UNIT 5: Environmental Influences on CB;

Industrial Market & Consumer Behaviour

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 UNIT 5: Environmental Influences on CB;
Industrial Market & Consumer Behaviour

Environmental Influences on CB:

Social class; Life style; Culture; Cross cultural
understanding; Profile of Indian Consumers.

Industrial Market & Consumer Behaviour:

Meaning, Scope and Characteristics of Industrial buying;
Factors affecting industrial buying, Industrial buying
process.

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UNIT 5: Environmental Influences on
CB

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Social class
 Evaluation of the word…
• Society - A society, or a human society, is a
group of people involved with each other
through persistent relations, or a large social
grouping sharing the same geographical or
social territory, subject to the same political
authority and dominant cultural expectations.

4
 What is a Social Class?
• Social class can be thought of as a continuum which
includes a range of social position on which each
member of the society can be placed, divided into a
small number of specific social classes, or strata…

• Definition: The division of members of a society into

a hierarchy of distinct status classes, so that
members of each class have the same relative status
and members of all other classes have either more or
less status
5
 Characteristics of Social Class
• Is hierarchical
• Is a natural form of segmentation
• Provides a frame of reference for consumer
behaviour
• Reflects a person’s relative social status
• In Canada, individuals can up or down the social
class hierarchy – when individuals/families move
up the order of social class then it is known as
social mobility.
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 Social Class and Social Status
• Status is frequently thought of as the relative
rankings of members of each social class
– wealth
– power
– prestige

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 Social Comparison Theory
• states that individuals compare their own
possessions against those of others to
determine their relative social standing.

8
 Status Consumption
• The process by which consumers actively
increase their social standing through
conspicuous consumption or possessions

9
 Social Class Measurement
• Subjective Measures: individuals are asked to
estimate their own social-class positions
• Reputational Measures: informants make
judgments concerning the social-class
membership of others within the community
• Objective Measures: individuals answer
specific socioeconomic questions and then
are categorized according to answers

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 Objective Measures

• Single-variable indexes  Composite-variable

– Occupation indexes
– Education – Index of Status
Characteristics
– Income
– Socioeconomic
– Other Variables Status Score

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 Index of Status Characteristics (ISC)

• A composite measure of social class that

combines occupation, source of income (not
amount), house type / dwelling area into a
single weighted index of social class standing.

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 Socioeconomic Status Score (SES)

• A multivariable social class measure used by

the United States Bureau of the Census that
combines occupational status, family income,
and educational attainment into a single
measure of social class standing.

13
 What is Middle Class?
• The “middle” 50% of household incomes
Households made up of college-educated
adults who use computers, and are involved
in children’s education

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 What is Working Class?
• Households with lower earnings; control
more than 30% of the total income in the U.S.
• These consumers tend to be more brand loyal
than wealthier consumers

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16
Social Class Profiles

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Social Class Profiles (Contd…)

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Social Class Profiles (Contd…)

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Social Class Profiles (Contd…)

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 How is it important to understand social class in
consumer behaviour study?
Social class is a crucial external factor which influence consumer’s behaviour; It
is because:

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 Impact of social classes on marketing…

• Let us rewind……. Economics….

– Demonstration effect…
– Clothing, Fashion, and Shopping
– Where one shops
– External point of identification
– The Pursuit of Leisure
– Type of leisure activities differ

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– Saving, Spending, and Credit
– Level of immediate gratification sought varies
– Responses to marketing communication
– Upper classes have a broader and more general view of
the world
– Regional variations in language rise as we move down
the social ladder
– Exposure to media varies by social class

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 Social mobility
• A movement of individuals, groups or families
through a system of social hierarchy
– Vertical mobility
• Upward and downward mobility
– A freedom to attain education has changed a way
we look at traditional social class model.
– A change in career – income increase/decrease
– Horizontal mobility

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 Limitations of Social Class
• Social class is more difficult to measure than income
• Many purchase behaviours are related more to
income than social class
• Consumers often use expected social class for their
consumption patterns
• Dual incomes have changed consumption patterns
• Individual dimensions of social class are sometimes
better predictors of consumer behaviour

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UNIT 5: Environmental Influences on
CB

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LIFE STYLE
 Lifestyle and Psychographics
• A pattern of consumption reflecting a person’s
choices of how he or she spends time and money

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Lifestyle

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 Lifestyles

• Lifestyles
– Looks at patterns of consumption, personal relationships
and leisure activities.
– Yankelovich Monitor’s MindBase
– VALS
– Products are linked to lifestyles in the way they reflect the
interests of people and the settings in which the products
are used.

