Marketing Management

UNIT-1

Nature and scope of marketing

Definition of Marketing

• Traditional Concept: The term ‘traditional marketing’ can be expressed as the business
activity through which goods and services directly move from producers to consumers or
users.
• Modern Concept: The term ‘modern marketing’ can be expressed as the achievement of
corporate goals through meeting and exceeding customer needs better than the competition.

According to Philip Kotler, the term ‘marketing’ is a social and managerial process by which
individual groups obtain what they need and want through creating, offering and freely exchanging
product and services of value with others.

Nature of Marketing

The Nature of Marketing (or Modern marketing) may be studied under the following points:

1. Human activity: Originally, the term marketing is a human activity under which human
needs are satisfied by human efforts. It’s a human action for human satisfaction.
2. Consumer-oriented: A business exist to satisfy human needs; hence business must find out
what the desire of customer (or consumer) and thereby produce goods & services as per
the needs of the customer. Thus, only those goods should be produce that satisfy consumer
needs and at a reasonable profit to the manufacturer (or producer).
3. Art as well as science: In the technological arena, marketing is the art and science of
choosing target markets and satisfying customers through creating, delivering, and
communicating superior customer value. It is a technique of making the goods available at
right time, right place, into right hands, right quality, in the right form and at right price.
4. Exchange Process: All marketing activities revolve around commercial exchange process.
The exchange process implies transactions between buyer and seller. It also involves
exchange of technology, exchange of information and exchange of ideas.
5. Starts and ends with customers: Marketing is consumer oriented and it is crucial to know
what the actual demand of consumer is. This is possible only when required information
related to the goods and services is collected from the customer. Thus, it is the starting of
marketing and the marketing end as soon as those goods and services reach into the safe
hands of the customer.
6. Creation of Utilities: Marketing creates four components of utilities viz. time, place,
possession and form. The form utility refers to the product or service a company offers to
their customers. The place utility refers to the availability of a product or service in a
location i.e. Easier for customers. By time utility, a company can ensure that products and
services are available when customers need them. The possession utility gives customers
ownership of a product or service and enables them to derive benefits in their own business.
7. Goal oriented: Marketing seeks to achieve benefits for both buyers and sellers by satisfying
human needs. The ultimate goal of marketing is to generate profits through the satisfaction
of the customer.
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 8. Guiding element of business: Modern Marketing is the heart of industrial activity that tells
what, when, how to produce. It is capable of guiding and controlling business.
9. System of Interacting Business Activities: Marketing is the system through which a
business enterprise, institution or organization interacts with the customers with the
objective to earn profit, satisfy customers and manage relationship. It is the performance
of business activities that direct the flow of goods and services from producer to consumer
or user.
10. Marketing is a dynamic process. series of interrelated functions: Marketing is a complex,
continuous and interrelated process. It involves continuous planning, implementation and
control.

Scope/Functions of Marketing

The term scope of marketing can be understood in terms of the functions of the marketing manager.
The major purpose of marketing manager is to generate revenue for the business by selling goods
and services to the consumers. It lies in insuring the customer needs and converting them into
product or services and moving the product and services to the final user or customer, to satisfy
the wants and needs of specific segment of customers with emphasis on profitability and ensuring
the optimum use of resources available with the organization. The marketing manager has to
perform the research functions and exchange functions. They are discussed below:

Functions of Research

The modern marketing activities start with consumer research. It is referred with the analysis of
consumer attitudes, tastes, habits, reactions and preferences to the company’s product so that the
products may be produced according to the needs of the consumers. The major functions of
research are as follows:

Marketing Research: The marketing research is helpful in analyzing the customer’s behavior,
popularity of product, effectiveness of advertising, pricing policy, etc. In other words, it is the
systematic gathering, recording and analyzing of data about problems relating to the marketing of
goods and services. For making correct and timely decisions, the marketing manager analyses all
the available opportunities, threats, strengths and weaknesses of the organization and determine
the best opportunity to be pursue for it.

Product planning and development: Under modern marketing activities, product planning is
determined before the start of actual production. It is the process in which shape, size, color,
weight, design, packing, etc. of the product is determined on the basis of information gathered with
the help of market research. Product development involves decisions regarding shape, size, color,
weight, design, quality, brand, label, etc. as per the needs of the consumer, which will give
maximum satisfaction to the consumer and reasonable profit to the manufacturer.

Various marketing orientations

The Production Concept. This concept is the oldest of the concepts in business. It holds that
consumers will prefer products that are widely available and inexpensive. Managers focusing on
this concept concentrate on achieving high production efficiency, low costs, and mass distribution.
They assume that consumers are primarily interested in product availability and low prices. This

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orientation makes sense in developing countries, where consumers are more interested in obtaining
the product than in its features.

