tss
ett
hef
loorf
ort
hepr
icet
hatt
hec
ompanyc
anc
har
gef
ori
tspr
oduc
t.Thepr
ice
oft
hepr
oduc
tus
ual
lymus
tcov
erc
ostofpr
oduc
tion,pr
omot
ionanddi
str
ibut
ion,

65|Page
pl
usapr
ofi
tfort
heof
fer
ingt
obeofv
aluet
othef
irm.I
naddi
ti
onwhenpr
oduc
tsar
e
pr
icedont
hebas
isofc
ost
spl
usaf
airpr
ofi
t,t
her
eisani
mpl
ici
tas
sumpt
iont
hatt
his
s
um r
epr
esent
stheec
onomi
cval
ueoft
hepr
oduc
tint
hemar
ketpl
ace.
Cos
t-or
ient
edpr
ici
ngi
sthemos
tcommonappr
oac
hinpr
act
ice,andt
her
ear
etwo
v
ari
ati
ons
:Mar
kuppr
ici
ngandc
ostpl
uspr
ici
ng.
Mar
kuppr
ici
ng Thi
sisc
ommonl
yus
edi
nret
ailbus
ines
s,wher
eaper
cent
agei
s
addedt
other
etai
ler
sinv
oic
epr
icet
odet
ermi
net
hef
inals
ell
ingpr
ice.
Cos
t pl
uspr
ici
ng Cl
osel
yrel
atedt
omar
kuppr
ici
ngi
scos
t pl
uspr
ici
ng,wher
e
t
hec
ost
sofpr
oduc
ingapr
oduc
tar
etot
aledandapr
ofi
tamountorper
cent
agei
s
addedon.
Cos
t-or
ient
ed appr
oac
hest
o pr
ici
nghav
ethe adv
ant
age ofs
impl
ici
tyand many
pr
act
it
ioner
sbel
iev
ethatt
heygener
all
yyi
eldagoodpr
ici
ngdec
isi
on.Howev
er,s
uch
appr
oac
heshav
ebeenc
rit
ici
zedf
ort
wobas
icr
eas
ons
.Fi
rst
,cos
tappr
oac
hesgi
ve
l
it
tl
eornoc
ons
ider
ati
ont
odemandf
act
ors
.Sec
ond,c
ostappr
oac
hesf
ailt
oref
lec
t
c
ompet
it
ionadequat
ely
.Onl
yini
ndus
tri
eswher
eal
lfi
rmsus
ethi
sappr
oac
handhav
e
s
imi
larc
ostc
omponent
,thi
sappr
oac
hyi
eldss
imi
larpr
icesand mi
nimi
ze pr
ice
c
ompet
it
ion.

6.
2.2.Ext
ernalF
act
orsAf
fec
tingPr
ici
ngDec
isi
ons
Theext
ernalenv
ironment
alf
act
ors
,whi
chaf
fec
tpr
ici
ngdec
isi
on,ar
e;
(
A)Demand
Ther
elat
ions
hipbet
weenpr
iceandc
ons
umerpur
chas
edec
isi
onc
anbeexpl
ainedby
t
heec
onomi
sts
’lawofdemandwhi
chs
tat
ethatc
ons
umerus
ual
lybuymor
euni
tsat
l
owerpr
iceandl
essuni
tsathi
gherpr
ices
.
(
B)Compet
it
ion
Thel
evelofc
ompet
it
ional
soaf
fec
tspr
ici
ng.Ther
efor
einor
dert
osetorc
hange
pr
ices
,thef
irm mus
tcons
ideri
tsc
ompet
it
ionandhow c
ompet
it
ionwi
llr
eac
ttot
he

66|Page
pr
iceoft
hepr
oduc
t.Her
eemphas
ismus
tbegi
venbyt
hef
irmf
ort
hef
oll
owi
ng
f
act
ors
.
F Numberands
izeofc
ompet
it
ors
.
F L
ocat
ionofc
ompet
it
ors
.
F Numberofpr
oduc
tss
oldbyc
ompet
it
ors
.
F Cos
tst
ruc
tur
eofc
ompet
it
ors
.
F Pas
t/pr
evi
ousr
eac
tionofc
ompet
it
orst
opr
icec
hange.
Thes
efac
tor
sdet
ermi
newhet
hert
hef
irm’
ssel
li
ngpr
ices
houl
dbeat
,bel
ow,orabov
e
c
ompet
it
ion.(
Eac
hoft
hes
epr
ici
ngs
trat
egi
eswi
llbedi
scus
sedl
aterunderpr
ici
ng
s
trat
egy
).
(
C)Gov
ernmentRegul
ati
ons
Pr
icesofc
ert
aingoodsands
erv
icesar
eregul
atedbys
tat
eandf
eder
algov
ernment
s.
Publ
icut
il
it
iess
uchasgas
oli
ne,t
axi
-f
arear
eexampl
esofs
tat
eregul
ati
onsofpr
ices
.
Si
ncemos
tmar
ket
ingmanager
sar
enott
rai
nedasl
awy
ers
,theyus
ual
lys
eekl
egal
c
ouns
elwhendev
elopi
ngpr
ici
ngs
trat
egi
est
oens
urec
onf
ormi
tyt
ost
ateandf
eder
al
l
egi
sl
ati
ons
.

