UNIT 4 BWER BEHAWOUR

Structure
4.0 Objectives
4.1 Introduction
4.2 Meaning of Buyer Behaviour
4.3 Importance of Understanding Buyer Behaviour
4.4 Types of Consumers
4.5 Factors Influencing Buyer Behaviour
4.5.1 Psychological Factors
4.5.2 Personal Factors
4.5.3 Social Factors
4.5.4 Cultural Factors
4.6 Consumer Buying Decision Process
4.6.1 Types of Buying Behaviour Situations
4.6.2 Stages in Buying Decision Process
4.7 Let Us Sum Up
4.8 Key Words
4.9 Answers to Check Your Progress
4.10 Terminal Questions

4.0 OBJECTIVES
After studying this unit, you will be able to:
discuss the meaning of buyer behaviour;
analyse the importance and applicability of buyer behaviour in the field of
marketing;
explain various types of consumers and their behavioural pattern;
describe various factors that influence the buyer behaviour;
explain various types of buying behaviour situations; and
discuss the stages involved in consumer buying decision process,

4.1 INTRODUCTION
One of the few common features among all of us is that we are all buyers
iirespective of what we are. As buyers, we play a vital role in the economy-local,
national, and international. We need to study buyer behaviour to gain insights into our
own consumption related decisio~lslike what we buy, why we buy, how we buy, and
the promotional influences that persuade us to buy. Marketers too need to adapt and
dovetail their strategies by taking the buyer into consideration. In this unit, you will
learn various dimensions of buyer behaviour, types of buyers, factors influericing the
buyer bel~aviourand the buying decision process. Before proceeding further, the
students should note that in this unit, the terms buyer behaviour and consumer
behaviour are used interchangeably and should not lead to any confusion.
Understanding Consumers
and Selecting Target 4.2 MEANING OF BUYER BENAVIOUR
Markets
While marketing a product the firm aims at satisfying the needs and wants of actual
and potential users of that product. But to achieve this, first it is essential to
understand the tastes, preferences, likes, dislikes, consumption patterns, process of
purchase, etc. of the buyers of that product. You may prefer to use Babool
toothpaste, LUX toilet soap, and Clinic shampoo while your friend may prefer
Miswak toothpaste, Rexona soap and Shikakai shampoo. It is interesting to note
that your preference vis-h-vis food, clothing, books, magazines, recreation, banks;
stores ]nay be different not only from those of your friends but also your neighbours
and colleagues. For example, take the case of banks. You may prefer to maintain a
savings bank account with State Bank of India while your friend may prefer Central
Bank of India. Thus, each buyer is unique and this uniqueness is reflected in the
consumption behaviour and pattern as well as process of purchase.
Various experts have defined buyerlco~isumerbehaviour differently. According to
Schiffman and Kanuk consumer behaviour is the behaviour that buyers or
consumers display in searching for, purchasing, using, evaluating, and
disposing of products and services that they expect will satisfy their needs.
Moven has defined it as the study of decision- making units arid the process
involved in acquiring, consuming, and disposing of goods, services,
experiences, and ideas,
Both the above definitions of buyer behaviour say more or less the same thing except
that Schiffman and Kanuk used the buyers whereas Moven has used the term
decision-making units. Here decision-making units mean the group of people in the
family who may be involved in the purchase process instead of all individual. So
behaviour occurs either for the individual, or in the context of a group (e.g., friends
may influence what kinds of clothes a person wears) or an organization (people on
the job make decisio~isas to which products the firm should use). From these
definitions we can identify three phases of buyer behaviour as follows:
a) Acquisition Phase: This refers to how buyers acquire the products and
services for their consumption. Much of the research in the buyer behaviour has
focused on the acquisition phase. When investigating the acquisition phase
marketers should analyse the factors thal influence the product and service
choice of buyers or consumers.
b) Consumption Phase: This refers to how buyers use or consume the products
and services. Here the marketers should analyse how buyers actually use a
product or service and the experiences that the buyer obtains from such use.
The investigation is important both for tangible products as well as for services.
c) Disposition Phase: It refers to what buyers do with a product once they have
completed its use.
Therefore, the marketers in understanding the buyer behaviour should take into
account the acquisition, consun~ptionand disposition phases. If they do so they will be
in a position to develop viable marketing strategies in terms of right product
positioning. Buyer behaviour illvolves purchase of services and ideas as well as
tangible products.

4.3 IMPORTANCE OF UNDERSTANDING

I
BUYER BEHAVIOUR
All inarketing sh-ategiesand tactics are based on explicit or implicit beliefs aboul
buyer behaviour. The study of buyers helps firms and organizations improve their
marketing strategies by understanding issues such as: I 1
I
 e How buyers think, feel, reason, and select between different alternatives (e.g., Buyer Behaviour
brands, products)?
0 How is the buyer influenced by his or her environment (e.g., culture, family,
signs, and media)?
0 Helps in understanding the behaviour buyers display while shopping or making
other marketing decisions
9 How buyer motivation and decision strategies differ between products that differ
in their level of importance or interest that they entail for the buyer; and
e How marketers can improve their promotional campaigns and marketing
strategies to target the buyer more effectively'?
1 There are four main applications of buyer behavior which are discussed below:
e The most obvious is for marketing strategy-i.e., for making better marketing
decisions. For example, by understanding that buyers are more receptive to food
advertising when they are hungry, we learn to schedule snack advertisements
late in the afternoon.
e A second application is public policy. In the 1980s, when Accutane, a near
miracle cure for acne, resulted in severe birth defects in pregnant women,
Federal Drug Administration (FDA) of US took the step of requiring that very
graphic pictures of deformed babies be shown on the medicine containers.
e Social marketing involves getting ideas across to buyers rather than selling
something. Understanding buyer behaviour will help in espousing for social
causes such as planned families,, prohibition, equality of girl child etc.
Government agencies with the help of buyer behaviour knowledge may develop
appropriate promotional strategies for greater acceptance of social causes.
e As a final benefit, studying buyer behaviour should make us better buyers.
Common sense suggests, for example, that if you buy a 200 ml liquid bottle of
laundry detergent, you should pay less per ml than if you bought two 100 ml
bottles. In practice, however, you often pay a size yremicmt by buying the larger
quantity. In other words, in this case, knowing this fact will sensitize you to the
need to check the unit cost labels to determine if you are really getting a
bargain.
In today's world of high technology, buyer tastes are also changing rapidly. To survive
in such a rapidly changing market, a firm has to constantly understand the latest
consumer trends and lastes. Buyer behaviour provides invaluable clues and guidelines
to marketers on new technological frontiers which they should explore. For example,
let us consider the advent of colour television in India. When we switched over from
black and white transmission to colour transmission in the early eighties, the buyers
exhibited a desire to purckrase colour TVs for closer-to-life picture viewing.

I 4.4 TYPES OF CONSUMERS

People purchase thousands of products and services for their consumption and use.
They may purchase these products and services for different purposes and they
may have myriad objectives, So the term consumer is often used to describe two
different kinds of consuming entities: (1) pel-sonal consumer and (2) organizational
consumer.
1) Personal Consumer: Personal consumer buys goods or services for his 01. her
own use (e.g, shaving cream, shampoo, lipstick) ar for use af the household (TV,
VCR) or family. In each of the above, the goods are brought for final use by the
individuals who are referred to as "end users" or "ultimate users".
Understanding Consumers 2) Organizational Consumer: Organizational consumer can be for profit and not-
and Selecting Target for-profit businesses, government agencies, institutions (schools, colleges,
Markets
hospitals). In each of the above examples we note that the products/services are
being bought in order to run the organization. For example, a travel agency
purchasing a computer and printer so as to render services they sell.
Buyers and Users: Buyers are not always the users or the only users, of the
product they buy, nor are they necessarily the persons who make the product
selection decisions. Individuals buy products for themselves and their family. The
person who makes the actual purchase decision may be usel-Inon-user and or only
user. For example, mother may buy toys for her children (actual users); she may buy
food for dinner (and may be one of the users); or she may buy handbag or lipstick
(and may be the only user). Marketers have to decide at whom to direct their
promotional efforts: buyer or user. For some products they must identify the person
who is most likely to influence the decision. We will discuss various roles played by
the family members in the purchase decisions in the section dealing with factors
influencing buyer behaviour.

Check Your Progress-A

1) In what way buyer behaviour helps you purchasing various products or
services?

......................................................................................................................
2) Based on your experience describe what activities have you performed in the
three phases of buyer behaviour for the following products?
a) Two-Wheeler, b) Washing Machine, c) Toothpaste, d) Insurance Policy.

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3) Distinguish between personal consumer and organizatio~ialconsumer.

4.5 FACTORS INFLUENCING BUYER BEHAVIOUR

The central question for marketers is: How do consumers respond to various
marketing efforts the company might use? The company that really understands how
consumers will respond to different product features, prices, and advertising appeals
has a great advantage over its competitors.
For a clear understanding of the various factors that influence buyer behaviour, the
stimulus-response model of buyerbehaviour can be considered as the starting point.
According to this model, marketing and other stimuli enter the consumer's "black Buyer Behaviour
box" and produce certain responses. 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. Look at Figure 4.1 which shows model of buyer behaviour.

Economic
Technological
Political
Promotion Cultural

Characteristics Decision
Process

Brand choice
Dealer choice
Purchase timing
Purchase umount

Figure 4.1: Model of Buyer Behaviour

The marketer wai~tsto understand how the stimuli are changed into responses inside
the buyer's black box, which has two patts. 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 behaviour.
We as consumers do not make the purchase decisions in a vacuum. We are being
continuously influenced by a number of factors. These are: psychological, social,
personal, and cultural factors. For most part marketers cannot control such factors,
but they must take them into account. These influences are shown in Figure 4.2.
Let us learn them in detail.

4.5.1 Psychological Factors

Consumers are being influenced by a number of psychological factors in the purchase
of various products and services. These factors influence consumers in a differentjal
way i.e., some factors may influence more and some less. The influence of these
factors may vary from product to product and from time to time. There are four
psychological factors which may influence buyer behaviour. They are: motivations,
perception, learning, and beliefs and attitudes. Let us discuss them in detail.
Understanding Consumers
and Selecting Target Psychological Factors Social Factors
Markets Reference groups, Family,
Motivation, Perception,
and Roles and statuses

Age and life cycle stage,

Occupation, Economic
circumstances,Lifestyle,
7
1 Culture, Subculture, and

Figure 4.2: Factors InfluencingBuyer behaviour

Motivation: A consumer may be interested to buy a specific product or service.

One question comes to the mind that why s/he wants to buy this product or service?
The possible answer is that s/he is motivated to buy this product. Then what is
motivation? We may define motivation as the driving force within individuals that
impels them to take action. This driving force is produced by a state of tension, which
exists as the result of an unfulfilled need, Individuals strive-both consciously and
unconsciously-to reduce this tension through behaviour they anticipate will fulfill their
needs and thus relieve them of the stress they feel. The specific goals they select and
the patterns of action they undertake to achieve their goals are the result of individual
thinking and learning. Whether gratification is actually achieved depends on the
course of action being pursued. For example, if a high school boy expects to become
a great cricket player by wearing the same brand of sports shoes that Sachin
Tendulkar wears, he is likely to be disappointed; if he takes cricket lessons and
practices diligently, he may succeed. Psychologists have developed a number of
theories of motivation. Two of the most popular motivation theories which are
relevant in the context of buyer behaviour are 1) Abraham Maslow's Hierarchy of
need theory, and 2) Sigmund Freud's Psychoanalytical theory of personality.
These two theories have different meaning and interpretations with regard to
marketing and consumer analysis
Maslow's Hierarchy of Need Theory of Motivation: Abraham Maslow tried to
explain that people have hierarchy of needs at particular time, which they want to
satisfy. According to him the most pressing human needs are required to be satisfied
first and the least pressing are at the last. In terms of hierarchy they may be arranged
as 1) physiological needs, 2) safety needs, 3)social needs, 4) esteem needs, and 5 )
self-actualization needs.
Maslow's Hierarchy of needs theory is based on the following premises:
* All human beings acquire a similar set of needs through genetic endowment and
social interaction.
* Some needs are more basic or critical than others.
 The Inore basic neeas must be satisfied to a minimum level before other needs Buyer Uehaviour
are activated.
As the basic needs become satisfied, more advanced needs come into play.
e These needs can be arranged in a hierarchy.
Let us take an example to explain this theory in the context of buyer behavioul:
Suppose a consumer is interested in buying digital video camera. We may presume
that this consumer has satisfied his physiological, safety, and social needs and his
interest in buying digital video camera might come from a strong need for fulfilling
esteem needs or it might have come from satisfying self-actualization need he wants
to be a creative person to show his talent in photography.
Maslow's theory is a good guide to general behaviour. It is important to remember
that any given consumption behaviour can satisfy more than one need. Likewise, the
same consumption behaviour can satisfy different needs at different times.
The major problem with Maslow's theory is that it can not be teslecl empirically; there
is no way to measure precisely how satisfied one need must be before the next higher
need becomes operative. But despite the criticisms Maslow's hierarchy is a useful
tool for understanding consumer motivations and is a readily adaptable to marketing
strategy, primarily because consumer goods often serve to satisfy each of the need
levels. This hierarchy offers a useful, comprehensive framework for marketers trying
to develop appropriate advertising appeals for their products. Look at Figure 4.3
which depicts Maslow's theory of motivation.

Figure 4.3: Maslow's Hierarchy of Need Theory

Freud's Psychoanalytical Theory of Personality: According to this theory, which

is considered to be the cornerstone of modern psycl~ology,much of individual's
personality stems from a fundamental conflict between a person's desire to gratify his
or her physical needs and tlie necessity to function as a responsible member of
society. This struggle is carried out among tlie three subsystems of a person's
personality. These subsystems he called as id, superego and ego.
a) 'The id was conceptualized as a repository of primitive and impulsive drives-
basic physiologjcal needs such as thirst, hunger and sex-for which the individual
seeks immediate gratification without concern for the specific means of
gratification. The id operates according to the pleasure prbzciple; behaviour is
guided by the primary desire to maximize pleasure and avoid pain. It directs a
person's psychic energy towards pleasurable acts without regard for any
consequences.
Understanding Consumers b) The superego is the counterweight to the id. It is conceptualized as the
nnd Selecting 'Igrget individual's internal expression of society's moral and ethical code of conduct.
Murkets
The superego's role is to see that the individual satisfies needs in a socially
acceptable manner. Thus, the superego is a kind of brake that restrains or
inhibits the impulsive forces of the id.
c) Finally, the ego, the third subsystem, mediates between the impulsive powers of
id and the repressive powers of superego. In a way it works as a referee
between the id and superego. The ego tries to balance these opposing forces
according to the reality principle, whereby it finds ways to gratify the id that will
be acceptable to the moral values of the superego. The conflicts among these
three subsystems occur on an unconscious level, so the person is not necessarily
aware of the underlying reasons for behaviour. The Figure 4.4 represents the
three subsystems and their interrelationships.

Subsystem Subsystem

u Subsystem

Figure 4.4: Interrelationshipbetween Three Subsystems of Personality

Some of the Freud's ideas have been adapted by consumer researchers. 11-1particular,
his work highlights the potential importance of unconscious motives underlying
purchases. The implication is that consumers cannot necessarily tell their true
motivations for choosing a product, even if someone devises a sensitive way to ask
them directly. One of the major applications of Freud's theory is the development of
motivational research, which is based on certain psychoanalytical tools. The main
purpose is to uncover the underlying motives of purchase which are normally not
divulged by the consumers if conventional marketing research tools are used.
Motivation researchers collect in-depth infoi-rnation from small samples of consumers
to uncover the deeper motives for their product choices, They use non-directive depth
interviews and various projective techniques. Motivation researchers have reached
some interesting and sometimes odd conclusions about what may be in t h e buyer's
mind regarding certain purchases. For example, one motivational research says men
smoke cigars as an adult version of thumb sucking, females like killing the
cockroaches and other insects with sprays like "Hit" as they derive sadistic pleasure.
Despite its sometimes bizarre findings, motivational research remains a useful tool for
marketers seeking a deeper understanding of consumer behaviour.
Perception: Another important psychological factor, which may influence the
consumers, is perception. How a motivated person acts depends on his or her
perception of the prevailing situation. It has been found quite often that two people
with the same level of motivation and in the same situation act differently because of
differing perceptions. For example a consumer who visits a superstore for the
purpose of purchasing a colour television, on being confronted with an over
enthusiastic salesperson may consider this sales person as being too pushy without
understanding his needs. Another consumer may perceive the same salesperson as
being genuine and sincere. This happens because the difference in the perception of Buyer Behaviour
the salesperson by the two consumers.
Why do people have different perceptions of the same situation? The answer is that
people learn by the flow of information through their five sense organs. However,
they receive, organize and interpret this sensory information according to their prior
experiences in an individual way. We may define perception as a process through
which individuals select, organize, and interpret information into a
meaningful and coherent picture of the world. Perception is an individual
process; it depends on internal factors such as a person's beliefs, experiences, needs,
moods, and expectations. The perception process is also influenced by the
characteristics of a stimulus (such as its size, colour, and intensity) and the context in
which it is received.
People can form different perceptions of the same stimulus because of four
perceptual processes or selective perception. These are: selective exposure, selective
attention, selective distortion, and selective retention. Look at Figure 4.5 which shows
selective perception. Let us learn them in detail.

