CONSUMER BEHAVIOUR BOOK

7/28/2019 CONSUMER BEHAVIOUR BOOK

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1.1 Defining Consumer Behavior :

Consumer Behavior may be defined as the interplay of forces that takes place during a consumptionprocess, within a consumers self and his environment.

this interaction takes place between three elements viz. knowledge, affect and behavior;

it continues through pre-purchase activity to the post purchase experience;

it includes the stages of evaluating, acquiring, using and disposing of goods and services.

The consumer includes both personal consumers and business/industrial/organizational consumers.

Consumer behavior explains the reasons and logic that underlie purchasing decisions and consumption

patterns; it explains the processes through which buyers make decisions. The study includes within itspurview, the interplay between cognition, affect and behavior that goes on within a consumer during theconsumption process: selecting, using and disposing off goods and services.

i. Cognition: This includes within its ambit the knowledge, information processing and thinking part;It includes the mental processesc involved in processing of information, thinking andinterpretation of stimuli (people, objects, things, places and events). In our case, stimuliwould be product or service offering; it could be a brand or even anything to do with the4Ps.

ii. Affect:This is the feelings part. It includes the favorable or unfavorable feelings andcorresponding emotions towards a stimuli (eg. towards a product or service offering or a

brand). These vary in direction, intensity and persistence.

iii. Behavior:This is the visible part. In our case, this could be the purchase activity: to buy or not abuy (again specific to a product or service offering, a brand or even related to any of the 4Ps).

The interaction is reciprocal between each of the three towards each other and with the environment.

Other Definitions :

The behavior that consumers display in searching for, purchasing, using, evalauting and disposing ofproducts and services that they expect will satisfy their needs.

- Schiffman and Kanuk

..the decision process and physical activity engaged in when evaluating, acquiring, using or disposing ofgoods and services."

- Loudon and Bitta


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The study of consumers as they exchange something ofvalue for a product or service that satisfies theirneeds

- Wells and Prensky

Those actions directly involved in obtaining, consuming and disposing of products and services including

the decision processes that precede and follow these actions.

-Engel, Blackwell, Miniard

the dynamic interaction of effect and cognition, behavior and the environment by which human beingsconduct the exchange aspects of their lives

-American Marketing Association

1.2 Nature and Scope of Consumer Behavior :

1.2.1 Nature of Consumer Behavior:

i. The subject deals with issues related to cognition, affect and behaviorin consumption behaviors,

against the backdrop ofindividualand environmentaldeterminants. The individualdeterminantspertain to an individuals internal selfand include psychological components like personal motivationand involvement, perception, learning and memory, attitudes, self-concept and personality, and,decision making. The environmentaldeterminants pertain to external influences surrounding anindividual and include sociological, anthropological and economic components like the family, socialgroups, reference groups, social class, culture, sub-culture, cross-culture, and national and regionalinfluences.

ii. The subject can be studied at micro or macro levels depending upon whether it is analyzed at theindividual level or at the group level.

iii. The subject is interdisciplinary. It has borrowed heavily frompsychology(the study of the

individual: individual determinants in buying behavior), sociology(the study of groups: groupdynamics in buying behavior), social psychology (the study of how an individual operates ingroup/groups and its effects on buying behavior), anthropology(the influence of society on theindividual: cultural and cross-cultural issues in buying behavior), and economics (income andpurchasing power).

iv. Consumer behavior is dynamic and interacting in nature. The three components of cognition, affectand behavior of individuals alone or in groups keeps on changing; so does the environment. Thereis a continuous interplay or interaction between the three components themselves and with theenvironment. This impacts consumption pattern and behavior and it keeps on evolving and it ishighly dynamic.

v. Consumer behavior involves the process ofexchange between the buyer and the seller, mutuallybeneficial for both.

vi. As a field of study it is descriptive and also analytical/ interpretive. It is descriptive as it explainsconsumer decision making and behavior in the context of individual determinants andenvironmental influences. It is analytical/ interpretive, as against a backdrop of theories borrowedfrom psychology, sociology, social psychology, anthropology and economics, the study analyzesconsumption behavior of individuals alone and in groups. It makes use of qualitative andquantitative tools and techniques for research and analysis, with the objective is to understand andpredict consumption behavior.


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vii. It is a science as well as an art. It uses both, theories borrowed from social sciences to understandconsumption behavior, and quantitative and qualitative toolsand techniques to predict consumerbehavior.

viii. 1.2.2 Scope of Consumer Behavior:

ix. The study of consumer behavior deals with understanding consumption patterns and behavior. Itincludes within its ambit the answers to the following:

x. - What the consumers buy:goods and services

- Why they buy it: need and want

- When do they buy it: time: day, week, month, year, occasions etc.

- Where they buy it: place

- How oftenthey buy it: time interval

- How often they use it: frequency of usexi. The scope of consumer behavior includes not only the actual buyer but also the

various roles played by him/ different individuals.

xii. Basic Components:xiii.

xiv.

i) Decision making (Cognitive and Affect):-this includes the stages of decision making: Need recognition, Information search, Evaluation ofalternatives, Purchase activity, Post purchase behavior.

xv. ii) Actual purchase (Behavior):-this includes the visible physical activity of buying of goods and/or service. It is the result of the

interplay of many individual and environmental determinants which are invisible.

xvi. iii) Individual determinants and environmental influences: The environmental factorsaffect the decision process indirectly, through way of affecting individual determinants.

xvii. iv) Buying roles: Actual Buyer vis a vis other users. There are five buying roles, viz., Initiator,Influencer, Decider, User, Buyer. The initiatoris the person who identifies that there exists a needor want; the influenceris the one who influences the purchase decision, the actual purchase activityand/or the use of the product or service; the decideris the one who decides whether to buy, whatto buy, when to buy, from where to buy, and how to buy; the buyeris theone who makes the actualpurchase; and, theuseris the person (s) who use the product or service. These five roles may beplayed by one person or by different persons. A person may assume one or more of these roles.

This would depend on the product or service in question.Examples: Let us take two examples.

Example 1:

A child goes to a kindergarten school. She comes back home and asks her parents to buy her a setof color pencils and crayons. Now the roles played are:

xviii. 1. Initiator: the child in nursery school

2. Influencer: a fellow classmate

3. Decider: the father or the mother

4. Buyer: the father or the mother

5. User: the child

Example 2:

The lady of a house who is a housewife and spends her day at home doing household chores watches TV inher free time. That is her only source of entertainment. The TV at home is giving problem. She desires anew TV set, and says that she wants an LCD plasma TV. Now the roles played are:


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1. Initiator: the housewife (mother)

2. Influencer: a friend / neighbour

3. Decider: the husband or the son

4. Buyer: the husband or the son

5. User: the family

Consumer behavior focuses specifically on the Buyer and often User.

But also analyzes impact of other roles.

vii. v) Buyers and Sellers:They are the key elements in consumer behavior. They have needs and

wants and go through a complex buying process, so as to be able to satisfy the need through

purchase of the good or service offering. They enter into an exchange process with the seller, which

leaves both the parties (buyer and seller) better off than before. In fact the exchange process is

value enhancing in nature, leading to satisfaction of both the parties.

viii. 1.3 Application of Consumer Behavior :ix.

An understanding of consumer behavior is necessary for long term success and survival of a firm. Itis viewed as the edifice of the marketing concept, an important orientation in marketingmanagement.

According to the marketing concept, the marketer should be able to determine needs and wants ofthe target segment and provide product and service offerings more effectively and efficiently than

competitors. It is essentially a customer-centered philosophy, which aims at understandingcustomer needs and wants, providing the right product and service, and deriving customersatisfaction; make what you can sell rather than sell what you make.

An understanding of the study of consumer behavior helps formulate appropriate marketingstrategies for a firm keeping in view the consumer and his environment.It has a number of applications; the main application bases are as follows:

x. 1. Analyze the environment:

xi. The knowledge of consumer behavior can be applied to help identify opportunities and fight threats.

Theopportunities could be in terms of newer customers, newer markets, unfulfilled needs and wants(through a study of consumer individual determinants and other environmental influences).The threats could be fought by developing and implementing appropriate marketing strategies tobest fit the environment.

