Basics of Marketing and Consumer Behavior

Understanding Market Environment: Marketing Environment refers to the forces or variables of the outer and inner environment of a firm that affects the marketing managements ability to build and maintain the successful relationships with the customer. The marketing environment framework consists of macro environment and micro environment. Microenvironment variables are close to the firm and include the suppliers, marketing intermediaries, customer markets, competition & publics. Microenvironment also refers to the internal environment of the company and affects not only marketing but also all the departments such as management, finance, research and development, Human resources, purchasing, operations and accounting. Macro-environment deals with the Demographic, economic, Technological, Natural, sociocultural and politico-legal environment of the markets. The following graphic shows the environmental framework.

1. Customers: Customers are the core of the marketing environment. There are different types of customers such as end consumers, business customers, government customers, international customers and retailer customers. 2. Suppliers: A slightest delay in receiving the supplies may result in dissatisfaction of the customers. The marketers have to watch the supply availability and other trends related to the suppliers. 3. Marketing intermediaries: The resellers, physical distribution firms, marketing services agencies, and financial intermediaries all make marketing intermediaries. They help in promotion of the company and sales and distribution of the companys products. Stores and warehouses are the physical distribution firms that store and transport the companys product from its origin to its destination. Other intermediaries are marketing services agencies, which are responsible for conducting marketing research, advertising, and consulting. Financial intermediaries are institutions such as banks, credit companies and insurance companies. 4. Publics: Publics is any group that has interest or impact on firms ability to meet its goals. This includes the financial publics, media publics, government publics, local publics such as NGO and citizen action organizations. While the financial publics can hinder a companys ability to obtain funds affecting the level of credit a company, the media publics can publish articles of interest regarding the company and editorials that may influence customers opinions. Similarly, government publics is capable of affecting the company by passing legislation and laws that put restrictions on the companys actions and citizen-action publics (eg. environmental groups and minority groups ) can question the actions of a company and put them in the public spotlight. 5. Competitors: Competitors are the companies with similar offerings for goods and services. To remain competitive a company must consider who their biggest competitors are while considering its own size and position in the industry. The company should develop a strategic advantage over their competitors. 6. Politico-legal factors: Political factors include how and to what degree a government intervenes in the economy. This includes monetary and tax policies of the government, labor laws, environmental laws, various trade restrictions, tariffs. Political stability is one of the main factors. This also includes the merit goods and demerit goods as per the provisions of the local government. Legal factors deal with the discrimination law, consumer law, antitrust law, employment law, and health and safety law. 7. Economic factors: Economic factors are general economic growth, interest rates, exchange rates, balance of payments, monetary policies, inflation rate etc. These factors play a very important role in business operations. These factors have the capability to alter the cost of operations, cost of capital and returns ultimately. There is a major impact of the exchange rates on exports and imports of the country. 8. Social factors: Social factors are the social and cultural aspects, which include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. They, have a major impact on demand of a firms products and services.

9. Technological factors: Technological factors include the research and development, automation, expansion of internet and other communication technologies, technology incentives and technological barriers. They affect the efficiency of the production. Outsourcing decisions mainly depend upon technological environments. 10. Natural Environment Factors: These factors include the weather, climate, and climate change, availability of water, availability of raw products etc.

Understanding Consumer Behavior: Consumer is King and Consumer is always right are the buzzwords in modern marketi ng. The activities of the marketer revolve around the consumer behavior. The firms have to provide what their consumers want and for this purpose they adopt various types of marketing strategies to reach and alter the consumers buying behavior in favor of their products and services. Consumer behavior is a dynamic, multidisciplinary and multidimensional process and studies when, why, how, and where people do or do not buy. Marketing has borrowed the elements from psychology, sociology, social anthropology and economics to explain the consumer behavior. The consumer behavior is now a distinct discipline of marketing which attempts to understand the buyer decision making process, both individually and in groups Kurt Lewin, a German-American psychologist who is also known as of the the pioneers of modern social, organizational, and applied psychology provides a very useful classification of Buyer's behavior. This is known as Lewin's Proposition. The Lewin's proposition says: B= int(P,E) The above proposition says that Buyers behavior (B) is a function of Personal Influences (P) and outside or external environmental forces (E). The most generic model of understanding the buyer behavior is stimulus-response pattern, which say that response of the consumer is a result of different types of stimuli. These stimuli are applied to the consumer and consumer in return comes up with a response. The stimuli can be marketing or environmental stimuli. The marketing stimuli are subject to manipulation by the marketer while the environmental stimuli like economy, culture are subject to consumers environment. The response is to buy and not to buy, what to buy, which brand, which dealer, which location and so on The above simple model is shown in following graphic which shows that there is a complex and continuous interaction of stimuli, consumer characteristics, and decision process and consumer responses.

