Chapter Three

Principles of Marketing
3
CHAPTER THREE
ANALYZING CONSUMER AND BUSINESS
MARKETS
By: Zinabu Girma (MA)
01/29/2024 By: Zinabu Girma (MA) 1

Part I : Consumer markets and consumer
buyer behavior
Introduction
• The aim of marketing is to meet and satisfy target
customers’ needs and wants. The field of consumer
behavior studies how individual, groups, and
organization select, buy, use, and dispose of goods,
services, ideas of experiences to satisfy their needs &
desires.
Cont’d
• Understanding consumer buying behavior and "Knowing

customers" are never simple. Customers may state their
needs and wants but may act differently
• Marketers must fully understand both the theory and
reality of consumer behavior. To know them well,
marketers must study their target customers’ wants,
perception, preferences, and shopping & buying behavior.

Cont’d
• Consumer buyer behavior refers to the buying

behavior of final consumers – individuals and
households that buy goods and services for personal
consumption. All of these final consumers combine to
make up the consumer market.
• Consumer market -All the individuals and households

that buy or acquire goods and services for personal
consumption.
3.1. MODEL OF BUYING BEHAVIOR
• Consumers make many buying decisions every day,

and the buying decision is the focal point of the
marketer’s effort. Marketers can study actual
consumer purchases to find out what they buy, where
and how much.
• The central question for marketers is: How do
consumers respond to various marketing efforts the
company might use? By: Zinabu Girma (MA)
01/29/2024 5
Cont’d
• The starting point for understanding buying behavior

is the stimulus- response. Marketing and
environmental stimuli enter the buyer’s
consciousness. The buyer’s characteristics and
decision process lead to purchase decisions.

Cont’d
• The marketer wants to understand how the stimuli are

changed into responses inside the consumer’s black
box, which has two parts. First, the buyer’s
characteristics influence how he or she perceives and
reacts to the stimuli. Second, the buyer’s decision
process itself affects the buyer’s behavior.

3.1 Stimulus- Response Model

3.2 Factors affecting consumers’ buying behavior
• The buyers purchasing choice will be influenced by many

cultural, social, personal and psychological factors.
1. Cultural Forces
• Cultural factors exert the broadest and deepest influence on
consumer behavior. The roles played by the buyer’s culture,
subculture, and social classes are particularly important.
• Culture:- is the most fundamental determinant of person’s
wants & behavior.

Cont’d
• E.g. A growing child acquires a set of values, perceptions,
preferences, and behavior through his or her family and other
key institutions.
• Subculture: Each culture consists of smaller subcultures that
provide more specific identification and socialization for its
members. Subculture includes nationalities, religions, racial
groups, and geographical regions. Many subcultures make up
important market segments, and marketers often design
products and marketing programs tailored to their needs.
Cont’d
• The buyer’s buying behavior will be influenced by his/ her
sub-culture identifications. They will influence his/ her food
preferences, clothing choices, and recreation and career
aspirations.
Social Class: are relating homogeneous and enduring divisions
in a society.
• Are hierarchically ordered .

Cont’d
• whose members share similar values, interests, and behavior.
• Social classes reflect income, occupation, education, and area
of residence.
• Social classes differ in their dresses, speech patterns,
recreational preferences and many other characteristics.
The Characteristics of social classes
• Persons within each social class tend to behave more alike
than persons from two different social classes.

Cont’d
• Persons are perceived as occupying inferior or superior

positions according to their class.
• A person’s social class will be indicated by social
stratification such as upper uppers, Lower uppers,
Upper middles, Middle class, Working class, Upper
lowers, and lower lowers.
• Individuals can move up and down from one social
class to another.
2 Social Factors
• A consumer’s behavior is also influenced by social factors
such as reference groups that have a direct (face-to-face) or
indirect influence on the person’s attitudes or behavior.
• Groups having a direct influence on a person are called
membership groups. Some membership groups are primary
groups, such as family, friends, neighbors and co-workers,
with whom the person interacts fairly consciously and
informally.
Cont’d
• People also belong to secondary groups, such as religious,

professional and trade union groups - which tend to be more
formal and require less continuous interaction.
• Reference groups pose influence on buyer’s behavior at

least in three ways:
1.They expose an individual to new behaviors and lifestyles.

