Principles of Marketing Unit 2 Consumer Behaviour and Market Segmentation

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Principles of Marketing Unit 2 Consumer Behaviour and Market Segmentation

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Principles of Marketing Unit 2 Consumer Behaviour and Market Segmentation Notes cover all the exercise questions in UGC Syllabus. Principles of Marketing Unit 2 Consumer Behaviour and Market Segmentation provided here ensures a smooth and easy understanding of all the concepts. Understand the concepts behind every Unit and score well in the board exams.

Consumer Behaviour and Market Segmentation



A. Multiple Choice Questions:

1. The market environment consists?

(a) Socio-economic.

(b) Competition.

(c) Substitutes.

(d) All of these.

Ans. (d) All of these.

2. Socio-Economic forces consists

(a) Customer.

(b) Competition.

(c) Substitutes.

(d) All of these.

Ans. (d) All of these.

3. Buying situations may be caused by-

(a) Awareness about competing brands in a Product group.

(b) Customer has a decision criteria.

(c) Customer is able to evaluate and decide on his choice. 

(d) All of the above.

Ans. (d) All of the above.

4. Sales forecast is a method of estimating volume that a Company can except to attain within plan period?

(a) Sales.

(b) Purchases.

(c) Product.

(d) Product or services.

Ans. (a) Sales.

5. Consumer behaviour consists of all human that go in making purchase decisions.

(a) Behaviour.

(b) Code of conduct.

(c) Character.

(d) Tradition.

Ans. (a) Behaviour.

6. The sociological aspects which help marketers to understand consumer behaviour include.

(a) Family. 

(b) Reference group.

(c) Opinion leader.

(d) All of these.

Ans. (d) All of these.

7. The tertiary environment has a territorial phenomenon comprising of

(a) Demography.

(b) Economic Issues.

(c) Technology.

(d) All of these.

Ans. (d) All of these. 

8. Customer driven consists

(a) Vission.

(b) Mission.

(c) Appraisal.

(d) All of these.

Ans. (d) All of these.

9. Which one of the following is not theories of buying behaviour?

(a) Inherent v/s learned motives.

(b) Emotional v/s rational motives.

(c) Consumer variable v/s product variable.

(d) All of these.

Ans. (d) All of these.

10. Which of the following is group of consumers according to buying behaviour?

(a) Habit determined group. 

(b) Cognitive group.

(c) Emotional reactors group. 

(d) New group. 

(e) Impulsive group. 

(f) All of these.

Ans. (f) All of these.

11. Which one of the following is not controllable variable of marketing environment?

(a) Science Environment.

(b) Technological Environment.

(c) Competitive Environment. 

(d) Economic Environment. 

Ans. (d) Economic Environment.

12. Which one of the following is a controllable variable of Marketing Management?

(a) Political Environment.

(b) Legal Environment.

(c) Advertisement.

(d) Packaging.

Ans. (d) Packaging.

13. Which cost are known as periodical cost? 

(a) Fixed cost. 

(b) Total cost. 

(c) Variable cost. 

(d) Sunk cost.

Ans. (a) Fixed cost.

14. Which of the below methods is best in developing a complete picture of customer behaviour in the relevant product category or market?

(a) Customer analysis.

(b) Conjoint analysis.

(c) Perceptual map. 

(d) Segmentation research.

Ans. (a) Customer analysis.

15. What type of customers should be analyzed to help understand weakness in your product or service operations?

(a) Competitor’s customers.

(b) Former customers.

(c) People who have never purchased the produce. 

(d) Current consumers.

Ans. (b) Former customers.

16. Analyzing – helps your to understand how to expand the market and achieve sales levels to market potential?

(a) Competitor’s customers.

(b) Former customers.

(c) People who have never purchased the produce. 

(d) Current consumer. 

Ans. (c) People who have never purchased the product.

17. A marketing manager’s task nis to identify variables that describe customers in terms of their own particular characteristics. These variables are called –

(a) Demographic.

(b) Geographic.

(c) Descriptors. 

(d) Behavioural.

Ans. (c) Descriptors.

18. Which of the following types of variables characterizes the psychological and social class?

(a) Geographic.

(b) Demographic.

(c) Psychographic. 

(d) Behavioural.

Ans. (c) Psychographic.

19. Which of the following examples is not a demographic variable?

(a) Age.

(b) Gender.

(c) Lifestyle.

(d) Income.

Ans. (c) Lifestyle.

20. When marketing management select which segments to pursue, it is called

(a) Analyzing the competition.

(b) Selecting the target market.

(c) Promoting the product.

(d) Consumer Behaviour Analysis.

Ans. (b) Selecting the target market.

B. Fill in the blanks:

1. Market segmentation _____________ marketing efficiency.

Ans. Increases.

2. Market segmentation is the sub-division of_____________.

Ans. Markets.

3. The concept of unique selling proposition was evolved by _____________.

Ans. Rosser Reeves.

4. When the market is segmented on the basis of factors as age, gender, marital status of consumers, it is known as _____________ segmentation.

Ans. Demographic.

5. Segmentation provides the basis for selection of _____________ Market?

Ans. Target.


1. What is the importance of consumer behaviour in business?

Ans. Consumer Behaviour is important to any business firm that wishes to sell goods or services to consumers. The study of consumer behaviour tells firms many things that they need to know. It tells them what kinds of things consumers want to buy. It tells them why consumers want to buy Certain things.

2. What do mean by bases of market segmentation? 

Ans. Market segmentation dividing the Heterogeneous market into homogeneous sub-units. Heterogeneous means mass marketing, which refers to people as a people. Homogeneous means dividing the market into different sub units according to the tastes and preferences of consumers.

3. What is the importance of learning in consumer behaviour?

Ans. In consumer behaviour terms, learning is the process by which consumers acquire the information that they apply to future purchase behaviour. Simply put, learning is the foundation of consumer behavior. Unfulfilled needs are the underlying drivers that lead to motivation.

4. What is role & status in social factors?

Ans: The person’s position in each group can be defined in terms of role & status. A role consist of all activities that a person is expected to perform. Each role carries a status. A Vice President of marketing has more status than a sales manager & a sales manager has more status than an office clerk & people choose those products that reflect & communicate their role & desired status in society.

5. What is consumer behaviour? Mention five difficulties in studying buying motives? 

Ans. The whole behaviour of a person while making purchases may be termed as consumer behaviour. It may be described as the dynamic interaction of affect and cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives. The study of consumer behaviour deals with how individuals, groups and organizations select, purchase, use etc to satisfy their needs and desires.

According to walters and Paul, “Consumer behaviour is the process whereby individuals decide what, when, how and from whom to purchase goods and services.” 

Five difficulties in studying buying motive are: 

(a) Ignorance of customer.

(b) Difficulties of expression.

(c) Variety and complexity of movies.

(d) Variability of motives.

(e) Limitations of sampling method.

6. Write short notes on the following: 

(a) Marketing survey.

Ans. Market survey: A Market survey is an important requirement for initiating any successful business. The objective of a market survey is to collect information or various aspects of the business. This survey is a tool through which we can minimize risk. After the market survey, the results must be analysed in order to finalize a business plan. It is a type at Marketing research, information is collected by conducting an elaborate survey regarding customer groups, their knowledge, beliefs, tastes and preferences via mail, telephone, internet, personally fax etc. Companies undertake market surveys to learn about people’s demands, wants, and desires try to fulfill the needs and desires and to satisfy them.

(b) Interpretation of data.

Ans. Interpretation of data: Interpretation means explanation or finding out the meaning. It involves drawing inferences from the analysis of data. Interpretation and analysis are closely interlinked. Analysis of data often includes a simultaneous interpretation of the results. Interpreting data in proper perspective is very important. In order to do so, the researchers should posses a high degree of skill and exercise the utmost care and objectives. For errors of interpretation, if committed, can nullify even the best research.

To begin with, the researcher must ensure that the data collected are reliable and adequate for drawing interfaces. If the data suffer from inadequacies. Then even the best of the methods used in analysis and interpretation would be rendered useless. It is advisable to take helps of experts in selecting one or more appropriate methods of data analysis.

(c) Evaluation of the Research Report.

Ans. Evaluation of the Research Report: After the report has been submitted by the researcher, he should try to get the feedback on the same. Feedback will enable him to know the deficiencies of his report, both in regard to the subject matter and the write up. Apart from feedback, a detailed evaluation of the research project should be undertaken. This evaluation should be done in as objective a manner as possible. Obviously, those involved in the preparation of the report or any of the research activity undertaken in connection with that research project should not be associated in its evaluation. Their association may bring in the subjective element in the evaluation, which may defeat the very purpose of this exercise.

An evaluation exercise can lead to an improvement is the quality research. A since research. A sincere researcher will find considerable improvement in the quality of research undertaken by him overtime.

(d) Personal Interviews.

Ans. Personal Interviews: Personal Interviews is a versatile method of market survey. The interview can ask some extra questions and record additional observations about the respondent. Personal interviews involve collection of information in a face to face situation. For conducting a personal interview a questionnaire is to be prepared, containing a few important and fact finding questions. It should be given to trained, experienced and reliable investigators for making personal enquiries from person to person or house to house. It possible, replies to the question may be in yes/no. The questions will depend on the purpose of the market investigation.

Oral Reporting: An oral report is any presentation of information through the spoken word.

(e) Target Marketing.

Ans. Target Marketing: The process of manipulating the marketing mix in terms of differentiating products, methods of communication and other marketing variables is known as market targeting or target Marketing. Target marketing is not synonymous to market segmentation. Through segmentation, a firm divides the market into many segments. But all of them need not from the target market. The target market signifies only those segments that it wants to adopt as its markets. Thus a target market is selected out of the segments formed. Customer in the target market have similar characteristics and a single marketing mix can be used to serve them. Creative segmentation may result in the identification of new segments that are not being served presently and may form attractive targets.

(f) Objectives of marketing segmentation.

Ans. Objectives of Market segmentation: The objectives of market segmentation may be summarized as follows: 

(i) To group of customers on the basis of their homogeneous characteristics, such as tastes, nature, habits, income, behaviour needs etc.

(ii) To locate or identify the preferences, buying motives, desires, expectations and priorities of the customers.

(iii) To determine marketing strategies, targets and goals.

(iv) To make the activities of the firm customer oriented. Customer orientation makes market segmentation an important pillar of the marketing concept.

(v) To identify the area or sectors where  the customers may be created and the sphere of the market is expanded.

(g) Sales Territory.

Ans. Sales Territory: A sales territory is a geographical area which contains present and potential customers, who can be served effectively and economically by a single salesman. Its aim is to facilitate the management’s task in matching sales efforts with sales opportunity. An efficient salesman can successfully discharge his duties and responsibilities in the territory allotted to him it is workable and suitable size. A good sales planning is based on sales territory alloted to him it is workable and suitable size. A good sales planning is based on sales territory, rather that taking the whole Market area. Hence, the market of a firm’s product is divided into small segments or territories, so that each territory can be alloted to individual salesman. After the sales field is located, almost all firms divide their markets into different territories.

Thus, a sales territory is a grouping of customers and prospect assigned to an individual sales person. Sales personnel are assigned and the responsibility for serving particular groupings of customers.

