Principle of marketing and Consumer behavior

CHAPTER 1
AN OVERVIEW OF MARKETING AND MARKETING MANAGEMENT

1.1.Introduction to Marketing
The foundation of marketing is exchange. In which one party provides to another party
something of value in return for something else of value. Business firms and non-profit
organizations engage in marketing. Products marketed include: goods as well as services,
ideas, people, & places. Marketing activities are targeted at market consisting of
products purchasers and also individuals and groups that influences the success of an
organization.
Market vs. Marketing
Traditionally, describe a market as collection of buyers and sellers who transact over a
particular product or product class. Market is the set of actual and potential buyers of a
product. These buyers share a particular need or want that can be satisfied through
exchange relationships.
Marketing means managing markets to bring about profitable customer relationship. It is
the craft of linking the producers (or potential producers) of a product or service with
customers, both existing and potential. Marketing is broadly defined as a social and
managerial process by which individuals and groups obtain what they need and want
through creating and exchanging value with others. Narrowly, marketing is the process
by which companies create value for customers and build strong customer relationships
in order to capture value from customers in turn. In other words, it is the process of
planning and executing the conception, pricing, distribution, and promotion of ideas,
goods, services, organizations, and events to create and maintain relationships that will
satisfy individual and organizational objectives.
Marketing is an exciting, dynamic and contemporary field. It influences us each day in
both our roles as providers of goods and services and as a customer. In the role of
providers of goods and services, we make such marketing related decisions as choosing
who our customers are, what goods and services to offer, where to sell goods and
services, what features to emphasize and what price to charge. In the role of a customer,
the marketing practices of goods and services providers impact on many of the decisions
made by different individuals.
Marketing management is the practical application of marketing techniques. It is the
analysis, planning, implementation, and control of programs designed to create, build,
and maintain mutually beneficial exchanges with target markets. ―Marketing
management is that field of business activity involving the establishment and execution
of the plans of all the phases or steps of a complete sales campaign‖ (Lewis K. Johnson.)
―Marketing management is concerned with the direction of purposeful activities towards
the attainment of marketing goals.‖ Cundiff & Still)
1 Principle of Marketing & Consumer behavior 2015 E.C

1.2.Core Concepts of Marketing
a. Needs, Wants & Demands
Marketing starts with human needs & wants.
Need: -
Human need is a state of deprivation of some basic satisfaction. People require food,
clothing, shelter, safety, and belonging & esteem.
Wants: -
Wants are desires for specific satisfiers of needs. Human wants are continually shaped &
reshaped by social forces & institutions, including churches, schools, families and
business cooperation. E.g. A person needs food but wants Injera.
Demands: -
Demands are wants for specific products that are backed by ability and willingness to buy
them. Wants become demands when supported by purchasing power. Companies must
therefore measure not only how many people want their product but, more importantly,
how many would actually be willing and able to buy it.
b. Products (Goods, Services & Ideas)
People satisfy their needs and wants with products. A product is anything that can be
offered to satisfy a need or want.
A product can consists of as many as three components:- Physical goods, service(s), and
idea(s). Eg .1. A computer manufacturer supply goods (computer, monitor, printer),
services (delivery, installation, training maintenance, repair, and an idea
(“computation power.”)
c. Value, Cost and Satisfaction

Value: Value is the consumer's estimate of the product's overall capacity to satisfy his/her needs.
Value is a ratio between what the customer gets and what he gives. The customer gets benefits and
assumes costs. Benefits include functional benefits and emotional benefits. On the other hand, costs
include monetary costs, time costs, energy costs and psychic costs. Thus, value can be given:
Value = Benefits = functional benefits + emotional benefits

Costs monetary costs + time costs + energy costs + psychic costs.
The consumer chooses the product that produces the most value per dollar. Value is the satisfaction
of customer requirements at lower possible cost of acquisition, ownership and use.

d. Exchange
Exchange is the act of obtaining a desired product from someone by offering something
in return. Marketing emerges when people decide to satisfy needs & wants through
exchange.
 For exchange potential to exist, five conditions must be satisfied.
I, There are at least two parties
II, Each party has something that might be of value to the other party.
III, Each party is capable of communication & delivery
IV, Each party is free to accept or reject the exchange offer.
V, Each party believes it is appropriate or desirable to deal with the other party.
e. Relationship & Networks
Transaction marketing is part of a larger idea called relationship marketing. Relationship
marketing is the practice of building long-term satisfying relations with key parties-
customers, suppliers, and distributors in order to retain their long-term preference and
business. Smart marketers try to build up long-term/, trusting, and ―win-win‖
relationships with valued customers, distributors, dealers, & suppliers.
The ultimate outcome of relationship marketing is the building of a unique company
asset called a marketing network.
A marketing network consists of the company and all of its supporting stakeholders:
customers, employees, suppliers, distributors, retailers, agencies, and others with whom it
has built mutually profitable business relationships.
The operating principle is simple build a good network of relationships with stakeholders,
and profits will follow.
f. Marketers & Prospects
When one party is actively seeking an exchange with the other party, we call the first
party a marketer & a second party a prospect.
A marketer is someone seeking one or more prospects that might engage in an exchange
of values. A prospect is some one whom the marketer identifies as potentially willing
and able to engage in an exchange of values.
1.3.Different philosophies of marketing management

Marketing activities should be carried out under a well-thought-out philosophy of
efficient, effective and socially responsible marketing. However, there are five concepts
under which organizations conduct marketing activities.

A. The Production concept
The production concept is one of the oldest concepts in business.
The production concept holds that consumers will favor these products that are widely
available and low in cost. Managers of production-oriented organization concentrate on
achieving high production efficiency, low cost, and wide distribution.
The assumption that consumers are primarily interested in product availability and low
price holds in at least two situations. The first is where the demand for a product exceeds
supply, as in many developing countries. The second situation is where the product‘s cost
is high and has to decrease to expand the market and increase production.
B. The Product Concept
The product concept holds that consumers will favor those products that offer the most
quality, performance or innovative features. Managers in product oriented organization
focus their energy on making superior products and improving them over time.
Product-oriented companies often design their products with little or no customer input.
They trust that their engineers will know how to design or improve the product.
C. Sales concept
The sales orientation stage was characterized by a heavy reliance on promotional activity
to sell the products the firm wanted to make.
In this stage, selling - related activities and sales executives began to get respect and
responsibility from company management. Along with responsibilities came expectations
for performance. Unfortunately, overly aggressive selling – the “hard sell” – and
unscrupulous tactics also evolved during this period. Managers began to realize that to
sell their product in an environment where consumers had the opportunity to choose from
among many alternatives required substantial promotional effort.
D. Marketing concept
In an attempt to stimulate sales, firms reverted to the aggressive promotional and sales
activities of the sales orientation era. However this time consumers were less willing to
be persuaded.
In the marketing orientation stage companies identify what a customer want and tailor
all of the activities of the firm to satisfy those needs as efficiently and effectively as
possible. Thus the evolution of marketing continued. Many companies recognized that to
put idle capacity to work they had to produce what consumers wanted.
E. Societal Marketing Concept
The societal marketing concept holds that marketing strategy should deliver value to
customers in a way that maintains or improves both the consumer‘s and the society‘s well

–being. The societal marketing concept questions whether the pure marketing concept
overlooks possible conflicts between consumers‘ short-run wants and consumer long-run
welfare.
As the figure 1.1 shows, companies should balance there considerations in setting their
marketing strategies: company profits, consumer wants, and society‘s interests
Fig. 1.1. Three considerations underlying the societal marketing concept

Society (Human welfare)
Social
Marketing
Consumers (Wants satisfaction) Company (Profit)
Difference between Marketing and Selling

Some distinction between selling and marketing are:
Selling Marketing
 Emphasis is on the product Emphasis is on customer‘s wants.
 Company first makes the Company first determines
product and then figures out customers wants and then figures at
how to Sell it. how to make and deliver a product
to satisfy those wants.
 Management is sales-volume Management is profit oriented.
oriented
 Planning is short run oriented, - Planning is long-run oriented,
in terms of today‘s products in terms of new products, tomorrow‘s
& markets. markets and future growth.
1.4.Function of Marketing
Marketing is the total business activity, intended to satisfy a human needs and wants at a
profit. In designing of a product that could satisfy the customer needs, the marketer have
indulge several functions which all adds up to a product value. These functions include:
exchange functions; distribution functions and supporting functions.

A) Function of Exchange
Exchange means the act of obtaining a desired product from someone by offering
something else in return. Under an exchange functions, marketers' perform selling and
buying activities.
i) Buying
Buying is the act of acquiring a product from the seller with some consideration where
title of ownership is passing from the seller to the buyer. In acquiring the product, the
buyer act as a purchasing agent to its customer while consider the product quality,
quantity, price and other pertinent factors that adds up value to the final product supplied
to customers.
Buying is the function of the equation of exchange. It requires planning of purchases,
intelligent search for probable sellers, selection of goods to be sold, assembling of goods
in right quantity and quality, at the right place and time, and at the right price.
ii) Selling
Selling is the act of transferring ownership from producer to customer in some
consideration. Selling provides a sales force for producers to reach small retailers,
customers and other business, at a lower cost than producers would under by having their
own sales forces.
Selling is one function of the equation of exchange. Selling creates demand for a product.
Selling function involves: (a) product planning and development, b) finding out or
locating buyers, c) demand create through salesmanship, advertising and sales promotion,
d) negotiation of terms of sale, such as price, quantity, quality, etc. e) sales contract
leading to transfer of title and possession of goods.
B) Distribution Function
Distribution refers to delivering the right amount of product, at the right time through
appropriate mode of transportations and channels from point of production to
consumption.
In delivering goods of the required quantity and quality at the right time the marketers are
performing certain activities. These activities include: Transportation and storing.
i) Storage
Every company has to store its finished goods until they are sold. A storage facility is
necessary because production and consumption cycles rarely match. For example, many
agricultural commodities are produced seasonally but demand for them is continuous.
The storage function helps to smooth discrepancies between desired quantities and timing
to the market.
The company must decide on a desirable number of stocking locations. More stocking
locations means the goods can be delivered to customers more quickly. But it also means
higher warehousing cost. The number of stocking locations must strike a balance between
customer service levels and distribution costs.

ii) Transportation
A major activity in the distribution system in many companies is transportation - shipping
products to customers.
In shipping goods to its warehouse, dealers and customers, the company can choose
among five transportation modes: rail, air, trucks, waterways and pipelines.
Shippers consider such criteria as speed, frequency, dependability, capability,
availability, trace ability and cost.
C) Facilitating functions
i) Branding and packaging
Brand is a name, symbol, or a thing, which is being used in a combination or otherwise to
differentiate the company's product offer from its competitor. Branding is a powerful
instrument of sales promotion that provides: product differentiation, usage, creations of
market; advertisement and publicity, etc.
Packaging is the process of developing and maintaining a wrapper or a package to a
product. Packaging, branding and labeling go together and constitute an integral part of
product planning and development.
ii) Salesmanship
Personal selling is the best means of oral and face-to-face communications and
presentation with the prospect for the purpose of marketing sales. There may be one
prospect or a number of prospects in the personal conversation.
iii) Standardization and grading
In agricultural marketing standardization and grading play a very important role.
Standardization makes sale by description possible. It assures quality. It promotes
uniformity of products. It widens the market for commodities. Standardization means
selecting standards of quality. Grading means separating or inspecting products according
to established standards. Each grade has uniformity in all attributes. Grading enhances
marketing efficiency.
v). Advertising
Advertising is any paid form of non-personal presentation of ideas, goods and services by
an identified sponsor. It is impersonal salesmanship for mass selling, means of mass
communication.
vi) Sales promotion
Sales promotion is a short term incentives intended to induce purchase. It concerns these
marketing activities other than advertising, publicity, and personal selling that stimulate
consumer purchasing and dealer effectiveness. Such activities are display exhibitions, and
many other non-routine selling efforts at the point of purchase.
To prepare to be a marketer, you need to understand what marketing is, how it works,
what is marketed, and who does the marketing.

1.5.Type of Demand
Demands are wants for specific products that are backed by ability and willingness to buy
them. Eight demand states are possible:
1. Negative demand - Consumers dislikes the product and may even pay a price to
avoid it. Some people have negative demand for vaccination and in some situation they
even pay a higher price to replace it by tablets or some other form of treatment. The
marketing task is to analyze why the market dislikes the product and whether a marketing
program consisting of product redesign, lower prices, and more positive promotion can
change the market‘s beliefs and attitudes. This marketing task/ activity are known as
―conversional marketing”.
2. Nonexistent demand - Consumers may be unaware or uninterested in the product.
Thus, farmers may not be interested in a new farming method, and college students may
not be interested in foreign language courses. The marketing task is known as
―stimulation marketing‖; its task is to find ways to connect the benefits of the product
with the person‘s natural needs and interests.
3. Latent demand - Consumers may share a strong need that cannot be satisfied by an
existing product. There is a strong latent demand for harmless cigarettes and HIV/AIDS
medicine. The marketing task is called; ―developmental marketing‖ its main task is to
measure the size of the potential market and develop effective goods and services that
would satisfy the demand.
4. Declining demand - Consumers begin to buy the product less frequently or not at all.
The marketer must analyze the causes of market decline and determine whether demand
can be re-stimulated by finding new target markets, changing the product‘s features or
developing more effective communication. The marketing task is, ―remarketing‖ to
reverse the declining demand through creative remarketing of the product.
5. Irregular demand - Consumer purchases vary on a seasonal, monthly, weekly, daily,
or even hourly basis causing problems of idle or overworked capacity. Museums are
under visited on weekdays and overcrowded on weekends. Hotels, restaurants,
recreational areas are also overworked in weekends and some specific hours and less
attended on others. The marketing task, which is called ‗synchromarketing’, is to find
ways to obtain the same pattern of demand through flexible pricing, promotion, and other
incentives.
6. Full demand - Consumers are adequately buying all products put into the
marketplace. ―Maintenance marketing‖ is the marketing task, which designs to
maintain the current level of demand in the face of changing consumer preferences and
increasing competition. The organization must maintain or improve its quality and
continually measure consumer satisfaction to make sure it is doing a good job.
7. Overfull demand - More consumers would like to buy the product than can be
satisfied. The marketing task, which is called ―de-marketing‖, it requires finding ways to
reduce demand temporarily or permanently. De-marketing seeks to discourage overall

demand and consists of such steps as raising prices and reducing promotion and service.
De-marketing aims not to destroy demand but, to reduce its level temporarily or
permanently.
8. Unwholesome demand – consumers may be attracted to products that have
undesirable social consequences. It is the demand for unhealthy products like cigarette,
alcohol, hard drugs, handguns, and X-rated movies. Unwholesome products will attract
organized efforts to discourage their consumption. The marketing task is to get people
who like something to give it up, using such tools as fear message, price hike, and
reduced availability. The corresponding marketing task is known as ―counter
marketing”.
In each case, marketers must identify the underlying cause (s) of the demand state and
then determine a plan for action to shift the demand to a more desired state.
The kinds of utility that marketing provides in the process are as follows:
Then potential buyers must be informed about the existence of products and the benefits
it offers through various forms of promotion.
a. Possession utility
Possession utility is created when a customer buys the product. That is, ownership is
transferred to the buyer. Thus, for a person to consume and enjoy the product a
transaction must take place. This occurs when you change your money for a product.
b. Time utility
Time utility refers to having a product available when you want it. Having a product
available when we want it is very convenient but it means that the retailers must
anticipate our desires and maintains an inventory. Thus, there are costs involved in
providing time utility.
c. Place utility
Place utility exists when a product is readily accessible to potential customers. So
physically moving the products to store near the customers add to its value.
d. Information utility
Information utility is created by informing prospective buyers that a product exists.
Unless you know a product exist and where you can get it, the product has no value.
Advertising that describes a sales person answering a customer question about the
durability of a product creates information utility.
e. Form utility
Form utility is associated primarily with production – the physical or chemical changes
that makes a product more valuable. When timber is made into furniture, form utility is
created. This is production not marketing. However, marketing research may aid in
decision making regarding product design, color, quantities produced, or some other
aspect of product. All of these things contribute to the product form utility.
Importance of marketing Reading assignment

CHAPTER TWO
MARKETING ENVIRONMENT
2.1 Meaning of Marketing Environment
Environmental forces influence organization marketing. Some of these forces are external
to the firm, while others come from within. There isn't much that management can do
about controlling the external forces, but it generally can control the internal ones.
A company‘s marketing environment consists of the actors and forces outside marketing
that affect marketing management‘s ability to build and maintain successful relationships
with target customers.
Marketing Environment is divided in to two parts:-
1. External Environment and 2. Internal Environment.
An organization operates with in an external environment that it generally cannot control.
2.2 Marketing Environment Elements
1. External Marketing Environment
There are two levels of external environment.
A. External macro environment (so called because they affect all firms) includes
demographics, economic conditions, culture, and laws.
B. External micro environment (so called because they affect a particular firm)
consists of competitors, suppliers, marketing intermediaries, and customers.
Controllable Marketing Environment Uncontrollable and cannot

be influenced
Internal Marketing Environment External Marketing Environment

Organizational Structure
Financial Capability
Micro Environment Macro Environment
Production System
Company‘s Location Market/ Customer Demographic
Research and Development Suppliers Economic
Marketing Intermediaries Political & Legal
Competitors Social & Cultural
Uncontrollable but can be Distributors Technology
influenced

Successful marketing depends largely on a company's ability to manage its marketing
programs within its environment. To do this, firm marketing executives must determine
what makes up the firms environment and then monitor it in a systematic, ongoing
fashion.
These marketing executives must be alert to spot environmental trends that could be
opportunities or problems for their organization. And they must be able to respond to
these trends with the resources they can control.
A. External Macro Environment
External forces have considerable influence on any organizations marketing system.
Therefore environmental monitoring also called environmental scanning is deemed
necessary. Environmental monitoring is the process of:
1. Gathering information regarding a company's external environment.
2. Analyzing it, and
3. Forecasting the impact of whatever trends the analysis suggests.
Five largely uncontrollable external forces influence an organization's marketing
activities.
They are:
I. Demography
II. Economic condition
III. Social and cultural forces
IV. Political and legal forces and
V. Technology.
Now let's take a look at these six external forces in more detail.
I. Demography
The statistical study of human population and its distribution is demography. It is of
special interest to marketing executives because people constitute markets. Therefore the
marketing executives direct their marketing activities based on the demographical
changes, i.e. Culture, age group, sex, etc.
Changes in the world demographic environment have major implications for business.
For example, consider China. Twenty-five years ago, to curb its skyrocketing population,
the Chinese government passed regulations limiting families to one child each.
The world‘s large and highly diverse population poses both opportunities and
challengers. Thus, marketers keep close track of demographic trends and developments
in their markets, both at home and abroad. As a result marketers basically focus on the
following demographic issues.

- Changing age - Educational Characteristics, and
- Geographic population shifts - Population diversity
II. Economic Conditions
A marketing program is affected especially by such economic factors as the current and
anticipated stage of the business cycle, as well as inflation. People alone do not make a market.
They must have money to spend and be willing to spend it. Consequently, the economic
environment is a significant force that affects the marketing activities of just about any
organization.
III. Social and Cultural Forces
The task facing marketing executives is becoming more complex because our culture patterns-
life styles, social values, beliefs-are changing much more quickly than they used to. People start
seeking value, quality, and safety in the products they buy. They have started concerning about
education, retraining of workers, about air and water pollution, solid waste disposal, distraction
of rain forests and other natural resources. These concerns have raised the level of environmental
consciousness.
IV. Political and Legal Forces
Every company's conduct is influenced more and more by the political and legal process in the
society. The political and legal forces on marketing can be the following:-
1. Monetary and fiscal policies- Government spending, tax legislation etc.
2. Social legislation and regulation-Anti pollution law.
3. Government relationship with industries- Tariffs and import quotas etc.
V. Technology
Technology has a tremendous impact on the life style, consumption pattern, and the economic
well-being.
New technologies create new markets and opportunities. However, every new technology
replaces an older technology. When old industries fought or ignored new technologies, their
business declined. Thus, marketers should watch the technological environment closely.
Companies that don‘t keep up with technological change soon will find their products outdated.
They will miss new product and market opportunities.
Technology is a mixed blessing in other ways also. A new technology may improve the life in
one area while creating environmental and social problems in other areas.
B. External Micro Environment
Four environmental forces that are external, but are a part of a company's marketing system, are
that firm's competition, market, its suppliers, and its marketing intermediaries. While they are
generally uncontrollable, these external forces can be influenced more than the macro forces.

i) Competition
A Company's competitive environment obviously is a major influence on its marketing
programs. Skillful marketing executives constantly monitor all aspects of competitors‘ marketing
activities – their products, pricing, distribution systems, and promotional programs.
The marketing concept states that to be successful, a company must provide greater customer
value and satisfaction than its competitors do. Thus, marketers must do more than simply adapt
to the needs of target consumers. They also must gain strategic advantage by positioning their
offerings strongly against competitors‘ offerings in the minds of consumers.
ii) Customers
As it is often exhorted, the major task of a business is to create and sustain customers. A
business exists only because of its customers. The customer should be loyal and retain with the
organizational brand /product. As a marketing concept clearly puts it forward, ―customer is a
king.‖ Without customer, there will not be demand. Without demand, there will not be a
business because a firm produces its product for market, not for consumption by itself.
Monitoring customer sensitivity is, therefore, a prerequisite for the business success.
A company may have different categories of consumers like individuals, households, industries,
and other commercial establishments and governments and other institutions. Just as it has been
said for suppliers, depending on a single customer is often too risky because it may place the
company in a poor bargaining position, apart from the risks due to the customer‘s switching over
to the competitors of the company.
III) Suppliers
The people or firms who supply the goods or services that we need to produce what we sell are
critical to our marketing success. And that is why we consider a firm's suppliers as part of its
marketing system.
Suppliers form an important link in the company‘s overall customer value delivery system. They
provide the resources needed by the company to produce its goods and services. Supplier
problems can seriously affect marketing. Marketing managers must watch supply availability-
supply shortages and delays, labor strikes, and other events can cost sales in the short-run and
damage customer satisfaction in the long run. Marketing managers also damage customer
satisfaction in the long run. Marketing managers also monitor the price trends of their key inputs.
Rising supply costs may force price increases that can harm the company‘s sales volume. Most
marketers today treat their suppliers as partners in creating and delivering customer value.
I. Marketing Intermediaries
Marketing intermediaries are independent business organizations that directly aid in the flow of
goods and services between a marketing organization and its markets. The types of
intermediaries:-
 The firms we call middlemen – wholesalers and retailers
Principle of Marketing Page 13

 Various facilitating organizations that provide such services as transportation,
warehousing, and financing that are needed to complete exchanges between buyers
and sellers.
These intermediaries operate between a company and its markets and between a company and
its suppliers. Thus that are part of what we call channels of distribution.
2. Internal Marketing Environment
Internal forces that are controllable also shape an organization's marketing system by
management. These internal influences include a firm's production, financial, and personal
activities.
If a company considers developing its existing product, it must determine whether existing
production facilities and expertise can be used. If a new product requires a new plant or
machinery, financial capability enters the picture.
Other non-marketing forces are the company's location, its research and development (R&D)
strength, and the overall image the firm projects to the public. Plant location often determines
the geographic limits of a company's market; particularly if transportation costs are high or its
products are perishable.
To sum up, various environmental forces influence an organization's marketing activities. Some
are external to the firm and are largely uncontrollable by the organization. Other forces are
within the firm and are generally controllable by management. A Company manages its
marketing system within this external and internal environment. Within the framework of these
constraints, management should develop a marketing program to provide want-satisfaction to its
markets.

