MODULE-3 – IDENTIFYING & SELECTING MARKETS, CONSUMER

BUYING BEHAVIOR, CONSUMER DECISION MAKING PROCESS,

MARKET SEGMENTATION, TARGETING, SEGMENTING CONSUMER
MARKETS AND BUSINESS MARKETS AND POSITIONING

1. What constitutes the “Niche marketing”?- 5 marks

Ans: Marketing segments are normally- large identifiable groups within a market. For eg,
nonsmokers, occasional smokers, regular smokers and heavy smokers.
A niche is a more narrowly defined group, typically a small market whose needs are not
being well served. Marketers usually identify niches by dividing a segment into sub
segments or a group with a distinctive set of traits who may seek a special combination of
benefits. For eg, the heavy smoker segment may include sub segments of heavy smokers
with emphysema, heavy smokers with emphysema who are overweight.
While segments are fairly large and thus normally attract several competitors, niches are
fairly small and normally attract only one or a few competitors. Niches typically attract
smaller companies. Niche marketers presumably understand theirs niche’s needs so well
that their costumers willingly pay a price premium.
For eg., Ferrari gets a high price for its cars because its loyal buyers feel that no other
automobile comes close to offering the product-service-membership benefit bundle that
Ferrari does.
2. What is “Brand equity”?-5 marks
Ans: Brands vary in the amount of power and value they have in the marketplace. At one
extreme are brands that are not known by most buyers in the marketplace.
Brand equity is highly related to how many of a brand’s costumers are in classes 3, 4, or
5. It is related, according to Aaker, to the degree of brand-name recognition, perceived
brand quality, strong mental and emotional associations, and other assets such as patents,
trademarks, and relationships.
Certain companies are basing their growth on acquiring and building rich brand
portfolios.
Eg: Grand Metropolitan acquired various Pillsbury brands, Green Giant vegetable,
Haagen-Dazs ice cream, and Burger King.