The Product Concept. This orientation holds that consumers will favor those products
that offer the most quality, performance, or innovative features. Managers focusing on this concept
concentrate on making superior products and improving them over time. They assume that buyers
admire well-made products and can appraise quality and performance. However, these managers
are sometimes caught up in a love affair with their product and do not realize what the market
needs. Management might commit the “better-mousetrap” fallacy, believing that a better
mousetrap will lead people to beat a path to its door.

The Selling Concept. This is another common business orientation. It holds that
consumers and businesses, if left alone, will ordinarily not buy enough of the selling company’s
products. The organization must, therefore, undertake an aggressive selling and promotion effort.
This concept assumes that consumers typically sho9w buyi8ng inertia or resistance and must be
coaxed into buying. It also assumes that the company has a whole battery of effective selling and
promotional tools to stimulate more buying. Most firms practice the selling concept when they
have overcapacity. Their aim is to sell what they make rather than make what the market wants.

The Marketing Concept. This is a business philosophy that challenges the above three
business orientations. Its central tenets crystallized in the 1950s. It holds that the key to achieving
its organizational goals (goals of the selling company) consists of the company being more
effective than competitors in creating, delivering, and communicating customer value to its
selected target customers. The marketing concept rests on four pillars: target market, customer
needs, integrated marketing and profitability.

Distinctions between the Sales Concept and the Marketing Concept:

1. The Sales Concept focuses on the needs of the seller. The Marketing Concept
focuses on the needs of the buyer.

2. The Sales Concept is preoccupied with the seller’s need to convert his/her product into
cash. The Marketing Concept is preoccupied with the idea of satisfying the needs of the customer
by means of the product as a solution to the customer’s problem (needs).

The Marketing Concept represents the major change in today’s company orientation that
provides the foundation to achieve competitive advantage. This philosophy is the foundation of
consultative selling.

The Marketing Concept has evolved into a fifth and more refined company orientation:
The Societal Marketing Concept. This concept is more theoretical and will undoubtedly influence
future forms of marketing and selling approaches.

The Societal Marketing Concept. This concept holds that the organization’s task is to
determine the needs, wants, and interests of target markets and to deliver the desired satisfactions
more effectively and efficiently than competitors (this is the original Marketing Concept).
Additionally, it holds that this all must be done in a way that preserves or enhances the consumer’s
and the society’s well-being.

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 This orientation arose as some questioned whether the Marketing Concept is an appropriate
philosophy in an age of environmental deterioration, resource shortages, explosive population
growth, world hunger and poverty, and neglected social services.

Are companies that do an excellent job of satisfying consumer wants necessarily acting in the best
long-run interests of consumers and society?

Need, Want, Demand

Needs

“Needs” is the basic human requirements like shelter, clothes, food, water, etc. which are essential
for human beings to survive. If we extend this further, other needs are education, healthcare or
even a social thing, for example, belonging to a certain society or self-expression. One can say
that the products which fall under the needs category of products do not require a push. Instead
the customer buys it themselves. But it’s actually not true. in today’s world with thousands of
brands competing in the same categories with identical offerings satisfying the same needs, even
the “needs category product” has to be pushed in the consumers’ mind. Example of needs category
products / sectors – Agriculture sector, Real Estate, Healthcare etc.

We all know about Maslow’s hierarchy of needs which categorizes needs into 5 levels starting
from physiological needs at the bottom and going up to self-actualization needs. But what’s
important as a marketer to know which level of need is your brand targeted to. Let’s look at some
of the examples of brands which are targeting different levels of needs

1. Physiological Needs – Food companies (Nestle, Pepsi, Coca Cola)

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2. Safety Needs – Insurance companies (ICICI Prudential, Tata AIG, HDFC Life)

3. Social Needs – Social networking sites (Facebook, Twitter, Instagram)

4. Esteem Needs – Luxury brands (iPhone, Mercedes, Estee Lauder)

5. Self-actualization needs – Non-Profit organizations and NGOs (UNICEF, Teach for India)

In marketing, there is another way to categorize needs. There are basically five types of consumers’
needs:

1. Stated Needs – As the name suggests, in this case, the consumer explicitly states what he
wants. For eg. “I need a phone”.

2. Real needs – This is more specific. So when the consumer wants a phone to remain connected
to his friends, family and colleagues, the actual need be a phone with high battery backup and not
high camera resolution.

3. Unstated needs – The consumer also expects warranty and other sorts of after sales service
when buying a phone which he might not say explicitly.

