MODULE MKT 2013 MQF 2.0 VERSION

Principles of Marketing
(MKT 2013)

NEW VERSION
( For internal circulation only)

JUN JUHAIZI JUHARI KPM SERI ISKANDAR

Principles of Marketing (MKT 2013)

Contents

Chapter 1: An Overview Of Marketing .................................................................................. 2
Chapter 2 : Marketing Process ..............................................................................................11
Chapter 3 : Analysing The Marketing Environment..............................................................25
Chapter 4 : Consumer Market And Consumer Buying Behaviour
Chapter 5 : Market Segmentation, Targeting And Positioning ..........................................54
Chapter 6 : Products And Services .......................................................................................72
Chapter 7: Pricing...................................................................................................................93
Chapter 8 : Place (Distribution) ...........................................................................................108
Chapter 9 : Promotion..........................................................................................................121
Chapter 10 : Additional Elements Of The Marketing Mix...................................................139
Chapter 11 : Ethics In Marketing..........................................................................................143
References ............................................................................................................................160

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Principles of Marketing (MKT 2013)

CHAPTER 1: AN OVERVIEW OF MARKETING

LEARNING OBJECTIVES:
1. Define marketing.
2. Explain the core marketing concepts.
3. Describe the marketing management philosophies/orientations.

MARKETING DEFINITIONS

▪ Marketing is a social and managerial process whereby individuals and groups obtain
what they need and want through creating and exchanging products and value with
others.

▪ It is the process by which companies create value for customers and build strong
customer relationships in order to capture value from customer in return. (Kotler &
Armstrong, 2016).

▪ It is the management process responsible for identifying, anticipating, and satisfying
customer requirements profitably. (CIM)

CORE MARKETING CONCEPTS

To explain this definition, the following important core marketing concepts will be examined:
1) Needs, Wants and Demands
2) Marketing Offers (Products, Services and Experiences)
3) Value and Satisfaction,
4) Exchanges, Transactions and Relationships
5) Markets

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1) Needs, Wants and Demand

Needs
▪ A state of felt deprivation
▪ The most basic concept underlying marketing is that of human needs.
▪ Human needs are states of lacking something necessary in a person.
▪ It is a basic part of human makeup.
▪ They include:

✓ Basic Physical needs – food, clothing, warmth, and safety.
✓ Social needs for belonging and affection.
✓ Individuals needs for knowledge and self-expression.

Wants.

▪ The form taken by human needs as they are shaped by culture and individual personality.
▪ Wants are shaped by one’s society and are described in term of objects that will satisfy

needs.
▪ A hungry person in the United State might want a Big Mac, but a hungry person in

Malaysia might want Nasi Goreng

Demands.

▪ Human wants that are backed by buying power.
▪ People have almost unlimited wants but limited resources.
▪ Thus, they want to choose products that provide the most value and satisfaction for their

money.
▪ When backed by buying power, wants become demands.
▪ Consumers view products as bundles of benefits and choose products that give them

the best bundle for their money.
▪ For example, A Honda Civic means basic transportation, affordable price and fuel

economy. Given their wants and resources, people demand products with the benefits
that add up to the most satisfaction.

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2) Products, Services and Experiences

People satisfy their needs and wants with products and services.

Product - anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a want or need. It
includes physical object, services, persons, places, organization and ideas. The concept of
product is not limited to physical objects. Anything capable of satisfying a need can be
called a product. In addition to tangible goods, products include services.

Service – Any activity or benefit that one party can offer to another that
is essentially intangible and does not result in the ownership of anything .e.g. Banking, airline,
hotel, air conditioner services, etc.

Broadly defined, products also include other entities such as
experiences, persons, places, organizations, activities and ideas. For
example, consumers decide which entertainers to watch on television, which
places to visit on vacation, which organizations to support through contributions and which
ideas to adopt.

3) Value, Satisfaction and Quality

Consumers usually face a broad array of products and services that might satisfy a given
need. How do they choose among these many products and services? Consumers make
buying choices based on their perceptions of the value that various products and services
deliver

Customer value – The differences between the values the customer gains from owning and
using a products and the costs of obtaining the product.

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For example, FedEx customers gain a number of benefits. The most obvious being fast and
reliable package delivery. However when using FedEx, customers also may receive some
status and image values. Using FedEx usually makes both the package sender and the
receiver feel more important.
Customers do not often judge products values and costs accurately or objectively but they
act on perceived value. Customer’s satisfaction depends on a product’s perceived
performance in delivery value relative to a buyers expectations.

Customer Satisfaction - is the extent to which a product’s perceived performance in
delivering value matches a buyer’s expectation. If the product’s performance falls short of
the customer’s expectation, the buyer is dissatisfied. If the performance matches
expectation, the buyer is satisfied. If performance exceeds expectations, the buyer is
delighted

Customer expectation Customer satisfaction

Below expectation Dissatisfied
Match expectation Satisfied
Exceed expectation Delight

Outstanding marketing companies go out of their way to keep their customers satisfied.
Satisfied customers make repeat purchase, and they tell others about their good experience
with the product. The key is to match customer expectations with companies’ performance.
Smart companies aim to delight customers by promising only what they can deliver, then
delivering more than they promise.

Satisfaction is the difference between products’ perceived performance in delivery value
relative to buyer’s expectations before a product.

Quality - Quality can be defined as “freedom from defects”. Quality has a direct impact on
product or service performance. This is closely linked to customer value and satisfaction.

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Customer’s satisfaction link to quality, lead the company adopted Total Quality
Management programs, designed to constantly improve the quality of their products services
and marketing processes. Quality has a direct impact on product performance and hence
on customer satisfaction.

4) Exchanges, transactions, and relationships

Exchange – The act of obtaining a desired object from someone by offering something in
returns. For example, hungry people could find food by hunting, fishing, or gathering fruits.
They could beg for food or take food from someone else. Or they could offer money or others
in return for food.

Transaction – A trade between two parties that involves at least two things of value, agreed
upon conditions, a time of agreement and a place of agreement. One party gives X to
another party and gets Y in return. For example, you pay RM2000 for a television set.

Relationship marketing – The process of creating, maintaining, and enhancing strong, value-
laden relationships with customers and other stakeholders. Beyond creating short term
transaction, marketers need to build long term relationship with valued customers, distributors,
dealers and suppliers.

5) Markets

Markets - The set of all actual and potential buyers of a product or services. These buyers
share a particular need or want that can be satisfied through exchanges and relationships.
The term market also stood for the place where buyers and sellers gathered to exchange
their goods such as village square.

Size of markets depends on:
1) Number of people who exhibit the need
2) Have resources to engage in exchange
3) Willing to offer these resources in exchange for what they want

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MARKETING MANAGEMENT PHILOSOPHIES/ORIENTATIONS

We define marketing management as the analysis, planning, implementation and control of
program designed to create, build and maintain beneficial exchanges with target buyers for
the purpose of achieving organizational objectives. So, what philosophy should guide these
marketing efforts?

There are five orientations (philosophical concepts to the marketplace have guided and
continue to guide organizational activities):
1. The Production Concept
2. The Product Concept
3. The Selling Concept
4. The Marketing Concept
5. The Societal Marketing Concept

The Five Concepts Described

1) The Production Concept

❑ The philosophy that consumers will favor products that are available and highly

affordable and that management should therefore focus on

improving production and distribution efficiency.

