MARKETING MANAGEMENT

Q1 (a)

(a) What are the challenges and issues of marketing in the present millennium?

Introduction of a product, service or idea into the market is always followed

by the
marketing effort, the functions and forms of which have been changing over
the decades. To
follow these changes and overviewing the current position of art in marketing
philosophy and
marketing challenges, the following structure of the papers is offered in
Figure 1. This research
logic implies that the main research goal is to review the marketing
orientations (Dibb and
Simkin, 2004; Lancaster and Reynolds, 2005; Blythe, 2005; Drummond and
Ensor, 2005;
Morgan, 1996; Kotler and Armstrong, 2008; Pranulis et al, 1999, 2000, 2008)
as constituted in
the marketing philosophy and to determine the marketing challenges (Sutton
and Klein, 2003;
Blythe, 2005; Kashani, 2005; Brown, 2008; Kotler and Armstrong, 2008;
Bishop, 2009) in the
new millennium, which could be consequently applied and tested in national
(Lithuanian) and
international markets.

Therefore, the paper also aims at applying the theoretical findings to the
practical case
studies, namely comparing two coffee bars one on the international level
Starbucks; and
another one from the Lithuanian market Coffee Inn.
2. LITERATURE REVIEW ON MARKETING PHYLOSOPHY AND
MODELLING
Efforts of reviewing and modelling marketing elements, concepts and
philosophical
attitudes were numerous and effective. But with new challenges causing
hurdles in making
marketing function more effective on macro- and micro- level of the
economy, a revision of
marketing philosophy is always at place.

As indicated in Table 1, authors tend to use various terms for the elements of
marketing
philosophy:
a) orientation (Dibb and Simkin, 2004; Lancaster and Reynolds, 2005;
Blythe,
2005; Drummond and Ensor, 2005);
b) philosophy (Morgan, 1996);
c) concept (Kotler and Armstrong, 2008).
Even the Lithuanian authors, who wrote the first university book on
marketing, professors
Pranulis, Pajuodis, Virvilaite and Urbonavicius (1999, 2000 and 2008) have
used the Lithuanian
counterpart word orientation. Following this broad tendency of the term
orientation usage,
here, in this article, the choice of the orientation term will be applied.
The renowned American professors Kotler and Armstrong (2008, pp.9-12)
indicated that
their choice of marketing management orientations were as follows:
the production concept,
the product concept,
the selling concept,
the marketing concept.
the societal marketing concept.
A similar opinion was expressed by a group of Lithuanian marketing
professors, where they
classified marketing orientations as follows (Pranulis et al., 1999, 2000): a)
production

orientation, b) product orientation, c) selling orientation, d) marketing

orientation; e) socialethical
marketing orientation.
Because of the difficulty of incorporating all the various facets of marketing
into a single
definition, Lancaster and Reynolds (2005) distinguished features of the
subject in the following
statements (Lancaster and Reynolds, 2005, p.16):
Marketing is dynamic and operational, requiring action as well as
planning.
Marketing requires an improved form of business organisation, although
this on its own
is not enough.
Marketing is an important functional area of management, often based in
a single
physical location. More importantly, it is an overall business philosophy that
should be
adopted by everybody in the entire organisation.
The marketing concept states that the identification, satisfaction and
retention of
customers is the key to long-term survival and prosperity.
Marketing involves planning and control.
The principle of marketing states that all business decisions should be
made with primary
consideration of customer requirements.
Marketing focuses attention from production towards the needs and wants
of the market
place.
Marketing is concerned with obtaining value from the market by offering
items of value
to the market. It does this by producing goods and services that satisfy the
genuine needs
and wants of specifically defined target markets.
The distinguishing feature of a marketing orientated organisation is the
way in which it
strives to provide customer satisfaction as a way of achieving its own
business
objectives.

The author of the article proposes the following perception on the

classification of
marketing orientations, which constitute the marketing philosophy
essence (see Figure 2 and
Figure 3):
1) the production orientation,
2) the product orientation,
3) the financial orientation,
4) the selling orientation,
5) the marketing orientation,
6) the market orientation (which extends to internal and external
orientations),
7) the social-ethical marketing orientation,
8) the holistic marketing orientation (which extends to internal marketing
orientation,

integrated marketing orientation, social marketing orientation relationship

marketing
orientation).
The holistic marketing concept was proposed by Kotler and Keller (2007) but
it was not
mentioned or wider discussed in the textbook of Principles of Marketing
(Kotler and Armstrong,
2008), but introduced in their co-operative book on Marketing Management
(2007). For this
reason, it is viable to include this new orientation in the proposed model
(Figure 3), as it
integrated at least four other sub-orientations: a) internal marketing
orientation, b) integrated
marketing orientation, c) social marketing orientation and d) relationship
marketing orientation.

Internal marketing orientation will be directly dealing with a Marketing

Department
within an organisation. It will directly subordinate to the senior management
level and other
organisational department, emphasising the organisational culture and
micro-climate, suitable for
effective work and success factors in marketing performance.
The Marketing Philosophy and Challenges for the New Millennium

173
Integrated marketing orientation would focus towards integrated marketing
communications, the cost-effective selection of marketing channels and
integrated development
of products and services within the scope, demand and challenges of the
national and
international markets.
Social marketing orientation would be focusing on the concept of societal
marketing
proposed by Kotler and Armstrong (2008), where the basic societal marketing
triangle is based
on the well-being of the community, incorporating the corporate social
responsibility of
companies and non-profit organisations, legal issues and environmental
protection issues, which
altogether streamline the sustainable development of the economy and
consumption patterns.
Relationship marketing orientation would be concerned with fostering the
customercompany
relationship with consumers, offering value added products and services.
This
orientation will also foster the company-partner company (B2B) relationship,
seeking trust and
reliability in partner selection process and its maintenance for coming years.
Therefore,
marketing channels should be effectively developed to reduce costs and
enhance profitability
ratios for all three market participants: a) producers, b) distributors and
sellers, c) consumers.
The market orientation (No 6 in Figure 3) is proposed to be grouped as
internal and external
orientations. Though Narver and Slater (1990) proposed a model that
identified the components
of market orientation as:
Customer orientation, which incorporates customers perceptions and
understanding by
customers creating value, offering cost-effective solutions to satisfy their
needs.
Competitor orientation emphasises one of the marketings functions,
i.e., to seek
competitive advantage in the market. Competitor analysis, performed in
various
techniques (e.g. PESTED analysis, Porters forces analysis, Boston matrix
analysis, etc.),
gives a company tools to objectively evaluate competitors capabilities and
results on the

market.
Organizational culture if analysed on an individual basis could be either
included into
market orientation factor or in the holistic marketing orientation, depending
how
integrative the marketing philosophy is on an organisational level.
Organisational culture
should support customer service and customer relationship development
through
employee performance prism.
Interfunctional coordination should focus on the interaction between
internal functional
areas of the organization which best serve customer need and satisfaction,
which in other
cases would correspond to the relationship marketing orientation (Kotler and
Keller,
2007).
Long-term focus would incorporate the consideration of how the above
can be sustained,
and financially viable, over the long term.
In this paper the proposition by Drummond et al (2000) is closer to the
authors perception of
market orientation, therefore the constituent parts of the market
orientation are considered to be
the balance between:
a) External market orientation: customers, competitors and other external
stakeholders.
b) Internal market orientation: employees and other internal stakeholders
3. LITERATURE REVIEW ON MARKETING CHALLENGES IN THE NEW
MILLENIUM
The precondition, which fostered to review the challenges for the marketing
in the new
millennium, was the statements in various forms and shapes, which
appeared during the past
decade in text books, social networks, media and social forums. The
selection of disturbing
statements were selected and presented here for the discussion (see Table
2).
The biased perception of marketing functions and orientations at the dawn of
the new
millennium is not compelling. Traditional (conventional) marketing is
visualised as a dead
function, notwithstanding the critics of modern marketing practice. The
critics bring up the