Cont’d
2. They also influence the person’s attitudes and self-

concept.
3. And they create pressure for conformity that may
affect actual product and brand choice.
• Persons are also influenced by groups in which they
are not members, but they would like to belong. The
groups a person would like to belong are called
aspiration groups.
Cont’d
• A Dissociative Group: are those whose values or
behavior an individual may want to avoid any r/ship
with such a group.
Marketers try to identify their target customers’
reference groups and try to influence their customers
by producing and marketing brands tailored to satisfy
that specific referenceBy: group.

01/29/2024 Zinabu Girma (MA) 17
Cont’d
• The reference groups have their own opinion leader.

The task of manufacturers is to reach and influence
the opinion leaders in the reference group.
• An opinion leader is a person in informal product
related communications who offers advice or
information about specific product or product
category, such as which of several brands is best.
Cont’d
• Family: The family is the most important consumer-

buying organization in society. Family members
constitute the most influential primary reference group.
• Roles and status: The person’s position in each group

can be defined in terms of role and status.
• A Role consists of the activities that a person is

expected to perform.
Cont’d
• A status is a position engaged by a person in society.

People choose products that communicate their role
and status in society. Marketers are aware of the
status symbol potential of products and brands.

3 Personal Factors
• A buyer’s decisions are also influenced by personal

characteristics. These include, the buyer’s age and
stage in the life cycle, occupation, economic
circumstance, lifestyle, personality, and self-concept.

Cont’d
Age & stage in the life cycle-People buy different goods

and services, over their lifetime.
• People’s taste in food, clothes, furniture, and recreation

is also age related and so differs as a person grows.
Occupation -affects the goods and services bought by

consumers. E.g. A company president will buy
expensive suits, air travel, and services are big hotels.
Cont’d
• Economic circumstance - Product choice is greatly

affected by ones economic circumstances. People’s
economic circumstances consist of their spendable
income, savings and assets (including the percentage
that is liquid), debts, borrowing power, and attitude
toward spending versus saving.

Cont’d
• Lifestyle is a person’s pattern of living as expressed
in his or her psychographics
• Measures a consumer’s AIOs (activities, interests,
opinions) to capture information about a person’s
pattern of acting and interacting in the environment
• Marketers search for relationships between their
products and lifestyle groups.
• The marketer may then aim the brand more clearly at
the achiever lifestyle

Cont’d
• Personality and Self-Concept
– Personality refers to the unique psychological

characteristics that lead to consistent and lasting
responses to the consumer’s environment
– The mental picture of people towards themselves is
called self concept.
– Thus people buy products which best fits their assumed
self-image.
Psychological Factors
Motivation
Perception
Learning
Beliefs and attitudes

Cont’d
• Motivation- A person has many needs at any

given time. Some needs are biogenic. They arise
from physiological states of tension such as
hunger, thirst, and discomfort. Other needs are
psychogenic; they arise from psychological states
of tension such as the need of recognition, esteem,
or belonging.
Cont’d
• A need becomes a motive when it is aroused to

a sufficient level of intensity.
• A motive is a need that is sufficiently pressing
to drive a person to act. Satisfying the need
reduces the felt tension.

