Theme 1-5 PDF

Technical Articles – MGT301 Theme # 1: Understanding Marketing Marketing affects all facets of one’s life as it shed a huge impact on consumer daily affairs and behavior. Daily we use products from advertising; from toothpaste to clothes. Marketing help consumer to take decisions, it help consumer...

Technical Articles – MGT301 Theme # 1: Understanding Marketing Marketing affects all facets of one’s life as it shed a huge impact on consumer daily affairs and behavior. Daily we use products from advertising; from toothpaste to clothes. Marketing help consumer to take decisions, it help consumer to know about different opportunities and novelties around them. To be successful, companies develop sound marketing functions. To understand more about the importance of marketing in our lives let’s start with understanding the definition of marketing and other key terms. Marketing has come out from the word market. Market is used both as noun and verb, as noun it means a place and as a verb it means to bring something to its customers. So, generally marketing is a process of taking something to its customers. Let’s have a look at what is the definition of marketing by Philip Kotler. “Marketing is a process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return”. Marketing deals with identifying and meeting human and social needs. One of the shortest definition of marketing is “meeting the needs profitably”. Marketing is a set of all those activities that create value for customers who need them and build strong relationship with them. It is all about exchange of values between the companies and the consumers. Let’s look at other key concepts in marketing such as need, want and demand. The marketer must try to understand the target market’s needs, wants and demands. Needs describe the basic human requirements. “Need is a state of felt deprivation”. It is a customer desire for certain products/ services. When you deprived of something, you try to fulfill it. Like thirst, it is the feeling of deficiency of fluid in body. Whenever fluid lac in your body, you feel that you need to drink the water. If we extend this concept further, other needs are education, healthcare and entertainment. "Wants" are a step ahead of needs actually wants aren’t necessary for one to survive. So, a want is the wish for a particular product or a service which are not necessary. “Wants are the form human needs take as they are shaped by culture and individual personality e.g., water and food”. When you are hungry you try to find out the food to satisfy your hunger need. For example, a Britain person needs food but he may want a Burger or Sandwich. while a Pakistani may want Haleem, Kebabs and rice. Wants are actually formed by one’s society. Wants turn to be “Demands” when a someone irrespective of the region and culture is willing and having the ability to buy that needs or wants. Desire is the core difference between demands and wants. “Demands are those human wants that are backed by his/her buying power”. if you are hungry (need) and you have several choices like burger, Haleem, samosas, rice etc. You want pizza(want) but you do not have enough money to buy it, then it is not your demand. Needs and wants are important but demand is very vital for marketers. Customers\ consumers are important for marketers. Those who buy something\those who consume something are customers \consumers respectively but those who buy something and those who consume something can be same or different. Value is something of importance or something having the ability to fulfill the gap or solve a problem. Marketers focus on values as marketing is exchange of values between buyers and seller. Exchange is the act of finding a desired thing. e.g., you want to have eggs in breakfast you will go to the nearby shop and ask for eggs by giving the price to the shopkeeper. In this case exchange has taken place. Transaction is an activity in which goods services or money is passed form account to another. Exchange when take place is called transaction. Whenever you buy or sell something a transaction has occurred. Market offering is any mixture of products, services or experiences and information to a market to satisfy the customer needs or wants, for example banks offer services; news channels offer information and confectioners offer sweets. “Marketing mix is a combination of 4P’s (product, price, place and promotion) used by marketers to distribute value to customers”. There are four Ps from marketer’s point which must match the four Cs from customers point of view. Product is all goods and services that you design and it must match with the customer solution. Price is the value on which any company offers its product. Price must be such that it matches the customer cost. Then next P is promotion. It is making your market or customer aware of the product / offering. The corresponding C is communication. Promotion must be such that message is communicated to the customer properly. Place is the distribution. Place your product such that it reaches the customer conveniently. So convenience is the corresponding C for place. Source:”https://megansbusinessblog.wordpress.com/2014/07/29/marketing-mix-the-four-ps-and- the-four-cs-category-5/” It has been discussed that demand is the essence of marketing. Marketing is used not only by businesses but also political parties, and charity organizations as well. Actual task of marketing is to manage demand. As demand of any product that is offered for selling is never ideal so marketers face different demand situations and resultantly make different strategies for different demand situations. Different demand situations are: Negative demand is a demand situation in which your product is facing biased or negative views of potential customers. For example, the society in which you are dealing with frozen food items, consider that only fresh food is good. Frozen food is unhealthy; there you are facing negative demand. Here you will use conversion strategy to change the views of the market about frozen food. No demand is something that every business face in the startup phase. People are not aware of your product then you will use creative / stimulating marketing which means you create the demand. Latent demand is dealing in a product which people may demand but right now the demand is hidden. For example, insurance policy which initially was introduced and had latent demand and people did not take interest in it. Later marketers highlighted the benefits and made people aware and they started buying. Declining demand is when due to any reason the demand of the product starts declining. In such case re- marketing is used; you may redevelop the product by adding some new features in it. Full/ regular demand is when demand of the product is equal to the production capacity and this is also called adequate or sufficient demand. It is ideal situation so marketers maintain marketing and try to prolong the full demand situation to get maximum benefits. Irregular demand is when demand of company product changes at different times. It increases in some season and decrease at some other time. It is called irregular demand. E.g air conditioners are sold at high prices in summers while in winters air conditioners are sold at discounted prices, by doing so companies shift the demand of products. So companies use demand shifting technique and use synchro-marketing strategy. When demand of company product exceeds the production, capacity means company is facing overwhelming demand and is unable to manage demand it is called overfull demand situation and company uses de marketing strategy. e.g., electricity companies use de-marketing to reduce or lower the demand since demand is high but availability is less so they charge high prices to manage the demand. Demand of any unhealthy product is called unwholesome demand like narcotics and drugs etc. for such products counter marketing is used to discourage the use of such products e.g. campaigns for cigarette use. There are different underlying marketing philosophies that guide the actions of marketers. The marketing practices are guided by different marketing orientations / philosophies or beliefs. Let’s discuss these one by one. “Production concept is the belief that consumer will like only those products that are accessible or affordable”. Here marketers focus on quantity as they believe that customers are quantity oriented. So, organization emphases on production to achieve economies of scale to make the product available to customer at affordable prices. “Product concept is the belief that consumers will choose those products that offers the maximum quality, performance and features”. Product concept misleads where you focus on product features and improvement and ignore the customer needs. This may also lead to Marketing Myopia. Let’s discuss the mouse trap phenomena. In US, there was a time people wanted the get rid of mouse. So, companies started making mouse traps considering that people want it. They did not consider that people actually wanted to get rid of mouse rather than a mouse trap. They must have thought of other ways to catch mouse like sprays or sticking gums etc. to get rid of the mouse. So, this overemphasis on product led to marketing myopia and many mouse trap manufacturing companies failed to sell enough products. “Selling concept is the belief that customer will not buy plenty of the firm’s products except it undertakes a huge scale selling and promotional efforts”. This approach is asking for heavy promotional activities. Telling and selling philosophy works in such a situation. You may sell your product once or twice through heavy advertisement but if your product is not good, customers will not choose it again. Source: “Kotler, P., & Armstrong, G. (2018). Principles of Marketing, 17h Edition” “Marketing concept is the philosophy that attaining the organizational goals rest on knowing the needs and preferences of the target market and giving the desired satisfaction better than competitors”. Here focus is on the customer/ market. Product must emphasis on customer needs. Here the problem is that the focus is on customer and company profit but this is sometimes may be done at the cost of society. It may be that your production unit discharges such waste that is damaging the land. This issue was catered in the societal marketing concept. Societal marketing concept is all about the development of human and society welfare. The company should make marketing decisions based on consumer interests and society long term benefits.  