❑ This concept is the oldest of the concepts in business.
❑ It holds that consumers will prefer products that are widely

available and inexpensive. high

❑ Managers focusing on this concept concentrate on achieving

production efficiency, low costs, and mass distribution.

❑ They assume that consumers are primarily interested in product availability and low

prices.

❑ This orientation makes sense in developing countries, where consumers are more

interested in obtaining the product than in its features.

❑ For example, Henry Ford’s whole philosophy was to perfect the production of the

Model T so that its cost could be reduced and more people could afford it.

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2) The Product Concept.

❑ This orientation holds that consumers will favor those products

that offer the most quality, performance, or innovative
features that organization should therefore devote its
energy to making continuous product improvements.

❑ Managers focusing on this concept concentrate on

making superior products and improving them over time.

❑ They assume that buyers admire well-made products and can

appraise quality and performance.

❑ However, these managers are sometimes caught up in a love affair with their product

and do not realize what the market needs.

❑ Management might commit the “better-mousetrap” fallacy, believing that a better

mousetrap will lead people to beat a path to its door.

❑ For example, Samsung came out with some innovative products Samsung’s folding

phone - otherwise known as the Galaxy X.

3) The Selling Concept.

❑ The idea that consumers will not buy enough of the

organization’s products unless the organization undertakes a
large scale selling and promotion efforts.

❑ This is another common business orientation. It holds that

consumers and businesses, if left alone, will ordinarily not buy
enough of the selling company’s products.

❑ The organization must, therefore, undertake an aggressive selling and promotion

effort.

❑ This concept assumes that consumers typically show buying inertia or resistance and

must be coaxed into buying.

❑ It also assumes that the company has a whole battery of effective selling and

promotional tools to stimulate more buying.

❑ Most firms practice the selling concept when they have overcapacity.
❑ Their aim is to sell what they make rather than make what the market wants.

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❑ For example, blood donations and insurance policies fall in the category of sale

concept, where the marketer thinks that their job is done after completing the
transaction.

4) The Marketing Concept.

❑ The marketing management philosophy that holds achieving

organizational goals depends on determining the needs and
wants of target market and delivering the desired satisfaction
more effectively and efficiently than competitors do.

❑ This is a business philosophy that challenges the above three

business orientations. Its central tenets crystallized in the 1950s.

❑ It holds that the key to achieving its organizational goals (goals of the selling company)

consists of the company being more effective than competitors in creating, delivering,
and communicating customer value to its selected target customers.

❑ The marketing concept rests on four pillars: target market, customer needs, integrated

marketing and profitability.

❑ Lets take an example of 2 eternal rivals – Pepsi and Coke – Both of these companies

have similar products. However the value proposition presented by both is different.
These companies thrive on the marketing concept. Where Pepsi focuses on
youngsters, Coke delivers on a holistic approach. Also the value proposition by Coke
has been better over ages as compared to Pepsi which shows that coke especially
thrives on the marketing concept, i.e it delivers a better value proposition as
compared to its competitor.

❑ The comparison of the main features of selling and marketing concept are as follow:

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5) The Societal Marketing Concept.

❑ This concept holds that the organization’s task is to determine the needs, wants, and

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

❑ The purpose of the social marketing concept is also to satisfy the needs and

requirements of customers before making any profit. But the emphasis of this concept
is to make the company to fulfill social responsibilities for the sustainable future in the
long term. The marketing strategy of businesses and companies should include both
customers and society as well.

❑ The idea of the social marketing concept is that the businesses should satisfy the needs

and wants of customers, but this target should be aligned with the long-term interest
of the society.

❑ This orientation arose as some questioned whether the Marketing Concept is an

appropriate philosophy in an age of environmental deterioration, resource shortages,
explosive population growth, world hunger and poverty, and neglected social
services.

❑ For example, Adidas is one of the top leading sportswear companies in the world.

When it comes to the environment, Adidas is committed to manufacture its products
that could be reused over and over again.

❑ A very good example of an organization following societal marketing concept is the

Body Shop: Body Shop is a cosmetic company founded by Anita Roddick in 1976.The
company uses only natural, vegetable based materials as ingredients for its products.

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CHAPTER 2 : MARKETING PROCESS

LEARNING OBJECTIVES:
1. Define Marketing Process
2. Explain steps of Marketing Process

MARKETING PROCESS DEFINITION

The Marketing Process can be divided into two large parts: the first one consists of activities
that create value for customers. This is the largest and main part of the process, and can be
further subdivided into four steps. In return, the company can capture value from
customers, which is the second part of the Marketing Process.

Marketing is how companies create value for customers and build strong customer
relationships to capture value from customers in return. 5 step processes of the marketing
framework wherein value is created for customers and marketers capture value from
customers in return.

Understanding The Marketplace And Customer Needs And Wants.

Designing A Customer-Driven Marketing Strategy.

Constructing an integrated marketing plan that delivers superior value.

Engage customers, build profitable relationships, and create customer
delight.

Capture value from customers to create profits and customer equity
The Marketing Process: Creating and Capturing Customer Value
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STEPS OF MARKETING PROCESS

The overall marketing process can be summarized into five main steps, namely:
1. Understanding The Marketplace and Customer Needs and Wants.
2. Designing A Customer-Driven Marketing Strategy.
3. Constructing an integrated marketing plan that delivers superior value.
4. Engage customers, build profitable relationships, and create customer delight.
5. Capture value from customers to create profits and customer equity

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Step 1: Understanding the Marketplace and Customer Needs and Wants

It is important to understand customer needs, wants, and demands to build want- satisfying
market offerings and building value-laden customer relationships. This increases long-term
customer equity for the firm.
i) Needs
▪ Human needs are states of felt deprivation.
▪ They include basic physical needs for food, clothing, warmth, and safety; social needs

for belonging and affection; and individual needs for knowledge and self-expression.
▪ Marketers did not create these needs; they are a basic part of the human makeup.
ii) Wants
▪ Wants are the form human needs take as they are shaped by culture and individual

personality.
▪ An American needs food but wants a Big Mac, fries, and a soft drink. A person in

Papua, New Guinea, needs food but wants taro, rice, yams, and pork.
▪ Wants are shaped by one’s society and are described in terms of objects that will satisfy

those needs
iii) Demands
▪ When backed by buying power, wants become demands.
▪ Given their wants and resources, people demand products and services with benefits

that add up to the most value and satisfaction.
Companies go to great lengths to learn about and understand customer needs, wants, and
demands. They conduct consumer research, analyse mountains of customer data, and
observe customers as they shop and interact, offline and online. People at all levels of the
company including top management stay close to customers.

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Step 2: Designing A Customer-Driven Marketing Strategy

▪ Once it fully understands consumers and the marketplace, marketing management can
design a customer value–driven marketing strategy.

▪ We define marketing management as the art and science of choosing target markets
and building profitable relationships with them.

▪ The marketing manager’s aim is to engage, keep, and grow target customers by
creating, delivering, and communicating superior customer value.