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 VALS - ("Values and Lifestyles")
• VALS ("Values and Lifestyles")[1] is a proprietary research methodology
used for psychographic market segmentation. Market segmentation is
designed to guide companies in tailoring their products and services in
order to appeal to the people most likely to purchase them
• VALS was developed in 1978 by social scientist and consumer futurist 
Arnold Mitchell and his colleagues at SRI International. It was
immediately embraced by advertising agencies and is currently
offered as a product of SRI's consulting services division. VALS draws
heavily on the work of Harvard sociologist David Riesman and
psychologist Abraham Maslow.

Source: [Link]

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 The VALs System
The VALs System categorizes
consumers according to psychological
traits that correlate to purchase
behavior.
• Thinkers and Believers—
motivated by ideals; abstract
criteria such as tradition, quality,
and integrity.
• Achievers and Strivers—
motivated by achievement,
seeking approval from a values
social group.
• Experiencers and Makers—
motivated by self-expression and
the need to stand out from the
crowd or make an impact on the
physical world. 31
Three Primary Consumer Motivations as per VALS:

1. Ideals Motivation
2. Achievement Motivation
3. Self-Expression Motivation

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Underlying Differences Across VALS Motivational
Types

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Lifestyle Dimensions

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 Integrating Products into Consumer Lifestyles

• For most of the people the

game World of Warcraft is
a lifestyle. It’s an online
game and the average
playtime for a player is 3-4
hours a day. First National
Bank of Omaha enabled
gamers to design their
own credit cards with their
WoW characters.

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 Lifestyle Marketing
• Lifestyle marketing recognizes that people sort
themselves into groups based on the things they like
to do
• Lifestyle marketing looks at patterns of behaviour to
understand how people use products to define
lifestyles.
• Examine how they make their choices in a variety of
product categories - in context
• An important part of lifestyle marketing is to identify
the set of products and services that go together
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Why is Knowledge about lifestyles is important for
Marketers?

• Defining the target market (beyond demographics)

• New product development,
• Cross-merchandising
• Promotional and media strategies
• Creating a new view of the market
• Better communicating product attributes/benefits -
to match a person's lifestyle.
• Reaching consumers

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 Psychographics
• Psychographics refers to information about
consumers’ attitudes, values, motivations, and
lifestyles as they relate to buying behavior in a
particular product category.
• It is a quantitative research intended to differentiate
and aggregate consumer in terms of psychological
dimensions.
• Psychographics look at the mental model of the
consumer in the context of a customer lifecycle.

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 Psychographic Segmentation uses

• To define target market

• To create new view of market
• To position product
• To better communicate product attributes
• To develop product strategy
• To market social/political issues

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Profiles

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 Customized Psychographic Profiles

PSYCHOGRAPHIC STUDY OF CONSUMERS’ BANKING PRACTICES

• These studies are typically customized to the client’s specific
product category.
• questionnaire items included are selected in view of the unique
characteristics of the product category.

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 General Purpose Psychographic Profiles

• Independent psychographic profiles of people are generated for

any particular product or service.
• Yankelovich MindBase psychographic segmentation scheme: -
• consists of eight general segments and 32 specific sub segments.
• It summarizes the eight general MindBase segments and labels
these with descriptive terms such as “I am Expressive,” “I am
Rock Steady,” and “I am Sophisticated.”
• Direct marketers and other marketing communicators use these
profiles for designing creative advertising campaigns that best
match the attitudes, values, and lifestyles of their target
audiences.

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ATTITUDES

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VALUES

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PSYCHOGRAPHIC VARIABLES

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• Psychographics
– Activities: work, hobbies, social events, vacation,
entertainment, shopping
– Opinions: self, social, future, political, business, culture,
economics, education,
– Interests: family, home, job, food, media, achievements,
recreation

Principle:
Often, differences in consumer behavior lie in
psychographics—consumers’ interests and lifestyles
—rather than in demographics.
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UNIT 5: Environmental Influences on CB

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Culture
 Culture
The sum total of learned beliefs, values, and
customs that serve to regulate the consumer
behavior of members of a particular society.

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 Culture
• Culture offers order, direction, and guidance in all
phases of human problem solving: When to eat,
Where to eat, What to eat for each meal, What to
serve guests at a dinner party, picnic, or wedding.
• Culture is a learned behavior.