The marketing strategies need to be dynamic and constantly evolving keeping in view the

uncertainty in the environment; Environmental uncertainty is a function ofcomplexity anddynamism. Complexityis defined in terms of the number, strength and interrelatedness of thevarious factors in the environment that a firm has to deal with. Dynamism relates to how quicklythe changes take place in the environment.

xii. 2. Segmentation, targeting and positioning:

xiii. The study of consumer behavior may be applied to segment the market, select the target marketand position the product or service offering. Identifying the target segment, understanding their

needs, providing the right product and service offering and communicating about the offering allof these help a marketer succeed in the long term and ensure his survival and success in a changing

environment.

a) Segmentthe market: The marketer needs to identify distinct customer groups with needsand wants, classify them on basis of descriptive characteristics and behavioral dimensions.

The descriptive characteristics may take forms of age, gender, income, occupation, education,family size, family life cycle, gender, lifestyle, personality, religion, generation, geography,nationality, and social class. The behavioral dimensions take forms ofbenefits, uses, use occasion,usage rates, and loyalty status.


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b) Select target market: The marketer then selects one or more markets to enter. Thesegment(s) that should be targeted should be viable; there should be a fit between the marketattractiveness and the companys objectives and resources. The marketer would be able to assessthe viability of a segment on the basis of the following criteria, viz., measurability, substantialability,

accessibility, differentiability, and actionability.

c) Position the product offering in the mind of the customers: The marketers should be able to

communicate the distinct and/or unique product characteristics.xiv. 3. Designing the Marketing Strategy:

xv. There exists interrelatedness between the Consumer, the Environment and the Marketing strategy.

a) Consumer: The consumer has his needs and wants as well as product preferences; Thus,there exists an interplay of Cognition (knowledge about products and alternatives), Affect (feelingsof favorableness and unfavorableness) and Behavior (action: buy or not to buy).

b) Environment: This refers to forces in the environment, which make the environment complexand dynamic.

c) Marketing strategies: This implies setting up of goals and then achieving them through thedesign of an appropriate marketing mix.

The Marketing Strategy should be designed to influence consumers (Cognition, Affect and Behavior)and be influenced by them. It should beflexible and ever evolving with changes in the customerneeds and wants; as well as, changes in the environment in which it operates. The knowledge ofconsumer behavior can be applied to develop a best fit between consumer needs and wants, theenvironment in which the firm operates; and, the firms goals and objectives.

4. Designing the Marketing Mix:

4 Ps The study of consumer behavior may be applied to design the 4 Ps.

a) Product: The term product includes both tangible products and intangible services. The issues toaddress consist of name (brand), size, shape, features, labeling, packaging, accessories and supplementaryproducts, terms of sale and services, after sales etc.

b) Price: This includes the pricing of the product offering. The major components include, form of payment,terms and conditions of payment, discounts, price sensitivity, differential prices and customer reaction,imagery (price increase and customer reaction, price decrease and customer reaction).

c) Place and Distribution: This includes the marketing channel, and comprises decisions regardingchoice of channel (direct or indirect), location, accessibility and availability of product offering, wholesaling,retailing, logistics etc.

d) Promotion: This includes marketing communication, and the major issues comprise decisions oncommunication/promotion mix, the message and media strategy (the content, appeal and context).

5. Application in Governmental and Non-profit Organizations and Social Marketing:

vii. The knowledge of consumer behavior finds relevance even in Governmental and Non-profit

Organizations and Social Marketing. Governmental and Non-profit Organizations have the society as

its customers and need to understand them so as to be able to serve them better.

Social marketing involves propagation of ideas; attempts at such circulation and spread of ideas for

moral and social upliftment can be more successful if there is a proper understanding of the these

consumers (i.e., the public and society)

viii. 1.4 Why Study Consumer Behavior ?ix. -The subject of Consumer Behavior is viewed as the edifice of the marketing concept, an important

orientation in marketing management. The knowledge of Consumer Behavior helps the marketerunderstand and predict the consumption patterns and consumption behaviors of people. It helps


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them gain insights as to why a consumer behaves differently to another consumer; as well as, whya consumer behaves differently in different times and buying situations. The study helps themunderstand the internal (individual determinants) and external (environmental factors) forces thatimpel people to act out different consumption patterns and behaviors.

The study helps the marketer in:

a) Analyzing the environment: identifying opportunities and fighting threats.

b) Segmenting, targeting and positioning.

c) Designing the marketing-mix.

d) Designing the marketing strategy.

e) Governmental and Non-profit Organization and Social Marketing.

x. 1.5 Evolution of Consumer Behavior as a Field of Study and ItsRelationship with Marketing Behavioral Dimension :

xi. The discipline finds its roots in the marketing concept and has been essentially interdisciplinary innature. As a subject it emerged as a separate field of study in the 1960s.

Initially the focus lay in the marketers attempts to study the causes of consumer behavior; theassumption was that if they could identify the reasons behind consumption behavior, they would beable to predict it; and if they couldpredictconsumer behavior, they could influence it. So theemphasis was topredictconsumer behavior; the approach came to be known as positivism.

Gradually, the focus of the study changed; the marketers wanted to understand the customerbetter, and this approach came to be known as interpretivism.

xii. 1.6 The Interdisciplinary Nature of Consumer Behavior :xiii. An interdisciplinary area of study, the subject borrows heavily from psychology, sociology; social

psychology; anthropology and, economics.

1.psychology:This includes the study of the individual as well as the individual determinants inbuying behavior, viz., consumer perception, learning and memory, attitude, self-concept andpersonality, motivation and involvement, attitudes and attitudinal change and, decision making.

2.sociology: This includes the study of groups as well as the group dynamics in buying behavior,viz., family influences, lifestyles and values, and social group influences.

3.social psychology: This includes the study of how an individual operates in group/groups andits effects on buying behavior viz, reference groups and social class influences.

4. anthropology: This is the influence of society on the individual viz., cultural and cross-culturalissues in buying behavior, national and regional cultures etc.

5. economics: This is the study of income and purchasing power, and its impact on consumerbehavior. The underlying premise is that consumers make rational choices while making purchasedecisions. While resourcse are limited and needs and wants many, consumers collect information,and evaluate the various alternatives to finally make a rational decision.


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2.1 Relevance of Market Research with Consumer Behavior :

xiv. Each individual is unique in himself/herself and, needs and wants vary from person to person; thus,

consumers are different and heterogeneous. However, like-minded clusters of customers do exist;

they are homogenous within such clusters and heterogeneous outside; these are referred to assegments. Marketers identify segments and target one or few of these segments, and thereby fulfilthe qualifications of the marketing concept; first, marketers identify customer needs and wants;and then, deliver product and service offerings so as to satisfy the customers more efficiently andeffectively than the competitors.In order to understand and predict consumption patterns andbehaviors within segment (s), market research becomes essential.

xv.

xvi. Market research may be defined as:xvii. - an organized effort to gather information about the market and the customers.

- systematic collection, analysis and interpretation of data related to the market and thesurrounding environment.

xviii. The environment surrounding a Company may be grouped as the micro-environment and the

macro environment. Themicro-environmentcomprises forces in the environment that are close tothe company and affect the company directly; for example, the companys internal environment,the founder/leader and his vision and mission, the customers, competitors, suppliers, and channelintermediaries. Themacro- environmenton the other hand,comprises forces in the environment thatfirst affect the micro environment and through that they affect the company; in other words theyaffect the company indirectly; examples are the demographic factors, socio-economic factors,political factors, technological factors, cultural factors, natural factors etc. The forces in the macroenvironment affect all the companies operating in a same industry in a similar manner.

The micro-environment is studied in terms of strengths (S) and weaknesses (W), while the macro-

environment is studied in terms of opportunities (O) and threats(T). The analysis of both of theseput together comprises the SWOT analysis.

xix. Table 1: Relationship between Marketing Research and Consumer Research

Marketing research Consumer Research

(From Market Research, evolved the subset Consumer Research)

Marketing research Consumer Research

Objective- To study the marketing environment and thecustomers who are a part of it.

Objective- To study consumers as individuals or as groups

Focus- To establish trends, and identify opportunitiesand threats in the environment.- To study the

market and forecast potential- To predict buyingpatterns based on modeling and simulation

Focus

- To understand consumption behavior andconsumption patterns

End result-Customer connect with company - Individualmarketing and customization

End result-Customer connect with company - Individualmarketing and customization

2.2 Approaches to Consumer Behavior Research :


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Broadly speaking there are two approaches towards consumer behavior research. These are (a)Traditionalapproach(b) Current approach. These can be further divided into sub approaches.

