The slides are in the following order

1
The slides are in the following
order 1. Consumer Behavior 2. Industrial
Buying Behavior 3. Marketing Strategies
2
Consumer Buying Behavior
3
Analyzing Consumer Markets and Buying Behavior

• Interest in examining aggregate market response
  to firm specific decision variables
• understanding
• explaining
• predicting
• Method
• analyze individual level behavior
• analyse aggregate market behavior

4
Analysing Consumer Markets and Buying Behavior

• Translation of individual level behavioral
  analysis to aggregate level market response is
  faced with the issues of aggregation bias and
  consumer heterogeneity
• A prime characteristic of consumers is their
  variation in preferences, tastes, likes,
  dislikes, purchase behavior patterns. Meaning
  thereby that markets are heterogenous and
  consumers exhibit heterogeneity
• Object of consumer behavior analysis - buyer or
  user ?
• answer - both with emphasis on decision maker

5
Behavioral processes of consumersAn integrative
conceptual framework
Society and Market Environment
Accultured individuality
Communication sensitivity
() Behavioral Process of
Consumers
Rational and Economic Decision making
6
Behavioral Processes of Consumers- Communication
Sensitivity
Within Market
Within Market
Word of Mouth
Diffusion Processes
Communication sensitivity
Firm To Market
Firm to Market

• Consumer Behaviour Concepts
• One way/Two way.

Communication
7
Behavioral Processes of Consumers- Communication
sensitivity

• Consumer Behaviour Concepts Endogenous Factors
• Selectivity
• Involvement
• Persuasion

8
Selectivity Selective attention Marketers have
to work hard to get consumers notice
consumers are more likely to notice stimuli of
current need, stimuli they anticipate, stimuli
whose deviations are large e.g. 25 off 100
rather than 5 Selective distortion tendency
to twist information into personal meanings
that will fit our preconceptions e.g. A
customer of LG may interpret an advertisement
saying that they are No. 1 company in
Microelectronics to be No.1 company in all of
consumer durables Selective Retention
consumers likely to remember good points of
products they like and forget good points of
competing products e.g. a user may remember
that Pears soap is the only soap good for dry
skin though in the market Dove and Mysore
Sandal Gold is also good for dry skin
9
Involvement Krugman proposed the concept of
level of involvement influencing buyer
behavior. Products purchased are either low
involvement Or high involvement. Assael has
classified types of buying behavior based on
involvement See slide next Persuasion Low
Involvement products use the peripheral route to
persuasion e.g. celebrity endorsements High
Involvement products use both the central route
(cognitive reason) to persuasion and the
peripheral route to persuasion.
10
Assaels Classification of types of Buying
Behaviour
High Involvement
Low Involvement
Significant Difference Between Brands
Variety-Seeking Buying Behaviour
Complex Buying Behaviour
Dissonance Reducing Behaviour
Habitual Buying Behaviour
Few Difference Between Brands
11
Assaels Classification of types of Buying
Behaviour

• Complex First develop beliefs about product.
  Then develop attitudes and then make a choice
• Dissonance First Act, then develop beliefs. Then
  end up with attitudes
• Habitual salt- out of habit, beliefs from
  passive learning-choice- evaluation/attitudes
• Variety seeking- lot of brand switching-
  chocolates (Low involvement)-Beliefs-Choice-Attitu
  des.

12
Behavioral Processes of Consumers- Accultured
Individuality

• Consumer Behaviour
• Concepts
• Personality and Self concept
• Life style
• Motivation

Culture Sub Culture Social Class
Accultured Individuality
Personal - Age and Life cycle - Occupation
- Economic Circumstances

• Social
• -Reference groups
• Family
• Roles and Status

13

• Independent Factors
• Culture
• a) Cultural factors exert the deepest and
  broadest influence on
• buyer behavior. Culture is fundamental
  determinant of a persons wants
• and behavior
• b) Subculture countries, regions, races,
  religions
• c) Social class
• Social factors
• a. Reference groups primary (family,
  coworkers), secondary
• (religious groups)
• b. Reference groups aspirational groups and
  disassociative groups
• c. Three influences of reference groups
• 1. individual exposed to new behaviors,
  lifestyle
• 2. create pressures for conformity (affects
  choice thereby)
• 3. influence attitudes and self concept

14

• Social Factors
• - Family
• - Family of orientation influences beliefs,
  values, attitudes
• - Family of procreation influences
  day-to-day living and
• purchases
• 3. People buy products that communicate their
  role and status in society