CHAPTER THREE
ANALYZING CONSUMER AND BUSINESS MARKETS
3.1 Consumer Behavior
The term consumer behavior is defined as the behavior that consumer display in searching for
purchasing, using, evaluating and disposing of product and services that they expect will satisfy
their needs. Consumer behavior focuses on how individuals make decisions to spend their
available resources (time, money, effort) on consumption related items. This includes what they
buy, why they buy it, when they buy it, where they buy it, how often they buy it, how often they
use it, how they evaluate it after the purchase and the impact of such evaluation on future, and
how they dispose of it.
Consumer behavior also includes the acquisition and use of information. Thus, communication
with consumers and receiving feedback for them is a crucial part of consumer behavior which is
of great interest to marketers.
Consumer behavior is often said to be multidisciplinary in nature. The behavioral sciences
disciplines that have most contributed to our understanding of consumer are:
· Psychology: study of the behavior and mental processes of individual
· Sociology: study of the collective behavior of people in groups.
· Social psychology: study of how individuals influence and are influenced by groups.
· Economics: study of people‘s production, exchange, and consumption of goods and services.
· Anthropology: study of people in relation to their culture.
3.1.1 Factors Affecting/influencing Consumer Behavior
Markets have to be understood before marketing strategies can be developed. People using
consumer markets buy goods and services for personal consumption. Consumers vary
tremendously in age, income, education, tastes, and other factors.
Consumer behavior is influenced by the buyer's characteristics and by the buyer's decision
process. Buyer characteristics include four major factors: cultural, social, personal, and
psychological. We can say that following factors can influence the Buying decision of the buyer:
A. Cultural C. Personal
B. Social D. psychological
A. Cultural Factors
Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer
needs to understand the role played by the buyer's culture, subculture, and social class.

I. Culture
Culture is the most basic cause of a person's wants and behavior. Human behavior is largely
learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviors
from the family and other important institutions.
II. Subculture
Each culture contains smaller subcultures or groups of people with shared value systems based
on common life experiences and situations. Subcultures include nationalities, religions, and
geographic regions. Many subcultures make up important market segments, and marketers often
design products and marketing programs tailored to their needs.
III. Social Class
Almost every society has some form of social class structure. Social Classes are society's
relatively permanent and ordered divisions whose members share similar values, interests, and
behaviors. Social class is not determined by a single factor, such as income, but is measured as a
combination of occupation, income, education, wealth, and other variables. Marketers are
interested in social class because people within a given social class tend to exhibit similar buying
behavior. Social classes show distinct product and brand preferences in areas such as clothing,
home furnishings, leisure activity, and automobiles.
B. Social Factors
A consumer's behavior also is influenced by social factors, such as the consumer's small groups,
family, and social roles and status.
I. Groups
Many small groups influence a person‘s behavior. Groups that have a direct influence and to
which a person belongs are called membership groups. In contrast, reference groups serve as
direct (faceto- face) or indirect points of comparison or reference in forming a person's attitudes
or behavior.
II. Family
Family members can strongly influence buyer behavior. The family is the most important
consumer buying organization in society, and it has been researched extensively. Marketers are
interested in the roles and influence of the husband, wife, and children on the purchase of
different products and services.
Husband-wife involvement varies widely by product category and by stage in the buying
process. Buying roles change with evolving consumer lifestyles.
III. Roles and Status
A person belongs to many groups—family, clubs, organizations. The person's position in each
group can be defined in terms of both role and status. A role consists of the activities people are
expected to perform according to the persons around them.
C. Personal Factors
Principle of Marketing and consumer behavior Page 16

A buyer's decisions also are influenced by personal characteristics such as the buyer's age and
lifecycle stage, occupation, economic situation, lifestyle, and personality and self-concept.
I. Age and Life-Cycle Stage

People change the goods and services they buy over their lifetimes. Tastes in food, clothes,
furniture, and recreation are often age related. Buying is also shaped by the stage of the family
life cycle—the stages through which families might pass as they mature over time. Marketers
often define their target markets in terms of life-cycle stage and develop appropriate products
and marketing plans for each stage. Traditional family life-cycle stages include young singles
and married couples with children.
II. Occupation
A person's occupation affects the goods and services bought. Blue-collar workers tend to buy
more rugged work clothes, whereas white-collar workers buy more business suits. Marketers try
to identify the occupational groups that have an above-average interest in their products and
services. A company can even specialize in making products needed by a given occupational
group. Thus, computer software companies will design different products for brand managers,
accountants, engineers, lawyers, and doctors.
III. Economic Situation
A person's economic situation will affect product choice. Marketers of income-sensitive goods
watch trends in personal income, savings, and interest rates. If economic indicators point to a
recession, marketers can take steps to redesign, reposition, and re-price their products closely.
IV. Lifestyle
People coming from the same subculture, social class, and occupation may have quite different
lifestyles. Life style is a person's pattern of living as expressed in his or her psychographics.
It involves measuring consumers' major AIO dimensions—activities (work, hobbies, shopping,
sports, social events), interests (food, fashion, family, recreation), and opinions (about
themselves, social issues, business, products). Lifestyle captures something more than the
person's social class or personality. It profiles a person's whole pattern of acting and interacting
in the world.
V. Personality
Each person's distinct personality influences his or her buying behavior. Personality refers to
the unique psychological characteristics that lead to relatively consistent and lasting
responses to one's own environment. Personality is usually described in terms of traits such as
self-confidence, dominance, sociability, autonomy, defensiveness, adaptability, and
aggressiveness. Personality can be useful in analyzing consumer behavior for certain product or
brand choices. For example, coffee marketers have discovered that heavy coffee drinkers tend to
be high on sociability. Thus, to attract customers, Starbucks and other coffeehouses create
environments in which people can relax and socialize over a cup of steaming coffee.

D Psychological Factors
A person's buying choices are further influenced by four major psychological factors:
motivation, perception, learning, and beliefs and attitudes.
I. Motivation
A person has many needs at any given time. Some are biological, arising from states of tension
such as hunger, thirst, or discomfort. Others are psychological, arising from the need for
recognition, esteem, or belonging. Most of these needs will not be strong enough to motivate the
person to act at a given point in time. A need becomes a motive when it is aroused to a sufficient
level of intensity. A motive (or drive) is a need that is sufficiently pressing to direct the person to
seek satisfaction.
II. Perception
A motivated person is ready to act. How the person acts is influenced by his or her own
perception of the situation. All of us learn by the flow of information through our five senses:
sight, hearing, smell, touch, and taste. However, each of us receives, organizes, and interprets
this sensory information in an individual way. Perception is the process by which people select,
organize, and interpret information to form a meaningful picture of the world.
III. Learning
When people act, they learn. Learning describes changes in an individual's behavior arising from
experience. Learning theorists say that most human behavior is learned. Learning occurs through
the interplay of drives, stimuli, cues, responses, and reinforcement.
IV. Beliefs and Attitudes
Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence their
buying behavior. A belief is a descriptive thought that a person has about something.
3.1.2. Buying Roles
We can distinguish five roles that people might play in a buying decision. An initiator first
suggests the idea of buying the product or service. An influencer is the person whose view or
advice influences the decision. A decider actually decides whether to buy, what to buy, how to
buy, or where to buy. A buyer makes the actual purchase, while a user consumes or uses the
product or service.
3.1.3. The Buying Decision Process
Now that we have looked at the influences that affect buyers, we are ready to look at how
consumers make buying decisions. The buyer decision process consists of five stages: need
recognition, information search, evaluation of alternatives, purchase decision, and post purchase
behavior.
1. Need Recognition
The buying process starts with need recognition—the buyer recognizes a problem or need. The
need can be triggered by internal stimuli when one of the person's normal needs—hunger,
thirst—raises to a level high enough to become a drive. A need can also be triggered by external
stimuli. At this stage, the marketer should research consumers to find out what kinds of needs or
problems arise, what brought them about, and how they led the consumer to this particular

product. By gathering such information, the marketer can identify the factors that most often
trigger interest in the product and can develop marketing programs that involve these factors.
2. Information Search
An aroused consumer may or may not search for more information. If the consumer's drive is
strong and a satisfying product is near at hand, the consumer is likely to buy it then. If not, the
consumer may store the need in memory or undertake an information search related to the need.
At one level, the consumer may simply enter heightened attention. The consumer can obtain
information from any of several sources. These include personal sources (family, friends,
neighbors, acquaintances), commercial sources (advertising, salespeople, dealers, packaging,
displays, Web sites), public sources (mass media, consumer-rating organizations), and
experiential sources (handling, examining, using the product). The relative influence of these
information sources varies with the product and the buyer. Generally, the consumer receives the
most information about a product from commercial sources—those controlled by the marketer.
The most effective sources, however, tend to be personal. Commercial sources normally inform
the buyer, but personal sources legitimize or evaluate products for the buyer.
People often ask others—friends, relatives, acquaintances, professionals—for recommendations

concerning a product or service. Thus, companies have a strong interest in building such word-of
mouth sources. These sources have two chief advantages.
First, they are convincing: Word of mouth is the only promotion method that is of consumers,
by consumers, and for consumers. Second, the costs are low. Keeping in touch with satisfied
customers and turning them into word-of-mouth advocates costs the business relatively little. As
more information is obtained, the consumer's awareness and knowledge of the available brands
and features increases. The information also helped her drop certain brands from consideration.
Evaluation of Alternatives
We have seen how the consumer uses information to arrive at a set of final brand choices. How
does the consumer choose among the alternative brands? The marketer needs to know about
alternatives evaluation—that is, how the consumer processes information to arrive at brand
choices. Unfortunately, consumers do not use a simple and single evaluation process in all
buying situations. Instead, several evaluation processes are at work.
The consumer arrives at attitudes toward different brands through some evaluation procedure.
How consumers go about evaluating purchase alternatives depends on the individual consumer
and the specific buying situation. In some cases, consumers use careful calculations and logical
thinking. At other times, the same consumers do little or no evaluating; instead they buy on
impulse and rely on intuition.
3. Purchase Decision
In the evaluation stage, the consumer ranks brands and forms purchase intentions. Generally, the
consumer's purchase decision will be to buy the most preferred brand, but two factors can come
between the purchase intention and the purchase decision. The first factor is the attitudes of
others. The second factor is unexpected situational factors. The consumer may form a purchase
intention based on factors such as expected income, expected price, and expected product

benefits. However, unexpected events may change the purchase intention. Thus, preferences and
even purchase intentions do not always result in actual purchase choice.
4. Post purchase Behavior

The marketer's job does not end when the product is bought. After purchasing the product, the
consumer will be satisfied or dissatisfied and will engage in post purchase behavior of interest to
the marketer. What determines whether the buyer is satisfied or dissatisfied with a purchase? The
answer lies in the relationship between the consumer's expectations and the product's perceived
performance. If the product falls short of expectations, the consumer is disappointed; if it meets
expectations, the consumer is satisfied; if it exceeds expectations, the consumer is delighted.
3.2 Business Buying Behavior
Organizational buying can be defined as the decision making process by which organizations
establish the need for purchased products and services, and identify, evaluate, and choose among
alternative brands and suppliers. Organizational buyers make purchase decisions in order to
satisfy their goals, as do final consumers. But the goals differ. Organizations have the goals of
producing a good, providing a service, or selling an item, and therefore buy products and
services that will allow them to effectively engage in these activities.
Buying Situations in Business Buying
Organizational buying decision occurs in three situations. These types of buying situations are
termed;
 New task, Modified Re-buy and Straight re-buy. New Task situations are those that are new
to the organization. These first time or unique purchases require much gathering of
information and careful establishment of the criteria on which to evaluate the product for
purchase.
 Modified Re-Buy situations occur when buyers re-evaluate and may make changes in their
available purchase alternatives. Some organizational buying evidence shows that new tasks
and modified re- buys are rather similar, but straight re-buys are quite different.
 Straight Re-Buy situations are rather routine purchases usually under similar terms of sale to
meet continuing or recurring requirements.
3.2.2 The Business Buying Decision Process
Unlike final consumer buying process, Organizational buyer goes through eight steps decision
stages namely: Problem Recognition, Need Description, Product Specification, Vendor Search,
Proposal Request, Vendor Selection, Purchase Routine Selection, and Post-Purchase Evaluation
Problem Recognition: problem recognition occurs when someone in the organization perceives
a different of sufficient magnitude between the desired state and the actual state of affairs. Either
external or internal stimuli may be the cause of problem recognition
Need Description: Once problem recognition occurs, the organization must then generally
determine the quantity and describe the characteristics of the item needed. This is analogous to

the final consumer determining how much of a certain type of product will fit his needs, but for
the organization the level of complexity may be much greater.
Product Specification: After the need has been described, detailed specifications of the product
must be prepared by the using department to communicate precisely what is needed. These
specifications may include detailed performance requirements, product attributes, service support
needs, etc. For complex products, using departments will typically be involved as well as
engineering experts and financial executives.
Vendor Search: At this stage the organization tries to identify companies who may be
appropriate suppliers of the specified product. Actually, for many situations this stage is more
closely linked with previous stages than appears to be the case here.
Proposal Request: This stage involves organization sending a request for proposal to qualified
vendors asking them to bid based on the product specifications. Suppliers who respond to the
request will submit a proposal through a catalog, a sales call, or a detailed written offer
specifying product or service features, terms of supply and price.
Vendor Selection: The supplier/product choice decision is made by one or more members of the
buying center based on the proposals submitted. One conceptualization of the vendor selection
decision making process suggests two possible strategies a firm may pursue: simultaneous
scanning or sequential evaluation. In simultaneous scanning a company arrays and reviews
potential suppliers at the same time, whereas in sequential evaluation the potential vendors are
first ranked and then evaluated sequentially until one is found that satisfies purchase needs.
Purchase Routine Selection: This stage involves placing an order with a vendor who processes
it and ships the product. It is then received, approved, and payment is made. Status reports within
the company will let management know whether timetables are being met. Rather than writing a
purchase order for each purchase in a straight rebuy situation, companies often negotiate a
contract to cover purchase over a specific length of time.
Post-Purchase Evaluation: The last stage in the purchase decision process involves an
evaluation of the supplier‘s performance by the buyer. This is an important stage in providing
feedback so that the buyer and seller will be better able to work as a team.

CHAPTER FOUR
MARKET SEGMENTATION TARGETING AND POSITIONING
4.1 MARKET SEGMENTATION

Markets consist of buyers, and buyers differ in one or more ways. They may differ in their wants,
resources, locations, buying attitudes, and buying practices. Through market segmentation,
companies divide large, heterogeneous markets into smaller segments that can be reached more
efficiently and effectively with products and services that match their unique needs. Companies
today recognize that they cannot appeal to all buyers in the market place or at least not to all
buyers in the same way. Buyers are too numerous, too widely scattered, and too varied in their
needs and buying practices. Moreover, the companies themselves vary widely in their abilities to
serve different segments of the market. Rather than trying to compete in an entire market,
sometimes against superior competitors, each company must identify the parts of the market that
it can serve best and most profitably.
Thus, most companies are more selective about the customers with whom they wish to connect.
Most have moved away from mass marketing and toward market segmentation and targeting—
identifying market segments, selecting one or more of them, and developing products and
marketing programs tailored to each. Instead of scattering their marketing efforts firms are
focusing on the buyers who have greater interest in the values they create best.
4.1.1 Levels of Market segmentation
Because buyers have unique needs and wants, each buyer is potentially a separate market.
Ideally, then, a seller might design a separate marketing program for each buyer. However,
although some companies attempt to serve buyers individually, many others face larger numbers
of smaller buyers and do not find complete segmentation worthwhile. Instead, they look for
broader classes of buyers who differ in their product needs or buying responses. Thus, market
segmentation can be carried out at several different levels. Figure shows that companies can
practice no segmentation (mass marketing), complete segmentation (micromarketing), or
something in between (segment marketing or niche marketing).
A. Mass Marketing
Companies have not always practiced target marketing. In fact, for most of the 1900s, major
consumer products companies held fast to mass marketing—mass producing, mass distributing,
and mass promoting about the same product in about the same way to all consumers. for
instance, Coca-Cola at one time produced only one drink for the whole market, hoping it would
appeal to everyone.
The traditional argument for mass marketing is that it creates the largest potential market, which
leads to the lowest costs, which in turn can translate into either lower prices or higher margins.
However, many factors now make mass marketing more difficult. The proliferation of
distribution channels and advertising media has also made it difficult to practice "one-size-fits-
all" marketing.
B. Segment Marketing

A company that practices segment marketing isolates broad segments that make up a market and
adapts its offers to more closely match the needs of one or more segments. Thus, Marriott
markets to a variety of segments—business travelers, families, and others—with packages
adapted to their varying needs. Segment marketing offers several benefits over mass marketing.
The company can market more efficiently, targeting its products or services, channels, and
communications programs toward only consumers that it can serve best and most profitably. The
company can also market more effectively by fine-tuning its products, prices, and programs to
the needs of carefully defined segments. The company may face fewer competitors if fewer
competitors are focusing on this market segment.
C. Niche Marketing
Market segments are normally large, identifiable groups within a market—for example, luxury
car buyers, performance car buyers, utility car buyers, and economy car buyers. Niche marketing
focuses on subgroups within these segments. A niche is a more narrowly defined group, usually
identified by dividing a segment into sub segments or by defining a group with a distinctive set
of traits who may seek a special combination of benefits. Whereas segments are fairly large and
normally attract several competitors, niches are smaller and normally attract only one or a few
competitors. Niche marketers presumably understand their niches' needs so well that their
customers willingly pay a price premium.
D. Micro marketing
Segment and niche marketers tailor their offers and marketing programs to meet the needs of
various market segments. At the same time, however, they do not customize their offers to each
individual customer. Thus, segment marketing and niche marketing fall between the extremes of
mass marketing and micro marketing. Micro marketing is the practice of tailoring products and
marketing programs to suit the tastes of specific individuals and locations. Micro marketing
includes:-
 local marketing
 And individual marketing
Local marketing involves tailoring brands and promotions to the needs and wants of local
customer groups—cities, neighborhoods, and even specific stores. Citibank provides different
mixes of banking services in its branches depending on neighborhood demographics) and
Individual marketing (tailoring products and marketing programs to the needs and preferences
of individual customers).
4.1.2 Segment variable selection
There is no single way to segment a market. A marketer has to try different segmentation
variables, alone and in combination, to find the best way to view the market structure. The major
variables that might be used in segmenting are major geographic, demographic, psychographics,
and behavioral variables.
a. Geographic Segmentation
Geographic segmentation calls for dividing the market into different geographical units such as
nations, regions, states, counties, cities, or neighborhoods. A company may decide to operate in
one or a few geographical areas, or to operate in all areas but pay attention to geographical

differences in needs and wants. It is common to localize products, advertising, promotions, and
sales efforts to fit the needs of geographical areas (regions, cities, and even neighborhoods).
b. Demographic Segmentation
Demographic segmentation divides the market into groups based on variables such as age,
gender, family size, family life cycle, income, occupation, education, religion, race, and
nationality. Demographic factors are the most popular bases for segmenting customer groups.
One reason is that consumer needs, wants, and usage rates often vary closely with demographic
variables. Another is that demographic variables are easier to measure than most other types of
variables. Even when market segments are first defined using other bases, such as benefits
sought or behavior, their demographic characteristics must be known in order to assess the size
of the target market and to reach it efficiently. Demographic variables are easier to measure than
most other types of variables.
i. Age and Life-Cycle Stage