(a) Traditional approach: This is further divided into two approaches, Positivistand Interpretivist.

i) Positivist approach:

This approach also referred to as modernism, is the earliest approach to studying consumer behavior andtreats the study as an applied science; the paradigm lays emphasis on science as a means of explainingbehavior. It lays emphasis on the causes of consumer behavior and as per its proponents, these causes aredirectly related to effects. Thus, it treats consumers as rational human beings, who make purchasedecisions after collecting information and weighing all alternatives. The process of consumer decision makingis looked upon as one of rationality. Rational decision making and problem solving is the key.

The approach is based on certain assumptions viz.,

-consumer actions based on cause and effect relationship can begeneralized; they can beobjectively measured and empirically tested;

- if a marketer/researcher could identify the reasons behind consumption behavior; he would beable topredictit; and if they couldpredictconsumer behavior, they could influence it.

The focus lies onprediction of consumer behavior. The methodology is essentially quantitative, withtechniques including surveys, observations, and, experiments. It aims at drawing conclusions on largesamples.

ii)Interpretivist approach:

This approach is also referred to as post-modernism or experientalist. Gradually there was a shift in theapproach towards the study of consumer behavior and the positivist approach gave way to a new approachthat came to be called post-modernism. The approach lays emphasis on understanding the customer better.

It treats consumer decision making process as one which is subjective. Thus while the approachis essentially subjective, the researchers following this approach try to identify common patterns.

This approach is also based on certain assumptions viz.:

- consumer actions are unique and different both, between two consumers, and/or within thesame consumer at different times and situations.

- a cause and effect relationship cannot be generalized; consumption patterns and behaviors areunique; these are unpredictable.

- they cannot be objectively measured, empirically tested and generalized.

The focus lies on the act of consumption rather than the act of purchase. The methodology is essentially

qualitative, with techniques including in depth interviews, focus group techniques, projective techniques.

It aims at drawing conclusions on small samples.

Table 2: The Positivist and Interpretivist Approach

POSITIVIST INTERPRETIVIST

Consumer actions based on cause and effectrelationship can be generalized

A cause and effect relationship cannot begeneralized; consumption patterns andbehaviors are unique; these are

unpredictable.

Consumer actions can be objectivelymeasured and empirically tested

Consumer actions are unique and differentboth, between two consumers, and/or withinthe same consumer at different times and


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situations.Cannot be objectively measured, empirically

tested and generalized.

Focus: to predict consumer behaviorFocus: the act of understanding the

consumption rather than predicting the actof purchase

Methodology: Quantitative Methodology: Qualitative

Large samples Small samples

(b) Current approach: Dialectical:The termdialectics considers all forms of human behavior; thus thecurrent approach to the study of consumer behavior research is broader in scope. This is further dividedinto four approaches, Materialism, Change, Totality and Contradiction.

i) Materialism:

This approachimplies that consumer behavior is shaped by the material environment eg. money,possessions etc.

ii) Change:

Consumer behavior is dynamic in nature; it is always in a process of continuous motion, transformation andchange.

iii) Totality:

Consumption behavior is interconnected with other forms of human behavior, like personal self and thesurrounding environment.

iv) Contradiction:

Views changes in consumer behavior as arising from their internal contradictions, like moods, emotions etc.

The approach studies the consumer as a complex total whole and views consumer purchase as well as

consumption processes. The current approach to studying Consumer Behavior uses both the quantitative aswell as qualitative approaches.

2.3 Research Perspectives on Consumer Behavior :

There are three broad research perspectives in consumer behavior. They are as follows: the Decision-Makingperspective, the Experiential perspective, and Behavioral-Influence perspective.

The Decision-Making Perspective: According to the decision making perspective, the buying process is asequential in nature, with the consumer perceiving that there exists a problem and then moving across aseries of logical and rational steps to solve the problem; stages being problem recognition, information

search, evaluation of alternatives, purchase decision, and post purchase behavior. This perspectiveemphasizes the rational, logical and cognitive approach to consumer decision making and purchase process.

The Experiential Perspective: The experiential perspective believes that not all buying may be rational andlogical; in some cases, buying results from a consumers desire for fun and fantasy, hedonic pleasures,emotions and moods. The perspective emphasizes that consumers are feelers as well as thinkers.

The Behavioral Influence Perspective: This perspective holds that forces in the environment stimulate aconsumer to make purchases without developing beliefs and attitudes about the product.

2.4 Research Paradigms in Consumer Behavior :


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The research paradigm in the study of consumer behavior focuses on two approachesviz.,Quantitativeresearch, used by thepositivists and, Qualitative research: used by theinterpretivists.Thepositivists and interpretivists as two schools of thought have already been discussed in the previouslesson. The current approach or the dialectic approach to studying Consumer Behavior makes use both theapproaches.

a) Quantitative Research in Consumer Behavior:

As the name suggests, the approach makes application of quantitative research techniques to the study ofConsumer Behavior. It comprises (i) research techniques that are used to gather quantitative data overlarge samples randomly, and (ii) statistical tools and techniques, inclusive of survey techniques, observationand experiments. This type of research is descriptive and empiricalin nature. It is primarily used bythepositivists while studying consumer behavior, with a focus on prediction of consumer behavior.The findings can be generalizedto marketing situations. As mentioned above, the quantitative techniquesare also used by dialectics.

b) Qualitative Research in Consumer Behavior:

This approach makes application ofqualitative research techniques to the study of Consumer Behavior. Itcomprises (i) research techniques that are used to gather qualitative data over small samples randomly and,(ii) non-statistical tools and techniques, inclusive of depth interviews, focus group, projective techniques andeven observation. The type of study is subjective and non-empiricalin nature. It lays emphasis on the

holistic what, where, when, why and how of human behavior.The focus is on understanding consumptionbehavior and consumption patterns. The objective is to gain an understanding of consumer behavior and the

underlying causes that govern such behavior. The approach assumes that all marketing situations areunique; and, hence the findings cannot be generalizedto marketing situations. This approach is primarilyused by the interpretivists while studying consumer behavior. However, as mentioned above, the qualitativetechniques are also used by dialectics.

c)Combining the two approaches:

Today, the two approaches are used in combination to study consumer behavior. Qualitative research is veryoften a prelude to quantitative research; the findings from qualitative research are used to prepare scales

for surveys and experiments.

In some cases quantitative research may also act as a precursor to qualitative research; the findings from

quantitative research are corroborated through case studies and other qualitative measures.

2.5 Consumer Research Process :

Marketers need to have knowledge about the environment in which they operate. The environment could beboth at a micro level and at a macro level. Market research focuses on study of the consumer and the

environment. Consumer research focuses on the consumer and his consumption behavior. Companies couldeither conduct consumer research through services of their in house marketing information systems or out

source the activity to marketing research consultants.

The consumer research process can be studied as a 5 staged procedure. The various stages are not

mutually exclusive; neither are these essentially sequential. However, for purposes of ease, such aprocedure exists. The various stages of the research process are as follows:

a) Defining the problem or the research objectives.

b) Developing the research plan.

c) Collecting data, both primary and secondary.

d) Analyzing the data.


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e) Preparing a report and presenting the findings.

xix. a) Defining the problem and state the research objectives:

First, the marketer has to define the research problem. The pproblem definition entails questionslike What is the problem?, What are the various issues?, What information is needed? etc.

Research may be conducted to solve problems or fight threats once the problem has arisen. This istermed as an Actual State Type or AS Type of problem solving. The approach is essentially towardsbeing active ; i.e. engaging oneself in solving the problem that has already arisen and, actingafter the problem has occurred. Research may also be conducted to identify opportunities or fightthreats that are foreseen. This is termed as a Desired State Type or DS Type of problem solving.Here the researcher is being pro-active; i.e. engaging oneself in solving the problem inanticipation, much before the problem occurs.

Example:

Let us discuss how the two approaches are different to each other using an example. Assume youare the Vice President (Marketing and Sales). Your company produces paper products andstationery and has been a market leader since a long time. Of late there have been concerns aboutenvironmental protection and recycling. The market is sensitive towards environmental issues and

people are getting conscious.

-Actual State Type Problem Solving:

Action: You fail to read the pulse of the market. Another company enters the scene with recyclablepaper and stationery products.

Effect: You begin to lose sales, and thereby market share to this entrant who is selling recyclablepaper.

Now, you feel that a problem has occurred and you need to act now (reactive)

Thus you go in for consumer research.xx. -Desired State Type Problem Solving:

Action: You realize that you need to adhere to regulatory norms.

