CHAPTER THREE

BUYING BEHAVIOR
3.1. Consumer buying behavior

Consumer buying behavior means the behavior consumers exhibit when searching for
information about product to buy, evaluate one brand against another, and when they are using
and exposing the product after using it.

In addition to a company’s marketing mix and factors present in the external environment, a
buyer is also influenced by personal characteristics and the process by which he/she makes
decisions. A buyer’s cultural characteristics, including values, perceptions, preferences, and
behavior learned through family or other key institutions, is the most fundamental determinant of
a person’s wants and behavior. Consumer markets and consumer buying behavior have to be
understood before sound marketing plans can be developed.

The consumer market buys goods and services for personal consumption. It is the ultimate
market in the organization of economic activities. In analyzing a consumer market, one needs to
know the occupants, the objects, and the buyers’ objectives, organization, operations, occasions
and outlets.

The buyer’s behavior is influenced by four major factors All of these provide clues as to how to
reach and serve buyers more effectively.

 cultural (culture, subculture, and social class),

 social (reference groups, family, and roles and statuses),
 personal (age and life cycle state, occupation, economic circumstances, lifestyle, and
personality and self-concept), and
 psychological (motivation, perception, learning, and beliefs and attitudes).

Before planning its marketing, a company needs to identify its target consumers and their
decision processes. Although many buying decisions involve only one decision maker, some
decisions may involve several participants, who play such roles as initiator, influencer, decider,
buyer, and user. The marketer’s job is to identify the other buying participants, their buying
criteria, and their influence on the buyer. The marketing program should be designed to appeal to
and reach the other key participants as well as the buyer.

The amount of buying deliberateness and the number of buying participants increase with the
complexity of the buying situation. Marketers must plan differently for four types of consumer
buying behavior: complex buying behavior, dissonance-reducing buying behavior, habitual
buying behavior, and variety-seeking buying behavior. These four types are based on whether

1|Page
the consumer has high or low involvement in the purchase and whether there are many or few
significant differences among the brands.

In complex buying behavior, the buyer goes through a decision process consisting of need
recognition, information search, and evaluation of alternatives, purchase decision, and post
purchase behavior. The marketer’s job is to understand and develop an effective and efficient
program for the target market.

3.1.1. The buyers’ decision process

The final consumer’s decision process is the way in which people gather and assess information
and make choices among alternative goods, services, organizations, people, places, and ideas. It
consists of the process itself and factors affecting the process.

The decision process consists of five basic stages (the next six sections). Factors affecting the
process are a consumer’s demographic, social, and psychological characteristics. Sometimes, all
five stages in the process are used; other times, only a few steps are utilized. At any point in the
process, it may be ended.

1. Need recognition: normally any purchase decision begins with the recognition of needs or
problem. The need may be triggered by internal stimuli such as hunger, thirst or sex. For e.g.
before thinking about purchasing something to eat a person first should be hungered. It may
also be triggered by external stimuli for e.g. a person passes a restaurant and smell nice food
that stimulates his hunger. In this case, the stimuli are external. At this stage, the marketer
should research consumers to find out what kinds of needs or problems are associated with
the product, what factors brought them about, and how they led the consumer to this
particular product. Then they can develop marketing strategies that trigger consumers
interest.
2. Information Search: Information search involves listing alternatives that will solve the
problem at hand and a determination of the characteristics of each. Search can be internal
and/or external. As risk increases; the amount of information sought also increases. Once the
information search is completed, it must be determined whether the shortage or unfulfilled
desire can be satisfied by any alternative. The internet has become a major source for
consumer shopping information.
3. Evaluation of Alternatives: The alternatives are evaluated on the basis of the consumer’s criteria
and the relative importance of these criteria. They are then ranked and a choice made. Generally,
marketers should study buyers to find out how they actually evaluate brand alternatives. If they
know what evaluative process go on, marketers can take steps to influence the buyer’s decision.
4. Purchase Decision: The purchase act involves the exchange of money or a promise to pay
for a product, or support in return of ownership of a specific good, the performance of a
specific and so on. Purchase decisions remaining at this stage center on
 The place of purchase

2|Page
  Terms
 Availability

If the above elements are acceptable, a consumer will make a purchase.