(h) Sales budget.

Ans. Sales budget: A budget is simply a tool, a financial plan that an administration uses to plan for profits by anticipating revenues and expenditure. The budgetary process and its off spring, beget are the very core of the planning control structure of most large companies. At the end of each year, top  management of most firms requires the organization to prepare a plan for operations during the coming year. Such operational plans are developed by each operation unit like marketing, sales, production finance, research etc. According to, the basic sales and profit targets for the year given them by top management. The sales budget are essentially based on sales forecast. If the forecast is wrong, the resulting budgets will have to be revised often to reflect actual sales results.

7. What do you mean by consumer Behaviour? Mention the nature of consumer behaviour?

Ans. The whole behaviour of a person while making purchases may be tarmed as consumer behaviour. It may be discribed as the dynamic interaction of affect and cognition, behaviour and environmental events by which human beings conduct the exchange aspects of their lives. The study of consumer behaviour deals with how individuals, groups and organizations select, purchase, use and dispose off products and experiences to satisfy their needs and desires.

According to walters and Paul “Consumer behaviour is the process where by individuals decide what, when, how and from whom to purchase goods and services.”

The nature of consumer behaviour are stated below: 

(a) It is the process by which individual decide what, whether, when, from whom, and how much to purchase.

(b) It comprises both mental and physical activities of a consumer.

(c) It covers both visible and invisible Activities of a buyer.

(d) It is very complex.

(e) It is a dynamic  exercise.

(f) It is an integral part of human behaviour.

(g) An individual’s behaviour is influenced by internal and external factors.

(h) In many cases, it is the sum total of the behaviour of a number of persons.

(i) It is influenced by a number of marketing stimuli offered by the Marketer.

(j) It involves both psychological and social process.

(k) Consumer behaviour is basically social innature.

(l) The often act emotionally rather than rationally.

(m) The learn and thereby change their attitudes and behaviour.

(n) Consumers are heterogeneous in nature.

8. What are the attributes of effective segment?

Ans. Market segmentation is resorted to for achieving certain practical purposes. In a nutshell, the attributes of effective segments are:

(a) Identifiable segment.

(b) The segment must be distinguishable from one another.

(c) The segment should be of a reasonable size.

(d) The segment should be growing preferably.

(e) The segment should have profit potential.

(f) The segment should not remain a dreamland. The firm should be able to reach and serve it.

(g) The segment should have profit potential.

(h) The segments  must be compatible with the firm’s resources, capabilities and ambitions.

9. Explain briefly the types of sales forecasts?

Ans. There are mainly three types of sales forecast:

(a) Short range forecast: It is also known as operating forecast converting a maximum of one year or it may be half yearly, quarterly, monthly and even weekly. This type of forecasting can be advantageously utilized for estimating stock requirements, providing working capital, establishing sales quota etc.

(b) Medium range forecast: This type of forecast may cover a period of more than one year to two or four years. This helps the management to estimate probable profits and control over budgets, expenditure, production etc. Factors like price trend, tax policies, institutional credit etc are specially considered for a good forecast.

(c) Long range forecast: This type of forecast may cover a period ranging from one year to five years, depending on the nature of the firm. Seasonal changes are not considered. The forecaster takes into account the population changes, competition changes, economic depression or boom etc. This forecast is good for adding new products and dropping old ones.

10. Why do companies establish sales territories?

Ans. A company can develop and uses sales territories for various reasons. Some of reasons are as follows: 

(a) To obtain entire coverage of the market.  

(b) To establish a sales person’s responsibility.

(c) To evaluate performance.

(d) To improve customer relations.

(e) To reduce sales expenses.

(f) To allow better matching of salespersons to customers.

(g) To benefit sales people and the company.

11. Write a note on the responsibility of territorial development?

Ans. Development of sales territories is usually the responsibility of sales manager (such as divisional, regional, zonal or local) for a larger sales unit or division he/she is in charge of who must know the market, customers and sales personnel needed to do the job. The manager makes recommendations to corporate management or decides himself or herself on whether to increase or decrease the number of sales territories.

12. Explain the two approaches for designing territories?

Ans. The two basic approaches commonly used for designing sales territories are discussed below: 

(a) Market Build up Approach: In this approach, an estimation of the present and potential product / services demand is found out by looking at how the market is built up, who are its present / potential users how much do they consumer and at what frequency. In this approach, information from trade directories, state publications etc is consolidated and then aggregated to understand an all India market potential for the product.

(b) The workload Approach: This approach has been designed by WJ Talley on the basis of the workload performed by sales persons.

The following steps should be considered important while using the above approach:

(i) Customers are grouped into class size according to the sales volume.

(ii) Optimum call frequencies for each class of customers are estimated.

(iii) Present and potential customers are then located geographically and arranged volume wise and value wise etc.

13. Write a note on sales quota. What are the characteristics of a good quota plan?


 Write the concept of sales quota. What are the characteristics of a good quota plan?

Ans. Sales quota may be defined as the estimated volume of sales that a company expects to secure within a definite period of time. It is the goal of sales accomplishment, a task, an objective or a standard that the sales organization strives to attain. Sales quota are developed from marketing plan. The forecast is the basis for planning production, work force size, and financial requirements. There after management establishes sales quota for its regions territories. Which add up to more than the sales forecast so as to stretch the sales manager to perform at their best level. Sales quota finally assigned to sales people. They should be accurate, fair and attainable.

The characteristics of good quota plan are stated below:

(a) Realistic attainability: If a quota is to spur the sales force to maximum effort, the goal must be realistically attainable. If it is too far out of reach, the sales people will loss their incentives.

(b) Objectives accuracy: Regardless of what type of quota management uses, it should be related to potentials. Management judgment is also required, but it should not be sole  factor in the decision.

(c) Ease of understanding and administering: A quota must be easy for both management and the sales force to understand. Also, the system should be economical to administer.

(d) Flexibility: All quota systems need adequate flexibility. Particularly if the quota period is as long as year, management may have to make adjustments because of changes in Market conditions.

(e) Fairness: A good  quota plan is perceived as fair to the people involved. The workload imposed by quotes should be the same for all sales report. But that does not mean that quotas must be equal.

14. What are the different schools of thought on quota setting? 

Ans. The thought on quota setting. Are explain below: 

(a) High-quota School: Believers of this school set quotas higher than what most sales people can achieve. Higher quotas are attainable, but demand extra effort from the sales people.

(b) Modest quota school: This schools set quotas so that a majority of the sales force can achieve. Sales force will accept these type of quotas as fair, attainable, confidence building.

(c) Variable quotas School: This school accepts individual difference among sales people in terms of attitude, skills and knowledge. Hence some quotes are set high and some modest depending on corresponding sales people.

15. What are the levels of target market selection?

Ans. Following are 5 criteria that indicate whether you have selected a viable Target market: 

(a) size.

(b) expected growth.

(c) competitive position.

(d) cost to reach. and 

(e) compatibility.

16. What are the factors be used in selecting target market? What are the four targeting strategies?

Ans. These include gender, age, income level, race, education, religion, marital status, and geographic location.

There are typically four different types of market targeting  strategy:

(a) Mass Marketing (undifferentiated marketing).

(b) Segmented marketing (differentiated marketing).

(c) Concentrated marketing (niche marketing).

(d) Micromarketing.

17. What are the basis of positioning in marketing? Name the five main strategies of positioning?

Ans. A product or service may be positioned on the basis of an attitude or benefit, use or application, user, class, price, or level of quality.

Filly are the five mai. Strategies of positioning.

(a) Positioning based on product characteristics.

(b) Positioning based on price.

(c) Positioning based on quality or luxury.

(d) Positioning based on product use or application.

(e) Positioning based on competition.

18. What are the four positioning based of marketing?

Ans. The four bases of market segmentation are:

(a) Demographic segmentation.

(b) Psychographic segmentation.

(c) Behavioural segmentation.

(d) Geographic segmentation.

19. What is product Differentiation? How many types of product differentiation are there? Name them.

Ans. Positioning is closely related to the concept of perceived value. In marketing, value is defined as the difference between a prospective customer’s evaluation of the benefit and costs of one product when compared with others. Value can be expressed in numerous forms including product benefit, features, style, value for money.

In economics, successful product differentiation leads to competitive advantages and is inconsistent with the conditions for perfect competition, which include the requirements that the products of competing firms should be perfect substitutes. There are three types of product differentiation:

(a) Simple: based on a variety of characteristics.

(b) Horizontal: based on a single characteristic but consumers are not clear on quality.

(c) Vertical: based on a single characteristic and consumers are clear on its quality.

 There are two types of product differentiation:

(a) Vertical product differentiation. and

(b) Horizontal product differentiation.

20. What are the major sources of product differentiation?

Ans. The brand differences are mostly minor; they can be merely a difference in packaging or an advertising theme. The physical product need not change, but it may. Differentiation is due to buyers perceiving a difference; hence, causes of differentiation may be functional aspects of the product or service, how it is distributed and marketing, or who buys it. 

The major sources of product differentiation are as follows:

(a) Differences in quality which are usually accompanied by differences in price.

(b) Differences in functional features or design.

(c) Ignorance of buyers regarding the essential characteristics and qualities of goods they are purchasing.

(d) Sales promotion activities of sellers and, in particular, advertising.

(e) Differences in availability (e.g. timing and location).

21. Write down the objectives of product differentiation.

Ans. The objective of differentiation is to develop a position that potential customers see as unique. The term is used frequently when dealing with freemium business models, in which businesses market a free and paid version of a given product. Given they target the same group of consumers, it is imperative that free and paid versions be effectively differentiated.

Differentiation primarily affects performance through reducing directness of competition: As the product becomes more different, categorization becomes more difficult and hence draws fewer comparisons with its competition. A successful product differentiation strategy will move your product from competing based primarily on price to competing on non-price factors (such as product characteristics, distribution strategy, or promotional variables).

Most people would say the implication of differentiation is the possibility of charging a price premium; however, this is a gross simplification. If customers value the firm’s offer, they will be less sensitive to aspects of competing offers; price may not be one of these aspects. Differentiation makes customers in a given segment have a lower sensitivity to other features (non-price) of the product.

22. What is Vertical Product Differentiation? 

Ans. Vertical product Differentiation can be measured objectively by a consumer, for example when comparing two similar products the quality and price can clearly be identified and ranked by the customer. If both A and B products are charged the same price to the consumer, then the market share for each one will be positive, according to the Hotelling model. The major theory in this is all consumers prefer the higher quality product if two distinct products are offered at the same price. A product can differ in many vertical attributes such as its operating speed. What really matters is the relationship between consumers willingness to pay for improvements in quality and the increase in cost per unit that comes with such improvement. Therefore, the perceived difference in quality is different with different consumer, so it is objective. A green product might be having a lower or zero negative effect on the environment, however, it may turn out to be inferior than other products in other aspects . Hence, it also depends on the way it is advertised and the social pressure a potential consumer is living in. Even one vertical differentiation can be a decisive factor in purchasing.