I . . . -

Selective exposure Selective altention

+.l,.'* XX I&%* V<',il 'd. ""Kaj'

Selective distortion

Figure 4.5: Selective Perception

a) Selective Exposure: Everyday people are exposed to a great number of stimuli

including marketing stimuli. One study has indicated that a typical consumer is
exposed to more than 1000 ads per day. Since, it is impossible to pay attention to
all these stimuli, nost of them are screened out. Research has shown that
~ e o p l are
e more likely to notice stimuli that relate to a current need. People are
also more likely tonotice stimuli that they expect (for example, in a retail store
dealing in apparels a shopper is unlikely to notice mobile phones on sale, because
slhe did not expect them to be there). Finally, people are more likely to notice
stimuli that deviate from the normal. Thus, marketer's ads must stand out from
the rest for people to notice them.
b) Selective Attention: This occul*swhen the consumer chooses to focus
attention on certain stimuli while excluding others. For example, out of the large
nu~nberof advertisements a consumer is exposed, he perceives or attends to a
few advertisements. This means advertisers must make considerable effort to
get their messages noticed. Advertisers often use the creative aspects of their
ads to gain consumer's attention. For example, some advertisers set their ads off
from others by showing their products in colour against a black-and-white
background.
c) Selective Distortion: Each person tries to fit incoming information into an
existing mind-set. People tend to interpret information in a way that will support
wliat they already believe. For example, an advertiser compares its brand with a
consumer's favourable brand which may be seen as biased or untruthful, and its
claim may not be accepted. Selective distortion means that the marketers must
try to understand the mind-sets of consumers and how they will effect
Understanding Consumers interpretation of advertising and sales information. Thus, marketer's need to
and Selecting Target understand consumer's mind-sets.
Markets
d) Selective Retention: People tend to retain only that information which
supports their attitudes and beliefs. Even messages that are received undistorted
are subject to selective retention. Consequently, ads are repeated many times.
The hope is that numerous exposures will etch the message into the recipient's
memory. This also partially explains why a firm with very familiar products, such
as Pepsi, Coke, KFC, McDonald's spend billions of rupees annually on
advertising.
Learning: Learning involves changes in an individual's behaviour arising from
observation and experience. Learning plays an important role at every stage of the
buying decision process. No universally workable and acceptable learning theory has
emerged. However, from marketing perspective consumer leanling can be thought of
as the process by which individuals acquire purchase and consumption
knowledge and experience that they apply to future purchase related
behaviour.
Despite their different viewpoints, learning experts in general agree that for occurring
learning, certain basic elements must be present. Four basic elements that are
fundamental to learning process are:
Drives: A drive is a strong internal stimulus that calls for action. A drive
becomes a inotive when it is directed toward a particular stimulus.
Cues: Are minor stimuli or signals from the environment that determine the
pattern of response. Cues are the stimuli that give direction to Lhe drives. For
example an advertisement of a brand of soft drink may serve as a cue for those
who are feeling thirsty. Cues serve to direct consulner drives when they are
consistent with consumer expectations. Therefore, it is necessary for the
marketers to provide only those cues, which are in tune with the co~~suiner
expectations.
Response: How individuals react to drives and configuration of cues-how they
behave-constitute their response. It is the behavioural reactions to the drives and
cues. Learning can occur even when responses are not overt. Many cues may
lead to the formation of positive attitudes and in future these attitudes may lead
to behaviour.
Reinforcement: This results when the response'is rewarding. Reinforcement
can be either positive or negative. For example, if a consumer purchases a
specific brand and he finds it satisfying and next Lime lle needs that product
there is likelihood that he may purchase the same brand. The response has been
reinforced. In addition the same consumer may develop a positive attitude
towards other brands manufactured by the same company. In case the response
is not rewarding, then the consumer may not purchase the brand and may
develop negative feelings towards other products manufactured by that
company.
If the response is rewarded by either positive or negative reinforcement, a
connection among the drive, cues, and responses will be established. Learning,
then, emerges from reinforcement, and repeated reinforcement leads to a habit
or brand loyalty. The practical significance of learning to the marketers is that
they can build demand for a product or brand by associating with strong drives,
using motivating cues, and providing positive reinforcement, However, learning
is not a peifect predictor of behaviour because a variety of other factors also
influence a consumer. For example, a pattern of repeatedly purchasing the same
 brand may be disrupted by a person's desire for variety or novelty. Or a Buyer Behaviaur
temporary situation such as being short of money or pressed for time may
produce behaviour different than a learned response. Thus, a learned response
does not necessarily occur every time a stimulus appears.

Check Your Progress-B

1 . How does Maslow theory of motivation.influence the buying decision?

2. Distinguish among Id, Ego and Superego.

......................................................................................................................
3. Distinguish between selective attention and selective distortion.

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4. How does reinforcement facilitate purchasing the,same brand of a product?

4.5.2 Personal Factors

A buyer's decisions are also intluenced by personal characteristics. They include: age
and life-cycle stage, occupation, economic circumstances, lifestyle and personality.
Age & Life-cycle Stage: People change the goods and services they buy over their
life time. For example, we all rely on some sort of baby food during infancy, most
other foods during growing years and may rely on special diets in later years. The
clothes that we wear, furniture we buy, and recreation are all age-related.
Because product needs and interests often vary with consumer's age, marketers
have found age to be a particularly useful demographic variable for distinguishing
segments. Many marketers have carved themselves a niche in the marketplace by
concentrating on a specific age segment. For example, Cartoon Network channel on
cable is aimed at children. Buying is also shaped by the stage of the fanlily life
cycle-the stages through which families might pass as they mature over time. The
basic assumption underlying the family life cycle approach is that most families pass
tlirough an orderly progression of stages, each with its own characteristics, financial
situations, and purchasing patterns. Each stage in the family life cycle poses a series
of problems, which the family decision makers must solve. For example, young
married couples with no children have time for relaxation and recreation. They may
consume tickets to the cinema, theater, restaurant meals etc. Each stage presents
Understanding Consumers unique needs and wants as well as financial conditions and experiences.
and Selecting Target
Markets Occupation: The importance of occupation as a social class indicator is highlighted
by the fact that we often "size up" people by enquiring about it. A person's
occupation affects the goods and services bought. Marketers frequently think in
terms of specific occupations when defining a target market for their products or
broader occupational categories. Truck drivers and auto mechanics may earn as
much as a young retail executive or college teacher, but the buying patterns of the
first two are likely to be different from the second two because of differing attitudes
and interests. Thus, occupation may be more meaningful criterion than income in
segmenting some markets. A company may even specialize in making products
needed by a given occupational group. For example, computer software companies
design software for engineers, accountants, lawyers, doctors, managers etc.
Economic Circumstances: A person's economic situation may greatly affect
product choice. People alone do not make a market; they must have money to spend.
Consequently incoine distribution is one of the most commonly used bases for
segmenting consumer markets. Marketers should analyze the spending patterns of
people at different income levels. Marketers of income-sensitive goods closely watch
trends in personal income, savings, and interest rates. If economic iildicators point to
a recession, marketers can take steps to redesign, reposition, and re-price their
products.
As discussed earlier, some consumer researchers argue that income alone does not
provide us a clear picture of the consumer spending patterns. For example, a blue-
collar automobile mechanic and a white-collar assistant bank manager may both earn
Rs. 15000 per month, yet because of social-class differences each will spend that
income in a different way. How they decide to spend their incomes reflects different
vnlcles. Within this context, it is the difference in values that is an important
determinant of social class between people, not the amount qf'inconle they earn.
Life-Style: People belonging to the same subculture, social class, and occupation
may exhibit different lifestyles. Lifestyle is defined simply as how orie lives in the
world, which is expressed in his activities, interests and opinions. It influences all
aspects of our consumption behaviour. It is influenced by the factors such as culture,
values, demographics, subculture, social class, reference groups, family, and individual
characteristics such as motives, emotions, and personality. Individuals and households
both have lifestyles. Our desired lifestyle influences our needs and attitudes and thus
our purchase and use behaviour. Buyers are seldom explicitly aware of the role
lifestyle plays in their purchase decisions. For example, some ti111cpoor families who
pursue an active lifestyle may think it appropriate to serve cold drinks to their guests;
or instant coffee etc. because of its convenience, since time is in~portantin an active
lifestyle.
The technique of measuring lifestyles is known as p,sychographics. It is the science
of using psychology, sociology, anthropology, and demographics to understand buyers.
Psychographics can help marketer fine-tune its offering to meet the needs of
different segments. Psychographic research attempts to place consumers on
psychological-as opposed to purely demographic-dimensions. Psychographic research
has been heartily embraced by marketing practitioners in the promotion of such a
diverse group of products as AT&T services, Kentucky Fried Chicken, Nescafe,
Newport Jeans, and Timex Watches etc.
Probably the best-known psychographics segmentation tool is Ki1ue.s nttd Lijestyles
(VALS), developed in 1978 by the research film SRI International in USA. The
VALS system was developed from a large study of the US populatiol-r that divided
adults into nine segments based on similarities in their values (beliefs, desires and
prejudices) and their lifestyles-hence the acronym VALS.
Personality: Marketers have long been intrigued by the possibility of appealing to Buyer Behaviour
consumers In terms of personality traits. They have felt that what consumers
purchase, and when and how they consume, are likely to be influenced by personality
factors. For this reason, advertising and marketing people have frequently depicted
specific personality traits or characteristics in their advertising messages. Personality
refers to those inner psychological characteristics that both determine and reflect how
a person responds to his or her environment. The emphasis in this definition is on
inner characteristics - those specific qualities, attributes, traits, factors, and
mannerisms that distinguish one individual from the other individuals. The deeply
ingrained characteristics that we call personality are likely to influence the individual's
product choices (and even certain brand choices); they also affect the way the
consumer responds to a firm's promotional efforts, and when, where and how they
consume particular products or services.
Therefore, identification of specific personality characteristics associated with buyer
behaviour may be highly useful in the development of a firm's market segmentation
strategies.
Some marketers use a concept related to personality-a person's self-concept. The
basic premise is that people's possessio~~scontribute to and reflect their identities: that
is "we are what we have." Self-concept can be defined as the totality of the
individual's thoughts and feelings having reference to him or her as an object. It is,
therefore, argued by some marketers that to understand consumer behaviour, one
must understand the relationship between consumer self-concept and possessions. All
of us have complex mental pictures of ourselves. For example, a consumer may see
himself or herself as outgoing, creative and active. Thus, he may favour a car that
projects the same qualities.

4.5.3 Social Factors

In addition to psychological and personal factors, buyer behaviour is influenced by
social factors. These social factors influence the buyers in different ways. For some
products the intluence of social factors is quite pronounced and for others it may not
be that pronounced. Important social factors which have certain bearings on buyer
behaviour are: reference groups, family, and social roles and statuses. Let us learn
them.
Reference Groups: A reference group is any person or group that serves as a point
of comparison (or reference) for an individual in forming either general or specific
values, attitudes, or behaviouc From the buyer behaviour perspective, reference
groups are groups that serve as frames of reference for individuals in their purchase
or consumption decisions. This may consist of all the groups that have a direct (face-
to-face) or indirect influence on the person's attitudes or behaviour.
Reference groups can be classified in terms of a person's membership or degree of
involvement with the group, as well as in terms of the positive or negative influences
they have on his or her values, attitudes, and behaviour. These groups are as follows:
a) A co~~tractual Group: This is a group in which a person holds membership or
has regular face-to-face contact and of whose values, attitudes, and standards
he or she approves. Thus, a contractual group is likely to have a congruent
intluence on an individual's attitudes or behaviour. This group includes friends,
family members, neighbours, and company-workers.
b) An aspirational Group: In this group, a person does not hold membership and
does not have face-to-face contact but wants to be a member. Thus, it often
serves as positive influence on that attitudes or behaviour. Young
people would like to be associated as well as like to emulate sports heroes,
Understanding Consumers movie stars, prominent personalities etc. for them these work as aspirational
and Selecting Target groups.
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C) A disclaimant Group: In this group, a person holds membership or has face-
to-face contact but disapproves the group's values, attitudes or behaviour. Thus,
the person tends to adopt attitudes and behaviour that are in opposition to the
norms of the group. For example, neighborhood friends who have been dropped
out of school.
d) An avoidance Group: In this group, a person does not hold membership and
does not have face-to-face contact and of whose values, attitudes, and
behaviours he or she disapproves. Thus, the person tends to adopt attitudes and
behaviour that are in opposition to those of the group. For example, one may
vocally reject the actions of those peers who do not demonstrate adequate
respect for their parents and religion. These four groups influence on the buyer
have been shown in the Table 4.1.
'Pdble4.1: Reference Groups and Types of Influence

Q p e of Influence Membership Group Non-membershipGroup

Positive Influence Contrnctual Group Aspiratio~~al
Group
Negative Influence Disclaimant Group Avoidance group

Marketers are of the view that people, including consumers, are significantly
influenced by their reference groups particularly with those reference groups which
exert positive influence such as contractual and aspirational groups. These reference
groups influence a person in at least three ways: 1) Reference groups expose the
person to new behaviours and life-styles. 2) They influence the person's attitudes and
self-concept because he or she wants to "fit in". 3) They create pressures to conform
that may affect the person's product and brand choices.
The importance of group influence varies across products and brands, but it tends to
be strongest for conspicuous purchases. A product or brand can be conspicuous for
one of the two reasons. Firstly, the product is used or owned by very few people in a
society. For example, luxuries are more conspicuous than necessities. Secondly, a
brand may be more conspicuous because it is consumed in public where others can
see it. By cornbilling these two dimensions i.e. luxury products and public products
one may get four categories of products: public luxuries, public necessities,
private luxuries and private necessities. Research has found that the reference
group influence varies in terms of product and brand choice decision on these four
categories of products.
If an item is a luxury as opposed to a necessity, the decision to buy or not to buy the
product is influenced by the reference groups. If the item will be co~lsumedpublicly
rather than privately, reference-group influellce tends to affect the brand cl~oice.The
relative influence of reference group is shown in figuare 4.6.

Strong Weak
-
M

m
I Public Luxuries
(Luxury cars, boats,
Private Luxuries
(Water Purifier,TV
etc) Video games)
Public Necessities Private Necessities
(Two-Whelers,Cars, (Refrigerators,
clothers. Wristwatch) Mattress)

Figuare 4.6: Extent of Group Influence on Product and Brand Choice

Advertisers are relying on reference group influence when they use celebrity Buyer Belinviour
endorsers to work as aspirational reference group. Professional athletes, musicians,
and actors can influence people who would like to be associated with them in some
way-for example Michael Jordan for Nike Shoes, Narayan Karthikeyan for JK Tyres,
Shahrukh Khan for Santro car, Ustad Zakir Husain Khan for Taj Mahal tea.
If the marketers come to know that their products and brands are susceptible to
strong group influences they must figure out how to reach opinion leaders in these
product areas with their marketing messages. Opinion leaders are people within
reference groups who, because of special skills, knowledge, personality or other
characteristics, exert influence on others. Opinion leaders are found in all areas and
strata of society, and one person may be an opinion leader in certain product areas an
opinion follower in others, Therefore, marketers must try to identify the personal
characteristics of opinion leaders in their respective product areas and then find out
what media they use so that they may direct marketing messages to them.
a) Family: A family is a group of two or more people related by blood, marriage,
or atloption living together in a household. Because of strong bond and close
continuous interaction family members may strongly influence buyer behaviour.
During their lives many people belong to at least two types of families:
b) Family of Orientation: The buyer's parents make up the family of orientation:
Even if the buyer no longer interacts very much with his or her parents, the
parents can still significantly influence the buyer's unconscious behaviour. In
countries like India where parents continue to live with their childreti;their
influence can be profound.
Family of Procreation: It consists of the buyer, hislher spouse and cl~ilclren.It exerts
a more direct influence on everyday buying bel~avior.
The family is the most important consumer buying organization in society, and it has
been researched extensively. Marketers are especially interested the relative roles
and influence of husband, wife, and children on the purchase of a large variety of
products and services. Research has shown that husband-wife involvement varies
signiricantly across different product categories and the stage in the buying process.
Marketers have acknowledged the role of family in general and involvement of
husband-wife dyad in the purchase decision-making process in particular. However,
one of the trickiest problems for marketers is to figure out who makes purchase
decisions for a household. The problem being that there is rarely consensus among
couples themselves. The information about who influences the purchase decision
within a family setup serves as the basic input in designing the marketing
cornmunicalion and subsequently in media selection.
Researchers who worked on the role and influence of family in the purcllase
decisions have classified family decision-making as lz~~sband domilzated, wife
dominated,joint (i.e., equal or syncratic), and autolzomic (i.e., individualised or
solitary or unilateral),
Research on family-member influence in durable goods buying is ]nore abundant than
that on frequently purchased items. Even a casual observer would probably agree
that important, one-time purchases are likely to involve more than one household
member. In contrast to non-durables, purchases of durable goods are often preceded
by a progression of interrelated decisions and activities through time. Husbands,
wives, and children have more opport~~nities to become involved at one or inore steps
in the process. One can presume that family members are also more motivated to
participate, since the purchase of an automobile, for example, often precludes other
acquisitions, given families' budget constraints.
Understanding Consumers Another important aspect of family decision-making is the role played by the family
and Selecting Target members in the purchase of various products and services. There are nine distinct
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roles in the family decision-making process which provide an insight into how family
members interact in their various consumption- related roles:
a) Initiators: The family member(s) who first recognizes the need or starts the
purchase process.
b) Influencers: Family member(s) who influence the alternatives evaluated, the
criterion considered, and the final choice.
c) Gatekeepers: Family member(s) who control the flow of information about a
product or service into the family. It is generally the individual who has expertise
and interest in a particular purchase.
d) Deciders: Family member(s) with the power to determine unilaterally or jointly
whether to shop for, purchase, use, consume, or dispose of a specific product or
service.
e) Buyers: Family member(s) who make the actual purchase of a particular
product or service.
t Preparers: Family member(s) who transform the product into a form suitable
for consumption by other family members.
g) Users: Family memberts) who use or consume a particular product or service.
h) Maintainers: Family member(s) who service or repair the product so that it will
provide continued satisfaction.
i) Disposers: Family member(s) who initiate or carry out the disposal or
discontinuation of a particular product or service.
The number and identity of the family members who fill these roles vary from family
to family and from product to product. Therefore, marketers should identify what
roles are being performed by various family members in their respective product
areas and accordingly may develop marketing communication strategies.
Finally, it is important for the marketers to know which family member is likely to
make the purchase decision. This knowledge will influence a company's entire
marketing mix. For example, if it is found that children are the key decision makers,
as is often the case with toys, confectionaries and breakfast cereal, then a
manufacturer should come out with a product in consonance with the children
preferences; design the package children in mind, and advertise in those media, which
cater to the children.
Roles and Status: In life a person performs various roles and may belong to many
groups such as family, clubs and work environment. The person's position can be
defined in terms of both role and status. A role is a prescribed pattern-of behaviour
expected of a person in a given situation by virtue of the person's position in that
situation. Each role carries a status reflecting the general esteem given to it by
society. For example the role of a product manager has more status in a society than
the role of a son. As a product manager, a consumer will buy the kind of clothing that
reflects his role and status. People often choose products that show their status in a
society.