issues of lost customers, mass marketing and viral marketing (Big Marketing
Ideas, 2009; see
Table 2). Therefore, a more fundamental change for marketing is at stake
towards a more
personal touch in the field, as well emphasised by Spellings (2009).
Boynett and Boynett (2003) in their book on The Guru Guide to
Marketing: A Concise
Guide to the Best Ideas from Todays Top Marketers have also identified a
number of citations,
which question the future of marketing and its conventional functionality. It is
apparent that
marketing is becoming a multi-disciplinary theory, which inevitably
incorporates postmodern
aspects of the markets and consumption patterns and consumer behaviour.

It could be generalised that marketing in the 21st century presents many

new postmodern
challenges (see Table 3):

shrinking markets, which in effect implies fragmentation and decentralised

subjects
(Brown, 2008), followed by increasing market complexity (Sutton and Klein,
2003)
and market globalisation (Kotler and Armstrong, 2008);
green issues (Blythe, 2005), more marketing ethics (Blythe, 2005; Kotler
and
Armstrong, 2008) and social responsibility (Kotler and Armstrong, 2008);
marketing strategy revisited (Blythe, 2005) through accelerating the
demand for
marketing efficiency and effectiveness (Sutton and Klein, 2003) and speed to
market
(Sutton and Klein, 2003), and aggressive innovations (Bishop, 2009);
advancements in technologies in the digital age (Kotler and Armstrong,
2008),
including Internet, commoditisation (Kashani, 2005), communications
(Bishop,
2009), internet marketing development (Blythe, 2005), increasing availability
of
innovative marketing technologies (Sutton and Klein, 2003);
engagement and connection to the customer (Bishop, 2009), through
service quality
enhancement (Blythe, 2005), delivering customer experiences at or above
expectations (Bishop, 2009), rapidly changing public attitudes towards
consumption
(Sutton and Klein, 2003);
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176

building a strong value proposition (Bishop, 2009) through growing need

to capture
marketing knowledge (Sutton and Klein, 2003), power shift (Kashani, 2005)
and
reversed production and consumption (Brown, 2008).
Therefore, marketers are facing the re-evaluation of marketing strategy,
applying new tools
and sophisticated techniques in the new millennium, where changes are of a
constant nature.
Ultimately, the firms who take the greatest care of their customers
interests are the ones most
likely to maintain their competitive edge in a cut-throat world (Blythe, 2005
p.332).
4. THE CASE OF COFFEE BARS: APPLYING MARKETING ORIENTATIONS
AND
MARKETING CHALLENGES IN THE NEW MILLENIUM

In practice, each company selects business and marketing philosophy which

suits it best.
The decision depends on the companys type, size, products and services it
produces, distributes
and sells and etc. In order to apply marketing orientations and marketing
challenges to a practical
situation, two companies in coffee bars sector:
a) an international company STARBUCKS (the USA) and
b) a national company COFFEE INN (Lithuania).
Their briefs and marketing philosophies will be discussed bellow.
4.1 THE CASE OF STARBUCKS (THE USA)
Probably one of the most famous brands in the United States and now in the
whole world,
reflecting the specific lifestyle of the few generations, is definitely Starbucks.
Starbucks is the
largest coffee-house company in the world, offering a wide range of various
coffees, hot and
cold coffee and non-coffee drinks, sandwiches and sweet snacks.
Founded in 1979, only as a coffee bean retailer Starbucks became a coffeehouse selling
coffee drinks as well as beans, when its present headmaster Howard Schultz
came in and bought
the company from its former owners in 1987. Since then, an extraordinary
quick expansion in the
Unites States, and from 1996 in the whole world, has begun. Now, Starbucks
owns
approximately 16 000 stores in the world and announces about opening 900
new stores outside
United States in 2009 (on the other hand, Starbucks is closing the same
amount of stores in the
United States) (www.strabucks.com).
It is obvious, that such a big success would be impossible without well
selected and
formulated marketing philosophy. As one of the most innovative companies
in the world
Starbucks has chosen social-ethical marketing orientation and declares care
for the environment
and common wealth as well as for people. The main idea of their philosophy
is defined in the
Starbucks mission statement. Starbucks has two mission statements which
are placed in the
official companys website : To inspire and nurture human spirit one
person, one cup, and
one neighbourhood at a time and Starbucks is committed to a role of
environmental leadership
in all facets of our business (www.strabucks.com).

Social-ethical marketing orientation is getting a trendy buzz word, as

environmental and
ecological problems are on the increase. Some years ago Starbucks was
criticised for wasting
resources by using paper and plastic cups, for wasting water and even
funding Israel army
(Vitkus, 2009). Now this company is shown as the best example of
environmental friendly
business in the business schools around the world. Starbucks announces its
corporate social
responsibility Annual reports for the public; here the company describes their
attention to the
employees, customers and the environment, manifesting marketing
orientation, market
The Marketing Philosophy and Challenges for the New Millennium

177
orientation and holistic marketing orientation. They started to use cups from
recycled paper or
biodegradable plastic. Social responsibility is also emphasised in their coffeebars design,
posters and various promotional campaigns (the integrated marketing suborientation in the
holistic marketing orientation).
According to Pranulis et al (2008), the main idea of marketing orientation is
to create the
circle of loyal clients rather than one-time buyers. Starbucks could be called
a champion in this
field too. The chairman of Starbucks Howard Schultz explains, that a person
gets more than just
coffee when he/she visits Starbucks he gets great people, first-rate music
and a comfortable
and upbeat meeting place (www.strabucks.com). Thats why people all
around the world are
willing to pay for coffee more than in other coffee-bars they buy and
experience, not a drink
(the selling orientation). According to Howard Schultz, Starbucks build
personal relationships
with each of their customers (this implies the relationship marketing suborientation in the
holistic marketing orientation). Even the waiters at Starbucks are called
baristas to make them
feel exceptional and proud about their workplace, not to feel just simple
service workers
(internal marketing sub-orientation in the holistic marketing orientation).
Another core element of marketing concept (Pranulis et al., 2008, Kotler and
Keller, 2007)

