CBMR - RTU - IV Sem

MODULE 1 – CONSUMER BEHAVIOR
Consumer Behaviour -
Introduction and Concept:

The term consumer behavior is defined as the behavior that consumer display in searching
for purchasing, using, evaluating and disposing of product and services that they expect will
satisfy their needs. Consumer behavior focuses on how individuals make decisions to spend
their available resources (time, money, effort) on consumption related items. This includes
what they buy, why they buy it, when they buy it, where they buy it, how often they buy it,
how often they use it, how they evaluate it after the purchase and the impact of such
evaluation on future, and how they dispose of it.
In another words, consumer behavior can be define as the behavior of individuals in regards
to acquiring, using, and disposing of products, services, ideas or experiences. Consumer
behavior also includes the acquisition and use of information. Thus, communication with
consumers and receiving feedback for them is a crucial part of consumer behavior which is
of great interest to marketer.
Consumer Behaviour: Meaning/Definition and Nature of Consumer
Behaviour
Consumer behaviour is the study of how individual customers, groups or organizations
select, buy, use, and dispose ideas, goods, and services to satisfy their needs and wants. It
refers to the actions of the consumers in the marketplace and the underlying motives for
those actions.
Marketers expect that by understanding what causes the consumers to buy particular goods
and services, they will be able to determine—which products are needed in the marketplace,
which are obsolete, and how best to present the goods to the consumers.
The study of consumer behaviour assumes that the consumers are actors in the marketplace.
The perspective of role theory assumes that consumers play various roles in the
marketplace. Starting from the information provider, from the user to the payer and to the
disposer, consumers play these roles in the decision process.
1 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

The roles also vary in different consumption situations; for example, a mother plays the role
of an influencer in a child’s purchase process, whereas she plays the role of a disposer for the
products consumed by the family.
Some selected definitions of consumer behaviour are as follows:
1. According to Engel, Blackwell, and Mansard, ‘consumer behaviour is the actions and
decision processes of people who purchase goods and services for personal
consumption’.
2. According to Louden and Bitta, ‘consumer behaviour is the decision process and
physical activity, which individuals engage in when evaluating, acquiring, using or
disposing of goods and services’.
Nature of Consumer Behaviour:

1. Influenced by various factors: The various factors that influence the consumer
behaviour are as follows:
a. Marketing factors such as product design, price, promotion, packaging, positioning

and distribution.
b. Personal factors such as age, gender, education and income level.
c. Psychological factors such as buying motives, perception of the product and
attitudes towards the product.
d. Situational factors such as physical surroundings at the time of purchase, social
surroundings and time factor.
e. Social factors such as social status, reference groups and family.
f. Cultural factors, such as religion, social class—caste and sub-castes.
2. Undergoes a constant change: Consumer behaviour is not static. It undergoes a change

over a period of time depending on the nature of products. For example, kids prefer colorful
and fancy footwear, but as they grow up as teenagers and young adults, they prefer trendy
footwear, and as middle-aged and senior citizens they prefer more sober footwear. The
change in buying behaviour may take place due to several other factors such as increase in
income level, education level and marketing factors.
3. Varies from consumer to consumer: All consumers do not behave in the same manner.
Different consumers behave differently. The differences in consumer behaviour are due to
individual factors such as the nature of the consumers, lifestyle and culture. For example,
some consumers are technoholics. They go on a shopping and spend beyond their means.
They borrow money from friends, relatives, banks, and at times even adopt unethical means
to spend on shopping of advance technologies. But there are other consumers who, despite
having surplus money, do not go even for the regular purchases and avoid use and purchase
of advance technologies.
4. Varies from region to region and country to county: The consumer behaviour varies
across states, regions and countries. For example, the behaviour of the urban consumers is
different from that of the rural consumers. A good number of rural consumers are
conservative in their buying behaviours.

The rich rural consumers may think twice to spend on luxuries despite having sufficient
funds, whereas the urban consumers may even take bank loans to buy luxury items such as
cars and household appliances. The consumer behaviour may also vary across the states,
regions and countries. It may differ depending on the upbringing, lifestyles and level of
development.
5. Information on consumer behaviour is important to the marketers: Marketers need

to have a good knowledge of the consumer behaviour. They need to study the various
factors that influence the consumer behaviour of their target customers. The knowledge of
consumer behaviour enables them to take appropriate marketing decisions in respect of the
following factors:
a. Product design/model
b. Pricing of the product
c. Promotion of the product
d. Packaging
e. Positioning
f. Place of distribution
6. Leads to purchase decision: Positive consumer behaviour leads to a purchase decision.

A consumer may take the decision of buying a product on the basis of different buying
motives. The purchase decision leads to higher demand, and the sales of the marketers
increase. Therefore, marketers need to influence consumer behaviour to increase their
purchases.
7. Varies from product to product: Consumer behaviour is different for different products.
There are some consumers who may buy more quantity of certain items and very low or no
quantity of other items. For example, teenagers may spend heavily on products such as cell
phones and branded wears for snob appeal, but may not spend on general and academic
reading. A middle- aged person may spend less on clothing, but may invest money in
savings, insurance schemes, pension schemes, and so on.
8. Improves standard of living: The buying behaviour of the consumers may lead to
higher standard of living. The more a person buys the goods and services, the higher is the
standard of living. But if a person spends less on goods and services, despite having a good
income, they deprive themselves of higher standard of living.
9. Reflects status: The consumer behaviour is not only influenced by the status of a
consumer, but it also reflects it. The consumers who own luxury cars, watches and other
items are considered belonging to a higher status. The luxury items also give a sense of
pride to the owners.
Concept of Consumer Behavior

Today, business around the world recognizes that “the consumer is supreme and his
sovereignty prevails.” The power of the consumer is immense. Consumer is not merely a
simple entity. “Consumer is a broad term and any person who uses a product or service or
deals with it can be called a consumer.”
It is not necessary that the particular person should be a buyer of the product or service. A
consumer can also be termed as an individual who identifies a need or desire and then makes
purchases. Consumer is regarded as most important person in the economy who constantly
tries to achieve a better standard of living by acquisition of goods and services. In the
present marketing scenario the success of any firm depends upon the satisfaction of
consumers. For satisfying the consumers it is mandatory for the firms to have thorough
knowledge and understanding of the behaviour of consumers in order to 'Please the King' of
the market.
The behaviour of consumer is an attempt at prediction of his action while evaluating,

acquiring, using or disposing goods and services. Behaviour is an observable action or
activity of a human being. “Behaviour is a response of the organism that is conceptualized
by the observer in a specified and systematic manner.” Behaviour of a consumer springs
from his deeply held values and attitudes, wishes, emotions and impulses. His behavior is
the impression of his inner life.
Consumer behaviour is a vast and complex subject. It is simply a sub-section of the larger
field of human behaviour. Consumer behavior is a dynamic and multidimensional process
and reflects the totality of consumers' decision with respect to the acquisition, consumption
and disposition of goods, services, activities and ideas. “Consumer behavior involves the
purchasing and other consumption related activities of people in the exchange process.”
It is a study of how individuals make decisions to spend their scarce resources like-time,
money and effort on consumption-related items. “consumer behaviour is the behaviour that
consumers display in searching for purchasing, using, evaluating and disposing of products
and services that they expect will satisfy their needs”. “Buyer behaviour may be viewed as
an orderly process whereby the individual interacts with his or her environment for the
purpose of making market-place decisions on products and services.”
“Consumer behavior involves understanding why, when, where, how, how much, how often,
and for how long consumers will buy, use, or dispose of an offering.” “Consumer behavior as
the sum total of how individuals and groups recognize and determine their needs and how
they purchase and experience goods and services to meet those needs.” In a wider sense,
consumer behaviour may be termed as the decision process consisting of the mental and
physical activities of consumers, through which they acquires, use or dispose goods and
services and obtain satisfaction from them. It is a system within which various behaviour
affecting elements are linked by flows of direct and indirect influence. Consumer behaviour
is the social, economic and psychological behaviour of consumers as they become aware of,
evaluate, purchase, consume and make up the ideas about the goods and services. Consumer
behaviour specifically comprises of three basic activities-acquiring, consuming and
disposing. Acquiring includes activities such as searching for information regarding product
features, evaluating alternative products or brands and purchasing. It refers to the factor
that influences the product or service choices for consumers.
“Consuming refers to how, where, when, and under what circumstances consumers use
products.” This activity is very important because it has symbolic implications for the
consumer. Disposing includes how consumers get rid of an offering they previously
acquired. “Consumer behaviour is an inter-disciplinary science.” It involves concepts from
various human behaviour sciences. The discipline of consumer behaviour has borrowed from
economics, psychology, sociology, cultural anthropology and other diverse disciplines.

Traditional Models of Consumer Behaviour:
The traditional models were developed by economists with a view to understand economic
systems. Economics explains how scarce resources are allocated among unlimited wants and
needs. The traditional models of consumer behaviour include the Economic model, the
Learning model, the Psychoanalytic model and the Sociological model.
A. The Economic Model - Under economics, it is assumed that man is a rational

human being who will evaluate all the alternatives in terms of cost and value
received and select that product or service which gives maximum satisfaction.
Consumers are assumed to follow the principle of maximum utility based on the law
of diminishing marginal utility. With limited purchasing power and a set of needs
and tastes, a consumer will allocate expenditure over different products at given
prices so as to maximise utility. The law of equi-marginal utility enables a
prospective consumer to secure maximum utility from limited purchasing power.
The Economic model of consumer behaviour is unidimensional. This implies that
buying decisions of a person are governed by the concept of utility. A rational man
will make purchase decisions with the intention of maximising the utility. The
economic model is based on certain predictions of buying behaviour.
(i) Price effect–the less the price of the product, the more will be the quantity
purchased.
(ii) Substitution effect–the less the price of the substitute product, the less will be
the quantity of the original product bought.
(iii) Income effect–the more the purchasing power, the more will be the quantity
purchased.
The assumption about the rational behaviour of human beings has been challenged
by the behavioural scientists. They are of the opinion that the model only explains
how a consumer ought to behave, it does not throw light on how the consumer
actually behaves.
B. The Learning Model - Living beings are influenced by both innate needs such as
the primary needs of hunger, thirst, shelter, and learned needs like fear and guilt. A
drive or an internal stimulus which when directed towards a drive reducing object
becomes a motive. The various products or services will act as stimuli to satisfy
drives. According to learning theorists, this response of satisfaction reinforces the
relationship between drive and the drive reducing stimulus object as well as the
related cues. Further, when consumers learn to associate connection between
stimulus and response, it becomes a habit. Learning helps to understand how
consumers learn to respond in new marketing situations or how they have learned
and responded in the past in similar situations. Consumer’s experience with one
product from an organisation is likely to be generalised to the other products of the
firm. This learning model helps marketers to promote the association of products
with strong drives and cues and positive re-inforcements from the consumers.
C. The Psychoanalytical Model - This model is based on the work of psychologists
who were concerned with personality. Human needs and motives operate at the
conscious as well as at the subconscious levels. This theory was developed by
Sigmund Frued. According to this model, human behaviour or personality is the
outcome of (i) ‘id’–the source of all psychic energy which drives to act, (ii) ‘ego’–the
conscious directing ‘id’ impulses to find gratification in a socially accepted manner
and (iii) ‘super ego’– the internal representation of what is approved by the society.
Thus, human behaviour is directed by a complex set of deep-seated motives. Buyers
will be influenced by symbolic factors in buying a product. This approach helps to
generate ideas for developing products–design, features, advertising and other
promotional techniques.
D. The Sociological Model - According to this model, the individual buyer is a part of
the institution called society. An individual gets influenced by the society and in turn
also influences it in its path of development. A consumer is playing many roles as a
part of various formal and informal associations or organisations such as a family
member, as an employee of a firm, as a member of a professional forum and as an
active member of an informal cultural organisation. Such interactions leave some
impressions and may play a role in influencing buying behaviour.
Intimate groups comprising family, friends and close colleagues can exercise a
strong influence on the lifestyle and the buying behaviour of an individual member.
The peer group plays a very important role in acting as an influencing factor
especially in adopting particular lifestyles and buying behaviour patterns. The group
generally has an informal opinion leader, whose views are respected by the group.
This leader is able to influence the individual member’s lifestyle and buying
decisions. Similarly, depending on the income, occupation and place of residence,
each individual member is recognised as belonging to a certain social class. An
individual member will adopt the role suitable to conform to the style and
behavioural pattern of the social class to which the individual belongs.
Models of Buyer Behavior
CONTEMPORARY MODELS OF CONSUMER BEHAVIOUR

Contemporary models or views focus on the decision process adopted by consumers and
derive concepts from the behavioural sciences field.
The Howard-Sheth Model of Buying Behaviour - The Howard-Sheth Model provides an

integrating framework for a very sophisticated comprehensive theory of consumer
behaviour. This model represents the rational brand choice behaviour by buyers when faced
with situations involving incomplete information and limited abilities. Figure below shows
the Howard-Sheth Model of Consumer Behaviour.
The model refers to three levels of decision making:
(i) Extensive Problem Solving - This represents the initial stages of decision making
when the buyer has little information about brands and has not yet developed a well
defined and structured criteria to make a selection from the various products.
(ii) Limited Problem Solving - In a slightly more advanced stage, choice criterion is
well defined but the buyer is not clear and undecided on the set of brands which will
best serve him. In this situation, the consumer is uncertain on the ‘best brand’ which
will suit him.
(iii) Routinised Response Behaviour - At this stage, the buyers have well defined
choice criteria along with strong predispositions towards one brand. In such a
situation, the consumer is ready to purchase a particular brand with little evaluation
of alternatives.

The model states that learning takes place as the buyer moves from extensive problem
solving to routinised problem solving behaviour. There are four components involved in the
model: (i) input variables, (ii) output variables, (iii) hypothetic constructs and (iv) exogenous
variables.
(i) Input Variables - Input variables act as stimuli in the environment. Significative
stimuli are those actual elements of brands which the buyer confronts whereas
symbolic stimuli are those which are used by marketers to represent the products
in a symbolic form through advertisements. Social stimuli are generated by the
social environment such as family, friends and groups.
(ii) Output Variables - The five output variables such as attention, comprehension,
attitude, intention and purchase behaviour are the buyer’s observable responses
to stimulus inputs.
(iii) Hypothetical Constructs - The model proposes a number of intervening
variables which have been categorised into two major groups:
(1) Perceptual constructs deal with information processing and include:

(a) Sensitivity to information,
(b) Perceptual bias and
(c) Search for information.
(2) Learning constructs are related to the buyer’s formation of concepts and
include:
(a) Motives,
(b) Brand potential of the evoked set,
(c) Decision mediators,
(d) Predisposition,
(e) Inhibitors and
(f) Satisfaction.
(iv) Exogeneous variables - These are variables external to the buyer which can
significantly influence buyer decisions. The model has identified how the
variables influencing consumers interact with each other. It also recognises the
different types of consumer problem solving and information search behaviour. It
also acknowledges that the outcomes of the consumer’s decisions go beyond
purchases.
The Nicosia Model - Francesco Nicosia was one of the first consumer behaviour modelers
to shift focus from the act of purchase itself to the more complex decision making process
that consumers engage in about products and services. Figure below shows the Nicosia
Model of Consumer Behaviour.
The model is presented in a flow-chart format, resembling the steps in a computer program.
Also, all variables are viewed as interacting, with none being inherently dependent or
independent. Thus, the model describes a circular flow of influences where each component
provides input to the next. The model is viewed as representing a situation where a firm is
designing communications to be delivered to consumers and responses of consumers will
influence the subsequent actions of the firm. The model contains four major components or
fields: (1) the firm’s attributes and communications and the consumer’s psychological
attributes, (2) the consumer’s search for and evaluation of the firm’s output and other
available alternatives, (3) the consumer’s motivated act of purchase and (4) the consumer’s
storage or use of the product. Nicosia assumes that the consumer is seeking to fulfill specific
goals and that initially there is no history between the consumer and the firm, so no positive
or negative predispositions toward the firm exist in the consumer’s mind.

The firm produces some type of communication that the consumer is exposed to. The
attributes of the message and the consumer determine the nature of the consumer’s
exposure to it and its influence. One consequence is that the message will influence the
consumer’s attitude towards the brand. This attitude is the input to field two. The consumer
will become motivated to gain information at this point and the search activity occurs. Some
search activity will involve searching the internal memory for relevant information about
the communication. External search also occurs where the consumer visits stores and gets
information. This is likely to lead to evaluation.
If the consumer processes relevant information and begins to favour the firm’s brand, this
motivation is likely to lead to shopping activity and the purchase of the brand. At this point,
a number of outcomes can occur. One outcome is that the firm receives feedback and
another is that the consumer’s attitude towards the brand may change due to the experience
gained with the product during its storage and use. The product experience is feedback to
the consumer’s predispositions.
The Engel-Kollat-Blackwell Model - This model considers consumer behaviour as a

decision making process in the form of five steps which occur over a period of time. Figure
below shows the Engel-Kollat-Blackwell Model of Consumer Behaviour.
The five steps involved in the decision process stage are:
(i) Problem Recognition - The consumer will recognise a difference between the
actual state and what the ideal state should be. This may occur on account of
external stimuli. The consumer must perceive a sufficiently large discrepancy
between actual and ideal states in order to be activated, recognise a problem and
find a way to solve it.

(ii) Information Search - The information available may be consistent to the beliefs
and attitudes held by the consumer. While being involved in an information
seeking or search stage, the consumer will try to gather more information from
various sources like sales persons, friends, neighbours and mass communication
media.
(iii) Alternative Evaluation - Now the individual will evaluate the alternative
brands. The methods used for evaluating the various products will be dependent
on the consumer’s underlying goals, motives and personality.
(iv) Choice - The intention and attitude of the consumer determine the choice of the
product. The choice will also depend upon normative compliance and anticipated
circumstances.
(v) Outcome - The outcome is either positive or negative. If the end result is
positive, the outcome will also be positive. If there is dissonance, that is, a feeling
of doubt experienced by the consumer about the choice made, the outcome will
not be positive. If this occurs, then the consumer will search for more
information to support the choice made.
The model has laid emphasis on the conscious decision making process adopted by the
consumer. It recognises that the consumer may not go through all the steps always. This is
because in case of repeat purchases, the consumer may bypass some of the steps.
The Engel, Blackwell and Miniard (EBM) Model – The model has four distinctive
sections, namely, input, information processing, decision process and variables influencing
decision process.
(i) Information Input - The marketer provides information to the prospective

consumers through marketing and non-marketing sources.
(ii) Information Processing - The consumer must get exposed to the information,
attend to it, comprehend or understand it, accept it and finally retain it in
memory. Any selective attention or exposure mechanisms which occur in post
purchase dissonance would operate at this stage.
(iii) Decision process - This process consists of five basic stages–need recognition,
search, alternative evaluation, purchase and outcomes.
(iv) Variables influencing decision process - The individual, social and situational
factors influence the decision processes.
The EBM model is very flexible and more coherent than the Howard-Sheth Model of
consumer behaviour. It also includes human processes like memory, information processing
and considers both the positive and negative purchase outcomes.

The Bettman Information-Processing Model - The Bettman model, proposed in 1979,
assumes that a typical consumer has a limited capacity for processing information.
According to this model, when faced with making a choice decision, the consumer rarely
undertakes a complex task of evaluating all possible alternatives. Instead, the consumer
invariably employs a simple decision rule. In its complete form, the Bettman model consists
of a number of interrelated flow-charts that depict the various possible stages involved in
the consumer’s choice process.
According to this model, the seven steps involved in the consumer’s choice process are
processing capacity, motivation, attention and perceptual encoding, information acquisition
and evaluation, memory, decision processes and consumption and learning processes. Figure
below shows the linkage between various proposed components in the Bettman Model.
(i) Processing Capacity - The Bettman model presumes that consumers have a
limited capacity for processing information. While making any decision,
consumers are likely to apply strategies that make product or brand selection
process an easy and less taxing activity.
(ii) Motivation - Since consumer choice is conceived as being purposeful, motivation
is a central component of the Bettman model. It influences both the direction and
the intensity of consumer choice and stimulates the consumer to seek particular
information to evaluate alternatives and make a choice.

(iii) Attention and Perceptual Encoding - The attention and perceptual encoding
components are closely linked and influenced by the consumer’s goal hierarchy.
There are two types of attention: voluntary attention which is a conscious
allocation of the processing capacity to current goals and (b) involuntary
attention which is more of an automated response to disruptive events like
conflicting views or newly acquired information. Perceptual encoding accounts
for the process by which the consumer organises and interprets perceived stimuli
and provides insights into the need for additional information.
(iv) Information Acquisition and Evaluation - The Bettman model assumes that a
consumer makes an external search when existing information in his memory is
thought to be inadequate.
(v) Memory - Memory is the component through which all information flows. It is
where a consumer first begins the search for information on which to base a
choice. If the internal information is insufficient, then the consumer undertakes
external search.
(vi) Decision Processes - The Bettman model emphasises that different types of
choices are usually made in conjunction with the fulfillment of specific
components of the model. Hence the choices made during the decision processes
are of a particular form of choice rather than the optimum choice.

(vii) Consumption and Learning Processes - The consumption and learning
processes of the Bettman model deal with the future utilisation of experience
acquired after the purchase has been made.
The Sheth-Newman-Gross Model - The Sheth-Newman-Gross (SNG) Model (1991) of

consumption tries to explain ‘why’ consumers make the choices as they do. This particular
model is of practical relevance for segmenting any market. It concentrates on accessing
consumption-relevant values that explain why consumers choose to buy or not to buy a
specific product over other possible alternatives. The SNG model is based on the basic
premise that “Consumer choice is a function of certain specific consumption values”, namely:
(i) Functional value,

(ii) Social value,
(i) Emotional value,
(ii) Epistemic value and
(iii) Conditional value.
(i) Functional value - Traditionally, functional value is presumed to be the primary

driver of consumer choice. Any brand’s functional value may be derived from its
characteristics or attributes such as reliability, durability and price. By identifying the
dominant function of a product, marketers can emphasise on those benefits in their
communication and packaging.
(ii) Social value - Social imagery refers to all relevant primary and secondary reference
groups which are likely to be supportive of the product consumption. Consumers acquire
positive or negative stereotypes based on their association with varied demographic, socio-
economic, cultural, political and ideological segments of the society.
(iii) Emotional value - Consumption emotion refers to the set of emotional responses
elicited specifically during product usage or consumption as described either by the
distinctive categories of emotional experience and expression such as joy, anger and fear or
by the structural dimensions underlying emotional categories such as
pleasantness/unpleasantness or calmness/excitement.
(iv) Epistemic value - Epistemic issues refer to reasons that would justify the perceived
satisfaction of curiosity, knowledge and exploratory needs offered by the product as a
change of pace. An entirely new experience certainly provides epistemic value.

(v) Conditional value - The utility of an alternative will often depend on the situation.
For instance, some products may have seasonal value, some are associated with once in a life
events.
The five consumption values identified by the model make their own contributions in
specific choice contexts. A choice may be influenced positively by all five consumption
values.

MODULE 2 – Individual Determinants of Consumer Behaviour
Psychologists have also provided certain clues as to why a consumer behaves this way or
that way. The major psychological determinants internal to the individual are motivation
perception learning, attitude and personality.
1. Motivation:
Motivation is the ‘why’ of behaviour. It is an intervening variable between stimulus and

response and a governing force of consumer behaviour. “Motivation refers to the drives,
urges, wishes or desires which initiate the sequence of events known as behaviour.” as
defined by Professor M.C. Burk. Motivation is an active, strong driving force that exists to
reduce a state of tension and to protect, satisfy and enhance the individual and his self-
concept. It is one that leads the individual to act in a particular way. It is the complex net-
work of psychological and physiological mechanisms.
Therefore, motives can be conscious or unconscious, rational or emotional, positive or

negative. These motives range from a mere biological desires like hunger and thirst to the
most advanced scientific pursuits like landing on the Moon or Mars. It was Abraham
Maslow who developed five steps human need hierarchy those of survival-Safety
Belongingness and Love-Easteem and Self Actualisation. According to him, fulfillment of
one will lead to the fulfillment of higher motives. The implications are that as we move up
in the ladder, the input of marketing becomes more and more deep and subtle.
2. Perception:
Marketing management is concerned with the understanding of the process of perception

because, perception leads to thought and thought leads to action. Perception is the process
whereby stimuli are received and interpreted by the individual and translated into a
response. In other words, perception is the process by which the mind receives, organises
and interprets physical stimuli. To perceive is to see, hear, touch, taste, smell and sense
internally something or some event or some relation.
Perception is selective because, and individual cannot possibly perceive all stimulus objects
within his perceptional field; hence, he perceives selectively. Perception is organized
because, perceptions have meaning for the individual and they do not represent a buzzing
confusion. Perception depends upon stimulus factors. That is, the nature of physical
stimulus itself is a determinant of perception.
The variables like colour size, contrast, intensity, frequency and movement are of this kind.
Again, perception depends on the personal factors. What the individual brings to the
situation governs perception his ability to see or hear the message, his needs, his moods,
memory, expressions and values all these modify the message reception. The personal factor
of perception is his self concept, need, span of apprehension, mental set and the past
experiences.
Perception has its own impact on consumer behaviour or consumer decision-making.

Let us take some such cases:

Perception and communication:
It is estimated that 90 per cent of the stimuli that the individuals perceive come through
sight and rest from hearing. That is why, advertisements bank heavily audio on visual
stimuli. However, it does not mean that loud noises, bright colours and large ads themselves
guarantee consumer attention and response. Contrary to this, it is the use of haunting
melodies, pastel shades, regional accents and careful adjustment of ad size in relation to the
total page or poster size all affect perception and these factors may give better results.
Product and brand perception:

Good many studies have been made of the ways in which the consumers perceive the
products and the brands they choose regularly. It is brand images and the brand
differentiation that play vital role in perception in addition to the physical characteristics of
the product. Therefore, it is a must for a marketer to examine all the factors that impinge on
the construction of a brand image to ascertain their effects on consumer perception of the
company’s marketing mix.
Price perception:
Price is another element of marketing mix where perception has its implications. Studies
have proved beyond doubt that consumers judge product or service quality by price. ‘Higher
the price better the quality’ that goes.
This goes on establishing that there is going to the direct or positive relationship between
price and demand where marketer is cared to gain. Another aspect of this price perception is
psychological pricing. The reasoning behind such pricing strategies is that consumers are
likely to perceive used in cut-price sales promotions to increase the feeling that a price has
been drastically reduced.
Store perception:
There are five major components of stores image namely, location design-product
assortment-services and personnel each of which contributes to consumer perception of the
place from which he or she buys.
Mere physical attributes do to talk of a store image. Other intangible factors, too, influence
consumer perception of stores image such as advertising, inter-personal communication and
experience. Consumer perceptions of stores are greatly influenced by consumer’s own self-
perception and motives. Further, consumer’s self-images influence the places in which they
shop.
Perceived risk:
The concept of perceived-risk recognizes that consumer experiences a sense of risk in
purchase and that consumer behaviour can be studied profitably as a risk reducing
behaviour.
Consumer behaviour involves risk in the sense that any action of a consumer will produce
results which he cannot predict with certainty. The perception of risk in a purchase
situation is a function of the possible consequences and the product uncertainty involved.
Perceived risk can be divided into forms namely, ‘functional’ and ‘psychological’.
Functional risk is related with the performance and the psychosocial risk is related with the
fact whether the product enhances one’s sense of well being or self-concept.
The level of perceived risk is a function of the uncertainty involved and the possible
consequences of purchase and can be reduced by gaining greater certainty or by minimising
consequences. In most cases, it is increasing the element of certainty.
3. Learning:
In behavioural science, learning means any change in behaviour which comes about as a
result of experience. Learning is the process of acquiring knowledge. Consumer behaviour is
a process of learning because; it is modified according to the customer’s past experience and
the objectives he or she has set. This process of learning is made up of four stages namely,
Drive- cue-response and Reinforcement. ‘Drive’ refers to an internal state of tension which
warrants action.
Thus, hunger or thirst can be a drive. A ‘cue’ is an environmental stimulus. For instance, it
can be an ad on food item or soft- drink, ‘Response’ represents the person’s reaction to cues
within his environment. Here, it can be purchased of food item or soft-drink.
‘Reinforcement’ is the responses reward.
The food item or soft-drink. ‘Reinforcement’ is the response reward. The food item or soft
drink satisfies the hunger or the thirst. When reinforcement happens, the response may be
duplicated resulting in habit formation or absence of reinforcement results in extinction of
learnt habit.
As most consumer behaviour is learnt behaviour, it has deep impact on consumer buying
process. Prior experience and learning acts as buying guide. In-spite of such habitual
behaviour, one can think of reasonable amount of brand switching, trying new products,
does take place.
The strong tendency of most consumers to develop brand loyalties definitely benefits the
makers of established brands. This makes the manufacturer of a new brand to face difficulty
in breaking such loyalties and encouraging brand switching.
He succeeds in his efforts when he shows that his product is potentially much more
satisfying than his competitors. Free sampling, in store trial and demonstrations and deal
activities may be used to break the existing brand barrier to establish new patterns of
purchase behaviour.
To the extent the learning and brand loyalty can be gained for a product, the manufacturer
activates a more stable sales profile less vulnerable to the competitive inroads.
4. Attitude:
The concept of attitude occupies a central position in the consumer behaviour studies in
particular and social psychology in general because; attitude measurements help in
understanding and prediction of consumer behaviour. ‘Attitude’ refers to a predisposition to
behave in a particular way when presented with a given stimulus and the attitudes towards
people, places, products and things can be positive or negative or favourable or
unfavourable.
Attitudes develop gradually as a result of experience; they emerge from interaction of a
person with family, friends, and reference groups. There are three distinct components of
attitude namely, cognitive, affective and co-native. ‘Cognitive’ component is what an
individual believes about an object, thing or an event whether it is good or bad, necessary or
unnecessary, useful or useless.
It is based on the reason and is linked with knowledge and about the object, thing or an
event whether it is pleasant or unpleasant, tasty how an individual responds to the object,
thing or an event. It is based on the other two components and is related with his behaviour.
Each of the three attitude components vary according to both the situation and the person.
The marketing manager’s success is determined partly by his ability to understand, predict
and influence the consumer attitudes.
The marketer may be interested in confirming the existing attitudes, or change in the
existing attitudes or create new attitudes depending on how his product is performing in
the market. Attitude confirmation is, perhaps, the easiest course of action which is followed
in case of established products. Such an act involves only reminding the consumers as to
why they like it and why they should continue it to purchase. Attitude changing is more
difficult task than mere confirming it. It is a change from disposition to act in the direction
of the original attitude to a disposition to act in the opposite direction.
A product disliked is to be liked by the consumers. It is really a difficult process. Attitude

creation is to make the consumers to forget the old products or brands and to make them to
go in for new product or brand entirely altogether, in fact, it is comparatively easier to
create new attitudes than to change the existing one. The most powerful instrument of
attitude change and creation is advertising.
5. Personality:
Very often, the word ‘personality’ is used to refer to the capacity of a person for popularity,
friendliness or charisma. However, in strict sense, it refers to the essential differences
between one individual and another.
Therefore, personality consists of the mannerisms, habits and actions that make a person an
individual and thereby serve to make him distinct from everyone else. It is the function of
innate drives, learned motives and experience.
This means that an individual responds with certain amount of consistency to similar
stimuli. Personality is the interplay of three components namely, ‘id’, ‘the ego’ and the ‘super
ego’.
The ‘id’ governs the basic drives and the instincts of an individual. On the other hand, the
‘super ego’ disciplines the ‘id’ by suppressing anti-social behaviour; it drives the individual
in the direction of more high minded pursuits of civilizations.
The ‘ego’ component is the executive and makes the conscious decisions and reconciles the
inflicting demands of ‘id’ and ‘super ego’, wherever necessary. For instance, ‘id’ may force an
individual to make full use of consumer credit to buy an automobile, ‘super ego’ dissuades
such an activity as borrowing is a kind of social sin in Indian society.

It is ‘ego’ that reconciles these and works out a compromise making the individual to pay
instalments regularly without any strain on his regular budget. The personality of an
individual is either expressed in terms of traits or type. The personality traits may be
aggressiveness honesty anxiety independence sociability and so on.
The personality types may be introvert or extrovert or another classification as tradition

direction outer direction and inner direction. Each of these traits and types has been
explored as the possible clues to the behaviour of consumers. Evaluation of personality’s
role in marketing is seen in drawing consumer profiles and psychographic market
segmentation.
Attitudes Influence of Buying Behavior

Consumer Behavior – Attitude - Consumer attitude may be defined as a feeling of
favorableness or unfavorableness that an individual has towards an object. As we, all know
that an individual with a positive attitude is more likely to buy a product and these results
in the possibility of liking or disliking a product. Consumer attitude basically comprises of
beliefs towards, feelings towards and behavioral intentions towards some objects.
Belief plays a vital role for consumers because; it can be either positive or negative towards
an object. For example, some may say tea is good and relieves tension, others may say too
much of tea is not good for health. Human beliefs are not accurate and can change
according to situations.
Consumers have certain specific feelings towards some products or brands. Sometimes
these feelings are based on certain beliefs and sometimes they are not. For example, an
individual feels uneasy when he thinks about cheese burst pizza, because of the tremendous
amount of cheese or fat it has.
Behavioral intentions show the plans of consumers with respect to the products. This is
sometimes a logical result of beliefs or feelings, but not always. For example, an individual
personally might not like a restaurant, but may visit it because it is the hangout place for
his friends.
Functions of Attitudes - The following are the functions of attitudes
1. Adjustment Function − Attitudes helps people to adjust to different situations and
circumstances.
2. Utilitarian Function: - This helps the consumers in achieving desired benefits. For
example, in small car segments, marketers usually reflects the utilitarian function of
attitudes in the ad. likeby featuring performance characteristics, mileage etc.
Similarly, in the ad. of toothbrushes, they reflect utility of cleaning the teeth and
giving them whiter look etc.

3. Ego Defensive Function − Attitudes are formed to protect the ego. We all are
bothered about our self-esteem and image so the product boosting our ego is the
target of such a kind of attitude.
4. Value Expression Function − Attitudes usually represent the values the individual
posses. We gain values, though our upbringing and training. Our value system
encourages or discourages us to buy certain products. For example, our value
system allows or disallows us to purchase products such as cigarettes, alcohol,
drugs, etc.
5. Knowledge Function − Individuals’ continuously seeks knowledge and
information. When an individual gets information about a particular product, he
creates and modifies his attitude towards that product.
Models of Attitude - The following are the models of attitude
1. Tri-component Model − According to tri-component model, attitude consists of
the following three components.
2. Cognitive Component − The first component is cognitive component. It consists
of an individual’s knowledge or perception towards few products or services
through personal experience or related information from various sources. This
knowledge, usually results in beliefs, which a consumer has, and specific behavior.
3. Affective Component − The second part is the affective component. This consists
of a person’s feelings, sentiments, and emotions for a particular brand or product.
They treat them as the primary criteria for the purpose of evaluation. The state of
mind also plays a major role, like the sadness, happiness, anger, or stress, which also
affects the attitude of a consumer.
4. Conative Component − The last component is conative component, which consists
of a person’s intention or likelihood towards a particular product. It usually means
the actual behavior of the person or his intention.
Properties of Attitudes: - Attitudes can vary along a number of dimensions or properties.
They are:
(i) Favourability: - A person may like Coke or Pepsi and dislike others like Fanta,
Mirinda, Canada Dry etc.
(ii) Intensity: - This means, the strength of liking or disliking. For example,
consumer may like two brands at a time but he/she may be more positive
towards one.
(iii) Confidence: - This means, attitude is the confidence with which they are held.
Intercity and confidence differ slightly. For example, a person may be equally
confident that he/she really likes Pepsi but may be slightly favourable toward
Coke. It is important for a marketer to study the degree of confidence associated
with an attitude because:
a. It can affect the strength of the relationship between attitudes and behaviour.
b. It can affect an attitudes susceptibility to change. That means, more strongly
held attitude is more resistant to change.
(iv) Stability: - Some attitudes are stable over an extended period of time, others will
change. This dynamic nature of attitudes is largely responsible for the changes in
consumers lifestyles. For example, people attitude towards fashion is changing.
Also they are changing in health attitudes this means, it is a great news for
fitness clubs, sporting equipment and clothing companies.
Attitude can vary in terms of whether it is based on the perceived utilitarian Vs. hedonic
properties of the attitude object. For example, consumers attitude towards toothpaste will

be more in knowing their functional benefits. For other products/services like amusement
parks, movies, ballets, music etc. are valued for their ability to influence consumers
emotions. These properties help in developing effective advertising appeals.
How Attitude is Developed?
To understand the role of attitudes in consumer behaviour, we must understand how they
develop and what functions they perform. The attitudes that consumers hold are, a result of
their prior experiences. Attitudes develop over time through a learning process and are
affected and also formed by family influences, peer group influences, personality, experience
and information (from environment). Environmental factors have a strong influence on
attitudes formation by shaping the type, amount, and quality of information and experience
available to consumers.
1. Family Influences: - Family is an important influence on purchase decisions. Bennet

and Kassarjian say, “Attitudes toward personal hygiene, preferences for food items
etc. are acquired from parents.”
2. Peer Group Influences: - Researches say that peer groups are much more likely
than advertising to influence attitudes and purchasing behaviour.
3. Personality: - Personality also affects consumer’s attitudes. Traits such as
aggression, extroversion, submissiveness or authoritarianism may influence
attitudes toward brands and products.
4. Information and experience: - According to learning theory, consumer’s past
experiences influence their brand attitude and condition their future behaviour. It is
seen that band loyalty will quickly end if the brand does not perform well.
Therefore, information and experience also determines attitude.
5. Role of Direct or Indirect Experience: - Attitudes are formed as a result of direct
contact with the object. Products that fail to perform as expected can easily lead to
negative attitudes. Sometimes, even in absence of actual experience with an object
one can form attitude. For example, many consumers have never driven Mercedes –
Benz or vacationed in Switzerland but then also form positive attitude for this.
Similarly, the consumers can form an attitude by just seeing the ad that means, they
can form the product attitudes. Attitudes based on direct experience are held with
more confidence. This means consumers form stronger convictions about the
product if had an actual direct experience with it. These processes that govern
attitude formation are very important in order to develop strategies and activities
that will create, reinforce, or modify consumer attitudes.
Individual Determinants of Buyer Behavior:

Motivation and involvement
Motivation is a driving force within individuals that impels them to action. It is defined as
the stimulation of any emotion operating upon ones will and prompting or driving it to
action. Psychologically speaking this driving force is the result of a state of tension
produced by an unfulfilled need. Individuals try to reduce this tension both consciously and
subconsciously through selecting goals and behavior.