3. Construct a simple model of consumer buyer behavior ( 5 or 10 marks)

Ans: The stages of consumer buying –decision process are
1. Need recognition: The consumer is moved to action by a need or desire.
Need may be internal or external.
Eg: feeling hungry.
2. Identification of alternatives: the consumer identifies alternative products and brands
and collects in information about them. eg: there may be many food items available for
the people.
3. Evaluation of alternatives: The consumer weighs the pros & cons. of the alternatives
identified. eg: among the available food items buyer will think about each n every item.
4. Decisions: The consumer decides to buy or not to buy, and makes other decisions
related to the purchase. eg: here buyer purchases the best possible alternative or food
item.
5. Post Purchase Behavior: The consumer seeks reassurance that the choice made was
correct one. Eg: In this stage, buyer will repeat the same buying behavior if he is satisfied
with that product if not he will switch over to other items.
Although the model is a useful starting point for examining purchase decisions, the
process is not always as straightforward as it may appear consider this possible
variations.
1. Consumer can withdraw at any stage prior to the actual purchase of if the need
diminishes or no satisfactory alternatives are available.
2. The stages are of usually different lengths, may overlap, and some may be even or
skipped.
3. The consumer is often involved in several different buying decisions simultaneously
and the out come of one can affect the others.
4. Explain the buyer decision process with an example (5 marks)
The Buying –decision process is sequence of five steps. Assume that the Hershey Foods
Corporation responding to increase concerns about diet and nutrition, is considering to
introduce a line of confectionary goods using a sugar substitute:
Need Recognition: Hershey’s marketing research has found that a growing number of
consumers are concerned about sugar and calories in the diet. The opportunity to produce
high quality, good tasting confections without sugar or fewer calories is, therefore, very
attractive, but finding right sugar substitutes is the challenge.
Identification of alternatives: Hershey’s marketing, production, and research and
development managers drop a list of products-performance specifications for the sugar
free goods. To appeal to consumers they must taste good, be competitively priced, meet
their dietary needs and have the texture for mouth feel of sugar based products.
Evaluation of alternatives: Hershey discovers that some sugar substitutes cannot
withstand high temperatures, there are differences in how well they stimulate the taste
and texture of sugar, and the approval from the Food and Drug administration restricts
how others can be used and must be labeled. The evaluation goes beyond performance
and price to consider the suppliers’ ability to meet delivery schedules and provide
consistent quality.
Purchase decisions: Hershey managers decide on a specific ingredient and supplier.
Next, the purchasing dept negotiates the contract.
Post purchase behavior: Hershey managers continue to evaluate the performance of sugar
substitute and the selected supplier to ensure that both meet expectations. Future dealings
with the supplier will depend on this performance evaluation and on how well the
supplier handles any problem that may arise involving its products.
5. What is market segmentation? What are its variables? Also discuss the three
market coverage strategies a firm should consider after evaluating different
segments (10 marks)
Ans: Market segmentation is a process of dividing the total market for a good or service
into several smaller, internally homogeneous groups. The essence of segmentation is that
the members of each group are similar with respect to the factors that influence demand.
A major element in a company’s success is the ability to segment its market effectively.
Eg: The Hain Celestial Group Inc. is focusing on various segments of the U.S and
international markets for organic and natural products.
There are four bases for segmenting consumer markets. They are:
1. Geographic.
2. Demographic.
3. Psychographic.
4. Behavioral.
Geographic Segmentation:
Subdividing markets into segments based on location- the regions, countries, cities and
towns where people live and work-is Geographic segmentation.
Regional population distribution:
Many firms market their products in a limited number of geographic regions, or they may
market nationally but prepare a separate marketing mix for each region. People within a
given region generally tend to share similar values, attitudes, style preferences.
Eg: Campbell Soup Company has altered some of its soup and bean recipes to suit
regional taste, and Friday’s restaurants with 345 units nation wide, allows each outlet to
offer up to 30 regional items on its menu.
Demographic Segmentation
Subdividing markets into segments based on age, gender, family life cycle stage, income
and education-is Demographic segmentation.
For Example, The average age of new Toyota buyers is 44yrs. This is in large part due to
the popularity of the Camry among consumers over 50. However, as a result Toyota is
developing a reputation as a brand for middle aged consumers. To dispel that image and
attract younger customers, Toyota has developed models specifically for drivers in their
twenties and thirties: M2Spyder, a mini SUV.
Psychographic Segmentation
Psychographic segmentation involves examining attributes related to how a person
thinks, feels and behaves.
Personal characteristics: An individual’s personality is usually described in terms of traits
that influence behavior.
Lifestyles: Lifestyle relates to activities, interests and options. You lifestyles reflects how
you spend your time and what your beliefs are on various social, economic and political
issues.
Values: Values are a reflections of our needs adjusted for the realities of the world in
which we live. For eg : people who place a high value of fun and enjoyment are more
likely to enjoy skiing, dancing, bicycling and backpacking whereas people who have
value for warm relationships tend to give gifts for no particular reason.
Behavioral Segmentation: It consists of two of these approaches:
The benefits desired from a product and the rate at which the consumer uses the product:
- Benefits desired: From a customer-oriented perspective, the ideal method for
segmenting a market is on the basis of customer’s desired benefits. To illustrate,
Forester Research Inc., surveyed 131,000 consumers about their motivations,
buying habits and financial ability to purchase technology products. The result
produces 10 segments, including the career-minded “fast forwards”, “new age
nurtures”, “digital hopefuls” and “media junkies”.
- Usage Rates: Another basis for markets segmentation is the rate at which people
consume a product. For example, customer service representatives at First Union
Corp.’s Charlotte, North California, offices can look at their computer screens at
the beginning of each call to see the customer’s banking profile. The rankings are
generated from a customer database that tracks account balances, number of
branch visits, services purchased and other information.
Three marketing strategies are – market aggregation, single segment concentration, or
multiple-segment targeting.
1. Aggregation strategy:
By adopting a market- aggregation strategy – also known as a mass-market
strategy or an undifferentiated market strategy- a seller treats its total market as a
single segment. An aggregate market’s members are considered to be alike with
 respect to demand for the product. That is, customers are willing to make some
compromises on less important dimensions in order to enjoy the primary benefit
the product offers.
2. Single segment concentration- focusing on providing products and services for
a single market- eg- Johnson and Johnson- Baby care products
3. Multiple-segment strategy- Focusing on providing products and services for
more than one segment. Targeting different products for different segment- HLL
provides different soap brands for different market segments.
6. How is business market different from consumer market? (5 marks)
Ans: Any good or service purchased for a reason other than personal or household
consumption is part of the business market, and each buyer within this market is termed
a business user.
The activity of marketing goods and services to business users, rather than to ultimate
consumers, is business marketing and a firm performing the activity is a business
marketer.
Ultimate consumers buy goods and services for their own personal or household use. The
consumer market is not only large, it is dynamic.
The distinction of whether a good or service is a consumer or business product depends
on the reason it is purchased, not on the item itself.
Eg: a PC purchased from Dell by a small business to keep track of its orders, inventory,
and accounts receivable would be a business good. The same PC (with different
software), also purchased from Dell but as a family Christmas gift for educational and
entertainment use at home, would be a consumer good.
7. Name various adopter categories. (5 marks)
Ans: The likelihood of achieving success with a new product, especially a really
innovative product, is increased if management understands the adoption and diffusion
processes of that product.
Different adopter categories are as follows:
1. Innovators: representing about 3% of the market, innovators are venturesome
consumers who are the first to adopt an innovation.
2. Early adopters: comprising about 13% of the market, early adopters purchase a
new product after innovators but sooner than other consumers. Unlike innovators,
who have broad involvements outside a local community, early adopters tend to
involved socially within a local community.
3. Early majority: representing about 34% of the market, includes more deliberate
consumers who accept an innovation just before the “average “ adopter in a social
system.
4. Late majority: another 34% of the market, is a skeptical group of consumers who
usually adopt an innovation to save money or in response to social pressure from
their peers.
5. Laggards: they comprise about 16% of the market. Laggards are suspicious of
innovations and innovators.