▪ To design a winning marketing strategy, the marketing manager must answer two
important questions: What customers will we serve (what’s our target market)? and How
can we serve these customers best (what’s our value proposition)?

i) Selecting Customers to Serve

▪ The company must first decide whom it will serve.
▪ It does this by dividing the market into segments of customers (market segmentation) and

selecting which segments it will go after (target marketing).
▪ Marketing managers must decide which customers they want to target and, on the level,

timing, and nature of their demand. Simply put, marketing management is customer
management and demand management.

ii) Choosing a Value Proposition

▪ The company must also decide how it will serve targeted customers—how it will
differentiate and position itself in the marketplace.

▪ A brand’s value proposition is the set of benefits or values it promises to deliver to
consumers to satisfy their needs.

▪ For example, JetBlue promises to put “You Above All” by bringing “humanity back to
travel.” By contrast, Spirit Airlines gives you “Bare Fare” pricing: “Less Money. More Go.”
Homewood Suites by Hilton wants you to “Make yourself at home.” Meanwhile, the Hyatt
Regency brand declares that sometimes “It’s good not to be home.” Its ads highlight the
joys of traveling and the fun things that people do when they are traveling on business.

▪ Such value propositions differentiate one brand from another. They answer the
customer’s question: “Why should I buy your brand rather than a competitor’s?”

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Companies must design strong value propositions that give them the greatest
advantage in their target markets.

5 alternative concepts for designing a customer-driven marketing strategy are;

1. Production concept: Consumers will favour products that are available and highly
affordable. Management should focus on improving production and distribution
efficiency.

2. Product concept: Consumers will favour products that offer the most quality,
performance, and innovative features. Focus on making continuous product
improvements.

3. Selling concept: Consumers will not buy enough of the firm’s products unless it
undertakes a large-scale selling and promotion effort. It is typically practiced with
unsought goods that the company needs to sell and generally results in aggressive
selling practices. The company sells what it makes rather than what the market
wants.

4. Marketing concept: Organizational goals are achieved by knowing the target
markets’ needs and wants and delivering the desired satisfactions better than
competitors do.

5. Societal Marketing concept: Marketing strategy should deliver value to customers in
such a way that improves both customers as wells as society’s well-being and long-
run interests.

Step 3: Constructing an integrated marketing plan that delivers superior value

▪ The company’s marketing strategy outlines which customers it will serve and how it will
create value for these customers.

▪ Next, the marketer develops an integrated marketing program that will actually deliver
the intended value to target customers.

▪ The marketing program builds customer relationships by transforming the marketing
strategy into action.

▪ It consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement
its marketing strategy.

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▪ The major marketing mix tools are classified into four broad groups, called the four Ps of
marketing: product, price, place, and promotion.

▪ To deliver on its value proposition, the firm must first create a need-satisfying market
offering (product). It must then decide how much it will charge for the offering (price)
and how it will make the offering available to target consumers (place). Finally, it must
engage target consumers, communicate about the offering, and persuade consumers
of the offer’s merits (promotion).

▪ The firm must blend each marketing mix tool into a comprehensive integrated marketing
program that communicates and delivers the intended value to chosen customers.

Step 4: Engage customers, build profitable relationships, and create customer delight.

The first three steps in the marketing process, understanding the marketplace and customer
needs, designing a customer value driven marketing strategy, and constructing a marketing
program all lead up to the fourth and most important step: engaging customers and
managing profitable customer relationships.

1) Customer Relationship Management

▪ Customer relationship management is perhaps the most important concept of modern
marketing.

▪ Customer relationship management is the overall process of building and maintaining
profitable customer relationships by delivering superior customer value and satisfaction.
It deals with all aspects of acquiring, engaging, and growing customers.

a) Relationship Building Blocks: Customer Value and Satisfaction.

▪ The key to building lasting customer relationships is to create superior customer value and
satisfaction. Satisfied customers are more likely to be loyal customers and give the
company a larger share of their business.

▪ Attracting and retaining customers can be a difficult task. Customers often face a
bewildering array of products and services from which to choose.

▪ Customer-perceived value is the customer’s evaluation of the difference between all the
benefits and all the costs of a marketing offer relative to those of competing offers.

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▪ A customer buys from the firm that offers the highest customer-perceived value whereby
the customer’s evaluation of the difference between all the benefits and all the costs of
a market offering relative to those of competing offers.

▪ Importantly, customers often do not judge values and costs “accurately” or
“objectively.” They act on perceived value.

▪ To some consumers, value might mean sensible products at affordable prices. To other
consumers, however, value might mean paying more to get more. For example, a
Steinway piano costs a lot. But to those who own one, a Steinway is a great value.

▪ Customer satisfaction depends on the product’s perceived performance relative to a
buyer’s expectations. If the product’s performance falls short of expectations, the
customer is dissatisfied. If performance matches expectations, the customer is satisfied. If
performance exceeds expectations, the customer is highly satisfied or delighted.

▪ Companies aim to delight customers by promising only what they can deliver and then
delivering more than they promise.

▪ Delighted customers not only make repeat purchases but also become willing marketing
partners and “customer evangelists” who spread the word about their good experiences
to others.

b) Customer Relationship Levels and Tools.

▪ Companies can build customer relationships at many levels, depending on the nature of
the target market.

▪ At one extreme, a company with many low-margin customers may seek to develop basic
relationships with them.

▪ For example, P&G’s Tide detergent does not phone or call on all of its consumers to get to
know them personally. Instead, Tide creates engagement and relationships through
product experiences, brand-building advertising, websites, and social media. At the other
extreme, in markets with few customers and high margins, sellers want to create full
partnerships with key customers. For example, P&G sales representatives work closely with
Walmart, Kroger, and other large retailers that sell Tide. In between these two extremes,
other levels of customer relationships are appropriate.

▪ Beyond offering consistently high value and satisfaction, marketers can use specific
marketing tools to develop stronger bonds with customers.

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▪ For example, many companies offer frequency marketing programs that reward
customers who buy frequently or in large amounts.

▪ Airlines offer frequent-flier programs, hotels give room upgrades to frequent guests, and
supermarkets give patronage discounts to “very important customers.”

▪ These days almost every brand has a loyalty rewards program. Such programs can
enhance and strengthen a customer’s brand experience.

▪ For example, Hilton’s HHonors loyalty program offers the usual ability to earn points
redeemable for free stays or upgrades (anywhere, any- time, with no blackout dates) but
also for flights (e.g., points can be converted into miles for flight bookings).

2) Customer Engagement and Today’s Digital and social media

▪ The digital age has spawned a dazzling set of new customer relationship-building tools,
from websites, online ads and videos, mobile ads and apps, and blogs to online com-
munities and the major social media, such as Twitter, Facebook, YouTube, Snapchat, and
Instagram.

▪ Customer-engagement marketing making the brand a meaningful part of consumers’
conversations and lives by fostering direct and continuous customer involvement in
shaping brand conversations, experiences, and community.

▪ The burgeoning internet and social media have given a huge boost to customer-
engagement marketing.

▪ Today’s consumers are better informed, more connected, and more empowered than
ever before.

▪ Newly empowered consumers have more information about brands, and they have a
wealth of digital platforms for airing and sharing their brand views with others.

▪ Thus, marketers are now embracing not only customer relationship management but also
customer-managed relationships, in which customers connect with companies and with
each other to help forge and share their own brand experiences.

▪ The key to engagement marketing is to find ways to enter targeted consumers’
conversations with engaging and relevant brand messages. Simply posting a humorous
video, creating a social media page, or hosting a blog is not enough.