is to appeal to customers needs. Starbucks does everything to achieve its

costumers
satisfaction. They were the first who offered free internet at their coffee-bars
and started to open
the stores 10 minutes before the actual opening time just to make customers
always feel welcome
and happy. Viral marketing has also become one of the most important
features of Starbucks.
You can hardly find and advertisement in any newspaper or marketplace, but
they build
extremely strong relationships by using social networks, internet and mouthto-mouth marketing,
which means Starbucks meets the marketing challenges of a) the digital
age, b) value
proposition, c) connecting to customers, d) corporate social responsibility, e)
green issues and f)
overall revised marketing strategy, g) market shrinking factors (as Starbucks
was forced to close
down 600 coffee-bars in the USA during the economic slowdown (Milasius,
2008)).
4.2 THE CASE OF COFFEE INN (LITHUANIA)
The other company selected for a comparative study is a national company,
located only in
Lithuania. Coffee Inn is a coffee-bars chain opened a few years ago in
Vilnius, the capital city of
the country. Started from just one coffee-bar, Coffee Inn now owns 7 coffeebars in Vilnius and
one in Kaunas in 2007 (Vaitiekuniene, 2007). At first, Coffee Inn came into
the market with the
same concept as Starbucks did. It sells coffee and various coffee drinks,
served in paper cups,
sandwiches and desserts in small, cosy coffee-bars, located in the city
centre.
The main difference between Starbucks and Coffee Inn is that Starbucks is a
big global
company (the globalisation challenge) and can afford applying social-ethical
marketing
orientation, while Coffee Inn is still too small to afford huge investments for
various social
projects and campaigns and it has chosen the marketing orientation.
However, Coffee Inn
expands constantly, therefore, sooner or later this company will also apply
social-ethical
marketing oreintation (now Coffee Inn supports various cultural festivals,
such as cultural night

Tebunie naktis, or Street music day, not financially, but by helping to

promote them, or by
prolonging their opening hours during these festivals).
The main idea, the co-owner of Coffee Inn Nidas Kiuberis explains, is that
they sell a
feeling of pleasure rather than just a cup of coffee (Obcarskaite, 2009). It
seems extremely
similar to Starbucks idea. The waiters are called baristas too, Coffee Inn also
offers free internet
access and their menu is quite similar to Starbucks one. Lithuanians
sometimes even claim that
Coffee Inn tries to copy Starbucks. On the other hand, there are a lot of
cafeterias offering similar
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178

facilities (e.g., Vero Cafe, Double Coffee and etc.), and Coffee Inn is not an
exception. However,
Coffee Inn is a lot smaller as coffee-bars chain than Starbucks and for this
reason it is much
easier to control it. Being small enables Coffee Inn to be more flexible and to
react to customers
demands and wants quicker and to create new demands and wants at the
same time (marketing
orientation). Coffee Inn constantly offers new drinks, snacks and other
features (product
orientation). They were one of the first who invited customers to come
together with their pets,
set free book collection and invited everyone to come to read or to donate a
book (the
communication challenge).
While talking about customers loyalty, new technologies play an important
part here too
(the technological challenge): Coffee Inn keeps exceptionally close
relationships with its
customers using Facebook social network, writing the blog and honestly
replying to all the
letters and comments. The co-owner Nidas Kiuberis maintains the Coffee Inn
blog himself this
is very important, as customers notice, that director of the company itself
pays attention to their
opinion (Milasius, 2008). Nidas Kiuberis explains, they are following guerilla
marketing
ideas, because it is the best solution for a small business without large
budget, where creativity
and energy are the most important things (Obcarskaite, 2009). Viral
marketing and personal

blog writing costs nothing and gives better results, than advertisement on TV
your loyalty for
customers loyalty, these are the things every company seeks, especially in a
crisis time
(Obcarskaite, 2009). As a result, Coffee Inn has created a steady circle of
loyal customers, who
are indifferent to similar competitors, such as Vero Cafe, offers.
5. CONCLUSIONS
In the changing market environment with changing customer behaviour and
seeking
business opportunities, companies face marketing challenges on a daily
basis. In the process of
theoretical research, a modified model of marketing orientations, which form
the marketing
philosophy, was proposed, comprising eight major orientations, where
market orientation and the
holistic marketing orientation are split into further sub-orientations. The
other task for the author
was to review and structure marketing challenges in the new millennium and
test these issues in
two cases of coffee-bars sector on international (Starbucks) and national
(Coffee Inn in
Lithuania) markets.
Starbucks and Coffee Inn both follow similar marketing orientations.
Starbucks follows
social-ethical marketing orientation as a basis of business, while Coffee Inn is
being still guided
by the marketing orientation. Both companies sell an experience, rather than
just coffee and
image is very important for the customers of these companies as they are
mainly young people
(20-40 years of age, Miksys, 2008). Both companies use viral marketing
techniques, though
Coffee Inn can create closer relationships with its customers, because it is
able to react to
changes quicker. Loyal customers could be called the biggest strength and
competitive advantage
of these companies as they do not compete on price, just by creating
exceptional atmosphere

(b) What is the relationship between

customers and corporate profitability?

(c) Customer profitability (CP) is the profit the firm makes from serving a
customer or customer group over a specified period of time, specifically the
difference between the revenues earned from and the costs associated with
the customer relationship in a specified period. According to Philip Kotler,"a
profitable customer is a person, household or a company that overtime, yields
a revenue stream that exceeds by an acceptable amount the company's cost
stream of attracting, selling and servicing the customer."
(d) Calculating customer profit is an important step in understanding which
customer relationships are better than others. Often, the firm will find that
some customer relationships are unprofitable. The firm may be better off
(more profitable) without these customers. At the other end, the firm will
identify its most profitable customers and be in a position to take steps to
ensure the continuation of these most profitable relationships. However,
abandoning customers is a sensitive practice, and a business should always
consider the public relations consequences of such actions. [1]
What is a Customer ?
Before spending a dime on customer profitability (or relationship based marketing in
general for that matter) it makes a whole lot of sense to figure out who your customers
are. And believe it or not, Customer likely means different things to different people
within your company.
For example: within a Canadian retail bank a customer might mean an account holder;
the originator of a transaction, an individual, a household or a family. Depending on
who in the organization we ask, we may hear very different views about who or what a
customer is.
There may also be complexities in the nature of the relationship between your company
and your customers. Joint ownership and multiple beneficiaries of accounts (especially
in business to business relationships) add complexity to the question. Intermediaries
that play a bridging role between company and end customer, for example the
relationship between Insurance provider and broker pose challenges to a simple notion
of customer.
So it is evident that we had best figure out what we mean by Customer before we get
started. To offer some guidance on this rather thorny issue we suggest this guideline: a
customer should be a purchasing decision unit. What this means in the context of your
business may require some careful thought.
Once you have defined who your customers are, the next issue that pops up is whether

