Marketing Unit 4 0 PDF

MARKETING MANAGEMENT
UNIT IV BUYER BEHAVIOUR
Understanding industrial and individual buyer behavior - Influencing factors Buyer Behaviour
Models Online buyer behaviour - Building and measuring customer satisfaction Customer
relationships management Customer acquisition, Retaining, Defection.
Contents
4.1 What is Buyer Behaviour?...........................................................................................................2
4.1.1Definition ...............................................................................................................................2
4.1.2 Two Categories of Buyers.................................................................................................3
4.1.3 Consumer Buying Decision ..............................................................................................3
4.2 Types of Individual Buyer Behaviour .......................................................................................10
4.2.1 Understanding industrial buyer behaviour..........................................................................11
4.2.2. Objectives of Industrial Buying .....................................................................................11
4.3 Factors influencing buying behavior ........................................................................................12
4.4 Online buying behaviour ...........................................................................................................12
4.4.2 Key enables of online Buying .........................................................................................13
4.5 Customer satisfaction ................................................................................................................14
4.5.1 Factors influencing customer Satisfaction.............................................................................15
4.4.4 Building customer satisfaction Satisfaction ....................................................................15
4.5 Customer Relationship Management (CRM) ............................................................................19
4.5.1 Meaning and Definition of CRM.......................................................................................19
4.5.2 Characteristics of CRM ...................................................................................................20
4.6 Customer acquisition .................................................................................................................21
4.6.1 Input for Acquisition .......................................................................................................22
4.7.1Retaining customer ..................................................................................................................23
4.7.2 Strategies for Customer Retention ......................................................................................23
4.8 Consumer defection ...................................................................................................................24
4.8.1 Types of Defectors ..............................................................................................................24
4.8.2 Causes of Customer Defection ........................................................................................25
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4.1 What is Buyer Behaviour?
The wealth of products and services produced in a country make our economy strong.
Almost a the products, which are available to buyers, have a number of alternative supplies; i.e.,
substitutive products are available to consumers, who make a decision to buy products.
Therefore, a seller, most of his time, seeks buyers and tries to please them. In order to be
successful, a seller is concerned with
Who is the customer?
What do consumers buy?
When do consumers buy?
How do consumers buy?
From where do consumers buy?
Why do consumers buy?
A buyer makes a purchase of a particular product or a particular brand and this can be
termed "product buying motives." And the reason behind the purchase from a particular seller is
"patronage motives."
A buyer makes a purchase of a particular product or a particular brand and this can be termed
product buying motives." And the reason behind the purchase from a particular seller is
"patronage motives."
The term individual buyer, consumer, end user and individual user refer to the same, a buyer
who buys product and service for end/final use. Consumer behavior is the study of when, why,
how, and where people do or do not buy a product. It blends elements from psychology,
sociology, social anthropology, and economics. It attempts to understand the buyer decision-
making process, both individually and in groups.
The term individual buyer behaviour, consumer buying behaviour and end user behaviour all
stands for the same. The study of consumer behaviour is the study of how individuals make
decisions to spend their available resources (time, money effort) on consumption-related items. It
includes the study of what they buy, why they buy it, when they buy it, where they buy it, how
often they buy it, and how often they use it.
4.1.1Definition
"Consumer buying behaviour refers to the buying behaviour of final consumers - individuals and
households who buy goods and services for personal consumption."
-Kotler and Armstrong
"Consumer behaviour consists of the acts of individuals in obtaining, using and disposing of
economic goods and services, including the decision processes that precede and determine these
acts." - Kurtz
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4.1.2 Two Categories of Buyers
There are two categories of buyers - the individual buyer and the business buyer. While the
individual buyer buys things for his own personal and family consumption, the business buyer is
a commercial buyer when buys things for manufacturing other products or for reselling or for use
in the running his enterprise. This distinction is substantial and it separates the two categories
into two different entities. In buying motivation, attitude and purchase behaviour etc., of the two
are different. These have been dealt with separately under the chapter: (a) Marketing of
Consumer Goods and (b) Marketing of industrial Goods.
1. Loyal buyers who remain loyal to a source for considerable periods;
2. Opportunistic buyers who choose between sellers on the basis of who will best further his
long-term interests;
3. Best deal buyers who concentrate on the best deal available at the time;
4. Creative buyers who tell the seller precisely what they want in terms of the product, service
and price;
5. Advertising buyers who demand advertising support as part of the deal;
6. Chisellers who constantly demand extra discounts;
7. Nuts and bolts buyers who select products on the basis of the quality of their construction.
4.1.3 Consumer Buying Decision
A very important area for marketing firms is to determine the decision maker or the real
customer
in the purchase decision of products and services. For purchasing a car, scooter etc., man take the
decisions whereas for buying baby products, kitchenwares, house-furnishing, etc., purchasing
decisions are taken by women For buying a house or going for vacations, decisions are taken by
majority members in the family. The firm must find out the characteristics of such persons who
play significant role in influencing the decision to make a purchase.
The following are the different participants in any consumer buying decision:
I. Initiator: Initiator is the person who first suggests the needs of the idea or the need for a
particular product which should be bought for satisfying certain requirements.
2. Influencer: After the initiator has suggested the idea for a particular product, the influencer is
the person who gives more information or gathers more information which will influence the
decision of the purchase.
3. Decider: A decider is the person who ultimately decides to buy a particular product depending
upon the situation. He is generally the dominating member of the family or head of the family
who carries out the role.
4. Buyer: The decision has been made for certain goods, the buyer goes to purchase from the
shop. The actual purchase made by the buyer will depend on the convenience of the family
members or of the group and it may depend on the earning members or bead of the family.
5. User: The user is generally one who actually consumes or uses the product or service and he
may or may not be the initiator, decider or buyer for instance, parents purchase toys but the
actual users are children.
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4.1.4 Characteristics of Buyer Behaviour
1. Buyer behaviour is very complex.

