Fundamentals of Marketing | ÀÅŔ

Market: 20, 18
Philip Kotler states, "A market consists of all the possible consumers sharing a certain need or want who
would be ready and able to participate in trade to fulfill that need or desire."

Classify market on the basis of geographical area, time and business, nature of products, consumption,
competition, volume and nature of transaction. 20, 18
Classification of Markets:
1. On the Basis of Geographic Location
➢ Local Markets: In such a market the buyers and sellers are limited to the local region or area. They
usually sell perishable goods of daily use since the transport of such goods can be expensive.
➢ Regional Markets: These markets cover a wider are than local markets like a district, or a cluster of
few smaller states.
➢ National Market: This is when the demand for the goods is limited to one specific country. Or the
government may not allow the trade of such goods outside national boundaries.
➢ International Market: When the demand for the product is international and the goods are also
traded internationally in bulk quantities, we call it an international market.
2. On the Basis of Time:
➢ Very Short Period Market: This is when the supply of the goods is fixed, and so it cannot be changed
instantaneously. Say for example the market for flowers, vegetables. Fruits etc. The price of goods
will depend on demand.
➢ Short Period Market: The market is slightly longer than the previous one. Here the supply can be
slightly adjusted.
➢ Long Period Market: Here the supply can be changed easily by scaling production. So, it can change
according to the demand of the market. So, the market will determine its equilibrium price in time.
➢ Very long Period market: In secular market, produces can get adequate time to use new technology
in production process and bring new changes in products. They become able to produce and supply
goods according to changed needs, interest, fashion etc. of customers. Market research become
helpful in doing so.
3. On the Basis of Volume of Business:
➢ Wholesale Market: In wholesale market goods are supplied in bulk quantity to dealers/ retailers.
The goods and services are not sold to customers directly.
➢ Retail Market: In retail market the goods are purchased from producer or wholesales and sold to
customers in small quantities by retailers.
4. On the Basis of Nature of Transaction:
➢ Spot Market: This is where spot transactions occur, that is the money is paid immediately. There is
no system of credit
➢ Future Market: This is where the transactions are credit transactions. There is a promise to pay the
consideration sometime in the future.
5. On the Basis of Nature of Commodities/Product:
➢ Commodity Market: A commodity market is a place where produced goods or consumption goods
are bought and sold. Commodity markets are subdivided into:
✓ Produce Exchange Market: It is an organized market where commodities or agricultural
produce are bought and sold on wholesale basis. Generally, it deals with a single commodity. It
is regulated and controlled by certain rules. e.g. Wheat Exchange Market of Hapur, the Cotton
Exchange Market of Bombay etc.
✓ Manufactured Goods Market: This market deals with manufactured goods. e.g., Leather
goods, manufactured machinery etc. The Leather Exchange Market at Kanpur is an example of
the same.
✓ Bullion Market: This type of market deals with the purchase or sale of gold and silver. Bullion
markets of Mumbai, Kolkata, Kanpur etc., are examples of such markets.
➢ Capital Markets: New or going concerns need finance at every stage. Their financial needs are met
by capital markets. They are of three types:

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✓ Money Market: It is a type of market where short-term securities are exchanged. It provides
short term and very short-term finance to industries, banks, government’s agencies and
financial intermediates.
✓ Foreign Exchange Market: It is an international market. This type of markets helps exporters
and importers, in converting their currencies into foreign currencies and vice versa.
✓ The Stock Market: This is a market where sales and purchases of shares, debentures, bonds
etc., of companies are dealt with. It is also known as Securities market. Stock Exchanges of
Mumbai, Kolkata, Chennai etc., are examples for this type of market.
6. On the basis of type of Competition: Based on the type of competition, markets are classified into Perfect
competition and Imperfect Competition:
➢ Monopoly Market: If there is full control of producer over market, then such market is called
monopoly market.
➢ Perfect Market: The market where the number of buyers and sellers is large, homogeneous of
products are bought and sold, same price of similar type products is determined from free
interaction between demand and supply is called perfect market.
➢ Imperfect Market: The market where there is no perfect competition between buyers and seller is
called imperfect market.
7. On the Basis of Regulation/control:
➢ Regulated Market: Government-regulated markets, like stock markets, ensure fair trade practices
and oversight to prevent unfair practices in products or groups.
➢ Non-regulated Market: This is an absolutely free market. There is no oversight or regulation, the
market forces decide everything
8. On the basis of Consumption:
➢ Consumer market: The market of products, which the people buy for consumption is called
consumption market.
➢ Industrial Market: Generally, raw materials and equipment, machine parts are dealt in industrial
market. Domestic consumer goods are produced using them.
9. On the Basis of Importance/ Position of Sellers:
➢ Primary Market: Primary farm producers sell their products to wholesalers or consumers in village-
based markets, primarily originating from the local area.
➢ Secondary Market: This market primarily sells semi-finished goods, not finished goods, sourced
from other markets, with transactions typically between wholesalers and retailers.
➢ Terminal Market: A central site in a metropolitan area is used for commodity assembly and trading,
typically near major transportation hubs for agricultural commodities.
10. On the Basis of Economics:
➢ Perfect Market: A market is said to be a perfect market, if it satisfies the following conditions:
✓ Large number of buyers and sellers are there.
✓ Prices should be uniform throughout the market.
✓ Buyers and sellers have a perfect knowledge of market.
✓ Goods can be moved from one place to another without restrictions.
➢ Imperfect Market: A market is said to be imperfect when
✓ Products are similar but not identical.
✓ Prices are not uniform.
✓ There is lack of communication.
✓ There are restrictions on the movement of goods.

Describe the nature and scope of consumer behavior. 21

Define: i) initiator ii) influencer iii) Buyer vi) User. 20
Nature of Consumer Behavior: 21, 19
Consumer behavior can be decision – making process and physical activity involved in acquiring, evaluating,
using and disposing of goods and services.
i) Initiator: The individual who determines that certain need or want is not being fulfilled & purchase a
product to fulfill the need.
ii) Influencer: A person who by some influential or uninfluential word or action influences the purchase
decision.

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iii) Buyer: The individual who actually makes the purchase transaction mostly is the head of the family.
iv) User: The person or persons who consume or use the purchase product.

Scope of Consumer Behavior: The most important reason for studying consumer behavior is the role that it plays
in our lives.
▪ Micro Perspective: It involves understanding consumer for the purpose of helping a firm or organization to
achieve its objectives. All the Managers in different departments are keen to understand the consumer.
They may be Adverting Managers, Product Designers, Marketing and Sales Managers and so on.
▪ Societal Perspective: It is on the macro level. Consumers collectively influenced economic and social
conditions within a society. Consumers strongly influence what will be product, what resources will be used
and it affects our standard of living.

Application of Consumer Behavior

▪ Marketing Management relies on consumer behavior knowledge for long-term success, focusing on
consumer wants, needs, target market selection, integrated marketing, and customer satisfaction.
▪ Consumer behavior is also important in on-profit and social organizations. Such organizations are govt.
agencies, religious organizations, universities and charitable organizations.
▪ Consumer behavior can enhance government agencies' performance by understanding consumer needs
and preferences, as well as implementing similar strategies for universities and charitable organizations.
▪ Consumer behavior influences the marketing of scarce goods like gas, fuel, water, and natural resources,
encouraging them to reduce their consumption.
▪ Consumers benefit from investigating their behavior, learning about variables affecting it, and
understanding how to influence it. This knowledge also benefits them in a formal sense.