Elements of motivation
1. Needs - Every individual has need. They are

 Innate needs – these are physiological need and it includes the need for food,
water, air, clothing, shelter and sex. These are needed to sustain the
biological life or biogenic needs.
 Acquired needs – these are need in response to our culture or environment.
These include the needs for self-esteem, affection, prestige and learning.
These are generally psychological and are considered as secondary needs.
2. Wants – wants are something more in addition to the needs that will have desirable
effect. For example – food is the need and type of food is want.
3. Goals- are the ideal state that a person desires as he thinks that it would help
him/her satisfy a need. There are two type of goals and they are
 Generic goals – Generic goals can be defined as the general category of
goals that consumers see as a means to satisfy their needs and wants.
Example- a consumer may want to buy a mobile
 Product –specific goals – these are specifically branded products or
services that the consumers select to fulfill the generic goal. Example – the
consumer would like to buy Nokia or Samsung ( here the consumer has a
specified brand choice towards the product)
Selection of Goals - The goals selected by an individual depends on their
 Personal experience
 Physical capacity
 Prevailing cultural norms and values
 Goals accessibility in the physical and social environment
Goals can be positive or negative. Positive goals is the one towards which behavior is
directed (approach object) and negative goals is the one form which behavior is directed
away and is referred to as an avoidance object.
Motives - Motives can be rational and emotional
• Rational motives - When consumer motives are objective, and when selection of
goals is made on the basis of objective criteria, they are referred to as rational
motives. These criteria could be price, size, weight etc.
• Emotional motives - When consumer motives are subjective, and when selection of
goals is made on the basis of personal and subjective criteria, like appearance and
looks, colour, aesthetics etc., they are referred to as emotional motives
Motivation: Motivation can be positive or negative
• Positive motivation: The person is driven towards an object/condition/situation.

Example: A person goes to the gym three times a week to build up his body and
muscles so that he can look good. The object in question (gym, work out, good
body) is referred to as an approach object. His behavior is directed towards
achievement of a positive goal, which is fitness, body building and great looks.
• Negative motivation: The person is driven away from an

object/condition/situation, and the corresponding effects of non usage.

For example, a person decides to buy Pepsodent toothpaste for his child as it helps
fight germs and tooth decay whole day long. His behavior is directed towards the
object (Pepsodent) to avoid a negative goal, which is tooth decay.
The Dynamic nature of motivation
• Needs and wants exhibit multiplicity. Various kinds of physiological and

psychological needs have been proposed and listed; while physiological needs are
few and universal, psychological needs are many and varied.
• A person may experience many needs and wants simultaneously and one may be
sacrificed at the cost of the other.
• Needs/wants/goals/motives vary from person to person. They also vary within a
person across situation to situation.
• Needs/wants are never fully satisfied. Wants are satisfied temporarily but needs are
never satisfied. They keep on emerging. As one need is satisfied, another emerges
and so forth, and as they emerge, they trigger off desire and motives.
• Needs/wants/goals/motives grow, develop and change in response to an individual
and his environment.
• Needs and wants may also lie dormant. They may suddenly trigger owing to
physiological factors, social factors, and/or external environmental factors.
• Success and failure to fulfill needs and wants also affect the future choice of goals.
Arousal of motives
1. Physiological Arousal - when a person becomes aware of his needs due to change
in his physiological state, it will give rise to physiological motives.
For example - a person who is cold may turn up the heat in his bedroom and also
make a mental note to buy a warm cardigan sweater to wear around the house
2. Emotional Arousal – At times the mundane nature of routine life leads a person to
fantasies or daydream and this stimulate his latent need to satisfy his emotion.
For example – A young women who daydream of torrid romance may spend her free
time in internet single chat rooms
3. Cognitive Arousal – this occurs when we come across some information

incidentally and this triggers our thought process and arouses a need in us.
4. Environmental Arousal – the various signals that we come across in our
environment in the form of the sight, smell and sound surrounding us also prompt
many needs.
Theories of Motivation
Maslow’s hierarchy of needs - Abraham Maslow, a clinical psychologist in 1943,

formulated a widely accepted theory of human motivation based on human needs. Maslow
proposed that human needs could be classified into five basic levels, that is; basic /primary
needs, safety/security needs, social/affiliation needs, ego/esteem needs and self
actualization needs. Each of the needs could be ranked in order of importance from the
lowest to the highest through a pyramidical structure starting from basic /primary needs to
the safety/security needs to the social/affiliation needs to the ego/esteem needs, to finally
the self actualization needs. The first two needs, ie; basic /primary needs and
safety/security needs were biogenic in nature and were regarded as lower-order needs;
while the rest of the three, i.e.; social/affiliation needs, ego/esteem needs and self
actualization needs were psychogenic in nature and were regarded as higher-order needs.
According to the theory, these needs are hierarchical and an individual will go level by level,
starting first with the fulfillment of the lower-order needs and gradually move towards the
fulfillment of the higher-order needs. A person cannot move to the second level unless the
first level is satisfied. Once a level is satisfied, it ceases to be a motivator and the moves to
the next.
Physiological Needs – in the hierarchy of needs theory, physiological needs are the first
and most basic level of human needs. These needs are required to sustain biological life,
include food, water, air, shelter, clothing, sex.
Example – for the man who is extremely hungry, no other interest exists but food. He
dreams of food, he remembers food, he thinks of food, he perceives only food and he wants
only food.
Safety needs – once the physiological needs are satisfied, safety and security needs become
the driving force behind an individual’s behavior. These needs are concerned not only with
physical safety but also include order, stability, routine and control over one’s life and
environment.
Example: savings accounts, insurance policies.
Social needs- the third level in Maslow’s need theory include needs as love, affection,
belonging and acceptance. People seek warm and satisfying human relationship with other
people and are motivated by love for their families.
Egoistic Needs / Esteem needs – once the social needs are more or les satisfied, the
fourth level becomes operative. This level is concerned with egoistic needs. These needs can
take either an inward or an outward orientation.
• Inward orientation – reflects an individual’s need for self acceptance, self esteem,
success
• Outward orientation – includes the needs for prestige, reputation, status, recognition
from others etc.

Self-actualization needs - most of the people do not satisfy their ego needs sufficiently to
ever move to the fifth level. This need refers to an individual’s desire to fulfill his/her
potential to become everything he/she is capable of becoming.
Mc Clelland’s Trio of Need Theory - According to him, an individual’s needs are acquired
over time and are learned and accordingly shaped by ones’ life experiences. These needs can
be classified into three categories and they are Needs for power (nPow), affiliation (nAff)
and achievement (NAch).
1. Need for Power (nPow) – the power need relates to an individuals desire to control
his/her environment. It includes the need to control other persons and various
objects. This need appears to be closely related to the ego need, in that many
individuals experience increased self-esteem when they exercise power over object
or people.
2. Need for Affiliation (nAff) – affiliation is well known and well researched social
motive that has far-reaching influence on consumer behavior. The affiliation need is
very similar to Maslow’s social need theory. People with high affiliation need tend to
be socially dependent on others. According to this, the behavior is strongly
influenced by the desire for friendship, acceptance and belongings.
3. Need for Achievement (nAch) – individual with a strong need for achievement
often regard personnel accomplishment as an end in itself. The achievement need is
closely relate to both egoistic need and self- actualizations need.
Motivation theory and market strategy
1. Approach – Approach Conflict – happens when the consumer has two different
choices of similar or dissimilar category of product or services, which he gives equal
importance but unable to choose one over the other. The marketer can come in to
make his offer more attractive and important in any sense and help the customer to
decide in its favour. Example – A hungry man is tempted to have both pizza and
Burger.
2. Approach – avoidance conflict - happens when the consumer has decides in favour
of a product but somehow not satisfied with a particular feature or want to avoid it.
The marketer can come in make some modification in the product features to suit
and help the customers to decide in its favour. Example - is that a lady wants to have
an ice-cream but is also concerned about the fact that it would mean adding to
calories and weight
3. Avoidance-Avoidance conflict- happens when the consumer has to decide between

two negative choices. The choices are said to be negative in relation to certain
personnel attributes of the consumer. The marketer can come in to make some
suggestion in the decision making process to suit and help the customers to decide
in its favour. For example, the doctor prescribes to a patient of a long drawn
treatment based on medicines with lower rate of success as against another option of
a surgical procedure with high risk of post operative complications.
Involvement
Defined as a psychological state that motivates people to be more aware and careful about
personnel object or situations. Consumer involvement is defined as a state of mind that
motivates consumers to identify with product / service offering, their consumption pattern
and behavior. Involvement creates within consumers an urge to look for and think about
the product /service category and the varying option before making decision on brand
preference and the final act of purchase.
Types of involvement
1. Situational involvement - This is a state of arousal directed towards attaching

relevance to a person/object/situation for a short term.It is specific to a situation
and is thus temporary in nature. It could vary from low to high, depending upon the
situational factors.
For example - a middle aged lady suddenly decides to gift a laptop to her son on his
birthday. She is not techno savvy and has little interest with the product category.
She goes to the electronics mall and visits the various stores that sell computers and
laptops. She collects information on the product features, prices, etc. and finally
takes the help of her middle aged neighbor to reach a final decision. Her involvement
with the purchase activity would be regarded as a situational involvement.
2. Enduring involvement - When the level of involvement towards the

product/service category extends over a period of time across situations, it is
referred to as enduring involvement. The person shows a high-level of interest in
the product category and spends time collecting and processing information and
integrating it within his memory.
For example, a person desires to buy a laptop for his son to be gifted to him when he
goes to college, which would be three years later. The father plans well in advance,
tries to collect information through advertisements, brochures, trade journals, visits
to dealers, and word of mouth from peers and colleagues. Within this period he gets
involved with the product category and after three years is in a position to take a
decision based on the facts that he has collected. This is referred to as enduring
involvement.
Measures of Involvement
• Brand
• Ego
• Importance of purchase
• Product
• Types (Situational/ enduring/
response)
Personality and self-concept
Personality defined as a sum total of outer physiological as well as inner psychological

characteristics that determine and reflect how a person reacts to his environment. It
exhibits itself through a unique psychological makeup that activates behavior on the part of
an individual in response to forces in his or her environment.
Nature of personality

1. Personality reflects individual differences – because the inner characteristics that
constitute an individual’s personality are a unique combination of factors , no two
individuals are exactly alike.
2. Personality is consistent and enduring – personality cannot be changed easily ,
quickly and frequently. This consistency and stability manifest itself even in buying
and consumption patterns and marketers need to learn how to overcome them.
3. Personality can change under certain circumstances and over life span, like for
example in reaction to abrupt events/incidents/situations as also due to gradual
maturing with age.
Theories of personality
Freudian Theory - Sigmund Freud, the Father of psychology become famous with its
psychoanalytic theory of personality. Sigmund framed his theory on certain assumptions,
they are
- Unconscious need drives lie at the heart of human motivation and personality
- The socialization process that takes place within people in a social set up has a
huge impact on individual’s behavior.
According to Freud, personality is based on the dynamic and continuous interplay between
the Id, Ego and Super Ego.
• Id – deals with the primitive and impulsive drives of human mind.

• Super Ego – Individual’s internal expression of moral and ethical codes of conduct
as moulded and influenced by the codes imposed by society.
• Ego – Individual’s conscious control. It functions as internal monitor that attempt
to balance the impulsive demands of the Id and the socio-cultural constraints of the
superego
Neo-Freudian Theory - A group of psychologists who believed that social interaction and
resultant relationships formed the basis for the growth and development of personality.
They disagreed with their contemporary, Freud who believed that personality was
i) biological and rooted in genetics, and

ii) Was groomed as a result of early childhood experiences.
The Neo-Freudian are
1. Alfred Adler - is regarded as the father of individual psychology was a disciple of

Freud. He broke away from the Freudian philosophy due to disagreement over the
importance that Freud gave to the Unconscious. Adler believe that:
o People are goal oriented, with an urge for personal growth, and “the will to
power”; they have within them a "self perfecting" drive; this drive is the
single "drive" or motivating force behind all behavior and experience.
o Individuals seek to overcome feelings of anxiety and feelings of inferiority;
the basic drive in human beings is to strive from an initial state of
inadequacy, or what he termed "inferiority", toward "superiority", or self-
actualization.
o People strive for goals that can be referred to as style of life.

o Social drives, especially family, friends and culture have an impact on
behavior and feelings; right from birth across a life span, people involve
themselves in social relationships;
o The primal social influences in an individual can be modified in a manner
such that that each one of us develops personal styles in dealing with our life
and achieving goals.
o According to Adler’s theory individuals’ buy to overcome feelings of
inferiority.
2. Herbert Harry Stack Sullivan – A psychiatrist extended Freud’s theory of
psychoanalysis and concluded that failure in interpersonal relationship were largely
responsible for mental illness and disorder. According to him, social relationships
were extremely important for human beings and loneliness was the most painful of
human experiences. He developed a theory of psychiatry based on interpersonal
relationships where social forces are largely responsible for mental illnesses.
Sullivan referred to his approach an interpersonal theory of psychiatry, to focus on
“what goes on between people”, sharp in contrast to Freud, who focused on “what
goes on inside people”. He believed that social relationships are primary, which
actually lead to personality. In fact personality manifests itself in such social
relationships.
3. Karen Homey – Homey’s approach came to be known as the psychosocial analysis.
Her work focused on the emotional relationship that exits between parent and child
early in the child’s life. While focusing on child-parent relationship, she also
researched on how people strive to overcome feelings of anxiety. According to
Homey, people experience anxiety and tend to act as neurotics, the irrational
defenses against anxiety become a permanent part of personality and that affect
human behavior based on their approach towards overcoming feelings of anxiety ,
people could be classified into three group. They are;
a. Compliant – individuals are those who move towards others
b. Aggressive – individuals are those who move against others
c. Detached – individuals are those who move away from others.
Trait Theory
According to the Trait theorists, an individual’s personality make-up stems out of the traits
that he possesses, and the identification of traits is important. People possess specific
psychological characteristics that are referred to as traits; and all those who possess a
particular trait, are said to belong to a personality type. A trait is a predisposition to behave
in a certain manner. The trait theories can be of two broad categories, viz., simple trait
theories and general trait theories.
i) Simple trait theories : A limited number of traits are identified, and people are
identified and classified on the basis of these traits.
ii) General trait theories: A large variety of traits are identified.
Assessment of Trait theory: Unlike the Freudian and the Neo-Freudian theories, the
Trait Theories possess a degree of quantification while classifying individuals into
personality types. Through the application of tests and scales, people are objectively
assessed for presence/absence of personality traits and accordingly classified into
personality types. Thus, unlike the previous theories, the Trait approach seems to be a more
realistic and objective approach. However, the limitation lies in the fact that sometimes
traits tend to be indefinable, vague and indescribable; nevertheless the personality tests are
widely used.
Trait theory and Consumer behavior - Some of traits and their relevance for a
marketer are explained as follows:
• Consumer innovativeness: - The degree to which consumers are receptive to new

products, new services or new practices.
• Dogmatism: - A personality trait that reflects the degree of rigidity a person
displays toward the unfamiliar and toward information that is contrary to his or her
own established beliefs. High dogmatic-discomfort with new product. Low
dogmatic-like to try new product.
• Social character: - It is a personality trait that range from inner-directedness to
other-directedness.
o Inner-Directed:
o Consumers who tend to rely on their own inner values
o More likely to be innovators
o Tend to prefer ads that stress product features and
benefits
o Other-Directed - Consumers who tend to look to others for
direction
• Less likely to be innovators
• Tend to prefer ads that feature social acceptance
• Need for uniqueness: Consumers who avoid appearing to conform to expectations
or standards of others.
• Optimum stimulation level: A personality trait that measures the level or
amount of novelty or complexity that individuals seek in their personal experiences.
High OSL consumers tend to accept risky and novel products more readily than low
OSL consumers.
• Sensation seeking: A personality trait characterized by the need for varied,
novel, and complex sensations and experience, and the willingness to take physical
and social risks for the sake of such experience
• Variety-novelty seeking: A personality trait similar to OSL, which
measures a consumer’s degree to variety seeking. Examples:
• Exploratory Purchase Behavior
• Use Innovativeness
• Vicarious Exploration
• Cognitive personality factors: Two cognitive personality traits are:

 Need for cognition
o A person’s craving for enjoyment of thinking
o Consumers high in NC are more likely to respond to ads rich in
product-related information
o Consumers low in NC are more likely to be attracted to background or
peripheral aspects of an ad.
 Visualizers versus verbalizers
o A person’s preference for information presented visually or verbally

• Consumer materialism:
o The degree of consumer attachment to a worldly possession.
o The extent to which a person is considered “materialistic.
Characteristic of materialistic people:
o Value acquiring and showing-off possessions
o Are particularly self-centered and selfish
o Seek lifestyles full of possessions
o Have many possessions that do not lead to greater happiness
Fixed consumption behavior
o Consumers fixated on certain products or categories of products
Consumers have
o A deep interest in a particular object or product category
o A willingness to go to considerable lengths to secure items in the
category of interest.
o The dedication of a considerable amount of discretionary time and money
to searching out the product. Examples: stamp collectors, hobbyists
Compulsive consumption behavior
o “Addicted” or “out-of-control” consumers
o Consumers who are compulsive buyers have an addiction; in some
respects, they are out of control and their actions may have damaging
consequences to them and to those around them
Consumer Ethnocentrism: - The consumers’ likelihood to accept or reject foreign
made products. Ethnocentric consumers feel it is wrong to purchase foreign-made
products They can be targeted by stressing nationalistic themes.
Self Concept - It is the sum totals of person’s feelings, knowledge and understanding of his
/ herself as an object. Two components:
• Actual Self - refers to an individual’s perception of what/who he or she is

• Ideal self - refers to an individual’s perception of what/who he or she wants to
be.
As a consumer actual and ideal self come to play in the market place. While a consumer
tries to relate his personality with the personality of the product/service offering, and the
brand, the “actual-self”, comes into play; on the other hand, when he tries to match the
product /service and the brand personality with his aspirational group, and aspires to buy
the same, the “ideal -self” comes into play. This confirms the assumption that self-concept is
closely related with personality, and individuals would buy such products/services, which
match their concept and personalities.
Self Image - Arises out of the persons background, values, lifestyles, experience etc as well
as interactions with parents, Family, friends etc. Traits, characteristics, qualities and
mannerisms of behavior, all put together create the self-image of a person.
Perception - Different people see things, events, and ideas from different view point, and
hold different opinions, views for them. In other words they have different “Perception” of
the world.
Definition of Perception: Perception is defined as the process by which the individual

selects, organizes, and interprets various stimuli into a meaningful & coherent picture of the
world. Marketers are deeply interested in such perceptions the consumers hold about their
products & services, brands, company etc.
Elements of Perception: The following are the elements of Perception:
1. Sensation – is the immediate & direct response of the sensory organs to stimuli. A
stimulus is a single input of any of the senses. Human beings have sensory receptors
called sensory organs. They are :
A. Eyes for sights & seeing,
B. Ears for sounds & hearing,
C. Nose for smells & smelling,
D. Tongue for tastes & tasting,
E. Skin for textures, touch & feeling,
Marketers try to stimulate the sensory organs of a consumer to create a favorable

perception towards their products.
2. Absolute threshold – is the minimum level that the individual can experience a
sensation. In other words, he can distinguish the difference between something &
nothing. This level varies from person to person & varies with time, place &
environment. Marketers often try to provide stimuli more than this level.
3. Differential Threshold or Just Noticeable Difference (JND) – is the minimal
difference that can be detected between two similar stimuli. German scientist Ernst
Weber discovered that the JND between two stimuli is not absolute, but an amount
relative to the intensity of the first stimulus. Thus marketers try to change certain
attributes which are just short of JND.
4. Subliminal Perception – there are certain types of stimuli which are not strong
enough to exceed the absolute threshold, but somehow stimulate the subconscious mind
& get recorded there, sometimes without the knowledge of the preceptor. At a later
stage this might surface as some form of expression or perception. Here the marketers
try to stimulate the subconscious mind of an individual.
Information processing: is a series of activities where the stimuli are perceived &
processed to convert/transform them to information, and then stored (very similar to
computer data processing). Later this info is used in selecting a product.
1. Exposure: Exposure occurs when our senses detect some external cue from the various
things we come in contact with. We are all exposed to a plethora of marketing ads
continuously. This becomes the starting point of all information processing. But people
tend to perceive things they need or want. The stronger the need, the greater the
tendency to ignore unrelated stimuli. Hence “Selective Perception” occurs when the
consumer selects the stimuli from the environment on the basis of interaction of
expectations & motives with the stimulus itself. These factors give rise to four
important concepts concerning perception :
a. Selective exposure – where the consumers want to avoid unpleasant or painful
messages & seek those which are sympathetic, interesting and pleasant.
b. Selective attention – where the consumers exercise selectivity in terms of their
attention to commercial stimuli. They have a heightened attention regarding the
stimuli that meet their needs, & minimal attention to the ones irrelevant to their

needs. People also vary in terms of kind of info like price, quality, features etc.,
forms of messages & type of medium they prefer.
c. Perceptual defense – where consumers subconsciously screen out stimuli that are
threatening or damaging even if the exposure has already taken place. Likewise
sometimes they unconsciously distort the information that is not matching their
needs, values, & beliefs. This may be due to psychological factors or any
unfavorable past experience.
d. Perceptual blocking – where consumers protect themselves from being exposed
by blocking such stimuli from conscious awareness. They do it for self protection
because of the visually overwhelming nature of the world we live in.
2. Attention: Normally all the stimuli of a message come thro’ the various sensory organs
simultaneously. But an individual can remember only one of them, usually the strongest
and tries to take action on that basis. Marketers try to exploit that situation to their
advantage, to leave an impact in the consumer. This is known as attention.
a. Stimulus – is the one which prompts an individual to initiate an action by creating
an attention. It has the following characteristics : Size & Intensity; Color &
Movement; Position; Format & Design; Isolation; Contrast or Distinction;
Information extent.
b. Individual factors – The attention of a consumer depends on the following factors:
Interest & Needs; Ability; Involvement, etc.
c. Situational factors – Often the situation, condition, environment or the

surrounding of the consumer have an affect on its attention of certain stimuli.
Hence the marketers should devise certain methods to help overcome that.
3. Interpretation – Just like people’s exercise of selective perception on the basis of
certain psychological principles, the interpretation of these stimuli is also highly
individual because it is based on what the individuals expect to see in the light of their
previous experience, motives, interests, reasoning at the time of perception. In the case
of any ambiguous stimuli, the individuals usually interpret these in such a way to serve
their own needs, interests, wishes, etc.
Consumer Imagery: Consumers have a number of enduring perceptions or images of
themselves. Products & brands have also a symbolic value for consumers, who evaluate
them on the basis of their consistency (congruence) with the perception of themselves. This
is the consumers’ self-image & they attempt to preserve or enhance it by buying products &
brands or patronizing services which they believe are congruent with their self-images and
avoiding which are not. This phenomenon is known as consumer imagery.
1. Product Image - where the consumer compares his self-image with his perception of
the product or brand.
2. Service Image - where the consumer compares his self-image with his perception of the
service or its provider.
Perception in Marketing: Marketers have realized that understanding the perception
process of consumers help them to design better ways to help them perceive favorably. The
main methods of stimuli are thro’ advertising, communication, messaging, company news
etc. Thus the marketers have to develop specific stimuli thro’ these methods so that the
consumers perception about their products clearly & enduringly. These are some
techniques:

1. Brand development & Perceptual Mapping – This technique helps the marketers to
determine how the products or services appear to the consumer in relation the other
competitive brands on one or more relevant attributes of the products or services.
2. Retail Stores – In retail stores normally all the brands in a particular category of
products are arranged at the same place, so they have a direct competitive setting. The
brands which claim to be special in any respect should be specially displayed to gain
attention.
Learning - Different theorists have different views about Learning. But somehow the
following are the most generally accepted definitions in the context of Marketing
Management.
Schiffman Defines Learning is a process by which individuals acquire the purchase and
consumption knowledge and experience that they apply to future related behavior.
The following are the salient features of Learning:
1. Consumer learning is a process, and thus it continuously changes and evolves as a

result of newly acquired knowledge
2. This knowledge can be obtained from reading, discussing, observing, thinking, etc. Or
from actual experience.
3. Both the newly acquired knowledge and personal experience serve as a feedback.
4. This also serves as a future behavior in similar situations.
5. Not all learning is deliberate. Learning can be :
a. Intentional: acquired as a result of careful search for information with effort.
b. Incidental: acquired as a result of accident or by the way, without much effort.
2. The term “Learning” generally covers all ranges of learning from simple reflexive
responses to abstract concepts or complex problem solving capability.
Elements of learning
Motivation: Motives, motivation or drive is very important for learning. People learn by
being driven by some motives or motivating factor. Motives arouse individuals in increasing
their readiness to respond to a leaning activity. It also activates the energy needed to do so.
The degree of relevance or involvement determines the consumer’s level of motivation to
search for information about a product / service. Marketers must be aware of this kind of
motive so that they are ready to provide product info right at that moment. For example,
showing ads for winter goods just before winter and summer products just before summer.
Cues: Motives stimulate learning, whereas “Cues” are the stimuli that give direction to
these motives. These are not as strong as motives, but they can influence in the manner
consumers respond to a motive. For example, in the market place, price, styling, packaging,
store display all serve as cues to help consumer to decide a particular product from a group.
Response: Response is how the consumers react to the motives or a cue, and how they
behave. Response can be overt (open, physical or visible) or covert (hidden or mental), but in
either case learning can occur. Often marketers may not succeed in stimulating a purchase.

But over a period of time they may succeed in forming a favorable image of a particular
product in the consumer’s mind. So when the consumer is ready, he is likely to buy that.
Reinforcement: Reinforcement is an important element which increases the probability of a

particular response to occur in future as a result of a given set of motives and cues. Because
reinforced behavior tends to be repeated, consumers can learn to develop successful means
of responding to their needs or changing conditions. The nature and characteristics of
Consumer Learning.
Consumer learning can be better explained by understanding the nature and characteristics
of learning:
A. Learning involves a change in behavior; in terms of consumer learning, it implies

that a consumer, who is exposed to the marketing stimuli, may react to it through
its purchase and consumption; if his experience is satisfying, he would repeat the
purchase behavior in favor of the brand. In case he is not satisfied, he would switch
over to another brand. Thus leaning involves a change in behavior.
B. The change in behavior is relatively permanent. Learning also leads to development
of attitudes. Until and unless an attempt is made to change this behavior, it
continues.
C. The change in behavior occurs because of experience, there has to be some kind of
an experience for learning to occur. This experience could be direct (self-experience)
or indirect (experiences of others, and word of mouth).
D. Learning must be reinforced to have an impact; if learning as a process is not
reinforced, the behavior would disappear. This reinforcement could be positive or
negative.
E. Learning also leads to development of attitudes.
F. Apart from experiences, consumer learning also reflects the impact of (i) marketing
(commercial) and non-marketing communication (interpersonal/non-commercial),
as well as (ii) background characteristics.
G. Learning is a cognitive process and can only be inferred through our actions and
behavior. Learning includes exposure to information, its processing and storage; this
entire process cannot be observed directly, and is only reflected in our behavior.
H. Learning is a continuous process. A person is exposed to information/ knowledge
and/experiences all the time; he interprets these, learns from them and stores these
in his memory for retrieval. This addition of knowledge to the memory bank may
alter/modify existing information (this entire bank is called the Associative
Network). The upgraded information provides a basis for future behavior.
I. Consumer learning as a continual process where knowledge is ever evolving as a
result of marketing stimuli; discussion with family, friends, peers, colleagues, blogs
and public forums; and, direct experiences (self) and indirect experiences (Word-of-
Mouth).
J. Learning may be specific/intentional, ongoing and incidental.
Learning Theories - There are two approaches to the study of learning, viz., the behavioral
approach to learning, and the cognitive approach to learning. According to the behavioral
theorists, learning takes place in response to events/happenings in a person’s external
environment. On the other hand, the cognitive theorists believe that learning takes place as
a result of a person’s conscious and deliberate information processing and storage activity.

BEHAVIORAL LEARNING THEORY: The approach defines learning in terms of an
association between stimulus and response, where the stimulus is an external
object/person/situation that a person senses and perceives, and response is the behavior of
the person that occurs in reaction to the object/person/situation.
The theories are based on the assumption that:
• People learn to associate the stimulus and response.

• They begin to relate the stimulus and response and they generalize the relationship,
across situations; whenever the stimulus occurs, there is a similar response.
• Observable and predictable responses to specific external stimuli are reflective and
symbolic of learning having taken place.
• Thus, these behavioral theories are also referred to as stimulus-response theories.
Behavioral theorists do not concentrate on the dynamics of the learning process. Their
major concern is on viewing learning as a response to events/happenings in a person’s
external environment. The main proponents of this approach were Pavlov, who proposed
the theory of classical conditioning, and Skinner, who proposed the theory of
operant/instrumental conditioning.
Theory of Classical Conditioning -
Proposed by Ivan Pavlov, a Russian psychologist, in the 1920’s, this pioneering work was
based on the famous experiments that were conducted on dogs. Pavlov believed:
• All living beings are passive in nature; they can be taught how to behave through
repetition or conditioning; and,
• Learning occurs as a repeated connection/association between stimulus and
response.
• Learning takes place through conditioning; as such classical conditioning also came
to be known as respondent conditioning.
• Learning becomes conditioned when a stimulus that is paired with another stimulus
that leads to a known response serves to produce the same response when used
alone.
Pavlov elaborated upon the process of conditioning through a series of experiments that he
conducted on dogs. Pavlov started his experiments on the dog by measuring the amount of
salivation secreted by the dog as and when changes were made. Initially, he gave meat
(unconditioned stimulus, US) to the dog and as natural, there was a great deal of salivation
(unconditioned response, UR). When he merely rang the bell (neutral stimulus) and gave no
meat, there was no salivation. In the next phase, he combined the two, meat as well as the
ringing of the bell (unconditioned stimulus plus conditioned stimulus, US+CS). The dog
salivated (unconditioned response, UR). He repeated the pairing many a times over a period
of time. In the last phase, Pavlov rang the bell without giving the meat (conditioned
stimulus, CS); and the dog salivated to the sound of the bell alone (conditioned response,
CR). The dog became conditioned to salivate at the sound of the ringing bell. The dogs
associated the bell sound of the bell (CS) with the meat (US) and, after a number of pairings
between the CS and the US, gave the same response (salivation) to the bell alone as he had
been doing to the meat alone.

I Before conditioning
Meat (US) Salivation (UR)
Ball (Neutral stimulus) No response
II During conditioning
Meat (US) + Bell (CS) Salivation (UR)
III After conditioning
Bell (CS) Salivation (UR)
In conceptual terms, according to Pavlov, conditioning would take place if:
• An unconditioned stimulus (US) results in an unconditioned response

(UR). Subsequently,
• An unconditioned stimulus (US) paired with a conditioned stimulus (CS), will result
in the same response, which would now be called a conditioned response (CR).
Finally, upon repeated pairings,
• The conditioning stimuli alone (without the unconditioned stimuli) would elicit the
same conditioned response (CR).
Thus, classical conditioning occurs when a person learns to relate an unrelated stimulus
(CS) with a particular behavioral response (UR/CR) that was previously elicited by a
related stimulus (US). If a person is exposed to a series of repetitive pairings between the
first and second stimulus, gradually what happens is that the second stimulus alone, begins
to be associated with the first, and elicits the same response, as the first one did alone or in
combination with the other.
Instrumental Conditioning - Skinner who is credited for his theory of operant

conditioning. An American psychologist of the 1950s, he emphasized on the role that
‘consequences’ have to play on the process of learning. He spoke of a response-stimulus
connection, (Response→Stimulus) or (R-S), rather than the S-R connection as proposed by
Pavlov. The learning took place through instrumental or operant conditioning.
Skinner based his theory on the experiments he conducted while working with animals and
birds, like rats and pigeons. He developed a cage, what was came to be known as the
“Skinner’s Box.” The cage had a mechanism which facilitated the learning process; the cage
had levers and keys; it also had a bar or a pedal on one of its walls, and that when pressed,
caused the mechanism to release food into the cage. The rats moved across the cage; and
suddenly, accidentally they would press the bar, and the food was released. The rat began to
understand a connection between his movement and the food; and gradually, learnt to press
the bar or pedal the right key that gave him the food. Skinner repeated these experiments
with pigeons; as and when they pecked the right key, food was released. The food acted as a
reward, where the rats and pigeons were "rewarded" for choosing an appropriate behavior,
and their behavior was positively reinforced. Over time, Skinner decided to withdraw the

food; while the rats and pigeons made the right movements, food was no longer released
and the creatures were disappointed. After several attempts with unrewarding
consequences, they stopped pressing the right bars and pedals. This was referred to as
extinction.
Skinner concluded that any behavior that is followed by pleasant events (reinforcing
stimulus), is likely to be repeated; a positively reinforced behavior increases the likelihood of
repetition of such behavior. On the other hand, any behavior that is followed by unpleasant
events (and a non-reinforcing stimulus), is less likely to be repeated; it results in a decreased
probability of that behavior occurring in the future. Thus, operant or instrumental
conditioning occurs when person learns to act out behaviors that are positively reinforced,
and avoids those acts of behavior that lead to punishment or yield negative reinforcement.
COGNTIVE LEARNING THEORY - There is another type of theory of learning, which

doesn’t involve repeated trials or a connection between a stimulus and response. This type
of learning arises out of using the mental faculty of the individual to discover things,
perceive things, seeking knowledge, search for information, sudden impulsive learning,
solving problems, etc.
Learning based on the mental activity is known as “cognitive learning”. Human beings are
the most evolved animals who have the most prominent characteristics of thinking,
deliberation and problem solving. Unlike behavioural theories, the cognitive theories
involve a complex mental processing of information, and emphasise the role of motivation
and mental processes in producing the desired response.
WOLFGANG KOHLER’s experiment with a chimpanzee provides an interesting example

to understand this theory of learning. A chimp was placed inside a cage with a box in a
corner of the cage and bananas hung from the roof of the cage beyond reach. The chimp
jumped several times and tried to reach the bananas, but in vain. Suddenly by impulse, the
chimp placed the box just under the bananas and jumped from it to reach the bananas, and
he got them. This suggests that the ape’s learning was not a result of repetition or trial-
and-error, but because of some thinking and a sudden insight into the problem solving
method. The bananas in this experiment are not rewards, but a kind of motivation to apply
thinking and problem solving methods.
In the context of consumer behaviour, the individuals are considered to show problem
solving behaviour and have active understanding of situations confronting them. This view
is therefore most important in understanding how consumers learn which stores, method of
shopping, or products will best meet their needs.
For example, it can take the form of learning about the uses and benefits of new products in
the market, especially if they represent significant innovations. It can also explain how
consumers learn about existing products for which they have developed a recent interest or
need.
Formation and Modification of Consumer Attitudes:
Attitude is considered to be the most important determinant of buying behavior. Marketers

therefore, pay close attention to consumers’ attitudes. It is very important for a marketer to

know the important aspects of consumer attitude. Equally important for a marketer is to
understand how attitude is organized.
Background of the Attitude Study
From the earlier unit you came to know that consumers’ motives determine or activate
behavior resulting in purchases. You also came to know that consumer behavior cannot be
predicted in a simple way from motivations. There are other intervening individual factors
that come into play. These factors tend to influence the consumer’s perception of various
products and brands of products that may be utilized to satisfy his/her needs. Some of the
important individual intervening variables are consumer’s attitudes, self-image, and habits.
You know that purchase decision process starts with the identification of a need that is
unmet. Once the desire for a need satisfaction arises, the next step that the consumer passes
in the purchase decision making process is the evaluation of different products or services as
ways of satisfying the unmet need. Evaluation helps the consumer to decide the brand to be
purchased or the seller to select in satisfying his need. His attitude plays an important role
in the process of evaluation of alternatives as well as selection of a particular brand of a
product or so that the consumer can satisfies his need. Attitudes thus play a direct and
influential role in consumer behavior. By this time it should be clear to you that attitudes of
consumers toward a company’s products significantly influence the success or failure of its
marketing strategy. Attitude study is important for the marketers in the sense that, it
affects consumers’ selective processes, learning, and ultimately the buying decision making.
As consumers’ attitudes influence their intention to buy, knowledge on different aspects of
consumer attitudes may help marketers to make a sales forecast of their products.
Measuring consumer attitudes may help a marketing executive get a better picture on both
present and potential markets. As attitudes often affect the consumer’s decision making
process, marketers must understand attitude formation and change if they expect to direct
marketing activities to influence consumers. “Awareness of consumer attitudes is such a
central concern of both product and service marketers that it is difficult to imagine any
consumer research project that does not include the measurement of some aspect of
consumer attitudes. An outgrowth of this widespread interest in consumer attitudes is a
consistent stream of attitude research reported in the consumer behavior literature.”
It is well understood that attitude has been one of the most important topics of study in
consumer behavior field. Attitude study may contribute in decisions regarding new product
development, repositioning of existing products, creating advertising campaigns, as well as
in understanding general pattern of consumer purchase behavior. Thus, an understanding of
what an attitude is, how it is organized, what functions it performs, how it can be measured,
and how a marketer can change an existing attitude is very important for a marketer to
successfully combat competition. Following few important and generally accepted findings
on consumer attitudes further justify the importance of attitude study for a marketer taken
from the studies of Alvin Achenbaum; Henry Assael and George S. Day; Frederick W.
Winter; and, Steward W. Bither, Ira J. Dolich and Elaine B. Nell.
Finding 1: Product usage tends to increase, as consumers’ attitudes toward a product

become more favorable. Usage tends to decline, as attitudes grow less favorable.
Finding 2: The reason for different market shares occupied by different sellers in a product
category is the differences in consumers’ attitudes toward different brands.
Finding 3: Marketers may try to change consumers’ attitudes toward their products aiming
at an increase in sales through persuasive communications. But, they should bear in mind
that the effectiveness of such communications is determined by a number of other variables.
Finding 4: It is likely that consumers may change their attitudes toward the existing
products if they are exposed to the new ones. It is, therefore important for the marketers to
even reinforce existing positive attitudes.
Attitude Defined and Explained
Everyone adopts conscious and unconscious attitudes toward ideas, people, and things, of
which they are aware. Allport defined an attitude as a mental state of readiness, organized
through experience, exerting a directive influence upon the individual’s response to all
objects and situations with which it is related. It extends to beliefs and knowledge of
products as well as to people and events. It also covers feelings, such as likes and dislikes
created, and also a disposition to act or not to act because of such feelings and beliefs. You
should keep in mind that there is nothing necessarily right, wrong, or rational about
attitudes. You should also note that consumers do not have to have direct experience of
products and services in order to form an attitude toward the product or service in question.
Berkman and Gilson, citing Daryl J. Bem, described attitudes as our likes and dislikes,
affinities for and aversions to situations, objects, persons, groups, or any other identifiable
aspects surrounding us, including abstract ideas and social policies. Attitude, like so many
concepts in the behavioral sciences, though is a word, used in everyday life and
conversation, has a more precise meaning within the context of psychology. It refers to the
positive or negative feelings directed at some object, issue, or behavior. It is a learned
predisposition to respond in a consistently favorable or unfavorable way with respect to a
given object.
Attitude can also be defined as a predisposition toward some aspect of the world that is
positive or negative. You should note that, this predisposition cann’t be neutral. That is, a
neutral attitude is virtually no attitude. Marketers and psychologists know that consumers’
attitudes are mixtures of beliefs, feelings, and tendencies to behave in particular ways.
That is the reason why marketers try to establish favorable beliefs about their offers. The
beliefs, feelings, and tendencies lead to favorable responses resulting in purchase. An
individual’s attitudes constitute his mental set that affects how he will view something, such
as a window provides a framework for our view into or out of a house. In the words of John
W. Newstrom and Keith Davis, “the window allows us to see some things, but the size and
shape of the frame prevents us from observing other elements. In addition, the color of the
glass may affect the accuracy of our perception, just as the ‘color’ of our attitudes has an
impact on how we view and judge our surroundings.” Thus, it is an individual’s point of
view toward something, which may be a product, an advertisement, a salesperson, a
company, an idea, a place or anything else. Let us now give some accepted definitions of
attitude and then try to find out the important aspects of attitude from these definition and
the ones given above.
• Attitudes are an ‘individual’s enduring favorable or unfavorable evaluations,

emotional feelings, and action tendencies toward some object or idea.’