15
Endogenous Factors Accultured Individuality
Lifestyle A lifestyle is a persons pattern of
living in the world as expressed in activities,
interests, opinions. Lifestyle portrays the
whole person. Marketers search for
relationships between their products and
lifestyle groups. If it is found that most
computer buyers for home purpose are achievement
oriented, then the marketer may aim his brand at
achiever lifestyle Psychographics is a way of
using psychology and demographics for
understanding consumers. VALS of SRI consulting
is a useful framework
16
Accultured Individuality Endogenous factors
Personality and Self Concept Personality is a
set of distinguishing human psychological traits
that lead to Consistent responses to
environmental stimuli. E.g. Self Confidence,
dominance Autonomy, sociability,
defensiveness Brand Personality is a specific
mix of human traits attributable to a particular
brand Consumers choose brands which have a
personality similar to that of their own. Self
Concept - Actual self concept how he/she
views him/herself - ideal self-concept how
she/he likes to view her/himself - others self
concept how he/she thinks others see him/her A
marketer has to judge the form of self concept
from the above to market his brand
17
Endogenous Factors Accultured
Individuality Motivation A person has many
needs (biogenic, psychogenic). A need becomes a
motive When it is aroused to a sufficient level
of intensity. In other words a motive is a need
that is sufficiently pressing to drive the person
to act.
Freuds Theory
Motivation Theories
Maslows Theory
Herzberg Theory
Herzb
18
Freuds Theory Consumers behavior is shaped
largely by unconscious psychological forces. A
technique called LADDERING is used to trace the
persons motivation From the stated ones to the
terminal ones. The marketer can then decide
to Target his appeal to the most appropriate
level. Motivation researchers also use
projective techniques such as word
association Sentence completion, picture
interpretation etc.
19
Maslows Theory
Self Actualization Needs
Esteem Needs
Social
Social Needs
Safety Needs
Physiological Needs
This helps how various products fit into lives,
goals and plans of consumers. Consumers fill
their needs starting from lowest to highest. So
it is not of much use to target a high end need
product to a person who is still satisfying his
lower end need.
20
Endogenous Factors Accultured Individuality
Motivation Herzberg Theory Factors for buyer
motivation are of two types hygiene factors
(or Dissatisfier removers) and motivators
(satisfiers). It is not enough if hygiene Factors
are present. Motivators must be present for a
purchase.
21
Behavioral Processes of Consumers- Beliefs and
Attitudes
Communication sensitivity
Accultured Individuality
Beliefs/Values
Experience usage In Decision making For
consumption
Society Mkt. Environment
Attitudes
Inputs from rational and Economic Decision Making
22
Beliefs / Values and Attitudes A Belief is a
descriptive thought that a person holds about
something. On Blind Test Diet Coke and Diet Pepsi
are equally preferred. But on revealing brand
Names Diet Coke was preferred by 65 of
consumers and Diet Pepsi by 35. This is an
illustration of role of beliefs. An attitude is
a persons enduring favorable or unfavorable
evaluations, emotional feelings and action
tendencies toward some object or idea. A
marketer is well advised to fit his product into
existing attitudes rather than try To change
attitudes, which take a long time. Sometimes it
pays to change Attitudes 1. Buying New in
exchange for old pays to change attitude as
market is going to be large 2. These days
food brands should have a diet variety as there
is health consciousness in the market pays
to fit product
23
Behavioral Processes of Consumers-Rational and
Economic Decision making

• Decision making process
• - Need Recognition
• Information Search
• Evaluation (perception)
• Purchase (Preference)
• Post-Purchase

24
Behavioral Processes of Consumers-Rational and
Economic Decision Making
Consumer Behaviour Processes/Concepts

• Post Purchase
• Feelings
• Cognitive Dissonance
• Contrast Theory

Individual constraints Budget constraints
Situational factors
Rational and Economic Decision making
Beliefs and values
Attitudes
Market environment Store Environment Firm
decision variable Competitor decision variable
25
Behavioral Outcomes of Rational and Economic
Decision making Process
Evoked set Consideration set
Purchase intention Purchase preference Purchase
Behaviour
Rational and Economic Decision making
Purchase behaviour decisions What to Buy (Basket
of goods decision) Where to Buy (Store
choice) Which brands to buy (Brand choice) How
much to Buy (purchase quantity) How often to Buy
(Purchase timing)
Post purchase feelings
26
Industrial Buying Behavior
27
Issues in Industrial Markets
28
Institutional markets
Large organizational markets
Small business market
Organizational markets
Government markets
29

• 1. Fewer, Larger Buyers Tire manufacturers
  have OEM contracts with few
• automobile manufacturers.
• Close supplier customer relationship as there
  are fewer customers, suppliers
• tend to develop a closer customer relationship.
  WIPROs close relationship
• with IIMB, for the sale of computers
• Professional purchasing use of buying
  instruments such as quotations,
• proposals and purchasing contracts buyers
  guided by firms purchasing
• policies, constraints and requirements
• Several buying influences the buying committee
  may consist of technical
• experts, senior management, gatekeepers from
  consultancies etc. Thus the seller
• should send trained sales people.
• Multiple sales calls sales cycles extends from
  few days to few years thus seller
• needs to make multiple sales calls to win
  orders.