8. Distinguish industrial and consumer products market segmentation with examples?

(5 marks)
Ans: Industrial products refer to products, which are used in an industry for producing a
product. They are not meant for direct consumption.
Where as consumer products refer to products, which are used or consumed by the
consumers.
The bases for segmenting the consumer markets are socio-economic factors, geographical
factors, personality factors, consumer behavior products.
Where as the bases for segmenting the markets for industrial goods are kinds of business,
size of the buyer, geographical location of the buyers, purchasing procedure of the buyer.
For example in case of the business of an insurance co. can be divided into fire
insurance, accident insurance, marine insurance etc. different marketing policies z`and
programmes may be prepared for these different segments to suit the needs of the
customers.

9. What are the buying characteristics influencing consumer

behavior? (10 marks)
Ans: Characteristics influencing Consumer Behavior:
Consumer behavior has certain characteristic features. They are:
!. Consumer behavior or buyer behavior is the process by which individuals decide
whether, what, when, and where and how much to buy.
2. Consumer behavior comprises both mental and physical activities of a consumer, when
he wants to buy goods or services to satisfy his needs.
3. It covers both visible and invisible activities of a buyer. The visible activities refer to
physical activities like going to the market place, buying the product and consuming it.
The invisible activities refer to mental activities like thinking about the product, deciding
to buy or not buy the product, deciding to buy one brand instead of another brand, and so
on.
1. Buyer behavior is very complex.
2. Buyer behavior is dynamic. That is, it is constantly changing, So, the marketing
management is required to adjust the marketing mix with changes in buyer
behavior.
3. An individual’s behavior is influenced by internal factors like needs, habits,
instincts, motives, attitudes, etc., and also by external or environmental factors
like family, social groups, culture, status, position, economic and business
conditions, etc.
4. Consumer behavior is integral part of human behavior, and so, it cannot be
separated from human behavior. (The human behavior refers to the total process
by which individuals interact with their environment. Every attitude, every action
and every motivation of the people are a part of the human behavior.
5. In many cases, the buying behavior is the sum total of the behavior of number of
persons. For instance, the decision to buy a car for a family is made by all the
members of the family jointly. This makes the study of consumer behavior
complex.
6. In some cases, the decision to buy is taken not by the consumer himself, but by a
third party. For instance, in the case of a patient, the decision regarding the
medicine to be purchased is taken by the doctor, the purchase is made by the
 relatives of the patient, and the medicine is actually consumed by the patient. This
also makes the study of consumer behavior complex.
7. Consumer behavior is influenced by a number of marketing stimuli offered by the
marketer. So, consumer behavior is considered as stimulus response. It may be
noted that the response on the part of a buyer may be positive or negative.
8. Buyer behavior involves both individual (i.e., psychological) process and group.
9. Consumer behavior is basically social in nature. So social environment plays an
important role in shaping buyer behavior.

