1. CLASSIFICATION
OF THE BUYERS' MARKETS
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THE BUYERS' MARKETS
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Successful implementation of the marketing
management process requires a thorough understanding
of buying behavior in various buyers' markets.
Buyers' Markets differ in their nature and size
and are classified into several specific types,
as illustrated below.
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CLASSIFICATION OF THE BUYERS' MARKETS
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The Consumer Market
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The
Organizational Market
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This market consists of all individuals and
households that purchase products and services
for personal use.
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This market consists of all individuals and
organizations that purchase products and
services for a broad range of organizational
or commercial purposes.
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The Organizational
Market can be further sub-divided into two categories,
as illustrated below.
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CLASSIFICATION
OF THE ORGANIZATIONAL MARKET
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The
Government Market
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The
Business Market
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This market consists of local, state, and
federal governmental organizations that purchase
products and services to fulfill their functional
objectives
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This market consists of all individuals and
organizations that purchase products and services
for various commercial purposes
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The Business Market
can be further sub-divided into two categories, as
illustrated below.
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CLASSIFICATION
OF THE BUSINESS MARKET
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The
Producer Market
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The
Reseller Market
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This market consists of all individuals and
organizations that purchase products and services
for their own manufacturing needs and supply
the produced goods and services to others
at a profit.
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This market consists of all individuals and
organizations that purchase products with
the sole purpose of reselling them to others
at a profit, i.e. wholesalers and retailers.
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2.
WHAT ARE THE KEY QUESTIONS RELATED TO THE BUYERS
MARKETS?
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UNDERSTANDING THE BUYING BEHAVIOR
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In order to understand the Buying Behavior
in various markets, it is necessary to provide
answers to a number of questions, as outlined
below.
Once the marketing
manager is able to find answers to these questions,
it will provide a positive beginning to the
marketing management process in your company.
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KEY
QUESTIONS IN UNDERSTANDING THE BUYING BEHAVIOR
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No.
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Details
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1
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Who Buys?
What kind of people initiate the purchasing
procedure and who places the actual purchase
order?
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2
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What Do
They Buy?
What kind of products or services are being
purchased?
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3
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How Much
Do They Buy?
In what quantities and how frequently are
products or services being purchased?
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4
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How Do
They Buy?
What procurement methods are being used during
the purchasing procedure?
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5
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Why Do
They Buy?
What are the reasons for purchasing specific
products or services?
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6
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When Do
They Buy?
Is there any particular time when people may
need and, subsequently, buy products or services
in larger quantities?
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3.
WHAT IS THE CONSUMER MARKET?
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THE
CONSUMER MARKET IN THE UNITED STATES
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The Consumer Market in the United
States, with a population of around 275 million
in the year 2001, and the highest prosperity
in many years, has the largest number of buyers
with money to spend.
The Average
Household Size is approximately 2.7
persons per family and the Median
Age of the population is about 32
years.
The percentages
related to the age distribution of the population
in the United States are illustrated below.
According to the U.S. Census Bureau,
these projections are expected to change during
the next 50 years.
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PERCENT
DISTRIBUTION OF THE U.S. POPULATION BY AGE
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Age Group
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2000
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2005
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2010
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2030
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2040
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2050
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Under 5
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7.4
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6.9
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6.6
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6.4
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6.4
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6.4
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5-13
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13.1
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13.1
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12.5
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11.7
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11.5
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11.6
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14-17
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5.6
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5.7
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5.9
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5.3
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5.3
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5.2
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18-24
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9.5
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9.5
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9.8
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9.1
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9.2
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9.0
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25-34
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15.5
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13.6
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12.7
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12.4
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12.4
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12.5
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35-44
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16.2
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16.3
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14.8
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12.9
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12.9
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12.2
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45-64
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19.9
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22.2
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24.9
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22.1
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22.1
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22.5
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65-older
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12.8
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12.7
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12.7
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20.2
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20.2
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20.6
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©
U.S. Census Bureau, Current Population Reports
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STATISTICAL
INFORMATION ABOUT THE CONSUMER MARKETS
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In addition, there is a continuous geographic
shift of the U.S. population which affects the
overall population growth in various states.
The Projected Population Growth Rates
in the United States during 1990 to 2000
are presented next.
Additional statistical
information pertinent to consumer markets may
be found in two main sources, as presented below.