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 Culture…
. . is adaptive, i.e. it changes as a society faces
new problems and opportunities...
. . . satisfies needs by providing norms (rules of
behavior)...
. . . provides values which delineate what is
right, good, and important to a society.

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 Characteristics of culture
• Culture is a learned response.
• Culture includes inculcated values.
• Culture is a social phenomenon.
• Culture is gratifying and continues for a long time.
• Cultures are similar and yet different.
• Culture prescribes the ideal standards of behavior.

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 Culture Includes:
• The Material Objects of a Society
• Ideas and Values
• Institutions
• Symbols
• The Ways We Dress, Think, Eat, and Spend Our
Leisure Tim

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 :::Beliefs:::
• Consist of the very large number of mental or verbal
statements that reflect a persons particular
knowledge and assessment of something
• “I believe this is a good restaurant to eat”
• “I believe she is a nasty person”

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 :::Values:::
1) Values are also beliefs in a way but they differ due to
2) They are relatively few in number
3) Serve as a guide for behavior
4) Difficult to change
5) Not tied to specific objects or situations
6) Widely accepted by society

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 The beliefs, values, customs…

Influence of culture
1. ON cultural values systems.
- Ethics-good, moral, immoral.
- Aesthetics-beautiful, ugly, pleasant, unpleasant.
- Doctrine- political, social, ideological

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2-Culture exist & reveals at different levels.
• Supranational level- Reflects different
dimensions of multiple cultures/ different
society of nations
• National level- dimensions of culture of country
and national characters.
• Group level- Held with in a country with various
sub-divisions of the society like family, reference
group, & other closely held group.
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 Levels of Culture
Level 1: Cultural differences
that cross national boundaries
or can be seen to be present in
more than one country
Level 2 : Unique to a particular Group
country
Level 3 : Basically subcultures
can also be Families, shopping National
groups, friendship groups
Supranational
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 Forms of Cultural Learning
• Formal Learning: what the elder family member
teach the younger one how to behave.
• Informal Learning: what the child learns
primarily by imitating the behavior of selected
others such as family, friend, or TV heroes.
• Technical Learning: In which teacher instruct the
child in an educational environment about what
should be done, how it should be done, and why
it should be done.
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The Movement of Cultural Meaning

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 Issues in Culture
• Enculturation: the learning of one’s own culture.
• Acculturation: The learning of a new or foreign culture.
• Language and symbols: Marketers must choose appropriate
symbols in advertising.
• Ritual: A ritual is a type of symbolic activity consisting of a series
of steps (multiple behavior) occurring in a fixed sequence and
repeated over time.
– Rituals extend over the human life cycle
– Marketers realize that rituals often involve products.
• Sharing of Culture: Culture is transferred through family, schools,
houses of worship, and media

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 Culture and Advertising
Is it the role of advertising to socialize readers
on how to dress, decorate their homes,
celebrate festivals and food for parties, etc.?

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American Core Values Indian Core Values

 Achievement and success  Family orientation

 Activity
 Efficiency and practicality
 Saving orientation
 Progress  Festivities
 Material comfort  Shopping as a ritual
 Individualism
 Freedom  Mythology
 External conformity  Food Habits
 Humanitarianism
 Youthfulness
 Fitness and health

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 Criteria for Value Selection
• The value must be pervasive.
• The value must be enduring.
• The value must be consumer-related.

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 Changing cultural trends in Indian urban markets

• Achievement orientation
• Work Ethic
• Material Success
• Middle of the road approach to tradition
• Impulse Gratification
• Use of hi-tech products

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UNIT 5: Environmental Influences on CB

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Cross cultural understanding
 Consumer Behavior,
Ninth Edition
Cross culture in the business world refers to a company's
efforts to ensure that its people interact effectively with
Schiffman
professionals from backgrounds &from
different Kanuk
their own. Like
the adjective cross-cultural, it implies a recognition of
national, regional, and ethnic differences in manners and
methods and a desire to bridge them.
 The effort to
determine to what
Cross-Cultural
extent the
Consumer
consumers of two
Analysis
or more nations are
similar or different.
 “consumer style”
• “consumer style” (i.e., how a consumer approaches
the purchase and consumption experience, including
attitudes, beliefs, and decision rules about price,
value, etc.).
Consumer Styles
 Measures of Cross-Cultural Aspects

