Introduction In life, there are universal laws that govern everything we do. These laws are so perfect that if you were to align yourself with them, you could have so much prosperity that it would be coming out of your ears. This is because God created the universe in the image and likeness of him. It is failure to follow the universal laws that causes one to fail. The laws that were created consisted of the following: · Law of Gratitude: The Law of Gratitude states that you must show gratitude for what you have. By having gratitude, you speed your growth and success faster than you normally would. This is because if you appreciate the things you have, even if they are small things, you are open to receiving more. Law of Attraction: The Law of Attraction states that if you focus your attention on something long enough you will get it. It all starts in the mind. You think of something and when you think of it, you manifest that in your life. This could be a mental picture of a check or actual cash, but you think about it with an image. Law of Karma: the Law of Karma states that if you go out and do something bad, it will come back to you with something bad. If you do well for others, good things happen to you. The principle here is to know you can create good or bad through your actions. There will always be an effect no matter what. Law of Love: the Law of Love states that love is more than emotion or feeling; it is energy. It has substance and can be felt. Love is also considered acceptance of oneself or others. This means that no matter what you do in life if you do not approach or leave the situation out of love, it won't work. Law of Allowing: The Law of Allowing states that for us to get what we want, we must be receptive to it. We can't merely say to the Universe that we want something if we don't allow ourselves to receive it. This will defeat our purpose for wanting it in the first place. Law of Vibration: the Law of Vibration states that if you wish on something and use your thoughts to visualize it, you are halfway there to get it. To complete the cycle you must use the Law of Vibration to feel part of what you want. Do this and you'll have anything you want in life. For everything to function properly there has to be structure. Without structure, our world, or universe, would be in utter chaos. Successful people understand universal laws and apply them daily. They may not acknowledge that to you, but they do follow the laws. There is a higher power and this higher power controls the universe and what we get out of it. People who know this, but wish to direct their own lives, follow the reasons. Successful people don't sit around and say "I'll try," they say yes and act on it. Chapter - 1 The Law of Attraction The law of attraction is the most powerful force in the universe. If you work against it, it can only bring you pain and misery. Successful people know this but have kept it hidden from the lower class for centuries because

1. DILLA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT
COURCE TITLE: PRINCIPLE OF MARKETING
(MGMT 1012)
Credit Hour -3
Chapter Three: Analyzing Consumer and Business
Markets
Instructor-Aklilu M. (MBA)
2016
1
By InstructorAklilu M.

2. Chapter 3: Analyzing Consumer and
Business Markets
Chapter Contents
3.1. Consumer behavior
3.1.1.The buying decision process
3.1.2.Factors influencing consumer behavior
3.2. Business buying behavior
3.2.1. The characteristics of business market
3.2.2. The organizational Buying situations
3.2.3.The organizational buying decision process
3.2.4. Factors influencing organizational buying decision
3.2.5. Differences from final consumers due to the
Nature of the Market
3.2.6. Organizational buying objectives
3.2.6. Organizational buying structure

3. Chapter 3: Analyzing Consumer and Business
Markets
After studying this chapter the student will be able to:
• Discuss consumer buying behavior .
• Identify factors influencing consumer behavior
• Understand consumer buying decision process
• Discuss business buying behavior
• Explain factors influencing organizational buying decision
• Discuss business buying decision process
• Explain differences between final consumers and
organization based on the nature of the market
• Identify Organizational buying objectives and buying
structure

4. 3.1. Consumer buying behavior
• Consumer buying behavior means the behavior
consumers exhibit when
– searching for information about product to buy,
– evaluating one brand against another, and
– When they are using and exposing the product
after using it.
• A company’s marketing mix, factors present in the
external environment, personal characteristics and
the process by which he/she makes decisions
influence buying decision.
• The consumer market buys goods and services for
personal consumption. It is the final market in the
organization of economic activities.

5. Consumer buying (cont’d…)
• The buyer’s behavior is influenced by four major
factors:
– cultural (culture, subculture, and social class),
– Social (reference groups, family, roles & statuses),
– personal (age and life cycle state, occupation,
economic circumstances, lifestyle, and personality
and self-concept), and
– psychological(motivation , perception, learning,
and beliefs and attitudes).
• All of these provide clues as to how to reach and serve
buyers more effectively.
• Before planning its marketing, a company needs to
identify its target consumers and their decision
processes.