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THE
PROJECTED POPULATION GROWTH RATES IN THE UNITED
STATES
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©
Projected Population Growth Rates During 1990 - 2000,
U.S. Department of Commerce, Bureau of Census
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MAIN
SOURCES OF STATISTICAL INFORMATION
ABOUT THE CONSUMER MARKETS
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The U.S.
Government
Printing Office
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The U.S.
Bureau
Of Census
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4.
WHAT IS A STUDY OF THE CONSUMER BEHAVIOR?
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THE
CONSUMER BEHAVIOR
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A successful
implementation of the marketing management process
requires of the marketing manager to understand
various aspects of the Consumer Behavior.
The study of the consumer behavior entails examination
of several issues, as outlined below.(8)
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KEY
ASPECTS IN THE AREA OF CONSUMER BEHAVIOR
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No.
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Details
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1
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Consumer behavior
relates to the behavior of individual buyers
in the marketplace and its purpose is to explain
the manner in which they purchase and use
products and services.
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2
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Consumer behavior
is based on a multi-disciplinary approach
and it is supported by information gained
from various fields, such as psychology, sociology,
and economics.
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3
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Consumer behavior
entails evaluation of factors that influence
the product or service buying decisions and
product and service usage during the buying
process and after the purchase has been made.
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4
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Consumer behavior
is concerned with the buying process by which
consumers reach buying decisions and how that
process varies between individuals in
relation to products and services they buy.
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5.
WHAT ARE THE MAIN CONSUMER BUYING BEHAVIOR FACTORS?
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THE CONSUMER BUYING BEHAVIOR
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The consumer buying behavior is influenced by
several types of factors that must be understood
by the marketing and sales managers.
The main Consumer Behavior Factors
are illustrated below.
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THE CONSUMER BUYING BEHAVIOR FACTORS
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Strategic
Marketing
Factors
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Consumer's
Individual
Factors
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Social
And Economic
Factors
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These factors
include:
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Product
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Price
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Promotion
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Place (Distribution)
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These factors
include:
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Values
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Requirements
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Attitudes
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Experience
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These factors
include
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Social
factors
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Economic factors
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Family and
friends
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Lifestyle
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6.
WHAT IS THE CONSUMER DECISION-MAKING PROCESS?
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THE
CONSUMER DECISION-MAKING PROCESS
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The integral part of an ordinary buying behavior
is the consumer decision-making process. This
process, illustrated below, has a number of
steps that enable the consumer to satisfy specific
needs.
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STEPS
IN THE CONSUMER DECISION-MAKING PROCESS
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Step 1:
Identification Of The Problem.
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The consumer
identifies a specific problem and recognizes
the need to solve it.
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Step 2:
Internal Search For A Solution.
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The consumer
evaluates existing knowledge and past experience
in solving a similar problem.
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Step 3:
External Search For A Solution.
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The consumer
examines new information in the marketplace
that may lead to solution of the existing
problem
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Step 4:
Making A Buying Decision.
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The consumer
decides on the most suitable method of solving
the existing problem.
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Step 5:
Evaluation Of The Buying Decision And Subsequent
Action.
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The consumer
evaluates the decision and subsequent action
and utilizes the acquired experience in making
similar decisions in the future.
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7.
HOW DOES THE CONSUMER MARKET SPEND ITS MONEY?
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THE
CONSUMER SPENDING PATTERNS
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Another important
element of marketing information which should
be taken into account by the marketing
manager, relates to the changing Consumer
Spending Patterns.
The consumer spending patterns depend upon the
Average Income Per Person or Average
Income Per Family and are summarized below.
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CONSUMER
SPENDING AT DIFFERENT INCOME LEVELS
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Expenditure
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Income Level
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$10,000 -15,000
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$20,000 -
30,000
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$50,000 And
Over
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Food
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17.7
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15.8
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12.6
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Housing
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24.8
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23.0
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24.9
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Utilities
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8.6
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7.1
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4.7
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Clothing
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5.4
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5.8
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5.8
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Transportation
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17.4
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19.1
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17.6
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Health Care
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7.8
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5.5
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3.7
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Entertainment
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3.7
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4.7
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6.1
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Tobacco
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1.5
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1.2
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0.5
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Contributions
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2.2
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2.9
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4.3
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Insurance/ Pensions
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4.5
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8.2
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13.2
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Other
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6.3
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6.7
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6.6
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© Consumer Expenditure Survey, U.S. Department
Of Labor, Bureau Of Labor Statistics,
8.
WHAT IS THE TREND IN THE CONSUMER MARKET AT PRESENT?