Effect: So you prepare to introduce recycled paper products.You go for consumer research to understand the probable consumer reaction to such products. Youare being proactive.

xxi. Second, the research problem should be conceptualized and the objectives should be defined; the

reasons as to why the research is being undertaken should be defined. The objectives should be

defined neither too narrowly nor too broadly. The objectives can be any one or more of the

following: explanation, prediction, insight generation and discovery, hypothesis testing, monitoring

of environment etc. Each of these are discussed below with examples.

i) Explanation: to explain events and identify reasons of occurrence.

- Example: Sudden fall in the sales of gold jewellery at Tanishq especially when the prices of goldhave been stable in the world market.

ii) Prediction: to predict occurrence of events in future.

- Example: Sales forecast of a new flavor of Amul chocolates

iii)Insight generation and discovery: to gain newer insights


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-Example: Study aimed to look out for new segments/markets for current product; i.e. market

development.

iv) Testing of Hypothesis: to test relationship between variables or set of variables.

- Example: Test relationship between price of a Sony Plasma and consumer perception of the

brand orquality.

xxii. v) Monitoring of marketing environment:

to identify opportunities and threats; assess performance of self; self monitoring.

- Example: Study aimed at self assessment of performance; or customer awareness and attitudetowards your product; or scope for newer segments.Depending upon the research objectives, the researcher may go for a Quantitative Study or aQualitative Study.

xxiii. Third, the researcher also needs to identify the type of study that needs to be undertaken

depending upon the research problem and the objectives. Research studies are of various types,viz., Descriptive, Exploratory, Causal, Correlation and experimental. The first three types are themore commonly used techniques. Each of these is discussed below.

i) Descriptive: This is the most commonly used type of research study. It seeks to ascertain thedegree, extent or magnitude of occurring events or phenomenon and variables under study; It alsoseeks to identify the causes of such occurrence. Such a research study helps describe thecharacteristics of the variables under study and is also used in testing of hypothesis. The researchdesign is structured and formatted unlike exploratory studies. The methodology includes surveys,interviews and observations. Example: Study of market potential of notebooks (laptops).

ii)Exploratory:Theobjective of such a study is to gain insight and deeper understanding of theobject of study, the person, object, situation etc. Its is aimed at earthening deeper to find out thenature of the problem and suggest possible solutions. The approach helps formulate problems andgenerate hypothesis. In this way, this type of research design may act as a prelude to more

elaborate and extensive study. The research design is flexible and dynamic and is developed as one

progresses through the research study. The methodology includes surveys, interviews, observation,focus groups, and case studies. Example: Study of consumers likes, preferences and attitudestowards electronic goods.

iii)Causal:The purpose of such a study is to test a cause-and-effect relationship between twovariables, independent and dependent (Cause: Independent variable), (Effect: Dependent variable).It is used for testing of hypothesis. The methodology includes surveys. Example: Study of impact ofdifferent advertising appeals on sales of a product.

iv)Correlation:The purpose is to analyze as to whether a relationship exists between twovariables and if so, to what degree. The relationship may not always be a causal one, i.e.,correlation may not always imply causation. Such a study is used for testing of hypothesis. Themethodology includes surveys. Example: Study of relationship between change of season and saleof products.

v) Experimental: The experimental study is similar to causal research in terms of establishing acause-effect relationship among the groups of subjects; But the cause (independent variable) isunder the control of the researcher. This type of research study is used where there is time priority

i.e. cause leads to effect; there is a causal relationship i.e. the cause will always lead to the sameeffect; and, the degree of the correlation is great. It is used for testing of hypothesis. Themethodology includes surveys, interviews, observation. Example: Study of consumers reactions to

four different varieties of breakfast cereal.xxiv. The decision to choose a particular type depends on the research problem and the research

objective. Sometimes for different phases of the same research project, the researcher may need to

adopt different types.xxv. b) Developing the research plan:

Once the problem has been conceptualized, the researcher has to develop the research plan. The


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research plan contains details on the data sources, research tools and techniques, sampling planand, contact methods for data collection.

i) Data Sources:

There are two data sources:primary and secondary. The researcher can gather either or both of

these. Generally, the researcher starts a study with secondary data sources, and then moves on to

primary sources; secondary data provides a starting point for research.

-Primary sources:

This is data which is freshly collected for a specific research study. It is collected through researchinstruments, tools and techniques specifically designed for the research problem; they can take theform of questionnaires, interviews and observation. The advantage is that such data is morepertinent to the research problem. The disadvantage is thatit is costly in terms of money and time.

xxvi. -Secondary sources:

Secondary data is data which exists already; paper sources (books, journals, reports etc.) as well aselectronic sources (CD-ROMS, online databases, internet). Such data is collected by studiesconducted earlier and is not gathered for purposes of current research. It could be obtained throughpublished data and reports. The advantage is that such data is easy to gather and is readily

available; longitudinal studies can also be possible. published reports and data possess credibility.The disadvantage is that validity may be questioned, and the sources need to be legitimate.

xxvii. ii) Research tools and techniques:

In case of primary data, the major tools and techniques are surveys (questionnaires andinterviews), focus groups, observation, behavioral measures and experiments. These methods

would use questionnaires, which may be structured or unstructured.-Survey Research: Surveys are the most popular of all techniques for data collection as far as thefield of marketing is concerned. They are conducted over a sample to learn about customersawareness, liking and preferences for an offering or a brand. They may also be undertaken tomeasure customer satisfaction. The findings from such surveys are then generalized to the entirepopulation (in our case, the market). Hence, the sample should be chosen with care; it should beadequate, appropriate and representative. The sample may be chosen randomly or purposively. The

major instrument used for surveys is through administration of the questionnaire; interviewtechnique may also be used. The questions framed may be structured and formatted or may even

be unstructured. They may be open-ended, closed ended, dichotomous, multiple choice, ratingscales, ranking scales etc. Questionnaires may be administered personally or by postal mail,electronic mail or even on telephone. Surveys are used in quantitative research.

Example: Conducting a survey to test customer awareness and reaction about a new advertisementcampaign.

xxviii. - Focus Group Research:

As the name suggest, this kind of research is conducted over a group of people through amoderator. The moderator focuses on the group of people, numbering 6-10, who are carefullyselected purposively based on demographic, psychographic and/or behavioral considerations. Thegroup members are asked questions about a product and the 4 Ps and they are even involved indiscussions related to the research problem/issue. Through discussions, the moderator is able togain insight into the group members emotions and feelings, attitudes, underlying motivations and

interests etc. These sessions are recorded for further analysis. The technique is used commonlyduring pre-testing of product in the market before it is launched; provides insight into productacceptance in the market. Focus group research is used in qualitative research.

xxix. Example:

Why do customers prefer a higher priced branded electronic good as compared to a lower pricedlocal one?

xxx. -Observational Research:

As the name suggests, this research technique is based on observing people, and drawingconclusions. The technique helps gain an insight and an in-depth understanding as to how people


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behave in the marketplace by carefully watching them buying and use products and services. Thesecustomers could be current customers or potential customers; they are observed in the marketplacewhile they are involved in the buying activity. The consumption pattern is observed. The techniquecould also be applied to test customer verbal and non-verbal reactions to product offerings (featuresand benefits, quality, aesthetics etc), price (increase/decrease, discounts and allowances, exchange,warranties and guarantees), distribution (stores, layout, ambience, attitude of staff etc) an,

promotion (advertising, sales promotion etc). The observations may be overtly or cohertly; in the

case of overt observations, the participant is aware of the objectives of the study and knows that heis being observed; in the case of cohert observations, the person is unaware that he is beingobserved and that his actions are being recorded by the researcher personally or through hiddencameras and recorders (mechanical and electronic devices: videos, closed circuit TVs; technologicaldevices: credit cards, shopping cards, online shopping and automated phonesystems).Observational Research is used in qualitative research.

Example:

Why do they ask for the competitors brand rather than your brand?xxxi. - Behavioral Measures:

The customer reactions in terms of their behavior are interpreted through customer databases andthe store scanning data. Customers actual responses in terms of purchase are recorded andanalyzed; the assumption is that there is a difference between customers intention to buy and

actual purchase. So actual behavior is recorded and analyzed. This is regarded as more reliable thanquestionnaire surveys and is used in both quantitative and qualitative research.

xxxii. - Experimental Research:

This type of research technique is the most time consuming, but most scientifically valid and reliableapproach towards conducting research studies and solving problems. It studies the cause-and-effectrelationships between independent (cause) and dependent (effect) variables; the researcheralters/manipulates one or more variables, and controls and measures any change in other variables.