23. What is Horizontal product Differentiation?

Ans. Horizontal differentiation seeks to affect an individual’s subjective decision-making, that is the difference cannot be measured in an objective way. For example, different color versions of the same iPhone or MacBook. A lemon ice cream is not superior to a chocolate ice cream, is completely based on the user’s preferences. A restaurant may price all of its desserts at the same price and lets the consumer freely choose its preferences since all the alternatives cost the same. A clear example of Horizontal product Differentiation can be seen when comparing Coca Cola and Pepsi: if priced the same then individuals will differentiate between the two based purely on their own taste preference.


1. What is the importance of consumers? What is the importance of consumer buying behavior? 

Ans. Consumers are the main source of demand for all the goods. The producers of industrial goods or the producers of agricultural products are all producing the various items according to the demand in the market. According to prof. Marshall, it is demand which controls the production or market.

Following are the important points of consumer buying behaviour:

(a) Consumer Differentiation: In marketing, consumer differentiation is a way to distinguish a consumer from several other consumers. This helps to make a target group of consumers with the same or similar behavior.

Though you have a targeted customer demographic in your business, you can still have variations between individual customers. Each group of consumers are different and their needs and wants differ from other groups. When a marketer is knowledgeable about differentiation of each group of consumers, he can design separate marketing programes.

Consumer differentiation will help to tailor your strategies to the needs of varying customer groups. When consumer differentiation is done, you can expand the width and breadth of your services. You will be able to effectively serve a wider group of people.

(b) Retention of Consumers: “Consumer Behaviour is of most Importance to marketers in business studies as the main aim is to create and retain customers” says professor Theodore Levitt (Kumar, 2004).

Consumer behavior is not just important to attract new customers, but it is very important to retain existing customers as well. When a customer is happy about a particular product, he / she will repeat the purchase. Therefore, marketing the product should be done in such a way that it will convince customers to buy the product again and again.

Thus, it is very evident that creating customer and retaining them is very important. This can be done only by understanding and paying attention towards the consumer’s buying behavior.

(c) Design Relevant Marketing Program: Understanding consumer behavior allows you to create effective marketing campaigns. Each campaign can speak specifically to the separate group of consumers based on their behavior.

For example, while targeting the kids market, you may have to look out for venues such as TV ads, school programes and blogs targeting young mothers. You will need to take different messaging approaches for different consumer groups.

A study of consumer behavior enables the marketers to understand what motivates consumers to make purchases. Furthermore, the same motive can be utilized in advertising media to stir the desire to make a purchase. Moreover, marketers should take decisions regarding the brand logo, coupons, packing and gifts on the basis of consumer behavior.

(d) Predicting Market Trend: Consumer behavior analysis will be the first to indicate a shift in market trend. For example, the recent trend of consumers is towards environment friendliness and healthy food. This changing market trend was observed by many brands including McDonalds. Based on the consumer behavior, McDonald’s brought healthy food options.

By conducting consumer behavior study, a company saves a lot of resources that might otherwise be allocated to produce a product that will not be sold in the market. For example, in summer a brand will not waste its resources for producing a product that will not sell in summer. Based on consumer behavior that company decides on production strategy which will save on warehouse costs and marketing costs.

(e) Competition: One of the most important reasons to study consumer behavior is to find out answers to some of the questions:

(i) Is the customer buying from your competitor?

(ii) Why is a consumer buying from your competitor?

(iii) What features attract a consumer to your competitor’s products?

(iv)  What gaps are your consumers identifying in your products when compared to your competitors?

Studying consumer behavior facilities in understanding and facing competition. Based on consumer’s expectations, your brand can offer competitive advantages.

(f) Innovate New products: We all know some of the big names such as New Coke, Crystal Pepsi, Colgate Kitchen Entrees, Earring Magic Ken Doll, and Wheaties Dunk-a-Balls Cereal. Can you see the similarities in these products? Yes, they all failed!!

The sad truth is that most new products and new ideas end up in failure. There is an estimate of new product failures – they range from 33% to 90% based on the kind of industry.

Companies consistently strive hard to improve the success rate of their new products or new ideas. One of the most important ways is to conduct sound and thoughtful consumer behavior study.

With the help of consumer behavior analysis, Nike realized that most of its target audience is not professional athletes, but many of them were striving to be more like them. So at the 2012 Olympics in  London, Nike introduced a campaign to encourage athletics called ‘Find your Greatness’. It aimed to promote the aspirations of being an athlete, not just with high-performing athletes, but wanted to include all people regardless of their physical capability. The campaign was well planned and was data-driven, of course, carefully analyzed before taking any action. This message inspired many consumers and had enormous appeal for target consumers.

(g) Stay Relevant in the Market: When the world is changing as rapidly as it is happening today, the biggest challenge we all face is staying relevant to our target market. And do you know what is the main reason behind the rapid changes? It is the ever-changing behavior of our customers.

Today’s consumers have greater choices and opportunities, which means they can easily switch to a company that offers better products and services.

“The pre-eminent skill required to shift ahead in the twenty-first century is the ability to see and size.” -Adamson and steckel, authors of shift Ahead.

Losing relevance will only cost the company its market share. Haven’t we seen Sony Walkman failing to stay relevant in the digital music era, and the taxi industry doom with no preparedness to battle the UBER uprisings!!

(h) Improve Customer Service: Consumers require different levels of customer service, and understanding the difference within your customers base will help you provide the most appropriate service for individual needs.

For example, if you own an electronics store, high school or college students who buy a new laptop are more likely to understand the features they’re looking for than a person buying his first computer. With the first demographic, your service goal will be to provide information about the least trends in technology, while with the second demographic, you’ll need to spend more time educating the customer, finding out what his specific needs are, and even teaching him how to use the features of his new electronic device.

2. Explain briefly the concept of consumer behaviour or buying behaviour?Explain 7’s Framework of consumer behaviour.

Ans. The concept of buying behaviour is an abstract term. It is very difficult to define it. However it involves an answer to the following sic “W”s.

(a) Who – Who is the customers.

(b) What – What does the customers want to buy.

(c) When – when does the customer want to buy?

(d) Where – where does the customer want to buy. 

(e) How – How does the customers want to buy.

(f) Why – Why does she want to buy?

Thus, consumer behaviour may be defined as “all psychological, social and physical behaviour of potential customers as they become aware of, evaluate, purchase, consume and tell others about products and services.

7’s framework is very useful in the study of consumer behaviour: 

(a) Who is the consumer (occupants): Understand his demographic, geographic, psychological and media graphics profile.

(b) What does he buy (object): This in terms of product (e.g. soft drinks, syrup etc.) product forms (in solu drinks– Cola va Lime vs Orange) and brands (coke vs. pepsi). What are the features, sizes, colours, flavors etc. that the consumer is seeking.

(c) Why is the consumer buying (objectives): What benefits is he seeking? What motivates he is trying to satisfy? For e. g.: Fair and Lovely is catering to a very strong motive wanting to be fair in a country obsessed with fair skin. Customers today are also looking for sun protection in their cream.

(d) When do they buy, how often do they buy, when do they use, and now often do they use (occasion)? For e.g.: big ticket items like refrigerators, Air conditioners are bought during diwali.

(e) Where do they buy (out lets)? Fir e.g.: Consumers buy soaps from grocery and general stores or more from chemists.

(f) How do they buy (operations) what kind of background information do consumers collect before buying and from ehom do they seek information? For e.g.: before buying a car the consumer collects a lot of background information from friends and does a lot of deliberation before buying.

(g) Who is involved (organization) i.e. who performs which buying role.

3. What are the different role played by buyer?

Ans. Each person may assume a role in the decision making process as started below: 

(a) USER: Buyer is the actual user of the product. The teenage, the housewife and the executive are the dominant users of the products they have bough, but the products may be used by other members of the family as well.

(b) Initiator: The person who starts the process of considering a purchase is the initiator, since he feels the need for the product he may also initiate the search for information about the purchase decision on his own, or by involving others.

(c) Decider: The decider is the person who makes the ultimate choice regarding which product to buy. This may be the initiator or the payee or the user, depending on the dynamics of the decision making process.

(d) Buyers: The buyer conducts the transaction. He visits stores, makes payments and effects delivery. Though the buyer is the only player whom the marketer can see being involved in the decision making process, the importance of the other players is very crucial in deciding the relevant Marketing mix.

(e) Influencer: The influencers attempt to persuade others in the decision making process to influence the outcome of the decision making process. These influencers may be sought out by the initiator, or may supply relevant information on their own. Influencers may be a part of the reference group of the initiator, experts in the particular categories retailers etc.

(f) Payer: The payer is the individuals with the power of/and financial authority to purchase the product. The payer is presumed to have a large influencing power on the product purchase as the spending power lies with him.

4. What are the advantages/ significance of study of consumer behaviour?


Explain the various importance/needs of study of consumer Behaviour.

Ans. The consumer science is largely used by marketer to find out whether a particular product will be purchased by consumer or not. The failure of a large number of products after 2nd world war compelled the producers and marketers to undertake consumer studies. The importance of study of consumer behaviour are as under:

(a) Saves from Disaster: The failure rate of new  products is not only high in competitive economies of U.S.A. Europe and Japan but even non India.

For E.g.: Roohafza of Hamdered succeeded well but when other companies tried like Dabur to produce similar product they could not succeed. Dabur had to stop production of ‘sharbat’ because consumers did not like its taste. If test marketing is done before launching a new product this type of disaster can be avoided or minimized.

(b) Helps in formulating right marketing strategy: If one studies well the factors that influence the demand of a product. The marketing strategies can be framed accordingly. For e.g.: Nirma in initial stages succeeded in its washing powder only an account of its price. It gave tough competition to Hindustan Lever. Surf, the market leader and today Nirma has become a big producer.

(c) Helps in sales promotion: If the consumer behaviour is known correctly, one can promotes sales of existing on new products. For e.g.: the scheme of buying back old items helped a lot LML in pushing sales. This strategy was followed by AKAI TV and no other companies like BAJAJ Auto manufacturer of Refrigerators, Pressure Cookers etc.

(d) Segmentation of market is helped: The study of consumer behaviour helps in segmentation of market. For high income groups high priced cloths have been produced. The producers of such items make heavy profits which would not have possible without study of consumer behavior.

(e) Helps in product orientation: The study of consumer behaviour helps to find out why consumers shift their demand from one product to another. Therefore, based on consumer research, new techniques are used by many companies like Hindustan Lever and proctor and Gamble for manufacture of surf Excel, Ariel etc.

(f) Helps in distribution policies: The knowledge of consumer behaviour helpful in taking decisions regarding channels of distribution as it depends on characteristics of buyer.

(g) Implementing the Marketing Concept: This calls for studying the consumer behaviour, as customers needs have to be given priority. Through identification of target market before production, the desired customer satisfaction and delight can be provided.

(h) Sales promotion policies: It helps the markets to know the buying motives of the consumers to make purchases and to use the information gathered about motives in advertising media to waken the consumers desire to purchase.

(i) Helps consumers to study their behaviour: The consumer often are guided by their income, emotions, opinion of others and they do not undertake the study of their behaviour. Such study can reveal whether buying an expansive item is regional or not whether they should buy Rs.5 ball pen or fancy pen costing Rs.100 or more.