Source: Kotler, P., & Armstrong, G. (2018). Principles of Marketing, 17h Edition. Here the efforts are made to fulfill customer needs profitably by keeping the society’s wellbeing in mind. Now after reviewing few marketing definitions lets advance our knowledge of marketing and see what is marketing management, according to Philip Kotler, “Marketing management is the art of selecting target markets and constructing a profitable relationship with them”. This concept is the skill and knowledge at the same time. Who will be our customers (Target market)? How the customers can be served in the best way (value proposition). “Customer relationship management is the overall process of building and maintaining a profitable relationship with the customers by delivering superior customer value and satisfaction”. Peter Drucker has defined Marketing in the following way: “The aim of marketing is to make selling superfluous; the aim of marketing is to understand customer so well that product fits and sells itself”. Marketer must understand the customer so well that he /she do not have to sell the product. It fits to customers’ needs so perfectly that it sells itself. Let’s discuss what the building blocks are for managing customers. Managing customer relationship is important. “The difference between total customer perceived benefits and customer cost is called Customer Perceived Value (CPV)”. When you buy something, you bear some kind of cost in the form of money, efforts or time or the combination of all and in return get some benefit. If the benefits and cost are justified or benefits exceed cost then you build a perception that this product is of value so marketers try that CPV is good. Customer satisfaction “is defined as the feeling that a customer experiences when an offering meets his or her expectations”. When you buy a product, you have certain expectations from it that it will perform or function in a certain way. When your expectations are fulfilled by the performance of product means you are satisfied. If performance exceeds your expectations, then you are delighted. Satisfied customers bring in more customers. Partner relationship management “involves working closely with partners in other company departments and outside the company to jointly bring greater value to customers”. After discussing Managing customer relationship, Lets discuss an associated concept managing customer value. In marketing we not only build relationships with customer but also have to capture value form the customer. Let’s discuss the building blocks to capture customer value. Customer lifetime value “is the value of the entire stream of purchases that the customer would make over the lifetime of patronage”. Take example of female who uses lipstick regularly. Suppose if she uses a particular lipstick of a company and on average, she will use it for 10 years. Then suppose if one lipstick is of Rs. 500 and it lasts for one month so in one year she will use 12 lipsticks. So, she will spend 500 *12 = 6000 in one year and in 10 years she will spend 6000*10=60000. If the company has won the customer, company is not selling one lipstick to the customer but it’s winning the sale of 60000 and if the customer is lost then it is losing this amount. Share of customer “is the portion of customer’s purchasing that the company gets in its product categories”. Example: the customer is satisfied with a particular brand and buys bread of this brand, milk, bun and biscuits of the same brand. Actually, what the customer spends on all the products of a particular brand is called share of customer. Customer equity” is the total combined customer lifetime values of all the company’s customers”. New trends in marketing keep on emerging with the passing time. Few of the prominent trends are: Customer engagement marketing “fosters direct and continuous customer involvement in shaping the brand conversations, experiences and community”. Companies are taking such indicatives where customers are involved in brand building due to the changing technologies. Customer-generated marketing (CGM) is the type of marketing in where firms invite their customers either to develop the content for company marketing campaign or to review it. Initially only companies were marketing the products now customers are also marketing. Everyone can now access everyone else so they are sharing their experience good or bad with others. We can say that Customer-generated marketing is leading now. Digital and social media marketing includes communication tools like websites, social media, mobile ads, online videos, blog and the emails to engage the consumers anywhere in the world, at any time. Now businesses are allocating increasing budget for digital and social media marketing. Digital age, free flow of information, rapid globalization, rising awareness and fast changing technologies have really changed the marketing landscape. Role of internet is phenomenal as it has connected many people. Anyone can access any other person sitting anywhere in the world. Everything is just a click away. It has facilitated everyone to reach media. Now customers can act and react about the company. It’s really easy as source of information have increased and flow of information is easy. This digital age has facilitated the process of globalization which is enhanced connectivity between people living in different parts of world. You can buy and sell from anywhere in the world. Due to increased education, new generation has realized about the damage being caused to the world around by the previous generations. They are worried and are now more socially and ethically responsible towards the environment. Another trend that has changed the marketing landscape is the growth of nonprofits. With this growth marketing in non-business ventures is also increasing like hospital, political parties and charity institutes have started using marketing to get resource. Conclusively let’s look at how marketing works? Consider that there is an organization and there is the market for it. Market is full of customers. Organization has many departments like HR, finance, accounting, R & D, production and operations and marketing is in the center of these all departments as it is linked to all. Now the organization tries to understand the market and for this marketing research is used. Using marketing research, the organization collects information form market. Marketing department processes the information and works in coordination with other departments to design a product to be offered to market. Working on the four Ps and matching with four Cs of customer, marketing offering is made. It is then sent to the customer. If your product is rightly suitable for the customers’ demand and requirement, then customer will appreciate otherwise it will be rejected. Whatever the case may be the feedback about the offering, be it good or bad, will be received by the organization’s marketing department. By learning the response from the market, organization decides to continue with the same product or modify it to suit the customer requirement. ……………………………………………………………………………………………………… GENERALLY ASKED QUESTIONS Question 1: What is economies of scale? Answer: Economies of scale are cost advantages gained by firms when their production turns efficient. The firm can gain its economies of scale by increasing production and lowering costs. Question 2: What do you understand by market offerings? Answer: Market offerings are combination of products, services, information, or it can be the experiences offered by the firm to a market to meet consumer needs or wants. Question 3: What is meaning of promotion? Answer: Promotion refers to the set of interrelated activities, which communicate the product, brand or service to the end user. Question 4: Discuss shortly about customer perceived value with a simple example? Answer: Customer perceived value is the concept that the success of a product or service is largely based on whether customers believe that it can satisfy their wants and needs For instance, you are in the process of buying a Scotty for your commuting, for the purpose you are making two types of comparisons. Firstly, you are comparing your cost of buying a Scotty, which includes price, time and purchase efforts, with the benefits you expect from a Scotty brand. Secondly you are comparing the expected benefits of different Scotty brands. In this case your customer perceived value is the difference between the cost of purchase and the expected benefits of the Scotty brand you are considering compared to other brands. Resultantly your perception of value can be low or high. Question 5: What is society welfare in marketing? Answer: The concept of welfare of society in marketing is not different from the general concept of social welfare. Generally anything which results into the wellbeing or happiness of a society is considered of its welfare. From another angle preventing from anything which may cause harm or damage to a society is also considered welfare. Reference to the Societal Marketing Concept any marketing activity which adds to social wellbeing or prevents a society from harmfulness will be considered welfare-oriented activity. For example, developing products which conserve energy or doing your business in a way that does not harm the society. Question 6: What do you understand by need, wants and demand? How you differentiae these. Answer: Need, want and demand seem to be very closely related words, however they all differ with respect to their meaning. Need is a state of felt deprivation. Whenever you feel there is some gap or you are deprived of something, you try to fulfill it, like hunger, thirst. Want is the form that a human need takes