CHAPTER 4

Understanding Markets
Technically speaking, a market is any place where two or more parties can meet to engage in
an economic transaction even those that don't involve legal tender. A market transaction may
involve goods, services, information, currency, or any combination of these that pass from
one party to another.
Markets may be represented by physical locations where transactions are made. These
include retail stores and other similar businesses that sell individual items to wholesale
markets selling goods to other distributors. There are two types of market depending upon
usefulness. These are
4.1 Consumer Market
A consumer market is the very system that allows us to purchase products, goods, and
service. These items can be used for personal use or shared with others. In a consumer
market, you make your own decisions about how you will spend money and use the products
you purchase. More people who go out and actively purchase products, the more active the
consumer market.
Consumer markets refer to the markets where people purchase products for consumption and
are not meant for further sale. This market is dominated by the products which consumer use
in their daily life.
Markets dominated by products and services designed for the general consumer. Consumer
markets are typically split into four primary categories: consumer products, food and
beverage products, retail products, and transportation products. Industries in the consumer
markets often have to deal with shifting brand loyalties and uncertainty about the future
popularity of products and services.
Consumer Behaviour: Are the decision processes and acts of people involved in buying and
using products
Consumer buying behaviour: refers to the buying behaviour of the ultimate consumer. A
firm needs to analyze buying behaviour for:
 Buyer’s reactions to a firms marketing strategy has a great impact on the firm’s
success.
 The marketing concept stresses that a firm should create a marketing mix (MM) that
satisfies (gives utility to) customers, therefore need to analyze the what, where, when
and how consumers buy.
 Marketers can better predict how consumers will respond to marketing strategies.

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 4.1.1 Consumer Buying Process
The purchase process is initiated when a consumer becomes aware of a need. This awareness
may come from an internal source such as hunger or an external source such as marketing
communications. Awareness of such a need motivates the consumer to search for information
about options with which to fulfil the need. This information can come from personal
sources, commercial sources, public or government sources, or the consumer’s own
experience.
Once alternatives have been identified through these sources, consumers evaluate the options,
paying particular attention to those attributes the consumer considers most important.
Evaluation culminates with a purchase decision, but the buying process does not end here. In
fact, marketers point out that a purchase represents the beginning, not the end, of a
consumer’s relationship with a company.
After a purchase has been made, a satisfied consumer is more likely to purchase another
company product and to say positive things about the company or its product to other
potential purchasers. The opposite is true for those dissatisfied customers. Because of this
fact, many companies continue to communicate with their customers after a purchase in an
effort to influence post-purchase satisfaction and behaviour.
Stages of the Consumer Buying Process
Actual purchasing is only one stage of the process. Not all decision processes lead to a
purchase. All consumer decisions do not always include all 6 stages, determined by the
degree of complexity. Six Stages to the Consumer Buying Decision Process are there.
1. Problem Recognition: - difference between the desired state and the actual condition.
Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat.
Can be stimulated by the marketer through product information--did not know you
were deficient? I.E., see a commercial for a new pair of shoes, stimulates your
recognition that you need a new pair of shoes.
2. Information search: - Once a problem is recognized, the customer search process
begins. They know there is an issue and they’re looking for a solution.
As a marketer, the best way to market to this need is to establish your brand or the
brand of your clients as an industry leader or expert in a specific field.
A successful information search leaves a buyer with possible alternatives, the evoked set.
Hungry, want to go out and eat, evoked set is
o cultural food o burger king
o Indian food

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 3. Evaluation of Alternatives: - need to establish criteria for evaluation, features the
buyer wants or does not want. Rank/weight alternatives or resume search. May decide
that you want to eat something spicy, Indian gets highest rank etc.
If not satisfied with your choice then returns to the search phase. Information from
different sources may be treated differently. Marketers try to influence by "framing"
alternatives.
4. Purchase decision--Choose buying alternative, includes product, package, store,
method of purchase etc.
5. Purchase--May differ from decision, time lapse between 4 & 5, product availability.
6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive
Dissonance, have you made the right decision. This can be reduced by warranties,
after sales communication etc.
After eating an Indian meal, may think that really you wanted a Chinese meal instead.
4.1.2 Types of Consumer Buying Behaviour
Types of consumer buying behaviour are determined by:
 Level of Involvement in purchase decision. Importance and intensity of interest in a
product in a particular situation.
 Buyer’s level of involvement determines why he/she is motivated to seek information
about a certain products and brands but virtually ignores others.
High involvement purchases--Honda Motorbike, high priced goods, products visible to
others, and the higher the risk the higher the involvement. Types of risk:
 Personal risk
 Social risk
 Economic risk
The four type of consumer buying behaviour are:
 Routine Response/Programmed Behaviour--buying low involvement frequently
purchased low cost items; need very little search and decision effort; purchased
almost automatically. Examples include soft drinks, snack foods, milk etc.
 Limited Decision Making--buying product occasionally. When you need to obtain
information about unfamiliar brand in a familiar product category, perhaps. Requires
a moderate amount of time for information gathering. Examples include Clothes--
know product class but not the brand.
 Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or
infrequently bought products. High degree of economic/performance/psychological