• ‘Attitude can be described as a learned predisposition to respond in a consistently
favorable or unfavorable manner with respect to a given object.’
• ‘An attitude is a relatively enduring organization of beliefs around an object or
situation predisposing one to respond in some preferential manner.’
Analyzing the above definitions and the discussion made above, we can identify following
few aspects of an attitude:
Important Aspects of an Attitude
• Attitudes are Learned: Individuals do not born with attitudes, that is, attitude are
not programmed genetically. Individuals rather learn attitudes through information
received from the environment. Information may be received by an individual both
from his commercial and social environments. Second, they learn attitudes through
direct experience with the attitude object. For example, one may buy and use a
particular brand of toothpaste and can develop a positive or negative feeling toward
the brand. Third, attitudes may be learned through a combination of information
received and experience with the attitude object. For example, one may read an
advertisement (information) and buy and use the product. As attitudes are learned,
marketers may provide information to customers through marketing communication
tools as well as distribute free samples for customers to have experience about the
product, thus helping them to form attitudes toward the product.
• Attitudes are Predispositions to Respond: Attitudes implies a covert or hidden
behavior, not overt or exposed, that is they (attitudes) cannot be observed by others.
One cannot see others’ attitudes or verify them; attitudes can be felt. They are the
predispositions of the individuals to evaluate some symbol or object or aspect of his
world in a favorable or unfavorable manner. Attitudes may be expressed verbally
through opinions, or non verbally through behavior. It means that attitudes are
hypothetical make-ups or constructs. These hypothetical constructs lead to actual
overt behavior. For example, if an individual is favorably predisposed toward a
brand, he is likely to recommend others to buy that brand or he may purchase the
brand himself.
• Attitudes are Consistently Favorable or Unfavorable Responses: Attitude
toward an object leads to responses toward that object. If the attitude of an
individual is found favorable toward an object, he is likely to make positive responses
toward it, and this tendency is likely to be fairly consistent. In case of a negative
attitude, negative responses are likely to happen, and happen consistently again.
• Attitude Objects: It was mentioned earlier that, attitudes are directed toward some
object. Object in this case may include a product, company, person, place, service,
idea, store, issues, and behavior and so on.
• Attitudes Have Degree and Intensity: Attitudes can be measured or quantified,
that is, they have degrees. For example, one may develop a highly positive attitude
toward a particular brand, and another may develop a moderately positive attitude
toward the same brand. By this you understand that, attitudes have degrees.
Moreover, they have intensity, that is, the level of certainty or confidence of
expression about the attitude object. For example, one individual may be highly
confident about his belief or feeling, whereas, another individual may not be equally
sure of his feeling or belief.
The Tripartite View or Three Component Attitude Model
Advocates of the three component model or tripartite view believe that attitude consists of
three components. They are cognitive (awareness, comprehension, knowledge), affective
(evaluation, liking, preference), and conation or action tendency component (intention, trial,
or purchase). These three components are shown in the following figure:
The Cognitive Component - Cognition refers to all beliefs that an individual holds with
respect to the attitude object. Let us say, we are talking about an individual’s attitude
toward a particular brand of toothpaste. His cognitive component of attitude toward the
said brand, say, ‘Pepsodent’, may be expressed as, “Pepsodent whitens teeth”. How he says
that this particular brand of toothpaste whitens teeth? This is based on his cognition or
knowledge about the brand. His cognition may be developed through reading, listening to
others, or through the actual experience. This aspect of attitude tells us how he evaluates
the attitude object. The evaluation is usually based on his knowledge about different aspects
of the attitude object as well as his beliefs on these aspects. His evaluation based on the
knowledge or cognition tells him whether to see the attitude aspect favorably or
unfavorably, and also the action he should take in case of unfavorable attitude developed
toward the object. For example, if an individual holds negative attitude toward cigarette
advertisements, he may not buy magazines putting on cigarette advertisements, or even
destroy the magazines publishing cigarette advertisements.
The Affective Component - Feeling or affect component of an attitude relates to positive

or negative emotional reactions to the attitude object. For example, if an individual believes
that ‘Pepsodent’ toothpaste whitens teeth (cognition), the affective component of his attitude
toward ‘Pepsodent’ may be expressed as: “I like Pepsodent”.
The Action Tendency or Conative Component - The third component of an attitude, the
conation or action tendency component encompasses intended and actual or overt behavior
with respect to the attitude object. So, this is a predisposition to behave in a particular way
toward the attitude object. For example, if an individual’s attitude toward ‘Pepsodent’ is
positive, he may be intending to buy or actually buy ‘Pepsodent’ toothpaste. This
component of his attitude toward ‘Pepsodent’ may be expressed as: “I like to buy Pepsodent”
or “I regularly use Pepsodent”.
The advocates of the three component model of attitude believe that, these three
components are the integral part of an attitude, that is, they work together. In other words,
in every attitude, these three components work together; may be their degrees vary. It is
also argued that, there are consistencies among the components. If one connotes positive
meaning, the other two will also connote the same. For example, if an individual believes
that a particular brand is good (cognition), he is likely to favor that brand (feeling or affect),
and will buy the same once he requires the product (action or overt behavior). But, the
problem with this model is that, it is not yet substantiated by a significant number of
empirical investigations. Moreover, it is very difficult to measure each of these components
of a given attitude, and, as a result, this model has a very limited real-life use in measuring
attitudes of consumers.
The Multiattribute Model of Attitude -
There are quite a few models of attitude showing the connection between perception and
preference or attributes and attitudes. These models are often referred to as evaluative belief
models of cognitive structure to emphasize that attitudes are the product of both
evaluations of the attributes and beliefs about how much of attributes are possessed by the
attitude object. One of such models has been developed by Martin A. Fishbein which is
widely used. According to this model, attitudes are viewed as having two basic components.
One is the beliefs about the specific attributes of an object (product, here in consumer
behavior). The attributes could be the product’s price, quality, size, shape, design,
distinctiveness, durability, availability, packaging and so on. The other component is the
evaluative aspects of consumer’s beliefs on different aspects of the attitude object. It implies
how an individual evaluates the importance of each attribute of the object (product) in
satisfying his/her need. The Fishbein’s model may be formulated as below:
Where,
b = T he individual’ s attitude toward a particular brand ‘b’.

Wi = The importance the individual attaches to attribute ‘i’.
Ii = The individual’s ideal performance on attribute ‘i’.
Xib = The individual’s belief about brand b’s performance on attribute ‘i’.
n = The number of attributes considered.
The attitude of the individual toward a particular brand is thus based on the sum of how
much the brand’s performance on each attribute differs from the individual’s ideal
performance on that attribute weighted by the importance of that attribute to the individual.
Functions Which Attitudes Perform for an Individual - Marketers are constantly trying
to shape or reshape consumers’ attitudes to make them purchase their products. An
identification of the function or functions being performed by an attitude is a prerequisite
for successful attitude modification. We have used the terms, ‘function’ and ‘functions’,
because any given attitude may serve more than one function simultaneously. There are
four major functions that attitudes serve for an individual. These functions are not seen as
mutually exclusive. They are complementary to each other, and at times, overlapping.
Daniel Katz, in his article titled “The Functional Approach to the Study of Attitudes”,
identified the following four functions that attitudes perform for an individual:
1. Function–1: The Instrumental, Adjustive, or Utilitarian Function - This

function is recognition of the fact that, people try to maximize the rewards in their
external environment and to minimize the negative consequences. For example, a
child develops positive attitudes toward the objects in his world which are associated
with the gratification of his needs and desires and negative attitudes toward objects
which punish him or thwart him. Why the child does so? The answer is to help him
reaching the desired goals and avoiding the undesirable ones. An individual favoring
a political party with the hope that he will be benefited if the party assumes power is
an example of instrumental, adjustive, or utilitarian attitude. The dynamics of
attitude formation with respect to the adjustment function are dependent upon
present or past perceptions of the utility of the attitudinal object for the person.
Thus, adjustment function of an attitude leads to an action, and may be related to the
action tendency component of the tripartite or the three component attitude model.
2. Function – 2: The Ego-Defensive Function - Through ego-defensive function, an
individual protects himself from acknowledging the basic truths about himself or the
harsh realities in his external world. We know that, individuals not only seek to
make the most of their external world and what it offers, but they also expend lot of
energy on living with themselves. Ego-defense basically includes the mechanisms of
protecting one’s ego from one’s unacceptable impulses and from the knowledge of
threatening forces from within, as well as reducing one’s anxieties created by such
problems. Ego-defense may also be termed as the devices by which a person avoids
facing either the inner reality of the kind of person he is, or the outer reality of the
dangers the world holds for him. These devices stem from the internal conflict with
its resulting insecurities. Defense mechanisms help the individual removing the
conflicts created within and save the person from complete disaster. They may also
handicap the individual in his social adjustments and in obtaining the maximum
satisfactions available to him from the world in which he lives. For example, a
worker, who regularly quarrels with his supervisor and colleagues may do so to act
out some of his own internal conflicts. By doing so he may relieve himself of some of
the emotional tensions which he is having. Ego-defense is related to the affective
component of the three component attitude model discussed earlier. Through the
performance of this function of an attitude, a person protects himself from others in
the environment by concealing his most basic feelings and desires, which are
regarded as socially undesirable. Ego-defense may lead to the projection of one’s
own weaknesses onto others or attribution of one’s shameful desires to others.
3. Function – 3: The Value Expression Function - Through the value expression
function an individual derives satisfactions from expressing attitudes appropriate to
his personal values and to his concept of himself. The value expression function is
the central to the doctrines of ego psychology which emphasize the importance of
self-expression, self-development, and self-realization. By this time you are aware
that many attitudes have the function of preventing the person from revealing to
himself and others his true nature. In addition, other attitudes have the function of
giving positive expression to the external world his central values and the type of
person he thinks himself. This is served by the function of an attitude, which we
term ‘value expression’ function. For example, if a person thinks himself of a
nationalist, will probably buy and use locally manufactured products to give others
the idea of his self-image. It is very important for the marketers to identify the
values their consumers hold to develop products and design promotional campaigns
that best suit the values of the market.
4. Function – 4: The Knowledge Function - This function is based upon the person’s
need to give adequate structure to his universe. Other descriptions of this function
could be an individual’s search for meaning, the need to understand, and, the trend
toward better organization of perceptions and beliefs to provide clarity and
consistency for him. People not only acquire knowledge in the interests of satisfying
specific needs or desires, but also to give meaning to what would otherwise be an
unorganized chaotic universe. To understand their world, people need standards or
frames of reference. Their attitudes help them to provide such standards. They do
want to understand the events which impinge directly on their lives. Knowledge
function may be related to the cognitive component of the three component attitude
model. This function helps the individual in evaluating the world around him. It
helps him to develop positive or negative attitude toward the attitude object.
Determinants of Attitude Formation and Arousal in Relation to Type of Function
Attitude Measurement Techniques
Marketers are interested in measuring consumers’ attitudes toward their products. There is
a wide variety of methods available for measuring consumers’ attitudes. Our attention here
will be limited to some of the important methods of attitude measurement. One of the
simplest ways of measuring attitudes is to ask questions directly. For example, an attitude
researcher for a calculator manufacturer may ask respondents what they think about the
styling and design of the firm’s new digital solar calculator. Marketers may also employ the
projective techniques used in motivation research to measure consumers’ attitudes. The
better option for a marketer is to use scaling techniques. An attitude scale involves a series
of phrases, adjectives, or sentences about the attitude object. The researchers ask the
subjects to indicate the intensity of their feelings toward the attitude object by reacting to
the phrases, adjectives, or sentences about the attitude object in a particular way. If a
marketer, for example, is measuring people’s attitudes toward video compact disc players,
respondents may be asked to state the degree to which they agree or disagree with a
number of statements such as “Video Compact Discs Players are complicated to handle or

operate”. Let us now look at some length on two of the most widely used scaling techniques
of attitude measurement. They are: The Likert Scale; and, The Thurstone Scale.
The Likert Scale of Attitude Measurement
One of the most popular technique of attitude measurement is the Likert Scale. Using this
scale, attitude researcher asks the consumer respondents to indicate the degree of approval
with a statement relating to the attitude object. Respondents are given the choice of five
responses regarding the statement. They are: strongly agree; agree; uncertain; disagree; and
strongly disagree. Numerical values are assigned to each response category. For example,
strongly agree is given 5 points, agree 4, uncertain 3, disagree 2, and strongly disagree 1
point. Respondents attach themselves with the statements relating to the attitude object by
selecting one of the five responses for each of the statement. Respondents are usually asked
to circle the category of response best expressing their feelings. The scores are summed,
once respondents circle their preferred responses to arrive at a conclusion on consumers’
attitudes. A higher score indicates a positive attitude and a lower score denotes unfavorable
attitude toward the attitude object.
The Thurstone Scale of Attitude Measurement
This method is also known as Thurstone’s Equal-Appearing Interval scale. This scale
involves having ‘judges’ scale attitude statements along an attitude continuum. The pool of
items collected by the researcher is given to a panel of judges who are likely to be the
representatives of the subject whose attitudes will be measured. They are needed to show
the amount of favorableness or unfavorableness toward the attitude object. That is, they
sort each item into one of eleven categories that they are to consider equal intervals along
the evaluative dimension, which range from ‘unfavorable’ through ‘neutral’ to ‘favorable’.
Consumer respondents are then presented with a list of statements which usually do not
have any numerical indication of their degree of favorableness or unfavorableness toward
the object under consideration. Subject respondents indicate their agreements or non-
agreements with each of the statements. Researcher categorizes the extremely favorable
statements as eleven, and categorizes extremely unfavorable statements as a one.
Statements that the respondents consider falling in between these two ranges express
intermediate degrees of favorableness or unfavorableness. After responses are received from
the respondents, the researcher assigns the previous given values by the judges to the
responses to determine the favorableness or unfavorableness of respondents’ attitudes.
Other Commonly Used Techniques of Attitude Measurement
In addition to the above techniques used in measuring consumers’ attitudes, there are quite
a few other techniques that may also be used to measure consumers’ attitudes. Some of these
techniques are: (a) Longitudinal Studies; (b) Observation of Overt Behavior Technique; (c)
Reactions to or Interpretation of Partially Structured Stimuli Technique; (d) Performance
on “Objective” Tasks Method; (e) Physiological Reactions Method; and, (f) Osgood
Semantic Differential Technique. Let us now focus on these methods in brief:
(a) Longitudinal Studies: Here, researcher measures attitude changes over a period
of time. He conducts subsequent interviews with the same subjects at various time
on the same attitude object. He plots the responses made by the subjects at
different times toward the attitude object along a consistent scale of ‘favorable’,
‘neutral’ and ‘unfavorable’ dimensions. This method is used to gauge the changes
in subjects’ attitudes over time toward a particular object.
(b) Observation of Overt Behavior Technique: By observing the overt behaviors of
subjects, their attitudes may be understood. For example, consumers’ attitudes
toward a particular store may be measured by observing their purchases at the said
store, frequency of purchases, and the volume of purchases made from the shop.
(c) Reactions to or Interpretation of Partially Structured Stimuli Technique:
Here, subjects are presented a particular situation through a picture and asked to
interpret it (picture). The way subjects interpret the picture tells the researcher the
attitudes they hold toward the object under consideration.
(d) Performance on “Objective” Tasks Method: Here, subjects are asked to perform
a certain task, or the researcher observes how subjects perform a particular task.
The ways they perform a task give an indication on their attitudes. The researcher
assumes that one’s task performance is influenced by the attitude that he holds.
(e) Physiological Reactions Method: Attitudes may also be measured by applying
techniques used to measure involuntary physiological reactions such as, galvanic
skin response, pupil dilation, and voice pitch.
(f) Osgood Semantic Differential Technique: In this test, pairs of words or
statements of opposite meaning that might describe an object (product for
example) are presented to the subject. The subjects rate each of several objects on
each dimension by placing a check at the place on a line that indicates their
feelings. Finally, the average of the checks is plotted as a profile for each object,
and thus, attitudes of the subjects are ascertained.
Attitude Change
How Attitudes May be Changed?
How a marketer can modify consumers’ evaluative inclinations or change their attitudes?
There are a number of strategies that marketers may adopt to change consumers’ attitudes.
Different models also explain techniques of attitude change that marketers may adopt. Here
we shall focus on some of the important techniques of attitude change as described in few
well-known models:
Cognitive Dissonance Theory Explaining Attitude Change - It is one of the best known
and widely used theory of attitude change. Leon Festinger, a famous psychologist, proposed
this theory in 1957. Dissonance basically denotes cognitive inconsistency. It is a situation in
which two cognitions (knowledge or thoughts) are inconsistent with one another. Cognitive
dissonance theory suggests that, dissonance or want of harmony or inconsistency occurs
when an individual holds conflicting thoughts about a belief or an attitude object. Once the
dissonance occurs, the individual will try to make a balance in his cognition, that is, he will
try to reduce dissonance. By changing his attitude he may bring cognitive consistency. If an
individual is exposed to dissonance creating information, it will affect his held attitude(s),
which will put the person in an uncomfortable situation. He will try to make the situation
comfortable by revising or modifying old attitudes, or by adopting new attitudes as well as
changing the entire personal value system. An individual may experience either the internal
dissonance or the interattitude dissonance. Internal dissonance or intra-attitude dissonance
may be created if there is a conflict takes place between the affective and cognitive
components of an attitude. Thus, marketers may bring change in consumers’ attitudes by
influencing their cognitions. It is done to change consumers’ beliefs about some attitude
object. This may be done with the help of marketing promotional tools. For example, if a
group of consumers believes that a particular brand of a product is not good, the marketer
of the said brand may develop an informative and persuasive advertisement or train his
salespeople to present the brand to the customers in a way that may bring changes in their
attitudes. As customers get new information, which were not known to them, they may
change their attitudes toward the brand. This may happen as consumers’ cognitions change.
Once consumers’ cognitive component of an attitude changes it will bring change in their
affective component. The said marketer may also try to change the feelings or the affective
component of consumers’ attitudes. By presenting the brand in an emotional context
marketers may also bring changes in consumers’ attitudes. If a marketer can bring change
in any one of the cognitive or affective components of an attitude, the other component will
be changed by the consumers themselves, as they seek consistency in components of their
attitudes. Thus, marketers should always try to create dissonance in consumers’ attitudes
toward competing brands, if attitudes toward them are positive.
The Functional Theory of Attitude Change
From the earlier discussion you know that attitudes serve four functions for an individual. If
an attitude serving a particular function changes, the individual’s attitude toward the object
will also change. The functional theory of attitude change mainly focuses on how attitudes
are changed with the change in functions serving attitudes. Let us now examine, how
attitudes serving each of the four functions may change or modify.
Attitudes that serve an adjustment or utilitarian function may change if one of the following
two conditions prevails. First, if the attitude and activities related to this function no longer
provide the satisfactions they once did. Second, if the level of aspiration of the individual
changes. The owner of a particular brand of a product who had positive attitudes toward the
brand may now want a more expensive brand commensurate with his status.
The procedures for changing attitudes and behavior have little positive effect upon attitudes
geared into our ego defenses, because, many ego defensive attitudes are not the projection of
repressed aggression but are expressions of apathy or withdrawal. Therefore, marketing
effort to change ego defensive attitudes may have a boomerang effect on marketers.
Consideration of three basic factors, however, can help marketers change ego defensive
attitudes. First, the removal of threat is necessary through providing permissive and
supportive atmosphere. An objective or a humorous approach can serve to remove threat.
Second, ventilation of feelings can help to set the stage for attitude change. Providing the
opportunity to talk copiously may help the subject ventilate his or her feelings. Third, ego
defensive behavior can be changed as the individual acquires insight into his own
mechanisms of defense. Procedures for arousing self-insight can be utilized to change
behavior.
Attitudes that serve value expression function may also be changed. If a consumer
experiences dissatisfaction with his self-concept, his value expressive attitude will change.
Two conditions are relevant in changing the value expressive attitudes. First, creating
dissatisfaction in the individual with respect to his self-concept can bring change in his held
attitudes. Second, dissatisfaction with old attitudes as inappropriate to one’s values can also
lead to attitude change. Attitudes serving knowledge function for the consumers may also

be changed. If an individual finds his old attitudes in conflict with new experience, he will
proceed to modify his beliefs. Thus, by providing information to consumers that are
inconsistent with their held attitudes may bring change in the cognitive component of their
attitudes. Thus, any situation, which is ambiguous for the individual is likely to produce
attitude change. One’s need for cognitive structure is such that he will either modify his
beliefs to impose structure or accept some new mechanisms to make a balance in his
cognition whenever there is an inconsistency.
Multi-attribute Theory of Attitude Change
You were given an idea on the multiattribute theory of attitude formation in lesson 1 of this
unit developed by Martin Fishbein. The same theory may also be applied in changing
consumers’ attitudes. Fishbein later on modified his model and termed it as an Extended
Behavioral Intentions model. According to the said model, a consumer’s intention to
perform a specific purchasing activity is a function of the person’s beliefs and evaluation of
the consequences of the buying activity. Fishbein expressed it as:
Aact = ∑ni = 1 Biai
Where, Aact = The attitude toward performance of a specific act, here in this case, a
purchase activity
Bi = Beliefs about the results of a specific act
ai = The evaluative aspects of the beliefs about the results of a specific act
ni = The number of relevant result or consequences
Using the elements of this model, a marketer may pursue a number of strategies to bring
changes in consumers’ attitudes toward his products.
The possible strategies are:

 Change the beliefs (Bi element) about the attributes of the brand.
 Change the relative importance of consumer’s beliefs
 Add new beliefs
 Change the beliefs about the attributes of the ideal brand.
Let us now discuss, how these strategies may be applied by a marketer: If a marketer
intends to change consumers’ beliefs about the attributes of the brand, he may try to shift
beliefs about the performance of the brand on one or more attributes. He may take attempts
to change consumers’ perceptions of the brand on one or more aspects. While deciding to
buy a particular brand of a product, consumers may consider some beliefs more important
than others. Thus, marketers may try to change attitudes by shifting the relative
importance away from poorly evaluated attributes to positively evaluated attributes. If, for
example, consumers believe that power consumption rate is more important in selecting a
brand of television, and if the advertiser’s brand consumes more power, he can try to change
consumers’ perception by focusing on the other attribute(s) that his brand possess. For
example, he may advertise through testimonials received from the experts that the life of
the picture tube is more important attribute buyers should consider while selecting a brand
of television. He should make sure that his brand is better in this attribute.

MODULE 3 – Social and Cultural Determinants
In the area of psychological determinants, the consumer behaviour was seen from the stand
point view of an individual. However, the sociologists and social psychologists have
attempted to explain the behaviour of a group of individuals and the way in which it affects
and conditions and individual’s behaviour in marketing or purchase decisions.
These groups of individuals as determinants are:

(1) Family
(2) Reference groups
(3) Opinion leaders
(4) Social class and
(5) Caste and culture.
Let us see these in brief to know their marketing implications:
1. Family:
Many of the decisions made by consumers are taken within the environment of the family
and are affected by the desires, attitudes, and values of the other family members. Family, as
a primary group, is vital because, it links the individual with a wider society and it is
through this that the individual learns the roles appropriate to the adult life. The family can
be ‘nuclear’ or ‘extended’.
A ‘nuclear’ family is a two generational family which consists, usually, a mother-father and
children. The ‘extended’ family is one that spans at-least three generations which consists of
mother-father- children-grandparents uncle-aunts, cousins-nephews and other in-laws.
There is another way of classifying the family based on family life-cycle. This classification
is ‘home making phase’ from marriage to birth of the first child; the ‘procreation phase’ from
the birth of the first child to the marriage of the first child’s; the dispersion phase’ from the
marriage of the first child to the marriage of the last and the ‘final phase’ from the marriage
of the last child to the death of original partners.
The family impact on consumer buying behavior can be traced in two ways:
1. The family influence on the individual personality characteristics, attitudes and the
evaluative criteria and
2. The family influence in the decision-making process involved in the purchases.
Family is both a purchasing and consuming unit. Therefore, it is essential to note
the distinguished family roles of the members.
These roles are:

Initiator:
The person who senses the need for the purchase;
Influencer:
The person who provides input into the purchase decision;
Decider:
The person who has the final say over the decision and

User:
The person who is most directly involved in using the purchase.
That is why; every marketer is keenly interested in four points in case of family
purchase. There are:
1. Who influences the buying?
2. Who does family buying?
3. Who makes buying decision?
4. Who uses the product?
In nuclear families, it is mostly the house-wife that has an upper hand in family purchases
regarding her family role such as food, clothing, cosmetics, interior decoration and
jewelleries.
Father has say over clothing, education, insurance etc., The children have say in clothes,
sports-equipments and recreational facilities such as TV, stereo-sets and the like.
Family life-cycle also has its own influence on buying behaviour. Thus, the proportion of a
family budget spent on food, clothing and children goes on increasing in the ‘procreation
stage’ than in ‘home making stage’.
2. Reference groups:
Each person in the society is not only the member of his family but the member of some
group or groups outside the family circle. These groups can be called as ‘reference groups’.
‘Reference groups’ are those groups which an individual identifies with to the extent that
these groups become a standard or norm which influences his behaviour. Reference group is
a social and professional group that influences the individual’s opinions, beliefs and
aspirations. It is one that provides an individual with a sense of identity, accomplishment
and stability. Generally, a person refers to any one of the following types of reference
groups in building his or her behaviour.
A. The groups that serve as comparison points:

Here, the individual compares himself, his attitudes, his behaviour and his performance with
the group of members. Thus, he may feel poor if members are richer than himself or vice
versa.
B. Groups to which a person aspires to belong:

Here, the individual aspires to be the member of such group and imitates the behavior of
that group including buying behavior. Thus, the group may be of higher social status or a
cult group such as ‘hippies’ or the ‘jet-set’.
C. Groups whose social perspectives are assumed by the individual as a frame-work of

reference for his own actions:
Here, an individual may adopt the views of the group without becoming a member. A
person need not be a professional sportsman to have the opinion and outlook of a
professional sportsman.
Some non-military persons behave more than ‘military’ personnel. Similarly, a person
belonging to minority may adopt the values and the perspectives of a majority which he
dislikes by very nature. Consumers as social animals spend most of their time in group
situations, and accept information provided by their groups on products, price, performance,
style and the like.
It is group norms that direct the attention of its members towards a new product, a new
brand. These reference groups have face to face interactions that provide word of mouth
communication which is more powerful than formal advertising. A satisfied customer
becomes the salesman of the product.
3. Opinion leaders:
Like reference groups, ‘opinion leaders’ or ‘influential’ play a key role in influencing the
buying behavior of their followers. Very often we come across situations where a person
refers to an individual than a group in formulating his or her behaviour pattern. The
individual to whom such reference is made by a person or persons is the opinion leader.
The beliefs, preferences, attitudes, actions and behaviour of the leader set a trend and a
pattern for others to follow in given situation. In very intimate reference group, there is a
reference person, an informal group leader. The group of followers respects him and looks
up to him. He is the innovator in the group of followers who respect him and look up to him.
He is the innovator in the group who first tries new ideas and products and then propagates
them to his followers.
Marketers very often try to catch hold of the opinion leaders through ads and other means
of communication. If they succeed in selling their ideas and products to the opinion leaders,
then they have sold it to the entire group of followers behind them.
4. Social class and caste:

Buying behaviour of individuals is also influenced by the social class and the caste to which
they belong. Social class is a relatively permanent and homogeneous division of a society
into which individuals or families sharing similar values, life-style, interests and behaviour
can be categorized. Social class is a larger group than intimate group in structure.
Constitution of a social class is determined by the income, authority, power, ownership, life-
styles, education, consumption patterns, occupation, type and place of residence of the
individual members. In our country, we can think of three classes are as ‘rich’, ‘middle’ and
‘poor’. Caste, on the other hand, is the group of the membership by birth. It is not the
wealth but the birth that decides his or her caste. These castes were based on activity
specialisation of profession or occupation.
In our country, we have four such broad categorization as ‘Brahmins’ ‘Kshatriyas’ ‘Vaishyas’
and ‘Shudras’. From the marketing stand point, both social class and caste frame are quite
relevant as buyer behaviour is influenced by these. Each class and caste develops its own
standards of style, living and behaviour patterns.
It is not a surprise, and then if the members of such a class select a particular brand of
product, shops at a particular store which caters to their group norms.
This does not mean that all the members of the group buy the same products, same brands,
or conform to same styles; however, more or less, it becomes a pattern with differential
range of likings and leanings. Thus, ‘Shudras’ may not enter the restaurants where
‘Brahmins’ and ‘Kshatriyas’ enter, though the ‘shudras’ are not barred from entering. It is
because of income pattern and traditional respect for higher castes, for in the eyes of Indian
Constitution, all are equal.
5. Culture:
Culture adds yet another dimension to the study of consumer behaviour. ‘Culture” refers to
all those symbols, anti-factor and behavioural patterns which are passed on socially from
one generation to the next.
It includes cognitive elements, beliefs, values, and norms, signs and non-normative
behaviour. Cultures are specific to the areas in which they evolve. Yet two nations can enjoy
a common cultural heritage. Thus, each nation has its distinct culture ; however, in a
particular nation, there may be subcultures identified on the basis of ethnicity, nationality,
religion and race.
Cultural and sub-cultural groups have their unique consumption patterns that provide
important bases to the marketers. Cultural trends have significant implications for market
segmentation, product development, advertising, merchandising, branding and packaging.
While designing the marketing-mix, it is but essential to determine the broad cultural
values that are relevant to the product as well as the most effective means of conveying
these values. A shrewd marketer never contradicts these cultural values in product,
promotion, price and distribution.
Group Dynamics
Group dynamics means how individuals form groups, and how one persons purchasing
influences the other individual’s actions. Now-a-days marketers use the concept of group
dynamics or personal influence often as this exceeds the power of company’s promotional
efforts. “A group may be defined as two or more people who interact to accomplish either
individual or mutual goals”.
This means that there can be an intimate group like two neighbours going out for shopping
specially grocery products and a more formal group like housing association members who
are more concerned about schools, parks, taxes etc., in their vicinity. We can also include,
that an individual consumer looks to others for help in deciding which products or services
to use.
Types of Groups:
Groups can be classified in a number of ways like by structure, by regularity of contact, by

size, by membership. Sometimes groups are differentiated in terms of size or complexity but
it is very difficult to state which group to be considered as large or small.
It is seen that in some groups a single member knows only a few of the group’s members
personally or is fully aware of roles or activities each member has to play where as in small
groups every member knows each other personally and are also aware of the specific roles
or activities in the group. For example, each member of the college science club is likely to
know others in the club and is also aware of their duties and interests within the group.

A. Primary Group and Secondary Group:
If a person interacts on regular basis with other individuals, then these individuals can be
considered a primary group. Interaction can be with members of the family, with the
colleagues, with neighbors etc., this means whose opinions are valued by that person, on the
other hand, if a person interacts only occasionally with others, or whose opinions are not
important, then this type of group is called secondary.
Difference:
Primary and secondary groups can be distinguished on the basis of perceived importance of
the group to the individual and the frequency with which the individual interacts with them.
Formal Group and Informal Group:
This is the second useful way to classify groups on the basis of their formal nature. If a
group has a highly defined structure, specific roles and authority levels and specific goals
then this is called a formal group. For example, in an organization – a list of all employees
(defined structure), Managing Director, Manager, Assistants etc., (specific roles and
authority levels), this shows a formal group.
Goals may be different for different organisations like to assist the homeless, working for
the benefit of old people or marketing goals-Increasing sales, promoting the product etc. In
these kinds of groups members have a vested interest towards a specific -goal, therefore,
they are classified as a formal group.
On the other hand, if a group is more loosely defined, then it is an informal group. For
example, four five girls who become friends in the school and now meet only once a month.
For the marketer, informal social groups are more important because of loosely defined
structure a more conducive environment is available for exchange of information to the
members.
B. Membership Group and Symbolic Group:
Membership Group is a group to which a person belongs or would qualify for membership.
For example, college alumni association, IMA, association of doctors, tennis club etc.
Symbolic group is a group in which an individual is not likely to receive membership even if
he/ she acts like a member by adopting that group’s values, behaviour and attitude. For
example, for youngsters cricketers like Sachin Tendulkar, Sourav Ganguly etc. may
constitute a symbolic group. They try to identify with these players by imitating their
behaviour like the style or sometimes by purchasing specific brand of bat, gloves, dress, ball
etc.
Even after this, youngsters probably will never qualify for membership as a professional
cricketer. Now-a-days marketers are using the celebrity for advertising their products, so
that people aspire to become like them after owning and using those products. Studying
these groups is very important to the marketer as they exert the greatest potential influence
on the consumption decisions of an individual.

C. Consumer Relevant Groups:
To understand in detail the kind of impact specific groups has on individuals, let us study
six basic consumer relevant groups:
The Family:
It is seen, that from childhood an individual needs and consumption decisions are influenced
by his/her family. Importance of the family in various decisions is based on the frequency of
contact that individual has with other family members. Moreover, it is in the family an
individual establishes a wide range of values, attitudes and behaviors.
Friendship Groups:
The immediate group which an individual forms after he/she moves out from the house is
friendship group. Friendships are also sign of maturity and independence as they represent
a breaking away from the family and forming of social ties with the outside world. They are
classified as informal groups as they are unstructured and usually lack specific authority
levels.
After family an individual’s purchase decisions are most likely influenced by friends. Friends
fulfill a wide range of needs like they provide companionship, security and opportunity to
discuss the matter which they can’t with the family members.
Friends’ opinions and preferences are very important for influencing an individual’s
behaviour in determining the products or brands he/she actually selects. For example,
marketers of products like branded shirts, jewellery and alcoholic beverages depicts
friendship situations in the advertisements- ‘Green Label’ -T.V. commercial of alcoholic
beverage. Consumers like to seek information from those friends who have values or
outlooks similar to their own. The influence of friends will be more in a purchase decision
one’s an individual finds greater similarity.
Formal social Groups:
Formal social groups, as the name says, lack intimate relationship and they serve different
function for an individual. A person joins this group to fulfill goals like making new friends,
pursuing a special interest, meeting important’ people specially for career advancement or
also sometimes promoting a specific cause (working for the welfare of orphans).
This type of group interests marketers because members often consume products together,
can discuss products or services or stores informally with other members and sometimes
can even copy the consumption behaviour of other members whom they admire.
Shopping Groups:
Two or more people who shop together this can be either for food, for clothing or simply to
pass the time-can be called a shopping group; people like to shop with others who are
pleasant company or who they feel have more experience or knowledge about a desired
product or service. Shopping with others reduces the risk that a purchase decision will be
socially unacceptable, collective decision is the best in which none of the members knows
about the product to be purchased.

Now-a-days, in-home shopping is more common, it consists of a group who gathers
together in the home of a friend to attend a “party” which is arranged to demonstrate and
evaluate a specific line of products. This kind of approach helps marketers to demonstrate
the features of their products simultaneously to a group of potential customers in their
surroundings.
Consumer-Action Groups:
Consumer-action groups can be divided into two broad categories: those that organize to
correct a specific consumer abuse and then disband, and those that organize to address
broader, more pervasive problem areas and operate over an extended or indefinite period of
time.
Work Groups:
This type of group also serves as a major influence on the consumption behaviour of
members as they spend a sheer amount of time at their jobs (around 48 hours per week).
Formal work group consists of those individuals who work together as a team.
Their direct and sustained work relationship offers substantial opportunity for one or more
members to influence the consumption related attitudes and activities of other team
members. Informal friendship/work groups consists of people who have become friends as a
result of working for the same firm, they may/ may not work together as a team. Marketers
have recognized that work groups influences consumers brand choices and sometimes even
the store choice, so now they are redirecting their sales efforts to offices and plants during
lunch-hour visits.
Family and Reference Groups

Family Groups
A family is an important element that affects the consumption and disposal of products by
an individual. A family may be defined as two or more people living together, related by
blood or marriage who share a common house, common income and similar status and
values.
It is important for a marketer to know the family structure, family compositions, buying
patterns, Buying roles and motives of family members, life cycle stages etc. in order to
understand family influence on consumer behaviour and position a product efficiently in the
market.
There may be two types of families:
• Nuclear Family – A small family comprising of a married couple and their children.
• Joint Family – It refers to a large family comprising of married couples, their
parents, their children and their relatives.
Family Influence on Consumer Behaviour: A family is a social group and all members of a
family influence and get influenced by each other. Family bonds are more stronger than
bonds in any other group and all members of the family form a single decision unit in case of
purchase of products and services for common consumption. Each member influences and

gets influenced by a family member depending upon his/her role, life cycle stage and
relationship dynamics in the family.
Therefore, family influence on consumer behaviour can be understood by studying the

buying roles, family dynamics and life cycle stage of a family member.
Buying Roles of a Family: The various roles played by members of a family while making
a purchase decision are:
• Influencer – The family member or family members who provide information about
a product or service to other family members
• Gate Keeper – Family members who controls the flow and direction of the contents
of information
• Decider – The one with the power to select the product whether individually or
jointly
• Buyer – The one who makes the actual purchase
• Preparer – The family member or family members who prepare the product for
family consumption
• User – The consumers of the product or service
• Maintainer – The members who maintain the product for continued use and
satisfaction
• Disposer – The member who disposes the product.
Family Dynamics
Family influence on consumer behaviour exists due to the relationship dynamics between
family members. The buying behaviour of a family and its members basically depend upon
the dynamics of husband-wife in decision making. There may be the following types of
decisions on the basis of husband-wife influences –
• Wife Dominant Decisions, E.g. grocery, food, home decoration

• Husband Dominant Decisions, E.g. phone, cars, insurance
• Joint Decisions, E.g. vacations, schools for children
• Autonomic or Unilateral decisions, E.g. milk, newspaper
Family Life Cycle Stages: The concept of household or family life cycle is important for
marketers in segmenting the market. In 1966, William wells and George Gubar proposed
eight stages to describe the family life cycle. The following life cycle stages are typical of
families:
1. The bachelor stage: young, single person under age of 35 years. Incomes are
generally low since they have started careers, but they may have few financial
burdens and sufficient discretionary income.
2. Newly married: young couples, no children. If both spores are employed, they will
have high level of discretionary income.
3. Full nest 1: young married couples with youngest child under 6 years of age. There
would be greater squeezes on income because of increased on childcare. However, if
they are members of a joint family, the level of discretionary income is likely to be
high.

