CHAPTER – TWO

CAPTURING MARKETING
INSIGHTS
 Contents to be covered
– Information Systems and Marketing Research
– Analyzing marketing Environment
– Measuring and forecasting demand
– Analysing Consumer Markets and buying behavior
• The buyers decision process
• Major factors influencing buying behavior
• Consumer buying,

– Analysing Business Markets buying behavior

• Characteristics of Business Market
• Buying situations in organizational buying
• Decision making process in organizational buying
• Influence on organizational buying decision
 INTRODUCTION
• To provide context, insight, and inspiration for marketing
decision making, companies must possess comprehensive
and up-to-date information about macro trends, as well as
about micro effects particular to their business.

• Holistic marketers recognize that the marketing environment

is constantly presenting new opportunities and threats, and
they understand the importance of continuously monitoring,
forecasting, and adapting to that environment.
 The Importance of Information

Understand
Marketing
Environment

Why
Information Competition
Identify Is
Customer Needed
Needs
Develop
Strategic
Planning
2.1 Information Systems & Marketing Research
• Some firms have marketing information systems that
provide rich detail about buyer wants, preferences, and
behavior

• Companies with superior information can choose their

markets better, develop better offerings, and execute
better marketing planning

• Thus, every firm must organize and distribute a

continuous flow of information to its marketing
managers
What is Marketing Information System (MkIS)?
• A marketing information system (MIS) consists of people,
equipment, and procedures to gather, sort, analyze, evaluate,
and distribute needed, timely, and accurate information to
marketing decision makers, i.e
co
nsi • People, equipment, and procedures
sts
of
Pr • Gather, sort, analyze, evaluate and distribute
oc
ess
w • Needed, timely, and accurate information
ha
t

To • Marketing decision makers.

whom
 Cont’d
• Sources of Marketing information system:
– internal company records,
– marketing intelligence activities, and
– marketing research

• Function: Assess, Develop and Distribute Information

• The company’s MKIS should be a mixture of :

– what managers think they need,
– what they really need, and
– what is economically feasible.
 The Marketing Information System
Marketing Managers
Marketing Information System
Marketing Decisions and Communications

Distributing Assessing Information

Information Needs
Developing Information

Information Internal
Analysis Data

Marketing Marketing
Research Intelligence

Marketing
MarketingEnvironment
Environment
Functions of a MkIS: Assessing Information Needs

MKIS committee Conduct Interviews and Determine

What Information is
Desired, Needed, and Feasible to Obtain.

Monitors
Monitors Environment
Environment for
for Examine
Examine Cost/
Cost/ Benefit
Benefit of
of
Information
Information Managers
Managers Desired
Desired Information
Information
Functions of MkIS: Developing Information

Obtains
ObtainsNeeded
NeededInformation
Informationfor
for Marketing
MarketingManagers
Managers
From
From the
theFollowing
FollowingSources
Sources

A.
A. Internal
InternalData
Data
Collection
Collectionof
ofInformation
Informationfrom
fromData
DataSources
SourcesWithin
Withinthe
theCompany
Company

From:
From:Accounting,
Accounting,Sales
SalesForce,
Force,Marketing,
Marketing,Manufacturing,
Manufacturing,Sales
Sales
B.
B.Marketing
MarketingIntelligence
Intelligence
Collection
Collectionand
andAnalysis
AnalysisofofPublicly
PubliclyAvailable
AvailableInformation
Informationabout
about
Competitors and the Marketing Environment
Competitors and the Marketing Environment
From:
From:Employees,
Employees,Suppliers,
Suppliers,Customers,
Customers,
Competitors,
Competitors,Marketing
MarketingResearch
ResearchCompanies
Companies

C.
C.Marketing
MarketingResearch
Research
Design,
Design,Collection,
Collection,Analysis,
Analysis,and
andReporting
Reportingof
ofData
Dataabout
aboutaa Situation
Situation
Functions of MkIS: Distributing Information

Information Must be Distributed

to the Right Managers at the Right Time.

Distributes
Distributes Routine
Routine Distributes
Distributes Nonroutine
Nonroutine
Information
Information for
for Information
Information for
for Special
Special
Decision
Decision Making
Making Situations
Situations
 Components of a Modern
Marketing Information System
• The major responsibility for identifying significant
marketplace changes falls to the company’s marketers.

• Marketers have advantages for the task:

– Disciplined methods for collecting information, and
– Time spent interacting with customers and observing
competitors and other outside groups.
– Marketers also have extensive information about how
consumption patterns vary across and within countries.

• The three components that modern MKIS cover are

briefly discussed below:
 A. Internal Records:
• To spot important opportunities and potential problems,
marketing managers rely on internal reports of: orders, sales,
prices, costs, inventory levels, receivables, and payables.

• The Order-to-Payment Cycle

– The heart of the internal records system is the order-to-payment cycle.
• Sales Information Systems
– Marketing managers need timely and accurate reports on current
sales. Companies must carefully interpret the sales data.
• Databases, Data Warehousing, and Data Mining
– Companies organize their information into customer, product, and
salesperson databases—and then combine their data.
– Companies make these data easily accessible to their decision makers.
 B. Marketing Intelligence
• A marketing intelligence system is a set of procedures and
sources that managers use to obtain everyday information
about developments in the marketing environment.