▪ And not all customers want to engage deeply or regularly with every brand.

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▪ Successful engagement marketing means making relevant and genuine contributions to
targeted consumers’ lives and interactions.

▪ Consider T-shirt and apparel maker Life is good. Life is good has an authentic,
engagement-worthy sense of purpose: spreading the power of optimism. The brand is
about helping people to open up, create relationships, and connect with other people.

3) Consumer-Generated Marketing
▪ Consumer-generated marketing Brand exchanges created by consumers themselves—

both invited and uninvited by which consumers are playing an increasing role in shaping
their own brand experiences and those of other consumers.
▪ This might happen through uninvited consumer-to-consumer exchanges in blogs, video-
sharing sites, social media, and other digital forums. But increasingly, companies them-
selves are inviting consumers to play a more active role in shaping products and brand
content.
▪ Some companies go directly to their customers for new product ideas and designs. For
example, Airbus claims that the interior of its new A330neo aircraft, which is set to launch
in 2017, is mainly designed based on comments gathered from disgruntled passengers
on social media.
▪ Through a profusion of consumer-generated videos, shared reviews, blogs, mobile apps,
and websites, consumers are playing a growing role in shaping their own and other
consumers’ brand experiences. Engaged consumers are now having a say in everything
from product design, usage, and packaging to brand messaging, pricing, and
distribution.

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4) Partner Relationship Management
▪ When it comes to creating customer value and building strong customer relationships,

today’s marketers know that they cannot go it alone. They must work closely with a
variety of marketing partners.
▪ Partner relationship management means working closely with partners in other company
departments and outside the company to jointly bring greater value to customers.
▪ In today’s more connected world, every functional area in the organization can interact
with customers.
▪ Marketers must also partner with suppliers, channel partners, and others outside the
company.
▪ Marketing channels consist of distributors, retailers, and others who connect the
company to its buyers.
▪ The supply chain describes a longer channel, stretching from raw materials to
components to final products that are carried to final buyers. Through supply chain
management, companies today are strengthening their connections with partners all
along the supply chain.

Step 5: Capture value from customers to create profits and customer equity
▪ The final step involves capturing value in return in the form of sales, market share, and

profits.
▪ By creating superior customer value, the firm creates satisfied customers who stay loyal

and buy more. It means greater long-run returns for the firm.
▪ Here, we discuss the outcomes of creating customer value:

i. customer loyalty and retention
ii. share of market and share of customer, and
iii. customer equity.

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i) Creating Customer Loyalty and Retention
▪ Good customer relationship management creates customer satisfaction.
▪ In turn, satisfied customers remain loyal and talk favorably to others about the

company and its products.
▪ The aim of customer relationship management is to create not only customer

satisfaction but also customer delight.
▪ Keeping customers loyal makes good economic sense.
▪ Loyal customers spend more and stay around longer.
▪ Research also shows that it is five times cheaper to keep an old customer than acquire

a new one. Conversely, customer defections can be costly. Losing a customer means
losing more than a single sale. It means losing the entire stream of purchases that the
customer would make over a lifetime of patronage.
▪ Customer lifetime value is the value of the entire stream of purchases a customer
makes over a lifetime of patronage.

ii) Growing Share of Customer
▪ Beyond simply retaining good customers to capture customer lifetime value, good

customer relationship management can help marketers increase their share of
customer— the share they get of the customer’s purchasing in their product categories.
▪ Thus, banks want to increase “share of wallet.” Supermarkets and restaurants want to
get more “share of stomach.” Car companies want to increase “share of garage,” and
airlines want greater “share of travel.”
▪ To increase share of customer, firms can offer greater variety to current customers. Or
they can create programs to cross-sell and up-sell to market more products and
services to existing customers.
▪ For example, Amazon is highly skilled at leveraging relationships with its 304 million
customers worldwide to increase its share of each customer’s spending budget.

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iii) Building Customer Equity

▪ We can now see the importance of not only acquiring customers but also keeping and
growing them.

▪ The value of a company comes from the value of its current and future customers.
▪ Customer relationship management takes a long-term view.
▪ Companies want to not only create profitable customers but also “own” them for life,

earn a greater share of their purchases, and capture their customer lifetime value.
▪ Customer equity is the total combined customer lifetime values of all of the company’s

current and potential customers.
▪ As such, it is a measure of the future value of the company’s customer base.
▪ Clearly, the more loyal the firm’s profitable customers, the higher its customer equity.
▪ Customer equity may be a better measure of a firm’s performance than current sales or

market share. Whereas sales and market share reflect the past, customer equity suggests
the future.
▪ For example, Cadillac is making the classic car cool again among younger buyers,
encouraging consumers to “Dare Greatly” to increase customer equity.

Building the Right Relationships with the Right Customers.

▪ Companies should manage customer equity carefully.
▪ They should view customers as assets that need to be managed and maximized. But not

all customers, not even all loyal customers, are good investments. Surprisingly, some loyal
customers can be unprofitable, and some disloyal customers can be profitable. Which
customers should the company acquire and retain?
▪ The company can classify customers according to their potential profitability and
manage its relationships with them accordingly.
▪ The figure below classifies customers into one of four relationship groups, according to
their profitability and projected loyalty.
▪ Each group requires a different relationship management strategy. Strangers show low
potential profitability and little projected loyalty. There is little fit between the company’s
offerings and their needs.
▪ The relationship management strategy for these customers is simple: Don’t invest
anything in them; make money on every transaction.

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Figure 1: Customer Relationship Group
Strangers show low potential profitability and little projected loyalty. There is little fit between
the company’s offerings and their needs. The relationship management strategy for these
customers is simple: Do not invest anything in them; make money on every transaction.
Butterflies are potentially profitable but not loyal. There is a good fit between the company’s
offerings and their needs. However, like real butterflies, we can enjoy them for only a short
while and then they are gone. An example is stock market investors who trade shares often
and in large amounts but who enjoy hunting out the best deals without building a regular
relationship with any single brokerage company. Efforts to convert butterflies into loyal
customers are rarely successful. Instead, the company should enjoy the butterflies for the
moment. It should create satisfying and profitable transactions with them, capturing as much
of their business as possible in the short time during which they buy from the company. Then
it should move on and cease investing in them until the next time around.

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True friends are both profitable and loyal. There is a strong fit between their needs and the
company’s offerings. The firm wants to make continuous relationship investments to delight
these customers and engage, nurture, retain, and grow them. It wants to turn true friends into
true believers, who come back regularly and tell others about their good experiences with
the company.
Barnacles are highly loyal but not very profitable. There is a limited fit between their needs
and the company’s offerings. An example is smaller bank customers who bank regularly but
do not generate enough returns to cover the costs of maintaining their accounts. Like
barnacles on the hull of a ship, they create drag. Barnacles are perhaps the most problematic
customers. The company might be able to improve their profitability by selling them more,
raising their fees, or reducing service to them. However, if they cannot be made profitable,
they should be “fired.”
The point here is an important one: Different types of customers require different engagement
and relationship management strategies. The goal is to build the right relationships with the
right customers.

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CHAPTER 3 : ANALYSING THE MARKETING ENVIRONMENT

LEARNING OBJECTIVES:

1. Describe the microenvironment forces that affect the company ability to serve its
customers.

2. Explain how changes in microenvironmental forces affect marketing decisions.
3. Describe the macro environment forces that affect the company ability to serve its

customers.
4. Explain how changes in macro environmental forces affect marketing decisions.