Model of Consumer Behavior (Philip Kotler)

Mention few types of consumer behavior model. 20

Models of Consumer Behavior: There are various consumers models which help in the understanding of consumer
behavior.
▪ Economic Model
▪ Psychological Model
▪ Pavlovian Model
▪ Input, Process Output Model
▪ Sociological Model
▪ Howarth Sheth Model
▪ Engel-Blackwell-Kollat Model
▪ Model of Family Decision-making

Economic Model:
In this model, consumers follow the principle of maximum utility based on the law of diminishing marginal
utility. The consumer wants to spend the minimum amount for maximizing his gains
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▪ Price effect: Lesser the price of the product, more will be the quantity purchased
▪ Substitution effect: Lesser the price of the substitute product, lesser will be the utility of the original
product bought
▪ Income effect: When more income is earned, or more money is available, more will be the quantity
purchased

Psychological Model:
The purchasing process and behavior is governed by motivational forces. Motivation stimulates people into
action. Motivation starts with the need. It is a driving force and also a mental phenomenon. Need arises when one
is deprived of something. A tension is created in the mind of the individual which leads him to a goal directed
behavior which satisfies the need. Once a need is satisfied, a new need arises and the process is continuous.

Pavlovian Model:

This model is named after the Russian Physiologist Ivan Pavlov. He experimented on a dog and observed how it
responded on the call of a bell and presenting it with a piece of meat. The responses were measured by the amount
of saliva secreted by the dog. Learning is defined as the changes in behavior which occur by practice and, based on
previous experience. This is important to marketers as well. The learning process consists of the following factors:
Pavlovian Model:
▪ Drives: Can be innate (inborn) which stem from physiological needs, such as hunger, thirst, pain, cold, sex,
etc. Learned drive, such as striving for status or social approval.
▪ Cause are weak stimuli that determine when the buyer will respond. We have:
➢ Triggering Cues: These activate the decision process for any purchase.
➢ Non-triggering Cues: These influence the decision process but do not activate it
These are of two kinds:
✓ Product cues are external stimuli received from the product directly, e.g., color of package, weight, style,
price, etc.
✓ Informational cues are external stimuli which provide information about the product, like advertisement,
sales promotion, talking to other people, suggestions of sales personnel, etc. Response is what the buyer
does, i.e., buys or does not buy.

Draw the ‘input – process – output’ model of consumer behavior. 21, 20, 18
Input, Process Output Model:
This is a simple model of consumer behavior, in which the input for the customer is the firm's marketing
effort (the product, price, promotion and place) and the social environment. The social environment consists of the
family, reference groups, culture, social class, etc. which influences the decision- making process. Both these factors
together constitute the input in the mind of the consumer.

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Sociological Model:
This is concerned with the society. A consumer is a part of the society and he may be a member of many
groups in a society. His buying behavior is influenced by these groups. Primary groups of family friends and close
associates exert a lot of influence on his buying. A consumer may be a member of a political party where his dress
norms are different. As a member of an elite organization, his dress requirements may be different, thus he has to
buy things that conform to his lifestyles in different groups.

Howard Seth Model (1969)

This model is slightly complicated and shows that consumer behavior is complex process and concepts of
learning, perception and attitudes influence consumer behavior. This model of decision-making is applicable to
individuals. It has four sets of variables which are:
1. Input:
(i) Significative stimuli: These are physical tangible characteristics of the product. These are price, quality,
distinctiveness, services rendered and availability of the product. These are essential for making
decisions
(ii) Symbolic stimuli: These are the same as significate characteristics, but they include the perception of
the individual, i.e., price is high or low.
(iii) Social stimuli: This is the stimulus provided by family, friends, social groups, and social class.
2. Perceptual and learning constructs: Psychological variables like motives, attitudes, and perception
influence consumer decision-making. Stimulus ambiguity and perceptual bias affect interpretation, leading
to brand comprehension and rating, ultimately influencing purchase decisions.
3. Outputs: Output refers to purchase decision, with satisfaction leading to positive brand comprehension,
and dissatisfaction causing negative attitudes. Feedback, represented by dotted and solid lines, indicates
information flow.
4. Exogenous or external variables: The model considers factors like personality traits, social class, purchase
importance, and financial status, which indirectly influence consumer decision-making, despite their
complexity.