6.
3.Pr
ici
ngObj
ect
ives
Theobj
ect
ivesofpr
ici
ngmaybec
las
sif
iedasunder
(
1)Pr
ofi
tor
ient
ed
a)Toac
hiev
etar
getr
etur
noni
nves
tmentornets
ales
b)Tomaxi
miz
epr
ofi
t
(
2)Sal
esor
ient
ed

67|Page
 a)Toi
ncr
eas
eSal
es
b)Tomai
ntai
nori
ncr
eas
emar
kets
har
e
(
3)St
atusquo-
ori
ent
ed
a)Tos
tabi
li
zepr
ices
b)Tomeetc
ompet
it
ion
6.
4.Gener
alPr
ici
ngAppr
oac
hes
I
tisc
leart
hatef
fec
tiv
epr
ici
ngdec
isi
oni
nvol
vest
hec
ons
ider
ati
onofmanyf
act
ors
and dependi
ng on t
he s
ituat
ion any of t
hes
efac
tor
scan be t
he pr
imar
y
c
ons
ider
ati
onsi
nset
ti
ng pr
ice.I
n addi
ti
on,i
tisdi
ff
icul
ttof
ormul
ate an exac
t
s
equenc
ingofwheneac
hfac
tors
houl
dbec
ons
ider
ed.Howev
er,t
hef
oll
owi
ngpr
ici
ng
dec
isi
onmodelv
iewspr
ici
ngdec
isi
onasas
teps
equenc
e.
1.Def
inet
argetmar
ket
s Anymar
ket
ingdec
isi
onmaki
ngac
tiv
itys
houl
dbegi
nwi
th
adef
ini
ti
onofs
egment
ati
ons
trat
egyandi
dent
if
icat
ionofpot
ent
ialc
ust
omer
s.
2.Es
timat
e mar
ket pot
ent
ial The maxi
mum s
ize of t
he av
ail
abl
e mar
ket
det
ermi
neswhati
spos
sibl
e.
3.Dev
eloppr
oductpos
iti
oni
ng Thef
irmsbr
andi
magei
nthemar
ketpl
acepr
ovi
de
i
mpor
tantc
ons
trai
ntsont
hepr
ici
ngdec
isi
onast
hef
irm at
tempt
stoobt
aina
uni
quec
ompet
it
iveadv
ant
agebydi
ff
erent
iat
ingi
tspr
oduc
tof
fer
ingf
rom t
hatof
c
ompet
it
ors
.
4.Des
igni
ngmar
ket
ingmi
x Devel
opi
ngmar
ket
ingmi
xel
ementdef
inest
her
olet
o
bepl
ayedbypr
ici
ngi
nrel
ati
ont
oandi
nsuppor
tofot
hermar
ket
ingv
ari
abl
es.
5.Es
timat
eal
lrel
evantcos
ts whi
les
trai
ghtc
ostpl
uspr
ici
ngi
stobeav
oided
bec
aus
eiti
sins
ens
iti
vet
odemand,pr
ici
ngdec
isi
onsmus
ttakei
ntoac
count
nec
ess
ary pl
anti
nves
tment
,inv
est
menti
n R&D,and i
nves
tmenti
n mar
ket
dev
elopment
,aswel
lasv
ari
abl
ecos
tsofpr
oduc
tionandmar
ket
ing.
6.Anal
yzeenvi
ronment
alf
act
orsands
etpr
ici
ngobj
ect
ives pr
ici
ngdec
isi
onsar
e
c
ons
trai
nedbyi
ndus
trypr
act
icesandl
egalr
equi
rement
ssot
hepr
ici
ngdec
isi
on

68|Page
 mus
tbeac
lears
tat
ementofobj
ect
ivest
hatr
ecogni
zesenv
ironment
alf
act
orsand
def
inet
her
oleofpr
ici
ngi
nthemar
ket
ings
trat
egyoft
hef
irm.
7.Dev
elopt
hepr
iceoft
hepr
oduct Att
hiss
tept
hepr
iceoft
hepr
oduc
tcanbe
det
ermi
nedandwi
lldef
ines
ell
ingpr
icesoft
hepr
oduc
t.