There are several frameworks for assessing consumption-related

cultural differences. One study identified the dimensions that
cross-cultural studies should address:
1. Judgments regarding the quality of a country’s products
2. Willingness to buy a country’s products
3. Ethnocentrism—willingness to buy foreign-made products
4. Perceptions of a country’s consumption culture
5. Acculturation—identification with a country’s culture
6. Ethnic self-identification
7. National self-identification
 Measures of Cross-Cultural Aspects
Attitudes toward local and global products (Agree/Disagree)
•Entertainment
e.g. I enjoy entertainment that I think is popular in many countries around the world
more than traditional entertainment that is popular in my own country.
•Furnishings
e.g. I prefer to have home furnishings that are traditional in my country rather than
furnishings that I think are popular in many countries around the world.
•Food
e.g. I enjoy foods that I think are popular in many countries around the world more than
my own country’s traditional foods.
•Lifestyles
e.g. I prefer to have a lifestyle that is traditional in my own country rather than one that I
think is similar to the lifestyle of consumers in many countries around the world.
•Brands
e.g. I prefer to buy brands that I think are bought by consumers in many countries around
the world rather than local brands that are sold only in my country.
 Cross-Cultural Consumer Analysis

Issues
• Similarities and • The greater the similarity
differences among between nations, the
people more feasible to use
relatively similar marketing
strategies
• Marketers often speak to
the same “types” of
consumers globally
 Discussion Questions

• Are people becoming more similar?

• Why or why not?
Comparisons of Chinese and American Cultural Traits

Chinese Cultural Traits American Cultural Traits

• Centered on Confucian • Individual centered
doctrine • Emphasis on self-
• Submissive to authority reliance
• Ancestor worship • Primary faith in
• Values a person’s duty rationalism
to family and state • Values individual
personality
 Cross-Cultural Consumer Analysis

Issues
• The growing global • Growing in Asia, South
middle class America, and Eastern
Europe
• Marketers should focus
on these markets
 Cross-Cultural Consumer Analysis

Issues
• The global teenage • There has been growth in an
market affluent global teenage and
young adult market
• They appear to have similar
interests, desires, and
consumption behavior no
matter where they live.
 The iPod has
global appeal to
the young
market.
 Cross-Cultural Consumer Analysis

Issues
• Acculturation • Marketers must learn
everything that is
relevant about the
usage of their product
and product categories
in foreign countries
Basic Research Issues in Cross-Cultural Analysis

FACTORS EXAMPLES
Differences in language and meaning Words or concepts may not mean the
same in two different countries.
Differences in market segmentation The income, social class, age, and sex
opportunities of target customers may differ
dramatically in two different
countries.
Differences in consumption patterns Two countries may differ
substantially in the level of
consumption or use of products or
services.
Differences in the perceived benefits Two nations may use or consume the
of products and services same product in very different ways.
Basic Research Issues in Cross-Cultural Analysis (Contd…)

FACTORS EXAMPLES
Differences in the criteria for The benefits sought from a service
evaluating products and services may differ from country to country.
Differences in economic and social The “style” of family decision
conditions and family structure making may vary significantly
from country to country.
Differences in marketing research The types and quality of retail
and conditions outlets and direct-mail lists may
vary greatly among countries.
Differences in marketing research The availability of professional
possibilities consumer researchers may vary
considerably from country to
country.
CUSTOMIZATION

To understand how to decide whether to customize products

for global markets or to sell standardized ones.
 Customization Examples

• McDonald’s
– Japan: Donald McDonald vs. Ronald McDonald
– Japan: Corn soup and green tea milkshakes
– Sweden: Softer design and woodcut packaging
– France: McBaguette
– Philippines: Rice and spaghetti as side dishes
• Pizza Hut Casual Dining in China
• Starbucks coffee in Europe
• Sunglasses for Chinese people
 Example : Linguistic Barriers

• General Motors
– Chevy Runs Deep  Find New Roads
– Nova “No Go” (Spanish)  Caribe
• Parker Pens (Mexico): “It won’t leak in your pocket
and make you pregnant”
• Vicks cough drops (Germany): sexual penetration
• Pepsi (Taiwan): bring ancestors back from the dead
• Coc-Cola (China): Ke-kou-ke-la = bite the wax tadpole
or female horse stuffed with wax  Ko-kou-ko-le =
happiness in the mouth
 Chinese Names: Examples

• Cadillac (Ka di la ke) and Hilton (Xi er dun) =

phonetic translations; mean nothing
• Snickers’ (Shi Li Jia) = “honorary powerful
support”
• Tide (Tai Zi) = “gets rid of dirt”
• Colgate (Gao Lu Jie) = “revealing superior
cleanliness”
• Citibank (Hua Qi Yihang) = “star-spangled banner
bank”
 Promotional Appeals
Humorous advertising: UK vs. Greece

Sexual appeals:
• Western country vs. Muslim or Buddhist countries
• South Asian cultures vs. the U.S.