4.5.4 Cultural Factors

Cultural Factors exert the broadest and deepest influence on buyer behaviour. The
marketers need to understand the roles played by the buyer's culture, sub-culture and
the social class Let us learn these factors in detail.
Culture: Culture is that complex whole which includes knowledge, belief, art, law,
morals, customs, and any other capabilities and habits acquired by humans as a
member of society. In the context of buyer behaviour we may define culture as the Buyer Behaviour
sum total of learned beliefs, values, and customs that serve to direct the buyer
Sehaviour of members of a particular society. It is the most basic cause of a person's
wants and behaviour. Human behaviour is largely learned. Growing up in a society, a
child learns basic values, perceptions, wants and behaviour from the family and other
important institutions.
The nature of cultul-a1 intluences is such that we are seldoin. aware of them. One
behaves, thinks, and feels in a manner consistent with other members of the same
culture because it seems "natural" or "right" to do so: Culture typically evolves and
changes slowly over time. However, there can be major changes during relatively
short time periods due to rapid technological advances, conflicts between existing
values, exposure to another culture's values, or dramatic events such as war.
Marketing managers must understand both the existing cultural values.and the
emerging cultural values of the societies they serve. They must always try to spot
c~~ltliral
shifis in order to imagine new products that might be wanted. Some cultural
trends affecting the buying behaviour of Indian consumers include the following:
e Gender roles are losing their identity
Greater concern about health and fitness (has created a huge industry for
exercise equipment and clothing, low calorie foods, health and fitness services)
e There has been a shift toward informality (it has resulted in more demand for
casual clothing, sports shoes, lighter entertainment etc.)
e There is an increased desire for leisure time (it has resulted in more demand for
convenience products and services such as microwave ovens, fast food etc.)
e I11 metros, two-income families are becoming the norm (some view it as a
necessity to achieve a reasonable standard of living; this is also bound to affect
their ability to buy, choice of products, time available for purchase and
consumption)
Sub-culture: In any society as heterogeneous as the one in India, there are bound to
be subcultures. Subcultures are groups in a culture that exhibit characteristic
behaviour patterns sufficient to distinguish them from other groups within the same
culture. The behaviour patterns that distinguish subcultures are based on factors such
as race, nationality, religion and urban-rural identification. A subculture takes on
importance in marketing if it constitutes a significant part of the population and
specific purchasi~igpatterns can be traced to it. Each subculture has different
attitudes, beliefs, customs and languages that must be taken into consideration by the
firms attempting to sell to them,
Social Class: Social class is a ranking within a society deter~ninedby the members
of the society. Social classes are relatively permanent and ordered divisions in a
society whose member share similar values, interests, and behaviours. Social class is
not determined by a single factor such as. income but is measured as a combination of
occupation, income, education, wealth, and other variables. The lilies between social
classes are normally not fixed and rigid; people belonging to one social class call
move to a higher class or lower class. Marketers are interested in social class
because the buying behaviour of people is strongly influenced by the class to which
they belong or which they aspire. Social class is not an indication of spending
capability; rather it is an indication of preferences and life-style. For example, a young
manager might be having the same income as that of a middle aged foreman in a
steel factoly, but they probably have quite different family backgrounds, tastes, and
aspirations. Social scientists have come out with a number of social class
classifications, where they have divided the society in five, sevetl or nine divisions.
We provide the five division of classification of social class below.
Understanding Consumers a) The Upper Class: People who are in the top strata of the society. This class
and Selecting Target includes two groups: (1) socially prominent "old families," often with inherited
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wealth, and (2) newly rich corporate executives, owners of large businesses, and
highly-paid professionals. They live in large houses in exclusive neighbourhoods
and exhibit a sense of social responsibility. The upper class patronises exclusive
and fancy shops. They go for expensive goods and services, but they do not
display their wealth in a conspicuous manner. They form a very small part of the
society. In tenns of percentage they may range between 2 to 3 percent.
b) The Upper-middle Class: This class comprises moderately successful
businessmen, professionals and owners of medium to small size companies.
People belonging to this class are well educated, and they crave for success in
life. They may engage in conspicuous consumption as compared to upper class.
This class buys products that signifies its class status. In terms of percentage
they may range between 12 to 15 percent.
C) The Lower-middle Class: This class comprises office employees-both
government and private, junior executives, teachers, technicians, and sinall
business owne1.s. People from this class crave for respectability by engaging i n
those activities, which are approved by the society as "right things". They are
future oriented, strive to move up in the next higher socialclass, exhibit self-
confidence, and are risk takers. In terms of percentage they may range between
30 to 40 percent.
d) The Upper-lower Class: People in this class are blue-collar workers, semi
skilled workers, and lower grade service personnel such as clerks etc. they are
more tied with their families and inaIe female roles are s h a i ~ l ydefined. They
live in smaller houses. They patronize products keeping an eye on economy
aspect of purchase. In terms of percentage they may range between 30 to 35
percent.
e) The Lower-lower Class: They belong to the lowest strata of the society. 'This
class includes unskilled workers, the unemployed, uneducated and low-income
earners. They live in substandard houses. Their priority is to purchase only
essential thiugs. They are not in the position of purchasing durable products. In
terms of percentage they may range between 20 to 25 percent. In some
developing and poor countries their percentage may go up to 40 percent.
The conclusions from social class research are:
a There are substantial differences among these classes with respect to buying
behaviour.
0 Because of this diversity, different social classes are likely to respond difl'ere~itly
to a seller's marketing program. Thus it may be necessary to tailor marketing
programs, which are in tune with the characteristics of a specific social class.

Check Your Progress-C

I) On the basis of your own experience write the factors which influenced you in
the purchase of following products.
a) Refrigerator, b) Colour Television, c) Toothpaste, d) Personal computer,
e) Two- wheeler, f) Music system, g) Washing machine.
 What do you mean by reference group? Buyer Behaviour
2)
......................................................................................................................

......................................................................................................................
3) Distinguish between initiators and influencers.

......................................................................................................................
4) State whether the following statements are True or False:
i) Highest order need is self-actualization need.
ii) Superego is the reservoir of basic needs.
iii) People can move one social class to another social class.
iv) Filin stars and sports heroes work as aspirational reference group for old
people.

4.6 CONSUMER BUYING DECISION PROCESS

In the preceding section we have discussed the various factors that influence buying
behaviour. Understanding the influence of these factors is importanl for the marketers
for designing effective marketing strategies. However, this is not sufficient.
Marketers should also develop an understanding of how consumers actually make
their buying decisions. Understanding buying decision process requires the knowledge
of three things. Firstly, marketers should find out in their respective product
categories the roles played by difrerent family members in the buying decision
process. Secondly, the types of buying behaviour consumers display in different
buying situations. Finally, the different stages through which, a consumer goes
through in the buying decision process. We have already discussed the different roles
played by various family members in the context of family influences on buying
behaviour. Therefore, in this section we will discuss the different buying situations,
and stages of buying decision process,

4.6.1 Qpes of Buying Behaviour Situations

Marketers are required to know that consumer decision-making varies with the type
of buying behaviour in different buying situations. The buyer decision making process
varies considerably if he is buying a soap, clothing, a scooter, a personal computer or
a major home appliance. In general, buyers are highly ii~volvedwhen purchasing
complex and expensive products and Inore members of the family are expected to
take part in the decision making process. Consumer decision-making is also
influenced by whether the consumers perceive significant differences among
available brands in a specific product category or not. Based on these two dimensiolis
(i.e., degree of buyer involvement and the degree of differences among brands)
Henry Assael, a consumer behaviour specialist, has identified following four types of
buying behaviour situations:
1) Complex Buying Behaviour: In this situation, firstly, buyers are highly
involved with the product as the product is expensive, bought infrequently, risky
Understanding Consumers and self expressive. Secondly, buyers perceive significant differences between
and Selecting Target the available brands. Therefore, buyers first develop beliefs about the product,
Markets
then deveIop attitudes about it, and finally make a thoughtf~~l
choice. Knowing
this, marketers can help educate buyers about product attributes, differentiate
and describe the brand's features, and motivate store personnel and others to
influence the final brand choice.
Dissonance Reducing Buying Behaviour: Here also the buyers are highly
involved with the purchase but they may consider most brands in the given price
range as being similar in product attributes. This situation also occurs in case of
expensive, and infrequently purchased products. The buyer takes less time in
purchasing the product but later experiences somesamountof post purchase
dissonance if he notices certain disquieting features or hears favourable things
about other discarded brands. Marketers should therefore supply beliefs and
evaluations that help consumers feel good about their brand choices.
3) Variety Seeking Buying Behaviour: This situation applies to low involvement I

pl-oducts. However, buyers perceive significant differences among the available

brands in that product category such as biscuits, ice creams etc. Here, buyers
may switch brands because they want variety and not because of
dissatisfaction. Mostly buyers have some beliefs about the product, choose a
1
brand with little evaluation, and later evaluate the product during consumption.
Marketers should therefore try to encourage habitual buying behaviour by
i
dominating retailers' shelf space, keeping shelves fully slocked, running reminder
advertisements, and resorting to consumer sales promotion campaigns.
4) Habitual Buying Behaviour: This situation applies to low involvement
products as well as where the buyers do not perceive significant differences
among the available brands. Here the products are low-cost and purchased
frequently. Buyers keep buying the same brand out of habit and not because of
brand loyalty. Buyers make decision on the basis of brand familiarity. Marketers
of such products should try to create brand familiarity by of advertisements
repetition, with competitive pricing, and frequent consumer sales promotion
campaigns. These four buying behaviour situations are shown in Figure 4.7:

between Brands

Figure 4.7: Types of Buying BehaviourSituations

Source: Henry Assael, Cons~lnlerBelznvior and Marketing Action (Boston: Ken1 Publishing
Company,1987)

4.6.2 Stages in Buying Decision Process

Buyers make large number of buying decisions in their daily life. Marketing savvy
compar~iesresearch consumer buying decisions process involved in their respective
product categories. Marketing experts have developed a "five-stage model" of the
buying decision process wahich has been shown in Figure 4.8. This model shows that
the consumer passes through five stages in the buying decision process. These stages
are: 1) problem recognition, 2) information search, 3) evaluation of alternatives, 4)
actual purchase decision, and 5) post purchase behaviour.
 Buyer Behaviour
Post
recognition
behaviour
arousal

Figme 4.8: Five- Stage Model of Consumer Buying Decision Process

Though this model is a useful starting point for examining purchase decision process,
the purchase process is not always as straightforward as it may appear. Certain
important points are to be noted before we proceed to explain this model. These are:
e This model emphasises that the buying process starts much before the actual
purchase and continues after the purchase has been made.
e This model seems to imply that consumers pass through all five stages with
every purchase. As discussed earlier, consumers are more likely to pass through
all the five stages when they face either complex or dissonance reducing buying
behaviour situations. However for frequently purchased, familiar products,
purchasing may be a routine matter and problem recognition may be followed by
repurchase of a familiar brand, and thus, the second and third stages of the five-
stage model are bypassed,
e The consumer may withdraw at ally stage prior to the actual purchase, If for
example, the need diminishes or no satisfactory alternatives are available, the
process will come to an abrupt end.
e The stages are not necessarily of the same length. For complex buying
behaviour situation consumers may take longer time in information search and
evaluation of alternative stages as compared to other buying situations.
However, we discuss all Lhe stages of this model because it captures the full range of
considerations that arise when a buyer faces a highly involving new purchase.
Stage 1: Problem Recognition or Need Arousal
This stage starts whenever the consumer sees a significant difference between his or
her current state of affairs and some desired or ideal state. The consumer perceives
there is a problem to be solved, which may be small or large, simple or complex. This
problem recognition is experienced because people have needs and unsatisfied needs
create tension and discomfort. Acquiring and consuming goods and services can
satisfy some of the needs. Many experts are of the view that needs are aroused by
factors both internal and external to the individual.
Marketers need to identify the circumsta~lcesthat activate a particular need. By
gathering information from a number of consumers, marketers can identify the most
frequent reasons that kindle an interest in a product category. On the basis of this
knowledge they may develop marketing strategies that trigger consumer interest in a
product.
Stage 2: Information Search
A consumer who is in the state of need arousal may or may not go for information
search. If the consumer's need is strong enough and a satisfying product is readily
available, the consumer is likely to buy it immediately. However, in many situations
the aroused consumer may engage in more information search.
The consumer may engage in two types of information search depending on his
intensity of need. These are heightelzed attention and active inforr?~ationsearch.
In the first case the consumer becomes more receptive to~information,which comes
to him aboul the product, which may satisfy his need. For example, an aroused
consumer may pay more attention to advertisements for various brands, pwducts
Understunding Consumers used by friends, and conversations related with the product and brand!;. Here [he
and Selecting Target information search is passive in nature. In the later case, the consumer seeks
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information from various sources. He spends time and efforts to obtain product
information. For example, in active information search aconsumer may read
magazines, seek information from friends or visit retail outlets to see the actual
brands. Here the consumer is the seeker of information rather than the receiver of
information. The amount of information search activity increases as the consumer
moves from habitual buying behaviour situation to complex buying behaviour situation.
There exists number of information sources from where a consumer can obtain
information. Some of these sources are company coiltrolled or dominated and while
others emanate from the environment. The marketers should have knowledge about
these sources and the influence each source exerts on buying decision process.
Consumer information sources fall into four categories:
Personal sources: family members, friend circle, neigl~bourhoods,coworkers, peers
Commercial sonrces: advertising, sales personnel, marketing intermediaries (dealers,
retailers, distributors), point-of-purchase displays
Public sources: mass media (newspapers, magazines, television channels),
consumer-rating organizations
Experiential sources: actual handling of a product,
Consumers whether they are in heightened state or in active information search state,
get information from the above mentioned information sources. In the former case
they are receivers of information and in the later they are the seekers of information.
Look at Figure 4.9 which shows information search process.

< - ,"' 1 I

Heightened Attention Active Information Search

Information Sources
'
personal sources, commercial sources, public sources, and
- experiential sources

Figure 4.9: Il~formzltionSearch Process

Note: Arrow originating t'ronl the source(s) toward the buyer indicates that the buyer
is passive recipient of information while iice versa is indicative of the buyer actively
seeking out information.
The marketers need to find out in respective product categories the relative influence
exerted by these informati011sources on the consumer buying decision process. The
relative influence of these information sources varies with the product and the buyer.
Generally, a buyer receives most information from commercial (marketer-dominated)
sources, although the most effective information comes from personal sources. Each
information source performs n different fi~nctionin influencing the buying decision
process. Commercial information normally performs an injbr17zir1g$~fictio1z, and
personal information sources perforln a legiti~zizitzgor evczluative f~uictiolz.For
example, a collsumer may learn about a new product from commercial sources such
as advertisements but may turn to social sources such as friends and colleagues for
evaluation.
As more infoimation is obtained, the consumer's awareness and knowledge of
available brands increases. For example, if a prospective buyer is contemplating to
purchase an expensive product such as a refrigerator, he may gather i~lforination
 li.om various sources aidut many refrigerator brands available in the market. A Buyer Uel~aviaur
company must design its marketing mix to make prospective buyers aware of and
knowledgeable about its brand. If it fails to do this, the company loses an opportunity
- to sell.

Stage 3: Evaluation of Alternatives

This stage of buying decision process is the most complex and least understood.
Important question for the marketers is once a buyer has progressed through the
information search stage how he or she processes the infortnation relating to
competing brands and makes a final decision? The marketer needs to know about
alternative evaluation-that is, how the buyer arrives at brand choice set. Research in
this area has indicated that buyers use different evaluative criteria in choosing
different products and services. The same buyer may use one criterion for one type
of product and another criterion for other product. There are several evaluation
procedures at work; the most current models view the evaluation process as being
cognitively orieizted i.e., buyers form judgments largely 011 a conscious and rational
basis.
Before discussing the buyer evaluation process one has to understand certain basic
concepts, which are used in it. These are:
Product Attributes and Benefits: In the purchase of a product, a buyer is basically
trying to satisfy some of his needs. Hcre he is looking for certain henejits, which he
may obtain by purchasing that product. Further each consumer sees a product as a
bundle of prod~rctattributes with varying capacities for delivering these benefils. For
example, for a motorcycle, the product attributes that may be considered are fuel
consumption, power, ease in handling, style, and price. Buyers may differ regarding as
to which of these attributes they consider relevant. For some motorcycle buyers all
the attributes inay be relevant and for others only some may be relevant.
Attribute Importance: Consumers do not attach same importance to all the
relevant attributes and instead they may attach different &g~-ees of il?z~~orr~zrzce
to
each attribute.
Brand Beliefs: On tlle basis of the obtained information the consumer may develop
a set of brand beliefs about each brand's ranking on each attribute.
Brand Image: The Lola1 set of beliefs held about a particular brand is known as
brand image. The consumer's beliefs may vary from true attributes because of his or
her experience and also due to the effect of selective perception, selective distortion
and selective retention.
Utility Function: The congumer assumes that each attribute to which he gives
importance has a utility [unction. The utility function describes how the consurner
expects total product satislaction to vary with different levels of different attributes.
For example, ill case of motorcycle purchase, a consumer's satisfaction is likely to
illcrease with better fuel consumption, more power, ease in handling, better style and
lower price. If we combine the attribute levels at which each attribute utility is
highest, then it may lead to his ideal motorcycle.
Evaluation Procedure or Criterion: o n the basis of brand beliefs, brand attributes,
brand iinage, and utility fu~lctionthe consumer inay use some evaluative procedure or
criterion for selecting the brand. As mentioned earlier buyers have been found to use
one or more of several evaluation criteria, depending on the consumer and buying
decision situation.
After explaining the above mentioned basic concepts we try to explain the evaluation
procedure being used by buyers with a specific example. Consider a prospective
buyer is in the process of purchasing a motorcycle. He has gathered information from
 Understanding Consumers various information sources about various brands available in the market. His choice
and Selecting Target has been narrowed down to four motorcycles: A, B, C, and D. Further assume that
Markets
he is primarily interested in five attributes-fuel consumption, power, ease in handling,
style, and price. Table 4.2 shows his ratings of each brand attributes on a 10-point
scale. In his ratings he gives 10 to an attribute if that exists at the highest level in a
specific brand and 1 to the same attribute in another brand if that attribute does not
exists or exists at the lowest level. He rates in between 10 and 1 if the attribute varies
between the highest and the lowest.
Table 4.2: Buyer's Brand Beliefs about Motorcycles

Attribute
Motorcycle Fuel consumption Power Ease of handling Style Price
A 10 8 6 8 4 I
B 8 9 8 6 3
/
C 6 8 I0 5 5
D 4 3 7 3 8

The above table shows the ratings on different attributes for four brands of
inotorcycles. From this table it is very difficult to predict which brand will be
purchased by the consumer because 110 brand is rated best on all attributes. However,
the brands vary in appeal. Some buyers base their buying decision on only one
attribute, and their choices are easy to predict. If this buyer wants fuel consumption
above everything, he would buy brand A; if he wants the motorcycle that is easiest to
handle, he would buy brand C; if he wants best power, he should buy brand B; if he
wants lowest price motorcycle, then he should go for brand D.
In case of expensive and infrequently purchased products such as motorcycle or
television, most buyers normally consider several attributes but assign different
importance weights to each attribute. If one knows the importance weights the
motorcycle buyer attached to the five attributes, one could predict his motorcycle
choice in a more reliable way. Suppose this buyer assigns 30 percent importance
weight to fuel consumption, 25 percent to power, 20 percent to ease in handling, 15
percent to style, and 10 percent to price. To find his perceived value for each brand
of motorcycle, we multiply his importance weights by his beliefs about each brand.
This gives the following perceived values which has been shown in Table 4.3.
Table 4.3 : Perceived Values of Buyers
-- -
I
1
Attribute
Motorcycle Fuel Power Ease of Style Price Perceived
consumption handling value

A .3(10) + .25(8) + .2(6) + .15(8) + .10(4)= 7.8

B .3(8) + .25(9) + .2(8) + .15(6) + .10(3)= 7.45
C .3(6) + .25(8)+ .2(10) + .15(5)+ .J0(5)= 7.05
D .3(4) + .25(3) + .2(7) + 33) + .lo@)= 4.6

From the above calculations of attribute importance and their respective weight one
may predict that this consumer will, in order of preference, favour brand A, followed
by brand 3, and C. The least preferred brand f& this consumer is D. This evaluative
procedure is known as expectczrzcy value model.
Marketers should try to study how the buyers actually evaluate various brand
alternatives. Knowledge of this enables marketers to take steps, which can influence
28

--
----
the buying decision process. For example, if the motorcycle buyer is inclined to buy
Brand A because he rates it high on fuel consumption and power, then what
strategies another inotorcycle brands owners use to influence consumers who give
high rating to fuel consumption and power.
Stage 4: Actual Purchase Decision
- is the cul~ninationof the earlier stage i.e., evaluation of alternatives. Once
This stage
the consumer has evaluated various alternative brands through some evaluative
criterion lie or she forms some brand preferences within the choice set. This leads to
the formation of purchase intentions. The consumer is now likely to take the actual
purchase decision for the most preferred brand but some times two factors may
come between the purchase intentions and the actual purchase decision. These
factors are attit~~des qf'others, and urtanticipated situutional factors. If these two
factors go in favour of tlie consumer's brand intentions then the buyer may purchase
the most preferred brand. However, if they go against the most preferred brand, the
buyer is likely to change his or her intentions and may purchase another brand from
among his or her choice set. How much another person's attitudes will affect buyer's
choices depends both on the strength of the other person's attitudes toward buyer's
buying decision and the buyer's motivation to comply with the wishes of others.
Unanticipated situational factors if they are adverse then they may also go
against the purchase of the preferred brand. The effect of these factors is
shown in the Figure 4.10.

r*L--hAttitudes of others

Unanticipated
situational factors

Figure 4.10: Intervening Factors between Purchase Intentions and Purchase Decision

