Introduction
Every one is a customer at one time or another. Production continues to flourish just like customers increases day by day for products that give value in return for consumer’s money. Although there are so many factors that influence customers to patronize product and one those ways is good marketing strategy. Good marketing function enhances competitive advantage to a firm which leads to attraction of customers.
Learning Outcomes
After studying this chapter, you should be able to:
Explain consumer market and
Explain consumer buyer behaviour
State and explain factors consumer behaviour
Differentiate different consumer behaviours
Explain business market and business buyer behaviour
Define segmentation and explain its different types
Explain market targeting and positioning
Terminology
No.
Term
Definition
1
Consumer
Individual and household who buy goods and services for personal consumption.
2
Consumer market
consists of individuals who buy a definite good or service
3
Black box
Contains marketing and other stimuli that produce certain responses.
4
Marketing stimuli
Contain product, price, place and promotion which referred to as 4Ps.
5
Other stimuli
Forces and event in the buyers’ environment such as cultural, political, economic and technological factors
6
Culture
Human attitudes and beliefs
7
Psychological factors
Factors that influence buying choices of individual comprise of motivation, perception, learning and attitude.
8
Perception
Process by which people select, organize and interpret information to form a meaningful picture of the world
9
Learning
Individual’s change in behaviour due to experience and it takes place through the interplay of stimuli, response, reinforcement and cues.
10
Business market
Market that deals with money and items than consumer market
11
Buyer behaviour
the activities and decision processes that involves in choosing between alternatives, procuring and using products or services
12
Segmentation
Splitting up of a market into different homogeneous groups of consumers
13
Market targeting
procedure of how to gets into segmented market
Personality
Unique psychological features that relative lead to consistent and longer responses to own environment
3.2 Consumer market and consumer buyer behaviour
3.2.1 Consumer market
Consumer refers to individual and household who buys goods and services for personal consumption. All final consumers combine to make up consumer market. Therefore, consumer market consists of individuals who buy a definite good or service. The Malaysian consumer market contains more than 27 million people who consume several millions of Ringgits worth of goods and services annually.
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Consumers in a country vary significantly in terms of age, level of education, fashion and taste. These consumers buy large volume of goods and services and it is very difficult to find a product that has been accepted collectively in the entire population. Small percentage of households may not consume some existing products available; therefore not everyone in the population would be a potential consumer to those products.
The allocation of consumers according to various market sectors differs in both time and space. Markets undergo and reflect the influence of opinion the privilege, fashion, tastes, and societal characteristics. However, markets also vary from place to place according to different societal structures.
Other variables that play vital roles include income and type of occupation. Less-educated individuals with lower income may be great consumers of culture.
3.2.2 Consumer buyer behaviour
Consumers make buying decision every day and companies especially large ones may engage in study regarding purchase decision to find out what consumers buy and how much they buy. Marketer’s central question is: in what way consumers respond to various marketing efforts used by company? To determine the buyer behaviour, marketer ought to figure out what is in the buyer’s black box. The black box contains marketing and other stimuli that produce certain responses. The marketing stimuli contain product, price, place and promotion which referred to as 4Ps. Other stimuli include forces and event in the buyers’ environment such as cultural, political, economic and technological factors. All these are found in buyer’s black box that subsequently turn into a set of observable buyers’ responses that include product choice, brand choice, dealer choice, purchase amount and timing. Therefore marketer that wants to understand how stimuli are converted into responses. Inside the black box, there exist two parts (1) the characteristics of the buyer that affect how the buyer perceives and react to the stimuli (2) the decision process that influence the behaviour of the buyer.
3.3 Factors Affecting consumer Behaviour
Consumers are influence by several factors such as cultural, social, personal and psychological characteristics. These factors cannot be control but must be carried along.