2.Buyer behaviour is the process by which individuals decide whether, what, when, from
whom, where and how much to buy.
3.Buyer behaviour is very dynamic.
4.Consumer behaviour comprises both mental and physical activities of a consumer.
5.It is an integral part of human behaviour.
6.In many cases, it is the sum total of the behaviour of a number of persons.
7.It is influenced by a number of marketing stimuli offered by the marketer.
8.Consumer behaviour is basically social in nature.
9.Consumers act differently at different times.
10.They learn and thereby change their attitudes and behavior.
4.1.5 Importance of Consumer Behaviour
The importance of studying consumer behaviour that it brings to marketer is given below:
1) Production Polices: The study of consumer behaviour affects production policies. of the
enterprise. Consumer behavior discovers the habits, tastes and preferences of consumers and
such discovery enables an enterprise to plan and develop its products according to these
specifications. It is necessary for an enterprise to be in continuous touch with the changes in
consumer behaviour so that necessary changes in products may be made.
2) Price Policies: The buyer behaviour is equally important in having price policies. The buyers
of some products purchase Only because particular articles are cheaper than the competitive
articles available in the market. In such a case the price of such products cannot be raised. On
the other band, some other articles are purchased because it enhances the prestige and social
status of persons. The prices of such things can easily be prestige and social status of the
persons. The price of such things can easily be raised or fixed higher. Some articles are
purchased under particular attitudes and emotions such as Khadi garments are purchased who
think themselves the followers of Gandhi. Prices of articles purchased under motives, can also
be raised.
3)Decision Regarding Channels of Distribution: The goods, which are sold and purchased
solely on the basis of low price, must have cheap and economical distribution channels. In case
of those articles, which require after-sale service such T.V. sets, refrigerators etc. must have
different channels of distribution. Thus, decisions regarding channels of distribution are taken
on the basis of consumer behavior.
4) Decision regarding Sales Promotion: A study of consumer behavior is also vital in making
decisions regarding sales Promotion. It enables the producer to know what motive prompts
consumer to make purchase and the same are utilized in advertising media to awaken the desire
to purchase. The marketer who takes decision regarding brand, packaging, discount, gifts etc.,
on the basis of consumer behavior for promoting
5) Exploiting Marketing Opportunities: A study of consumer behavior helps the marketers to
understand the needs, aspirations, expectations, problems, etc. This knowledge will be useful to
the marketers in exploiting opportunities and meeting the challenges of the market. sales of the
products.
6) Consumer do not always Act or React Predictably: The consumers of the past used to
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react to price levels as if price had positive relation. Today, consumers seek value for money,
lesser price but with superior features. The consumer response indicates that the shift had
occurred. This shift has occurred due to availability of more choice now. Thus Study of
consumer behavior is important to understand the changes.
7) Rapid introduction of New Products: Rapid introduction of new product with
technological advancement has made the job of studying consumer behavior more imperative.
For example, the information technologies are changing very fast in personal computer
industry.
8) Implementing the ''Marketing Concept": This calls for studying the consumer behavior, as
customers needs have to be given priority. Thus identification of target market before
production becomes essential to deliver the desired customer satisfaction and delight.
4.1.6 What are Buying Motives?
Purchase a product, because of certain motives. Motives refer to thought, urge, strong
feelings, emotion, drive etc. They make a buyer to react in the form of a decision. Motivation
explains the behaviour of a buyer. Motives induce a consumer to purchase a particular product.
The motives may be generally controlled by economic, social, psychological influences etc.
When a consumer buys a product, his aims are desire for security, rest, comfort, curiosity, self
preservation, fashion etc. People purchase products urged by mental and economic forces,
which create a desire; and this desire is satisfied by the articles displayed for sale. Motive is an
inner urge that prompts one to action; it is not a mere desire. The stimulated desire is called a
motive.
Knowledge of the buying motives of consumers is essential for a marketer. The changes
in the market are brought by the consumers. The needs and desire of the consumers and their
buying behaviour greatly depend upon their income, social status, psychology etc. The
consumer and the customer are two different terms. Customer is not always the consumer and
the consumer is not always the customer. Customers, like middlemen, agent etc., and may or
may not purchase products their own use, whereas consumers get the products for their own
consumption. Here we are concemed with consumer behaviour and the consumer is the
important factor.' "Buyer behaviour is all psychological, social and physical behaviour of
potential customers, as they evaluate, purchase, consume, and tell others about the product and
services."
According to D.J. Durian, "Buying motives are those influences or considerations which
provide the impulse to buy, induce action or determine choice in the purchase of goods or
services .
4.1.7 Types of motives

Motives behind purchase are of two types, which are as follows:
1) Personal Motives
i)Role-Playing: Shopping activities are learned behaviour and are accepted as part of one's
position or role. Such as mother or housewife. It is expected that a woman expecting her first
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child will shop extensively for baby clothes and other stuff meant for infants. It is also expected
that a housewife does the grocery shopping for home.
ii) Diversion: Shopping can offer a diversion from the routine of daily life and is a form of
recreation.
iii) Learning about New Trends: Shopping provides consumers with information about trends
and movements, and product symbols reflecting attitudes and lifestyles. For example, a visit to
Weekender will reveal the latest trend in casual wear and it is with this motive in mind that
many young shoppers visit Weekender.
iv) Sensory Stimulation: Shopping can provide sensory benefits such as looking at and handling
merchandise, listening to the sounds (music), and smelling the scents. .
2) Social Motives
i)Social Experience: Outside the home shopping can provide opportunities for seeking new
acquaintances encounters with friends, or just "people watching".
ii) Status and Authority: Shopping may provide an opportunity to attain a feeling of status and
power by being waited on. For example, it is a pleasure shopping at Big Jo's in Delhi where the
sales staff is extremely courteous and treats customers with a great deal of respect.
iii) Pleasure of Bargaining: Shopping may offer the enjoyment of gaining a lower price through
bargaining, companion shopping, or visiting sales.
4.1.8 Buying Role of consumer / consumer buying decision
A very important area for marketing firms is to determine the decision maker or the real
customer in the purchase decision of products and services. For purchasing a car, scooter etc.,
man take the decisions whereas for buying baby products, kitchenwares, house-furnishing, etc.,
purchasing decisions are taken by women For buying a house or going for vacations, decisions
are taken by majority members in the family. The firm must find out the characteristics of such
persons who play significant role in influencing the decision to make a purchase.
The following are the different participants in any consumer buying decision:
1. Initiator: Initiator is the person who first suggests the needs of the idea or the need for a
particular product which should be bought for satisfying certain requirements.
2. Influencer: After the initiator has suggested the idea for a particular product, the influencer is
the person who gives more information or gathers more information which will influence the
decision of the purchase.
3. Decider: A decider is the person who ultimately decides to buy a particular product
depending upon the situation. He is generally the dominating member of the family or head of
the family who carries out the role.
4.Buyer: The decision has been made for certain goods, the buyer goes to purchase from the
shop. The actual purchase made by the buyer will depend on the convenience of the family
members or of the group and it may depend on the earning members or bead of the family.
5.User: The user is generally one who actually consumes or uses the product or service he may
or may not be the initiator, decider or buyer for instance, parents purchase toys but the actual
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users are children.
4.1.9 Consumer Buying Process: Consumer Decision Making Process

Decision-making is a process of selecting an appropriate option from two or more alternatives.
A customer enjoys freedom of choosing a particular brand or product when there is more than
one brand or product to choose from purchaser or consumer takes his buying decision, for some
commodities immediately without much consideration such items of daily use while for some
other commodities mainly luxury or durable items, he thinks much before taking a decision to
purchase it. Sometimes, he consults with others. Generally, the purchaser passes through five
distinct stages in taking decision for purchasing a particular commodity. Broadly, in making a
purchase decision the consumer goes through following stages:
1) Problem Recognition: The buying process starts when the buyer recognizes a problem or
need. The need can triggered by internal stimuli. In the former case one of the person's normal
needs-hunger, thirst, sex-rises to a thresh level and become a drive. In the latter case, a need is
aroused by an external stimulus. Marketers need to identify the circumstances that trigger a
particular need by gathering information from a number of consumers; marketers can identify
the most frequent stimuli that spark an interest in a product category. They can then develop
marketing strategies that trigger consumer interest.
2) Pre-purchase Information Search: An aroused consumer will be inclined to search for more
information. One can distinguish between two levels of arousal. The milder search state is called
heightened attention. At this level a person simply becomes more receptive to information about
a product. At the next level the person may enter active information search: looking for reading
material, phoning friends and visiting stores to learn about the product of key interest to the
marketers, are the major information sources to which the
consumer will turn and the relative influence each will have on the subsequent purchase
decision. Consumer information sources fall into four groups:
i) Personal Sources: Family, friends, neighbours, acquaintances. _
ii) Commercial Sources: Advertising, salespersons, dealers, packaging, displays.
iii) Public Sources: Mass media, consumers, rating organizations.
iv) Experiential Sources: Handling, examining, uses of the product.
3) Evaluation of Alternatives: There is no single evaluation process used by all consumers or by
one consumer in all buying situations. There are several decision evaluation processes the most
current models of, which see the process as cognitively-oriented. That is, they see the consumer
as framing judgment largely on a conscious and rational basis, Evaluation may be thought of as a
system as:
i)Evaluative (Choice) Criteria: These are the dimensions used by consumers to compare or
evaluate products or brands. In the car example, the relevant evaluative criteria may be fuel
economy, purchase price and reliability.
ii)Beliefs: These are the degrees to which, in the consumer's mind, a product possesses various
characteristics, e.g., roominess.
iii) Attitudes: These are the degrees of liking or disliking a product and are in turn dependent on
the evaluative criteria used to judge the products and the beliefs about the product measured by
those criteria.
iv) Intentions: These measure the probability that attitudes will be acted upon. The assumption is
that favorable attitudes will increase purchase intentions, i.e., the probability that the consumer
will buy.
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4) Purchase Decision: In the evaluation stage, the consumer forms preference among the brands
in the choice. The consumer may also form an intention to buy the most preferred brand.
However, two factors can intervene between the purchase intention and the purchase decision.
i) The first factor is the attitudes of others. The extent to which another person's attitude reduces,
one's preferred alternative depends on two things:
The intensity of the other person's negative attitude towards the consumer's preferred
alternative.
The consumer's motivation to comply with the other person's wishes.
ii) The second factor is unanticipated situation factors that may erupt to change the purchase
intention. Preferences and even purchase intentions are not completely reliable predictors of
purchase behavior.
A consumer's decision to modify, postpone, or avoid a purchase decision is heavily