In addition to the factors described above, a buyer's purchase decision is also

influenced by the amount of perceived risk associated with the product choice. As a
rule, purchase decisions that involve extensive search also entail some kind of
perceived risk, or belief that the product has potentially negative consequences.
Perceived risk may be present if the product is expensive or is complex and difficult
to understand. Alternatively, perceived risk can be a factor when the product choice
is visible to others and tlie buyers run the risk of embarrassment if tlie wrong choice
is made. Because of this perceived risk some sort of pre-purchase anxiety is
produced. A buyer takes certain actions to reduce risk, such as avoiding purchase
decisions, gathering more information, and looking for highly reputed brands, and
brands with warranties. The amount of perceived risk may also vary with the type of
buyers. Buyers with greater "risk capital" are less likely to be affected by perceived
risks associated with tlie products. For example, a highly self-confident buyer would
be less worried about the social risk inherent in a product, whereas a more vulnerable,
insecure buyer might be reluctant to take a chance on a product that might not be
accepted by peers. Therefore, marketers should understand the factors that lead to
the feelings of risk in the buyers and should respond with information and support that
will reduce the perceived risk.
Understanding Consumers Stage 5: Postpurchase Behaviour
and Selecting Target
Markets As indicated in the model of buying
. - decision process the marketer's job does not end
here. After the purchase, the consumer may experience either satisfactio~ior
dissatisfactio~lwith .the product or service. This has a bearing 011 buyer's future
behaviour with regard to the purchase of the same product if the same need arises.
Therefore, a buyer will engage in post purchase behaviour which has implications to
the marlceters.
The catisfaction or dissatisfactioll of a buyer is a function of two things-buyer's
expectations and product's perceived perfor~nance.After purchasing and using the
product, if the buyer finds that the product's peihnnance is below the expectations,
the buyer is dissatisfied, if the performance equals the expectations, the buyer is
satisfied and if the pelformnnce exceeds the expectations the buycr is highly satisfied
and/or delighted.
These feelings of satisfaction influence the buyer's future purchase decisions. {

Satisfied buyers are more likely to purchase the product again, talk favourably to
(WOM)
others about the product, that is, they may engage in positive wo?-d-oJ-~~io~lt/~
communication, pay less attention to competing brands and their advertising, and buy
other products from the same company. On the other hand, a dis-sntisficd buyer
responds dirferently. Dissatisfied buyer may take a number of actions. For example, a I
dis-satisfied buyer may abandon or return the product; seek infolmation which may
support his decision; take public action by complaining to the company, file a law suit,
or complain to the govelnment and private agencies such as consuiner folums or
consumer courts, or take private actions by not buyil-~gthe product o r engage in
negative WOM communication. The consumer's post-purchase actions are shown ill
Figure4.1 I .

consumer groups ,

Engage in - ve WOM

Figitre 4.11: Buyer's Post-purchase Actions

 The post purchase actions as shown in the Figure 4.9 have great implications to the - Buyer Behaviour
marketers. As we know that a company's sales come from two basic groups-new
customers and repeat customers. It usually costs more to attract new customers than
to retain cument ones. And the key to keeping current customers is customer
satisfaction. Thus a customer-oriented company regularly measures customer
satisfaction w d dissatisfactiol~.
Understanding the buyer's needs and buying process will help tho marketers to
develop appropriate marketing strategies for getting desired inarket response.
Check Your Progress-D

1 I. Enumerate the stepB involved in the consumer buying process.

......................................................................................................................
2. What do you mean by utility function?
......................................................................................................................

3. Enumerate intervening factors between purchase intensions and purchase

decision.

1 4) Stae whether the following statements are T n ~ or

r Fulse:

I i)
ii)
In complex buying behaviour situation the buyers arenot highly involved.
A buyer goes through all the five stages of buying decision process in
variety seeking buying behaviour situation.

I ,iii) The most important information sources are personal sources.

iv) . Buyers are found to use a number of evaluative criteria in evaluating
various brand altel~latives.
1 v) Going to the coui-t i n case of dissatisfaction from a product use is private

4.7 LET US SUM UP

Buyer or consumer behaviour ir; the behi.iviour that buyers or consumers display in
searching for, purchasing, using, evaluating, and disposing of pl-oductsand services
that they expect will satisfy their needs. There are three phases of buyer behaviour.
These are: accluisitivn phase, consumption phase and disposition phase.
The four rnain 'ipplications of buyer behaviour nw in developing marketing strategy,
and in consumer education. To survive in a
public policy formulation, sociai n~a~.keting,
rapidly changing market, u firm has to constantly understand the latest consumer
trends anc! tastcs for coming out viable marketing strategies.
Understanfling Consumers In purchasing various products and services buyers are influenced by host of factors.
and Selecting Target These are: psychological factors, personal factors, social factors, and cultural factors.
Markets
Psychological factors include: motivation, perception, learning and beliefs. Personal
factors include: age and life cycle stage, occupation, economic circumstances,
lifestyle, and personality.Social factors include: reference groups, family, and roles
and statuses. Cultural factors include: culture, subcu!ture, and social class. All these
factors influence the buyer in different way. Therefore marketers are required to
analyse the relative influence of these factors in their product areas.
Finally, buyers while making purchases of different products pass through different
stages of buying decision process. These stages are: problem recognition, information
search, evaluation of alternatives, actual purchase decision and post purchase
behaviour. Depending upon the buying situations buyers may or may not go through
all these stages. Buyers face four types of buying behaviour situations. These are:
complex buying behaviour,dissonance reducing buying behaviour, variety seeking
buying behaviour and habitual buying behaviour.

4.8 KEY WORDS

Acquisition Phase: This refers to how buyers acquire the products and services for
their consumption.
Buyer o r Consumer Behaviour: Behaviour that buyers or consumers display in
searching for, purchasing, using, evaluating, and disposing of products and services
that they expect will satisfy their needs.
Complex Buying Behaviour: Consumer buying behaviour in situations
characterized by high consumer involvement in a purchase and significant perceived
differences among brands.
Consumption Phase: This refers to how buyers use or consume the products and
services.
Culture: The set of basic values, perceptions, wants, and behaviours learned by a
member of society from family and other important institutions.
Disposition Phase: It refers to what buyers do with a product once they have
completed use of it.
Dissonance-Reducing Buying Behaviour: Consumer buying behaviour in
situations characterized by high involveinent but few perceived differences among
brands.
Ego: In Freudian theoiy, the part of the personality that serves as the individual's
conscious control.
Evaluation of Alternatives: A stage in the consumer decision-making process in
which the consumer appraises the benefits to be derived from each of the product
a[ternatives being considered
Family: Two or more persons related by blood, marriage, or adoptioil who reside
together.
Habitual Buying Behaviour: Consumer buying behaviour in situations
characterized by low consumer involvement and few significant perceived brand
differences.
Id: In Freudian theory, the part of the personality that consists of primitive and
impulsivedrives that the individual strives to satisfy.
Information Search: The stage of the buyer decision process in which the consumer Buyer Behaviour
is aroused to search for more information; the consumer may simply have heightened
attention or may go into active information search.
Learning: The process by which individuals acquire the knowledge and experience
they apply to future purchase and consumption behaviour.
Lifestyle: A person's pattern of living as expressed in his or her activities, interests,
and opinions
Maslow's Need Hierarchy: A theory of motivation that postulates that individuals
strive to satisfy their needs according to a basic hierarchical structure, starting with
physiological needs, then moving to safety needs, social needs, egoistic needs, and
finally self-actualization needs.
Motivation: The driving force within individuals that impels them to take action.
Organizational Consumer: Buys goods or services for organizational use.
Perception: The process, by which an individual receives, selects, organizes, and
interprets information to create a meaningful picture of the world.
Personal Consumer: Buys goods or services for his or her own use
Personality: A person's distinguishing psychological characteristics that lead to
relatively consistent and lasting responses Lo his or her own environment.
Post Purchase Behaviour: The stage of the buyer decision process in which
consumers take further action after purchase based their satisfaction or
dissatisfaction.
Problem Recognition: The first stage in the consumer's decision-making process in
which the consumer perceives a need and becomes motivated to satisfy it.
Psychographics: It is the science of using psychology, sociology, anthropology, and
demographics to better understand buyers.
Reference Group: A person or group that serves as a point of comparison (or
reference) for an individual in the formation of either general or specific values,
attitudes, or behaviour.
Selective Perception: The perceptual process involving the filtering or screening of
exposure, attention, cornprehension and retention.
Social Class: Relatively homogeneous divisions of society into which people are
grouped based on similar lifestyles, values, norms, interests and behaviours.
Social Marketing: Applying marketing principles for promoting social causes.
Subculture: Smaller groups within a culture that possesses similar beliefs, values,
norms, and patterns of behaviour chat differentiate them from the larger cultural
~nainstream.
Superego: In Freudian theory, the part of the personality that reflects society's moral
and ethical codes of conduct.
Variety Seeking Buying Behaviour: Consumer buying behaviour in situations
characterized by low consumer involvement but significant perceived brand
differences.

4.9 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress-C
4. i) T11ie ii) False iii) True iv) False
Understanding Consumers Check Your Progress-D
and Selecting Target
Markets 4. i) False ii) False iii) True iv) True v) False

4.1 0 TERMINAL OUESTIONS *

1. What do you mean by buyer behaviour? Why is understanding of buyer

behaviour important for marketers?
2. Describe Maslow's hierarchy of need theory. Discuss its significance for
understanding the buyer behaviour.
3. Do yo11 agree that people do not want to divulge their real motives in the
purchase of certain products and services? If yes, explain the
psychoanalytical theory of personality and give examples from your own
experience in what types of products this theory is applicable and why?
4. Fro111the concept social class as given in the text do you think it is applied in
certain buying situations. If yes, identify the products in which this coilcept is
most relevant.
5. How do perception and learning influence the buyer behaviour? Elaborate with
the help of suitable examples.
6. "Consumers are being influenced by anumber of psychological factors in the
purchase of products and services". Discuss these factors briefly.
7. Analyse the personal factors which influence buyer behaviour. Give suitable
examples.
8. Why are social factors important for understanding buyer behaviour? Discuss
various social factors which influence the buyer behaviour.
9. Explain various cultural factors which influence buyer behaviour.
10. Discuss various stages involved in the buying decision process.
11. Give your answer with suitable examples.
i) Discuss the role of family members in the purchase of consumer durable
products.
ii) Describe various sources of information and their role in the buying
decision process.
iii) Taking help with the evaluation process discussed in this unit describe the
evaluation of alternatives for deciding the choices set for various brands
of cars.
iv) Based on your experience what actions have you taken both in case of
satisfaction and dissatisfactions from the use of various products. Give
reasons.
12. Writenoteson:
i) ?'ypes of buying behaviour situations
ii) Types of consumers
iii) Freud's psychoanalytical theory of personality
UNIT 5 TS AND MARKET

Structure
5.0 Objectives
5.1 Introduction
5.2 What is a Market?
5.3 Types of Markets and their Characteristics
5.3.1 Consumer Markets
5.3.2 Organizalional Markets
5.4 Meaning and Concept of Market Segmentation
5.5 Importance of Market Segmentation
5.6 Requirements of Effective Market Segmentation
5.7 Bases for Market Segmentation
5.7.1 Boscs I'or Segmenting Consumer Markcts
5.7.2 Bases {'orSegrilenting Organizatio~lalMarkets
5.8 Micro Segmentation and Mass Custornization
5.9 Let Us Sum Up
510 Key Words
5.1 1 Answers to Check Your Progress
5.12 Terminal Questions

5.0 OBJECTIVES
After studying this unit, you should be able to:
0 explain the meaning of market;
0 discuss diffesent types of markets and explain their characteristics;
a describe the meaning and significance of market segmentation;
a describe I-equire~nents
for effective market segmentation;
0 explain various bases for segmenting consumer and organizational markets; and
a describe the concept of micromarketing and mass customization.

5.1 INTRODUCTION
From the study of the previous four units you must have understood various aspects
of marketing ma~~agement. You may be aware by now that basic purpose of a
company's marketing department is to pel-form "three S" for its consumers. The first
S stands for sensirzg the consumer, the second S stands for sewing the consumer,
and the third S stands for sati.yfyirag the consumer. In doing so the marketer is
basically looking towal-ds its market, which is the set of actual and potential buyers of
~l product with want satisfying products and services. To be successful in its
m:u-lteting efforts a company should understand the characteristics of the market in
order to sense, serve and satisfy its consumers-market with its products. In this unit,
you will learn the meaning of a market, types of markets and their characteristics.
Understanding Consumers You will further learn the meaning and importance of market segmentation,
and Selecting Target requiremenis of effective segmentation, bases of segmentation, and the meaning of
Markets
micro marketing and mass customization.

5.2 WHAT IS A MARKET?

The term market has many meanings and connotations. Originally the term market
stood for the place where buyers and sellers gathered to exchange their goods, such
as a village bazaar. Another popular way of describing a market is in the context of a
particular place where several shops or buyers or users may be located. For example,
Connaught Place is considered a market in New Delhi. Economists use the term
market to refer to a collection of buyers and sellers who transact a particular product
categoly or a range of products such as computer market, two-wheelers market, car
market, etc. But marketers do not agree with economists as they consider the sellers \
as constituting the industry and the buyers as constituting the market. I
From the marketing point of view it can be defined as group of people or
organisations with needs to satisfy, money to spend, and the willingness to spend it. It
can be identified by Lome common characteristic, interest, or problem; use a certain
product to advantage; and be reached through some medium. However, within a total
market there is always some diversity among the buyers. The size of the market
depends on the number of people who exhibit the need, have resources to engage in
exchange and are willing to offer these resources in exchange for what they want.
Within the sane general market there w e groups of customers with different needs,
buying preferences, or product-use behaviour. In some markets these differences are
relatively minor, and the primary benefit sought by consumers can be satisfied with a
single marketing mix. In other markets customers are unwilling to make the
compromises necessitated by a single marketing mix. As a result different marketing
mixes are required to reach the entire market. Whether it is large or small, the group
of consumers (people or organizations) for whom the seller designs a particular
marketing mix is a turget market. Thus a target market refers to a group of people or
organizations at which a firm directs a marketing program with a specific marketing
mix. For example, Malvti Udyog, the market leader in passenger car market, focuses
on one target market for its Maruti 800, for Zen it has another target market, for
Esteem il considers yet another target market, and for Baleno it is targeting a
different target market. Therefore, a company may have different target markets for
its various brands in the same general market in a product category. For each target
market the company has to develop distinct marketing program if it wants to succeed
in that target market.

5.3 TYPES OF MARKETS AND THEIR

CHARACTERISTICS
We as consumers, buy various goods and services for our own consumption or use in
our daily life. 111 the same way business enterpiises buy innumerable goods and I
services for the purpose of using them in manufacturing process, helping in
manufacturing process, for running the business, and reselling them to the final
consumers. For proper understanding of the markets, therefore, it is essential to
classify the markets 011 the basis of the type of buyer group. As such, markets are
classified into two broad categories. They are: consumer markets and organizational
markets. Let us study these two types of markets in detail.

5.3.1 Consumer Markets

Here consumers mean all the individuals and households who buy goods and services
for their personal or household consumption. Thus the consumer market consists of
all the individuals and households who buy or acquire goods and services for their Markets and Market
own personal or household use. They buy strictly to satisfy their non-business Segmentation
personal needs and wants. For example, you purchase items such as toothpaste, soap,
biscuits, sweets etc., for your personal consumption or your family consumption. But
when an individual or organization buys goods for resale or for further production,
such an individual o r organization is not treated as belonging to the consumer market.
These ultimate consumers are large in numbers and spread throughout the country.
They also vary tremendously in age, income, educational level, tastes, preferences,
etc. In Unit 4 we have discussed in detail that buyers are influenced by a host of
factors in purchasing various products arid services. These factors are cultural, social,
personal, ecoiioinic and psychological characteristics of the buyer. You may also
recall while buying different products and services a buyer typically goes through five
slages of buying decision process. These five stages are: problem recognition or need
arousal, information search, evaluation of alternatives, actual purchases decision and
post-purchase beliaviour.

5.3.2 Organizational Markets

It is generally considered that business organizations engage in selling their products
and services to their consumers. This is tiue, but they also buy vast quantities of raw
materials, ~nanufacturedcomponents, plants and equipments, supplies, and business
services. Thousands of business, institutional, and government organizations represent
a huge, lucrative buying market for goods and services purchased from both domestic
and international suppliers. In fact, organizational markets involve many more lupees
and items than do consumer markets.
Today most of the large companies, in addition to selling their products to the
consumer market, sell to other organ~zations.Many industrial goods manufacturing
companies sell most of their products to other business organizations. Even large
consumer goods ~nanufacturersengage in organizational marketing. For examplr,
MRF, the leading manufacturer of various types of tyres, in addition to selling to the
ultimate consumers it also sells tyres to different automobile co~npanieswho
n1;lnufacture different types of vehicles. Organizational market purchases goods ancl
services lo achieve specific goals, such as making money, reducing operating costs,
and satisfyi~igsocial or legal obligations. The organizational market comprises all the
organizations that buy goods and services for use in the production of the other
products and services that are solcl or rented, 01. supplied to other customers or used
by the~nselvesfor mnning the organization.
Marketing various products and services to organizations is dil'~cr*erit
form marketing
to consumer marltet. The unique considerations of organizationd market, which are
not present in consumer markets, are:
a Organizations do not buy for personal consu~nptionbut to obtain goods and
services that will be used in fiirthcr production, reselling or servicing.
e More persons are normally got involved in organizational buying, especially for
rn+ior items, than in consumer buying.
0 The organization imposes policies constraints, and recluirements that must be
kept in mind by its sellers.
e The buying instmments, such as request for quotations, proposals, and purchase
contract, adcl another dimension not found in consumer buying.