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 risk. Examples include cars, homes, computers, education. Spend a lot of time seeking
information and deciding.
Information from the companies MM; friends and relatives, store personnel etc. Go
through all six stages of the buying process.
 Impulse buying, no conscious planning.
The purchase of the same product does not always elicit the same Buying behaviour. Product
can shift from one category to the next.
For example:-
Going out for dinner for one person may be extensive decision making (for someone that
does not go out often at all), but limited decision making for someone else. The reason for the
dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also
determine the extent of the decision making.
Categories that Effect the Consumer Buying Decision Process
A consumer, making a purchase decision will be affected by the following three factors:
1. Personal
2. Psychological
3. Social
The marketer must be aware of these factors in order to develop an appropriate MM for its
target market.
Personal
Demographic Factors such as sex, race, age etc.
Who in the family is responsible for the decision making?
Young people purchase things for different reasons than older people.

Psychological factors
Psychological factors include:
 Motives
A motive is an internal energizing force that orients a person's activities toward
satisfying a need or achieving a goal.
Actions are effected by a set of motives, not just one. If marketers can identify
motives then they can better develop a marketing mix.
Maslow hierarchy of needs!
o Physiological

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 o Safety
o Love and Belonging
o Esteem
o Self Actualization
Need to determine what level of the hierarchy the consumers are at to determine what
motivates their purchases.
Social Factors
Consumer wants, learning, motives etc. are influenced by opinion leaders, person's family,
reference groups, social class and culture.
4.2 Business market
An Overview of Business Marketing
Business marketing, also known as business-to-business marketing, occurs when a business
markets and sells its products or services to another business or organization. The
businesses that purchase these products may use them in manufacturing, to run their
businesses or for resale. In consumer marketing, advertising can be broad and interaction
with customers often takes place through large retailers. Business marketing differs in that it
relies on much more personal, direct relationships between businesses.

Marketplaces where organizations purchase raw materials, natural resources and components
of other products for their resale or for use in manufacturing another product. Business
markets are generally made up of businesses which buy products and raw materials for their
own operation.
A business market is the specific group or industry a company focuses on when trying
to sell products and services. These audiences are often dictated by the kind of materials an
organization deals in and the kinds of competition these businesses experience. A business
market is also called a target market.

Business buyer behaviour is the intent and behaviour shown by companies and employees
into making purchases for the organization. Business buying behaviour is the concept of
understanding the needs and wants of a business and making appropriate purchases, which
ultimately help a company get profits.
Companies have specific roles allotted to employees, who responsible for making business
purchases. This role is often known as business buyer. Business buyer behaviour can be
understood on the basis of the business buying process, which helps companies to get the best
raw material & goods, which can be processed to get maximum output and returns.

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Business markets are split up depending on the overall focus a firm wants to exert over its
marketing and advertising initiatives. These operations are determined based on the kinds of
products and services a company has, as not all consumers are interested in what a firm has to
offer. Companies need to find out who wants what they have to offer, and then drive their
sales initiatives toward these markets.

The above image depicts the buying process which is based on the business buyer behaviour.
Organizational forces- Technical and price related specifications
3. Group forces- preferences of buying centre group
4. Individual forces- individual preferences
5. Factors like supplier of choice, order quantity, delivery, service, payment terms etc
4.2.2 Types of Buying Situations
Broadly there are three types of buying situations in a company
1. New Task- extensive problem solving stage; focus on product; 2 types- judgemental and
strategic
2. Modified Re-buy- limited problem solving; focus on product & vendor; 2 types-simple
and compel
3. Straight Re-buy- routine problem solving; focus on vendor; 2 types- casual and routine
Hence, this concludes the definition of Business Buyer Behaviour along with its overview.