• The internal records system supplies results data, but the

marketing intelligence system supplies happenings data.
• Marketing managers collect marketing intelligence in a variety
of ways, such as:
– by reading books, newspapers, and trade publications;
– by talking to customers, suppliers, and distributors;
– by monitoring social media on the Internet; and
– by meeting with other company managers .
NB: Marketing intelligence gathering must be legal and ethical
 Cont’d
• A company can take some possible actions to improve
the quantity & quality of its marketing intelligence.

1. Train and motivate the sales force to spot and report new
developments.

2. Motivate distributors, retailers, and other intermediaries to

pass along important intelligence. Marketing intermediaries are
often closer to the customer and competition and can offer
helpful insights.

3. Hire external experts to collect intelligence: many companies hire

specialists to gather marketing intelligence
 Cont’d
4. Network internally and externally. The firm can:
– purchase competitors’ products,
– read competitors’ published reports,
– attend stockholders’ meetings,
– talk to employees, collect competitors’ ads,
– consult with suppliers, and look up news stories about competitors.
5. Set up a customer advisory panel.
• Members including:
– the company’s largest customers.,
– most outspoken customers. ,
– most sophisticated customers. , or
– most representative customers.

6. Purchase information from outside research firms and vendors.

7. Take advantage of government-related data resources.

 C. Conducting Market Research
• It is applicable When we do not have answers through own
Market Information and Intelligence System

• It is the systematic gathering, recording and analysing of data

about problems related to the marketing of goods and services.

• Marketing research
– Is a process
– Use data available from different sources
– Is conducted to aid decision making
– Findings should be communicated to the appropriate decision
maker
 What to find out?
• What does the customer need?
• Who is the target audience?
• What is the competition?
• Are there any gaps in the market?
• Would the product be acceptable in the market?
• Why customer traffic is reduced?
• Why is profitability decreased?
• Do our sales have any association with some given variables?
• Which internal or external factor is contributing more?
The Marketing Research Process

Defining
Defining the
the Problem
Problem and
and the
the Research
Research Objectives
Objectives

Developing
Developing the
the Research
Research Plan
Plan

Implementing
Implementing the
the Research
Research Plan
Plan

Interpreting
Interpreting and
and Reporting
Reporting the
the Findings
Findings
Marketing Research Process
Step 1. Defining the Problem & Research Objectives

• In this step the researcher Defines the Problem, the

Decision Alternatives, and the Research Objectives.

• Marketing managers must be careful not to define the

problem too broadly or too narrowly for the marketing
researcher.(See some examples on pp-99 of your text).

• Then Set specific objectives in line with the defined

problem
Marketing Research Process
Step 2. Develop the Research Plan
Determine
Determine the
the Specific
Specific Information
Information Needed
Needed

Secondary Primary

Information Information
Informationcollected
Informationthat
thathas
has for
collected
been
beenpreviously
previously forthe
thespecific
specificpurpose
purpose
collected. at
athand.
hand.
collected.

Both
BothMust
MustBe:
Be:
Relevant
Relevant
Accurate
Accurate
Current
Current
Impartial
Impartial
I. Primary Data Collection Process
A. Research Approaches
Observational
ObservationalResearch
Research

Gathering
Gatheringdata
databy
byobserving
observingpeople,
people,
actions and situations
actions and situations
(Exploratory)
(Exploratory)

Survey
SurveyResearch
Research
Asking
Askingindividuals
individualsabout
about
attitudes,
attitudes,preferences
preferencesor
or
buying behaviors
buying behaviors
(Descriptive)
(Descriptive)

Associational
AssociationalResearch
Research
Using
Usinggroups
groupsof
ofpeople
peopleto
to
determine
determinecause-and-effect
cause-and-effect
relationships
relationships
(Causal)
(Causal)
Primary Data Collection Process
B. Developing a Sampling Plan

Probability
Probabilityor
or
Who
Whoisisto
tobe
be Non-probability
surveyed? Non-probability
surveyed? sampling?
sampling?
(target
(targetpopulation)
population)

Sample -
representative
segment of the
population

How
Howshould
shouldthe How
sample
the Howmany
many
samplebebe should
shouldbe
be
chosen?
chosen? surveyed?
(techniques) surveyed?
(techniques) (sample
(samplesize)
size)
Primary Data Collection Process
C. Research Instruments
Research
ResearchInstruments
Instruments

Questionnaire
Questionnaire Mechanical
MechanicalDevices
Devices
••What
Whatto
toask? ••Grocery
••Form
ask? GroceryScanners
Scanners
Formof
ofeach
eachquestion?
question? ••People Meters
People Meters
••Wording?
Wording? ••measuring
••Ordering? measuringdevices
devices
Ordering? •• Balances
Balances
 II. Secondary Data sources
• Reference Library
• Directories of Products/Companies
• The commodity exchange
• Industry/Trade Journals
• Trade fairs and Exhibitions
• Company Annual Reports
• Internet
Marketing Research Process
Step 3. Implementing the Research Plan

Collection
Collection
of
of Data
Data

Converting
Converting the
the
Research
Research Processing
Processing of
of
Plan
Plan into…
into… Data
Data

Analyzing
Analyzing the
the
Data
Data
Marketing Research Process
Step 4. Interpreting and Reporting Findings

Interpret
Interpretthe
theFindings
Findings

Draw
DrawConclusions
Conclusions

Report
Report to
toManagement
Management
 2.2. Analyzing The
Marketing Environment
 Components of Marketing Environment

• The external environment consists of:

– Macro environment that are broad forces which shape the
character of opportunities and threats
– Micro environment consist of the actors in the immediate
environment

• Internal environment consist of:

- forces and actors in side the firm that affect the marketing
operation; composed of internal stakeholders and the other
functional areas with in the business organization.
 Controllability
• The organization has no control over the macro environment, it
can only respond to changes taking place

• The organization has some degree of influence over the

microenvironment but by no means complete control.