as shaped by culture and individual personality e.g. water and food. Whenever you are hunger you search for something to fulfill that need. The thing that you are searching is your want. All human in this world feel hunger but there wants are different as regions and cultures change. Needs are universal but wants are regional or local. When hungry some may take burger, some pizza, some rice etc. Demands are human wants that are backed by buying power. Anything that you want to have to fulfill your need and you have purchasing power to buy that thing is your demand. E.g if you are hungry(need) you have many options like burger, pizza, rice etc. suppose you want to buy pizza(want) and you do not have money to buy it, then it is not your demand. Needs and wants are important but demand is very crucial for marketers. Question 7: What role marketing plays in our life? Answer: We live in an interdependent world where we have to convince others and seek their support for any activity we do in our life. This is a fact that others will only get convinced and extend their support if what we are offering has relevance for them. At all such occasions, fundamentally, marketing will teach you to understand what concerns others and how to present your offer in a way that appeals to others. Marketing will also guide you to express yourself to the world around to get maximum out of it. Question 8: Discuss the sustainable marketing with help of an example. Answer: Sustainable marketing involves more focus over the promotion of environment and social responsiveness. It lays more stress over preserving the resources for future generations. Example may be the promotion of recycled products minimizing harm to the environment. Question 9: What is meant by creative and stimulating marketing in the era of 'no demand'? Answer: Stimulation Marketing is the task of converting no demand into positive demand. So, it is the process of creating a demand for a product. For example, there is little to no demand for shoes in an area, so in order to transform no demand to positive demand, marketers must stimulate the market. At most times, transforming the public’s demand for a certain product can be challenging. And there could be many steps for creating positive demand from no demand which includes building public awareness, reaching the audience, stay connected with them, give them solutions to their problem, create demand, focus on your product and services benefits. All these steps vary from market to market and according to your marketing strategies to create positive demand.  Technical Articles – MGT301 Theme # 2: Marketing Environment In this theme, we will discuss the most important and essential topic i.e. Marketing environment. First of all, we have to understand what is "environment"? An environment is the surroundings of any living thing. Whatever around you is considered to be your environment. The environment is somewhat you are very used to with. It is actually everything around us. It comprises human actors, system's, physical, chemical, and other natural factors, etc. We can't change our environment abruptly. The environment is an extremely complex set of factors that define your behavior in every way and for every living thing. Our environment will influence us anyway and somehow we may also influence the environment. For example, a flower may grow when weather conditions are appropriate, or die if it is not. It couldn't survive with extreme variations in their environment. Now, what is the marketing environment? In marketing our main objective is to deliver the value to the customer and in return earns value. Marketing is not alone; as per Phillip Kotler it has its own environment and in this environment, it has its own actors and forces that affect a firm's ability to deliver value to the customer and create profitable customer relationships ". Here we can take an example of one of the actors of the marketing environment and that is supplier. For instance, if you are making a surgical instrument and for that you use stainless steel metal, now the quality of the surgical instrument depends on the metal which a supplier provides you, what if the quality of that metal is not up to the mark it will certainly affect the ability to serve your customers and ultimately the relationship between you and the customer will suffer. In simple words, a firm is surrounded by internal and external forces which have a great effect on a firm's ability to sustain long-lasting relations with their potential customers. There are two types of the marketing environments, one is microenvironment and the other one is macro environment. Let's discuss them one by one. What is Micro Environment? The microenvironment is defined as the secure or safe environment, under which the firm works. The microenvironment consists of the Organization itself, Suppliers, Intermediaries, Competitors, Customers and Public. These actors are very close to the organization as they all work together and this would build your value network as well as a value delivery system. These actors are makers and breakers of the organization, because if these actors will not work properly then your ultimate goal to serve the customers will not be fulfilled. Firstly, we’ll see the actors of microenvironment. 1. The Company: In designing organization's strategies and objectives, marketing executives will make close coordination with other departments, within the organization because; if they do not develop coordination within the organization they can't achieve their goals in an appropriate way. 2. Suppliers: They are the one who provide the resources for goods and services. For example, raw material, equipment etc. Business accomplishment depends on the suppliers as the supplier's good is the essential component of the end product of the buyer. It is famous sayings that treat your supplier as your partners to provide customer value. 3. Marketing Intermediaries: The role of intermediaries is to promote, sell and distribute the company's products to the end users. If these intermediaries are not cooperative or supportive companies won't be able to deliver their value. Marketing intermediaries usually consist of wholesalers, distributors, and retailers that make a relationship between the organization and the customers. 4. The Competitors, Rivals or Inspirers: Competitors are who aim at what we aim at. In business the presence of one or more competitors can cut down the prices of goods and services, just to gain the larger market share. Competitors are the inspirers as well and due to their inspiration, companies are becoming more efficient and determined in terms of goal setting. 5. Customers: The most important and beloved actors in microenvironment are our customers. They are the ones who buy goods for their own consumption. All the marketing activities are customer- centric. Customers are the king of business. They are important as companies need them and the success of their business depends on them. 6. Publics: Public is any group which has an actual or possible interest in the organization to achieve its goals such as financial publics, media publics, government public, local public, general public or internal publics etc. They are actually the stakeholders. They are not direct buyers or suppliers, but they have somehow direct or indirect interest in achieving the objectives. Generally, it is the responsibility of the organization to satisfy the general public. The company must take decisions while taking the point of view of the general public into consideration because they played an important role in decision making. Now we will discuss these publics one by one. 6.1 Financial Publics: Financial Publics are the organizations who work in financial sectors and influence the company's funding e.g. Banks, investment analysts, stockholders etc. These financial publics affect a company's ability to take loans. The financial experts of the companies will deal with these financial publics and very conscious to build a positive image of the company in front of the customers and other public. 6.2 Media Publics: We are living in the information age and the custodians of the information are media houses. Media gives mass exposure to the company's activity. It includes Print Media, television, newspaper and Social Media like Facebook, Twitter etc. The role of Media is that much strong that it can make or break the companies. They are considered to be the watchdogs for the companies which protect the public interest against any mismanagement and malpractice. To deal with media houses the public relation department of the organization plays a vital role and always has good media relations. So they would highlight the strengths and hides the faults of the company. 6.3 Government Publics: Government is the protector of the state's public interest. They provide services too. Their work is to regulate the businesses and carefully watch that while operating the business they should follow the safety standards and rules and regulations. 6.4 Citizen-Action Publics: There are many organizations (government or non-government) in our society who work for different groups or communities to protect their rights. They mostly work voluntarily. Sometimes these communities will be affected by the marketing activities of the companies. For protecting their rights this organization becomes activated. So to avoid any issue between these organizations and the company, Public relation department of the company intervene and takes care of what these groups are saying regarding the company. The key role of this public relation department is to make efforts to create a friendly relationship with them; otherwise, they will harm the name of the company. 6.5 Local Publics: Every organization is working in some locality or area. The neighborhood residents are the local publics. Some production plants are running in these localities. These plants sometimes directly or indirectly harm the premises. For example, air pollution or water contamination etc. To compensate for the damage of this locality, organizations offer some incentives like providing the jobs or creating some hospital facilities to the local publics. 