4. Delight needs – The consumer would like the phone manufacturer or the dealer to give him
some free gift or a promotional item (phone case, tempered glass, free SIM etc.), but he doesn’t
clearly express that he wants something with the phone.

5. Secret Needs – These are the needs which the consumer feels reluctant to admit; for example,
the consumer wants the phone for his status symbol but he feels uncomfortable to admit that status
is important to him.

In the above example, responding to only stated need ie., “I need a phone” doesn’t help in arriving
at a right product proposition. As a marketer, it is important to dig deeper and uncover not only
the real, but also his other needs: unstated need, delight need and secret needs.

Wants

"Wants" are a step ahead of needs Wants aren’t essential for humans to survive, but it’s associated
with needs Simply put, A want is a product desired by a customer that is not required for us to
survive. So, want is the complete opposite of need, which is essential for our survival. Wants aren’t
permanent and it regularly changes. As time passes, people and location change, wants change
accordingly.

Wants are directed by our surrounding towards reaching certain needs. Therefore, human’s wants
can be varied depending on each individual’s perception, environment, culture, and society. For
example, an Indian needs food but he may want a Dosa or Paratha while an American may want
Burger or Sandwich. Example of wants category products / sectors – Hospitality industry,
Electronics, FMCG, Consumer Durables etc.

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Elements of Marketing mix:

Marketing Mix is a set of marketing tool or tactics, used to promote a product or services in the
market and sell it. It is about positioning a product and deciding it to sell in the right place, at the
right price and right time. The product will then be sold, according to marketing and promotional
strategy. The components of the marketing mix consist of 4Ps Product, Price, Place, and
Promotion. In the business sector, the marketing managers plan a marketing strategy taking into
consideration all the 4Ps. However, nowadays, the marketing mix increasingly includes several
other Ps for vital development.

What is 4 P of Marketing

Product in Marketing Mix:

A product is a commodity, produced or built to satisfy the need of an individual or a group. The
product can be intangible or tangible as it can be in the form of services or goods. It is important
to do extensive research before developing a product as it has a fluctuating life cycle, from the
growth phase to the maturity phase to the sales decline phase.

A product has a certain life cycle that includes the growth phase, the maturity phase, and the sales
decline phase. It is important for marketers to reinvent their products to stimulate more demand
once it reaches the sales decline phase. It should create an impact in the mind of the customers,
which is exclusive and different from the competitor’s product. There is an old saying stating for
marketers, “what can I do to offer a better product to this group of people than my competitors”.
This strategy also helps the company to build brand value.

Price in Marketing Mix:

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Price is a very important component of the marketing mix definition. The price of the product is
basically the amount that a customer pays for to enjoy it. Price is the most critical element of a
marketing plan because it dictates a company’s survival and profit. Adjusting the price of the
product, even a little bit has a big impact on the entire marketing strategy as well as greatly
affecting the sales and demand of the product in the market. Things to keep on mind while
determining the cost of the product are, the competitor’s price, list price, customer location,
discount, terms of sale, etc.,

Place in Marketing Mix:

Placement or distribution is a very important part of the marketing mix strategy. We should
position and distribute our product in a place that is easily accessible to potential buyers/customers.

Promotion in Marketing Mix:

It is a marketing communication process that helps the company to publicize the product and its
features to the public. It is the most expensive and essential components of the marketing mix, that
helps to grab the attention of the customers and influence them to buy the product. Most of the
marketers use promotion tactics to promote their product and reach out to the public or the target
audience. The promotion might include direct marketing, advertising, personal branding, sales
promotion, etc.

What is 7 P of Marketing:

The 7Ps model is a marketing model that modifies the 4Ps model. As Marketing mix 4P is
becoming an old trend, and nowadays, marketing business needs deep understanding of the rise in
new technology and concept. So, 3 more new P’s were added in the old 4Ps model to give a deep
understanding of the concept of the marketing mix.

People in Marketing Mix:

The company’s employees are important in marketing because they are the ones who deliver the
service to clients. It is important to hire and train the right people to deliver superior service to the
clients, whether they run a support desk, customer service, copywriters, programmers…etc. It is
very important to find people who genuinely believe in the products or services that the particular
business creates, as there is a huge chance of giving their best performance. Adding to it, the
organisation should accept the honest feedback from the employees about the business and should
input their own thoughts and passions which can scale and grow the business.

Process in Marketing Mix:

We should always make sure that the business process is well structured and verified regularly to
avoid mistakes and minimize costs. To maximise the profit, Its important to tighten up the
enhancement process.

