BSM210 PRINCIPLES OF

MARKETING
LECTURE 4
Unit 4: In this lecture, you will be
learning about:
Analysing • Consumer buying behaviour
consumer • Factors influencing buyer
markets behaviour (Social, cultural,
personal and psychological)
and buyer • Identifying market segments
and selecting target markets
behaviour • Bases of segmentation
 • An organization that wants to be successful must
consider buyer behaviour when developing the
marketing mix. Buyer behaviour is the actions
people take with regard to buying and using
products. Marketers must understand buyer
behaviour, such as how raising or lowering a price
Consumer will affect the buyer’s perception of the product
and therefore create a fluctuation in sales, or how a

buying
specific review on social media can create an
entirely new direction for the marketing mix based
on the comments (buyer behaviour/input) of the
behaviour target market.
• To understand buyer behaviour, marketers must
understand how customers make buying decisions.
Consumers and businesses have processes for
making decisions about purchases. These decision-
making processes are affected by cultural, social,
individual, and psychological factors.
Consumer
decision making
process
 • The buyer decision process
represents a number of stages that
the purchaser will go through
Continuation before actually making the final
purchase decision.
Stage 1: Need recognition
Stage one is the recognition of the
particular problem or need and here
the buyer has a need to satisfy or a
problem that needs solving, and this
is the beginning of the buyer decision
process. Need recognition could be as
simple as running out of coffee. Need
recognition could also take place over
several months, such as when
repeated car repairs influence a
consumer to make a decision to buy a
new car.
 Stage 2: Information search
Stage two is where we begin to search for information about the
product or service. Buyers here begin to look around to find out
what’s out there in terms of choice and they start to work out
what might be the best product or service for solving the
Continuation problem or satisfying any need. For example If the consumer is
making a decision to purchase a house, he or she might research
information about financing, available homes, styles, locations,
and so forth.
Stage 3: Evaluation of alternatives
Stage three sees the evaluation of the available alternatives
whereby the buyer decides upon a set of criteria by which to
assess each alternative. Once the consumer has gathered the
information, he or she must evaluate alternatives. For example, a
consumer might eliminate all homes that cost over K150,000 or
are more than a 30-minute drive to work.
 Stage 4: Make your choice(purchase)
After evaluating the alternatives, the consumer will
make a decision based on those alternatives. Then the
consumer makes the purchase decision, the decision to
buy or not to buy
Continuatio Stage : Post purchase evaluation

n The process continues even when the product or

service is being consumed by the individual or business.
So if it doesn’t meet your needs or solve your problem
you can take action to improve the product or service.
Your actions at this point might inform other potential
buyers who would be keen to hear about your
experiences – good or bad.
Factors influence consumer
decision making
• Cultural, social, individual, and psychological factors have an impact
on consumer decision-making from the time a person recognizes a
need through post-purchase behaviour. We will examine each of
these factors in more detail. It is important to understand the
relevance of these influences on consumer decision-making.
Culture factors
• Purchase roles within the family are influenced by culture. Culture is
the set of values, ideas, attitudes, and symbols created to shape
human behaviour. Culture is the part of customs and traditions of a
group of people that is transformed into its art, food,
costumes/clothing, architecture, and language, as well as other
unique manifestations of a specific group of related individuals.
• Culture by definition is social in nature. It is human interaction that
creates values and prescribes acceptable behaviour. Culture gives
order to society by creating common expectations. Sometimes these
expectations are codified into law; for example, if you come to a red
light, you stop the car. In some cultures, a young man undergoes a
special rite of passage from youth into adulthood.
 • In other cultures, young women have a rite of passage but young
men do not. As long as a value or belief meets the needs of
society, it will remain part of the culture. If it is no longer
functional, the value or belief fades away. For example, the value
that very large families are “good” is no longer held by a majority
of Americans. This is because most Americans live in an urban

Continuatio
rather than a rural environment, and children are no longer
needed to perform farm chores.
Social factors

n • Most consumers are likely to seek out the opinions of others to

reduce their search and evaluation effort or uncertainty,
especially as the perceived risk of the decision increases.
Consumers may also seek out others’ opinions for guidance on
new products or services, products with image-related attributes,
or products where attribute information is lacking or
uninformative.
 • Specifically, consumers interact socially with reference groups,
opinion leaders, and family members to obtain product
information and decision approval. All the formal and informal
groups that influence the buying behaviour of an individual are
considered that person’s reference groups. Consumers may
use products or brands to identify with or become a member
of a group. They learn from observing how members of their
reference groups consume, and they use the same criteria to
Continuatio make their own consumer decisions. A reference group might
be a fraternity or sorority, a group you work with, or a club to
n which you belong.
Individual factors
• A person’s buying decisions are also influenced by personal
characteristics unique to each individual, such as gender and
personality. Individual characteristics are generally stable over
the course of one’s life. For instance, most people do not
change their gender, and the act of changing personality
requires a complete reorientation of one’s life.
 • Physiological differences between men and women result in
different needs, such as health and beauty products. Just as
important are the distinct cultural, social, and economic
roles played by men and women and the effects that these
have on their decision-making processes. Men and women
also shop differently.
•  Studies show that men and women share similar

