Lesson 4

Differentiate the buying Behavior and Decision Making of

individual/household customer versus the Business (organizational)
customer

(ABM_PM11-le-i-13)

What I Need To Know

At the end of the lesson, you are expected to:

 Describe consumer and business markets; and

 Differentiate the buying behavior and decision making of individual/household

customer versus the business (organizational) customer.

What’s New

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 Ac琀椀vity 1: Research of a companies that are part of organiza琀椀onal markets and explain only
What purpose and opera琀椀ong of these markets? And Research also a picture of consumers and
explain why consumer purchase products and services? A昀琀er that you are going to determine at least
one similarity and di昀昀erences between consumers and organiza琀椀onal markets.
_______________________________________________________________________________
___________________________________________________________________________________
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________________________________________________________.
1

What Is It

Consumer and Organiza琀椀onal Markets

Business o昀昀er products and services to both consumer and organiza琀椀onal markets.

Consumer Markets

Consumer markets include individuals and/or households that purchase products and services
for personal consump琀椀on. Consumers normally make purchase in smaller quan琀椀琀椀es, due to their
tendency to consume products gradually over a period of 琀椀me. Moreover, consumers tend to be more
emo琀椀onal about their purchases. The purchases are at 琀椀mes impulsive or spontaneous.

Di昀昀eren琀椀ate the buying Behavior and Decision Making of individual/household customer versus the
Business (organiza琀椀onal) customer

The customer buying process (also called a buying decision process) describes the journey your
customer goes through before they buy your product. Understanding your customer’s buying process
is not only very important for your salespeople, it will also enable you to align your sales strategy
accordingly.

The 昀椀ve stages framework remains a good way to evaluate the customer’s buying process. John
Dewey 昀椀rst introduced the following 昀椀ve stages in 1910:

1. Problem/need recogni琀椀on

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 This is o昀琀en iden琀椀昀椀ed as the 昀椀rst and most important step in the customer’s decision process. A
purchase cannot take place without the recogni琀椀on of the need. The need may have been triggered
by internal s琀椀muli (such as hunger or thirst) or external s琀椀muli (such as adver琀椀sing or word of mouth).

2. Informa琀椀on search

Having recognized a problem or need, the next step a customer may take is the informa琀椀on
search stage, in order to 昀椀nd out what they feel is the best solu琀椀on. This is the buyer’s e昀昀ort to search
internal and external business environments, in order to iden琀椀fy and evaluate informa琀椀on sources
related to the central buying decision. Your customer may rely on print, visual, online media or word
of mouth for obtaining informa琀椀on.

3. Evalua琀椀on of alterna琀椀ves

As you might expect, individuals will evaluate di昀昀erent products or brands at this stage on the
basis of alterna琀椀ve product a琀琀ributes – those which have the ability to deliver the bene昀椀ts the
customer is seeking. A factor that heavily in昀氀uences this stage is the customer’s a琀�tude. Involvement
is another factor that in昀氀uences the evalua琀椀on process. For example, if the customer’s a琀�tude is
posi琀椀ve and involvement is high, then they will evaluate a number of companies or brands; but if it is
low, only one company or brand will be evaluated.

4. Purchase decision

The penul琀椀mate stage is where the purchase takes place. Philip Kotler (2009) states that the 昀椀nal
purchase decision may be ‘disrupted’ by two factors: nega琀椀ve feedback from other customers and the
level of mo琀椀va琀椀on to accept the feedback. For example, having gone through the previous three
stages, a customer chooses to buy a new telescope. However, because his very good friend, a keen
astronomer, gives him nega琀椀ve feedback, he will then be bound to change his preference.
Furthermore, the decision may be disrupted due to unforeseen situa琀椀ons such as a sudden job loss or
reloca琀椀on.

5. Post-purchase behaviour

In brief, customers will compare products with their previous expecta琀椀ons and will be either
sa琀椀s昀椀ed or dissa琀椀s昀椀ed. Therefore, these stages are cri琀椀cal in retaining customers. This can greatly
a昀昀ect the decision process for similar purchases from the same company in the future, having a knock-
on e昀昀ect at the informa琀椀on search stage and evalua琀椀on of alterna琀椀ves stage. If your customer is
sa琀椀s昀椀ed, this will result in brand loyalty, and the Informa琀椀on search and Evalua琀椀on of alterna琀椀ve
stages will o昀琀en be fast-tracked or skipped altogether.

On the basis of being either sa琀椀s昀椀ed or dissa琀椀s昀椀ed, it is common for customers to distribute
their posi琀椀ve or nega琀椀ve feedback about the product. This may be through reviews on website, social
media networks or word of mouth. Companies should be very careful to create posi琀椀ve post-purchase
communica琀椀on, in order to engage customers and make the process as e昀฀cient as possible.

Consumer Buying Roles

There are 昀椀ve roles individuals may portray in a consumer buying decision:

 Ini琀椀ator- person who ini琀椀ally suggests buying a par琀椀cular product or service.

 In昀氀uencer- person who tries to convince others of the need for the product/service
and in昀氀uences the purchase decision.

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  Decider- the person who makes the 昀椀nal decision to purchase or makes the 昀椀nal
decision on any product/service components such as what to buy, how to buy, where
you buy, etc.

 Buyer- the person who makes the actual purchase.

 User- the person who actually uses the products/service whether or not he/she was
involved in the buying decision.

As an example, the wife in a family may suggest to her husband that since their eldest son is
about to start working, it may be 琀椀me for him to have his own car. In this case, the wife is the ini琀椀ator.
The younger son agrees with the sugges琀椀on and informs his parents of make, model, and color. Both
the younger son and elder sister are in昀氀uencers. The father may visit several car showrooms, un琀椀l he
eventually decides on the purchase and pays for the car. The father is the both the decider and the
buyer. The eldest son receives the car ans uses it as his personal vehicle. He is the user.

Consumer Markets and Buying Behavior

Consumers are of di昀昀erent genders and ages. They have varying income levels, live in di昀昀erent
regions of the country, and have various personali琀椀es and psychological pro昀椀les. This makes
developing a single way to sell to consumers. Di昀฀cult as they are in昀氀uenced by di昀昀erent factors when
buying goods and services.