influenced by perceived risk. The amount of perceived risk varies with the amount of money at
stake the amount of attribute uncertainty and the amount of consumer self-confidence.
5)Post-purchase Behavior: After purchasing the product, the consumer. will experience some
level of satisfaction or dissatisfaction. The marketer's job does not end when the product is
bought. Marketers must monitor post purchase satisfaction, post purchase actions and post
purchase product uses.
i) Post-purchase Satisfaction: What determines whether the buyer will be highly satisfied,
somewhat satisfies or dissatisfied with a purchase? The buyer's satisfaction is a function of the
closeness between the buyer's expectations and the product's perceived performance. If
performance falls short of expectations, the customer is disappointed meets expectations the
customers is satisfied; if it beyond expectations the customer is delighted. These feelings signify
a difference in whether the customer buys the product again and talks favorably or unfavorably
about the product to others.
4.1.10Buying Decision Process
The process consists of:

1.Recognition of an unsatisfied need
2Identification of alternatives
3.Evaluation of alternatives
4.Purchase decision
5.Post purchase behaviour.
1. Recognition of An Unsatisfied Need: When a person has an unsatisfied need, the buyin
process begins to satisfy the needs. Generally the unsatisfied need leads to tension. The natur
of the want indicates the speed with which a person moves to fulfill the unsatisfied want, which
is of high pressing need. On the basis of need and its urgency, forms the order of priority
Marketers should furnish the information of selling points.
2. Identification of Alternatives: Different alternatives are available in the market. The
consume
must know the brand of the product, which gives maximum satisfaction. And the person ha
to search out for relevant information of the product-brand, location etc. There are many sources
friends, neighbors etc., and the marketers, salesman, advertising display, sales promotions
newspapers, television etc.
3. Evaluation of Alternatives: This is a critical stage, especially with regard to the costly items
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Consumers have different views on different alternatives. The attributes-taste, colour, price
durability etc., have different preferences. All the details of the attributes are provided by th
marketers. On the basis of attribute preferences-say price, colour etc., consumers reduce tb
number of alternatives. For instance, when we buy a table on the basis of price range, w
may be able to eliminate the alternatives, then colour etc. This process must be understood
by the marketers.
4. Purchase Decision: By considering the likes and dislikes of alternatives, one is about to taking
a decision as to buy or not to buy. One will consider with reference to product, type, price
quality etc. A seller can facilitate such consumers to understand the product through
advertisements.
5. Post-purchase Behaviour: Feedback information is important as far as a seller is concerned

A brand preference naturally repeats sales to a marketer. A satisfied buyer is a silent
advertisement If the purchased brand fails to give the expected satisfaction to the buyer, it affects
the sale negatively. A satisfying experience of a buyer tends to strengthen the brand preference.
4.1.11 The buying Process
Researchers have identified eight stages in buying process. They are:

1. Problem Recognition (Need Recognition): The process ofbuying normally starts with the
recognition of a need by the consumer. He recognises a problem and develops a perception of the
problem. Then he seeks information for solving his problem.
2. Awareness: The customer turns to his environment of information around him. It makes
him aware of the existence of the product that would solve his problem.
3. Comprehension (Evaluation): Comprehension comes out of his ability to reason with the
information. The awareness and comprehension stages represent the information processing
stage. These two stages constitute the cognitive field of the purchase process. Cognition refers to
acquisition of knowledge.
4. Attitude: It is the sum total of the individual's faith and feelings towards a product. As a
result of his awareness and comprehension, the consumer develops an attitude-favorable or
unfavorable-towards the product. The purchase process will continue only if he develops a
favorable attitude or a liking for the product.
5. Legitimisation: The buyer must be convinced that the purchase of the product is the
legitimate course of action. This stage often stands as a barrier between a favourable attitude
towards the product and actual purchase. Only if the buyer is convinced about the correctness of
the purchase decision, he will proceed. At this stage, be may seek further information regarding
the product or attempt to assess the information already available. Attitude and legitimization
constitute the attitude field of the purchase process.
6. Trial: Conviction leads the consumer to try the product on a small scale; he may buy a
sample. He tries to evaluate the product from his own experience.
7. Adoption: A successful trial leads him to buy/adopt the product. Trial and adoption stages
constitute the behavioural field in the buying process.
8. Post-Purchase Behaviour: The purchase leads to a specific post-purchase behoviour.
Usually, it creates some restlessness in the mind of the individual. He is not sure about the
product. He may feel that the other brand would have been better. He may even feel that the
salesman has taken him for a ride. At this dissonance is uncomfortable, the individual, by
himself, will seek all means to recover his conviction and poise. He will seek reassuring
advertisements of the products or he may deliberately avoid positive stories about the competing
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brand.
4.2 Types of Individual Buyer Behaviour
Types of consumer buying situation habits are also known as levels of consumer decision
making process. Every time a person purchases a good or service or visits a retailer, customer
uses a form of the decision process just described. Often, the process is used sub-consciously,
and a person is not even aware of its use.
Consumer decision making varies with the types of buying decision.
1)Complex Buying Behaviour/Extensive Problem SolvinglNew Task: This situation occurs

when a consumer makes full use of the decision process. Considerable time is spent in gathering
information and evaluating alternatives - both what to buy and where to buy it - before a
purchase is made. The potential for cognitive dissonance is great. In this category are expensive,
complex items with which the person has had little or no experience. Perceived risk of all kinds
is high. For example, a house, a first car, and a life insurance policy. A low-key approach should
be enacted, so shoppers feel comfortable and not threatened. In this way, the consumer's
perceived risk can be minimised.
2. Dissonance Ewducing Buying Behaviour / Limited problem solving / modified This

situation occurs when a consumer uses each step in the purchase process but does not spend a
great deal of time on each of them. It requires less
time than extended decision-making since the person typically has some experience with both
'what' and the 'where' of the purchase. In this category are items that have been purchased before,
but not regularly. Risk is moderate, and the consumer will spend some time shopping. For
example, a second car, clothing, a vacation, and gifts.
3. Habitual Buying Behavioral / Routinised Response Behaviour/Straight Rebuy , Brand

loyalty: This situation takes place When the consumer buys out of habit and skips steps in the
purchase process. Customer wants to spend little or no time on shopping, and the same brands
are usually re-purchased (often from the same retailers). In this category items are bought
regularly. They have little risk because of consumer experience. The key step for this type of
decision-making is problem awareness. For example, groceries, newspapers, and haircuts.
At this level, consumers have some experience with the product category and a well-
established set of criteria with which to evaluate the brands they are considering. In some
situations, they may search for a small amount of additional information; in others, they simply
review what they already know.
4. Variety seeking buying behavior / brand switching:

Some buying situations are characterized by low involvement but significant brand differences;
here consumers often do a lot of brand switching. The market leader and the minor brand in this
product category have different marketing strategies. The market leader will try to encourage
habitual buying behaviour by dominating the shelf space, avoiding out-of-stock conditions, and
sponsoring frequent reminder advertising. Challenger firms will encourage variety seeking by
offering lower prices, deals, coupons, free samples, and advertising that presents reasons for
trying something new.
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4.2.1 Understanding Industrial Buyer Behaviour
The industrial buyers (also referred to as the producer/manufacturer/
business/organisational buyers) consist of all the individuals or organisations who acquire goods
and services that enter into the production of other products or services that are sold, rented or
supplied to others. Industrial/Business/Organisational buying can be defined as the decision-
making process by which formal organisations establish the need for purchase products and
services and identify, evaluate, and choose among alternative brands and suppliers. Although no
two companies buy in the same way, the seller hopes to identify clusters of business firms that
buy in similar ways to permit marketing strategy and targeting. Developing effective marketing
strategies to reach organisational buyers rests on the organisational marketers working towards
understanding the nature of organisational buying. This entails knowledge of the different types
of buying situations that organisations encounter, the process that organisational buyers go
through in reaching purchasing decisions how those decisions are affected by different members
of the firm and the criteria they apply in making purchasing decisions. In making decisions,
purchasing managers must coordinate with numerous people with diverse organisational
responsibilities who apply different criteria to purchasing decisions.
Organizational marketing is characterized by complex interaction processes both within the
marketing and purchasing companies and between these companies. Financial and technological
dependencies are generally more pronounced in organizational buyer-seller. relations than in
consumer markets. This tends to increase both the involvement and time dimension of the
exchange process. The understanding of this typically multi-phased and multi-objective process
is essential for effective purchase planning, and supplier negotiations, as well as for designing
organizational marketing program.
4.2.2. Objectives of Industrial Buying
The procurement department, which looks into the organisational buying, must act in tune with
the general objectives of the firm and the specific objectives laid-down for the department itself.
The specific objectives of the organisational buying can be broadly classified into:
1. Non- Task Objectives: These are the general objectives which the procurement department
should consider for achieving the task-oriented objectives. Non-task objectives include non-
discrimination and transparency in operations, accountability to management, and efficiency in
the procurement process. The procurement department should show no discrimination or
partiality toward any single vendor or group of vendors. During the bidding process, it should be
unbiased and carry-out the operations and transactions of the purchase in a transparent manner.
The efficiency of the department has its effect on the performance of the entire firm. So, the
procurement department should try to procure the required goods and services without wasting
time; at the same time, it should take care not to compromise on quality.
2. Task-Oriented Objectives: These are objectives developed to attain specific goals. These
objectives are related to cost, quality, and service, which are as follows:
Cost: Controlling the cost of purchase is the most important objective. This objective is
achieved by purchasing the right product from the right source, in the right quantity, and at the
right time. The procurement department first looks for the right suppliers and then negotiates
with them over the price in order to maximise the value it derives for the money spent.
Quality: It is the next major concern in any purchase decision. The objective of the
procurement department is to ensure that the right quality inputs, say raw materials, enter the
firm. The quality parameters are specified by the individual end-user or the user department and
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the procurement department has to procure based on the given specifications. The procurement
department may sometimes perform value analysis on the products to be purchased and suggest
alternative products or products with modified specifications. In any case, the final output of the
firm should be in line with market expectations.
Service: The service objectives should be framed before the actual purchase is done. When
a firm purchases a product from the vendor, it should be clear about the nature of the
accompanying service expected from the vendor. This service can be in the form of providing
information regarding product technicalities and product updates, providing technical support
and training to the staff, after-sales service in the form of maintenance agreements, etc. The
procurement department should negotiate with the vendor for these services to be provided along
with the purchase.
4.3 Factors influencing buying behavior
4.4 Online buying behaviour
Online buying behaviour is a complex construct and not easy to understand or to predict. Only a
few years ago, it seemed obvious that customers like to get information online, but prefer to
make the actual purchase offline. Even if they bought something over the Internet, if the bought
product was defective, they preferred to hand it over to a physical expert to get it repaired. In
contrast to it; nowadays more and more people are using the Internet as a new purchasing
channel. An analyst at
Forrester Research explains this development by stating that online shopping is a self-feeding
machine - the more people buy over the Internet, the more sellers go online and pull new
customers in.
4.4.1 Features of online Buying
There are some salient points of online buying. They are as follows:
I) Assortment can be unlimited - depending on the ability of the retailer to physically deliver the
products.
2) Items are not on hold - someone has to deliver the product and it involves delays and costs.
3) On the net, a consumer cannot touch or feel the product.
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4 )Better information makes the consumer a better shopper.
5) Internet makes it easier to do comparison shopping and to compare prices from different
sellers.
6) The consumer has to plan ahead when he buys on the internet.
4.4.2 Key enables of online Buying
Middle-class population with spending power is growing. There is about 200 million of
middle-class population with good spending powers. These people have very little time to spend
for shopping. Many of them have started to depend on internet to satisfy their shopping desires.
The amounts of consumer spend through online buying has shown steady trend during last few
years. The key enablers are given as under:
1) Increase in PC Penetration: India is comparatively ':l young nation with more than 50% of
population with a median age of 25 years. Young customers are Internet savvy and access it on
regular basis. Battle among online retailers is for mind-share of consumers.
2) Proliferation of Payment Options: Growth usage of credit cards, cheques, and cash on
deliveries has prompted customers even with low payment capacity to opt for online shopping
experience.
3) Saves Time and Efforts: Now the customers are money-rich but time-poor. Ease of buying
by spending little time is the prime factor prompting buyers to purchase online. It is a much
better option in case of routine purchases.
4) Convenience of Shopping at Home: In addition to convenience, online retailing makes
products available at places where it is not available otherwise. It is time independent. Customers
can access merchandise 24 x 7 x 365.
5) More Variety of Merchandise: Though optimum utilisation of space is an issue in online
retailing, but as such it does not face space constraints like physical stores. So, more choices can
be actually offered to customers. Indiaplaza is carrying over thousands of SKUs spread over 27-
28 of product categories.
6) More Economical Prices: Online retailers tend to ensure that products are available at prices
lower than that of market. E-retailers can use price discrimination in an effective and efficient
manner.
7) More Detailed Information about the Product: Though human interface and spontaneous
response to customer queries are not there in cyberspace, yet more detailed and accurate
information about the products is found on the online stores.
8) Better Comparison of Brands and Products: Websites such as www.amazon.com makes
process of comparing, buying, and receiving books interesting, convenient, and easy to use.
9)Search Option: With web search capabilities (which need further development) it is easier to
find the particular types of goods required by a customer. The consumer decides what he wants
to buy rather than the retailer offering what he wants to sell. This ultimately translates into
consume empowerment.
10) No Real Estate Costs: E-retailers do not have to maintain expensive showrooms or
warehouses in prime locations; they operate through their websites and thus, save drastically on
the real estate costs. The real estate costs in the metropolitan cities are sky high. Besides this,
maintenance costs of a virtual store vis a vis a physical store is much less.
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4.4.3 Types of online Buyers
There are five different types of web users or rather modes of usage of the Internet which remain
valid today:
1) Directed Information-Seekers: These users will be looking for product, market or leisure
information such as details of their football club's fixtures, They are not typically planning to buy
online.
2)Undirected Information-Seekers: These are the users, usually referred to as 'surfers', who
like to browse and change sites by following hyperlinks. Members of this group tend to be
novice users (but not exclusively so) and they may be more likely to click on banner
advertisements.
3)Directed Buyers: These buyers are online to purchase specific products online. For such
users, brokers or cybermediaries that compare product features and prices will be important
locations to visit.
4)Bargain Hunters: These users (sometimes known as 'compers') want to find the offers
available from sales promotions such as free samples or competitions. For example, the
MyOffers site (www.myoffers.co.uk) is used by many brands to generate awareness and interest
from consumers.
5)Entertainment Seekers: These are users looking to interact with the Web for enjoyment
through entering contests such as quizzes, puzzles or interactive multi-player games.
4.5 Customer Satisfaction
Customer satisfaction, a business term is a measure of how products and services supplied
by a company meet or surpass customer expectation. It is seen as a key performance indicator
within business and is part of the four perspectives of balanced scorecard. In a competitive
marketplace where businesses compete for customers, customer satisfaction is seen as a key
differentiate and increasingly has become a key element of business strategy. There is a
substantial body of empirical literature that establishes the benefits of customer satisfaction for
firms. Customer satisfaction is an overarching concern for marketing professionals. Simply put,
customer satisfaction is how happy a customer is with a product or service, both in the product's
performance as well as the company's delivery of the product to the market. One commonly used
measure of customer satisfaction is the 'gap model'. The gap model is defined by the following
equation:
Customer Satisfaction = Delivery - Expectations
Delivery refers to the customer's perception of the actual delivery of the product or service.
Expectations refer to the customer's expectations about that product or service. Thus customer
satisfaction is the difference, or "gap," between when the consumer expected and what he or she
received. For example, if a consumer purchases a product that he expects to last months and it
lasts 6 months (the delivery of the product was six months of use), he will be very satisfied with
the product
Conversely, if the product only lasts 1 month (the delivery then is 1 month of use), the consumer
is likely to be high] dissatisfied. Thus, expectations serve as the base pointfor the customer's
assessment of delivery and satisfaction. Therefore, beyond the operational functions involved in
bringing a product or service to the market, marketing executive work to manage the customer's
perceptions of delivery or the quality of the product or service the customer has receive and, they
14
both track and attempt to manipulate the customer's perceptions. Similarly, marketing can help
customers to set more realistic expectations.
4.5.1 Factors influencing customer Satisfaction