In controlled settings, where the sample is treated as a test group, the variables under study arealtered/manipulated and the reactions of the sample are recorded; thereafter these findings aregeneralized. This i used in quantitative research. The technique is commonly used in test marketing

for pre-testing of the product before launch.xxxiii. Example: Study consumer reaction (in terms of impact on sales) due to changes made in product

features, price, or advertisement appeal or store layout etc.

In case of secondary data, the researcher could access: company reports (published andunpublished), industry reports, trade journals, government reports, research articles and journals,magazines, books etc; also CD-ROMS, Internet, Online databases.

Primarily, quantitative studies include questionnaires and experimentation as tools for study whilequalitative studies use questionnaires, case studies, as well as observation.

xxxiv. Questionnaire:

A questionnaire is a research instrument with a set of questions that is administered to therespondents. The questions are framed keeping in mind the research problem; the questionnaire ispre tested for reliability and validity before it is finally administered. Depending upon the nature ofresearch, quantitative or qualitative, various kinds of questionnaires are prepared; they may bestructured or unstructured; and they may use varying scales.

- Structured questionnaires:

A list of questions that are to be asked are prepared, well structured and formatted into aquestionnaire. These questions are capable of quantification. The same questionnaire isadministered to the entire sample, and after it is filled up by the respondent, the researcher collectsthem and analyzes the responses.

- Unstructured questionnaires:

The questionnaires are unstructured; While a few questions are listed and given to the respondents,many questions/issues emerge as the respondent is filling up his responses. Thus, the questionnaire


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takes the form of a schedule. It is much more flexible and idea generating than the structuredquestionnaire.

The questionnaires should not be too long. The questions should be clear, precise, simpleto understand and free from ambiguities. The questionnaire may contain open-ended questions orclosed-ended questions or both; They may also use various kinds of scales: Rating scales, Likertscale, Semantic differential, Dichotomous, Multiple choice, Word association, Sentence completion,

Story completion, Projective techniques, Metaphor Analysis.

Quantitative research makes use of questions that use Rating scales, Likert scale, etc andmay be Dichotomous or Multiple choice types. Qualitative research uses forms like Semanticdifferential types, Dichotomous types, Multiple choice types, Word association types, Sentencecompletion types, Story completion types, Projective techniques, and, Metaphor Analysis.

xxxv. iii) Sampling plan:

Keeping in mind the research objectives, the researcher needs to prepare the sampling plan. Asample is a part of the population or the universe that is chosen to represent the whole. Sampling isthe process by which a sample is chosen. The sampling plan consists of three main constituents:

xxxvi. - Sampling unit:

A sampling unit is the element (s) that could be considered to be chosen in a sample; it is a basicunit of study. The issues for consideration is in consumer research is the target population, i.e., whois to be surveyed?Example: A research study to test the causal relationship between tooth decay in children and the

use of Colgate toothpaste. Now, school going children aged 4-12 years would be the population orthe universe; If we restrict the study to the city of Delhi, then school going children aged 4-12 years

in the city of Delhi would be the target population. Any child from a school in Delhi between the ageof 4-12 years, could be the sampling unit.

xxxvii. - Sample size:

The size of the sample affects the reliability and validity of the results and so sample size should be

carefully decided upon. Also the sample must be representative of the universe so as to obtainreliable and valid results and be able to draw generalizations. The issue for consideration is thenumber of people to be surveyed.

xxxviii. - Sampling procedure:

The issue for consideration here is that how should the sample be chosen, whether through a

randomized probability sampling or through a non-probability sampling procedure. Probability

sampling is a sampling procedure where every unit in the universe/population has an equal chanceof being chosen in the sample. The various types of probability sampling are simple random

sampling, systematic random or interval random, stratified random sampling, and cluster

sampling. Non-probability sampling is a sampling procedure where every unit in the

universe/population does not have an equal chance of being chosen in the sample. The various

types of non-probability sampling are convenience sampling, judgmental sampling, purposive

sampling, quota sampling, and snowballing.

xxxix. iv) Contact methods for data collection:

The respondents may be contacted personally or on telephone, postal mail and email.xl. - Personal: Interviews, Schedules:

The researcher may contact the respondent personally and interview him. He may also provide the

respondent with the questionnaire and assist him filling it. This is called a schedule which is a moreversatile method. The interview may be structured (questions are predetermined) or may beunstructured (issues come up for discussion as the interview progresses). The advantages ofinterviews and schedules is that this tool is very versatile; it is flexible, and takes the form of twoway communication. It allows more detailed questions to be asked. The researcher asks questionsfrom the respondent and records the answers. If the respondent has any doubts or queries, the

researcher can help the ambiguities. Incomplete responses and questionnaires can be followed up.Infact, may a times, the researcher is able to again a lot of insight on personal feelings, perceptionand additional knowledge through observation and non-verbal communication. The response rate ishigher than the mailed questionnaires. This techniques is also called mall intercept, if conducted in a


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market place. The disadvantages of such a technique are that it is time consuming and expensiveand it could suffer from bias and distortion.

xli. -Telephonic Interviews:

These aresimilar to personal interviews but here the respondent is interviewed ontelephone.Advantagesare that this tool is flexible and versatile like personal interviews; it allows

more detailed questions to be asked. It is possible to cover large samples across large geographical

territories. Respondents can be reached in a short period of time. Data can be collected quickly. Theresearcher asks questions from the respondent and records the answers. If the respondent has anydoubts or queries, the researcher can help the ambiguities. Incomplete responses andquestionnaires can be followed up. The response rate is higher than the mailed questionnaires.The disadvantages of such a technique are that it has to be planned in a manner that the length ofthe call is short. Sometimes, the respondent refuses to comment and hang up. He may also giveresponses that need not be true and correct.

xlii. - Questionnaire by Post:

The researcher mails the questionnaire by post. Along with the questionnaire, he encloses aforwarded letter (stating the purpose) and a self-addressed stamped envelope so as to increase

response rate. Theadvantages of such a technique is that the questionnaire is highly structured andstandardized, and thus, the responses can be easily measured and scaled. They are free of bias anddistortion. They can spread over large geographical areas and large samples, making the samplerepresentative. However, thee technique suffers from disadvantages also. The technique is

expensive in terms of time and money. The response rate is slow and time taking. Rate of non-response is also very high. There is no control as to who completes the questionnaire. Unlikeinterviews, it is not possible for the researcher to be face to face with the respondent and clear offambiguities. So the researcher has to be careful while framing questionnaires: they should besimple, easy to understand and free from ambiguities. If not, the participants could misinterpret thequestions and answer wrongly.

xliii. Questionnaire by Email:

The conduct of surveys online through the internet has come into use increasingly by researchers.The questionnaire can be posted online by the market researcher or the company on the companywebsite or on frequently accessed websites. The researcher may also mail the questionnaire

electronically, with a request to the respondent to fill up the questionnaire and send it back theemail. The advantages are that the questionnaire is highly structured and standardized. Because thequestionnaire is standardized, the responses can be easily measured and scaled. They are free ofbias and distortion. An online survey is easy to administer and saves on time and money. It can

spread over large geographical areas and large samples, making the sample representative.The disadvantages of such a technique are that the response rate is slow and time taking. Rate ofnon-response is also very high. There is no control as to who completes the questionnaire. Unlikeinterviews, it is not possible for the researcher to be face to face with the respondent and clear off

ambiguities. So the researcher has to be careful while framing questionnaires: they should besimple, easy to understand and free from ambiguities. If not, the participants could misinterpret thequestions and answer wrongly.

xliv. c) Collecting data, both primary and secondary:

After the objectives of the study and the research plan are laid out, themarket researcher goes onto collect data. The data is collected from primary and secondary sources. To start with, theresearcher accesses secondary data and then moves on to collect primary data. He may use any ofthe tools and techniques depending upon the research plan. This is a time consuming stage of

research. With advancement of technology, data collecting methods are improving day by day.xlv. d) Analyzing the data:

After the data is collected, it is analyzed and interpreted. The major question is What conclusionscan be drawn? Both statistical and non-statistical tools are used for analysis.