10. What is the need to understand consumer behavior?

i) It helps the producers to produce only those goods that are needed by the
consumers.
ii) It is helpful to the marketers to plan the marketing activities.
iii) It is helpful to the marketers to select the best method of advertising.
iv) It helps the marketers to understand the successful sales promotion measures.

v) If a marketer understands the intellectual or emotional process that makes a

potential customer to accept or reject a particular product. he (i.e., the
marketer) could adopt those marketing strategies that would make his
promotional investments more productive.
vi) A knowledge of buying motives will be useful to a marketer when he is
dissatisfied with specified techniques and is seeking to make innovations in
his product or promotional instruments.

11. What are the benefits of market segmentation?

Importance and Benefits of Market Segmentation:
Market segmentation. If properly done, is advantageous to the marketer, the consumers
and the community.
1. Understanding the needs of consumers:
Market segmentation helps the marketer to understand the needs, behavior and
expectations of the consumers of different segments. When information is
collected segment –wise, the information becomes more precise and clear and
becomes easily and effectively usable. Decisions made on the basis of such
precise and clear information will certainly be more effective.
2. Better position to spot marketing opportunities:
Market segmentation helps the producer to make a fair estimate of marketing
opportunities, (i.e., the volume of his sales). On the basis of marketing research
involved in market segmentation, the habits, tastes, nature, etc, of consumers of
different markets can be understood deeply to harness marketing opportunities.
This would be helpful to the producer to re-adjust the strategy of approach
suitably in regions where the response of the customers is poor.
3. Allocation of marketing budget:
It is on the basis of market segmentation that marketing budget is allocated for a
particular region or locality. In the regions where the sales opportunities are
limited, a huge budget allocation is of no use, and so, budget allocation will be
limited. On the other hand, in regions where there are more sales opportunities,
 budget allocation will be more. Thus, market segmentation channelize most
profitable segments of the market.
4. Meeting the competition effectively:
Market segmentation helps the producer to face the competition of his rivals
effectively. Market segmentation provides an opportunity of making deep study
of the products, policies, and strategies of competitors in all the segments. This
helps the producer to adopt different markets, taking into account the rivals
strategies, policies and programmes.
5. Benefits to the customers:
Market segmentation benefits the customers, as the producer produces and
supplies goods, which serve customers interest, and satisfy their needs and wants

10. What are the types of buying motives?

Ans: The buying motives of the buyer may be classified into two broad categories:
1. Product buying motives.
2. Patronage buying motives.
1. Product buying motives:
Refer to those influences and reasons which induce a buyer to choose a particular product
in preference to other products. They include the physical attraction of the product ( i.e.,
the design, shape, dimension, size, color, package, performance, price etc.) or the
psychological attraction of the product.
Product buying behavior may be sub divided into two groups, viz.,
i. Emotional product buying motives and
ii. Rational product buying motives.
i. Emotional product buying motives: when a buyer decides to purchase a
product without thinking over the matter logically and carefully (i.e., without
much reasoning) he is said to have been influenced by emotional product
buying motives.
Eg: diamond merchants sell their products by suggesting to the buyer that the
possession of diamonds increases their prestige or social status.
ii. Rational product buying motives: when a buyer decides to buy a certain thing
after careful consideration he is said to have been influenced by rational
product buying motives.
Eg: Bajaj scooters are preferred by the people because of the economy or
saving in the operating costs, i.e., petrol costs.
2. Patronage buying motives: refer to those considerations or reasons which make a
buyer to buy the product wanted by him from a particular shop in preference to
other shops.
a. Emotional patronage buying motives: here a buyer patronizes a shop without
applying his mind or without reasoning. Eg: attractive appearance of the shop.
b. Rational patronage buying motives: here a buyer patronizes a shop after careful
consideration. Eg: a store having reputation for fair dealings.