5. Post-purchase Behavior: Frequently, the consumer engages in post-purchase behavior.

Buying one item may lead to the purchase of another. Re-evaluation of the purchase occurs
when the consumer rates the alternative selected against performances standards. Cognitive
dissonance, doubt that a correct purchase decision has been made, can be reduced by follow-
up calls, extended warranties, and post-purchase advertisement.

3.1.2. Major factors influencing buying behavior

- Demographic, social, and psychological factors affect consumer decision-making

- By understanding how these factors affect decision making, a firm can fine-tune(modify)
its strategies to cater to the target market.

There are various factors affecting consumers buying behavior. These include:

1. Cultural Factors:

Cultural factors a significant impact on customer behavior. Culture is the most basic cause of a
person’s wants and behavior. Growing up, children learn basic values, perception and wants
from the family and other important groups. Marketers are always trying to spot “cultural shifts”
which might point to new products that might be wanted by customers or to increased demand.
For example, the cultural shift towards greater concern about health and fitness has created
opportunities (and now industries) servicing customers who wish to buy:

 Low calorie foods

 Health club memberships
 Exercise equipment
 Activity or health-related holidays etc.

Similarly, the increased desire for “leisure time” has resulted in increased demand for
convenience products and services such as microwave ovens, ready meals and direct marketing
service businesses such as telephone banking and insurance.

Each culture contains “subcultures” – groups of people with share values. Sub-cultures can
include nationalities, religions, racial groups, or groups of people sharing the same geographical
location. Sometimes a subculture will create a substantial and distinctive market segment of its
own. For example, the “youth culture’ or “club culture” has quite distinct values and buying
characteristics from the much older “gray generation”.

3|Page
Similarly, differences in social class can create customer groups. In fact, the official six social
classes in the UK are widely used to profile and predict different customer behavior. In the UK’s
socioeconomic classification scheme, social class is not just determined by income. It is
measured as a combination of occupation, income, education, wealth and other variables.

2. Social Factors:

A customer’s buying behavior is also influenced by social factors, such as the groups to which
the customer belongs and social status. In a group, several individuals may interact to influence
the purchase decision. The typical roles in such a group decision can be summarized as follows:

Reference Groups: - As a consumer, your decision to purchase and use certain products and
services, is influenced not only by psychological factors, your personality and life-style, but also
by the people around you with whom you interact and the various social groups to which you
belong. The groups with whom you interact directly or indirectly influence your purchase
decisions and thus their study is of great importance to the marketer.

Family: The family, as a unit, is an important of all these groups and we shall discuss it in detail.
The family is an important consumer for many products which are purchased for consumption by
all family members. It is a source of major influence on the individual members’ buying
behavior. We can identify two families which shape an individual’s consumption behavior. One
is the family of orientation that is the family in which you are born and consists of your parents,
brothers and sisters. It is from parents that we imbibe (take in) most of our values, attitudes,
beliefs and purchase behavior patterns. Long after an individual has ceased to live with his
parents, their influence of the sub-conscious mind still continues to be great. In our country,
where children continue to live with parents even after attain adulthood, the latter’s influence is
extremely important. The other kind of family is family of procreation (namely one's spouse and
children), which has a more direct influence on specific purchase decision.

Roles: An individual may participate in many groups. His position within each group can be
defined in terms of the activities he is expected to perform. You are probably a manager, and
when in your work situation you play that role. However, at home you play the role of spouse
and parent. Thus in different social positions you play different roles. Each of these roles
influences your purchase decisions.

Status: Status is often measured by the degree of influence an individual exerts in the behavior
and attitude of others. People buy and use products that reflect their status. The managing
director of a company may drive a Mercedes to communicate his status in society.

3. Personal Factors:

4|Page
Age and life cycle stage: Like the social class the human life cycle can have a significant impact
on consumer behavior. The life cycle is an orderly series of stages in which consumer attitude
and behavioral tendencies evolve and occur because of developing maturity, experiences,
income, and status. Marketers often define their target market in terms of the consumers’ present
lifecycle stage. The concept of lifecycle as applied to marketing will be discussed in more
details.

Occupation and Income: Today people are very concerned about their image and the status in
the society, which is a direct outcome of their material prosperity. The profession or the
occupation a person is in again has an impact on the products they consume. The status of a
person is projected through various symbols like the dress, accessories and possessions.