6.
5.NewPr
oduc
tPr
ici
ngSt
rat
egi
es
Whenac
ompanyi
ntr
oduc
esanewpr
oduc
tfort
hemar
ket
,itc
anappl
yanyoneoft
he
f
oll
owi
ngpr
ici
ngs
trat
egi
es.
1)Ski
mmi
ng pol
icy Thi
sinv
olv
es s
ett
ing pr
ice athi
gh l
evelus
ual
lyi
nthe
i
ntr
oduc
tions
tageoft
hepr
oduc
tli
fec
ycl
eandl
ower
sthepr
icei
nthel
aters
tages
.
Thef
irmi
ses
sent
ial
lyt
ryi
ngt
o s
kimt
hec
ream ofdemandoft
hos
epeopl
ethat
s
trongl
ydes
iret
hepr
oduc
tatapr
emi
um pr
ice.Ski
mmi
ngpr
icewi
llbes
ucc
ess
ful
undert
wos
ituat
ions
.Fi
rst
,whent
hec
ompany
2)Penet
rat
ion pol
icy Her
ethes
ell
erc
hangesar
elat
ivel
ylow pr
iceon anew
pr
oduc
t.Gener
all
ythi
spol
icyi
sus
edwhent
hef
irm expec
tsc
ompet
it
iont
omov
ein
r
api
dlyandwher
edemandf
ort
hepr
oduc
tis
,atl
eas
tint
hes
hor
trun,pr
iceel
ast
ic
(
i.
e.as
mal
lper
cent
agec
hangei
n pr
icei
nleadst
oahi
gh per
cent
agec
hangei
n
quant
it
ydemand)
.Thi
spol
icyi
sal
sous
edt
oac
hiev
eec
onomi
esofs
cal
e.I
nlat
ter
s
taget
hef
irm wi
llber
equi
redt
oal
teri
tspr
ices
oast
omeet
schangesi
nthemar
ket
pl
ace.

69|Page
 Chapt
erSev
en
Di
str
ibut
ionChannel(
Plac
e)

7.
1.Meani
ngofDi
str
ibut
ion Channel
Channelofdi
str
ibut
iondec
isi
onsi
nvol
venumer
ousi
nter
rel
atedv
ari
abl
est
hatmus
t
bei
ntegr
atedi
ntot
het
otalmar
ket
ingmi
x.
Ac
hannelofdi
str
ibut
ioni
sthec
ombi
nat
ionofi
nst
it
uti
ont
hroughwhi
chas
ell
er
mar
ket
spr
oduc
tst
otheus
erorul
ti
mat
econs
umer
.
Theneedf
orot
heri
nst
it
uti
onsori
nter
medi
ari
esi
nthedel
iver
yofgoodsi
ssomet
imes
ques
tioned,par
tic
ular
lys
inc
ethepr
ofi
tst
heymakear
evi
ewedasaddi
ngt
othec
ost
oft
hepr
oduc
t.Howev
er,t
hisr
eas
oni
ngi
snotl
ogi
cal
,si
ncepr
oduc
ersus
emar
ket
ing
i
nter
medi
ari
esbec
aus
ethei
nter
medi
aryc
anper
for
mfunc
tionsmor
echeapl
yand
mor
eef
fi
cient
lyt
hant
hepr
oduc
er.
Di
str
ibut
ionmaybedef
inedasanoper
ati
onors
eri
esofoper
ati
onswhi
chphy
sic
all
y
br
inggoodsmanuf
act
ured orpr
oduc
ed byanypar
tic
ularmanuf
act
ureri
ntot
he
handsoff
inalc
ons
umerorus
er. R.
S.Dawar

7.
2.Maj
orChannel
sofDi
str
ibut
ion
Aspr
evi
ous
lynot
ed,ac
hannelofdi
str
ibut
ion i
sthec
ombi
nat
ion ofi
nst
it
uti
ons
t
hroughwhi
chas
ell
ermar
ket
spr
oduc
ttot
heus
erorul
ti
mat
econs
umer
.Someof
t
hes
eli
nksas
sumet
her
isksofowner
shi
p;ot
her
sdonot
.Someper
for
m mar
ket
ing
f
unc
tionswhi
le ot
herper
for
msnon-
mar
ket
ing orf
aci
li
tat
ing f
unc
tions
,suc
h as
t
rans
por
tat
ion.Thec
onv
ent
ionalc
hannelofdi
str
ibut
ionpat
ter
nforc
ons
umergoods
mar
keti
sshownbel
low.