Graphical Representation:

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Engel-Blackwell-Kollat Model:
It consists of four components:
1. Information processing
2. Central control unit
3. Decision process
4. Environmental influences
Information processing: consists of exposure, attention, comprehension and retention of the marketing and non-
marketing stimuli.
Central control unit: The stimuli processes and interprets the information received by an individual.
Decision process: The decision outcome or the satisfaction and dissatisfaction is also an important factor which
influences further decisions.
Environmental influences: Consist of income, social class, family influences, social class and physical influences and
other considerations. All these factors may favor or disfavor the purchase decisions.

Model of Industrial Buying Behavior

The purchases made in an industrial organization involve many more people of different backgrounds and
it is more complex. There are three main features in this model:
▪ There are different individuals involved who have a different psychological make up.
▪ Conditions leading to joint decision-making by these individuals.
▪ Differences of opinion on purchases or conflicts that have to be resolved to reach a decision.

Describe the factors that influence on business buyer behavior. 20, 18

Describe the characteristics of consumer behavior. 21, 20, 19
Characteristics Affecting Consumer Behavior/Factors Influencing Consumer Behavior

Cultural Factors
▪ Culture: Cultural values and norms have a significant influence on what people buy.
▪ Subculture: Smaller cultural groups within a society can have distinct preferences.
▪ Social Class: Social status and class affect consumer decisions.
Social Factors
▪ Status: One’s social status or position can impact what they purchase.
▪ Lifestyle: A person’s way of living influences their buying choices.
▪ Occupation and Economic Status: Employment and financial situation play a role in consumer behavior.
▪ Personality: Individual personality traits can affect preferences and decisions.
Personal Factors
▪ Age: Different age groups have varying preferences and buying patterns.
▪ Stages in the Life Cycle: Life events and stages, such as getting married or having children, impact consumer
behavior.
▪ Learning: Consumer behavior can change as people learn more about products or services.
▪ Beliefs and Attitudes: Personal beliefs and attitudes shape consumer choices.
Psychological Factors
▪ Consumer Needs and Motivation: This factor explores the basic human needs that drive buying decisions,
as outlined in Maslow’s hierarchy of needs.

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▪ Reference Groups: People are influenced by the groups they belong to or admire, impacting their choices.
▪ Roles and Status: Social roles and positions can affect what individuals purchase.
▪ Family: Family dynamics and roles play a crucial role in consumer choices.
▪ Perception: How consumers perceive products and brands can heavily influence their decisions.

Show the differences between buyer and consumer. 22, 20, 18

Parameter Buyer Consumer
Definition An entity that buys goods and service. An entity that consumes a product or utilizes a
service
Purpose The Buyer’s primary purpose is to consume Consumer’s primary goal is to use a product
or resale a product.
Mode of A Buyer always pays for the products they A Consumer does not always pay for the goods
obtaining the get they get
product
Other names Customer, reseller User, end-user
Type of entity Individuals, businesses, organizations Individual, family, or a group
Etymology Originated from bycgan, an Old English word Originated from consumere, a Latin word
meaning “owning something by paying for it.” meaning “use up.”

What are the differences between market and marketing. 21, 18

Basis for
Market Marketing
comparison
Meaning Market is defined as an arrangement whereby Marketing is a function that identifies human and
buyers and sellers meet each other to social needs and satisfies them.
conclude the transaction.
What is it? A set up i.e. A place. A set of processes, i.e. A means of creating utility.
Process Market is a process, that fixes the price of Marketing is a process that analyses, creates,
commodities through demand and supply informs and delivers value to the customer.
forces.
Concept Market is a narrow concept. Marketing is a wide concept that includes diverse
activities.
Consistency Market varies by products, place, factors and Marketing philosophy remains same, no matter
so on. where it is applied.
Facilitates Trade between parties. Link between customer and company.