Life Style: Our life styles are reflected in our personalities and self-concepts, same is the case
with any consumer. We need to know what a life-style is made of. It is a person’s mode of living
as identified by his or her activities, interest and opinions. There is a method of measuring a
consumer’s lifestyle. This method is called as the psychographics-which is the analysis
technique used to measure consumer lifestyles-people activities, interest and opinions. Then
based upon the combinations of these dimensions, consumers are classified. Unlike personality
typologies, which are difficult to describe measure lifestyle analysis has proven valuable in
segmenting and targeting consumers according to their lifestyle classification.

Personality: Personality is the sum total of an individual’s enduring internal psychological traits
that make him or her unique. Self-confidence, dominance, autonomy, sociability, defensiveness,
adaptability, and emotional stability are selected personality traits. People who have self-
confidence have different purchasing behavior than people who have no self-confidence.

4. Psychological Factors:

Motivation: Motivation involves the positive or negative needs, goals, and desires that impel a
person to or away from certain actions. By appealing to motives (reasons for behavior), a
marketer can generate motivation. Economic and emotional motives are possible. Each person
has distinct motives for purchases; these change by situation and over time.

Consumer Needs and Motivations: We all have needs we consume different goods and
services with the expectation that they will help fulfill these needs. When a need is sufficiently
pressing, it directs the person to seek its satisfaction. It is known as motive. All our needs can be
classified into two categories – primary and secondary. Primary needs or motives are the
physiological needs, which we are born with, such as the need for air, water, food, clothing,
shelter and sex. The secondary needs are our acquired needs, which we have developed in
response to the individuals’ psychological make-up and his relationship with other members of
the society.

5|Page
The secondary needs 0many include the need for power, prestige, esteem, affection, learning,
status etc. clothing is a primary need for all of us. But the need for three-piece tweed suit, or
bananas brocade sari or silk kimonos are expressions of our acquired needs. The man wearing a
three-piece tweed suit may be seeking to fulfill his status need or his ego need by impressing his
friends and family.

All human needs can be classified in to five hierarchical categories and this hierarchy is
universally applicable. The theory of hierarchy of needs can be ranked in order of importance
from the low biological needs to the higher level psychological needs. Each level of need is
fulfilled, people keep moving on the next higher level of need.

3.2. Organizational buying behavior

Business market is the collection of buyers who are buying products and services for resale
purpose, or for using it in day to day operation or to use it to make another product. Let us see
the difference between consumer market and business market.

3.2.1. Characteristics of business market

a. Organizational consumers purchase capital equipment, raw materials, semi-finished
goods, and other products for use in further production or operations or for resale to
others, whereas final consumers usually acquire the finished items for personal, family,
or household use.
b. Organizational consumers are likely to require exact product specifications. Final
consumers more often buy on the basis of description, style, and color.
c. Organizational consumers often use multiple-buying responsibility, in which two or more
employees formally participate in complex or expensive purchase decisions. Final
consumers employ it less frequently and less formally.
d. Organizational consumers more frequently employ competitive bidding and negotiation.

3.2.2. Organizational Buying situations

There are three major types of buying situations. At one extreme is the straight re-buy, which is a
fairly routine decision. At the other extreme is the new task, which may call for thorough
research. In the middle is the modified re-buy, which requires some research.

In a straight re-buy, the buyer reorders something without any modifications. It is usually
handled on a routine basis by the purchasing department. Based past buying satisfaction, the
buyer simply chooses. They often propose automatic reordering systems so that the purchasing
agent will save reordering time. “Out” suppliers try to offer something new or exploit
dissatisfaction so that the buyer will consider them.

In a modified re-buy, the buyer wants to modify product specifications, prices, terms, or
suppliers. The modified re-buy usually involves more decision participants than does the straight
re-buy. The in suppliers may become nervous and feel pressured to put their best foot forward to
6|Page
protect an account. Our suppliers may see the modified re-buy situation as an opportunity to
make a better offer and gain new business.

A company buying a product or service for the first time faces a new-task situation. In such
cases, the greater the cost or risk, the larger the number of decision participants and the greater
their efforts to collect information will be. The new -task situation is the marketer’s greatest
opportunity and challenge. The marketer not only tires to reach as many key buying influences as
possible but also provides help and information.