or not you can actually recognize them in your data. You need the ability to say which
transactions and accounts relate to a given customer or you cannot achieve an
actionable view of their behaviour and its implication for profitability of your company.
This is usually achieved by establishing a customer hierarchy within your database.
Creating a customer hierarchy is a technical issue, usually resolved by building a
Customer Information File (CIF) which cross references customers however defined to accounts and transactions. Many companies use Householding algorithms to achieve
a similar matching of customers to business activity. Both CIF development and
Householding methods are substantial topics that we will leave to a separate discussion.
Suffice it to say that it is very difficult to proceed without a reliable customer hierarchy
if you want to measure customer profitability.
What is Profitability ?
Now that the foundation is established we get into the next big question: what is profit
anyway ? Again there is an obvious answer - it is revenue minus expenses. But which
revenues and which expenses to include and when to include them is not at all clear
when we take a closer look at your customers behaviour and your business.
Should revenue be recognized when it is received (cash basis) or when it is earned
(accrual basis) ? Should your existing customers bear the cost of money spent on
soliciting new business from someone else ? Which customers should bear the cost of
corporate functions like the Lear Jet ? Should insurance claim experience or loan losses,
or warranty claims or coupons be attributed to individuals (and when) ?
These are not trivial or easy questions to answer. The decisions you make concerning
the treatment of individual revenue and expense items will have profound impact on
the absolute profitability measurement results and the relative profit ranking of your
customers. For example one Canadian bank learned that using average cost per
account instead of individual transaction costs changed the ranking of many of its
customers by three deciles or more. Their experience highlights how important it is to
build a measurement that truly reflects your business.
Once your accounting methods are figured out are we done ? Not really. There are
other questions you should think about as well to ensure that the measurement you are
going to build will support the decisions you need to make in your business.
In some businesses it is imperative to measure the profitability of customers in relation
to the capital resources they consume (e.g. Return on Capital for a lending business).
In others it is important to measure profitability over the duration of a cycle that is
inherent in the business (e.g. lifetime of a car lease, a growing season for a farmer, a
project lifetime for a building contractor, a redemption cycle for a loyalty program
customer). There are a wide variety of measurements that may be used to provide
insight into the profitability of your customers business. Choosing what to measure and
how will profoundly affect the usefulness of the information you produce.
Customer Profitability measurement is not the simplest thing to implement., yet many
leading companies have surmounted the challenges that it presents. Why would you
want to go through the effort of figuring all this out and building (or buying) a system

to do it ?
what is the relationship between customer's and corporate profitability.
We willingly admit to having a bias towards measuring customer profitability: at a basic
level we believe that what gets measured gets managed. Managing value exchanges
with your customers as a strategic process is just as relevant now as it was when CRM
was first touted as the next great thing. What Customer Profitability adds to the mix is
an understanding of what pays and what doesnt.

(a) What do you understand by marketing as a process?

What are the needs, wants, and demands of a customer?
Introduction
The activities of marketers both reflect and shape the world we live in. Every year new
products and services are launched and some of them succeeds on an unprecedented
scale. As in the case of Apple's iPod, iPhone, and also iPad. They all are great inventions
and highly successful in market.
According to marketing concept, the organisation must find ways to discover unfulfilled
customer needs and wants and bring products that satisfy those needs and wants. This can
be done in a sequence of steps that is called marketing process.
After reading this you will understand - what is marketing process, and the steps involved in
marketing process.
Meaning of Marketing Process
The Marketing Process of a company typically involves identifying the viable and potential
marketing opportunities in the environment, developing strategies to effective utilise the
opportunities, evolving suitable marketing strategies, and supervising the implementation of
these marketing efforts.
Marketing process involves ways that value can be created for the customers to satisfy their
needs. Marketing process is a continual series of actions and reactions between the
customers and the organisations which are making attempt to create value for and satisfy
needs of customers. In marketing process the situation is analysed to identify opportunities,
the strategy is formulated for a value proposition, tactical decisions are taken, plan is
implemented, and results are monitored.
Steps in Marketing Process

Following are the steps involved in the Marketing Process :Situation Analysis

Marketing Strategy

Marketing Mix Decision

Marketing Mix Decision

Implementation and Control

1. Situation Analysis
Analysis of situation in which the organisation finds itself serves as the basis for identifying
opportunities to satisfy unfulfilled customer needs. Situational and environmental analysis is
done to identify the marketing opportunities, to understand firms own capabilities, and to
understand the environment in which the firm is operating.
2. Marketing Strategy
After identifying the marketing opportunities a strategic plan is developed to pursue the
identified opportunities.
3. Marketing Mix Decisions
At this step detailed tactical decisions are made for the controllable parameters of the
marketing mix. It includes - product development decisions, product pricing decisions,
product distribution decisions, and product promotional decisions.
4. Implementation and Control
Finally, the marketing plan is implemented and the results of marketing efforts are monitored
to adjust the marketing mix according to the market changes.
Needs wants and demands are a part of basic marketing principles. Though they are 3
simple worlds, they hold a very complex meaning behind them along with a huge
differentiation factor. In fact, a product can be differentiated on the basis of whether it
satisfies a customers needs, wants or demands.

Needs -Human needs are the basic requirements and include food clothing and shelter.
An extended part of needs today has become education and healthcare. Generally, the
products which fall under the needs category of products do not require a push. But in
todays tough and competitive world, so many brands have come up with the same
offering satisfying the needs of the customer that even the needs category product has
to be pushed in the customers mind.
Example Real Estate (land always appreciates), FMCG, etc.
Wants Wants are largely dependent on the needs of humans themselves. For

example, you step into a restaurant. You may satisfy by eating basic plate meals rice.
But you definitely want to try different recipes because it is your want. Example
Hospitality industry, Electronics, Consumer Durables etc, FMCG, etc.
Demands . Demands are wants for specific products backed by ability to pay. When
an individual wants something which is premium, but he also has the ability to buy it,
then these wants are converted to demands. The basic difference between wants and
demands is desire. A customer may desire something but he may not be able to fulfil his
desire Many people want a luxury car or a weekend break in Dubai, but only a few
people are willing and able to buy one. In business terms, companies must measure not
only how many people want their product but also how many would actually be willing
and able to buy it.
Example: BMWs, 5 star hotels etc.
Need is a necessity without which a person cannot exist. E.g; Food,Water.
Want is something that you decide to get but without which you can still survive and
exist. E.g; car, mobile,
Demand is a state of mind which drives your want towards fulfilment.
The needs wants and demands are a very important component of marketing because
they help the marketer decide the products which he needs to offer in the market.
The Production Concept. This concept is the oldest of the concepts in business. It
holds that consumers will prefer products that are widely available and inexpensive.
Managers focusing on this concept concentrate on achieving high production efficiency,
low costs, and mass distribution. They assume that consumers are primarily interested
in product availability and low prices. This orientation makes sense in developing
countries, where consumers are more interested in obtaining the product than in its
features.
The Product Concept. This orientation holds that consumers will favour those products
that offer the most quality, performance, or innovative features. Managers focusing on
this concept concentrate on making superior products and improving them over time.
They assume that buyers admire well-made products and can appraise quality and
performance. However, these managers are sometimes so engrossed with their product
and do not realize what the market needs.

The Sales Concept. This concept assumes that consumers typically show buying inertia
or resistance and must be coax into buying. It also assumes that the company has a
whole battery of effective selling and promotional tools to stimulate more buying. Most
firms practice the selling concept when they have overcapacity. Their aim is to sell what
they make rather than make what the market wants.
The Marketing Concept. This is a business philosophy that challenges the above three
business orientations. It holds that the key to achieving its organizational goals (goals of
the selling company) consists of the company being more effective than competitors in
creating, delivering, and communicating customer value to its selected target customers.
The marketing concept rests on four pillars: target market, customer needs, integrated
marketing and profitability.
Distinctions between the Sales Concept and the Marketing Concept:

The Sales Concept focuses on the needs of the seller.

The Marketing Concept focuses on the needs of the buyer.
The Sales Concept is preoccupied with the sellers need to convert his/her product into
cash.
The Marketing Concept represents the major change in todays company orientation
that provides the foundation to achieve competitive advantage. This philosophy is the
foundation of consultative selling.

The Societal Marketing Concept.

