CHAPTER THREE

UNDERSTANDING THE MARKET

 WHAT IS MARKET?
• To a marketer, a market is a group of people
(actual and potential buyers of a product) with
needs or wants to satisfy, money to spend
and willingness to spend it.
• The size of the market is determined by the
size of buyers.
• There are 6 types of customer market
 Cont’d
The relationship between the industry and the market is shown in the following figure.

Communication

Industry goods and services Market

(Collection of sellers) Money (Collection of buyers)

Information
Consumer market and buying behavior

Consumer buying behavior:

• Means the behavior consumers exhibit when
searching for information about product to
buy, evaluate one brand against another, and
when they are using and exposing the
product after using it.
 Cont’d
• Buyer is also influenced by:-
personal characteristics
marketing mix
factors present in the external environment
Before planning its marketing, a company
needs to identify its target consumers
 Cont’d
• Based on the degree of buyer involvement and the
degree of differences among brands, we can
distinguish four types of consumer buying behavior.
They are:
1. Complex buying behavior: Consumers engage in
complex buying behavior when they purchase
complex and expensive products and perceive
significant differences among brands.
This is the case when the product is expensive, bought
infrequently, risky, and highly self-expressive.
 Cont’d
2. Dissonance-reducing buyer behavior: occurs
when consumers are highly involved with
an expensive, infrequent, or risky purchase,
but see little difference among brands.
• The high involvement is based on the fact that
the purchase is expensive, infrequent, and
risky.
 Cont’d
3. Habitual Buying Behavior: occurs when consumers
have low involvement and there is absence of
significant brand difference
When the product is of low cost, frequently purchased, and
less risky and when there is no significant brand
differences, the involvement of consumers will be low.
• They will go to the store and reach for the brand without
making hard effort
4. Variety-seeking Buying Behavior: Some buying
situations are characterized by low-consumer
involvement but significant brand differences.
Model of Consumer Behavior
Most large companies research consumer buying decisions in great detail to
answer questions about what consumers buy, where they buy, how they buy,
how much they buy, when they buy, and why they buy.

Environmental Factors Buyer's Black Box Buyer's Response

Marketing Environmental Buyer Decision Process

Stimuli Stimuli Characteristics

 Product o Economic Attitudes Problem recognition Product choice

 Price o Technological Motivation Information search Brand choice
 Place o Political Perceptions Alternative evaluation Dealer choice
 Promotion o Cultural Personality Purchase decision Purchase timing
oDemographic Lifestyle Post-purchase behavior Purchase amount
o Natural Knowledge
 The buyers decision process

1. Need recognition: normally any purchase decision

begins with the recognition of needs or problem.
• The need may be triggered by internal stimuli such
as hunger, thirst or sex.
• For e.g. before thinking about purchasing
something to eat a person first should be hungered.

• It may also be triggered by external stimuli for

• e.g. a person passes a restaurant and smell nice
food that stimulates his hunger.
 Cont’d
2. Information Search: Information Search
Once the need is identified, it’s time for the consumer
to seek information about possible solutions to the
problem.
Internal search
• Scanning one’s memory to recall previous
experiences with products or brands

External search
Personal sources—family and friends
Commercial sources—advertising, Internet

Public sources—mass media, consumer organizations

3. Evaluation of Alternatives: The alternatives
are evaluated on the basis of the consumer’s
criteria and the relative importance of these
criteria.
now the consumer has to evaluate
and understand which product
would be properly right.
 Cont’d
4. Purchase Decision: The purchase act involves
the exchange of money or a promise to pay for
a product, or support in return of ownership
of a specific goods
the act by the consumer to buy the most
preferred brand.
• 5. Post-purchase Behavior
• After buying a product, the consumer
compares it with expectations and is either
satisfied or dissatisfied. Satisfaction or
dissatisfaction affects
• The post-purchase evaluation may have
important consequences for a brand. A
satisfied customer is very likely to become a
loyal and regular customer.
Major Factors Influencing Buying Behavior

Cultural Factors Social Factors

• Buyer’s culture • Reference groups
• Buyer’s subculture • Family
• Buyer’s social class • Roles and status

Personal Factors Psychological Factors

• Age and life-cycle stage • Motivation
• Occupation • Perception
• Economic situation • Learning
• Lifestyle • Beliefs and attitudes
• Personality and self-
concept
1. Cultural Factors
Culture is the learned values, perceptions, wants, and behavior from

family and other important institutions.

Subculture are groups of people within a culture with shared value systems

based on common life experiences and situations.

For instance: nationalities, religions, racial groups & geographic regions.

2. Social Factors

Social classes are society’s relatively permanent and ordered divisions

whose members share similar values, interests, and behaviors.