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Physical Evidence in Marketing Mix:

In the service industries, there should be physical evidence that the service was delivered. A
concept of this is branding. For example, when you think of “fast food”, you think of KFC. When
you think of sports, the names Nike and Adidas come to mind.

Customer value

Customer value is best defined as how much a product or service is worth to a customer. It's a
measure of all the costs and benefits associated with a product or service. Examples include price,
quality, and what the product or service can do for that particular person.

value delivery process:

Value delivery is the manner in which you design your products such that it gives maximum
value to the customer using it. The value delivered to customers can be in the form of products,
benefits, attributes etc. Anything which creates value for your customer should be involved in your
value delivery process.

The Value Delivery Process

Marketing is the process of Value Exchange. Value actually represents the exchange of tangible
goods, services, ideas, time and maybe other intangibles between buyers and sellers. In fact, the
key to a successful exchange is that each party has some value desired by the other. This has got
an impact on the entire Marketing Concepts' philosophy design and implementation.

Building and enhancing strong Buyer-Seller Business Relationships is a strong part - coefficient
of the Value Delivery Process. Most pragmatically, the Value Delivery Process is a Strategic
Marketing approach that differentiates a customer-oriented organization from the traditional
brand making and selling.

The Value Delivery Process brakes into three distinct phases:

A) Choosing the value where Marketing Management does its own “homework marketing”
before any product exists (e.g. market segmentation, targeting and positioning as the essence of
the first phase of strategic marketing.

B) Providing the value where Marketing Management decide the marketing mix criteria (For
example, Marketing tactics) that will provide a strong competitive and thus a differential
advantage (see previous posts).

C) Communicating the value where Marketing Management decides on the actual

implementation process - utilization of the Sales Force, Sales Promotion , Advertising and other
integrated communication tools.

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Understanding Consumer Behavior

Consumer behaviour is the study of how individual customers, groups or organizations select,
buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It refers to
the. actions of the consumers in the marketplace and the underlying motives for those actions.

Buying motives of consumer

Buying motives of a buyer refers to the influences or motivations forces which determine his
buying. In other words, a buying motive is the inner feelings, urge, instinct, drive, desire,
stimulus, thoughts, or emotion that makes a buyer buy a certain product or service to satisfy
his needs.

Buying Motives are the reason(s) you buy the goods and services that you choose. There are 3
categories of buying motives: Emotional, Rational, and Patronage. Emotional motives are
reasons to purchase based on feelings and emotions.

1. Physical, Psychological and Sociological Buying Motives:

The psychological buying motives are related to the satisfaction of basic human needs for
subsistence such as satisfaction of the needs for food, shelter and clothes, and security. The
psychological buying motives relates to the need for prestige or self-preservation, etc. the
sociological buying motives are related to the motives that exist at present and is expected in all
the social situations.

2. Acquired and Inherent Buying Motives:

The acquired buying motives are learned motives and are influenced by the environment factors.
Such motives are related to socioeconomic conditions and the level of education, such as economy,
information, work efficiency, profit facility, quality, beauty, fashion, social presage, acceptance,
etc.

The inherent buying motives are present in a person from his birth. It belongs to basic human
instincts whereas the acquired buying motives are concerned with the environment. They are
influenced by hunger, thirsts, sleep, leisure, security, playing entertainment, etc.

3. Primary and Selective Buying Motives:

The primary buying motives increase the general demands for products and not the specific
demands for a specified product/brand. The demands for radios, TVs, cars, motorcycles, etc. fall
under this category of primary motives. The selective buying motives influence for the purchase
of specific brands, for instance, the demands for Bajaj’s Chetak Scooter, Onida TV, Philips Radios,
etc.

4. Conscious and Dormant Buying Motives:

The conscious buying motives are such motives, which are identified by the buyer without any
help from marketing functions, like advertising, personal selling or promotional tools. The
conscious buying motives influence the satisfaction of presently existing needs of a customer. Such
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buying motives take shape within the sub-conscious minds of the customers and are not influenced
by the external environmental factors.

The dormant buying motives are silent motives and do not influence the buyers until their attention
is invited by the marketing functions. Thus, dormant buying motives are related with satisfaction
of those needs which are created by the marketing functions. A consumer does not possess the
knowledge of such needs without the persuasion of marketing activities.

5. Rational and Emotional Buying Motives:

Alfred Gross has classified the buying motives as emotional and rational.

A customer takes rational or economic buying decisions for availing at least a few of the
following advantages:

(i) Where the buying is more profitable.

(ii) Where there is saving of time.

(iii) Where there is similarity/uniformity in the products.