6.7 General Publics: A general customer's perception or opinion portrays the general public. A good brand image or perception is very important for any organization's success. Different marketing activities will be undertaken to create a positive image of the company. This opinion or perception of the general public can be judged by the feedback which they shared through social media or other media. So this opinion of general publics is very important for the image building. 6.8 Internal Publics: The internal publics are the vital resources of the organization. They are actually the company's own employees, executives, suppliers or stakeholders. If a company wants to increase its goodwill, they should make their internal Publics happy and content. For that, they have to arrange meetings in which they educate and involve their internal publics and inform the employees about the new development of the company. After concluding microeconomics, we will come to the next environment which is the macro environment. What is Macro Environment? Macro environment refers to the broader environment; it has no concern with the immediate environment. The macro environment is the external forces which are not controllable and can affect the processes of all business setups. These forces have an indirect effect on the company's operation and working situation. Macro environment consists of six external forces i.e. demographic, economic, natural, technological, political and cultural. 1. Demographic Environment: Demographics are the study of population based on factors such as age, race gender, size, density, location, occupation etc." These demographics are very important to learn for the purpose of policy development and economic market research. Now the question arises why the population is so important? It is important because people needs and wants are the reasons for companies to exist. In simple words, people are the motivating factor for the growth of markets. Therefore, marketers should keep a close eye on demographics. But over time there is a change in demographics in terms of world population, age structure, family sizes etc. This change in demographics both offer opportunities as well as threats for the businesses. Mostly large companies conduct demographic research to decide how to market their product and how to grab the potential customers. This information helps the company to select how much investment is needed for the specific group. 2. Economic Environment: We have to see the factors that affect consumer purchasing power and spending patterns. We will take an example that, an organization could not start exporting their good to a country until they have examined how much people will be able to spend and what are their purchasing powers. To check the health of the economy and growth rate, we have many economic indicators, which are GDP volume and growth rate, Per capita income, Interest rate, inflation, Import Duty rate etc. 3. Natural Environment: The natural environment in the Macro Environment is very important as far as the natural resources are concerned. You may do business in whichever place, your business will come across the local environment and you will shape your business according to the environment you are encountered in. The most important changes in the natural environment are the increasing shortage of raw materials especially in terms of non-renewable resources like water, gas, and oil. Moreover, increased pollution is also one of the factors of a natural disaster. Due to the shortage of natural resources, the governments then intervene in these issues and make some environmental sustainable strategies. So being a business person or marketer one should keep a record of the trends in the natural environment. 4. Technological Environment: It is the most crucial force of the Macro Environment. In the last few decades, there is a drastic development in technology, and we are in favor of advanced technology because we are in favor of convenience and ease. New products and services are imaginable due to new technologies. This new technology has affected every phase of our lives. If we look back like few years before we‘ll see how we shop, to how we travel to how we linked ourselves. Technology also affected businesses around the world as technological transformation get both opportunities and threats for a business. Every novel technology swaps an older one, so if businesses would not adopt such technological changes these businesses will very quickly be obsoleted and outdated from the market. Thus marketers must keep an eye or watch very carefully about the dynamic changing trend of the technology and try to adapt it as soon as possible. A very relevant example here is the world-renowned Photocopy Company "Xerox” which is obsoleted, because they have not adopted the new technology and today only a few people know the name of that giant company. 5. Political and Legal Environment: Political factor is one of the external environmental factors which affect the business both positively or negatively. Businesses are strictly influenced and affected by changes in the political environment. That's why before entering a new market in a foreign country; the company must know each and everything about the legal and political environment of the host country. Companies should know how a country's political system affects the economy. They also need to evaluate how stress-free it is for the company to enter and exit, they may also assess the political risk and stability of the country. 6. Cultural Environment: Cultural factors play a major role in our society. Our lifestyle, values, and attitudes determine culture. "Culture is the integrated sum total of learned behavioral traits that are shared by members of society". Cultural factor is one of the most influencing factors as far as the business decisions are concerned. So for businesses it is very essential to consider cultural barriers while making their business strategies. For example, The McDonald's of Pakistan is much different from the McDonald's in India. This is because McDonald's is capable to adapt its food and business strategies according to each culture. It is also necessary for the businesses to respect the differences between cultures and obeys to the country's policy. The sum up of all the internal and external environment study is that, all organizations plan according to their environment, the only change is in their attitude and approach. Sometimes this approach is proactive, sometimes it is reactive and sometimes it is active. The old adage that prevention is better than cure is appropriate here. So I think it is better to be proactive rather than reactive or active. In simple words, the proactive approach emphases on reducing the problems before they will appear. Our marketers and businessmen should also be smart enough to cope up and adopt the proactive approaches to survive in the environment. ……………………………………………………………………………………………………… GENERALLY ASKED QUESTIONS Question 1: What is the major difference between micro and macro environment and what's its key role in field marketing? Answer: Micro environment is the close or nearest environment in which the firm operates. It affects the working of a particular business only to which they relate to. While, Macro environment mentions the overall or broader environment, that can affect the working of all business enterprises. It actually affects the functioning of all the business entities, operating in the economy. These environmental factors are beyond the control of marketers but they still influence the decisions made when creating a strategic marketing plan. Question 2: What do you understand by the term publics? Answer: A public refers to a group that has an actual or potential interest in or impact on a company’s ability to achieve its objectives. Financial publics, media publics, government publics, local publics, general publics or internal publics are some of the examples of Publics. It is the key responsibility of the company to satisfy the public at large including its customers and competitors. Also, creating good will among the public helps to get a favorable response for a company. Question 3: What do you mean by rivals in marketing term? Answer: In simple words Rivals are the competitors. In terms of marketing, Rival is a person who is competing for the same product or service as another. For example Surf Excel is in direct competition with Arial.  Technical Articles – MGT301 Theme # 3: Organization and Marketing Strategy After studying environmental analysis, in the current theme we would discuss about Organization and marketing strategy. Marketing is all about serving customers profitably. Marketing is surrounded by environment which has actors, factors and forces that affect marketing positively or negatively. Environment remains the same but organization has to deal with its environment. Marketing strategy is basically response of marketing to its environment. Strategic planning is done at broad level in any organization. However, Strategic planning is known as the process to develop and maintain strategic fit between organizational capabilities and goals in a dynamic marketing environment. Goals can be to be no.1, to grow etc, capabilities can be some resources or skills that an organizational can have. As individual is affected by its environmental changes and get dressed according to weather, similarly organizational environment has an effect on the organization and marketing specifically. Parts of strategic planning are: 1. Environment analysis 2. Internal analysis 3. Vision 4. Mission 5. Objectives Environment means what surrounds organization/ market. Environmental analysis is the process of studying actors, factors and forces outside marketing to map challenges and opportunities. Actors---------e.g supplier, distributors etc. Factors____ public Forces______e.g economic, political forces So all these are outside market and we need to analyze them. There are several tools for environmental analysis. PESTEL/STEPEL   Political  Economic  Social  