Cont’d
• Perception is the process by which people select,

organize, and interpret information to form a
meaningful picture of the world from three perceptual
processes (selective attention, selective distortion,
selective retention)
• Selective attention is the tendency for people to screen

out most of the information to which they are exposed
Cont’d
• Selective distortion is the tendency for people to

interpret information in a way that will support what
they already believe
• Selective retention is the tendency to remember good
points made about a brand they favor and forget good
points about competing brands

Cont’d
• Learning- involves changes in an individual's behavior

arising from experience. When people act, they learn.
Learning theorist believe that learning is produced through
the interplay of drives, stimuli, responses, and
reinforcement.
• Beliefs and Attitudes - Through doing and learning,
People acquire beliefs and attitudes. These in turn
influence their buying behavior.
Cont’d
• Belief is a descriptive thought that a person has about

something based on:Knowledge, Opinion, Faith
• Attitudes -describe a person’s relatively consistent
evaluations, feelings, and tendencies toward an object
or idea.

The Buying Roles
• 5 roles people might play in a buying decision
– Initiator ğ who first gives the idea of buying the
product or service
– Influencer ğ whose view or advice influences the
decision
– Decider ğ who decide on any component of
buying decision
– Buyer ğ who makes the actual purchase
– User ğ who uses the product or sevice purchased
TYPES OF CONSUMERS’ BUYING BEHAVIOR
• There are four types of consumer buying behavior

based on the degree of buyer involvement and the
degree of differences among brands.

Cont’d
A. Complex buying behavior: situations characterized by

high consumer involvement in a purchase and
significant perceived differences among brands. Or
when the product is expensive, risky, purchased
infrequently and highly self-expressive.
• This buyer will pass through a learning process, first
developing beliefs about the product, then developing
attitudes, and then making a thoughtful purchase choice.
Cont’d
B. Dissonance-Reducing Buying Behavior

 Occurs when consumers are highly involved with an
expensive, infrequent or risky purchase, but see little
difference among brands.
 In this case, because perceived brand differences are
not large, buyers may shop around to learn what is
available, but buy relatively quickly.
Cont’d
C. Habitual Buying Behavior
• Occurs under conditions of low consumer involvement and
little significant brand difference. For example, take salt.
• Consumers appear to have low involvement with most low-
cost, frequently purchased products.
• Consumers do not form strong attitudes towards a brand; they
select the brand because it is familiar and may not evaluate the
choice even after purchase.

Cont’d
D. Variety Seeking Buying Behavior

• Situations characterized by low consumer involvement,
but significant perceived brand differences.
• In such cases, consumers often do a lot of brand
switching.
• Brand switching occurs for the sake of variety rather
than because of dissatisfaction.
Cont’d
• For example, when purchasing biscuits, a consumer

may hold some beliefs, choose a biscuit without
much evaluation, then evaluate that brand during
consumption. But the next time, the consumer might
pick another brand out of boredom or simply to try
something different.

THE BUYER DECISION PROCESS
• There are five stages of buying decision process.

Consumers pass sequentially through all five stages
in buying high-involvement product. But this is not
the case, especially with low-involvement purchases.
Consumers may skip or reverse some stages when
they are not highly involved in the search of the
product.

The Consumer Decision-Making Process

Cont’d
• The stages of the consumers buying decision process

are:
1. Problem recognition Attention
2. Information search Interest
3. Evaluation of alternatives Desire
4. Purchase decision Action
5. Post purchase behavior Satisfaction
Cont’d
1. Problem recognition - The buying process starts

when the buyer recognizes the problem or need. The
need can be triggered by the internal or external
stimuli. In the case of the internal stimuli, one of the
people’s normal needs- hunger, and thirst to a
threshold level and becomes a drive. In the case of
external stimuli, a need is aroused by external stimuli.

