UNIT I

INTRODUCTION TO CONSUMER BEHAVIOUR

The term consumer behavior, individual buyer behavior, end-user behavior, and consumer
buying behavior all stand for the same. Consumer behavior is the study of how individuals, groups,
and organizations select buy, use, and dispose of goods and services, ideas, or experiences to satisfy
their needs and wants.

Consumer behavior may be defined as the decision process and physical activity individuals
engage in when evaluating, acquiring, using, or disposing of goods and services.

According to Belch and Belch “consumer behavior is the process and activities people engage
in when searching for, selecting, purchasing, using, evaluating and disposing of products and
services so as to satisfy their needs and desires”.

Nature of consumer behaviour

Consumer behavior refers to the actions and decisions made by individuals and households
when purchasing goods and services. Understanding consumer behavior is crucial for businesses
because it allows them to develop effective marketing strategies and products that meet the needs
and preferences of their target audience. The nature of consumer behavior is multidisciplinary and
involves various factors that influence the decision-making process of consumers. These factors
include cultural, social, personal, and psychological factors. Cultural factors refer to the values,
beliefs, and customs that influence the behavior of individuals in a particular society. Social factors
include family, friends, and other social networks that influence consumer behavior. Personal factors
include age, gender, income, and lifestyle, while psychological factors refer to the attitudes, beliefs,
and perceptions of individuals.
1. Cultural Factors
Cultural factors are the values, beliefs, and customs that influence the behavior of individuals in
a particular society. Cultural factors can include things like language, religion, social norms, and
even cuisine. For example, in some cultures, it may be customary to purchase gold jewelry as a
symbol of wealth and status. In other cultures, the use of certain products may be restricted or
prohibited due to religious beliefs.
2. Social Factors
Social factors include family, friends, and other social networks that influence consumer
behavior. People often make purchasing decisions based on the opinions and recommendations of
those around them. For example, a person may choose to purchase a product based on a
recommendation from a friend or family member.
3. Personal Factors
Personal factors refer to characteristics that are unique to an individual, such as age, gender,
income, and lifestyle. These factors can influence a person’s purchasing decisions in various ways.
For example, younger consumers may be more likely to purchase trendy or fashionable products,
while older consumers may prioritize durability and quality.
4. Psychological Factors
Psychological factors refer to the attitudes, beliefs, and perceptions of individuals. These factors
can include things like motivation, personality, and perception of risk. For example, a person may
choose to purchase a particular product because they believe it will make them feel happier or more
confident.
Overall, the nature of consumer behavior is complex and influenced by various factors.
Understanding these factors can help businesses develop effective marketing strategies and products
that meet the needs and preferences of their target audience.

Scope of consumer behaviour

Consumer behavior is a crucial aspect of marketing that involves understanding the needs,
preferences, and decision-making processes of consumers. The scope of consumer behavior is broad
and encompasses various aspects of marketing, such as product development, pricing, promotion,
and distribution.

Product Development
By understanding consumer behavior, businesses can develop products that meet the needs
and preferences of their target customers. This includes identifying the features and benefits that are
most important to customers and designing products that align with these preferences. Consumer
behavior research can also help businesses identify gaps in the market and opportunities for
innovation.

Pricing
Effective pricing strategies require an understanding of consumer behavior. By analyzing
consumer behavior data, businesses can identify the price points that are most likely to be accepted
by their target audience. This includes considering factors like consumer demographics, purchasing
habits, and perceptions of value.

Promotion
Advertising and promotion techniques are developed based on the behavior of the target
audience. By analyzing consumer behavior data, businesses can identify the most effective
communication channels and messaging strategies for their products. This includes considering
factors like consumer demographics, media consumption habits, and purchasing behavior.

Distribution

Identifying the best distribution channels for their products is another key aspect of consumer
behavior. By analyzing consumer behavior data, businesses can identify the most effective
distribution channels for their target audience. This includes considering factors like consumer
purchasing habits, geographic location, and online behavior.

Overall, the scope of consumer behavior is broad and includes various aspects of marketing.
By understanding consumer behavior, businesses can develop effective strategies that meet the needs
and preferences of their target audience, which can lead to increased sales and profitability.

Importance of consumer behaviour

Consumer behavior is an important aspect of marketing that helps businesses understand their
target customers. By studying consumer behavior, businesses can identify what motivates customers
to buy their products or services, which can help them develop effective marketing strategies. There
are several reasons why consumer behavior is important for businesses:

Understanding Customer Needs

One of the primary reasons why consumer behavior is important is because it helps businesses
understand the needs and preferences of their target customers. By analyzing consumer behavior
data, businesses can identify the features and benefits that are most important to customers, which
can inform product development and marketing strategies.

Developing Effective Marketing Strategies

Effective marketing strategies require an understanding of consumer behavior. By analyzing

consumer behavior data, businesses can identify the most effective communication channels and
messaging strategies for their target audience. This can help businesses develop advertising and
promotion techniques that resonate with their target audience, leading to increased sales and
profitability.
Identifying Opportunities for Growth

Analyzing consumer behavior data can also help businesses identify opportunities for growth.
By identifying gaps in the market and understanding consumer needs and preferences, businesses
can develop innovative products and services that meet the needs of their target audience. This can
help businesses stay ahead of their competitors and increase their market share.
Enhancing Customer Satisfaction

By understanding consumer behavior, businesses can also enhance customer satisfaction. By

identifying the features and benefits that are most important to customers, businesses can develop
products and services that meet their needs and preferences. This can lead to increased customer
loyalty and positive word-of-mouth, which can help businesses attract new customers and increase
their customer base.

Applications Of Consumer Behavior

Analyzing market opportunity

Consumer behavior study help in identifying the unfulfilled needs and wants of consumers.
This requires examining the friends and conditions operating in the Marketplace, consumer’s
lifestyle, income levels, and energy influences. This may reveal unsatisfied needs and wants.
Mosquito repellents have been marketed in response to a genuine and unfulfilled consumer need.

Selecting the target market

Review of market opportunities often helps in identifying district consumer segments with
very distinct and unique wants and needs. Identifying these groups, behave and how they make
purchase decisions enable the marketer to design and market products or services particularly suited
to their wants and needs. For example, please sleep revealed that many existing and potential
shampoo users did not want to buy shampoo fax price at rate 60 for more and would rather prefer a
low price package containing enough quantity for one or two washers. This finding LED companies
to introduce the shampoos sachet, which become a good seller.

Marketing-mix decisions
Once unsatisfied needs and wants are identified, the marketer has to determine the right mix
of product, price, distribution, and promotion. Where too, consumer behavior study is very helpful in
finding answers to too many perplexing questions. The factors of marketing mix decisions are: i)
product ii) price iii) promotion iv) distribution
Use in social and nonprofits marketing

Consumer behavior studies are useful to design marketing strategies by social, governmental,
and not for profit organizations to make their programs more effective such as family planning,
awareness about AIDS.
 UNIT II

FACTORS INFLUENCING CONSUMER BEHAVIOUR

Introduction
Consumer behavior involves the psychological processes that consumers go through in
recognizing needs, finding ways to solve these needs, making purchase decisions (e.g., whether or
not to purchase a product and, if so, which brand and where), interpret information, make plans,
and implement these plans (e.g., by engaging in comparison shopping or actually purchasing a
product).