Marketing researchers have identified four distinct factors which influence the consumer
satisfaction:
1)Product (Basic Design): How familiar designers ate with customer needs, what incentives
drive the designing, manufacturing and quality control. .
2)Sales Activity; What messages the company sends out in its advertising and promotion
programmes, how it chooses and monitors its sales forcel intermediaries, and the attitudes that it
projects to the customer.
3)After-Sales Service: Guarantees! parts and service, feedback, complaints handling, and
overall responsiveness to a customer with a problem.
4)Culture: Intrinsic values and beliefs of the firm as well as the tangible and intangible symbols
and systems it uses to. instill these values into employee behavior at all levels.
4.4.4 Building customer satisfaction Satisfaction
No business or organisation can succeed without building customer satisfaction and loyalty.
Satisfaction will be determined by the value of the difference between what the customer
receives and what they pay to receive. In the present scenario of competition companies can
build the required customer satisfaction by:
1)Incorporating Good Business Practices: Companies are able to achieve this state of total
customer satisfaction by incorporating good business practices. These practices are constructed
around stakeholders, business process, resource and organisation. Company's stakeholders
consist of employees, suppliers, distributors and customers. Earlier focus has always solely been
on shareholders, but now stakeholders need to be satisfied for shareholder's profit. Companies
need
to define boundaries of relation with stakeholders as to get maximum value for every participant.
2) Creating and Delivering Value: Companies through creating and delivering value can
develop total customer satisfaction. Company itself can be considered as a value chain
consisting of primary and secondary activities. Primary activities consist of inbound materials,
operation, delivering finished products, sales/marketing and servicing clients. Secondary
activities consist of functional departments like technology department, procurement department,
human resource and finance department. This value created is delivered to customer through the
distribution channel under the principle of supply chain management. Customers in the digital
age are much more conscious and aware of their need and wants, making them a difficult lot to
please. Companies run marketing campaign highlighting points of similarity and difference with
competitor's products. The art is not at attracting the customer, but it is at retaining the customer
and creating long term relation with them.
Companies usually suffer from churning effect where customers do not make the repurchase.
3)Customer Relationship Management: Companies need to develop policies for retaining
customers along with attracting new customers. This art of retention can be achieved through
customer relationship management (CRM). In CRM the task is to develop strong consumer
based brand equity, which is done by converting first time buyer to repeat buyer to a client to a
member to advocates and finally to partners. During these courses, companies can look forward
to offering financial benefits in terms of discount for frequent buyers or also by association with
a social cause. Companies are in business to make profit. Therefore, it has to identify profitable
customers. Profitable customers provide
15
a revenue stream more than the expense stream on retaining them. And this revenue stream
should be higher for a company to have a competitive advantage. More and more companies are
deploying total quality management approach across the organisation to build and deliver
customer satisfaction.
4.4.5 Importance of building customer Satisfaction
Building strong relationships with customers and providing satisfaction to them, can have many
benefits for the business owner, aside from simple profits:
1)Customer-Oriented Management: During the course of a customer satisfaction analysis,
customer shares their goals, needs, and wishes. The company is thereby given the opportunity to
adjust what it has to offer to the expectations and perceptions of the customer. Because of
reliable feedback received from the customer's side, it is possible for the company to guide its
actions toward establishing and assuring a long-term relationship with the customer.
2)Comparison with the Competition: Customers are also an excellent source of competitive
intelligence. They can keep everyone informed of what competitors are doing, and better still,
anyone do not even have to pay them in order to acquire this information. A customer will only
maintain a relationship with a company if the products and services being offered lead to
satisfaction and are better than alternative offers. Therefore, it is of fundamental importance that
a company compares its service with that of competitors.
3)Comparison Over Time: It is important for a company to not only use satisfaction studies to
ascertain possible sources of satisfaction or dissatisfaction, but to also use them for analyzing
and deriving possible strategies for action. Via regular studies, comparisons can be derived with
regard to product and service quality over a given time period.
4)Profit from Specific Insights: Through innovation and strategic changes, the rapid and early
attainment of customer satisfaction can be an advantage. By goal-oriented teamwork, products
and services can be developed or directly adjusted to the expectations of potential customers.
5)Loyalty: A highly satisfied customer often becomes loyal customer. The term brand loyalty is
used to describe the behaviour of repeat purchases, as well as those that offer good ratings,
reviews, or testimonials. Brand loyalty describes the tendency of a customer to choose one
business or product over another for a particular need. Customers may express
high satisfaction levels with a company in a survey, but satisfaction does 'not imply loyalty.
6)Reduced Costs: A highly satisfied customer costs less to serve than a new customer. Because
retaining the customer requires less cost than procuring the new customers. A highly satisfied
customer is willing to pay more for the product or service. A highly satisfied customer tells their
family and friends about the product or service.
7)Leads and Referrals: The existing base of customers can often be the best source of
providing new sales leads, as well as referrals which can also benefit from the products and
services. The best part is that one can simply have to get into the habit of asking every customer
for these. Sometimes, it may take some careful questioning - Has the customer met any people
who are new to the area? Do some of the people they know share characteristics which are
common to the current base of customers?
16
8) Ideas for New Developments: The customers probably know what they want or what they
are willing to spend money on, in most cases. By getting this information, one can make it more
likely and will retain customers well in the future. In some cases, the customers may develop the
products or services for others, and can do the job of selling it to others, in exchange for a share
of the profits. This can benefit both the business, and the customers further.
4.4.6 Measuring Customer Satisfaction
Customer satisfaction review and evaluation or measurement of customer satisfaction is