Cont’d
2. Information search - An aroused consumer will be
inclined to search for more information. Consumer
information sources fall into four groups:
– Personal sources: family, friends, neighbors, acquaintances
– Commercial sources: Ads, salespersons, dealers,
packaging, displays,
– Public sources: Mass media, consumer rating
organizations.
– Experiential sources: Handling, examining, using the
product.
• Each information source performs a different function
in influencing the buying decision.
Cont’d
3.Evaluation of alternatives - How does the consumer

process competitive brand information and make a final
value judgment? No single process is used by all consumers,
or by one consumer in all buying situations. There are
several processes, and the most current models see the
consumer forming judgments largely on a conscious and
rational basis.
• Some basic concepts will help us understand consumer
evaluation processes
Cont’d
• First, the consumer is trying to satisfy a need.
• Second, the consumer is looking for certain benefits from the
product solution.
• Third, the consumer sees each product as a bundle of attributes
with varying abilities for delivering the benefits sought to
satisfy this need.
• The attributes of interest to buyers vary by product
• Consumers will pay the most attention to attributes that deliver

the sought-after benefits.
Cont’d
4. Purchase decision - In the evaluation stage, the

consumer forms the preferences among the brands in
the choice set. The consumer may also form an
intention to buy the most preferred brand. However,
two factors can intervene b/n the purchase intention
and the purchase decision.

Cont’d
• The first factor is the attitudes of others. The extent to
which another person’s attitude reduces one’s preferred

alternative depends on two things:
• The intensity of the other person’s negative attitude toward
the consumers preferred alternative:
1. The more intense the other person’s negativism and the

closer the other person is to the consumer, the more the
consumer will adjust his/
01/29/2024
her purchase intention.
By: Zinabu Girma (MA) 48
Cont’d
• The buyer’s preference for the brand will increase if

someone he or she respects favors the same brand
strongly. The influence of others becomes complex where
several people close to the buyer hold contradictory
opinions and the buyer would like to please them all.
2. The consumer’s motivation to comply with the other
person’s wishes.

Cont’d
• The second factor is unanticipated situational factor

that may erupt to change the purchase intention. If
somebody loses his job accidentally, all purchase
intentions may be avoided or dropped. A consumer’s
purchase decision will be modified, postponed, or
avoided if there is serious perceived risk.

Cont’d
5. Post purchase behavior - After purchasing the

product, the consumer will experience some level of
satisfaction or dissatisfaction. The marketer’s job
does not end when the product is bought but
continues into post purchase period. Marketers must
monitor post-purchase satisfaction, post-purchase
actions, post-purchase product use, and disposal.

Cont’d
• Post-purchase satisfaction: What will determine

that the buyer is highly satisfied, somewhat satisfied
or dissatisfied with a purchase?
• The buyer’s satisfaction is a function of the closeness
between the buyer’s product expectation and the
product’s perceived performance.

Cont’d
• Consumers form their expectations on the basis of

messages received form sellers, friends, and other
information sources. If the seller exaggerates the benefits,
consumers will experience disconfirmed expectations,
which will lead to dissatisfaction. When marketers
introduce their products in the market, they must
communicate to the users of their product the products
likely performance without exaggeration.
Cont’d
• Post-purchase action: The consumers’ satisfaction or

dissatisfaction with product will influence subsequent
behavior. If the consumer is satisfied, he or she will exhibit
a higher probability of purchasing the product again. If the
consumer is dissatisfied, he may abandon the product, may
take public action such as by complaining the company,
going to a lawyer, or complaining to consumer
organizations. He also bad- mouth the product to his friends.
Cont’d
• He also returns the product to the organization and

claims refund. These all can tarnish the goodwill and
image of the organization. For these reasons
companies must work to ensure consumer satisfaction
at all levels of the buying process.

Cont’d
• Post-purchase use and Disposal: Marketers should

monitor how the buyers use and dispose the product.
If the consumers are using up their products soon
after purchase, the product might be a good , If they
store it for long time. Therefore, marketers must take
care not to produce the product that pollutes the
environment.