The buyer makes the fewest decisions in the straight re-buy and the most in the new-task
decision. In the new-task situation, the buyer must decide on product specifications, suppliers,
price limits, payment terms, order quantities, delivery times, and service terms. The order of
these decision varies with each situation, and different decision participants influence each
choice.

Many business buyers prefer to buy a packaged solution to a problem from a single seller.
Instead of buying and putting all the components together, the buyer may ask sellers to supply
the components and assemble the package or system. The sale often goes to the firm that
provides the most complete system meeting the customer’s needs. Thus, systems selling are
often a key business marketing strategy for winning and holding accounts.

Sellers increasingly have recognized that buyers like this method and have adopted systems
selling as a marketing too. Systems selling are a two-step process. First, the supplier sells a group
of interlocking products. For example, the supplier sells not only glue, but also applicators and
dryers. Second, the supplier sells a system of production, inventory control, distribution, and
other services to meet the buyer’s need for a smooth-running operation.

Systems selling are a key business marketing strategy for winning and holding accounts. The
contract often goes to the firm that provides the most complete solution to the customer’s needs.
For example, the Indonesian government requested bids to build a cement factory near Jakarta.
An American firm’s proposal included choosing the site, designing the cement factory, hiring the
construction crews, assembling the materials and equipment, and turning the finished factory
over to the Indonesian government. A Japanese firm’s proposal included all of these services,
plus hiring and training workers to run the factory, exporting the cement through their trading
companies, and using the cement to build some needed roads and new office buildings in Jakarta.
Although the Japanese firm’s proposal cost more, it won the contract. Clearly, the Japanese
viewed the problem not as just building a cement factory (the narrow view of systems selling)
but or running it in a way that would contribute to the country’s economy. They took the
broadest view of the customer’s needs. This is true systems selling.

3.2.3. Decision making process in organizational buying

7|Page
Figure 6.3 lists the eight stages of the business buying process. Buyers who face a new-task
buying situation usually go through all stages of the buying process. Buyers making modified or
straight re-buys may skip some of the stages. We will examine these steps for the typical new-
task buying situation.

Problem General need Product Supplier

recognition description Specification search

Supplier Order-routine Performance

Proposal
selection specification review
solicitation

Problem Recognition

The buying process begins when someone in the company recognizes a problem or need that can
be met by acquiring a specific product or service. Problem recognition can result from internal or
external stimuli. Internally, the company may decide to launch a new product that requires new
production equipment and materials. Or a machine may break down and need new parts. Perhaps
a purchasing manager is unhappy with a current supplier’s product quality, service, or prices.
Externally, the buyer may get some new ideas at a trade show, see an ad, or receive a call from a
salesperson who offers a better product or a lower price. In fact, in their advertising, business
marketers often alert customers to potential problems and then show how their products provide
solutions.

General Need Description

Having recognized a need, the buyer next prepares a general need description that describes the
characteristics and quantity of the needed item. For standard items, this process presents few
problems. For complex items, however, the buyer may have to work with others – engineers,
users, consultants – to define the item. The team may want to rank the importance of reliability,
durability, price, and other attributes desired in the item. In this phase, the alert business
marketer can help the buyers define their needs and provide information about the value of
different product characteristics.

Product Specification

The buying organization next develops the item’s technical product specifications, often with
the help of a value analysis engineering team. Value analysis is an approach to cost reduction in
which components are studied carefully to determine if they can be redesigned, standardized, or
made by less costly methods of production. The team decides on the best product characteristics

8|Page
and specifies them accordingly. Sellers, too, can use value analysis as a tool to help secure a new
account. By showing buyers a better way to make an object, outside sellers can turn straight
re-buy situations into new-task situations that give them a chance to obtain new business.

Supplier Search

The buyer now conducts a supplier search to find the best vendors. The buyers can compile a
small list of qualified suppliers by reviewing trade directories, doing a computer search, or
phoning other companies for recommendations. today, more and more companies are turning to
the internet to find suppliers. For marketers, this has leveled the playing field – the Internet gives
smaller suppliers many of the same advantages as larger competitors.