Technological  Ecological  Legal As a result of environmental analysis we can come up with several opportunities and challenges. Internal analysis is a process of studying actors, factors and forces inside organization to map strengths and weaknesses. These actors’ factors and forces can be resources, technology, machinery, location, brand or any other thing that can give organization as strength vice versa for weaknesses. There are several tools of internal analysis but for the scope of this course we would study Portfolio Analysis only. Portfolio means basket of products and services that are offered. In portfolio analysis the products and businesses are the evaluated by the management of the organization, and this activity has a essential role in strategic planning. Usually in marketing we follow the trend that which products are our strengths and which are weaknesses. Result of internal analysis  Strengths  Weaknesses Once an organization has done its strategic analysis about its external environment and about its internal strengths and weaknesses then it has to be sure about its vision. Vision gives long term direction, what it wants to be in long term. Forward sports is a Pakistan based manufacturing company that makes soccer balls for international football games, its vision is: “Translating marketing and business goals into design strategy, novelty and to attain a new product success.” Millat tractors Vision is: “Millat to be a global group of companies, recognized for a range of quality products with innovative design capabilities.” Through vision we get direction, after that, organizations have a mission to achieve its vision. Mission: Organization’s purpose; what is wants to accomplish in the larger environment, and the business organization is in. Examples: Forward sports: “Aiming to work with coherence of renowned global brands, organizations and entrepreneurs”. Adidas: “to be the best sports company in the world”. We should always have mission in terms of customers/ customer needs rather than in terms of products. For example we are not selling mobile phone we are selling way of communication. After setting missions we need to set objectives. Objectives are what an organization wishes to achieve precisely. Such as increasing market share, offering new outlets, more customer satisfaction. Objectives/targets and goals are used as same meaning over here. Sometimes in theory Goals are broader objectives and targets are more specific. As discussed earlier business portfolio is the assortment of businesses and products that make up an organization. For example, a company making all household items e.g. hand soap, detergent, tea whitener and everything else. All these items would be its portfolio.  Strategic Business Unit (SBU) is known as the unit of any organization that has a separate planning as compare to other businesses of the company/organization with separate mission and objectives. Some products are so important that you have to have separate mission and objectives. BCG matrix is a tool for portfolio analysis. It is done on the scale of relative market share and market growth rate. Star: This Quadrant has High growth rate with High market share. Question mark: This Quadrant has high growth rate with low market share Cash cow: This Quadrant has Low growth rate with high market share Dog: This Quadrant has low growth rate with low market share. If portfolio has a balance of all these products it can cope with changing environment. The market growth rate in marketing refers to the percentage increase in the size, value, or volume of a market over a specific period. Relative market share is a metric used in marketing to compare a company's market share to that of its largest competitor. Source: Kotler, P., & Armstrong, G. (2010). Principles of Marketing, 10th Edition. Product/ market expansion Grid is a tool for identifying company growth opportunities through market penetration, market development, product development or diversification. Market penetration: Means existing products in existing markets. These products require more promotion. Product development: New product in existing market. You get more growth with more revenue. Market development: Existing products in new markets. E.g same product in new geographical area. Diversification: New product in new market. Source: Kotler, P., & Armstrong, G. (2010). Principles of Marketing, 10th Edition. What we deliver to customers and what we get in return both are values. Products / services that are offered to customers are the result of any need. Value chain is a chain of different departments that perform value producing activities such as design of a product, producing of a product, marketing of a products and delivery of a products, and finally to provide the support services to a company. Value delivery network consists of company, suppliers, distributors and customers who work together to improve performance of the entire system. Suppliers deliver value to company then they deliver to distributor who ultimately deliver to end consumers. Companies not only invest in themselves but they also invest in their suppliers and distributors. If any of these fail to deliver, company will not be able to deliver value to its customers. A single organization cannot fulfil needs of the society and cannot fulfil needs in the same manner market can be divided into different segments. Market segmentation is the process of dividing market into different group of buyers with different characteristics, attributes, and needs. These buyers need distinct products or marketing mixes. Segmentation can be done on the basis of gender, location, age etc. People in a similar segment have similar needs and characteristics for which separate products and marketing mix is required. After segmentation is done targeting is done. It is not always possible for companies to target every segment that they have made. Market targeting is the process to evaluate the attractiveness of each market segment in order to take the decision to enter in that segment or to target that segment. Market positioning is a process to create a unique and distinct place of a product as compare to competitor’s products in the minds of target consumer. For example, some tooth pastes are famous for its cavity protection, and some for whitening. This is positioning. Marketing mix is developed after segmentation, targeting and positioning are done. Marketing mix consists of marketing tools such as products, price, place and promotion. The combination of these four factors are controlled by a company to influence its customers to purchase its products. These are actually 4 Ps of marketing mix. When we talk about products we talk about its quality, design, packaging etc. Price includes listed prices, available discounts, payment methods etc. In promotion we discuss advertising, personal selling, sales promotion and public relations. Place deals with channels, locations, inventory, transportation and logistics related methods. Customer is the core of marketing activities. In external environment there are marketing intermediaries, competitors, suppliers and publics. Market analysis, planning, implementation and control is done. 4 Ps are developed for the product. As explained earlier, Market is divided into segments and then appropriate segment is targetted and positioned. Marketing ROI In simple words, a company spends a handsome amount on marketing activities and expect to have a good return on this investment. It has different methods to calculate marketing return on investment but generally the net return is divided by costs of marketing investment. For building marketing strategy we need to do SWOT analysis as well. S Strengths – It shows internal capabilities of the company to reach its objectives W Weaknesses- It shows internal limitations of the company that creates hindrance for a company to achieve its objectives O Opportunities – It shows how a company can take advantages of opportunities available externally T Threats- It shows how factors may challenge a company’s performance ……………………………………………………………………………………………………… GENERALLY ASKED QUESTIONS Question 1: What is the difference between customer and consumer? Answer: A customer is a person who purchases something from the market. While a consumer is a person who consumes that thing. For example, you purchase candies for your children. Here, you are a customer and your children are consumers. Question 2: What is PESTEL analysis? Answer: PESTEL stands for Political, Economic, Social, Technological, Environmental, and Legal factors. It is also known as PEST analysis. An organization does the PESTEL by evaluating all these factors and their impact on the business. For example, in political factors, a business must evaluate the factors like government policy, political stability or instability in overseas markets, foreign trade policy, tax policy, labor law, environmental law, trade restrictions, and so on. Question 3: What is basic difference between suppliers and distributers according to marketing? Answer: A supplier can be a person who provides the products or goods to the consumers, usually with the help of distributors. A supplier could be a manufacturer. Whereas, a distributor is the one who distributes the goods directly to the wholesalers and retailers. You can say a distributor is an intermediary between the manufacturer and consumers. Question 4: What is the difference between political and social-ecological? Answer: In marketing, political analysis focuses on the interrelationships among individuals, governments, and public policy whereas a social-ecological system consists of 'a bio geophysical unit and its associated social actors and institutions. It includes the study related to social values and welfare.  