3.3.1 Cultural factor
Culture is defined as human attitudes and beliefs. Culture exert a broad and high degree of influence on consumer, thus, marketer needs to understand the role that it’s being playing. Obviously, culture is the most causative agent of person’s want and behaviour. Behaviour is learnable. As an individual growing up, he or she is influenced by their parents, brothers, sister and other family members who may train them what is wrong and right. They learn about their religion and culture, which helps them develop these opinions, attitudes and beliefs. These factors influence individual’s purchase behaviour. Other factors such as peer group or people may influence their choices of purchasing a particular product or service.
3.3.2 Social factor
Behaviour is influenced by a group. Group that have direct influence and to which a person belongs is referred to as membership. Reference group is a particular group of people, some people may look up be influence by this reference group even though they are not belong to the group. This reference group exerts influence towards consumer behaviour. Opinion leaders are those people that one look up to because he or she respects their views and judgements and these views may influence consumer decisions. Similarly, family, role and status effects consumer behaviour.
3.3.3 Personal factor
Personal factors that influence consumer behaviour include buyer’s age and life cycle stage, occupation, economic situation, lifestyle, personality.
Age and life cycle stage involves people changing goods and services they buy over their life times. Taste of food we eat, clothes, family, car and other recreation facilities are age related. Buying is therefore shaped by stage of the family life cycle which is regarded as stages which families pass through as they are getting maturity over time. Marketers considered target market in terms of life cycle stage and then produce suitable output and suggest marketing strategy at each stage.
On other hand, individual occupation influences goods and services purchased and economic situation affects product choice. People of different culture, social class and occupation tend to have different lifestyle.
Individual’s personality influences buying behaviour. Personality is viewed as unique psychological features that relative lead to consistent and longer responses to own environment.
3.3.4 Psychological factors
The psychological factors that influence buying choices of individual comprise of motivation, perception, learning and attitude.
Abraham Maslow hierarchy of need is used to describe how human needs influence buying behaviour at a particular time. The theory sets out to explain what motivate individuals in life. It suggests that individuals aim to meet basic psychological needs of hunger and thirst. When this has been met then individuals move up to the next stage of the hierarchy, safety needs, where the priority is on the job security and the knowing that an income will be available regularly. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people do strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognized or the need to wear branded clothes as a symbol of status. Self-actualization is the realization that an individual has reached their potential in life.
Perception refers to the process by which people select, organize and interpret information to form a meaningful picture of the world (Kotler & Armstrong, 2005).
Perception refers to the process by which people select, organize and interpret information to form a meaningful picture of the world (Kotler &Armstrong, 2005).
It is expected that a motivated person has developed readiness to act and that act is influence by one’s own perception of situation. Individual uses his five senses to flow information and individual receive information, organize and interpret according to the individual’s way.
Learning refers to individual’s change in behaviour due to experience and it takes place through the interplay of stimuli, response, reinforcement and cues. On the other hand attitude and belief are acquired through learning and doing.
3.4 Types of buying behaviour
There are four typical types of buying behaviour based on the type of products that one intends to purchase.
Complex buying behaviour is when the individual purchases a high value brand and seeks for adequate information before the purchase is made.
Habitual buying behaviour is when individual buys a product out of habit e.g. a daily newspaper.
Variety seeking buying behaviour is when individual likes to shop around and test with different products.
Dissonance reducing buying behaviour is when buyers are highly involved with the purchase of the product, because the purchase is expensive or occasional.
3.5 Business Marketing and Business buyer behaviour
3.5.1 Business Market
Business market deals with money and items than consumer market. Various producers supply goods to the market for sale to the consumer. The business market involves people who play buying roles and make purchase decision to satisfy needs. Business market differs significantly from consumer market.
3.5.2 Business buyer behaviour
Buyer behaviour can be defined as the activities and decision processes that involves in choosing between alternatives, acquiring and using products or services
Kotler and Armstrong (2005) maintained that the behaviour of buyers is influenced by various factors and Parker has broadly categorized them into two:
Endogenous factors (factors that are internal to the individual). They include needs and motives, learning, attitudes, personality and self concept.
Exogenous factors (factors that are external to the individual). These are culture, reference groups, family, social status etc.
Consumer buying process involves need recognition, information search, evaluation of the alternatives and deciding upon one of the alternatives and making the purchase decision (Kotler and Armstrong, 2005).