For descriptive data analyses, the following tools are used:- Parametric analysis: Central tendency (mean, median, mode), Dispersion (Standard deviation,variance, Range, Shape of curve: Skewness, Kurtosis)

- Graphical method: Bar chart, Histogram, Line graphs, Pie chart-Tabular method: Frequency distribution tables


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xlvi. In case ofinferential data analyses, which requires testing of hypothesis, the researcher needs tomake an assessment of the kind of data collected. Data collected on interval/ratio scale, qualifiesfor parametric tests, while that collected on nominal/ordinal scale qualifies for non-parametric tests.Parametric analysis includes t test, z test, paired sample t test, independent sample t test; Non-parametric tests include Chi-square, Mann-Whitney U, Kolmogorov-Smirnov etc.Mathematical models, decision models and simulation techniques, may be applied to obtain results

and propose frameworks. Case studies may also be developed.

xlvii. e) Preparing a report and presenting the findings:

Lastly, the report is prepared and the findings are presented to the marketing department. The

report should comprise (i) summary/ abstract (ii) research problem (iii) objectives (iv)

methodology (v) findings (vi) conclusions (vii) recommendations (viii) limitations. The report

should be short; it should be precise and related to the research problem only; Unnecessary details

should be avoided. The research problem should be addressed with the solution. Limitations of the

study if any should spelled out. Recommendations should be clearly delineated. If required along

with the written report, an oral presentation may also be made.

3.1 Aggregate Marketing and Market Segmentation :

vii. The marketer could either opt for aggregate marketing wherein he could treat the entire population

as a single segment, or he could go in for a market segmentation wherein he would identify groups

of like minded customers who were similar on one or more base(s) and cater to one or more of such

segment(s).

a) Aggregate Marketing: Earlier the assumption was that customers have similar needs and

wants and can be satisfied with a standardized product/service offering. Thus, a standardized

product was produced and distributed with a single marketing program or the same marketing mix.

This led to a focus on mass production and distribution, which resulted in lower costs; finally

resulting in lower prices and higher margins. Aggregate marketing is also termed as mass

marketing and undifferentiated marketing.

b) Market Segmentation: The assumption underlying market segmentation is that customers are

unique. They have different needs, wants and preferences. There do exist diverse customer groups

homogenous on certain bases within, but heterogeneous among each other. So, instead of a single

standardized product offering, the product and service offerings need to be designed according to

the needs and wants of the segment so as to satisfy them better. The marketers assumption is that

because of the homogeneity that exists within the members of the group, they would react similarly

towards a product and service offering and behave likewise to a corresponding marketing program.

viii. 3.2 Target Marketing :ix. The traditional way of doing business was Market Aggregation or Mass Marketing. This meant

offering a standardized product to all the consumers or the entire market. However, it was realized

that customers are unique, with different needs, wants and preferences across people as well as

across situations. Marketers understood that they cannot satisfy the customers with the same

product and service offering. Market aggregation gave way to Target marketing and finally Targetmarketing is giving way to Customization. The benefits of Target Marketing were understood by the

marketers as they realized that it is not possible to cater to the needs, wants and preferences of the

entire market. So the marketer would target a segment or a few segments, design the marketing

mix accordingly and serves the segment(s) efficiently and effectively. In this way he could meet

customer needs in a better way.

Target marketing or STP i.e., Segmentation, Targeting and Positioning involves a major exercise for

a marketer to start with. Segmentation involves Identifying distinct groups of buyers who are


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homogenous within but heterogeneous between each other; Targeting involves evaluating the

viability of each segment, and then selecting one or few market segment (s) to serve better and in

a superior way. Positioning involves creating an image in the minds of the target market about the

product and service offering; this image should relate to the need/want as well as portray

uniqueness and/or superiority than other competitive offerings.

3.3 Market Segment/Segmentation :

Segments pre-exist a marketer; they already exist. The marketers task is to identify the most lucrative andprofitable one (s) and target them. He has to then create a unique marketing program that would be mosteffective for that particular segment.

Amarket segmentmay be defined as a group of customers who are similar to each other oncertain bases; they are expected to behave in a similar manner towards a product and service offering andtowards a single marketing program.

Market segmentationis the process of identifying distinct groups and or sub groups of customersin the market, who have distinct needs, characteristics, preferences and/or behaviours, and require separateproduct and service offerings and corresponding marketing mixes.

The marketer experiences a heterogeneous market, with varying customers with diverse needs, preferencesand behaviours. However, a certain degree of homogeneity within groups and/or sub groups of customerson certain bases and dimensions may be identified. This leads to the identification of a segment. A marketsegment exhibits homogeneity within the group and heterogeneity outside. Further, each of the segmentscan be effectively served with a different marketing mix.

OTHER DEFINITIONS:

Amarket segmentconsists of a group of customers who share a similar set of needs and wants.

-Kotler

Market segmentation can be defined as the process of dividing a market into distinct subsets of consumerswith common needs or characteristics and selecting one or more segments to target with a distinctmarketing mix.

- Schiffman and Kanuk

vii. Segmentation could take place for both Consumer markets as well as for Business markets.

A Consumer Markets is defined as an end user market; the product and service offering is

bought by the consumer for his personal use. This is also called Business to Consumer market, or

B2C market. Examples: i) Bread is bought for end consumption and usage. (ii) Ceiling fan.

A Business Markets is defined as a market that buys, transforms/processes and sells

further, either for further transformation/processing or, for consumer use. This is also called a

Business to Business market, or B2B market. Examples: i) Wheat is bought by a baker from the

farmer (B2B). He transforms it into bread. ii) Copper wires are bought by an electronic company

which uses these in the manufacture of ceiling fans.

3.4 Alterative Levels/Types available for Segmentation :


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Segmentation can take place at various levels; Depending upon the company policy and the segmentattractiveness in terms of growth and profitability, a marketer could choose out of a variety of options. Thevarious levels/types include single segmentation, differentiated segment marketing, concentrated marketingand micro marketing. Each of this is explained as follows:

a) Single Segmentation: This form comprises one segment only. The marketer caters to the entiremarket with a single offering and the same marketing mix. This is similar to mass marketing or

undifferentiated marketing. All the consumers are treated the same. Examples: products like salt, sugar andstaples.

b) Differentiated segment marketing: This implies selection oftwo or more segments.Themarketer approaches these segments with differentiated offerings and corresponding marketing mixesand programs. Examples: Shampoos and other toiletries.

c) Concentrated marketing: The marketer caters to just one segment although the product could appealto others. This is generally a sub-group within the whole segment. The process includes targeting a smallsegment with a specialized mix meant only for that segment. This form of segmentation is alsocalled focusedor niche marketing. Examples: Sports channels on TV, Religious channels on TV etc.

d) Micro-marketing: This could assume two forms, viz., local marketing and individual marketing.- Local marketing: The marketer caters to local customer groups. Example: movies dubbed in vernaculars orlocal languages.

- Individual marketing: The marketers caters to the customer individualand personalizes the marketing mix.So the segment comprises one individual and it is individual to individual marketing. This is alsocalled customization. Example: Holiday packages designed by travel agents.

Table 1: Alternatives available for Segmentation

No. Type Meaning Examples

1 Segments

(Differentiatedsegments)

Large groups ofpeople similar toeach other oncertain criterion

- Tata group of hotels:- Taj Hotels vs. Ginger(Premium vs. Economy)j

2 Concentrated

marketing

(Niches)

Very narrow in

nature

- Astha, Sanskar TV channels cater to a

group of people interested in religionand spirituality;

- Fashion designers (Manish Malhotra,Rohit Bal) cater to a very smallsegment.

3 Micro-marketing

(Individual)

One to onemarketing:Customization

-Dell, Amazon customize their offeringsas per individual desires.

-Fashion designers (Manish Malhotra,Rohit Bal) cater to celebrities.

3.5 Basis for Segmentation :

a) Segmentation of Consumer Markets: The bases for segmentation of consumer marketsmay be divided into two broad categories of variables, demographic variables and behavioralvariables.

i) Demographic variables: these comprise: demographics, geography and psychographics.

ii) Behavioral variables: these comprise the day to day consumption pattern and behavioraldimensions like consumer awareness and knowledge, feelings and disposition, purchase andusage etc. of a product and service offering.


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Each of these are described and examples illustrated in the following tables.