4. Full nest 2: young married couples with children from 6 years to 12 years of age.
Better financial position because income of both parents rising. Children spend more
hours outside their parents influence.
5. Full nest 3: older married couples with dependent teenage children living at home.
Financial position of family continues to improve. There are increasing costs of
college education for children.
6. Empty nest 1: older married couples with no children living with them, parents still
employed. Reduced expenses result in greater savings and highest discretionary
income.
7. Empty nest 2: older married couples with no children living with them and parents
retired. Drop in income and couple relies on savings and fixed income from
retirement benefits.
8. Solitary survivor 1: older single persons with low income and increasing medical
needs.
The changing structure of family
Three other basic functions provided by the family are particularly relevant to a discussion
of consumer behavior.
These include:
• Economic well being
• Emotional support
• Suitable family lifestyles

Emotional well-being:
Although families in the affluent nations of North America, Europe and Asia are no longer
formed primarily for economic security, providing financial means to its dependents
unquestionably a basic family function. How the family divides its responsibilities for
providing economic well-being has changed considerably during past 30 years. No longer
are traditional husband as economic provider and wife as home maker and child-rearer still
valid. For instance, it is very common for married women with children in the United States
and other industrial countries to be employed outside the home for their husbands to share
household responsibilities.
The economic role of children also has changed. Today, despite the fact that many teenage
children work, they rarely assist the family financially. Instead, many teenagers are
expected to pay for their own amusements.
Emotional support:
The provision of emotional nourishment (including love, affection, and intimacy) to its
members is an important core function of the contemporary family. In fulfilling this
function, the family provides support and encouragement and assists its members in coping
with decision making and with personal or social problems. To make it easier for working
parents to show their love, affection, and support to their children, greeting card companies
have been increasingly creating cards for parents to give to their children (vice versa)
Suitable family lifestyle:
Another important family function in terms of consumer behavior is the establishment of a

suitable lifestyle for the family. Upbringing, experience, and the personal and jointly held
goals of the spouses determine the importance placed on education or career, on reading, on
television viewing, on the learning of computer skills, on the frequency quality of dining
out, and on the selection of other entertainment and recreational activities.
Family lifestyle commitments, including the allocation of time, are generally influencing
consumption patterns.
Role of Family in Consumer Behaviour: No two individuals have same buying

preferences. The buying tendencies of individuals vary as per their age, need, income,
lifestyle, geographical location, willingness to spend, family status and so on. An
individual’s immediate family members play an essential role in influencing his/her buying
behaviour.
An individual tends to discuss with his immediate family members before purchasing a
particular product or service. Family members might support an individual’s decision to buy
a particular product, stop him for purchasing it or suggest few other options.
Family comprises of:
• Parents
• Siblings
• Spouse
• Grandparents
• Relatives (Cousins/Aunts, Uncles etc)
What an individual imbibes from his parents becomes his/her culture. In countries like
India, where children are supposed to stay with their parents till the time they get married,
the influence of parents on an individual’s buying decisions can not be ignored. What he
sees from his childhood becomes his habit or in other words lifestyle. A female from an
orthodox background would prefer salwar suits, saris instead of westerns or short outfits. In
India, parents expect their children to dress up in nice, colourful outfits during marriages,
festivals or other auspicious occasions. Even if children want to buy something else, their
parents would always prompt them to buy traditional attire, thus influencing their buying
decision.
The moment an individual enters into wedlock, his/her partner influences his buying
decisions to a great extent. In most families, wife accompanies her husband for shopping be
it grocery, home appliances, furnishings, car etc.An individual would always discuss with
his/her partner before any major purchase. After marriage, individuals generally do not like
spending on himself/herself; rather they do it for their partner or family.
A young bachelor would not mind spending on alcohol, attending night parties, casinos but
the moment he has a wife at home, he would instead spend on household and necessary
items. No bachelor likes to invest money on mutual funds, insurance policies, mediclaims etc
but for someone who is married buying an investment plan becomes his first priority.
Women generally are inclined towards buying toiletries, perfumes, dresses, household
items, furnishings, food products while men would rather love to spend on gadgets, cars,
bikes, alcohol etc.Both have different tastes but when they come together, they mutually
decide on what to buy and what not to buy.
A Bachelor would never purchase Women’s Horlicks or Kellogg’s K special or a female

perfume but when he has a wife at home; he would love to purchase them for his wife. A
young girl who has never purchased shaving creams or men’s perfume all through her life
for herself would not mind purchasing for her husband, father or father in law. A working
woman would have different needs as compared to a housewife. A woman who goes to office
would prompt her husband to buy formal trouser and shirt, office bag, make up products etc
for her while a house wife would not like spending on all these as she does not require an
office bag and so on.
Children also influence the buying decisions of individuals. An individual spends happily on
toys, candies, ice creams, chocolates. sweets when he has children at home. Children in the
family prompt their parents to subscribe to Disney Channel, Cartoon network and so on.
Individuals do not mind spending on medicines, health supplements, vitamin tablets, protein
drinks if they have ailing parents at home.
Following are the roles in the family decision making process −
1. Influencers − Influencers are the ones who give ideas or information about the
product or service to the consumer.
2. Gate Keepers − Gatekeepers are the family members who usually panel the
information. They can be our parents or siblings too who can in any form provide us
the information about the product.

3. Decision Makers − Family or our parents who usually have the power to take
decisions on our behalf are the decision makers. After the complete the research they
may decide to purchase the particular or dispose it.
4. Buyers − Buyer is the one who actually makes the purchase of the product.
5. End Users − The person who finally uses the product or consumes the service is the
ultimate consumer also called as End user as per the context.
Reference Groups
A Reference group refers to a group of people you refer to, while making buying decisions.
It is a group that serves as a reference point for an individual for his/her beliefs, attitude
and behaviour.
A group consists of two or more individuals who share a set of norms, values or beliefs and
have a defined relationship such that their behaviour is interdependent.
Reference Groups are basically small in size and differ from one individual to another.
Family members, Relative, Friends, Colleagues and other close acquaintance are usually
termed as Reference Group. Common organizations like Colleges, Schools, Police
Academies and membership firms also fall under Reference Group.
Characteristics of Reference Groups:
• Reference Group consists of people who share interests in common

• People in reference groups are sought for before any real purchase decision is made
• Opinions or recommendations made by people in Reference Groups have a huge
impact on the approach and behaviour of a potential consumer
• Reference Groups many a times acts as the factor responsible for creating
aspirations in other members of the group
• Reference Group tends to provide ideas pertaining to products that can be purchased
with reference to specific lifestyles
• Reference Groups play an important role in setting standards pertaining to purchase
decisions made from time to time
• Reference Groups become successful when homogeneity is found in the same
• Some Reference Group that are common to public exert pressures related to
conformity to set rules
• All members associated with the group are expected to certain rules and regulations
set through mutual understanding
Nature of Reference Group
• Norms – These are unwritten codes or standards of conduct that are assigned to an
individual within a group.
• Roles – These are functions that an individual assumes or that the group assigns to
an individual to attain group objectives. E.g. The influencer, the gatekeeper, decision
maker, purchaser, consumer
• Status – It is the position of authority that is designated within a group. High status
implies greater power and influence.

• Socialisation – It is the process by which an individual learns the group norms and
role expectations.
Types of Reference Group
(1) Aspirational Groups – These are groups in which people are not members but desires
to become one on a future date. The aspiration may become true once they are ready to join
the group at the future point of time. The influences exerted by such group members on
consumers make them join many groups every now and then.
(2) Primary and Secondary Groups – Primary Groups are basically ones whose members
are closely knit. Family and relatives fall in this group Secondary Groups are not as closely
knit as Primary Groups. They may be memberships in clubs where the meeting may happen
only once a while. The influence exerted by both the Primary and Secondary Group
members play a crucial role in the decision making process pertaining to purchase of goods
and services
(3) Non-Membership and Membership Groups – As the very name suggests,

Membership Groups are the ones which insist on people to become members to avail
benefits offered by the same. Non-Membership group are general groups in which one
associate them for keeping self updated about certain aspects of their interest. Such groups
do not insist on any type of memberships. The influence exerted by Membership groups on
consumers and their purchase decisions are many a times higher than that of the same from
non-membership groups. This is mainly because of the adherence levels exhibited in
Membership groups
(4) Formal and Informal Groups – While formal groups are bound by set rules and
regulations Informal groups lack the same. The unstructured nature of Informal groups
tends to exert lesser influence over consumer preferences than the Formal Groups which
are highly structured. Due to the structure nature of Formal groups, the influence on the
group members with respect to various aspects is generally high.
Influence of reference groups on consumer behavior: The influence of reference groups

depends upon –
• An individual’s information and experience

• Credibility of the group
• Attitude towards the group
• The nature of the product
The involvement of members in a group can range anywhere between a simple one or one
with high dedication levels. It can be divided into:
• Compliant
• Identity
• Internalization
Compliant – This type of group members remain in a group paying the set membership
fees, participating in the meetings and other get together in the instructed manner and
adhere to things like dress code etc. during all occasions. They do not undergo any change
as far as their attitude and personality is concerned just because they are the members of the
group. In a typical consumer scenario, being one of the members of the group, people tend
to go in for the brands and products when the same is suggested by another group member.
Identity – People of this type tend to mend their attitudes and ideas to suit the objectives of
the organization they associate themselves with. They will be more inclined towards
attaching themselves with the group through services and other such activities. They
express their pride in being one of the group members and show this as their key identity.
In a real life purchase decision making scenario, any consumer who identifies himself with
the group he is associated with, respects the opinion of the group members more than any
other thing
Internalization – The involvement levels of people who fall in this category are very high.
Not only they act highly dedicated to the group but they pull in others into the group. They
motivate other members of the group to get involved in a deeper manner. They become one
with the group. Anyone with such high levels of involvement in groups will go in for
recommendations from other in the group with respect to their purchase decisions. They try
to influence the purchase decision of others also basing the same on the recommendations of
other group members.
Many factors pertaining to Reference Groups tend to influence consumers and their
purchase related decisions. Three factors concerned with Reference Groups are Norms,
Status and Roles.
(1) Norms are rules set by Reference Groups in writing. People who belong to the
Group are expected to adhere to the same at all points of time. Norms force
consumers to go in for certain options as a part of their adherence process.
(2) Status of members in the reference Groups matter the most when it comes to
decision making pertaining to purchase. Member who are highly positioned within a
group have the power to take the final decision of purchase. For instance, in the case
of a family, the Father holds an upper hand in decision making pertaining to
purchases.
(3) Roles here refer to the part played by every member of the reference group. In a
typical family environment, each family member plays a different role like
gatekeeper, initiator, decision maker, influencer and many more.
Categories of Reference Groups
The four categories are Normative Groups, Comparative Reference Groups, Status
Reference Groups and Dissociative Groups.
(1) Normative Groups Park and Lessing – A consumer is motivated to conform to the
norms and behaviour of the group if :
• The group provides significant rewards for the compliance

• The individual’s behaviour in conforming is visible to the member
These are the groups that care for set norms and ensure that the same are held up at all
points of time. Influence exerted on the consumer by such Normative Groups is many a
time subjective. This type of influence is also termed as Utilitarian Influence. Any group
expectation getting fulfilled by one of the individuals in the group is referred to as
Utilitarian Influence. For instance, when you purchase a refrigerator brand suggested by
your family member without choosing the one of your choice, the influence is called as
Utilitarian. Young students who avoid wearing certain style of clothes for the fear of
getting mocked by his friends experiences the type influence common to Normative groups.
(2) Comparative Reference Groups –These are groups with whom the individual
compares himself and his attitudes. They provide a basis for validating beliefs, values and
attitudes. Value expressive influence.
Getting influenced by a likeminded neighbor is a typical happening that can be witnessed in

Comparative Reference Groups. The main characteristics of such groups is the validation of
practices and belief systems that happen between people who belong to the group. The
influence exerted in such type of groups is termed as Value Expressive Influence. The
reason for the term ‘Value expressive’ is the uniformity in thoughts and belief systems that
prevails between the members of the group. For instance such a group members may be of
the same opinion when it comes to smoking or drinking habit.
(3) Status Reference Groups –A group in which one refers to the position or status of the
people in a group before making a purchase decision.
This group is also called as Aspiration Group since anyone who wants to exert influence
being a member of this group may do so based on his status. The higher the status in the
group, the more intense the influence exerted on other group members.
(4) Dissociative Groups – Some individuals do not want to be linked to, or identified by a
group of individuals and try to dissociate themselves from the group.
Many a times, people wish to and dissociate themselves from a group which they consider as
a ‘not suitable one’ for themselves. For instance, in a typical office scenario, a person may
not want himself to be identified with a group of people who are considered as dishonest. He
tends to dissociate himself from them. As a consumer, he keeps away from buying the
products and brands any of the other group members buys.
Application of Reference groups in Marketing of a product –
Product purchases can be influenced by using the following to promote products:
• Celebrities
• Experts and Professionals in the relevant field
• Good spokesperson
• Opinion leaders
Characteristics of groups influencing Consumer Behaviour
• People who associate themselves with a group adhere to norms that are common to
all in the group
• Their beliefs and value system complement each others’ thoughts
• They share a relationship that is either direct or indirect by nature
• Their approach towards each other in taking decisions is mutual and interdependent

• Every member of the group learn many crucial things from others present in the
group
The above characteristics enable organizations to device their marketing mix based on the
approach and behaviour of each individual group. Stratification is thus leveraged to the
marketing advantage of organizations which focuses on tapping the right set of customers
for selling their products and services.
Reference Group and Social Power
The influence of reference groups on Consumer Behaviour is felt through the influence of
Social power. The following powers are used to influence individuals in a group:
(1) Reward Power – It is the power to restrict or allocate material resources and rewards
to a person.
Consumers are offered rewards in the form of cash and kind whenever they yield to the
influences of the group they are associated with.
(2) Coercive Power – It is the power based on application of fear, pain, restrictions etc. on a
person.
Many a times, consumers are threatened to go in for certain brands or to avoid a particular
brand. Here coerciveness acts as the main power and so is termed as Coercive Power
(3) Legitimate Power – This power is based on the position of a person in an organization
or social unit.
As the terminology implies, when someone gets what is legitimately due to them as a
consumer, it is termed as Legitimate Power
(4) Referent Power – A person tries to copy the behaviour of another person whom he
takes as an idol and wants to be identified as him. The referent power lies with the person
whose personality characteristics others try to copy and are attracted towards him.
(5) Expert Power – It is one`s power to withhold information from others. It is based upon
one`s experience, special skill, or knowledge.
The behaviour of consumers tends to get modified when a person who is an expert in the
product or area of interest vouches otherwise. The expertise power rules over purchase
decision made by the consumers to a great extent.
Social Class
Meaning and Definition of Social Class:
Consumer behaviour is influenced by environment in which one lives. The decision process
is affected by a number of factors such as culture, social class, personal influences, family,
religion, region he lives in, and his situation. Amongst them social class has great impact on
consumer behaviour but what is a social class has been described differently by different
researchers.

It can be best described “divisions within society composed of individuals sharing similar
values, interest and behaviours”. They are differentiated by socio-economic status
differences but some researchers do not take into consideration social factors. Leon G.
Schiffman and Lisline Lazor Kanuk measure social class “in terms of social status” such as
profession, income, quality of neighborhood and dollar value of residence and do not
consider cash, region and other social factors stating that consumer behaviour study is
different than socio-culture study.
According to T.E. Lasswell in his book (Class and Stratum: An Introduction to Concepts
and Research (Boston: Houghton Mifflin Co.) “Social class is the relatively permanent and
homogenous division in society into which individuals and families sharing similar values
life styles, interest, and behaviour can be categorized”.
According to W.P. Dommermuth in his book Promotion Analysis, Creativity and Strategy
(Boston “Kent Publishing Co.) “Social classes are very broad groupings of individuals
which hold roughly similar status levels in society arranged in a hierarchy from low
through middle to upper class divisions”. This definition has placed emphasis on status and
treated persons in same social class who have similar status and position and similar values
in life and so there are preferences, likings and disliking’s are of similar nature.
D. Dresser and D. Corns Professor of sociology in their book and the study of Human
Interaction have defined social class “a group consisting of a number of people who have
approximately equal positions in a society. These positions may be achieved rather than
described, with some opportunity for upward or downward movement of other classes”. He
has placed emphasis on economic position rather than cultural or social similarity.
Thus there are two thoughts for segregation of social classes but there is almost unanimity
about the factors which should determine the existence of a separate class. They are
mutually exclusive, exhaustive and influential. It means that there should be very clear cut
demarcation between one class and another class based on various fixed criteria. Secondly
the relationship between different classes should be ranked as top most, second, third, forth
etc.
It’s also desirable that one individual should be included only into one social class. This,
however, becomes very difficult to determine when large variables are taken. One individual
may fall in one group according to one criteria and in another group as per another variable.
Therefore, some researchers are against considering too many variables.
It is, however, desirable that all members of the society must be included in one class or
other i.e. the classification should be exhaustive. Further, while fixing the groups it should
be ascertained that these classes are such that they influence the behaviour of its members
to a certain extent in the matter of buying behaviour.
In USA researchers like Mc Kinley L. Blackburn, David E. Bloom, Pierre Mortineaw and
Richard P. Coleman have taken following variables to determine the class all of which are
based on economic factors.
Two – Category Social Class Scheme
It is the simplest and divides the society in two classes based on profession or level of
income i.e.

1. Blue collar (workers) and white collar (office jobs).
2. Lower and upper based on income level but other factors are also taken into
consideration.
Three Category Social Class Schemes: Divides the society into three classes:
1. Blue collar (factory and mines workers;

2. Gray collar (office workers; and
3. White collar (who do not undertake physical work).
Four Level Social Class Scheme:
Is based on level of income and divides society into four groups lower, lower middle, upper
middle and upper class; in India also in many respects this classification is adopted i.e. poor,
middle class, upper class and rich class.
Five Category Social Class Scheme:
Divides the society into five classes based on income level but other factors as indexation is
also taken into account.
They are:
1. Lower, working class, lower middle,-upper middle and upper class.

2. Lower: lower middle, middle, upper middle and upper class.
Six Category Social Class Scheme:
Divides the society into six categories based largely on income level. This classification is as
under lower, upper lower, lower middle, upper middle, lower upper and upper- upper.
Seven Category Social-class Scheme:
It is further refinement based on income level and as the class is segregated into more
class’s people of the class have more similar behaviour. The classification is real lower i.e.
(lowest income group), a lower group but not the lowest, working class, middle class, upper
middle, lower upper, upper – upper.
There is no fixed criteria for these classifications and the researcher divides them according
to the purpose of the study and more refinement one wants he divides the society into more
categories.
Occupation:
The classification can also be based on occupation because people of same profession are
expected to behave in a similar manner. All chartered accountants, all lawyers, all architects,
all engineers; all computers personal may behave similarly. However, they will not be
having same lookout. For example, the income of a chartered accountant in India varies
between Rs. 60,000 to Rs. 12 lakhs per annum.
A lawers earning varies from Rs. 5000 per month to Rs. 30 lakh per month. A doctor may
earn any where between Rs. 100 per day to Rs. 10000 per day. These income differences
makes big differences in their behaviour as a consumer and if all of them are classified into
one class marketer may not be able to get much advantage in marketing.
Therefore, along with occupation there is further division based on income. Persons of same
occupation are therefore subdivided into various classes based on income.
Education:
The level of education also affects the behaviour as a consumer. An illiterate man has no
interest in newspapers, books and magazines but persons with high education need these
products regularly. In the matter of other products, consumption also differs widely,
therefore sometimes it is desirable to classify as per level of education. This can be combined
with occupation, and income to give better picture.
Income:
The income of an individual or family plays a very important role in his behaviour as a
consumer. The demand of products for rich, high income, middle income, low income and
poor differs widely and therefore it is most important criteria for social classification.
But persons even in same income bracket behave differently based on many other factors
such as place of their residence (rural, unban, region) Bihar, Assam, Bengal, Orissa, Punjab,
Haryana, Maharashtra, Rajasthan, Gujarat etc. Even people with same education,
occupation and income behave differently in different regions due to cultural factors,
climate, traditions, social customs etc.
Religion:
Religion is another factor which influences the behaviour as a consumer too Consumption of
certain products is Tabaco in some religions but permitted in others irrespective of other
factors. Jains, Brahmin, Agarwals generally will not eat meat but it is openly consumed by
many other classes. Sikhs will not consume tobacco and cigarettes.
Not only in the matter of eating religion also affects consumption in other ways. People of
different religions have different festivals when they are gey and happy and buy new things
for self, family and for gifting. These factors affect their behaviour as a consumer and are
very important for marketer.
Social – System:
In India till lately there was system of joint family and even today there are many joint
facilities i.e. father, his sons and their families live together, have common one kitchen, one
house. The behaviour of such families is different than single family (husband, wife and their
children).
In India gradually more and more ladies are working i.e. both husband and wife is earring
members and sometimes unmarried adult educated sons and daughters too. The
requirements of such families are different than single person family earner.
When husband, wife, son, daughter earn all of them have a say in consumer behaviour not
only in the matter of big items like TV, car, refrigerator, house and investment but also in
the matter of furniture, furnishing, and sometimes even what should be cooked, where

should they eat outside, which movie they should watch and in which theatre. Such factors
are often ignored while making social classes but they are very important in Indian setting.
Castes:
Caste is not as important social factor in USA, Europe or Japan as in India. The
consumption pattern of vaish (banias) is much different than of khatris or compared to
backward classes. Certain consumptions are related to their customs, traditions, culture and
other social factors. These cast factors are somewhat of permanent nature; they do not
change with the level of income or education.
All persons of one cast irrespective of other factors behave in a similar manner and is an
important variable for segregation of population in social classes. But some researchers do
not give it due importance as they feel that segregation should be based only on economic
groupings. But in countries like India where consumption of certain products is based on
their social casts and therefore it cannot be ignored in social classes.
Social Classes:
Americans and Europeans do not believe in social classes. They believe in classless society.
Indian constitution also does not believe in classes and every one has been given equal
rights. Still when it has reserved seats for election, admissions in educational institutions
and or government jobs it has indirectly admitted that there are social classes based on
historical factors.
In USA there are classes based on race. In India there are tribals and scheduled classes who
have different perceptions, consumption pattern, food habits, social customs, systems of
marriages and other rituals. These factors affect behaviour as a consumer and therefore to
optimize sales each class will have to be approached differently.
Quality of neighbourhood also has impact on behaviour. For instance in Delhi residence of
South Extension, G.K. or other colonies of South Delhi is rich elite. Their habits,
consumption pattern is much different than that of a person of East Delhi or West Delhi. In
South Delhi upper income group persons reside and many of them own big cars, big
bungalows, their children study in famous schools and colleges.
They are more modern in outlook and have adopted western fashions. They visit modern
show rooms for shopping and buy only costly products. They consume more cosmetics; go
to clubs and restaurants more often than people of other localities.
They are really affluent elite and their consumption pattern is different than persons of
other localities. These types of differences are visible not only in one town but all over the
world. Hence locality can be one method of social classification.
Lifestyle of various Social Classes:
The life style that is consumer behaviour of various social classes differ widely. A person in
lowest class is able to buy only bare minimum requirements of life. In India and some other
countries there are persons ‘below the poverty line’. This class is not able to meet even basic
minimum and live on the mercy of state and / or social organisations for their shelter,
education of children and meeting their day to day requirements.

On the other extreme there are rich elites either because of historical factors like zamidars
in India or persons in foreign countries who have inherited. But researchers have
established that lifestyle of one social class in terms of attitude towards life, activities (like
visiting clubs, hotels) behaviours (liking or disliking of certain products and activities),
beliefs and behaviour tend to be similar on this basis consumer researchers segregate them
in different classes.
For instance, upper most class has well established small family. They are richest persons
and some of them like Indian industrialists run charity institutions. They sponsor colleges,
hospitals in their family and their name. Some of the persons in this group are top lawyers
and physicians who have made name and wealth heavily for their services, major
industrialists, bankers, financiers, exporters etc. they accumulate wealth for the sake of
wealth and they do not waste wealth.
New Wealthy Class:
The second group is of ‘new rich’ upper class who have acquired wealth through success in
business, industry or service. The senior successful top business executives drawing salary
of Rs. 1 lakh or more per month also fall in this group. The persons in this group often
believe in showing their new acquired richness.
They buy high priced cars, house, get best education for their children and get treatment in
best hospitals in case of illness. This class wants to have best enjoyment of life and looks for
the future of their family.
The next class is of high level professionals. These persons do not have family status and
have acquired wealth due to proficiency in their profession. Therefore, they are career
oriented and their priority is to build career of their children too through best education in
India or abroad. Young successful professionals, senior corporate executives and small scale
and medium scale new businessmen fail in this group who has come up through their
education and hard work.
They all are well educated and many of them have advanced Indian or foreign degrees in
their profession like from IIT’s or IIM’s or other reputed colleges. These persons are active
in professional, social and community activities but most of them do not take much interest
in religious functions.
They believe in high standard of living and try to buy best things in life-houses, furniture,
furnishings, automobiles, health care, insurance, education of their children so that they may
also become good professionals. They prefer to live in posh colonies and buy goods in best
stores. They take great interest in development of their children and therefore believe in
small family.
Middle Class:
The next social class according to economic status is middle class whose mean income in
India varies between Rs. 7000 to Rs. 10,000 per month, though some have higher income.
They are mostly junior executives. They are white collar workers but also include high paid
blue collar persons and small traders. These people have great ambition to move up and are
one of the biggest classes in every society. Sometimes they are called cream of the society.

They are generally well educated or technical hands and always try to improve their skills
so that they can move up. They want respectability in the society and therefore on certain
occasions they spend more than their capacity. Most of them spend sometime worshiping of
their faith and participate in religious and social functions. They take all possible care that
their children do well in competitive admission tests of medical, engineering, management
and other professional colleges.
They have target that children are admitted in state owned or aided colleges because private
colleges are considered too expensive. But if they are not admitted on the basis of merit they
try to get their sons and daughters admitted in best private colleges which has resulted fast
growth of such institutions in last two decades specially in 90’s and beyond. These persons
are major consumers for many branded products, new developing stores on western style
and they also patronize e-commerce.
Lower Middle Class:
Most of the factory workers and petty shopkeepers fall in this group and majority of them
have income within range of Rs. 5000 to Rs. 7000 per month. In view of limited income they
are not able to satisfy all their demands. They try to get their children to be well educated
so that they get good jobs when they become adult. Persons in this group are most
influenced by culture and social customs.
They spend heavily on marriages and funerals of elderly people, many times more than their
resources and become indebted. But majority of them are security minded and therefore
save for future in banks, insurance policies, purchase of gold ornaments. Most of them want
to own TV for leisure and electric fans, coolers and refrigerators for daily comfort.
They also want to own two wheelers for movement to offices and other places. These
factors has increased demand of these goods speedily in last two decades and even in
juggins in Delhi one comes across families owning TV, fridge and two wheelers.
Poor Class:
It consists mainly of unskilled workers and often they work as labourers on farms,
construction of houses and roads and in factories. They earn per day between Rs. 100 to Rs.
150 and do not remain employed year round; often they are without work. This class is
found not only in India but even in countries like USA but their per day earning is much
higher than in India but is not adequate to live decent life.
In this class both husband and wife and many times even children work. They are forced to
work to help the family and have to forego education which is cause of higher rate of
illiteracy in this class all over the world; for them current earning is more important than
future.
This rock bottom class though does not earn enough to meet their necessities but for many
of them drinking becomes necessity much more than anything else. In such people wife and
children are ill treated and many times they remain hungry, half clad and ill fed. They
believe in day to day existence and do not think of tomorrow. If on someday they earn more
that day they will eat and marry rather than saving for tomorrow.
In order to study6 life style of various social classes which actually are classes largely based
on income researchers have studied in detail life style of various classes in countries of west
to estimate demand, segment them for advertisement, producing products and services and
influence their behaviour.
Some of the factors of activities which are considered are stock investment, travel, specially
foreign travel, investment in property, interest in politics, golf, fine arts, which are universal
for top class all over the world. In addition in countries like India they spend heavily on
show in marriages, births, parties, gold and jewellery.
They also take good care of health and education of their children and services who
segregate the society into different classes. They consider features like blue blood status,
money and brains, furs and station wagons, pools and parties, etc., gold coast, black
enterprises, rank and files and like.
The PRIZM has segregated the society into 40 life style clusters and then organised them
into 12 broad social groups for the purpose of marketer. These forty groups have also been
coded into suburban, urban, towns, and rural.
In India no consumer research has gone into that detail but looking to states and union
territories in India with large number of languages, division of population into urban, semi
urban, rural, level of income and cultural differences there can be much larger number of
classes for which deep research is called for by economist, sociologists and consumer
researchers to segregate the society in social classes for better marketing strategy.
In India in some state there is more than one social class even on the basis of geography.
For example, persons of Bundel Khand, Eastern U.P and Western U.P are different social
classes. In Madhya Pradesh even after formation of Chhattisgarh there is more than one
social class. People living in Vindhyachal therefore are demanding Vindhya Pradesh by
further carving Madhya Pradesh.
Similarly, in Rajasthan there is more than one culture which is also true for some Southern
states; people of Telangana in Andhra Pradesh have different social culture. Thus for the
purpose of marketing if one wants to tackle different social classes properly to capture the
market and influence the attitude of consumers, first requirement is to classify society in
proper social groups taking into consideration all economic, social, cultural, religious and
other factors, the way it is done after consumer research in USA and some other developed
countries.
Mobility:
Some researchers believe that social classes are static and the person who is in one social
class remains in that class for ever. But this is not always true. When one considers
economic factors it is possible to move from one social class to other?
These social classes “membership in this country (USA) is not so hard and fixed as it is in
some another countries and cultures”. This is true for India too. People have moved in India
too from lower classes to higher classes with rise in their education level and income level
but their culture and food habits do not change.
Many persons from Gujarat, Rajasthan and Punjab have moved up, many NRI’s have come
up from the ranks. But even after going abroad their food habits, system of marriages,
functions etc. have not changed which has created market for Indian food, Indian books,
magazines etc. in countries where NRI’s have settled.
There are other sets of persons within India who have risen from ranks to senior executives,
middle and small level entrepreneurs. Persons like Ambanis, Patel have risen from bottom
to top and in the past the history of Jains, Dalmias, Tatas, Birlas etc. is similar. They now
are able to buy anything they like and can afford same life style as persons of that class in
Europe, Japan or USA but because of their culture, religion, family background they have
not completely broken ties from the past.
Thus it may be concluded that with the rise in income one moves to higher social status but
also maintains old traditions. Thus the social class partly changes. However, it is true that
upward mobility is always taking place round the global and those persons who achieve
something becomes reference groups for others who try to copy successful men and women
in different occupations and professions.
Persons who are just below try to copy life style of those who are in higher social class
which gives another handle to marketer to change the attitude of consumers. Because of this
fact famous film actors and actresses are used in advertisement campaign. The mobility of
social classes and desire to go up in next higher class also changes the consumption habits
and behaviour of next lower class who copy the higher classes in the matters of brands,
shops used for marketing, hotels and restaurants visited, the fashion, the type of clothes and
so on.
Thus there is mobility of consumption pattern too which is exploited by marketers. No

longer best hospitals are visited by top class only but those who can afford also get
treatment in them for self and family. Similarly best clothes, best restaurants, no longer are
monopoly of rich classes only but others also use their services for experience and for show
if not for other things.
This is general desire in every individual to consume best products as are consumed by
elites. It has been proved by studies that persons are moving up in higher classes due to
education, promotion in their profession and there is downward mobility of products. The
tendency for experiments is highest in teenagers who use discretionary income on high
value consumption even if it is beyond their normal capacity.
The changing family composition with lesser number of children and both husband and wife
working is also changing social classes. Such persons believe to be young, and have fun. The
phenomena of smaller families are spreading to highly educate urban society mainly
metropolitan cities in India too and now both work.
Divorce is another social factor in changing family composition. In USA half of all
marriages end in divorce. In India divorce percentage even now is very low but the number
is upward and so of single living men and women who are class in themselves.
One social class persons have common values and “defines the ranking of people in a society
into a Higher of upper, middle and lower classes “based on their power and prestige”. It
takes into consideration environment (i.e. culture, social class, personal influence on family
and the situation and individual differences like resources i.e. income, motivation and
involvement, knowledge i.e. education, attitudes, personality, values, as all these factors are
dynamic; social classes are not static but some of the factors specially environmental factors
are less dynamic than individual differences.

Thus the social classes are ever changing and require regular review of classes; some of
researchers, therefore, have prepared index of socioeconomic factors for this purpose W.
Loyal Warmer has used Index of Status Characteristics.
He used following socioeconomic indicators:
1. Occupations ranging from unskilled workers to professionals.

2. Source of income ranging from public relief to inherited wealth.
3. House type rated from very poor to excellent.
4. Dwelling area ranking from slums to “gold coast” areas. Based on these four factors
he categorized persons into seven social classes.
Applications of Social Classes: Classification of social classes is used for following

purposes:
1. Advertising
2. Market segmentation
3. Distribution
4. Product Development
Different Social Classes in India:
In India social classes have been divided on the basis of income by planners National Sample
Survey Organization collects data on consumer expenditure on the basis of large sample and
so far (up to 1999-2000) had 55 rounds. It defines persons below the poverty line who are
not able to spend enough to maintain minimum desirable standards of life. In 1973-74 54.9
percent of Indian population was below poverty line.
This percentage has been gradually coming down and was 23.33 percent in 1999-2000
based on 7 days recall period (Table 8.1). These are the people who are not able to afford
two square meals, do no have proper houses to live, are not able to send their children for
education and force them to supplement family income.
They do not have proper clothes to protect themselves from winter as they are not able to
buy woolens and do not have proper clothes even for summer, some of them use rags. They
are not able to take proper health care and therefore suffer from many diseases. They
heavily depend upon state help and charity.
In order to help them food grains are supplied at half the ration price. But this class cannot
choose to buy what they would like. Therefore, often marketers ignore them but in spite of
poverty they account for one-fourth India’s population i.e. over 25 crores of persons and
those who ignore them, ignore large market which may grow in future when their income
rises.

As persons in poverty class are moving up with greater employment, better education,
government aid etc. consumption level of these people is going up, which will be clear from
Table 8.2.
Expected that in next ten years all of them will move up to next higher class. Hence
marketer from now itself should look into their emerging behaviour and consumption
pattern. When they will move up, the demand of many food products, clothe, etc. should go
up.
Many persons in this class are drinkers and with the rise of their income they will move up
from Deshi to Videshi or better deshi rather mere “taraha” which most of them consume.
They are also likely to spend some money on health care and medical treatment.
After they are able to afford they may like to go on pilgrimage and part of the income to
repay debts and may buy some goods of necessity which they are not able to do at present,
when their income will go up market will explode. Hence it is desirable to study
consumption pattern of poverty striken persons and those who fall in next class.
The percentage of population below poverty line differs widely from state to state. The level
of poverty in Andhra Pradesh, Bihar, Madhya Pradesh, Orissa, Rajasthan and Eastern U.P.
is much higher than average for the country.

These facts are of great importance for consumer researcher and marketers some of the
economic researchers like Minhas, Jain and Tendulkar below poverty line put estimate of
45.9 percent of 1987-88 is higher than Planning Commission estimates of 39.3 percent for
the same year but according to this estimate also population below poverty line is coming
down. However, poverty in rural India is more than in urban India because lesser job
opportunities in rural areas.
Some economist believe that poverty should not be measured merely in terms of income but
in terms of deprivation of facilities, opportunities, dignity, self-respect and respect of others.
In this respect UNDP “Human Development Report 1999” has worked out ‘human poverty
index’ which is as given in Table 8.3 and provides greater opportunities for marketer.
During last one decade there had been reduction in deprivation rate and the index will not
be much different than poverty rate. It is because of various poverty alleviation
programmes. The other point to be noted is that even in the one group consumption pattern
is not same for all members of the family. HLL study suggests that in “rural areas there are
persons who buy Pepsodent for their Children but use ash for themselves and say that “it’s
good for kids because they are part of a new generation”.
Similarly in matters of education and health elders give up for the benefit of youngsters.
Hence one cannot dismiss this class as a consumer nearly because they are poverty ridden.
In this class also there are some percentages who consume modern products. Therefore all
of them cannot be classed together. The companies should classify them on the basis of
consumption pattern rather merely on income. This requires much more research than what
has been done in India.
Low Income Group:
The next income or economic group is one who are able to afford minimum required food,
essentials of life like shelter, clothing and some comforts like bicycles, radios, and education
of their children largely in government aided schools and depend upon government
dispensaries and hospitals for treatment. This group consists largely of labour class and
fourth class employees in government and other establishments.
The income of this group does not exceed Rs. 5000 per month but many persons in this
group own TV’s, refrigerators and two wheelers. Many of them also own houses and some
of them have small landholdings in rural areas. This is the largest class of Indian population
and many of them are moving upward through promotions in their jobs; many educated
women in the group living in urban areas take up to jobs and if the income of husband and
wife is clubbed quite a few of them earn more than Rs. 5000 per month and fall in middle
income group.