Consumers’ purchases are ini琀椀ated by marke琀椀ng s琀椀muli. Marke琀椀ng s琀椀muli refer to the elements
of the marke琀椀ng mix, o昀琀en琀椀mes referred to as the 4P’s: Product, Price, Place, and Promo琀椀on.

Consumers are in昀氀uenced by the products/services that they see, hear from mass media, the
Internet, and through word of mouth. Marke琀椀ng organiza琀椀ons organize these four elements so
marke琀椀ng s琀椀muli can result in experted sales and brand loyalty.

Marke琀椀ng Inputs
 Products Consumer Purchase Decisions
 Price  Product choice
 Place  Brand choice
 Promo琀椀on  Loca琀椀on choice
 Purchase 琀椀ming
 Purchase amount
 Purchase frequency

Psychological Inputs
 Culture
Figure 9. The  A琀�tude
Consumer Behavior
Model
 Learning
 Percep琀椀on

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 Buyer characteris琀椀cs comprise of cultural, social, personal, and psychological factors. Cultural
characteris琀椀cs, par琀椀cularly, play a large role in consumer interest and eventual purchase. Products and
services must “昀椀t” the cultural background of the poten琀椀al buyer and not run contrary to it. An
individual’s personal culture is developed over琀椀me. This includes his manner of upbringing, his
educa琀椀onal background, and the collec琀椀ve culture consciousness” or “ keeping up with the Joneses”
will favorably in昀氀uence an individual’s a琀琀rac琀椀on toward products and services with pres琀椀gious brand
reputa琀椀ons. A consumer, therefore, may be drawn to an adver琀椀sement of a high-end model but may
selec琀椀vely ignore adver琀椀sements of a high-end model but may selec琀椀vely ignore adver琀椀sements of
other lesser known brands that he perceives are rela琀椀vely inferior or does not promote his culture of
brand consciousness.

Sub-cultural factors are minute parts of one’s culture that provide speci昀椀c iden琀椀昀椀ca琀椀on of its
members. This can include one’s na琀椀onality mix (e.g. Tsinoy, Mes琀椀zo, Fil-Am) or regional origins (e.g.
Ilocano, Batangueño, Ilonggo, or Manileño). These factors play a cri琀椀cal role in one’s buying behavior.
For example, Chinese-Filipinos are supposedly very prac琀椀cal in their spending habits, and Ilocanos
have been know to be thri昀琀y.

This behavior may likewise be in昀氀uenced by one’s social class. Social class is a status heirarchy in
which individuals and groups are classi昀椀ed through economic success and accumula琀椀on of wealth.
The four most common social classes are upper class, middle class, working class, and lower class.

Commonly, consumers belonging to a par琀椀cular economic class (such as class A, the highest
economic class), purchase products and services consistent with their economic status. An income
class A senior corporate execu琀椀ve may therefore drive or be driven in an expensive car, wear branded
clothes, own a high-end smart phone, dine in the 昀椀nest restaurants, and speak and act in a restrained,
measured, and socially eloquent manner. In cases of this nature, this person’s income classi昀椀ca琀椀on is
consistent with his/her social class (income class A= upper social class).

Consumers usually purchase products and services be昀椀琀�ng what they perceive as “acceptable”
by their own social class. Purchases made outside this “acceptable” classi昀椀ca琀椀on can lead to one
being openly or silently ostracized by other members of their social class.

Therefore, if this senior execu琀椀ve suddenly decides to purchase a 15-year old obviously
dilapidated car and decides to begin driving it personally to and from work, he may raise many of this
o昀฀ce mates and acquaintances eyebrows as “ac琀椀ng outside his social class” or may even be
suspected of having lost his previously enviable economic status.

Conversely, if one of this senior execu琀椀ve’s lowest ranking employees belonging to the lowest
income classes (classes D and E), invests all his pay, maximizes his credit, purchasing and coming to
work consistently in branded clothes, communicates with others higher ranking, substan琀椀ally
wealthier o昀฀ce-mates and otherwise exhibits the purchasing his true economic standing will frown
upon this behavior as spending beyond one’s means, and may even brand him as a “social climber.”

Reference groups, likewise, exert a strong in昀氀uence on buyer behavior. Reference groups include

individuals or groups that in昀氀uence consumer opinions, beliefs, a琀�tude, and behaviors. They o昀琀en
serve as role models and inspira琀椀on. Many consumers belong to reference groups such as families,
friends, schoolmates, and co-workers. These are people whom they have extended and in琀椀mate

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contact with. These groups exert con琀椀nuous in昀氀uence on an individual’s choice of products/services
or brands to purchase.

On the other hand, aspira琀椀onal groups are groups that a person currently does not belong to but
wishes to belong to or to be associated with. What aspira琀椀onal groups purchase also in昀氀uences and
individual considerably, as he may feel that buying products/services and brands make him feel some
degree of belongingness to the aspira琀椀onal group:

The challenge to marketers with reference and aspira琀椀onal groups is to iden琀椀fy the leaders of
these groups and to shape their opinions that in昀氀uence their followers in favor of a product or service.
Some琀椀mes, product or service. Some琀椀mes, products adver琀椀sers produce aspira琀椀onal ads to appeal to
customers’ desire to be a昀฀liated with a par琀椀cular group.

An even stronger in昀氀uence on buyer behavior is the family. This phenomenon is par琀椀cularly true
among Filipinos. Because of the length of 琀椀me one spends with his family, an individual adopts the
values, habits, and philosophical orienta琀椀on of his family, i.e. self-worth, spending habits, and general
perspec琀椀ve and outlook towards life. This con琀椀nues even a昀琀er he has married. Spouses exert varying
levels of in昀氀uence in the purchase of goods/services so marketers must be able to iden琀椀fy the
decision-maker in the rela琀椀onship. In the Philippines, the wife is o昀琀en the decision-maker in the
purchase of daily household items, while the husband exerts a greater in昀氀uence in the purchase of
large 琀椀cket items such as durable and specialty goods.

Each individual performs a par琀椀cular role in rela琀椀on to his environment. This role is related to his
occupa琀椀on or profession. His buying decisions shall be昀椀t the image or status that he projects. For
example, a vice-president of a company is expected to drive a luxury car and wear high-end clothing,
and to be seen frequen琀椀ng pres琀椀gious commercial establishments.