'2lypcs of Orgailizational Markets

There are four types of organizational markets: the industrial market, the reseller
market, the government market, and the institutional market.
Understanding Consumers a) TIze Industrial Market: It is also called producer or business market. It
and Selecting Target consists of all the individuals and organisations that buy or acquire goods and
Markets
services that enter into the production of other products and services that are
sold, rented or supplied to others. The major industries making up the
organizational market are agriculture, forestry and fisheries; mining;
manufacturing; construction; transportation; communication; public utilities;
banking; finance, and insurance; distribution; and services. For example, Maruti
Udyog purchases large number of raw materials, component parts, machinery,
and supplies. After manufacturing different brands of passenger cars it sells to
final consumers and organizations. Within the industrial market, customers tend
to be larger and fewer than in consumer markets. But even here, great
variations are found. First, the number of industrial firms making up the market
varies from one (monopsony), to few (oligopsony), to many. Secondly, we can
also distinguish between indusrial markets made up of only large films, or a few
large and many small firms, or only small firms.
b) The Reseller Market: It consists of all the individuals and organisations that
acquire goods for the purpose of reselling or renting them to others at a profit.
The basic activity of resellers-unlike industrial or business market-is buying
products from manufacturing organizations and reselling these products
essentially in the same form to the resellers' customers. In economic terms
resellers create time, place and possession utilities rather than form utility.
Resellers also buy many goods and services for use in operating their
businesses-items such as office supplies and equipment, warehouses, materials-
handling equipment, legal services, and electrical services. In the case of the
resellers like small wholesale and retail organisations, buying is done by one or a
few ii~dividuals.In large reseller's organizations, buying is done by a buying
committee made up of experts on demand, supply, and prices. One of the major
problems a reseller faces is to determine its unique assortment-the combination
of products and services that it will offer to its customers. The wholesaler or
retailer can choose any four of the following assortment strategies:

-
ru,lt organlzatlons

Ryre 5.1 :Types of OrganizationalMarket

 Excluive Assortment: It represents the line of only one manufacturer. For Markets and Market
example, an exclusive show room of cars from a single manufacturer. Segmentation

Deep Assortment: It represents a given homogenous product family in depth,

drawing on many ~nanufacturersproducts. For example, a TV dealer who keeps
many brands of TVs from different manufacturers.
Broad Assortments: They represent a wide range of product lines that still fall
within the natural coverage of reseller's type of business. For example, an
electronic goods dealer that keeps different electronic goods from various
~nanufacturers.
Scrar~tbledAssortment: It represents many unrelated product families. For
example, a grocery store or a super market that keeps thousands of products
and brands in different product categories from hundreds of manufacturers,
This choice of assortment may be available to a single reseller also. For
example, a camera store may decide to sell only Kodak cameras (e;:clusive
assortment), many brands of cameras (deep assortment), cameras, tape
recorders, TVs, music systems (broad assortment), and many different products
altogether (scrambled assortment).
c) The Governrnent Market: In most countries, government organizations are a
major buyer of goods and services. The government market consists of central,
slate, and local governmental units that purchase or rent goods for carrying out
the main fu~ictionsof government. The government market constitutes a huge
market potential for many companies. For example, government market buys
hundreds of products and services from large number of companies. The
governmental agencies buy amazing range of products and services; they buy
every thing from toiletries, clothing, furniture, computers, vehicles, and fuel to
sculpture, fire engines, weapons, and practically everything.
Gove~~iment purchasing processes are different from those in the private sector
of the industrial or business market. A unique feature of the government buying
is the competitive bidding system. Much government procurement, by law, must
be done on a bid basis. That is, the government agency advertises for bids using
a standard format called a request for proposal (RFP), or quotation Lhat states
specifications for the intended purchase. Then it must accept the lowest bid that
meets these specifications. An alternative to this system, the government may
sometimes negotiate a purchase contract with an individual supplier. This system
is used when government wants to purchase a specialized product that has no
comparable products on which to base bidding specifications. In India, most of
the government purchases for standard products are based on the rates
approved by the Directorate General of Supplies and Disposal (DGS&D). From
time to time DGS&D decides the rates of various products and services which
are needed by governmental agencies. Despite the vast opportunities available
from the government market, many companies are reluctant to sell because they
are intimidated by the red tape.
d) The Instit~itiorzalMarket: This is also known as non-profit organization or
"nonbusiness" business market. This market consists of various non-profit
instilulions other than the government market. This includes: educational
institutions (schools, colleges, universities, and research laboratories), hospitals,
nursing homes, religious institutions, etc. Many non-profit institutions have low
budgets and captive clienteles. For example, many universities, colleges and
governmental hospitals work on funds provided by the government and in most
of the cases these are limited. Therefore, those companies who wish to sell to
this market should keep in mind the inherent budget constraints.
 Understanding Consumers Characteristics of Organizational Market
and Selecting Target
Markets After discussing various types of organizational market we now describe briefly the
- - characteristics of organizational
distinguishing - market which make it different from
consumer market. These characteristics are more or less applicable to all types of
organizational market, but these are more applicable to industrial or business market.
These are:
Fewer Buyers: Normally organizational buyers are less in number compared with
consumers. Therefore, an industrial marketer normally deals with fewer buyers than
does the consumer marketer. For instance, if a MRF a leading tyre manufacturing
company wants to sell its tyres in the industrial market, it may concentrate on one of
the big automobile manufacturing concerns. When the same company wishes to sell
tyres to consumers (vehicle owners) it has to contact lakhs of vehicle owners.
Larger Buyers: Organizational buyers norlnally require large quantities of goods
whereas personal consumers require smaller quantities. Thus industrial buyers are
large scale buyers. Even among industrial buyers a few large buyers normally
account for most of the purchasing. In such industries as automobiles, telephone,
soaps, cigarette, synthetic yarn etc., a few top manufacturers account for more than
a substantial part of total production. Such industries account for a major share of
1 raw material bought in the market,
Geographical Concentration: Organizational buyers are mainly concentrated in
few places like, Mumbai, Kolkata, Delhi, Chennai, Bangalore, Pune, Hyderabad, etc.,
whereas consumers are spread throughout the country. For example, most of the
companies in textile sector are located in the westetn belt of India. Because of this
geographical concentration of industrial markets, the marketers need not establish
distribution network throughout the country. This helps in reducing the cost of
distribution.
Derived Demand: The demand for industrial goods is ultimately derived from the
demand for consumer goods. For instance, Maruti Udyog Ltd. purchases steel and
produces cars for the consumer market. If the consumer demand for cars drops, so
will the demand for the steel and all the other products used to make cars. Therefore,
industrial marketers sometimes promote their products directly to final consumers to
increase business demand. For example, Intel Corporation, the largest supplier of
computer processors engages in mass media advertising quite often.
Inelastic Demand: Demand for many industrial goods and services is inelastic and
not much affected by price changes, especially in the short run, because producers
can not make quick changes in production schedules. For example, footwear
manufacturers will not buy much more leather if the prices of leather fall. Nor will
they buy less leather if the prices rise unless they can find satisfactory substitutes. In
case of price increase of industrial product such as key raw material, the
manufacturers will increase the price of the finished product. In this way they pass on
the price increase to the ultimate consumers.
Fluctuating Demand: The demand for industrial goods and services tends to be
more volatile than for consumer goods and services. This is especially tnle of the
demand for new plant and equipment. A given percentage increase in consumer
demand can lead to a much larger percentage increase in the demand for necessary
plant and equipment to produce the additional quantity in order to meet the increased
demand. Economists refer to this as the acceleration principle.
Professional Purchasing-: Most of the organisations have professionally trained
personnel in the purchasing division. Goods are purchased by these specialists. There
are professional journals which provide inforlnation for the benefit of these
40 professional buyers. Consumers, on the other hand are less trained in the art of
carefl~lbuying. In industrial purchasing, if the buying decision is complex; it is likely Markets and Market
that several persons will participate in the decision-making process. Purchase Segmentation
committee comprising experts and top management are common inlthe purchase of
major goods. In addition to this, Inany of the buying instruments-such as purchase
contracts-are not found in consumer buying.
Close Supplier-Customer Relationship: With the smaller customer base and the
importance and power of the larger customers, industrial sellers are frequently
required to customize their offerings, practices, and performance to meet the needs of
individual customers.
Multiple Buying Influences: More people typically influence business buying
decisions. Buying committees are common in the purchase of major goods; marketers
have to send well trained and experienced sales people and often sales teams to deal
with these well-trained buyers
Multiple Sales Calls: With the more people involved in the process, the sales
representatives or sales teams from the industrial supplier are req~~iredto call many
times before getting an order from an industrial buyer. A long period, ranging from a
few weeks to few months is required to get an order for major capital equipment
from an industrial buyer.
Direct Purchasing: Organizational buyers particularly business buyers often buy
directly from manufacturers rather than through intermediaries, especially products
that are technically coinplex or expensive.
Reciprocity: Organizational buyers often select suppliers who also in turn buy from
them. For example a paper manufacturer who buys chemicals from a chemical
company that is buying a considerable quantity of its paper. Even in this reciprocal
buying situation the buyer will make sure to get the supplies at a competitive price, of
proper quality and service.
Leasing: In case of ma-jor and expensive eq~lipmentmany induslrial buyers lease
rather than buy in order to conserve funds, get the latest products, receive better
service, and gain tax advantages. The lessor often makes more profit and sells to
customers who could not afford outright purchase of equipmelit, There are certain
income tax benefits according to Indian Income Tax Act given to both lessor and
leasee.

Check Your Progress-A

1. Distinguish between deep assortment and broad assortment.

2. Enumerate five characteristics of organisational market.

3. Distinguish between industrial markets and reseller markets.

......................................................................................................................
Understanding Consumers ......................................................................................................................
and Selecting Target ......................................................................................................................
Markets
4. Distinguish between derived demand and inelastic demand.

5.4 MEANING AND CONCEPT OF MARKET

SEGMENTATION
Today companies that sell their products and services to various consumer and
industrial markets are aware that they cannot serve to all buyers in the entire market
for a specific product or service category. The reason is that buyers in a specific
product market are too numerous, too widely spread, and have different needs and
buying motives. This is known as heterogeneity or diversity of buyers. For examples,
not all consumers wlio wear pants want to wear jeans. Even those wear jeans some
will go for designer's jeans and some go for cheaper jeans. In the same way
businesses who use compute s may not want the same amount of memory or speed
in computers. Thus rather than to compete in an entire market each company must
identify the parts of the market that it can serve in a more meaningful way.
What we are seeing here is that within the same general market there are groups of
consumers with different needs, buying preferences, or product-use behavio~~r. In
some product markets these differences are relatively minor, and the primary beliefit
sought by consumers can be satisfied with a single marketing mix. In other product
markets these differences are pronounced and consumers are not likely to
compromise on single product and other elements of marketing mix. As a result,
alternative or multiple marketing mixes are rcquired to reach the entire product
market. For example, today in India there are various brands of cars which are
serving the "small car market", some are serving "mid-size car market", and some
brands of cars are serving "luxury car market". Whether it is large or small, the group
o i consumers (personal consumers or business buyers) for whom the seller designs
and directs a particular marketing mix is a target market.
Historically speaking, companies did not practice target market approach. They have,
over the years passed through three stages in marketing their products and services.
These are:
Mass Marketing: In this marketing practice companies use to produce a single
product on a mass scale, distkibuted and promoted on a mass level. The main
advantage that has been advocated for mass marketing is that this will lead to
economies of scale to t h e manufacturers and lower price to the consumers. This
practice is also known as "shotgun approach" or market aggregation. In the present
market scenario this practice ris seldotn used by the marketers as consumers in most
of the markets exhibit differences in terins of bnying preferences, needs and product
use behaviour. This has made mass mnrketi~ignlsre difficult in the present tirnes.
Target Marketing: Here the tola1 market is viewcri as consisting of several s~nnller
segments with differences significant enough that one marketinp mix will not satisfy
everyone or even a majority in a given product or servicc, n~arlcet.Therefore, a firm
here identifies different submarkets or malket szgments, selects one or more of them,
and develops products and marketing mixes rLtilasedto each. This strategy etnploys a
"rifle" approach instead of "shotg~~n"approaclk.
42
Today most of the companies are moving away from mass marketing and adopting Markets and Market
target marlceting approach. Marketers who want to practice target marketing Segmentation
effectively are required to take three steps. The first step is rlzarket segnzentation,
the second step is inarket targeting, and the third step is market positiolzilzg.
Therefore, target marketing is also known as STP marketing i,e. segmenting,
targeting, and positioning. In this unit we will discuss market segmentation and the
remaining two steps i.e., lnarket targeting and marlcet positioning will be discussed in
thc next unit. Look at Figure 5.2 which shows various steps in target marketing.

Market Segmentation Market Targeting Market Positioning

Thc process of clivicling Evaluating and selecting Setting tlie competitive
market into distinct markel segment positioning for product
with specific marketing

Figure 5.2:Steps in Target Marlteting

As buyers of a product exhibit different needs and wants, and therefore, eacli group
with similar needs rnny be treated as a separate market. Customer-oriented
companies take these diffclcnces into consideration, but they usually cannot afford to
tailor-made n different product and marketing mix for every consumer. Consequently,
most niarlcetcrs operate between the extremes of one marketing mix for all (mass
marketing) and a different one for each consumer. Therefore, companies go for
marlcet segmentation. We define market segmentation as the process of dividing
tlie total nlarltet for a product or service into several smaller groups, such
that the members of each group arc similar with respect to the factors that
influence demilnd. Therefore, companies through market segmentation divide large,
betel-ogencous marlcets into smaller segments that can be reached Inore efficiently
and effectively with products and services that match their unique needs.
The stl.alegy of marltct scgmentation involves the development of two or more
different milrketing plogrilnls for a given product or service, with each milrkcting
11rogram aimed at a different market segment. A strategy of marketing scgmentation
recluires that the company first clearly defines the number and nature of the customer
I
groupings (marltet segments) to wliicli, it intentls to oL'fer its product or service. This
is necessary (though not sufficient) condition for optimiziilg efficiency of marlcetilig
cfi'ort against those scgments or the total market where it is likely to yield higher
returns on the effort and investment. Some people criticize that marketers create the
segments. This is not truc. They do not create the segments but they first identify the
segments and then decicie to focus on one or more segments with different marketing
~nixes.

5.5 IMPORTANCE OF MARKET SEGMENTATION

Marltet segmentation being customer-oriented is i l l consonance with the marketing
concept philosophy. In marltet segmentation, a company first identifies the needs of
consumers within a segllienl: and then decides if it is practical to develop a product
and marlceting mix to satisfy those needs. By practicing market segmentation n
company may obtain the following advantages and benefits.
0 By tailoring marketing programs to each lnarket segment, a company can do a
better marketing job and can make more efficient use of its'marketing resources.
e A small company with limited resources may be ill a better position to compete
more effectively in one or two small market segments, whereas the same
comp;uny would be overwhelmed by the competition from bigger companies if it
aimed for a major segment.
Understanding Cr~nsurners e A company with effective market segmentation strategy can create a more fine-
and Selecting Target tuned product or service offering and price it appropriately for the target segment.
Markets
e The company can more easily select the most appropriate distribution network
and communication strategy, and it will be able to understand its competitors in a
better way, which are serving the same segment.
e By developing strong position in a specialized market segments, a medium sized
company can grow rapidly.
e Even very large companies with the vast resources at their disposal are
abandoning mass marketing strategies and embracing market segmentation as
more effective strategy to reach various market segments in broad product
market. For example, Hindustan Lever Ltd (HLL), one of the most admired
companies, has developed a number of detergent brands to cater to the needs of
various segments in detergent market. This has been done by HLL after it faced
stiff competition in the 1970s from a sinall and lesser known Nirma Chemicals
Ltd, in the form of Nirma brand. As a result of Nirma's onslaught HLL came up
with an economical brand named Wheel to cater to the needs of middle class
and economy conscious detergent buyers.
Because of these factors and the benefits from the market segmentation most of the
companies both in consumer and industrial markets are practicing this strategy.
Because of obvious benefits, today not only market segmentation is practiced by the
companies manufacturing goods and services but it has also been adopted by
retailers. Many marketing experts are of the view that the days of mass marketing
have gone and even if some companies are following mass marketing its days are
numbered. Therefore, today companies use market segmentation to stay focused
rather than scattering their ma keting resources.

5.6 REQUIREMENTS OF EFFECTIVE MARKET

SEGMENTATION
The goal of segme~~tation is to divide a market so that each segment responds to a
different or unique marketing mix. The variables on the basis on which the market is
segmented should be capable of measurement and quantification. It should not be
merely a subjective phenomenon. For this measurement, adequate data should be
available or be capable of being collected. If the data is not available and not
quantifiable, the segmei~tationwill be difficult orunscientific. As we will see in the
next section that there are several ways to segment a market, but not all
segmentation approaches are equally effective. To carry out effective market
segmentation, the selected segments should be ( I ) identifiable and measurable, (2)
sufficient (in terms of size), (3) stability, (4) reachable (accessible) in terms of media
and costs, (5) differentiable, and (6) actionable. Let us discuss them in detail.
Identifiable and Measurable: To divide the market into separate segments on the
basis of a common need or characteristics that is relevant to the product or service,
marketers must be able to jdeiitify the relevant characteristics or variables. Some
segmentation variables, such as geography (location) or demographics (age, gender,
occupation), are relatively easy to ibntify or are even observable. Others, such as
education, 'income, or marital status, can be determined through survey research using
questionnaire. Still other characteristics, such as benefits sought or lifestyle, are more
difficult to identify. Even after the proper identification of variable(s) the marketers
will be in a position to measure the resultant segments in terms of their size,
purchasing power, and profile. Certain segmentation variables are difficult to measure
because they are difficult to identify. Therefore, if any segmentation variable can not
be measured properly segmentation of muket will not be effective.
r
Sufficient (in terms of size): For a market segment to be worthwhile target, it must Markets and Market ~
have a sufficient number of people to warrant tailoring a product or promotional Segmentation
campaign to its specific needs or interests. The segment not only should be large but
it should also be profitable enough to serve with a specific marketing mix. In
estimating the size of each segment under consideration, marketers often use
secondary demographic data or undertake a probability based survey whose findings
may be projected to the total market. For example, it would not pay for a motorcycle
manufacturer to develop not or cycles that are physically challenged.
Stability: Most marketers prefer to target consumer segments that are relatively
stable in terms of demographic and psychographic variables and needs that are likely
to grow larger over time. They normally prefer those market segments which can be
predicted with certain amount of certainty and stability. In the context of certain
products which are amenable to fashion and fads, trying to segment a market on the
basis of fads, which may change in a short period, will be a risky proposition. For
example, teens are a sizeable and easily identifiable market segment, eager to buy,
able to spend, and easily reached. Yet, by the time a marketer produces merchandise
for a popular teenage fad; interest in it may have waned or decreased.
Reachable (accessible) in Terms of Media and Costs: A fourth requirement for
effective market segmentation is accessibility. It refers to the degree to which the
segments can be effectively reached and served in an economical way. Despite the
wide availability of special-interest magazines and cable TV network, marketers are
constantly looking for new media to reach their target markets with a minimum of
waste circulation and competition. With the advent of Internet, now marketers are
able to reach to a narrow group of segments. Suppose, a perfume manufacturing
company finds that the regular users of its brands are unmarried men who are out
late at night and frequently visit bars, unless this group of men lives in a specific
locality or do shopping at certain places, for the company it will be difficult to identify
them and reach them. Therefore, when markets are segmented, each segment should
be accessible and approachable.
Differentiable: The resultant segments should be conceptually distinguishable and
respond differently to different marketing mix elements and programs. For example, if
married and unmarried respond similarly to a sale on perfume, they do not constitute
separate segments.
Actionability: It refers to the degree to which effective programs can be formulated
for attracting and serving the segments. A small travel agency, for example, identified
seven market segments, but its staff was too small to develop separate marketing
programs for each segment.

5.7 BASES FOR MARKET SEGMENTATION

The first step in market segmentation strategy is to select the most appropriate
base(s) on which to segment the market. Because of inherent differences between
consumer and organizational or business markets, marketers cannot use exactly the
same variables to segment both. Instead, they use one broad group of variables as the
basis for consumer market segmentation and another broad group for business
market segmentation. We will disclss various bases used in segmenting a consumer
market and then discuss the bases for segmenting business markets. Before we
discuss the bases for segmentation one caveat is in order. There are innumerable
ways of segmenting a market. However, not every base is equally applicable for
every product category. For some products one base may be more appropriate and
for other product category another base may be more appropriate. As you know,
market segmentation means dividing the market into several homogeneous
I Untlerstanding Consumers submarkets or segments. Now the question is: what is the basis of segmenting the
and Selecting Target market? In fact there is no single way to segment a market. A marketer has to try
Mwkcts
different segmentation variables to view the rnarltet structure. You have learnt that
the market can be broadly divided into two categories: consumer market and
organizational or business market. We need to identify some of the widely used base
for segmenting these two broad types of markets. We will first take various bases
used in segmenting consumer inarltets.