INTRODUCTION

Marketing Environment - The actors and forces outside marketing that affect marketing
management’s ability to develop and maintain successful transactions with its target
customers.
The marketing environment offers both opportunities and threats. Successful companies know
the vital importance of constantly watching and adapting to the changing environment.
A company’s marketers take the major responsibility for identifying significant changes in the
environment.

THE COMPANY’S MICROENVIRONMENT

Company’s Microenvironment - The forces close to the
company that affect its ability to serve its customers – The
company, suppliers, marketing channel firms, customer
markets, competitors and publics.
Marketing management ‘s job is to attract and build
relationships with customers by creating customer value
and satisfaction. However, marketing managers cannot
accomplish this task alone. Their success will depend on
other actors in the company’s microenvironment.

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1) The Company

▪ In designing Marketing Plans, marketing management takes other company groups
into account such as top management, finance, research and development,
purchasing, manufacturing and accounting.

▪ Example: Marketing managers must also work closely with other departments in the
organization. The finance department is concerned with finding and using funds to
carry out the marketing plan. R&D focuses on the problem of designing safe and
effective products, as well as the processes used. Purchasing concerns it with getting
supplies and materials and manufacturing is responsible for producing the desired
number of cartons of finished product.

▪ These interrelated groups form the internal environment.

1 Top management Set company mission, objectives, broad strategies
and policies
2 Finance Concern with finding and using funds to carry out the
marketing plan
3 R&D Focuses on designing safe and attractive product.
4 Purchasing Worries about getting supplies and materials
5 Manufacturing Responsible for producing the desired product
quality and quantities of the product
6 Accounting Measure revenues and cost to help marketing know
how well it is achieving its objectives

▪ Marketing manager must work closely with other company department.
▪ All the functions must think consumer and they should work in harmony to provide

superior customer value and satisfaction

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2) Suppliers

▪ Suppliers are an important link in the company’s overall customer ‘value delivery system’.
They provide resources needed by the company to produce its goods and services.

▪ Supplier developments can seriously affect marketing. Marketing managers must watch
supply availability – supply shortages or delays, labor strikes, and other events can cost
sales in the short run and damage customer satisfaction in long run.

▪ Marketing managers also monitor the price trends in their key inputs. Rising supply costs
may force price increases that can harm the company’s sales volume.

3) Marketing Intermediaries
▪ Marketing intermediaries are firms that help the company to promote, sell, and distribute

its goods to final buyers.
▪ They include resellers, physical distribution firms, marketing service agencies, and

financial intermediaries.

a) Resellers.
i) Resellers are distribution channel firms that help the company find customers or
make sales to them.
ii) Include Wholesaler and retailers who buy and resell merchandise.
iii) Selecting and working with wholesalers is not easy. No longer do manufacturers
have many small, independent resellers from which to choose.
iv) They now face large and growing reseller organizations. These organizations
frequently have enough power to dictate terms

b) Physical distribution Firms.
i) Physical Distribution firms help the company to stock and move goods from
their points of origin to their destinations
ii) Working with warehouse and transportation firms, a company must determine
the best ways to store and ship goods, balancing factors such as cost, delivery,
speed and safety.
iii) e.g. warehouse, transportation firm.
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c) Marketing Services Agencies
i) Marketing Services Agencies are the marketing research firms, advertising
agencies, media firms and marketing consulting firms that help the company
target and promote its products to the right markets.
ii) When the company decides to use one of these agencies, it must choose
carefully because these firms vary in creativity, quality, service and price.

d) Financial Intermediaries.
i) Financial Intermediaries include banks, credit companies, insurance
companies, and other businesses that that help finance transactions or insure
against the risk associated with the buying and selling of goods.
ii) Most firms and customers depend on financial intermediaries to finance their
transactions.
iii) Like suppliers, marketing intermediaries form an important component of the
company’s overall value delivery system.

4) Customers

There are 5 types of customers. The company needs to study its markets closely. Each market
has special characteristic that call for careful study by the seller

a) Consumer market – consist of individuals and household that buy goods and services
for personal consumption.

b) Business Market - buy goods and services for further processing or for use in their
production process

c) Reseller Markets – buy product and services to resell at a profit
d) Government market – made up of government agencies that buy goods and services

to produce public services or transfer the goods and services to other who need
them
e) International Market – consist of this buyer in other countries including consumers,
producers, resellers and government.

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5) Competitors

▪ The marketing concepts states that to be successful, a company must provide greater
customer value and satisfaction than its competitors. Thus, marketer must do more than
simply adapt to the needs of target consumers.

▪ They must also gain strategic advantage by positioning their offerings strongly against
competitors’ offerings in the minds of consumers. No single competitive marketing
strategy is best for all companies.

▪ Each firm should consider its own size and industry position compared to those of its
competitor. Large firms with dominant positions in an industry can use certain strategies
that smaller firms cannot afford. Small firms can develop strategies that give them better
rates of return than large firms enjoy.

6) Publics

Publics - Any group that has an actual or potential interest in or impact on an organization’s
ability to achieve its objectives.

Financial - Influence the company’s ability to obtain funds.
1 - Banks, investment house, and stockholders are the major financial

Publics publics
Media
2 - Carry news, features and editorial opinion.
publics - Newspapers, magazines and radio and television stations.

- Management must take government development into account.
Government
3 - Marketer must often consult the company’s lawyers on issues of
Public

product safety, truth in advertising and other matters

Citizen - A company’s marketing decisions may be questioned by
4 Action consumers organizations, environmental groups, minority groups
and others
Publics
- Public relations Department can help it stay in touch with
consumers and citizen groups.

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- Neighborhood residents and community organizations.
- Appoint a community relations officer to deal with the
5 Local Publics

community, attend meeting, answers questions and contribute to
worthwhile causes

General - A company needs to be concerned about the general public’s
6 attitude toward its product and activities.

Public - The public’s image of the company affects its buying.

Internal - Include workers. Managers, volunteers and the board of director.
7 - When employees feel good about their company, the positive

Publics attitude spills over to external publics

THE COMPANY’S MACROENVIRONMENT

Company’s Macroenvironment - The larger societal forces that affect the microenvironment
– demographic, economic, natural, technological, political, and cultural forces

The company and all actors operate in a larger macroenvironment of forces that shape
opportunities and pose threats to the company

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1) Demographic Environment

▪ Demography is the study of human populations in terms of size, density, location, age,
gender, race, occupation and other statistics.

▪ The explosive world population growth means growing to human needs to satisfy –
growing market opportunities.

▪ Marketers keep close track of demographic trends and development s in their markets
both at home and abroad which includes family structures, changing age, geographic
population shifts, educational characteristics and population diversity.

2) Economic Environment

▪ Economics is the factors that affect consumer buying power and spending patterns.
▪ Nations vary greatly in their levels and distribution of income. Some countries have

subsistence economies.
a) Subsistence Economies – Country population that consume most of their own

agricultural and industrial output – this country offer few market opportunities
b) Industrial Economies – Constitute rich markets for many different kinds of goods

▪ Changes in major economic variables such as income, cost of living, interest rates and
savings and borrowing patterns have a large impact on the marketplace.