Age and life cycle segmentation consists of offering different products or using different
marketing approaches for different age and life-cycle groups. Marketers must guard against
stereotypes when using this form of segmentation. While certain age and life cycle groups do
behave similarly, age is often a poor predictor of a person‘s life cycle, health, work or family
status, needs, and buying power. Consumer needs and wants change with age. Some companies
use age and life cycle segmentation, offering different products or using different marketing
approaches for different age and life-cycle groups.
ii. Gender segmentation
Calls for dividing a market into different groups based on sex. This segmentation form has long
been used for clothing, cosmetics, toiletries, and magazines. New opportunities in this area are
emerging such as automobiles, deodorants, and financial services. There is an increased
emphasis on marketing and advertising to women. Specialized Web sites are becoming very
popular with this group.
iii. Income segmentation
It consists of dividing a market into different income groups. Marketers for automobiles, boats,
clothing, cosmetics, financial services, and travel have long used this form of segmentation.
Using this form, marketers must remember that they do not always have to target the affluent.
Other income groups are also viable and profitable market segments.
c. Psychographics segmentation
It calls for dividing a market into different groups based on social class, lifestyle, or personality
characteristics. People in the same demographic class can exhibit very different psychographics
characteristics. As previously seen in, lifestyle also affects people‘s interest in various goods,
and the goods they buy express those lifestyles. This method of segmentation is gaining in
popularity. Personality variables can also be used to segment markets. Marketers will give their
products personalities that correspond to consumer personalities.
d. Behavioral segmentation
It involves dividing a market into groups based on consumer knowledge, attitudes, uses, or
responses to a product. Many marketers believe that behavior variables are the best starting point

for building market segments. Occasion segmentation consists of dividing the market into groups
according to occasions when buyers get the idea to buy, actually make their purchase, or use the
purchased item. Benefit segmentation involves dividing the market into groups according to the
different benefits the consumers seek from the product. Companies can use benefit segmentation
to clarify the benefit segment to which they are appealing, its characteristics, and the major
competing brands. They can also search for new benefits and establish brands that deliver them.
User status can also be used to divide the market. Segments of nonusers, ex-users, potential
users, first-time users, and regular users of a product are potential ways to segment.
Usage rates are another way that marketers segment markets. These categories might be light,
medium, and heavy user groups.
Loyalty status can also be used to segment markets. Consumers can be loyal to brands, stores,
and companies. Consumers can be completely loyal, somewhat loyal, or not loyal at all. An
amazing amount of information can be uncovered by studying loyalty patterns.
Today there is a trend toward targeting multiple segments. Very often, companies begin their
marketing with one targeted segment, and then expand into other segments. This often boosts a
company‘s competitive advantage and knowledge of the customer base. One of the most
promising developments in multivariable segmentation is ―geo demographic‖ segmentation
based upon both geographic and demographic variables.
4.1.3 Prerequisite for Effective Segmentation

There are many ways to segment, but not all segmentations are effective. To be useful, market
segments must have certain characteristics. Among the most significant of these are:
1) Measurability is the degree to which the size, purchasing power, and profiles of a market
segment can be measured.
2) Accessibility refers to the degree to which a market segment can be reached and served.
3) Substantiality refers to the degree to which a market segment is sufficiently large or
profitable.
4) Differentiation refers to the degree to which a market segment can conceptually be
distinguished and has the ability to respond differently to different marketing mix elements
and programs.
5) Action ability is the degree to which effective programs can be designed for attracting and
serving a given market segment.
4.2 MARKET TARGETING

Once the firm has identified its market-segment opportunities, it is ready to initiate market
targeting. Here, marketers evaluate each segment to determine how many and which ones to
target and enter.
Evaluating Market Segments
In evaluating different market segments, the firm must look at two factors: (1) the segment‘s
overall attractiveness, and (2) the company‘s objectives and resources. First, the firm must ask
whether a potential segment has the characteristics that make it generally attractive, such as size,
growth, profitability, scale economies, and low risk. Second, the firm must consider whether

investing in the segment makes sense given the firm‘s objectives and resources. Some attractive
segments could be dismissed because they do not mesh with the company‘s long-run objectives;
some should be dismissed if the company lacks one or more of the competences needed to offer
superior value.
Selecting and Entering Market Segments
Having evaluated different segments, the company can consider five patterns of target market
selection.
4.2.1 Patterns of target market selection
1. Single-Segment Concentration
Many companies concentrate on a single segment: Volkswagen, for example, concentrates on the
small-car market, while Porsche concentrates on the sports car market. Through concentrated
marketing, the firm gains a thorough understanding of the segment‘s needs and achieves a strong
market presence. Furthermore, the firm enjoys operating economies by specializing its
production, distribution, and promotion; if it attains segment leadership, it can earn a high return
on its investment. However, concentrated marketing involves higher than normal risks if the
segment turns sour because of changes in buying patterns or new competition. For these reasons,
many companies prefer to operate in more than one segment.
2. Selective Specialization
Here the firm selects a number of segments, each objectively attractive and appropriate. There
may be little or no synergy among the segments, but each segment promises to be a
moneymaker. This multi segment coverage strategy has the advantage of diversifying the firm‘s
risk. Consider a radio broadcaster that wants to appeal to both younger and older listeners using
selective specialization. Emmis Communications owns New York‘s WRKSRM, which describes
itself as ―smooth R&B [rhythm and blues] and classic soul‖ and appeals to older listeners, as
well as WQHT-FM, which plays hip-hop (urban street music) for under-25 listeners.
3. Product Specialization
Another approach is to specialize in making a certain product for several segments. An example
would be a microscope manufacturer that sells microscopes to university laboratories,
government laboratories, and commercial laboratories. The firm makes different microscopes for
different customer groups but does not manufacture other instruments that laboratories might
use. Through a product specialization strategy, the firm builds a strong reputation in the specific
product area. The downside risk is that the product may be supplanted by an entirely new
technology.
4. Market Specialization
With market specialization, the firm concentrates on serving many needs of a particular customer
group. An example would be a firm that sells an assortment of products only to university
laboratories, including microscopes, oscilloscopes, and chemical flasks. The firm gains a strong
reputation in serving this customer group and becomes a channel for further products that the
customer group could use. However, the downside risk is that the customer group may have its
budgets cut.

5. Full Market Coverage
Here a firm attempts to serve all customer groups with all of the products they might need. Only
very large firms can undertake a full market coverage strategy. Examples include IBM (computer
market), General Motors (vehicle market), and Coca-Cola (drink market). Large firms can cover
a whole market in two broad ways: through undifferentiated marketing or differentiated
marketing.
In undifferentiated marketing, the firm ignores market-segment differences and goes after
the whole market with one market offer. Focusing on a basic buyer need, it designs a product and
a marketing program that will appeal to the broadest number of buyers. To reach the market, the
firm uses mass distribution backed by mass advertising to create a superior product image in
people‘s minds. The narrow product line keeps down costs of research and development,
production, inventory, transportation, marketing research, advertising, and product management;
the undifferentiated advertising program keeps down advertising costs. Presumably, the company
can turn its lower costs into lower prices to win the price-sensitive segment of the market.
In differentiated marketing, the firm operates in several market segments and designs
different programs for each segment. General Motors does this with its various vehicle brands
and models; Intel does this with chips and programs for consumer, business, small business,
networking, digital imaging, and video markets. Differentiated marketing typically creates more
total sales than does undifferentiated marketing. However, the need for different products and
marketing programs also increases the firm‘s costs for:-
 Product modification costs. Modifying a product to meet different market-segment
requirements usually involves R&D, engineering, and special tooling costs.
 Manufacturing costs. It is usually more expensive to produce 10 units of 10 different
products than 100 units of one product. The longer the production setup time and the
smaller the sales volume of each product, the more expensive the product becomes.
However, if each model is sold in sufficiently large volume, the higher setup costs may
be quite small per unit.
 Administrative costs. The company has to develop separate marketing plans for each
market segment. This requires extra marketing research, forecasting, sales analysis,
promotion, planning, and channel management.
 Inventory costs. It is more costly to manage inventories containing many products.
 Promotion costs. The company has to reach different market segments with different
promotion programs. The result is increased promotion-planning costs and media costs.
Fig. Patterns of Targeting

4.3 POSITIONING
Positioning is the act of designing the company‘s offering and image to occupy a distinctive
place in the target market‘s mind. The end result of positioning is the successful creation of a
market-focused value proposition.
Value proposition is a cogent reason why the target market should buy the product. When
positioning a product the marketer wants to convey the benefits most desired by the target
market.
―Positioning starts with a product. A piece of merchandise, a service, a company, an institution,
or even a person. . . . But positioning is not what you do to a product. Positioning is what you do
to the mind of the prospect. That is, you position the product in the mind of the prospect.‖
4.3.1 Communicating and Delivering the Chosen Position

Once it has chosen a position, the company must take strong steps to deliver and communicate
the desired position to target consumers. All the company's marketing mix efforts must support
the positioning strategy. Positioning the company calls for concrete action, not just talk. If the
company decides to build a position on better quality and service, it must first deliver that
position.
Designing the marketing mix—product, price, place, and promotion—essentially involves
working out the tactical details of the positioning strategy. Thus, a firm that seizes on a "for
more" position knows that it must produce high-quality products, charge a high price, distribute
through high quality dealers, and advertise in high-quality media. It must hire and train more
service people, find retailers who have a good reputation for service, and develop sales and
advertising messages that broadcast its superior service. This is the only way to build a consistent
and believable "more for more" position. Companies often find it easier to come up with a good
positioning strategy than to implement it. Establishing a position or changing one usually takes a
long time. In contrast, positions that have taken years to build can quickly be lost. Once a
company has built the desired position, it must take care to maintain the position through
consistent performance and communication. It must closely monitor and adapt the position over
time to match changes in consumer needs and competitors' strategies. However, the company
should avoid abrupt changes that might confuse consumers. Instead, a product's position should
evolve gradually as it adapts to the ever-changing marketing environment.
Positioning Possibilities
A company can now choose from several different positioning possibilities
1. Attribute positioning
A company position itself on an attribute such as size or number of years in existence
Example Coca Cola positioned itself as the largest soft drink company or by number of
years in existence St. George beer positioned itself the first beer in Ethiopia.
2. Benefit positioning
The product is positioned as the leader in certain benefit
Example 7 up positioned itself by promoting as it is Uncola product or
Dashen beer –Sugar free beer

3. Use or application Positioning
Positioning the product as the best for some use or application
Example Teim park position itself for the tourist who has only an hour to catch some
quickly entertainment.
4. Product category positioning
The product is positioned as the leader in certain product category
Tools for competitive differentiations
A company must try to identify the specific way it can differentiate its products to obtain a
competitive advantage. Differentiation is the act of designing a set of meaningful differences to
distinguish the company‘s offering from competitors offering.
The differentiation should fulfill the following criteria to be succeeded over competitors:
Important: The difference should deliver highly valued benefits to sufficient number of buyers.
Distinctive: The difference either is not offered by others or is offered in a more distinctive way
by the company.
Superior: The difference should be superior to other ways of obtaining the same benefit.
Communicable: The difference should be communicable and visible to buyers.
Pre-emptive: The difference cannot easily copied by competitors.
Affordable: The difference should be in such a way that the buyers can afford to pay for them.
Profitable: The Company should find it profitable to introduce the difference.
How exactly can a company differentiate its market offering from competitors? Here we will
examine how a market offering can be differentiated along time dimensions: - product, services,
personnel, channel or image.
i. Product Differentiation
Product differentiation is differentiation that takes place on the physical products. At one
extreme we find highly standards products that allow little variation. At the other extreme are
products capable of high differentiation, such as automobiles, commercial holdings, and
furniture. Here the seller faces an abundance of design parameters. The main product
differentiations are features, performance, conformance, durability, reliability, reparability, style
and design.
a. Features: - Features are characteristics that supplement the products basic function. The
company can create additional version by adding extra features. Thus automobile manufacturers
can offer optional features, such as electric windows, air bags, automatic transmission, and air
conditioning. Each feature has a chance of capturing the fancy of additional buyers.
How can a company identify and select appropriate features? One answer is for the company to
contact recent buyers and ask them a series of questions. How do you like the product? Any bad
features? Good features? Are there any features that could be added that would improve your
satisfaction? What are they? How much would you pay for each feature? How do you feel about

each of several features that other customers suggested? This research will provide the company
with a long list of potential features. The next task is to decide which features one worth adding.
b. Performance Quality:- Most products are established initially at one of four
performance levels, low, average, high and superior. Performance quality refers to the level at
which the products primary characteristics operate. The important question here is: Does higher
product performance produce higher profitability? Quality‘s link to profitability does not mean
that the firms should always design the highest performance level possible. There are
diminishing returns to level increasing performance, in that fewer buyers are willing to pay for it.
The manufacturer must design a performance level appropriate to the target market and
competitor‘s performance levels. A company must also decide how to manage performance
quality through time.
c. Conformance Quality:-Conformance quality is the degree to which all the produced
units are identical and meet the promised target specifications. The problem with low
conformance is that the product will felt to deliver on its promises to many buyers.
d. Durability:- Durability is a measure of the product‘s expected operating life under
natural and/or stressful conditions. Buyers will generally pay more for products that have more
durability. However, this rule is subject to some qualifications. The extra price must not be
exclusive. Furthermore, the product must not be subject to technological obsolescence, in which
case the buyer may not pay more for longer-lined products.
e. Reliability:-Reliability is a measure of the probability that a product will not
manufacture or fail within a specified time period. Buyers normally will pay a premium for
product with more reliability. Buyers want to avoid the high costs of product breakdowns and
repair time.
f. Reparability:-Reparability is a measure of the ease of fixing a product that
manufactures or fails. Buyers prefer products that are easy to repair. Thus an automobile made
with standard parts that are easily replaced has high reparability. Ideal reparability would exist if
users could fix the product themselves with little or no cost or time lost. The buyer might simply
remove the defective part and insert a replacement part.
g. Style:-Buyers are normally willing to pay a premium for products that are attractively
styled. Style describes the product‘s looks and feel to the buyer. Many car buyers pay a
premium for jaguar automobiles because of this extraordinary look, even though Jaguar had in
the past a poor record of reliability.
Style has the advantage of creating product distinctiveness that is difficult to copy. Under style
differentiation, we must include packaging as a styling weapon, especially in food products,
cosmetics, toiletries, and small-consumer appliances. The package provides the buyer‘s first
encounter with the product and is capable of turning the buyer on or off.
h. Design:-As competitions intensify, designs will offer one of the most patent ways to
differentiate and position a company‘s products and services. Design is the totality of features
that affect how a product look and functions in terms of customer requirements.
Design is particularity important in making and marketing desirable equipment, apparel, retail
services and packaged goods. All of the qualities we‘ve discussed under the meaning ―Product

differentiation are design parameters. The design has to figure out how much to invest in feature
development, performance, conformance, reliability, reparability, style and so forth.
ii. Service Differentiation
In addition to differentiating its physical products, a firm can also differentiate its services. When
the physical product cannot easily be differentiated, the key to competitive success and
improving their quality is differentiating its services. The main service differentiations are
ordering ease, delivery, installation, customer training, customers consulting, maintenance and
repair, and a few others.
a. Ordering Ease: -
Ordering ease refers to how easy it is for the customer to place an order with the company. For
example, some company‘s has eased the ordering process by supplying customers with computer
terminals through which they sell orders directly to the seller. Many banks are now providing
home banking software to help customers get information and transact with the bank more
efficiently.
b. Delivery: -
Delivery refers to how well the product or service is delivered to the customers. It includes the
speed, accuracy, and care attending the delivery process. Buyers will often choose the supplier
with a better reputation for on-time delivery.
c. Installation: -
Installation refers to the work done to make a product operational in its planned location. Buyers
of heavy equipment expect good installation service from the vendor. For examples, some
companies deliver all the purchased equipment to the site at the same time rather than sending in
different components at different times.
d. Customer Training: -
Customer training refers to training the customer‘s employees to use the vendor‘s equipment
properly and efficiently. Some companies are not only selling and installs this expensive
equipment‘s but also takes on the responsibility for training the uses of this equipment.
e. Customer consulting: -
Customers consulting refer to data, information systems, and advising services that the seller
offers free or for a price to buyers. Some sellers consult their buyers in setting up accounting and
inventory systems, computer ordering systems and so forth.
f. Maintenance and repair
Maintenance and repair describes the company‘s service program for helping customers keep
this purchased product in good working order. Automobile buyers are especially concerned with
the quality of repair service that they can expect from this dealer.
g. Miscellaneous services
Companies can find many other ways to add value by differentiating their customer services.
They can offer a better product warranty or maintenance contract than their competitors. They
can establish patronage awards, as the airlines have done with their frequent-flyer programs.
iii. Personal Differentiation
Companies can gain a strong competitive advantage through hiring and training better people
than their competitions do. Better-trained personnel exhibit six characteristics:

 Competence –The employees possess the required skill and knowledge.
 Courtesy –The employees are friendly, respectful and considerate.
 Credibility –The employees are trust worthy.
 Reliability –The employees perform the service consistently and accurately.
 Responsiveness –The employees respond quickly to customer‘s requests and problems.
 Communication –The employees make an effort to understand the customer and
communicate clearly.
iv. Channel differentiation
Companies can achieve differentiation through the way they shape their distribution channel,
particularly: channel‘s coverage, expertise and performance. For example, caterpillars success in
the construction-equipment industry is based partly on its superior channel development. Its
dealers are found in more locations than competitor‘s dealers and caterpillars dealers are
typically better trained and perform more reliably.
v. Image differentiations
Even when competing offers look the same buyers may respond differently to the company
image or brand image. Companies can craft powerful, compelling images. The primary
explanation for Marlboro's extraordinary worldwide market share (around 30%) is that
Marlboro's "macho cowboy" image has struck a responsive chord with much of the cigarette
smoking public. Wine and liquor companies also work hard to develop distinctive images for
their brands. Even a seller's physical space can be a powerful image generator.

CHAPTER 5
PRODUCT MANAGEMENT
At the end of this chapter you will be able to:
 Define what a product is
 Identify the levels of a product
 Classify products
 Outline the new product development stages
 Discuss the life-cycle stages of products
 Discuss product identification and protection methods
5.1. Definition of Product: product is anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or need. It includes more than tangible
goods. Broadly defined, products include physical objects, services, events, persons, places,
organizations, ideas or mixes of these entities.
Services are a form of products that consists of activities, benefits or satisfactions offered for
sale that are essentially intangible and do not result in the ownership of anything. Examples are
banking, hotel, airline, retail, and tax preparation and home repair services.
5.1.1. Levels of product and services
Product planners need to think about product and services on three levels.
 Core product (benefit) - it is the most basic level which addresses the question what is
the buyers really buying? - It stands at the center of the total product. - It consists of the
core, problem solving benefits that consumers seek what they buy a product or service.
For example, a hotel gust is buying ―rest & sleep‖, the purchaser of a drill is buying
―holes‖. Marketers must see themselves as benefit providers.
 Actual product- it built around the core product. Actual products may have the as many
as five characteristics: these are a quality level, features, design, a brand name, and
packaging. For example, thus a hotel room includes a bed, desk, dresser, and closet.
 Augmented product- it builds around the core and actual products by offering
additional consumer services and benefits.
Figure 5.1.1: Level of product

5.1.3. Classification of Product
Products and services fall in two broad classes based on the types of consumers that use them.
These are Consumes products and Industrial products
 Consumer products: are those bought by final consumers for personal consumption.
Marketers usually classify these goods further based on how consumers go about buying
them.
Consumer products include:
a) Convenience, Shopping, Specialty and Unsought products
These products are differing in the ways consumers buy them and how they are marketed.
 Convenience products: are consumer products and services that the customer usually
buys frequently, and with a minimum of comparison and buying effort. Convenience
products are usually low priced and marketers place them in many locations to make
them readily available when customers need them. For example, soap, candy, and
newspaper.
It can be divided further in to 3:
I. staples: are products that consumers buy on a regular basis, such as ketch up, tooth paste, or
crackers.