6. Consumer buying (cont’d…)
• Although many buying decisions involve only one
decision maker, some decisions may involve several
participants, who play such roles as initiator,
influencer, decider, buyer, and user.
• The marketer’s job is to identify the other buying
participants, their buying criteria, and their influence
on the buyer.
• The marketing program should be designed to appeal to
& reach the other key participants as well as the buyer.
• The amount of buying deliberateness and the number
of buying participants increase with the complexity of
the buying situation. In complex buying behavior, the
buyer goes through a decision process.

7. 3.1.1. The buying decision process
• The consumer’s buying decision process is the way in
which people gather and assess information and make
choices among alternative goods & services.
• The consumers buying decision process consists of six
basic stages. The six basic decision process stages are:-
1.Stimulus
2.Problems awareness
3.Information search
4.Evaluation of alternatives
5.Purchase
6.Post-purchase behavior
• Sometimes, all six stages in the process are used; other
times, only a few steps are utilized.

8. The buying decision process (cont’d…)
1.Stimulus:- A stimulus is a signal or drive meant to motivate
a person to act. A stimulus can be any of the following:-
Social ,Commercial ,Non-commercial, &Physical.
• If a person is sufficiently stimulated, he or she will go on to
the next step in the decision process.
2.Problems Awareness:- The consumer recognizes that the
good or services, may solve a problem of shortage or
unfulfilled desire.
3.Information Search:-Listing the alternatives that will solve
the problem at hand and a determination of the
characteristics of each.
4. Evaluation of Alternatives:- The alternatives are evaluated
on the basis of the consumer’s criteria and then ranked & a
choice is made.

9. The buying decision process (cont’d…)
5. Purchase act:- It involves the exchange of money or a
promise to pay for a product, or support in return of
ownership of a specific goods.
Purchase decisions remaining at this stage center on
– The place of purchase ,
– Terms /conditions and
– Availability/easy of use
• If the above elements are acceptable, a consumer will
make a purchase.
6. Post-purchase Behavior:- Buying one item may lead
to the purchase of another. Re-evaluation of the
purchase occurs when the consumer rates the
alternative selected against performances standards.

10. 3.1.2. Factors influencing Consumer behavior
•Factors affecting consumer buying decision-making are:-
• Demographic characteristics ,
• Social characteristics, and
• Psychological characteristics
• By understanding how these factors affect decision
making, a firm can adjust its strategies to supply to the
target market.
• There are various factors affecting consumers buying
behavior . These are:-
• Cultural Factors,
• Social Factors
• Personal Factors, and
• Psychological Factors:

11. Factors influencing Consumer (cont’d…)
A. Cultural Factors:
• Cultural factors have a significant impact on customer
behavior. Culture is the most basic cause of a person’s
wants and behavior.
• Growing up, children learn basic values, perception
and wants from the family and other important groups.
• Marketers are always trying to spot “cultural shifts”
which might point to new products that might be
wanted by customers or to increased demand.
• Each culture contains “subcultures” groups of people
with shared values. Sub-cultures can include
nationalities, religions, racial groups, or groups of
people sharing the same geographical location.

12. Major factors influencing (cont’d…)
B. Social Factors
•A customer’s buying behavior is also influenced by
social factors, such as the groups to which the
customer belongs and social status. In a group,
several individuals may interact to influence the
purchase decision.
• The groups in Social Factors include:-
• Reference Groups,
• Primary & secondary groups,
• Formal & informal groups,
• membership & symbolic groups , and
• Family,
• Social status include:-
• Roles, Status & Group Norms.

13. Major factors influencing (cont’d…)
 The typical roles in such a group decision are:-
•Reference Groups:- Your decision to purchase and use
certain products and services, is influenced by the
people around you with whom you interact and the
various social groups to which you belong.
• The groups with whom you interact directly or
indirectly influence your purchase decisions and thus
their study is of great importance to marketer to
understand them.
 Primary and secondary groups
–A primary group:- is one with which an individual
interacts regularly & whose opinion are of importance
to him. Family, neighbors, close friends, colleagues &
coworkers are examples of primary groups.