30

• Derived demand The demand for industrial goods
  is driven by the
• demand for consumer goods. The boom in the
  construction industry is
• driving the demand for cement and steel.
• Inelastic demand Demand for many business goods
  and services is inelastic
• - that is not much affected by price changes.
  For example the demand for
• batteries is not going to change much with price
  as the demand of batteries
• is driven by the demand for automobiles.
• Fluctuating demand A small increase in the
  consumer demand can give rise
• to a significantly large increase in industrial
  demand this effect is called the
• acceleration effect. Similarly a 10 fall in
  consumer demand can cause a
• significant decrease of the industrial demand.
• Geographically concentrated buyers there is
  clustering to rationalize
• production software in Bangalore hosiery in
  Coimbatore auto-ancillaries
• in Pune and Nasik etc.
• 10. Direct Purchasing Firms buy direct mostly
  rather than thru intermediaries

31
Key Elements of Industrial Buying Behavior
32
Straight Re-buy routine order consumables,
office supplies outside Suppliers tend to get in
on dissatisfac tion of existing supplier
Buy Situations
Modified Rebuy Modify specs, Prices, delivery
requirements. In- Suppliers have to protect an
account Out-suppliers try for an opportunity
e.g. computers
Buying Process
New Task Buy for first time greater the cost /
risk longer it takes to decide Pass through
stages awareness, interest, evaluation, trial,
adoption. Includes setting specs, price limits,
delivery terms, order qty, acceptable Suppliers
and selected supplier(s). Because of complex
selling use of Dedicated missionary sales force.
Systems Buying and Selling also called turnkey
solutions key industrial Marketing strategy in
bidding large projects dams, steel factories
etc.
33
Buying Centre - Includes all members of the
organization who play any of seven roles in the
purchase decision process 1. Initiators those
who put up the request 2. Users - Those who
use the product many times the user is the
initiator 3. Influencers help define specs,
provide info for evaluating alternatives,
technical people are good influencers 4. Decider
s those who decide on requirements.
5. Approvers those who authorize deciders
and buyers 6. Buyers members authorized to
select supplier and decide terms 7. Gatekeepers
Members who are info conduits to
other members of buy center e.g.
receptionists , agents
34
Characteristics of BUY CENTER

• Several individuals can occupy a given role
  (e.g. many users / influencers) and
• one individual can occupy multiple roles.
• The buying center may include people outside
  the organization such as
• government officials, consultants, technical
  advisors and other members of the
• marketing channel.
• Different members of the buy centre have
  different influences, for e.g. the
• engineering department may be concerned with
  actual performance of the
• product, whereas production may be more
  interested in ease of use and reliability
• of supply.
• Members of buy centre different personal
  motivations, perceptions and
• Preferences which in turn are dependent on - age,
  income, education, job position,
• personality, attitudes towards risk and culture

35
Characteristics of BUY CENTER .. Cont.
Small sellers are advised to concentrate on key
buying influencers. Large sellers Go for
multilevel in-depth selling Sellers are advised
to periodically question or revise their
assumptions about the Buy center to adapt to
organizational changes
36

• Purchasing / Buying Orientations
• Buying Orientation Buy at lowest price given a
  quality level . Use two
• Techniques (a) commoditization regard the
  product is only a commodity and
• care only about price (b) multisourcing to bring
  in competition among vendors
• Procurement Orientation look for collaborative
  relationships and seek
• savings through better management such as
  material requirements
• planning, just-in-time management and even
  product design.
• Supply Chain Management Orientation purchasing
  is a strategic value
• adding operation and purchase department betters
  its role as a part of the value
• chain from raw materials to finished goods

37
BUYGRID FRAMEWORK
BUYCLASSES
New Modified
Straight Task Rebuy Rebuy
Yes Maybe No Yes Maybe
No Yes Yes Yes Yes
Maybe No Yes Maybe
No Yes Maybe No Yes
Maybe No Yes Yes
Yes