This concept is more theoretical and will surely influence future forms of marketing and
selling approaches. This concept holds that the organizations task is to determine the
needs, wants, and interests of target markets and to deliver the desired satisfactions
more effectively and efficiently than competitors while preserving or enhancing the
consumers and the societys well-being.
Critics question if Marketing Concept is an appropriate philosophy in an age of
environmental deterioration, resource shortages, explosive population growth, world
hunger and poverty, and neglected social services. Are companies that do an excellent
job of satisfying consumer wants necessarily acting in the best long-run interests of
consumers and society?

The marketing concept possibly sidesteps the potential conflicts among consumer
wants, consumer interests, and long-run societal welfare. Just consider:
The fast-food industry offers tasty but unhealthy food. The burgers/pizza has a high fat
content, and the restaurants promote fries and pies, two products high in starch and fat.
The products are wrapped in convenient packaging, which leads to much waste. In
satisfying consumer wants, these restaurants may be hurting consumer health and
causing environmental problems in a long run.
Exchange and Transactions:
Exchange, which is the core concept of marketing, is the process of obtaining a desired
product from someone by offering something in return. For exchange potential to exist,
five conditions must be satisfied:
1. There are at least two parties.
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.
Whether exchange actually takes place depends on whether the two parties can agree
on terms that will leave them both better off (or at least not worse off) than before.
Exchange is a value-creating process because it normally leaves both parties better off.
Two parties are engaged in exchange if they are negotiating-trying to arrive at mutually
agreeable e terms. When an agreement is reached, we say that a transaction takes
place. A transaction is a trade of values between two or more parties: A gives X to B
and receives Y in return. Smith sells Jones a television set and Jones pays $400 to
Smith. This is a classic monetary transaction but transactions do not require money as
one of the traded values. A barter transaction involves trading goods or services for
other goods or services, as when lawyer Jones writes a will for physician Smith in return
for a medical examination.
A transaction involves several dimensions: at least two things of value, agreed-upon
conditions, a time of agreement, and a place of agreement.
Marketing deals with identifying and meeting human and social needs. One of the
shortest definitions of marketing is "meeting needs profitably."

The American Marketing Association offers the following formal definition: Marketing is
an organizational function and a set of processes of recreating, communicating, and
delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stake holders. Coping with exchange processes calls for
a considerable amount of work and skill.
Marketing management takes place when at least one party to a potential exchange
thinks about the means of achieving desired responses from other parties.
Product:
In marketing, a product is anything that can be offered to a market that might satisfy a
want or need.
PRODUCT' can be classified as tangible or intangible. A tangible product is a physical
object that can be perceived by touch such as a house, automobile, computer, pencil.
An intangible product is a product that can only be perceived indirectly such as an
insurance policy.
Market
Traditionally 'a "market" was a physical place where buyers and sellers gathered to buy
and sell goods. Economists describe a market as a collection of buyers and sellers who
transact over a particular product or product class (e.g., the housing market or grain
market).
Manufacturers go to resource markets (raw material markets, labour markets, money
markets), buy resources and turn them into goods and services, and then sell finished
products to intermediaries, who sell them to consumers. Consumers sell their labour
and receive money with which they pay for goods and services. The government
collects tax revenues to buy goods from resource, manufacturer, and intermediary
markets and uses these goods and services to provide public services. Each nation's
economy and the global economy consist of complex interacting sets of markets linked
through exchange processes.
Key Customer Markets
Consider the following key customer markets: consumer, business, global, and
nonprofit.
Consumer Markets
Companies selling mass consumer goods and service such as soft drinks, cosmetics,
and athletic shoes and equipment spend a great deal of time trying to establish a
superior brand image.

Business Markets
Business buyers buy goods in order to make or resell a product to others at a profit.
Business marketers must demonstrate how their products will help these buyers achieve
higher revenue or lower costs.
Global Markets
Companies selling goods and services in the global marketplace face additional
decisions and challenges. They must decide which countries to enter; how to enter each
country (as an exporter, licenser, joint venture partner, contract manufacturer, or solo
manufacturer); how to adapt their product and service features to each country; how to
price their products in different countries; and how to adapt their communications to fit
different cultures. These decisions must be made in the face of different requirements
for buying, negotiating, owning, and disposing of property; different culture, language,
and legal and political systems; and a currency that might fluctuate in value.
Non profit and Government Markets: Companies selling their goods to non-profit
organizations such as churches, universities, charitable organizations, or government
agencies need to price carefully because these organizations have limited purchasing
power.

(b)

Explain meta-markets. Discuss marketing as a

managerial function.

The combination of an intangible market such as the internet, promoting closely related
tangible or intangible products is known as a Meta market. For understanding meta
markets lets first outline two definitions.
Market Places Markets of physical goods and products is known as Market places.
The market places has presence of companies which manufacture their own products.
Market space The online market space with websites such as Ebay, Amazon and
others is known as Market spaces. These sites do not have offline products. They only
sell others products online.

Meta Markets An online website such as the Maruti suzuki website for second hand
cars which promotes the purchase of physical goods (Maruti suzuki cars) is known as a
meta market. Lets take a look at the automobile industry. Whatever company it may be,
an automobile company would involve suppliers, channels, service providers so and so
forth. Thus the meta market will bring all these buyers and sellers online in one place for
one purpose only. Rather than giving multiple products to one customer, the meta
market brings together different customers of the same product.
It can also be said that the combination of various entities within the same industry can
be known as a meta market. The meta markets are on the rise because of the increase in
accessibility of internet on both computers as well as smart phones. Almost every
individual in urban areas have access to the computer and the internet. There are plans
being made by the Indian government to have an internet outlet in every 2 Km of India
thus making internet available to even the rural population.
The meta market helps facilitate the movement of physical goods through online
medium. Take an example of 99acres.com a real estate portal. It brings together
buyers and sellers or real estate. Yatra.com brings together the travelers and the travel
providers.
Shaadi.com
brings
the
marriage
service
providers
and the
groom/brides family together. So on and so forth. Thus both Yatra.com and
99acres.com are meta markets for real estate and travelers respectively.
The factor contributing most to meta markets is the convenience of users. Nowadays you
can make purchases in one click. However, what if instead of going on ebay or amazon
which offer tons of different options, you want to go for the website which is specific to
your niche itself? Thats a meta market.

MARKETING AS A MANAGERIAL FUNCTION

Marketing as a managerial activity involves analyzing the market
opportunities, planning the marketing activities ,implementing
marketing plans and setting control mechanism, in such a way
that organizational objectives are accomplished at the minimum
cost. In other words, marketing is:

1. Understanding consumer needs.

2. Environmental scanning and market opportunity analysis.
3. Developmental of competitive marketing plan and strategy such
that an organization is able to satisfy not only the consumer
needs but also achieve its objectives.
4. Implementation of marketing plan and development of tactical
plans to overcome problems at the market place ; and
5. Development of control mechanisms.
Marketing is therefore, an important organizational function.
Interestingly, an important aspect of buyers is ignored, i.e that
they too use the marketing ,sales and production concept. Buyer
and marketer are roles played by individuals and their behavior in
exchange relationship determines whether they are adopting the
marketing, sales or production concept .For example, the buyers
side in a marketing exchange gathers information about current
and potential exchange partner. Then the buyers side tailors
offerings like product, price or even point of purchase, mentioned
above, but aggressively purchase exchange through other
elements of the marketing mix, like word of mouth of publicity
,sales talk, etc. This has been termed as the buying concept, as it
is the buyers form of the sales concept. Likewise ,when the buyer
is passive in his buying behavior, accepting or rejecting whatever
that has been offered to him and not actively seeking an
exchange ,it has been termed as the offering concept as it
corresponds to the production concept.
These types of exchanges demystifying the marketing concept
are shown below

Q 3 (a) What is the role of marketing in the

modern organizations?