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TRENDS IN THE CONSUMER MARKET
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Marketing managers must realize that
the consumer market in the United States undergoes
a continuous process of change and adjustment.
Some of the typical
changes, or trends, in the Consumer
Market are summarized below.
(9)
All of these
trends play an important role in understanding
the consumer market behavior and provide a better
insight in the overall marketing management
process.
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PRESENT
TRENDS IN THE CONSUMER MARKET
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No.
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Details
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1
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Changing demographic
environment, where the 75 million
"baby boomers (born after the
Second World War) now account for about one
third of the total population.
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2
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People marry
later in life and have less children.
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3
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The number
of married couples continues to decline.
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4
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Number of
working women is increasing dramatically.
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5
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About 65 percent
of women will be in the labor force by 2005.
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6
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47 percent
of all households will be non-family or single
parent households by the year 2005.
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7
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Younger adults
move out of their parents home earlier in
life.
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8
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The divorce
rate is increasing.
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9
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The percentage
of the more educated people is increasing.
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10
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People are
becoming increasingly health conscious.
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11
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People generally
live longer.
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9.
WHAT IS THE ORGANIZATIONAL MARKET?
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THE ORGANIZATIONAL MARKET
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The Organizational Market represents
another important consideration for the marketing
manager.
Although the organizational market is much smaller
than the consumer market in terms of the number
of buyers, it generates the largest aggregate
dollar volume of purchases. As mentioned earlier
the organizational markets can be classified
into two types, as illustrated next.
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TWO
TYPES OF ORGANIZATIONAL MARKETS
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Government
Market
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Business
Market
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The
Business Markets are further classified into two
types, as illustrated below.
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TWO
TYPES OF BUSINESS MARKETS
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Producers
Market
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Resellers
Market
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The
organizational market includes all industrial, commercial,
and government organizations, as illustrated below.
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ELEMENTS
OF THE ORGANIZATIONAL MARKET
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No.
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Details
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1
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Manufacturers.
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2
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Service companies.
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3
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Wholesalers.
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4
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Retailers.
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5
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Contractors.
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6
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Project management
companies
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7
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Farmers.
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8
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Government
organizations.
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The organizational
market is best characterized by the size of various
organizations, as illustrated below.
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SIZE
DISTRIBUTION OF THE ORGANIZATIONAL MARKET
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Type
Of
Organization
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Number
Of
Employees
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Percent
Of Total Companies
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Percent
Of Total Employees
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Manufacturers
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1 - 9
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45
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2
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10 - 49
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34
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10
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50 - 249
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16
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24
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250 - 999
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4
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27
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1000 - over
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1
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36
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Wholesalers
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1 - 4
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43
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7
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5 - 9
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24
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12
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10 - 9
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29
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44
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50 - over
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4
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37
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Retailers
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1 - 4
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48
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7
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5 - 9
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24
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12
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10 - 49
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24
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44
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50 - over
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4
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37
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©
County Business Patterns (Adapted)
The organizational
markets generate a continuous need for three types
of products and services, as illustrated below.
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TYPES
OF PRODUCTS AND SERVICES
GENERATED BY THE ORGANIZATIONAL MARKET
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Consumer
Goods
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Industrial
Goods
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Organizational
Services
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These include all products that are ultimately
purchased and used by individual consumers.
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These include raw materials, components, capital
equipment, accessory equipment, and consumables
purchased by organizations.
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These include all services rendered by individuals
or organizations for other organizations.
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10.
WHAT ARE THE CHARACTERISTICS OF ORGANIZATIONAL MARKETS?
The
Organizational Market, and, particularly,
the Business Market has certain characteristics,
which are outlined below.(10)
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THE CHARACTERISTICS OF ORGANIZATIONAL MARKETS
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No.
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Details
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1
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There are
less potential customers in the business markets
in comparison with the consumer markets.
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2
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The value
of the business markets is substantially higher
per potential customer in comparison with
the consumer markets.
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3
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Existing and
potential customers are concentrated in smaller
geographic areas in comparison with the consumer
markets.
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4
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Price changes
in the business markets usually do not affect
the demand for products and services as much
is they do in the consumer markets.
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5
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Demand for
products and services in business markets
may fluctuate more frequently and in comparison
with the consumer markets.
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6
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There are
more people involved in the business decision-making
process in comparison with the individual
consumer's buying process.