I 5.7.1 Bases for Segmenting Consumer Markets

As stated earlier there is no single way of segmenting a market. A marketer has to
try different segmentation variables, alone and in combination, to find the best way to
view the market structure. Eight major categories of consumer characteristics
provide the most popular bases for consumer market segmentation. They include:
geographic factors, demographic factors, psychological factors, sociocultural
variables, use-related characteristics, use-situation factors, benefit sought, and hybrid
segmentation forms such as de~nographiclpsychographicprofiles, geodemograpl~ic
factors, aild values and lifestyles. Hybrid segmentation forms a combination of
several segmentation bases to create rich and comprehensive profiles of particular
consumer segments. All eight segmentation bases are divided further into specific
variables. Look at Figure 5.3 which shows these bases.

Consumer Markets

Seg~nentation Segmentation

Use-siluation
Segmentation Segmentation Segmentation Scgnientalion

Figure 5.3 : Bases for Segmenting Consumer Marltets

Geographic Segmentation: This calls for dividing the market on the basis of
location. A company may divide the market into different geographical areas such as
nations, regions, states, cities, urbanliural areas, or neighbourhoods and then decides
to operate in one or few geographical areas, or to operate in all areas but pay
attention to geographical differences in consumer needs and wants. The basic reason
of using geographic base for segmentation is that people who live in the same area
share some similar needs and wants that these needs and wants differ from those
people living in other areas. For example, certain food and beverages sell better in
one region than in others. Take the example of coffee which is consumed in India, but
it is more consumed in South India tliai~any other region. A company who is
marketing coffee may keep the taste and flavour preferences in the different regions
and accordingly it may come out with different variants of coffee in terns of taste
and flavours which may be liked by people belonging to different regions. I11 the
context of India, another variation may be found in terms of purchasing pattern
among urban and niral consumers. Companies, if they observe divergent pattern of
purchasing in a specific product category among the people of these areas then Lhey
may develop products and marketing mixes to suit the consumers' tastes and
preferences belonging to urban or rural areas.
In short, geographic segmentation may prove to be a useful strategy for many
marketers. It is relatively easy to find geographical differences in many products.
In addition, geographic segments can be easily reached through the local media,
including newspapers, TV, and radio, and throzlgh regional edition of magazines. Markets and Market
Segmentation
Demographic Segmentation: Demographic segmentation consists of dividing the
marltet into groups on tlie basis of demographic characteristics of consumers such as
age, sex, family size, income, occupation, education, religion, nationality, etc.
Demography refers to the vital and the measurable statistics of population.
Demographic variables are the most populal- bases for distinguishing customer
groups. One of tlie reasons for preferring demographic bases is that consumer wants,
preferences and usage rates are, often highly associated with demographic
characteristics. Another reason is that demographic variables are easier to measure
than most other types of variables, even when the target market is described in non-
demographic terms (say, a personality type), it should be linked back to demographic
characleristics in order to Itnow the size of the target market and rcach it effectively.
Another reason of its popularity is that demographic variables reveal ongoing trends,
such as shil'ls in age, sex (gender), and income distribution that signal business
opportunities. Let us discuss how certain demographic variables can be applied to
marltet segmentation,
a) Age a ~ i dZtfe c y c b stage: Because product needs and interest often vary with
consumer age, marketers have found age to be particularly userul demographic
variable for distinguishing segments. Many marketers have carved themselves a
niche in the marketplace by concentrating on a specific age segment. For
instance, children of six months age differ from children of three months age in
theit I'ood requirements and consumption potential. A Loy manuracture nlay
realize this and may design different toys to be used by children belonging to
clifferent age groups. A bay food company may market different foods which
may suit the requirements of different aged babies. Recently, different cable
channels have come up which cater to the children, youth, and males/fe~nalesof
dirrerent age groul~s.Segmenting a market on the basis of age sotnetilne create
problems. Marketers must be carelill in defining market segments in strictly
chronologicill age terms as it can sometimes be stereotypical and misleading,
particularly because nlany adult consumers have a perceived age (i.e., cogtiitivc
q e ) about I O to 15 years younger than their chronological age. A useful
segiientation approach categorizes older consumers in t e n s of their cognitive
age rather than chronological age.
b) Sex (Gender): Segnlentation of marltets based on sex or gender has long been
usecl in the case of proclz~ctssuch as clolhing, cosmetics, and magazincs. Gender
has long been a distinguishing segmentation variable. Women have traditionally
been the main users of such products as hair colouring, shampoo, and cosmelics
alicl Inen have heen the main ilsers of tools and shaving goods. However, sex
roles, in the recent years, have blurred considerably, and gender is no longer an
accurate way of dist i nguishing consumers in somc product categories. For
example, women are buying all types of I~ouseholdproducts and men have
become significant users of skin care, sliampoo and cologne and hair care
products. It is becoming increasingly colnlnon to see magazine ads and TV
rommercials to depict man and women in roles traditionally occupied by the
o l ~ ~ o s isex.
t e Much of the sex role change has occurrecl because of emergence
of increased number of dual-income families. in every country including India
more and more women are going for e~nploy~nent and this has resulted in the
change in traditional roles of men and women. Till few years back, men were
the main users of two-wheelers in India. Now, two-wheeler industry has already
recognized sex as a basis of segmelltation. In the past, two wheelers were
desig~iedto appeal to the men only. With the increase in the number of working
women, many companies in this indust~yhave designed scooters which are
suitable for woluen.
Understanding Consumers C) Marital Status: another way of segmenting a market is on the basis of marital
and Selecting Target status. Traditionally the family has been the focus of most marketing efforts, and
Markets
many products and services; the household continues to be the relevant
consuming unit. Marketers are interested in the number and kinds of households
that own and/or buy certain products they are also interested in determining the
demographic and media profiles of household decision makers (the person
involved in the actual selection of the product) to develop appropriate marketing
strategies.
d) Irzcome, Education, and Occupation: In the recent years the popularity of
income as segmenting variable of a market has been decreased. Although
income has long been an important variable for distinguishing market segments,
a major problem with segmenting the market on the basis of income alone is that
income simply indicates the ability (or inability) to pay for a product. For this
reason, marketers often combine income with some other demographic
variable(s) to define their target market, more accurately. For example, very
often marketers combine income with age to identify the important affluent
elderly and affluent younger segments. Many marketers are of the view that
education, occupation, and income tend to be closely correlated in almost a
cause-and-effect relationship. High level occupations that produce high incomes
usually require advanced educational training. Individuals with little education
rarely qualify for higher level jobs. Because of the interrelationship among these
three variables, education, occupatioil, and income are combined into a
composite index of social class. Income is another basis of segmenting the
markets for automobiles, clothing, cosmetics and travel. Other industries
occasionaIly adopt this basis. However, at macro level the per capita income of
a person or family can be a basis for segmentation. Accordingly, segmentation
could be made in terms of low, middle and higher income groups. Price may be
the sole criterion to fit into a particular per capita income group. It is more so at
the lower levels of income. As the income goes up other non-economic
considerations or bases have a greater influence.
Psychograpl~icSegmentation: Demographic data are used to segment markets
because these data are related to behaviour and are relatively easy to gather.
However, demographics are not in themselves the causes of behaviour. Coilsumers
do not buy products purely on the demographic variables but these variables may
correlate with certain psychological characteristics of consumers. Therefore,
marketers have gone beyond demographic attributes in an effort to better understand
why consumers behave as they do. They now engage in psychological segmentation,
which involve examining attribute such as personality, and lifestyles. When
demographic and psychological attributes are combined, richer description of
segments is produced. Let us learn some of the psychographic bases of
segmentation.
a) Lqcstyle Seg~nentation:Lifestyle relates to activities, interests, and opinions. A
person's lifestyle reflects how he spends his time and what his beliefs are on
various social, economic, and political issues. People are found to exhibit many
types of lifestyles and their lifestyles undoubtedly affect what goods they
purchase and what brands they prefer. Marketers are aware of this and attempt
to segment their markets based on lifestyle characteristics. One theory relaling
to lifestyles is that lifestyles are shaped partly by whether consumers are time-
constrained or money-constrained. Consumers who experience time-constrain
i.e., paucity of time at their disposal, are prone to multitasking, that is, doing two
or more things at the same time. Companies aiming to serve them will try to
create convenient services for this group. As for the money-constrained
individuals companies aiming to serve them will create lower-cost products and
 services. The technique of measuring lifestyles is known as psychographics. It Markets ant1 Market
Segmentation
is the science of using psychology, sociology, anthropology, and denlographics to
better understand buyers. Psychographics can help marketer fine-tune its
offering to meet the needs of different segments. Psychographic research
attempts to place consumers on psychological-as opposed to purely
demographic-dimensions.
Companies making cosmetics, alcoholic beverages, and furniture are always
seeking opportunities in lifestyle segmentation, but lifestyle segmentation does
not always work. It is difficult to accurately measure the size of lifestyle
segment in a cluantitative manner. Another problem is that a given lifestyle
segment might not be accessible at a reasoilable cost through a company's usual
distribution system or promotional program.
17) Personality Segmentation: Marketers also use personality variables Lo
segment marltets. An individual's personality characteristics are described in
terms of traits that influence behaviour. In t ~ y i ~to
l gsegment a market on
personality traits marketers endow their products with what is known as brand
yersorzality that corresponds to target group personality. Then they project this
brand personality through their promotional campaigns. For example, Bajaj
Scooter has been pro-jected ~nosloften as "Trusted friend" and Red and White
Cigarettes as 'Daring" Lipton Tiger Tea as "valiant". However, using personality
traits as a basis for segmentation solnetilnes create problems that limit their
~~sefulness in practical market segmentation. First the presence and strength of
these traits are virtually impossible to measure. Another problem is associated
with the accessibility condition of segmentation. There is no advertising medium
which can reach to a particular personality type. For example, a TV medium
reaches to all types of personality types. Therefore, one of the major goals of
segmentation, to avoid wasted marketing effort, is not likely to be accomplished
using personality segmentation. Nevertheless, many companies tailor their
advertising messages to appeal to certain personality traits, even though the
iniportance of the personality dimension in a particular decision may be difficult
to measure.
Value Segmentation: Some marketers try to segment a particular market by
values. According to psychologists, values are a reflection of our needs adjusted
for the realities oi'the world in which we live. In other words values are the
belief syslems that underlie consumer attitudes and behaviours. Research at the
SLII-vey Research Center at thc University of Michigan has identified nine basic
values that relate to purchase behaviour. These are known as List of Values
(LOV). These values are:
r Self-respect e Sense of accomplishment
e Self-ful.fiIlrnent Fun and enjoy~ne~ltin life
e Security e Being well respected
r Sense of belonging Having warm relationship
o Excitement
While most people will view all of these values as desirable, their relative
importance differs among people and their importance changes over a person's
life. Marketers who attempt to segment their markels on the basis of values
believe that by appealing to peoples' inner selves, that is, values, it is possible to
influence their outer selves, that is, their purchase behaviour.
Sociocultural Segmentation: Sociological (i.e., group) and anthropological (i.e.,
cultural) variables-that is sociocultural variables-provide further bases for market
segmentation. We will briefly discuss three bases under this head. These are: fa~nily
life cycle, social class, and culture. Let us learn them.
Understanding Consumers a) Family Life Cycle Segmentation: This is based on the premise thal many
and Selecting Target families pass through similar phases in their formation, growth, and final
Markets
dissolution. At each phase, the family unit needs different products and services.
Family life cycle is a composite variable based explicitly on marital and family
status, but implicitly including relative age, income, and employment status. Each
of the stages in the traditional family life cycle (i.e., bachelorship, newly married
couple, couple with small children, couples with grown up children, and retired
people with no children) represents an important target segment to a variety of
marketers. For example, Life Insurance Corporation of India (LIC) has different
life insurance policies for young married couples, couples with grown up children
and for retired persons.
b) Social Class Segmentation: Social class is a potential market segmentation
variable. It is traditionally measured by a weighted index of several demographic
variables, such as education, occupation, income (we have already discussed
social class influence in Unit 4). The concept of social class implies that people
belonging to different social classes vary in tenns of values, product
preferences, and buying habits. Therefore, marketers have used their knowledge
of social class differences to appeal to specific segments.
Culture Segmentation: Some marketers have found it useful to segment their
markets on the basis of cult~~ral heritage, because members of the same culture tend
to share the same values, beliefs, and customs. Marketers who use cultural
segmentation stress specific, widely held cuItural values which they hope consumers
will identify. Cultural segmentation is particularly successful in international marketing,
but in such instances, it is important for the marketer to understand f~lllythe beliefs,
values, and customs of the countries in which the product marketed. Within the larger
culture, there exist subcultures. These subcultures sometime exhibit distinct purchase
preferences. If this is the case then marketers may segment a particular market on
the basis of subcultures. Also culturally distinct segments can be prospects for the
same product but often are Largeted more efficiently with different promotional
appeals.
Use-Related Segmentation: An extremely popular and effective form of
segmentation is based on the user-related variables. We will briefly discuss three
bases of segmentation under this category. These are: user rate, awareness status,
and loyalty status.
a) User Rate Segmentation: Here the rnnrketer differentiates among heavy
users, medium users, light users, and non users of a specific product, service, or
brand. Normally a company is most interested in the heavy users of its product
because heavy users are often a small percentage of the market but account for
a high percentage of total consumption. For example, research has consistently
indicated that between 25 and 35 percent of beer driiikers account for more than
70 percent of all beer consumed. In many frequently purchased product
categories less than 50 percent of all users account for 80 to 90 percent of total
purchases. For this reason, most marketers prefer to target their promotional
campaigns to the heavy users to retain them. They also try to encourage the
heavy users of competitors' brands to switch. Sometime a marketer will select
as a target market the nonuser or light usel; intending to woo these consumers
into higher usage. Or light users may constitute :in iiltractive niche for a
marketer simply because they are being ignored by the cornp;ulies that are
targeting heavy users. Marketers who use this type of seglne~ltationfirst try to
find out the demographic and psychograpl~iccharacteristics of light users and
then come out with a product and marketing mix to suit the recl~airementsof this
segment.
50
b) Awareness Status Segmentation: This is also known as buyer-readiness Markets and Market
stage segmentation. A ~narketconsists of people in different stages of readiness Segmentation
to buy a product. Marketers have to determine what percent of potential
consumers are aware of the product, interested in the product, or need to be
informed about the product. The relative numbers make big difference in
designing tlie marketing program.
c) Loyalty Status Segmentation: So~netimesbrand loyalty is used as the basis of
segmentation. Buyers can be divided into four groups accosding to brand loyalty
status: ( I ) hard-core loyals (who always buy one brand), (2) soft-core loyals or
split loyals (who are loyal to two or three brands), (3) shifting loyals ( w l ~ oshift
from one brand to another), and (4) switchers (who show no loyalty to any
brand). Each market consists of different numbers of these four types of buyers:
thus a briund-loyal rnarket lias a high percentage of hard-core loyals. Companies
that sell in such a market Iiave a hard time gaining more market share, and new
competitors have a hard time breaking in. In the recent years, many marketers
in order to retain their loyal customers offer special benefits to them in the form
of loyalty rewards. For example, Indian Airlines lias introduced "frequent flyer"
scheme to retain tlie reguliir passengers by offering heavy discounts or free
tickets to family members after a certain number of flying trips.
Usage-Related Segmentation: Marketers recognize that the occasion or situation
determines what consumers will purchase or consume. For this reason, they
sometimes focus on tlie usage situation as a segmentation variable. We will briefly
discuss one variable under this category i.e., occasion.
Occasion Segmentation: Buyers can be distinguished according to the
occasions on which they develop a need, purchase a product, or use a product.
For example air travel is undertalcen by occasion related to business, vacation or
family, so an airline can specialize in one of these occasions. Another example is
of hotel acco~i~~nocla.tion.
Many hotels in India develop different stay paclcages
for vacation, for honey~nooners,for regular visitors etc. apart from this, many
products are promoted for special usage occasions. For example the greeting
card industry stresses special cards for a variety of occasions such as on Diwali,
Eid, Christ~nas,Valentine Day, Mother's Day etc. Today many companies are
promoting their products for different occasions.
Benefit Segmentation: Marketing people constantly attempt to isolate the one
articular benefit char they should communicate to consumers. Segmenting tlie market
on tlie basis of benefit sought by various consumers has been a popular segmenting
base for many products ancl services. For example, motorcycle manufacturers tried to
segment chis market on the basis of benefits sought by various consumers. Hero
Honda e~lipliasisedfuel c o ~ ~ s u m l ~ t iIhwasaki
on, Bajaj and Yamalia emphasised on
power and style. Benefit segmentation can be used to position various brands within
the same product category. The classic case of successf~~l benefit segmentation is the
marlcet for tootlipaste: Colgate for total dental care, Close-up with a special appeal
that stresses bright teeth, Forhans appeals to the protection of gums.
Hybrid Segnicntation: Marketers commonly segment markets by combining
scveral seglnentation variables rather than relying on a single segmentation base. We
will discuss two hybrid segmentation approaches i.e., psychographic/demographic
profiles, and gcodernographics. These two approaches provide marketers with more
accuralely defined consumer segments than can be derived using a single
segmentation base.
a) Psychographic-demographic Profiles: Psychographic and demographic
profiles are highly co~nplerne~ltary
approaches that work best when used
together, By combining the knowledge gained from both demographic and
Understanding Consumers psychographic studies, marketers are provided with powerful information about
nnd Selecting Target their target markets. The demographic information provide the marketer about
Markets
the prospective customers' age, education, income, etc. and the psychographic
information provides the basis of the prospective consumers personality, and
lifestyle pattern. Used together, this type of segmentation help in creating
customer profiles (for product and service marketers) and creating audience
profiles (foe mass and special interest media to attract advertisers).
Demographic/psychographic profiling has been widely used in the development
of advertising campaigns by various companies.
b) Geodemographic Segmentation: This type of hybrid segmentation scheme is
based on the notion that people who live close to one another are likely to have
similar financial means, tastes, preferences, lifestyles, and consumption habits. ,
Many marketing research firms collect information on geodemographic clustel-s
and then provide this information to advertisers for developing effective
advertising campaigns. These clusters are based on consumer lifestyles, and a
specific cluster include similar neighbourhoods, that is, neighbourhoods
composed of people with similar lifestyles w~delyscattered throughout the
countiy. Geodemographlc segmentation is most useful wheii advertiser's best
prospects (in terms of personality, goals, and interests) can be isolated in lerins
of where they live. However, for products and services used by broad cross-
sectioil of people in a country, other segmentation schemes may be more
productive.

5.7.2 Bases for Segmenting Organizational Markets

Organizational markets can be segmented with many of the same variables used in
segmenting the consumer markets. For example, we can segment organizational
markets on a geographic basis. Some industries are geographically concentrated. For
example, in India most of the companies belonging to textile industry are located in
Maharashtra and Gujrat. Any company that sells to this industry could use geographic
segmentation.
Also, like consumers, businesses have demographics that can be used to segment
market. For example, the size of a company (measured by sales volume or number of
employees), the company's type of business (advertising agencies typically focus on
cither clients that market to consumers or companies that sell to other businesses), or
the company's method of buying (some rely on price and select the lowest bidder,
while others use criteria such as quality or delivery time). Companies can also
segment their orgailizational markets on the benefit desired by buyer and on product
usage rates. We will discuss brietly the specific segmentation approaches for
organizational markets below. In parlicular, there are tliree colnmonly used bases: 1)
type of customer 2) size of customel; and 3) type of buying situation. Let us learn
them.
a) Type of Customer Segmentation: A common way lo segment industrial
markets is by end users. Different users often seek different benefits and can be
approached with different marketing mixes. For example, a company that sells
small electric motors would have broad potential market among many different
industries such as automobiles, electrical appliances, governme~ltdepartments
etc, However, this company will do better by segmenting its potential market by
type of customer and then specializii~gto meet the needs of businesses in n
limited number of these segments.
b) Customer Size Segmentation: Customer size is another variable used for
segmenting organizational markets. Many cornpallies set up separate systems
for dealing with major and minor customers. For example, a company which
manufactures office furniture, may divide its customers into two groups as major
 accounts and minor accounts. Accounts of large and reputed companies come Markets and Market
under major accounts. Such accounts are handled by national account managers Segmentation
working with district field managers. Smaller accounts are categorized as dealer
accounts. These accounts are handled by the field personnel working with-
franchised dealers who sell company's products.
c) Q p e of Buying Situations Segmentation: While discussing organizational
markets we have identified three types of buying situations: new buy, modified
rebuy, and straight reb~ty.These buying situations, as you know, are different
from each other in a significant way. An industrial seller can segment his market
on this basis of buying situations and adopt marketing strategies accordingly.