One observes that the role of marketing in modern organization

is that of integrating the needs and wants of the customers to
the other organizational functions like production, R&D, finance,
personnel, etc. One look at the companies today would be
sufficient to conclude that neither marketing nor any other
function alone holds the key to success. All functions are
equally important. However it is marketing, which performs the
role of integration.
Integrative Function of Marketing
An interesting feature of successful companies is the integration
of objectives of all corporate functions in a way that synergy is
obtained. This is crucial in todays competitive environment
because the responsibility to market the product and also to
expand/maintain the market share is on the shoulders of every
individual of the organization. Lets take examples of
companies where such integration does not or does exist. A
well-known large-sized public limited company, producing and
marketing agricultural inputs like urea, recently found itself in
the midst of stiff competition from other local and foreign
brands. The company had been operating in a sheltered market
and hence no one bothered about packaging, quality, price, etc.
Now, in a changed situation, all these were as critical as selling
skills and other marketing strategies and tactics. But, marketing
and other departments continued to work at cross-purposes,
leading to further deterioration in the companys
performance.
Another company, manufacturer of consumer durables, had an
excellent integration between all its functions. The R&D
department ,while working on a new model of cooking range,
worked in coordination with production, finance and

marketing .The resultan excellent cooking range, just the

kind required by Indian middle class consumers at an affordable
price.
The above examples illustrate that the problems are not
department specific, pertaining solely to the marketing or the
production departments. Rather, each is a total business
problem requiring an integrative solution. Marketing forms the
lead and core of any business set up for profits. All other
functions including Production, Purchase or Administration must
be complimentary to Marketing.

Discuss
about
the
integrative function of marketing.

(b)

Companies that regard integrated marketing communications as a management function

can organize the various marketing and communication activities under one leadership. The
marketing communications manager controls all communications either directly or through
reporting relationships. In addition to marketing material that the company generates to
inform the public about its products, public relations and other information that the company
produces go through the integrated management function. The marketing communications
manager makes sure that the image the company projects in the marketplace is consistent
and positive.
Sales
The traditional role of marketing communications has been to develop marketing material
that supports the company's sales activities. The integrated marketing communications
manager continues to provide this service, but the other activities under his integrated
management function influence the production of marketing material. If he sees a lot of
complaints from customers, positive or negative publicity in the media or becomes aware of
an event that can link to his marketing, he can orient the marketing material to address
these factors, which are normally outside of his area of responsibility.

Special Events
Companies often organize, attend or support special events in their fields of activity. Such
events could be the responsibility of engineering, sales or production. With marketing
communications integrated under one management function, all events go through the
integrated communications function. It means that the company's profile and the image it
projects at such events is consistent and in keeping with overall company goals.

Public Relations

Under integrated marketing communications management, companies no

longer maintain a separate public relations operation whose activities may not
support the efforts of marketing. The public relations function becomes part of
the integrated strategy and supports the marketing function. Published
information, even if not directly relevant to the marketing of the company's
products, helps create an image of the company that supports the ability to
market them. Companies and their products become more tightly identified in
the minds of the public.

Media
Instead of separate media relations, the integrated marketing communications
concept groups this responsibility with all the other company communications.
The integrated marketing communication operations review and manage the
image of the company in the media. Marketing personnel release targeted
information to support the image they want to see. When the company is in the
news, they shape the information coming out of the company to support the
company's overall goals and a positive media image.

Publicity
A company often has various people authorized to create press releases. Under
the integrated concept, integrated marketing communications management
handles all such publicity. Others may want to publicize some newsworthy items,
but the press release itself goes through the integrated management function.
The manager can decide how to structure the release of the news so that it has
the desired effect, or he can decide that the release of a particular news item is
not in the interests of the company.

Customers
Companies often place communications with customers in customer service.
Under integrated communications, the marketing function handles direct
customer contact. This arrangement has a two-fold advantage. Marketing
management can shape the responses to complaints to maximize customer
satisfaction while protecting the company. Marketing management also
becomes aware first hand of issues with the company's products. When
marketing is placed on the front lines, the function becomes more responsive to
customer concerns, and the influence of customers increases.

Integrated marketing communications is an approach to planning communications that

gives your small business the potential to get better results from your campaigns and
reduce marketing costs. By integrating tools such as advertising, direct mail, social media,
telemarketing and sales promotion, you provide clarity, consistency and maximum
communications impact, according to the American Association of Advertising Agencies
definition.
Results
In the traditional approach to marketing communications, businesses and their agencies plan separate
campaigns for advertising, press relations, direct marketing and sales promotions. Integrated campaigns
use the same communication tools to reinforce each other and improve marketing effectiveness. In an
integrated campaign, you can use advertising to raise awareness of a product and generate leads for the
sales force. By communicating the same information in press releases and feature articles, you reinforce
the messages in the advertising. You can then use direct mail or email to follow up inquiries from the
advertising or press campaigns and provide prospects with more information. To help convert those
prospects to customers, you can use telemarketing to sell directly or make appointments for the sales
team.

Cost Savings
Creative consistency in your integrated campaigns can also save you money. By
using the same images and adapting the same copy for different media, you
reduce copy-writing, design and photography costs. If you work with external
communications suppliers, you may be able to reduce agency fees by working
with a single firm that offers integrated communications services, rather than
separate specialist agencies.

Customer Preference
An integrated campaign helps you provide customers with information in the
format they prefer. Consumers and business customers can specify if they want
to receive product information via email, direct mail, text message or telephone.
Integration ensures they receive the same information in all communications.
You can also meet the needs of customers who search the Internet for product
information by integrating your website design and content with other
communications.

Discuss about the strategies for customer loyalty creation.

The easiest way to grow your customers is not to lose them

The average business loses around 20 percent of its customers annually simply by failing to attend to customer
relationships. In some industries this leakage is as high as 80 percent. The cost, in either case, is staggering, but
few businesses truly understand the implications.
Imagine two businesses, one that retains 90 percent of its customers, the other retaining 80 percent. If both add
new customers at the rate of 20 percent per year, the first will have a 10 percent net growth in customers per
year, while the other will have none. Over seven years, the first firm will virtually double, while the second will
have no real growth. Everything else being equal, that 10-percent advantage in customer retention will result in a
doubling of customers every seven years without doing anything else.
The consequences of customer retention also compound over time, and in sometimes unexpected ways. Even a
tiny change in customer retention can cascade through a business system and multiply over time. The resulting
effect on long-term profit and growth shouldnt be underestimated.
Marketing Wizdom can introduce you to a number of simple customer retention strstegies that will cost you little
or nothing to implement. Behind each technique listed here there is an in-depth step-by-step process that will
increase your customer retention significantly once implemented, and will have a massive impact on your business.
1. Reducing Attrition
Virtually every business loses some customers, but few ever measure or recognise how many of their customers
become inactive. Most businesses, ironically, invest an enormous amount of time, effort and expense building that
initial customer relationship. Then they let that relationship go unattended, in some cases even losing interest as
soon as the sale been made, or even worse, they abandon the customer as soon as an easily remedied problem
occurs, only to have to spend another small fortune to replace that customer. The easiest way to grow your
business is not to lose your customers. Once you stop the leakage, its often possible to double or triple your
growth rate because youre no longer forced to make up lost ground just to stand still.
2. Sell and then sell again
So many people do an excellent job of making the initial sale, then drop the ball and get complacent, ignoring the
customer, while they chase more business. Your selling has actually only just begun when someone makes that
initial purchase decision because virtually everyone is susceptible to buyers remorse. To lock in that sale, and all
of the referrals and repeat business that will flow from it, you need to strike while the iron is hot to allay your
customers fears and demonstrate by your actions that you really care. You should thank them and remind them
again why theyve made the right decision to deal with you and put a system in place to sell to them again, and
again, constantly proving that they made the right decision.
3. Bring back the lost sheep
Theres little point in dedicating massive resources to generating new customers when 25-60% of your dormant
customers will be receptive to your attempts to regenerate their business if you approach them the right way, with
the right offer. Reactivating customers who already know you and your product is one of the easiest, quickest ways