The newer the buying task, and the more complex and costly the item, the greater the amount of
time the buyer will spend searching for suppliers. The supplier’s task is to get listed in major
directories and build a good reputation in the marketplace. Salespeople should watch for
companies in the process of searching for suppliers and make certain that their firm is
considered.

Proposal Solicitation

In the proposal solicitation stages of the business buying process, the buyer invites qualified
suppliers to submit proposals. In response, some suppliers will spend only a catalog or a
salesperson. However, when the item is complex or expensive, the buyer will usually require
detailed written proposals or formal presentations from each potential supplier.

Business marketers must be skilled in researching, writing, and presenting proposals in response
to buyer proposal solicitations. Proposals should be marketing documents, not just technical
documents. Presentations should inspire confidence and should make the marketer’s company
stand out from the competition.

Supplier Selection

The members of the buying center now review the proposals and select a supplier or suppliers.
During supplier selection, the buying center often will draw up a list of the desired supplier
attributes and their relat\\ive importance. In one survey, purchasing executives listed the
following attributes as most important in influencing the relationship between supplier and
customer; quality products and services, on-time delivery, ethical corporate behavior, honest
communication, and competitive prices. Other important factors include repair and servicing
capabilities, technical aid and advice, geographic location, performance history, and reputation.
The members of the buying center will rate suppliers against these attributes and identify the best
suppliers.

Buyers may attempt to negotiate with preferred suppliers for better prices and terms before
making the final selections. In the end, they may select a single supplier or a few suppliers. Many

9|Page
buyers prefer multiple sources of supplies to avoid being totally dependent on one supplier and
to allow comparisons of prices and performance of several suppliers over time. Today’s supplier
developments managers want to develop a full network of supplier partners that can help the
company bring more value to its customers.

Order-Routine Specification

The buyer now prepares an order-routine specification. It includes the final order with the chosen
supplier or suppliers and lists items such as technical specifications, quantity needed, expected
time of delivery, return policies, and warranties. In the case of maintenance, repair, and operating
items, buyers may use blanket contracts rather than periodic purchase orders. A blanket contract
creates a long-term relationship in which the supplier promises to resupply the buyer as needed
at agreed prices for a set time period. A blanket order eliminates the expensive process of
renegotiating a purchase each time that stock is required. It also allows buyers to write more, but
smaller, purchase orders, resulting in lower inventory levels and carrying costs.

Blanket contracting leads to more single-source buying and buying more items from that source.
This practice locks the supplier in tighter with the buyer and makes it difficult for other suppliers
to break in unless the buyer becomes dissatisfied with prices or service.

Performance Review

In this stage, the buyer reviews supplier performance. The buyer may contract users and ask
them to rate their satisfaction. The performance review may lead the buyer to continue, modify,
or drop the arrangement. The seller’s job is to monitor the same factors used by the buyer to
make sure that the seller is giving the expected satisfaction.

We have described the stages that typically would occur in a new-task buying situation. The
eight-stage model provides a simple view of the business buying-decision process. The actual
process is usually much more complex. In the modified re-buy or straight re-buy situation, some
of these stages would be compressed or bypassed. Each organization buys in its own way, and
each buying situation has unique requirements.

Different buying center participants may be involved at different stages of the process. Although
certain buying-process steps usually do occur, buyers do not always follow them in the same
order, and they may add other steps. Often, buyers will repeat certain stages of the process.
Finally, a customer relationship might involve many different types of purchases ongoing at a
given time, all in different stages of the buying process. The seller must manage the total
customer relationship, not just individual purchases.

3.2.4. Factors influencing organizational buying Decision

Business buyers are subject to many influences when they make their buying decisions. Some
marketers assume that the major influences are economic. They think buyers will favor the

10 | P a g e
supplier who offers the lowest price or the best product or the most service. They concentrate on
offering strong economic benefits to buyers. However, business buyers actually respond to both
economic and personal factors. Far from being cold, calculating, and impersonal, business buyers
are human and social as well. They react to both reason and emotion.

Environmental Factors

Business buyers are influenced heavily by factors in the current and expected economic
environment, such as the level of primary demand, the economic outlook, and the cost of money.
As economic uncertainty rises, business buyers cut back on new investments and attempt to
reduce their inventories.