The consumer faces numerous sources of influence. Often, we take cultural influences for
granted, but they are significant. An American will usually not bargain with a store owner. This,
however, is a common practice in much of the world. Physical factors also influence our
behavior. We are more likely to buy a soft drink when we are thirsty, for example, and food
manufacturers have found that it is more effective to advertise their products on the radio in the
late afternoon when people are getting hungry.
A person’s self-image will also tend to influence what he or she will buy an upwardly mobile
manager may buy a flashy car to project an image of success. Social factors also influence what
the consumers buy often, consumers seek to imitate others whom they admire, and may buy the
same brands.
The social environment can include both the mainstream culture (e.g., Americans are more
likely to have corn flakes or ham and eggs for breakfast than to have rice, which is preferred in
many Asian countries) and a sub-culture (e.g., rap music often appeals to a segment within the
population that seeks to distinguish itself from the mainstream population). Thus, sneaker
manufacturers are eager to have their products worn by admired athletes. Finally, consumer
behavior is influenced by learning — you try a hamburger and make sure that it satisfies your
hunger and tastes good, and the next time you are hungry, you may consider another hamburger.
Consumer behavior refers to the selection, acquisition and consumption of goods and services
to meet their needs. There are different processes involved in consumer behavior. Initially, the
consumer tries to find what products you would like to consume, and then select only those
products that promise greater utility. After selecting the products, the consumer makes an
estimate of available funds that can happen.
Finally, the consumer looks at the current prices of commodities and makes the decision about
which products to consume. Meanwhile, there are several factors that influence consumer
purchases, such as social, cultural, personal and psychological. The explanation of these factors is
as follows.
 1. Cultural factors: Consumer behavior is deeply influenced by cultural factors, such as buyer’s
culture, subculture and social class.
(a) Culture: Essentially, culture is the share of each company and is the major cause of the person
who wants culture and behavior. The influence of culture on the purchasing behavior varies from
country to country, therefore sellers have to be very careful in the analysis of the culture of
different groups, regions or even countries.
(b) Subculture: Each culture has different subcultures, such as religions, nationalities, geographical
regions, racial, etc. Marketing groups may use these groups, segmenting the market in several
small portions. For example, marketers can design products according to the needs of a specific
geographical group.
(c) Social Class: Every society has some kind of social class which is important for marketing
because the buying behavior of people in a particular social class is similar. Thus marketing
activities could be adapted to different social classes. Here we should note that social class is not
only determined by income, but also there are several other factors such as wealth, education,
occupation etc.
2. Social factors: Social factors also influence the purchasing behavior of consumers. Social factors
are: the reference groups, family, the role and status.
(a) Reference groups: Reference groups have the potential for the formation of an attitude or
behavior of an individual. The impact of reference groups vary across products and brands. For
example, if the product is visible as clothing, shoes, car etc. The influence of reference groups
will be higher. Reference groups also include opinion leader (a person who influences others
by his special skill, knowledge or other characteristics).
(b) Family: Buyer behavior is strongly influenced by a family member. So vendors are trying to find
the roles and influence of the husband, wife and children. If the decision to purchase a particular
product is influenced by the wife of a buyer then sellers will try to target women in their
advertisements. Here we should note that the purchase of roles change with changing lifestyles of
 consumers.
(c) Roles and Status: Each person has different roles and status in society in terms of groups, clubs,
family, etc. organization to which it belongs. For example, a woman working in an organization as
manager of finance. Now she is playing two roles. One is the chief financial officer and the other
one is mother. Therefore, purchasing decisions will be influenced by their role and status.
3. Personal factors: Personal factors may also affect consumer behavior. Some of the important
factors that influence personal buying behavior include lifestyle, economic status, occupation, age,
personality and self esteem.
(a) Age: Age and life-cycle have a potential impact on the purchasing behavior of consumers. It is
obvious that consumers change the purchase of goods and services over time. Family life cycle
consists of different stages as young, singles, married couples, and unmarried couples etc that help
marketers develop suitable products for each stage.
(b) Occupation: The occupation of a person has a significant impact on their buying behavior. For
example, a marketing manager of an organization is trying to buybusiness suits, while a low level
worker in the same organization buy - resistant clothing works.
(c) Economic Situation: Economic situation of the consumer has a greater influence on their buying
behavior. If income and savings a customer is high, then going to buy more expensive products.
Moreover, a person with low income and savings buy cheap products.
(d) Lifestyle: Lifestyle clients are another factor affecting import purchasing behavior of consumers.
Lifestyle refers to the way a person lives in a society and express things in their environment. It is
determined by the client’s interests, opinions, etc and activities shape their whole pattern of acting
and interacting in the world.
(e) Personality: Personality varies from person to person, time to time and place to place. Therefore,
it can greatly influence the buying behavior of customers. In fact, personality is not what one has,
but is the totality of the conduct of a man in different circumstances. He has a different
characteristic, such as dominance, aggression, confidence etc that may be useful to determine the
behavior of consumers to the product or service.
4. Psychological Factors: There are four major psychological factors that affect the purchasing
behavior of consumers. They include perception, motivation, learning, beliefs and attitudes.
(a) Motivation: The level of motivation also affects the purchasing behavior of customers. Each
person has different needs, such as physiological needs, biological needs, social needs, etc. The
nature of the requirements is that some are more urgent, while others are less pressing. Therefore,
a need becomes a motive when it is most urgent to lead the individual to seek satisfaction.
(b) Perception: Select, organize and interpret information in a way to produce a meaningful
experience of the world is called perception. There are three different perceptual processes which
are selective attention, selective distortion and selective retention. In case of selective attention,
sellers try to attract the attention of the customer, whereas, in case of selective distortion,
customers try to interpret the information in a way that supports what customers already believe.
Similarly, in case of selective retention, marketers try to retain information that supports their
beliefs.
(c) Beliefs and Attitudes: Client has specific beliefs and attitudes towards different products. Because
such beliefs and attitudes shape the brand image and affect consumer buying behavior so traders
are interested in them. Marketers can change beliefs and attitudes of customers with special
campaigns in this regard.
 UNIT – III

CONSUMER DECISION MAKING PROCESS

Three types of Consumer Decision – Making:

The three types of decision – making are nominal, limited and extended.

• Nominal decisions are made on low-involvement products. These kinds of decisions

are involved in frequent purchases of familiar brands and products, used often. This is the 'do-
think- feel' approach.
• Limited decisions are made on products not bought regularly, but which are neither
high- cost nor high-involvement products. Customers will take some time to consider their
memory of the product and make decisions based on logic. Limited decisions generally come
from a lack of brand loyalty within the category, the novelty of purchasing something new and
different, or boredom with a previous shopping habit. This is the feel-do-think approach.
• Extended decisions are made on high-involvement products that are not purchased
often (such as a car). These decisions require MUCH consideration and research, often around
unfamiliar brands or products. These purchases generally come with more risk, so more in-depth
analysis needs to take place. This typically involves reading reviews, speaking with friends and
family, and comparing specifications. This is the think-feel-do approach.

Consumer Decision Making process

The consumer decision-making process involves five basic steps. This is the process by
which consumers evaluate making a purchasing decision. The 5 steps are problem recognition,
information search, alternatives evaluation, purchase decision and post-purchase evaluation.

1. Problem recognition

The first step of the consumer decision-making process is recognizing the need for a
service or product. Need recognition, whether prompted internally or externally, results in the
same response: a want. Once consumers recognize a want, they need to gather information to
understand how they can fulfill that want, which leads to step two.

But how can you influence consumers at this stage? Since internal stimulus comes from
within and includes basic impulses like hunger or a change in lifestyle, focus your sales and
marketing efforts on external stimulus.

Develop a comprehensive brand campaign to build brand awareness and recognition––

you want consumers to know you and trust you. Most importantly, you want them to feel like
they havea problem only you can solve.
 Example: Winter is coming. This particular customer has several light jackets, but
she’ll need a heavy-duty winter coat if she’s going to survive the snow and lower temperatures.

2. Information search

When researching their options, consumers again rely on internal and external factors,
as well as past interactions with a product or brand, both positive and negative. In the
information stage, they may browse through options at a physical location or consult online
resources, such as Google or customer reviews.

Your job as a brand is to give the potential customer access to the information they
want, with the hopes that they decide to purchase your product or service. Create a funnel and
plan out the types of content that people will need. Present yourself as a trustworthy source of
knowledge and information.

Another important strategy is word of mouth—since consumers trust each other more
than they do businesses, make sure to include consumer-generated content, like customer
reviews or video testimonials, on your website.

Example: The customer searches “women’s winter coats” on Google to see what options are
out there. When she sees someone with a cute coat, she asks them where they bought it and
what theythink of that brand.

3. Alternatives evaluation

At this point in the consumer decision-making process, prospective buyers have

developed criteria for what they want in a product. Now they weigh their prospective choices
against comparable alternatives.

Alternatives may present themselves in the form of lower prices, additional product
benefits, product availability, or something as personal as color or style options. Your
marketing material should be geared towards convincing consumers that your product is
superior to other alternatives. Be ready to overcome objections e.g., in sales calls, know your
competitors so you can answer questions and compare benefits.

Example: The customer compares a few brands that she likes. She knows that she
wants a brightly colored coat that will complement the rest of her wardrobe, and though she
would ratherspend less money, she also wants to find a coat made from sustainable materials.

4. Purchase decision

This is the moment the consumer has been waiting for: the purchase. Once they have
gathered all the facts, including feedback from previous customers, consumers should arrive at
a logical conclusion on the product or service to purchase.
 If you’ve done your job correctly, the consumer will recognize that your product is the
best option and decide to purchase it.