Collectivist vs. individualistic ad appeals

• A study of Chinese Generation-X consumers, aged 18 to 35, with high income and
high education, found that they were equally persuaded by individualistic and
collectivistic ad appeals, whereas their older counterparts were more persuaded
by collectivistic than individualistic ad appeals.

Comparative advertising
• Self-construal
• Need for cognition
 Products that are
manufactured,
packaged, and
World
positioned the same
Brands
way regardless of the
country in which they
are sold.
Why Does One of the World’s Most Highly Regarded Wristwatch
Brands Use a Single Global Advertising Strategy (Only Varying the
Language)?

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They Speak to Them in Their Own Language to
Maximize their “Comfort Zone.”

92
 Are Global Brands Different?

• According to a survey – yes.

• Global brands have:
– Quality signal
– Global myth
– Social responsibility
 Global brand
created a global
campaign, where the
advertising copy is in
different languages, but
the message the ads
communicate is the
same:
Example of a Global Brand
The World’s Most Valuable Brands

1. Apple
2. Google
3. Microsoft
4. Coca-Cola
5. IBM
6. Toyota
7. Samsung
8. GE
9. McDonald’s
10. Amazon
 The Imperative to Be Multinational

• Global Trade Agreements

– EU (Europian Union)
– NAFTA (North American Free Trade Agreement)
• Acquiring Exposure to Other Cultures
• Country-of-origin Effects
Most of these
brands offer
different Web
sites for each
country.
 Discussion Questions

• What challenges may Toyota have faced to get this

status?
• What might they have done right in their marketing
strategy to achieve this status? Consider the 4Ps.
 Country of Origin Effects: Negative and Positive

• Many consumers may take into consideration the

country of origin of a product.
• Some consumers have animosity toward a country
– People’s Republic of China has some animosity to Japan
– Jewish consumers avoid German products
– New Zealand and Australian consumers boycott French
products
 Country of Origin Effects: Positive

• Many consumers may take into consideration

the country of origin of a product.
• Country-of-origin commonly:
– France = wine, fashion, perfume
– Italy = pasta, designer clothing, furniture, shoes,
and sports cars
– Japan = cameras and consumer electronics
– Germany = cars, tools, and machinery
 Country of Origin Effects: Negative

• Some consumers have animosity toward a country

– People’s Republic of China has some animosity to Japan
– Jewish consumers avoid German products
– New Zealand and Australian consumers boycott French
products
 This U.S.
Government Web
site helps those
who want to buy
USA products.
 Characteristics of Global Brands
1. Quality Signal:
• Consumers believe that the more people who purchase a brand,
the higher the brand’s quality (which often results in a global
brand being able to command a premium price). Furthermore,
consumers worldwide believe that global brands develop new
products and breakthrough
• technologies at a faster pace than local brands.
2. Global Myth:
• Consumers view global brands as a kind of “cultural ideal”; their
purchase and use make consumers feel like citizens of the world,
and give them an identity (i.e., “Local brands show what we are;
global brands show what we want to be”).
3. Social Responsibility:
• Global companies are held to a higher level of corporate social
responsibility than local brands, and are expected to respond to
social problems associated with what they sell.
 Global Brands : Intracountry consumer segments

1. Global Citizens
• (55% of the total respondents) use a company’s global success as
an indication of product quality and innovativeness, and are
concerned that the firm acts in a socially responsible manner.
2. Global Dreamers
• (23%) view global brands as quality products, and are not
particularly concerned about social responsibility issues.
3. Anti-globals
• (13%) feel that global brands are higher quality than local brands,
but they dislike brands that preach U.S. values and do not trust
global companies to act responsibly. Generally, they try to avoid
purchasing global brands.