Figure 10. Buyer

Characteris琀椀cs In昀氀uencing
Purchase Behavior
(Source: stock photo

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 An individual’s personal factors also play a sizeable in昀氀uence in his buying behavior. People’s
need and wants change as one ages-- from toys in early childhood, to denim pants as teenager, to
suits and dress clothes as one joins the workforce. A very useful guide to buying prospensity was
developed by William D. Wells and George Gubar-- the nine stages of a family’s life cycle. The authors
have modi昀椀ed it to 昀椀t to the Philippine context.

Stage 1: Bachelor/bachelore琀琀e stage- They are highly dependent on their parents for 昀椀nances
in the form of allowances. Some may be employed part-琀椀me in fast food chains or business
out sourcing companies. They spend primarily on entertainment, ea琀椀ng out, fashion,
da琀椀ng, and ac琀椀vi琀椀es with friends.

Stage 2: Young, newly married couple with no children- Most have dual income as both spouses
may be working. They may be ren琀椀ng a house or temporarily staying with parent/in-law.
They buy household appliances and audio and video equipment, and spend to make their
living space comfortable. If living with parent/in-law, they may share in household
expenses.

Stage 3: Married couple, with eldest child below elementary school age- They may be ren琀椀ng
their living facility or s琀椀ll staying with parent/in-law. They spend their income on nursery
and kindergarten educa琀椀on, food, children’s clothes, juvenile furniture, toys, and trips to
amusement parks.

Stage 4: Married couple, with youngest child six years old or over- They spend primarily on
school tui琀椀on, uniforms, books, and allowances. They usually live independently in an
apartment or condominium. They may join social and civic clubs and begin inves琀椀ng in
insurance. They purchase groceries and food items frequently and in larger quan琀椀琀椀es.

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 Stage 5: Older married couple, family head s琀椀ll working, all children living on their o wn- They
have increased savings as a result of reduced 昀椀nancial requirements. Their expenditures
include vaca琀椀ons, some luxury items, health and 昀椀tness, vitamins and supplements. They
ini琀椀ate re琀椀rement fund investments.

Stage 6: Widow/widower, in labor force - They have substan琀椀al savings. They may move out
from a conven琀椀onal home to live in a small condominium unit. They spend on ea琀椀ng out,
movies, other forms of entertainment, health and 昀椀tness, and dietary supplement. Also,
they spend a lot of free 琀椀me with friends who share similar lifestyles.

Stage 7: Widow/widower, re琀椀red - Pensioner. They may be asked to move in by one of their
adult children for be琀琀er care. Substan琀椀al expenses are for ambulatory and healthcare,
usually with host child’s family.

An individual’s occupa琀椀on also plays an important indicator in the products and services he/she
purchases. Lawyers are expected to buy a lot of dress shirts, neck琀椀es, suits or barong tagalogs. Blue
collar workers purchase work purchase work boots and denims, while students regularly buy school
supplies such as pens, paper, and notebooks.

Buyer behavior is also dictated by economic capability. It is evident that individuals need money
to purchase goods and services. The more money available, the greater the amount and quan琀椀ty of
purchase.

Lifestyle is de昀椀ned as a manner of living that re昀氀ects a person’s values and a琀�tudes. One’s
lifestyle is independent of his/her occupa琀椀on, social class, or status. Therefore, a person may occupy a
high posi琀椀on in a bank, and yet prefer to maintain a frugal lifestyle. In contrast, an entry-level teller in
the same bank may live an extravagant lifestyle: always ea琀椀ng out, buying branded clothes, and using
the latest communica琀椀on gadget.

Personality refers to individual di昀昀erences in characteris琀椀cs pa琀琀erns of thinking, feeling, and

behaving. Typical personality traits are dominance, deference, defensiveness, adaptability, autonomy,
sociability, and self-con昀椀dence. The individual personali琀椀es of consumers likewise in昀氀uence their
buying behavior. Marketers can use personality as a means of enhancing product. For example, a car
manufacturer may discover that most buyers of its brand are self-con昀椀dent and highly sociable. The
car company can then proceed to compose adver琀椀sing copy or adver琀椀sing messages that appeal to
these personality types in marke琀椀ng its cars.

Similar to psychological factors, mo琀椀va琀椀on addresses the issue of why a consumer buys a
product or what needs he is trying to sa琀椀sfy. Most individuals purchase products and services in order
to sa琀椀sfy one or more of the 昀椀ve need levels iden琀椀昀椀ed by Abraham Maslow.

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 For example, three friends decide to meet and dine in a restaurant. One of the three may look
forward to the event because it will strengthen her rela琀椀onship with her friends. She is sa琀椀sfying her
social needs. Another may an琀椀cipate the event as she wants to take advantage of the occasion to
make an emergency loan from one of her friends. In this case, she is sa琀椀sfying her safety or security
needs. The third may actually just want to a琀琀end the occasion because she has heard the food in the
restaurant is par琀椀cularly good. She is a琀琀ending the a昀昀air to sa琀椀sfy her physiological needs.

Percep琀椀on is the process by which people translate sensory impression into a coherent and
uni昀椀ed view of the world around them. Because of percep琀椀on, consumers may view marke琀椀ng s琀椀muli
in di昀昀erent ways. Although a housewife may have been mo琀椀vated to buy a pair of shoes for an
important occasion, she may have a nega琀椀ve percep琀椀on of the level of service in a shoe store. She
may judge the e昀昀orts of an extremely mo琀椀vated salesperson as being “too pushy.” She may just prefer
to just ask for assistance when necessary. Another consumer in another shoe store that gives
shoppers “space” to browse may perceive the store as totally lacking in customer service and concern.

Three perceptual processes guide an individual’s percep琀椀on:

 Selec琀椀ve a琀琀en琀椀on - because consumers are exposed to hundreds of commercial messages

each day, they tend to pay a琀琀en琀椀on to only those that address a current need. This is the
reason why therefore meal 琀椀me, consumers are selec琀椀vely a琀琀racted to food commercials,
but almost totally ignore them when their hunger has been sa琀椀s昀椀ed. This is also why
companies develop adver琀椀sements that’s stand out and are di昀昀erent from other 昀椀rms. They
may, for example, use black and white as their medium to set their adver琀椀sement apart, or
use extreme drama琀椀za琀椀on in their messages.