Example: The customer finds a pink winter coat that’s on sale for 20% off. After confirming
that the brand uses sustainable materials and asking friends for their feedback, she orders the
coat online.

5. Post-purchase evaluation

This part of the consumer decision-making process involves reflection from both the
consumer and the seller. As a seller, you should try to gauge the following:

 Did the purchase meet the need the consumer identified?

 Is the customer happy with the purchase?
 How can you continue to engage with this customer?

Remember, it’s your job to ensure your customer continues to have a positive experience
with your product. Post-purchase engagement could include follow-up emails, discount
coupons, and newsletters to entice the customer to make an additional purchase. You want to
gain life-long customers, and in an age where anyone can leave an online review, it’s more
important than ever to keep customers happy.

CONSUMER BEHAVIOR MODEL

There are various consumers’ models which help in the understanding of consumer
behaviour. These are listed below. We shall discuss these briefly.

1. Economic Model
2. Psychological Model
3. Pavlovian Model
4. Input, Process Output Model—Gandhi: Philip Kotler
5. Sociological Model
6. Howarth Sheth Model
7. Engel-Blackwell-Kollat Model
8. Model of Family Decision-making
9. Nicosia Model
10. A Model of Industrial Buying Behaviour.
1. Economic Model
In this model, consumers follow the principle of maximum utility based on the law of
diminishing marginal utility. The consumer wants to spend the minimum amount for
maximising his gains.

Economic man model is based on:

Price effect: Lesser the price of the product, more will be the quantity purchased.
Substitution effect: Lesser the price of the substitute product, lesser will be the
utility of the original product bought.
Income effect: When more income is earned, or more money is available, more
will be the quantity purchased.
This model, according to behavioural scientists, is not complete as it assumes the
homo- genetic of the market, similarity of buyer behaviour and concentrates only on the
product or price. It ignores all the other aspects such as perception, motivation,
learning, attitudes, personality and socio-cultural factors. It is important to have a multi-
disciplinary approach, as human beings are complex entities and are influenced by
external and internal factors dis- cussed in Chapter 2. Thus, price is not the only factor
influencing decision-making and the economic model according to scientists have
shortcomings.

2.Psychological Model
Psychologists have been investigating the causes which lead to purchases and decision-
making. This has been answered by A.H. Maslow in his hierarchy of needs. The behaviour
of an individual at a particular time is determined by his strongest need at that time.
This also shows that needs have a priority. First they satisfy the basic needs and then go
onfor secondary needs.
The purchasing process and behaviour is governed by motivational forces.
Motivation stimulates people into action. Motivation starts with the need. It is a driving
force and also a mental phenomenon. Need arises when one is deprived of something. A
tension is created in the mind of the individual which leads him to a goal directed
behaviour which satisfies the need. Once a need is satisfied, a new need arises and the
process is continuous.
 5. Self-actualisation: Self-fulfilment

4. Ego Needs: Prestige, Status, Success, Self-respect, etc.

3. Social Needs: Affection, Friendship, Belonging, etc.

2. Safety and Security Needs: Protection, Order, Stability, etc.

1. Physiological Needs: Food, Water, Air, Shelter, Sex, etc.

Maslow’s hierarchy of needs

3. Pavlovian Learning Model

This model is named after the Russian Physiologist Ivan Pavlov. He experimented
on a dog and observed how it responded on the call of a bell and presenting it with a piece
of meat. The responses were measured by the amount of saliva secreted by the dog.
Learning

is defined as the changes in behaviour which occur by practice and, based on previous
experience. This is important to marketers as well.
The learning process consists of the following factors:

Drive
This is a strong internal stimuli which impels action. Because of the drive, a person is
stimulated to action to fulfil his desires.

Drives
Can be innate (in-born) which stem from physiological needs, such as hunger,
thirst, pain, cold, sex, etc. Learned drive, such as striving for status or social
approval.

Cause are weak stimuli that determine when the buyer will respond. We have:
(a) Triggering Cues: These activate the decision process for any purchase.
(b) Non-triggering Cues: These influence the decision process but do not activate it.
These are of two kinds:
1. Product cues are external stimuli received from the product directly, e.g., colour of
package, weight, style, price, etc.
2. Informational cues are external stimuli which provide information about the product, like
advertisement, sales promotion, talking to other people, suggestions of sales personnel,
etc.
 Response is what the buyer does, i.e., buys or does not buy.

Reinforcement
Thus, when a person has a need to buy, say clothing, and passes by a showroom and is
attracted by the display of clothing, their colour and style, which acts as a stimulus, and
he makes a purchase. He uses it, and if he likes it, an enforcement takes place and he
is happy and satisfied with the purchase. He recommends it to his friends as well, and visits
the same shop again. Learning part, thus is an important part of buyer behaviour and the
marketer tries to create a good image of the product in the mind of the consumer for repeat
purchases through learning.

Personality

Purchase
Firm’s Need Intention
marketing recognition Post-purchase
effort behaviour

Perception
Motivation

Social Product
Interest Evaluation
environment awareness Repeat
purchase

Interest breakdown Discontinuation

Attitudes

Input, process and ouput model

4. Input, Process and Output Model

This is a simple model of consumer behaviour, in which the input for the customer is the
firm’s marketing effort (the product, price, promotion and place) and the social environment.
The social environment consists of the family, reference groups, culture, social class, etc.
which influences the decision-making process. Both these factors together constitute the
input in the mind of the consumer.

Need recognition
When one is aware of a want, tension is created and one chooses a product to satisfy his
needs. There is also a possibility that a person may be aware of a product before its need is
recognised. This is indicated by the arrows going both ways from the need to the
product and vice-versa.

Product awareness
Product awareness can be had from advertisement or exposure to different types of media or
by the social circle. The awareness and the need leads to the building of interest. In
some cases, the interest may also breakdown and, the decision pro cess also stops or may be
postponed for the time being.
Evaluation
Evaluation may consist of getting more information about the product and comparing and
contrasting it with other products. This can be done theoretically or by taking a trial.
Once the evaluation is completed, the consumer’s interest may either build up and he has
intentions to buy, or he may lose interest and the decision process may again stop or be
postponed.

Intention
Once there is intention to purchase the product, the consu mer goes ahead and acts or
purchases the product. Once the product is purchased, it is used to fulfil the need and, the
more the product is used, the more the consumer becomes aware of the positive and negative
points of the product.

Post-purchase behaviour
If, after the purchase and use of the product the customer is satisfied, he is happy and
goes in for repeat purchases or recommends the same to his friends and acquaintances. If,
however, the customer is dissatisfied, he discontinues further purchase of the product
and builds a negative attitude towards it, which may be harmful to the company.
The post-purchase behaviour is very important for the marketer and the company
because it leads to proper feedback for improvement and maintaining the quality and features
desired by the product. If the customer is very happy with the purchase, he forms a good
impression about the product and the company.
Buyers Black Box

Buyers Buyers
Buyers Response
Characteristics Decision Process
Marketing Other
Cultural Problem 1. Product choice
Stimuli Stimuli
Social Recognition 2. Brand choice
Product Economical
Personal Information
Price Cultural Psychological Search 3. Dealer choice
Promotion Technological Evaluation
Place Political 4. Purchase timing
Decision
Post-purchase 5. Purchase amount
Behaviour

Buyer’s black box model

The above figure shows three stages in terms of stimuli buyer’s black box and buyer’s
response.
The consumer gets the input from the marketing effort of the firm (4 Ps) and the
other stimuli. This input is processed in the mind (Black Box), which constitutes the
characteristics of the buyer and the process of decision-making. Once the buyer has
decided to buy then, he responds in terms of his choice of product, brand, dealer, timing
and amount.
 The post-purchase behaviour of being satisfied or dissatisfied is also important, and is
shown in the decision-making process.

5. Sociological Model
This is concerned with the society. A consumer is a part of the society and he may
be a member of many groups in a society. His buying behaviour is influenced by these
groups. Primary groups of family friends and close associates exert a lot of influence on
his buying. A consumer may be a member of a political party where his dress norms are
different. As a member of an elite organisation, his dress requirements may be different,
thus he has to buy things that conform to his lifestyles in different groups.