essential to maintain. Measurement will reveal the status at every point of time and will be
helpful in planning. Customer dissatisfaction can creep in at any point of time. It shows-off its
effects gradually. If noticed early, the damage can be rectified easily. Prolonged carelessness on
the part of the organisation can lead to a situation where correction is impossible.
Customer satisfaction measurement is done using customer survey methods. Survey may
be oral or in written form. Questionnaires have to be prepared after carefully considering the
type of questions, sequencing and scaling. There are three possible methods of administering the
survey. It may be Interviewer-administered, Machine-administered or Self-administered. Each
has its own merits and demerits. Appropriate methods can be chosen, based on the following
characteristics:
1) Extent of control maintained,
2) Cooperation rate,
3) Cost,
4) Possibilities of collection of observational data,
5) Minimum bias.
1. Business Related
i)Measurement of customer satisfaction allows a company to judge the effectiveness of its
business plan and provide information on how much customer-centric it is?
ii) It provides quantified information on:
a)How many customers have been lost?
b)How much business has been lost?
c)How much business volume and profit, customer decay had caused?
iii) Satisfied customer acts as an extended marketing arm of the supplier.
iv) A customer is unsatisfied when the supplier has either not come up to his expectations or not
honoured his commitment. It hurts the customer more as somewhere his own profitability and
image is also getting affected due to supplier's delay. Some of the customers may make it a point
to share their negative/unfortunate experience with other fellow customers that may affect the
business of the supplier.
v)Due to human psychology, an unsatisfied customer is more likely to speak often on the subject
than a satisfied customer. A single unsatisfied customer could undo the effect of three satisfied
customers.
vi) Loss of a customer is loss of an opportunity for business and profitability.
vii) Customer satisfaction increases the business and profitability of the supplier by increasing
his realisation. It helps him in securing premium on his product.
viii) Channelises the organisation's resources to bridge the gap in customer satisfaction.
2. Customer Related
i) How many customers have been lost?
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ii) Which customers have been lost?
iii) Why and where have they been lost?
iv) It helps the supplier in identifying reasons for loss of customers and in taking preventive
measures. It also gives advance signal to the supplier about the potential loss of business, so that
he can take timely action. Cost of acquiring a new customer is many times higher than retaining
an old customer.
v)It helps the supplier to find out the value the customer assigns to the product and service being
rendered by him.
vi) Customers' decision-making factors and relative weightage/importance he assigns to them.
vii) Customer needs and requirements.
viii) It helps the supplier to start the process of stepping in the customer's shoes and trying to
walk in it.
3. Supplier Related
i)Measurement of customer satisfaction allows the supplier to get feedback about his strengths
and weaknesses and also about his competitors. It acts as a mirror reflecting his actual position
in comparison to other participants .:
ii) Measurement of customer satisfaction allows the supplier to identify his core competencies as
perceived by the market on which future business strategy can be developed by the supplier.
iii) It helps the supplier in identifying his weak areas needing improvement. Feedback from the
customers helps him arrest this trend and reclaim lost customers.
iv) Supplier's market image and standing.
v) Customer perception on the supplier.
vi) Supplier's position compared to benchmark.
vii) Success rate of the vendor in keeping its customers satisfied.
4. Competitors Related
i)Loss of business of the supplier is the gain of the competitor. Not knowing the decay in
business or cause of it may deprive the vendor from taking corrective action and reversing the
negative trend. This will1eave the field open for competitors to consolidate.
ii) It helps the supplier to understand the strengths and weaknesses of different competitors from
the customer's perception and help in charting out a suitable strategy to meet it.
iii) It helps in ascertaining the relative position of competitors with reference to benchmark and
this can help the supplier to anticipate the type of competition he is going to face in the market
and prepare for it.
5. Performance Related: It helps the company to assess the following:

i) Opportunities for improvement with existing programme, product and services.
ii) The actual cost of customer turnover.
4.4.7 Methods to Measure Customer Satisfaction/ Voice of the Customer
1) Comment Card: It is a cheap method. A card is enclosed with the warranty card and packed
along with the product, during sales. The card collects information on name, address, age, sex,
occupation and the factor that influenced customer's decision to buy the product, etc. Comment
cards are very much common in hospitality industry.
18
2) Customer Questionnaire: It is a familiar method to get opinions and perceptions on the
organisation and its product and service. But it is time consuming and costly. Many surveys
seek the customer's response on 'one to five' scale grading. To make surveys effective, it is
necessary to bear in mind that the well structured question elicits a better answer. If more time is
spent in survey development, the time spent in data analysis and interpretation will be less.
Before collecting data, one should determine how the data are to be analysed.
3) Focus Groups: This method is very expensive. But it is very effective in collecting
information on customer expectations and requirements. A group of customers is gathered in a
meeting, and a series of questions are answered. The structured questions probe into the
participants' ideas, perceptions and also frank comments. In this method current, as well as,
proposed products and services are included. In this method, inherent feelings associated with a
product or service, word association, discussion and relaxation techniques are used to identify
customer's future needs. For example, a fast food company found that consumers preferred low
energy foods during week days and energy rich dishes on weekends!
4) Toll Free Telephone Numbers: This method is most effective for obtaining complaints and
feedback. Response can be faster and cheap.
5) Visits to Customer's Place of Business: By this approach, the organisation can proactively
monitor the performance of the product, which is being used on the spot. This enables them to
identify any of the specific or recurring problems.
6)Report Card: A specimen report card is shown in table 4.2. The data are examined to locate
the areas of improvement.
4.5 Customer Relationship Management (CRM)

4.5.1 Meaning and Definition of CRM
Customer Relationship Management can be defined as a business philosophy and set of

strategies, programs, and systems that focuses on identifying and building loyalty with a
marketer's profitable customers. It is based on the business philosophy that all customers are not
profitable in the same way and marketers' can increase their profitability by building
relationships with their better customers. The goal is to develop a base of loyal customers who
patronise the retailer frequently.
According to Gartner, "CRM is a business strategy designed to optirnise profitability,
revenue, and customer satisfaction".
According to PWC Consulting, "CRM is a business strategy that aims to

understand/appreciate, manage and personalise the needs of an organisation's current and
potential customers".
According to Parvatiyar and Sheth, "CRM is a competitive strategy and process of
acquiring, reacting and partnering with selective customers to create superior value for the
company and the customer".
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4.5.2 Characteristics of CRM
Characteristics of CRM are as follows:

1) Share of Customer: Historically, marketers have measured success in a product category by
their share of market. For example, if there are 100 million pairs of athletic: shoes sold each
year, a firm that sells 10 million of them has a 10 per cent market share. If the shoemaker's
marketing objective is to increase market share, it may lower the price of its shoes, increase its
advertising, or offer customers a free basketball with every pair of shoes purchased.
2) Lifetime Value of the Customer: With CRM, a customer's lifetime value is identified and is
the true goal, not an individual transaction. It just makes sense that a firm's profitability and
long-term success are going to be far greater if it develops long-term relationships with its
customers to ensure repeat purchases.
3) Customer Equity: Today an increasing number of companies are considering their
relationships with customers as financial assets. Such firms measure success by calculating the
value of their customer equity the financial value of customer relationships throughout the
lifetime of the relationships. To do this, firms compare the investments they make in acquiring
customers, retaining customers, and relationship enhancement with the financial return on those
investments. The goal is to reap a high return on the investments made in customer relationships
and maxirnise the value of a firm's customer equity.
4) Greater Focus on High-Value Customers: Using a CRM approach, customers must be
prioritized and communication customized accordingly. For example, any banker will tell you
that not all customers are equal when it comes to profitability. So, some banks (about one out of
every eight at this point) now use CRM systems to generate a profile of each customer based on
factors such as value, risk, attrition, and interest in buying new financial products.
4.5.3 Difference between Relationship ,marketing and CRM
Relationship Marketing Customer Relationship Management
1) A philosophy that helps to draw a marketing More (CRM) about technology, putting strategy into practise
embodying
strategy the spirit of ho relations marketi ca b implemen i the
as regards
relationship. organisation
w hip using
ng the IT product
n e ted and " n
2) Busine interactio with clients acro the Collaborative
solution and operational CRM eractions
organisation
ss ns to understand clients' present
ss and end clients using technology tools, such
facilitates with as call
needs
future and ways and means to porta:l, etc.
centre, IVRS,
3) Relations
address them.marketi a a a sour of Pervasive use of IT tools for customer profiling and
hip
authentic ng
business ct about
data s ce more
prospects business
data analysis.
(4 and clients.
Outco of s
relations marketi ar CRM outputs using Business Intelligence, Data
cross-sell,
mes up-sell hip
successful and ng e etc., tools support top management in. taking
Warehouse,
repeat sale. - decisions.
strategic business
5) More of person to person interactions, Highly process-oriented activity originating from
situation to win customer
handling critical strategy.
6) Activities
confidence. coordinated by Relationship Responsibilities lie predominantly with technology
Manager. team
IT Headled in
byfunctional coordination with Relationship
(7 Function with the objective of long-term Support Manager.the internal team with analytical figures to
relationship
profitable with the client. business
achieve goals and objectives.
8) Relationship marketing refers to relationship CRM refers only to customers.
Customers
with both and
9) partners.
Relationship marketing has a narrow on CRM, on the other hand, focuses more widely on
customers
focus and only on the marketing
the on the entire
customers andfunctions connected with value creation
organisati
functions of the chain of
delivery the organisation.
on.
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4.5.4 Types of CRM
CRM has gained a lot of importance for running a successful business in the last few years.
Various approaches of CRM are as follows:
1) Operational CRM: Operational CRM is mainly focused on automation, improvement and
enhancement of business processes which are based on customer-facing or customer
supporting. Operational CRM renders automated support for businesses that have a direct
interaction with their customers. Every interaction with a customer and their personal
preferences are recorded for use by the different departments of an organisation to retrieve
customer information. The operational CRM is a process or an approach, which involves the
areas where direct customer contact is possible.
Operational CRM represents the automation of business processes involving customers. Its
purpose is to provide transaction level data about individuals and products, and provide support
for customer facing processes, such as direct mail, phone interactions, web-based
communications, and point of sale information.
2) Analytical CRM: Analytical CRM supports organisational back-office operations and