14. Major factors influencing (cont’d…)
• Secondary groups:- are those with which an
individual interacts only occasionally and does not
consider their opinion very important.
• Formal and informal groups:-
–A formal group is a group which has a highly defined
structure, specific role , authority, positions and
specific goals. Example:-Labor unions, social clubs
and societies
– An informal group is loosely defined group and may
have no specified roles and goals.
• Membership and symbolic groups:-
–A membership group is one to which a person belongs
or qualifies for membership. Example ;-All workers in
a factory qualify for membership to the labor union.

15. Major factors influencing (cont’d…)
• A symbolic group is one, which an individual aspires to
belong to, but is not likely to be received as a member. Ex.
A head clerk in an office. Different kinds of reference
groups have both direct and indirect influences.
• Indirect reference groups comprise those individuals or
groups with whom an individual do not have any direct
fact to face contact, such as film stars, TV stars,
sportsman, and politicians.
• Reference groups are used to promote products and
services.
 Family:- The family, as a unit, is an important of all
these groups. The family is an important consumer for
many products which are purchased for consumption by
all family members.

16. Major factors influencing (cont’d…)
• Family is a source of major influence on the individual
members’ buying behavior.
• It is from parents that we absorb most of values,
attitudes, beliefs and purchase behavior patters.
 Social status as the Factors influencing Consumer
behavior include:- Roles, Status & Group Norms
 Roles: - An individual may participate in many groups.
His position within each group can be defined in terms
of the activities he is expected to perform.
• Thus in different social positions you play different
roles. Each of these roles influences your purchase
decisions.

17. Major factors influencing (cont’d…)
 Status:- Status is often measured by the degree of
influence an individual exerts in the behavior and
attitude of others. people buy and use products that
reflect their status.
• Example :-The managing director of a company may
drive a Mercedes to communicate his status in the
society.
 Group Norms:- are the implicit rules of conduct and
behavior that are expected of its member.

18. Major factors influencing (cont’d…)
C. Personal Factors:
• Age and life cycle stage:- Like the social class the
human life cycle can have a significant impact on
consumer behavior. The life cycle is an orderly series
of stages in which consumer attitude and behavioral
tendencies evolve and occur because of developing
maturity, experiences, income, and status.
• Marketers often define their target market in terms of
the consumers’ present lifecycle stage.
• Occupation and Income:-The profession or the
occupation a person is in again has an impact on the
products they consume. The status of a person is
projected through various symbols like the dress,
accessories and possessions.

19. Major factors influencing (cont’d…)
 Life Style:- Our life styles are reflected in our
personalities and self-concepts, same is the case with
any consumer .Life-style is a person’s mode of living
as identified by his or her activities, interest and
opinions. Then based upon the combinations of these
dimensions, consumers are classified.
 Personality: Personality is the sum total of an
individual’s enduring internal psychological traits that
make him or her unique. Self-confidence, dominance,
autonomy, sociability, defensiveness, adaptability, and
emotional stability are selected personality traits.
People who have self-confidence have different
purchasing behavior than people who have no self-
confidence.

20. Major factors influencing (cont’d…)
D. Psychological Factors:
• Motivation:- Motivation involves the positive or
negative needs, goals, and desires that impel a person to
or away from certain actions. By appealing to motives ,
a marketer can generate motivation. Each person has
distinct motives for purchases; these change by
situation and over time.
• Consumer Needs and Motivations:- We all have needs
we consume different goods and services with the
expectation that they will help fulfill these needs. When
a need is sufficiently pressing, it directs the person to
seek its satisfaction. It is known as motive.
• All our needs can be classified into two categories –
primary and secondary.

21. Major factors influencing (cont’d…)
•Primary needs or motives are the physiological needs,
which we are born with, such as the need for air, water,
food, clothing, shelter and sex.
•The secondary needs are our acquired needs, which we
have developed in response to the individuals’
psychological make-up and his relationship with other
members of the society.
• The secondary needs may include the need for power,
prestige, esteem, affection, learning, status etc. Clothing
is a primary need for all of us.
• All human needs can be classified in to five hierarchical
categories. Hierarchy of needs can be ranked in order of
importance from the low psychological/ biological
needs to the higher level needs.