6. Howarth Sheth Model

This model is slightly complicated and shows that consumer behaviour is complex
process and concepts of learning, perception and attitudes influence consumer behaviour.
This model of decision-making is applicable to individuals. It has four sets of variables
which are:
(i) Input
(ii) Perceptual and learning constructs
(iii) Outputs
(iv) Exogenous or external variables.
(i) Input
Some inputs are necessary for the customer for making decisions: These inputs
areprovided by three types of stimuli as
(a) Significative stimuli: These are physical tangible characteristics of the
product. These are price, quality, distinctiveness, services rendered and availability of the
product. These are essential for making decisions.
(b) Symbolic stimuli: These are the same as significative characteristics, but they
include the perception of the individual, i.e., price is high or low. Quality is upto the
mark or below average. How is it different from the other products, what services
can the product render and, what is the position of after sales service and how quickly or
easily is the product available and, from where?
(c) Social stimuli: This is the stimulus provided by family, friends, social groups, and
social class. This is important, as one lives in society and for the approval and
appreciationof the society, buying habits have to be governed.

(ii) Perceptual and learning constructs

These constructs are psychological variables, e.g., motives, attitudes, perception which
influence the consumer decision process.
The consumer receives the stimuli and interprets it. Two factors that influence his
interpretation are stimulus-ambiguity and perpetual bias.
Stimulus ambiguity occurs when the consumer cannot interpret or fully understand the
meaning of the stimuli he has received, and does not know how to respond. Perceptual
 bias occurs when an individual distorts the information according to his needs and
experiences.
These two factors influence the individual for the comprehensions and rating of the
brand. If the brand is rated high, he develops confidence in it and finally purchases it.

(iii) Outputs
By output we mean the purchase decision. After purchase there is satisfaction or
dissatisfaction. Satisfaction leads to positive attitude and increases brand comprehension.
With dissatisfaction, a negative attitude is developed. The feedback shown by the dotted
line and the solid lines shows the flow of information.

(iv) Exogenous or external variables

These are not shown in the model, and do not directly influence the decision
process. They influence the consumer indirectly and vary from one consumer to anot her.
These are the individual’s own personality traits, social class, importance of purchase and
financial status.
All the four factors discussed above are dependent on each other and influence the
decision-making process. The model though complicated, deals with the purchase
behaviourin an exhaustive manner.

7. Engel-Blackwell-Kollat Model
It consists of four components:
(i) Information processing
(ii) Central control unit
(iii) Decision process
(iv) Environmental influences.

Information processing

A shown in the diagram the information processing consists of exposure, attention,

comprehension and retention of the marketing and non-marketing stimuli. For successful
sales, the consumer must be properly and repeatedly exposed to the message. His
attention should be drawn, such that he understands what is to be conveyed and
retainsit in his mind. Central control unit

The stimuli processes and interprets the information received by an individual. This is
done by the help of four psychological factors.
(a) Stores information and past experience about the product, which serves as a standard
for comparing other products and brands.

(b) Evaluative criteria which could be different for different individuals.

(c) Attitudes or the state of mind which changes from time to time, and helps in choosing
the product.

(d) The personality of the consumer which guides him to make a choice suiting his
personality.

Decision process

This chapter is dealt with later in the text, and consists basically of problem
recognition, internal and external search, evaluation and the purchase. The decision
outcome or the satisfaction and dissatisfaction is also an important factor which
influences further decisions
Information Processing Central Control Unit Environment Influences

Stimuli Exposure Income

Information
and Culture

Personality
Attention experience

Filter
Family
Comprehension
Evaluative
Social class
criteria

Retention Physical
Attitude

Problem
recognition
Information
feedback Hold

External
search Internal search
and alternative
evaluation
Hold

External search
and alternative
evaluation

Hold

Purch asing
processes

Outcomes

Post-purchase Further
evaluation behaviour

Solid lines show flow of information, dashed lines feedback effect -Blackwell-Kollat
model of buyer behaviour

The decision process may involve extensive problem solving, limited problem
solving or routinised response behaviour. This depends on the type and value of the
product to be purchased.
 Environmental influences
The environmental influences are also shown in a separate box and consist of
income, social class, family influences, social class and physical influences and other
considerations. All these factors may favor or disfavor the purchase decisions.
8. Model of Family Decision-making
In a family decision-making model, it is important to understand how the family members
interact with each other in the context of their consumer decision-making. There are
different consumption roles played by various members of the family. These roles
are as follows:

(i) Influencers
The members who influence the purchase of the product by providing information to the
family members, the son in a family may inform the members of a new fast food joint.
He can influence the family members to visit the joint for food and entertainment.

(ii) Gate keepers

These members control the flow of information for a product or brand that they favour
and influence the family to buy the product of their choice. They provide the
information favorable to themselves and, withhold information about other product which
they do not favor.

(iii) Deciders
These are the people who have the power or, money and authority to buy. They play a
major role in deciding which product to buy.

(iv) Buyers
Buyers are the people who actually buy. A mother buying ration for the house etc.
Father buying crayons for his children.

Preparers
Those who prepare the product in the form it is actually consumed. Mother preparing
food by adding ingredients to the raw vegetable. Frying an egg for consumption,
sewing clothesfor the family, etc.

User
The person who actually uses or consumes the product. The product can be consumed
individually or jointly by all members of the family. Use of car by the family, use of
refrigerator, TV, etc.
The roles that the family members play are different from product to product. Some
products do not involve the influence of family members—vegetables bought by the
housewife. She can play many roles of a decider, preparer as well as the user. In limited
problem solving or extensive problem solving there is usually a joint decision by family
members.
 9. Nicosia Model
Field one consists of subfields one and two. Subfield one is the firm’s attributes
and the attributes of the product. The subfield two is the predisposition of the consumer
and his own characteristics and attributes, which are affected by his exposure to various
information and message, and is responsible for the building of attitude of the
consumer.

Field two is the preaction field, where the consumer goes on for research and eva
luation and gets motivated to buy the product. It highlights the means and end
relationship. Field three is the act of purchase or the decision-making to buy the product.
The customer buys the product and uses it. Field four highlights the post-purchase
behaviour and the use of the product, its storage and consumption. The feedback from
field four is fed into the firms attributes or field one, and the feedback from the experience
is responsibl e for changing the pre-disposition of the consumer and later his attitude
towards the product.
Nicosia Model is a comprehensive model of dealing with all aspects of building
attitudes, purchase and use of product including the post-purchase behaviour of the
consumer.
10. A Model of Industrial Buyer Behaviour
The purchases made in an industrial organisation involve many more people
of different back- grounds and it is more complex.
There are three main features in this model:
1. There are different individuals involved who have a different psychological make
up.
2. Conditions leading to joint decision-making by these individuals.
3. Differences of opinion on purchases or conflicts that have to be resolved to reacha
decision.
The persons involved in the decision-making are from quality control,
manufacturing, finance, research and development and other possible areas. These
may be named as purchase agents, engineers, and users, as referred to in the model.
These constitute a purchasing committee. They have:
(1a) Different backgrounds
(1b) Different information sources
(1c) Undertake active search
(1d) They have perceptual distortion
(1e) Satisfaction with past purchase.
With these characteristics, they develop certain expectations from the product
to be bought. The obvious ones are product quality, delivery time, quantity of supply,
after sales service and price. These are known as explicit objectives. There are other
objectives as well, which are the reputation of the supplier, credit terms, location of
the supplier, relationship with the supplier, technical competence and even the
personality, skill and lifestyle of the salesman. These are known as implicit
objectives.
Different individuals in the purchasing committee give emphasis on different
aspects of the product. Engineers look for quality and standardisation of the product.
Users think of timely delivery, proper installation and after sales service. Finance
people look for maximum price advantage. Thus, there are conflicting interests and
view that have to be resolved. If autonomous decisions are made, these issue do not
surface. There are conditions leading to autonomous or joint decisions.

(2a) Product specific factors

Perceived risk: With higher risks joint decisions are favoured.
Type of purchase: Items involving heavy investments are made jointly, routine
andless costly decisions can be made independently.
Time pressure: If goods are urgently required, individual decisions are favoured.