Continuatio
motivations in terms of where to shop—that is, seeking
reasonable prices, merchandise quality, and a friendly, low-
pressure environment—but they don’t necessarily feel the
same about shopping in general. Most women enjoy

n shopping; their male counterparts claim to dislike the

experience and shop only out of necessity. Furthermore,
men desire simple shopping experiences, stores with less
variety, and convenience. 
• When it comes to online shopping, gender differences
continue. According to recent research, women tend to
shop based on their future needs, while men tend to shop
when their need is immediate. In addition, women tend to
make impulse buys more frequently than men, who tend to
think logically when making purchase decisions.
 • Each consumer has a unique personality. Personality is a broad
concept that can be thought of as a way of organizing and
grouping how an individual typically reacts to situations. Thus,
personality combines psychological makeup and
environmental forces. It includes people’s underlying
dispositions, especially their most dominant characteristics.
Although personality is one of the least useful concepts in the
study of consumer behaviour, some marketers believe that
Continuatio personality influences the types and brands of products
purchased. For instance, the type of car, clothes, or jewellery a
n consumer buys may reflect one or more personality traits.
Psychological factors
• An individual’s buying decisions are further influenced by
psychological factors such as perception, beliefs, and attitudes.
These factors are what consumers use to interact with their
world. They are the tools consumers use to recognize their
feelings, gather and analyse information, formulate thoughts
and opinions, and take action. 
 • Unlike the other three influences on
consumer behaviour, psychological
influences can be affected by a person’s
Continuation environment because they are applied on
specific occasions. For example, individuals
will perceive different stimuli and process
these stimuli in different ways depending on
whether the individual is sitting in class
concentrating on an instructor’s lecture,
sitting outside of class talking to friends, or
sitting at home watching television.
B2B purchase decision making
• Business-to-business (B2B) buyer behaviour and business markets are different from consumer
markets. Business markets include institutions such as hospitals and schools, manufacturers,
wholesalers and retailers, and various branches of government.
• The key difference between a consumer product and a business product is the intended use.
For example, if a consumer purchases a certain brand of computer for use at home, it is
considered a consumer good. If a purchasing agent for Netflix buys exactly the same computer
for Netflix scriptwriter, it is considered a business good. Why? The reason is that Netflix is a
business, so the computer will be used in a business environment.
The decision making
process
• The purchases that organizations make often involve greater risk
than purchases made by individual consumers. For this reason,
businesses (and other organizations) tend to base purchase
decisions on more data and make purchase decisions based on
rational decision-making so purchases will optimize value for the
organization and minimize risk. For this reason, the business
purchase decision-making process differs from the consumer
process.
• The steps are similar: need recognition, setting specifications,
information search (including identification of suppliers),
evaluation (including evaluation of suppliers), purchase (“go or no-
go”), and post-purchase evaluation. The major difference between
the two processes is that businesses decide beforehand what
exactly is needed on the purchase (setting specifications) and then
seek information regarding products that meet those
specifications. In this way, the purchases are more likely to satisfy
the needs of the overall organization, thus reducing the risk.
 The main differences between consumer markets and
business markets include the following:
 Purchase volume: Business customers buy in much larger
quantities than consumers.
 Number of customers: Business marketers usually have
far fewer customers than consumer marketers. As a
Characteristi result, it is much easier to identify prospective buyers
and monitor current needs.
cs of B2B  Location of buyers: Business customers tend to be much
markets more geographically concentrated than consumers.
1.Direct distribution: Business sales tend to be made
directly to the buyer because such sales frequently
involve large quantities or custom-made items such as
heavy machinery. Consumer goods are more likely to be
sold through intermediaries such as wholesalers and
retailers.
 • Organizations that sell to consumer and business
markets recognize that they cannot appeal to all buyers
in those markets, or at least not to all buyers in the saint
way. Buyers are too numerous, too widely scattered and
too varied in their needs and buying practices.
Identifying Companies vary widely in their abilities to serve
different segments of the market.