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7
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The buying
process in the business markets is generally
formal, more complex, and requires more professional
expertise in comparison with the consumer
markets
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8
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The buying
process in the business markets is often based
on repetitive orders by buyers who established
long-term close relations with reliable suppliers.
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9
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The buying
process in the business markets is often carried
out between the suppliers and the end-users,
bypassing the intermediaries.
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10
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The buying
process in the business markets is sometimes
based on the reciprocity and even bartering
whereby the buyer and the seller exchange
goods or services for mutual benefit.
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11.
WHAT ARE THE ORGANIZATIONAL BUYING BEHAVIOR FACTORS?
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THE ORGANIZATIONAL BUYING BEHAVIOR
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A broad range of products and services
is purchased by various organizations in accordance
with specific buying practices discussed in
Materials
Purchasing
in Tutorial 4.
These practices are guided by Organizational
Buying Behavior and are influenced by a
number of factors, as illustrated below.
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THE ORGANIZATIONAL BUYING BEHAVIOR FACTORS
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Internal
Organizational Factors
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Individual
Buyer's
Factors
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External
Organizational
Factors
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Environmental
Factors
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These factors include:
. Company's
structure
. Policy
. Objectives
. Plans
. Employees
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These
factors include:
. Personal
values
. Requirements
. Buyer's
attitudes
. Buyer's
experience
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These
factors include:
. Relationships
with existing
suppliers
. Relationships
with potential
suppliers
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These factors include:
. External
environment
. Economic
conditions
. Political
conditions
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12.
WHAT IS AN ORGANIZATIONAL DECISION-MAKING PROCESS?
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THE
ORGANIZATIONAL DECISION-MAKING PROCESS
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The Organizational Decision-Making Process
used by organizational
buyers is similar to the consumer decision-making
process described earlier. This process includes
a number of steps, as illustrated below.
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STEPS
IN THE ORGANIZATIONAL DECISION-MAKING PROCESS
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Step
1: Identification Of The Problem.
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The organizational
buyer identifies a specific problem and recognizes
the need to solve it.
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Step 2:
Internal Search For A Solution.
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The organizational
buyer evaluates existing knowledge and past
experience in solving a similar problem.
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Step 3:
External Search For A Solution.
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The organizational
buyer examines new information in the marketplace
that may lead to solution of the existing
problem.
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Step 4:
Making A Buying Decision.
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The consumer decides on the most suitable method
of solving the existing problem. |
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Step 5:
Evaluation Of The Buying Decision And Subsequent
Action.
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The organizational
buyer evaluates the decision and subsequent
action and utilizes the acquired experience
in making similar decisions in the future.
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13.
WHAT IS AN INDIVIDUAL BUYING BEHAVIOR?
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THE
INDIVIDUAL BUYING BEHAVIOR
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Successful planning and implementation
of marketing strategies also depends upon the
ability of the marketing and sales employees
to understand an Individual Buying Behavior
of prospective customers, or organizational
buyers.
When
dealing with customers or buyers, particularly
in the area of personal selling, it is essential
to be aware of a broad range of Personality
Types which may exist in the marketplace.
Some of these personality types are described
below. (11)
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RANGE
OF PERSONALITY TYPES IN THE MARKETPLACE
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No.
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Details
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1
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A Friendly
Buyer.
A prospect knows you, your company and your
products well from the past experience.
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2
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A Bargain
Hunter.
A prospect is looking for the best deal and
will not relax until he gets it.
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3
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A Prudent
Buyer.
A prospect follows the formality and is shopping
around by meeting many sellers and getting
numerous estimates.
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4
|
An Evasive
Buyer.
A prospect does not respond to your phone
calls, and it is hard to make an appointment
with him.
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5
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A Complaining
Buyer.
A prospect always complains about something,
is never satisfied, and is usually demonstrating
a negative attitude.
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6
|
An Organized
Buyer.
A prospect prepares a detailed list of what
he wants to buy. He is very nit-picking and
knows exactly what he wants
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7
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A Controlling
Buyer.
A prospect wants to be in control at all times
during the buying process. He may demonstrate
some arrogance and even rudeness.
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8
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A Suspicious
Buyer.
A prospect may question everything that he
hears about a particular product or service.
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9
|
A Domineering
Buyer.
A prospect may demonstrate a strong will and
domineering attitude toward everybody with
whom he gets into contact.
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Note:
Any reference
to gender means "he" or "she"
throughout the text.
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14. FOR SERIOUS BUSINESS OWNERS ONLY
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Reprinted
with permission. |
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