analysis. It deals with all the operations and processes that do not directly deal with
customers. Hence, there is a key difference between operational CRM and Analytical CRM.
Unlike from operational CRM, where automation of marketing, sales-force and services are
done by direct interaction with customers and determining customers' needs, analytical CRM
is designed to analyse deeply the customers' information and data and unwrap the intentions
of customers which can be capitalised by the organisation. Primary goal of analytical CRM
is to develop, support and enhance the work and decision making capability of an
organisation by determining sirong patterns and predictions in customer data gathered from
different operational CRM systems.
3) Collaborative CRM: Collaborative CRM deals with synchronisation and integration of

customer interaction and channels of communications like phone, email, fax, web etc. with
the intent of referencing the customers a consistent and systematic way. The idea is not only
enhancing the interactions but also to increase and improve customer retention and liberty.
Collaborative CRM entangles various departments of organisation like sales, marketing,
finance and service and shares the customer information among them to highlight better
understanding of customers. For example, the information of preferred products could be
shared with marketing department so that analysis can be performed in this aspect to provide
preferred products to customers.
4.6 Customer Acquisition

Customer acquisition is a broad term that is used to identify the processes and procedures
used to locate, qualify, and ultimately secure the business of new customers. There are many
different strategies used as part of the acquisition process, with some methods being more
effective with specific types of potential clients. In spite of the many and sometimes
contradictory ideas that surround the central idea of how to earn a customer, there are a few
essentials that are included in just about any type of customer acquisition plan. One of the basics
of any customer acquisition effort is to identify and quality potential-customers. This is
sometimes accomplished with the use of telemarketing as a means of locating individuals and
21
businesses that either express interest in or already use products similar to those produced by the
business. From this initial list, these leads are then qualified a little further, using various
research methods to determine if there is any solid chance of making a sale with a given lead. If
there is a good chance, and the contact is interested in learning more about the products offered,
his or her status is usually upgraded to that of prospect, and assigned to a salesperson for further
interaction.
4.6.1 Input for Acquisition
For the purpose of customer acquisition an organisation is likely to focus its attention on
the following as its major sources for providing input for acquisition:
1) Suspects and Enquiries: The suspects represent the segment of the market who have the
potential to become prospective customers. Enquiries whether they are intentional or casual
provide for a focused approach in the process of acquisition. Proper responses to enquiries are
likely to result in customer acquisition.
2) Lapsed and Former Customers: The lapsed customers should not be neglected. They can be
booked as new customers if the reasons for lapses are rectified suitably. The reasons for lapses
are dealt under the head "recovery of lapsed customers". Lapsed customer should be encouraged
to become a customer again, by marketing the organisation's new offerings to fulfil the
customer's emerging new needs and so on.
3) Competitor's Customers: The competitor's customers, competitor's lapsed customers,

competitor's former customers and competitor's enquiries are major attractions for acquisition.
Customers, who always prefer more value for money every time, are naturally inclined to opt
for alternatives. In this context, the competing organisation can acquire the competitor's
customers if the customers perceive that they would be rewarded with more value for money.
4) Referrals: Referrals play a significant role and provide a strong base for new customer
acquisition. It is likely that fresh customers will rely heavily on referrals rather than the
organisation's own promotion efforts. Referrals may be from within the organisations or from
anyone outside connected to the organisation including-suppliers, bankers, consultants, etc.
4.6.2 Process of Acquisition

The acquisition process constitutes the following stages. Each one of the above stages
assumes a significant role in the requisition process:
1) Enquiry: In the enquiry stage, the prospective buyer undertakes a detailed enquiry with
regard to several aspects pertaining to the organisation, product, nature of transaction, and all
other related aspects.
2) Interaction: Having stored the information he passes on to the interaction stage, where the
customer interacts with the organization and obtains additional information, clarifies, and
ensures already collected information.
3) Exchange: Terms of exchange, mode of delivery, and other things related to exchange, are
settled at the exchange stage.
4) Coordination and Adoption: Further coordinated effort on either side would lead the
customers moving to adoption of the product or service concerned, and that completes the
acquisition process.
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4.7.1 Retaining Customer
It is difficult to exactly define customer retention as it is a variable process. A basic
definition could be 'customer retention is the process when customers continue to buy products
and services within a determine time period'. However this definition is not applicable for most
of the high end and low purchase frequency products as each and every product is not purchased
by the customer. For example, in the stock brokerage industry, a customer may not buy a
particular scrip in the given period of time but is tended to buy the same when the conditions to
buy the scrip becomes favourable and when the customer evaluates that now this scrip could be
profitable to buy. In this case the definition of customer retention could be 'customer retention is
the process when customer is intended to buy the product and services at next favourable buy
occasion'. These products are called as long purchase cycle products
4.7.2 Strategies for Customer Retention
The major retention strategies which are often taken into account for maintaining customer
relationship and retaining the customers are:
1) People: People within the organisation have the basic role in developing and maintaining
relationship with customers. Everyone in the organisation must realise the fact that their work is
towards satisfying customers.
2) Process: Process involves a logical sequence of activities right from the need identification of
potential customers to need fulfilment. Need fulfilment requires manufacture of products with
desired attributes. The process has to be derived from the customer's viewpoint, which paves
way for total customer satisfaction.
3) Product: The product offered must constantly provide value addition. The expectations of the
customers may always be on the increase due to various reasons. A customer satisfied with a
given product may soon become dissatisfied customer in view of the changes that take place in
his expectations.
4) Organisation: In order to build customer relationship, an organisation should be aware of the

technology advancements and provide quality services in tune with the customer's expectations.
It should concentrate on total customer satisfaction and respond to the requirements of the
customers faster than its competitors.
4.7.3 Benefits of Customer Retention
1)Possibility of Repeat Business: This is probably the most obvious advantage of customer
retention. Effective services that lead to customer satisfaction will make the customer corning
back to individual again, thus giving repeat business. Repeat business is a win-win proposition
for the business/service provider and for the customer. The business reduces the cost of
customer acquisition, while the customer reduces the cost of finding a reliable vendor and thus
also saves on costs associated with switching vendors.
2)Reduced Costs for Customer Acquisition: Acquiring a customer has certain associated costs.
These include the costs associated with advertising, following up, sales demos, travel and
meeting costs, etc. Having a repeat customer means that the customer is already aware of the
23
processes and can predict a certain quality of output, thus minirnising the costs involved in new
customer acquisition. Having a repeat customer also has the potential to open up another channel
to advertise the business - word-of-mouth. Word-of-mouth advertising/recommendations are
perhaps the most important outcome of having a satisfied customer.
3)Fostering Greater Interaction between Business and Customer: Today's markets are
increasingly moving away from mass produced standard products and services, towards a .more
custornised market, where products and services are tailored to meet customers' specific
requirements. Having a repeat customer is an opportunity for individual to build more focused
relationship based on the customers' specific needs and requirements. Being ensured of having a
custom who comes back, individual have more confidence to suggest improvements, provide
insights to better understand the needs and consequently design products and services that are
relevant. Having a repeat business also provides; opportunity for the buyer and the seller to co-
create products and services.
4)Having more Delighted Customers: Effective customer retention strategies allow