22. Early Theories of Motivation
Fig. 4.2. Abraham Maslow’s need hierarchy
Major factors influencing (cont’d…)

23. 3.2. Business buying behavior
• Business market is the collection of buyers who are
buying products and services for resale purpose, or for
using it in day to day operation or to use it to make
another product. There are differences between consumer
market and business market.
3.2.1. Characteristics of business market
• Organizational consumers purchase capital equipment,
raw materials, semi-finished goods, and other products for
use in further production or operations or for resale to
others, whereas final consumers usually acquire the
finished items for personal, family, or household use.
• Organizational consumers are likely to require exact
product specifications. Final consumers more often buy on
the basis of description, style, and color.

24. Business buying behavior (cont’d…)
• Organizational consumers often use multiple-buying
responsibility, in which two or more employees
formally participate in complex or expensive purchase
decisions. Final consumers use it less formally.
• Organizational consumers more frequently employ
competitive bidding and negotiation. Final consumers
employ it less frequently or not.
 There are three major types of buying situations.
• At one extreme is the straight re-buy, which is a fairly
routine decision.
• At the other extreme is the new task, which may call for
thorough research.
• In the middle is the modified re-buy, which requires
some research.

25. 2.2.2. Organizational Buying situations
• In a straight re-buy, the buyer reorders something without
any modifications. It is usually handled on a routine basis
by the purchasing department. Based on past buying
satisfaction, the buyer simply chooses.
• In a modified re-buy, the buyer wants to modify product
specifications, prices, terms, or suppliers. The modified re-
buy usually involves more decision participants than does
the straight re-buy.
• A company buying a product or service for the first time
faces a new-task situation. In such cases, the greater the
cost or risk, the larger the number of decision participants
and the greater their efforts to collect information will be.
• In the new-task situation, the buyer must decide on
product specifications, suppliers, price limits, payment
terms, order quantities, delivery times, and service terms.

26. 2.2.3. Organizational Buying Process
 The buying process beings when someone in the
company recognizes a problem or need that can be met
by acquiring a specific product or service.
• Problem recognition can result from internal or
external stimuli. Internally, the company may decide to
launch a new product that requires new production
equipment and materials.
• Or a machine may break down and need new parts.
Perhaps a manager is unhappy with a current supplier’s
product quality, service, or prices.
• Externally, the buyer may get some new ideas at a trade
show, see an advertisement, or receive a call from a
salesperson who offers a better product or a lower price.

27. Organizational Buying Process(cont’d…)
 General Need Description
• Having recognized a need, the buyer next prepares a
general need description that describes the
characteristics and quantity of the needed item.
 Product Specification
• The buying organization next develops the item’s
technical product specifications, often with the help
of a value analysis engineering team.
• Value analysis is an approach to cost reduction in
which components are studied carefully to determine
if they can be redesigned, standardized, or made by
less costly methods of production.

28. Organizational Buying Process(cont’d…)
 Supplier Search
• The buyer now conducts a supplier search to find the
best vendors. The buyers can compile a small list of
qualified suppliers by reviewing trade directories, doing
a computer search, or phoning other companies for
recommendations. Today, more and more companies
are turning to the internet to find suppliers.
 Proposal Solicitation
• In the proposal solicitation stages of the business
buying process, the buyer invites qualified suppliers to
submit proposals. When the item is complex or
expensive, the buyer will usually require detailed
written proposals or formal presentations from each
potential supplier.

29. Organizational Buying Process(cont’d…)
 Supplier Selection
• The members of the buying center now review the
proposals and select a supplier or suppliers.
• During supplier selection, the buying center often will
draw up a list of the desired supplier attributes and their
relative importance.
• The following attributes are most important in
influencing the relationship between supplier and
customer; quality products and services, on-time
delivery, ethical corporate behavior, honest
communication, and competitive prices. Other important
factors include repair and servicing capabilities,
technical aid and advice, geographic location,
performance history, and reputation.

30. Organizational Buying Process(cont’d…)
 Order-Routine Specification
• It includes the final order with the chosen supplier or
suppliers and lists items such as technical
specifications, quantity needed, expected time of
delivery, return policies, and warranties.
• In the case of maintenance, repair, and operating
items, buyers may use blanket contracts rather than
periodic purchase orders.
 Performance Review
• In this stage, the buyer reviews supplier performance.
The buyer may contract users and ask them to rate
their satisfaction.