(j) Price policies: The study of consumer behaviour enables the marketer to know why a consumer purchases the product, because of low cost or social status. This information can be utilized for deciding the price of such product thus it helps in deciding pricing policies.

5. Why is consumer behaviour a multi-disciplinary? Explain how the study of consumer behaviour assists marketers in segmenting the market.

Ans: Consumer behaviour emerged in the 1940–1950s as a distinct sub-discipline of marketing, but has become an interdisciplinary social science that blends elements from psychology, sociology, social anthropology, anthropology, ethnography, ethnology, marketing, and economics.Consumer behaviour as a very new field and, as it grows; it is being influenced by many different perspectives. Indeed, it is hard to think of a field that is more interdisciplinary. The study of consumer behaviour draws on many different disciplines, from psychology and economics to anthropology, sociology and marketing. Understanding why people make the decisions they do forms part of a complex ongoing investigation.

6. Describe the various factors affecting Consumer behavior?


What are the determinants of consumer behavior?


What are the psychological determinants of consumer behaviour? Discuss their relevance in marketing decision making.


What are the social cultured and economic determination of consumer behaviour?

Ans. A number of factors affect as determine consumer behaviour. It is important to note that consumer behaviour never remains fixed but it is ever changing. Hence factors affecting consumer behaviour is also changing.

The determinants of consumer behaviour may broadly be classified under the following three major heads: 

Factors affecting Consumer Behaviour 

(a) Basic needs(a) Personal income (a) Family
(b) Image(b) Family income(b) Social class and caste
(c) Learning(c) Income Expectations group(c) Reference 
(d) Attitude(d) Consumer credit (d) Culture
(e) Personality (e) Discretionary income(e) Opinion leader 

(a) Psychological Factors: Psychological Factors decide the personality, attitudes, life styles, taste and preferences on many occasions.

The important psychological determinants of consumer behaviour are as follows:

(i) Basic Needs: Consumer Behaviour is decided towards satisfying certain needs A. H. Maslow classified the human needs into high categories namely phychological needs, safety needs, social needs, esteem needs and self actualization needs.

The consumer behaviour is considerebly influenced by the driving force called “Need” therefore a marketer is interested in influencing these needs so as to dispose the companies products.

(ii) Image: Image is a psychological factor which affects the human behavior. Image means feeling on impression of a person about a particular product. Image determines what is seen and felt by consumers about a product.

For example: Hindustan Unilever Ltd (HUL), ipear’s soap’ carriers a message on its wrapper. “A quality product from Hindustan Lever.” it has got a better market image then many of the competitive brands.

(iii) Learning: Learning is also an important psychological determinant of consumer behaviour learning refers to changes in behaviour that result from previous experiences. Learning is the center topic in the study of human behaviour.

Learning process involves 3 steps:

(a) Drive: A drive or need motivates a person for action in order to satisfy his need.

(b) cues: It may be defined as any object in the environment perceived by the individual. The aim of marketer is to find out or create the cue of sufficient importance that it becomes the drive.

(c) Response: Response is the answer to a given drive or cue for example, if a man feels hungry, he will attempt to get food by visiting a shop as indicated by an advertisement. Here advertisment is acting as cue, attempt is the response to the drive for research of food.

The links between drive, cue and response results in habits: 

(d) Attitude: It is also a psychological determinante of consumer behaviour. Attitude imply acceptance or rejection of objects or concepts we change our attitudes slowly. For example: once a consumer has developed a brand loyalty, it is difficult to change his attitude towards that brand, knowledge of consumers attitudes can provide a good basis for improving products, redesigning packages and developing promotional programmes etc.

(e) personality: psychologist have high-lighted the personality traits as an important factor or determinant of consumer behaviour, personality traits differ individual to individual. Some people may be more active or aggressive than other or many be more friendly and cooperative than others.

An understanding of the personality traits of the consumer’s helps the marketers to identify the kind of behaviour their consumer have.

(ii) Economic Factors: Among the social scientist, economist were the first to examine consumer buying behavior. The most important economic factor that influence consumer behaviour may be summarized as under.

(a) Personal Income: Personal income of the consumer is considered to be the most powerful economic factor that influences behaviour. It gives purchasing power to consumers which helps them in making purchases.

(b) Family Income: Family income in the Indian content is also an important determinant of consumer behaviour. In joint family system it is not the income of an individual member that matters but it is the income of whole family that matters.

(c) Income Expectations of consumer: Consumer Behaviour is also influenced by the future income expectation by a consumer. If the income expectations are week, there will be a tendency to spend less and save more in the present.

(d) Consumer Credit: Another determinant in the consumer credit which influences the buying behavior of the consumer. Marketers make use of these factor by selling goods on credit including selling on him, purchase and installment basis.

(iii) Sociological Factors: Marketer’s find the Sociological Factors relevant for understanding consumer behaviour. The important sociological factors are as follows: 

(a) Family: Family as a primary group exercises considerable influence on the consumer behaviour. The family influence the individual personality and attitudes. It also includes the decision making process involved in purchase of goods and services.

For example: Spending of money in marriage in India.

(b) Social caste and class: Social class and caste also go a long way in influencing the consumer behaviour. Class categorization is based on a variety of factors including income, power, property, occupation, lifestyle, education etc. Caste are classified into 4 categories in India namely bramhins, vaish yas, khatriyas and shudras. From the marketer’s point of view both caste and class categories influence consumer behaviour.

(c) Culture: Culture represents an overall social heritage. It includes social beliefs, values, attitudes, customs, habits etc. That are shared by a society from generation to generation. More of our behaviour is determined by culture. Market segmentation can be based on cultural determinant.

(d) Reference Group: Reference Group are also the social group which a consumer uses to make decisions for example, a circle of friends, a local club etc. are examples of reference groups which influence brand preference and brand choices.

(e) Opinion Leaders: The study of opinion leaders is also an important determinant which influences Consumer behaviour. The person by whom reference is made is called the opinion leader. The beliefs, reference, actions and behaviour of the leader set a pattern for others to follow in a given situation.

7. Discuss the four stage model of buying decision process?


Briefly explain the four models of buyer behaviour models?

Ans. Broadly one can classify Buyer Behaviour Models into four broad categories namely:

(a) Economic Model. 

(b) Learning Model.

(c) Psychoanalytical Model.

(d) Sociological Mode. 

These are explained below:

(a) Economic Model: According to this economic model of buying behaviour, the buyer is a rational animal and his buying decisions are totally governed by the concept of utility. This purchasing power or economic model of consumer behaviour is certainly dimentional.

It leads us to the four important predictions about the buyer behaviour:

(i) Lower the price of the product, the bigger the quantity that will be bought which is generally called price effect.

(ii) Higher the purchasing power, the higher the quantity that will bought which is known as income effect.

(iii) Lower the price of a substitute product, the lower quantity will be bought of the original product which is known as substitutes effect.

(iv) Higher the provisional expenditure, the higher the sales which is most commonly known as communication effect.

(b) Learning Model: All theories of buyer behavior have been basically based on a learning model namely, stimulation response or more popularly known as SP model. SR learning theory is very useful to modern Marketing and marketers. Learning is the centrifugal point in the entire study of human behaviour. Learning refers to a change in the behaviour which occurs as a result of practice.

(c) The psychoanalytical Model: According to this model. The individual consumer has a complex set of deep seated motives which drive him towards certain buying decisions. The buyer has private world with all his hidden fears, suppressed desires and totally subjective longings. His buying action can be influenced by appealing to there desires and longings.

(d) Sociological model: According to this model, the individual buyer behaviour is influenced by society-by intimate groups as well as social classes that this buying decisions are not totally determined by the concept of utility. That is his buying decisions are governed by social compulsions. As a part of sociological model-two important variations can be considered namely, one that of Nicosia and another Howard Sheth.

8. What do you mean by Organizational Buying Behaviour? What are the characteristics of organizational buying behaviour?

Ans. Organizational Buying means the decision making process by which formal organizations establish the need for purchased products and services and identify, evaluate and choose among alternative brands and supplies.

The organizational buying behaviour is distinguished on the following groups from that of individual buying behaviour: 

(a) It is a rational process: The purchasing behaviour is guided by objectives factors more in the areas of production and distribution. There are lesser chances of committing mistakes.

(b) It is done in large quantity: Bulk  purchases are common in case of organization. Large-scale buying is a regular feature because of large scale operations so that production schedules can be met and sufficient stock levels are maintained to avoid stock out.

(c) More individuals are involved in buying process: Purchasing is not one man’s responsibility or one man show. Instead, many individuals drawn from different departments are responsible for the purchases decision. It is more a committee decision than an individual’s.

(d) Purchase criteria are well defined: Generally, organizational buyers have a brands to choose than the individuals and their purchase are subject to evaluation according to the predetermined criteria that are specific to the overall needs of the organization.

(e) Extensive contact between buyers and sellers: Regular and more extensive contact between organizational buyers and sellers is warranted because, the industrial goods market is localized and a few buyers are seen, such sales are not regular and therefore, the seller’s representative very often visits and contact these buyers further.

(f) The five roles in purchase process: In the purchase process of an organization, there are at least five roles played in buying centres. These are Users, Influencers, Buyers, Deciders and Gate Keeper. As against these, in consumer purchasing, we have these roles but two or more of these are assumed by the same person making the buying process a simple affair.

9. What is buying motives ? Explain the various important buying motives?

Ans. Motive is the desire that prompts one to take a definite action. When it turns to a buying action is a commodity. It is termed as buying motives.

According to prof. R.S. Davar, “Buying motives refers to the feelings, thought, emotions and instincts which arouse in the customer to purchase and possess an article.”

Buying motives may be divided into a group including primary motives which are those fundamental drives with which people are born. Another is the secondary motives which are principally beared by the people.

The important buying motives are as follows:

(a) Fear: It is a negative but very powerful motive for example, people buy life insurance policy on account of fear.

(b) Desire for money: This motive has to phases namely:

(i) To earn or make money.

(ii) To save money.

For example: a housewife moves around from one shop to another to purchase goods at cheaper rate with the motive to save money.

(c) Fashion: It is closely linked up with pride or desire for Importance. The young men and women want to purchase and wear clothes of latest fashion to make themselves feel important.

(d) Variety: Variety is another role which plays an important role in the life of all. This motive is most common among women. It is a powerful motive in the hands of the marketers.

(e) Possession: Every individual has an inborn design to possess and to call things mine. Hence, it is also an important buying motives. This motive leads person to hoarding and collective things.

(f) Love and Affection: It is an important buying motive which Instigate a person to make purchases. For example, parents purchases various things like toys, fancy dresses etc for their children’s on account of love and affection.

(g) Sex or Romance: It is very important buying motive in case of sale of articles such as clothes, clothing, cosmetics etc. Women spend money on clothes etc. Simply to look appealing to men. Similarly men dress best so as to attract women.

(h) Pride: It is another strong buying motive. A human being desires to be recognized as an important personality.

10. Explain the determinants of organizational purchase behaviour?

Ans: There are two types of Organizational purchase behaviour:

(a) Organization factors: The organizational factors that influence purchase decisions in an organization are objectives, technological capabilities and kithe company structure.