 Selec琀椀ve distor琀椀on - pertains to the tendency of individuals to twist or “distort” informa琀椀on

to 昀椀t their exis琀椀ng mindset toward a brand. A 昀椀rst 琀椀me customer in a restaurant with
excellent market reputa琀椀on may, for example, “twist” or ra琀椀onalize the unreasonably long
琀椀me it takes for his order to arrive. He may convince himself that the chef is taking extra
care in selec琀椀ng the ingredients and preparing his order. In reality, however, the delay could
simply have been caused by the order being overlooked by the kitchen sta昀昀.

 Selec琀椀ve reten琀椀on - means that consumers tend to remember only the posi琀椀ve things that
reinforce their a琀�tudes and beliefs. Therefore, a shopper in a supermarket may only
remember the wide product selec琀椀on, a昀昀ordable prices, and relaxing shopping atmosphere
and totally “forget” the spill he had seen at the meat sec琀椀on, or the delay he encountered
at the checkout counter.

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 Learning is a rela琀椀vely las琀椀ng change in behavior that is the result of experience. When a
consumer purchases a par琀椀cular brand of product and is completely sa琀椀s昀椀ed with it, his/her posi琀椀ve
experience with the brand is reinforced. This learning can easily be applied to another product of the
same brand. If a consumer purchases a par琀椀cular brand of mayonnaise and is completely sa琀椀s昀椀ed
with it, he may project the same posi琀椀ve experience to tomato sauce with the same brand. This is a
strong argument for building brand equity, so that consumers will view several, if not all, the products
under the brand favorably.

A belief is de昀椀ned as con昀椀dence in the truth or existence of something not immediately

suscep琀椀ble to rigorous proof. On the other hand, an a琀�tude is a se琀琀led way of feeling about
someone or something, typically one that is re昀氀ected in a person’s behavior.

Consumers acquire both beliefs and a琀�tudes through learning. Some琀椀mes, consumers hold
strong beliefs about speci昀椀c products or their quali琀椀es and a琀琀ributes. Some of these beliefs may be
correct, some may be wrong. Correc琀椀ng an erroneous belief can be expensive. This is also true with
a琀�tudes.

For these reasons, organiza琀椀ons must study and understand various consumer beliefs and
a琀�tudes regarding their product. One way of discovering consumer a琀�tudes is through the conduct
of marke琀椀ng research, par琀椀cularly a usage, a琀�tude, and image survey.

What role do beliefs and a琀�tudes play in consumer marke琀椀ng? Many of those who are regularly
do their own laundry believe that detergents that produce a lot of suds clean clothes be琀琀er. This has
caused many households to reject new detergents in the market that do not produce a lot of suds. A
new detergent manufacturer, therefore, must either tailor his product to 昀椀t this belief or engage in a
massive campaign to correct or alter consumer a琀�tudes.

The study of consumer buyer behavior is already complex. Cultural, social, personal, and
psychological characteris琀椀cs all come into play. Some of these factors are largely uncontrollable.

What’s More

Activity 2: Explain in one pharagraph

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 A popular shampoo brand in the market is “Smooth and Fragrant Hair All Day” The brand
is positioned as a fragrance shampoo, curently a very desirable attribute to both men and
women. However, consumer preferences and priorities change over time. If, example, five
years from now, consumers give more importance to the ability of shampoo to make their hair
and shiny, how should “Smooth and Fragrant Hair All day” reposition itselt in the market?

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Activity 3: Explain in one pharagraph

If you are going to visit a large supermarket and observe shoppers in the personal care
or toiletries section buying either toothpaste, soap, or shampoo. What do you observe of their
buying behavior and decision making process. Classify specific shopping behaviors with
certain population segments such as: men, women, teenage, middle-aged, elderly, wealthy,
middle-class, etc. And after that, you are going to document and evaluate their observations.

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What I Have Learned

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Activity 4: Reflection

As a student;

1. What do you think is a good way to improve your buying behavior?

_______________________________________________________________

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2. Does impulse buying considered a negative consumer behavior? Giv some

instances and explain.

_______________________________________________________________

_______________________________________________________________

______________________________________________________________

You have done your lesson between strategic and tac琀椀c marke琀椀ng with their
objec琀椀ves. And also the macro-environment and micro-environment. Keep it up for
a job well done! Now, you may proceed to the next lesson.
Good luck!

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 Lesson 3

Lesson 5

Iden琀椀fy and Segment Market for Product or Service

(ABM_PM11-le-l-14)

Select the appropriate target market segment and its posi琀椀oning

(ABM_PM11-le-I-15)

What I Need To Know

The learners are expected to:

 Iden琀椀fy and segment market for a product or service; and

 Select the appropriate target market segment and its posi琀椀oning

What’s New

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Activity 1:

Ac琀椀vity 1: Picture

The picture above are part of the organiza琀椀onal markets about theIR 3W purpose and opera琀椀on
of these markets.List down the product what they want. And explain why you did not choose the
other product? 昀椀ve sentence only.

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 What Is It

Market Segmenta琀椀on

Market segmenta琀椀on is the process of dividing a market of poten琀椀al customers into groups, or
segments, based on di昀昀erent characteris琀椀cs. The segments created are composed of consumers who
will respond similarly to marke琀椀ng strategies and who share traits such as similar interests, needs, or
loca琀椀ons.

Why is market segmenta琀椀on important for marketers?

Market segmenta琀椀on makes it easier for marketers to personalize their marke琀椀ng campaigns.

By arranging their company’s target market into segmented groups, rather than targe琀椀ng each
poten琀椀al customer individually, marketers can be more e昀฀cient with their 琀椀me, money, and other
resources than if they were targe琀椀ng consumers on an individual level. Grouping similar consumers
together allows marketers to target speci昀椀c audiences in a cost e昀昀ec琀椀ve manner.

10

Market segmenta琀椀on also reduces the risk of an unsuccessful or ine昀昀ec琀椀ve marke琀椀ng campaign.
When marketers divide a market based on key characteris琀椀cs and personalize their strategies based
on that informa琀椀on, there is a much higher chance of success than if they were to create a generic
campaign and try to implement it across all segments.