70|Page
v Conv
ent
ionalChannel
sforDi
str
ibut
ionofCons
umerGoods
Manuf
act
urer Consumer s
Manuf
act
urer Retai
ler Cons
umer
s
Manuf
act
urer Wholesal
er Ret
ail
ers Consumer
Manuf
act
urer Agent Ret
ail
er Consumer
Manuf
act
urer Agent Whol
esal
er Retai
ler Consumer

Somemanuf
act
urer
sus
eadi
rec
tchannel
,sel
li
ngdi
rec
tlyt
oamar
ket
.Us
ingadi
rec
t
c
hannel
,cal
led di
rec
tmar
ket
ingi
ncr
eas
ed i
n popul
ari
tyasmar
ket
ersf
ound t
hat
pr
oduc
tsc
oul
dbes
olddi
rec
tlyus
ingav
ari
etyofmedi
a.Thes
emedi
ainc
ludedi
rec
t
mai
l,t
elemar
ket
ing,di
rec
t-ac
tionadv
ert
isi
ng,on-
li
nes
ell
inganddi
rec
tsel
li
ngt
hrough
demons
trat
ionsathomeorwor
kpl
ace.
I
not
herc
ases
,oneormor
eint
ermedi
ari
esmaybeus
edi
nthedi
str
ibut
ionpr
oces
s.A
c
ommonc
hannelf
orc
ons
umergoodsi
sonei
nwhi
cht
hemanuf
act
urers
ell
sthr
ough
whol
esal
ersandr
etai
ler
s.Smal
lmanuf
act
urer
smayal
sous
eagent
s,s
inc
etheydon’
t
hav
esuf
fi
cientc
api
talf
ort
hei
rowns
alesf
orc
es.
Thef
inalc
hannelabov
eisus
edpr
imar
il
ywhens
mal
lwhol
esal
ersandr
etai
ler
sar
e
i
nvol
ved.
I
ncont
ras
ttoc
ons
umerpr
oduc
ts,or
gani
zat
ionalgoodshav
eac
onv
ent
ionalc
hannel
ofdi
str
ibut
ion.
v Thec
onv
ent
ionaldi
str
ibut
ionc
hannel
sofor
gani
zat
ionalgoodsar
eshownbel
ow:
Manufact
urer Organi
zat
ionaluser
Manufact
urer Organi
zat
ionaldist
ributi
on Organi
zat
ionalus
er
Manufact
urer Agent Organizati
onalusers
Manufact
urer Agent Organizati
onaldi
stri
buti
on
Organi
zat
ionalus
er

Thedi
rec
tchanneli
sof
ten us
ed i
nthedi
str
ibut
ion ofor
gani
zat
ionalgoods
.The
r
eas
onf
ort
hiss
temsf
rom t
hes
truc
tur
eofmos
tor
gani
zat
ionalmar
ket
swhi
chof
ten

71|Page
hav
erel
ati
vel
yfewbutext
remel
ylar
gec
ust
omer
s.Al
so,manyor
gani
zat
ionalpr
oduc
ts
s
uchasc
omput
ersneedagr
eatdealofpr
esal
eandpos
tsal
eser
vic
e.
Di
str
ibut
ionsar
eus
edi
nor
gani
zat
ionalmar
ket
swhent
henumberofbuy
ersi
slar
ge
andt
hes
izeoft
hebuy
ingf
irmi
ssmal
l.Asi
nthec
ons
umergood,agent
sar
eus
edi
n
or
gani
zat
ionalmar
ket
sinc
asewher
emanuf
act
uresdon’
twi
sht
ohav
ethei
rowns
ales
f
orc
e.Suc
har
rangementc
anbeus
edbys
mal
lmanuf
act
urer
sorwhent
hemar
keti
s
geogr
aphi
cal
lydi
sper
sed.

7.
3.F
act
orsAf
fec
tingChoi
ceofDi
str
ibut
ionChannel
s

F
act
orsaf
fec
tingc
hannelc
hoi
cesar
enumer
ousasbel
ow:

1.Productfact
orl i
keper
ishabil
it
y,s
ize,s
tyl
euni
tval
ue,t
ypeofendus
ersandot
her
fact
orsli
keaftersal
esser
vic
eetc.
2.Marketf
act
ors
uch asmar
kets
ize,di
sper
salofc
ons
umer
ssi
ze ofc
ons
umer
or
derset
c.
3.Cons
umerf
act
ori
.e.t
ypeofc
ons
umer
;andt
hei
rbuy
inghabi
ts.
4.I
nter
medi
aryf
act
or(
ser
vic
esr
ender
edbymi
ddl
emen)
5.Ent
erpri
sefact
or(fi
nanci
alf
act
or,exper
ienc
e,needf
orc
ont
rol
;qual
it
yandqual
it
y
ofmarket
ingserv
ices)
6.Envi
ronmentfactor
ssuc
hasc
ompet
it
orsc
hannelandc
ostofc
hannelal
soaf
fec
t
channels
elec
tion.
7.Otherfac
tor
ssuc
hasc
ompet
it
ors
’channelandc
ostofc
hannelal
soaf
fec
tchannel
sel
ecti
on.

72|Page
73|Page