31. Organizational Buying Process(cont’d…)
• The performance review may lead the buyer to
continue, modify, or drop the arrangement.
• The seller’s job is to monitor the same factors used
by the buyer to make sure that the seller is giving the
expected satisfaction.
• Each organization buys in its own way, and each
buying situation has unique requirements.
• Different buying center participants may be involved
at different stages of the process.
• Although certain buying-process steps do occur,
buyers do not always follow them in the same order,
and they may add other steps.

32. 2.2.4.Factors influencing organizational
buying Decision
•Business buyers are subject to many influences when they
make their buying decisions. These factors are
–Both economic and personal factors
• Buyers will favor the supplier who offers the lowest price or
the best product or the most service. Business buyers are
human and social as well, they react to both cause .
– Environmental Factors
• Business buyers are influenced heavily by factors in the
current and expected economic environment, such as the
level of primary demand, the economic outlook, the cost of
money and shortages in key materials. As economic
uncertainty rises, business buyers cut back on new
investments and attempt to reduce their inventories.

33. Factors influencing organizational (cont’d…)
– Technological, political, and competitive
• Business buyers affected by technological, political,
and competitive developments in the environment.
– Culture and customs
• Culture and customs can strongly influence business
buyer reactions to the marketer’s behavior and
strategies, especially in the international marketing
environment. The business marketer must watch these
factors, determine how they will affect the buyer, and
try to turn these challenges into opportunities.
– Organizational Factors
• Each buying organization has its own objectives,
policies, procedures, structure, and systems, and the
business marketer must understand these factors well.

34. Differences from Final Consumers (cont’d…)
• Nations’ cultures have a large impact on the way
their organizational consumers negotiate and reach
decisions.
• Foreign nations’ stage of economic development
has a major affect on the types of goods and
services bought by organizational consumers there.
• Companies need to adapt their strategies to address
them characteristics and needs of customers in
foreign counties.
• With the new technology available, there are more
opportunities to market to foreign organizational
consumers than ever before.
• The internet, E-mail, fax machines, satellite TV, and
video conferencing all facilitate buyer-seller
communications

35. 2.2.5. Differences from Final Consumers Due
to the Nature of the Market
• There are differences between organizational consumer
and the final consumers due to the nature of the
market. These includes:-
• Organizational consumers are less sensitive to price
changes. As long as final consumers are willing to pay
higher prices, organizational consumers will not object
to price increase.
• Demand is volatile due to the accelerator principle,
whereby final consumer demand affects may levels of
organizational consumers. There are fewer organization
consumers than final consumers.
• Organizational consumers tend to be geographically
concentrated.

36. Differences from Final Consumers (cont’d…)
• Buying specialists are often used in organizational
consumers.
• Organizational consumers may require special
relationships consisting consultations as new products
are devised, extra customer services (such as extended
warranties, a liberal return policy, and free credit), and
close communications with vendors.
 Differences Based on a Global Perspective
• As with final consumers, there are many distinctions
among organizational consumers around the world; and
sellers must understand and respond to them.
• Companies doing business in foreign markets must
know how to deal with organizational consumers in
those markets.

37. 2.2.6. Organizational Buying Objectives
• Organizational buyers have several distinct objectives in
purchasing goods and services. These are
• Availability of items:-buyer is able to obtain items
throughout the year of whenever necessary.
• Seller reliability:– based on fairness to organizational
consumers in allocating items in high demand.
• Consistency of quality:- being able to purchase items
of proper quality on a regular basis.
• Delivery goals : – minimized length of time from order
placement to delivery.
• Price considerations:– involve purchase prices and the
flexibility of payment terms.
• Customer service:– seller’s ability to meet special
requests, answer questions, address problems, and so on.

38. 2.2.7. Buying Structure
• Organizational buying structure refers to the level of
formality and specialization used in the purchases
processes.
• A firm’s buying structure depends on an organization’s
size, resources, diversity, and format.Manufactures and
wholesalers often have purchasing agents.
 Constraints on Purchases
• The major constraint on purchase behavior is
– Derived demand.
– Availability of goods ,
– Ability to pay, financing availability, and risk.
• Government consumers are constrained by the
budgeting process.

39. 39