Marketers can also us segmenta琀椀on to priori琀椀ze their target audiences. If segmenta琀椀on shows that
some consumers would be more likely to buy a product than others, marketers can be琀琀er allocate
their a琀琀en琀椀on and resources.

Consumer Segmenta琀椀on Variables

These are four major variables used in market segmenta琀椀on:

1. Geographic- pertains to where the popula琀椀on is located. Geographic segmenta琀椀on divides the
market by regions, ci琀椀es, urban and rural area, coastal and central land masses, by density or areas
with low, medium or heavy concentra琀椀on of popula琀椀on, or by areas of the country with either
rela琀椀vely temperate or hot temperature, among others.

Some examples of geographic segmenta琀椀on sub-variables are:

0 0
  Region

 Density

 Climate

2. Demographic - refers to the general characteris琀椀cs of the popula琀椀on. Using demographic

segmenta琀椀on, males may be grouped together in one segment, and females in another. Those
belonging to the higher income (income class A and B) may form a segment, the middle income class
(income class C) another segment, and the lower income (D and E) yet another. Age can also be an
e昀昀ec琀椀ve segmenta琀椀on variable. Teenagers may compose a segment, young adults another, and
mature individuals and senior ci琀椀zens may form two more individual segments. Educa琀椀onal
a琀琀ainment can be an e昀昀ec琀椀ve segmenta琀椀on sub-variable as well, such as those with higher educa琀椀on
(holders) of master’s degree, or doctorate degrees), individuals who have completed their college
educa琀椀on, graduated from high school, completed elementary educa琀椀on, and those with li琀琀le or no
educa琀椀on.

Some examples of common demographic segmenta琀椀on sub-variables are:

 Gender

 Age

 Income

 Occupa琀椀on

 Educa琀椀on

 Civil status

 Religion

 Na琀椀onality

 Race

 Family size

3. Psychographic - these are variables that represent the psychological pro昀椀le of consumers. This
is one of the most e昀昀ec琀椀ve segmenta琀椀on variables in predic琀椀ng purchase behavior. However, the
psycho-graphic pro昀椀les of di昀昀erent segments of the popula琀椀on are di昀฀cult to measure as no
government agency undertakes regular studies and release data to iden琀椀fy and quan琀椀fy these
segments. This is in contrast with geographic and demographic popula琀椀on data, which is collected
every 昀椀ve years by the Philippine Sta琀椀s琀椀cs Authority. Another is through Expecta琀椀on Surveys
undertaken by several government agencies as the Bangko Sentral ng Pilipinas.

Examples of psycho-graphic segmenta琀椀on sub-variables are:

 Lifestyle

0 0
  Personality

 Social Class

 User status

11

 Usage rate

 Loyalty status

 Bene昀椀ts sought

4. Behavior-graphic - is the segmenta琀椀on variable most indica琀椀ve of purchase behavior.

Unfortunately, it is not available to all organiza琀椀ons as it depends on the me琀椀culous maintenance and
conversa琀椀on of internal databases. Retailer databases, for example, can provide informa琀椀on such as
customer lis琀椀ngs, their home and email addresses, and contact numbers. When customer database is
organized and synchronized with point-of-sales system, retailers can pinpoint individual customer
purchases, by item, transac琀椀on size, 琀椀me of day, and frequency. When the database of a par琀椀cular
female customer, for example, indicates a preference for capri pants, the retailer can send an email to
this customer to advise her of the arrival of new capri pants. Without the database, the email will be
sent to all of the retailer’s customers. Behavior-graphic segmenta琀椀on not only enhances the likelihood
of sales, but drama琀椀cally reduces direct marke琀椀ng costs.

The organiza琀椀on has to decide which segmenta琀椀on sub-variables are relevant to the successful
and cost-e昀฀cient marke琀椀ng of its product or service. For example, a fruit juices company may decide
to concentrate the marke琀椀ng of its products to teenagers from the middle class income bracket. It
may also decide not to segment its poten琀椀al consumers by educa琀椀on, as educa琀椀onal a琀琀ainment may
be irrelevant in fruit juices purchase and consump琀椀on.

Target Market

A昀琀er segmen琀椀ng the market into various homogeneous parts (or segments possessing similar
characteris琀椀cs), the marketer decide which parts/segments he/she wants to ac琀椀vely pursue. The
target market of a product or service is de昀椀ned as its most probable and most logical consumers, and
may likewise be its heaviest consumers. A company may, for example, decide its product’s target
market to be:

“Males and females residing in Metro Manila who belong to income classes A, B and C, single,
are between the ages of 21 to 30, who are sports-minded and are looking for a sports drink that can
provide relief a昀琀er strenuous physical ac琀椀vi琀椀es.”

Research into na琀椀onal sta琀椀s琀椀cal database (e.g. the Philippines Sta琀椀s琀椀cs Authority) shows the
following popula琀椀on pro昀椀le:

Figure 13. Popula琀椀on Sta琀椀s琀椀c

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 Metro Manila Popula琀椀on 11,278,564

By gender: By marital status:

Male 49.3% Single 31.1%

Female 50.7% Married 46.2%

Separated/Widow/Widower 22.7%

By income class: By age:

Class AB 21.2% Below 10 14.8%

Class C 41.3% 10 to 20 21.4%

Class D 22.4% 21 to 30 19.7%

Class E 15.1% 31 to 40 17.9%

41 to 50 11.7%

51 to 60 8.4%

Above 60 6.1%

Elements of an Ideal Target Market

A company may 昀椀nalize the selec琀椀on of its market upon considera琀椀on of its conformity with the
following elements:

 Substan琀椀al - the select target market must be large enough in terms of quan琀椀ty and/or total
consump琀椀on capability. The size of a target market can be determined as follows:

Target market: Males and females residing in Metro Manila who belong to income classes A,B,
and C, single, are between the ages of 21 to 30, who are sports-minded and are looking for a sports
drink that can provide relief a昀琀er heavy physical ac琀椀vity.