Table 2: Demographic Variables

Variable Meaning

Demo- graphicIdentifying segments on the basis of any of the following bases

Bases Examples

i) age -Infants, Kids 3-5, 8-12 Teenagers, Adults(Example: Clothes, Toys)

ii) gender -Men, Women(Example: Clothes, Cosmetics)

iii) income - >50000, 50000-1 lac, 1-2 lac, 2-5lac,


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iv) City/Metrodensity ofpopulation

Urban Semi-urban, Rural(Example: Hospitals in Cities, Polyclinics anddispensaries in Villages:Apollo Hospital and

Pharmacies

v) Climate Hot, Cold, Humid, Rainy

(Example: Clothes: Woolen garments)vi) Terrain Hilly, Plain, Rocky

(Example: Two wheelers and Motorbikes)

Table 4: Psychographic Variables

Variable Meaning

Psycho-

graphicsIdentifying segments on the basis of any of the following bases

Bases Example

i) Needs andmotivation

Benefits sought:Basic functional, Safety/security, Affection/Social

need,Esteem/Status/ Sense of Selfworth(Example: Flats versus Posh villas and Penthouses)

ii)

Perception

Low risk, Moderate risk, High risk

(Example: Innovators vs. laggards)

Price oriented, Quality & value oriented

(Example: Videocon TV vs. Sony)

Aware or Unaware.

iii)

Personality

Innovative (High/Low);

(Example: Innovators vs late adopters vs laggards)

Dogmatic (High/Low); Need for Cognition (High/Low)

Extrovert/Introvert (Inner-directed, Other-directed)

Ethnocentrism (High/Low);(Example: Loyal to Made in India products)

Novelty seeker (Exploratory, Vicarious, Deals andBargains)

(Example: people who buy from Sales and Discounts)

iv) Attitude Positive, Negative;

Loyal to one or many products

v)

Involvement

Highly involved customers, Low involved customers;

Brand loyalists, Information seekers, Routine brand

buyers and, Brand switchers

vi) Lifestyle: AIO


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Activities:

Interests:

Opinions:

Work, Hobbies, Vacation, Shopping, Entertainment,Sports (Activity: A)

Job, Home, Family, Fashion, Food and culinary,

Recreation (Interests: I)

Social, Political, Economy and business, Environment(Opinion: O)

Examples: TV Channels (Star News, Star TV, StarSports, Star Movies)

Magazines (India Today Group: India Today, Business

Today, Mens Health, Woman, Cosmopolitan)

Table 5: Behavioral Variables

Variable MeaningBeha-

vioralIdentifying segments on the basis of any of the following bases:

Bases Example

i) Consumerawareness

Unaware, Aware, Informed, Interested,Desiring/enthusiastic

ii) Benefits

sought/uses/

needs/

motivation

Basic functional, Safety/security, Affection/Social

need, Esteem/Status/ Sense of Self worth

(Example: Cakes and pastries: Normal ones forsnackers and Sugar free, for calorie conscious and

diabetics;

Toothpaste: Forhans for Gums; Peposodent: Fighttooth decay; Close up: Prevent bad breath)

iii) Buyingoccasions/

Purchase

situations

Morning, Night(Example: now 24 hours)

Weekday, Weekend

(Example: Movies released on weekends)

Occasions, Seasons

(Examples: Greeting Cards: all occasions)

Leisure, Urgency(Example: Mail post versus Courier Service)

iv)

Buying/usage

frequency

Routine, Frequent, Seldom OR Routine, Emergency

(Example: Calcium Tablet versus Band Aid )

v) Buying

readiness

Unaware, Aware, Informed, Interested, Desiring,

Intending, Demanding, Buying


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stage

vi) Loyalty

status

Non-users, First time user, Regulars, Ex-users OR

Hard-core loyals, Split loyals, Shifting loyals,

Switchers

vii) Usage rate Heavy half; Light half OR Heavy, Medium, Light,

Non-users(Example: Joint family and nuclear family:

Consumption of cooking oil)

viii) Shopping

orientation

Economic, Convenience and leisure, Status

(Example: Economic: Deal prone and bargains: Small

shops;

Convenience and leisure: Departmental stores

Status: Malls and BrandsHybrid Segmentation :

While individual bases for segmentation exist, the market is generally segmented on a combinationof bases.Commonly used bases are combination of (i) psychographic/demographic (ii)

geodemographics and, (iii) VALS: Values and Lifestyles.

b)Segmentation of Business Markets: Business markets are large in nature, with fewer, yet

larger buyers. Purchases are bulky and often high valued. The busying process is complex and

highly professional through proposals, quotations, tenders, contracts, etc. Buying is influenced by a

committee of people referred to as a buying center, which comprises people from various divisions

and departments. The people comprising the buying center have diverse backgrounds which result

in varied perspectives and orientation towards buying. This is because With characteristics that

differentiate a business market from consumer markets, it is logical and deductive that the bases

for segmentation of business markets are different from that of consumer markets. Business

markets could be segmented on basis of demography, geography, purchase approach and

orientation, purchasing orientation, and, personal variables. These are discussed below:

i) Demographic variables: This implies the

-type of industry;

-the size of the company;

-technology used etc.

ii) Geographic variables: Location.

iii) Purchasing approach and orientation:This basis includes

-consumption and usage rate (i.e is the order size small or bulky);

-buying situations (straight rebuy, modified rebuy, new-task);

-loyalty and partnerships;

-purchasing orientation (i.e. buying/transaction/price orientation; or consultative/solution

orientation; or, procurement/quality orientation; or, strategic value orientation);


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-purchasing criteria: Price, Quality, Service

iv) Purchasing methods: The basis includes

-the decision unit and/or the buying center influences: Power balance and equation of various

departments in the buying center: i.e. production dominated or R&D dominated or purchasedominated?

- the purchasing function: centralized or decentralized;

- transactional exchanges (short term) or collaborative exchanges (long term and strategic)

- purchasing policies: leasing, contracting etc.

v) Personal variables: The various bases include

-buyer-seller similarity in terms of vision, objectives, strategies, values, attitudes etc.

-loyalty

3.6 Targeting :

After identification of segments, the marketer has to decide upon the segment (s), he would cater to anddirects his market efforts. The target segment is the group(s) of customers that the marketer decides toserve. It comprises buyers who share common needs, wants and preferences, and the company decides toserve them. The marketer would choose a segment that is viable; and, that he can cater to effectively andefficiently.

3.6.1 Viability of the Segment: A segment is regarded to be viable if it is:

measurable, substantial, accessible, differentiable and, actionable.

- Measurable: The segment should be measurable in term of the total size, purchasing power and,demographic, geographic and psychographic characteristics.

- Substantial: It should be of sufficient size so as to generate profits; it should also have a potential forgrowth.

- Accessible: It should be reachable and easy to enter or penetrate. The marketers must be able to deliverthe product or service offering and must be able to operate therein.

- Differentiable: One segment should be easily differentiated from another. Clear differences in consumerwants, needs and preferences for the product must exist across segments, and the people therein shouldreact differently from other segments towards a marketing mix program. There should exist a homogeneitywithin the segment and, a heterogeneity with other segments.

- Actionable: It should be possible to design a marketing program directed towards that segment and serveit effectively and efficiently. The marketer should be able to react to the need, wants and preferences of thesegment with the appropriate marketing mix.

3.6.2 Evaluation and selection of Target Markets: While evaluation and selection of the MarketSegments, two issues need to be addressed; one, the overall attractiveness of the segment; and two,thecompanys objectives and constraints.

i) What is the overall attractiveness of the segment?

-This is explained in terms of segment size, sales, growth rate and overall profitability. Structural


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attractiveness can be elaborated upon to include details on existing competition, entry/exit barriers forcompetition, availability of substitute products, and the backward power balance equilibrium betweensupplier and the buyer (i.e. marketer).

ii) What are the companys objectives and constraints (physical, financial and time)?

- The marketer needs to address the core competencies and competitive advantage to grow in that

segment; this would include the companys hold over resources, skills and competencies and overallstrengths in terms of physical and financial resources as well as time constraints.

3.6.3 Patterns of Target Market Selection: Broadly speaking there could be 5 different patterns oftarget market selection, viz., single-segment concentration, selective specialization or multi-segment,product specialization, market specialization and full market coverage.

a) Single-segment concentration: The marketer decides to cater to a single segment only. Also referredto as concentrated marketing, the marketer understands the needs and wants of the segment and focuseson one segment only. Example: Rolex watches.

3.7 Positioning :

As a part of STP, after deciding upon the targets to cater to, the marketer needs to position the product orservice offering. Positioning is the act of designing the product and service offering of a company in theminds of the customers so that

(i) the consumer can relate the product and service offering to a need or want;

(ii) the marketer can create a distinctive image of himself.

(iii) the consumer can perceive a brands characteristics relative to those ofcompetitive offerings.