Middle Income Groups:
Those persons whose monthly income is between Rs. 5000 to Rs. 10,000 are middle class.
They are white collar workers, junior executives and junior technicians in factories. Many
shopkeepers in urban areas also fall in this group. They are very much concerned about the
education of their children so that they may become good professionals and may be able to
get jobs above the average.
Some people in this class own cars and large number of them own two wheelers due to loan
facility from office or from financiers. Besides service class it also includes small farm
holders, some of whom own modern equipment of farming.
This class is forward looking and takes interest in social and political activities specially
those persons who are teachers or in legal profession. The class as a whole wants to
consume more and all those goods which are consumed by higher classes through hire
purchase, supplementing their income by taking part time jobs and/or their wives to take
up jobs.
Many of ladies are in teaching profession, working in banks and private offices, telephone
exchanges. Many of them own houses or flats under installment schemes of development
agencies or loans from banks and other agencies set up by government.
This class it seems is great believers in savings and take up to insurance, investment in
mutual funds, banks and stock market. They have big ambitions and with the rise in income
level can be biggest consumers for many products which they are not able to enjoy.
High Income Groups:
Persons in income range of Rs. 10,000 to Rs. 25,000 are in high income group. Sometimes
this group is further divided into two subgroups as high income group and higher income
group. Persons in this group are senior executives in government and private sector, big
shopkeepers, small industrialists and some land owners in rural areas.
They are generally well educated and well settled in profession, business or other
occupation. They get their children admitted in best possible schools which often are top
priority for them. A large percentage of them own houses and cars, visit restaurants and
wear fashionable dresses.
Ordinary service is not linked by them, therefore, they visit better shops and buy branded
products. Still they are not able to afford certain costly items like micro waves, AC and big
cars, because they have to save a lot for education and marriage of their children but give
great importance for appearance.
Hence they wear impressive dresses and ladies use considerable quantity of cosmetics.
Children like to go to clubs and some of them have dating’s which is not objected by their
parents as they are more open minded and gradually breaking from family traditions.
Upper Class:
All those persons whose income is above Rs. 25000 per month are classified as upper class.
Ten percent of India’s population falls in this group and they can buy whatever they want.
Top executives, big shopkeepers, middle and big size industrialists and big farmers, fall in
this category, often money has little value for them.
They buy big cars, big houses, send their children to best schools, get treatment in best
hospitals, spend heavily on marriages and other functions. They, perhaps believe in show of
wealth and in certain cases their family life is not cordial and a few of them have relations
with person of opposite sex and spend heavily on such activities. They often take trips /
tours both within the country and outside the country. Still they are believer of family
traditions and often pray god in the temple or in their houses.
So far adequate research has not been done about expenditure pattern of various income
groups though National Council of Applied Economic Research (NCAER) has conducted
some surveys. These studies do not throw adequate light on consumption pattern of various
classes, their preferences, priorities and other aspects. Much more work is called for.
Social Classes and Culture, Religion and Geographical Impact on Consumer

Behaviour:
Social classes in foreign countries have largely been distinguished on the basis of income
level, cultural, religious and geographical impact has not been given that importance as it
deserves because society has been classified largely on economic factors. Further cultural
and religious factors are similar for all persons of the society in a particular region
irrespective of their income group but they are important variable in deciding the behaviour
of consumers.
These factors are much more important in country like India where culture, religion,
language and geographical differences are much wider than in the west. Further, in the
same income group the behaviour of urban and rural population is not similar or in all
geographical regions. Hence there is need of dividing classes based on various variables.
A person in a particular income group does have different cultures, different religions and
they live in different regions of the country. They speak different languages. All these
factors have impact on behaviour as a consumer and therefore persons with different social
background are classified in different classes.
Social class is a homogenous group in the society who are likely to behave in similar manner
irrespective of level of income. Thus truly speaking social class is a class of persons who
behave homogeneously irrespective of place of stay, education economic possessions. They
share similar values, interests, festivals, customs etc.
A Bihari, Bengali, Tamalian, Gujarati or person of other states living in Delhi, Bombay,
Lucknow or abroad have common bonds through marriages, common festivals, beliefs etc.
Thus they behave similarly for purchases etc. but level of education, income and profession
have divided them on the basis of status.
The economic factors have broken social classes but still for certain products like food,
worship, marriages etc. they follow similar practices but there are hierarchy in them. Even
otherwise some casts consider themselves superior than others.

Even in Brahamis, Vaish, Khatris and schedule casts there is social ranking in terms of
superiority and inferiority. This type of ranking, however, is only in the minds of certain
people and no where-else but it has made differences in their behaviour and consumption
patterns. This hierarchy, however, is different than hierarchy based on over all social status.
There are innumerable aspects of social class some of which may be listed below:
1. Fertility rate is influenced by social class and belief in family planning. Therefore
birth of an individual is influenced by his social class.
2. The functions held after the birth.
3. The life expectancy.
4. The upbringing including education, schooling, society is also dependent upon social
class and so the future of a child.
5. The role of the adult in selecting his life partner.
6. The functions of the marriage and class in which one is married. As yet generally
person is married in his own social class though there are exceptions.
7. The profession often is also decided by social class; son of a chartered accountant,
medical practitioner, lawyer ordinarily opt for similar profession. But educated sons
of farmers and shopkeepers often choose different professions. Thus the aspirations
are influenced by birth.
8. The attitude towards life specially economic goods is influenced by his religion and
social upbringing.
9. The attitude towards society is greatly influenced by his class.
10. The attitude towards liking, priorities, preferences for goods, prices versus quality
and the impact of advertisement all are conditioned by social class one belongs with
some exceptions.
Thus the impact of social classes is very important to be studied by marketer and consumer
researcher. Gradually social classes are breaking but till now they have great role to play in
ones attitudes and behaviour. Therefore, social class remains important for marketers.
Behaviour of Different Classes:
Behaviour as a consumer of a social class depends how we make classes. If all the variables
are taken into account the number of classes will be very large in a country of the size and
diversity of culture-, languages, religions, regions, customs like India. Even in a country like
USA where there is more homogeneity than India researchers have divided the country into
210 classes.
In India enough research has not been done but if all the variables are taken into account
there will be few thousand classes if one wants to make them homogenous. As it is a difficult
task often classes have been made on the basis of economic status but this is not enough for
consumer research and segregation. However, as already stated there is need of such
segregation.
Thus in each state like U.P., Kerala, Madhya Pradesh, Rajasthan, Andhra Pradesh, Tamil
Nadu, Karnataka, Assam, West Bengal etc. social classes will have to take various variables
into account. Only in the newly created states of Uttaranchal, Chhattisgarh and Jharkhand
there is greater homogeneity in terms of culture but in these states also there are wide
differences in economic status and many classification within same class people in rural area
behave differently than in urban area.
The level of knowledge, communication facilities, education further makes differences in
social classes. Because of such diversity it is not possible to describe the features of various
classes. However, the major economic differences have been brought out while discussing
economic classes.
There is however distinct behavioural differences which should be understood. Indian

people by and large follow traditions irrespective of education and economic prospects and
irrespective of region one belongs. Therefore, most of the people follow their traditions and
customs at least at the time of birth, marriages and death and normally spend more than
their capacity. This is one of the reasons for rural indebtedness.
Rural people generally give preference in education to male member and neglect the
education of girl child specially poor and less educated persons. All the persons irrespective
of cast, economic status, education, region, religion, place of stay (rural-urban) all prefer
male child. Therefore, number of females per one thousand females is going down. In 2001
there were 933 females for 1000 males.
Education plays an important role in behaviour. The literacy rate for male population is
three fourth of males but it is only half of female population. It is expected that with greater
education people will be more liberal in their social outlook, in the matter of marriages but
this is trickling down very slowly.
Everyone wants to marry in their community and inter-casts marriages are very few. They
are not liked by society and sometimes create social tension. But more educated girls are
taking jobs especially in urban areas irrespective of the class one belongs.
This has changed family life style, ladies prefer time saving foods and devices and do not
cook lunch unless there are other family members who stay at home or return home by
launch time. The increase in the number of working ladies has created demand for crutches.
With spread of education the divorce rate is going up but still it is much less than 50
percent in USA; actually as yet it is insignificant in India.
The religious functions even for the follower of same religion differ considerably from state
to state. While in Northern India Deshra, Deepawali, Holi are major festivals in South India
Deshra and Holi is rearly celebrated; they have Pongal (Tamil Nadu) and Onam (Kerala).
In West Bengal and other places dominated by Bengalies Durga Puja, Kali Puja and
Saraswati Puja are main functions. In Punjab Baisakhi and Lohri are celebrated with dance
and music but people of many other states do not know anything about these festivals. In
Assam, Nagaland etc. festivals are different. But the celebration does not depend upon social
status but religion. However, for Muslims and Christians festivals do not differ from state to
state.
Marriage systems and customs do not depend merely on religion but region also have
influence on them. The rate of growth in population for India as a whole had been 2.25
percent per annum during 1991-2001 but there are wide variations from state to state. It is
lowest in Kerala at 0.94 percent where literacy rate is highest. The different population
growth and other factors has made West Bengal most densely populated state (904 people
per sq km).

The difference density ratios has created problem of land, jobs, social amenities differently
in different regions. This is also responsible for poverty, and migration to other places for
employment. But migration is also dependent upon other factors like enterprising sprit and
therefore people going abroad are largely Pujabies, Gujaratis and Keralists and to a certain
extent Marwaries. They have helped in making their states richer by sending lot of their
savings for their relatives and families well being.
Within India lot of people from Bihar, Eastern U.P. and Orissa work as workers in other
parts of the country; often live alone and send money home for parents, wife and children.
They try to save maximum so that maximum possible amount may be sent at home. These
factors have great impact on consumption.
But all said and done as yet adequate research has not been done in India on social classes as
consumer. If students of marketing management, institutes of management and corporate
sector undertake research much more will be known about behaviour of different social
classes.
Values and Norms

Values can be divided into many different groups such as cultural/ethnic values, family
values and individual values.
1. Cultural/Ethnic Values: First are cultural values. Cultural backgrounds influence

people’s behavior. The context of consumer behavior, culture refers to the collective
memory. Culture affects people in two ways: Create consists of the history, values,
beliefs, social structure, religion and ways of living and relationships. These grow up
from childhood. Culture is also typical by external factors such as different symbols,
traditions, rituals and heroes. Each created a cultural environment and it shapes a
person’s personality. It adopts the practices, models, values and attitudes. Culture
changes slowly over time.
2. Family Values: The family has really strong influence on consumer behavior. If the
family will appreciate, for example ethics, it will be seen for sure in the future of
children. And if parents will appreciate certain kinds of values it has impact on
younger values. Family members have an effect on decisions. This means that
family decisions are often together, and each consumer’s decision to participate in
more than one person. Human behavior is largely learned. Often people learn the
values at an early stage, for example, from school or from parents.
3. Individual Values: Today, the environment is considered very important and
appreciated. It also shows the consumers behaviors because today favor the
environment to support and promote the products. That’s a big part of our life
nowadays. Consumer behavior depends on personal factors such as age, stage of life,
occupation, education, income, and lifestyle. At different ages and stages of life,
consumers have different needs, desires and values. Furthermore, the economic
situation, education, occupation, lifestyle, and personality influence the issues on
which the consumer is interested in, and what services and products they use at the
moment. Different economical circumstance influences consumer behavior, because
for example of the different life situations may not be used in the same way money.

Some other types of Values
Family values involve all the ideas of how you want to live your family life, and they are
often passed down from previous generations. They can help define behavior in various
situations, help youth make good choices, and solidify the bond that your family has. If your
family doesn't already have these values in place, know that it is never too late to make a
list.
Although every family's list of values will be different, there are different categories of
values that tend to be similar.
Social Values: Social values consist of things like peace, justice, freedom, equality, and
bettering our community. Examples of social values include:
• Not hurting others and also standing up for those who can't stand up for themselves
• Being respectful and courteous in your interactions
• Volunteering time and skills in the community
• Being generous with what you have
• Being honest with others
• Participating in teamwork whenever possible
Political Values: Although being a liberal, conservative, or moderate may determine your
opinion on how the government should run and what laws should be enacted, there are
certain political values that remain constant across political parties. American values often
include:
• Exceptionalism - that America is a land of limitless opportunities and, as such, has a

duty to act as an example to other countries.
• Capitalism and private ownership of property
• Patriotism
• Treating everyone equally, regardless of ethnicity, race, religion, or sexual
orientation
• Being open-minded to new things
• Following the law and respecting those who enforce it
• Working hard for success
Religious Values: Religious values center around the expectations that people have about
themselves and others based on the beliefs of their faith. Although each faith has its beliefs,
there are common values that many faiths tend to share. Examples of religious values
include:
• Showing compassion to those in need

• Treating others as one would like to be treated
• Continually learning and growing both spiritually and intellectually
• Being modest in your relations with others
• Being respectful and nonviolent when interacting with others

Work Values: Work values include such things as your philosophies about your job, your
finances, and how you spend your money. For children, these values include how they
approach school and their education. Examples of work values include:
• Always doing your best work

• Working in a team
• Saving a portion of your salary/allowance
• Finding opportunities to express your ideas and creativity
• Being proud of your achievements
• Making education a priority
• Keeping in mind the part that your job plays in society
• Treating co-workers, fellow students, customers, and authority figures the way that
you want to be treated
Moral Values: Moral values are your individual values about what you think is right and
wrong. Moral values provide the foundation from which you make decisions. Morals are
learned from your parents and your experiences. Examples of moral values include:
• Being honest and trustworthy

• Being courageous
• Never giving up
• Adding value to the world
• Being patient
• Taking personal responsibility
Recreational Values: Recreational values refer to anything that involves fun and play.
Recreation is important in the family because it fosters closeness in the family, opportunities
for learning, creating memories, improving social skills, and developing empathy. Examples
of recreational values include:
• Providing unstructured play time

• Having family game nights
• Allowing and encouraging each family member to pursue interests
• Taking vacations together
• Spending time together outside playing
Sample Family Values List
Although every family's list of values will be different, the following is an example of a
family values list:
• Think of the consequences before you act

• Follow the guidelines of religion
• Discuss right and wrong when modern values clash with traditional values
• Spend time together as a family, but also pursue individual interests
• Live these values, don't just talk about them
• Treat others (both inside and outside of the family) with compassion and respect
• Put your best effort toward every task
• Always continue to learn
• Learn from failures
• Celebrate successes
• Use money to do, rather than to buy
• Treat pets as family
• Remember to not always act on feelings
• Show love every day
• Sever relationships with disrespectful people
• Treat others' possessions with care and respect
• Listen since all opinions are important
• Always strive to maintain safety
• Be honest
Traditional Values versus Modern Values
Family values tend to be reflective of the culture and time period and can be seen shifting
throughout history depending on the environment. Traditional values tended to emphasize
the extended family unit when more families were living and working together. With
modernization, family values can be seen shifting to an emphasis on independence and
development versus togetherness.
Society's Impact on Values
As society becomes more technologically advanced, the family values will change to reflect
that on a cultural level. When families worked together prior to the industrial revolution,
there was more shared time together and most likely extended family lived with each other
or very close by to make their work life more convenient. Post industrial revolution families
had the option to be more spread out and independent from each other thus shifting the
emphasis on the extended family system unit and welcoming in the nuclear family dynamic.
Shift in Gender Roles, Gender Fluidity, and Sexuality
Traditional versus modern gender roles can be reflected in society and have impacted family
values. Many women were once encouraged to stay at home and raise families while men
went out into the workforce. This notion has drastically shifted as both men and women,
regardless of having children, are able to have jobs as society has normalized women in the
workforce. During the rise of the nuclear family men and women were encouraged to raise
children that reflected the perfect nuclear family. Television, ads, and consumer products
reflected this societal drive. This atmosphere put a strict adherence on gender roles and
rigid sexuality. Gender fluidity and sexual fluidity is much more accepted in society today
and the culture and family values may reflect that. Although not a perfect system, creating
family values based upon acceptance with an emphasis on learning can help create a more
open and loving familial environment where everyone feels accepted, whereas the nuclear
family era certainly did not encourage that on a large scale.
Updating Your Family Values
Your family values can be changed at any time, especially if the goal is to create an
environment of inclusivity. Family values can be selected by the parent or parents, or

children can also be included in making the decisions if they are old enough to participate.
Because the family values are supposed to be reflective of the family as a unit, it's a good
idea to encourage the younger family members to participate in these discussions so the
values mean something to everyone in the family, not just the adults.
Sub Culture and Cross Culture Impact on Consumer Behaviour

Subculture is a part of the culture containing the important features of the main culture. In
this lesson we shall highlight on the subcultural context, types of subcultures, subcultural
influence on consumer behavior as well as marketing implications of the concept of
subculture.
Subcultural Context Affecting Consumer Behavior
Culture, you know, is an extremely broad and encompassing term. It includes what we have
learned, our history, values, morals, customs, art, and habit. Marketing takes place within a
given culture. Marketers should know that experience, history, values, morals, customs, art,
habit, etc. vary within a given culture requiring different marketing programs. Not
everyone in the same country or society shares the same behavioral pattern of the dominant
or main culture. It clearly indicates that there are subcultures, such as those of northerners,
southerners, city-dwellers, the poor, teen agers, elderly, religious groups and so on. The
identification of a subculture may provide a firm with a segment of a market that it can
develop. For example, products have been developed in great quantity for the teenage
subculture, and advertising has been directed to these consumers. Each subculture, like a
larger culture, has distinctive values, beliefs, and attitudes that the marketer must
understand if he is effectively to exploit them. It is not always easy to identify differences
among subcultures, however, and marketers disagree, for instance, about whether there
exists a northerners’ market that is distinct from southerners’ market. It is easy to develop
mistaken stereotyped notions about subcultures due to the lack of proper knowledge on
subcultures. Marketers are interested in identifying any subculture as a potential market for
their products.
The advertising of many products in a local newspaper like “Dainik Azadi” published from
Chittagong, is an illustration of selling to subculture. The aggregation of people by
demographic variables has long been done by marketing research staffs. This is, of course, a
way to study and measure the buying potential of a subculture. Such study is usually based
on demographic variables such as age, occupation, income, race, religion etc. These
classifications are illustrative of demographic variables. All of the demographic groups listed
above may buy the same products, but each also has some unique needs and can, therefore,
be classified as a separate market. The aged, for example, purchase some drugs made and
marketed expressly for them. This relationship between demographic variables and
purchasing behavior has long been studied by those in marketing. By this time you should
understand that subcultural differences do exist and are responsible for differences in
consumption patterns of people of different subcultures. Now question may come to your
mind that, what actually subculture means. In the next section we shall try to define
subculture as an attempt to respond to your query.

Defining Subculture
A Bangladeshi visiting to a foreign country may be considered similar to other Bangladeshis

by a local individual. The same Bangladeshi may have a different and complicated identity
here in Bangladesh. He may be one belonging to the northern part of Bangladesh, a Muslim,
a reasonably successful businessman living in the capital city, a young unmarried individual,
an old man living on pension, or a mid-level government official. No matter, what his
identity here in the country, he is likely to conform to the principal norms and values of the
dominant or mainstream Bangladesh culture. But, as because of his belongingness to a
particular segment of the culture he will share certain cultural traits with others in the same
segment unlike those of any other segment. The segments may be based on many variables.
Some of the variables noteworthy to mention could be income, religion, region, occupation
etc. Because of one’s belongingness to a particular segment, he could display a different
behavioral pattern. These behavioral differences may be well understood by a term known
as subculture. In very much the same way as a culture is oriented around the common needs
and problems of its members, so a subculture may be said to form around the common needs
and problems of a social class.
As there can be broad differences between the cultures of various societies, there can also be
differences within the same culture. Every culture, therefore, contains subcultures, defined
as groups that share the values and artifacts of the larger society, but also have distinctive
practices, preferences, and beliefs. Businessmen living in the old part of Dhaka, cinema
artists, and people living in the urban slums are all examples of subcultures. Islam is the
dominant religion in the culture of Bangladesh; Sunni, Shiaa, and Baahaai, for example, may
be viewed as subcultures within the larger Muslim culture here in Bangladesh.
Subculture may also be defined in terms of such factors as region, rural or urban residence,
ethnic background, and religion. Those identified with a subculture tend to think and act
alike in certain respects, and this has important implications for their lifestyles. Recognition
of this has led to experimentation with market segmentation as a means of developing
effective marketing strategy adapted to market targets that are believed to have special
prospect. Subculture is thus a part or segment of the main culture. As markets may be
segmented according to different variables so as the culture. Subculture, therefore, may also
be termed as cultural segmentation. If you divide the total culture in to small homogeneous
groups, which may be reached with a distinct marketing mix, you can call each part a
subculture.
It is thus a segment of the culture that shares distinguishing patterns of behavior. You can
identify two important features analyzing this definition. Distinguishing patterns of
behavior is the first aspect with regards to subculture that marketers need to emphasize.
Members of a sub-cultural group must share behaviors that differ from those of the larger
or dominant culture of a country. You can call a group or segment a subculture only when
members of that group display a behavior pattern different from other groups.
The other important aspect or feature of subculture is that members of a subculture are very
much part of the dominant culture. Behaviors of the members of a subculture largely
coincide with those of the main culture as shown in the following figure, which is self-
explanatory.

Figure: Showing Subculture’s Relation with the Main Culture
Berkman and Gilson have defined subculture for marketing purposes as any cultural
patterning that preserves important features of the dominant society but provides values
and life styles of its own. Bangladeshis for example, hold certain types of values and
maintain certain common norms around the country. But people of hill-tracts display
different lifestyles though they hold common values of the Bangladesh culture. “The
members of a specific subculture possess beliefs, values, and customs that set them apart
from other members of the same society. In addition, they adhere to most of the dominant
cultural beliefs, values, and behavioral patterns of the larger society. We define subculture,
then, as a distinct cultural group that exists as an identifiable segment within a larger, more
complex society. Thus, the cultural profile of a society or nation is a composite of two
distinct elements: (1) the unique beliefs, values, and customs subscribed to by members of
specific subcultures; and (2) the central or core cultural themes that are shared by most of
the population, regardless of specific subcultural membership.”
You may look at this explanation in another way. Each Bangladeshi is, in large part, a
product of the Bangladeshi way of life. Each Bangladeshi, however, is at the same time a
member of various subcultures. A 16-year-old boy, for example, may simultaneously be a
Muslim, a ‘Dhakaia’, and a teenager. It is expected that membership in each different
subculture would provide its own set of specific beliefs, values, customs, and attitudes. The
behavior patterns that distinguish subcultures are based on factors such as race, nationality,
religion, urban and rural identification and so on.
Major Sub-Cultural Categories and Their Influences on Consumption
Subculture may be categorized into many different classes. Here in this unit we shall
consider some of the important subcultural groups and show how they affect consumption
and marketing decision. Following table shows (though not extensive) major subcultural
categories:
Categories Examples
Ethnic (based on the ancestors’ birthplace) English, Chinese, Arab
Religious Muslim, Hindu, Christian
Regional Northern, Southern, Central
Age Teens, Middle aged, Elderly
Singles Unmarried individuals

Gender Male, Female
Occupation Teachers, Doctors, Engineers
Social Class Upper, Middle, Lower
Let us now have some idea on the major subcultural categories mentioned in the above
table:
Ethnic Subculture
The ethnic subculture is based on the nationality of one’s ancestors who have migrated to a
new country. It (nationality) may form a basis for a subculture when the members of that
nationality group identify with it and base at least some of their behaviors on the norms of
the national group. Ethnic subculture is usually found in affluent countries where people
migrate from other parts of the world with the hope of a better life and live-li-hood. Though
ethnic groups may lose their nationality over time, but in fact ethnic identification is held
from one generation to the next through a number of institutions.
Though the citizens of a particular country see themselves as citizens of that country, but
they frequently retain a sense of pride and identification in the tradition and language of
their ancestors. “When it comes to consumer behavior, this ancestral pride is manifested
most strongly in the consumption of ethnic foods, in travel to homeland, and in the purchase
of numerous cultural artifacts (ethnic clothing, art, music, foreign-language newspapers).”2
One’s interest in ethnic goods and services expands rapidly, as one tends to better
understand and associates with his ethnic origin. In the UK, for example, there are many
Bangladeshi immigrants who have now become British citizens, but they display
consumption behavior in many occasions that resembles with that of someone living here in
Bangladesh. They buy and use Bangladeshi foods, wear ‘lungi’ and ‘sharee’ and go to
mosques on Fridays. This could be a glaring example of how ethnic subculture affects
consumer behavior.
Functions Served by Ethnic Subcultures
Milton M. Gordon in his “The Sub-society and the Subculture” mentioned three functions
that an ethnic subculture may serve. They are:
• Ethnic subculture provides a psychological source of group identification. An

individual gains a sense of identity as he interacts with other members of the same
ethnic group. The interaction increases intimacy among the members and they feel
good to identify themselves with a distinct group.
• It also offers a patterned network of groups and organizations, and a member of the
said subculture may maintain cordial and intimate relationship with other members
as long as he wishes.
• An individual migrating to a new culture may find it difficult to understand many
aspects of that culture. Here the ethnic subculture to which he belongs may help him
to view the new culture by providing him a guideline on the new culture.

Each of the ethnic subculture has unique traditions and behaviors that have potential
influence on product preferences and consumption behavior. A particular market consisting
of ethnic subcultures may be the focus of a marketer. But, it is not very easy to reach
effectively a particular ethnic subculture with a particular type of product. The reason is
that not everyone in the same ethnic subculture will consume the same type of product, nor
will lead the same lifestyle. A Bangladeshi, for example, migrated to US from district
(region) ‘X’ will not have the same food habit as one migrated to the same country from
district (region) ‘Y’ from Bangladesh. It means that, to be effective, marketers should further
study ethnic subcultures on the basis of demographic and other aspects. Based on the results
of such study, the same ethnic market may be further segmented and different offers should
be made for different subsegments.
Religious Subculture
An individual’s religious affiliation influences to a great extent his consumption pattern.

Those who belong to a particular religion may buy/not buy and use/not use certain goods
and services. Members of a particular religion constitute what we call religious subculture.
Religious beliefs and rituals may dictate the use of certain items and may discourage the
consumption of others. Muslims for example, buy and consume certain specific food items
heavily during the month of ‘Ramadan’ and buy lot of gifts during the ‘Eid-Ul-Fitr”. Again,
Islam discourages its followers the consumption of certain items such as alcoholic
beverages, pork etc.
It is expected that members of a particular religious subculture will display similar

behavioral patterns in their purchases and consumption. But, differences may be found
among the members of a particular religious subculture in terms of their consumption and
life style. A devout member of ‘Islam’ may consider it immoral to be materialistic, where
another member of the same religion may find nothing wrong in becoming materialistic. A
marketer of cine-magazine will have no problem in reaching the later person, where it will
be almost impossible for him to penetrate the market consisting of people of the other
mentality and religious beliefs.
Regional Subculture
The way people lead their lifestyles may also vary according to where they live or from
which part of the country they have moved to the other part of the country. People from a
particular part of the country or people living in a particular part constitute what we call
regional or geographic subculture. On this basis, there could be two different types of
regional or geographic subculture. One could be based on geographic region of the country
and other could be based on urban, suburban or rural distinction.
“Different geographic regions of the country pose different problems that consumers must
solve. The most obvious of these are the climatic conditions. Climatic conditions influence
home construction, clothing requirements, and recreational opportunities to name but a few.
In addition, different regions of the country have different age distributions and different
social histories. These variables in combination with the climatic variables have produced
differing values and lifestyles which newcomers to a region generally acquire after a period
of time. These regional variations influence the use of particular media, the types of
products used, and the product attributes considered important.”3 Differences in region
influence the type of products used as well the way they are produced and used.

Bangladeshis, for example, living in the hill districts display different patterns in food
consumption, housing, and recreation than those of the people living in the other parts of
the country. The people of Chittagong region of Bangladesh prefer hot and spicy food,
where people of the other parts may not like hot food. Again, fish is consumed by everybody
here in Bangladesh, but dry fish is consumed heavily by people living in the southern and
coastal areas of Bangladesh. These are some of the glaring examples of regional subcultural
influences on consumer behaviors.
Regional subcultures clearly influence many aspects of consumer behavior. The

consumption process also is influenced by the urban, suburban, and rural distinctions,
another type of regional subculture. The urban, and suburban people, for example, prefer
ready or instant food, prefer eating out, and enjoy their leisure in a way different from rural
people.
Subculture Based on Age
Subcultures may also be based on the age differences of people living in the same country
and belonging to the same main culture. It is likely that those who belong to the teen age
group will behave quite differently than those of middle age or elderly. Because the
outlooks, experiences, attitudes and other aspects vary among people of different age
groups, their consumption patterns are likely to vary. The teen-agers are likely to be
influenced more by popular heroes and heroines and will display more materialistic life
styles. The youth market is a significant subculture for the marketer. It is important to
marketers not only because it is lucrative, but also because many consumption patterns held
throughout life are formed at this time. The youth, as they start their career in this age are
flaunt with more luxury items. Since they have little obligation at this age, they can spend
whatever they are. Their consumption patterns lean toward personal care and luxury items.
The middle aged group, on the contrary, are matured, worried about the future and careful
in making purchase decisions. As an attempt to build a reserve for the future, they are likely
to be conservative in buying many material goods, and are found to spend money on
protective investments.
The elderly people display quite different consumption behaviors with that of teen-agers
and middle aged people. The elderly subculture consists of people who have gone on
retirements or whose regular income generating activities have ceased. They have got some
special characteristics. Most of them live with their children; their health conditions
gradually deteriorate; have emotional difficulties; have minimum amount of money at hands
to spend; are price/value conscious; are deal prone; like to shop as it has special meaning;
are tuned in to the mass media; and read direct mail, package labels, and package inserts.
These few characteristics make them behave quite differently than other groups. Because of
their differences with other groups, they also require different types of products.
The elderly people, because of deteriorating health, will require more fat free foods, tonic
items, medical advices and medication as well as hospitalization. Since they have limited
incomes, they prefer comparison shopping. Because of their maturity and different attitudes,
they are skeptical of advertising claims and are influenced more by the informed sources.
The emergence of elderly market has created a need for many different types of products
such as old people’s home, health clubs and a number of other products and services.

Marketers face lot of problems and challenges in reaching elderly market. The
communication strategy, particularly formulated to reach elderly market should be well
thought. “One major reason that old people are seldom addressed directly in advertising is
that they resent being depicted as old. A baby-food manufacturer, recognizing that elderly
individuals were eating the product because of dental problems, introduced a new line of
senior foods. This nearly proved disastrous because older people preferred to claim that
they were buying baby food for their grandchildren. ... People dislike to admit to themselves
or others that they are no longer young. .... The most successful communications are those
that show a mixture of age groups using the product.”4 Smart marketers have been attuned
to the needs of elderly consumers and have been quickest to realize their value as customers.
Singles Subculture
The singles subculture consists of unmarried individuals. This subculture is found to be

increasing particularly in the urban and semi-urban areas. The size of this subculture is
gradually becoming prominent to call a special marketing attention. Quite a few reasons are
associated with the growing size of the subculture of the singles. They could be delaying
marriage; postponement of marriage; higher divorce rates; inability to find a suitable source
of earning to bear family expenditures and so on. The singles have some special needs,
which cannot be met through normal social interaction. Marketers who can recognize their
specific needs and can develop products aimed at meeting those specific needs can reap a
considerable benefit. Singles night clubs, exotic telephone talk services, dating services,
artificial sexual organs, bachelors’ hostels/mess, product that promise sex appeals,
convenience foods, restaurants, sports equipment, etc., could be some of the examples of
products and services aimed at the subculture of singles. In a country like ours, the singles
subculture is growing prominent in the urban areas, and as a result lot of hostels for both
males and females have been established aiming to provide accommodation services to
singles.
Subculture Based on Gender Difference
Subculture may also be formed based on gender difference, such as subculture of males and
subculture of females. Since every society emphasizes distinct, specific roles for men and
women, they are likely to behave differently. As their behaviors vary, they consume
different types of products and respond differently to marketing appeals. Men for example,
are influenced more by aggressiveness, competitiveness, independence, self-confidence, and
masculinity. Women on the other hand, are influenced by neatness, gentleness, tactfulness,
talkativeness, and feminity. There are products which are equally used by men and women.
But, different appeals in the same product are needed for these two groups. Cosmetics,
perfumes, clothing, bicycles etc., are used both by men and women. But, you know that
different designs, colors, sizes, shapes, and fragrances are provided for by the marketers to
appeal people of different sex. Bicycle, for example, is designed differently for men and
women. Even promotional appeals are made different for these two groups. Again, among
the females, those who are professionals, behave differently than those of non-
professionals/housewives. The working women, particularly those, who are married, will
again require different types of products and services that may not be bought by unmarried
working women. The shopping patterns of these two groups will also vary. Since
characteristics, attitudes, and needs vary between these two groups they may be considered
as two different market segments.

Occupational Subculture
People display different patterns of purchase behaviors according to their occupational

involvement. People of different occupations may constitute occupational subcultures, such
as subculture of the doctors, subculture of the lawyers, subculture of the teachers,
subculture of the engineers, subculture of the defense personnel. A defense officer, for
example, will show different purchase behavior than someone belonging to the civilians’
society. Doctors’ for example, may look at the nutritional aspect while buying a food item.
Marketers should recognize the differences in attitudes and behaviors among people of
different occupations and formulate marketing strategies accordingly to be successful in
each specific subculture.
Subculture Based on Social Class
Social class may also be used as a determinant of subcultural differences. There could be
subculture of the well-offs, subculture of the middle class, and subculture of the poverty.
People belonging to the subculture of the rich will display altogether different buying
behavior than those of middle class and poors. Rich will be very selective in their purchases;
people of the middle class will have substantial control over their consumption decisions;
poors on the otherhand will be very careful and cautious in taking their purchase decisions.
The subculture of poverty consists of people living below the poverty line. Because of their
low incomes, they will avoid buying pre-packed, instant, frozen food items as they are likely
to be costlier than the fresh staple ones. As they have limited educational opportunities, they
develop different attitudes, outlooks, and motivation resulting in different buying behaviors
on the part of them. Most of their incomes are spent on basic necessities such as food, and
housing. Only a small amount of their incomes are spent on clothing, transportation,
recreation, and luxury. They basically look at low-cost items, favor shops where they get
credit, and are attracted by different inducements offered by the marketers.
Subcultural Differences Affecting Marketing Decisions
Because of the important differences within any culture, marketers must be aware of diverse
subcultures -examining them individually and on their own terms. We know that, those
identified with a subculture tend to think and act alike in certain respects, and this has
important implications for their lifestyle. Recognition of this has led to experimentation
with market segmentation as a means of developing effective marketing strategy adapted to
market targets that are believed to have special promise. Marketers must recognize that
even though their operations are confined to a particular country, or a division or district, or
even to one city, subcultural differences may dictate considerable variations in what, how,
and when people buy. To deal with these differences effectively, marketers may have to alter
their product, distribution systems, price, or promotion to satisfy members of particular
subcultures.
A particular subculture takes on importance in marketing if it constitutes a significant part

of the population and specific purchasing patterns can be identified with it. Marketers
should also keep in mind that, in reality, subculture is not a sufficient basis for market
segmentation. They need to be aware of how subcultural characteristics influence buying
behavior. Moreover, they should also bear in mind that one subcultural background may
interact with other aspects such as social class, personality, life-style and so on during the
buying decision process. Marketers should be interested in subcultures to the extent that
they can serve their unique needs. Marketers should understand that, if the members of a
subculture, no matter how distinct from the dominant culture, do not differ in their needs
and behaviors associated with a particular product area, the subculture does not require
recognition as a separate group. Understanding subcultures help marketers to focus on
sizeable and natural market segments. Marketers should also keep in mind that, like culture,
subcultures also change. Therefore, continuous monitoring of subcultural characteristics
may help marketers bring appropriate and timely changes in their marketing strategies to
make them more market oriented.
Types of Subculture
Based on the varying criteria, there can be different types of sub-cultures. The important
subcultural categories are nationality, geographical location, religion, race and caste, gender
and age. From a marketing perspective, these could also be discussed as market segments,
which need to be studied and assessed carefully before deciding on a product/service
offering and formulating a marketing mix for a particular segment(s).
1. Nationality: Sub-cultures could be based on nationality. While we are all Asians, we

are distinct with respect to culture, and are different in terms of language, customs
and traditions etc. Thus, we are classified as Indians, Burmese, Nepalese, Pakistani
etc.
2. Geographical location: Within a country, we could be different across geography,
climatic conditions, regions and terrains, and density of population. This is more so
in cases where the country is large and borders spread across a huge population
occupying a vast territory. People tend to develop regional affinity and
identification, and this gets reflected in the food they eat, clothes they wear, interests
they pursue, etc. They constitute as distinct sub-cultures and people across such sub-
cultures are different to each other. For example, we can be classified as North
Indians and South Indians. As consumers, our needs are different and would
translate into various wants, for example, i) differences in food habits, and demand
for poori-sabji, paratha, idli-vada etc.; or ii) differences in clothing, and demand for
cottons, woolens and silk.
3. Religion: People also exhibit differences when it comes to the religions that they
belong to. Hindus, Muslims, Christians, Sikhs, Parsis etc. are all different from one
another and have different values and beliefs, customs and traditions etc. As
consumers, they make purchase choices and purchase decisions that are influenced
by the dictates of their religious leaders, scriptures, and holy books. In fact, many
products/services are symbolically and ritualistically associated with religion. For
example, as per Islam, non-vegetarian food must be “Halal”, and this itself comprises
a huge segment that marketers across national boundaries are catering to.
4. Race and caste: Culture and its components also vary across race and caste. Jats,
Jaats, Rajputs, Pathans and Yadavs are all different from one another. Such racial
sub-cultures also impact buying behavior and consumption patterns.
5. Gender: Because gender roles have an impact on acts of behavior, gender constitutes
an important cultural sub-group. Males and females across all cultures are assigned
different traits and characteristics that make them masculine and feminine. They also
perform different roles in society and are two distinct sub-groups. It is true that
gender roles have got blurred, and both men and women are performing such roles
that they did not perform earlier. Product usage is common to both man and woman;
for example, a man shown as using a LG washing machine or making Act II
popcorn. Similarly products like shavers and razors exclusive to usage by men, are
also being used by women (Gillette thus introduced a razor for women). All this has
brought about a big socio-economic change and led to cultural transformation. The
values espoused by the generation of today is much different to the one espoused by
the previous generation. The pace of change has been further accelerated with
households no longer being single income households, but turned to dual-income
households. The role of women is no longer restricted to bearing children and
managing the home. Women have started working outside, and are contributing to
household income. This has impacted consumer needs and wants as also the
priorities. The impact is evinced on consumption behavior, where the ‘decider’ role is
no longer confined to a single person, i.e. the man of the family. Today buying
decisions are jointly taken by husband and wife.
6. Age: Infants, kids, teenagers and adolescents, adults and the aged, may all be looked
up as distinct sub-groups. They have different values and beliefs, and all this impacts
upon their priorities in life. Daily lifestyles, activities and interests, fashion and
accessories, food and diet, etc. receive varying priorities across the various sub-
groups. For example, an aged person would prioritize health and go in for nutritious
home food as opposed to young man who would prioritize work and go in for fast
food. Today we see a rising trend amongst kids, adolescents and the young towards
junk food, and they constitute a lucrative segment for restaurants providing fast
food.
The Hofstede’s Cultural Dimensions Theory, developed by Geert Hofstede, is a

framework used to understand the differences in culture across countries and to discern the
ways that business is done across different cultures. In other words, the framework is used
to distinguish between different national cultures, the dimensions of culture, and their
impact on a business setting.
The Hofstede’s Cultural Dimensions Theory was created in 1980 by Dutch management
researcher Geert Hofstede. The aim of the study was to determine the dimensions in which
cultures vary.

Hofstede identified six categories that define culture:
1. Power Distance Index

2. Collectivism vs. Individualism
3. Uncertainty Avoidance Index
4. Femininity vs. Masculinity
5. Short-Term vs. Long-Term Orientation
6. Restraint vs. Indulgence
Power Distance Index
The power distance index considers the extent to which inequality and power are tolerated.
In this dimension, inequality and power are viewed from the viewpoint of the followers –
the lower level.
• High power distance index indicates that a culture accepts inequity and power
differences, encourages bureaucracy and shows high respect for rank and authority.
• Low power distance index indicates that a culture encourages organizational
structures that are flat, decentralized decision-making responsibility, participative
style of management, and places emphasis on power distribution.
Individualism vs. Collectivism
The individualism vs. collectivism dimension considers the degree to which societies are
integrated into groups and their perceived obligation and dependence on groups.
• Individualism indicates that there is greater importance on attaining personal goals.