1. Problem recognition
2. General need description
3. Product specification
4. Supplier Search
5. Proposal Solicitation
6. Supplier selection
7. Order-routine specification
8. Performance review

BUY PHASES
38
Marketer stimulates problem recognition by Direct
mail, telemarketing, calling on prospects
Internal stimuli new product development for
which parts are needed, breakdown of equipment,
existing suppliers unsatisfactory
Problem recognition
Buyer attends a trade show Purchase Manager
senses an opportunity to get lower prices or
better quality
39
Standard items go as per internal records or as
per specs laid out in ISI documents
Complex items collaborate with
engineers, users else sit with marketers
application engineers who do consultative selling
and work out specs and likely price
General need description and product specification
Certain buying organizations attach a PVA
or product value analysis team to the project who
will conduct extensive analysis to arrive at
specs that will lead to minimum cost
40

• Identify suppliers
• - trade directories, hunt online catalogs for
  suppliers
• - trade shows
• - trade advertisements
• - Internet search Websites have two types of
  e-hubs
• Vertical hubs centered on industries
• -plastics, steel, paper
• Functional hubs centered on logistics
• media buying, advertising
• Direct extranet links to major suppliers
• (WalMart PG)
• Buying alliances to get best price.
• Coca-Cola, Sara Lee, Kraft, PepsiCo, Gillette
• PG, have joined to form alliance Transora
• Company buying sites Firms like GE have their
• own site where it places Requests for Proposal,
• negotiate terms, place orders

Supplier Search
41
Invite suppliers to make detailed proposals Set
up quality standards if any e.g ISO 9000 or ISI
etc. Large technology systems need a
detailed Techno-Commercial proposal. The
technical quote will be cleared first and after
that only qualified technical bidders will be
called for commercial negotiation Buyers can
invite suppliers to make presentations.
Proposal Solicitation
42
A supplier rating list is made by some
companies based on relative importance given to a
select set of attributes. For routine order
products the factors are price, supplier
reputation, delivery . For procedural problem
products such as copiers the important attributes
are technical service, supplier flexibility,
reliability and price For political problem
products such as choice of a set of computers
the factors are price, reputation, reliability
and flexibility One way to encounter price
factor from supplier side is to talk of total
cost of product or life cycle cost.
Supplier Selection
43
Buyers negotiate the final order with the
selected suppliers, and details the tech.
specs., the quantity the delivery time, return
policies, warranties etc. For maintenance and
repair items , firms are moving towards a
blanket contract that establishes a long
run relation. Such contracts are called stockless
purchase plans as the stock is held by the
supplier Long run contracts are also agreed upon
in case of shortage raw materials / inputs so
that there is a steady flow of material. In many
cases the supplier locates his factory near the
buyer for bringing down inventory and transport
costs. Vendor managed inventory is when the
responsibility rests with the vendor for
maintaining inventory Important parameters to
see are OT deliver on time IF in full, NE
No error
Order routine specification
44

• Three methods of review
• Ask for evaluation from buyers
• Buyer rates supplier on weighted score
• method
• Based on drawbacks of performance the
• buyer may come up with adjusted cost
• of purchase including price
• Managers are rewarded for good buying
• performance

Performance Review
45

• Institutional and Government Markets
• Institutional Markets are schools, colleges,
  universities, hospitals,
• nursing homes.
• Institutions normally ask for lowest price given
  a minimum quality
• In government organizations the normal process
  is bidding with the
• order going to the lowest bidder(s)
• Negotiated contracts are applicable where the
  project is complex and
• risky.
• Governments tend to favor domestic suppliers
• Government decisions are subject to review, so
  there is lot of paperwork
• in contracting
• Director General of Supplies and Disposals is the
  central purchasing unit of
• Indian Government.

46
Marketing Strategies
47
Strategy

• the art or skill of using stratagems in business,
  politics, courtship or like
• (American Heritage Dictionary of the English
  Language, 1973, p 1273)
• a plan of action resulting from the practice of
  this art or science
• the set of strategic decisions for a particular
  marketing situation
• guidelines for decision making in a contingent
  framework
• apportionment of relative emphasis among the
  different elements of
• the strategic decision set