market • Rather than trying to compete in an entire market,

sometimes against superior competitors, each company

segments and
must identity the parts of the market that it can serve
best. Segmentation is thus a compromise between mass
marketing, which assumes everyone can be treated the

selecting target same, and the assumption that each person needs a
dedicated marketing effort.
• Few companies now use mass marketing. Instead, they
markets practise target marketing - identifying market segments,
selecting one or more of them, and developing products
and marketing mixes tailored to each. In this way, sellers
can develop the right product for each target market
and adjust their prices, distribution channels and
advertising to reach the target market efficiently
 • Markets consist of buyers, and buyers differ in
one or more ways. They may differ in their
wants, resources, locations, buying attitudes and
Market buying practices. Through market segmentation,
companies divide large, heterogeneous markets
segmentation into smaller segments that can be reached more
efficiently with products and services that match
their unique needs.
• Market segmentation means dividing a market
into distinct groups of buyers with different
needs, characteristics or behaviours, who might
require separate products or marketing mixes.
 Because buyers have unique needs and wants, each buyer is
potentially a separate market. Ideally, then, a seller might
design a separate marketing programme 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
Levels of their product needs or buying responses.

market Thus, market segmentation can be carried out at many

segmentation different levels. Companies can practise no segmentation
(mass marketing), complete segmentation (micromarketing)
or something in between (segment marketing or niche
marketing).
 • Companies have not always practised target
marketing. In fact, for most of the twentieth
century, 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.

Mass • Mass marketing Using almost the same

product, promotion and distribution for all
consumers. The traditional argument for mass

marketing 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 .
• No wonder some have claimed that mass
marketing is dying. Not surprisingly, many
companies are retreating from mass marketing
and turning to segmented marketing.
 • A company that practises segment marketing recognizes that
buyers differ in their needs, perceptions and buying
behaviours. The company tries to isolate broad segments that
make up a market and adapts its offers to match more closely
the needs of one or more segments. Thus, BMW has designed
specific models for different income and age groups. In fact, it
sells models for segments with varied combinations of age and
income.
Segmenting • Adapting a company's offerings so they more closely match
the needs of one or more segments.
markets • Segment marketing offers several benefits over mass
marketing. The company can market more efficiently, targeting
its products or services, channels and communications
programmes towards only consumers that it can serve best.
The company can also market more effectively by fine-tuning
its products, prices and programmes to the needs of carefully
defined segments. And the company may face fewer
competitors if tower competitors are focusing on this market
segment.
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 subsegments or by defining a
group with a distinctive set of traits who may seek a special combination of benefits.
• Niche marketing Adapting a company's offerings to more closely match the needs of one or more subsegments &here
there is often little competition.
• Where as 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 price premium.
• Niching offers smaller companies an opportunity to compete by focusing their limited resources on serving niches that
may be unimportant to or overlooked by larger competitors.
• In many markets today, niches are the norm. As an advertising agency executive observed: 'There will be no market for
products that everybody likes a little, only for products that somebody likes a lot.'3 Other experts assert that companies
will have to 'niche or be niched'.
Micro marketing
Segment and niche marketers tailor their
offers and marketing programmes So 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 micromarketing.
Micro marketing is a form of target
marketing in which companies tailor their
marketing programmes to the needs and
wants of narrowly defined geographic,
demographic, psychographic or
behavioural segments.
 • 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. we look at the major
geographic, demographical, psychographic and behavioural variables.
1. Geographic segmentation
• Geographic segmentation calls for dividing the market into different
Segmenting geographical units, such as nations, states, regions, counties, cities or
neighbourhoods. A company may decide to operate in one or a few

consumer geographical areas, or to operate in all areas but pay attention to

geographical differences in needs and wants.

markets • Climatic differences lead to different lifestyles and eating habits. In

countries with warm climates, social life takes place outdoors and
furniture is less important than in cold countries.
• Many companies today have regional marketing programmes within
national boundaries - localizing their products, advertising, promotion
and sales efforts to fit the needs of individual regions, cities and even
neighbourhoods. Others are seeking to cultivate yet untapped
territory.
2. Demographic
segmentation
• Demographic segmentation consists of dividing 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 variable. Even when
market segments are first defined using other bases -
such as personality or behaviour - their demographics
need knowing to assess the size of the target market
and to reach it efficiently.
 • Psychographic segmentation divides buyers into groups based on
social class, lifestyle or personality characteristics. People in the
same demographic group can have very different psychographic

3. make-ups.
• LIFESTYLE. People's interest in goods is affected by their lifestyles.