• The organization controls its own internal environment although

this does not mean the marketing department or marketing
manager has control
 Why is it important?
• It is essential for planning

• Assists in the identification of opportunities and threats

• Enables an organization to take advantage of emerging strategic

opportunities

• It helps a business to compete more effectively against its rivals

 The Internal Or Organizational Environment

• This refers to the other internal functions that impact

on the marketing functions

• It comprises of:
– The human resources dept.
– The operations dept.
– The accounting and finance dept.
– The research and development dept.
– The information systems dept.
– Others functional and support units in the organization
 Cont’d

• Marketing is affected by
– Allocation of authority and responsibilities within the
organization

– Resource availability

– The extent to which major functional areas work together

supporting the marketing function to be customer oriented

– The attitude of internal stakeholder

 The Micro environment
• Refers to the environment most closely linked to the organization
• It comprises all those organizations and individuals who directly
affect the activities of the company

• The actors in the immediate environment that affect the firm’s

capability to operate effectively in its chosen market

Elements In The Micro Environment

• Customers • Local community
• Suppliers • Local government
• Intermediaries • Cooperators (partner firms in
• Competitors alliance)
 The Macro-environment
• Comprises general forces and trends rather than specific
organizations-the big issues that affect all businesses active in
the market
• The macro-environment refers to the general environmental
factors that influence the organization
• Factors outside the area of marketing which impact on but
which cannot be influenced by the marketing effort

Elements Of Macro-economic Environment

• Political and Legal environment
• Socio-cultural and demographic environment
• Technological environment
Analysis approaches to the Marketing Environment

• SWOT analysis
• PEST/STEP analysis
• Five forces analysis
 I. SWOT analysis
Strengths Internal Like experience in the sector, competitive
. advantage, financial capacity

Weaknesses Internal Structural problem , lack of proper

management system, lack adequate resources,
lack of adequate information….

Opportunities external Good government support, demographic

changes, technological change, lack some
resources in the community….

Threats external Political instability, free market entry, the

continuously increasing number of competitors
 II. PEST analysis
Poli • Political stability , Environmental protection laws
tica • Taxation policy, Employment laws
l • Government policy
fact
ors
Eco •Inflation, Disposable income, Employment
no •Energy availability and cost
mic •Level of economic development
fact
ors • Demographics (population size and growth)
Soci
o- • The culture, beliefs and values of the community
cult • Lifestyle changes, Levels of education
ural
Tec
fact
hno • New discoveries and innovations
ors • Speed of technology transfer
logi
cal • Rates of obsolescence, Internet (Information technology)
fact
ors
 III. Competitive Analysis Using Five forces
• The competitive environment (industry environment) comprises those
factors with which the organization comes into closest contact, factors
that have a rather obvious and immediate impact on its success.

• The competitive environment is usually subdivided in to five forces (M.

E. Porter, 1980):
– Direct competitive rivals

– The threat from new entry competition

– The threat of substitute products

– Bargaining power of Buyers

– Bargaining power of Suppliers

• Profitability and the achievement of objectives will be affected by the

combination of five forces.
 Responding to the Marketing Environment

• Reactive: Passive Acceptance and Adaptation

– Companies design strategies that avoid threats and
capitalize upon opportunities.

• Proactive: Environmental Management

– Use of lobbyists, lawsuits, complaints, and contractual
agreements to influence environmental forces.
 2.3 Measuring And Forecasting Demand

• DEFINITION of 'Forecasting'
– The use of historic data to determine the direction of future trends.
– Forecasting is used by companies to determine how to allocate their
budgets for an upcoming period of time.

• Forecasting is a decision-making tool used by many

businesses to help in budgeting, planning, and estimating
future growth.

• Forecast may include, sales / demand forecast, economic

forecast, technological forecast, political forecast,
demographic forecast cultural forecast etc.
 Importance of forecasting demand
It provides a basis:
For setting and maintaining a production schedule –
manufacturing.
For setting the objectives of the sales department.
For task assignments to various segments of the marketing
and other areas.
It helps in getting information about sales figures for the
organization in future.
It helps in understanding the business trends from time to
time.
Common Features to All Forecasts
• A wide variety of forecasting techniques are in use. Nonetheless,
certain features are common to all, and it is important to recognize
them.