4. Global Agnostics
• (8%) evaluate global brands in the same way they evaluate local
brands.
Market Growth Opportunities
Top Global Brands and Appeals
Top Global Brands (cont.)
Brand Shares
 Reasons to Pursue Global Markets

• Multinational fever –
attractive multinational
markets, products, or
services
• Overseas markets offer
future growth when
home markets mature
• Consumers around the
globe eager to try
“foreign” products
Spending Power
Multinational Reactions to Brand Extensions

• A global brand does not always have success

with brand extentions
• Example Coke brand extension – Coke
popcorn
– Eastern culture saw fit and accepted the brand
extension
– Western culture did not see fit
 Adaptive Global Marketing

• Adaptation of advertising message to specific

values of particular cultures
• McDonald’s uses localization
– Example Ronald McDonald is Donald McDonald in
Japan
– Japanese menu includes corn soup and green tea
milkshakes
• Often best to combine global and local
marketing strategies
 Discussion Question

• If your university is considering a satellite business

program in India
– How would they need to adapt the program?
– What would prompt these changes?
Alternative Multinational Strategies: Global Versus
Local

• Framework for Assessing Multinational

Strategies
– Global
– Local
– Mixed
 A Framework for Alternative Global
Marketing Strategies

PRODUCT COMMUNICATON
STRATEGY STRATEGY
STANDARDIZED LOCALIZED
COMMUNICATIO COMMUNICATIO
STANDARDIZ NS
Global strategy: NS
Mixed Strategy:
ED PRODUCT Uniform Product/ Uniform Product/
Uniform Message Customized Message
LOCALIZED Mixed strategy: Local Strategy:
PRODUCT Customized Product/ Customized Product/
Uniform Message Customized Message
 Cross-Cultural Psychographic Segmentation

The only ultimate truth possible is that humans

are both deeply the same and obviously
different.
Changing cultural trends in Indian urban markets

• Achievement orientation
• Work Ethic
• Material Success
• Middle of the road approach to tradition
• Impulse Gratification
• Use of hi-tech products

118
 SUBCULTURE
• Sub-culture is defined as a distinct cultural group
that exists as an identifiable segment within a larger,
more complex society. Ex. Nationality, social class,
Religion, Language,

119
 Divisions of Sub-culture
Nationality subculture: with in a particular country like in India-
• Anglo Indians-A person of mixed English and Indian descent
• Parsees-The Parsis came to India sometime around the 10th
century A.D. to escape Arab persecution in Persia which
began in the 7th century.
• Mughals- Mogul Muslim empire in India, 1526–1857. The
dynasty was founded by Babur who came from Farghana,
now in Uzbekistan.
• Pathans- Pathans came from Afghanistan As a vendor and
businessmen. They had living in community different area in
Indi

120
 Divisions of Sub-culture (Contd…)
• Religious sub-culture : Based on different
faiths, Beliefs, & Religion. Like -
– Muslims
– Sikhs
– Christians
– Hindus
– Buddhists

121
 Subculture & consumer behavior
• Geographic & Religious sub-culture; Ex. South Indians,
North Indians, North-east Indians.
• Racial sub-culture: In Caucasians, Africans, Asian, American
& American Indians.
• Age sub-culture :

• Gender as subculture- All societies have assigned different

traits & roles for Males females, like breadwinners for
Males & Homemakers for females etc.

122
 Marketers focus
• Marketers focus on satisfying traditional tastes
& preferences.
• Companies are now focusing more on Age sub-
culture & gender subculture.
• For Ex.
1) Lifestyle
2) Levies
3) Upcoming segment of Unisexual saloons.
4) Automobiles like TVS- Scotty & Bajaj-pulsar etc.
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UNIT 5: Environmental Influences on CB

5
Profile of Indian Consumers
 Consumer Profile

• The population of India in 2019 is estimated at 1.37 billion according

to the latest UN data.
• The largest city in India is Mumbai, with a population of 12.5 million,
followed closely by Delhi with a population of over 11 million.
• Overall, there are more than 50 areas India with a population of
more than one million.
• While the number of Indians living in urban areas has increased over
the past two decades, about 67% of the population still lives in rural
areas.
• India is a vast country, marked by a great diversity of religions,
languages, literacy levels, traditions, social customs and economic
status.

125
 Consumer Profile (Contd…)

• There are five categories of Indian homes: elite, well-off,

aspiring, future billionaires, strivers. The first two classes of
income are those that grow the fastest. However, the largest
consumption expenditure is concentrated on categories
including people with undergraduate degrees (skilled
employees), blue-collar workers and migrant workers.
• In India, these categories represent about 129 million workers
with incomes of more than 3,200 USD per year on average.
• In 2011, India had a literacy rate of 74%: 82% for men and 62%
for women. However, the literacy rate varies enormously from
one state to another.