Social class is measured by a combination of occupation, income,

education, wealth, and other variables.
3. Personal Factors
Age and life-cycle stage
Occupation affects the goods and services bought by consumers
Economic situation
Lifestyle is a person’s pattern of living as expressed in his or her
psychographics.
Personality refers to the unique psychological characteristics that
lead to consistent and lasting responses to the consumer’s
environment.
Self-concept refers to people’s possessions that contribute to and
reflect their identities.
4. Psychological Factors
A. Motivation
Motive: A need becomes a motive when it is aroused to a sufficient level of
intensity causing a person to act.

Biogenic Needs – Arising from physiological states of tension such as

hunger, thirst, discomfort.

Psychogenic needs – Arising from psychological states of tension such as

need for recognition, esteem or belonging.

B. Perception

Perception is the process by which people select, organize, and

interpret information to form a meaningful picture of the
C. Learning
Learning is relatively permanent changes in an
individual’s behavior arising from experience
D. Attitudes
Attitudes describe a person’s relatively consistent
favorable or unfavorable evaluations, feelings, and
tendencies toward an object or idea. Types of attitude
1. Enthusiastic
2. Hostile
3. Positive
4. Negative
5. Indifferent
 Cont’d
• All our needs can be classified into two
categories – primary and secondary.
• Primary needs or motives are the physiological
needs, which we are born with, such as the need
for air, water, food, clothing, shelter and sex.
• The secondary needs are our acquired needs,
which we have developed in response to the
individuals’ psychological make-up and his
relationship with other members of the society.
Organizational Buying Behavior

Organizational Buying is the decisions making

process, by which formal organizations establish
the need for purchased products and services and
identify, evaluate and choose between alternative
brands and suppliers.
It refers to the buying behavior of the organizations that
buy goods and services for use in the production of other
products and services or to resell or rent them to others for
a profit.
•Nature of the Buying Unit
• Compared with consumer purchases, a
business purchase usually involves more
decision participants and a more
professional purchasing effort.
• Often, business buying is done by trained
purchasing agents
 Cont’d
• There are three major types of buying
situations.
1. straight re-buy, the buyer reorders something
without any modifications.
• Based past buying satisfaction, the buyer
simply chooses.
2. modified re-buy, the buyer wants to modify
product specifications, prices, terms, or
suppliers.
 Cont’d
3. A company buying a product or service for the first
time faces a new-task situation.
• In such cases, the greater the cost or risk, the
larger the number of decision participants and the
greater their efforts to collect information will be.
• In the new-task situation, the buyer must decide
on product specifications, suppliers, price limits,
payment terms, order quantities, delivery times,
and service terms.
 Decision making process in
organizational buying
• There are eight stages of the business buying
process.
• Buyers who face a new-task buying situation
usually go through all stages of the buying
process.
• Buyers making modified or straight re-buys
may skip some of the stages.
 Cont’d
1. Problem Recognition: can result from
internal or external stimuli.
• Internally, a machine may break down and
need new parts.
• Externally, the buyer may get some new ideas
at a trade show, see an ad, or receive a call
from a salesperson who offers a better
product or a lower price
 Cont’d
2. General Need Description : describes the
characteristics and quantity of the needed
item.
3. Product specification describes the technical
criteria analysis its cost
 Cont’d
4. Supplier Search: The buyers can compile a
small list of qualified suppliers by reviewing
trade directories, doing a computer search, or
phoning other companies for
recommendations, internet to find suppliers
etc
 Cont’d
5. Proposal Solicitation: In the proposal solicitation
stages of the business buying process, the buyer
invites qualified suppliers to submit proposals
6. Supplier Selection: The members of the buying
center now review the proposals and select a
supplier or suppliers.
• Criteria: quality products and services, on-time
delivery, ethical corporate behavior, honest
communication, and competitive prices.
 Cont’d
7. Order-Routine Specification :It includes the
final order with the chosen supplier or
suppliers and lists items such as technical
specifications, quantity needed, expected time
of delivery, return policies, and warranties.
8. Performance Review
 Factors influencing organizational buying
Decision
• Environmental Factors
• Business buyers are influenced heavily by
factors in the current and expected economic
environment, Business buyers also are affected
by technological, political, and competitive
developments in the environment.
• Culture and customs can strongly influence
business buyer reactions to the marketer’s
behavior and strategies.
 Cont’d
• Organizational Factors
• Each buying organization has its own
objectives, policies, procedures, structure, and
systems,
• the business marketer must understand these
factors well.
 Cont’d
• Interpersonal Factors
• The buying center usually includes many
participants who influence each other, so
interpersonal factors also influence the business
buying process.
• Participants may influence the buying decision
because they control rewards and punishments,
are well liked, have special expertise, or have a
special relationship with other important
participants.
 Cont’d
• Individual Factors
• Each participant in the business buying-
decision process brings in personal motives,
perceptions, and preferences.
• These individual factors are affected by
personal characteristics such as age, income,
education, professional identification,
personality, and attitudes toward risk. Also,
buyers have different buying styles.
 Quiz 5%
1.List and discuss three major types of buying
situations illustrate it with example
2. List and discuss Types of attitude illustrate it
with example
 Thank
You