(i) Objectives: The goals or objectives of the organization spell out its Marketing orientation and therefore its purchasing behaviour. Purchase decisions are influenced by goal related decision made by top management. Every organization defines the  specific buying tasks in order to achieve its present goals.

(ii) Technological capabilities: The purchasing decisions of the company are to be geared to the company’s resources and technological capabilities. The company’s buying technology involves information systems that help to co-ordinate its purchases and allied functions. Purchasing efficiency and performance are greatly improved by the extensive use of computers.

(b) The company structure: The company structure has two dimensions namely, size and dimension degree of concentration. The size of the company plays an important role in purchasing behaviour.

(c) Psychological Factors: Psychological Factors are likely to influence the purchase behaviour to a very great extent. The people under very heavy psychological pressure are the buyers because, each decision of the organizational buyers make will affect the entire company.

11. Explain the various stages that involved in buying process?

Ans. Buying process is the decision making process leading to purchase decisions. There are different steps of consumer behaviour depicting the buying process. However, the stages developed by Howard and sketch is the most comprehensive and largely approved model.

This model involves five steps or stages of buying process:

(a) Need Recognition: Need Recognition means awareness of a want or desires or consumption problem. The buying process starts when a person beings to feel that a certain want or desires or consumption problem has arisen and it has beings to be satisfied. Marketer’s should offer appropriate and attractive points in the buying process.

(b) Information search: The next stage in the buying process is the information search. Recognized needs can be satisfied promptly when the desired product is not only known but also is easily available. In this connection, the consumer can tap many sources of information, namely family, friends, neighbor’s opinion of leaders etc. Marketers can provide information through salesman, advertising, dealer’s window dressing packaging etc.

(c) Evaluation of alternatives: It is the most critical stage in the buying process, particularly in case of costly goods. After collecting the requisite information, a consumer enters the step of evaluation of alternatives. He has to judge the products can different angles. The alternative products evaluation the basis of brand name, price, quality, availability etc.

(d) Purchase decision: After evaluation of alternatives the consumer enters the next stage which is called purchase decision stage. While making purchase decision, the consumer takes into account the following factors: 

(i) Social Factors: Attitudes of relatives, wifes, friends and others.

(ii) Situational factors: Terms of dealers, price availability etc.

(e) Post purchase behaviour: The last but not the least important stage of buying process is the post purchase experience and behaviour. These behaviour is reflected in repeating purchases or discontinuation of purchases. If the experience indicates satisfaction, consumers will go for repeat purchases, in case of dissatisfaction, purchases is discontinued.

12. What are the contents to be included in a report outline?

Ans. A typical report outline based on the logical format is as follows: 

(a) Title page. 

(b) Letters of transmittal and Authorization.

(c) Table of contents, statistical table, charts and illustration.

(d) Introduction.

(e) Methodology.

(f) Finding.

(g) Limitations.

(h) Summary and conclusions.

(i) Recommendations.

(j) Appendices.

(k) Bibliography.

(l) Index. 

(a) Title page: The title page should indicate the topic on which the report has been prepared, the person or agency who has prepared it, the person or agency for whom it has been prepared and the date of submission of the report.

(b) Letter of transmittal: This indicates the official who has authorized or sponsored  the research and the official to whom the report is submitted.

(c) Table of contents: It should contains a table of contents to guide the reader as to what it contains. It should indicate the main parts, divisions or sections of the report.

(d) Introduction: It explains why the study was undertaken, the statement and formulation of the problem, hypothesis and the scope of the study. It is desirable to give a review of the report also.

(e) Methodology: The report should describe the methodology i.e. either it is based on primary or secondary data or if a sample survey is undertaken or census survey is undertaken under the study.

(f) Finding: This section or steps includes/conclude the result of the research is perhaps the largest section of the report. It is desirable to present the related data and exhibit as near the write up on the findings as possible.

(g) Limitations: The report should also contain the limitations of the research reported therein. This will be helpful to the reader who can form his own opinion as to how far results are available.

(h) Recommendation: When study has been commissioned by management which expects that the researcher recommend certain measures, it is necessary that these be made in clear language.

(i) Summary and conclusions: This section contains a summary and conclusions of the report. This section conclude the limitation and advantages that find out from the research.

(j) Appendices, bibliography and index: An appendix gives supplementary information which supports the body of the report. Bibliography showing the title of the report, books, name of books author, reports used in the preparation of the report, the page numbers etc. Index showing the various topic and the relevant page numbers in the report, it should be presented in alphabetical basis etc.

13. What do you mean by Market Segmentation? What criteria or bases are used for segmentation a market? 

Ans. The concept of market segmentation is based on the assumption that markets are not homogeneous but are heterogeneous. Consumers differs in their behaviour and buying decisions. The characteristics of consumer is one segment differ with those of other segment. In this way, market segmentation is the strategy of dividing markets in segment in order to conquer them. Thus, grouping of consumer is called market segmentation.

According to R.S. Davar, “Grouping of buyer or segmenting the markets is described as market segmentation.”

In market segmentation, we divide or subdivide the market on the basis of some common, characteristics. Such as nature, habits, income etc. of the consumer.

Basis for segmentation Market: The basis of market segmentation can be broadly divided into 3 major groups: 

(a) Customer based segmentation: On the basis of the customer of the product the Market may be segmented in following ways:

(i) Location of customers: This is generally the starting point of all market segmentation strategy. The entire market may be segmented into districts, sub-districts, urban, rural etc. The geographical base segmentation help the marketer in planning the distribution function.

(ii) Demographic characteristics:  The next commonly used basis for market segmentation is the demographics of the market. Factors like age, sex, education, income, occupation, family size and marital status are used to segment the markets. The different factors used in demographic segmentation are explained below: 

(a) Age: On the basis of the customers age, the market can be divided as follows: 

→ Infant Market  (Newly born – 1years).

→ Child Market  (1 year –12Year).

→ Teens Market (13 year – 16 year).

→ Adolescent Market (16 year – 19 year).

→ Youth Market (20 year – 35 year).

→ Middle Aged Market (36 year – 50 year).

→ Elders Market (50 year and above).

(b) Income: The next commonly used variable is income on the basis of income, the market can be divided as follows: 

→ Low Income. 

→ Low, Middle Income.

→ Middle Income. 

→ Upper Middle Income.

→ Higher Income. 

(c) Sex: The male market is different from female market. Hence, gender is used for segmentation the market for different product. For example, a cosmetic firm will have to take a decision whether it wants to manufacture or market cosmetic for men only or women or for both.

(d) Occupation: The occupation of the consumers is also an important variable in segmenting the markets on the basis of the occupation and consumption habits, one may find segment like: 

Traders and shopkeepers:

→ Businessman or Industrialist.

→ Professional.

→ College and University professors.

→ Students.

→ House wives.

(e) Education: The education profile of the customer also affect his / her preferences.

Based on education,the Indian market can be divided as follows:

→ High School education. 

→ Literate and illiterate.

→ Secondary or University educational.

→ Graduate, post Graduate and doctorates. 

(f) Marital Status: Another demographic basis used for segmentation is the marital status of the customers. The behaviour of unmarried people are different from married people. Married people are often the consumers of many expensive or inexpensive gift items.

(g) Family Size: Another important demographic variable is the family size or structure. Today, the Marketer can segment his market into families with 3 or less members, families with 4 members and families with more than 5 members.

(B) Product Related segmentation: The marketers may use product related basis for segmentation the market. There are 3 important ways of product related segmentation: 

(i) Product Use Situation: Different customers may use the same product in different use situation. For e.g.Rasna is shown as being used in different situation like a party. The unexpected guests a drink at the end of a tiring working day etc.

(ii) Benefit Segmentation: Another commonly used product related variable is the benefits segmentation. This method has been used effectively for segmenting the market for watch where a customer may buy a watch for just knowing the time or as a gift or dress item or a jewellery item. Thus, customers look for different benefits looking attractive and pretty is very important to a woman when she buys dresses or cosmetics.

(iii) Quantity Consumed: The quantity consumed at any given time has also been the basis for segmenting of the beverages (tea, coffee) soft drinks and cigarettes markets. Accordingly.

The following market segments are visible:

→ Heavy users.

→ Moderate users. 

→ Light users. 

(C) Competition Based segmentation: The market can also be divided on the basis of competitive position of the firm. Based on loyalty of customers we can have the following segments.

(i) Hard core Loyals: Hard core customers are those customer who continues to buy the same brand over and over again. The customer refuses the competing brands and insist on buying his own preferred brand. Newspaper Readers, Cigarette smokers are some customer groups where hard core loyalist are commonly visible.

(ii) Soft-core Loyals: The customer who are loyal to ⅔ brands are called soft core Loyals. For e.g. a house wife who buys Lux, Cinthol, Cinthod, Cinthol, Lux, pears, pears in her 8 shopping expenditions will be considered as a soft-core Loyals.

(iii) Switcher: Switchers are those customers who never stick to a brand.  There are the customer for whom brand switching is as easy as changing a shirt. They may switch for a variety. It is a very sleeping market segment for the marketers.

The marketers should examine these factors carefully and see if any of them is a factor determining customer loyalty.

14. Explain the various Importance/ Benefits/Needs/ of Market segmentation?

Ans. Market segmentation offers the following benefits or advantages:

(a) Better position to locate marketing opportunities: Under market segmentation, marketers are in a better position to locate and compare marketing opportunities. Accordingly, the marketing strategies can be readjusted.

(b) Effective Utilization of Resources: Segmentation leads to a more effective utilization of Marketing resources. On the basis of segmentation, resources can be provided and used in the most profitable manner.

(c) Facing the competition effectively: Segmentation helps the producers to face the competition of his rivals effectively. The marketers can adopt different strategies for different markets taking into account the rival strategies.

(d) Marketing Programme: Marketers can effectively formulate and implement for different system on the basis of segmentation.

(e) Effective Advertising Appeals: Different advertising appeals can be formulated and implemented in accordance with the needs of different market segments. Thus, advertising appeal can be made more effective.

(f) Adjustments in product: Under market segmentation, marketers can easily make adjustment in their products and communicate to customers according to the tastes, needs and income of the customers.

(g) Enhance Marketing Efficiency: Market segmentation enhances marketing efficiency by offering specific pricing policy, sales promotion and distribution channel as per the characteristics of different segment.

(h) Miscellaneous Benefits: Some other benefits of market segmentation are: 

(i) It increases consumer satisfaction.

(ii) It assist in marketing research. 

(iii) It helps in effective evaluation of distribution channels. 

15. State and explain various conditions essential for effective marketing?


What are the requirements for effective segmentation?

Ans. In order to be effective,a segment should be attractive enough.

The main conditions essential for successful market segmentation are as follows:

(a) Viability: The segments should be viable, i.e. it should be cost effective and profitable for the marketers.

(b) Measurability: The segment should be measurable. It should be possible to quantity the segment as it would helps in estimating its size. Attitude, perception, motivation etc are subjective and non-measurable.

(c) Accessibility: The segment should be easily accessible. It means that the firm must be able to reach the customers through suitable means of communication and channels of distribution. A large parts of the north east remain in accessible either because of weather condition, geographical isolation or problems of incidence etc.