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 Purchasing Power

• Rising incomes influence spending patterns in the various

consumer categories.
• In 2017, annual growth in consumer spending was 12% and India is
expected to become the third largest consumer market by 2025.
• Fundamental changes in Indian family structure are a determining
factor in consumption patterns: extended family gives way to
nuclear homes - a couple or a single person, with or without
children who tend to spend more.
• According to World Bank data for 2017, per capita GDP (Purchasing
Power Parity) in India was US $ 7059.32, up 7.33% from 2016.
According to the World Organisation of Labour , the Gross National
Income per capita was 1,800 USD for the same period.

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 Consumer Behaviour
• Indian consumer behaviour is strongly influenced by the caste
system that compartmentalizes society. It creates social
differences and makes it possible to strengthen bonds between
people from the same social group.
• Thus, a brand will be much easier to advertise via the
recommendations of parents and word of mouth.
• In general, Indian consumers are attached to a particular brand,
but are not exclusive. Indeed, they seek above all the added
value of the purchase and the brand, more than its reputation.
Companies wishing to reach as many consumers as possible
must make significant efforts in terms of market penetration.

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• Indian consumers tend to buy fresh produce (dairy products, fruits and
vegetables) at least every two or three days, an advantage for traditional
"kirana" stores compared to so-called modern stores like supermarkets.
• In recent years, rural consumers have grown in importance. Broader
Internet access is driving a growing demand for streaming services as
well as significant growth in e-commerce. According to data from the
IBEF, by 2025, India will be the 5th largest consumer goods market in the
world (currently 12th). The durable goods market is expected to reach $
20.6 billion by 2020. The shared economy has undergone a tremendous
development in India and has grown exponentially in the past five years.
Services like MERU Cab are used as an alternative for Uber or BlaBlaCar.

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UNIT 5: Industrial Market &
Consumer Behaviour

1
Meaning, Scope and
Characteristics of Industrial
buying
 MEANING OF ORGANIZATIONAL/ INDUSTRIAL
BUYING

• Organizational or Industrial behavior refers to the

to the buying behavior of organizations that buy
products for business use, resell or to make other
products.

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 Nature and Scope Of Industrial Marketing/ Buying
- Overview

• Industrial markets present different types of challenges and

opportunities as compared to consumer markets.
• Industrial Markets are markets for products and services,
local to international, bought by businesses, government
bodies and institutions for incorporation (ingredient material
or components), for consumption (process material,
consulting services), for use (installations or equipment) or
for resale.
• Industrial markets consist of all organisations that purchase
goods and services to use in the creation of their own goods
and services.

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• Industrial marketing is the process of matching and
combining the capabilities of the supplier with the
desired outcomes of the customer to create value for
the “customers customer” and hence for both
organisations.

136
 Difference between consumer and organisational
buying

• Setting for Buying

• Technical/Commercial Knowledge
• Contact with Buyers/Distribution Channels
• Number of Decision-Makers
• Reciprocal Demand

137
 Characteristics of Industrial Buying
FEWER ORGANIZATIONAL BUYERS
• A company marketing industrial products will have fewer potential
buyers than one marketing in consumer markets.

CLOSE, LONG-TERM RELATIONSHIPS BETWEEN ORGANZATIONAL

BUYERS AND SELLERS

• Invest in long-term relationships with them

ORGANIZATIONAL BUYERS ARE MORE RATIONAL

• Organizational buyers have to justify their decisions to other members

of their organization.
ORGANIZATIONAL BUYING MAY BE TO SPECIFIC REQUIREMENTS

• It is not uncommon in business to business marketing for buyers to

determine product specifications and for sellers to tailor their product
offerings to meet them.
RECIPROCAL BUY MAY BE IMPORTANT IN
ORGANIZATIONAL BUYING
• Because an organizational buyer may be in a
powerful negotiating position with a seller, it
may be possible to demand
discounts/concessions in return for placing the
order.

ORGANIZATIONAL SELLING/BUYING MAY BE MORE

RISKY
• Business to business markets are sometimes
characterized by a contract being agreed
before the product is made. Further, the
product itself may be highly technical and the
seller may be faced with unforeseen problems
once work has started.
ORGANIZATIONAL
BUYING IS MORE
COMPLEX
• Many organizational purchases, notably those
which involve large sums of money and are new to
the company, involve many people at different
levels of the organization.