12. what are the factors influencing buying behavior for a)cosmetics b) pizzas. – 5
marks
Ans: a) cosmetics:
 Social factors and psychological factors influence the buyer to buy the cosmetics.
Reference groups like friends, neighbors, co-workers etc. may influence the
individual to buy cosmetics.
Eg: co-worker may use a particular type of cosmetic, which may attract the attention
of the employee.
Personal factors like lifestyle may also influence the consumer behavior.
b) Pizzas: pizzas even today is perceived as fancy food in India. Now the McDonalds
has priced its lowest price for its pizzas in India.
So it’s a psychological factor that would influence the buyer to purchase a product.
and most of the times it’s the question of prestige or status.
Eg: giving party to a friend in pizza hut may be a question of pride to the employer
than giving the party in local hotels…

13. Define Consumerism.

Ans: consumerism is a relatively recent phenomenon, starting in the sixties in the affluent
societies like USA. We now see it emerging in India as well. It is an organized movement
of the consumers – a movement that seeks to protect the consumers from unfair practices
of the producers and marketers, and to enhance the right of the consumers in relation to
producers and marketers. In many cases, the Government of the societies concerned are
also on the side of the consumers in this raging battle.
Drucker said that, ‘consumerism is the shame of marketing’. If marketing is practiced as
per the Marketing Concept, the very motive for consumerism will disappear. A firm
practicing the marketing concept, would not only be sensitive to consumer attitudes, but
would also anticipate these attitudes and adjust its marketing accordingly; and it would
proceed on assumption that what is good for the consumer is good for the firm. Such an
approach would evidently remove the very raison d’etre of consumerism.
 Distinguish between consumer market and business market?

Segmentation Possible market segment Segmentation Possible market segment

basis Consumer market basis Business market
Geographic New England, Middle Atlantic, Costumer
Region city or and other census regions Location Southeast Asia, Central America,
metro Region Upper Midwest, Atlantic
Area size Population under 25000, 25001-
100000, 100001-500000, 500001-
Urban-rural 10000000 Seaboard Single buying site, multiple buying
Climate Urban, suburban, rural. Location sites
Hot, cold, sunny, rainy, cloudy
Demographic
income Under $25000, $25000- Costumer type
$50000,$50001-$75000,$75001- Industry Selected NAICS codes
Age $100000,over $100000.
Gender Under 6, 6-12, 13-19, 20-34, 35- Size Sales volume, number of employees
Family life 49, 50-64, 65and over
cycle Male, female Organization Centralized or decentralized, group or
Social class Young, single, married, no structure individual decisions
Education children etc,.
Occupation Upper class, upper-middle, lower- Purchase Quality, price, durability, lead time
middle, upper-lower, etc. criteria
Ethnic Grade school only, high school
background graduate, collage graduates.
Psychographi Professionals, manager, clerical, Transaction
c personality sales, student, homemaker, Conditions
unemployed, etc. Buying Straight rebuy, modified rebuy, new
Life style African, Asian, European, situations buy
Hispanic, Middle Eastern, etc.
Values Ambitious, self-confident, Usage rate Nonuser, light user, heavy user
Behavioral aggressive, introverted,
benefits extroverted, sociable, etc. Purchasing
desired Activities(golf, travel), interests procedure Competitive bidding, lease, service
(politics, modern art), contracts
opinions(conservation, capitalism)
Usage rate Values and lifestyles 2 (VALS2), Order size Small, medium, large
list of values (LOV)
Examples very widely depending Service Light, moderate, heavy
on product, appliance-cost, requirement
quality, operating life, toothpaste-
no cavities, plaque control, bright
teeth, good taste, low price
Nonuser, light user, heavy user.
What is VALS classification?

VALS li
The VALS classification is based on Values, attitudes and lifestyle of consumers.
Consumers are classified considering two parameters- resources and motivation.
Innovators- have highest resources and are highly motivated, try out new and innovative,
expensive products.
Survivors- Have least resources and least motivation,. They struggle to make both ends
meet.
Consumers are further classified on the basis of three factors- Ideals, Achievement or Self
expression

Primary mo
Idealistic consumers- Thinkers and Believers- Thinkers are thoughtful, focus on a
particular philosophy of life, ask for good quality and innovative products. Believers also
look for innovation, but have less purchasing power than thinkers, they prefer branded
products.
Achievement oriented consumers- Achievers and strivers- Achievers feel the need to
scale new heights. They prefer good brands and display their material wealth through
possessions. Strivers imitate the purchases of achievers, they buy products favored by
achievers.
Self- expression oriented consumers- Experiencers and makers- Experiencers are very

Ideals
innovative, and choose products, which can express their emotions, freedom etc.
Makers are also innovative as they lack adequate resources they try to be creative in their
day-to-day life. Making paintings, decoration of home etc.