– 1. Assumption- things existed in the past will continue to

exist in the future.
– 2. Forecasts are rarely perfect; actual results usually differ
from predicted values.
– 3. Forecasts for groups of items tend to be more accurate
than forecasts for individual items.
– 4. Forecast accuracy decreases as the time period covered by the forecast—
the time horizon—increases. Hence, flexible business organizations require a shorter
Basic Approaches to Forecasting
• There are two general approaches to forecasting
 Qualitative methods consist mainly of subjective inputs, which
often challenge precise numerical description.
 Quantitative methods involve either:

– the extension of historical data or

– the development of associative models that attempt to utilize
causal (determinant) variables to make a forecast.
 A. Qualitative Forecasting Techniques

• I. Forecasts Based on Judgment and Opinion

• II. Executive Opinions
• III. Sales force Opinions
• IV. Consumer Surveys
• V. Delphi method.
 B. Quantitative Forecasting Technique
• Averaging techniques
– Moving average- takes the average of previous observations
in the demand
– Weighted moving average - takes the average of previous
observations in the demand by giving weight. (0 - 1)
– Exponential smoothing - based on the previous forecast (Ft-1)
plus a percentage of the difference between that forecast
and the actual value (At-1).

• Associational techniques
– Regression and correlation analysis
 CHAPTER THREE

Connecting with Customers

 CUSTOMER ANALYSIS
• How do consumer characteristics influence buying behavior?
• How do marketers analyze consumer decision making?

• What is the business market, and how does it differ from the
consumer market?

• Who participates in the business-to-business buying process?

• How do business buyers make their decisions?

 What is Customer Analysis
• To develop effective marketing strategies, it requires to
understand the needs of customers

• The success of any customer-focused program will involve

– inventive product development,(product)
– integrated distribution methods, (placement)
– well calibrated pricing (pricing) and
– state of the art communications(promotion)

• Customer analysis involves analysis of

– Consumer buying behavior
– Organizational buying behavior
 3.1.1 Analyzing the Consumer Market
• Consumer behaviour is the study of how individuals, and groups,
select, buy, use, and dispose of goods, services, ideas, or experiences
to satisfy their needs and wants.
• consumer behavior is the process whereby individuals decide what,
when, where, how and from whom to purchase goods and services

• Consumers behavior is described as an investigation into the way

individuals make decisions on how to spend their available
resources (time, money, effort) on personal and household products.

• A study of consumer behavior need to consider

– what occurs before people consume something,
– what goes on during the consumption period itself and
– how consumers handle the disposal of what they have consumed.
What Influences Consumer Behavior?

• Cultural factors
• Social factors
• Personal factors
• Psychological factors
Factors affecting the buying behaviour
 A. Cultural Factors

• Culture, subculture, and social class are important influences on

consumer buying behavior.
• Culture is a set of: Ideas, Customs, Values, Art and Belief that are
produced or shaped by a society and passed on from generation
to generation.

• Each culture consists of smaller subcultures that provide more

specific identification and socialization for their members.

• Subculture is based on religion, language, geographic region,

nationality, age etc
Nationalities e.g. in USA population-we can find
Asians, Europeans, Africans, Latino and many more..) (in
Ethiopia many nations with their own subculture)

Religions (e.g. Christian, Muslim… )

Racial groups (e.g. black, white, Hispanics…)

 Social Classes

• A social class is a group of people with similar values, interest and

behavior within a society.
• Consumers buying behavior is determined by the social class to which
they belong rather than by their income alone.
• The social class is based on: income, education, occupation, family
history, wealth, lifestyle, area of residence etc.
Social class can be:
• Upper uppers
• Upper middles
• Lower uppers
• Middle
• Working
• Upper lowers
• Lower lowers
• lower social
Note:

-Within a class, people tend to behave alike.

-Class may be indicated by a cluster of variables (occupation,

income, wealth etc.)

-Class designation is not fixed over time

-Social class members show distinct product and brand

preferences in many areas, including clothing, home furnishing,
leisure activities, and automobiles etc…
 B. Social Factors

Social factors that affect buyer behavior includes:

a) Reference groups: a person’s reference groups are all the groups that
have a direct or indirect influence on their attitudes or behavior
 Groups having a direct influence are called membership groups. It includes
• Primary groups: whom the person interacts fairly continuously and
informally, such as family, friends, neighbors, and coworkers
• Secondary groups: such as religious, professional, and trade-union
groups, which tend to be more formal and require less continuous
interaction

 People are also influenced by groups to which they do not belong.

• Aspirational groups: are those a person hopes to join
• Dissociative groups: are those whose values/behavior an individual
rejects
Reference group: create pressures for conformity that may affect
actual product and brand choices.
b) Family: we can identify two families which affect individuals buying behavior:
i) family orientation-involves the families which you are born and consists of
your parents, brothers and sisters.
Long after an individual ceased to live with his parents, their influence on the
subconscious mind still continuous to be great

ii) Family of procreation: the person’s spouse and children. Within the family
different member plays different role and marketers are interested to find out
exactly the role played by individual member.

c) Social roles and Status

-Role consists of the activities a person is expected to perform.

-Each role that a person play connotes a status
Thus, people choose products that reflect and communicate their role and their
actual or desired status in society
 C. Personal Factors

Personal characteristics that influence a buyer’s decision include

• Age and Life cycle stage and economic circumstances

• Occupation and Wealth
• Self-concept/self image
• Personality and Values
• Life style
 Age and Stage in the Life Cycle
 Our taste in food, clothes, and recreation is often related to our
age.

 Consumption is also shaped by the family-life cycle and the

number, age, and gender, of people in the household at any point
in time.

 In addition, psychological life-cycles may matter.