(2b) Company specific factors

size of the organisation: Larger the size of the organisation, the more the
emphasis laid on joint decision.
Organisation orientation: In a manufacturing organisation, the purchases are
domi- nated by production personnel and in a technology oriented organisation, the
decisions are based on engineers.
(3) The conflict that arises for buying decision has to be resolved. The resolution
can be done by:
(a) Problem solving
(b) Persuasion
(c) Bargaining
(d) Politicking
The fourth aspect is the influence of situational factors which must be considered.
These are economic conditions such as inflation, recession or boom, price contracts,
rationing foreign trade, strikes or lock outs. Organisational change such as a merger,
acquisition change of key personnel, etc. Sometimes these factors outweigh the
realistic criteria of decision-making.
This model explains how purchase decision are made in an industrial
organisation. All the models discussed in this chapter give us an idea of the buying
behaviour in diverse situations. An understanding of these models gives the marketer
clues to formulate his strategies according to the target audience, e.g., an individual, a
family or an industry, etc.
 UNIT IV
Product Strategy

A product strategy is a business plan that sets out the goals and objectives for a
company’s product development and marketing activities. The strategy should take into account
the company’s strengths and weaknesses, the competitive environment, the needs and wants of
target customers, and the company’s overall business strategy. In this blog, we’ll learn more
about what a product strategy means, the template, the different types, and also understand why
it is important to have a strategy in place.
A high-level plan that describes what a business aims to achieve with its products and
how it plans to achieve these goals is known as a product strategy. This strategy acts as a
roadmap to develop your products and answers questions such as who the product will serve
(product persona), how the product will benefit personas and the company goals. A product
strategy acts as a guide to allow users to know what tasks they should complete in order to
achieve the business goals. Creating a detailed product strategy will ensure that tasks are
completed on time and efficiently.

It also outlines how the product would benefit the business by describing the problem that
the product solves and how it will impact the customers. This strategy can be used to explain
what product is being built and when, it gives a clear definition of the product. It acts as a
baseline to measure success before, during, and after product development.

Product Strategy Template

1. Define your vision

2. Establish your product goals
3. Create your product initiatives

1. Define your vision

Based on the template shown above, you can describe each of the outer circles. This
consists of – competitors, personas, go-to plan, strengths, weaknesses, etc. Through this process,
you should be able to get a clear picture of what problem you are trying to solve and who this
will help in the long run. This is how you can define a vision for your product.

A product vision statement talks about the long-term mission or goal of the product. It
should be written in a concise manner such that we can articulate what the product may achieve.
It should remain static. For example, one of Google’s early vision statements was “Organise the
world’s first information and make it universally accessible and useful.”

2. Establish your product goals

After defining your vision, add goals for your product. For each goal that has been
decided, figure out a quantifiable method of tracking its success. Set a deadline for achieving
your goal.

Examples of product goals:

 Generate $1.5M in revenue in the first two years

 Increase the free-trial downloads by 40% in the upcoming 6 months
 Improve the average customer ratings

Using SMART goals is an approach that can be followed for efficient goal-setting. Read
our blog on SMART goals to learn more about the same.

3. Create your product initiatives

Once you have established the goals, you need to add them to your product roadmap for
the cross-functional teams to be able to review them, break them into smaller detailed tasks, and
begin working on them.

Examples of product initiatives:

 Increase customer value

 Improve customer satisfaction
 Break into new geographical areas
 Increase mobile adoption
 Sustain product features

Key components of a product strategy

Roman Pilcher, a product management expert, suggests that a product strategy must
contain the following key components:

 The key differentiators or USP (Unique selling proposition) of the product

 Company’s business goals in accordance with the product
 The needs that the specific product will address and it’s market

Types of Product Strategies

Here is a list of the different types of product strategies.

1. Cost Strategy

Being able to create a product strategy in a cost-effective manner is helpful. It allows us

to assess the resources that are being used and helps us determine where money can be saved.
This strategy is good for low-effort purchases and for certain industries only. If there’s any such
product that is typically similar to other products and customers do not have any loyalty towards
one particular brand, undercutting the competitor’s price point will make you a favorite among
the customer base.

2. Differentiation Strategy

This approach focuses on ensuring that your product stands out from the competition in
the market. There are several factors that can be kept in mind when differentiating your product
from others in the industry. Use of the best materials for luxury products, ground-breaking
features, or any other factors that provide a USP to your product.

3. Focus Strategy

Creating a product strategy that caters to one specific customer or buyer persona is
helpful when a company has a large customer base. It is an effective way to target a select group
of people and create a personalized solution for them. This also helps in creating brand loyalty
while acquiring new customers.

4. Quality Strategy

To stand out from your competitors, one aspect that can surely help you is the quality of
your product. Focusing on creating a product that has the highest quality in the market will help
you stand out. Several customers may go out of their way to purchase a product if it has a greater
quality compared to others in the market since it is worth their investment.

5. Service Strategy

Customers will base their decisions on customer service provided by a brand. If the
company does not provide customer service, people become wary of purchasing decisions.
Providing customers with quick after-sales service and response will attract brand loyalty like no
other.

Importance of product strategy

There are several reasons why a product strategy is important to the organization. Here
are a few reasons:

1. Provides clarity to your employees

Once a clear and well-thought-out product strategy is in place, the team will be in a better
position to deliver their best work and achieve the set targets. The developers will also have a
clear understanding of the product they are working on. It’s easy to lose sight of the goal, but
with the help of a clearly communicated strategy, you always have something to fall back on.
 The sales and marketing teams will be able to better articulate the USPs. And finally,
your customer success teams will also understand the use cases to help in providing better
customer support.

2. Helps in prioritizing the product roadmap

Building a compelling roadmap and a high-level action plan will help you prioritize the
right tasks. Without a clear roadmap and strategy, the team may prioritize the wrong tasks,
measure the wrong metrics, and misuse their time and resources. Having a clear roadmap will
help in working towards the right goals.

3. Improves your team’s tactical decisions

There is an ever-changing market and eternal factors can always affect our plans. Thus,
being able to adjust plans accordingly will help in improving the team’s tactical decision-making
skills. If you have a clear goal in mind, being able to adjust the plan or change the estimated
timelines becomes easier.

Consumer Pricing Strategy

Definition

Businesses often compete in the marketplace since each company wants to increase
profits and grow its customer base. One strategy that business professionals may implement to
increase revenue and appeal to customers is a consumer pricing strategy. If you're interested in
increasing profits, you may benefit from learning about various consumer pricing strategies.
A consumer pricing strategy is a tool that business professionals can design and
implement to establish the best price for a product or service. Business owners who sell both
goods and services can implement a consumer pricing strategy to maximize their profits. A
professional can tailor these strategies to their company to make it most effective for their
business model. You can use a consumer pricing strategy to choose a price can increase your
profits, add value for shareholders and customers and consider the demand of the market.
Various internal and external factors can influence your consumer pricing strategy. For
example, your team's marketing objectives and revenue projections may influence your strategy.
The consumer demand for your product or general market trends can affect your pricing
strategy externally. Over time, your company may implement several pricing strategies to meet
different economic needs. However, the type of strategy you implement often depends on your
industry, the competition's prices and the cost of goods you need to make your product.
Benefits of using a consumer pricing strategy
Using a consumer pricing strategy can benefit your company in a variety of ways. Not
only does a pricing strategy prepare you to make sales, but it can also affect your revenue and the
overall success of your business. Here are a few benefits of a using a consumer pricing strategy:
Cover production costs
One of the major costs for a company is the cost of production, including manufacturing,
getting raw materials and distributing goods. You can create a pricing strategy that works to
cover the costs of production. By covering these costs within the price of your products, you can
begin generating a profit for your business. This can equip you to pay employees, afford
additional company costs and expand your production.

Appeal to customers
Another benefit of a consumer pricing strategy is the ability to appeal to customers. You
can set a price that's targeted to a certain demographic, making the product affordable for your
audience. By appealing to customers through your pricing strategy, you can further develop your
brand reputation and increase customer loyalty.

Differentiate yourself from the competition

You can also differentiate yourself from the competition by using a pricing strategy,
which is a great benefit in a saturated market. For example, if there are four other companies in
your town that sell the same product as you, your price may differentiate you from the others. By
offering your goods at a strategic price, you might receive more business than your competition

Define the value of the product

Another benefit of consumer pricing strategies is the ability to define the value of your
product. While customers may determine how much they're willing to pay for a product, you can
set the original price in order to assert the value of your product. When you offer a product that's
of value, you may have the ability to charge customers a higher price, which can increase your
revenue.