A person’s self-image in this category is defined as “I.”
• Collectivism indicates that there is greater importance on the goals and well-being
of the group. A person’s self-image in this category is defined as “We”.
Uncertainty Avoidance Index
The uncertainty avoidance index considers the extent to which uncertainty and ambiguity
are tolerated. This dimension considers how unknown situations and unexpected events are
dealt with.
• High uncertainty avoidance index indicates a low tolerance for uncertainty,

ambiguity, and risk-taking. The unknown is minimized through strict rules,
regulations, etc.
• Low uncertainty avoidance index indicates a high tolerance for uncertainty,
ambiguity, and risk-taking. The unknown is more openly accepted, and there are lax
rules, regulations, etc.
Masculinity vs. Femininity
The masculinity vs. femininity dimension is also referred to as “tough vs. tender,” and
considers the preference of society for achievement, attitude towards sexuality equality,
behavior, etc.
• Masculinity comes with the following characteristics: distinct gender roles,
assertive, and concentrated on material achievements and wealth-building.
• Femininity comes with the following characteristics: fluid gender roles, modest,
nurturing, and concerned with the quality of life.
Long-Term Orientation vs. Short-Term Orientation
The long-term orientation vs. short-term orientation dimension considers the extent to
which society views its time horizon.
• Long-term orientation shows focus on the future and involves delaying short-term
success or gratification in order to achieve long-term success. Long-term orientation
emphasizes persistence, perseverance, and long-term growth.
• Short-term orientation shows focus on the near future, involves delivering short-
term success or gratification and places a stronger emphasis on the present than the
future. Short-term orientation emphasizes quick results and respect for tradition.
Indulgence vs. Restraint
The indulgence vs. restraint dimension considers the extent and tendency for a society to
fulfill its desires. In other words, this dimension revolves around how societies can control
their impulses and desires.
• Indulgence indicates that a society allows relatively free gratification related to

enjoying life and having fun.
• Restraint indicates that a society suppresses gratification of needs and regulates it
through social norms.
Country Comparisons: Hofstede Insights
Hofstede Insights is a great resource to understand the impact of culture on work and life. It
can be accessed here to understand how the different dimensions differ among countries
under the Hofstede’s Cultural Dimensions Theory.
Cross Cultural Consumer Behavior Models

In international marketing understanding the cross-cultural differences is imperative for
developing effective marketing strategies for the diverse foreign markets with a variety of
cultures. Consumer behavior is the central aspect of human behavior. Consumer behavior
includes not only purchasing products but also consuming products and leisure activities;
not only fulfilling daily needs but also realization of long term life values. Thus consumer
behavior can be regarded as a utility and value producing activities.
There are basically two approaches in international marketing: one approach considers that
basic needs and behavior are universal everywhere and so the same products can be sold
similarly in every market while the second approach considers that every country has its
own unique set of problems and culture. This group contends that universal marketing
theory is inapplicable in different regions and so there should be unique marketing decisions
specific for each culture.

The proponents of first thought argue that the globalization of markets is causing the
convergence of customers’ needs and so cross cultural differences will have minimal effect
on the consumer behavior, thus calling for standardization of products and other marketing
mix elements. The concept of this approach is based on the theory of learning on human
behavior but doesn‘t take into account culture which can affect behavior. The proponents of
the second thought argue that culture has significant effect on the behavior of individuals.
Culture has ―profound implications on the psyche of the consumers and adaptation to
cultural values leads to marketing effectiveness. Selected aspects of consumer behavior on
which the culture may have possible impact are: perception, motivation, learning and
memory, age, self concept, group influence, social class, sex roles, attitude change, decision
making, purchase and post-purchase behavior.
Culture influences culture to a considerable extent but there is scarce research on

interaction of consumer behavior and culture (Maheswaram and Shavitt 2000 p.59). There
are very few models that explain cross-cultural consumer behavior but some models have
gained acceptance and are widely referred in the literature. The models regard culture as
one of the potent factors responsible for consumer behavior. They are as below:
Sheth and Sethi‘s Model: Sheth and Sethi (1977) made one of the earliest attempts to
develop a comprehensive model of cross-cultural consumer behavior. The model is based on
the presumption that various cultures can be placed on a continuum according to the degree
of resistance to change. The lower is the resistance to change the higher the society will be
placed on the continuum .The transition of a society from one point to another on a
continuum is accompanied by a weakening of the resistance to change. The understanding
of this transition of cultures and the variables which affect this change, on the continuum
help in understanding and predicting the circumstances under which a given product is
likely to be accepted. Different types of products and ideas, and different cultures and their
rate of transition will vary for different product types.
The multinationals introduce new products and services and act as agents of change and
innovation. The country's propensity to change is influenced by the communication from
the various sources. The customers process the information and evaluate the innovation but
if the culture is not ready for a change the customers won't pay attention to the
communication on the innovation. The country's change agents, the opinion leadership and
lifestyle are other factors which affect the propensity to change and the evaluation of
innovation. The adoption of the innovation depends on the per capita income; marketing
institutions and distribution infrastructure have a considerable effect on the adoption of the
innovation. The permanent adaptation of an innovation influences the propensity to change
and innovation evaluation. If the culture is satisfied with the adoption, it will be receptive to
change and there will be a favorable attitude towards the multinational that introduced the
innovation.

A-B-C-D Model: P.S. Raju (1995) has developed a framework known as A-B-C-D paradigm
to study and understand consumer behavior in Third World and Eastern Europe identifies
the major factors within each stage:

The acronym A-B-C-D stands for the four stages of the paradigm namely access, buying
behavior, consumption characteristics, and disposal. Access is the first step of the paradigm,
refers to providing the physical and economic access of the products and services to
consumers within a culture. The buying behavior refers to all the factors like perceptions,
attitudes and consumer responses having effect on the decision making and the choices
available within a culture. The third stage consumption characteristics refers to the type of
products and services consumed within a culture and depend on the cultural orientation,
social class , reference group and patterns of urban versus rural sector consumption. The
last stage of the paradigm disposal refers to the resale, recycling, and remanufacturing,
social and environmental considerations of product disposal. The customers world over are
becoming environmentally conscious and so marketers need to be socially and
environmentally responsible.
Manrai and Manrai Model: Manrai and Manrai "structures the cultural component of the
person in terms The marketing communications act as moderator of the effect of cross
culture on consumer behavior and can even influence of consumer attributes and processes,
and the cultural components of behavior in consumer behavior domains".
The culture is influenced by the income and in turn gets influenced by the culture. The
'Who' refers to what the people are. The components of 'Who' are self i.e. what a person
thinks who he is, his identity, image, attitudes, and the lifestyle. The 'How' refers to the
processes that influence peoples' thinking, perception, learning and motivation.
Luna and Gupta Model: Luna and Gupta (2001) in their model recognize the influence of
cultural value systems on the behavior. Culture is manifested through values, heroes,
rituals, and symbols. Values are the core of culture and it influences the consumer behavior.

In marketing the products are associated with heroes as they may influence the consumer
behavior. Rituals involve consumption so are important in consumer behavior. Symbols may
be absent or their meaning may be different in cultures. The consumers in order to define
their self indulge in symbolic consumption.
The consumer behavior constitutes of three elements-cognition, affect and behavior. The
cognition refers to the memory processes, affect refers to the attitude formation process and
the behavior includes the individual behaviour and consumption patterns.

MODULE 4 – Consumer Decision Making Process
CONSUMER DECISION MAKING – PROCESS, MODELS, LEVELS, DECISION

RULES
Consumer Decision Making Process
An individual who purchases products and services from the market for his/her own
personal consumption is called as consumer. To understand the complete process of
consumer decision making, let us first go through the following example:
Tim went to a nearby retail store to buy a laptop for himself. The store manager showed
him all the latest models and after few rounds of negotiations, Tim immediately selected one
for himself.
In the above example Tim is the consumer and the laptop is the product which Tim wanted
to purchase for his end-use.
Why do you think Tim went to the nearby store to purchase a new laptop ?
The answer is very simple. Tim needed a laptop. In other words it was actually Tim’s need
to buy a laptop which took him to the store.
The Need to buy a laptop can be due to any of the following reasons:
• His old laptop was giving him problems.

• He wanted a new laptop to check his personal mails at home.
• He wanted to gift a new laptop to his wife.
• He needed a new laptop to start his own business.
The store manager showed Tim all the samples available with him and explained him the
features and specifications of each model. This is called information. Tim before buying the
laptop checked few other options as well. The information can come from various other
sources such as newspaper, websites, magazines, advertisements, billboards etc.
The Consumer decision making process consists of a series of steps that a buyer goes
through in order to solve a problem or satisfy a need. They are as follows:

(1) Need/Problem Recognition – A purchase process starts with a need, a problem or
a motive within a consumer`s mind. Any internal or external stimulus may drive a
customer to believe that he lacks something and motivates him to look for
something that will satisfy his need or solve his problem.
(2) Information Search – When a need/problem receives heightened attention from a
buyer, he become more receptive about information that may solve his problem and
starts gathering data about products/services that will satisfy this need. He uses his
personal sources (friends, family, peers etc.) and commercial sources (radio, T.V.,
newspapers, internet etc.) to look for relevant information. An individual can acquire
information through any of the following sources:
a. Personal Sources - He might discuss his need with his friends, family
members, co workers and other acquaintances.
b. Commercial sources - Advertisements, sales people (in Tim’s case it was the
store manager), Packaging of a particular product in many cases prompt
individuals to buy the same, Displays (Props, Mannequins etc)
c. Public sources - Newspaper, Radio, Magazine
d. Experiential sources - Individual’s own experience, prior handling of a
particular product (Tim would definitely purchase a Dell laptop again if he
had already used one)
(3) Evaluation of Alternatives – After collecting information from various sources, the
customer evaluates the benefits and disadvantages of various product alternatives
and develops a set of choices regarding the product attributes, brand, store etc. that
suit his/her needs, taste & preference, personality, lifestyle etc.
(4) Selection and Trial – After keeping a set of choices in mind the customer makes the
first product trial. He may buy different products in small quantities (1 kg, 1 packet,
1 bottle) or actually use products individually for some time (tasting food, inspecting
phones, taking a test drive) to form an opinion and develop an attitude towards the
product.
(5) Purchase Decision – When the customer believes that a product or service offers
the best solution to his need or problem, he makes the actual purchase. This includes
making a product choice, choosing a brand, a dealer and deciding the amount and
time of purchase.
(6) Post Purchase Dissonance/Behaviour – A person seeks reassurance after making
a purchase. A purchase generally has the following three outcomes:
a. Actual Performance is equal to expected performance – Customer`s
behaviour is natural as the product performed according to his expectations.
This leads to repeat purchases.
b. Actual Performance is less than expected performance – The customer is
dissatisfied as the product did not meet his expectations and hence he rejects
the product.
c. Actual Performance is more than expected performance – This leads to
customer delight/satisfaction as the product performance is better than his
expectations. This leads to customer loyalty.
Levels of Consumer Decision Making: The consumer decision making process is complex
with varying degree. All purchase decisions do not require extensive effort. On continuum
of effort ranging from very high to very low, it can be distinguished into three specific levels
of consumer decision making:

(1) Extensive Problem Solving – Consumers are highly involved in the product and
critically evaluate the product on the basis of established product criteria that will
fulfill his/her need.
(2) Limited Problem Solving – Consumer conducts a general search for a product that
will satisfy his/her basic product criteria from a selected group of brands.
(3) Routine Response Behaviour – The consumer has very low involvement in the
product and he selects any product or brand that fulfills the basic need.
Models/ Four Views of Consumer Decision Making
(A) Economic View or Model – This model assumes that a consumer is rational person
and he takes rational decisions. He compares various products, evaluates its benefits and
disadvantages, and then makes a purchase decision on the basis of information collected. He
is aware of all product alternatives and is capable of ranking products in terms of benefits
and disadvantages. However this model is considered unrealistic as people are limited by
skills, habits, existing values and perceptions and they are not always rational when making
a purchase decision.
(B) Passive View or Model – This model assumes that the consumers take decisions
according to the promotional efforts of the marketers and respond directly to the sales and
advertisement appeals offered by the marketers. It is opposite to the economic model, as it
assumes people will evaluate a product depending upon how it is promoted and positioned
in the market. However this model is also unrealistic as the consumers are capable of
collecting and evaluating information about product alternatives and then making a
purchase.
(C) Cognitive View or Model – The cognitive view is the best of the four models of
consumer decision making. This model states that the consumers make decisions on the
basis of their own interests and understanding of the market demand and not according to
their rational needs or promotional efforts of the marketers. Every marketer must help
consumers to develop a short-cut decision rules that shorten the decision making process
and lead to instant purchases.
(D) Emotional View or Model – The Emotional model states that all consumers are
emotional and act upon their emotions while making a purchase decision. Consumers make
more impulsive purchases when they relate themselves with a product or service. They take
less time to think whether the product is necessary for them or not, but develops negative
or positive emotions related with the product. Hence products that bring negative emotions
are avoided and products that bring positive emotions in a consumer are bought by him.
Consumer Decision Rules
(1) Compensatory Decision Rule – In such a decision rule the consumer evaluates each
brand in terms of each relevant attribute and then selects the brand with the highest score.
Consumers evaluate brand or model in terms of each attribute and compute a weighted
score for each brand. The computed score reflects the brand‘s relative merit as a potential
purchase choice. The assumption is that consumer will select the brand that scores highest
among alternative brands. The unique feature of this rule is that it balances the positive
evaluation of a brand on one attribute to balance out a negative evaluation on some other

attribute. For example, positive attribute like high fuel efficiency is balanced with the
negative evaluation of high maintenance cost.
Result: Consumer selects a product after carefully evaluating all product attributes and
balancing the pros and cons of each attribute.
(2) Non-compensatory Decision Rule – According to this decision rule, a positive

evaluation of a brand or product attribute does not compensate for negative evaluation of
the same brand or product on some other attribute i.e. a positive attribute of the product
does not make the consumer overlook the negative attributes of the product.
Conjunctive Decision Rule – Consumers establish a minimum cut-off point for each
product attribute and brands that fall below the cut-off point on any one attribute are not
considered. In conjunctive decision rule the consumer establishes a different, minimally
acceptable level as a cut off point for each attribute. In this the option is eliminated for
further consideration if a specific brand or model falls below the cut off point on any
attribute.
Result: Consumer selects a product which has no negative attributes or bad features.
Disjunctive Decision Rule – It is the mirror image of conjunctive rule. Here the consumer
establishes a separate minimally acceptable cut off level for each attribute. In this case if an
option meets or exceeds the cut off establishes for any one attribute it is accepted.
Consumers establish minimum cut-off points for only those product attributes that are
relevant to him.
Result: Consumer selects a product that excels in at least one attribute.
Lexicographic Rule – Consumers first rank the product attributes in terms of importance
and then compares the important attributes.
Result: Consumer selects the product that excels in the attribute that is important to the
consumer.
(3) Affect Referral Decision Rule – A type of consumer decision rule in which a consumer
makes a product choice on the basis of his previously established experience and rating of
the product/brand rather than on specific attributes.
Personal Influence and Opinion Leadership

Personal Influence: Each individual receives the information and processes and evaluates
the product in his own way. This is irrespective of the family, social class or cultural
heritage etc. His own personality ultimately influences his decision. He has his own personal
reasons for likes, dislikes, price, convenience or status. Some individuals may lay greater
emphasis on price, others on quality and still others on status, symbol, convenience of the
product etc. Personal influences go a long way in the purchase of a product. The personal
influences can be linked to the following:
• Age and life cycle stage

o Bachelor, married.
o Full Nest I, II
o Empty Nest I, II
o Solitary Survivor
• Occupation, Blues Collar, White Collar.

• Economic Circumstances
o High Income Group
o Low Income Group
o Middle Income Group
• Life Style --- Pattern of Living.
• Personality --- It is an internal determinant which influence our consumption
patterns.
• Self concept --- How one perceives himself and his behavior.
Personal influence is the effect or change in a person’s attitude or behavior as a result of

communication with others.
The change in behavior may be influenced by communication. It may be source initiated(by

the influencer) or recipient oriented by the influence).
• Communication may result in one-way or two-way influence i.e., The individual may
influence while being influenced.
• Communication resulting in influence may be verbal or visual.
Personal influence is synonymously used as word-of-mouth, although the word-of-mouths

only a verbal communication. Word of mouth communication is more effective than
advertising whether it is product or services. The executives of the Paramount Motion
Pictures has remarked that “Word of mouth is the most important Marketing element that
exists. “There can be ‘Synthetic’ or simulated word of mouth (When celebrities talk to us on
T. V. It creates a situation as if they have entered our house and are actually talking to us).
The other is the real word of mouth. Both can be very convincing. The communication
should be positive, to be effective. The word of mouth of communications strong because:
• Consumers view word of mouth as trustworthy information which helps in making

better decisions.
• Personal contacts provide special support and give a stamp of approach to a purchase
which is not the case in Mass Media.
• The information provided is backed by social group pressures and forces the
purchase.
When choosing the products and services consumers are also influenced by advice fro
mother people. Today 80% of all buying decision are influenced by some one’s direct
recommendation .Decision such as which Air Conditioner to buy, which Movie to see. There
are a lot of interaction which helps the individual to make decisions. An individual can also
be personally influenced by neighbors, friends, co-workers, acquaintances. Those who
influence are the opinion leaders and those who are influenced are opinion receivers.
Personal influences are dependent on the process of communication. For a long time
marketing communication was a one-way process media which was dissipated by opinioned.

Audience now are not passive receivers of communication but take active part in the two-
way communication.
The verbal flow of communication and personal influence may take between a source and
receiver in the following stages:
(1) Source initiated–one-way influence

“Ram told me how good his Fridge was, so I decided to buy one”.
(2) Receiver initiated–two-way influence
“I asked Ram what brand of Fridge he recommends”
(3) Source initiated–two-way influence
“I showed my cupboard to Ram. He got interested and said that he would buy one
bassoon as possible”.
(4) Receiver initiated–two-way influence
“I asked Ram what he know about electric ranges. We had a nice discussion of the
features of various brands”.
The Nature and Significance of Personal Influence: Personal influence is best described
as the effect of change in a person’s attitudes or behavior as a result of communication with
others. It can occur in a number of ways.
(i) Communication leading to influence may be source-oriented (by the influencer) or

recipient-oriented (by the influence).
(ii) Communication may result in one-way or two-way influence. That is, the
individual may influence while being influenced.
(iii) Communication resulting in influence may be verbal or visual.
Personal influence is frequently used synonymously with the term word-of-mouth

advertising or communication, even though the above classification indicates that they are
not the same. Since word of mouth is oral communication, it is actually a subset of influence.
There is evidence that favorable word-of-mouth communication can actually have more
influence than the huge sums spent on advertising. Consequently, many companies
advertise little and depend instead, on word of mouth promotion.
The marketer frequently tries to create synthetic or simulated word of mouth program by
using celebrities in advertising campaigns. These spokespeople enter our homes via the
media and speak to us as if it were a one to one conversation. This simulated personal
influence may nevertheless be very effective.
There are three reasons why word-of-mouth seems to be dominant position in relation to
impersonal communication:
(i) Consumers view word-of-mouth as reliable and trustworthy information, which can
help people to make better buying decisions.
(ii) In contrast to the mass media, personal contracts can provide social support and give
a stamp of approval to a purchase.
(iii) The information provided is often backed up by social-group pressure to force
compliance with recommendations.
Communication and Influence flow: Personal influence is necessarily dependent upon the
process of communication. For years, marketers assumed that communication was a one-
way process flowing from the marketer to consumers. Later, the process of communication
and influence was found not to be an exclusively direct flow as had been originally
supposed. Instead, influence can move from the mass media directly to influencials, or
opinion leaders, who then through interpersonal networks pass on to their associates what
they have seen.
However, problems with this view are:
(i) it suggests that an absolute leader exists for each informal group, when actually all
group members have some amount of opinion leadership;
(ii) information is assumed to flow only from the mass media to opinion leaders who
disseminate it to followers - actually followers are also in touch with mass media but
perhaps not to the same degree as leaders; and
(iii) it is not always influence that is transmitted interpersonally, but in some cases
simply information, which may be relatively free of influence. Because of these
limitations, many communications researchers now suggest a multi-step interaction
mode as a more accurate representation of personal influence.
Consider the following examples of the different directions that a verbal flow of
communication and personal influence may take between a source and a receiver. (i) Source-
initiated, one-way influence (this is most typical of the two-step flow model): Jim told me
how good his Sony TV is, so I decided to buy one. (ii) Receiver initiated, one-way influence:
I asked Jim what kind of tire he recommends. (iii) Source-initiated, two-way influence: I
showed Susan our new Sony TV. She really wants to buy one when she will replace her old
TV. Her interest made me feel better about our Sony TV. (iv) Receiver-initiated, two-way
influence: I asked James what he knew about computer games. We have interesting
discussion of various games.
Opinion Leadership in Marketing: Opinion leaders are people who are able in a given
situation to exert personal influence. They are the ones to whom others look for advice and
information. The term opinion leader is perhaps unfortunate because it tends to connote
people of high status who make major decisions for the rest of us m In the marketing
contest, such a designation is unfortunate because it erroneously suggests an absolute leader
whom other seek to follow, In effect, opinion leadership is a relative concept, and the
opinion leader may not be much more influential than his followers.
Nevertheless, opinion leaders can informally and subtly affect the behavior of others toward
products, either positively or negatively. If they like a product or service, thy can help to
assure its success, if they don’t like it, they can contribute to its failure.
Who are opinion leaders: (i) Opinion leaders have approximately the same social-class
position as non-leaders, although they may have higher social status within the class; (ii)
opinion leaders have greater exposure to mass media that are relevant to their area of
interest; (iii) have greater interest and knowledge of the area of influences than do non-
leaders; (iv) more innovative that non-leasers; (v) more familiar with and loyal to groups
standards and values than are non-leaders. (vi) Opinion leaders may be general and
situational.
Why opinion leaders attempt to influence others: Consumers, generally, do not speak about
products or service unless they expect to drive some kind of satisfaction from the activity.
There are four reasons that opinion leaders engage in word-of-mouth. (i) Product-
involvement: use of a product or service may create a tension that may need to be reduced
by way of talk, recommendation, and enthusiasm to price relief. For example, consumers
often are fascinated by new items and feel they must tell someone about how good a product
they have found. (ii) Self-involvement: the emphasis is more on ways the influencer can
gratify certain emotional needs (gaining attention, feeling like a pioneer, having inside
information, suggesting status, seeking confirmation, asserting superiority etc). (iii) Other-
involvement: product talk fills the need to give something to the listener, to share one’s
happiness with the influence, or to express care, love or friendship. (iv) Message-
involvement: talking may also be stimulated by great interest in the messages used to
present the product. For example, advertising that is highly original an entertaining may be
the topic of conversation, especially since most of us feel we are experts on effective
advertising and can thus speak as critics.
The involvement level of consumers, therefore, is a critically important dimension of their

behavior as opinion leaders and as innovators.
Why followers accept Personal influence: The marketers would certainly want to know
the situational attributes user which opinion leadership will most likely occur so that he or
she could actively cultivate the process. There are numerous product, individual, and group
characteristics that can be expected to influence the acceptance of opinion leadership by
followers. Product complexity give rise to the occurrence of personal influence, as would a
product that is high on the amount of risk which consumers perceive to be associated with
its purchase. Individuals who face new life of experience may be very receptive to
information and consequently be quite susceptible to personal influence. A final factor to be
mentioned that affects acceptance of opinion leadership is the individual’s personality. For
example, some individuals are more persuasible than others.
Marketing Implications of Personal Influence: It should be remembered that opinion

leaders are not equally active foe all products- some products are very prone to personal
influence. It may be difficult and expensive to control the process of personal influence.
Using opinion leaders may be effective to diffuse information about such products as
automobiles but may ineffective for products like refrigerators.
The marketer will want to address several questions when targeting prospects of a new
product: (i) the target market’s innovative and early adoption propensities, (ii) its heavy
volume potential, (iii) its susceptibility to influence, and (iv) the cost of reaching this group.
This will require a systematic procedure utilizing information form concept testing, product
testing, test marketing, and so forth. If the marketer finds that personal influence is
potentially strong for the product, then he or she may desire to guide the process. There are
several strategies which might be adopted: (i) identifying and using opinion leaders directly,
(ii) creating opinion leaders, (iii) simulating opinion leaders, (iv) stimulating opinion
leadership, and (v) stiffing opinion leadership.
Opinion Leadership
One of those people who indulge in informal product related communication, usually
provides information about a product or product category, whether it would useful to buy,
how it would be used etc. He would also offer advice as to which of several brands is the
best and from where it should be bought. This person is known as the Opinion Leader and
the process is known as Opinion Leadership.
In some cases, the Opinion Leader just likes to talk and discuss about a product or service
category. He voluntarily provides information about the product and product category
and/or about brands. The people who form the audience and listen to him are called
Opinion Receivers.
In other cases, prior to a purchase, people could approach an Opinion Leader and request
him for information and advice about the product category and/or about brands. That is,
the Opinion Leader would provide information only when asked for. In such cases, the
persons (audience/or the receiver of information) are known as Opinion Seekers. Individuals
who on their own seek information and advice about products and brands are called Opinion
Seekers.
There is a two-way exchange of information, and both opinion leaders and opinion
receivers/seekers interact with each other. Opinion leaders provide the receivers/seekers
with product information, advice, and relate to them their experiences. In return for this,
they gather more information, personal opinion and personal experiences from the
receivers/seekers.
Opinion Leaders are not generic in nature; they are specific to a product category and the
Opinion Leader for a product category would become an Opinion Receiver/Seeker for
another product category.
ROLE PLAYED BY OPINION LEADERS
Opinion leaders play a key role and act as a vital role between the marketer and the
consumer. He communicates informally about product and service offerings and/or brands;
he gives product news and advice to consumers (current and potential) and also narrates his
personal experience to others. The major roles played by opinion leaders are, i) authority
figure; ii) trend setter; and iii) local opinion leader. These roles are discussed as follows:
i) Authority figure: The role that is played by an Opinion Leader when he gives product
news and advice, and also narrates his personal experiences to consumers, is known as the
authority figure role. By providing product news and advice, as also narrating his personal
experiences, he helps current and potential consumers satisfy their needs and wants.
Opinion leaders are highly involved with a product category. They gather information
about new, technically complex and risky products by reading about them in newspapers,
journals and magazines (also special interest magazines). They attend product launch
parties, trade fairs and trade shows, conferences and symposiums etc. They also enter into
conversations and discussions with subject experts, researchers, scientists, and even
innovators. Innovators provide them with accounts of their first hand experience. It is
noteworthy that sometimes even Opinion Leaders act as innovators and are the first to try
out a new product offering in the product category of their interest. Opinion Leaders are
said to be performing the authority figure role as they act as experts and authorities for a
particular product category. They have knowledge, expertise and experience with the
product category. They are aware of the various evaluative criteria on which the product
and service offerings should be assessed and they are also aware of the decision rules that
need to be applied to make a final purchase decision. Opinion Leaders are also aware of the
various brands that are available, and the value associated with each. So they are in the best
position to provide information and advice to consumer as to i) whether to make a purchase?
ii) If yes, which brand to buy? Because of this role that they perform as experts, consumers
prefer approaching them for information and advice. This helps the consumers i) reduce the
level of physical and cognitive effort associated with a purchase; ii) reduce the level of risk
associated with the purchase. Opinion Leaders enjoy playing this role because of the
prestige and pride associated with it. As mentioned above, they may voluntarily play this
role and enjoy talking about a product category, or they may be approached and requested
for it by the consumers. In any case, they derive pleasure and pride in acting out the expert’s
role. Opinion Leaders are specific to a product or service category. It is very rare that an
Opinion Leader is an expert or authority for more than one product category. This is
because of the fact that it would involve a lot of effort and would difficult for a person to be
well informed and educated about any and every product category. Further, the expertise
would be maintained only if it is an ongoing effort of information gathering, storage and
retention. It would involve a huge amount of effort to develop and maintain expertise in
more than one or few areas. Thus, as an expert, Opinion Leaders specialize in one product
category. However, Opinion Leadership could tend to overlap across certain combinations
of interest areas, i.e., Opinion leaders in one product category can often be Opinion Leaders
in related areas, like kitchen ware and household goods, fashion apparel and cosmetics,
computers and mobiles, tourism and travel.
ii) Trend setter: Opinion Leaders act as trend setters. They are inner oriented and do not
bother about what others in the society say or do. They are also innovative and often go in
for purchase of new product and service offerings (of their interest category) and through
the purchase and usage, they set the trend. Opinion Leaders play the trend setter role when
they narrate accounts of their personal experiences to others to copy and emulate. In other
words, if they purchase a new innovative product of their interest, they speak of their
experience as acts of behavior that the audience (opinion receivers/opinion seekers) should
emulate. Unlike the authority role (of providing news and advice), they emphasize more on
narrating their personal experiences. Rather than knowledge and expertise being the source
of credibility, it is the personal experience that provides credibility. Once a trend is set by
trend setters, people begin to copy them. In fact they act as a reference group for others
who want to use the same product and service offerings that are used by former. As trend
setters, Opinion Leaders could belong to membership or non-membership reference groups.
iii) Local Opinion Leader: People like to behave like others in their reference groups. They
desire social approval from contactual (membership) and aspirational (nonmembership)
groups. People from such groups directly or indirectly provide information and advice that
helps consumers to make purchase decisions, and buy such goods and services and/or
brands that the contactual and aspirational groups approve off. Opinion Leaders are said to
act a local opinion leaders when a) they constitute a person’s positive reference group; and
b) they provide information about such product and service offerings and/or brands that
help satisfy their needs and wants of the consumer group in a manner that is consistent with
group values and norms. As local opinion leaders, they provide knowledge and advice, and
narrate personal experiences about product and service offerings. Their credibility lies in
the fact that as they belong to the same group as others who approach them, they are able to
advise on the “good” or “bad”, and thereby guarantee social approval and appreciation.
DYNAMICS OF OPINION LEADERSHIP PROCESS:
The Opinion Leadership process is highly dynamic in nature. Opinion Leaders communicate
informally about product and service offerings and/or brands. They offer product

information and advice, and narrate experiences. They are not generic in nature; they are
specific to a product category, and an expert in one product category would not be an expert
for another product category. Thus, a person may be an Opinion Leader for a product
category and an Opinion Receiver for another. The dynamic nature of Opinion Leadership is
discussed as follows:
Opinion Leaders provide product information, advice and narrate experiences:

Opinion Leaders communicate informally about product and service offerings and/or
brands; they give product news and advice to consumers (current and potential) and also
narrate their personal experience to others. As such they act as authority figures, trend
setters and local opinion leaders.
Opinion Leaders provide both positive and negative information: Opinion Leaders
provide both favorable and unfavorable information about product and service offerings
and/or brands, and this adds to their credibility. Compared to positive and neutral
information and/or evaluation, the impact of negative information and/or evaluation is
much greater and has a bigger impact on Opinion Receivers/Seekers. Thus, they would
avoid such product and service offerings and/or brands that are spoken negatively by
Opinion Leaders.
Opinion Leaders are influential and persuasive: Opinion Leaders are highly influential
and very effective at persuading people around them. They are credible informal sources of
product knowledge, information and advice. People look up to them for advice and they are
good at influencing the former because of the following:
• They are regarded as subject experts, i.e. it is believed that opinion leaders are
knowledgeable and experienced about a product or service category.
• Since they receive no monetary compensation, their information, advice, opinion and
experiences about a product or service category, are perceived as genuine, objective
and unbiased.
• They are thought to have no selfish, ulterior or hidden motives, and this adds to
their credibility (unlike a marketer who wants to make a sale).
• Because they have no self-interest, their advice is regarded as being in the best
interests of others (potential and actual consumers).
Opinion Leaders are not generic in nature: They are specific to a product or service
category, and possess expertise and specialization in it. Because of the in depth knowledge
they have about the product category, people approach them for information and advice for
that product or service category. It is important to distinguish between Opinion Leaders
and Market Mavens. There are some people who seem to know about everything and offer
their advice about anything and everything. Such people are called market mavens. They
are different from Opinion Leaders in the sense that actually they do not provide
information about a product or service category. They provide information, advice and
narrate experiences of general buying and consumption behavior. They also seem to know
less intensive about a product or service category, and more extensively about many
products and services. They know more about what should be bought, how should it be
used, when it should be bought, where it would be available (retail outlets) etc. In a nutshell,
they possess more of general knowledge or market expertise.

Opinion Leaders could also become Opinion Receivers/Seekers: As explained above,
Opinion Leaders are category specific. They are experts in one product/service category,
and act as Opinion Leaders. However, when it comes to another product/service category,
they may become Opinion Receivers/Seekers. They may even seek information from people
to whom they had given information earlier about another product category. Thus, the roles
may get reversed from Opinion Leaders to Opinion Receivers/Seekers in the context of
other product/service categories. Sometimes a person may become an Opinion
Receiver/Seeker for the same product also. This is when he is in a product-related
conversation/discussion with a Opinion Receiver/Seeker who is more informed,
enlightened and updated with information product knowledge. This information then adds
to the Opinion Leaders’ knowledge database in his memory (adds to his associated network).
TRAITS AND CHARACTERISTICS OF OPINION LEADERS:
As discussed above, an understanding of the traits and characteristics of Opinion Leaders is

helpful to marketers so that they can target their marketing efforts, particularly their
promotional efforts and their communication programme at all such consumers. Marketers
assume that given their characteristics, the Opinion Leaders would indulge in WOM
communication and spread product news, advice and experiences. They would successfully
be able to influence consumption patterns and consumption behavior of others.
Consumer researchers and market practitioners have successfully identified traits and
characteristics of Opinion Leaders, and developed their profile. Such traits and
characteristics are discussed as follows:
1. Opinion leaders possess high levels of involvement and interest in a specific product or
service category. They gather information from various sources (print, electronic and
audio visual, internet and websites etc.) about product development, and are updated
about information. They have greater interest for exposure to media and news
specifically relevant to their subject areas of interest and specialization. They like to
read and hear more about what interests them. The information search is ongoing
because of the level of interest that they possess.
2. They are subject experts and have tremendous knowledge about the specific product
or service category. They are well-informed about product attributes and features,
benefits and utility, knowledge about brands, price and availability. Because of their
knowledge and expertise, people turn to tem for advice. They are authority figures and
provide information, advice and narrate experiences to Opinion Receiver/Seekers.
3. They are product or service category specific; a person who is an opinion leader in a
particular product/service category would be an Opinion Receiver/Seeker for another.
However, Opinion Leadership could tend to overlap across certain combinations of
interest areas, i.e., Opinion leaders in one product category can often be Opinion
Leaders in related areas, like kitchen ware and household goods, fashion apparel and
cosmetics, computers and mobiles, tourism and travel.
4. In most cases, Opinion Leaders are also consumer innovators. Because of their interest
in a product or service category, they have a tendency to purchase a new product
offering as soon as it is launched in the market. Also, because with their fist hand
experience with the product, they speak with authority and experience. They act as
trend setters and are in a better position to give advice and convince others to make a
purchase.