to increase your revenues. Re-contacting and reminding them of your existence, finding out why theyre no longer
buying, overcoming their objections and demonstrating that you still value and respect them will usually result in a
tremendous bounty of sales and drastically increased revenues in a matter of days and will lead to some of your
best and most loyal customers.
4. Frequent Communications Calendar
Avoid losing your customers by building relationships and keeping in touch using a rolling calendar of
communications. This is a programmed sequence of letters, events, phone calls, thank yous, special offers,
follow-ups, magic moments, and cards or notes with a personal touch etc. that occur constantly and automatically
at defined points in the pre-sales, sales and post-sales process. People not only respond to this positively, they
really appreciate it because they feel valued and important. It acknowledges them, keeps them informed, offsets
post-purchase doubts, reinforces the reason theyre doing business with you and makes them feel part of your
business so that they want to come back again and again.
5. Extraordinary Customer Service
The never-ending pursuit of excellence to keep customers so satisfied that they tell others how well they were
treated when doing business with you. Moving the product or service you deliver into the realm of the
extraordinary by delivering higher than expected levels of service to each and every customer. Key facets include:
dedication to customer satisfaction by every employee; providing immediate response; no buck passing; going
above and beyond the call of duty; consistent on-time delivery; delivering what you promise before AND after the
sale; a zero-defects and error-free-delivery process and recruiting outstanding people to deliver your customer
service. Extraordinary service builds fortunes in repeat customers, whereas poor service will drive your customers
to your competition.
6. Courtesy system
A powerful system that improves the interpersonal skills of your team and changes the spirit of your organisation.
It involves speaking to colleagues politely and pleasantly, without sarcasm or parody, and treating them at least as
well as you would want them to treat your customers. This will help your team to feel worthwhile and important,
which makes for pleasant social contacts at work. It also motivates them to provide extraordinary service,
encourages them to be consistently pleasant in all of their dealings and to relate to customers in a warm, human
and natural manner. This results in better, warmer, stronger, more trusting relationships and longer term bonds
with your customers.
7. Product or service integrity
Long-term success and customer retention belongs to those who do not take ethical shortcuts. There must always
be total consistency between what you say and do and what your customers experience. The design, build quality,
reliability and serviceability of your product or service must be of the standard your customers want, need and
expect. Service integrity is also demonstrated by the way you handle the small things, as well as the large.
Customers will be attracted to you if you are open and honest with them, care for them, take a genuine interest in
them, dont let them down and practice what you preach and they will avoid you if you dont.
8. Measure lifetime value

Theres a vast difference between the one-off profit you might make on an average sale, which ignores the bigger
picture, and the total aggregate profit your average customer represents over the lifetime of their business
relationship with you. Once you recognise how much combined profit a customer represents to your business when
they purchase from you again and again, over the months, years or decades, youll realise the critical importance
of taking good care of your customers. And because youll understand just how much time, effort and expense you
can afford to invest in retaining that customer, youll be in control of your marketing expenditure.
9. A complaint is a gift
96 percent of dissatisfied customers dont complain. They just walk away, and youll never know why. Thats
because they often dont know how to complain, or cant be bothered, or are too frightened, or dont believe itll
make any difference. Whilst they may not tell you whats wrong, they will certainly tell plenty of others. A system
for unearthing complaints can therefore be the lifeblood of your business, because customers who complain are
giving you a gift, theyre still talking to you, theyre giving you another opportunity to return them to a state of
satisfaction and delight them and the manner in which you respond gives you another chance to show what youre
made of and create even greater customer loyalty.

(b) What are the basis of consumer classification. Discuss about

the behaviour pattern of the rich.

Consumer Behavior
A market is designed for buying and selling of products and services. It is a human
activity to satisfy the human needs and wants through the exchange process. This
means the aim of marketing is to satisfy the potential needs and wants of products and
services of the consumer. To do marketing effectively, first we need to understand the
likes, dislikes, preferences, taste, process of purchase, consumption patterns, buying
power, buying place, quantity etc. of the buyers of that product. Here comes the
importance for us to learn the consumer behavior. Let us look at the meaning,
importance, types and factors affecting the consumer behavior.

Meaning of consumer behavior.

We all are consumers. In fact, everybody in this world is a consumer. We buy and
consume a variety of services and goods in our daily life. But we all have different taste.
We adopt different behavior patterns while making purchase decisions. We have
different likes and dislikes. You may prefer to use Nokia Mobile phone with Airtel

connection while your spouse may prefer Samsung Mobile phone with Vodaphone
connection. Your colleague may be using Sony Ericsson Mobile phone with MTNL
connection. Your neighbor may be carrying a Motorala Mobile with Reliance connection.
You may prefer Close-up toothpaste, Lux toilet soap and Sunslik shampoo while your
spouse may prefer Colgate toothpaste, Dove toilet soap and Suave Shampoo.
Similarly, you may have certain preference in selecting your magazines, books, brands,
clothing, food, recreational activities, mode of investing, brand of vehicle you use, forms
of savings, stores from where you prefer to shop, the people you associate with etc.
While you'll find that your spouse, your colleagues and your neighbors are holding
different preference in selecting their food, vehicle, books, magazines, cloths,
investments, mode of savings etc. While buying vehicles people hold different choices
like brand, size and capacity etc.
Economically weaker section buy a car which would help them to commute with less
cost. So the preference of such people is entirely different from the preference of rich
people. Rich people who can shell out a lot of money look for safety, comfort and look of
the vehicle. Price or running cost is least concern for such people.
Again within each category also different people prefer different brands. Thus, each
consumer is unique. This uniqueness is reflected in the consumption behavior and
pattern as well as process of purchase. The knowledge of consumer behavior provides
us reasons as to why consumers differ from one another in buying and using products
and services.
What products and services do we buy, how often do we buy, why do we buy, From
where do we buy etc. are the issues which are comes under the subject of consumer
behavior. It blends the elements from economics, psychology, sociology and social
anthropology. It tries to understand both individual and group decision making process
of consumers.
Consumer behavior can be defined as those acts of consumers (individuals) directly
involved in using, obtaining and disposing of economic goods and services, including
decision process that precede and determine the these acts.