An increasingly important environmental factor is shortages in key materials. Many companies

now are more willing to buy and hold larger inventories of scarce materials to ensure adequate
supply. Business buyers also are affected by technological, political, and competitive
developments in the environment. Culture and customs can strongly influence business buyer
reactions to the marketer’s behavior and strategies, especially in the international marketing
environment. The business marketer must watch these factors, determine how they will affect the
buyer, and try to turn these challenges into opportunities.

Organizational Factors
Each buying organization has its own objectives, policies, procedures, structure, and systems,
and the business marketer must understand these factors well. Questions such as these arise:
How many people are involved in the buying decision? Who are they? What are their evaluative
criteria? What are the company’s policies and limits on its buyers?

Interpersonal Factors
The buying center usually includes many participants who influence each other, so interpersonal
factors also influence the business buying process. However, it is often difficult to assess such
interpersonal factors and group dynamics. Managers do not wear labels that identify them as
important or unimportant buying center participants, and powerful influencers are often buried
behind the scenes. Nor does the highest-ranking buying center participant always have the most
influence. Participants may influence the buying decision because they control rewards and
punishments, are well liked, have special expertise, or have a special relationship with other
important participants. Interpersonal factors are often very subtle. Whenever possible, business
marketers must try to understand these factors and design strategies that take them into account.

Individual Factors
Each participant in the business buying-decision process brings in personal motives, perceptions,
and preferences. These individual factors are affected by personal characteristics such as age,
income, education, professional identification, personality, and attitudes toward risk. Also,
buyers have different buying styles. Some may be technical types who make in-depth analyses of

11 | P a g e
competitive proposals before choosing a supplier. Other buyers may be intuitive negotiators who
are adept at pitting the sellers against one another for the best deal.

CHAPTER FOUR
MARKET SEGMENTATION, TARGETING AND POSITIONING

4.1. Market Segmentation

Market segmentation means the process of dividing the whole market for a product into several
smaller, internally homogenous groups. I.e. it is dividing a market into distinct groups of buyers
with different needs, characteristics, or behavior who might require separate products of
marketing mixes. A company that practices market segmentation recognizes that buyers differ in
their needs perceptions, and buying behaviors. Hence, the company tries to isolate the broad
segments that make up the market and adapts its offers to more closely match the needs of one or
more segments. The essence of segmentation is that the members of each group are similar with
respect to the factors that influence demand. Hence, sometimes the ability to segment markets
effectively is considered as a major element for company success.

4.1.2. Basis for segmenting consumer market

Two broad groups of variables are used to segment consumer markets. Some researches try to
form segments by looking at consumer’s characteristics. They commonly use Geographic,
demographic and psychographics characteristics. Other researchers try to form segments by
looking at consumer responses (behavior) to benefit sought, use occasions or brands.

Once the segments are formed, the researcher sees whether different consumer characteristics are
associated with each customer response segment. For example, the researcher might examine
whether people who want “quality” versus “low price” in buying an automobile differ in their
geographic and psychographic makeup.

The major segmentation variables – geographic, demographics, psychographics and behavioral

segmentation can be used singly or in combination.

Geographic Segmentation

This calls for dividing the market into different geographical units such as nations, states,
regions, countries, cities or neighborhoods. The company can decide to operate in one or a few
geographic areas or operate in all but pay attention to local variations in geographic needs and
preferences.

12 | P a g e
Demographic Segmentation

In demographic segmentation, the market is divided into groups on the bases of demographic
variables such as age, family size, gender, income, occupation, education, religion, race,
generation, nationality or social class.

Demographic variables are the most popular bases for distinguishing customer groups. One
reason is that consumer wants, preferences and usage rates are often highly associated with
demographic variables. Another is that demographic are easier to measure than most other types
of variables.

Psychographic Segmentation

In psychographic segmentation, buyers are divided into different groups on the basis of life style
and/or personality. People within the same demographic group can exhibit very different
psychographic profile.

Behavioral Segmentation

Behavioral segmentation focuses on product related behavior of customers. This focuses on such
attributes as product usage rates (heavy users, medium users or light users), the benefits derived
from the product (benefit sought), attitude towards the product (enthusiastic, positive, indifferent,
negative, and hostile), buyers’ readiness stage (unaware, aware, informed, interested, desirous,
and intending to buy), etc.