5. Opinion Leaders also possess certain personal characteristics; by nature, they are
selfconfident and gregarious. Because of the knowledge and experience that they
possess, they are self-confident. They are extroverts and sociable by nature, who enjoy
being in company of others, love talking to others and provide them with product
news and advice and share their experiences.
6. As far as characteristics related to social class and social standing are concerned,
Opinion leaders generally belong to the same socioeconomic group as Opinion
Receivers/Seekers. The reasons for this are quite logical. First, Opinion Leaders
indulge in informal communication, and the Receivers/Seekers would in most cases be
their own friends, neighbours, peers and colleagues. It is with them and other
members of their social class that a regular exchange of information takes place, and it
is to them that they would give information and advice and share their experiences.
Secondly, it is only when there is a match of economic class, that Opinion
Receivers/Seekers would approach an Opinion Leader. This is because there would be
a better level of comfort and understanding between the two. Opinion Leaders would
recommend a product and/or brand that he has been able to monetarily afford and use
and it would also be something that the Receivers/ Seekers can also afford. Thirdly,
the Receivers/Seekers desire social approval and social approval and acceptance, and
thus all the more reason that he approaches someone from his socio-economic class.
MEASUREMENT OF OPINION LEADERSHIP:
As Opinion Leaders act as a vital link between marketers and consumers, the marketers are
always concerned with i) the identification of such people in a social structure who are
Opinion Leaders; ii) the identification of people who have the potential to become Opinion
Leaders; and iii) the measurement of Opinion Leadership. In order to measure Opinion
Leadership, it is essential that Opinion Leaders with respect to the product/service category
are identified. It is also important that people who have the potential to become Opinion
Leaders are also identified. There are three ways in which Opinion Leaders can be identified;
these are listed as follows:
a) Marketers directly ask the consumers whether they are Opinion Leaders.
b) They ask a subject expert to identify who the Opinion Leaders are.
c) They study the communication patterns and flows among consumers, interpret the
dynamics and identify the leaders
As far as measurement of Opinion Leadership is concerned, researchers make use of various

methods. According to Rogers, there are four basic techniques for measuring Opinion
Leadership, viz., i) the self-designating method; ii) the sociometric method; iii) the key
informant method; and iv) the objective method. Each of these is explained and critically
assessed as follows:
i) The self-designating method: A marketing survey is conducted and people are asked a
series of questions to determine the degree to which they behave as Opinion Leaders.
Questions pertain to:
a) The extent to which they have given information and advice about a product/service
category and/or brands to others in the social system
b) How often they have been able to influence the purchase decisions about others.

c) How often they have been approached by others for information and advice about that
particular product/service category
Advantages: It is easy to include and apply in market research questionnaires. It helps

measure an individual’s perception and assessment about his/her actual Opinion Leadership
and related capacities.
Disadvantages: As the technique is based on self assessment and evaluation, it could be to

lead to over-estimation of self and thus, suffer from bias. People could portray themselves as
being “knowledgeable and important advisors” to others when it comes to making purchase
decisions. It is also difficult to assess the outcome of the informal communication in terms of
knowledge and advice. While a person may report that he provides information and advice,
and helps people make purchase decisions, it may not be essential that the receivers may be
actually using this information and advice. Thus, success of the technique would depend on
the objectivity with which a respondent can identify, assess and report his personal
influence.
The final assessment needs to be made by the marketer. The marketer must understand the
degree of relevance the Opinion Receivers/Seekers attach to the information and advice that
they receive from the various so called Opinion Leaders. This assessment would help the
marketer identify who among the many are Opinion Leaders and who are not.
ii) The sociometric method: The sociometric method of measuring Opinion Leadership
basis itself on the study of the social system, and particularly the communication patterns
and flows to identify those to give information and advice as act as Opinion Leaders.
Researchers examine complete patterns of informal information flows among consumers of
a particular product/service category, and identify those who provide information to others
as Opinion Leaders.
While the technique makes use of the analysis of the communication flow, it also uses
questionnaires that are administered to people in a social system. People in a social system
are asked to identify:
a) Those people to whom they have given information and advice about a product/service
category. In case the respondent identifies one or many people to whom he has provided
information and advice, he is regarded as an Opinion Leader. Researchers could cross
examine by contacting and questioning the Receiver/Seekers of information and confirming
from them.
b) Those people to whom they have gone for information and advice about a product or
service category and/or brand. Her again, researchers could cross-examine by contacting
and questioning the Opinion Leaders and confirming from them.
Advantages: The technique can meet tests of validity and reliability. Chances of
misconception and bias are less.
Disadvantages: It is a costly in terms of both money and time. In order to obtain results
that are valid and reliable, it requires intensive and extensive data, i.e. a large amount of
information from a large sample of respondents. This could be expensive and time
consuming. The analysis could also be complex and would require experts in the area.

iii) The key informant method: Based on careful observation and analysis of social
communication, key informants in a social system are identified. These key informants are
asked to identify and/or designate individuals in the social group who are Opinion Leaders
or who are most likely to be Opinion Leaders. The key informants are those who are aware
about the communication patterns in a social environment and able to provide a fair and
impartial assessment of these patterns. They may or may not be a member of such group(s);
they may be active participants or passive observers. In this way (where an expert is asked
to identify Opinion Leaders), the technique is better than the self-designating method
(where a person is asked to assess himself as an Opinion Leader).
Advantages: This is relatively less expensive and time consuming, as compared to the
sociometric method. The study is based on a chosen few rather than large samples in the
self-designating and sociometric methods.
Disadvantages: If informants are not carefully chosen, they may provide wrong
information.
iv) The objective method: The objective method is based on simulation. It identifies and
measures Opinion Leadership by placing people in controlled environments (just as
controlled experiments). People are chosen, given information about new products and
service categories, and the asked to act out as Opinion Leaders. The resulting “web” and
“patterns” of informal interpersonal communication regarding the relevant product or
service category are traced and analyzed. The technique thus measures the results of their
efforts and assesses how successful their impact is on consumption behavior.
Advantages: It measures people’s abilities to provide news and advice and influence
purchase decisions in controlled environments.
Disadvantages: It is time consuming as it requires setting up of experimental designs. It is

a complex process and requires subject experts and trained psychologists.
Impact of Firms’ Promotional Strategy

Successful firms of the millennium exhaust all efforts to offer value addition to their
customers over their competitors. ‘Customer value is the difference between all the benefits
derived from a total product and all the costs of acquiring those benefits ‘Providing superior
consumer value requires the organization to do a better job of anticipating and reacting to
consumer needs than the competition does. As Figure highlights the requirement of a
comprehensive awareness of consumer behaviour to develop a marketing strategy, since
marketing strategies of all firms should synchronise with the consumer demands and
aspirations.
Market Analysis: The process of developing marketing strategy commences with Market
Analysis as stated in Figure, capabilities of the firms, competitors, economic and technology
environment and potential opportunities and threats from consumers in the market are
evaluated in market analysis. Leads about the needs of consumer are derived from consumer
analysis and the same is matched with firms’ capabilities to narrow down to a target market.
Marketing Strategy: It aims at offering higher value to customer than its competitors,
more so at a profit to the firm. Marketing mix is referred to as total product. Reaction of the
target market to the total product lends an image to the product, brand or organisation.
Highly satisfied customers generate more profits to a firm in the long-run than higher sales;
consumer holds the key to success as all other efforts wouldn’t be able to generate consumer
satisfaction in the absence of a comprehensive consumer analysis.
Evaluation of company, competitor, conditions, and customer enlightens the firm with the
status quo of the firm, the potential threats posed by the competitor, the opportunities lying
in the consumer market, and the strong and weak factors in the form of conditions.
Knowledge of such kind offers the firm with the required leads on the kind and nature of the
product, level of the price, and mode of distribution to be opted, and nature and kind of
promotion required for the success of a product.
Market Segmentation helps in identifying a firms product related need set, grouping
customers with similar need sets, according to their description, and finally identifies the
most attractive and suitable segment to target.
Consumer Decision Process involves the stages of identifying the problem; i.e. trying to
segregate the problems, which can be best, answered by the firm’s product. Information
search is the stage where a customer evaluates information and is an opportunity for a firm
to find its brand so that it stands a chance to appear in the shortlisted brands. Alternative
evaluation is the stage of consumer evaluation of shortlisted brands leading to a decision to
purchase. Purchase is a stage where a firm needs to accompany the customer physically in
terms of outdoor advertising, transit advertising, POP advertising to materialise the sale.
The stage of using a product is critical to the firm since opinions are reinforced in this stage.
A common formula here is if performance of a product matches the expectations of a
customer he is satisfied, if performance exceeds expectations than the customer is delighted,
if performance is not up to expectations the customer is dissatisfied. Except in the case of
dissatisfaction a customer repeats his purchases and offers positive word of mouthing, it is
vice versa in the other case. After the sale reinforcements need to be provided by means of
advertisements of satisfied customers, free service camps, free checks, and future
acknowledgements, and reminders to enable continuous reinforcing.
Outcomes of using a product influence the individual, firm, and society. Individuals satisfy
their needs and offer free publicity for the product and firm. The firm’s sale and ROI are
increased, leading to staggered production schedules and economies of scale resulting in
reduced production costs and higher productivity. The society comprises of customers of
the firm, and firms employees. Customers receive good products for their money; employees
receive salary, and respect thus leading to a new kind of lifestyle.
Diffusion of Innovations: Diffusion Process, Adoption Process
Diffusion of Innovation Theory
Diffusion of Innovation (DOI) Theory, developed by E.M. Rogers in 1962, is one of the
oldest social science theories. It originated in communication to explain how, over time, an
idea or product gains momentum and diffuses (or spreads) through a specific population or
social system. The end result of this diffusion is that people, as part of a social system, adopt
a new idea, behavior, or product. Adoption means that a person does something differently
than what they had previously (i.e., purchase or use a new product, acquire and perform a
new behavior, etc.). The key to adoption is that the person must perceive the idea, behavior,
or product as new or innovative. It is through this that diffusion is possible.
Adoption of a new idea, behavior, or product (i.e., "innovation") does not happen
simultaneously in a social system; rather it is a process whereby some people are more apt
to adopt the innovation than others. Researchers have found that people who adopt an
innovation early have different characteristics than people who adopt an innovation later.
When promoting an innovation to a target population, it is important to understand the
characteristics of the target population that will help or hinder adoption of the innovation.
There are five established adopter categories, and while the majority of the general
population tends to fall in the middle categories, it is still necessary to understand the
characteristics of the target population. When promoting an innovation, there are different
strategies used to appeal to the different adopter categories.
1. Innovators - These are people who want to be the first to try the innovation. They
are venturesome and interested in new ideas. These people are very willing to take
risks, and are often the first to develop new ideas. Very little, if anything, needs to be
done to appeal to this population.
2. Early Adopters - These are people who represent opinion leaders. They enjoy
leadership roles, and embrace change opportunities. They are already aware of the
need to change and so are very comfortable adopting new ideas. Strategies to appeal
to this population include how-to manuals and information sheets on
implementation. They do not need information to convince them to change.
3. Early Majority - These people are rarely leaders, but they do adopt new ideas
before the average person. That said, they typically need to see evidence that the
innovation works before they are willing to adopt it. Strategies to appeal to this
population include success stories and evidence of the innovation's effectiveness.
4. Late Majority - These people are skeptical of change, and will only adopt an
innovation after it has been tried by the majority. Strategies to appeal to this
population include information on how many other people have tried the innovation
and have adopted it successfully.
5. Laggards - These people are bound by tradition and very conservative. They are
very skeptical of change and are the hardest group to bring on board. Strategies to
appeal to this population include statistics, fear appeals, and pressure from people in
the other adopter groups.
The stages, by which a person adopts an innovation, and whereby diffusion is accomplished,
include awareness of the need for an innovation, decision to adopt (or reject) the
innovation, initial use of the innovation to test it, and continued use of the innovation.
There are five main factors that influence adoption of an innovation, and each of these
factors is at play to a different extent in the five adopter categories.
1. Relative Advantage - The degree to which an innovation is seen as better than the
idea, program, or product it replaces.
2. Compatibility - How consistent the innovation is with the values, experiences, and
needs of the potential adopters.
3. Complexity - How difficult the innovation is to understand and/or use.
4. Triability - The extent to which the innovation can be tested or experimented with
before a commitment to adopt is made.
5. Observability - The extent to which the innovation provides tangible results.
Several forces often work against innovation. One is risk, which can be either social or
financial. For example, early buyers of the CD player risked that few CDs would be
recorded before the CD player went the way of the 8 track player. Another risk is being
perceived by others as being weird for trying a “fringe” product or idea. For example,
Barbara Mandrell sings the song “I Was Country When Country Wasn’t Cool.” Other
sources of resistance include the initial effort needed to learn to use new products (e.g., it
takes time to learn to meditate or to learn how to use a computer) and concerns about
compatibility with the existing culture or technology. For example, birth control is
incompatible with strong religious influences in countries heavily influenced by Islam or
Catholicism, and a computer database is incompatible with a large, established card file.
Innovations come in different degrees. A continuous innovation includes slight

improvements over time. Very little usually changes from year to year in automobiles, and
even automobiles of the 1990s are driven much the same way that automobiles of the 1950
were driven. A dynamically continuous innovation involves some change in technology,
although the product is used much the same way that its predecessors were used—e.g., jet
vs. propeller aircraft. A discontinous innovation involves a product that fundamentally
changes the way that things are done—e.g., the fax and photocopiers. In general,
discontinuous innovations are more difficult to market since greater changes are required in
the way things are done, but the rewards are also often significant.
Several factors influence the speed with which an innovation spreads. One issue is relative
advantage (i.e., the ratio of risk or cost to benefits). Some products, such as cellular phones,
fax machines, and ATM cards, have a strong relative advantage. Other products, such as
automobile satellite navigation systems, entail some advantages, but the cost ratio is high.
Lower priced products often spread more quickly, and the extent to which the product is
trialable (farmers did not have to plant all their land with hybrid corn at once, while one
usually has to buy a cellular phone to try it out) influence the speed of diffusion. The extent
of switching difficulties influences speed many offices were slow to adopt computers because
users had to learn how to use them. Some cultures tend to adopt new products more quickly
than others, based on several factors:
a. Modernity: The extent to which the culture is receptive to new things. In some
countries, such as Britain and Saudi Arabia, tradition is greatly valued—thus, new
products often don’t fare too well. The United States, in contrast, tends to value
progress.
b. Homophily: The more similar to each other that members of a culture are, the more
likely an innovation is to spread—people are more likely to imitate similar than
different models. The two most rapidly adopting countries in the World are the U.S.
and Japan. While the U.S. interestingly scores very low, Japan scores high.
c. Physical distance: The greater the distance between people, the less likely
innovation is to spread.
d. Opinion leadership: The more opinion leaders are valued and respected, the more
likely an innovation is to spread. The style of opinion leaders moderates this
influence, however. In less innovative countries, opinion leaders tend to be more
conservative, i.e., to reflect the local norms of resistance.
It should be noted that innovation is not always an unqualifiedly good thing. Some
innovations, such as infant formula adopted in developing countries, may do more harm
than good. Individuals may also become dependent on the innovations. For example, travel
agents who get used to booking online may be unable to process manual reservations.
Limitations of Diffusion of Innovation Theory

There are several limitations of Diffusion of Innovation Theory, which include the
following:
• Much of the evidence for this theory, including the adopter categories, did not
originate in public health and it was not developed to explicitly apply to adoption of
new behaviors or health innovations.
• It does not foster a participatory approach to adoption of a public health program.
• It works better with adoption of behaviors rather than cessation or prevention of
behaviors.
• It doesn't take into account an individual's resources or social support to adopt the
new behavior (or innovation).
This theory has been used successfully in many fields including communication, agriculture,
public health, criminal justice, social work, and marketing. In public health, Diffusion of
Innovation Theory is used to accelerate the adoption of important public health programs
that typically aim to change the behavior of a social system. For example, an intervention to
address a public health problem is developed, and the intervention is promoted to people in
a social system with the goal of adoption (based on Diffusion of Innovation Theory). The
most successful adoption of a public health program results from understanding the target
population and the factors influencing their rate of adoption.
5 Stages Involved in Adoption / Diffusion Process

The main focus of this process is the stages through which an individual consumer passes
before arriving at a decision to try or not to try, to continue using or to discontinue using a
new product. Therefore, this can also be called as Adoption – Decision ones a time. To know
why many new products fail, marketers need to understand the time and process required
for adoption to occur. Most of the organizations believe that if they just develop a new
product that fits an important need recognized by consumers and promote, price and
distribute it well, sales will take place. But this does not work always various models have
been given by marketing analysts after examining the process of both adoption and
diffusion. The first was called AIDA (Awareness, Interest, Desire, Action), other alternative
Models were also conceptualized but with different terminology and with same process.
Fig: Models of Adoption/Diffusion Process

Let us study the most widely adopted model i.e., Rogers.
The process shown in the fig 10.5 is explained stage wise as follows:
(1) Knowledge: Consumer is exposed to the innovations existence and gains some
understanding of how it functions. In this stage, consumers are aware of the product but
have made no judgment concerning the relevance of the product to a problem or recognized
need. Knowledge of a new product is considered to be result selective perception and is
more likely to occur through the mass media than in late stages which are more influenced
by opinion leaders.
(2) Persuasion: In this stage, usually attitude formation takes place that is consumer forms
favorable or unfavorable attitudes toward the innovation. Consumer may mentally imagine
how satisfactory new product might be in use, i.e., “vicarious trial” of the product in
consumer’s mind.
It is also considered as the evaluation of consequences of using the product. This means
consumers weigh the potential gains from adopting the product against the potential losses
of switching from the product now used.
A person may seek out new stories, pay particular attention to advertising for the product,
subscribe to product rating services, talk to experts in that product category etc. This is
basically done to reduce perceived risk in adopting new products. Each of the above
information search and evaluation strategies has an economic and/or psychological cost.
Many persuasion methods are used by marketers. One of the common arid effective method
is catalogues, specially used for new products because this provides more information than
the typical retail setting. For example – marketer can show the advantages ones present
solutions of hair problems.
(3) Decision: Consumer engages in activities that lead to a choice to adopt or reject the
innovation (i.e., adoption or rejection). Adoption can be defined as a decision to make full use
of an innovation as the best course of action. This means continued use of the product unless
situational variables (lack of availability, or money etc.) prevent usage. Rejection means not
to adopt an innovation.
There may be some persons who first consider adopting an innovation or at least give a
trial, but then deciding not to adopt it. This is called an active rejection. Others never
consider the use of the innovation, known as passive rejection.
(4) Implementation: Implementation means consumer, puts the innovation into use. Until
this stage, the process is a mental exercise, but in this stage behavioral change is required
Marketing plan is the determinant of whether a good product has been communicated
effectively (i.e., actually sales). Marketing mix planned should be such that purchase is made
easy. This means proper coordination of the channels of distribution with new products and
their communication process.
(5) Confirmation: Consumer seeks approval/reinforcement for the innovation decision, but
may reverse this decision if exposed to conflicting messages about the product. This stage is
also influenced by communication sources and consumers evaluate their purchase
experiences. After evaluating, they try to support their behaviour and later decide to
continue or discontinue using the product.
Marketers consider studying discontinuance to be equally important as the rate of adoption.
They study so that marketing strategies can be tailor made with respect to the reasons for
the same. It is seen that people who adopt the product later than early adopters, are more
likely to discontinue. Therefore, marketers try to upgrade follow – up service and feedback
as sales of a new product expands.
Elements in the diffusion of innovations:

The four main elements in diffusion of innovations are
i) Innovation
ii) Communication channels
iii) Time
iv) Social system.
The description for these elements is presented below:
1) The innovation: An innovation is an idea, practice or object that is perceived as new by

an individual or other unit of adoption. The perceived newness of the idea for the individual
determines his or her reaction to it. The "newness" aspect of an innovation may be
expressed in terms of knowledge, persuasion or a decision to adopt. In this context, to know
about the perceived attributes of innovation would be appropriate which are described in the
succeeding paras:
a. Relative advantage: It is the degree to which an innovation is perceived as better than

the idea it supersedes. The degree of relative advantage may be measured in economic
terms, but social-prestige factors, convenience and satisfaction are also often the important
components.
b. Compatibility: It is the degree to which an innovation is perceived as being consistent

with the existing values, past experiences and needs of potential adopters.
c. Complexity: It is the degree to which an innovation is perceived as difficult to

understand and use. In general, new ideas that are simpler to understand will be adopted
more rapidly than innovations that require the adopter to develop new skills and
understandings.
d. Trialability: It is the degree to which an innovation may be experimented with on a

limited basis. An innovation that is trialable represents less uncertainty to the individual
who is considering it for adoption, as it is possible to learn by doing.
e. Observability: It is the degree to which the results of an innovation are visible to others.
The easier it is for individuals to see the results of an innovation, the more likely they are to
adopt.
2) Communication channels: A communication channel is the means by which messages

get from one individual to another. The following classification of channels would help the
communicator to use them appropriately:

i) Interpersonal channels - It refers to those which are used for face to face
communication between two or more individuals.
ii) Mass media channels - These enable the messages to reach a larger, diverse audience
simultaneously in a relatively shorter time. e.g.: Radio and T.V.
iii) Localite channels - They originate within the social system of the receiver. eg:
neighbours, relatives, opinion leaders etc.
iv) Cosmopolite channels - They originate outside a particular social system. eg:
Extension worker, sales personnel etc.
3. Time: It is an important element in the diffusion process. Time is an obvious aspect of

any communication process. Time does not exist independently of events, but it is an aspect
of every activity. The time dimension is involved in diffusion (i) in the innovation - decision
process, (ii) in the innovativeness of an individual or other unit of adoption, and (iii)
innovation's rate of adoption in a system.
4. Social System: It is defined as a set of interrelated units that are engaged in joint
problem solving to accomplish a common goal. The members or units of a social system
may be individuals, informal groups, organisations and / or subsystems. The social system
constitutes a boundary within which an innovation diffuses.
Fundamental Adoption Process
Philip Kotler considers five steps in consumer adoption process, such as awareness, interest,
evaluation, trial, and adoption. On the other hand, William Stanton considers six steps, such
as awareness stage, interest and information stage, evaluation stage, trial stage, adoption
stage, and post-adoption stage. We will follow six steps.
1. Awareness Stage: Individual consumer becomes aware of the innovation. He is exposed

to innovation but knows very little regarding the innovation. He has only limited
information about it. He is aware of either by discussion with friends, relatives, salesmen, or
dealers. He gets idea about a new product from various means of advertising like
newspapers, magazines, Internet, television, outdoor media, etc. At this stage, he doesn’t
give much attention to the new product.
2. Interest and Information Stage: In this stage, the consumer becomes interested in
innovation and tries to collect more information. He collects information from advertising
media, salesmen, dealers, current users, or directly from company. He tries to know about
qualities, features, functions, risk, producers, brand, colour, shape, price, incentives,
availability, services, and other relevant aspects. Simply, he collects as much information as
he can.
3. Evaluation Stage: Now, accumulated information is used to evaluate the innovation. The
consumer considers all the significant aspects to judge the worth of innovation. He
compares different aspects of innovation like qualities, features, performance, price, after-
sales services, etc., with the existing products to arrive at the decision whether the
innovation should be tried out. The Customer utilizes social media channels, online
shopping sites and other media channels to learn and explore about the products. The
consumer use recommendations, online reviews, and suggestions from online groups before
making purchase decisions.
• In this phase the consumer verifies the pro and cons of the product, the substitutes
available in the market and the value for money.
• The consumer outlines the unique selling proposition, identifies what your product
offers against other competing products.
• Utilizing the marketing strategies provides the companies with a platform that
allows the businesses to communicate to the existing and potential customers and
advertise the unique feature of the product.
4. Trial Stage: Consumer is ready to try or test the new product. He practically examines
it. He tries out the innovation in a small scale to get self-experience. He can buy the
product, or can use free samples. This is an important stage as it determines whether to buy
it.
5. Adoption Stage: If trial produces satisfactory results, finally the consumer decides to
adopt/buy the innovation. He decides on quantity, type, model, dealer, payment, and other
issues. He purchases the product and consumes individually or jointly with other members.
6. Post Adoption Behaviour Stage: This is the last stage of consumer adoption. If a
consumer satisfies with a new product and related services, he continues buying it
frequently, and vice-versa. He becomes a regular user of innovation and also talks
favourable to others. This is a crucial step for a marketer.
In every stage of consumer adoption, a marketer is required to facilitate consumers. He

must take all possible actions to make them try, buy, and repeat buy the innovation. Be clear
that every type of consumer (innovators, early adopters, early majority, late majority, or
laggards) follows all the stages of adoption process, but takes different amount of time to
adopt the innovation.
Factors Affecting Consumer Adoption Process: Some important factors influencing the
consumer adoption process are as bellow:
• Readiness of the Consumer/Customer to try new products and switch to the new
brands
• New product or Innovation
• Personal Choices and influences about the Purchase Decisions
• Varying Rates of Product Adoption
• Readiness of the organization to launch new products
Consumer adoption Process varies from customer to customer based upon the behavioral
factors. Some Consumers prefer change and some are very resistant towards changing
things and have a difficulty in accepting and adopting new things. Rate of adopting a
product depends upon competitive advantage, complexity, compatibility and
communicability.

Personal Influences is the effect of other people on the consumer attitude and purchase
decision. Personal Influences can greatly impact the adoption process of the consumer and it
can really affect the acceptance and rejection of the purchase decision of a customer.
SEVERAL RISKS INVOLVED IN THE PURCHASE OF A NEW PRODUCT
The more risk involved with a product’s purchase, the slower the adaptation process.
Several types of risk are:
1. Financial risk: The monetary loss that would result from a wrong decision
2. Performance risk: The chance that the product or service would not meet the
consumer’s expectations
3. Physical risk: Any mental or physical harm that would occur.
4. Social risk: The possibility that the product would not meet approval of one’s peer.
The following characteristics of the new product or service also influence its speed of
adoption:
1. Relative advantage: the greater the perceived added value offered by the product,
the quicker it will be adopted.
2. Compatibility: if the product does not disrupt the customer’s current practices and
processes it will be taken up more quickly.
3. Complexity: adoption will be facilitated if it is easy to understand and use.
4. Divisibility: it helps if the customer can sample or trial the product before purchase.
5. Risk: the greater the economic or social risk attached to failure, the more reluctant
the buyers will be in buying it.
6. Communicability: adoption is facilitated when the product’s advantages are easy to
show.
In the adoption process, consumers go through a series of stages from first learning about
the new product to trying it and deciding whether to purchase it regularly or reject it. The
consumer adoption process is influenced by consumer characteristics, such as personality
traits and demographic or socioeconomic factors, the characteristics of the new product,
such as its relative advantage and complexity, and social influences, such as opinion leaders.
Diffusion and adoption process models supplement product lifecycle. They track the sales
experiences of the new products overtime.
The product lifecycle strategies are form by evaluating adoption process.

MODULE 5 – BASIC CONCEPTS OF MARKETING RESEARCH
Marketing Research
Marketing research (also called consumer research) is a form of business research. The field
of marketing research as a statistical science was pioneered by Arthur Nielsen with the
founding of the ACNielsen Company in 1923.
Marketing research is a systematic and objective study of problems pertaining to the

marketing of goods and services. It is applicable to any area of marketing.
Research is the only tool an organization has to keep in contact with its external operating
environment. In order to be proactive and change with the environment simple questions
need to be asked:
1. What are the customer needs and how are they changing? How to meet these
changing needs? What do the customers think about existing products or services?
What more are they looking at?
2. What are the competitors doing to retain customers in this environment? Are their
strategies exceeding or influencing yours? What should you do to be more
competitive?
3. How are macro and micro environmental factors influencing your organisation?
How will you react t this environment?
Authors have defined Marketing Research in many ways:
1. Kotler (1999) defines marketing research as systematic problem analysis, model-

building and fact-finding for the purpose of improved decision-making and control in
the marketing of goods and services‘.
2. The American Marketing Association (AMA, 1961) defines it as the systematic
gathering, recording and analyzing of data relating to the marketing of goods and
services‘.
3. Green and Tull have defined marketing research as the systematic and objective
search for and analysis of information relevant to the identification and solution of
any problem in the field of marketing.
The aim of marketing management is to satisfy the needs of the consumer. Marketing
research helps in achieving this. Marketing research is a systematic and logical way of
assessing ways of satisfying customer needs.
Marketing Research: Concept, Objective, Advantages and Limitations!
The marketing concept states that the character of the marketing orientated organisation,
whether product or service based, profit or non-profit based, is the identification and true
delivery of consumers’ needs and wants, more effectively and efficiently than the
competition.
Hence, in a broad sense, marketing management needs to understand the minds of their
target markets, their attitudes, feelings, beliefs and value systems. They require a
formalised, managerial approach to this most important job. And this entire job is the basic
role and purpose of formal marketing research. Marketing research is the systematic,
objective and exhaustive search for study of the facts relating to any problem in the field of
marketing. It is systematic problem analysis, model building and fact-finding for the
purpose of decision-making and control in the marketing of goods and services.
According to American Marketing Association “marketing research is the systematic

gathering, recording and analysing of data about problems relating to the marketing of
goods and services.” According to Green and Tull, “marketing research is the systematic
and objective search for and analysis of information relevant to the identification and
solution of any problem in the field of marketing”. Professor Philip Kotler defines marketing
research as “Systematic problem analysis, model-building and fact-finding for the purpose of
improved decision making and control in the marketing of goods and services.”
The features of marketing research are:
1. Search for data: It is a search for data which are relevant to marketing problems –
problems in different functional areas of marketing consumer behaviour, product,
sales, distribution channel, pricing, ad and physical distribution.
2. It is systematic: It has to be carried out in a systematic manner rather than
haphazard way. The whole process should be planned with a clear objective.
3. It should be objective: Objectivity is more important in any result. It means that
the research is neither carried on to establish an opinion nor is intentionally slanted
towards pre-determined results.
4. It is a process: It involves various steps for gathering, recording and analysing of
data.
Objectives of Marketing Research:
Marketing research may be conducted for different purposes. The main objectives or
purposes of marketing research are:
1. To estimate the potential market for a new product to be introduced in the market.
2. To know the reactions of the consumers to a product already existing in the
market.
3. To find out the general market conditions and tendencies.
4. To know the reasons for failure of a product already in the market.
5. To find out the better methods of distributing the products to consumers.
6. To know the types of consumers buying a product and their buying motives to
know their opinions about the product and to get their suggestion improvement of
a product.
7. To assess the strength and weakness of the competitors.
8. To know the dimensions of the marketing problems.
9. To ascertain the distribution methods suited to the product and the
10. To estimate the market share of a firm.
11. To assess the probable sales volume of a firm.
12. To assess the reaction of the consumers to the packaging of the firm and to make
packaging as attractive as possible.
Advantages of Marketing Research:

(1) Marketing research helps the management of a firm in planning by providing
accurate and up- to-date information about the demands, their changing tastes,
attitudes, preferences, buying
(2) It helps the manufacturer to adjust his production according to the conditions of
demand.
(3) It helps to establish correlative relationship between the product brand and
consumers’ needs and preferences.
(4) It helps the manufacturer to secure economies in the distribution о his products.
(5) It makes the marketing of goods efficient and economical by eliminating all type
of wastage.
(6) It helps the manufacturer and dealers to find out the best way of approaching the
potential
(7) It helps the manufacturer to find out the defects in the existing product and take
the required corrective steps to improve the product.
(8) It helps the manufacturer in finding out the effectiveness of the existing channels
of distribution and in finding out the best way of distributing the goods to the
ultimate consumers.
(9) It guides the manufacturer in planning his advertising and sales promotion
efforts.
(10) It is helpful in assessing the effectiveness of advertising programmes.
(11) It is helpful in evaluating the relative efficiency of the different advertising
media.
(12) It is helpful in evaluating selling methods.
(13) It reveals the causes of consumer resistance.
(14) It minimises the risks of uncertainties and helps in taking sound decisions.
(15) It reveals the nature of demand for the firm’s product. That is, it indicates
whether the demand for the product is constant or seasonal.
(16) It is helpful in ascertaining the reputation of the firm and its products.
(17) It helps the firm in determining the range within which its products are to be
offered to the consumers. That is, it is helpful in determining the sizes, colours,
designs, prices, etc., of the products of the firm.
(18) It would help the management to know how patents, licensing agreements and
other legal restrictions affect the manufacture and sale of the firm’s products.
(19) It is helpful to the management in determining the actual prices and the price
ranges.
(20) It is helpful to the management in determining the discount rates.
(21) It is helpful to the management in ascertaining the price elasticity for its
products.
(22) It helps the firm in knowing the marketing and pricing strategy of competitors.
(23) It is helpful in knowing the general conditions prevailing in the mark
(24) It is helpful to the management in finding out the size of the market for its
products.
(25) It helps the firm in knowing its market share over various time periods
(26) It is quite helpful to a firm in launching a new product.
(27) It helps the firm in knowing the transportation, storage and supply requirements
of its products.
(28) It helps the firm in exploring new uses for its existing products and thereby,
increasing the demand for its products.
(29) It is helpful to a firm in making sales forecasts for its products and thereby,
establishing harmonious adjustment between demand and supply of its products.
(30) It helps the firm in exploring new markets for its products.
Limitations of Marketing Research:
1. It is not a Panacea: Marketing Research is not the ultimate solution to all

marketing problems. Rather it offers accurate information, which can arrive at
suitable decisions to solve problem.
2. Not an exact science: It deals with human behaviour and as such cannot be
examined in a controlled environment. There are various and uncontrollable factors
which influence marketing forces. This gives scope for wrong conclusions. Hence
this leads to marketing research as not being an exact science.
3. Limitation of time: Its process is lengthy and needs long time to complete it.
During the period between starting the research and implementation of decisions,
the situation and assumptions may have changed drastically which reduces the
utility of research report. Decisions based on such report prove to be obsolete and
result in false conclusions.
4. Erroneous findings: The complicated problems may not be comprehensively
studied and their impact properly analysed by the researcher on account of
insufficient fund, time and technique. This leads to erroneous findings, which
disappoint the management.
5. Not an exact tool of forecasting: It cannot be used as a foolproof tool of
forecasting because there are number of intervening factors between the findings of
the research and marketing complex. The forces act and react and interact to give a
complex state, which is difficult to be studied.
6. In experienced research staff: It needs great expertise and well-trained and
experienced researcher, interviewer and investigator.
7. Narrow Conception: Marketing research is a fact-finding exercise. It is not problem
oriented. It is of low and questionable validity.
8. Involves high cost: It is considered as a luxury for the management as it involves
high cost.
9. Limitations of tools and techniques: The validity of marketing research is also
limited by the limitation of tools and techniques involved.
10. It is passive: Its use and effectiveness largely depends upon the ability of executives
to get the most value of it.
Scope of marketing research: Marketing research can be used in:
 Product Management: One of the major scopes of marketing research is to manage

the current products and new products. In product management Marketing
Research is helpful in
o Competitive Intelligence – To understand the competitive product
strategy.
o Prelaunch strategy for new products
o Test Marketing – To monitor the performance of the brand by launching in
a select area and then taking it across the country. In other words it is a

small-scale product launch used to determine the likely acceptance of the
product when it is introduced into a wider market.
o Concept testing - to test the acceptance of a concept by target consumers.
 Sales analysis: Marketing research is used to study the sales trend and make
suitable strategies when required. It is used to
o Assess market potential
o Estimation of demand for a product
o Market share estimation
o Study seasonal variation for a product
o Market segmentation studies
o Estimate size of the market
o Need analysis to find out where the product fits in
 Corporate Research: Marketing Research is used to analyze the corporate
effectiveness. Some examples are:
o Assessing the image of the company
o Knowledge of the company activities
 Advertising Research: Advertising is an arena in which Marketing Research is
extensively used. Some scopes are:
o Readership feedbacks – Mainly carried out for newspapers and magazines
o Advertising Recall – To assess the recall of television or other advertising
and thereby assess its effectiveness.
 Syndicated Research: This is compiled by agencies on a regular basis and sold to
organisations on subscription basis.
All of these forms of marketing research can be classified as either problem-identification

research or as problem-solving research. A similar distinction exists between exploratory
research and conclusive research.
 Exploratory research provides insights into and comprehension of an issue or

situation. It should draw definitive conclusions only with extreme caution.
 Conclusive research draws conclusions: the results of the study can be generalized
to the whole population.
Research can also be:
 Primary Marketing Research: It is research conducted by an organisation for its

own purpose which addresses its requirements. It is generally expensive but is
specific and objective to the organisation‘s requirement. There are several ways to
collect data in primary research.
o Interviews
o Surveys
o Questionnaires
o Focus groups that include a sample of potential clients or customers
Questions might include the following.
o What factors do you consider when purchasing this product or service?

o What do you like or dislike about current products or services currently on
the market?
o What areas would you suggest for improvement?
o What is the appropriate price for a product or service?
Many companies make the mistake of ignoring primary research, Pyle notes.
Primary research gives companies a full picture; the insight from actual customers
can be extremely valuable.
 Secondary Marketing Research: This is used if the organisation is considering

extending its business into new markets or adding new services or product lines.
This type of research is based on information obtained from studies previously
performed by government agencies, chambers of commerce, trade associations and
other organizations. This also includes Census Bureau information. In other terms
this is research published previously and usually by someone else. Secondary
research costs less than primary research, but seldom comes in a form that exactly
meets the needs of the researcher. It can cater to anyone who wishes to use the data.
This data can be found in local libraries or on the Web, but books and business
publications, as well as magazines and newspapers, are also great sources.
Hence, Primary research delivers more specific results than secondary research, which is an
especially important while launching a new product or service. In addition, primary
research is usually based on statistical methodologies that involve sampling as small as 1
percent of a target market. This tiny representative sample can give an accurate
representation of a particular market.
With the advance in technology a lot of software have been developed which help in
primary market research online and offline thereby making analysis and interpretation
easier.
The ideal way to conduct Marketing Research is to do secondary research first and then do
the primary research for the data not available from secondary sources.
Hence, secondary research lays the groundwork and primary research helps fill in the gaps.
By using both types of market research, organisations get a better picture of their market
and have the information they need to make important business decisions.
Types of Market Research Methods
Methodologically, marketing research uses four types of research designs, namely:
1. Qualitative Marketing Research – This is generally used for exploratory

purposes. The data collected is qualitative and focuses on people‘s opinions and
attitudes towards a product or service. The respondents are generally few in number
and the findings cannot be generalised tot eh whole population. No statistical
methods are generally applied. Ex: Focus groups, In-depth interviews, and
Projective techniques
2. Quantitative Marketing Research – This is generally used to draw conclusions for
a specific problem. It tests a specific hypothesis and uses random sampling
techniques so as to infer from the sample to the population. It involves a large
number of respondents and analysis is carried out using statistical techniques. Ex:
Surveys and Questionnaires
3. Observational Techniques - The researcher observes social phenomena in their
natural setting and draws conclusion from the same. The observations can occur
cross-sectionally (observations made at one time) or longitudinally (observations
occur over several time-periods) Ex: Product-use analysis and computer cookie
tracing
4. Experimental Techniques – Here, the researcher creates a quasi-artificial
environment to try to control spurious factors, then manipulates at least one of the
variables to get an answer to a research Ex: Test marketing and Purchase
laboratories
More than one research designs could be used at a time. They may start with secondary
research to get background information, then conduct a focus group (qualitative research
design) to explore the issues. Finally they might do a full nation-wide survey (quantitative
research design) in order to devise specific recommendations for the client organisation.
Quantitative research relies more on direct questioning, quantitative data collection and,
therefore, mathematical analysis. Contrary to this, qualitative research believes in
psychological methods and techniques of measuring the consumer behaviour.
The most common methods and techniques used in marketing research are:
1. Survey.
2. Observation
3. Experimentation.
4. In-depth interviews and
5. Projective techniques.
The first three are methods while the last two are the techniques.
1. Survey Method: Survey methods refer to all methods of obtaining the needed
information through asking the questions to the respondents. This method is, therefore,
known as the ‘questionnaire’ method. Professors Tull D.S. and Hawkins D.I. define survey
method as “the systematic gathering of information from the respondents for the purpose of
understanding and/or predicting some aspects of behaviour of the population of interest”.
Surveys are commonly conducted both in quantitative and qualitative researches. After
having decided about the sampling, questionnaire is designed and the respondents are
contacted to answer these questions asked in the questionnaire. This process of getting
answers is called as interviewing.
In questionnaire research, such interviewing is more direct in that the respondent knows
the purpose of the study and answers to the questions. On the other hand, in qualitative
research, interviewing is more indirect as the respondent does not know the purpose of
study yet answers the questions.
Two significant factors affect the effectiveness of a survey method:
1. Wording of questionnaire must be such that desired information can be obtained

accurately and unbiased.
2. Ability and willingness of the respondent to give accurate and unbiased information.
There are three major methods of conducting a survey the ways to reach the
respondents for getting the desired research information.