 Marketers should also consider the following critical life events or

transitions as giving rise to new needs
 cont’d
• Marriage, • These should alert
• Child Birth service providers –
• Illness • Banks, lawyers , and
• Relocation • marriage and
• Divorce bereavement
• Career change counselors
• Widowhood
 Recent family life cycle classification

Family Life cycle Buying behavior/pattern

Single stage(young unmarried - few financial burden. Spent on food, rent, very basic kitchen
people living away from home) equipments & furniture

Young newly married(no children) - Better of financially than they will be in near future, highest
Full nest I(youngest child under 6) purchase rate. Spend on furniture, refrigerator..
- Spend maximum on home purchase. Interested in new
product and influenced by ad. Buy TV, baby food, cough
medication, toy…
Full nest II(Youngest child over 6)
- Better financial position, less influenced by ad, buy: large size
Full nest III(old married couple with package, various types of food, education, house
dependant children) - Spent on more tasteful furniture, car, non necessary
Empty nest I-Older(married couple appliance
with no dependent, still working)
- Spend on travel, recreation, home improvement, healthcare
Empty nest II-older(married, no
children, retired) - Drastic reduction of income, buy medical appliance, and
Solitary survivor (in labor force) medi-care products

Solitary survivor(out of labor force)

- Like to sell home
- Spend on medical products
 Self-concept(Image)
• Self image implies what one thinks of himself/herself. It is the
way one sees himself/herself or wishes to see himself/herself or
wants to be seen by others.
• Consumers have a variety of enduring images of themselves
• These images are associated with personality in that
• individuals consumption relates to self-image
 Different Self-Images
• .
Actual Self-Image Ideal Self-Image

Ideal Social
Social Self-Image
Self-Image

Expected
Self-Image
 The Nature of Personality and personal value

• Personality is Relatively enduring or persistent pattern of

thoughts, emotions, and behaviors that characterize a person

• Personality reflects individual differences

• Personality is consistent and enduring
• Personality can change
• Personal value – dictates the way consumers prefer, prioritize,
and act
 Theories of Personality

• Freudian theory
– Unconscious needs or drives are at the heart of human
motivation
• Neo-Freudian personality theory
– Social relationships are fundamental to the formation and
development of personality
• Trait theory
– Quantitative approach to personality as a set of
psychological traits
 Freudian Theory

• Id
– Warehouse of primitive or instinctual needs for which
individual seeks immediate satisfaction
• Superego
– Individual’s internal expression of society’s moral and
ethical codes of conduct
• Ego
– Individual’s conscious control that balances the
demands of the id and superego
 Neo-Freudian Personality Theory

• We seek goals to overcome feelings of inferiority

• We continually attempt to establish relationships
with others to reduce tensions
• Karen Horney who was interested in child-parent
relationships and desires to conquer feelings of
anxiety, proposed three personality groups:
– Compliant move toward others, they desire to be loved,
wanted, and appreciated
– Aggressive move against others
– Detached move away from others
 Trait Theory

• Personality theory with a focus on

psychological characteristics
• Trait - any distinguishing, relatively enduring
way in which one individual differs from
another
• Personality is linked to how consumers make
their choices or to consumption of a broad
product category - not a specific brand
 Consumer Ethnocentrism
• Ethnocentric consumers feel it is wrong to
purchase foreign-made products
• They can be targeted by stressing nationalistic
themes
 Life style
Life style: indicates how people live, how they spend their time, how and
what they choose and where they shop.
It is the way people eat, drink, spend leisure time, work and so on
People from the same subculture, social class, and occupation may lead
quite different lifestyles.

A) A lifestyle is a person’s pattern of living in the world as expressed in activities,

interests, and opinions. It portrays the “whole person” interacting with his or her
environment.
B) Marketers search for relationships between their products and lifestyle groups.
C) LOHAS is an acronym standing for: Lifestyles of health and sustainability.
Consumers who worry about the environment, want products to be produced in a
sustainable way, & spend money to advance their personal health, development,

Ex: organic food, energy-efficient appliances such as Solar panels, alternative

medicine, etc
 Occupation and Economic Circumstances

• Occupation influences product choice, brands beliefs etc. It

determines income, buying power and status

• Occupation influences consumption patterns and economic

circumstances influence product choice.

• Product choice is greatly affected by economic circumstances

including:
A) Spendable income (level, stability, and time pattern)
B) Savings and assets
C) Debts
D) Borrowing power
E) Attitudes toward spending and saving
 D. Psychological Factors
 A person's buying choices are further influenced
by four important psychological factors:
• Motivation,
• Perception,
• Learning, and
• Beliefs and attitudes.
 i. Motivation
• Motivation is the driving force within
individuals that impels them to action.

• They are internal feelings justifying behavior

and reasons out why’s.

• Consumers buying decision are determined by

the internal feeling they hold.
Model of the Motivation Process
 Cont’d
• Goal: the sought-after results of motivated
behavior
• Generic goals: general solutions to fulfill
consumers’ needs
• Product-specific goals: specific choices from
within the general product or service
categories
Motivation theory

Maslow’s theory of motivation: claimed that individuals have a

hierarchy of needs
The implication of the theory for marketers is that individuals will
seek different products and services as they move up this hierarchy.