How can you differentiate between differentiated marketing and undifferentiated marketing? 19, 18
Differentiated Marketing
Purpose Achieve audience diversification.
Strategy • Use various messages for a sign
campaign
• Employ different channels and
strategies
Benefit Resonate with different customer groups
Characteristics Keep improving and adding new features to
match customer expectations
Examples Products with diverse needs among the
audience - food, beverages, etc.
Undifferentiated Marketing
Reach as large an audience as possible.
• Use one marketing mix - product, price,
place, promotion - for all marketing
campaigns
Reach many people with a more standardized
process
Focus on quality and key features of the
product
Products that serve the same need for everyone
- toothpaste, shampoo, shower gel, etc.

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What is business buyer? 20

State business buyer. 18
A business buyer is one who engages in the purchase or acquisition of a part or the entire business
organization. A business buyer can be an individual, a group of individuals or a corporation. They are responsible
for the buying raw materials done for the company which are used for business processes and for making the
final products.
Like any buyer, these employees also have a business buyer behavior, which helps them buy high quality
goods for the company.

Discuss the importance of consumer behavior in marketing. 21, 19

Importance of consumer behavior in marketing:
• Comprehending consumer needs: Consumer behavior research helps businesses understand their target
audience's needs, desires, and motivations, enabling them to create products and services that meet their
demands, thereby enhancing customer satisfaction.
• Fabricating effective marketing strategies: The study aids businesses in identifying effective marketing
techniques, developing targeted advertising campaigns, pricing strategies, and promotional activities to
boost sales and connect with consumers.
• Identifying market opportunities: Consumer behavior research helps businesses identify emerging trends,
preferences, and market needs, enabling them to identify new opportunities, enhance existing offerings,
and maintain a competitive edge.
• Enhancing customer experience: Understanding the customer journey, from pre-purchase to post-
purchase, helps businesses improve customer experience, personalize interactions, and deliver exceptional
service, fostering loyalty and positive word-of-mouth.
• Minimizing risks and failures: Understanding consumer behavior aids businesses in reducing product
failure risks and marketing campaigns by analyzing preferences, feedback, and behavior, enabling informed
decisions on product design, features, packaging, and marketing strategies.
▪ Building strong brand relationships: Research aids in building long-term customer relationships by
understanding consumer preferences, values, and behaviors, enabling companies to customize messaging
and offerings, fostering strong emotional bonds.

Discuss the model of business buyer behavior. 20, 18

Model of consumer buying behavior
The buyer behavior model is a structured step-by-step process. Under the influence of marketing stimuli
(product, price, place, and promotion) and environmental factors (economic, technological, political, cultural), a
customer understands the need to make a purchase.
Most buyers go through several stages when making a purchase decision:
1. Need recognition: At the first stage, the buyer recognizes that there is a need for a product or service. For
instance, they might realize that, since their company is growing, manual email outreach is no longer effective, so
they need an email automation solution.
2. Information search: After understanding the need for a product or service, the buyer starts looking for
information. They might obtain it from different sources (friends, commercials, mass media). For example,
a prospect may start browsing email automation solutions, read reviews, etc.
3. Evaluation of alternatives: Once all the necessary information has been gathered, the buyer starts to evaluate a
choice. They might compare key features and pricing, looking for advantages of one tool over all others.
4. Purchase decision: After evaluation, the buyer makes a purchase decision. For example, they start their free trial
or purchase a paid plan.
5. Post purchase evaluation: After purchasing the product or service, the buyer assesses whether it has met their
expectations. At this stage, they might also leave an online review about the purchase or share their feedback with
subscribers, colleagues, or friends.

What is meant by business market? 18

A business market is a market in which organizations sell their goods and services to other organizations to
use in their manufacturing process or service provision. Business markets consist of fewer buyers who purchase in
larger quantities. Business buying behavior is different to that of consumers (end-users).

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