Importance of understanding the consumer behavior

The importance of understanding the consumer behavior is that to know and

understand the preferences of different consumers which will enable the marketers to
form the marketing strategies accordingly. Human being differ in terms of social status,
nationality, age, sex, income, occupation, religion, family set-up, education and the
culture of the society. We have different needs because of these differences. We buy
only those products which we think will satisfy our needs. We can find out or classify the
different market segment by analyzing the consumer behavior of same product or
variation of same basic product. Better understanding of market segment is necessary
for a marketing manager to design strategies for different segments. Knowledge of
consumer behavior and taste is important factor which plays a vital role in the creation
of marketing strategies.
Consumer taste are also changing as fast as the technology changes. In today's world
technology changes are taking place rapidly. The changes in technology changes the
taste of consumers. To cater to the need of a rapidly changing consumer trends, a firm
has to constantly understand the latest consumer trends and tastes. Consumer
behavior provides invaluable clues and guidelines to marketers on new technological
frontiers which they should explore. For example, let us consider the 3G enabled mobile
phones in India. When the 3G technology introduced and the service providers started
3G services in the end of 2010, the consumers exhibited a desire to purchase 3G
enabled mobile phones than the ordinary mobile phones. In the early eighties when the
color transmission started, consumers exhibited a desire to purchase color Television
for closer-to-life color picture viewing.
To identify and understand the prospective customers and their buying behavior a
management which believes in the philosophy of marketing concept will take necessary
steps to constantly in touch with the customers to know their likes and dislikes or
requirement and expectation of the product. Customer relationship department is a two
way communicating agency between the management and the customers. To
understand the customer means to understand the goals of customers, which may be
long-term or short-term in nature. Once the goals are identified, the firm can decide and
design the products accordingly to match the goal of the consumer. The next step is to
make the customer aware about the product or services. An advertisement message
explaining how the product or services can help the customer to reach his goal will fulfill
that part of the work.

There are many difficulties in finding out the goal of the prospective customers. People
rarely ever give their goals any conscious thought nor express them in a way that can
be understand easily. Many times the consumers fail to express the goals in the order of
importance. Sometimes expressed goals are of short term in nature and seeks
immediate satisfaction which lacks the long term significance. These difficulties can fail
you to understand the true picture of consumer behavior.
To select the appropriate message and medium of advertisement, it is necessary for the
firm to understand the specific goals with a fair level of accuracy of the targeted groups.
Some of the areas that provide useful insight into consumer behavior are psychology,
Sociology, social psychology, economics and cultural anthropology. Special markets
which are consists of government agencies and other non profit organizations needs to
be studied carefully to understand the unique consumer behavior. To capitalize the
potentials of the market we need to analyze the market in depth.

Types of consumers:
Types of consumers can be classified in to two. They are:
1. Personal Consumers and
2. Organizational consumers.
Personal Consumers: When you buy a Watch for your own use, you are buying in your
capacity as a personal consumer. Whenever you buy goods and services for your own
or for your family use, you are treated as a personal consumer. All individuals therefore,
fall in the category of personal consumers. Buying decisions of a personal consumer
mostly depend on his taste, availability and afford-ability of the goods and services.
Organizational Consumer: When you buy a printer for your use in office, you are
making the the purchase in your capacity as an organizational consumer. All business
firms, government agencies and bodies, non-business organizations such as temples,
truest, hospitals etc. are organizational consumers who purchase goods and services
for running the organizations. Even in the organization, buying decisions are taken by

individuals only. Therefore, the behavior pattern of organizational consumer is

marginally different from personal consumers.

Factors influencing consumer behavior

Consumer behavior is affected by a host of different factors ranging from personality
characteristics, needs, attitudes, values, economic and cultural background like age,
sex, professional status to social influences of various kinds like forces from family,
friends, colleagues and society as a whole. The combined effect of these various factors
influence the purchasing decision and behavior of the consumer.
Consumer behavior results from environmental and individual influences. To achieve
ideal self-image and to project the self-image they want others to accept, consumers
often adjust their purchases of goods and services. Influence of others and the
psychological makeup of individuals control the consumer behavior.
All the factors that influence the consumer behavior can be classified in to four broad
groups:
1. Psychological Factors
2. Personal Factors
3. Social Factors
4. Cultural Factors
Psychological Factors: A felt need of something useful is the starting point of a purchase
decision process. We all have needs. We hope fulfilling those needs will improve and
satisfy our life. Sufficiently pressing needs will direct the person to seek its satisfaction.
We call this urgency of the need motive. Therefore, motives are inner states that direct
people towards the goal of satisfying a felt need. People take steps or action to reduce
the tension created by the want or need.
Mr. Abraham Maslow (1908 - 1970) has developed a useful theory of the hierarchy of
needs based on tow important assumptions.
1. People are wanting animals whose needs depend on what they already possess.
Only these needs that have not been fulfilled can influence human behaviour. A satisfied
need is not a motivator.

2. In the order of importance all needs can be ranked from the low biological needs to
the higher level psychological needs. Unfulfilled level of need is the motivator behind the
individuals behaviour. As soon as one level of need is fulfilled, he moves on to the next
higher level of needs.
Maslow has classified the needs into five categories. They are:
1.

Physiological needs

2.

Safety Needs

3.

Social Needs

4.

Esteem Needs

5.

Self Actualization Nees

Since no need is ever totally satisfied, there is always overlap amongst the different
levels of needs. Also there is always scope for further fulfillment.
Physiological Needs: The basic needs or primary needs are food, shelter and
clothing. It is the common and the basic need of a human being. He sees to fulfill this
need before he goes for higher needs. Once hungry, a person ignores all other needs
until he gets food to satisfy his hunger. Once his Physiological needs are met, he looks
for other higher levels of needs and try to fulfill such needs. He tries to fulfill his basic
needs of Food, water, air, shelter and sex at this stage.
Safety Needs: The second important need is the safety, security and protection from
physical unexpected harm which may come in the way as the life progress. To protect
oneself from such unexpected harm, he take the necessary steps to face such
situations. Saving account, medical insurance, life insurance, health club membership
are some of the tools he use to protect himself. Security of: body, employment,
resources, morality, health, family health are some of the desires he tries to fulfill at this
stage.
Social needs: The desire to be accepted by family, individuals and the society (group)
comes after fulfilling the physiological and safety needs. To be accepted in the society,
he starts to behave in such a way that acceptable to the society in which he live. He

change his dress code. Use gadgets to match the status of the group he belongs. He
would be interested in obtaining status among the group in which he belong. Friendship,
belongingness, family, sexual intimacy are the some of the needs that one desire at this
stage.
Esteem needs: A sense of accomplishment, achievement and to receive respect from
others is the next higher level of need a person desire to fulfill. Status, Prestige,
Success, Self Respect, confidence, respect by others and respect of others are some of
the desires one look for at this stage. Esteem needs are present in all human beings.
But very few work towards to achieve the same in a big way. In this level he not only
desire to get acceptance but also have a desire for respect and recognition. He wanted
to be an outstanding individual in the crowed.
Self-actualization Needs: Maslow defines self-actualization as "The healthy man is
primarily motivated by his needs to develop and actualize his fullest potentialities and
capacities. What man can be, he must be." He tries to achieve his fullest potential of
his capabilities and talents at this stage. Morality, creativity, spontaneity, problem
solving, lack of prejudice, acceptance of facts are some of the needs of this stage one
seeks for.

Q 5 (a) What do you mean by suppliers? What are the

techniques for environmental scanning?