(d) Responsiveness: The market segment should respond favourably to the marketing efforts. To have the desired responds from the customers, the markets should be aware of the buying motives and buying habits of customers.

(e) Competition: Another parameter determining the attractiveness of segment is the intensity in competition. The higher the intensity, the more unattractive the segment will be for the marketer.

(f) Potentiality: Finally, each market segment must be large enough to justify the investment, unless the size of the segment is large enough, the marketing efforts cannot yield a rich dividend.

16. What do you mean by sales forecasting?


Define sales forecasting?

Ans: Sales forecast is a prediction of expected sales for a specified period”. It is an estimate for sales in rupees or units for a future period of time.

According to American Marketing Association “Sales forecast is an estimate of sales in Dollar or physical units for a specified future period.

Thus, we can conclude that:

(a) Sales forecast is an estimate of sales for a specified future period.

(b) It is expressed in rupees or units.

(c) The estimate is based on the marketing programmes and economic and other factors.

17. Examine the various sales forecasting methods that may indirectly help the production department of an organization?

Ans: Following are the various method of sales forecasting:

(a) Bottom up or Direct Method: Under this method, different departmental heads and their subordinates collects information on different aspects of production, sales, finance etc. This information is later compiled together and becomes data for the company as follows.

(b) Indirect  Method: Under this method, no different departments or subordinates are expected to take part in the preparation of forecast. In this case, the responsibility for successful forecasting rest with the top executives.

(c) Opinion of executives: The oldest type of sales forecasting is a broad guess made by executives in change of business. One or more top executives forecast future sales based on personal knowledge from talking to other managers inside and outside the company through customer contacts or through reading published reports relating to rational economy and industrial conditions.

(d) Historical and past sales method: Past data and information on production, sales, purchases, capital needs etc. are compiled and tabulated. So that a decision on future trends may be arrived at under this method. No guess work is done. All the past records and results are studied and analyzed before the future trend is determined.

(e) Statistical Sampling: Sampling can be used to get total estimates. Sampling procedure can be illustrated by the following example. A company is selling consumer goods and has 20 sales territories. It can design a sample to get sales estimates in one district in each territory or region. The districts selected should represent various economic levels on the basis of income and spending habits of people.

(f) Deductive Method: Under this method, the forecaster believe the old data becomes obsolete after the lapse of certain time they, therefore, lay greater emphasis on the current data available in the organization. Since old information  is discarded, this method is more dynamic in character.

(g) Sales force Estimates: Many companies base their sales forecasts upon the estimates given by salesman. Sales managers can evaluate and merge individual estimates into an overall production for the territory or region. This process continues until a total sales figure is secured for the entire company. Salesman have first hand information. They have direct contact with customers, they can easily find out further purchase intentions.

(h) Survey of customers buying plans: This method concentrates on customer’s behaviour. It is generally used for industrial goods that are supplied to a limited number of customers in different territories. It’s mainly based on opinion rather than on established data. Therefore,there may be a considerable amount of long sampling errors.

(i) Time series Analysis: It is a common device of mathematical projection of future sales. It involves the projection of past sales trends into the future.

To predict future sales are analyze four kinds of historical sales variations: 

(i) Seasonal variations.

(ii) Movements related to change in the business cycle (wepression, Revival, Prosperity, Boom followed by sump and so on.

(iii) The variation.

By isolating and analyzing these three types of variations in sales, an analyst can estimate with accuracy the probable level of sales for a coming period of course, it is assumed that the past trend will continue in the future under such extrapolation. This is an objective methods of sales forecast.

18. What are various stages in consumer buying process? What are the personal psychological and social factors that influence consumer behaviour?

Ans: Behaviour is a mirror in which everyone shows his or her image. Behaviour is the process of responding to a thing or event. Consumer behavior is to do with the activities of individual in obtaining and using the good and services. In the words of Professor Bearden and Associates, ”Consumer behaviour is the mental and emotional process and the physical activities of people who purchase and use goods and services to satisfy needs and wants.”

Various stages in consumer buying process are:

(i) Problem Recognition: Problem recognition is the initial stage of the consumer decision-making process. At this point, individuals become aware of a need or problem that can be addressed by acquiring a product or service. This stage is triggered by a gap between the consumer’s current state (a perceived problem) and their desired state (a solution).

(ii) Information search: When researching their options, consumers again rely on internal and external factors, as well as past interactions with a product or brand, both positive and negative. In the information stage, they may browse through options at a physical location or consult online resources, such as Google or customer reviews. Your job as a brand is to give the potential customer access to the information they want, with the hopes that they decide to purchase your product or service.

(iii) Evaluation of Alternatives: In the consumer decision-making process, the “Evaluation of Alternatives” stage occurs after consumers have recognized a need and gathered information. During this phase, individuals assess the available options, weighing factors such as quality, price, brand reputation, and reviews to determine which product or service aligns best with their needs and preferences.

(iv) Economic Factors: Economic factors revolve around the financial aspects that influence buying decisions. Personal income dictates disposable income levels, thereby determining purchasing power. 

(a) Personal Income: How much someone earns directly affects their purchasing power. Someone with a high salary might not think twice about buying branded goods, while someone with a lower salary might look for deals.

(b) Country Economic Situation: In a recession, even those with stable incomes might cut back on luxury items, prioritizing necessities.

(v) Purchase-Decision: The purchase decision is the phase in the consumer decision-making process where individuals, having recognized a need and gathered information, finalize their choice of product or service. At this stage, consumers weigh the options and decide which one to purchase based on price, brand, and perceived value.

Factors that influence consumer behaviour:

(i) Personal factors: The personal factors include the buyer’s age and stage in the life cycle, occupation and economic position, personality and self-concept and lifestyle and values.

(a) Cultural factors: Culture refers to the values, ideas, and attitudes that are learned and shared among members of a group. Human behavior is largely learned. When you were a child, you learned basic values, perceptions, wants, and behaviors from your family and other external influences like the schools and churches you attended. Consider how these values and attitudes have shaped your buying behavior.

(b) Social class: Social class is also an important influence on your buying behavior. Sociologists base definitions of social class on several different factors, including income, occupation, and education. While there is disagreement on the number of social classes defined by income in the United States, many sociologists suggest five social classes: upper class, upper-middle class, lower-middle class, working class, and the economically disadvantaged.

(c) Gender: Gender plays an important role in your buying behavior. People of different genders not only want different products as a result of their upbringing and socialization, but they approach shopping itself with different motives, perspectives, and considerations. While it’s always dangerous to stereotype, those who identify as male typically follow a utilitarian, more logic-based approach when shopping. 

(ii) Psychological factors: Psychological factors are crucial in shaping consumer behavior. These factors are mainly internal and subjective, involving how consumers perceive, interpret, and process information about a consumer purchase. 

(a) Motivation: It refers to the internal drive or desire that prompts consumers to take action, such as buying a product. Various factors, including personal needs, desires, and goals, can influence motivation. 

(b) Perception: It refers to how consumers interpret and make sense of information about a product or service. Various factors can influence perception, including the consumer’s past experiences, expectations, and cultural background.

(iii) Social Factors: Consumer’s behaviour is influenced by social factors such as reference groups, family, social roles and  status. The buyer is living in a society, is influenced and  There is a constant interaction between the individual and  the groups to which he belongs. All these interactions affect him in his day to day life.

(a) Family: The family is the most important buying organization in society. From parents a person acquires an orientation toward religion politics and a sense of personal ambition, self-worth and love. E.g. In traditional joint families, the influence of grandparents on major purchase decisions affect the lifestyles of younger generations. 

(b) Reference Groups: A person’s reference groups consist of all the groups that have a direct or indirect influence on his attitude. They can be family friends, neighbours, co-worker, religious, professional and  trade union groups. Reference groups expose an individual to new behaviours and lifestyles and influence attitude and self-concept. 

19. Explain the various Importance /usefulness/Advantages of sales forecasting?

Ans. Sales forecasting is the most important aspects of Marketing programme of a company. It is not only commencement of sales budgeting but of the budgetary control as a whole.

The importance/ usefulness of sales forecasting may be studied under the following heads:

(a) Personal Management: The sales forecasting is important for personnel department. The number of sales executives, salesman and other staff for sales department can be increased or decreased in accordance with the sales forecasting.

(b) In the field of distribution: Sales forecasting is an important tool in the hands of dealers. Distribution can be planned on the basis of sales, forecasting. The producers can select appropriate channel of distribution on the basis of sales forecasting. In the same way, distributors, Wholesalers, agents, retailers etc can also plan. Thus sales strategy on the basis of sales forecasting. 

(c) Marketing Management: The importance of sales forecasting in the field of marketing management may be summarized as under:

(i) It helps in product mix development/decision.

(ii) It helps in taking decision as to enter in a new market or not.

(iii) It helps in making assessment of a proposed marketing programme.

(iv) It helps in preparing a standard of performance in marketing.

(v) It helps in preparing annual marketing budgets.

(d) In the field of production: Sales forecasting occupies a key position in the field of production. It is on the basis of sales forecast that the producer is able to adjust or readjust his production schedules and plant capacity.

(e) Advertising and sales Promotion: Advertising and sales promotion or budgets are based on sales. The sales are planned according to sales forecasting. It the company expects rapid increase in sales on account of sales forecasting, the company may think of establishing its advertising and sales promotion department.

(f) Miscellaneous Advantages / Benefits: Besides above, the sales forecasting also plays an important role in the following fields.

(i) It is good for budgeting and budgetary control.

(ii) It is the basis of financial planning.

(iii) It helps in reducing selling cost.

(iv) It also helps in pricing of product.

20. Briefly explain the types of sales forecast?

Ans. On the basis of time frame of the forecast demand forecast can be grouped into three types:

(a) Short range forecast.

(b) Long range forecast.

(c) Medium range forecast.

(a) Short range forecast: It helps in the year-to-year business/marketing planning. Such forecasts are usually made for one year and reviewed monthly, quarterly and half yearly. They are used for projecting cash flow of the enterprise and for planning various marketing activities like personal selling, advertising and warehousing. They are also used for planning the functions outside marketing, such as production, manpower and materials.

(b) Long range forecast: This type of forecast facilities investment decisions at the time of starting a new industrial unit or while attempting expansion or diversi cation. Since industrial investment is often irrevocable and pay off period extends over a long term, demand forecasting for a longer-term say 5 to 10 years will be essential for investment decision. Sometimes, one comes across a still longer term forecast, say for 15 to 20 years. Such forecasts are normally used for the purpose of perspective planning.

(c) Medium-range forecast: This type of forecasting extend to 2 or 3 years, depending on the requirements of the firm.

Medium range sales forecasting helps the management in the following areas: 

(i) To estimate the probable profit.

(ii) The determine total expenditure or budget.

(iii) To determine time schedule for production as well as for distribution.

21. Explain the various determinants that affecting sales territories?


What are the factors that we should keep into mind while determining sales territories?

Ans: The sales territory is influenced by a number of factors which are to be noted by the sales management.

The factors that affect the sales territories are as follows:

(i) Competition is the Territory: It is the nature and extent of competition that affects the size of sales territories. If the competition is keen the size of the territory should be reduced. The degree of competition depends on the nature of the product and the rate of consumption of that product.