48
Marketing Strategy
Business Strategy
Technology Strategy
Sourcing Strategy
Other functional Strategies
49
Marketing
Conceptualization Design Build
Up Execution Monitor
Identify and satisfy customer needs and
wants Through exchange processes
simultaneously Fulfilling organizational
objectives
Marketing Programs
of
to
Strategy
Long term implications Huge Investments Continge
ncy Build Up
50
Market Orientation Customer
Orientation Competitor Focus Inter-Organizat
ion Orientation
51
Marketing Strategy
Integration of the elements of marketing into a
marketing mix that includes Market entry /
timing Market selection encompassing
segmentation Differentiation and
Positioning Product planning Pricing Distributi
on systems Marketing communications Functionalit
ies Market exit
Evolution of marketing strategy as the market
grows and matures - Introduction - market
development Rapid growth - expansion of primary
demand, product proliferation Levelling - off -
maximize market share as total demand has
levelled Market maturity - maintain mkt share,
customer service / satisfaction
52
Marketing Strategy Formulation - STP -
Decisions in the Marketing Consideration set as
outlined in the previous slide - Communication
of the Value Value Proposition Positioning S
logan Writing Branding
Marketing Strategy
Marketing Strategy Implementation
53
Intensive Growth Opportunities
Growth Opportunities
Integrative Growth Opportunities
Diversification Growth Opportunities
54
Intensive Growth Strategies Ansoffs
Product-Market Expansion Grid
Current Products New Products
Current Markets New Markets
Market Product Development Strategy Penetration
Strategy Market Development Strategy
(Diversification Strategy)
55
Identification of Growth Opportunities cont
Integrative growth opportunities backward
(acquiring suppliers) , forward (acquiring
channel members) and horizontal integration
(acquiring competitors)
Diversification growth opportunities concentric
technological or marketing synergies to a
new group of consumers e.g. audio cassettes
from a firm making computer tape Conglomerate
new opportunities which have no relation to
current technologies, products or
markets Reliance into Telecom Horizontal
diversification Appeal to current
customers with new technologies e.g. Music
company produces CD / Cassette racks
56
The strategic square of marketing strategy
Market Leader
Market Nichers
Market Followers
Market Challengers
57
Expand the total Market
Market Leaders
Defend Market Share
Increase Market share if that is profitable
58
Penetrate those who might use it but do not
e.g. mobile usage among housewives when they go
shopping
Those who have never used it toothpowder among
hard rural
New users
In another geographical market use of paan
in western markets
Use product development email for computer
New uses
Expand total market
Increase quantity of consumption e.g. Vicks
originally On nose, later on chest and back
More usage
Increase frequency of consumption e.g. Use Pepsi
/ Coke as light user to medium and heavy user
59
Defend Market Share
Flanking Defense
Competitor or potential competitor
Con- Frontation Strategy Proactive Reactive
Fortress or Position Defense
strategy Leader
Contraction or Strategic withdrawal
Pre emptive defense
Counter Offensive defense
Mobile Defense
60
Possibility of invoking dominant firm action as
laid out in the Competition Act of India
economic cost of obtaining market share may
exceed the resulting profit. The incremental
customers conditions for adopting the
firms products may not be attractive loyal to
competitors, have unique Needs. Sometimes profit
can be improved by decreasing mkt. share
Expand Market Share If profitable
Inappropriate marketing mix as in excessive
expenditures on advertising
System problems on high growth, effects on
maintaining quality
61

• Challenger Strategies

Leapfrog strategy
Flanking attack
Challenger
Target Competitor
Frontal attack
Guerilla attack
Encirclement Strategy
62
Specific attack strategies of Challengers -
Price discount Big Bazaar - Low Price Goods
Ruf and Tuf Jeans - Value Priced goods Nirma,
Subhiksha - Prestige goods Challenger can
offer higher quality product at higher price
Apartment market in Bangalore, better amenity
flats are coming up - Product proliferation
Baskin-Robbins offered more flavors to beat
competition - Product Innovation 3M enters
new markets with an innovation - Improved
services Avis vs Hertz - Distribution
Innovation Avon vs leading cosmetic firms -
Intensive advertising promotion HLL in
toothpastes vs Colgate
63
Follower Strategies
Counterfeiter- duplicates product and sells in
black market thru Disreputable dealers Apple
Computer, Rolex watches
Cloner emulates leaders product PC Market
Market Follower Strategies
Imitator copies but maintains differentiation
in packaging, advertising Pricing, location e.g.
Matsushita in Japanese is maneshita denki
meaning Electronics copied.
Adapter adapts or improves leaders products
e.g. Sony Innovates then LG, Samsung bring out
improved versions
64
Nicher
Nicher leader in a small market or niche.
Better margin than mass marketer as end user
needs served better by nicher
Some useful Nicher roles - end user specialist
software for banks - vertical level
specialist copper company concentrates on
producing finished goods - Specific Customer
specialist PG WalMart - Service specialist
banks take loan requests over phone and
delivers money personally