4.1.3. Importance of segmentation

Buyers are too numerous, too widely scattered and too varied in their needs and buying practices.
Moreover, the companies themselves vary widely in their ability to serve different segments of
the market. Rather than trying to compete in an entire market, each company must identify the
part of the market that it can serve best and most profitably.

To choose its markets and serve them well, many companies are embracing target marketing. In
target marketing, sellers distinguish the major market segments, target one or more of those
segments, and develop products and marketing programs tailored to each segments. Instead of
scattering their marketing effort, they can focus on the buyers whom they have the greatest
chance of satisfying.

Criteria’s for effective segmentation

13 | P a g e
There is no underlying theory to the process of market segmentation. It follows that what is an
appropriate basis for segmenting one market may not be appropriate to other markets. Before we
begin to look at the bases on which marketers can segment any given market, we need to be
aware of requirements by which the effectiveness of any segmentation basis can be assessed. We
will consider here five important criteria.

Market segments must be:

a) Measurable – The size purchasing power and profiles of the segments can be measured.
b) Substantial – the market segments are large or profitable enough to serve
c) Differentiable - the segments are conceptually distinguishable and respond differently to
different marketing mix elements and programs.
d) Accessible – the market segments can be effectively reached and served
e) Actionable – effective programs can be designed for attracting and serving the segment.

4.2. Target Marketing

After a market is segmented, the company must decide which and how many segments to serve.
This is what we call market selection (target marketing). A target market consists of a set of
buyers who share common needs or characteristics that the company decides to serve. In
selecting markets, it is advisable for companies to consider the followings:

 First, target markets should be compatible with the organization’s goals and image.
 Second, the segment’s opportunity should commensurate with the company’s resource.
 Third, the segment must be profitable.
 Fourth, a company ordinarily should seek a market where there are the least and
smallest competitors.

There are three alternative strategies in target marketing:

1. Aggregation strategy: (undifferentiated marketing or mass strategy): - a firm might

decide to ignore market segment differences and go after the whole market with one offer
(treating the total market as a single segment). An aggregate market’s members are
considered to be alike with respect to demand for the product i.e. customers are willing to
make some compromises on less important dimensions in order to enjoy the primary benefit
the product offers. Hence, this approach focuses on what is common among consumers rather
than what is different. The company designs a product and a marketing program that will
appeal to the largest number of buyers. It relies on mass distribution and mass advertising
and one pricing strategy and superior image in the people’s minds. Undifferentiated
marketing provides cost economies. The narrow product line keeps down production,
inventory and transportation costs. The undifferentiated advertising program keeps down
advertising costs. The absence of segments marketing research and planning lowers the costs
of marketing research and product management. But it may not be advantageous to use this
approach in today’s competitive environment. This is because this approach targets its

14 | P a g e
 products at everybody or the average customer. The fallacy of developing products directed
at average customer is that relatively a few customers are exist. Typically, population is
characterized by diversity. An average is simply midpoint in some set of characteristics.
Because most customers are not average they are not likely to be attracted to an average
product. Rather they tend to use the products of other companies that appear to tailor to their
specific needs. But, this by no means that there is no any circumstance that this approach can
be practiced. It may be applied when the total market for the type of product under
consideration (the majority of customers in the total market) are likely to respond in very
similar fashion to one marketing mix. In addition, it may be appropriate for firms that are
marketing an undifferentiated, staple product like salt or sugar. For most customers sugar is
sugar and salt is salt.
2. Single segment strategy (Concentrated marketing): - is selecting one segment among
many segments. Then one marketing mix (program) will be designed to reach this market
segment. This approach is desirable when the company has limited resource to serve many
segments. Apart from this, it enables companies to penetrate new market in depth and to
acquire reputation as a specialist in that market. No matter how this advantage, it may turn
out to be a little bit disadvantageous from the risk point of view. In this approach, the
company invests the whole of its resources in a single market and hence if anything wrong
happens with that market, say if the market declines, the seller will suffer considerably.
3. Multiple segment strategy (differentiated marketing):- When a firm selects two or more
market segments to serve. A separate marketing mix (program) is designed for each of such
market segments. Companies pursuing this strategy hope that a stronger position in several
segments will strengthen consumers’ over all identification of the company with the product
category. This strategy may provide the company with higher sales as compared to other
strategies and of course minimizes the vulnerability of the firm for risk as it operates in more
than one segment. No matter how, companies advocating this approach should recognize that
the costs associated with this strategy is relatively greater than the other approaches. This is
so; first because marketing for different segments requires producing different kinds of
products tailored to each segment hence, production costs are obviously greater. Second, the
company should come up with different promotional and distribution programs for each
segment, which in turn keeps the associated costs up.