3.2 BUSINESS MARKETS
 The business market consists of all business users,

organization that buys goods and services for one of
the following purposes.
To make other goods and services
To resell to other business users or to consumers
and
To conduct the organizations operations
Components of the Business Market
• Traditionally, business markets were referred to as

industrial markets. This caused many people to think
the term referred only to manufacturing firms.
Certainly manufactures constitute a major portion of
the business market, but six other components –
agriculture, resellers, government agencies, service
companies, nonprofit organizations, and international.
Cont’d
1. The Agriculture Market - The high level of income from

the sale of agricultural products
2. The Reseller Market - Intermediaries like wholesalers and
retailer constitute the reseller market. The basic activity of
resellers – unlike any other business market segment – is
buying products from suppliers’ organizations and reselling
these items in essentially the same form to the resellers’
customers. In economic terms, resellers’ create time, place,
and possession utilities, rather than form utility.
Cont’d
3. The Government Market - large government market

includes the federal, state, and local units that spend a
huge amount for buying for government institutions,
such as schools, offices, hospitals, and military bases.
• Government procurement processes are different from
those in the private sector of the business market. A
unique feature of government buying is the
competitive bidding By:system
01/29/2024 Zinabu Girma (MA) 60
Cont’d
4. The Service Market - Currently, firms that produce services

greatly out numbered than firms that produce goods. That is,
there are more service firms than the total of all
manufacturers, mining companies, construction firms and
enterprise engaged in farming, forestry and fishing. This
market also includes organizations that produce and sell such
diverse services as rental housing, recreation and
entertainment, repairs, health care, personal care and
business services.
Cont’d
5. The “non-business” market - so-called non-business or

non-profit organizations. The non-business market
includes such diverse institutions as ;churches, colleges
and universities, museums, hospital, and other health
institutions, political parties, labor unions, and charitable
organic stations. Non-profit organizations also conduct
marketing campaigns. In terms they spend billions of
dollars buying goods and
01/29/2024
services to run their operations.62
By: Zinabu Girma (MA)
Cont’d
6. The International Market - Another dimension of

international business is companies manufacturing
abroad in overseas subsidiaries. Though these sales
do not count as exports, they are a significant part of
the operations of many firms.

Characteristics of Business Markets over . . .
. consumer market
• The business market consists of all the organizations
that acquire goods and services for reason (i.e. for
producing other goods and services, reselling
purpose, or to facilitate the main operation of the
business).Business markets have several
characteristics that contrast sharply with those of
consumer markets. These are:

Cont’d
Market Structure and Demand

• Fewer, but larger buyers:
• Derived demand
• Inelastic demand
• Fluctuating demand
• Geographically concentrated buyers:
• Direct purchasing:
Cont’d
Nature of the Buying Unit

• Several buying influences:
• More professional purchasing effort
Types of Decisions & the Decision Process
• More complex decisions
• Process is more formalized

Cont’d
• Buyer and seller are more dependent on each other

• Build close long-term relationships with customers

Types of Business Buying Structure
• Organizational buying behavior have identified three

classes of business buying situations. The three buy
classes are new-task buying; straight re buy, and
modified re buy.
1. New task is a purchase decision that requires thorough
research such as a new product. Is situation in which a
purchaser buys a product or service for the first time.

Cont’d
• This is the most difficult and complex buying situation

because it is a first-time purchase of a major product.
2. Straight re-buy is a routine purchase decision such

as reorder without any modification
3. Modified re-buy is a purchase decision that

requires some research where the buyer wants to
modify the product specification, price, terms, or
suppliers
Participants in the Business Buying Process
• Buying center is all of the individuals and units that

participate in the business decision-making process
Users are those that will use the product or service
Influencers help define specifications and provide
information for evaluating alternatives
Buyers have formal authority to select the supplier and
arrange terms of purchase
Deciders have formal or informal power to select and
approve final suppliers
Gatekeepers control theBy:flow
01/29/2024
of information
Zinabu Girma (MA) 70
The Business Buying Process
• The general stages in the business buying decision

process called them buy-phase. The eight-stage buy-
phase model describes the major steps in the business
buying process.