Freud’s theory of motivation: Freud proposed that individuals are

motivated by unconscious psychological factors.
This theory would suggest that an individual’s consciously stated
reason for buying a product may hide a more fundamental
unconscious motive

.
Motivation researchers often collect in-depth interviews with a few
dozen consumers to uncover deeper motives triggered by a
product
e.g. An individual proposing to purchase an executive car may claim that
this decision is based on the need for quality and reliability, whereas the
unconscious desire may be for status

HERZBERG’S THEORY : Frederick Herzberg developed a two-factor

theory that distinguishes dissatisfiers (factors that cause
dissatisfaction) from satisfiers (factors that cause satisfaction)

Herzberg’s theory has two implications:

First, sellers should do their best to avoid dissatisfiers (for example, a
poor training manual or a poor service policy). Although these things will
not sell a product, they might easily unsell it.
Second, the seller should identify the major satisfiers or motivators of
purchase in the market and then supply them.
 Rational versus Emotional Motives

• Rational buying motive: a conscious, logical reason to

make a purchase, such as convenience or comfort, and
on your will.
• Emotional buying motive: a feeling a buyer associates
with a product, such as recognition or prestige, or
absence of alternatives.

Note:
• Needs are never fully satisfied
• New needs emerge as old ones are satisfied
• People who achieve their goals set new and higher goals for
themselves
Maslow's hierarchy of needs
 ii. Perception

• A motivated person is ready to act. How the person acts is

influenced by his or her perception of the situation.

• perception is the process by which people select, organize and

interpret information to form a meaningful picture of the world.

• All the time we are receiving information through our sense

organ and the different sight, sound, smell, test, and sensation
that we feel are known as stimuli.

NB: Different individual respond differently for the same stimuli

 Cont’d
• Consumers can form different perceptions of the same stimulus
(Product) because of perceptual processes:

• Stimuli selected depends on many factors

– Consumers’ previous experience
– Consumers’ motives
– Expectations
– Selective perception
– Halo effect
– Contrast effects
– Nature of the stimulus
– Situations Surrounding the perception
Individuals can have different perceptions of the same stimulus due to the
process of: selective attention, selective distortion and selective retention

Selective attention: Individuals cannot observe all the potential

stimuli in the external environment. Selective attention refers to the
tendency of individuals to screen out the majority of stimulants to
which they are exposed.

Selective distortion: The tendency to adjust perceptions to conform to

their current mindset is called selective distortion or,

When you attempt to fit information to suit your own ideas or personal meaning,
the process is known as selective distortion.

Selective retention: Individuals do not remember everything they

perceive. Information that reinforces their attitudes and beliefs is
more likely to be retained
 Elements of Perception

• Sensation: The immediate and direct response of the

sensory organs to stimuli (a stimulus is any unit of sensory
input).
• Absolute threshold: the lowest level at which an individual
can experience a sensation.
• Differential threshold: Minimal difference that can be
detected between two similar stimuli (also known as the just
noticeable difference (the j.n.d.)
• Subliminal perception: Stimuli that are too weak or too
brief to be consciously seen or heard may be strong enough to
be perceived by one or more receptor cells. No research
evidence that subliminal advertising can cause behavior
changes
 Weber’s Law
• The j.n.d. between two stimuli is not an absolute
amount but an amount relative to the intensity of
the first stimulus

• Weber’s law states that the stronger the initial

stimulus, the greater the additional intensity needed
for the second stimulus to be perceived as different.
• Marketers need to determine the relevant level of j.n.d. so
that negative changes are not readily discernible to the public
while product/service improvements are very apparent to
consumers
 Perceptual Selection
• Consumers subconsciously are selective as to what
they perceive.
• Stimuli selected depends on two major factors
– Consumers’ previous experience
– Consumers’ motives
• Selection depends on the
– Nature of the stimulus
– Expectations
– Motives
 Cont’d...
• Selective Exposure: Consumers seek out messages
which are pleasant, resonate with them, and help
them make good purchase decisions
• Selective Attention: Heightened awareness when
motivated; Prefer different messages and media
• Perceptual Defense: Screening out threatening
stimuli
• Perceptual Blocking: Consumers avoid being
bombarded by tuning out, using TiVo etc.
 Principles of Perceptual Organization
• Figure and ground: experience events by focusing on
some part and relegating the rest to a sort of hazy
background
• Grouping: group stimuli to form a unified impression or
concept. Grouping helps memory and recall
• Closure: Will often fill in missing pieces
Incomplete messages remembered more than complete
• Good figures: Familiar, symmetrical and orderly
experiences are perceived faster and remembered
longer.
 Interpretation
• Physical Appearances: People seek positive attributes of
experiences to relate to. More attractive models are often
more persuasive.
• Stereotypes: Ascribe meanings based on fragments of past
information.
• First Impressions: People look for relevant, important, or
predictive stimuli. First impressions are lasting
• Jumping to Conclusions: based on information captured
first. Put persuasive argument first.
• Halo Effect: perceive and evaluate multiple objects based on
just one dimension
 iii. Learning
• The process by which individuals acquire the purchase
and consumption knowledge and experience that they
apply to future related behavior

• Marketers must teach consumers:

– where to buy
– how to use
– how to maintain
– how to dispose of products
 Learning Theories

Behavioral Theories: Cognitive Theories:

Learning result from Learning is based on
observable mental information
responses to processing, often in
external stimuli. response to problem
Also known as solving.
stimulus response
theories.
Learning can be intentional or incidental

02/12/2025
 iv. Beliefs and Attitude
• Through experience and learning, people acquire beliefs and
attitudes. These in turn influence buying behaviour.
• A belief is a descriptive thought that a person holds about
something.
• Consumers decide to buy in compliance to their belief.