4.3. The Concept of Positioning

After segmenting and targeting its market, then the company should develop marketing mix
program tailored to each targeted market so that customers in each target market will respond in
favor of the company’s product. This, the act of – designing the company’s offering and image to
occupy a distinctive place in the mind of the target customers is what we call positioning. The
end result of positioning is the successful creation of a customer focused value proposition, a
cogent reason why the target market should buy the product. In positioning, the firm will decide
upon the nature of the product i.e. form, attribute, performance quality, conformance quality,

15 | P a g e
durability reliability etc aspects of the product in light with each segment, the pricing strategy,
promotional approach and distribution strategy associated with each segment.

Positioning task consists of three steps: identifying a set of competitive advantage upon which to
build a position, selecting the right competitive advantages, and effectively communicating and
delivering the chosen position to the market.

A. Identifying possible competitive advantage: - Consumers typically choose products that

give them the greatest value. Thus the key to success is to understand customer needs and buying
process better than competitors do. That means a firm should come up with some kind of
benefits to customers that make it different from competitors so that customers will be attracted
to the company’s products than competitor products. To this end, a company needs to know on
what grounds it can make its offers peculiar from competitors. A company’s offer can be
differentiated along the lines of product, services, people or image.

1. Product differentiation: - Physical products vary in their potential for differentiation. At one
extreme we find products that allow little variation and at the other extreme products capable of
high differentiation. Companies can differentiate their products on such attributes as features,
performance, durability, reliability, reparability style and design.

2. Service differentiation: Beyond differentiating its physical product, a firm can also
differentiate the service that accompanies the product. Some companies gain competitive
advantage through speed, convenient, careful delivery, installations, customer training, customer
consultancy service and maintenance and repair.

3. Personnel differentiation: companies can get competitive advantage through hiring and
training better people than their competitors do. People differentiation requires that a company
select its customers –contact people carefully and trained them well.

4. Channel differentiation: companies can gain competitive advantage through the way they
design their distribution channel’ coverage, expertise and performance.

5. Image differentiation: Buyers respond differently to company and brand image. Image
refers to the way the public perceives the company or its product.

B. Selecting the right competitive advantage: suppose that a company is fortunate enough to
discover several potential competitive advantages. It now must choose the ones on which it will
build its positioning strategy. It must decide how many differences to promote and which ones.

How many to promote: there is no fast and hard rule in this regard. A company may select as
many differentiation bases as it needs. Today in a time when mass marketing is fragmenting in
favor of small segments, companies most often tend to broaden their positioning strategy by
accommodating more than one differentiation basis. However, as they increase the number of
claims of their brands, they risk disbelief and a loss of clear positioning.

16 | P a g e
Which difference to promote: Not all brand differences are meaningful or worthwhile, not
every difference is a good differentiator. Each difference has a potential to create company costs
as well as customer benefits. Therefore, the company must carefully select the ways in which it
will distinguish itself from competitors. A difference is worth establishing to the extent that it
satisfies highly valued benefit to customers (important), possibility to deliver it in distinct way
than competitors (distinctive), the difference must be presented in superior ways than it is
presented by competitors (superior), it should be communicable and visible to customers
(communicability), it should be difficult for competitors to copy the difference (preemptive), it
should be affordable at prices desired by buyers (affordability), and it should be profitable to the
company.

C. Communicating and delivering the chosen position: - Once it has chosen the position, the
company must take strong steps to deliver and communicate the desired position to target
customers. All company’s marketing mix elements should support the positioning strategy.
Positioning calls for concrete action not talk. E.g. if the company decides to position on better
quality and service, it should not only communicate these differentiation bases to the prospective
target markets but also should deliver it. Otherwise, it bound to fail sooner or later even if its
positioning strategy is the best one.

17 | P a g e