(iv) Where the item is simple to operate.

(v) Where there are different uses of the product.

(vi) Where it saves the space in keeping the product.

(vii) Where there is economy in use.

(viii) Where the product is of good design.

(ix) Where it is a better product comparing to other products.

(x) Where the product is durable and the consumer has confidence on its durability.

(xi) Where the product is easily available.

(xii) Where the product is made as a result of high level innovation.

(xiii) Where it maintains continuity of supply.

(xiv) Where the goods are available with complete set and services facility is available.

(xv) Where it is automatically working.

Emotional buying motives influence a person to purchase certain goods or services not because of
its rationality, but because of his emotion.

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Factors influencing buying behavior

In a general scenario, we’ve got five main factors that determine consumer behavior, i.e these
factors regulate if a target customer purchases a product or not. These factors are namely
Psychological, Social, Cultural, Personal, and Economic factors.

1. Psychological Factors

Interestingly, human psychology is actually an integral factor that influences consumer behavior
although these factors aren’t exactly easy to measure. A few integral psychological factors driving
the behavior of consumers are:

• Motivation

Motivation actually becomes a considerable defining factor influencing a person’s buying

behavior. A popular motivation theory is Maslow's theory of hierarchy of needs in which he
developed a model that lays the foundation for 5 different levels of human needs where he
lays the base with psychological needs and moves on to safety needs, social needs, esteem
needs and finally heading to self-actualization needs. Amongst these requirements, our basic
requirements and security needs are generally put above all needs.

For instance, The U.S. Army’s famous “Be All You Can Be” slogan and advertising
campaigns encouraged young adults to join the army (self-actualization).

• Perception

Our perception is shaped when we gather information regarding a product and examine it to
generate a relevant image regarding a certain product.

Whenever we see an advertisement, review, feedback or promotion regarding a product, we

form an image of that item. As a result, our perception plays an integral role in shaping our
purchasing decisions.

Being in the times where we are gathering constant information by simultaneously surfing
through the Internet, watching TV, and exploring through our cell phones, the perception
we gain through all these resources plays a definite role in regulating our consumer
behavior.

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 • Learning

Every time we purchase a product we get a deeper knowledge about it through experience.
This learning mainly depends on our experience, knowledge, and skills.

This learning can either be cognitive or conditional. While in cognitive learning, we use our
knowledge for finding satisfaction and fulfilling his needs with the item we purchase,
conditional learning is where we get constantly exposed to a situation, enabling us to respond
towards it.

For instance, we all seek resources through nonexperiential learning as we read reviews for
books and products on platforms like Amazon, learn about film reviews through platforms
like Rotten Tomatoes, and explore restaurants through Yelp.

• Attitudes and Beliefs

We’ve all got certain attitudes or beliefs that consciously or subconsciously prompt our
purchasing decisions. For instance, while your friend who believes caffeine is adverse for
one’s health may prefer tea, you who believe that caffeine energizes us, may prefer coffee.
Our attitude and what we believe influence our behavior towards a product and also play a
key role in shaping the product’s brand image. So, understanding a consumer’s attitude and
belief becomes useful for marketers to design their marketing campaigns.

2. Social Factors

We are all social animals so of course our purchasing decisions are impacted to some extent by
the people around. We are constantly working on imitating other human beings, longing to fit in
our surroundings. As a result, social factors influence our buying behavior regarding items. Some
of these factors include:

• Family

Our families actually have a considerable role to play in impacting our purchasing behavior.
We form an inclination or aversion towards certain products from our childhood by
observing our families use that product and persist in using those products as we grow up.

For instance, if our family members are fond of Papa Jones, we would subconsciously end
up choosing Papa Jones over say, Pizza Hut or Domino’s.

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 • Reference Groups

Reference groups are basically groups of people with whom we associate ourselves. These
include clubs, schools, professional or playgroups, churches, and even acquaintances or a
group of friends, etc. The people in the reference groups normally have a common pattern
of purchasing and an opinion leader who influences them in terms of their buying behavior.

• Roles and status

We are all of course influenced by the role that we hold in society. The higher position we
hold, the more our status affects what and how much we purchase. For instance, the CEO of
a company and a normal employee would have a varied buying pattern.

3. Cultural factors

We all have our values and ideologies that are shaped by the values and ideologies of the society
we exist in and the community we belong to. Our behavior is consciously or subconsciously driven
by the culture followed by that particular community.