Types of consumer pricing strategies

Each company may require a different type of consumer pricing strategy to most
accurately meet the needs of the organization. The industry, competition and market trends can
affect the pricing strategy that a company uses. It's common for a company to change its pricing
strategy as the company size, goals and outcomes vary. Here are a few types of consumer pricing
strategies you might implement:

Cost-based pricing
A common type of consumer pricing strategy is cost-based pricing. This strategy is
helpful for generating regular and predictable revenue for your company. This model calculates
the total cost of production, manufacturing and product distribution. Then, it uses this cost to
determine the price of the product. Typically, a business adds a percentage of production costs to
the price of the good or service. This ensures that a company turns a profit as long as they're
making sales regularly.

Competition-based pricing
Competition-based pricing focuses on the current market and the ongoing rate for the
product or service. Instead of considering the production costs, this model analyzes competitors'
prices, using these as a guide for determining its own price. This strategy works well when your
company exists in a highly saturated market. Since customers often use price as a deciding factor
in a saturated market, you can strategically price your product lower, higher or the same as your
competitors, depending on the other factors.
Value-based pricing
Another pricing strategy is value-based pricing, which chooses a price based on how
valuable customers perceive it is. For example, if customers believe a product is very valuable,
they may be willing to pay a higher price for the product. By setting a price with this strategy,
you can appeal directly to the customers. You may have the opportunity to increase your
revenue, especially if customers perceive the value of a product or service to be higher than
production costs. This may be a useful strategy for companies that specialize in designer
products or highly valuable services.

Price skimming
You might implement the price skimming strategy, which occurs when a company
introduces a product at a very high price. Then, as the demand or value decreases, so does the
price. This helps companies sell products at the highest possible price when it's in the highest
demand. This strategy is most common with companies that sell technology, since technology
can quickly become outdated as new products enter the market.
Tips for implementing a consumer pricing strategy
 Implementing a pricing strategy is a beneficial idea for businesses of all sizes. This
strategy can guide company behavior and influence other business decisions as well.
Here are a few tips for implementing a consumer pricing strategy:
 Choose the best one for your company: Each company has different needs and goals. It's
best to choose the pricing strategy that best suits your company and its current growth
trajectory so the strategy works effectively.
 Be flexible: It's very common for a company to change its pricing strategy regularly. It's
helpful to be flexible during strategy implementation so you can ensure that your
company is using the best possible strategy for its current objectives.
 Conduct preliminary research: Before you implement a consumer pricing strategy, try to
conduct preliminary research. You can assess market trends, consumer demand and other
data points that inform your strategy and make it more effective.

Distribution Strategy

Definition
Companies that make products use a distribution strategy to get them to the consumer
market, and there are several types and forms to choose from. Knowing more about distribution
strategies and the benefits of each can help you create the strategy that's right for your business.
Distribution strategy is the method used to bring products, goods and services to
customers or end-users. You often gain repeat customers by ensuring an easy and effective way
to get your goods and services to people, depending on the item and its distribution needs.
Organizations consider which distribution strategy is best while being cost-effective and
increasing overall profitability. You can even use multiple or overlapping distribution strategies
to reach target audiences and meet company goals and objectives. For example, a product might
sell better online to one demographic and via a mail-to-order catalog to another target audience
group.
 Consider basing distribution on your ideal customer, thinking about where and how they
buy products and what you can do to make purchasing your goods or services easier. The item
itself is often key to determining the right distribution strategy, type and channel. For example, if
your product is a high-end designer line of furniture, buying directly from the manufacturer may
be worth the customer's time. Or if your product is a routine, everyday item like a bottle of water,
buying through convenient and nearby shops may be more appealing to the customer.
When planning your distribution strategy, there are several factors to consider, including:

Product type

Depending on the type of product or service you offer, your distribution strategy may
vary. For example, the distribution strategy for a luxury car brand may differ from that of a paper
towel manufacturer. Most consumer purchases get categorized into these three groups:
 Routine: A routine purchase is typically a low-cost item or service a customer chooses
quickly, like gum, soda and paper products
 Limited: A limited purchase is a moderately priced item a customer spends more time
selecting than a routine purchase, like a refrigerator, couch or computer
 Extensive: An extensive purchase is often an expensive item a customer intensively
thinks about before buying, like a vehicle, house or college education

Customer base

Another factor to consider is your user, or customer, base. Depending on where your
customers typically shop, your distribution strategy varies, and often advances in technology
influence distribution, too. For example, if your target customer base for your paper towel
product is a middle-aged woman buying at a grocery store, you may choose to distribute to
various brick-and-mortar storefronts, like grocery store chains and warehouse companies. If your
ideal customer base for your customizable furniture is a high-tech affluent customer, distributing
directly from the manufacturing warehouse via online sales may work best. Types of shopping
methods preferred by consumers can include:
 E-commerce websites
 Direct mail ordering
 Storefronts, booths and shops
 Door-to-door sales
 Warehouse and transportation logistics

The capabilities and costs associated with running a warehouse and delivery logistics are
another consideration when building a distribution strategy. For example, it is a large financial
investment to have a warehouse for storing goods, a fleet of transportation vehicles like trucks
and vans and personnel to staff the warehouse and deliver the items. Depending on the storage
and delivery needs for your product or service, picking an alternative distribution strategy may
lead to higher cost savings and increased revenue.
types of distribution strategies

There are primarily two types of distribution strategies, known as direct and indirect, and
depending on the product or service, the two strategies offer different benefits and cost savings to
a company. Here's a definition of direct and indirect distribution strategy:

Direct distribution strategy: Direct distribution is when manufacturers sell and send their
products directly to consumers without the use of other parties and entities. It often requires
having a warehouse to store products and a delivery process to get them to customers.

Indirect distribution strategy: Indirect distribution strategy is when manufacturers use

intermediary businesses and entities to help logistically get products to customers. It's often most
helpful for large amounts of routine products and can create cost savings for a company.
Within these two main types of distribution strategy are more specific options, including:

 Exclusive: Exclusive distribution is when a manufacturer picks a few sales outlets to

create a level of exclusivity for an item or brand, like luxury goods or exotic vehicles.
 Intensive: Intensive distribution is when a manufacturer wants to penetrate the market by
selling its goods to as many sales outlets as possible to reach customers, most often for
affordable routine items like candy bars, household products and drink items.
 Selective: Selective distribution is a mix of exclusive and intensive distribution, giving
you more locations to sell a product while still being choosy in which stores or
partnerships to sell within, like a high-end rug manufacturer selecting a specific retail
department store to reach more customers.
 Dual: Dual distribution combines direct and selective distribution strategies to grow
market influence and also maintain direct sales with customers.
 Reverse: Reverse distribution is often less common, where an item flows from the
customer back to a company, typically for recycling or refurbishing of goods, like used
computers or other electronics.

distribution channels

A distribution channel refers to the path that services or products follow until they reach
their end-users and customers. The proper distribution channel depends on the product, who it's
serving and where it's going. For instance, a product may go from the factory to a warehouse to
the consumer. Or it may go from the factory to a wholesaler to a retail storefront to the
consumer. This series of events would be the product's distribution channel.

Here are four primary distribution channels with explanations of how they work:

Wholesale

A wholesale distribution channel is when a wholesaler purchases items in bulk from a

manufacturer and then sells them to retailers later. This is often a good way to secure products
for less money because you place a large order. Wholesalers focus on the storage and delivery of
goods and act as a trader between the manufacturer and the retailer who sells them, rarely
interacting directly with the customer.

Retail
A retail distributor is often the place an item ends up before being purchased by a
customer. Retailers can get their products by buying from wholesalers or the manufacturer
directly, and they mark up the cost of an item to earn a profit. Retailers are often thought of as
actual storefront locations, like a supermarket or department store, though with technological
advancements, retailers are also online websites, catalog companies or even phone-order
businesses.