3) Natural Environment

▪ It is referring to natural resources that are needed as inputs by marketers or that are
affected by marketing activities. Environmental concerns have grown steadily during the
past three decades.

▪ Marketer should be aware of several trends in natural environment as below:
a) Shortages of raw material.
▪ Air and water may seem to be infinite resources, but air pollution chokes many of
the world’s largest cities.
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▪ Renewable resources such as forest and food have to be used widely.
▪ Nonrenewable resources, such as oil, coal and various minerals pose a serious

problem
▪ Firms making products that require these scarce resources resource face large cost

increases, even while the materials are available.

b) Increased pollution.
▪ Industry will almost always damage the quality of the natural environment.
▪ Disposal of chemical and nuclear wastes
▪ Dangerous mercury level in the ocean
▪ Quantity of chemical pollutants in the soil and food supply
▪ The littering of the environment with non-biodegradable bottles, plastics and other

packaging materials.

c) Increased in government intervention in natural resources management.
▪ The governments of different countries vary in their concern and efforts to promote

a clean environment.
▪ Some like the German government vigorously pursue environmental quality.
▪ Others, especially many poorer nations do little about pollution, largely because

they lack the needed funds and political will.
▪ Even the richer nations lack the vast funds and political accord needed to mount

a worldwide environmental effort.
▪ The general hope is that companies around the world will accept more social

responsibility, and that less expensive devices can be found to control and reduce
pollution.
▪ Concern for the natural environment has spawned the so-called green movement.
▪ Today, enlightened companies go beyond what government regulations dictate.
They are responding to consumer demands with the ecologically safer products,
recyclable or biodegradable packaging, better pollution controls, and more
energy –efficient operations.
▪ E.g. Mc Donald’s has eliminated polystyrene cartons a now uses smaller, recyclable
paper wrappings and napkins.

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4) Technological Environment

▪ The technological environment is perhaps the most dramatic force now shaping our
world.

▪ It is forces that create new technologies, creating new technologies, creating new
product and market opportunities.

▪ Technology released wonders such as antibiotics, organ transplant, notebook computers
and internet. Technology also released horror such as nuclear missiles, chemical
weapons and assault rifles.

▪ It has released mixed blessings such as the automobile, television and credit cards. The
technological environment changes rapidly. Think of all today’s common products that
were not available 100 years ago, or even 30 years ago.

▪ Our attitudes toward technology depends on whether we are more impressed with its
wonder or its blunder. New technologies create new markets and opportunity, however,
every new technology replace an older technology

▪ The business related to the old technology will decline, so the marketer should watch the
technological environment closely. The challenge in technology not only technical but
also commercial – practical and affordable. Marketer should be aware of all regulation
when applying new technologies and developing new products.

▪ As products and technology become more complex, the public’s needs to know that
they are safe. Thus, government agencies investigate and ban potentially unsafe
product. Marketers should be aware of these regulations when applying new
technologies and developing new product.

5) Political Environment

▪ It refers to Laws, government agencies, and pressure groups that influence and limit various
organizations and individuals in a given society.

▪ Political factors are government regulations that influence business operation positively
and negatively. Managers must keep a bird’s eye view over political factors. These factors
may be current and impending legislation, political stability and changes, freedom of

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speech, protection and discrimination laws are factors affecting business operation and
activities.

What Political Factors Affect Business Environment?
▪ With a change in administration policies, there arise political factors that can change the

entire business scenario. These changes can be economic, legal or social and can include
the following factors:
1. Tax and economic policies: Increasing or decreasing rate of taxes is a good

example of a political component. Government regulations may raise the tax rate for
some businesses and can lower the same for others due to specific reasons. This
decision will directly impact businesses. Therefore maintaining a strategy which can
deal with such situations is very important.

2. Political stability: Lack of political stability within a country can significantly impact the
operations of a business. This can especially be true for businesses that are operating
on the global scale. For instance, a hostile takeover can take over a government.
Eventually, such a situation will lead to looting, riots and general disorder within the
environment. Such situations can disrupt business operations and activities which can
have a major impact on its bottom line.

3. Foreign Trade Regulations: Every business has a need to expand business operation to
other countries. However, political background of a country can influences the desire
for a business to expand its operations. Tax policies that are particularly controlled by
the government can induce a particular business to expand operations in different
regions whereas; other tax policies can hinder the process of business expansion for
some industries. Government initiatives, which have been designed to support local
businesses, might work against international companies when the question is of their
competitiveness in a foreign region.

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4. Employment Laws: Employment laws are made to protect the rights of employees and
include every aspect of employer/employee relationship. Employment law is an
aspect that is very complex and involves several pitfalls as well. When businesses’ are
in touch with the latest developments in this law, they can manage to take their
business in the right direction however, those who get it wrong needs to be completely
prepared for the expensive results it will generate.

▪ It involves laws that covering the issue of:
✓ Competition
✓ Fair trade practice
✓ Environmental protection
✓ Product safety
✓ Truth in advertising

▪ Reasons of enacting business legislation:
✓ Protect companies from each other – such as prevent unfair competition.
✓ Protect consumers from unfair business practiced.
✓ Protect the interest of society against unrestrained business behavior.

6) Cultural Environment

▪ Cultural is Institution and other forces that affect society’s basic values, perceptions,
preference and behaviors.

▪ The following cultural characteristics can affect marketing decision making:
1) Persistence of Cultural Value.

▪ People in a given society hold many beliefs and values. Their core beliefs and value

have a high degree of persistence. Core belief and value passed on from parents
to children and are reinforced by schools, mosque, business and government

▪ Secondary beliefs and values are more open to change. E.g. For muslims

market in Malaysia, believing that they are only allowed to take only halal food
is a core belief. Believing that Nasi Lemak is the common breakfast is a

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secondary belief. Marketer have some chance of changing secondary values,
but little chance of changing core values.

2) Shifts in Secondary Cultural Value.

▪ Although core values are fairly persistent, cultural swings do take place E.g.

Popular music group, young people’s hair styling etc

▪ Marketers want to predict cultural shifts in order to spot new opportunities or

threats.

▪ The major cultural values of a society are expressed in people’s views of

themselves and others, as well as in their views of organization, society, nature
and the universe:
a. People View of Themselves.

- People vary in their emphasis on serving themselves versus serving

others.

- Some peoples seek pleasure, fun. Others seek self-realization through

religion

b. People Views of Others.
- Shift from ‘me society’ to a ‘we society’ in which more people want to
be with and serve others.
- Materialism, flashy spending and self-indulgence are being replaced by
more sensible spending, saving, family concerns and helping others

c. People’s Views of Organization.

- People vary in their attitudes towards corporations, government

agencies, trade unions universities and other organizations.

- By and large, people are willing to work for major organizations and

expect them, in turn to carry out society’s work.

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d. People’s View of Society.

- People vary in their attitudes towards their society
- Patriots defend it, reformers want to change it, and malcontents want

to leave it.

- People’s orientation to their society influences their consumption

patterns, levels of savings and attitudes toward the market place.
e. People’s Views of Nature.

- People vary in their attitude toward the natural world
- Some feel ruled by it, others feel in harmony with it and still others seek

to master it

- More recently people have recognized that nature is finite and fragile –

that can be destroyed or spoiled by human activities

- Love of nature leading to more camping, hiking, boating and others

outdoor activities.

