CHAPTER 2:

Understanding the Marketplace and

Consumer

2 July 2022
Lesson Learning Outcome

• Understanding the marketplace

• Analyse consumer buying behaviour and their

influences
1. The Marketing Environment

• A combination of external & internal forces or factors that affects a

companies ability to establish relationship and serve its customers.

• These forces/factors impact the market or marketing efforts of an

enterprise, which includes decision-making and marketing strategies.

• According to Philip Kotler, marketing environment refers to “external

factors and forces that affect the company’s ability to develop and
maintain successful relationships with its target customers”.
The Marketing Environment
• Internal factors/forces are company-specific: owners, employees, machinery,
materials, finances, etc.

• External forces:
• Micro – factors engaged in producing, distributing & promoting the offering
(products/services), competitors.
• Macro – forces that influence society at-large; e.g. government policies,
demographic, economic , technology, infrastructure, politics, legal, social-
cultural

• Companies need to assess marketing opportunities and threats present in the

surroundings and appreciate that changes in the environment can lead to changes
in demand for its products/service, & adapt to the changes to survive.
Discussion

What do you think were the changes that influenced

the demand of products/services during the recent
pandemic situation?
Scanning the Environment

• Successful companies know the importance of constantly watching and

adapting to the changing environment. A company’s marketers take a major
responsibility in identifying significant changes in the environment.

• Marketers must be the trend trackers and opportunity seekers.

• Marketing can be seen as a system which must respond to environmental

changes because businesses may fail if they do not adapt to external
changes such as new sources of competition or changes in consumers’
preferences.
 Importance/Benefits of Environment Analysis
• Essential for business planning – it helps when making important decision and best strategies, in the
light of analyzing “what is going around the company”.
• Understanding consumer behavior – thorough analysis should be done for the marketer to be able
predict what the customer wants.
• Tapping trends – breaking into new markets & leveraging on new trends; this requires a lot of insight
of the marketing environment.
• It can assess the impact of opportunities and threats on the business - to safeguard his business from
future threats and tap into future market opportunities.
• Helps with marketing analysis – it is possible to develop effective marketing strategies on the basis of
analysis.
• It facilitates the company to increase general awareness of environmental changes.
• It helps to capitalize the opportunities rather than losing out to competitors.
• It facilitates to understand the elements of the environment.
Need for Environment Analysis

• Environment analysis attempts to give an extensive insight as to the current

market conditions as well as on impact of external factors that are
uncontrollable by the marketers – important role in convincing potential
customers regarding changes in market trend, market conditions, etc.

• The company has to come up with alternative programs and strategies in line
with environmental realities.

• Spotting the opportunities and threats is the central purpose here.

Discussion

Based on the current industry that you are

employed in, what do you think is a threat to the
business?

What should the owner do to safeguard his

business and survive?
2. Consumer Buying Behaviour
Consumer Buying Behaviour

• Refers to the buying behavior of the final consumers – individual &

household – buy products/services for personal consumption/use.

• They vary in terms of age, taste, income group and education level –
buy an incredible variety of products/service.

• All individuals and household combine and make up the consumer

market.
Model of Consumer Behaviour

The central question for marketers: How do consumers respond to various

marketing efforts the company might use? The starting point is the stimulus-
response Model of Buyer Behavior as shown below:

All these inputs enter the buyer’s ‘Black Box’ & turned into a set of buyer
responses: what to buy, when, where, how much to buy and how often.
Model of Buyer Behaviour

• Marketing stimuli consist of the 4Ps: product, price, place, and promotion. Other
stimuli include major forces and events in the buyer’s environment: economic,
technological, social, and cultural.
• All these inputs enter the buyer’s Black Box, where they are turned into a set of
buyer responses—the buyer’s attitudes and preferences, brand engagements and
relationships, and what he or she buys, when, where, and how much.
• Marketers want to understand how the stimuli are changed into responses in the
buyer’s “Black Box”:
➢Buyer’s black Box consists of 2 parts:
i) Buyer’s characteristics
ii) Buyer’s decision process.
Buyer’s Black Box – Buyer’s Characteristic
• How buyer’s characteristic are influenced by the stimuli (marketing efforts & other factors) – how
he/she reacts to the stimuli?
• Consumer purchases are influenced strongly by cultural, social, personal, and psychological
characteristics:
Factors Influencing Consumer Buying Behaviour

i. Cultural Factor
• Culture - “the way of life, especially the general customs and beliefs
of a particular group of people at a particular time – passed down
from generation to generation” (Cambridge dictionary)
• Each culture is composed of smaller subcultures – ethnicity, religion,
geographic region, etc.
• Every society has its social class and it is not identified by a single
factor, such as income. It is determined by a combination of
occupation, income, education, wealth, and other variables.
Factors Influencing Consumer Buying Behaviour

ii. Social Factor

• Consumer behavior is also influenced by their family, social
group/friends, online social network.
• Word-of-mouth influence can have a powerful impact on consumer
buying behavior. The personal words and recommendations of trusted
friends, family, associates, and other consumers tend to be more
credible than those coming from commercial sources, such as
advertisements or salespeople
Factors Influencing Consumer Buying Behaviour

iii. Personal Factor

• Lifestyle – pattern of living – changing consumer values and influencing buying
behavior.
• Age & Family life cycle - stages through which families might pass as they mature
over time & marketers use this information to develop appropriate products and
marketing plans for each stage; young, middle-age, older
• Personality – e.g. coffee makers have discovered that heavy coffee drinkers tend
to be high on sociability. Thus, Maxwell House ads show people relaxing and
socializing over a cup of steaming coffee.
• Occupation
• Economic situation – personal income, savings, interest rates
Factors Influencing Consumer Buying Behaviour

iii. Psychological Factor

• Motivation – Maslow’s Hierarchy of Needs
• Perception – selection, organize &
interpret information to form a meaningful
picture.
• Learning – changes in behavior due to
experiences.
• Beliefs & attitudes - Marketers try to
understand the beliefs that people formulate
about specific products and services.
4 Types of Buying Behaviour

• Some purchases are simple, almost habitual but if you need to buy
a new car for instance, you will certainly need a lot of information
before you are able to make a sound decision.