12

11, 278, 564 (Metro Manila Popula琀椀on)

x 1.00 (decimal equivalent of the percentage of the popula琀椀on who are

male and female)

0 0
x 0.625 (decimal equivalent of the percentage of the popula琀椀on who
belong to income classes A,B, and C)

x 0.311 (decimal equivalent of the percentage of the popula琀椀on who are

single)

x 0.197 (decimal equivalent of the percentage of the popula琀椀on who are

between the ages 21 to 31)

431,877 Target market size

Although psychographic segmenta琀椀on sub-variables (such as being sports-minded, or those

engaged in heavy physical ac琀椀vity) may be the most indica琀椀ve in determining poten琀椀al consump琀椀on,
no database on these factors are available in public database. In most cases, organiza琀椀ons may have
to conduct market research to determine the percentage of the total popula琀椀on processing these
psychographic characteris琀椀cs.

A昀琀er the total size of the target market is determined (in this case 431.877), the organiza琀椀on
then decides on the substan琀椀veness of the total market. If the organiza琀椀on feels the size is su昀฀cient
to generate substan琀椀al sales revenues to make a pro昀椀t, the company can proceed to market its
product/service o昀昀ering.

If, however, the organiza琀椀on feels that the target market is not substan琀椀al enough to generate
su昀฀cient revenues, the organiza琀椀on can either:

A. Expand its target market to include other segment brackets previously not targeted

The company may decide to not just target ages 21 to 30 but likewise include ages 31 to 40. This
will result in a larger target market, as follows:

11,278,564 (Metro Manila Popula琀椀on)

x 1.00 (decimal equivalent of the percentage of the popula琀椀on who

are male and female)

x 0.625 (decimal equivalent of the percentage of the popula琀椀on who

0 0
 belong to income classes A,B, and C)

x 0.311 (decimal equivalent of the percentage of the popula琀椀on who

are single)

x 0.376 (decimal equivalent of the percentage of the popula琀椀on who

are between the ages 21 to 30 and 31 to 40)

824,294 Target market size

B. Expand its target market by reducing the number of sub-variables

The company may decide to exclude civil status as a segmenta琀椀on sub-variable by targe琀椀ng all
men and women regardless of marital status. The resul琀椀ng target market size is as follows:

11,278,564 (Metro Manila Popula琀椀on)

x 1.00 (decimal equivalent of the percentage of the popula琀椀on who

are made and female)

x 0.625 (decimal equivalent of the percentage of the popula琀椀on who

belong to income classes A,B, and C)

x 0.376 (decimal equivalent of the percentage of the popula琀椀on who

are between the ages 21 to 30 and 31 to 40)

2,650,463 Target market size

13

0 0
 C. Combina琀椀on of the two op琀椀ons

The company may decide not to use civil status as a segmenta琀椀on sub-variable. It may expand its
target market to include ages 31 to 40. The resul琀椀ng target market size is as follows:

11,278,564 (Metro Manila Popula琀椀on)

x 1.00 (decimal equivalent of the percentage of the popula琀椀on who

are male and female)

x 0.625 (decimal equivalent of the percentage of the popula琀椀on who

belong to income classes A,B, and C)

x 0.376 (decimal equivalent of the percentage of the popula琀椀on who

are between the ages 21 to 30 and 31 to 40)

2.650,463 Target market size

However, expanding one’s target requires necessary adjustments in the elements of the
product’s or service’s marke琀椀ng mix. For example, extending the original target market from income
classes A and B to include income class C would require adjustments in its suggested retail price, an
expansion of its distribu琀椀on network, and a possible re-calibra琀椀on in the details of its intended
adver琀椀sing and promo琀椀ons plan.

In market segmenta琀椀on, the more segmenta琀椀on sub-variables are used, the smaller the target
market becomes. This results in a focused market, where the market may feel that the product has
been made exclusively for me. Inversely, the less segmenta琀椀on sub-variables are used, the larger the
target market becomes.

The target market should ideally be:

 Financially capable - must have the 昀椀nancial means to a昀昀ord means to a昀昀ord the purchase
price of the product/service. Since organiza琀椀ons require a selling price for their
product/service, 昀椀nancial capability is an essen琀椀al element of an ideal target market. For
this reason, most pro昀椀t-oriented organiza琀椀ons exclude income class E as part of their target
market.

0 0
  Reachable - must be within physical reach to permit product distribu琀椀on. It should also
reachable by various marke琀椀ng ac琀椀vi琀椀es (adver琀椀sing, promo琀椀ons, Internet and digital
marke琀椀ng, etc.)

 Homogeneous - must react similarly to speci昀椀c marke琀椀ng s琀椀muli. A homogeneous market is

an ideal target market. Since companies employ various marke琀椀ng s琀椀muli to a琀琀ract,
persuade, or retain the loyalty of its target market, homogeneous markets will ensure that
the marke琀椀ng ac琀椀vi琀椀es will be e昀฀cient and e昀昀ec琀椀ve.

Target Market vs. Consuming Market

How does a product’s target market di昀昀er from its consuming market? A company’s target
market is the group of individuals with speci昀椀c characteris琀椀c to whom the company has decided to
focus its marke琀椀ng e昀昀orts. For example, a fruit juices brand may have iden琀椀昀椀ed its target market to be
“males and females residing in major urban centers na琀椀onwide, who are between the ages of 12 and
25, belonging to income classes A,B and C who are looking for a carbonated beverage with a high
ca昀昀eine content that can reinvigorate them and keep them ac琀椀ve enough to perform their daily
ac琀椀vi琀椀es.” Individuals who 昀椀t this descrip琀椀on is the brand’s target market.

On the other hand, the consuming market comprise of actual consumers of the product/service.
The great majority of its consuming market would naturally come from their selected target market.
However, some individuals outside the product’s target market descrip琀椀on (above the age of 25, for
example) may also buy the fruit juices brand and may also 昀椀nd its value proposi琀椀on applicable to
them (although to a lesser extent). A product’s or service’s consuming market, therefore, is larger than
its target market, because it includes individuals that are not target market of the product/service.

14

Posi琀椀oning

Posi琀椀oning is the process of communica琀椀ng the image of a brand into the minds of consumers.
The objec琀椀ve is to make the brand stand out in comparison to its compe琀椀tors.