Franchisor
A franchise distribution channel is a unique way of distributing products and services. A
business owner pays to use company branding to gain sales through flat fees and specific royalty
amounts agreed upon in a contract. Organizations and manufacturers with brand recognition and
established customer bases can benefit from this distribution channel without the everyday
responsibilities of managing each location. Some common examples of franchise distribution
channels are well-known fast-food restaurants, real estate offices and some healthcare
companies. Franchising often centers on these three types:
 Product distribution franchising
 Business format franchising
 Social franchising

Distributor

A distributor gets and transports items from manufacturers to retailers and other
locations, and it's beneficial to use this method to save on the cost of having a shipping site, staff
and logistics operation. A distributor can also benefit by having multiple clients that overlap,
creating comprehensive product groupings that generate more sales. For example, a distributor
that has separate furniture, rug and lighting manufacturers can create an all-in-one living room
package deal for the customer to buy that includes a sofa, chair, coffee and end tables and two
lamps.

examples of distribution strategies

Here are three examples of various distribution strategies using business examples from
various industries:

A toothpaste company

With this example, a toothpaste company wants to have its product sold at as many
locations as possible to reach consumers so it selects intensive distribution through both direct
and indirect outlets. It sells online via a website and ships directly to customers but also uses
indirect methods like wholesalers and distributors to sell more. With an intensive distribution
strategy, the toothpaste gets sold at places like:
  Supermarkets
 Convenience stores
 Warehouses
 Big-box retailers
 E-commerce websites

Intensive distribution strategies for everyday items like toothpaste are useful for
consumers who are loyal to a brand, buying it each time regardless of where they make the
purchase, but also for those who buy based on sales promotions, to try a new brand or variety or
to substitute for a brand they usually buy that's not in stock or costs significantly more.

A luxury watch brand

A high-end luxury watch brand company has two flagship stores, one on each U.S.
coastline. This exclusive distribution strategy leverages the prestige and rarity of its brand by
having a limited number of locations to buy a watch. By maintaining this exclusive distribution
strategy, the company also has more control over manufacturing, price, contract negotiations and
more because it involves fewer entities in the process.

The watch company may choose to overlap its exclusive distribution strategy with a
selective distribution one to garner more customers in a controlled way. For example, the
company may partner with a luxury department store that has more locations than its flagship
stores, but not as many locations as more affordable department stores in order to maintain its
luxury appeal and brand. It might be something they consider doing year-round, for a select
amount of time or special occasions, like the holiday sales season.

A neighborhood lawn care business

With this example, a small business owner may distribute its lawn care services through
direct marketing and distribution to the customer, choosing to advertise and provide all the lawn
care services themselves through an online presence, door-to-door flyer sales and a small staff.

As the company grows, it might consider franchising to other neighborhood

businesspeople who want to sell lawn care services using the name of this now established
business. The lawn care business owner can charge a flat fee to use their name and collect a
percentage of profits from each franchised area.

Types of promotional strategies:

Discounts: Offering reduced prices or markdowns on products or services to incentivize

customers to make a purchase. Examples include percentage-based discounts, buy-one-get-one
(BOGO) offers, and seasonal sales.

Coupons: Providing customers with vouchers or codes that offer discounts or special deals when
redeemed during a purchase. Coupons can be distributed through various channels, such as print
media, online platforms, or mobile applications.

Loyalty Programs: Implementing programs that reward customers for their repeat business and
encourage loyalty. These programs often involve offering exclusive discounts, points
accumulation, tiered rewards, or personalized offers to incentivize customers to choose a
particular brand repeatedly.

Free Samples: Providing customers with complimentary samples of products to introduce them
to new offerings or encourage trial. Free samples can be distributed in-store, through mail, or as
part of promotional events to generate interest and potentially lead to future purchases.

Contests and Giveaways: Organizing competitions or giveaways where customers have the
opportunity to win prizes or receive free products. Contests can involve creative submissions,
social media engagement, or random drawings to create excitement and engagement.

Referral Programs: Encouraging existing customers to refer new customers by offering

incentives or rewards for successful referrals. This strategy leverages word-of-mouth marketing
and taps into customers' networks to expand the customer base.

Product Bundling: Packaging multiple products or services together at a discounted price to

encourage customers to purchase more items. Bundling can create perceived value and provide
customers with a convenient and cost-effective way to obtain complementary products.

4. Conclusion:
Based on the findings of the research paper, it was concluded that promotional strategies have a
significant impact on consumer behavior within the retail industry.
The study found that offering discounts and promotions led to a 25% increase in sales.
In addition, the research showed that loyalty programs and free samples were also effective in
attracting and retaining customers.

5. Enhancing Marketing Role in Today's World:

 To enhance your marketing role in today's world, consider the following key points
derived from the research paper's findings:
 Utilize promotional strategies to attract and retain customers, such as offering discounts,
coupons, loyalty programs, and free samples.
 Monitor and analyze the effectiveness of different promotional tactics to optimize
marketing efforts and maximize sales.
 Implement targeted promotions based on customer preferences and behavior to increase
engagement and conversion rates.
 Leverage technology and data analytics to gather insights and make data-driven decisions
for promotional activities.
 Continuously experiment and innovate with new promotional strategies to stay ahead of
the competition and meet evolving customer needs.
 UNIT V

DIFFUSION OF INNOVATIONS THEORY

Meaning

The diffusion of innovations theory is a hypothesis outlining how new technological and
other advancements spread throughout societies and cultures, from introduction to widespread
adoption. The diffusion of innovations theory seeks to explain how and why new ideas and
practices are adopted, including why the adoption of new ideas can be spread out over long
periods.

The way in which innovations are communicated to different parts of society and the
subjective opinions associated with the innovations are important factors in how quickly
diffusion—or spreading—occurs. This theory is frequently referred to when companies are
developing a marketing strategy for new products and developing market share,

Understanding the Diffusion of Innovations Theory

The diffusion of innovations theory was developed by E.M. Rogers, a communication

theorist at the University of New Mexico, in 1962. The theory explains the passage of a new
idea through stages of adoption by different people who participate in or begin using the new
idea. The main people in the diffusion of innovations theory are:

 Innovators: Those who are open to risks and the first to try new ideas
 Early adopters: People who are interested in trying new technologies and establishing
their utility in society
 Early majority: Those who pave the way for the use of an innovation within
mainstream society and are part of the general population
 Late majority: People who follow the early majority into adopting the innovation as
part of their daily life and are also part of the general population
 Laggards: People who lag behind the general population in adopting innovative
products and new ideas

Product Characteristics

Product characteristics refer to the attributes that are added to various products to
improve product descriptions. Some examples of product characteristics are weight, shape, size,
or color. In some industries, such as the pharmaceutical industry, product characteristics play a
very important role.
 Significance of Product Characteristics

Product characteristics play a deciding role in a brand’s overall market reputation. Here
are some of its key benefits:

1. Maintain transparency: With a product that has the right accompanying product
characteristics label, box, or leaflet, there will be a sense of transparency, which buyers
appreciate.
2. Easier maintenance in warehouses: When product characteristics like manufacturing and
expiry dates are kept a record of, companies can use that data to combine stocks with the same
manufacturing and expiry dates and, subsequently, ship them out accordingly.
3. Build awareness: If a company has launched a novel product, the product characteristics sheet
can help provide awareness to the buyers about the unique features of the product.
Prerequisites for Product Characteristics and How It Works

To prepare product characteristics, it is necessary to have all the information about the
product. Therefore, it is imperative to have a copy of essential information like

 Manufacturing date
 Expiry date
 Batch number
 Product dimension
 Physical attributes
 Storage instructions (if any)
 Usage instructions (if any), and so on.

Subsequently, this information can be printed on a label, stuck to the product itself, or on
its box. Sometimes, all the characteristics are printed on a leaflet with the product.

Use Case with Product Characteristics

Suppose a medicine manufacturing company ships out its products to retailers. In

addition to every batch of a particular medicine, the company also sends out a document that
contains the product characteristics, like composition, dosage, usage, and storage, of each type of
medicine. This document helps retailers evaluate the basic features of every medicine and sell
them accordingly.
 The stages by which a person adopts an innovation, and whereby diffusion is
accomplished, include awareness of the need for an innovation, decision to adopt (or reject) the
innovation, initial use of the innovation to test it, and continued use of the innovation. There
are five main factors that influence adoption of an innovation, and each of these factors is at
play to a different extent in the five adopter categories.

1. Relative Advantage - The degree to which an innovation is seen as better than the idea,
program, or product it replaces.
2. Compatibility - How consistent the innovation is with the values, experiences, and needs
of the potential adopters.
3. Complexity - How difficult the innovation is to understand and/or use.
4. Triability - The extent to which the innovation can be tested or experimented with before
a commitment to adopt is made.
5. Observability - The extent to which the innovation provides tangible results.

Limitations of Diffusion of Innovation Theory

There are several limitations of Diffusion of Innovation Theory, which include the following:

 Much of the evidence for this theory, including the adopter categories, did not originate
in public health and it was not developed to explicitly apply to adoption of new behaviors
or health innovations.
 It does not foster a participatory approach to adoption of a public health program.
 It works better with adoption of behaviors rather than cessation or prevention of
behaviors.
 It doesn't take into account an individual's resources or social support to adopt the new
behavior (or innovation).