3.6 Segmentation, Market Targeting and Position
3.6.1 Segmentation
This refers to the splitting up of a market into different homogeneous groups of consumers. The purpose for segmentation is to allow marketing program to focus on the division of prospects that are most likely to purchase the offering.
3.6.1.1 The Need for Market Segmentation
The marketing concepts demand for understanding of customers and satisfying their needs better than the opposition. Customers needs differ and it is almost impossible to satisfy all customers by treating them in a similar way.
Mass marketing is viewed as treatment of the market as a homogenous group and offering the same marketing mix to all customers. Mass marketing allows economies of scale to be realized through mass production, distribution, and communication. The negative aspect of mass marketing is that customers’ needs and preferences differ and offering the same is doubtful to be viewed as most favourable by all customers. But if firms ignored the differences in customers’ needs, another firm is likely to enter the market with a product that serves a need of the exact group, and the current firms would lose those customers.
Target marketing recognizes the difference among the customers and does not attempt to please all the customers with the same offering. The step number one in target marketing is the identification of different market segments and their respective needs.
A market segment should be:
Quantifiable
Reachable through communication and distribution channels
Diverse in its reaction to a marketing mix
Strong (not changing quickly)
Extensive and sufficient to be gainful
A market can be segmented by various bases, and industrial markets are segmented somewhat differently from consumer markets, as described below.
Market segmentation can be done on the various bases. Industrial market is segmented to some extent differently from consumer market as provided below:
3.6.1.2 Consumer Market Segmentation
A basis for segmentation is a factor that varies among groups within a market, but it is consistent within groups. The followings are four primary bases on which consumer market can be segmented.
Geographic segmentation is based on regional variables such as region, climate, population density, and population growth rate.
Demographic segmentation is based on variables such as age, gender, ethnicity, education, occupation, income and class of the family.
Psychographic segmentation is based on variables such as values, attitudes, and lifestyle.
Behavioral segmentation is based on variables such as practice rate and patterns, price sensitivity, loyalty, and benefits required.
The most favorable bases on which market can be segmented depend entirely on the particular situation and are determined by marketing research, market trends, and managerial judgment.
3.6.1.3 Business Market Segmentation
Consumer market segmentation bases are equally applicable to businesses and organizations. The diverse nature of business markets leads to segmentation on the following bases:
Geographic segmentation – based on regional variables such as customer concentration, regional industrial growth rate and international macroeconomic factors.
Customer type – based on factors that include; the size of the organization, its industry, position etc.
Buyer behavior – based on factors such as loyalty to suppliers, habit patterns, and size of order
3.6.2 Market targeting
Market targeting deals with procedure of how to gets to those segmented market. Companies consider some variable when choosing market-targeting approach. The approach depends entirely on company resources. In a situation where the company’s resources are limited, the best approach is the concentrated marketing. Product variability is another important factor when choosing the approach.
Undifferentiated marketing is more suitable for products that are uniform. This is otherwise known as mass marketing as the firm may decide to channel its resources to the entire market with one particular product.
3.6.3 Position
When company decided which segment of the market to target, it must however decide what position it is aiming to occupy in those segment. Product position refers to method the product is defined by consumers on important features. The product occupies consumers’ mind relative to the opposing products and it deals with embedding the brands unique gain and differentiation in the mind of customer. Consumers have excess information about the products and services, the product has won their heart, therefore they cannot reassess product all the time they decide to buy.
Market positioning is a complicated process. Companies need to see how consumers perceive their product, and how differences in presentation can impact perception. Occasionally, companies engage reposition, attempting to adjust the perception of their product among the public.
The process of positioning consists of three steps (Kotler & Armstrong, 2005):
Identifying a set of possible competitive advantage upon which to build a position
Choosing the right competitive advantages
Selecting an overall position strategy
Summary
Consumer market is influence by a number of factors and it differs from business market. Companies employ strategies in marketing their product. The chapter discusses buyer behaviour and factors that influence the behaviour.
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