(ii) Potential volume of sales: While determining the size of the sales territory, the potential sales volume of such an area should be ascertained. Thus is decided by making a market analysis of each sub territorial unit.

(iii) Demand for the product: The demand for the product in a territory affect the size of the territory covered by a salesmen. If there is a little demand for a product a salesman is likely to take more time to make sales and a smaller territory is needed.

(iv) Type of the product sold: A product which is a necessity will have repeated sales requiring a smaller sales territory as commodities are fast moving. If the products are durable with limited and infrequent sales, larger sales territories is preferred.

(v) Economic Conditions: The economic conditions prevailing in the territory decide the size of the territory. Favourable economic conditions justify thorough coverage and a smaller territory. Adverse economic warrant a creation of a larger sales territories so that salesman may secure a profitable volume of sales.

(vi) Method of Distribution: When a product is sold through wholesalers and chain stores the number of buyers to be contacted is limited and the size of the territory may be larger than if a product is sold direct to the consumers.

(vii) The sales policy: When the sales policy has national distribution coverage, a large sales territory is indicated. In case, it wants to have thorough coverage of local and regional areas, the sales territory will be smaller.

(viii) Cost of covering an area: Each company has standard ratio of sales cost of net sales. The size of the territory needs adjustment making it smaller or larger to maintain the sales expresses ratio. A territory should produce enough sales volume to justify the expenses of coverage.

22. Write a comprehensive note on sales quotas? What factors should be kept into consideration while setting the quota/sales quota?

Ans. Sales quotas are closely related to sales forecasting and sales budget. Sales forecast is a sales estimate tied to particular marketing mix or programme and assuming a given se of environment factors. Sales forecast in a sense is the company’s decision on the total sales volume objectives. Sales budget and sales quotas are naturally based on the sales forecast. Sales quota is a quantitative objective assigned to a salesperson. Planners integrate sales forecasting sales budgeting and sales quota setting. Companies set and use sales volume quotas of facilities and improve control over sales operations, In addition to sales volume quota, e.g. Rs.4L per year, there may be an expense quota, e.g. 10% of not sales as well as activity quota. e.g. 1,000 calls per year. Such combination quotas can be used to measure a salesman’s effectiveness. Sales quotas are the most important of all quantitative standards employed for evaluation the sales performance level. It also enables management to secme more effective budgetary control. Similarly sales performance against the quota can be the criteria for awarding sales people. Sales quotas finally assigned to sales people should be accurate fair and attainable. It should not be too small was too big. Better sales people should be able to reach or slightly exceed this sales quotas. Sales personal should understand their quotas and the methods used in obtaining then. The quota setting method should be simple and readily explainable to sales personnel. If sales people are allowed to participate in quota setting, management will have more assurance regarding achievement of these sales quotas by salespeople. Sales quotas are quantitative objectives assigned to sales personal and they can stimulate performance.

The following factors are to be borne in mind while setting or fixing the sales quota:

(i) Estimate purchasing power: The first point that needs attention of the selling house is that of estimating accurately the purchasing power of the customers. For example, if a selling housing is thinking of selling consumer durable like colour Television set in a particular city, first the selling house is to know how many sets are needed rather than how many are able to buy. This involves the study of their purchasing power and the status in the society.

(ii) Consulting the facts and opinion: There are people who know facts about varying market conditions. They are in a positive to form definite opinions based on sound judgement and vision.

(iii) Study of past sales: If the company is in the same line of products, the record of the past sales will be a valuable source of projecting the future sales with due adjustment. Ever new companies do depend house in the line to determine its share.

(iv) Investigation of sales policies: The sales policies of selling house have bearing on the sales quota which can be fixed or raised with the changes in the sales policies.

(v) Extend and Nature of competition: The strength of the competition prevailing in the market decides the size of the quota for a salesman. A company enjoying a near monopoly position has assured sales and can gives larger quotas to its salesman. On the other hand, a selling house facing a keen competition will have to give comparative smaller quotas.

23. Explain all the important points of Target Market Selection Process in Marketing Management?

Ans. After segmentation the market, an organization focuses on or Targets the most profitable segments to gain profit. Target market selection process involves the evolution of the attractiveness of every market and selection of one or more profitable markets. An organization considers various factors, such as size and growth of a particular segment. It tries to understand the customers and competitive environment.

(A) Evaluating the Market Segment: An organization evaluates the potential of a selected segment and checks whether it has resources to cater to the needs of the segment. It ensures that the organizational objectives are also achieved while serving the segment. The estimation of sales volume also plays an important role to evaluate the relevant market segment.

The external factors are the factors that are not in the control of an organization; whereas, the factors that are within the control of an organization are called internal factors. A marketer designs sales strategies after identifying the factors that can be the hindrance for the growth of an organization.

The organization can estimate its sales volume by focusing on the following dimensions:

(i) Market Potential: It implies the amount of a product that is purchased by a customer. In this case, a marketer calculates the market potential of the targeted segment. The purchases by customers can be affected by various forces, such as price and quality of a product and income and expectations of customers.

(ii) Organization’s Sales Potential: It refers to the percentage of market potential that an organization expects to gain for a product.

Following are the two approaches for measuring the sales potential of an organization: 

(a) Breakdown Approach: It involves developing the general forecast for an organization to derive market potential. Then, the sales potential is calculated from the estimated market potential. This approach is also called top-down analysis.

(b) Build-Up Approach: It involves estimating the purchases made by customers in a particular segment and  then multiplying it with the number of potential customers. This helps to evaluate the total sales potential of a particular segment. This approach is also called bottom-up analysis.

Sales forecast is used to estimate the sales volume of an organization. A sales forecast can be defined as the amount of a product that an organization expects to sell during a specific period of time in future.

Following are the various sales forecasting technique used by organizations: 

(i) Surveys: It involves questioning customers regarding their future purchases. Surveys help marketers to know what quality and quantity of product is expected by the customers. The demerit of surveys is that they consume much time and money of an organization.

(ii) Time Series Analysis: It implies forecasting by using the past sales data. This method assumes that the past performance of sales continues in future. This method is appropriate only when the demand of a product is stable in nature.

(iii) Regression Analysis: It forms a relationship between dependent variable and independent variable. The dependent variable is the past sales data; whereas, independent variable can be per capita income, gross domestic product, or population.

An organization depends on either single or multiple methods of sales forecasting. For example, if an organization is targeting different segments then it requires utilizing different sales forecasting methods for every segment.

In addition to sales estimation, it is important for an organization to assess competitors in the targeted segment. An organization can evaluate competition in the targeted segment by assessing the strengths, weaknesses, market share, and marketing mix strategies of its competitors. The main task in evaluating competition is to know the differentiation strategies adopted by the competitors. This further helps in estimating the sales potential of an organization effectively.

The cost estimates also act as an important evaluation criterion for evaluating the market segment. Every segment involves different marketing mix as per the varying needs of customers. Thus, an organization should estimate the cost for every segment to compete successfully without any shortage of resources.

(B) Selecting the Market Segment: The evaluation of market segmentation is followed by the selection of the profitable segment of market. Selecting the market segment involves finding the target market to sell the products. The target market can be defined as a market in which an organization decides to utilize its marketing efforts. Targeting is not an easy process in this competitive world. The marketers have to design new and better ways of targeting market.

The organizations keep on changing their product line as per the requirement of customers while entering into a new market segment. A continuous research is required to select a target segment.

The basis techniques of Selecting a market segment are as follows:

(i) Single segment Concentration: It helps in selecting the most attractive segment by an organization. It is often known as concentrated segmentation. The small-scale organizations with limited resources often target a single segment. For example, Ginger Hotels targets only budget conscious customers and provides only the basis facilities for its customers.

(ii) Selective Specialization: If focuses on multiple market segments. In this type of specialization, the organization utilizes expertise in fulfilling the needs of the selected segment. Selecting more than one segment helps an organization to minimize its risk because when one of the segments becomes less profitable, organization can divert its efforts towards more profitable segment. For example, Hyundai has different models, such as control, Sonata and Accent, which cater to the customers having different levels of income.

(iii) Productive Specialization: It focuses on providing different products to different types of segments. The focus of an organization is more on products rather than the segments. An organization using such a strategy earns a substantial reputation in producing those specific products. For example, Nokia manufactures mobile phones for different customer segments. They have basic phones for low-income group and E-Series  phones especially for business class customers.

(iv) Market Specialization: It refers to concentrating on the needs and wants of customers belonging to a specific market. It also involves some risks as the organization caters to only a specific market. For example, the profitability and sustainability of the organization is affected when there is recession in the market.

(v) Full Market Coverage: It emphasizes the importance of supplying products for all the segments of the market. Full market coverage helps an organization to expand its market and earn more revenue. For example, Tata Motors Limited manufacturers cars for all the segments in the market. They launched Nano for lower middle class, Indica for higher middle class and safari for upper class. They also bought Land Rover and Jaguar from Ford for targeting the Sport Utility Vehicle (SUV) segments.

(vi) Tools for competitive Differentiation: Competitive Differentiation is defined as a process of formulating a list of differentiating factors to distinguish between the offerings of an organization and its competitors. The organization needs to differentiate its products from the existing substitutes available in the market to survive in the competitive environment.

The differentiation opportunities matrix of The Boston Consulting Group (BCG) is an important tool for studying the competitive differentiation in different industries.

Now, let us discuss the different types of industries in the BCG Matrix:

(i) Volume Industry: It comprises of few organization with very large competitive advantages. The growth in such type of industry is related to the size and Market share of an organization. For example, Jaypee Group, a renowned Indian real estate organization, has invested a lot of money in setting up heavy infrastructure with best of the amenities in Noida, Uttar Pradesh. It has started a project called Jaypee Greens, which aims at building a luxurious complex in Noida.

(ii) Stalemated Industry: It provides lesser growth opportunities and the benefits derived from these opportunities are very less. In Stalemated Industry, it is difficult for the organization to differentiate the products. Therefore, it is not profitable for the organizations to enter into such type of industry. For example, in the steel and iron ore industry, it is very difficult to differentiate between the steel products manufactured by different organizations.

(iii) Specialized Industry: It provides a number of growth opportunities and the benefits derived from these opportunities are very high. It does not coincide with the organization’s size and its market share. For example the demand for software products is based on the requirements of customers. Therefore, the growth opportunities for an organization are very high.

(iv) Fragmented Industry: It refers to a type of industry where the growth opportunities are high and the benefits derived from the opportunities are less. For example, there are a number of opportunities in the food industry but the benefits are very limited. India is a diversified country where people have different tastes. For example, the food habits of North Indian, South Indian, and Chinese people are different from each other. Therefore, the food industry of India is characterized by high diversity but the benefits are less.

An organization can achieve competitive differentiation based on the following five dimensions:

(i) Product Differentiation: It forms a very important tool for competitive differentiation. It is imperative for an organization to study the demand and performance of substitute products in the market.

The most important feature of a product is its quality that can be further classified as follows:

(a) Performance: It studies the prototype of a sample product in a market.

(b) Conformance: It helps in checking the attributes, such as durability, reliability, repeatability, style, and design of every product.