For instance, let’s take the example of McDonald's India

India has a massive consumer base with McDonald’s has adjusted its menu to match the tastes
and preferences of the local community in whose vicinity it resides. For instance, on account of
cows being sacred and widely worshipped in India, chicken has been put in place of beef. The fast-
food corporation introduced McCurry Pan in India, a baked menu item consisting of curried
vegetables.

A few significant cultural factors include :

• Culture

Our cultural factors are basically basic requirements, values, wants behaviors, and
preferences that are observed and absorbed by us from our close family members as well as
other significant people around us.

• Subculture

Amongst a cultural group, we have several subcultures. These groups share a common set
of values and beliefs. They can consist of people from varied nationalities, religions, caste,
and geographies. An entire customer segment is formed by this customer segment.

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 We’ve taken an easy example of Burger King here. In their advertising strategy, the
platform wished its “Ramadan Kareem” implying to have a generous Ramadan.

Burger King has adapted to the Muslim culture and created its advertisement in Ramadan
style by showing a mostly eaten burger, presented in the shape of a crescent moon.

• Social Class

Each society all over the globe is defined and known by some form of social class. This
social class is determined collectively by our family backgrounds, occupation, education,
and residence location. Our social class is another component holding the reins for consumer
behavior.

4. Personal Factors

Alongside social, psychological, and cultural factors, we all have factors that are personal to us
that influence our choices. These factors vary from person to person, introducing varied
perceptions and behavior.

Some of these personal factors include:

• Age

Age is one of the primary factors that impact our preferences. The vibrant and flashy
purchasing choices of a teenager would obviously differ from what an elderly person
purchases. Meanwhile, we have middle-aged people who are naturally more focused on
purchasing properties, houses, or vehicles.

For instance, as Baby Boomers proceed for retirement they are targeted by marketers with
messages regarding prescription drugs as well as other health care items such as home,
financial security, or insurance, all of which are relevant issues with regard to their age.

• Income

Our income definitely impacts our purchasing behavior. The higher our income, the more
purchasing power we hold and vice versa. Higher disposable income compels us to spend
more on luxurious items while a lower or mediocre income makes us spend more on our
basic needs like education, groceries, and clothing.

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 • Occupation

Our occupation largely steers our purchasing decision making. We all tend to purchase the
items that are relevant or suitable for our profession. For instance, a businessman would
have different clothes purchasing pattern in comparison to an artist.

• Lifestyle

Our way of life is one of the most powerful influencers that controls our choices. Our
lifestyle dominates our buying behavior quite significantly. Suppose we are on a diet then
the products we purchase will also complement our diet, from food, weighing scale to using
protein.

For instance, Oprah Winfrey’s brand has been developed to charm women that are socially
conscious seekers, readers, idealists, self-helpers, working women, who work towards
achieving balance and self-fulfillment.

5. Economic Factors

The purchasing quirks and decisions of the consumer largely rely upon the market or nation’s
economic circumstances. The more that a nation is prosperous and its economy stable, the larger
will be the money supply of the market and the consumer’s purchasing power.

A strong, healthy economy brings purchasing confidence while a weak economy reveals a strained
market, marked by a weakened purchasing power and unemployment.

Some significant economic factors include:

• Personal Income:

Our personal income is the criteria that dictate the level of money we will spend on buying
goods or services. There are primarily two kinds of personal incomes that a consumer has
namely disposable income and discretionary income.

Our disposable income is mainly the income that remains in hand after removing all
necessary payments such as taxes. The greater the disposable personal income the greater
would be the expenditure on several products, and the same would be the case when it is the
other way around.

Meanwhile, our discretionary personal income would be the income that remains after
managing all the basic life necessities. This income is also used when it comes to purchasing
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 shopping goods, durables, luxury items, etc. An escalation in this income leads to an
improvement in the standard of living which in turn leads to greater expenditure on shopping
goods.

• Family Income:

Our family income is actually an aggregate of the sum total of the income of all our family
members. This income also plays a considerable role in driving consumer behavior. The
income that remains after meeting all the basic life necessities is what is then used for buying
various goods, branded items, luxuries, durables, etc.

• Income Expectations:

It's not just our personal and family income that impacts our buying behavior, our future
income expectations also have a role to play. For instance, if we expect our income to rise
in the future, we would naturally spend a greater amount of money in purchasing items. And
of course, in case we expect our income to take a plunge in the near future, it would have a
negative influence on our expenditure.

• Consumer Credit:

The credit facilities at our behest also impact our purchasing behavior. This credit is
normally provided by sellers, either directly or indirectly via banks or financial institutions.
If we have flexible credit terms as well as accessible EMI schemes, our expenditure on items
is likely to increase and in less flexible credit terms would result in the opposite.