Why should a brand have an image or a brand posi琀椀on? The 昀椀rst reason is to recall. Customers
have di昀฀culty remembering brand posi琀椀on? The 昀椀rst reason is to recall. Customers have di昀฀culty
remembering brands that have no dis琀椀nct image. This can be illustrated using a typical high school
student a琀琀ending a reunion of his elementary gradua琀椀ng class. Upon seeing his former schoolmates,
he may remember some schoolmates immediately, some even by name. These schoolmates are
memorable because of some dis琀椀nct image they had when they were together in primary school: the
most intelligent, the neatest, the cutest, the tallest, the darkest, the funniest, etc. He may struggle to
remember the names of the majority of his schoolmates because they were just “faces in the class,”
li琀琀le known for anything in par琀椀cular.

The same holds true with customers. When a customer needs a par琀椀cular product or service, he
will only include in his/her mental list of possible brands to purchase. Those brands that he
remembers and recalls. The customer will exclude other brands that have not established their
posi琀椀on in his memory.

0 0
 Having a catchy brand
name is good strategy
for branding

Elements of Good Brand Posi琀椀on

What is a good brand posi琀椀on? These are three requirements:

 Unique - A brand must select a posi琀椀on that is not currently occupied by another brand. For
example, it would not be good for a new bank to posi琀椀on itself as a full service 昀椀nancial
ins琀椀tu琀椀on that is willing to go out of its way to sa琀椀sfy customer needs and adopt other
bank’s tagline. The new bank must iden琀椀fy its own dis琀椀nc琀椀ve features and communicate
them to its customers using a di昀昀erent tagline

 Bene昀椀cial - The selected posi琀椀on must be perceived by its customers as bene昀椀cial

Customers always ask when considering a product or service, “what in it for me?” They are
willing to patronize market o昀昀erings that they perceive as capable of sa琀椀sfying their needs
and/or wants. Hence, if a commercial bank that is slow in processing transac琀椀ons.

 Credible - Once a brand posi琀椀on is selected, it must ensure that it performs and ful昀椀lls the
promise of its posi琀椀on. If a retailer posi琀椀ons itself as customer-friendly and communicates
this through the tagline “service with a smile,” the organiza琀椀on must ensure that this
posi琀椀oning is implemented 100% of the 琀椀me for it to be credible, perhaps requiring
employees to smile all the 琀椀me when dealing with customers.

Selec琀椀ng a Good Brand Posi琀椀on

0 0
 There are several tools available that can be used in the selec琀椀on of a good brand posi琀椀on. One
of the most powerful of these tools is perceptual mapping.

Perceptual Mapping

Perceptual mapping involves the iden琀椀昀椀ca琀椀on of a compe琀椀琀椀ve brand’s posi琀椀on using two
variables or axes (for example, price and quality). Each variable represents a factor relevant and

15

important to customers. Using perceptual maps, new products launched into the market can select
the posi琀椀on they wish to occupy. This is a昀琀er a comprehensive assessment of the number, size, and
intensity of compe琀椀琀椀on in each quadrant of the map.

For exis琀椀ng brands,

perceptual mapping is
useful in iden琀椀fying
industry par琀椀cipants
perceived by customers to
be the brand’s most direct
compe琀椀tor’s

0 0
Communica琀椀ng Brand Posi琀椀on

The brand posi琀椀on of a product/service must be consistent and communicated e昀昀ec琀椀vely to its
target market. It is pointless to adopt a brand posi琀椀on if it is known only to the company’s execu琀椀ves
and employees. The con琀椀nuous and consistent communica琀椀on of the brand’s posi琀椀oning to its target
market is important to create impact in the market. All elements of the product must be consistent to
the brand’s selected posi琀椀oning.

For example, products intended for the female market are packaged in rela琀椀vely small containers
(for comfortable handling by a woman’s hand), in so昀琀 shapes, and labeled in colors, e.g. pink,
lavender, etc.. For products intended for the upper income classes, they would be priced rela琀椀vely
higher.

Some of the elements to be considered in communica琀椀ng brand posi琀椀oning are:

 Packaging

 Labeling

 Selling Price

 Adver琀椀sing

 Brand endorser

 Tagline

Examine this caselet: (Note: the following was established through the authors’ observa琀椀on)

In 2015, kopiko launched 78°C, a ready-to-drink co昀昀ee la琀琀e. As la琀琀es are mixtures of espresso
co昀昀ee and milk, Kopiko posi琀椀oned itself as the “best tas琀椀ng la琀琀e,” extracted a temperature of 78°C. It
claims that 78°C degrees in the op琀椀mum extrac琀椀on temperature for co昀昀ee. The result is a la琀琀e that
has “rich taste and temp琀椀ng aroma. “It comes in a “shapely” PET bo琀琀le. The 30-second video
adver琀椀sement casts European-looking endorsers. It used the University Athle琀椀c Associa琀椀on of the
Philippines (UAAP) as its major adver琀椀sing vehicle. This is par琀椀cularly e昀昀ec琀椀ve since the primary
target market are students of the UAAP member schools and viewers of the athle琀椀c games. In
addi琀椀on, the campaign also focuses on the 78th year of UAAP. The product or brand is placed
prominently in all adver琀椀sements announcing UAAP game schedules.

Iden琀椀fying and Selec琀椀ng Compe琀椀琀椀ve Advantage

0 0
 Compe琀椀琀椀ve advantage is de昀椀ned as the superiority of an organiza琀椀on over compe琀椀tor. It
typically answers the ques琀椀on “Why should the customer purchase from this company instead of its
compe琀椀tors?”

 Cost advantage - results when 昀椀rm has the ability to produce a product or service at a lower
cost compared to its compe琀椀tors

This cost superiority will result in the company either being able to sell its products or
services at a lower price than its compe琀椀tors, or generate a larger margin from its sales.

 Di昀昀eren琀椀al advantage - when a company’s product or service di昀昀ers from its compe琀椀tors
and are perceived by consumers to be be琀琀er or of greater value.

 Focus advantage - When a company knows its target market very well, and can service its
needs be琀琀er than any of its compe琀椀tors.

Compe琀椀琀椀ve advantage can be achieved through external or internal means. Companies can take
advantage of opportuni琀椀es that arise from changes in macro-environmental factors, and being
responsive to these changes. Internally, a company can achieve cost advantage or di昀昀eren琀椀a琀椀on
through improvements int he produc琀椀on process, cost e昀฀ciency measures, branding, or product
innova琀椀on. Focus advantage, on the other hand, can be a琀琀ained by studying and predic琀椀ng the needs
and preferences of the target market.