II. Impulse products: are purchased with little planning or search effort, such as candy bars and
magazines.
III) Emergency products: are purchased when their need is urgent.
 Shopping product: are less frequently purchased. Consumers compare carefully on

suitability, quality, price and style. Consumers also spend much time and effort in
gathering information and making comparisons. Shopping products marketers usually
distribute their products through fewer outlets but provide deeper sales support to help
customers in their comparison effort. For example, furniture, closing and the like.
 Specialty products: are consumer products and services with unique characteristics or
brand identification for which a significant group of buyers is willing to make a special
purchase effort. Buyers normally don‘t compare specialty products. They invest only the
time needed to reach dealers carrying the wanted products. Examples – luxury products,
designer clothes and the like.
 Unsought goods: are consumer‘s products that the consumer either does not know or
knows about but does not normally think of buying. Most major innovations are unsought
until the consumer becomes aware of them through advertising. Examples include: life
insurance, blood donation. By their very nature, unsought goods require a lot of
advertising, personal selling and other marketing efforts.
II, Industrial- goods classification
Industrial goods may be classified in terms of how they enter the production process and their
relative costliness. There are three groups of industrial goods: material and parts, capital items,
and supplies and business services.
1. Materials and parts: are goods that enter the manufacturer‘s product completely. They
fall into two classes: these are Raw materials and Manufactured materials and parts.
Raw materials fall into two major classes: farm products (e.g. wheat, cotton, livestock, fruits
and vegetables) and natural products (e.g. fish, lumber, crude petroleum, iron ore). Each is
marketed somewhat differently. Farm products are seasonal and perishable. Their perishable and
seasonal nature gives rise to special marketing practices. Farm products are supplied by many
producers, who turn them over to marketing intermediaries, who provide assembly, grading,
storage, transportation and selling service. Their commodity character results in relatively little
advertising and promotional activity, with some exceptions.
Natural products: are highly limited in supply. They usually have great bulk and low unit value
and require substantial transportation to move them from producer to user. The producers of
natural products market them to industrial users.
Manufactured materials and parts: are divided into two categories: 1) component material
(E.g. iron, yarn, cement, wire) and component parts (E.g. small motors, tires, castings).
Component materials are usually fabricated further- for example, pig iron is made into steel, and

yarn is woven into cloth. Standardized nature of component materials usually means that price
and supplier reliability are the most important purchase factors. The component parts enter the
finished product completely with no further change in form, as when small motors put into
vacuum cleaners, and tires are put on automobiles. Most manufactured materials and parts are
sold directly to industrial users.
Capital items: are long-lasting goods that facilitate developing and/or managing the finished
product. They include two groups: Installations and Equipment. Installations consist of
buildings (e.g. factories and offices) and Equipment (e.g. generators, drill presses, mainframe
computers, elevators). Installations are major purchases. They are usually bought directly from
producer, with typical sale preceded by long negotiation period. Ads may be used but much less
important than personal selling.
Equipment comprises portable factory equipment and tools (e.g. hand tools, lift trucks) and
office equipment (e.g. personal computers, desks). These types of equipment do not become part
of finished product. They simple help in the production process. They have a shorter life than
installations but a longer life than operating supplies. Even though some manufacturers sell it
directly, more often may use marketing intermediaries, because the market is geographically
dispersed, the buyers are numerous and the orders are small. Quality, features, price, and service
are major considerations in vendor selection. The sales force tends to be more important in this
type of sales although ads can be used effectively.
Supplies and Business services are short lasting goods and services that facilitate developing
and/or managing the finished product. Supplies are of two types, namely, operating supplies (e.g.
lubricants, coal, writing paper, pencils) and maintenance and repair items (e.g. paint, nails,
brooms). Supplies are the equivalent of convenience goods in the industrial field. They are
purchased with minimum effort on a straight rebuy basis. They are normally marketed through
intermediaries because of their low unit and great number and geographical dispersion of
customers.
Business services include maintenance and repair services (e.g. window cleaning and typewriter
repair) and business advisory services (e.g. legal, management consulting, and advertising).
Maintenance service is often provided by small producers, and repair services are often available
from the manufacturers of the original equipment.
5.1.4.1 Characteristics of service and their marketing implication
Services have four major characteristics that greatly affect the design of marketing programs:
intangibility, inseparability, variability and perish ability.
Service Inseparability
Service typically produced and consumed simultaneously. This is not physical goods, which are
manufactured, put into inventory, distributed through multiple resellers and consumed later. If a

person is renders the service, the provider is part of the service. Since the client is also present as
the service is produced, provider client interaction is a special feature of service marketing.
Service Intangibility
Unlike physical products, services are intangible; they cannot be seen, tasted, felt or smelled
before they are bought. To reduce uncertainty buyers will look for signs or evidence of service
quality.
They will draw inferences about the service quality from the place, people, equipment,
communication material, symbols and price that they see. The service provider‘s task is to
―manage the evidence‖ to ―to tangibilize the intangible‖.
Service Variability
It is impossible for a service industry, or even an individual seller of services, to standardize

output. Each ―unit‖ of the service is somewhat different from the other ―unit‖ of the same
service. An added complication is the fact that it is often difficult to judge the quality of a
service. It is particularly difficult to forecast the quality in advance of buying a service. Since
services depends on who provide them when and where they are provided, they are highly
variable.
Service Perish ability
Service cannot be stored, some doctors charge patients for missed appointment because the
service value existed only at that point. The perish ability of the service is not a problem when
demand is steady because it is easy to hire people in advance. When demand fluctuates, service
firms have difficult problem.
5.1.5 Product Lifecycle
Product life cycle is the course of a product‘s sales and profits over its life-time. It involves four
distinctive stages:-
1. Introduction stage
2. Growth stage
3. Maturity stage
4. Decline stage
Stages in the product life cycle

The time at each stage vary greatly
 Introduction stage
This stage starts when the new product is first launched. It takes time and sales growth is apt to
be slow. In this stage, as compared to other stages:-
 Profits are negative or low
 Require much money to attract distributors and build their inventories.
 Promotion spending is relatively high to inform customers of the new

product and get them to try it.
Market strategy: Firms focus their selling on those buyers who are the most ready to buy.
As the pioneer moves through later stages of the life cycle, it will have to continuously
formulate new pricing, promotion and other marketing strategies. The firm has the best
chance of building and retaining market leadership if it plays its cards correctly from the
start.
 Growth stage
If the new product satisfies the market, it will enter a growth stage, in which sales will start
climbing quickly. The early adopters will continue to buy and later buyers will start
following their lead, especially, of they hear favorable word of mouth. New competitors will
enter the market, because of the attractions by opportunities for profit. In this case, firms will
introduce new product features, and the market will expand. Prices remain where they are or
fall only slightly. Companies keep their promotion spending at the same or a slightly higher

level. Profits increase during the growth stage, as promotion costs are spread over a large
volume and as unit manufacturing costs fall.
Marketing strategy: the firm uses several strategies to sustain rapid market growth through,
o By improving product quality and adds new product features and models.
o By entering new market segments and new distribution channels.
o By shifting some advertising from building product awareness to building product

conviction and purchase
o By lowering prices at the right time to attract more buyers.
o By spending a lot of more on product improvement, promotion and distribution, the

company can capture a dominant position.
 Maturity stage
At some point, a products sales growth will slow down and the product will enter a maturity
stage. This stage normally lasts longer than the previous stages and it poses strong challenges to
marketing management. Here, the slowdown in sales growth results in:
 Marking down prices
 Increasing their advertising and sales promotion
 Upping their research and development budgets to find better versions of

the product.
This step leads to a drop in profit, some of the weak competitors start dropping out, and the
industry eventually contains only well established competitors. To prevent the product
going into decline you modify the market, the product and the marketing mix elements. To
Modify the Market, the company tries to increase the consumption of the product and looks
for new users and market segments. To Modify the Product, the company tries to changing
characteristics of the product like quality, features, or styles to attract new users and to
inspire more usage. To Modify the Marketing Mix, the company tries to modify the marketing
mix; it can cut prices to attract new users and competitor‘s customers. It can launch a better
advertising campaign or use aggressive sales promotion, trade deals, cents-off, premiums,
and contests. It can also move in to larger market channels, using mass merchandisers, if
these channels are growing. Finally the firm can offer new or improved services to buyers.

 Decline Stage
Here, the sales of most product forms or brands eventually dip. Sales decline for many reasons
including due to; technological advances, shifts in consumer tastes, increased competition and
the like. As sales and profits decline, some firms withdraw from the market. Those remaining
may prune the product offerings. In this case, carrying a weak product can be very costly to a
firm.
A product failing reputation can cause customer concerns about the company and its other
products. Companies need to pay more attention to their aging products. The firm‘s first task is
to identify those products in the decline stage by regularly reviewing sales, market shares, costs,
and profit trends. Then management must decide whether to maintain, harvest or drop each of
these declining products.
In general, the product life cycle concept can be applied by marketers as a useful framework for
describing how products and markets work. The products current product life cycle position
suggests the best marketing strategies and the resulting marketing strategies affect product
performance in later life cycle stages. Yet, when used carefully, the product life cycle concept
can help in developing good marketing strategies for different stages of the product life cycle.
5.1.7. New Product Development
What are the push factors for the development of new product and service?
 rapid change in consumer tastes

 rapid change in technologies and
 rapid change in competition
Methods of new product development
 Acquisition: by buying a whole company, a patent or a license to produce someone

else‘s product.
 New product development-this is undertaken in the company‘s own research and

development department.
Strong new product planning and setting up a systematic new product development process is
important for finding and growing new product.
New product development has 8 major steps.
1. Idea Generation; It is the systematic search for new product ideas. Major sources of new
–product ideas include: internal sources and external sources.
Internal sources: These sources obtained within the company. It includes: through formal R&D
(research and development), it can be pick the brain of its scientists, engineers, manufacturing

people and company executives , brain storming and the company sales people – they have good
sources because they are in daily contact with customers.
External ideas source:- By watching and listening to customers, the company can conduct
surveys or focus groups to learn about customers needed and wants, competitors are other good
sources of new product ideas. Companies watch competitor‘s ad and other communication to get
clues about their new products. Distributors and suppliers: can also contribute many good new
product ideas. Resellers are also close to the market and can pass along information about
consumer problems and new product possibilities. Suppliers can tell the company about new
product concepts, techniques, and materials that can be used to develop new idea.
Other sources include: trade magazine, shows and seminars, government agencies, new
product consultant, advertising agencies, marketing research firms and university and inventors.
2. Idea Screening: it helps to spot good ideas and drop poor ones as soon as possible based
on some criteria;
 Marketability
 Ease of advertising
 Resource availability
3. Concept Development and Testing: An attractive idea must be developed in to a

product concept. It is important to distinguish between a product idea, a product concept
and a product image.
A product idea: is an idea for a possible product that the company can see itself offering to the
market.
A product concept: is a detail version of the idea stated in meaningful consumer terms.
A product image is the way consumers perceive an actual or potential product.
Concept development: find out how attractive each concept is to customers and choose the best
one.
Concept testing: it calls for testing new product concepts with groups of target customers. The
concepts may be presented to consumers symbolically or physically.
4. Market strategy Development: Designing an actual marketing strategy for introducing

the new product. The marketing strategy statement consists of three parts.
The first part describes the target market, the planned product positioning, and the sales market
share and profit goals for the first few years.

The second part of the marketing strategy statement outlines the products planned price,
distribution and marketing budget for the first year.
The third part of the marketing strategy statement describes the planned long run sales, profit
goals and marketing mix strategies.
5. Business Analysis: It involves a review of the sales, cost and profit projections for a new
product to find out whether they satisfy the company‘s objectives or not.
6. Product Development: Here research and development or engineering develops the

product concept in to physical product.
7. Test Marketing: This is the stage at which the product and marketing program are
introduced in to more realistic settings. The amount of test marketing needed varies with
each new product. Test marketing costs can be enormous, and it takes time that may
allow competitors to gain advantages.
8. Commercialization: Introducing the new product in to the market. When the company
wants for launching the new product, it must first decide on the timing of introduction.
Next the company must decide where to launch the new product: in a single location,
region, the national market, or the international market.
5.1.8. Introduction to Branding, Packaging and Labeling
Brand: In developing a marketing strategy for individual product, the seller has to confront the
issue of branding. Branding can add great value to a product and is therefore an intrinsic aspect
of product strategy.
A brand is a name, term, symbol, sign, or design or a combination of them, which is intended to
identify the goods or services of one seller or a group of sellers and to differentiate them from
those of competitors.
 Brand name-the part of, which consists of words, latter, or/and number which can be
vocalized. Example-Toyota, omo, coca-cola, 7-up bix and the like.
 Brand mark-the part of the brand that can be recognized but not utter able. It recognized by
sight but can‘t be expressed when a person pronounce the brand name.
 Trade mark-a brand or part of the brand that has been given legal protection, So
that the owner has exclusive right to its use.
Importance of a brand
Branding is more preferred than unbranded goods because

The brand makes it easier for the seller to process orders and track down problems.
The seller‘s brand name and trade mark provide legal protection of unique product
features.
Good brand help to build the corporate image because it advertise the quality and size
of the company.
Brands make it easy for customer to identify products or services.
Brands also assure purchasers that they are getting comparable quality when they
reorder.
Packaging: it is the activities of designing and producing the container or wrapper for a
product.
Importance of packaging
 Protect the product on its way to the customer.

 Provide protection after the product is purchased.
 Help persuade consumers to buy the product
Labeling: is part of a product which carries different information about the product. The
essence of label is expository by nature because it expresses some features of the product
such as ingredients, weight measure, use, warning, performance and the like and sometimes
it also includes advertising messages.
A label may be part of a package or it may be a tag attached directly to the product.
Typically, there are three kinds of labels:
1. Brand label:-simply the brand alone applied to the product or the package
2. Grade label:-a label which identifies the quality with a latter, number or word
3. Descriptive label:-it gives objective information about the use, construction, care,
performance or other features of the product.

CHAPTER 6
PRICING PRODUCTS
 Explain the meaning of price and pricing
 Identify the factors affecting pricing decisions
 Use the different pricing approaches
 Discuss pricing strategies and policies

6.1 Meaning of Price
Price is the amount of money charged for a product or service. Price is the sum of all the values
that consumers exchange for the benefits of having or using the product or service.
Price is the only element in the marketing mix that produces revenue; the other elements produce
costs. Price is also one of the most flexible elements of the marketing mix. Unlike product
feature and channel commitments, price can be change quickly.
6.2 Factors Affecting Pricing Decisions
A company‘s pricing decisions are affected by both internal company factors and external
environmental factors.
Internal factors affecting pricing decisions
Firms have to consider the internal factors in setting their pricing policy. Factors include the
company‘s marketing objectives, marketing mix strategy, costs and organizations.
I. Marketing objectives
A firm may have various objectives and pricing contributions. And hence, the clearer a firm is
about its objectives, the easier it is to set price. A company can pursue its various objectives
through its pricing: survival, current profit maximization, market share leadership and product
quality leadership.
Non-profit and public organizations may adopt a number of other pricing objectives
 A university aims for partial cost recovery.
 A non-profit hospital may aim for full cost recovery in its pricing
 A social service agency may set a social price geared to the varying income situation of
different clients.

ii. Marketing Mix Strategy
Price is only one of the marketing mix tools that a company uses to achieve its marketing
objectives price decision must be coordinated with product design, distribution, and promotion
decisions to form a consistent and effective marketing programs. Decisions made for other
marketing mix variables may affect pricing decision. Thus, the marketers must consider total
marketing mix when setting prices. If the product is positioned on non-price factors, then
decision about quality, promotion and distribution will strongly affect decision made about the
other marketing mix elements.
iii. Costs
Costs set the floor for the price that the company can charge for its product. Company wants to
charge a price that both covers all its costs for producing, distribution and selling the product and
delivers a fair rate of return for its effort and risk. A company‘s costs take two forms, fixed and
variable costs. Fixed costs (overhead) are costs that do not vary with production or sales level,
whereas variable costs vary directly with the level of production.
iv. Organizational considerations
Management must decide who within the organization should set prices. Companies handle
pricing in a variety of ways. In small companies, prices often are set by top management rather
than by the marketing or sales departments. In large companies, pricing typically is handled by
divisional or product line managers. In industrial markets, sales people may be allowed to
negotiate with customers within certain ranges. Even so, top management sets the pricing
objectives and policies, and it often approves the prices proposed by lower-level management or
sales people.
External factors affecting pricing decisions
External factors that affect pricing decisions include the nature of the market and demand,
competition and other environmental elements.
I. The Market and Demand
The seller‘s pricing freedom varies with different types of markets. Economists recognize four
types of markets, each presenting a different pricing challenge.
Pure competition: Under pure competition the market consists of many buyers and sellers trade
in a uniform commodity (homogenous product). No single buyer or a seller has much effect on
the going market price. A seller can‘t charge more or less than the going price.

Monopolistic competition: Under monopolistic competition the market consists of many buyer
and sellers who trade over a range of prices rather than a single market price. A range of prices
occurs because sellers can differentiate their offers to buyers. Either the physical product can be
varied in quality, features, or style or the accompanying service can be varied.
Oligopolistic competition: products are either uniform or differentiated. Under oligopolistic

competition, the market consists of few sellers who are highly sensitive to each other‘s pricing
and marketing strategies. If the compa ny cut its price by some percentage, buyers will
quickly switch to this company. In contrast, if an obligation raises its price, its competitors
might not follow this lead.
Pure monopoly: In a pure monopoly the market consists of one seller. The seller maybe a
government monopoly, a private regulated monopoly, or a private non-regulated monopoly.
Pricing is handled differently in each case. A government monopoly can pursue a variety of
pricing objectives. It may set a price below cost because the product is important to buyers who
cannot afford to pay full cost or, the price might be set either to cover costs or to produce good
revenue. It can even be set quite high to slow down consumption. In a regulated monopoly the
government permits the company to set rates that will yield a fair return? Non-regulated
monopolies are free to set price at what the market will bear.
II. Competitors’ Costs, Prices and Offers
Another external factor affecting the company‘s pricing decisions is competitors‘ costs, and
price and possible competitors‘ reactions to the company‘s pricing moves. The company needs
to benchmark its costs against its competitors‘ costs to learn whether it is operating at a cost
advantage or disadvantage.
The company also needs to learn the price and quality of competitors‘ offers; it can use them as a
starting point for its own pricing. If the firm‘s offer is similar to a major competitor‘s offer, then
the firm will have to price close to the competitor or lose sales. If the firm‘s offer is superior, the
firm can charge more than the competitor. The firm must be aware, however, the competitors
might change their price in response to the firm‘s price.
iii. Other external factor
Economic conditions: can have a strong impact on the firm‘s pricing strategies. Economic
factors such as boom or recession, inflation and interest rates affect pricing decision because
they affect both the costs of producing a product and consumer perceptions of the product‘s price
and value.
Resellers: the company should set prices that give resellers a fair profit, encourage their supports
and help them to sell the product effectively.

Government price decision also affects the p rice if government controlled through enactment of
legislation.
6.3 Pricing Objectives
The company first decides where it wants to position its market offering. The clearer a firm's
objectives, the easier it is to set price. A company can pursue any of five major objectives
through pricing: survival, maximum current profit, maximum market share, maximum market
skimming, or product-quality leadership.
 Survival: Companies pursue survival as their major objective if they are plagued with
overcapacity, intense competition, or changing consumer wants. As long as prices cover
variable costs and some fixed costs, the company stays in business. Survival is a short-
run objective; in the long run, the firm must learn how to add value or face extinction.
 Maximum Current Profit: Many companies try to set a price that will maximize
current profits. They estimate the demand and costs associated with alternative prices
and choose the price that produces maximum current profit, cash flow, or rate of return
on investment. This strategy assumes that the firm has knowledge of its demand and cost
functions; in reality, these are difficult to estimate. In emphasizing current performance,
the company may sacrifice long-run performance by ignoring the effects of other
marketing-mix variables, competitors' reactions, and legal restraints on price.
 Maximum Market Share: Some companies want to maximize their market share. They
believe that a higher sales volume will lead to lower unit costs and higher long-run profit.
They set the lowest price, assuming the market is price sensitive.
The following conditions favor setting a low price: (1) The market is highly price sensitive, and
a low price stimulates market growth; (2) production and distribution costs fall with accumulated
production experience; and (3) a low price discourages actual and potential competition.
 Maximum Market Skimming: Companies unveiling a new technology favor setting

high prices to maximize market skimming. Sony is a frequent practitioner of market-
skimming pricing, where prices start high and are slowly lowered over time.
Market skimming makes sense under the following conditions: (1) A sufficient number of buyers
have a high current demand; (2) the unit costs of producing a small volume are not so high that
they cancel the advantage of charging what the traffic will bear; (3) the high initial price does not
attract more competitors to the market; (4) the high price communicates the image of a superior
product.
 Quality Leadership: A company might aim to be the product-quality leader in the

market. Many brands strive to be "affordable luxuries"—products or services
characterized by high levels of perceived quality, taste, and status with a price just high

enough not to be out of consumers' reach. Brands such as Starbucks coffee, Aveda
shampoo, Victoria's Secret lingerie, BMW cars, and Viking ranges have been able to
position themselves as quality leaders in their categories, combining quality, luxury, and
premium prices with an intensely loyal customer base.
6.4 General Approach of Pricing
Companies set prices by selecting a general pricing approach that includes one or more of these
three considerations. The price method will then lead to a specific price. We will examine the
following approaches:
 Cost based pricing
 The buyer based approach (perceived value pricing)
 The competition based approach (going rate and sealed bid pricing)
A. Cost Based Pricing
I-Cost Plus Pricing (Markup Pricing)
The most elementary/simplest/ pricing method is to add a standard markup to the cost of the
product.
B. Value Based pricing /Buyer-Based pricing
Company sets its target price based on customer perceptions of the product value rather than on
its cost. The targeted value and price then drive decisions about product design and what costs
can be incurred. As a result, pricing begins with analyzing consumer needs and value
perceptions, and price is set to match consumers‘ perceived value.
C. Competition Based Pricing- There are two forms of competition based pricing
 Going rate pricing: Setting price based largely on following competitors‘ price rather
than on company costs or demand. The firm might charge the same, more, or less than its
major competitors.
 Sealed- Bid pricing: Setting price based on how the firm thinks competitors will price
rather than on its own costs or demand. It used when a company bids for job. The firm
wants to win a contract, and winning the contract requires pricing less than other firms.
6.5 New-Product Pricing Strategies

Pricing strategies usually change as the product passes through its life cycle. The introductory
stage is especially challenging. Companies bringing out a new product face the challenge of

setting prices for the first time. They can choose between two broad strategies: market-skimming
pricing and market penetration pricing.
a) Market-Skimming Pricing
Many companies that invent new products initially set high prices to "skim" revenues layer by
layer from the market. Intel is a prime user of this strategy, called market-skimming pricing.
Market skimming makes sense only under certain conditions. First, the product's quality and
image must support its higher price, and enough buyers must want the product at that price.
Second, the costs of producing a smaller volume cannot be so high that they cancel the
advantage of charging more. Finally, competitors should not be able to enter the market easily
and undercut the high price.
b) Market-Penetration Pricing
Rather than setting a high initial price to skim off small but profitable market segments, some
companies use market-penetration pricing. They set a low initial price in order to penetrate the
market quickly and deeply—to attract a large number of buyers quickly and win a large market
share. The high sales volume results in falling costs, allowing the company to cut its price even
further. Several conditions must be met for this low-price strategy to work. First, the market must
be highly price sensitive so that a low price produces more market growth. Second, production
and distribution costs must fall as sales volume increases. Finally, the low price must help keep
out the competition, and the penetration price must maintain its low-price position—otherwise,
the price advantage may be only temporary.
6.6 Price-Adjustment Strategies

Companies usually adjust their basic prices to account for various customer differences and
changing situations. Fig summarizes six price-adjustment strategies: discount and allowance
pricing, segmented pricing, psychological pricing, promotional pricing, geographical pricing, and
international pricing.
a. Discount and Allowance Pricing
Most companies adjust their basic price to reward customers for certain responses, such as early
payment of bills, volume purchases, and off-season buying. These price adjustments—called
discounts and allowances—can take many forms.
A cash discount is a price reduction to buyers who pay their bills promptly. A typical example is
"2/10, net 30," which means that although payment is due within 30 days, the buyer can deduct 2
percent if the bill is paid within 10 days. The discount must be granted to all buyers meeting
these terms. Such discounts are customary in many industries and help to improve the sellers'
cash situation and reduce bad debts and credit collection costs.
A quantity discount is a price reduction to buyers who buy large volumes. A typical example
might be "Rs10 per unit for less than 100 units, Rs9 per unit for 100 or more units." By law,
quantity discounts must be offered equally to all customers and must not exceed the seller's cost
savings associated with selling large quantities. These savings include lower selling, inventory,
and transportation expenses. Discounts provide an incentive to the customer to buy more from
one given seller, rather than from many different sources.

