CHAPTER THREE

ANALYZING CONSUMER AND BUSINESS

MARKETS
What is market?
 Market: people or institutions with
sufficient purchasing power, authority, and
willingness to buy
Types Of Markets
1) Consumer Market: Purchasers and
household members who intend to
consume or benefit from the purchased
products and do not buy products to make
products.
2) Business Market :goods or services
purchased for use either directly or
indirectly in the production of other goods
and services for resale.
 Meaning and concepts of Consumer
Behavior
Who is the consumer?
 Consumer is the person who identifies a need or desire,
searches for a product to satisfy this need, buys the
product and then consumes the product in order to
satisfy the need.
 However, in many cases, different individuals may be
involved in this chain of events.
 Consumer behavior: the study of the processes
involved when individuals or groups select, purchase,
use, or dispose of products, to satisfy needs and
desires.
 Model of Consumer Behavior
 Consumers make many buying decisions every day.
 Most large companies’ research consumer buying decisions in great
detail to answer questions about what consumers buy where they buy,

how and how much they buy, when they buy, and why they buy.
Marketers can study actual consumer purchases to find out
• What they buy,
• Where, and
• How much.
 But learning about the ways of consumer buying behavior is not so
easy—the answers are often locked deep within the consumer's head.
Model of Consumer/Buyer
Behavior
Marketing stimuli consist of the four Ps: product, price,
place, and promotion.
Other stimuli include major forces and events in the
buyer's environment:
 Economic,
 Technological,
 Political, and
 Cultural.
All these inputs enter the buyer's black box, where they
are turned into a set of observable buyer responses:
product choice, brand choice, dealer choice, purchase
timing, and purchase amount.
 Factors influencing consumer behavior
We can say that following factors can influence the Buying
decision of the buyer:
a. Cultural
b. Social
c. Personal
d. Psychological
 A. Cultural Factors
Cultural factors exert the broadest and deepest influence on
consumer behavior.
The marketer needs to understand the role played by the
buyer's culture, subculture, and social class.
I. Culture
Culture is the learned values, perceptions,
wants, and behavior from family and other
important institutions
Culture is the most basic cause of a person's wants and
Growing up in a society, a child learns basic values,
perceptions, wants, and behaviors from the family and
other important institutions.
Every group or society has a culture, and cultural
influences on buying behavior may vary greatly from
country to country.
A child in the United States normally learns
or is exposed to the following values:
achievement and success, activity and
involvement, efficiency and
practicality,progress, material comfort,
individualism, freedom, humanitarianism,
youthfulness, and fitness and health.
 International marketers must understand the
culture in each international market and
 II. Subculture
Each culture contains smaller subcultures or groups of
people with shared value systems based on common life
experiences and situations.
Subcultures include nationalities, religions, racial groups,
and geographic regions.
Many subcultures make up important market segments,
and marketers often design products and marketing
programs tailored to their needs.
 III. Social Class
Almost every society has some form of social class
structure.

Marketers are interested in social class because people

within a given social class tend to exhibit similar buying
behavior.
Social classes show distinct product and brand
preferences in areas such as clothing, home furnishings,
leisure activity, and automobiles.
B. Social Factors
A consumer's behavior also is influenced by social factors,
such as
 The consumer's small groups,
 Family, and
 Social roles and status.
 I. Groups
Many small groups influence a person’s behavior.
Groups that have a direct influence and to which a person
belongs are called membership groups.
In contrast, reference groups serve as direct (face- to-
face) or indirect points of comparison or reference in
forming a person's attitudes or behavior.
Reference groups to which they do not belong often
influence people.
 Marketers try to identify the reference groups of their
target markets.
The importance of group influence varies across products
and brands.
Manufacturers of products and brands subjected to strong
group influence must figure out how to reach opinion
leaders—
 Opinion leaders are people within a reference group
who, because of special skills, knowledge, personality,
or other characteristics, exert influence on others.
Many marketers try to identify opinion leaders for their
products and direct marketing efforts toward them.
 II. Family
Family members can strongly influence buyer behavior.