Cont’d
1. Problem recognition occurs when someone in the
company recognizes a problem or need
– Internal stimuli
• Need for new product or production equipment
– External stimuli
• Idea from a trade show or advertising
2. General need description: determine the needed
item’s general characteristics and quality needed.
These may include reliability durability, price, and or
other attributes.

Cont’d
3. Product specification describes the technical criteria
4.Supplier search involves compiling a list of qualified

suppliers
5.Proposal solicitation is the process of requesting proposals

from qualified suppliers
6. Supplier selection is the process when the buying center

creates a list of desired supplier attributes and negotiates
with preferred suppliersBy:for
01/29/2024
favorable terms and conditions 73
Zinabu Girma (MA)
Cont’d
7. Order-routine specifications is the final order with

the chosen supplier and lists all of the specifications
and terms of the purchase
8. Performance review involves a criticism of supplier
performance to the purchase terms

Business Buying Process in Relation to Major Business Buying Situations

!!!
o u
k y
a n
T h

Chapter Three

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chapter Three

Uploaded by

Copyright:

Available Formats

Principles of Marketing

01/29/2024 By: Zinabu Girma (MA) 1

• Understanding consumer buying behavior and "Knowing

01/29/2024 By: Zinabu Girma (MA) 3

• Consumer buyer behavior refers to the buying

• Consumer market -All the individuals and households

• Consumers make many buying decisions every day,

• The starting point for understanding buying behavior

01/29/2024 By: Zinabu Girma (MA) 6

• The marketer wants to understand how the stimuli are

01/29/2024 By: Zinabu Girma (MA) 7

01/29/2024 By: Zinabu Girma (MA) 8

• The buyers purchasing choice will be influenced by many

• Cultural factors exert the broadest and deepest influence on

consumer behavior. The roles played by the buyer’s culture,

subculture, and social classes are particularly important.

• Culture:- is the most fundamental determinant of person’s

wants & behavior.

• The buyer’s buying behavior will be influenced by his/ her

sub-culture identifications. They will influence his/ her food

preferences, clothing choices, and recreation and career

Social Class: are relating homogeneous and enduring divisions

• Are hierarchically ordered .

01/29/2024 By: Zinabu Girma (MA) 12

• Persons are perceived as occupying inferior or superior

• A consumer’s behavior is also influenced by social factors

such as reference groups that have a direct (face-to-face) or

indirect influence on the person’s attitudes or behavior.

• Groups having a direct influence on a person are called

membership groups. Some membership groups are primary

groups, such as family, friends, neighbors and co-workers,

with whom the person interacts fairly consciously and

• People also belong to secondary groups, such as religious,

• Reference groups pose influence on buyer’s behavior at

1.They expose an individual to new behaviors and lifestyles.

01/29/2024 By: Zinabu Girma (MA) 15

2. They also influence the person’s attitudes and self-

• A Dissociative Group: are those whose values or

behavior an individual may want to avoid any r/ship

with such a group.

Marketers try to identify their target customers’

reference groups and try to influence their customers

by producing and marketing brands tailored to satisfy

that specific referenceBy: group.

• The reference groups have their own opinion leader.

• Family: The family is the most important consumer-

• Roles and status: The person’s position in each group

• A Role consists of the activities that a person is

• A status is a position engaged by a person in society.

01/29/2024 By: Zinabu Girma (MA) 20

• A buyer’s decisions are also influenced by personal

01/29/2024 By: Zinabu Girma (MA) 21

Age & stage in the life cycle-People buy different goods

• People’s taste in food, clothes, furniture, and recreation

Occupation -affects the goods and services bought by

• Economic circumstance - Product choice is greatly

01/29/2024 By: Zinabu Girma (MA) 23

01/29/2024 By: Zinabu Girma (MA) 24

• Personality and Self-Concept

– Personality refers to the unique psychological

Beliefs and attitudes

• Motivation- A person has many needs at any

• A need becomes a motive when it is aroused to