• Liquid Assets:

Even the liquid assets we’ve maintained influence our purchasing behavior. In case you are
wondering, these are the assets that get promptly converted into cash such as stocks, mutual
funds, our savings or current accounts. If we have more liquid assets, there is a greater
likelihood of us spending more on luxuries and shopping items. Lesser liquid assets
meanwhile result in lesser expenditure on these items.

• Savings:

The savings generated from our personal income are also regulating our buying behavior.
For instance, if we take the decision of saving more from our income for a certain period of

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 time, our expenditure on goods and services would be lesser and for that period and if we
wish to save less, our expenditure on such items would increase.

Buying habits

Buying habits are the tendencies customers have when purchasing products and services.
These tendencies come from a variety of different factors, many of which seem obvious and
unimportant. When examining buying habits, take into account both physical and mental factors
that make up your customer or client base.

Stages in consumer buying decision process

The consumer decision-making process involves five basic steps. This is the process by which
consumers evaluate making a purchasing decision. The 5 steps are problem recognition,
information search, alternatives evaluation, purchase decision and post-purchase evaluation.

Stage 1: Need recognition

In this first stage, the consumer recognizes that he has an unmet need and is driven to action by a
need or desire. Unsatisfied needs create discomfort to the consumer, so that he begins to recognize
that this need can be met by acquiring or consuming goods and services.
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This desire to meet this need over time becomes strong enough to motivate a person to decide to
make a purchase. This recognition of a need can arise internally at any time. When you are
watching television, you are on the computer, you are on the boring sofa, you are stuck in traffic,
etc.

Or in another case, the need may be numbed within it until an external stimulus wakes it up, such
as an advertisement or the sight of a product or service.

The depletion of a product (the ink in your pen runs out) or dissatisfaction with the product you
are currently using can also trigger the decision process.

However, becoming aware of the need is not enough to generate the purchase. As consumers, we
have many needs and desires, but finite amounts of time and money. For this reason, there is also
competition between our needs. Therefore, the consumer quickly once recognized that he has an
unmet need, proceeds to the second stage of the consumer purchase decision process.

Stage 2: Information and Alternatives Search

In this second stage of the consumer buying decision process, the consumer identifies alternative
products and brands that are able to meet their needs, and therefore proceeds to gather information
about them from different sources. Whether asking acquaintances or searching the internet.

Most commonly, alternative products are identified first and then alternative brands. The following
factors influence the search for alternatives:

• The amount of information that the consumer already has from experiences and other
sources.
• Consumer confidence in that information.
• The expected value of the additional information or, in other words, what other information
is considered worth acquiring.

After identifying the different alternatives with which the consumer considers that it could meet
their needs, this proceeds to what is the third stage of the process: evaluate the alternatives.

Stage 3: Evaluation of Alternatives

In this third stage of the consumer buying decision process, the consumer ponders the pros and
cons of the identified alternatives.

When some satisfactory alternatives have been identified, the consumer proceeds to evaluate them
before making a decision. The evaluation may involve a single or several criteria, with which the
alternatives are compared. For example, price, quality, ease of use, time, durability or color.

When multiple criteria are involved, it is common that not all criteria have equal preponderance.
Ease of use, for example, could be more important than price. As experience is often limited and
information from sources such as advertising or friendships can be biased, evaluations may be
incorrect from the point of view of the facts.
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That is, the consumer may believe that the price of the A brand is more expensive than that of the
B brand when in fact it is the opposite.

As business owners or marketers, we must closely observe consumers to determine what criteria
of choice they follow, to identify any changes that may occur in their criteria or priorities, and to
correct any unfavorable misperceptions related to our product or service.

Stage 4: Purchase Decision

In this 4 stage of the consumer buying decision process, the consumer decides to buy or not buy,
and makes other decisions related to the purchase.

After searching and evaluating, the consumer has to decide whether or not to buy. Thus, the first
result is the decision to buy or not the alternative evaluated as the most desirable. This part of the
process the consumer can make the decision in 1 hour or up to 1 month later. Everything will
depend on the type of product or service and how large the investment is to acquire said product
or service.

In this part of the process it can happen that the consumer does not make the purchase after finding
complicated the way to acquire said product or service. What will make you consider other
alternatives.

On the other hand, if the decision is to buy, you have to make a series of related decisions related
to the characteristics, where and when to make the actual transaction, how to take possession or
receive the delivery, the method of payment and other issues. So the decision to make a purchase
is actually the beginning of an entirely new series of decisions that can be as time consuming and
as difficult as the initial one.

Once the consumer has made the decision, he proceeds to make the purchase and feel happy for
having satisfied an intrinsic desire or need.