Technical Articles – MGT301 Theme # 4: Marketing Information System Customer is amongst 5 C’s of marketing and keeps top most significance as all activities in a marketing system surround the customer. Accordingly, successful organizations build up lifelong relationships with their customers. In order to build strong and lifelong relationships with customers it is quite significant to understand the needs of the customers. Organizations collect information about their customers’ needs through a range of sources and the information that organizations collect in this regard is called Marketing Information. Since, marketing environment is dynamic, that’s why marketers need to develop their marketing strategies according to latest information about customers’ needs and demands. As we are living in a dynamic and digital marketing environment, thus, customer plays the most significant part to produce marketing information. While talking about social media sites; these are enriched ways for companies knowing their customers’ bio-data and grab their needs. Thus, a large data becomes available for markers in the form of Marketing Information System that help them identify the characteristics and demographics of their targeted customers. Managers use this data to make multiple decisions about certain marketing issues. Managers make major marketing decisions based on the information they gather from marketing environment and this information is stored in marketing database to maintain a record and for further decision making when needed. This is called internal data. While talking about the external data, Marketing Intelligence helps marketers in a variety of marketing decisions i.e. increasing sales, building customer retention capacities, and keeping an eye on competitors. Coming towards Marketing Research, it helps an organization increasing profit, maximizing sales, knowing the reason of declining sales, and assessing the feedback of customers before launching any product. Marketers go through the process of marketing research to make decisions based on systematic and logical conclusions. Marketing research department assesses that what kind of information about customers is required by seeking guidelines from Marketing Managers and other Information Users. Marketing research department collects this information from Marketing Environment (Target Marketing, Marketing Channels, Competitors, Publics, and Microenvironment forces) and afterwards the information is moved towards Internal Databases, Marketing intelligence, and Marketing Research process for the sake of developing analyzing and using the information. In the first step of marketing research process problem is defined and objectives of the research are designed. The marketing problems could be of various types i.e. a) newly launched product is not obtaining positive feedback from the users, b) advertisement policy is not working according to the advertising objectives, c) customers are complaining about any product, d) how competitors are influencing the product, e) what difficulties have been assessed in the pricing policy of the product. In the second step research plan is developed for the sake of collecting information. Information could be collected through interviews, surveys, and from published material. In the third step of research process research plan is implemented for the sake of collecting and analyzing the data. In the last step the interpretation and reporting of findings is conducted. For the purpose of implementing marketing research process different types of researches could be conducted according to the nature of the study. For example exploratory research that is among the three types of Marketing Research is used to investigate a problem that is not clearly defined. The research is carried out when the problem is at initial or primary stage. For example manager of a coffee shop feels that increasing the variety of flavors in the coffee may increase the customers and he carries out an exploratory research and hypothesizes that increasing coffee flavors will enable him to get more customers. While the purpose of descriptive research in marketing scenario usually is to know the profiles of customers and competitors. This type of research describes the characteristics of the population being studied; for example, an apparel brand intending to know the fashion trends of any particular region i.e. Islamabad will conduct a demographic survey of Islamabad, gather population data and then would conduct descriptive research on this particular segment. On the other hand Causal Research is conducted to test hypotheses about cause-and-effect relationship. Causal research assesses the effect of one variable on the other, for example, to know the reasons of downfall in the distribution network a firm would go through the process of causal research and would assess the effect of political policies, low incentives, or any other variable on the downfall of distribution channel. To conduct all the mentioned types of research marketers collect the first-hand or primary information through various methods like surveys, interviews, or experiments. For example if a company wants to check the response of consumers about its newly launched soft drink; the personnel of the company may go to different shopping malls and take interviews or ask questions about the taste of new soft drink. In this way the company collects primary data from the consumers; while the sources of secondary data could be newspaper, magazines, journals, and government databases. Although the information in the mentioned sources is published for various purposes but it could be used for research purpose taking in consideration the relevancy of the data. To collect primary data from customers various research techniques could be used i.e. in observational research technique the researcher observes the ongoing behavior of any subject in the natural setting. For example if any company offers free samples of tea whitener along with the tea; the researcher may go to any shopping mall and may record the responses of the customers by observing customer’s movements i.e. excitement, and eagerness to purchase the tea. On the other hand in ethnographic research researchers submerge them in the lifestyle of consumers to know depths and details about consumers. Ethnographic research may be conducted in person or installing cameras in participants’ homes or offices. Another type among research techniques the survey research is conducted through questionnaires, interviews. Surveys offer a quick way of collecting required information. Survey research is conducted in public areas or visiting targeted offices, schools, universities etc. You might have ever met any person coming to you to with a bunch of few papers to give your opinion about some problem discussed in that particular paper or questionnaire. Thus, different survey or contact methods could be used to collect the data from customers i.e. mail, telephone, personal contact and online contact. The forth type of research technique; the experimental research is about gathering primary data by selecting matched groups of subjects, giving them treatments, controlling related factors, and checking for differences in group responses. For example to test the effect of improving packing of deodorant on deodorant’s sales growth the researcher might keep all other factors i.e. odor, quantity and price of the deodorant constant/controlled. Thus, marketers find logical conclusion about any marketing phenomenon following the marketing research process and may store the collected information in Marketing Information database for future use as well. ……………………………………………………………………………………………………… GENERALLY ASKED QUESTIONS Question 1: Describe Market information system (MIS) with real time example. Answer: Marketing Information System is the collection, sorting and evaluation of market and customer data for decision making. Managers need such type of data on regular intervals for decision making. For example companies collect and maintain the databases of their customers’ needs, demands, behaviors, lifestyles, and professions etc. Companies keep updating the data according to changing customers’ demands and dynamic environmental trends, so that Marketing Managers may use this data for decision making about products and services. Question 2: Is it possible to get data or information about the product with the help of descriptive research? Answer: Organizations may use a descriptive research design to know that how different target groups respond to a certain product. For example, a clothing brand creates a survey asking general questions that measure the brand’s image among its target customers. Question 3: Why is it important for Marketing Mangers to get information about their customers? Answer: Marketing Managers collect and maintain the information about their customers’ needs, demands, behaviors, lifestyles, and professions etc. They use this information to come up to customers’ expectations about products and services. They also keep updating the information according to changing customers’ demands and dynamic environmental trends, so that they may sustain customers and face the competitors. Question 4: Explain Marketing Information System (MIS). Answer: Marketing Information System is the collection, sorting and evaluation of market and customer data for decision making. Managers need such type of data on regular intervals for decision making.  Technical Articles – MGT301 Theme # 5: Consumer Buyer Behavior The most important component of the marketplace is consumer. The buying behavior of end user is referred to as consumer buying behavior. Consumer market consists of all the end users who purchase the goods or services for their personal use. Every day, consumers are making many buying decisions for which marketers are researching on why, how, when and what are they purchasing. Marketers can learn how, when, what and how much the consumers are buying by studying actual consumer purchases but it is hard to know “whys” of consumer buying behavior. The answer to “why” the consumer is buying something lies deep inside the mind of the consumer. Often, the consumers don’t know themselves why they are buying certain product. Figure 1 represents a model of consumer buyer behavior which illustrates that marketing and other environmental stimuli enters the “black box” of consumer which further produces specific responses. The major job of the marketers is to understand what is in the black box of consumer. THE ENVIRONMENT BUYER RESPONSES Marketing stimuli Others BUYER’S BLACK BOX Buying attitudes and Product Economic Buyer’s characteristics preferences Purchase behavior: Price Cultural Buyer’s decision what the buyer buys, when, Place Technological process where, and how much Brand Promotion Social and company relationship behavior Figure 1: Model of consumer buyer behavior Marketing stimuli involves product, place, promotion, and price. Other environmental stimuli consist of economic, technological, social, and cultural forces. The aim of marketers is to comprehend the process of buyer’s black box which changes these stimuli into specific responses.  