A functional discount (also called a trade discount) is offered by the seller to trade channel
members who perform certain functions, such as selling, storing, and record keeping.
Manufacturers may offer different functional discounts to different trade channels because of the
varying services they perform, but manufacturers must offer the same functional discounts
within each trade channel.
A seasonal discount is a price reduction to buyers who buy merchandise or services out of
season. For example, lawn and garden equipment manufacturers offer seasonal discounts to
retailers during the fall and winter months to encourage early ordering in anticipation of the
heavy spring and summer selling seasons. Hotels, motels, and airlines will offer seasonal
discounts in their slower selling periods. Seasonal discounts allow the seller to keep production
steady during an entire year.
Allowances are another type of reduction from the list price. For example, trade-in allowances
are price reductions given for turning in an old item when buying a new one. Trade-in
allowances are most common in the automobile industry but are also given for other durable
goods. Promotional allowances are payments or price reductions to reward dealers for
participating in advertising and sales support programs.
B, Segmented Pricing
Companies will often adjust their basic prices to allow for differences in customers, products,
and locations. In segmented pricing, the company sells a product or service at two or more
prices, even though the difference in prices is not based on differences in costs.
Segmented pricing takes several forms. Under customer-segment pricing, different customers
pay different prices for the same product or service. Museums, for example, will charge a lower
admission for students and senior citizens. Under product-form pricing, different versions of the
product are priced differently but not according to differences in their costs. Using location
pricing, a company charges different prices for different locations, even though the cost of
offering at each location is the same. For instance, theaters vary their seat prices because of
audience preferences for certain locations. Finally, using time pricing, a firm varies its price by
the season, the month, the day, and even the hour. Public utilities vary their prices to commercial
users by time of day and weekend versus weekday. The telephone company offers lower off-
peak charges, and resorts give seasonal discounts. For segmented pricing to be an effective
strategy, certain conditions must exist. The market must be segmentable, and the segments must
show different degrees of demand. Members of the segment paying the lower price should not be
able to turn around and resell the product to the segment paying the higher price. Competitors
should not be able to undersell the firm in the segment being charged the higher price. Nor
should the costs of segmenting and watching the market exceed the extra revenue obtained from
the price difference. Of course, the segmented pricing must also be legal. Most importantly,
segmented prices should reflect real differences in customers' perceived value. Otherwise, in the
long run, the practice will lead to customer resentment and ill will.
c. Psychological Pricing
Price says something about the product. For example, many consumers use price to judge
quality.

An Rs1000 bottle of perfume may contain only Rs300 worth of scent, but some people are
willing to pay the Rs 1000 because this price indicates something special. In using psychological
pricing, sellers consider the psychology of prices and not simply the economics. For example,
one study of the relationship between price and quality perceptions of cars found that consumers
perceive higher-priced cars as having higher quality. By the same token, higher-quality cars are
perceived to be even higher priced than they actually are. When consumers can judge the quality
of a product by examining it or by calling on past experience with it, they use price less to judge
quality. When consumers cannot judge quality because they lack the information or skill, price
becomes an important quality signal: Another aspect of psychological pricing is reference
pricing—prices that buyers carry in their minds and refer to when looking at a given product.
The reference price might be formed by noting current prices, remembering past prices, or
assessing the buying situation. Sellers can influence or use these consumers' reference prices
when setting price. For example, a company could display its product next to more expensive
ones in order to imply that it belongs in the same class. Department stores often sell women's
clothing in separate departments differentiated by price: Clothing found in the more expensive
department is assumed to be of better quality. Companies can also influence consumers'
reference prices by stating high manufacturer's suggested prices, by indicating that the product
was originally priced much higher, or by pointing to a competitor's higher price.
d. Promotional pricing,
Companies will temporarily price their products below list price and sometimes even below cost.
Promotional pricing takes several forms. Supermarkets and department stores will price a few
products as loss leaders to attract customers to the store in the hope that they will buy other items
at normal markups. Sellers will also use special-event pricing in certain seasons to draw more
customers. Manufacturers will sometimes offer cash rebates to consumers who buy the product
from dealers within a specified time; the manufacturer sends the rebate directly to the customer.
Rebates have been popular with automakers and producers of durable goods and small
appliances, but they are also used with consumer-packaged goods. Some manufacturers offer
low-interest financing, longer warranties, or free maintenance to reduce the consumer's "price."
This practice has recently become a favorite of the auto industry. Or, the seller may simply offer
discounts from normal prices to increase sales and reduce inventories. Promotional pricing,
however, can have adverse effects. Used too frequently and copied by competitors, price
promotions can create "deal-prone" customers who wait until brands go on sale before buying
them. Or, constantly reduced prices can erode a brand's value in the eyes of customers. Marketers
sometimes use price promotions as a quick fix instead of sweating through the difficult process
of developing effective longer-term strategies for building their brands. In fact, one observer
notes that price promotions can be downright addicting to both the company and the customer.
The point is that promotional pricing can be an effective means of generating sales in certain
circumstances but can be damaging if taken as a steady diet.
e. Geographical Pricing
A company also must decide how to price its products for customers located in different parts of
the country or world. Should the company take risk of losing the business of more distant
customers by charging them higher prices to cover the higher shipping costs? Or should the

company charge all customers the same prices regardless of location? Because each customer
picks up its own cost, supporters of FOB pricing feel that this is the fairest way to assess freight
charges.
The disadvantage, however, is that Peerless will be a high-cost firm to distant customers?
Uniform-delivered pricing is the opposite of FOB pricing. Here, the company charges the same
price plus freight to all customers, regardless of their location. The freight charge is set at the
average freight cost. Other advantages of uniform-delivered pricing are that it is fairly easy to
administer and it lets the firm advertise its price nationally. Zone pricing falls between FOB-
origin pricing and uniform-delivered pricing. The company sets up two or more zones. All
customers within a given zone pay a single total price; the more distant the zone, the higher the
price. Using base point pricing, the seller selects a given city as a "basing point" and charges all
customers the freight cost from that city to the customer location, regardless of the city from
which the goods are actually shipped. If all sellers used the same basing-point city, delivered
prices would be the same for all customers and price competition would be eliminated.
Industries such as sugar, cement, steel, and automobiles used basing-point pricing for years, but
this method has become less popular today. Some companies set up multiple basing points to
create more flexibility: They quote freight charges from the basing-point city nearest to the
customer. Finally, the seller who is anxious to do business with a certain customer or
geographical area might use freight-absorption pricing. Using this strategy, the seller absorbs all
or part of the actual freight charges in order to get the desired business. The seller might reason
that if it can get more business, its average costs will fall and more than compensate for its extra
freight cost. Freightabsorption pricing is used for market penetration and to hold on to
increasingly competitive markets.
f. International Pricing
Companies that market their products internationally must decide what prices to charge in the
different countries in which they operate. In some cases, a company can set a uniform worldwide
price. The price that a company should charge in a specific country depends on many factors,
including economic conditions, competitive situations, laws and regulations, and development of
the wholesaling and retailing system. Consumer perceptions and preferences also may vary from
country to country, calling for different prices. Or the company may have different marketing
objectives in various world markets, which require changes in pricing strategy. Costs play an
important role in setting international prices. Travelers abroad are often surprised to find that
goods that are relatively inexpensive at home may carry outrageously higher price tags in other
countries. In some cases, such price escalation may result from differences in selling strategies or
market conditions. In most instances, however, it is simply a result of the higher costs of selling
in foreign markets—the additional costs of modifying the product, higher shipping and insurance
costs, import tariffs and taxes, costs associated with exchange-rate fluctuations, and higher
channel and physical distribution costs.
6.7 Product Mix Pricing Strategies

The strategy for setting a product's price often has to be changed when the product is part of a
product mix. In this case, the firm looks for a set of prices that maximizes the profits on the total

product mix. Pricing is difficult because the various products have related demand and costs and
face different degrees of competition. We now take a closer look at the five product mix pricing
situations
a) Product Line Pricing
Companies usually develop product lines rather than single products. In product line pricing,
management must decide on the price steps to set between the various products in a line. The
price steps should take into account cost differences between the products in the line, customer
evaluations of their different features, and competitors' prices. In many industries, sellers use
well-established price points for the products in their line. The seller's task is to establish
perceived quality differences that support the price differences.
b) Optional-Product Pricing
Many companies use optional-product pricing—offering to sell optional or accessory products
along with their main product. For example, a car buyer may choose to order power windows,
cruise control, and a CD changer. Pricing these options is a sticky problem. Automobile
companies have to decide which items to include in the base price and which to offer as options.
Until recent years, the economy model was stripped of so many comforts and conveniences that
most buyers rejected it.
c) Captive-Product Pricing
Companies that make products that must be used along with a main product are using
captiveproduct pricing. Examples of captive products are razor blades, camera film, video
games, and computer software. Producers of the main products (razors, cameras, video game
consoles, and mcomputers) often price them low and set high markups on the supplies. Thus,
camera manufactures price its cameras low because they make its money on the film it sells. In
the case of services, this strategy is called two-part pricing. The price of the service is broken
into a fixed fee plus a variable usage rate. Thus, a telephone company charges a monthly rate—
the fixed fee—plus charges for calls beyond some minimum number—the variable usage rate.
Amusement parks charge admission plus fees for food, midway attractions, and rides over a
minimum.
d) By-Product Pricing
In producing processed meats, petroleum products, chemicals, and other products, there are often
by-products. If the by-products have no value and if getting rid of them is costly, this will affect
the pricing of the main product.
e) Product Bundle Pricing
Using product bundle pricing, sellers often combine several of their products and offer the
bundle at a reduced price. Thus, theaters and sports teams sell season tickets at less than the cost
of single tickets; hotels sell specially priced packages that include room, meals, and
entertainment; computer makers include attractive software packages with their personal
computers. Price bundling can promote the sales of products consumers might not otherwise buy,
but the combined price must be low enough to get them to buy the bundle.

CHAPTER SEVEN
DISTRIBUTION CHANNEL
 Describe the meaning of distribution channel
 Outline major channels of distribution
 Discuss the factors affecting the choice of distribution channel
7.1 Meaning and Importance of Distribution Channel
Marketing channels are sets of interdependent organizations involved in the process of making
a product or service available for use or consumption. Why would a producer delegate some of
the selling job to intermediaries? Although delegation means relinquishing some control over
how and to whom the products are sold, producers gain several advantages by using channel
intermediaries:
➤ Many producers lack the financial resources to carry out direct marketing.
➤ Direct marketing simply is not feasible for some products.
➤ Producers who do establish their own channels can often earn a greater return by increasing
their investment in their main business. If a company earns a 20 percent rate of return on
manufacturing and only a 10 percent return on retailing, it does not make sense to undertake its
own retailing.
Intermediaries normally achieve superior efficiency in making goods widely available and
accessible to target markets. Through their contacts, experience, specialization, and scale of
operation, these specialists usually offer the firm more than it can achieve on its own. The
discrepancy results from the fact that manufacturers typically produce a large quantity of a
limited variety of goods, whereas consumers usually desire only a limited quantity of a wide
variety of goods.‖
7.2 Channel Functions and Flows
A marketing channel performs the work of moving goods from producers to consumers,
overcoming the time, place, and possession gaps that separate goods and services from those
who need or want them. Members of the marketing channel perform a number of key functions:
➤ They gather information about potential and current customers, competitors, and other actors
and forces in the marketing environment.
➤ They develop and disseminate persuasive communications to stimulate purchasing.
➤ They reach agreement on price and other terms so that transfer of ownership or possession
can be effected.

➤ They place orders with manufacturers.
➤ They acquire the funds to finance inventories at different levels in the marketing channel.
➤ They assume risks connected with carrying out channel work.
➤ They provide for the successive storage and movement of physical products.
➤ They provide for buyers‘ payment of their bills through banks and other financial institutions.
➤ They oversee actual transfer of ownership from one organization or person to another.
Some functions (physical, title, promotion) constitute a forward flow of activity from the
company to the customer; other functions (ordering and payment) constitute a backward flow
from customers to the company. Still others (information, negotiation, finance, and risk taking)
occur in both directions.
7.3 Channel Levels
The producer and the final customer are part of every channel. We will use the number of
intermediary levels to designate the length of a channel.
A zero-level channel (also called a direct-marketing channel) consists of a manufacturer selling

directly to the final customer through Internet selling, door-to-door sales, home parties, mail
order, telemarketing, TV selling, manufacturer-owned stores, and other methods.
A one-level channel contains one selling intermediary, such as a retailer.
A two-level channel contains two intermediaries;
A three-level channel contains three intermediaries.
From the producer‘s point of view, obtaining information about end users and exercising control
becomes more difficult as the number of channel levels increases.
Channels normally describe a forward movement of products. One can also talk about backward
channels, which recycle trash and old or obsolete products no longer used by customers.
7.4 Identifying Major Channel Alternatives
After a firm has examined its customers‘ desired service outputs and has set channel objectives,
the next step is to identify channel alternatives. These are described by
o The types of available intermediaries,

o The number of intermediaries needed, and
o The terms and responsibilities of each channel member.
7.4.1 Types of Intermediaries
Intermediaries known as merchants—such as wholesalers and retailers—buy, take title to, and
resell the merchandise. Agents—brokers, manufacturers‘ representatives and sales agents—
search for customers and may negotiate on the producer‘s behalf but do not take title to the
goods. Facilitators—transportation companies, independent warehouses, banks, and advertising
agencies—assist in the distribution process but neither take title to goods nor negotiate purchases
or sales.
7.4.2 Number of Intermediaries
In deciding how many intermediaries to use, successful companies use one of three strategies:
➤ Exclusive distribution means severely limiting the number of intermediaries. Firms such as
automakers use this approach when they want to maintain control over the service level and
service outputs offered by the resellers. Often it involves exclusive dealing arrangements, in
which the resellers agree not to carry competing brands.
➤ Selective distribution involves the use of more than a few but less than all of the
intermediaries who are willing to carry a particular product. In this way, the producer avoids
dissipating its efforts over too many outlets, and it gains adequate market coverage with more
control and less cost than intensive distribution.
➤ Intensive distribution consists of the manufacturer placing the goods or services in as many
outlets as possible. This strategy is generally used for items such as tobacco products, soap,
snack foods, and gum, products for which the consumer requires a great deal of location
convenience.
7.4.3 Evaluating the Major Alternatives
Once the company has identified its major channel alternatives, it must evaluate each alternative
against appropriate economic, control, and adaptive criteria.
➤ Economic criteria. Each channel alternative will produce a different level of sales and costs,
so producers must estimate the fixed and variable costs of selling different volumes through each
channel. For example, in comparing a company sales force to a manufacturer‘s sales agency, the
producer would estimate the variable cost of commissions paid to representatives and the fixed

cost of rent payments for a sales office. By comparing its costs at different sales levels, the
company can determine which alternative appears to be the most profitable.
➤ Control criteria. Producers must consider how much channel control they require, since they
will have less control over members they do not own, such as outside sales agencies. In seeking
to maximize profits, outside agents may concentrate on customers who buy the most, but not
necessarily of the producer‘s goods. Furthermore, agents might not master the details of every
product they carry.
➤ Adaptive criteria. To develop a channel, the members must make some mutual commitments
for a specified period of time. Yet these commitments invariably lead to a decrease in the
producer‘s ability to respond to a changing marketplace. In a volatile or uncertain environment,
smart producers seek out channel structures and policies that provide high adaptability.
After a company has chosen a channel alternative, it must select, train, motivate, and evaluate the
individual intermediaries. Then, because neither the marketing environment nor the product life
cycle remains static, the company must be ready to modify these channel arrangements over
time.
Factors Affecting Choice of Distribution Channels (R/Assignment)

CHAPTER EIGHT
PROMOTION
 Define what promotion is
 Explain the factors affecting the promotion mix
 Describe sales promotion and its objectives
 Identify the possible sales promotion tools
 Describe publicity and its objectives
 Identify the possible publicity tools
 Describe advertising and its objectives
 Discuss the major decisions in advertising
 Describe personal selling and its nature
 Explain the procedures involved in personal selling
8.1. Promoting the Product
Meaning of Promotion: Promotion is a form of corporate communication that uses various

methods to reach a targeted audience with a certain message in order to achieve specific
organizational objectives.
8.1.1. Objectives of Marketing Promotions
 Build awareness and provide information: new products and new companies are often
unknown to a market, which means initial promotional efforts must focus on establishing
an identity.
 Create interest: moving a customer from awareness of a product to making a purchase
can present a significant challenge. The focus on creating messages that convince
customers that a need exist has been the hallmark of marketing for a long time with
promotional appeals targeted at basic human characteristics such as emotions, fears, sex,
and humor.
 Stimulate demand: the right promotion can be drive customers to make a purchase. In the
case of products that a customer has not previously purchased or has not purchased in a
long time, the promotional efforts may be directed at getting the customers to try the
product.
 Reinforce the brand: once a purchase is made, a marketer can use promotion to help build
a strong relationship that can lead to the purchaser becoming a loyal customer.
Selecting promotional tools
A marketer must do the following while planning and sending communications to a target
audience.
1. Identify the audience: the first step in the process of selecting promotional tools is
identifying audiences which may include individuals, groups, special publics or the
general publics.

2. Identify the stage of product life cycle and promotional strategy:
 Introductory: inform
 Growth: persuade differentiate from competitors offerings.
 Maturity: remind
 Decline: cut budget
3. Product characteristics:
 Complexity: the more complex the message the greater the need to use personal
selling.
 Risk: greater risk the need for personal selling.
4. Stage of buying decision: in many case the final response sought is purchase, but
purchase is the result of a long process of consumer decision making. Need to know
where the target audience now stands (in the process), and what state they need to be
moved.
5. Chanel strategies:
Push Vs pull
 Push promotes product only to the next institutions down the marketing channel.
Stress personal selling, can use sales promotions and advertising used in
conjunction.
 Pull promotes directly to consumers, intention is to create a strong consumer
demand, primarily advertising and sales promotion. Since consumers are persuade
to seek products in retail stores, retailers will in turn go to wholesalers etc (use
channels overhead)
8.1.2. Promotion Mix Elements
8.1.2.1.Advertising
Adverting is any paid form of non personal presentation and promotion of ideas, goods, or
services by an identified sponsor. Advertisers include not only business firms but also museums,
charitable organizations, and government agencies that direct messages to target publics.
Advertisings are a cost-effective way to disseminate messages, whether to build brand preference
for Intel computer chips or to educate people about the dangers of drugs.
In developing an advertising program, successful firms start by identifying the target market and
buyer motives. Then they can make five critical decisions, known as the five Ms: Mission: What
are the advertising objectives? Money: How much can be spent? Message: What message should
be sent? Media: What media should be used? Measurement: How should the results be
evaluated?
Use of Advertising
 Stimulate primarily and selective demand: first to introduce products needs to

stimulate primarily demand. Pioneer advertising informs people about the product
(introduction stage of the product lifecycle).