(ii) Service Differentiation: It helps in organization to attract customers by imparting hing quality standards in their services offerings. The essential attributes of a survive are ordering ease, on time delivery, error proof installation, training, and consulting customers.

(iii) Personnel Differentiation: It determines various attributes required in the human resource for making an organization successful. These attributes can be the competency, accountability, and responsibilities of an individual.

(iv) Channel Differentiation: It directs an organization to nurture and strengthen its distribution channel. The better distribution of goods and services can be done with the help of expert channel managers. A channel should be fast and flexible to adapt the changes.

(v) Image Differentiation: It defines the need of a unique identity for a product or organization to challenge its competitors. An organization should create communication channels to enhance and develop its image in the market. Making a product image is called brand image that implies how the characteristics of products are perceived by customers.

(C) Developing a positioning Strategy: A positioning Strategy can be defined as a process by which an organization creates an image or identity for its products in the mind of its target customers.

According to Steve Johnson, “How can we use one message to communicate to multiple buyers? Obviously we cannot. We’ll need different articulations of our message that resonate with each buyer type.” 

The positioning Strategy should create the first impression in the mind of customers. A product is positioned with the help of a punch line that carries the unique selling proposition of a product and a promotional message to create a different space in the mind of customers.

For example, Amul has positioned itself with the punch line “the taste of India”. Its promotion strategy focuses on the usage of hoarding that display creative messages to grab the attention of customers.

The positioning Strategy should satisfy the following aspects: 

(a) Carries a value benefit for ample number of customers.

(b) Makes the product of an organization different from its competitors.

(c) Denies the possibility of imitation of product by other organizations.

(d) Generates profit for the organization.

A successful product positioning can be done by differentiating the products of an organization from its competitors.

Now, let us discuss the criteria for. Differentiation in brief: 

(i) Significance: It implies that a product should give benefits to its target customers.

(ii) Uniqueness: It implies that a product should consist of distinctive features. Product uniqueness can be a new or add-on benefit in the existing product of an organization.

(iii) Reasonable: It checks the buying ability and budget of customers.

(iv) Profitability: It helps an organization to continue its operations for a longer period and differentiate with Change in time.

Following are the various errors made. By the organizations while positioning a product: 

(a) Targeting a limited part of the market due to the limited available information.

(b) Targeting a very narrow group of consumers who are not even profitable for the organization.

(c) Misinformation the customers about the features, prices and benefits of products that in turn dissatisfy them and creates a bad image of the organization.

24. What are the base of market segmentation? Discuss the favourable conditions for successful market segmentation?

Ans: The concept of market segmentation is based on the assumption that markets are not homogeneous but are heterogeneous. Consumers differs in their behaviour and buying decisions. The characteristics of consumer is one segment differ with those of other segment. In this way, market segmentation is the strategy of dividing markets in segment in order to conquer them. Thus, grouping of consumer is called market segmentation.

Base of market Segmentations:

(i) Geographical Factors: On the basis of geographical factors, market may be classified as state-wise, region-wise and nation-wise. In this type of market segmentation, customers are put into groups based on factors like temperature, population, food habits, clothing, etc as well as where they live.

(ii) Demographic Factors: This is the most widely used basis for market segmentation. Market is classified on the basis of population, using ages, income, sex, etc. as indicators.

(a) Age: Age is the most basic variable of them all, albeit the most important because consumer preferences continually change with age. Almost all marketing campaigns target age-specific audiences. This variable can be viewed regarding specific age ranges or life cycle stages: babies, children, adolescents, adults, middle-age, and seniors.

(b) Sex: There is a variation of consumption behavior between males and females. This factor is used as a basis for segmentation for products like watches, clothes, cosmetics, leather goods, magazines, motor vehicle, etc.

(c) Family Life Cycle: This is another important factor, which influences the consumer’s behavior. Family makeup can be instrumental in segmentation because when a family’s dynamic changes, its needs and desires often do too. This strongly affects their buying habits and your sales process. Single individuals tend to prioritize themselves, while newly married couples are likely prioritizing each other and their homes. 

(iii) Psychological factors: Psychographic segmentation is a marketing research approach that categorizes consumers into groups based on psychological factors influencing their buying behavior, personality, values, beliefs, lifestyle, attitudes, interests, activities, and social class.In psychographic segmentation, elements like personality traits, attitude lifestyle and value system form the base. The strict norms that consumers follow with respect to good habits or dress codes are representative examples.

(iv) Economic Factors: economic segmentation: concentration, economic scale, capital intensity, and state purchases. To offset somewhat the limitations of these industrial level variables, we also use a firm-level measure of segmentation: the size of the establishment for which the individual works.

In our country, it is classified as upper class (rich), middle class, and  the lower class. Another classification based on income in our country is as follows:

(a) Very Rich.

(b) The Rich class.

(c) The Aspiration Class and.

(d) The Destitute.

(v) Behavior Factors: This is one of the most important bases used for market segmentation. Market is classified on the basis of attitude of consumers and special occasions.

(a) Occasional: These customers know your brand, though infrequently purchase. You can learn why or motivate them for more engagement through surveys or special offers.

(b) Benefits: Each consumer expects to fulfill certain desire or to derive some benefits from the product he purchases. E.g.: A person may purchase clothes to save money and another to impress others. Based upon this, markets may be classified as markets for cheap price products and market for quality products etc.

(c) Attitude: On the basis of attitude of consumers, markets may be classified as enthusiastic market, indifferent market, positive market, and negative market.

Essentials elements for success of Marketing Segmentation:

(i) Identifiable: The segment or the group of consumers must be clearly defined. The marketer must be able to identify the members of the segment on the basis of some characteristics.These of data should permit the measurements of the size and importance of the segment as a potential product of marketing strategy.

(ii) Heterogeneity: There should be clear difference between the preferences of the consumers for the same product. If the product is used by the consumers in same manner and for the same purpose then there is no need of segmentation but if the product is demanded by the consumers for different purposes then there is a need for segmentation of the market on the basis of the purpose for which the product would be used.

(iii) It is economically accessible: Segmentation involves a search for enough similarity among buyers to permit the seller each search of these potential customers economically. For example, segment members could be concentrated geographically, may be shopping at the same store or may be reordering the same magazines. A segment based on motivational characteristics cannot be reached economically.

(iv) Accessible: Segment must be accessible in two senses. Firstly, the firm must be able to make them aware of products and services. Secondly, they must get these products at a reasonable price. It must be easily accessible means it should be easy to reach. The final criterion is that the market segmented should be readily assessable and reachable for the targeted customers.

(v) It is dynamic: Once a company finds its segment, it will not last forever. The marketing is changing constantly. The segments should be modified with the changing marketing scenario. Technology, competition, perceptions and attitudes – all are volatile. Because of such changes, marketers must monitor the market constantly to detect the changes in it to adapt the strategy accordingly. That is nothing different than dynamic segmentation.

(vi) It evidence adequate market potential: The identified market segment should respond favorably to marketing efforts. A clearly defined segment must respond to changes in any of the elements of marketing mix. Potential needs can be transformed into perceived wants through education or persuasion. Potential needs are more difficult to ascertain than the actual needs. Here, marketer is to develop strategies only for substantial segments – whether actual or potential.

25. What is positioning in target marketing?

Ans. Positioning refers to the place that a brand occupies in the minds of the customers and how it is distinguished from the products of the competitors and different from the concept of brand awareness. In order to position products or brands, companies may emphasize the distinguishing features of their brand (what it is, what it does and how, etc.) or they may try to create a suitable image (inexpensive or premium, utilitarian or luxurious, entry-level or high-end, etc.) through the marketing mix. Once a brand has achieved a strong position, it can become difficult to reposition it. 

Positioning is one of the most powerful marketing concepts. Originally, positioning focused on the product and with AI Ries and Jack Trout grew to include building a product’s reputation and ranking among Competitor’s products. Schaefer and Kuehlwein extend the concept beyond material and rational aspects to include ‘meaning’ carried by a brand’s mission or myth. Primarily, positioning is about “the place a brand occupies in the mind of its target audience”. Positioning is now a regular marketing activity or strategy. A national positioning Strategy can often be used, or modified slightly, as a tool to accommodate entering into foreign markets.

The origins of the positioning concept are unclear. Scholars suggest that it may have 1 emerged from the burgeoning advertising industry in the period following World War I, only to be codified and popularized in the 1950s and 60s. The positioning concept became very influential and continues to evolve in ways that ensure it remains current and relevant to practicing marketers.

Positioning is the final step in the S-T-P planning approach (Segmentation’ ! Targeting’ ! Positioning). Positioning refers to decisions about how to present the offer in a way that resonates with the target market. During the research and analysis carried out during the segmentation and targeting process, the marketer will have gained insights into what motivates consumers to purchase a product or brand. These insights can be used to inform the development of the positioning Strategy.

Firms typically develop a detailed positioning statement which includes the target market definition, the market need, the product name and category, the key benefit delivered and the basis of the product’s differentiation from any competing alternatives. The communications strategy is the primary means by which businesses communicate their positioning statement to Target audiences.

Positioning is closely related to the concept of perceived value. In marketing, value is defined as the difference between a prospective customer’s evaluation of the benefits and costs of one product when compared with others. Value can be expressed in numerous forms including product benefit, features, style, value for money.

26. Explain the Differences Between product Differentiation & Market segmentation.

Ans. Product differentiation and market segmentation are two distinct, important marketing strategy concepts. Product differentiation refers to the basic need to have product-related qualities that set your brand apart from the competition. Market segmentation is the breakdown of a large target audience into smaller, more homogeneous groups of customers.

Differentiation Basics: As the root word “different” suggests,  differentiating your products means making it distinct from other products that are competing for the same customer. While it is important to have a product that is of good quality and offers excellent benefits, you also need something that allows consumers to recognize it as unique. If 10 companies all offer “good” products that are very similar and are marketed similarly, it is difficult for customers to make a choice. This leaves your potential for purchase largely up to random chance. Differentiation is a key element of positioning, which is creating a unique image of your brand in the mind of your Target audience.

Approaches: Generally, you differentiate your products or brand by making it of better quality than competing products. In highly competitive marketplaces, you have to get more creative to develop and communicate better value. Unique features, customized designs and use of green-friendly or organic materials may separate your products from the crowd. You can also offer money-back guarantees, warranties, service, support, and opportunities for upgrades over time.

Segmentation Basics: Market segmentation is intended to help you Optimize efficiency with your advertising investments. It is derived from the basic adage “you can’t be all things to all people”. Companies may target one distinct target market, or go after several different ones. Market segmentation allows you to target markets that either have different needs, want different benefits, or require different messages delivered through different media. In essence, segmentation overcomes the inability to impact all possible customers with one advertising campaign or message.

Approaches: The most traditional segmentation strategy is demographics. This is identifying particular customers based on shared traits, such as age,race, gender, Marital status, income, education or occupation. This approach allows you to design messages for a prototypical customer and figure out what he watches or reads. Lifestyle segmentation is another approach, where you target people with shared hobbies and interests. Geographic segmentation is used by companies with broad audiences located in particular local, state, regional, national or international markets. Behavioral segmentation emphasizes customers with similar usage rates or benefits requirements.

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