- Business have to respond by offering more products and services

catering to these interest.
f. People’s View of the Universe.

- People vary in their beliefs about the origin of the universe and their

place in it.

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CHAPTER 4 : CONSUMER MARKET AND CONSUMER BUYING BEHAVIOUR

LEARNING OBEJCTIVES:
1. Define Consumer Market and Consumer Buying Behaviour
2. Describe the Characteristics Affecting Consumer Behaviour
3. Explain the Consumer Buying Decision Process

DEFINITION OF CONSUMER MARKET AND CONSUMER BUYER BEHAVIOUR

Consumers make many buying decisions every day. Most large companies research
consumer buying decisions in great detail to answer questions about: what consumers buy,
where they buy, how and how much they buy, when they buy and why they buy.

A firm needs to analyze buying behavior for:
• Buyers’ reactions to a firms marketing strategy has a great impact on the firms success.
• The marketing concept stresses that a firm should create a Marketing Mix (MM) that

satisfies (gives utility to) customers, therefore need to analyze the what, where, when and
how consumers buy.
• Marketers can better predict how consumers will respond to marketing strategies.

Consumer market – Refer to all the individuals and households who buy or acquire goods and
services for personal consumptions

Consumer buyer behaviour – is the buying behaviour of final consumers: individuals and
households who buy goods and services for personal consumption.
Need to understand:
- why consumers make the purchases that they make?
- what factors influence consumer purchases?
- the changing factors in our society.

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CHARACTERISTIC AFFECTING CONSUMER BEHAVIOR

Source from: Google image
1. Cultural Factors
The marketer needs to understand the role
played by the buyer’s culture, subculture and
social class.
A) Culture

❑ the set of basic values, perceptions,
wants and behaviors learned by a
member of society from family and other
important institutions.

❑ Culture is the most basic cause of a person’s wants and behavior. Human behavior is
largely learned. Growing up in a society, a child learns basic values, perceptions,
wants, and behaviors from the family and other important institutions.

❑ A person normally learns or is exposed to the following values: achievement and
success, activity and involvement, efficiency and practicality, progress, material
comfort, individualism, freedom, humanitarianism, youthfulness, and fitness and health

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❑ For example, business representatives of a U.S. community trying to market itself in
Taiwan found this out the hard way. Seeking more foreign trade, they arrived in Taiwan
bearing gifts of green baseball caps. It turned out that the trip was scheduled a month
before Taiwan elections, and that green was the color of the political opposition party.
Worse yet, the visitors learned after the fact that according to Taiwan culture, a man
wears green to signify that his wife has been unfaithful. The head of the community
delegation later noted, “I don’t know whatever happened to those green hats, but
the trip gave us an understanding of the extreme differences in our cultures.”
International marketers must understand the culture in each international market and
adapt their marketing strategies accordingly.

B) Subculture
❑ a group of people with shared value systems based on common life experiences and
situations.
❑ Each culture contains smaller subcultures or groups of people with shared value
systems based on common life experiences and situations.
❑ Subcultures include nationalities, religions, racial groups, and geographic regions.
❑ Many subcultures make up important market segments, and marketers often design
products and marketing programs tailored to their needs.

C) Social class
❑ relatively permanent and ordered divisions in a society whose members share similar
values, interest and behaviors.
❑ 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.
❑ Marketers are interested in social class because people within a given social class tend
to exhibit similar buying behavior.
❑ Social classes show distinct product and brand preferences in areas

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2. Social Factors

A consumer’s behavior also is influenced
by social factors, such as the consumer’s
small groups, family, and social roles and
status.

A) Groups
❑ Groups that have a direct
influence and to which a person
belongs are called membership
groups.
❑ In contrast, reference groups serve as direct (face to- face) or indirect points of
comparison or reference in forming a person’s attitudes or behavior. Reference
groups to which they do not belong often influence people.
❑ Marketers try to identify the reference groups of their target markets. Reference groups
expose a person to new behaviors and lifestyles, influence the person’s attitudes and
self-concept, and create pressures to conform that may affect the person’s product
and brand choices.
❑ The importance of group influence varies across products and brands. It tends to be
strongest when the product is visible to others whom the buyer respects.
Manufacturers of products and brands subjected to strong group influence must
figure out how to reach opinion leaders—people within a reference group who,
because of special skills, knowledge, personality, or other characteristics, exert
influence on others.
❑ Many marketers try to identify opinion leaders for their products and direct marketing
efforts toward them. In other cases, advertisements can simulate opinion leadership,
thereby reducing the need for consumers to seek advice from others.
❑ The importance of group influence varies across products and brands. It tends to be
strongest when the product is visible to others whom the buyer respects. Purchases of

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products that are bought and used privately are not much affected by group
influences because neither the product nor the brand will be noticed by others.

B) Family
❑ Family members can strongly influence buyer behavior. The family is the most
important consumer buying organization in society, and it has been researched
extensively. Marketers are interested in the roles and influence of the husband, wife,
and children on the purchase of different products and services.
❑ Husband-wife involvement varies widely by product category and by stage in the
buying process. Buying roles change with evolving consumer lifestyles.
❑ Such changes suggest that marketers who’ve typically sold their products to only
women or only men are now courting the opposite sex. For example, with research
revealing that women now account for nearly half of all hardware store purchases,
home improvement retailers such as Home
❑ Depot and Builders Square have turned what once were intimidating warehouses into
female friendly retail outlets. The new Builders Square II outlets feature decorator
design centers at the front of the store. To attract more women, Builders Square runs
ads targeting women in Home, House Beautiful, Woman’s Day, and Better Homes and
Gardens. Home Depot even offers bridal registries.
❑ Similarly, after research indicated that women now make up 34 percent of the luxury
car market, Cadillac has started paying more attention to this important segment.
Male car designers at Cadillac are going about their work with paper clips on their
fingers to simulate what it feels like to operate buttons, knobs, and other interior
features with longer fingernails. The Cadillac Catera features an air-conditioned glove
box to preserve such items as lipstick and film. Under the hood, yellow markings
highlight where fluid fills go.
❑ Children may also have a strong influence on family buying decisions. For example, it
ran ads to woo these “back-seat consumers” in Sports Illustrated for Kids, which
attracts mostly 8- to 14- year-old boys. “We’re kidding ourselves when we think kids
aren’t aware of brands,” says Venture’s brand manager, adding that even she was
surprised at how often parents told her that kids played a tie-breaking role in deciding

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which car to buy. In the case of expensive products and services, husbands and wives
often make joint decisions.

C) Roles and Status
❑ A person belongs to many groups—family, clubs, organizations.
❑ The person’s position in each group can be defined in terms of both role and status.
❑ A role consists of the activities people are expected to perform according to the
persons around them

3. Personal factors
3) PERSONAL FACTORS
A buyer’s decisions also are
influenced by personal
characteristics such as the buyer’s
age and lifecycle stage,
occupation, economic situation,
lifestyle, and personality and self-
concept.

A) Age and Family Life-Cycle
Stage:

❑ People change the goods and services they buy over their lifetimes. Tastes in food,
clothes, furniture, and recreation are often age related. Buying is also shaped by the
stage of the family life cycle—the stages through which families might pass as they
mature over time. Marketers often define their target markets in terms of life-cycle
stage and develop appropriate products and marketing plans for each stage.
Traditional family life-cycle stages include young singles and married couples with
children.