 Offsetting competitors advertising: defensive advertising offsets to lessen the effect of
competitors advertising.
 Making sales person more effective: tries to presale product to buyers by informing
them of uses, features, and benefits encourage them to contact dealers etc.
 Increasing use of products: consumers can consume only so much of a product, this
limits absolute demand. May need to convince the market to use the product in more than
one way.
 Reminding and reinforcing customers: reminder, need to keep company/ product name
at the forefront of consumers‘ minds in the competitive marketplace. Reinforcement
prevents cognitive dissonance.
 Reducing sales fluctuations: increase sales during slow periods will help increase
production efficiency.
Setting the Advertising Objectives

Advertising objectives can be classified according to whether their aim is to inform, persuade, or
remind.
➤ Informative advertising figures heavily in the pioneering stage of a product category, where
the objective is to build primary demand. Thus, DVD makers initially had to inform consumers
of the benefits of this technology.
➤ Persuasive advertising becomes important in the competitive stage, where the objective is to
build selective demand for a particular brand. For example, ChivasRegal attempts to persuade
consumers that it delivers more taste and status than other brands of Scotch whiskey. Some
persuasive advertising is comparative advertising, which explicitly compares two or more
brands.
➤ Reminder advertising is important with mature products. Coca-Cola advertisings are primarily
intended to remind people to purchase Coca-Cola. A related form of advertising is reinforcement
advertising, which seeks to assure current purchasers that they have made the right choice.
Automobile advertisings often depict satisfied customers enjoying special features of their new
car.
The advertising objective should emerge from a thorough analysis of the current marketing
situation. If the product class is mature, the company is the market leader, and brand usage is
low, the proper objective should be to stimulate more usage. If the product class is new, the
company is not the market leader, but the brand is superior to the leader, then the proper
objective is to convince the market of the brand‘s superiority.
8.1.2.2.Sales –Promotion Strategies
Sales promotion, a key ingredient in many marketing campaigns, consists of a diverse collection
of incentive tools, mostly short term, designed to stimulate trial, or quicker or greater purchase,

of particular products or services by consumers or the trade. Whereas advertising offers a reason
to buy, sales promotion offers an incentive to buy. Sales promotion includes tools for consumer
promotion (samples, coupons, cash refund offers, prices off, premiums, prizes, patronage
rewards, free trials, warranties, tie-in promotions, cross-promotions, point-of-purchase displays,
and demonstrations); trade promotion (prices off, advertising and display allowances, and free
goods), and business and sales force promotion (trade shows and conventions, contests for sales
reps, and specialty advertising).
Objectives of sales promotion techniques
Building product awareness: several sales promotion techniques are highly effective in
exposing customers to products for the first time and can serve as key promotional
components in the early stage of new product introduction.
Creating interest: marketers find that sales promotions very effective in creating
interests in a product.
Providing information: generally, sales promotions techniques are designed to move
customers to some actions and are rarely simply information in nature. However, some
sales promotion does offer customers to produce information.
Stimulating demand: next to building initial product awareness, the most important use
of sales promotion is to build demand by convincing customers to make a purchase. Price
reduction can be employed to stimulate sales.
Reinforcing the brand: once customers have made a purchase sales promotion can be
used to both encourage additional purchasing and also as a reward for purchase loyalty.
Sales Promotion techniques
 Samples: Offer of a free amount of a product or service
 Coupons: Certificates offering a stated saving on the purchase of a specific product.
 Cash Refund Offers (rebates): Provide a price reduction after purchase: Consumer
sends a specified ―proof of purchase‖ to the manufacturer who ―refunds‖ part of the
purchase price by mail.
 Price packs (cents-off deals): Promoted on the package or label, these offer savings off
the product‘s regular price.
 Premiums (gifts): Merchandise offered at low or no cost as an incentive to buy a

particular product.
 Prizes (contests, sweepstakes, games): Prizes offer consumers the chance to win cash,
trips, or merchandise as a result of purchasing something. A contest calls for consumers
to submit an entry to be examined by judges who will select the best entries. A

sweepstakes asks consumer‘s to submit their names for a drawing. A game presents
consumers with something every time they buy—bingo numbers, missing letters—that
might help them win a prize.
 Patronage Awards: Values in cash or points given to reward patronage of a certain

seller.
 Free Trials: Inviting prospects to try the product free in the hope that they will buy the
product.
 Product Warranties: Explicit or implicit promises by sellers that the product will
perform as specified or that the seller will fix it or refund the customer‘s money during a
specified period.
 Tie-in Promotions: Two or more brands or companies team up on coupons, refunds, and
contests to increase pulling power.
 Cross-Promotions: Using one brand to advertise another noncompeting brand.
 Point-of-Purchase (POP) Displays and Demonstrations: Displays and demonstrations

that take place at the point of purchase or sale.
8.1.2.3.Public Relation Strategies
Public relation involves the cultivation of favorable relationship for organization and products
with its key publics through the use of variety of communications channels and tools.
Roles of public relations:
Building awareness and a favorable image for a company or client within stories and
articles found in relevant media outlets.
Closely monitoring numerous media channels for public comment about a company and
its products.
Managing crises that threaten company or product image.
Building goodwill among an organization‘s target markets through community. Special
program and events.
Advantages of Public Relation
1. PR is often considered a highly credible form of promotion. One of PR key points of

power rests with helping to establish credibility for a product, company, or persons in the
minds of target customers group by capitalizing on the influence of a third party-the
media.
2. Well structured PR campaign can result in the target market being exposed to more
detailed information than they receive with other forms of promotion. That is, media
sources often provide more space and time for explanation of a product.
3. Depending on the media outlets, a story mentioning a company may be picked up by a
large number of additional media, thus, spreading a single story to many locations.
4. PR objectives can be achieved at very low cost when compared to other promotional
efforts.
Disadvantage of PR
I. Marketers don not have a direct control over whether a message is delivered and where it
is placed for delivery.
II. While other promotional messages are carefully crafted and distributed as written through
a predetermined placement in a media vehicle, public relations generally conveys
information to a member of the news media (e.g. reporter) who then re crafts the
information as part of a news story or feature. Thus, the final message may not be
precisely what the marketer planned.
III. With PR there is always a chance that a well devised news event or release will get
bumped from planned media coverage because of a more critical breaking news story,
such as wars, or serious crime.
Objectives of PR
Building product awareness: when introducing a new product or relaunching an

existing product, marketers can use PR element that generates consumer attention and
awareness through media placement and special events.
Creating interest: whether a PR placement is a short product articles or is included with
other product in round up article, stories in media can help entice a targeted audience to
try the product.
Providing information: PR can be used to provide customers with more in-depth
information about products and services.
Stimulating demand: a positive article in a newspaper, on TV news shows or mentioned
on the Internet, often result in a discernable increases in product sales.
Reinforcing the brand: aid in building a strong image.
PR Tools
 Media relations  Speaking engagements

 Plant tours  Sponsorship
 Newsletters  Employee relationships
 Special events  Community relationships
8.1.2.4.Personal Selling
Personal selling is a promotional method in which one party (for example sales person)
uses skills and techniques for building personal relationship with another party (for
example those involved in a purchase decision) that result in both parties obtaining value.
In most cases then value for the sales person is realized through financial rewards for the
sale while the customer‘s value is realized from the benefits obtained by consuming the
product.

Because selling involves personal contact, these promotional methods often occurs
through face-to-face meetings or via a telephone conversation, through newer
technologies allow contact to take place over the Internet including using video
conferencing or text message (for example online chatting).
Advantages of personal selling
One key advantage of personal selling has over other promotional methods is that it is a
two way form of communication. In selling situation the message (for example
salesperson) can adjust the message as they gain feedback from message receivers (for
example customer). So if a customer does not understand the initial message, the sales
person can make adjustments to address questions or concerns.
The interactive nature of personal selling also makes it the most effective promotional
method for building relationships with customers, particularly in the business-to-business
market. This is especially important for companies that either sell expensive products or
sell lower costs but high volume products that rely heavily on customers making repeat
purchase. Because such purchase may take considerable amount of time to complete and
may involve the input of many people at the purchasing company, sales success often
require the marketer develop and maintain strong relationships with members of the
purchasing company.
The best example is in selling to the business market where, compared to the consumer
market, advertising, public relations and sales promotions are often not well received.
Disadvantages of Personal Selling
Possibly the biggest disadvantage of selling is the degree to which the promotional
method is misunderstood. Most people have had some bad experiences with sales people
who they perceived were overly aggressive or even downright annoying. While there are
certainly many sales people who fall in to this category, the truth is sales people are most
successfully when they focus their efforts on satisfying customers over the long term and
not focusing own their own selfish interest.
A second disadvantage of personal selling is the high cost in maintaining this type of
promotional effort. Costs incurred in personal selling include:
 High cost-per-action: since personal selling involves person-to-person contact,

the money spent to support a sales staff can be steep.
 Training costs: most forms of personal selling require the sales staff be
extensively trained on product knowledge, industry information and selling skills.
 The third advantage is that personal selling is not for everyone.

CHAPTER ONE
AN INTRODUCTION TO CONSUMER BEHAVIOR
DEFINITION
All of us are consumers. We consume things of daily use; we also consume and buy these
products according to our needs, preferences and buying power. These can be consumable
goods, durable goods, specialty goods or, industrial goods.
What we buy, how we buy, where and when we buy, in how much quantity we buy depends on
our perception, self concept, social and cultural background and our age and family cycle, our
attitudes, beliefs, values, motivation, personality, social class and many other factors that are
both internal and external to us. While buying, we also consider whether to buy or not to buy
and, from which source or seller to buy. In some societies, there is a lot of affluence and, these
societies can afford to buy in greater quantities and at shorter intervals. In poor societies, the
consumer can barely meet his barest needs.
Consumer behavior can be defined as the decision-making process and physical activity
involved in acquiring, evaluating, using and disposing of goods and services.
Consumer generally refers to any one engaging in any one or all of the activities stated in our
definition. The traditional viewpoint was to define consumers strictly in terms of economic
goods and services and purchasers of products offered for sale. The view now has been
broadened. It now also holds that monetary change is not essential for the definition of
consumers. Few potential adopters of free services or even philosophic ideas can be
encompassed by this definition.
Sometimes, the goods are bought by the father and the children use it. The children ultimately
become the consumer. A packet of colored crayons bought by the father and used by his
children in school.
The father buys a refrigerator and the user is the entire household. Therefore, we study certain
consumer behavior roles.
Roles Descriptions
Initiator: The individual who determines that certain need or
want is not being fulfilled and purchases a product to
fulfill the need.
Influencer: A person who by some intentional or unintentional word
or action influences the purchase decision.
Buyer: The individual who actually makes the purchase transaction
mostly is the head of the family.
User: The person or persons who consume or use the purchased
product.

1.2: Importance of Studying Consumer Behavior
The most important reason for studying consumer behavior is the role that it plays in our lives.
We spend a lot of time in shops and market places. We talk and discuss with friends about
products and services and get lot of information from T.V. This influences our daily lives.
Consumer decisions are affected by their behavior. Therefore, consumer behavior is said to be
an applied discipline. This leads to the micro perspective and societal perspective.
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 Advertising Managers, Product Designers, Marketing and Sales Managers and so
on.
Societal Perspective 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.
Management is the youngest of sciences and oldest of arts and consumer behavior in
management is a very young discipline. Various scholars and academicians concentrated on it
at a much later stage. It was during the 1950s, that marketing concept developed, and thus the
need to study the behavior of consumers was recognized. Marketing starts with the needs of the
customer and ends with his satisfaction. When everything revolves round the customer then the
study of consumer behavior becomes a necessity. It starts with buying of goods. Goods can be
bought individually, or in groups. Goods can be bought under stress (to satisfy an immediate
need), for comfort and luxury in small quantities or in bulk. For all this, exchange is required.
This exchange is usually between the seller and the buyer. It can also be between consumers.
Consumer behavior is a complex, dynamic, multi-dimensional process, and all marketing
decisions are based on assumptions about consumer behavior.
Applying Consumer Behavior Knowledge
(1) Consumer behavior knowledge is applied in Marketing Management. A sound
understanding of the consumer behavior is essential to the long-term success of any marketing
programmer. It is the corner stone of marketing concept which stress on consumer wants and
needs, target market selection, integrated marketing and profits through the satisfaction of the
consumers.
(2) Consumer behavior is also important in non-profit and social organizations. Such
organizations are govt. agencies, religious organizations, universities and charitable
organizations.
(3) Consumer behavior is applied to improve the performance of government agencies as well.
For instance, the performance of government transportation is poor. It can be improved by
knowing the needs and wants of the consumers, Getting checks from them for their likes or
dislikes. Same can be applied to other organizations like universities and charitable
organizations.

(4) Consumer behavior also helps in marketing of various goods which are in scarcity. People
are made aware that gas, fuel, water and natural resources are in scarcity. Consumers are
encouraged to reduce their consumption of these commodities.
(5) Consumer benefit from the investigation of their own behavior. When the consumer learns
the many variables that affect his behavior, he gets educated and understands better how to
affect his own behavior. What is learnt about consumer behavior also benefit consumer in a
formal sense.
1.3 Model of Consumer Behavior
There are various consumers‘ models which help in the understanding of consumer behavior.
These are listed below. We shall discuss these briefly.
1. Psychological Model
2. Input, Process Output Model—Gandhi: Philip Kotler
1. Psychological Model
Psychologists have been investigating the causes which lead to purchases and decision-
making. This has been answered by Maslow in his hierarchy of needs. The behavior of an
individual at a particular time is determined by his strongest need at that time. This also shows
that needs have a priority. First they satisfy the basic needs and then go on for secondary needs.
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.
5. Self-actualization: Self-fulfillment
4. Ego Needs: Prestige, Status, Success, Self-respect, etc.
3. Social Needs: Affection, Friendship, Belonging, etc.
2. Safety and Security Needs: Protection, Order, Stability, etc.
1. Physiological Needs: Food, Water, Air, Shelter, Sex, etc.
Fig. 1.1 Maslow’s hierarchy of needs
Personality
Need Intention
Purchase
recognition
Firm’s
Post-purchased
Marketing
Product behavior
Effort awareness Interest Evaluation
Perception Motivation
Repeat purchased
Social Interest breakdown
Environment Discontinuation
Fig.1.2 Input, process and output model
Attitude
2. Input, Process and 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.
Need recognition
When one is aware of a want, tension is created and one chooses a product to satisfy his needs.
There is also a possibility that a person may be aware of a product before its need is
recognized. This is indicated by the arrows going both ways from the need to the product and
vice-versa.
Product awareness
Product awareness can be had from advertisement or exposure to different types of media or by
the social circle. The awareness and the need leads to the building of interest. In some cases,
the interest may also breakdown and, the decision process also stops or may be postponed for
the time being.
Evaluation
Evaluation may consist of getting more information about the product and comparing and
contrasting it with other products. This can be done theoretically or by taking a trial. Once the
evaluation is completed, the consumer‘s interest may either build up and he has intentions to
buy, or he may lose interest and the decision process may again stop or be postponed.
Intention
Once there is intention to purchase the product, the consumer goes ahead and acts or purchases
the product. Once the product is purchased, it is used to fulfill the need and, the more the
product is used, the more the consumer becomes aware of the positive and negative points of
the product.
Post-purchase behavior
If, after the purchase and use of the product the customer is satisfied, he is happy and goes in
for repeat purchases or recommends the same to his friends and acquaintances. If, however, the
customer is dissatisfied, he discontinues further purchase of the product and builds a negative
attitude towards it, which may be harmful to the company.
The post-purchase behavior is very important for the marketer and the company because it
leads to proper feedback for improvement and maintaining the quality and features desired by
the product. If the customer is very happy with the purchase, he forms a good impression about
the product and the company.
Buyers Black Box Buyers response

Marketing Other Buyers
Stimuli Stimuli Characteristics Decision Processes 1. Product Choice
Product Economical Culture problem recognition
2. Brand Choice
Price Cultural Social Information search
Personal Evaluation 3. Dealer Choice
Promotion Technological Fig. 20.3 Buyer’s black box model 4. Purchase Timing
Place Political Psychological Decision
Principle of Marketing and consumer behavior Post-purchase Behavior 5. Page 68Amount
Purchase
The above figure shows three stages in terms of stimuli buyer‘s black box and buyer‘s
response.
The consumer gets the input from the marketing effort of the firm (4 Ps) and the other stimuli.
This input is processed in the mind (Black Box), which constitutes the characteristics of the
buyer and the process of decision-making. Once the buyer has decided to buy then, he responds
in terms of his choice of product, brand, dealer, timing and amount.
The post-purchase behavior of being satisfied or dissatisfied is also important, and is shown in
the decision-making process.

CHAPTER TWO
CONSUMER DECISION PROCESSES
After completing this chapter students will be able to understand:
 What is decision
 Levels and types of consumer decision making
 Consumer decision making Process pacifier ladle spatula
2.1: DEFINITION
―A decision is the selection of an action from two or more alternative choices.‖
Everyday we take many decisions and sometimes stopping to think how we make these
decisions and what is involved in its process. The consumer-related models of decision
making are discussed below:
(i) Economic Man Model: Customer is characterized as an Economic MAN and he
makes rational decision.
(ii) Passive Man Model: It is opposite to Economic Man model and describes the
consumer as impulsive and irrational purchasers. They are ready to yield to the tactics of
the consumer. The salesman takes the consumer through 4 stages (AIDA). These are:
Attention
Interest
Desire
Action
(iii) Cognitive Man Model: It portrays the consumer as a thinking problem solver. It
focuses on the process by which consumers seek and evaluate information on selecting
brands and retail outlets. The information seeking is stopped as soon as sufficient
information is received. It develops shortcut decisions. The consumer avoids Information
Load i.e., too much information.
2.2: LEVELS AND TYPES OF CONSUMER DECISION MAKING
(i) Habitual decision-making or routinized response behavior: Here the information

search is low, the risk is low and the involvement is also low. These are products which
are bought with greater frequency like a toothpaste, shaving cream, blades, cosmetics,
etc. There is hardly any dissonance and very limited evaluation.
(ii) Limited decision-making: This is for products which have a higher time, risk and
money involvement. In this, information search takes place and the buyer wants to find
out a number of features, attributes and aspects of the product before finally making a
decision to purchase. The purchase is for items like a TV, computer, a machine, motor
cycle, etc. In this there can be limited dissonance if the product does not perform up to
expectations.
(iii) Extended problem solving: In this category, the risk involved is high; the money
involvement is much more. The goods are not purchased frequently. These involve a lot
of information search and greater physical activity for finding out about the attributes of

the products. These items include a house, a motor car, jewelry or something which is
valued most.
Extended problem solving is carried out in case of
High-priced products
Medical products associated with risk
Automobiles associated with functions
Complex products (computers)
Products associated with one‘s ego or emotions (Clothing, Cosmetics etc.)
When the product is of great interest to the consumer.
It is identified with the norms of the group (all steps shown in Fig. 2.1).
Fig.2.2: A Consumer-Marketer Nexus
2.3 CONSUMERS DECISION MAKING PROCESS
There are five stages in consumer decision making process0926285858:

1. Problem recognition: A consumer recognizes a need to buy a product.
2. Information search: Attempt is made to gain knowledge about the product.
3. Evaluation and alternatives: The products which can fulfill the needs are evaluated in
terms of plus and minus points.
4. Purchase action: The actual purchase is made from store after consideration of a
number of factors.
5. Post-purchase behavior (followed sequentially): This is how a consumer feels after
using the product, i.e., satisfaction or dissatisfaction.
1. PROBLEM RECOGNITION
Problem recognition is a perceived gap between existing and desired consumer position.
Existing consumer position is how one feels presently about the product. Desired position

is his expectation and anticipation about the products. The gap then results in natural
fashion. As the consumers grows financially, physically and psychologically, a perceived
gap is created between the existing and desired position, e.g., growing child first needs a
tricycle, then a bicycle, and then a motor cycle. Marketing stimuli influences the current
or desired state of mind or both.
Problem recognition occurs whenever consumption situations exist. Many situations
prompt a consumer to buy. Some situations are common and can‘t be recalled. Some are
special and can be recalled. This depends on the degree of involvement. Some purchases
are recognized and concluded on the spur of the moment. These are impulse purchases.
Threshold Level: In problem recognition, this refers to the minimum amount of tension,
energy or intensity which is necessary for the feeling or ―need‖ to occur. Tension can be
increased by enhancing peer comparison.
Importance of Problem Recognition (Need Recognition) or Identification of Needs
It is the first stage in decision-making.
Problem recognition explains:
1. Why a buyer buys.
2. Gives definite direction to subsequent purchase behavior.
3. Helps the marketer exert his influence, so that the need is to be recognized. A virtual
circle exists between them (problem recognition and marketers stimuli).
2. INFORMATION SEARCH
Information search starts the moment a need is recognized. It is a deliberate attempt to

gain appropriate knowledge about products. Knowledge of brands and their important
characteristics, and knowledge of stores from where to purchase the goods is gained.
Optimum amount of information is required for making a proper choice. Consumers
gather information, they then understand (perceive) by selecting, organizing and
interpreting it.
Questions Faced by Marketer

1. What are the types of information search, and what are their determinants?
2. What is the appropriate information load that can be handled by customers?
3. How can marketers help facilitate the information search?
4. Which source of information is used by the customer?
Types of Information Search
 Internal search: It is sufficient in case of loyalty decisions and impulsive
purchases. Internal search is also done for routine response behavior and limited
problem solving.
 External Search: It is a mediated, planned and rational pursuit of information for
high involvement purchase decision, i.e., extensive problem solving.

 Passive Search: Low involvement—uses repetitive advertising use T.V.
Emphasize Price Promotion and in-store marketing stimuli.
 Active Information Search: Marketer must vary message content frequently. Use
Print Media. Emphasize advertising and emphasize marketing before customer
enters store.
 Hedonic Search: In this, sensory stimuli dominate. There is ongoing information
search. Personal sources are more important symbols and imagery is most
effective.
 Utilitarian Search: Product attributes are more important for purchase. There is
specific information search. Non-personal sources are more important. Product
information is more effective.
Information Overload
Jacob Jacoby and Associates developed this concept, which cautions marketers against
the popular assumption ―If some information is good, then more information must be
better‖.
Too much information confuses the consumer, and with more information, often poor
decisions are made. Increasing package information adversely affects the ability to
choose best brands.
Sources of Information
(i) Controlled by marketers:
(a) Advertising: Provides about 35 per cent to 50 per cent information sought. It
is the most important sources of information.
(b) In-store promotion: e.g., display prices, danglers, brochures, technical reports,
summaries.
(c) Information on distribution support: Yellow pages.
(d) Package information: Color, design, ingredients and mode of using.
(e) Sales personnel: Consumer durables, furniture, electronic, clothing
indigenous products.
(f) Samples and demonstrations (most important): Create a favorable impact for
marketers.
(ii) Outside marketer’s control:
Personal friends, independent consumer reports, new articles shopping columns.
Some sources are face to face, others are non-personal in nature (advertisement
and publicity, etc.).
 There are many situations which lead to high or low information search.
Factors Leading to High Information Search
1. If one feels that there will be more benefit by undertaking a search—search is high.

2. If there is greater involvement in the product, i.e., a camera bought by a professional
photographer or, a racket chosen by a professional tennis player.
3. If one likes shopping and enjoys it—search is high.
4. If more time is available—high search.
5. If one is mobile and can go from place to place, i.e., his movement is not restricted—
high information search.
6. If one can process the information easily about the product one wants to buy. It leads
to high information search.
7. If many attributes are to be evaluated and one is interested in many attributes and their
mix—high information search.
8. If there is a little product knowledge and experience it leads to high risk. Therefore,
more information search is required.
9. If there is more product differentiation high price is charged.
Factors Leading to Low Information Search
1. If the cost of the information search is high—it leads to low information search.
2. If one relies on his past experience of purchases—low information search.
3. If one is satisfied with existing brands he is using he will go for—low information
search.
4. If there is social pressure of friends and relatives to buy a particular product—low
information search.
5. If one has low confidence in dealing with information or, cannot process much
information— low information search.
Consumers can be classified as:
1. Non-searchers
2. Limited information searchers
3. Extended information searchers
3. EVALUATION OF ALTERNATIVE
Consumers selects one of the several alternatives (brands, dealers, and so on)available to
them.
Cost vs. Benefit Analysis
 Benefits can be (a) Tangible, i.e., lower price preferred style, more quantity, better
quality;
(b) Intangible—reduced risk, greater confidence even providing
enjoyment. It has been observed that 50 per cent of the appliance buyers do little or no
external search as they do not perceive enough benefits from it.
 No search is also done because of the cost incurred. It can be both
Monetary i.e., money used in transportation, lost time, lost wages, lost
opportunities.