5.8 MICRO SEGMENTATION AND MASS

CUSTOMIZATION
In the market segmentation we have discussed the process of dividing a product
market into various submarkets or segments. Market segments are normally large,
identifiable groups within a market. Many companies are focusing their marketing
efforts on the subgroups within these market segments. These small segments are
known as niches. Going beyond niche marketing, a marketer may further divide the
market into micro segments. Micro segmentation takes the form of micro marketing
and inass customizati,on.We will discuss these in the following:
Micromarketing: Segment and niche marketers tailor their offers and marketing
progrnins to meet tlie needs of various market segments. At the same time, however,
they do not custo~nizetheir offers to each,individual customer. Thus segment
marketing and niche marketing fall between extremes of mass marketing and
micromarketiiig. Micromarketing is the practice of tailoring products and marketing
propraliis to suit the tastes of specific individuals and locations. Micro marketing
includes local marketing and individual inarketing or mass customization. Let us learn
them.
a) Local Marketing: This involves tailoring brands and promotions to the needs
and wants of local customer groups-cities, neighbourhoods, and even specific
stores. Many big retailers routinely customize each store's merchandise and
pro~notionsto match its specific clientele. Local marketing has some drawbacks,
It can drive up manufacturing and marketing costs by reducing economies of
scale. It call also create logistics problems as companies try to meet the varied
requirements of different regional and local markets. Despite some of these
drawbacks, local marketing helps a company to market more effectively in the
face of pronounced regional and local differences in community demographics
and lifestyles. It also meets the needs of the company's first line customers-
retailers-who prefer more fine-tuned product assortments for their
neighbourlioods.
b) Individual Customer Marketing or Mass Customization: In its extreme
form, micro marketing becomes individual customer marketing or mass
customization-tailoring products and marketing programs to the needs and
preferences of individual customers. This has also been labeled one-to-one
marketing, customized marketing, and markets-of-one marketing. Mass
customizatio~lis tlie ability of a company to prepare on a mass basis individually
designed products, services, programs, and communication, to meet each
custo~ner'srequirements. In tlie context of consumer market, not every
company can use this approach. However, if a company achieves mass
customizatiori it inay gain competitive advantage over its competitors. Business-
to-business marketers are also finding new ways to customize their offerings. A
number of companies-both in consumer market and organizational market-are
Understanding Consumers: using existing technologies to customize their products to the individual
and Selecting Target customers. The examples include Dell Computers, Mattel-the manufacturer of
Markets
Barbie Dolls, Levi's-the jean maker, Acumins-Internet based vitamin company,
DeBeers-maker of diamond jewellery. All of these companies are practicing
mass customization successfully.

Check Your Progress-B

I. Distinguish between mass marketing and target marketing.

......................................................................................................................
2. What do you mean by geographical segmentation of market?
......................................................................................................................

......................................................................................................................
3. Enumerate four variables of demographic segmentation of market.
......................................................................................................................

......................................................................................................................
4. Enumerate five variables of psychographic segmentation of market.

......................................................................................................................
5. What do you mean by family life cycle segmentation?
......................................................................................................................

......................................................................................................................
6. State whether the following statements are Tiue or False.
i) Market segmentation refers to classification of markets on the basis of the
products.
ii) A segment of a market is normally homogeneous in all significant aspects.
iii) In undifferentiated marketing, the marketer coilcentrates all Iiis efforts in
one or a few lucrative segments only.
iv) Market segmentation enables the marketer to identify and reach the target
customer more effectively.
v) Same bases can be used for segmenting industrial markets and consumer
market.
 Markets and Market
5.9 LETUSSUMUP Segmentation

From the marketing point of view a market may be defined as group of people or
organisations with ( I ) needs to satisfy; (2) money to spend, and (3) the willingness to
spend it. Basically markets may be divided in to two broad categories, that is,
consumer market and organizational market. The consumer market consists of all the
individuals and households who buy or acquire goods and services for their own
personal or household use. Organizational market purchases goods and services to
achieve specific goals, such as making money, reducing operating costs, and
satisfying social or legal obligations. The organizational market comprises all the
organizations that buy goods and services for use in the production of other products
and services that are sold or rented, or supplied to other customers or used by
themselves for running the organization. There are four types of organizational
markets: the industrial market, the reseller market, the government market, and the
institutional market. In many respects organizational market differs with consumer
market. Therefore, marketers should keep in mind these differences while selling
their products to the organizational market.
Within the same general market there are groups of consumers with different needs,
buying preferences, or product-use behaviour. Today most of the companies are
moving away From mass marketing and adopting target marketing approach. Target
requires that a broad market has to be divided into homogenous smaller markets
through the process of market segmentation. Market segmentation is the process of
dividing the total market for a product or service into several smaller groups, such that
the members of each group are similar with respect to the factors that influence
demand. To carry out effective market segmentation, the selected segments should
be (1) iclentifiable and measurable, (2) sufficient (in terms of size), (3) stability, (4)
reachable (accessible) in terms of media and costs, (5) differentiable, and (6)
actionable.
A marketer has to use different segmentation variables, alone and in combination, to
find the best way to view the market structure. Eight major categories of consumer
characteristics provide the most popular bases for consumer market segmentation.
They include: geographic factors, demographic factors, psychological factors,
sociocultural variables, use-related characteristics, use-situation factors, benefit
sought, and hybrid segmentation. Organizational markets can be segmented with
many of the same variables used in segmenting the consumer markets. The specific
segmentatioll app~.oachesfor organizational markets are: I) type of customer 2) size
of customer, and 3) type of buying situation.
In the recent years many companies going beyond market segmentation and moving
toward micro segmentation and mass customization. Micro segmentation is also
known as micro marketing. Micromarketing is the practice of tailoring products and
marketing programs to suit the tastes of specific individuals and locations. Mass
customization is the process of tailoring products and marketing programs to the
needs and prei:el.ences of indiviclual customers. This has also been labeled one-to-one
marketing, custo~nizedmarketing, and markets-of-one marketing.

5.10 KEY WORDS

Benefit Segmentation: Segmentation based on the kinds of benefits consumers
seek in a product.
Consumer Market: All the individuals and households who buy or acquire goods
and services for personal consumption.
Understanding Consumers Demographic Segmentation: Dividing the market into groups based on
and Selecting Target demographic variables such as age, gender, family size, family life cycle, income,
Markets
occupation, education, religion, race, and nationality.
Derived Demand: Demand for a particular product or service results from the need
for other goods and / or consumption of soft drinks or beer,
Geographic Segmentation: Dividing a market into different geographical units such
as nations, states, regions, countries, cities, or neighborhoods.
Government Market: Governmental units-federal, state, and local-that purchase
or rent goods and services for carrying out the main functions of government.
Institutional market: Schools, hospitals, nursing homes, prisons, and other
institutions that provide goods and services to people in their care.
Market: The set of all actual and potential buyers of a product or service.
Market Megmentation: The process of breaking a heterogeneous group of
consumers into smaller more homogeneous groups.
Mass Customization: It is the ability of a company to prepare on a mass basis
individually designed products, services, programs, and communication, to meet each
customer's requirements.
Mass Marketing: Marketing practice where companies use to produce a single
product on a mass scale, distributed on a mass level and mass promoted one product
to a11 buyers,
Micromarketing: The practice of tailoring products and marketing programs to suit
the tastes of specific individuaisand locations-includes local marketing and
individual marketing.
Organizational Market: All the organizations that buy goods and services for use in
the production of the other products and services that are sold or rented, or supplied
to other customers or used by themselves for running the organization.
Psychographic Segmentation: Dividing a market into different groups based on
social class, lifestyle, or personality characteristics.
Reciprocity: Situation in which two companies buy products and/or services from
one another.
Target Market: It refers to a group of people or organizations at which a firm
directs a marketing program with a specific marketing mix.
Target Marketing: The process of identifying the specific needs of segments,
selecting one or more of these segments as a target and developing marketing
programs directed to each.
The Industrial Market: All the individuals and organisations that buy or acquire
goods and services that enter into the production of other products and services that
are sold, rented or supplied to others.
The Reseller Market: It consists of all the individuals and organisations that
acquire goods for the purpose of reselling or renting them to others at a profit.

5.11 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress-B
6) i) False ii) False iii) True iv) False v) True
 Markets and Market
INAL QUESTIONS Segmentation

1) Describe the distinguishing characteristics of organizational market.

2) Briefly discuss various types of organizational market.
3) What is market segmentation? Explain the importance of segmenting markets.
4) Critically evaluate four important bases for segmenting consumer markets.
5) Discuss various bases on which an organizational market may be segmented,
6) Describe the concept of micro marketing and find out whether this concept is
being adopted by some Indian companies.
 IT6 MLQ T TARGETmG AND
PBSITIBNPNG
Structure
6.1 Objectives
6.2. Introduction
6.3 Market Targeting
4.3.1 Evaluation of Potential Targets
6.3.2 Market Targeting Strategies
6.4 Positioning
6.4.1 Requirements for Positioning
6.4.2 Positioning Process
6.4.3 Selecting an Overall Positioning Strategy
6.4.4 Communicating and Delivering the Chosen Positioning Strategy
6.5 Repositioning
6.6 Let Us Sum Up
6.7 Key Words
6.8 Answers to Check Your Progress
6.9 Terminal Questions

6.1 OBJECTIVES
After studying this unit, you should be able to:
explain the concept of targeting;
examine the methods for evaluating potential target markets;
discuss the strategies for market targeting;
describe the positioning process;
explain the meaning and requirements for positioning;
discuss the process of positioning;
describe the process of selection of an overall positioning strategy; and
explain the communicating and delivering strategy for the chosen positioning.

6.2 INTRODUCTION
You have already learnt the buyer behnviour and bases of segmenting the market. It
is time now to u~~derstand how as a marketer you call target these markets and how
the product offer can be positioned in the market. While segmentation explains whom
to target for, targeting explains haw to target these markets. In this unit, you will
learn the meaning and importance of market targeting, the evaluation of potential
targets and strategies for market targeting. You will also learn the meaning and
requirements for positioning and the process of positioning. You will be further
exposed to the concept of repositioning.
 Market Taregting and
6.3 MARKET TARGETING Positioning
By applying the learning from the market segmentation chapter, you as a business
manager will be able to identify your firm's markets segment opportunities. These
opportunities have to be evaluated to select either one or a number of strategically
significant segments for launching your marketing program. It is a stage where tlie
firm has to evaluate different segments and decide how many and which ones to
target for . This method is called market targeting. A target market is defined as a
set of buyers sharing common needs or characteristics that the company
decides to serve. It is very important to select the target market to which the
company decides to serve because knowledge about how the consumers decide,
what are the criteria of buying products, the characteristics and life style of the
targeted customers can help the marlteters to develop a suitable marketing strategy.
Every marketing slsategy involves marketing expenditure and the return 011a marltet
program can only be identified if we are able to know the target market for which the
marketing program is targeted. It is observed from research that a majority of the
marketing expenditure is actually wastage of company resources as they are spent on
non buyers. So an understanding oT the nature and characteristics of the target
market will help Lhe marketer to derive higher returns on a marketing program.
Knowledge on the target market and ils growth and changes in attitude will help the
marketer to mod~fyand design new marketing programs for the success of the
enterprise as a whole. Hence, an understanding of the target market and
measuremen1 of their altractiveness is a key decision in marketing.

I 6.3.1 Evaluation of Potential Targets

After the firm has identified the target markets, the next task is to evaluate the target
segments. The n~arketingmanager should look at five factors for evaluating e,ach
segment. They are: segment size and worthwhileness, segment measurability,
segment ntlractiveness, accessibility of the segment, coinpany objectives and
resources. The colnpnny shoulcl first collect and analyze data on size of the current
segment, growth rates i n the past and the likely rate of growth from the market
indicators for the future on short term and long term basis, and expected profitability
horn each segment. One of the best ways to calculate the profitability is to fill$ o ~ ~ t
through tlie calculation of response elasticity. Response elasticity can be calculated by
talcing past rnarlteting expenditures iIs independent variable and the returns from the
past marketing expcnclirures in different pel-iods of time. A graph of response
elasticity where responses (sales) on the Y-axis and the corresponding marketing
expenditures on tlie X-axis is a sufficient indicator about the profit growth potential in
each of the segments. The myth of marketing says that the fastest growing and
largest size markets may not be so for a long period of time. Hence future profitability
may slow down as more competitors will enter in to tlie business looking at the profit
potential. So a marketer should be careful about this behaviour of the market. The
segments identified should be also measurable from its size and market share from
the potential ma~.ltet.The segments should also be evaluated from the point of view of
accessibility as there may be a very attractive segment available but the cost to reach
at that segment and serve the segment will be higher compared to segments where
potential lnay seem moderate. The Indian rural 'market suffers from this problem of
accessibility. The company should also evaluate the resources available for ~narket
coverage. If the compilny lacks the skill and resources then it should concentrate on
markets geographically closer or with a higher density if potential customers in limited
markets called a niche segment.
Understanding Consumers 6.3.2 Market Targeting Strategies
and Selecting Target
Markets You have learnt the meaning of targeting, let us now look at what are the various
strategic options available to the marketers for targeting their products and services in ,
the market. The targeting strategy will largely depend upon the kind of product
market coverage that the firm takes for the future. The resources, capabilities and
intent of the respective firms influence this product market coverage decisions. The
product market coverage strategies are broadly classified as concentrated marketing,
differentiated marketing and undifferentiated marketing. Let us learn them in detail.
Concentrated Marketing : When company resources are limited and the
competition is intense enough that the marketing manager has to stretch the market
budget for market coverage, the companies follow a concentrated marketing strategy.
The company decides to cover a large niche than fighting for a small share in a large
market. It is an excellent strategy for small manufacturers those can stay closer to
the segment and cater to the emerging needs of a close loop customers. This helps
them to gather market share in small markets against strong and large competitors.
Through concentrated marketing firms can achieve strong market positions in the
segments or niches they serve because of the greater knowledge of the target
customers and the special reputation they acquire. Medimix was a regional brand
with a very strong South Indian presence that helped them to go for a national launch
in a latter period. The firms can enjoy operating economies because of the
specialization in production, distribution and promotion, which can give a higher return
on the investments also. Concentrated marketing strategy has its own share of risk
also. Looking at the profit potential large competitors may decide to enter in to this
market, which may ultimately lead to a take over bid by the large player in business.
Differentiated Marketing: In differentiated marketing strategy, marketers target
several market segments and design separate offers for each segment. They target
severaI segments or niches with a varied marketing offer to suit to each segment
needs. For example, Maruti as an automobile company has the distinction of having
products for different segments. Where as its Maruti8OO is targeted for the upcoming
middleclass, the Baleno is targeted for the upper rich class people and Maruti Omli is
targeted for large families. The main objective of offering varied marketing offer is to
cater to different segments and get higher sales with a dominant position on each
segment. Developing a stronger position within each segment creates more total sales
than a mass marketing strategy across all segments. The risk involved in this kind of a
marketing strategy is in the form of extra cost in marketing research, product
development, different forecasting models, varied sales analysis, promotion planning
and channel management. Trying to reach different market segments with different
pro~notionplan involves higher promotion budget. Thus, the marketing manager has to
decide the pay off between the higher cost and the higher sales due to such a
strategy
Undifferentiated Marketing: hlarketers may go against the idea of a segmented
market and decide to sale the product in the whole market. Here the marketing
manager ignores the idea of segment characteristics differences and develop a
marketing program for the whole market. This approach keeps the over all marketing
costs low and makes it easier to manage and track the market forces uniformly. Here
the marketer tries to find out the commonality across the segments rather than
focusing on the diffei-ences. The company designs a marketing offer and a marketing
program that will appeal to the largest number of buyers with a mass distribution and
mass advertising program. The problem of this strategy lies in finding a common
product and marketing program catering to large number of custoiners with different
characteristics and interests. Here the marketer finds it difficult to fight with focused
players in business.
Choosing a Product - Market Strategy Market Taregting and
Positioning
As mentioned earlier, the market coverage strategy largely depends on company's
resources and ability to cater to the market. The best strategy also depends on the
product variability. Undifferentiated marketing suits best to uniform products and
commodities like petrol, steel and sugar. The product's life cycle is also another
important factor considered while selecting a market coverage strategy. At the
introductory stage of a product, the company will prefer a single product in an
undifferentiated market or concentrated market. In the maturity stage of the product
life cycle, many players follow differentiated marketing strategy. If all the customers
have uniform taste, buy the same amount and respond to a marketing program in the
same way then market variability is minimum. So an undifferentiated marketing
strategy is most suitable. Every marketing manager should also look at the
competitor's marketing strategy. If the competitor is following a differentiated
strategy with specific offer for distinct segments then an undifferentiated marketing
strategy will be fatal to follow in the market but the vice versa is a suitable strategy
for the marketer.

Check Your Progress-A

I. Distinguish between segmentatioi~and market targeting.

......................................................................................................................
2. Distinguish between concentrated marketing and differentiated marketing.

......................................................................................................................
3. Explain the concept of segment evaluation.

6.4 POSITIONING
After the company has decided its market targeting strategy, the next managerial
challenge is to decide what position it wants to occupy in the selected segment(s).
Kotler has defined product positioning as the way the product is defined by
consumers on important attributes - the place - the product occupies in consumer's
mind relative to competing products. Thus product's position reflects important
attributes which a consumer gives to the product. It is the position in the perceptual
space of the consun~er'smind that the product takes in relation to competitor's
products, which is often verbalized by customers on certain attributes. Product
positioning depends on market structure, competitive position of the firm and the
concepts of substitution and competition among products.
Product positioning reflects most of the features of the word position, For example,
position of a place - what place does the product occupy in its market, a rank, how
Understanding Consumers does the product fare against its competitors in various evaluative dimensions and a
and Selecting Target mental attitude - what are consumer attitudes i.e., the cognitive, effective and action
Markets
tendencies towards the given product. Therefore product positioning should be
assessed by measuring consumer's or organisational buyer's perceptions and
preference for the product in relation to its competitors.
Brand positioning involves implanting the brand's unique benefits and differences in
customer's mind. A Maggi noodle is positioned in Indian market as a convenience
food, which can solve the frequent food demand of the growing kids. Dove soap is
positioned as a premium brand in the market with high moisturizer content which can
be used as a face wash also. Vicks Vapo-rub is positioned as a rub exclusively for the
purpose of cold and cough relief.