This theory has been used successfully in many fields including communication,
agriculture, public health, criminal justice, social work, and marketing. In public health,
Diffusion of Innovation Theory is used to accelerate the adoption of important public health
programs that typically aim to change the behavior of a social system. For example, an
intervention to address a public health problem is developed, and the intervention is promoted to
people in a social system with the goal of adoption (based on Diffusion of Innovation Theory).
The most successful adoption of a public health program results from understanding the target
population and the factors influencing their rate of adoption.

Consumer Behaviour

Consumer behaviour studies how individuals, groups, or organisations decide and utilise
resources to satisfy their needs and wants. It encompasses various psychological, social, and
cultural factors that shape the decision-making process. Understanding consumer behaviour is
crucial for businesses as it helps them identify and respond to customer needs effectively.

Consumer Behaviour change in the Digital Era

Consumer behaviour has undergone significant changes in the digital era, driven by
advancements in technology and the widespread adoption of the internet. Let's explore some key
ways in which consumer behaviour has evolved in response to the digital revolution:

1. Empowered Decision-Making

In the digital era, consumers can access abundant information at their fingertips. They
can easily research products, compare prices, read reviews, and gather insights before
purchasing. This easy access to information has empowered consumers to make more informed
choices.
Consumers no longer have to rely solely on advertisements or sales pitches but can
instead rely on authentic user reviews and recommendations. As a result, businesses need to
focus on building a positive online reputation, providing transparent and accurate information,
and ensuring the quality of their products or services.

2. Rise of Online Shopping

The digital era has witnessed a significant shift towards online shopping. eCommerce
platforms have made it convenient for consumers to browse and purchase products from the
comfort of their homes. Online retailers offer various choices, competitive prices, and
personalised recommendations based on consumer preferences and past purchases. This shift has
posed challenges for traditional brick-and-mortar stores, prompting them to establish their online
presence or adopt omnichannel strategies to stay competitive.

3. Influence of Social Media

Social media has emerged as a powerful influence on consumer behaviour. Consumers

often seek recommendations and opinions from their peers on social media before purchasing.
Influencers with a significant following and expertise in specific niches can also sway consumer
opinions and preferences. Businesses have recognised the impact of social media and are actively
leveraging these platforms to engage with their target audience, build brand awareness, and drive
sales.
4. Mobile Dominance

Smartphones have become integral to consumers' lives, transforming how they interact
with brands. Mobile devices offer convenience and accessibility, allowing consumers to browse,
shop, and interact with businesses anytime, anywhere. As a result, businesses must optimise their
websites and online experiences for mobile devices to ensure seamless navigation, fast loading
times, and a user-friendly interface. Mobile apps have also gained popularity, providing
personalised experiences and enhancing customer loyalty.

5. Personalisation and Customisation

The digital era has ushered in an era of personalised experiences. Businesses can leverage
consumer data and advanced analytics to understand individual preferences and tailor their
offerings accordingly. Personalisation goes beyond addressing customers by name; it involves
curating product recommendations, delivering relevant content, and providing customised
promotions based on previous interactions and purchase history. This focus on personalisation
helps businesses enhance customer satisfaction, build stronger relationships, and foster loyalty in
an increasingly competitive market.

Challenges for Businesses in Adapting to Digital Consumer Behaviour

Consumer behaviour in the digital era as described above brings some new problems for
companies. Here are some challenges that businesses should look out for in navigating the
changing consumer behaviour in the digital era:

1. Constantly Changing Platforms

New digital platforms and social media networks seem to emerge regularly. Businesses
must adapt to these platforms and understand where their target audience is most active. Staying
updated on platform changes, algorithms, and features can be overwhelming.

2. Information Overload

Consumers are inundated with information and content daily. Cutting through the noise
and grabbing their attention is a challenge. Businesses must create compelling, relevant, and
personalised content to stand out.

3. Privacy Concerns

Consumers are increasingly concerned about their privacy online. Stricter data protection
regulations, like GDPR, have changed how businesses can collect and use customer data.
Companies must navigate these regulations while still personalising their marketing efforts.

4. Customer Expectations

Consumers expect immediate responses to their inquiries and personalised experiences.

Meeting these expectations requires real-time monitoring and responsive customer service.
5. Global Competition

The digital era has made it easier for businesses to reach a global audience, but it has also
increased competition around the world. Standing out in a crowded market requires innovative
and strategic marketing approaches.

6. Analytics and Data Complexity

In order to understand consumer behaviour in the digital age, data plays an important
role. However, managing and making sense of vast amounts of data can be challenging.
Businesses need the right tools and expertise to analyse data effectively and use it to inform
decision-making.

7. Sustainability and Social Responsibility

Consumers increasingly expect businesses to be environmentally and socially

responsible. Companies must align their marketing efforts with their sustainability initiatives to
meet these expectations.

Navigating these challenges in the face of evolving consumer behaviour requires

businesses to be agile, data-driven, and customer-centric. Adapting to changing technology and
consumer preferences while maintaining ethical and responsible marketing practices is essential
for success in the digital era.

Adaptation of Consumer Behaviour in the Digital Age

To thrive in the digital age and effectively connect with consumers, businesses must
adapt their strategies to align with evolving consumer behaviour. Let's explore ten key strategies
that businesses can employ to adapt and succeed in the digital era:

1. Develop a Strong Online Presence

Establishing a strong online presence is crucial for reaching and engaging digital
consumers. This includes creating a user-friendly website, optimising it for search engines
(SEO), and utilising social media platforms to connect with the target audience. Regularly
updating online content and maintaining a consistent brand image across digital channels helps
build consumer trust and credibility.

2. Embrace eCommerce

With the rise of online shopping, businesses should consider integrating eCommerce into
their operations. Setting up an online store enables customers to browse and purchase products at
any time conveniently. Offering secure payment options and a seamless checkout process
enhances the customer experience and encourages repeat purchases.

3. Leverage Social Media Marketing

Social media platforms provide an excellent opportunity for businesses to connect
directly with their target audience. Developing a comprehensive social media strategy involves
identifying the platforms most relevant to the business and its target market, creating engaging
content, and actively interacting with followers. Leveraging social media advertising and
influencer collaborations can further amplify brand visibility and reach.

4. Optimise Mobile Devices

Given the dominance of mobile devices, businesses must optimise their online presence
for mobile users. This involves adopting responsive web design, ensuring fast loading times, and
providing a seamless mobile browsing experience. Mobile optimisation extends to emails, ads,
and other digital marketing assets, ensuring they are designed to be mobile-friendly and visually
appealing on smaller screens.

5. Utilise Data Analytics

Leveraging data analytics allows businesses to gain valuable insights into consumer
behaviour and preferences. By analysing data from website analytics, social media metrics, and
customer interactions, businesses can identify patterns, trends, and areas for improvement. This
data-driven approach helps make informed decisions and tailor marketing strategies to meet
consumer needs effectively.

6. Personalise the Customer Experience

Personalisation is key to enhancing the customer experience in the digital age. Utilise
data and customer profiles to deliver personalised recommendations, targeted offers, and relevant
content. Personalisation extends beyond product recommendations and can include personalised
email marketing campaigns, customised landing pages, and tailored customer support
experiences.

7. Foster Online Reviews and Testimonials

Online reviews and testimonials have a significant impact on consumer decision-making.

Encourage satisfied customers to leave reviews and testimonials on review platforms, social
media, and your website. Whether positive or negative, responding to reviews demonstrates your
commitment to customer satisfaction and helps build trust with potential customers.

8. Engage with Influencers

Influencer marketing has become an effective way to reach and engage digital
consumers. Identify influencers relevant to your industry and target audience, and collaborate
with them to promote your products or services. Influencers can provide authentic
recommendations, increase brand visibility, and drive traffic to your business.

9. Provide Exceptional Customer Service

Digital consumers expect prompt and personalised customer service. Utilise various
communication channels, such as live chat, social media messaging, and email, to provide timely
and helpful assistance to customers. Aim for quick response times, effectively address customer
inquiries and concerns, and go the extra mile to provide a positive customer experience.

10. Stay Agile and Adapt

Consumer behaviour in the digital era is constantly evolving. Stay informed about the latest
trends, emerging technologies, and changes in consumer preferences. Continually monitor and
analyse the effectiveness of your digital marketing efforts, gather feedback from customers, and
be ready to adapt and refine your strategies accordingly.