Non-Monetary may include psychological and physical cost, frustration cost,
conflict between searches and other activities fatigue, etc.
4. PURCHASE PROCESS
Once the consumer has evaluated the alternative, he or she makes the final decision
transaction. This step is broken down in to three sub-steps. The first step is when the
consumers identified the most preferred. The second sub-step develops purchase intent.
Finally, implementing the purchase.
When a consumer undertakes a search, he comes across various brands and has to choose
from them. Some brands are considered out of the total set of brands available.
We thus have:
Total set: All the brands available in the market.
Awareness set: Brands potential buyer is aware of.
Inept set: Not suitable/rejected.
Considerations set (Evoked set): Brand to be considered.
Choice set: In contention (controversy) with final choice.
Choice: Ultimate choice.
Table 16.2 Sets that lead to choice
5. POST PURCHASE PROCESS

The consumers‘ decision process does not end with the purchase. Rather, the experience
of buying and using the product providing of information that the consumer will use in
future, decision making. The goal of the consumers, decision lies in the consumption, and
consumption occurs during the post purchase phase.
In general, the post purchase process includes four steps;

I/ Decision confirmation
II/ Consumption experience evaluation
III/Satisfaction and Dissatisfaction
IV/Possible Future Response

CHAPTER THRE
CONSUMER NEED AND MOTIVATION
After the completion of this unit, students will be able to:

 Explain the concepts that help to understand motivation.
 Discuss the hierarchy of need and its marketing implications
 Distinguish and discuss the three motivational conflicts
 Discuss consumer involvement
3.1 Introduction
Human needs (consumer needs) are the basis of all modern marketing. Needs are the
essence of the marketing concept. The key to a company‘s survival, profitability, and
growth in a highly competitive marketplace is its ability to identify and satisfy unfulfilled
consumer needs better and sooner than the competition.
Marketers do not create needs, though in some instances they may make consumers more
keenly aware of unfelt needs. Successful marketers define their markets in terms of the
needs they presume to satisfy, not in terms of the products they sell. This is a market-
oriented, rather than a production oriented, approach to marketing. A marketing
orientation focuses on the needs of the buyer; a production orientation focuses on the
needs of the seller. The marketing concept implies that the manufacturer will make only
what it knows people will buy; a production orientation implies that the manufacturer
will try to sell whatever it decides to make.
This chapter discusses basic needs that operate in most people to motivate behavior. It
explores the influence that such needs have on consumption behavior and discuses
consumer involvement to show how marketers should account for these in developing
marketing strategies.
3.2. Motivation as psychological force.
Motivation is the driving force within individuals that impels them to action. This
driving force is produced by a state of tension, which exists as the result of an unfulfilled
need. It occurs when a need is aroused that the consumer wishes to satisfy.
Motivation is an inner drive that reflects goal-directed arousal. In a consumer behavior

context, the result is a desire for a product, service, or experience. It is the drive to satisfy
needs and wants, both physiological and psychological, through the purchase and use of
products and services. Motivation is the reason for behavior.
A motive is a construct representing an unobservable and compels a behavioral response

and provides specific direction to that response. A motive is why an individual does
something.
Motivation in the context of consumers may be best understood with the help of
following concepts:
1. Positive/Negative Motivation
Driving force towards some object or condition is positive motivation. Driving force
away from some object or condition is negative motivation. Some psychologists refer to
positive drives as needs, wants or desires. Negative drives as fears or aversions. Even
though the positive and negative drives seem to differ dramatically in terms of physical
and sometimes emotional activity, they are similar in that they both serve to initiate and
sustain human behavior.
Approach object: is a positive goal towards which the behavior is directed and
Avoidance object is a negative goal from which the behavior is directed away.
2. Rational and Emotional Motivation
Rational Motivation is consumers select goals based upon totally objective criteria such
as size, weight, price or miles per gallon. Emotional Motivation implies the selection of
goals according to personal or subjective criteria (e.g. pride, fear, affection or status)
3.3. Goal
Goals are sought -after results of motivated behavior. All behavior is goal oriented.
Types of Goals
Two types of goals may be differentiated:
 Generic Goals
 Product Specific Goals
Generic Goals include general classes or categories of goals that consumers see as
means to fulfill their needs. If a student tells his parents that he wants to become a doctor,
he has stated a general goal. If he says he wants to get a medical degree from Gondar
Medical College, then he has stated a product specific goal. Marketers are particularly
concerned with product specific goals, that is, the specifically branded products and
services that consumers select for goal fulfillment. Individuals select goals on the basis of
their personal values and they select means and (or behaviors that they believe will help
them achieve their goals).
Goal selection depends upon individuals:

 Personal Experiences
 Physical Capacity
 Prevailing cultural norms and values
 Goal‘s accessibility
3.4. Type and system of need
 Every Individual has needs some are innate others are acquired.
 I. Innate/Primary Needs
 Physiological needs the needs for food, water, air, clothing, shelter and sex. They
are needed to sustain the biological life
 II. Acquired /Secondary Needs
 Needs that we learn in response to our culture or environment. These may
include needs for self-esteem, prestige, affection, power and learning
1. Hierarchy of needs
For many years psychologists interested in human behavior have attempted to develop
exhaustive lists of human needs. Dr. Abraham Maslow, a clinical psychologist,
formulated a widely accepted theory of human motivation based on the notion of
universal hierarchy of human needs. Maslow‘s theory identifies five basic levels of
human needs, which rank in order of importance from lower level (biogenic) need to
higher level (psychogenic) needs. The theory postulates that individuals seek to satisfy
lower level needs before higher level needs emerge. The lowest level of chronically
unsatisfied need that an individual experiences serves to motivate his of her behavior.
When that need is fairly well satisfied, a new (and higher) need emerges that the
individual is motivated to fulfill. The five types of needs are:
 Physiological need: food, water, air, clothing , shelter, sex

 Safety and security need: protection, order and stability normalcy in daily life
 Social need: affection and acceptance as part of a family or group
 ego: self-respect and the respect of others; the need to feel competent, confident,
important, and appreciated
 Self-actualization: the need to realize one‘s own potential, to achieve dreams and
ambitions
Self-actualization
Ego need
Social need
Safety and security need
Physiological need
Fig3.1 Maslow’s Hierarchy of needs

Marketing implication of Need hierarchy
The hierarchy offers a highly useful framework for marketers trying to develop
appropriate advertising appeals for their products. It is adaptable in two ways: First, it
enables marketers to focus their advertising appeals on a need level that is likely to be
shared by a large segment of the target audience; second, it facilitates product positioning
or repositioning.
Maslow‘s need hierarchy is readily adaptable to market segmentation and the

development of advertising appeal because there are consumer goods designed to satisfy
each of the need levels and because most needs are shared by large segments of
consumers. For example, individuals buy health foods, medicines, and low-fat products
to satisfy physiological needs. They buy insurance, preventive medical services, and
home security systems to satisfy safety and security needs. Almost all personal care and
grooming products (example, cosmetics, mouth washes, shaving creams), as well as most
clothes, are bought to satisfy social needs. High-tech products such as elaborate sound
systems and luxury products (example, furs, big cars, or expensive furniture) are often
bought to fulfill ego and esteem needs. Post graduate colleges education; hobby related
products, exotic and physically challenging adventure trips are sold as ways of achieving
self-fulfillment. The need hierarchy is often used as the basis for market segmentation
with specific advertising appeals directed to one or more need segment levels.
Advertiser may use the need hierarchy for positioning products- that is, deciding how
the product should be perceived by prospective consumers. The key to positioning is to
find a niche-an unsatisfied need- that is not occupied by a competing product or brand.
The need hierarchy is a very versatile tool for developing positioning strategies because
different appeals for the same product can be based on different needs included in this
framework. For example, many ads for soft drinks stress social appeal by showing a
group of young people enjoying themselves and the advertised product; others stress
refreshment ( a physiological need); still others may focus on low caloric content ( thus
indirectly appealing to the ego need).
2. A trio of needs
Some psychologists believe in the existence of a trio of basic needs: the needs for
power, for affiliation, and for achievement. These needs can each be subsumed within
Maslow‘s need hierarchy; considered individually; however, each has a unique relevance
to consumer motivation.

Power
The power need relates to an individual‘s desire to control his or her environment. It
includes the need to control other persons and various objects. This need appears to be
closely related to the ego need, in that many individuals experience increased self-esteem
when they exercise power over objects or people.
Affiliation
Affiliation is a well known and well researched social motive that has far reaching
influence on consumer behavior. The affiliation need suggests that behavior is strongly
influenced by the desire for friendship, for acceptance, for belonging. People with high
affiliation needs tend to be socially dependent on others. They often select goods they
feel will meet with the approval of friends. Teenagers who hang out at malls or techies
who congregate at computer shows often do so more for the satisfaction of being with
others than for making a purchase. The affiliation need is very similar to Maslow‘s social
need.
Achievement
Individuals with a strong need for achievement often regard personal accomplishment as
an end in itself. The achievement need is closely related to both egoistic need and the
self-actualization need. People with a high need for achievement tend to be more self-
confident, enjoy taking calculated risks, actively research their environments, and value
feedback. Monetary rewards provide an important type of feedback as to how they are
doing. People with high achievement needs prefer situations in which they can take
personal responsibility for finding solutions. High achievement is a useful promotional
strategy for many products and services targeted to educated and affluent consumers.
In summary, individuals with specific psychological needs tend to be receptive to

advertising appeals directed at those needs. They also to be receptive to certain kind of
products. Thus, knowledge of motivational theory provides marketers with key bases for
segmenting markets and developing promotional strategies.
3. Sheth’s Five Needs
Sheth had identified five levels of needs, which we are mentioning below, with some
examples
 Functional needs
Those needs which satisfy a physical/functional purpose, e.g. soap
 Social needs
Needs that Allow identification with desired group, e.g. Logos
 Emotional needs
Those needs which, create appropriate emotions, e.g. joy on getting gift
 Epistemic needs
The Need for knowledge/information, e.g. newspaper
 Situational needs
The needs, which are contingent on time/place, e.g emergency repairs
4. Henry Murray delineates a set of 20 psychogenic needs that result in specific
behaviors. This needs include such dimensions as autonomy (being independent),
dependence (defending the self against criticism) and play (engaging in pleasurable
activities).
3.4 Motivational conflicts
A purchase decision may involve more than source of motivation. Consumers often find
themselves in situations where different motives, both positive and negative conflicts
with one another. Since marketers are attempting to satisfy consumers‘ needs, they can
also be helpful by providing possible solutions to these dilemmas. There are three
conflicts can occur: approach-approach, approach-avoidance, and avoidance-avoidance.
1. Approach-approach
A consumer who must choose between two attractive alternatives faces approach-
approach conflict. The more equal this attraction, the greater the conflict. A student might
be torn between going home for holidays or going on a skiing trip with friends. A
consumer who recently received a large cash gift for graduation might be torn between a
trip to Hawaii and a new mountain bike.
2. Approach-avoidance
A consumer facing a purchase choice with both positive and negative consequences
confronts approach-avoidance conflict. A person who is concerned about gaining weight
yet likes snack foods faces this type of problem. He or she may want the taste and
emotional satisfaction associated with the snacks (approach) but does not want to gain
weight (avoidance).
3. Avoidance-avoidance
A choice involving only undesirable outcome produces avoidance-avoidance conflict.

When consumer‘s old washing machine, or pay to have the old one repaired, or go
without one. The availability of credit is one way of reducing this motivational conflict.
Advertisements emphasizing the importance of regular maintenance for cars, such as oil
filter changes, also use this type of motive conflict: ‗pay me now, or pay me (more)
later.‖

CHAPTER FOUR
4. PERSONALITY AND CONSUMER BEHAVIOR
 Define the term personality
 Discuss the three distinct characteristics that are important to study personality.
 Define and discuss about brand personality.
4.1 What is personality?
The study of personality has been approached by theorist in a variety of ways. Some have
emphasized the dual influence of heredity (looks) and early childhood Experience On
personality development; others have stressed broader social and environmental
influences and the fact that personalities develop continuously over time. Some theorist
prefer to view personality as a unified whole; others focus on specific individual traits.
These are some of the considerations while trying to define the personality.
Personality may be defined as inner psychological characteristics that both determine and
reflect how a person responds to his/her environment.
Inner Characteristics are distinguishing characteristics of an individual. They may
include: attributes, traits and mannerisms. Personality is likely to influence an
individual‘s product choices. Identification of personality characteristics associated with
consumer behavior has proven to be highly useful in the development of a firm‘s market
segmentation strategies.
Personality refers to a person‘s unique psychological makeup and how it consistently
influences the way a person responds to his or her environment.
Personality is usually described in terms of traits such as self-confidence, dominance,
sociability, autonomy, defensiveness, adaptability, and aggressiveness.
Personality can be useful in analyzing consumer behavior for certain products and brand
choices. For example, coffee marketers have discovered that heavy coffee drinkers tend
to be high on sociability.
The three distinct properties in the study of personality are:
1. Personality reflects individual differences: no two individuals are exactly alike.
Nevertheless, many individuals to tend to be similar in terms of some personality
characters. If each people were different in all aspects, it would be impossible to
group consumers in to segments.
2. Personality is consistent and enduring: a mother who comments ―the child was
stubborn from the day he was born‖ supports the contention that personality has both
consistency and endurance.
3. Personality can change: personality may change under certain circumstances. It may
be alerted by major life events such as birth of a child, death of a loved one, divorce,
major career promotion. Personality changed not only in response to abrupt events,
but also as part of a gradual maturing process.
4.2. Theories of Personality (R/assignment)

CHAPTER FIVE
5. Consumer Perception
5.1 Introduction to consumer perception.
 Define perception
 Identify the various elements in perception
 Explain the perceptual process
 Explain the perceptual organization
Individuals act and react on the basis of their perceptions, not on the basis of objective
reality. For each individual, reality is a totally personal phenomenon, based on that
person‘s needs, wants, values, and personal experiences. Thus, to the marketer,
consumers‘ perceptions are much more important than their knowledge of objective
reality. For if on thinks about it, it‘s not what actually so is, but what consumers think is
so, that affects their actions, their buying habits, their leisure habits, and so forth. And,
because individuals make decisions and take actions based on what they perceive to be
reality, it is important that marketers understand the whole notion of perception and its
related concepts to more readily determine what factors influence consumers to buy. This
unit examines the nature and process, elements of perception and discusses the specific
principles underlying perceptual organization.
First we shall see some words which incorporate in the perception process. These
terminologies are:
 Sensation-it is the immediate and direct response of the sensory organs to stimuli.
 Stimulus – it is any unit of input to any of the senses.
 Sensory receptors- are the human organs (the eyes, ears, nose, mouth and skin)
that receive sensory input.
 Absolute threshold- it is a minimum amount of stimuli that can be detect by
sensory receptor.
 Differential threshold (just noticeable difference)-the ability of sensory system
that can detect the change or difference between two stimuli or the minimum
difference that can be detected between two similar stimuli.
 Subliminal perception- people are stimulated below their level of conscious
awareness; that is, they can perceive stimuli without being consciously aware that
they are doing so.
5.2 Nature of Consumer perception
Perception is the process of selecting, organizing and interpreting information
inputs to produce meaning. This means we chose what information we pay attention to,
organize it and interpret it. Information inputs are the sensations received through sight,
taste, hearing, smell and touch.
Thus we can say that the above definition of perception lays emphasis on certain features:

 Perception is a mental process, whereby an individual selects data or
information from the environment, organizes it and then draws significance or
meaning from it.
 Perception is basically a cognitive or thinking process and individual
activities; emotions, feelings etc. are based on his or her perceptions of their
surroundings or environment.
 Perception being an intellectual and cognitive process will be subjective in
nature.
The key word in the definition of perception is individual. We can say that it is the
process by which an individual selects, organizes and interprets information received
from the environment.
One person might perceive a fast-talking salesperson as aggressive and insincere;
another, as intelligent and helpful. People can emerge with different perceptions of the
same object because of three perceptual processes: selective attention, selective
distortion and selective retention.
 Selective Attention. People are exposed to a tremendous amount of daily stimuli: the
average person may be exposed to over 1500 ads a day. A person cannot possibly
attend to all of these; most stimuli will be screened out. Selective attention means that
marketers have to work hard to attract consumers‘ notice. Select inputs to be exposed
to our awareness. More likely if it is linked to an event, satisfies current needs,
intensity of input changes (sharp price drop).
 Selective Distortion. Even notice stimuli do not always come across in the way the
senders intended. Selective distortion is the tendency to twist information into
personal meanings and interpret information in a way that will fit our preconceptions.
Unfortunately, there is not much that marketers can do about selective distortion.
Advertisers that use comparative advertisements (pitching one product against
another), have to be very careful that consumers do not distort the facts and perceive
that the advertisement was for the competitor.
 Selective retention. People will forget much that they learn but will tend to retain
information that supports their attitudes and beliefs. Because of selective retention,
we are likely to remember good points mentioned about competing products.
Selective retention explains why marketers use drama and repetition in sending
messages to their target market. Remember inputs that support beliefs, forgets
those that don‘t.
Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30
minutes-60% of purchases are unplanned Exposed to 1,500 advertisements per day. Can‘t
be expected to be aware of all these inputs, and certainly will not retain many.
5.3 Process of consumer perception

Information processing is a series of activities by which stimuli are perceived,
transformed into information and stored.
People undergo stages of information processing which is a series of activities by which
stimuli are perceived, transformed into information, and stored. Figure 2-1 illustrates a
useful information processing model having four major steps or stages: exposure,
attention, interpretation and memory. The first three of these constitute perception.
Both perception and memory are extremely selective. Of the massive amount of
information available, an individual can exposed to only a limited amount. Of the
information to which the individual is exposed, only a relatively small percentage is
attended to and passed on to the central processing part of the brain for interpretation.
The meaning assigned to a stimulus is a much or more a function of the individual as it is
the stimulus itself. Further, much of the interpreted information will not be available to
active memory when the individual needs to make a purchase decision.
This selectivity, sometimes, referred to as perceptual defenses, means that individuals are
not passive recipient of marketing messages. Rather, consumers largely determine the
messages they will encounter and notice as well as the meaning they assign them.
Clearly, the marketing manager faces a challenging task when communicating with
consumers.
A. Exposure
Exposure occurs when a stimulus comes within range of our sensory receptor nerves.
Consumers concentrate on some stimuli, are unaware of others, and even go out of their
way to ignore some messages. For an individual to be exposed a stimulus requires only
that the stimulus be placed within the person‘s relevant environment. That is, you have
been exposed to a television commercial if it aired while you were in the room, even if
you were ―not paying attention‖ and did not notice the commercial.
An individual can be exposed to only a minuscule fraction of the available stimuli.
There are now hundreds of television channels, thousands of radio stations,
innumerable magazines, and exponentially increasing number of websites. Yet,
normally watches only one television station at a time, reads one magazine, newspaper,
or book at a time and so forth. What determines which stimuli an individual will be
exposed to? Is it a random process or purposeful?
Most of the stimuli to which individuals are exposed are self-selected. That is, people
deliberately seek out exposure to certain stimuli and avoid others. Generally, people
seek information that they think will help them achieve their goal. These goals may be
immediate or long range. Immediate goals could involve seeking stimuli such as a
television program for amusement or a website to assist in a purchase decision. Long
range goals might involve studying this text in hopes of passing the next exam,
obtaining a degree, becoming a better marketing manager, or all three. An individual‘s
goals and the types of information needed to achieve those goals are a function of that
person‘s existing and desired lifestyle and such short term motive as hunger or
curiosity.

Of course, people are also exposed to a large number of stimuli on a more or less
random basis during their daily activities. While driving, they may hear commercials,
see billboards and display ads, and so on that they did not purposefully seek out.
Exposure is not enough to significantly impact the individual at least not based on a
single trial (certain advertisements, or commercial exposures, are based on extensive
repetition rather than much conscious attention)
B. Attention
Attention refers to the extent to which processing activity is devoted to a particular
stimulus. People are constantly exposed to thousands of items more stimuli than they
can process. The average supermarket has 30,000 individual items. It would take hours
to attend to each of them. Each television network shows 6,000 commercials per week,
and radio stations air many more. Therefore, consumers have to be selective in
attending to marketing as well as other messages. Because the brain‘s capacity to
process information is limited, consumers are selective about what they pay attention
to. The process of perceptual selection means that people attend to only a small portion
of the stimuli to which they are exposed. Consumers practice a form of ―psychic
economy,‖ picking and choosing among stimuli to avoid overwhelming. The stimuli
will get attention depends on two factors:
Personal and stimulus factors

I. Personal factor: personal factors are characteristics of the individual;
Interest and need are the primary personal characteristics that influence attention.
Individuals seek out and examine information relevant to their current needs and interests
this is said to be perceptual vigilance. Thus, an individual contemplating a car is likely
to attend to car related advertisements. The flip side of perceptual vigilance is perceptual
defense. This means that people see what they want to see and do not see what they do
not want to see. If a stimulus is threatening to us in some way, we may not process it or
we distort its meaning so that it‘s more acceptable. For example, a heavy smoker may
block out images of cancer-scarred lungs because these vivid reminder hit a bit too close
to home. Still another factor is adaptation, the degree to which consumers continue to
notice a stimulus over time. The process of adaptation occurs when consumers no longer
pay attention to a stimulus because it is so familiar. A consumer can become ―habituated‖
and require increasingly stronger ―doses‖ of a stimulus for it to be noticed.
II. Stimulus factor
Stimulus factors are physical characteristics of the stimulus itself that play an important
role in determining what gets noticed and what gets ignored. These factors need to be
understood by marketers, who can apply them to their messages and packages to boost
their chances of cutting through the clutter and commanding attention. In general, stimuli
that differ from others around them are more likely to be noticed. This contrast can be
created by several ways.