• Attitude is an evaluative statements about an object, event,

person, action that result in either positively(favorable) or
negatively(unfavorable). evaluations, emotional feelings, and
action tendencies toward some object or idea.

• Attitude is a person's enduring feeling, evaluation and tendency

towards a particular idea or object
– Attitudes have an incidence
– Attitudes have an emotional feeling
– Attitudes are action oriented
Attitude is learned predisposition to behave in a
consistently favorable or unfavorable manner with
respect to a given object

A positive attitude is generally a necessary, but not

sufficient, condition for purchase

e.g. Mercedes seen as ‘top of class’ but intention to

purchase was low
 What are attitudes?
• The attitudes have “object”
• Attitudes are a learned predisposition
• Attitudes have consistency
• Attitudes occur within a situation
 Structural Models of Attitudes
• Tri component Attitude Model
• Muli-attribute Attitude Model
• The Trying-to-Consume Model
• Attitude-toward-the-Ad Model
A Simple Representation of the Tricomponent Attitude Model

Conation

Affect

Cognition
 The Tricomponent Model
• Cognitive Component
– The knowledge and perceptions that are acquired by a
combination of direct experience with the attitude object
and related information from various sources.
• Affective Component
– A consumer’s emotions or feelings about a particular
product or brand.
• Conative Component
– The likelihood or tendency that an individual will
undertake a specific action or behave in a particular way
with regard to the attitude object.
 Multiattribute Attitude Models

• Attitude models that examine the composition

of consumer attitudes in terms of selected
product attributes or beliefs.
 Theory of Trying to Consume

• An attitude theory designed to account for the

many cases where the action or outcome is
not certain but instead reflects the consumer’s
attempt to consume (or purchase).
 Attitude-Toward-the-Ad Model

• A model that proposes that a consumer forms

various feelings (affects) and judgments
(cognitions) as the result of exposure to an
advertisement, which, in turn, affect the
consumer’s attitude toward the ad and
attitude toward the brand.
 A Conception of the Relationship among Elements in
an Attitude-Toward-the-Ad Model

Exposure to an Ad

Judgments about
the Ad (Cognition)

Beliefs about the Attitude toward

Brand the Ad

Attitude toward
the Brand
 Issues in Attitude Formation
• How attitudes are learned
• Sources of influence on attitude formation
• Personality factors
 Strategies of Attitude Change
• Changing the Basic Motivational Function
• Associating the Product With an Admired
Group or Event
• Resolving Two Conflicting Attitudes
• Altering Components of the Multiattribute
Model
• Changing Beliefs About Competitors’ Brands
The Buying Decision Process: The Five-stage Model
The consumer's choice results from the complex
interplay of cultural, social, personal and psychological
factors.

Although the marketer cannot influence many of these

factors, they can be useful in identifying interested
buyers and in shaping products and appeals to serve
their needs better.
 Marketers need to do some research

• Who buys product or services?

• Who makes the decision to buy the product?
• Who influences the decision to buy product ?
• How is the purchase decision made?
• Why do customers buy certain product?
• How is our product is perceived by customer?
Successive Sets involved in consumer Decision Making
The most current models see the consumer forming judgments
largely on a conscious and rational basis.
a) First, the consumer is trying to satisfy the want.

b) Second, the consumer is looking for certain benefits from the

product solution.

c) Third, the consumer sees each product as a bundle of

attributes with varying abilities for delivering the benefits
 3.1.2. Business Markets and Business Buyer Behaviour

• The business markets consists of all organizations that acquire

goods and services used in the production of other products or
services that are sold or supplied to others.

• Organization buyers are customers that comprised of various

organizations such as
– Industrial Firms,
– Commercial Businesses, or
– Governmental Organizations And Institutions

• It is also known by the Business-to- Business Marketing (B2B

marketing)

• B2B markets have fewer buyers that can be communicated through

personal selling than mass advertising
 What is Organizational Buying?

• Organizational buying- refers to the decision-making process

by which formal organizations establish the need for
purchased products and services, and identify, evaluate, &
choose among alternative brands and suppliers.
 Example of leather industry
• Hide venders sell to hide tanners

in
• Tanners sell to shoes manufacturers

cha
• Manufacturers to whole sellers

ply
• Whole sellers to retailers

sup
• Retailers to customers

• Each party in the supply chain also buy many

other goods and services in support of their
operations.
 Characteristics

• It is concerned with the marketing of products and

services from one organization to another.