Buyer’s black box has two components; buyer’s characteristics which deals with how consumer perceives and responds and other is buyers decision process which affects buyer behavior. First, we will see the buyer’s characteristics which influence buyer’s behavior as shown in figure 2. Consumers’ buying is significantly affected by social, cultural, personal, and psychological factors. These are the factors which are not in the control of marketers. Cultural Culture Social Reference Personal Groups Age and Sub culture Psychological lifecycle stage Occupation Motivation Social class Family Perception Economic Learning Buyer Roles and situation Lifestyle Beliefs and status attitudes Sub culture Personality and self- Social class concept Figure 2: Buyer’s characteristics Influencing Consumer Behavior Cultural factors have a huge effect on the buying behavior of consumer. Marketers must recognize the importance of buyer’s culture, social class, and subculture. The major reason of a buyer’s wants, and behaviors is his/her culture. In other words, culture shapes the wants of people. Culture refers to as the set of basic wants, behaviors, perceptions, and values that a member of a society learns from his/her family or other institutions. Whereas every culture has its own traits and characteristics. Following are the characteristics of Pakistani culture:  Orientation/inclination towards religion.  Hospitality. The guests, visitor, tourists, whether local or international are always welcomed by Pakistani people and they are well taken care of.  Passionate, expressive and emotional  Aggressive  Fun loving and colorful; they enjoy and celebrate each moment and event to the core. Hanging out and family or friends gathering is common in Pakistani culture.  Hardworking and tough  Family comes first in Pakistani culture. Pakistani culture is led by collectivism instead of individualism where family and other relationships are always there for each other’s support.  Humble, approachable, helpful and friendly  Male dominant and conservativeness  Diversity Every culture has small cultures within it. These small cultural groups consist of the people who share same values and perceptions called subcultures. Subcultures are basically cultures within a culture. They include religions, nationalities, regions and ethnic groups etc. These small cultural groups (subcultures) can make an essential market segment and marketer soften design the products based on subcultures. Example of four major subcultures in Pakistan is as following: Punjabi culture: main characteristics of Punjabi subculture are hospitality and love for food, poetry and music. Sindhi culture: main characteristics of Sindhi subculture are love for mystics and Sufism, Sindhi folk songs and music. KPK Culture: main characteristics of KPK subculture are hospitality, love, care and respect for guests, bravery and protection/respect to females. Balochi culture: main characteristics of Balochi subculture are arts and crafts, tribes, festivals and storytelling tradition. Another factor affecting buyer behavior is social class. The Social classes are a society’s divisions based on the similar interests, behaviors, and values of society’s members. 1. Upper Class: This class consists of the elite who have inherited wealth. They also include people who have made high income or wealth through exceptional ability. This class can further be divided into upper uppers and lower uppers. 2. Middle Class: This social class comprised of independent businesspersons, corporate managers and professionals who have neither unusual wealth nor family status. They purchase branded products to maintain themselves according to the ongoing trends. This class can further be divided into upper middles and lower middles. 3. Lower Class: This social class comprised of poor who are working. Their standard of living is just above the poverty line. It also includes poorly educated unskilled laborers. This class can further be divided into upper lowers and lower lowers. These social classes and their further divisions can become a distinct market segment for marketers as each social class share the same attitude, behavior and spending pattern. Another major factor which Influences consumer behavior is social factors such as: groups, family, social roles and status and social networks. Different Groups impact the consumer’s behavior. The Groups which the person belongs to, have a direct impact on his/her purchasing behavior; such group is called membership group. On the other hand, reference groups are the groups which influence people who do not belong to them. They are inspired with that group, compare themselves with them and want to be like them. For example, for a cricket lover, the reference group will be national cricket team. Marketers must find the ‘reference groups’ within their target markets and try to influence the attitudes of the consumers through creating pressure via reference groups. For example, taking a cricket star in their advertisements to target cricket lovers. A new kind of social interface has been emerged over the last years, which is “online social networking”. Online social networks are the groups on internet or online communities where individuals meet, socialize, and exchange opinions on internet using social networking websites like Facebook, Instagram and Twitter. Marketers are trying to use these recent technological platforms to have one to one communication with customers and become the part of their lives and conversations. Another important group which can influence a consumer’s purchase decision is Family. Family structures and buying behaviors have been widely researched in marketing. Marketers are concerned to know the influence of husband, children and wife in family decision making as well as the overall buying behavior of family. A person belongs to different groups at one time; for example, family, organization, sports club, online community. The position of an individual in each group is characterized by both his status and role. A role is defined as the activities/actions people of that group expect you to perform. Each role holds a status based on the general approval given to it by society. For example, a person may be the brand manager in his organization, a father and husband in family, a captain in sports team and opinion leader in online community. A consumer’s decision is also affected by personal factors that are his/her personal traits or characteristics e.g. age, economic situation, occupation, personality, life style and self-concept. People’s occupation plays a major role in what they buy. For example, business people may buy suits while a person working in factory will buy rough clothing. Marketers identify different occupational groups and see if they can target them according to their product. People keep on changing the goods and services during their lifetime. At young age, they use different products and will change them as the get aged. Taste of food, clothing, recreation and furniture changes as the person gets old. Another factor which plays a major role in consumer’s buying pattern is his economic situation. People spend on goods and services based on the income they earn. Marketers have to see the trends in personal income, interest rates and savings and reprise or redesign their products to target the specific group accordingly, if needed. People also buy goods and services according to their life style. The lifestyle of the people of same subculture group or same social class might be different as it is a person’s style of living. Lifestyle encompasses consumers’ major AIO dimensions which are: activities (hobbies, shopping, work, shopping, social events, sports), interests (family, fashion, recreation, food), and opinions (about social issues, business, themselves, products). Marketers have to understand that consumers don not purchase products, they purchase values and lifestyle. Personality is defined as unique psychological traits that differentiate an individual or a group from that of others. It is usually defined as personal characteristics for instance sociability, honesty, autonomy, self-assurance, aggressiveness, and beauty. Personality of a person has a greater impact on his/her product choice. Marketing research suggests that brands also have personalities. Consumers buy the products which suit their personalities or the ones which have the same personality characteristics as the consumer has. The buying choices of consumers are further affected by psychological factors which include attitude, beliefs, learning, perception and motivation. People have many needs at one time; some needs are biological needs for instance hunger, thirst, or comfort whilst others are psychological for instance esteem needs, need for recognition, and love. A need turns into motive when it reaches to a certain level of intensity. When a need is so intense that it motivates/persuade a person to seek satisfaction, it is called motive. This motivation to seek water when you are thirsty or food when you are hungry is what marketers use to persuade consumers to buy their products. There are different theories of motivation; we will discuss here Abraham Maslow’s theory of motivation called hierarchy of need theory. Figure 3 shows the five needs in a pyramid, from extremely pressing needs at the bottom side or base to less pressing needs at the top of the pyramid. The needs include self-actualization