The family is the most important consumer buying

organization in society, and it has been researched
extensively.

Marketers are interested in the roles and influence of the

husband, wife, and children on the purchase of different
products and services.
.
 III. Roles and Status
A person belongs to many groups—family, clubs,
organizations.
The person's position in each group can be defined in
terms of both role and status.
 A role consists of the activities people are expected to
perform according to the persons around them.
 People buy a products to communicate their role and
status.
C Personal Factors
A buyer's decisions also are influenced by personal
characteristics such as:
 The buyer's age and life- cycle stage,
 occupation,
 Economic situation,
 Lifestyle, and
 Personality and self-concept.
I. Age and Life-Cycle Stage

People change the goods and services they buy

over their lifetimes.
Tastes in food, clothes, furniture, and recreation
are often age related.
Buying is also shaped by the stage of the family
life cycle—the stages through which families might
pass as they mature over time.
Marketers often define their target markets in
terms of life-cycle stage and develop appropriate
products and marketing plans for each stage.
II. Occupation
A person's occupation affects the goods and services
bought.

Blue-collar workers tend to buy more rugged work

clothes, whereas white-collar workers buy more business
suits.

 E.g. computer software companies will design different

products for brand managers, accountants, engineers,
lawyers, and doctors.
III. Economic Situation
A person's economic situation will affect product choice.
Marketers of income-sensitive goods watch trends in
personal income, savings, and interest rates.
If economic indicators point to a recession, marketers can
take steps to
 Redesign,
 Reposition, and
 Re-price their products closely.
IV. Lifestyle
 People coming from the same subculture, social class, and
occupation may have quite different lifestyles.
 Life style is a person's pattern of living as expressed in his or her
psychographics.
 Lifestyles are shaped partly by whether consumers
are money constrained or time constrained.
 Lifestyle captures something more than the person's social class or
personality.
V. Personality
 Each person's distinct personality influences his or her buying
behavior.

 Personality refers to the unique psychological characteristics that

lead to relatively consistent and lasting responses to one's own
environment.

 Personality is usually described in terms of traits such as self-

confidence, dominance, sociability, autonomy, defensiveness,
adaptability, and aggressiveness.

 Personality can be useful in analyzing consumer behavior for

certain product or brand choices.

 For example, coffee marketers have discovered that heavy coffee

drinkers tend to be high on sociability.
 D. Psychological Factors
A person's buying choices are further influenced by four
major psychological factors:
 Motivation,
 Perception,
 Learning, and
 Beliefs and attitudes.
 I. Motivation
Motivation is the driving force within individuals that
impels them to action.
A person has many needs at any given time.
Some are biological, arising from states of tension such as hunger,
thirst, or discomfort.
Others are psychological, arising from the need for recognition,
esteem, or belonging.
For example, when you are very hungry, you
are extremely motivated to find food.
Perhaps when you need a new pair of pants,
you are a bit less motivated to fulfill this need
as compared to your need for food. In the case
of needing pants, it is important for marketers
to help increase your motivation and/or specify
your need for their products