• The customer is an organization with organizational goals

• Business to business marketing is the process of trying to

match a company’s products and services to the
organizational goals of its target customers.
Characteristics of Business markets
Dimension Characteristics of Explanation
business market

Nature of Demand Derived Demand The demand from a business is

derived from its own sales volume
Buying influences Many influences There are often many interested
parties who influence the buying
decision (bid committee, experts, etc)

Market structure Often concentrated A small number of large customers

demand often make up a substantial share of
the market
Purchasing motives organizational, rational Products purchased for the
achievements of organizational goals

Purchasing decision Often complex and Decisions can involve long and
process lengthy complex analysis and negotiation

Purchasing skills Professional, trained Buyers are often professionally

qualified in purchasing
In sum…the Business Market is characterized by:

• Fewer, larger buyers • Derived demand

• Close supplier-customer • Inelastic demand
relationships • Fluctuating demand
• Professional purchasing • Geographically
• Many buying influences concentrated buyers
• Direct purchasing
• For further
understanding refer
your text on pp:185-
186
 Organizational Buying Situations
• The business buyer faces many decisions in making a
purchase depending up on:
 the complexity of the problem being solved,
 newness of the buying requirement,
 number of people involved, and
 time required

• Three types of buying situations are: the straight

rebuy, modified rebuy, and new task.
Organizational Buying Situations
The buyer routinely re-orders the same
Straight Rebuy product or service with out any
modification

The buyer is not satisfied with the

performance of the existing supplier and
Modify Rebuy
wants to modify product specifications,
price, service or supplier

The buyer purchase product or service

New Task
for the first time

practice of buying from suppliers that

Reciprocity are also customers
 Cont’d
a) A new-task

• A new-task purchaser buys a product or service for the first time

(an office building, a new security system etc).

• The greater the cost or risk, the larger the number of participants,
and the greater their information gathering-the longer the time to a
decision.

• Generally new task purchase:

• is first time purchase
• need evaluation of wide range of possible problem solutions
• the process tend to be time consuming and involves a number of
people
b. Straight Re-buy
In a straight rebuy, the purchasing department reorders supplies
such as office supplies and bulk chemicals on a routine basis and
chooses from suppliers on an approved list.

The suppliers make an effort to maintain product and service

quality and often propose automatic reordering systems to save
time.
•
• Repeat purchase situation, triggered automatically when existing
stocks reach a certain level
• No evaluation of competing brands
• Organizations opt for a straight re-buy because of lack of
resources to evaluate alternative purchases, the possible risks in
changing suppliers.
 Cont’d
c. Modified Re-buy

• The buyer in a modified rebuy wants to change product

specifications, prices, delivery requirements, or other terms and
hence go for re-evaluation of product or service that has been
bought before

• This usually requires additional participants on both sides. The

evaluation is less than the new task situation and more than the
straight re-buy situation
 Systems Buying and Selling

• Many business buyers prefer to buy a total problem solution

from one seller. Called systems buying, this practice originated
with government purchases of major weapons and
communications systems.

• The government solicited bids from prime contractors that, if

awarded the contract, would be responsible for bidding out and
assembling the system’s subcomponents from second-tier
contractors.
 Participants in the Business Buying Process

• Purchasing staffs are influential in straight-rebuy and

modified-rebuy situations, whereas other department
personnel are more influential in new-buy situations

• Engineering personnel usually have a major influence in

selecting product components, and
• purchasing agents dominate in selecting suppliers
Major influences on business buyer behavior

Buying Centre

Environmental

Organizational

Individual
 The Buying Centre or Decision making Unit (DMU)

• Webster and Wind call the decision-making unit of a buying

organization “the buying centre”

• Buying centre consists of “all those individuals & groups who

participate in the purchasing decision-making process, who
share some common goals and the risks arising from the
decisions.”

• The buying centre includes all members of the organization

who play any of the following seven roles in the purchase
decision process.
Cont’d
 Major Influences on Business Buyers

. Key Factors 1. Initiator- individuals who first

recognize a problem
2. User - who use the product
• Buying Centre
3. Influencer (who involve in
• Environmental specification like technical people)
4. Deciders –who decide on product
• Organizational requirements or on suppliers
• Individual 5. Approvers- People who authorize the
proposed actions of deciders or
buyers
6. Buyers- People who have formal
authority to select the supplier and
arrange the purchase terms.
7. Gatekeepers who control/filter the
flow of information
 Major Influences on Business Buyers

These influences are exerted through

Key Factors suppliers, customers, governments,
Political trade unions etc.

• • Economic trends
Buying Centre
• Supply conditions
• Environmental • Technological change
• Organizational • Regulatory and political
environments
• Individual
• Competitive
developments
• Culture and customs
 Major Influences on Business Buyers

Key Factors
• Objectives
• Buying Centre • Policies
• Environmental • Procedures
• Organizational • structure
• Individual • Systems
 Major Influences on Business Buyers

Key Factors

• Authority
• Buying Centre • Age
• Environmental • Education
• Organizational • Job position
• • Personality of buyer
Individual
• Risk attitudes
 Stages in the org. Buying Process: Buy phases

• Problem recognition
• General need description and product specification
• Supplier search
• Proposal solicitation- inviting qualified suppliers
• Supplier evaluation and selection
• Order-routine specification - negotiating the final
order, listing the technical specifications
• Performance review

• Further reading on pp-95

Buy-grid Framework: Major Stages (Buy-phases) to Major Buying
Situations (Buy-classes)
 Cont’d

• In modified-rebuy or straight-rebuy situations, some stages are

compressed or bypassed.

• For example, the buyer normally has a favorite supplier or a

ranked list of suppliers and can skip the search and proposal
solicitation stages.
Factors Affecting Buyer-Supplier Relationships

• Availability of alternatives
• Importance of supply
• Complexity of supply
• Supply market dynamism
CHAPTER END
 Marketing Debate
• Take a position:
• Business-to-business marketing requires a
special, unique set of marketing concepts and
principles versus Business-to-business
marketing is really not that different, and the
basic marketing concepts and principles
apply.