Sources of compe琀椀琀椀ve advantage include the company’s cost structure, products/service

o昀昀erings, and distribu琀椀on networks, among others. In selec琀椀ng its compe琀椀琀椀ve advantage, the
company must know what opera琀椀onal a琀琀ributes ( such as products/service o昀昀erings, and distribu琀椀on
network, among others. In selec琀椀ng its compe琀椀琀椀ve advantage, the company must know what
opera琀椀onal a琀琀ributes (such as product quality, technology, price, availability, service, etc.) are
important to its target market. Selec琀椀ng an opera琀椀onal aspect with low importance to a company’s
target market will result to incremental compe琀椀琀椀ve advantage.

What’s More

0 0
Ac琀椀vity 2:

Enumerate and brie昀氀y explain the following:

A. Major variables used in market segmenta琀椀on

_______________________________________________________________________________
_______________________________________________________________________________
__________________________________________

B. Elements of target market

_______________________________________________________________________________
_______________________________________________________________________________
______________________________________

C. Elements of a good brand posi琀椀on

_______________________________________________________________________________
_______________________________________________________________________________
_____________________________________

16

What I Have Learned

Activity 3: Reflection

Research for an advertisement of a famous Philippin company. Then let them answer the
following questions:

1. Who do you think is the target market of this company? Why?

______________________________________________________________________
______________________________________________________________________
_________________

0 0
 2. Do you think their company’s target market is appropriate with the products / services
they are offering? Why?

______________________________________________________________________
______________________________________________________________________
__________________________________

3. For you, why is it important for companies to have a particular target market?

______________________________________________________________________
______________________________________________________________________
____________________

0 0
 17

What I Can Do

Ac琀椀vity 4: Research Project

Conduct a mini marke琀椀ng research. Follow the guidelines and format provided
below:

0 0
Mini-Marke琀椀ng Research Guidelines

The purpose of these research project is to challenge the students to think like a marke琀椀ng manager/researcher by
applying the knowledge accumulated throughout the chapter. Your going to conduct your own research study by
formula琀椀ng a research problem, determining the research methodology to be used, collec琀椀ng the data, presen琀椀ng the
research report to the class.

Step 1: Choose a Topic

Your going to choose a topic that is home-based related to. Here are some ideas:
1. E-load business
2. Snacks
3. Mini Store

Step 2: Develop a Research Proposal

The sond step of the project is to develop a research proposal. This research proposal will include the research
objec琀椀ves and an outline of their research design.

Step 3: Date Collec琀椀on

During this step in the process, you will prepare for data collec琀椀on and do the 昀椀eld work necessary to collect the data.
Use the following precedure as a guide:
1. Write the ques琀椀onaire
2. Pre-test ques琀椀onaire
3. Make revisions to the ques琀椀onaire, if necessary, based on the pre-test.
4. Administer ques琀椀onaire to target respondents
5. Conduct interviews (with in your family)

Step 4: Analysis of Data

During this phase, you will prepare your ques琀椀onnaire for tabula琀椀on and nalyze the data.
1. Code your ques琀椀onaire prior to data input. You should have procedures for coding open-ended ques琀椀ons.
2. Edit ques琀椀onaires prior to data input. Develop an edi琀椀ng guideline for those who will input the data.
3. Input the data from the ques琀椀onnaires into a spreadheet applica琀椀on.
4. Develop at least 3 cross tabula琀椀ons of the data.
5. Analyze and interpret the results.
6. Present the results in summary graphs and tables.
7. Draw conslusions from the result of data analysis, then recommend 3-5 points to management that are speci昀椀c
and a琀琀ainable.

18

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 17

Step 5: Write and Present the Research Report

The number of pages are meant to be guidelines, Your wri琀琀en report should

Include the following.

1. Title Page (1 page)

2. Table of Contents (1 page)

3. Execu琀椀ve Summary (5-10 pages max.)

The exucu琀椀ve summary is considered by many to be most important part of the

research report. There may be only a few people who will have the 琀椀me to read

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 the en琀椀re research report in detail. Most people will only focus on the execu琀椀ve

summary so it is important not to try to summarize the en琀椀re report, but rather

provide a concise summary of the following:

1. Brief statement of problem & reasearch objec琀椀ves

2. Major 昀椀ndings

3. Conclusions

4. Recommenda琀椀ons

Oral Presenta琀椀on

The oral presenta琀椀on should be approximately 10-12 minutes and include:

A. Introduc琀椀on of Presenters

B. Problem De昀椀ni琀椀on

C. Research Objec琀椀ve

D. Research Methodology

E. Findings/Conclusions

F. Recommenda琀椀ons

Note: This oral presenta琀椀on should be conduct by face to face presenta琀椀on.

This involve by the 3 cri琀椀ques and 1 presenter only . Your going to use as many

visual aids dduring the presenta琀椀on as deem necessary. (follow the health

protocol: wear facemask, faceshield and observe social distancing

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 19

POST-TEST
Note: This covered as a whole chapter:

I- Write the blank the correct answer given inside the box.

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 Consumer markets Test Marke琀椀ng Loca琀椀on studies

Data analysis Observa琀椀on research Adver琀椀sing pre-and pos-tes琀椀ng

Concept, product development, and product studies Pricing tests

Usage, a琀�tude, and image studies Target market studies

Usage, a琀�tude, and image studies External factor research

___________ 1. It can be used to decide on the packaging, to determine the market reaction,
and to justify brand positioning.

___________ 2. It can be utilized by marketers to calculate a product’s or service’s optimal

price, and to determine price elasticity.

___________ 3. These studies can provide cost-effective ways on how to increase a

product’s/service’s awareness level and brand trial.

___________ 4. The information from these researches helps marketers identify macro-
environmental shifts.

___________ 5. It includes individuals and/or house-holds that purchase products and

services for personal consumption.

____________6. It reveals the effectiveness of point-of-purchase collateral materials.

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____________7. It determines ideal retail store locations and is a valuable tool in site
selection.

____________ 8. These help identify, quantify, and understand the target market better.

____________ 9. These tests can determine advertising copy effectiveness, advertising re-
call, sales promotion response rates.

____________ 10. Based on these results, the company shall gauge the acceptability of a
proposed product/service.

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