individual to move from the zone customer satisfaction to customer delight. Studies have shown
that customer delight is achieved only when there is perfect synergy between the buyer and seller
- when the seller understands exactly what the buyer needs and the buy understands what the
seller can deliver exactly what he needs. If individual is able to delight the customers, he ha
better chances of them corning back, since they now know why one is different from the rest of
competition.
4.8 Consumer Defection
Customer defection is also known as customer churn or customer turnover. It comes after
customer attrition -when is not managed through CRM activities. It is a business term used to
describe loss of clients or customers. Customer defect means losing a business. It occurs when an
unhappy customer decides to stop hire or purchase the services or products a decides to find
some other suitable alternative that satisfies its needs which the organisation failed to deliver.
Therefore customer defection is a threat. On the other hand, retaining a customer is great
opportunity. For a product manufacturing company a customer defection may occur due to poor
quality of product or poor after-sales services, whereas in case service sector it plainly based on
the quality of service itself.
4.8.1 Types of Defectors

A defector can defect due to several reasons. The various types of defectors are:
1)Price Defectors: Those who switch to competitors for lower priced goods or services.
2)Product Defectors: Customers who switch to competitors who offer superior goods and
services.
3)Service Defectors: Customers who defect because of poor customer service.
4)Market Defectors: Customers who exit the market because of re-location or business failure.
5)Technological Defectors: Customers who switch to products outside the industry.
6)Organisational Defectors: Customers who leave because of political considerations inside the
firm, such as reciprocal buying arrangements.
24
4.8.2 Causes of Customer Defection
Certain causes of customer defection are as follows:

1)Loyalty Problems: When companies institute a systematic process for "listening" to
customers and the market, they less likely to have serious loyalty problems. Customers are not
shy; they openly share their concerns and problem directly or indirectly letting an organisation
know when they are considering defecting.
2)Misconception about Price: There is a misconception that price is the primary cause for
customer attrition. While price is a contributing factor, particularly in the current environment
where most customers - consumers or businesses - perceive the majority of products and services
to be cornmoditised, service is the primary differentiator. But the term "service" encompasses all
aspects of a customer's relationship with a company - from the initial touch, through the sale,
product performance, ongoing support, and replacement. If nothing goes wrong at any point in a
relationship, most customers continue to do business with a company. However, if a consumer
has a negative experience or a change in their lifestyle, they may be "forced" to re-consider the
relationship. If the company performs well at the "moment of truth", they retain the customer; if
not, the company usually loses the customer.
3)Contact Centre: The contact centre plays a crucial role in retaining customers throughout the
customer life cycle, particularly at the pivotal point when a customer is reconsidering the value
proposition of the company's products and services. If agents are well-trained, empowered to act,
and have the necessary systems and data to determine the right actions, they will be able to retain
at-risk customers by meeting or exceeding their expectations.
4.8.3 Reducing Defection
It is not enough, however, to attract new customers; the company must keep .them and increase
their business. Too many companies suffer from high customer chum or defection. Adding
customers here is like adding water to a leaking bucket. Cellular carriers and cable T.V.
operators, e.g., are plagued with "spinners", customers who switch carrier's at least three times a
year looking for the best deal. To reduce the defection rate, the company must:
1)Measuring Retention Rate: Define and measure its retention rate. For a magazine,
subscription renewal rate is a good measure of retention. For a college, it could be the first-to
second-year retention rate, or the class graduation rate.
2)Distinguishing Causes of Customer Attrition: Distinguish the causes of customer attrition

and identify those that can be managed better. Not much can be done about customers who
leave the region or go out of business, but much can be done about those who leave because of
poor service, shoddy products, or high prices.
3)Comparing the Lost Profit: Compare the lost profit equal to the CL V (Customer Lifetime
Value) from a lost customer to the costs to reduce the defection rate. As long as the cost to
discourage defection is lower than the lost profit, the company should spend the money to try to
retain the customer.
4)Implement Effective Complaint-Handling and Service Recovery Procedures: Effective

complaint handling and excellent service recovery are crucial to keeping unhappy customers
25
from switching providers. That includes making it easy for customers to voice their problems
with the firm, and then responding with strong service recovery.
5) Increase Switching Costs: Another way to reduce chum is to increase switching barriers.
Many services have natural switching costs (e.g., it is a lot of work for customers to change their
primary banking account, especially when many direct debits, credits, and other related banking
services are tied to that account, plus many customers are reluctant to learn about the products
and processes of a new provider
26

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MARKETING MANAGEMENT

UNIT IV BUYER BEHAVIOUR

4.1.3 Consumer Buying Decision

1. Buyer behaviour is very complex.

4.1.5 Importance of Consumer Behaviour

4.1.6 What are Buying Motives?

4.1.7 Types of motives

4.1.8 Buying Role of consumer / consumer buying decision

4.1.9 Consumer Buying Process: Consumer Decision Making Process

A consumer's decision to modify, postpone, or avoid a purchase decision is heavily

4.1.10Buying Decision Process

The process consists of:

5. Post-purchase Behaviour: Feedback information is important as far as a seller is concerned

4.1.11 The buying Process

Researchers have identified eight stages in buying process. They are:

4.2 Types of Individual Buyer Behaviour

1)Complex Buying Behaviour/Extensive Problem SolvinglNew Task: This situation occurs

2. Dissonance Ewducing Buying Behaviour / Limited problem solving / modified This

3. Habitual Buying Behavioral / Routinised Response Behaviour/Straight Rebuy , Brand

4. Variety seeking buying behavior / brand switching:

4.3 Factors influencing buying behavior

4.4 Online buying behaviour

4.4.1 Features of online Buying

4.4.2 Key enables of online Buying

4.5 Customer Satisfaction

Customer Satisfaction = Delivery - Expectations

4.5.1 Factors influencing customer Satisfaction

4.4.5 Importance of building customer Satisfaction

4.4.6 Measuring Customer Satisfaction

Customer satisfaction review and evaluation or measurement of customer satisfaction is

i) How many customers have been lost?

5. Performance Related: It helps the company to assess the following:

4.4.7 Methods to Measure Customer Satisfaction/ Voice of the Customer

4.5 Customer Relationship Management (CRM)

Customer Relationship Management can be defined as a business philosophy and set of

According to PWC Consulting, "CRM is a business strategy that aims to

Characteristics of CRM are as follows:

2) Analytical CRM: Analytical CRM supports organisational back-office operations and

3) Collaborative CRM: Collaborative CRM deals with synchronisation and integration of

4.6 Customer Acquisition

3) Competitor's Customers: The competitor's customers, competitor's lapsed customers,

4.6.2 Process of Acquisition

4.7.2 Strategies for Customer Retention

4) Organisation: In order to build customer relationship, an organisation should be aware of the

4.7.3 Benefits of Customer Retention

4)Having more Delighted Customers: Effective customer retention strategies allow

4.8 Consumer Defection

4.8.1 Types of Defectors

Certain causes of customer defection are as follows:

4.8.3 Reducing Defection

2)Distinguishing Causes of Customer Attrition: Distinguish the causes of customer attrition

4)Implement Effective Complaint-Handling and Service Recovery Procedures: Effective

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