.
 III. Perception
 Perception is the process by which people select, organize, and
interpret information to form a meaningful picture of the world.
A motivated person is ready to act.
How the person acts is influenced by his or her own perception of
the situation.
All of us learn by the flow of information through our five senses:
sight, hearing, smell, touch, and taste.
However, each of us receives, organizes, and interprets this sensory
information in an individual way.
 IV. Learning
When people act, they learn.
Learning describes changes in an individual's behavior arising from
experience.
Learning theorists say that most human behavior is learned.
 Learning occurs through the interplay of drives, stimuli, cues,
responses, and reinforcement.
 Suppose you buy an HP computer. If your experience is
rewarding, your response to computers of HP will be
positively reinforced. Later, when you want to buy a
printer, you may assume that because HP makes good
computers, it also makes good printers.
V. Beliefs and Attitudes
 Through doing and learning, people acquire beliefs and attitudes.
These, in turn, influence their buying behavior.
 A belief is a descriptive thought that a person has about something.
Beliefs may be based on knowledge, opinion, or faith,
and they may or may not carry an emotional charge.
If some beliefs are wrong and inhibit purchase, the
manufacturer will want to launch a campaign to
correct these beliefs.
 An attitude is a person’s enduring favorable or
unfavorable evaluations, emotional feelings, and
action tendencies toward some object or idea.
 People have attitudes toward almost everything:
religion, politics, clothes, music, food.
 Attitudes put them into a frame of mind of liking or
disliking an object, moving toward or away from it.
The Buying Decision Process
1.Need Recognition
2.Information Search
3.Evaluation of Alternatives
4.Purchase Decision
5.Post purchase Behavior
Need Recognition: The buying process starts with need recognition. The
buyer recognizes a problem or need. The need can be triggered by
internal and external stimuli
Information Search: The consumer can obtain information from any of
several sources. These include personal sources, commercial sources,
experiential sources.
Evaluation of Alternatives: Marketers should study buyers to find out
how they actually evaluate brand alternatives. If they know what
evaluative processes go on, marketers can take steps to influence the
buyer's decision.
Purchase Decision: the consumer's purchase decision will be to buy the
most preferred brand, but two factors can come between the purchase
intention and the purchase decision. The first factor is the attitudes of
others. The second factor is unexpected situational factors.
Post purchase Behavior: After purchasing the product, the consumer
will be satisfied or dissatisfied and will engage in post purchase
behavior of interest to the marketer and word-of mouth-
communication.
 Part II
Business Markets and Buying Behavior
A. What is a Business Market?
The business market includes firms that buy goods and services in
order to produce products and services to sell to others.
The business marketer needs to know the following:
 Who are the major participants?
 In what decisions do they exercise influence?
 What is their relative degree of influence?
 What evaluation criteria does each decision participant use?
 The business marketer also needs to understand the major
environmental, interpersonal, and individual influences on the
buying process.
B. Characteristics of Business Markets
In some ways, business markets are similar to consumer
markets.
 Both involve people who assume buying roles and make
purchase decisions to satisfy needs.
However, business markets differ in many ways from
consumer markets.
The main differences are:
1. In the market structure and demand,
2. The nature of the buying unit, and
3.The types of decisions and the decision process
involved.
 1. Market structure and demand.
Business markets typically deal with far fewer but far larger buyers.
They are more geographically concentrated.

Business markets have derived demand (business demand that

ultimately comes from or derives from the demand for consumer
goods).
Hewlett-Packard and Dell buy Intel microprocessor
chips because consumers buy personal computers. If
consumer demand for PCs drops, so will the demand
for computer chips.
Textbooks demand > paper demand > pulp demand >
forestry product demand
Many business markets have inelastic demand; that is,
total demand for many business products is not affected
much by price changes.
E.g A drop in the price of leather will not cause shoe
manufacturers to buy much more leather unless it results
in lower shoe prices that, in turn, will increase consumer
demand for shoes.
Business markets have more fluctuating demand.
E.g A small percentage increase in consumer
demand can cause large increases in business
demand. Sometimes a rise of only 10 percent
in consumer demand can cause as much as a
200 percent rise in business demand during
the next period.
 2. 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 who spend their working lives learning how to
make better buying decisions.
 Therefore, business marketers must have well-trained
salespeople to deal with well-trained buyers.
III. Habitual Buying Behavior
 Habitual buying behavior occurs under conditions of low
consumer involvement and little significant brand
difference. For example, take salt.
 Consumers have little involvement in this product category
—they simply go to the store and reach for a brand.
D. A Model of Business Buyer Behavior

Model of Business Buyer Behavior

The buying
Organization Buyer Responses
Marketing Other The buying Product of service choice
Stimuli Stimuli center
Supplier choice
Economic Buying Decision
Process Order Quantities
Product Technological
(interpersonal & Delivery Terms & times
Price Political
individual Service Terms
Place Cultural preferences)
Payment
Promotion Competitive (Organizational
influences)