• 4 types of buying behavior :

i) Complex buying behaviour
ii) Dissonance-reducing buying behaviour
iii) Habitual buying behaviour
iv) Variety-seeking buying behaviour
i) Complex Buying Behaviour

• Consumers undertake complex buying behavior when they are highly involved in a
purchase and perceive significant differences among brands.
• Typically, the consumer has much to learn about the product category.
E.g. buying a new car
• Marketers need to understand about the information-gathering & evaluation-
behavior of their buyers and help the buyers learn about the product attribute &
relevance importance.
• They need share information that will differentiate the-said product from other
brands.
• Their salesperson must be motivated enough to influence the buyer’s final choice.
ii) Dissonance-reducing buying behaviour

• Dissonance-reducing buying behavior happens when consumers are highly

involved with an expensive, infrequent, or risky purchase but see little
difference among brands.
• E.g. buying a watch - because perceived brand differences are not large,
buyers may shop around to learn what is available but buy relatively
quickly. They may respond primarily to a good price or purchase
convenience.
• After purchasing the product, buyer might feel post-purchase dissonance
(discomfort) - the marketer’s after-sale communications should provide
evidence and support to help consumers feel good about their brand choice.
iii) Habitual buying behaviour

• Habitual buying behavior occurs under conditions of low-consumer involvement

and little significant of brand difference.
• E.g. buying sugar – buyer goes to the shop and buys the product without much
concern about the brand, extensive information, etc.
• Because buyers are not highly committed to any brands, marketers of low-
involvement products with few brand differences often use price and sales
promotions to promote buying.
• Alternatively, they can add some additional features to enhance their product and
brand; e.g. buying breakfast cereal.
iv) Variety-seeking buying behaviour

• Consumers undertake variety-seeking buying behavior in situations

characterized by low consumer involvement but significant perceived
brand difference.
• In cases like this, consumers do a lot of brand switching and this is not
because of dissatisfaction but for the sake of variety.
• E.g. buying soap – switch to a different brand because of how it
smells.
Significant Involvement & Perception among Brands
Discussion
• Based on the 4 types of Buyers, which one do you
closely relate to?

• If you were the Marketer selling a product to a Buyer

who is like you, what will you do to influence the final
decision on brand choice?
Consumer’s Black Box – Buyer’s Decision Process

• There are 5 stages:

Stage 1 – Need Recognition

• The buying process starts with need recognition—the buyer recognizes

a problem or need. The need can be triggered by an internal stimuli
(physiological needs) or external stimuli (advertisements about a car,
chatting with a social group, etc.).
• Marketer’s role:
• To find out why the need /problem arise.
• What is the root cause of this need / problem?
• How it led consumer to this particular product?
• E.g. “I am hungry; I need food”, buying a washing machine.
Stage 2 – Information Search

• If a consumer’s drive is high about a product,

they will start searching for more information
about a product/service they intend to purchase.
E.g. buying a washing machine.
• Information is available from several sources: personal source (family, friends)
commercial sources (advertisements, fairs), public sources (social media, peer
review, online searches) & experiential sources.
• The most effective sources, tend to be personal source that seem to be more
important in influencing the purchase of services.
• Commercial sources normally inform the buyer, but personal sources legitimize or
evaluate products for the buyer.
Stage 3 – Evaluation of Alternatives

• With the information in hand, the consumer proceeds to alternative evaluation,

during which the information is used to evaluate brands in the choice set.
• Sometime consumer use logical thinking
and careful calculation, and other times,
the same consumer may buy on impulse.
• Most buyers consider several attributes
with different importance.
• Marketers should find out how buyers
evaluate brand alternatives – influence
buyer’s decision.
Stage 4 – Purchase Decision

• After the evaluation stage, consumers would normally have

already decided which brand that they are going to purchase and
they would have made a purchase decision.
• Purchase decision - influenced by the attitude of others &
unexpected situational factors.

• E.g. Buying a sports shoe

Stage 5 – Post-purchase Behaviour

• After the product is bought, the buyer might be

satisfied or dissatisfied with the product –
post-purchase behavior.
• Why is it so important to satisfy the customer? Customer satisfaction is a key to
building profitable relationships with consumers.
• Many marketers go beyond merely meeting the expectations of customers—they
aim to delight customers. Therefore, a company should measure customer
satisfaction by setting up avenues that encourage customers to complain. In this
way, the company can learn how well it is doing and how it can improve.
• By studying the overall buyer decision process, marketers may be able to find
ways to help consumers move through post-purchase behaviour.
Consumer Satisfaction

• Consumer satisfaction is a function of consumer expectations and

perceived product performance.

Performance < Expectations Disappointment

Performance = Expectations Satisfaction
Performance > Expectations Delight