Psychographi
Reciprocally, the goods they buy express their lifestyles. Marketers
are increasingly segmenting their markets by consumer lifestyles.
• PERSONALITY. Marketers have also used personality variables to

c segment markets, giving their products personalities that

correspond to consumer personalities. Successful market
segmentation strategies based on personality work for products

segmentation
such as cosmetics, cigarettes, insurance and alcohol.
• SOCIAL CLASS. social class affects people’s preferences in cars,
clothes, home furnishings, leisure activities, reading habits and
retailers. Many companies design products or services for specific
social classes, building in features that appeal to them.
 • Behavioural segmentation divides buyers into groups
based on their knowledge, attitudes, uses or
responses to a product. Many marketers believe that
behaviour variables are the best starting point for
building market segments.

4. • OCCASIONS. Buyers can be grouped according to

occasions when they get the idea to buy, make their
purchase or use the purchased item. Occasion

Behavioural segmentation can help firms build up product usage.

• BENEFITS SOUGHT. A powerful form of
segmentation is to group buyers according to the

segmentatio different benefits that they seek from the product.

Benefit segmentation requires finding the main
benefits people look for in the product class, the

n kinds of people who look for each benefit and the

major brands that deliver each benefit.
• LOYALTY STATUS. Many firms are now trying to
segment their markets by loyalty, and are using
loyalty schemes to do it. They assume that some
consumers are completely loyal - they buy one brand
all the time.
 • Clearly there are many ways to segment a market, but
not all segmentations are effective. Indeed, there is quite
a gap between the sophisticated approaches to
segmentation that are sometimes suggested and what is
actually used by practitioners. To be useful, market
segments must have the following characteristics:
Requirement  Measurability: The degree to 'which the size, purchasing
s for effective price and profits of a market segment can be measured.
 Accessibility: The degree to which a market segment can
segmentation he reached and served.
 Substantiality: The degree to which a market segment in
sufficiently large or profitable.
 Actionability :The degree to -which effective
programmes can be designed/or attracting and serving a
given market segment.
 • Market targeting is a process of selecting the
target market from the entire market. Target
market consists of group/groups of buyers to
whom the company wants to satisfy or for
whom product is manufactured, price is set,
promotion efforts are made, and distribution
network is prepared.

Market
• A company cannot concentrate on all the
segments of the market. The company can
satisfy only limited segments. The segments

targeting the company wants to serve are called the

target market, and the process of selecting
the target market is referred as market
targeting.
• Once the market is divided into various
segments, the company has to evaluate
various segments and decide how many and
which ones to target. It is simply an act or
process of selecting a target market.
 . Evaluating Market Segments:
Evaluation of market segments calls for measuring
suitability of segments. The segments are evaluated
with certain relevant criteria to determine their
feasibility.

Procedure 2. Selecting Market Segments:

 When the evaluation of segments is over, the
of market company has to decide in which market segments
to enter. That is, the company decides on which
targeting and how many segments to enter.
 Philip Kotler describes five alternative patterns to
select the target market. Selection of a suitable
option depends on situations prevailing inside and
outside the company.
 1.Single Segment Concentration
 It is the simplest case. The company selects only a single
segment as target market and offers a single product.
 Here, product is one; segment is one. For example, a
company may select only higher income segment to serve
from various segments based on income, such as poor,
middleclass, elite class, etc. All the product items produced
by the company are meant for only a single segment.
Strategies(method 2. Selective Specialization

s) for market In this option, the company selects a number of segments. A


company selects several segments and sells different
products to each of the segments.
targeting  Here, company selects many segments to serve them with
many products. All such segments are attractive and
appropriate with firm’s objectives and resources.
3. Product Specialization
 In this alternative, a company makes a specific product,
which can be sold to several segments. Here, product is one,
but segments are many.
Continuation
4. Market Specialization
 This strategy consists of serving many needs of a particular segment. Here, products are
many but the segment is one.
 The firm can gain a strong reputation by specializing in serving the specific segment.
Company provides all new products that the group can feasibly use.
5. Full Market Coverage
 In this strategy, a company attempts to serve all the customer groups with all the
products they need. Here, all the needs of all the segments are served. Only very large
firm with overall capacity can undertake a full market coverage strategy.
Methods of Full Market Coverage
Philip Kotler identifies two broad ways for full market coverage strategy as under:
 Undifferentiated Marketing
Company sells the same products to all the customer groups. It does not consider difference
among buyers. Product and marketing programme remain common for all the segments.
 Differentiated Marketing
Here, company operates in several segments and designs different marketing programmes
for each of the segments. Various groups of customers are targeted by several types of
products and marketing strategies. It is based on the notion that each group needs different
products.
END OF LECTURE
23/09/2020
MRS ABBY N. MUMBA