 Size: large stimuli are more likely to be noticed than the smaller once. Thus, a
large banner ad is more likely to be noticed than a small one.
 Insertion frequency: the number of times the same ad appears in the same issue
of a magazine has an impact similar to ad size.
 Intensity: the intensity of a stimulus operates in the same manner as size
(example, loudness, brightness, length). For instance, the longer a scene in an
advertisement is held on screen, the more likely it is to be noticed and recalled.
Intensity for banner ads is the degree to which one is forced to see the banner ad
in order to see the desired content.
 Color and movement: both color and movement serve to attract attention, with
brightly colored and moving items being noticed. Thus, banner ads with dynamic
animation attract more attention than similar ads without dynamic animation. A
brightly colored package is more apt to receive attention than a dull package.
 Position: position refers to the placement of an object in a person‘s visual field.
Objects placed near the center of the visual field are more likely to be noticed
than those near the edge of the field. This is a primary reason why consumer
goods manufacturers compete fiercely for eye-level space in grocery stores.
Likewise, advertisements on the right hand page receive more attention than those
on the left. The position of text and illustrations within a print ad has a significant
influence on which will be attended to first and how attention each will receive.
The probability of a television commercial being viewed drops sharply as it
moves from being the first to air during a break to the last to air.
 Novelty: Stimuli that appear in unexpected ways or places tend to grab our
attention. One solution has been to put ads in unconventional places, where there
will be less competition for attention. These places include the backs of shopping
carts, walls of tunnels, floors of sports stadiums, and yes even, public restrooms.
C. Interpretation
Interpretation refers to the meaning that we assign to sensory stimuli. Just as people
differ in terms of the stimuli that they perceive the eventual assignment of meaning to
these stimuli various as well. Two people can see or hear the same event, but their
interpretation of it can be different as night and day depending on what they had
expected the stimulus to be. People exercise selectivity as to which stimuli they
perceive, and they organize these stimuli on the basis of certain psychological
principles. The interpretation of stimuli is also uniquely individual; because it is based
on what individual expect to see in light of their previous experiences on the number of
plausible explanations they can envision, and on their motives and interests at the time
of perception.

5.4. Perceptual Organization
People do not experience the numerous stimuli they select from the environment as
separate and discrete sensations; rather, they tend to organize them into groups and
perceive them as unified wholes. Thus, perceived characteristics of even simplest
stimulus are viewed as a function of the whole to which the stimulus appears to belong.
This method of organization simplifies life considerably for the individual.
The specific principles underlying perceptual organization are often referred to, by the
name given the school of psychology that first developed and stressed it Gestalt
psychology (Gestalt in Germen means ―pattern‖ or Configuration.‖). Three of the most
basic principles of perceptual organization are figure and ground, grouping, and
closure.
1. Figure and ground
Stimuli must contrast with their environment in order to be noticed. A sound must be
louder or softer. The simplest visual illustration consists of a figure on a ground (i.e
background). The figure is usually perceived clearly because, in contrast to its ground, it
appears to be well defined, solid, and in the forefront. The ground, however, is usually
perceived as indefinite, hazy, and continuous. Figure is more clearly perceived because it
appears to be dominant; in contrast, ground appears to be subordinate and therefore, less
important.
People have a tendency to organize their perception into figure and ground relationship.
Advertisers have to plan their advertisements carefully to make sure that the stimulus
they want noted is seen as figure and not as ground. The musical background must not
overwhelm the jingle; the background of an advertisement must not detract from the
product. Some print advertisers often silhouette their products against a while background
to make sure that the features they want noted are clearly perceived. Others use reverse
lettering (white letters on a black background) to achieve contrast, however, they must be
careful to avoid the problem of figure-ground reversal. Marketers sometimes make the
mistake of running advertisements that confuse the consumer because there is no clear
indication of which is figure and which is ground.
2. Grouping
Individuals tend to group stimuli automatically so that they form a unified picture or
impression. The perception of stimuli as groups or ―chunks‖ of information, rather than
as discrete bits of information, facilitates their memory and recall. Grouping can be used
advantageously by marketers to imply certain desired meanings in connection with their
products. For example, an advertisement for tea may show a young man and woman
sipping tea in a beautifully appointed room before a blazing hearth. The grouping of
stimuli by proximity leads the consumer to associate the drinking of tea with romance,
fine living and winter warmth.
3. Closure
Individuals have a need for closure. They express this need by organizing their
perceptions so that they form a complete picture. If the pattern of stimuli to which they
are exposed is incomplete, they tend to perceive it nevertheless as complete; that is, they
consciously fill in the missing pieces. Thus, a circle with a section of its periphery
missing invariably is perceived as a circle and not as an arc.
A classic study reported in 1972 found that incomplete tasks are better remembered than
complete tasks. One explanation for this phenomenon is that the person who begins a task
develops a need to complete it. The need for closure has some interesting implications for
marketers. The presentation of an incomplete advertising message ―begs‘ for completion
by consumers, and the very act of completion serves to involve them deeply in the
message itself. In related vein, advertisers have discovered that they can achieve excellent
results by using the soundtrack of a frequently shown television commercial on radio.
Consumers, who are familiar with the TV commercial, perceive the audio parts alone as
incomplete; in their need for completion, they mentally play back the visual content as
well.

Chapter six
Consumer’s Attitudes and belief

 Identify the characteristics of attitude and belief.
 Identify and discuss the simple representation of attitude model
 Identify the strategies of attitude and belief change.
6.1 Introduction
As consumers each of us has a vast number of attitudes towards products, services,

advertisements, internet, etc…Whenever we are asked: Whether we like cable TV or
Direct TV, whether we like or dislike a product. We are being asked to express our
attitudes. Within the domain of Consumer Behavior, an appreciation of prevailing
attitudes has considerable merit for Consumer Psychology. For example there has been
rapid growth in the sales of natural ingredient bath, and other cosmetic products through
out the world. This trend is linked to current popular ―attitude‖. Things natural are good
and things synthetic are bad. In realty this evidence is not based on systematic evidence
that natural products are any safer or better for consumers. To get to the heart of what is
driving the Consumer Behavior attitude research has been used to study a wide range of
topics.
Attitude Research is frequently undertaken to determine whether consumers will accept a

proposed new product idea, to gauge why a firm‘s target audience has not reacted more
favorably to its new product advertisement or to understand how target consumers are
likely to react to a proposed change in the firm‘s packaging design. All marketing
activities are related to the task of impacting the Consumer‘s Attitudes.
Beliefs: cognitive component of consumer attitude.
A consumer belief is psychological association between a product or brand and an
attribute or feature of that product or brand. Belief are cognitive based on knowledge) as
opposed to affect (based on feelings) whether they are true or not. Consumers link certain
products. Accepting them as facts.
Strategies to change consumer beliefs.

 Positioning by product attributes; some marketers aim to make their products
synonymous with performance attributes that make consumers buy.
 Positioning by intangible attributes; product quality, technological leadership, and
value for money are all intangible or nonfunctional factors that consumers
associate with brands.

 Positioning by consumers benefits; a computer with touch-screen entry attract
consumer looking for ease of use.
 Positioning by price; consumer associated particular brand with a particular price
or price range.
 Positioning by application; consumers associate a particular use or application
with different brands.
 Positioning by brand user; related to the concept of ideal self-image is the
association of a particular kind of user with a brand.
6.2 Characteristics of Attitudes
In a consumer behavior context, an attitude is a learned predisposition to behave in a

consistently favorable or unfavorable way with respect to a given object. Each part of this
definition describes an important property of an attitude and is critical to understanding
the role of attitudes in consumer behavior. Following characteristics explain the nature of
attitudes:
 The attitude object
 Attitude are learned predisposition
 Attitudes have consistency
 Attitudes occur within a situation
1. Attitude Object
The word object in our consumer-oriented definition should be interpreted broadly to
include specific consumption or marketing related concepts such as product, product
category, brand, service, possessions, product use, causes or issues, people or
advertisements. In conducting attitude research we tend to be objects specific. For
example if we are interested in learning about three popularly priced brands of watches
our ―object‖ might include: Seiko, Fossil and Casio. If we are examining attitudes
towards major brands of computer printers, our ―object‖ of study may include HP, Dell,
and Epson
2. Attitudes are learned predisposition
There is general agreement that attitudes are learned. This means attitudes relevant to
purchase behavior are formed as a result of direct experience with product, word of
mouth, information acquired from others, exposure to mass media advertising, the
internet and various forms of direct marketing. It is important to remember that attitudes
result from behavior they are not synonymous to behavior, instead they reflect either
favorable or unfavorable evaluation of the attitude object
3. Attitudes have consistency
Attitudes are relatively consistent with the behavior they reflect; however, attitudes are
not necessarily permanent, they do change.
4. Attitudes occur within a situation

Situation means events or circumstances that at a particular point in time influence the
relationship between attitude and behavior. A specific situation may cause individuals to
behave in a way seemingly inconsistent with their behavior. For example if Temesgen
purchases a different brand of toothpaste every time he runs low. Although his brand
switching behavior may seem to reflect a negative attitude or dissatisfaction with the
brands he tries, it actually may be influenced by a specific situation which in this case is
Temesgen‘s wish to economize.
6.3 Attitude Model
Consumer attitudes are a composite of a consumer‘s (1) beliefs about, (2) feelings about,
(3) and behavioral intentions toward some object--within the context of marketing,
usually a brand or retail store. These components are viewed together since they are
highly interdependent and together represent forces that influence how the consumer will
react to the object.
Beliefs
Affect
(Feeling)
Behavioral
intentions
Fig 6.1 A simple representation of attitude model

1. Beliefs. The first component is beliefs. A consumer may hold both positive beliefs
toward an object (e.g., coffee tastes good) as well as negative beliefs (e.g., coffee is easily
spilled and stains papers). In addition, some beliefs may be neutral (coffee is black), and
some may be differ in valance depending on the person or the situation (e.g., coffee is hot
and stimulates--good on a cold morning, but not well on a hot summer evening when one
wants to sleep). Note also that the beliefs that consumers hold need not be accurate (e.g.,
that pork contains little fat), and some beliefs may, upon closer examination, be
contradictory (e.g., that a historical figure was a good person but also owned slaves).
Since a consumer holds many beliefs, it may often be difficult to get down to a bottom
line overall belief about whether an object such as McDonalds is overall good or bad.

2. Affect. Consumers also hold certain feelings toward brands or other objects.
Sometimes these feelings are based on the beliefs (e.g., a person feels nauseated when
thinking about a hamburger because of the tremendous amount of fat it contains), but
there may also be feelings which are relatively independent of beliefs. For example, an
extreme environmentalist may believe that cutting down trees is morally wrong, but may
have positive affect toward Christmas trees because he or she unconsciously associates
these trees with the experience that he or she had at Christmas as a child.
3. Behavioral Intention. The behavioral intention is what the consumer plans to do with
respect to the object (e.g., buy or not buy the brand). As with affect, this is sometimes a
logical consequence of beliefs (or affect), but may sometimes reflect other circumstances-
-e.g., although a consumer does not really like a restaurant, he or she will go there
because it is a hangout for his or her friends.
Attitude-Behavior Consistency. Consumers often do not behave consistently with their

attitudes for several reasons:
 Ability. He or she may be unable to do so. Although junior high school student
likes pick-up trucks and would like to buy one, she may lack a driver‘s license.
 Competing demands for resources. Although the above student would like to buy
a pickup truck on her sixteenth birthday, she would rather have a computer, and
has money for only one of the two.
 Social influence. A student thinks that smoking is really cool, but since his friends
think it‘s disgusting, he does not smoke.
 Measurement problems. Measuring attitudes is difficult. In many situations,
consumers do not consciously set out to enumerate how positively or negatively
they feel about mopeds, and when a market researcher asks them about their
beliefs about mopeds, how important these beliefs are, and their evaluation of the
performance of mopeds with respect to these beliefs, consumers often do not give
very reliable answers. Thus, the consumers may act consistently with their true
attitudes, which were never uncovered because an erroneous measurement was
made.
6.4 Attitude formation
How do people, especially young people form their initial general attitudes towards
clothing they wear, e.g. casual wear, and business attire? How do they form attitudes
towards certain brands of clothing? How do friends and family members come to admire
certain celebrities? Why some attitudes do seem to persist infinitely while others change
fairly often? Our examination of attitude formation is divided into three areas:
 How attitudes are learned?

 Sources of influence on attitude formation.
 Impact of personality on attitude formation
1. How attitudes are learned?

Attitude formation refers to the shift from having no attitude toward an object to having
some attitude toward the object. The shift from no attitude to attitude formation is the
result of learning. Consumers often purchase new products that are associated with a
favorably viewed brand. Their favorable attitude toward the brand is the result of
repeated satisfactions with other products produced by the same company. The behavior
can be explained in terms of classical Conditioning.
Stage 1
Unconditioned Response
Unconditioned Stimulus
(Purchase)
Stage 2
Unconditioned Stimulus
(Favorite brand/company)
Unconditioned Response
(Purchase)
Conditioned Stimulus (new
product by the same
company)
Stage 3 after repeated pairings
Conditioned Stimulus Conditioned Response
(New product) (Purchase)
Attitude Formation without Prior Knowledge

Sometimes consumers purchase a product without prior knowledge or attitude towards it
e.g. the last bottle of aspirin on the gas station min mart.
Consumers Experiments

Sometimes consumers make trial purchases of new brands from product categories in
which they have little personal involvement. If the find the purchased brand to be
satisfactory, they are likely to develop a favorable attitude toward it.
Information about the Products

In situations in which consumers are seek to solve a problem or satisfy a need, they are
likely to form attitudes (either positive or negative) about products on the basis of
information exposure and their own cognition (knowledge and beliefs). The more
information consumers have about a product more likely are they to form attitudes
toward it, either positive or negative. Regardless of available information consumers are
not always ready or willing to process product related information
2. Sources of influence on attitude formation

Formation of attitudes is strongly influenced by consumers‘ personal experience,
influence of family and friends and direct marketing of the companies and mass media.
3. Personality factors
Personality also plays a critical role in attitude formation. For example, individuals with a
high need for cognition (i.e. those who crave information and enjoy thinking) are likely to
form positive attitudes in response to ads or direct mails that are rich in product related
information. On other hand, consumers who are relatively low in need of cognition are
more likely to form positive attitudes in response to ads that features an attractive model
or well known celebrity. In a similar fashion, attitudes toward new product and new
consumption situations are strongly influenced by specific personality characteristics of
consumers.
6.5 Strategies of attitude change
Much of is true about attitude formation is also true about attitude change. Attitude
changes are learned and influenced by personal experience, sources of information, and
personality. Altering consumer attitudes is a key strategic consideration for marketers.
Marketers who are fortunate enough to be market leaders and enjoy a significant amount
of consumer goodwill and loyalty the overriding goal is to fortify the existing positive
attitudes. The objective of the competitor marketers is to change the attitudes of the
customers of the market leaders and win them over.
Attitude Change Strategies available to the marketers include:
 Changing the consumers basic motivational function
 Associating the product with admired group or events
 Resolving two conflicting attitudes
 Changing consumers beliefs about competitor‘s brands
1. Changing the consumers basic motivational function

An effective strategy of changing consumer attitudes towards a product is to make
particular needs prominent. One method of changing motivation is called Functional
Approach. According to functional approach consumers attitudes can be classified in
terms of four functions:
 Utilitarian function
 Ego-Defensive Function
 Value Expressive Function
 Knowledge Function
I. Utilitarian Function
Certain brand attitudes are held because of utility. When a product has been useful and
helpful for us in the past, our attitude towards it tends to be favorable. One way of
changing attitudes in favor of products is by showing people that it can serve a utilitarian
purpose that they may not have considered. Dishwashing detergent bar that also keeps the
skin of hands glowing and leaves its refreshing scent in your hands.
II. Ego-Defensive Function
Most people want to protect their self images from inner feelings of doubt – they want to
replace their uncertainty with a sense of security and personal confidence. Some Ads
acknowledge this need of consumers to increase both their relevance to the consumer and
likelihood of favorable attitude change by offering reassurance to the consumers‘ self
images. For example
 A retailer of fashion clothing stresses in its headline:
-When I believe in myself everything becomes possible
 A lighters manufacturing company countering the trends towards disposable
lighters.
- True love is not disposable
III. Value Expressive Function

Attitudes are an expression of consumers‘ general values, lifestyle and outlook. By
knowing the target consumers‘ attitudes marketers can anticipate their values, lifestyles
or outlook and can reflect these characteristics in their advertising and direct marketing
efforts. For example if consumer segments generally hold a positive attitude towards
owning the latest designer jeans, then their attitudes towards new brands of designer jeans
are likely to reflect that orientation. Similarly if a segment of consumers has an attitude
towards being high tech then their attitudes towards thin wall mounted HDTV‘s are likely
to reflect this viewpoint.
IV. The knowledge function: Human nature is such that individuals prefer to know and
understand the people and things they are in contact. While product positioning,
marketers try to do this and improve the consumers attitude towards their product or
brand by highlighting its benefits over competing brands.
2. Associating the product with admired group or events

Attitudes are related at least in part to special groups, events or causes. It is possible to
alter attitudes towards companies and their products, services and brands by pointing put
their relationships to particular social groups, events or causes. For example a detergent
powder advertising that a certain percentage of their profits will be going towards
educating the poor children of the country. A study found that both the brand and the
cause benefit from such alliances. A low familiar cause benefits more from its association
with a positive brand than a highly familiar cause. Another research found that if
corporate sponsors fail to explicitly indicate their motives for a company/cause or
product/cause association, it is likely that consumer will from their own motive for the
association between the company, product or service and the cause. The research
indicates that it is good idea for a sponsor to reveal to target consumers the reasoning
behind their sponsorship, so that consumers know their motives rather than form their
own potentially inaccurate or negative motives.
3. Resolving two conflicting attitudes

Attitude change strategies sometimes resolve actual or potential conflict between two
attitudes. If the consumers may be made to see that their negative attitude towards a
product or a specific brand or attributes is not in conflict with another attitude. They may
be induced to change their evaluation of a brand (from negative to positive). Usually
detergent powders are effective in cleaning but these also cause a bad effect on the skin.
Now in some countries seventh generation of natural dishwashing and laundry detergents
is introduced. These are as effective as synthetic chemical cleaning agents and are safer
because they are natural. For a person who cares about both effectiveness and
environmental safety Seventh generation is attempting to resolve what might otherwise
be conflicting attitudes.
I. Multi attributes models

Multi attribute models portray consumers‘ attitudes with regard to an attitude object
(product, service, etc…) as a function of consumers' perceptions and assessments of the
key attributes or beliefs held with regards to a particular attitude object. According to
these models attitude change can be brought about in four ways:
 Changing the relative evaluation of attributes
 Changing brand beliefs
 Adding an attribute
 Changing the over-all brand rating
a. Changing the relative evaluation of attributes

The overall market for many consumer products is set out so that different consumer
segments are offered different brands with different features. If detergent powder is a
product category then one brand may stress potency and the other brand may stress

gentleness. In general when a product category is naturally divided according to distinct
product features or benefits that appeal to a particular segment of consumers marketers
usually have an opportunity to persuade consumers to ―cross over‖. That is persuading
consumers to shift their favorable attitude from one version of the product to the other.
b. Changing brand beliefs
A cognitive oriented strategy for changing attitudes that concentrates on changing beliefs
or perceptions about the brand itself - a most common form of advertising appeal.
Advertisers are constantly reminding us that their product is ―more‖ is ―better‖ or ―the
best‖.
 For example Dishwashing Liquid:
Palmolive dishwashing liquids are designed to extend consumers‘ beliefs with regard to
product‘s gentleness by suggesting that it be used for hand washing of fine clothing items
 Bush‘s Baked Beans
We couldn‘t make our secret family recipe any better, so we made it easier (by placing it
in a microwavable cup)
c. Adding an attribute
This strategy can be accomplished by adding an attribute that previously has been
ignored or one that represents improvement or technological advancement.
For example previously ignored attribute Yogurt has more potassium than a banana (a
fruit associated with high quantity of potassium) for a consumer looking to increase their
potassium intake the comparison has the power to change their attitude from banana to
yogurt. Another example may be of a refrigerator that has an advanced and unique water
filtration system, a feature that reflects a company‘s continued efforts to create innovative
products.
d. Changing the over-all brand rating
Another cognitive oriented strategy that attempts to alter consumers‘ overall rating of a
brand directly, without attempting to change their evaluation of any single brand
attribute. Such strategy frequently relies on some form of global statement that this is:
 ―the largest selling brand‖
 ―thee most awarded car ever‖
4. Changing consumers beliefs about competitor’s brands
This approach emphasizes the attitude strategy to change the consumers‘ beliefs about the
attributes of competitive brands. E.g. a pain killer advertises that no other pain killer
works faster or stronger on muscle pain.


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CHAPTER 1

AN OVERVIEW OF MARKETING AND MARKETING MANAGEMENT

1 Principle of Marketing & Consumer behavior 2015 E.C

c. Value, Cost and Satisfaction

Value = Benefits = functional benefits + emotional benefits

2 Principle of Marketing & Consumer behavior 2015 E.C

1.3.Different philosophies of marketing management

3 Principle of Marketing & Consumer behavior 2015 E.C

4 Principle of Marketing & Consumer behavior 2015 E.C

Fig. 1.1. Three considerations underlying the societal marketing concept

Consumers (Wants satisfaction) Company (Profit)

Difference between Marketing and Selling

5 Principle of Marketing & Consumer behavior 2015 E.C

6 Principle of Marketing & Consumer behavior 2015 E.C

7 Principle of Marketing & Consumer behavior 2015 E.C

8 Principle of Marketing & Consumer behavior 2015 E.C

9 Principle of Marketing & Consumer behavior 2015 E.C

Controllable Marketing Environment Uncontrollable and cannot

Internal Marketing Environment External Marketing Environment

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3.1 Consumer Behavior

3.1.1 Factors Affecting/influencing Consumer Behavior

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I. Age and Life-Cycle Stage

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People often ask others—friends, relatives, acquaintances, professionals—for recommendations

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4. Post purchase Behavior

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MARKET SEGMENTATION TARGETING AND POSITIONING

4.1 MARKET SEGMENTATION

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i. Age and Life-Cycle Stage

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4.1.3 Prerequisite for Effective Segmentation

4.2 MARKET TARGETING

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Fig. Patterns of Targeting

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4.3.1 Communicating and Delivering the Chosen Position

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Tools for competitive differentiations

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5.1.1. Levels of product and services

Figure 5.1.1: Level of product

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Consumer products include:

a) Convenience, Shopping, Specialty and Unsought products

It can be divided further in to 3:

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III) Emergency products: are purchased when their need is urgent.

 Shopping product: are less frequently purchased. Consumers compare carefully on