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It is process of creating an image of the product and service offering in the minds of the consumer, trying todifferentiate itself from the competitor.

OTHER DEFINITIONS:

- designing an offer so that it occupies a distinct and valued place in the minds of the target customer. Kotler.

Positioning is not what you do to your product, but what you do to the mind of your prospectivecustomer.-Al Ries and Jack Trout.

A product or service offering is positioned on the basis of the attributes or features that theproduct or service offering possesses; Some examples are as follows:

i) Johnson and Johnson: Baby care

ii) Dove: Skin care; Soap with Moisturizer

iii) Amul: the Taste of India; Cooperative Movement

iv) Tata tea: Jaago re: Public Awareness

The marketer should choose the positioning parameters with care; they should be important (andof value to the customers); distinctive, superior, affordable and viable.

3.7.1 ISSUES to address:

a) Choosing what to position: The criteria to promote could relate to products, services, the4Ps, company image and reputation, and the people. As a strategy, positioning can be based on:

i) perceived benefits, characteristics or image.

ii) competition

iii) a combination of both (i) and (ii).

The product positioning may be done on specific bases/features/characteristics:

i) Product Attributes: Example: LG Golden Eye: Auto contrast and Brightness control.

ii) Benefits, Problem Solutions and Basic Needs: Examples: Pepsodent (decay

prevention), Close-Up (Fresh breath).

iii) Quality: Example: Sony picture quality and sound

iv) Product User: Examples: Parker (Amitabh Bachchan), Reid and Taylor (Executive/

Lifestyle), Johnson and Johnson (Babies)

v) Product Usage: Example: Burnol

vi) Specific use: Example: Greeting cards for every occasion

vii) Services: Example: Maruti Service Station all over India

viii) Price: Example: Subhikha: Isse sasta aur nahi???

ix) Distribution: Example: Dell (direct selling: customization)


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x) Against other Products (Competitors): Example: Savlon vs Dettol; Savlon jalta nahin.

b) How many criteria to use for positioning:The marketer has the option to use one or few of thecriteria to position himself. When he uses just one criterion, he makes use of what is called a Unique SellingProposition. He may also decide to position on more than one criterion and may position on a few features

or attributes or benefits.

c) What qualities should the criteria forpositioning possess?The criteria for positioning should be:- Important: value in the eyes of the segment;eg. Sony color TVs: known for picture quality and sound effect.

- Distinctive:unique.eg., Savlon antiseptic does not sting or burn when applied.

- Superior:better than other available brands;eg., Cooling time for Refrigerators; Helps make Ice quicker: Videocon, LG

- Communicable:the criteria should be easily communicable to the segment in a laymans language (lessof technical descriptions and jargons).

- Preemptive: The criteria should be such that it is not easy to copy or imitate easily.eg. Auto contrast and colour adjustment by LG Golden Eye.

-Affordable: The criteria should be valuable but should not be so high priced that it is out of reach for thesegment; The customer must be able and willing to pay for the feature.

- Profitable: The delivery of such value should not be at the cost of earning losses for the company. Itshould be valuable both from a customers perspective as well as from the companys perspective.

3.7.2 Positioning Strategies :

A marketer could choose amongst two kinds of positioning strategies; he could either opt for positioning on

i) Points of parity(POP) or ii) Points of difference (POD). Points of parity could be further sub-dividedinto Category point-of-parity associations, and Competitive point-of-parity associations.

i) Points of parity (POP): Here the product in question is not unique in nature; it is shared by othercompetitive brands; The product or service offering is similar to that of the competitor.

Example: Complan, Milo and Bournvita: Positionedas: All help children to grow.POP has two basic forms, viz., (a) Category point-of-parity b) Competitive point-of-parity.

a) Category point-of-parity: The product or service offering should possess these qualities in order to qualifybeing a part of the product or service category. These are the bare minimum that all the brands shouldpossess in order to qualify as a part of the product or service industry. Example: All mouthwashes containantimicrobials; they are also minty.

b)Competitive point-of-parity: These are developed to fight against and balance out with the competitorspoints-of-difference.

Example: Listerine vs Scope: Listerine claims to leave you fresh after a rinse and prevents bad breath;Scope claims that it does the same but in a milder way.

Other examples:Savlon versus Dettol: Savlon does not sting when applied on wound

ii) Points of difference (POD): Here the product or service offering is unique; The positioning is based on


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the USP (Unique Selling Proposition). The uniqueness should be something that the customers value, andcan relate to favorably. This USP leads to differentiation and can thus, develop competitive brandpositioning. The product and service offering can be differentiated on the basis of product, service, people,

image and public relations etc.

Example: Auto color and contrast setting: LG Golden Eye.

4.1 Decision Making :

A decision is defined as choosing an option of the few/many available. Decision making is the processofchoosing between two or more alternatives; It is the selection of an alternative out of the few/many

choices that are available.

Decision making is:

a) a goal oriented process.

b) it is a problem solving process: helps take advantage of opportunities and fight threats.

Decisions Making can be oftwo types, a) Programmed decision making, and, b) Non-programmed decisionmaking.

a) Programmed decision making: This is applied for problems that are routine and regular. Suchproblems are simple to deal with and guidelines to sort out such problems exist. Such decisions are madewithout much thought. With respect to marketing, these are decisions related to day to day purchases orconvenience and shopping goods; these are generally low involvement purchases. They may also behabitual in nature, and brand loyalty could easily develop. Examples: Purchases made for staples,toiletaries etc.

b) Non-programmed decision making: This is applied for problems that arise suddenly and are uniqueor novel. As the problem is sudden and novel, it is complex and requires a lot of information gathering,

deliberation and thought. With respect to marketing, these are decisions related to infrequent purchases orspecialty goods and emergency goods; these are high involvement purchases. Examples: Purchases madefor laptops, real estate etc.

4.2 Consumer Decision Making :

A consumer purchase is actually a response to a problem. Consumer Decision Making pertains tomakingdecisions regarding product and service offerings. It may be defined as a process of gathering andprocessing information, evaluating it and selecting the best possible option so as to solve a problem or make

a buying choice.

Consumer Decision Making pertains to the following decisions:

a) What to buy: Products and Services (and the Brands?)

b) How much to buy: Quantity

c) Where to buy: Place

d) When to buy: Time

e) How to buy: Payment terms.


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All purchase decisions are not similar. The effort put into each decision making is different.

4.3 Levels of Decision Making :

While decision making is defined as the selection of an alternative to solve a problem, the time and effortrequired to complete the process varies across buying situations. We may define three kinds problem solving

spread over a continuum; these are referred to as the levels of consumer decision making; (i) Extensiveproblem solving (EPS) (ii) Limited problem solving (LPS) (iii) Routinized problem solving (RPS) or routinizedresponse behavior. These are explained as follows:

a) Extensive problem solving (EPS): In EPS, the consumer is unfamiliar with the product/servicecategory; he is not informed of the product or service offering, and thus, the situation requires extensiveinformation search and evaluation.

The consumer is not aware:

- about the various decision criteria used to evaluate the product or service offering.

- of the various brands that are available and from which to evaluate.

The result is that the purchase process involves significant effort on part of the consumer. He has to gatherknowledge about (i) the decision criteria;(ii) the brands available; and (iii) make a choice amongst the brands.

The types of products and / situations where we generally have EPS:

1. These goods are ones of high involvement; they are expensive; they are infrequently bought; thereis considerable amount of risk involved.

2. These are generally first time purchases

Examples: Jewellery, electronic goods, Real estate and property etc.

b) Limited problem solving (LPS): The consumer is familiar of the product or service offering; but he is

unaware of the various brands. The case is one where the buyer is familiar wit the product category butunfamiliar with the brands.

The consumer:

- is aware of some brands and also of the various criteria used to evaluate the product or service offering.

- is unaware of the new brands that have been introduced.

- has not evaluatedthe brands amongst the awareness set and has not established preferences amongst thegroup of brands.

The result is that the purchase process is more of a recurring purchase and it involves only a moderate

effort on part of the consumer. He has to gather knowledge to add/modify the existing knowledge that hehas in his memory. Thereafter he has to make a decision.

The types of products and / situations where we generally have LPS:

1. These goods are ones of low involvement; they are generally moderately priced; they are frequentlybought; there is lesser amount of risk involved.

2. These are generally recurring purchases.

Exceptions:


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They may also be cases

CONSUMER BEHAVIOUR BOOK

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