NEGOTATION IS OFTEN
IMPORTANT IN
ORGANIZATIONAL
BUYING
• Negotiation is often important in organizational
buying because of the presence of professional
buyers and sellers and the size and complexity of
organizational buying.
 Characteristics of Industrial Buying (Contd…)

 Industrial Market customers comprise commercial enterprises,

institutions and governments – HCL Computers customers can be
Air India, Delhi University and State Governments
 A single purchase by an industrial customer may be far larger
than individual customers – An individual may purchase one unit
of Microsoft software or an upgrade but Citibank may buy 1000
units.
 The demand for industrial products is derived from the ultimate
demand for consumer products – Increase in demand for housing
will stimulate demand for wood for making furniture and
numerous other related products.

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Characteristics of Industrial Buying (Contd…)
 Relationships between industrial marketers tend to be close and
enduring - HCL Computers relationship with some key
customers spans decades.
 Buying decisions by industrial customers often involve multiple
buying influences rather than a single decision maker – a cross
functional team from an industrial buyer, say textile producer
will evaluate various textile machinery companies before buying
from any particular company. Purchasing, engineering, material
mgt and other division members may be involved in this
purchase

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 Scope of Industrial Marketing Industrial Customers

1. Commercial Enterprises
• Users
• Original Equipment manufacturers
• Dealers and Distributors
2. Government Organisations
3. Institutions

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 Commercial Enterprises

 Users purchase industrial products or services to produce other

goods or services that are sold in business or consumer markets.
Machine tools is an example of such a purchase. Products
purchased by users are not incorporated into final product, hence
different from OEM’s as explained below.
 Original Equipment Manufacturers ( OEM’s)- Enterprises like
Maruti, Xerox purchase industrial goods to be incorporated ation
is OEM. They are generally the large volume users of goods and
services

144
 Commercial Enterprises (Contd…)

 Dealers and Distributors – They are commercial enterprises that

purchase industrial goods for resale( in basically the same form)
to users and OEM’s. They accumulate, store and sell a large
assortment of goods to industrial users. They ensure that their
customers have timely access to the goods. They play an
important strategic role

145
 Government Organisations / Institutions

 Government and its agencies can be the large purchasers of

industrial goods
 The high volume purchasing can have procurement and
administrative requirements that may require a large amount of
effort to ensure compliance.
 Focus should be on the value expectation and the factors that
influence the buying decision
 Public and private Institutions are also important customers and
their procedural requirements should be carefully understood.
Some of them may be subject to public scrutiny and may follow
detailed procedures

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UNIT 5: Industrial Market &
Consumer Behaviour

2
Factors affecting industrial
buying
148
Major Influences on Industrial Buying Behavior

149
 FACTORS INFLUENCING ORGANIZATIONAL BUYERS

• ENVIRONMENT FACTORS- factors in current & expected

economic environment, such as primary demand, economic,
outlook, cost of money.
• ORGANIZATIONAL FACTORS-specific objectives, policies,
procedures, organizational structure & system.
• INTERPERSONAL FACTORS- includes several participants with
different status, authority, empathy & persuasiveness.
• INDIVIDUAL FACTORS – personal motives, perceptions &
preferences. These factors are further affected by personal
characteristics like age, income, education, styles & attitudes.

150
UNIT 5: Industrial Market &
Consumer Behaviour

3
Industrial buying process
ORGANIZATIONAL BUYING PROCESS

152
 ORGANIZATIONAL BUYING PROCESS

• Problem recognition – recognition of need by someone in

the company that could be met by purchasing a particular
product or service. New ideas may come through trade
shows, advertisement, sales person.
• General need decision- the features & quantity of the
needed item are described by the originating department in
consultation with technical service people.
• Product specialization – technical specifications of the
required product are developed .
• Supplier search – search for the best vendors using database
or directories.

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 ORGANIZATIONAL BUYING PROCESS (Contd…)

• Proposal solicitation - inviting bids from vendors .vendor’s

salesmen may give presentation.
• Supplier selection – analysis of proposals.
• Order routine specification- preparation of purchase order
/supplier contract which includes technical specification ,
quantity to be supplied, delivery schedules, price,
guarantees.
• Performance review- the buyer reviews the performance of
the supplier. The feedback normally comes from the user
department . Based on the review , the buyer may decide to
continue the contract or cancel further supply .

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 TYPES OF BUYING SITUATIONS

• Straight rebuy- purchase department reorders on a

routine basis, such as office stationery.
• Modified rebuy- buyer wants to modify product
specifications, prices, other terms of suppliers , such
as new electronic components.
• New task- buying for first time. This is marketer’s
greatest opportunity &challenge.

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