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B) Occupation
❑ A person’s occupation affects the goods and services bought. Blue-collar workers
tend to buy more rugged work clothes, whereas white-collar workers buy more
business suits. Marketers try to identify the occupational groups that have an above-
average interest in their products and services.
❑ A company can even specialize in making products needed by a given occupational
group.
❑ For example, computer software companies will design different products for brand
managers, accountants, engineers, lawyers, and doctors.

C) Economic Situation
❑ A person’s economic situation will affect product choice. Marketers of income-
sensitive goods watch trends in personal income, savings, and interest rates.
❑ For instance, if economic indicators point to a recession, marketers can take steps to
redesign, reposition, and reprice their products closely.

D) Lifestyle
❑ People coming from the same subculture, social class, and occupation may have
quite different lifestyles.
❑ Lifestyle is a person’s pattern of living as expressed in his or her psychographics. It
involves measuring consumers’ major AIO dimensions—activities (work, hobbies,
shopping, sports, social events), interests (food, fashion, family, recreation), and
opinions (about themselves, social issues, business, products).
❑ Lifestyle captures something more than the person’s social class or personality. It
profiles a person’s whole pattern of acting and interacting in the world.
❑ Several research firms have developed lifestyle classifications. It divides consumers into
eight groups based on two major dimensions: self-orientation and resources. Self-
orientation groups include principle-oriented consumers who buy based on their views
of the world; status-oriented buyers who base their purchases on the actions and
opinions of others; and action-oriented buyers who are driven by their desire for
activity, variety, and risk taking.

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❑ Consumers within each orientation are further classified into those with abundant
resources and those with minimal resources, depending on whether they have high or
low levels of income, education, health, self-confidence, energy, and other factors.
Consumers with either very high or very low levels of resources are classified without
regard to their self-orientations (actualizers, strugglers). Actualizers are people with so
many resources that they can indulge in any or all self-orientations. In contrast,
strugglers are people with too few resources to be included in any consumer
orientation.

E) Personality and Self-Concept
❑ Each person’s distinct personality influences his or her buying behavior. Personality
refers to the unique psychological characteristics that lead to relatively consistent and
lasting responses to one’s own environment. Personality is usually described in terms of
traits such as self-confidence, dominance, sociability, autonomy, defensiveness,
adaptability, and aggressiveness.
❑ Personality can be useful in analyzing consumer behavior for certain product or brand
choices. For example, coffee marketers have discovered that heavy coffee drinkers
tend to be high on sociability. Thus, to attract customers, Starbucks and other
coffeehouses create environments in which people can relax and socialize over a cup
of steaming coffee.
❑ Many marketers use a concept related to personality—a person’s self-concept (also
called self-image). The basic self-concept premise is that people’s possessions
contribute to and reflect their identities; that is, “we are what we have.”
❑ Thus, in order to understand consumer behavior, the marketer must first understand
the relationship between consumer self-concept and possessions. For example, the
founder and chief executive of Barnes & Noble, the nation’s leading bookseller, notes.

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4. Psychological Factors

A person’s buying choices are
further influenced by four major
psychological factors: motivation,
perception, learning and beliefs
and attitudes.

a. Motivation
❑ A person has many needs at
any given time. Some are
biological, arising from
states of tension such as
hunger, thirst, or discomfort. Others are psychological, arising from the need for
recognition, esteem, or belonging.
❑ Most of these needs will not be strong enough to motivate the person to act at a given
point in time. A need becomes a motive when it is aroused to a sufficient level of
intensity.
❑ A motive (or drive) is a need that is sufficiently pressing to direct the person to seek
satisfaction. Psychologists have developed theories of human motivation. Two of the
most popular—the theories of Sigmund Freud and Abraham Maslow—have quite
different meanings for consumer analysis and marketing.

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Source from: Google image
Maslow’s Theory of Motivation

Maslow’s answer is that human needs are arranged in a hierarchy, from the most pressing to the least
pressing. In order of importance, they are physiological needs, safety needs, social needs, esteem needs,
and self-actualization needs. A person tries to satisfy the most important need first. When that need is satisfied,
it will stop being a motivator and the person will then try to satisfy the next most important need. For example,
starving people (physiological need) will not take an interest in the latest happenings in the art world (self-
actualization needs), nor in how they are seen or esteemed by others (social or esteem needs), nor even in
whether they are breathing clean air (safety needs). But as each important need is satisfied, the next most
important need will come into play.

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c. Perception
❑ A motivated person is ready to act. How the person acts is influenced by his or her
own perception of the situation. All of us learn by the flow of information through our
five senses: sight, hearing, smell, touch, and taste. However, each of us receives,
organizes, and interprets this sensory information in an individual way.
❑ Perception is the process by which people select, organize, and interpret information
to form a meaningful picture of the world.
❑ People can form different perceptions of the same stimulus because of three
perceptual processes: selective attention, selective distortion, and selective retention.
People are exposed to a great amount of stimuli every day. For example, the average
person may be exposed to more than 1,500 ads in a single day. It is impossible for a
person to pay attention to all these stimuli. Selective attention—the tendency for
people to screen out most of the information to which they are exposed—means that
marketers have to work especially hard to attract the consumer’s attention.
❑ Even noted stimuli do not always come across in the intended way. Each person fits
incoming information into an existing mind-set. Selective distortion describes the
tendency of people to interpret information in a way that will support what they
already believe. Selective distortion means that marketers must try to understand the
mind-sets of consumers and how these will affect interpretations of advertising and
sales information.

d. Learning
❑ When people act, they learn. Learning describes changes in an individual’s behavior
arising from experience.
❑ Learning theorists say that most human behavior is learned. Learning occurs through
the interplay of drives, stimuli, cues, responses, and reinforcement.

e. Beliefs and Attitudes
❑ Through doing and learning, people acquire beliefs and attitudes. These, in turn,
influence their buying behavior.
❑ A belief is a descriptive thought that a person has about something.

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❑ Buying behavior differs greatly for a tube of toothpaste, a tennis racket, an expensive
camera, and a new car. More complex decisions usually involve more buying
participants and more buyer deliberation.

THE BUYER DECISION PROCESS

Marketers need to focus on the entire buying process rather than on just the purchase
decision. It consists of 5 stages: need recognition, information search, evaluation of
alternatives, purchase decision and post-purchase behavior.

The Buyer Decision Process
How consumers make buying decisions?

1) Need Recognition:

❑ The first stage of the buyer decision process, in which the consumer recognizes a
problem or need. The need can be triggered by internal stimuli when one of the
person’s normal needs – hunger, thirst, sex- rises to a level high enough to become a
drive.

❑ At this stage, the marketer should research consumers to find out what kinds of needs
or problem arise, what brought them about, and how they led the consumer to this
particular product.

❑ This is the first stage of the buying process. A consumer will not initiate a purchase
without the recognition of the needs or wants. When a consumer feels the need to
buy a particular product, he will go for a purchase decision. There is an unmet need
or there is a problem which can be solved by buying a particular product.

❑ Needs arise as there is a problem. For example, you broke your table that you were
regular ling using for your business. And due to this problem, you now have to buy a
new table.
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