Cultural & Social factors affecting Buyer Behavior: What is culture? The values, beliefs preferences and tastes passed on from one generation to another generation in the society are called culture. Culture is one of the broadest determinants of Buyers behavior. A marketer needs to understand the culture to be able to do successful marketing. Culture keeps changing and so do the values, beliefs, preferences and tastes of the people. The successful marketer needs to monitors these changes and inculcates them in the marketing strategy of the firm.

Culture is very important in Global marketing. To market a product overseas, one needs to understand the cultural taboos, social customs, preferences, religious outlook and other things. Social Factors: Man is a social animal. Every person belongs to social group or groups. Group imparts a major influence on a consumers buying decisions. These influences may be informational or normative. In psychology, it is referred to as conformity. Conformity is a process by which an individual's attitudes, beliefs, and behaviors are conditioned by what is conceived to be what other people might perceive. Solomon Eliot Asch, an American Psychologist, first explained this and it was known as Asch Phenomenon. The group influences may be the result of subtle unconscious influences, or direct and overt social pressures. Informational social influence occurs when a person turns to the members of his/ her group to obtain accurate information. Normative social influence occurs when a person conforms to be liked or accepted by the members of the group. It usually results in public compliance, doing or saying something without believing in it. The impact can be easily seen in children. The decisions of children are often based upon their groups what the other children are wearing, eating and doing. The people who affect a group like the brand ambassadors are known as Opinion Leaders who have the capability to act as trendsetters and affect the buyers behavior. Family Influences: Family is a group and one of the most dominant factors affecting the purchase decisions of person. Family often has a set of norms and has different role and status for its members. Household decision-making depends upon the role of the family members.

Personal factors affecting Buyers Behavior: Consumer behavior is also affected by internal factors such as personal & inter-personal factors. Each individual has his own set of unique needs, motives, perceptions, attitudes, learning and self-concepts, to buying decisions. Individual purchase decisions are driven by the needs, motives, perceptions, attitudes, learnings and self-concept. They have been discussed here: Needs and Motives: A need is necessary for a person to live a healthy life. Need is different than want, a deficiency of need is a dysfunction or death. Needs can be physical needs or psychological needs. Physical needs involve water, food and shelter while the examples of social need are self -esteem. Want is something that is desired. Every person has unlimited wants, but his/ her resources are limited. Thus, people cannot have everything they want and must look for the most affordable alternatives. A need is an imbalance between the consumer's actual and desired states. This imbalance needs to be corrected A marketer does the job of creating an imbalance. Marketing makes the need felt and motivates the person to correct this imbalance. The action taken to bring

the condition in equilibrium is the ultimate goal of a marketer. This action leads to person's buying decision. Perceptions: The word "perception" is derived from Latin words perceptio, percipio, which mean "receiving, collecting, and action of taking possession. Perceptions is what a person attributes the incoming stimuli gathered through five sense of hearing, sight, touch, smell, and taste. Perception is the process of attaining awareness and is dependent on the senses. Perception also involves a person's understanding which depends upon his / her Psyche; i.e. imagination, conscience, intellect, memory. Perception is widely used in management science. In consumer behavior, perception plays a very important role in driving the purchasing decisions at personal level. Attitudes: An attitude is a hypothetical construct. Attitude represents the degree of like or dislike of a person for an item/ idea/ information/event. Attitudes may be positive or negative views of a person, place, thing, or event. Attitudes affect the perception. The purchasing decisions are strongly based upon the current attitude about a product/ service / brand/ shop/ sales person. The marker's job is to create favorable attitude, which positively affect the brand preferences. Marketers need to determine the consumer attitude towards their products. Learning: Consumer learning is a process by which the consumers acquire the purchase and consumption knowledge and this experience affects the future purchases. Self-Concept: A persons multifaceted picture about himself or herself plays a very important role in the consumer behavior. The self-concept is an outcome of personal and interpersonal influences and they affect the buying behavior of a person.

Economic factors affecting Buyers Behavior: A need when identifies an object to fulfill that need becomes a want. A want backed by a buying power becomes a demand. A demand leads the person to make a purchasing decision, which is duly affected by the economic factors such as personal income, family income, consumer credit, govt. policies, etc. Personal Income: Income of a consumer is most important factor affecting the demand and subsequently the purchase decisions. Every person has unlimited wants but limited resources so higher the income higher is want backed by the buying power i.e. demand. The demands may increase or decrease depending upon the persons expectations about the future income. A persons deposable income is what is left after fulfilling the basic needs and the disposable income increases the purchasing power of the consumers. Family Income: The low-income families have lesser demands and happy and prosperous family income have more demands. Consumer Credit: The facility of credit available to the consumer increases the demand. Government Policies: Tax rates and other government policies have a great impact on the consumers buying behavior.