needs, esteems need, social needs, safety needs and physiological needs. Maslow explained that these needs are sequential. One cannot move to the upper level need unless he/she has satisfied the previous need in the hierarchy. A person first tries to fulfill the basic needs. When these needs are satisfied, they will stop motivating the person and he/she will then try to satisfy the next pressing need. Figure 3: Maslow’s hierarchy of need theory When a person is motivated, he/she is ready to take some action. How that person will act, depends upon his/her perception. Perception is a process by which an individual selects, organizes, and interprets pieces of information in order to form a meaningful image of the world. It’s a glass through which we see the world. Different individuals can form different views about the same object due to three perceptual processes: selective distortion, selective attention, and selective retention. Consumers are bombarded with thousands of ads or stimuli every day. It is not possible for them to pay full attention to all. The preference of the consumers to screen out information which they are exposed and not interested in is called selective attention. Marketers must work hard on marketing campaigns to capture the attention of target consumers. Even if the consumers pay attention to a certain stimuli does not mean that the information has been transferred the way it was intended to. Every person matches the received information into his/her existing mindset. The tendency of individuals to interpret information in a way which favor their existing beliefs is called selective distortion. Consumers do not remember everything they pay attention to. Selective retention means that consumers are expected to remember good things about a product they support and forget good things about competing products or brands. When people take action, they do learn. Learning is defined as the change which occurs in a person’s behavior because of his/her experience. Most of the behavior is learned. For example, if a person buys Apple computer and his experience is good, he will buy Apple’s products again, and his response will be reinforced. Through perception and learning, consumers develop beliefs and attitudes which, in turn, impact their purchase behavior. A belief is referred to as a descriptive thought which a person holds about something. Beliefs might be based on opinion, faith, or knowledge. These beliefs create brand image of products which is the reason marketers are concerned about the beliefs that consumers make about their products. Attitude is defined as a person’s comparatively constant evaluations, tendencies, and feelings about an idea or object. Attitude is what makes consumers like or dislike something. To summarize, social factors, cultural factors, psychological factors social factors, and personal factors collectively influence the buyer behavior and purchase decision. The second component which influences buyer’s black box is buyer decision process. Before discussing buyer decision process, we will see types of buying decision behavior. Buying behavior of consumers differs for different products. Buying behavior for a toothpaste or shampoo will certainly be different from a car or mobile. Figure 4 shows different types of buying behavior based on the degree of differences among brands and the extent of buyer’s involvement. Figure 4: Types of buyer decision behavior Complex buying behavior is undertaken by the consumers when they are highly engaged in the whole purchase process and there are significant perceived differences among brands. Buyers are highly engaged when products are costly, purchased infrequently and risky. Consumers undertake dissonance reducing buying behavior when they are highly involved with an expensive, risky and infrequent purchase but there are few perceived differences among brands. For example, if a person wants to purchase carpet, he will face few differences in carpet brands. In this type of buying, consumers may face post purchase dissonance (after-sale dissatisfaction) which marketers can reduce by after sale support so that consumer feel good about their purchase decision. Habitual buying behavior occurs where consumers are less involved and there are few significant brand differences. For example, low cost products like daily grocery items. Buyers undertake variety seeking buying behavior when there is low involvement but significant perceived differences among brands. In these cases, consumers go for brand switching. For example, if a consumer purchases biscuits, he/she would like to try different brand every time. Now we will see how consumers make buying decisions. Figure 5 shows the five stages of buyer decision process. Figure 5: Buyer decision process The first stage in buying process is need recognition where the buyer identifies the need. This need can be caused either by internal stimuli (hunger or thirst) or external stimuli (where consumer thinks of buying a new mobile by watching an advertisement). Second stage is information search where consumer’s drive is so strong that he/she starts searching for more information about the product. Information can be gathered from several sources such as personal sources (family, friends and colleagues), commercial sources (media, advertisement, and sales people), public sources (mass media, internet search) and experiential sources (examining, handling and using the product). Marketers need to know about alternative evaluation which is related to how consumers evaluate different products to choose the final product to purchase. Consumer uses some personal criteria of evaluating different brands which depends on individual consumer as well as specific buying situation. After evaluation among the alternatives, consumer chooses one product to purchase and make the actual purchase decision. The process does not end here; after buying the product, buyer may be satisfied or dissatisfied with the product. If the performance of the product is below expectations, consumer will be dissatisfied. On the other hand, if the performance of the product meets expectations, buyer will be satisfied. Moreover, if the performance of the product is above expectations, buyer will be delighted. An important thing to consider here is, in case of new products/innovations, buyer’s decision process would be different. A new product is a good, idea, or service, that is recognized by some potential buyers as new. The perceptual process, through which a person goes from first knowing about an innovative product to final adoption of that product, is called new product adoption process. A consumer goes through the following five stages while adopting a new product/innovation. Awareness: The consumer hears about the new product but have a little knowledge about it. Interest: The consumer tries to get more information about the new product. Evaluation: The consumer evaluates the benefits of the new product. Is it of any use to him? Does this purchase make sense? Will it benefit him? Trial: It is very hard for consumers to buy a new product without trying. So, the consumer tries the new product (if allowed) on a small level to improve his or her assessment of its value. Adoption: The buyer takes decision to fully use the product. When introducing innovations/new products, marketers have to think on how they can help consumers pass through these stages to make them try the new product. When introducing new products in the market, marketers should know how much the product characteristics influences its rate of adoption. Some innovations are adopted too quickly like microwave while others take long time to be accepted in market. Following are the characteristics of products which influence new product’s rate of adoption. Relative advantage: Consumers will adopt the new product more quickly if they think it is superior to the existing products. For example, when microwave was introduced, there was no such thing in market which could heat food in seconds without using stoves. Compatibility: Compatibility is the extent to which a product matches the experiences and values of prospective consumers. It is related to the product traits that affect the adoption rate because consumers will not adopt the product initially if it is not compatible with their mindset. Complexity: The extent to which a new product is hard to use or to understand is also one of the product traits that affect the adoption rate. For example, when microwave was first introduced in the market, it was adopted very fast because of the ease to use it. Divisibility: Divisibility refers to the extent to which a product may be tried on a limited basis. Consumer wants to try some expensive product before purchasing it. For example, consumer will not buy the new car without having to test-drive it first. In case of the products which are too expensive, the rate of adoption is slow as there is less opportunity to test it before purchase. Communicability: Even if all other product traits that affect the rate of adoption are satisfactory, communicability can still slow down the adoption of the product substantially. Communicability is the extent to which the results of utilizing an innovative product can be seen or described to others. Because microwaves lent itself to display and description, its consumption had spread faster among customers. ……………………………………………………………………………………………………… GENERALLY ASKED QUESTIONS Question 1: What is the key difference between exploratory and descriptive research with examples? Answer: An exploratory research is the investigation of a problem which is not clearly defined and answers the 'why' element of a question. While in descriptive research we describe the characteristics of a phenomenon under study by answering the 'what' element of a question. For example, a researcher wants to investigate the purchasing pattern of a clothing brand so in order to answer the question 'what is the purchasing pattern of customers in Lahore'; he conducts descriptive research. While in order to study the 'why the customers of Lahore purchase a particular clothing brand?' he conducts exploratory research.