Stage 5: Post Purchase Behavior

Finally, at this fifth stage of the consumer buying decision process, the consumer seeks to ensure
that the choice he made was correct.

What the consumer learns in his journey through the purchase process has an influence on how he
will behave the next time the same need is pressed. Moreover, new opinions and beliefs have been
formed and the old ones have been corrected. Therefore, this time, we have a more expert
consumer in the field.

Therefore, as business owners and marketers, we must also assess how they behave in consumer
after making the purchase. Do you feel happy with the product? Are you dissatisfied with the
service? Were your product expectations higher? For this, it is important to carry out market studies
or surveys to be able to determine if the product or service we offer meets expectations and meets
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needs. When not, it is the ideal situation to consider improving our product or service, or making
changes in the way we market and promote our product or service.

Types of consumer buying decisions

1. Complex buying behavior

Complex buying behavior is encountered particularly when consumers are buying an expensive
product. In this infrequent transaction, consumers are highly involved in the purchase decision.
Consumers will research thoroughly before committing to invest.

Consumer behaves very differently when buying an expensive product or a product that is
unfamiliar to them. When the risk of buying a product is very high, a consumer consults friends,
family, and experts before making the decision.

For example, when a consumer is buying a car for the first time, it’s a big decision as it involves
high economic risk. There is a lot of thought on how it looks, how his friends and family will react,
how will his social status change after buying the car, and so on.

In complex buying behavior, the buyer will pass through a learning process. He will first develop
beliefs about the product, then attitudes, and then make a thoughtful purchase choice.

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For complex buying behavior customers, marketers should have a deep understanding of the
products. It is expected that they help the consumer to understand their product. It is important to
create an advertising message in a way that influences the buyer’s beliefs and attitudes.

2. Dissonance-reducing buying behavior

In dissonance-reducing buying behavior, consumer involvement is very high. This might be due
to high prices and infrequent purchases. In addition, there is low availability of choices with fewer
significant differences among brands. In this type, a consumer buys a product that is easily
available.

Consumers will be forced to buy goods that do not have too many choices and therefore consumers
will be left with limited decision making. Based on the products available, time limitations, or
budget limitations, consumers buy certain products without a lot of research.

For example, a consumer who is looking for a new collapsible table that can be taken for camping
quickly decides on the product based on a few brands available. The main criteria here will be the
use and the feature of the collapsible table and the budget available to him.

Marketers should run after-sale service camps that deliver focused messaging. These campaigns
should aim to support consumers and convince them to continue with the choice of their brand.
These marketing campaigns should focus on building repeat purchases and referrals by offering
discounts and incentives.

3. Habitual buying behavior

Habitual Buying Behavior is depicted when a consumer has low involvement in a purchase
decision. In this case, the consumer is perceiving only a few significant differences between
brands.

When consumers are buying products that they use for their daily routine, they do not put a lot of
thought. They either buy their favorite brand or the one that they use regularly – or the one available
in the store or the one that costs the least.

For example, when a consumer buys an energy drink, he tends to buy the flavor/taste that he likes
without actually putting in a lot of research and time. Many products fit into this category. Products
such as chocolates, cakes, juices, etc., all fit into this product category.

Consumers just go for it and buy it – there is no brand loyalty. Consumers do not research or need
information regarding the purchase of such products.

Habitual buying behavior is influenced by radio, television, and print media. Moreover, consumers
are buying based on brand familiarity. Hence marketers must use repetitive advertisements to build
brand familiarity. Further to initiate product trial, marketers should use tactics like price drop
promotions and sales promotions.

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Marketers should attract consumers using visual symbols and imagery in their advertising.
Consumers can easily remember visual advertisements and can associate with a brand.

4. Variety seeking buying behavior

In variety-seeking consumer behavior, consumer involvement is low. There are significant

differences between brands. Here consumers often do a lot of brand switching. The cost of
switching products is low, and hence consumers might want to try out new products just out of
curiosity or boredom. Consumers here, generally buy different products not because of
dissatisfaction but mainly with an urge to seek variety.

For example, a consumer likes to buy a cookie and choose a brand without putting much thought
into it. Next time, the same consumer might choose a different brand out of a wish for a different
taste. Brand switching occurs often and without intention.

Brands have to adopt different strategies for such types of consumer behavior. The market leader
will persuade habitual buying behavior by influencing the shelf space. The shelf will display a
large number of related but different product versions.

Marketers avoid out-of-stock conditions, sponsor frequent advertising, offer lower prices,
discounts, deals, coupons, and free samples to attract consumers.

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