6.4.1 Requirements for Positioning

There is a high decibel of marketing communication aimed at consumers of today.
They are exposed to various level and type of communication through multiple media
like newspaper, television, radio, internet and u~lconventionalmedia like fairs, festivals,
exhibitions, events and outdoor media. But the ability of the consumer to evaluate the
information and remember all of them are limited by two factors. The consumer at a
particular point of time pursues one consumption goal which makes other information
redundant for him. Secondly, the ability of the consumer to process all the information
is limited due to high level of distortion and poor retention rate in consumer's memory
box. So consumers are overloaded with information in market place but cons~uner's
intention and ability to process this infonnatioil is limited. So to simplify the buying
process and reduce the mental tension consumer's group information about
competing products, and evaluate them on perceptual attributes depending on
perceived quality to create distinct position in their mind.
A product's position is the complex set of perceptions, impressions and feelings that
consumers have for the product in comparison with the competing alternatives
available in the market. They position with or without the help of the marketers. A
successful marketer provides requisite information to the consumer while the
consumer is still in the process of developing a position through company's marketing
communication program. Therefore, a marketer can plan positions to his product and
can create a sustainabIe competitive advantage for the product in the selected
segments. Rest other marketing strategy can support the position that is capable of
providing sustainable colnpetitive advantage to the firm. Each firm must create a set
of differentiation or unique bundle of benefits that appeals to a substantial segment of
the market place.

6.4.2 Positioning Process

A firm call decide a quaIity and price positioning in a single player situation as the
customers do not have alternatives to compare with. However, it is observed that any
successful positioning decision motivates the competitors to position their offerings in
the same platform. Therefore, over a period product clusters are formed in the
market with similar offerings. Instead of creating uniqueness ill offel; this creates
more confusion in the customer's mind and then a new position emerges in the
market. Let us take Indian bathing soap category in to considerations, The market
has more than fifty brands avaiIable in two distinct clusters viz. the Do Good category
like Margo, Dettol and the Feel Good Category like Lux, Evita etc. Each one of these
brands tries to create differentiation within the clusters by offering different brand
values. But suddenIy Fair and Lovely Launched a new categoty of shop which is a
combination of Feel Good and Do Good variety and entered in to the market with its
unique offering. The success of Fair and Lovely in the highly competitive market is
62
attributed to identification of the competitive advantage and developing a marketing Market Taregting and
strategy based over that. A successful positioning strategy involves three steps: Positioning
identifying a set of possible competitive advantages, upon which to build a position,
choosing the right competitive advantage and selecting an over all positioning strategy.
The company must then effectively communicate effectively and deliver the chosen
position to the market.
Identifying Possible Competitive Advantages: The success of ally marketing
program largely depends on understandii~gthe needs and characteristics of the target
markets and delivering higher value to the customers in comparison to the competitor.
When the company can position itself as providing superior value to customers, then
we can say that the company has competitive advantage in the market place. If the
company decides to position the product in the market as a superior product on quality
dimension, then the brand should also deliver the same to the customers failing which
there is likely to be consumer dissonance and subsequent rejection of the product by
the customers. So positioning begins with differentiating the product on actual
attributes so that the consumers will receive higher value than the competitor. A
customer-oriented company can create a differentiation at all the stages of the value
chain and not necessarily at the stage of product only.
A firm call create competitive advantage by deciding on the positioning in the
industry, leveraging capabilities and neutralizing competition. The positioning in the
industry is decided by identifying the entry'barriers and attractive segments and
understanding the nature of the competitive game played by each player. The
technological capabilities which the firm adopts, the reputation of the firm a i d the
country of origin in the global marketing environment. The capabilities should be
unique in nature so that they will be difficult to replicate by the competitors and these
capabilities should be widely applicable across all the offerings in a multi product or
service environment.
The uniqueness of the capability will provide sustainable competitive advantage to the
firm. The third aspect of creating competitive advantage is by neutralizing
competition. Competition inherently has a tendency to grow on its own as the
profitability will attract new and major players to enter in to the business and
competition for existing players is susceptible to imitation. Neutralizing competition
demands a strategic perspective, which starts identifying who are your rivals in
business. There may be large number of players but the firm has to decide with
whom he has to fight in the market for that segment (identify the strategic group).
The manager should understand the capabilities of the competitors which can be
neut~.alizedthrough tactics (a sales promotion program for instance) or a sustained
effort is necessary to develop a strategy to neutralize the competition .The manager
should try to create barriers to the imitation of his strategy.
Let us analyze the decision of Reliance Industries to enter in to the telecom business.
To create con~petitiveadvantage and offer benefit the company invested heavily on
the spread of optical fiber network in almost large part of the country. When
everybody was using GSM technology, the firm decided to launch CDMA technology
to have a technology advantage. As they decided to have an access through WLL,
they targeted a larger market with a low cost pricing strategy e.g. making a call as
low as forty paisa per minute to the customers. This created a sustainable competitive
advantage for the firm as they do not have to take the lease from the carriers like
BSNL and could basgain with competing carriers due to their own network facilitation
benefit and due to technology advantage could stay at the top end of the market with
a low price structure. Reliance has used all the three methods that we have discussed
for creating competitive advantage in business of telecom in India, which needs huge
investments for other firms to copy and save the firm from the imitation of the
strategy.
Understanding Consumers A marketing offer can be differentiated based on the product, services, channels,
and Selecting Target people or image. Product differentiation is on a continuum. There are commodities
Markets
that allow little variation, yet marketers can create differentiation. Chiquita as a
company markets bananas all across the globe with a differentiation that its products
are ripen on the tree and no artificial means are used for this and enjoys a premium in
the market. On the extreme, we have highly differentiated products like automobiles,
furniture and consumer durables that are differentiated for every product line and
across all the manufacturers through the process of brand communication. The firms
can differentiate products based on consistency, durability, reliance and precision.
Beyond differentiating at the physical level, firms can differentiate the accompanying
services with the product. Companies like DHL talk about speedy delivery with
accuracy and lesser damage and with convenience through home pick up for creating
- a differentiation in the courier service industry. Banks are differentiating their
services based on twenty-four hour banking, ATMs, distributed customer interaction
points and internet banking facility. Firms can create competitive advantage through
channel differentiation by designing alternate channels through channel coverage,
expertise and performance. Dell computer world wide created a competitive
advantage through web based direct marketing and distribution model, which was
difficult for many strong competitors to imitate in business. Real Value, Eureka
Forbes and Amway are examples of business success with channel differentiation.
People differentiation is another method for building differentiation in marketing
offerings, Many companies handle their internal customers and groom them so that
they can deliver the same service with a differentiation. Customers rate Singapore
Airlines in flight services better. It needs a careful selection of the customer contact
staff that can impress upon the customers through a professional approach. Image
differentiation is also possible for firms operating at different stages of the choice
spectrum where a company or brand image should convey the product's distinctive
benefits and positioning. Development of a strong and distinctive differentiation
largely depends on creative strategy by the brand communication expert. An enduring
and distinctive image positioning is possible through consistent communication and
matching product performance. The Kodak (red and yellow), The Sargam Tea
(Distinct Green), Wipro (with Rainbow and catch line 'Applying Thought') are some
of the stories of successful image differentiation in business.
Choosing the Right Competitive Advantage: After the identification of possible
competitive advantages, the firm has to decide the best suitable one over which the
positioning strategy will be based upon. Therefore, it should decide about the number
of possible differences and which one in particular to promote.
Rosser Reeves has propounded about promoting a single difference on which the
company has a distant advantage than its competitors. This strategy has come to be
known as Unique Selling Proposition (USP). In the eighties Godrej refrigerator was
promoted on the basis of one selling proposition called PUF which was unique to the
brand at that point of time. While other refrigerstors were selling with glass wool
insulation Godrej introduced poly urethane foam (PUF) and had a distinctive
advantage than its competitors. As we have said, the advantage should be such that it
should be difficult for the competitor to copy, but a unique advantage always runs the
risk of imitation and hence the firm will lose its competitive advantage very soon. In
the case of Godrej, the competitors Voltas from the house of Tata and Allwyn entered
in to the market with P W and then the advantage was lost. Nevertheless, buyers
tend to remember the number one always and hence the TOMA (Top of the Mind
Awareness) test reveals about Godrej being identified with PUF s l o g a ~ ~ .
Other theory in marketing proposes that more than one difference should be
promoted so that the flanker differences can take over as and when the major
advantage is lost due to imitation. This strategy has come to be known as Extra Value
 proposition (EVP). When the mass market is fragmented with many players and Market Taregting and
each holding a substantial amount of market share to influence the marketing Positioning
decisions of other players, companies are trying to broaden their positioning strategies
to appeal to more segments. BPL washing machines positioning strategy is based on
the fundamentals of extra value proposition. While they talk about the fuzzy logic
technology as the main advantage, still they promote the other value proposition
supporting the product superiority like rotary compressor, digital power switching etc.
The second proposition is mostly seen in white goods industry. But as companies
develop large number of positioning differences they tend to lose unique positioning
and suffer from the dilution of this distinctiveness in the consumer's perception and
risk an element of disbelief.
A manager should always avoid three kind of positioning errors. They are under
positioning, over positioning and confused positioning. Many times, it is observed that
buyers carry very vague idea or no idea about the company and its brands where as
the company may be promoting the brand. This is due to under positioning of the
brand on the uniqueness platform. The company is not known for any distinctive
product or service attribute. Contrary to this, managers tend to give too narrow a
picture about the cornpany to the customers making the consumer think that the
company only makes that variety of the product. Suffola as a brand suffered in Indian
market because of too a narrow positioning strategy where as its competitor Sundrop
broadened the scope of the positioning which helped the later brand to capture a
larger market share. Finally, managers should avoid the situation of confused
positioning where the buyer is left with a high level of confusion about the brand. 111
multi-product situations, managers tend to make such mistakes and the positioning of
the flanker brands does not stand in coherence with the master brand. It is
apprehended that the current range of Ayush toiletries will create consumer confusion
for Hindustari Lever, as they are not known for herbal formulations. They have to
promote "Ayush" as a separate line of business.
All brand differences are not worthwhile for positioning and they do not necessarily
carry same meaning to the consumers. Each difference has the potential of an
additional cost of com~nunicationand an additional benefit of revenue due to distinct
differentiation. A difference should satisfy the following criteria:
Distilactive: Competitors cannot offer or the company can offer better than the
competitor can.
Snperior: The difference is superior to other ways that the customers might obtain
the same benefit.
Profitable: The manager can introduce the difference with a profit,
Preemptive: Competitors cannot imitate the difference easily.
Aflordable: Buye1.s can afford to pay for the difference.
Comntuiticable:The difference should be communicable and visible to the buyer.
Important: The difference delivers a highly values benefit to target buyers.

6.4.3 Selecting an Overall Positioning Strategy

The product position strategy is decided by analyzing the features of the product,
price, usage, etc. Let us first learn the bases for the product positioning which are
discussed below:

. Alternative Bases for Positioning

Marketers use a number of alternative bases for positioning their products. While
positi;ning a product, specific features may be highlighted. Price and specific
 Understanding Consumers performance features are used usually as a basis for positioning. Let us l e a n them
and Selecting Target in detail.
Markets
Positioning on Benefits, Problem Solution or Needs: In this positioning
strategy, the marketer highlights the benefits of the product to the consumer. For
example, herbal cosmetics focus on natural products, no side effects, skin friendly,
etc.
Positioning for Specific Usage Occasions: Here positioning is based on specific
usage occasioiis. For example, Maggi 2 minutes noodles suggests preparation of
snack as fast as possible.
Positioning for User Category: Product is positioned based on the category of
the user. For example, Raymond's 'The Complete Man'. Another example is
Electrolux's fully automatic washing machine whose users are those whose hands are
cleaned, lotioned and nail polished, and they are sophisticated and intelligent. They
would consider it insulting and way below their manicured dignity to turn more than
one knob.
-
Positioning against another Product: Both implicit and explicit positioning
strategies are used against rival products. For example, Thomson presents "what is
missing in other televisions". It focuses the features of Thomson without naming its
competitor. This is an example of implicit positioning. Another examples are:
attribute charts shown by cars and televisions which highlight their own features
without naming their competitor's name.
In the explicit positioning, the product is positioned by comparing its superior features
with other products. For example, before launch, Telco positioned Tata Indica by
claiming the features as - Maruti Zen's size, Ambassador's internal dimensions, the
price of a Maruti 800 and with running cost of diesel.
Production Class Dissociation : It is a less common positioning strategy. It is
effective when a new.product is introduced and it differs from the typical products in
an established category. For example, at the brand level most successful anti-
product class positioning is that of 7-up with un-colapositioning.
Hybrid bases : In this strategy, marketers use a hybrid approach incorporating
features from more than one bases for positioning.
Consuiners will buy products and services which gives them the highest possible
value among all the available alternatives. Therefore, managers should position the
brands in such a way that they offer the highest value to the consumers. The over all
effect of the brand and its full positioning is termed as value proposition i.e. the net
colnbination of all the brand benefits over which the brand is positioned. Probably the
\ ,
value proposition is well ans&red by the consumer when he answers the reason of
owliershiy of a particular brand. The consumer's possible answer may include: the
value proposition alternatives like buying nzol-e for niore money ( premium
positioning strategy), 11zorefor tile satlze ( comparable quality at a lower pricing
point), The sanze for less ( price performance positioning strategy), Less for nzuch
less( lower performance at a lower price point proposition), More for less ( high
value proposition).

6.4.4 Communicating and Delivering the Chosen Positioning Strategy

The managers should take the next step in comnmnictlting the selected position to the
target audience. The marketing mix should support the desired positioning
communication through integrated marketing comin~inication.If the brand
i
communication talks about a specific positioning proposition then the brand should
1
deliver the same at trial as well as the adoption stage of the product. The marketing
i
66 mix design involves the ractical execution of the strategic brand position decision. It is
easier to find a good positioning platform but difficult to deliver the desired brand Market Taregting and
proposition as it involves coordination of the over all marketing function. A minor Positioning
tactical failure may lead to loss of position built for the brand over a period. Rasna
suffered in Indian market due to high level ofbrominized vegetable oil (BVO) content
and lost its position as the largest soft drink concentrate brand of India. Therefore,
after a company has built up the desired position, it should continue to monitor its
position through continuous brand tracking and monitoring study. It is also necessary
for the brand to evolve over aperiod with changing attitude and behaviour of the
target consumer and changes in competitor's strategy. Any abrupt changes may also
confuse the consumer. Therefore, a brand's position should evolve by adopting itself
to the changing market dynamics.

6.5 REPOSITIONING
Repositioning is a critical decision in marketing. The manager can go for repositioning
due to two reasons viz. the failure of the current positioning strategy due to the three
positioning mistakes like under positioning, over positioning and confused positioning,
the opening up of another positioning opportunity due to evolution of the customers on
value life cycle or emergence of new tecl~nologyto redefine the structure of
competition. Brand managers normally undertake brand tracking and monitoring
studies to identify the gap between the desired positioning or stated position through
brand communication alld the perceived position by the custon~ers.Any substantial
gap in these two measures will warn the brand managers to go for a reposition
decision. Si~nilarly,the customers and their value expectation from a brand undergo
change over a period. Brands, symbols and ideas prevalent in one period may not
stand significanl al a different time due to this value migration of customers.
Therefore, a customer centric company will prefer to reposition the brand in this
changing context. As we have already discussed the technology life cycle of a
product also changes with every phase of innovation in product and its delivery to
consumers. These kinds of changes demand repositiollillg of the product offer in the
changing situation. S o repositioning is necessary. Repositioning will follow the same
process like that of posilioning as discussed with suitable ~noclificatio~~s
on the
selection of competitive advantage in the new context.

Check Your Progress-B

1. What do you mean by repositioning?

3. Explain the concept of competitive advantage.

......................................................................................................................
3. Enumerate the process of positioning of a product.
Understanding Consumers ......................................................................................................................
and Selecting Target
Markets ......................................................................................................................
4. State whether the following statements are true or false:
i) Positioning is a product driven strategy.
ii) Competitive advantage should be always sustainable,
iii) Brand tracking and monitoring helps in repositioning decisions.
iv) Leveraging capabilities decreases the competitive advantage.
V) Thedecision of positioning is a strategic decision.

6.6 LET US SUM UP

Managers tend to define their market in specific terms through the method of target
marketing. Target marketing involves three issues. These are market segmentation,
market targeting and market positioning. The market targeting is done to find out the
exact customers and learn their characteristics and response pattern to marketing
program. By market targeting, a company can realize a higher return on investment
as the effectiveness of the marketing program will increase. A market can be
targeted through three methods. They are full market coverage, concentrated
marketing and differentiated marketing. While full market coverage talks about
delivering one product for the whole market without recognizing any significant
difference in customer characteristics, differentiated marketing program regroups
customers in to distinct groups and offers specific program for each market. Once
the target markets are identified then the marketer should look in to the evaluation
and selection of each segment for marketing profitability. Then the manager should
decide about thepositioiiing strategy of the firm.
The positioning strategy is an attempt by the marketer to create a situation by which
the consumers will perceive the product differentiation and brand value delivery as
superior to the competitors.A positioning decision is normally taken for creating a
sustainable competitive advantage by the firm in the market place so that the
competitors call not easily imitate the strategy and hence the film will be able to
generate higher profits. While positioning the brand in customer's mind the manager
should be careful about the common mistakes of under positioning, over positioning
and confused positioning. Failing in a positioning strategy leads a tnanager to
reposition the brand again in the market through repositioning strategy. Brands and
products need a constant monitoring in the market place so that the customer always
receives zui additional value compared to competitors due to brand ownership of the
manager's brand.

- - -

6.7 ]KEY WORDS

Brand Positioning: It involves implanting the brand's unique benefits and
differences in customer's mind.
Competitive Advantage: An adv,antage over competitors gained by offering
consumer's greater value, either through lower prices or by providing more benefits
that justify higher price.
Concentrated Marketing: When company resources are limited and the
competition is intense enough that the marketing manager has to stretch the market
budget for market coverage, the companies follow a concentrated marketing strategy.
Differentiated Marketing: When the marketers chose to target several segments Market Taregting and
or niches with a varied marketing offer to suit to each segment needs, it is called a Positioning
Differentiated Marketing.
Positioning Strategy: It involves three steps: identifying a set of possible competitive
advantages, upon which to build aposition, choosing the right competitive advantage
and selecting an over all positioning strategy. The company must then effectively
communicate and deliver the chosen position to the market.
Product position- The way the product is defined by consumers on important
attributes. It is the position in the perceptual space of the consumer's mind that the
product takes in relation to competitor's products, which is often verbalized by
customers on certain attributes.
Segmentation Evaluation Criteria: They are segment size and worthwhileness,
segment measurability, segment attractiveness, accessibility of the segment, company
objectives and resources.
Target Market: A target market is defined as a set of buyers sharing common
needs or characteristics that the company decides to serve.
Undifferentiated Marketing: Marketers may go against the idea of a segmented
market and decide to sale the product in the whole market. Here the marketing
manager ignores the idea of segment characteristics differences and develop a
marketing program for the whole market
Value Proposition: The full positioning of a brand which includes the combination of
all the benefits on which the brand is positioned.

6.8 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress B
B) 4. i) False ii) True iii) True iv) False v)True

6.9 TERMINAL OUESTIONS

I. Define market targeting and explain the procedure on how to target different
markets.
2. What is competitive advantage? How can a competitive advantage be created
for positioning the product?
\
3. How will you evaluate the potential of a target market?
4. What is value proposition? How managers can increase value proposition in a
changing customer market?
5. Repositioning needs a continuous monitoring of the brand's performance in the
market. Explain with suitable examples.

These questions will help you to understand the unit better. Try to write answers
for them. But do not submit your answers to the University for Assessment.
These are for your practice only.