These are:
A. Personal Interview
B. Mail Interview and
C. Telephone Interview.
A. Personal Interview:
Personal interview is the process of communication where face to face contact between the
investigator and the respondent is established. It is the conversation arranged for the
purpose of obtaining views of the respondent on the topic of interest to the interviewer.
Under this method, the investigator presents the questionnaire in person either at the
residence or at the office of the respondent. Being active participant, he establishes a close
rapport with the respondent and motivates him or her to answer all the questions
satisfactorily.
Merits:
1. It is a superior method: Personal interview method is superior to mail and telephone

interview methods because, it has two special features of its own.
These are:
(i) Answer is not only on asking,
(ii) Personal observation.
That is why, this method is widely used.
2. Maximum information is sought: Maximum and accurate information can be elicited by

the investigator because, he can explain each question in person and this enables the
respondent to answer the questions only after understanding. So no question is left
unanswered.
3. Regulation of interview: In personal interview, the investigator being an active

participant can control the interview to his advantage and to the convenience of the
respondent by directing, guiding and supervising the respondent. It is he who matches to
the needs and moods of the respondents.
Demerits:
1. It is expensive: This method works out costly because of varieties of expenses incurred
on sampling, questionnaire, interviewing, recruiting training and controlling investigators,
paying for their services. Above all the time lost is too much. That is 35 per cent to 45 per
cent extra time is to be provided for arriving at the total time spent.
2. More administrative problems: Personal interview method involves more

administrative problems because of wider organizational paraphernalia, selection, training
and control of personnel both research and non-research. The greatest problem is that of
chasing of widely scattered investigating staff.
3. Biased information: The investigators may not get accurate and unbiased information
though it is possible to get maximum information.
It is likely to be biased as the investigator plays more active role in explaining the
questions; he may get answers only to the key questions and the rest he may manage as per
his sweet will caprice.
B. Mail Interview Method:
As the title suggests, the respondents are contacted through post. There is no face to face
contact between the investigator and the respondent. The questionnaire is sent to the
mailing address of the respondent with a request to fill in and return back.
Much care is to be taken while designing the questionnaire as there is no face to face
contact. The questions asked must be answerable quick in terms ‘Yes’ or ‘No’. The covering
letter must be carefully couched to induce, convince and motivate the respondent to answer
all the questions and return the questionnaire duly filled back to the investigator.
The cost of return postage is to be borne by the investigator. Some business houses enclose
a gift or a cash payment for having taken the trouble of providing the relevant information.
It is more a goodwill gesture.
Merits:
1. Detailed and accurate information: The researcher can contact maximum number of
persons by sitting at his office. It is powerful in terms of distance and time covered and
saved. The information given is likely to be unbiased, detailed and accurate as answers are
given at the convenience of the respondent.
2. It is economical: Though there are unavoidable costs, the -heavy expenses on travelling
and personnel are totally eliminated unlike personal interview. This brings about what is
known as ‘user surplus’. Due to wide coverage, the costs are the least.
3. More objectivity: This is more objective method of data collection in the sense that the
questionnaires are sent to be standardized and self- administered that makes possible
uniformity of interviews making the data collected more comparable. It is free from bias
because, the interviewer is absent.
Demerits:
1. Possibility of poor response: The greatest draw-back of this method is poor response to
the questions asked and the persons responding. There is no guarantee that all the
respondents will answer all the questions. Further, it is not compulsory to answer the
questionnaire.
2. It is time consuming: The researcher will not be able to keep the time schedule for
completing his research programme. Though he puts the deadline for answering the
questions, his bitter experience is that questionnaires reach him only after the due date. It
undermines the value of time-dimension of research work.
3. Incomplete and inaccurate data: As there is no investigator present, there is no

personal enforcement to answer such and very question. It may so happen that friends and
relatives may answer the questionnaire on behalf of the respondent.
He will not get accurate information on matters like age, income, education, marital status
and the like. This wrong information leads to wrong conclusions.

C. Telephone Interview:
Under telephone interview method, the researcher establishes a contact through telephone.
The investigator will have to be selective and careful while designing the questionnaire for
it cannot be a lengthy type as in case of earlier two methods.
It must be brief, simple, to the point and non-confidential. The special problem of telephone
interview is that of building close rapport with the respondents so that he can be induced
and persuaded to reply satisfactorily.
Merits:
1. It is economical: It is the speediest method of data collection where up-to-date

information is got at telephone call without waste of time just sitting in the office. Other
expenses on questionnaire, sampling, investigation and office are nil. The only expenditure
is on calls made. The cost per call decreases with the unlimited calls made.
2. Unbiased Data: Normally respondents are more frank on telephone than in person.
They are not influenced by family members and friends as telephone conversation is
considered to be private affair. The facts heard by the investigation can be recorded and
verified, if need there be.
3. Best method to elicit information from specific group: When the respondents are
belonging to higher socio- economic classes, it is really very difficult to get personal
appointments. It is normally the case with professionals like doctors, lawyers, consultants,
businessmen, architects, executives, professors and the like.
In such cases, telephone call can command more respect than a door-bell. These busy
persons give interviews provided the time taken is of short duration. Moreover, these people
are more cooperative for they know what research is.
Demerits:
1. It is of limited use: Telephone interview is limited to the extent of its contacts with the
respondents. Though, telephone interview is gaining ground in western countries because
of wide coverage, it is quite discouraging in country like ours where coverage is as low as 15
per cent of total population as against 85 per cent in advanced nations. Further, all phones
are not working efficiently all the time.
2. Possibility of no reply: Thinking that the respondent has the telephone facility, still
there is no guarantee that the interviewer gets the reply. It is easier and convenient to say
‘no’ on phone than in person. Many a times the respondent may simply hang up and deny
any useful information.
Further, it is difficult to include and persuade the respondent who has not been seen by the
investigator.
3. Lack of personal observation: Unlike, personal interview telephone interview does not
lend itself to have close observation of the respondent. No behavioural gestures such as
grins, winks, frowns, raised eye-brows and the like are possible. Again, visual aids are of no
avail. Unless vision phone facility is made available, this continues to the limitation.

Observation Method:
Observation implies viewing or noting the act or occurrence. Observation is the method
that places an observer human or machine to watch and record as to what is taking place.
Here, the observer does not ask the questions to the respondent but observes his or her
actions or behaviour with or without telling the respondent that he or she is being observed.
Many a times the investigator will not get answers for his questions under other methods;
but he gets here without asking the questions.
Thus, observation method works well in lieu of communication. Such an observation is to be

scientific and casual. For instance, if you are to get answer for question say “What brand of
shampoo does a lady use?” Instead of asking the question, the observer can note her
behaviour at the sales counter and determine her choice. Further, it may be a question of
determining the efficiency and the devotion of a salesman in a store. An observer can
measure the same in disguise of a customer.
Observation is mostly done by human-beings as it is more comprehensive though less

accurate, less convenient and uneconomical. Of late, mechanical or electronic devices are
used on the grounds of accuracy, economy and convenience, though of limited applicability.
These mechanical devices are traffic counting machines, hidden cameras, audio-meters, eye-
cameras, pupitometers, tachistoscopes, psycho-galvanometers and so on. Observation
method is commonly and more fruitfully used both in quantitative and qualitative research.
This method is more objective and accurate than survey method as it eliminates human
element uncontrolled.
The limitations of observation method are:
1. The information that is sought by the observer may not be sufficient as he can
observe only the overt behaviour.
2. It is much costlier than the survey method itself. Further, the experts have not been
able to develop alternative method of observation nor they have been fully utilized.
The techniques developed so far need further refinement for their perfect and fuller
use.
Experimental Method:
Experimental method of research is the procedure of carrying out the best possible solution
to a given problem on a small scale. The aim is to determine whether the tentative
conclusions reached can be proved in actual conditions.
The actual conditions are ever changing and cannot be controlled by the researcher.
However, continuous experimentation in differing conditions, it may be possible to isolate

the effect of these differing conditions. Professor Tull D.S. and Hawkin D.I. have defined
this method as “the deliberate manipulation of one or more variables by the experimenter in
such a way that its effect upon one or other variables can be measured.”
In marketing area, an experimenter may be interested in measuring the effect of change in

the brand name, price, product design, color, package, copy of the advertisement and the like
on the sale of a product. Such an exercise is known as test-marketing.
Test-marketing establishes the cause and effect relations and its findings may be the basis
for bringing about change in the product-mix. Let us take the case of colour. If the
experimenter wants to know the best colour of the two proposed toilet soaps, he has to say,
pink and yellow with same coloured packages.
He would select five very popular stores located in the different parts of the state, giving
equal display of the two packages. He would record the actual sales in all the five stores for
each colour and will take that colour for granted that has shown the highest sales in all the
stores. Let us take that pink colour has the upper hand then, it is clue for him to go in for
larger quantities of pink than yellow.
The strength of experimentation lies in the fact that it helps not only in building a theory
but also solving marketing problems as it resembles practical setting. In fact, decision
makers rely on it to a very great extent as it helps them in detecting the real causes of
impediments or troubles for taking marketing actions to plug the gaps.
However, its limitations are:
(a) It is costlier method both for researchers and non- researchers.

(b) The findings may not remain for a very long time because, the researcher will not be
able to control the dynamics of changing consumer needs.
In our case, observed people may not like pink colour. By the time the firm goes in for
larger production of pink cakes, they may prefer yellow or white or even light green.
Techniques:
1. Depth interviews: Depth interview is a technique of getting the replies from the
respondents in an atmosphere of freedom and relaxation. It is a form of unstructured
research or interview. It is non-directive interview where the respondent is being urged to
talk than mere saying ‘yes’ or ‘no’ for a specific question.
The respondents are kept in dark that they are being interviewed and, therefore, they
express or expose themselves without any kind of fear or disapproval, dispute or
admonition.
It is beneath line or beneath the consumer surface interviewing to ask leading questions to
stimulate free and frank discussion of the subject on hand without asking a standardized list
of questions. It is called as depth interview because, the researcher proves through probing
the unconscious mind, feelings, needs, conflicts, fears, motives, attitudes, habits and taboos.
The standard size of the group varies between 5 to 45 persons. The interview may be or
may not be tape-recorded. It normally lasts for one to three hours. Since depth interview is
unstructured and undirected, the degree of success totally depends on the competence of or
the caliber of the interviewer. It is his ability to make the respondent to expose to his
queries that count the most.
The brighter side of depth interview is that it helps in uncovering the human pre-
dispositions having far reaching impact on his research problem.
The variety and the volume of the information sought are really substantial. This
information reduces the level of uncertainty in decision making.
However, the limitations are:
a. Neither it is possible to get really competent interviewers at least did not cost nor
the information collected by them is unbiased.
b. It is a time consuming affair so much so that it is really difficult to hold on
respondent hours together.
c. Many a times, the respondent may not expose to the extent the researcher desires.
You may uncover every-thing of his ‘inner-self except the taboos.
2. Projective Techniques: Projective tests are the tests conducted wherein the respondents
are encouraged to project their feelings, attitudes, impressions, motives, reactions and the
like to a third person or an object. It is that technique which involves stimulating the
interviewee to project himself or herself in an artificial or ambiguous situation. Here, the
inner feelings are made to reveal.
If you ask a respondent as to why he has not yet bought a colour television set, he may say
that he is waiting for a particular latest model. However, the real reason may be his financial
difficulty. This hidden feeling or cause is unearthed by the projective techniques.
The most commonly administered tests of this kind are:
1. Word Association Test

2. Sentence Completion Test
3. Thematic Appreciation Test and
4. Paired Picture Test.
Sometimes, Third Person Test is also conducted. Then the other varieties are ‘role playing’
‘psycho-drama’ ‘graphology’ and the like.
These tests are discussed in coming pages under the title of Motivation Research. All these
are drawn from clinical psychology and psychiatry. The strength of these tests lies in the
fact they are of great assistance to the researcher in discovering the latent and factual
consumer behaviour.
However, the crucial and delicate tasks involved in testing are conducting the tests to
collect the data on one hand, and analysis and interpretation of the data on the other.
These warrant high degree of caliber, proven skill and candid diligence on the part of
researcher. Really it is very difficult to get the services of such personnel at the minimum
costs.
Why is Market Research Important?
With economy being competitive with each passing day it is important for businesses to
know and understand preferences of their consumers. Conducting research is one of the best
ways of achieving customer satisfaction, reduce customer churn and elevate business. Here
are the reasons why market research is important and should not be ignored:
 It provides information and opportunities about the value of existing and new
products, thus, helping businesses plan and strategizes accordingly.
 It helps in determining what the customers need and want. Marketing is customer-
centric and knowing the customers and their needs will help businesses design
product or services that best suit them.
 By understanding the needs of customers, businesses can also forecast their
production and sales. One of the most difficult aspects for a production manager is to
keep inventory stacked. What is the requirement and how much should be produced
to fulfill the needs of the customer? Market research helps in determining optimum
inventory stock.
 To stay ahead of competitors’ market research is a vital tool to carry out
comparative studies. Businesses can device business strategies that can help them
stay ahead of their competitors.
 Competition: According to a study conducted by Business Insider, 72% of small
businesses focus on increasing revenue. Conducting research helps businesses gain
insight into competitor behavior. By learning about your competitor’s strengths and
weaknesses, you can learn how to position your product or offering. In order to be
successful, small businesses need to have an understanding of what products and
services competitors are offering, and their price point.
 Customers: Many small businesses feel they have an understanding of their
customer, only to conduct market research and learn they had the wrong
assumptions. By conducting research, you can create a profile of your average
customer and gain insight into their buying habits, how much they’re willing to
spend, and which features resonate with them. Additionally, and perhaps more
importantly, you can learn what will make someone use your product or service over
a competitor.
 Opportunities: Potential opportunities, whether they are products or services, can
be identified by conducting market research. By learning more about your
customers, you can gather insights into complementary products and services.
Consumer needs change over time, influenced by new technology and different
conditions, and you may find new needs that are not being met, which can create
new opportunities for your business.
 Forecast: A small business is affected by the performance of the local and national
economy, as are its’ customers. If consumers are worried, then they will be more
restrained when spending money, which affects the business. By conducting research
with consumers, businesses can get an idea of whether they are optimistic or
apprehensive about the direction of the economy, and make adjustments as
necessary. For example, a small business owner may decide to postpone a new
product launch if it appears the economic environment is turning negative.
Marketing Research Process
Some of the major steps involved in marketing research process are as follows: 1.
Identification and Defining the Problem 2. Statement of Research Objectives 3. Planning
the Research Design or Designing the Research Study 4. Planning the Sample 5. Data
Collection 6. Data Processing and Analysis 7. Formulating Conclusion, Preparing and
Presenting the Report.
Marketing research exercise may take many forms but systematic enquiry is a feature
common to all such forms. Being a systematic enquiry, it requires a careful planning of the
orderly investigation process.
Though it is not necessary that all research processes would invariably follow a given
sequence, yet marketing research often follows a generalised pattern which can be broken
down and studied as sequential stages.
The various stages or steps in the marketing research process are discussed below:
1. Identification and Defining the Problem:
The market research process begins with the identification “of a problem faced by the
company. The clear-cut statement of problem may not be possible at the very outset of
research process because often only the symptoms of the problems are apparent at that
stage. Then, after some explanatory research, clear definition of the problem is of crucial
importance in marketing research because such research is a costly process involving time,
energy and money.
Clear definition of the problem helps the researcher in all subsequent research efforts
including setting of proper research objectives, the determination of the techniques to be
used, and the extent of information to be collected.
It may be noted that the methods of explanatory research popularly in use are—survey of
secondary data, experience survey, or pilot studies, i.e., studies of a small initial sample. All
this is also known as ‘preliminary investigation’.
2. Statement of Research Objectives:
After identifying and defining the problem with or without explanatory research, the
researcher must take a formal statement of research objectives. Such objectives may be
stated in qualitative or quantitative terms and expressed as research questions, statement or
hypothesis. For example, the research objective, “To find out the extent to which sales
promotion schemes affected the sales volume” is a research objective expressed as a
statement.
On the other hand, a hypothesis is a statement that can be refuted or supported by empirical
finding. The same research objective could be stated as, “To test the proposition that sales
are positively affected by the sales promotion schemes undertaken this winter.”
Example of another hypothesis may be: “The new packaging pattern has resulted in increase
in sales and profits.” Once the objectives or the hypotheses are developed, the researcher is
ready to choose the research design.
3. Planning the Research Design or Designing the Research Study:
After defining the research problem and deciding the objectives, the research design must
be developed. A research design is a master plan specifying the procedure for collecting and
analysing the needed information. It represents a framework for the research plan of action.
The objectives of the study are included in the research design to ensure that data collected
are relevant to the objectives. At this stage, the researcher should also determine the type of
sources of information needed, the data collection method (e.g., survey or interview), the
sampling, methodology, and the timing and possible costs of research. Your choice of
research instrument will be based on the nature of the data you are trying to collect. There
are three classifications to consider:
1. Exploratory Research – This form of research is used when the topic is not well
defined or understood, your hypothesis is not well defined, and your knowledge of a
topic is vague. Exploratory research will help you gain broad insights, narrow your
focus, and learn the basics necessary to go deeper. Common exploratory market
research techniques include secondary research, focus groups and interviews.
Exploratory research is a qualitative form of research.
2. Descriptive Research – If your research objective calls for more detailed data on a
specific topic, you’ll be conducting quantitative descriptive research. The goal of
this form of market research is to measure specific topics of interest, usually in a
quantitative way. Surveys are the most common research instrument for descriptive
research.
3. Causal Research – The most specific type of research is causal research, which
usually comes in the form of a field test or experiment. In this case, you are trying
to determine a causal relationship between variables. For example, does the music I
play in my restaurant increase dessert sales (i.e. is there a causal relationship
between music and sales?).
4. Planning the Sample:
Sampling involves procedures that use a small number of items or parts of the ‘population’
(total items) to make conclusion regarding the ‘population’. Important questions in this
regard are— who is to be sampled as a rightly representative lot? Which is the target
‘population’? What should be the sample size—how large or how small? How to select the
various units to make up the sample?
A representative sample is a small number of people that reflect, as accurately as possible, a

larger group.
 An organization cannot waste their resources in collecting information from the

wrong population. It is important that the population represents characteristics that
matter to the researchers and that they need to investigate, are in the chosen sample.
 Take into account that marketers will always be prone to fall into a bias in the
sample because there will always be people who do not answer the survey because
they are busy, or answer it incompletely, so researchers may not obtain the required
data.
 Regarding the size of the sample, the larger it is, the more likely it is to be
representative of the population. A larger representative sample gives the researcher
greater certainty that the people included are the ones they need, and they can
possibly reduce bias. Therefore, if they want to avoid inaccuracy in our surveys, they
should have representative and balanced samples.
 Practically all the surveys that are considered in a serious way, are based on a
scientific sampling, based on statistical and probability theories.
There are two ways to obtain a representative sample:
1. Probability sampling: In probability sampling, the choice of the sample will be

made at random, which guarantees that each member of the population will have the
same probability of selection and inclusion in the sample group. Researchers should
ensure that they have updated information on the population from which they will
draw the sample and survey the majority to establish representativeness.
2. Non-probability sampling: In a non-probability sampling, different types of people
are seeking to obtain a more balanced representative sample. Knowing the
demographic characteristics of our group will undoubtedly help to limit the profile of
the desired sample and define the variables that interest the researchers, such as
gender, age, place of residence, etc. By knowing these criteria, before obtaining the
information, researchers can have the control to create a representative sample that
is efficient for us.
5. Data Collection:
The collection of data relates to the gathering of facts to be used in solving the problem.
Hence, methods of market research are essentially methods of data collection. Data can be
secondary, i.e., collected from concerned reports, magazines and other periodicals, especially
written articles, government publications, company publications, books, etc.
Data can be primary, i.e., collected from the original base through empirical research by
means of various tools.

There can be broadly two types of sources
(i) Internal sources—existing within the firm itself, such as accounting data, salesmen’s
reports, etc.
(ii) External sources—outside the firm.
6. Data Processing and Analysis:
Once data have been collected, these have to be converted into a format that will suggest
answers to the initially identified and defined problem. Data processing begins with the
editing of data and its coding. Editing involves inspecting the data-collection forms for
omission, legibility, and consistency in classification. Before tabulation, responses need to be
classified into meaningful categories.
The rules for categorizing, recording and transferring the data to ‘data storage media’ are
called codes. This coding process facilitates the manual or computer tabulation. If computer
analysis is being used, the data can be key punched and verified.
Analysis of data represents the application of logic to the understanding of data collected
about the subject. In its simplest form analysis may involve determination of consistent
patterns and summarising of appropriate details.
The appropriate analytical techniques chosen would depend upon informational

requirements of the problem, characteristics of the research designs and the nature of the
data gathered. The statistical analysis may range from simple immediate analysis to very
complex multivariate analysis.
7. Formulating Conclusion, Preparing and Presenting the Report:
The final stage in the marketing research process is that of interpreting the information and
drawing conclusion for use in managerial decision. The research report should clearly and
effectively communicate the research findings and need not include complicated statement
about the technical aspect of the study and research methods.
Often the management is not interested in details of research design and statistical analysis,
but instead, in the concrete findings of the research. If need be, the researcher may bring out
his appropriate recommendations or suggestions in the matter. Researchers must make the
presentation technically accurate, understandable and useful.
Benefits of an Efficient Market Research
1. Make well-informed decisions: The growth of an organization is dependent on the

way decisions are made by the management. Using market research techniques, the
management can make business decisions on the basis of obtained results that back
their knowledge and experience. Market research helps to know market trends,
hence to carry it out frequently to get to know the customers thoroughly.
2. Gain accurate information: Market research provides real and accurate
information that will prepare the organization for any mishaps that may happen in
the future. By properly investigating the market, a business will undoubtedly be
taking a step forward, and therefore it will be taking advantage of its existing
competitors.

3. Determine the market size: A researcher can evaluate the size of the market that
must be covered in case of selling a product or service in order to make profits.
4. Choose an appropriate sales system: Select a precise sales system according to what
the market is asking for, and according to this, the product/service can be positioned
in the market.
5. Learn about customer preferences: It helps to know how the preferences (and
tastes) of the clients change so that the company can satisfy preferences, purchasing
habits, and income level. Researchers can determine the type of product that must be
manufactured or sold based on the specific needs of consumers.
6. Gather details about customer perception about the brand: In addition to
generating information, market research helps a researcher in understanding how
the customers perceive the organization or brand.
7. Analyze customer communication methods: Market research serves as a guide for
communication with current and potential clients.
8. Productive business investment: It is a great investment for any business, because
thanks to it they get invaluable information, it shows researchers the way to follow
to take the right path and achieve the sales that are required.

MODULE – VI
Defining Problem
Research Problem - If you have a specific idea for the basic of your inquiry, you do not
need to go through this chapter. However, you should make sure that your idea is
researchable as not all problems lend themselves to research methodologies. Broadly
speaking, any question that you want answered and any assumption or assertion that you
want to challenge or investigate can become a research problem or a research topic for your
study. However, it is important to remember that not all questions can be transformed into
research problems and some may prove to be extremely difficult to study. According to
powers, Meenaghan and Twoomey (1985), ‘Potential research questions may occur to us on
a regular basis, but the process of formulating them in a meaningful way is not at all an easy
task; as a new comer it might seem easy to formulate a problem but it requires a
considerable knowledge of both the subject area and research methodology. Once you
examine a question more closely you will soon realize the complexity of formulating an idea
into a problem which is researchable. ‘First identifying and then specifying a research
problem might seem like research takes that ought to be easy and quickly accomplished.
It is essential for the problem you formulate to be able to withstand scrutiny in terms of the
procedures required to be undertaken. Hence, you should spend considerable time in
thinking it through.
THE IMPORTANCE OF FORMULATING A RESEARCH PROBLEM:
The formulation for research problem is the first and most important step of the research
process. It is like the identification of destination before undertaking a journey. As in the
absence of a destination, it is impossible to identify the shortest or indeed any route, in the
absence of a clear research problem, a clear and economical plan is impossible. A research
problem is like the foundation of a building. The type and design of the building is
dependent upon the foundation. If the foundation is well designed ad strong you can expect
the building to be also. The research problem serves as the foundation of a research study: It
is well formulated, you can expect a good study to follow.
According to Kerlinger, if one wants to solve a problem one must generally know what the
problem is. It can be said that a large part of the problem lies in knowing what one is trying
to do.
You must have a clear idea with regard to what it is that you want to find out about and not
what you think you must find.
A research problem may take a number of forms, from the very simple to the very complex.
The way you formulate a problem determines almost every step that follows: the type of
study design that can be used; the type of sampling strategy that can be employed; the
research instrument that can be used or developed; and the type of analysis that can be
undertaken. The formulation of a problem is like the ‘input’ into a study, and the ‘output’-
the quality of the contents of the research report and the validity of the association or
causation established- is entirely dependent upon it. Hence, the famous saying about
computers- ‘garbags in garbags out’- is equally applicable to a research problem.

In the beginning you may be become more confused but this is normal and a sign of
progression. Remember: confusion is often but a first step towards clarity. Take time over
formulating your problem, for the clearers you are about your research problem, question,
the easier it will be for you later on. Remember, this is the most crucial step.
SOURCES OF RESEARCH PROBLEM:
This section is of particular relevance if you have not yet selected a research topic and do
not know where to start. If you have already selected your topic or question, go to the next
section. Most research in the humanities revolves around four Ps:
1. People 3. Programs
2. Problems 4. Phenomena
The emphasis on a particular ‘p’ may vary from study to study but generally, in practice,
most research studies are based upon at least a combination of two Ps. You may select a
group of individuals (a group or a community as such- ‘people’), either to examine the
existence of certain issues or problems relating to their lives, to ascertain attitude of a group
of people towards an issue (‘problem’), to establish existence of a regularity (‘phenomenon’)
or to evaluate the effectiveness of an intervening (‘program’). Your focus may be the study
of an issues an association or a phenomenon per Ps; for example, the relationship between
unemployment and street crime, smoking and cancer or fertility and mortality, which is
done on the basis of an information collected from individuals, groups communities or
organizations. The emphasis in these studies is on exploring, discovering or establishing
associations or causation. Similarly, you can study different aspects of a program; its
effectiveness, its structure, the need for it, consumers’ satisfaction with it, and so on. In
order to ascertain these you collect information from people. The ‘people’ provide you with
the ‘study population’, whereas the other three Ps furnish the ‘subject areas’. Your study
population individuals, groups and communities is the peoples from whom the information
is collected. Your subject area is a ‘problem’, ‘program’ or ‘phenomenon’ about which the
information is collected a closer look at any academic discipline or occupation field will also
that most research revolves around the four Ps.
Every research study has two aspects:
a. The study population;

b. The subject area.

We can study a problem, a program of a phenomenon in any academic field or from any
professional perspective. For example, you can measure the effectiveness of a program in the
field of health, education, social work, industrial management, public health, nursing, health
promotion or a welfare program, or you can look at a problem from a health, business or
welfare perspective. Similarly you can gauge consumers’ opinions about any aspect of a
program in the above fields.
CRITERIA/CONSIDERATIONS IN SELECTING RESEARCH PROBLEM
When selecting a research problem/topic there are a number of considerations to keep in

mind. These help to ensure that your study will be manageable and that you will be
manageable and that you will remain motivated. These considerations are interest,
magnitude, measurement of concepts, level of expertise, relevance, availability of data and
ethical issues.
1. Interest: Interest should be most important consideration in selecting a research

problem. A research endeavour is usually time consuming, and involves hard work
and possibly unforeseen problems. If you select a topic which does not greatly
interest you, it could become extremely difficult to sustain the required motivation,
and hence its completion as well as the amount of time taken could be affected.
2. Magnitude: You should have sufficient knowledge about the research process to be
able to visualise the work involved in completing the proposed study. Narrow the
topic down to something manageable, specific and clear. It is extremely important to
select a topic that you can manage within the time and resources at your disposal.
Even if you are undertaking a descriptive study, you need to carefully consider its
magnitude.
3. Measurement of Concept: If you are using a concept in you study, make sure you
are clear about its indicators and their measurement for example, if you plan to
measure the effectiveness of a health promotion program, you must be clear as to
what determines effectiveness and how it will be measured. Do not use concepts in
your research problem that you are not sure how to measure. This does not mean
you cannot develop a measurement procedure as the study progresses. While most
of the developmental work will be done during your study, it is imperative that you
are reasonably clear about the measurement of these concepts at this stage.
4. Level of Expertise: Make sure you have an adequate level of expertise for the task
you are proposing. Allow for the fact that you will learn during the study and may
receive help from your research supervisors and others, but remember you need to
do most of the work yourself.
5. Relevance: Select a topic that is of relevance to you as a professional. Ensure that
your study adds to the existing body of knowledge, bridges current gaps or is useful
in policy formulation. This will help you to sustain interest in the study.
6. Availability of Data: If your topic entails collection of information from secondary
sources (office records, client records, census or other already- published reports,
etc) before finalising your topic, make sure that these data are available and in the
format you want.
7. Ethical Issues: Another important consideration in formulating a research problem
is the ethical issue involved. In the course of conducting a research study, the study
population may be adversely affected by some of the question (directly or indirectly);
deprived of an intervention, expected to share sensitive and private information; or
expected to be simply experimental ‘guinea pigs’. How ethical issues can affect the
study population and how ethical problems can be overcome should be thoroughly
examined at the problem formulation stage.
STEP IN THE FORMULATION OF A RESEARCH PROBLEM
The formulation of a research problem is the most crucial part of the research journey on
which the quality of the entire project depends. Yet the available books offer very little be
way of specific guidance. This task is largely left either to the teachers of research
methodology or to students like you to learn themselves. One of the strength of this book is
that it offers a beginner a very specific set of step-by-step guidelines in one place.
The process of formulating a research problem consists of a number of steps. Working

through these steps presupposes a reasonable level of knowledge in the broad subject area
within which the study is to be undertaken. A brief review of the relevant literature helps
enormously in broadening this knowledge base. Without such knowledge it is difficult to
clearly and adequately ‘dissect’ a subject area.
If your do not know what specific research topic, idea or issue you want to research (which
is not uncommon among students) first go through the following two steps:
Step 1: Identify a Broad Subject: Identify a broad field or subject area of interest to you.
Ask yourself, ‘what is it that really interests me as a professional’? In the authors’ opinion, it
is good idea to think about the field in which you would like to work after graduation. This
will help you to find an interesting topic, and one which may be of use to you in the future
for example, if you are a social work student, inclined to work in the area of youth welfare,
refugees or domestic violence after graduation, you might take to research in one of these
area or if you are studying marketing you might be interested in researching consumer
behaviour or, as a student of public health, intending to work with patients who have
HIV/AIDS, you might like to conduct research on a subject area relating to HIV/AIDS. As
far as the research journey goes, these are the broad research areas it is imperative that you
identify one of interest to you before undertaking your research journey.
Step 2: Discussing sub Area of subject: Dissect the broad area into sub areas. At the
onset, you will realise that all the broad areas mentioned above youth welfare, refugees,
domestic violence, consumer behaviour and HIV/AIDS have many aspect. Take domestic
violence for example. There are many aspect and issue in the area of domestic violence
shows of its any aspects.
Dissecting the subject area of domestic violence and sub areas:

Similarly, you can select any subject area from other field such as community health or
consumer research and to through this dissection process. In preparing this list of sub areas
you should also consult others who have some knowledge of the area and the literature in
you subject area. Once you have developed an exhaustive list of the sub areas from various
sources, you processed to the next stage where you select what will become the basis of
your inquiry.
Step 3: Selecting most interested Area of study: Select what as of most interest to you. It
is neither advisable nor feasible to study all sub areas. Out of this list, select issues or sub
areas about which you are passionate. This is because your interest should be the most
important determinant for selection, even though there are other considerations which have
been discussed in the previous section, ‘considerations in selecting a research problem’. One
way to decide what interests you most is to start with the process of elimination. Go
through your list and delete all those sub areas in which you are not very interested you will
find that towards the end of this process, it will become very difficult for you to delete
anything further. You need to continue until you are left with something that is manageable
considering the time available to you, your level of expertise and other resources needed to
undertake the study. Once you are confident that what you have selected you are passionate
about and can manage, you are ready to go to the next step.
Step 4: Development of Research Problem: Raise research questions at this step you ask
yourself, ‘what is it that I want to find out about in this sub area’? Within your chosen sub
area, first list whatever questions you want to find answers to. If you find yourself in a
situation where you can think of many question, too many to be manageable, again go
through a process of elimination, as you did in step 3.
Step 5: Formulate Objectives: Formulate objectives formulate your main objectives and
your sub objectives. Your objectives grow out of your research questions. The main
difference between objectives and research question is the way in which they are written.
Research questions are obviously those questions. Objectives transform these questions into
behavioural aim by using action oriented words such as ‘to find out’, ‘to determine’, ‘to
ascertain’ and ‘to examine’. Some researchers prefer to reverse the process; that is, they start
from objectives and formulate research questions from them. Some researchers are satisfied
only with research questions, and do not formulate objectives at all. If you prefer to have
only research questions or only objectives, this is fine but keep in mind the requirement of
your institution for research proposals.
Step 6: Examine Objectives: Assess your objectives. Now examine your objectives to
ascertain the feasibility of achieving them through your research endeavor. Consider them
in the light of the time, resources (financial and human) and technical expertise at your
disposal.
Step 7: Double check: Go back and give final consideration to whether or not you are
sufficiently interested in the study, and have adequate resources to undertaken it. Ask
yourself, ‘Am I really enthusiastic about this study’, and ‘Do I really have enough resources
to undertake it’? Answer these questions thoughtfully and realistically.
So, far we have focused on the basis of your study, the research problem. But every study in
social science has a second element, the study population, from whom the required
information to find answer to your research questions is obtained. As you narrow the
research problem, similarly you need to decide very specifically who constitutes your study
population, in order to select the appropriate respondents.
Setting Research Objectives
Formulating research aim and objectives in an appropriate manner is one of the most
important aspects. This is because research aim and objectives determine the scope, depth
and the overall direction of the research. Research question is the central question of the
study that has to be answered on the basis of research findings. Achievement of research
aim provides answer to the research question. Research objectives divide research aim into
several parts and address each part separately. Moreover, research aim specifies WHAT
needs to be studied and research objectives comprise a number of steps that address HOW
research aim will be achieved. As a rule of dumb, there would be one research aim and
several research objectives to facilitate the achievement of this aim.
The following is an example:

1. Research title: Effects of organizational culture on business profitability: a case
study of Virgin Atlantic
2. Research aim: To assess the effects of Virgin Atlantic organizational culture on
business profitability
Following research objectives would facilitate the achievement of this aim:

1. Analyzing the nature of organizational culture at Virgin Atlantic.
2. Identifying factors impacting Virgin Atlantic organizational culture.
3. Analyzing impacts of Virgin Atlantic organizational culture on employee
performances by September 30, 2020
4. Providing recommendations to Virgin Atlantic strategic level management in terms
of increasing the level of effectiveness of organizational culture by October 5, 2018
Figure below illustrates additional examples in formulating research aims and objectives:

Common mistakes in the formulation of research aim relate to the following:
1. Choosing the topic too broadly. This is the most common mistake. For example, a
research title of “An analysis of leadership practices” can be classified as too broad because
the title fails to answer the following questions:
a) Which aspects of leadership practices? Leadership has many aspects such as

employee motivation, ethical behaviour, strategic planning, change management etc.
An attempt to cover all of these aspects of organizational leadership within a single
research will result in a poor work.
b) An analysis of leadership practices in which country? Leadership practices tend to be
different in various countries due to cross-cultural differences, legislations and a
range of other region-specific factors. Therefore, a study of leadership practices
needs to be country-specific.
c) Analysis of leadership practices in which company or industry? Similar to the point
above, analysis of leadership practices needs to take into account industry-specific
and company-specific differences, and there is no way to conduct a leadership
research that relates to all industries and organizations in an equal manner.
Accordingly, “A study into the impacts of ethical behaviour of a leader on the level of
employee motivation in US healthcare sector” would be a more appropriate title than simply
“An analysis of leadership practices”.
2. Setting an unrealistic aim. Formulation of a research aim that involves in-depth

interviews with Apple strategic level management by an undergraduate level student can be
specified as a bit over-ambitious. This is because securing an interview with Apple CEO
Tim Cook or members of Apple management board might not be easy. This is an extreme
example, but you got the idea. Instead, you may aim to interview the manager of your local
Apple store and adopt a more feasible strategy to get your dissertation completed.
3. Choosing research methods incompatible with the timeframe available. Conducting

interviews with 20 sample group members and collecting primary data through 2 focus
groups when only three months left until submission of your dissertation can be very
difficult, if not impossible. Accordingly, timeframe available need to be taken into account
when formulating research aims and objectives and selecting specific research methods.
Moreover, research objectives need to be formulated according to SMART objectives,

where the abbreviation stands for specific, measurable, achievable, realistic, and timely.
Hypothesis Formulation
In conducting research, the important consideration after the formulation of a research

problem is the construction of hypothesis. As you know, any scientific inquiry starts with
the statement of a solvable problem, when the problem has been stated, a tentative solution
in the form of testable proposition is offered by the researcher.
Hypothesis is often considered a tentative and testable statement of the possible relationship
between two or more events / variables under investigation. According to Mcguigan
(1990), ‘a testable statement of a potential relationship between two or more variables, i.e.
advance as potential solution to the problem’. Kerlinger (1973) defined ‘a hypothesis is a
conjectural statement of the relation between two or more variables’. In order to be useful in
any study, the hypothesis needs to be stated in such a way that it might be subjected to
empirical testing.
The researcher is responsible to suggest or find some way to check how the hypothesis
stands against empirical data. When a hypothesis is formulated, the investigator must
determine usefulness of the formulated hypothesis. There are several criteria or
characteristics of a good research hypothesis. A good hypothesis is one which meets such
criteria to a large extent. Some of these characteristics are enumerated below:
1) Hypothesis should be conceptually clear;

2) Hypothesis must be testable;
3) Hypothesis should be related to the existing body or theory and impact;
4) Hypothesis should have logical unity and comprehensiveness;
5) Hypothesis should be capable of verification; and
6) Hypothesis should be operationisable.
Science proceeds with observation, hypothesis formulation and hypothesis testing. After
testing the hypothesis, through various statistical tests, researcher can accept or reject the
hypothesis. If the hypothesis is accepted then researcher can replicate the results, if
hypothesis is rejected then researcher can refined or modify the results.
By stating a specific hypothesis, the researcher narrows the focus of the data collection
effort and is able to design a data collection procedure which is aimed at testing the
plausibility of the hypothesis as a possible statement of the relationship between the terms
of the research problem.
It is, therefore, always useful to have a clear idea and vision about the hypothesis. It is
essential for the research question as the researcher intents to verify, as it will direct and
greatly help to interpretation of the results.
Possible Difficulties in Formulation of A Good Hypothesis
There are three major possible difficulties; a researcher could face during formulation of
hypothesis. First, the absence of knowledge of a theoretical framework is a major difficulty
in formulating a good research hypothesis. Second, if detailed theoretical evidences are not
available or if the investigator is not aware of the availability of those theoretical evidences,
a research hypothesis cannot be formulated. Third, when the investigator is not aware of the
scientific research techniques, she/he will not be able to frame a good research hypothesis.
Despite these difficulties, the investigator attempts in her/his research to formulate a

hypothesis. Usually the hypothesis is derived from the problem statement. The hypothesis
should be formulated in a positive and substantive form before data are collected. In some
cases additional hypothesis may be formulated after collection of data, but they should be
tested on a new set of data and not on the old set which has suggested it. The formulation of
a hypothesis is a creative task and involves a lot of thinking, imagination and innovation.
Reichenbach (1938) has made a distinction between the two processes found commonly in
any hypothesis formulation task. One is the context of discovery and another is the context
of justification. The manner or the process through which a scientist arrives at a hypothesis
illustrates the context of justification. A scientist is concerned more with a context of
justification in the development of a hypothesis. He never puts his ideas or thoughts as they
nakedly occur in the formulation of a hypothesis. Rather, he logically reconstructs his ideas
or thoughts and draws some justifiable inferences from those ideas and thoughts. He never
cares to relate how he actually arrived at a hypothesis. He does not say, for example, that
while he was shaving, this particular hypothesis occurred to him. He usually arrives at a
hypothesis by the rational reconstruction of thoughts. When a scientist reconstructs his
thoughts and communicates them in the form of a hypothesis to others, he uses the context
of justification. When he arrives at a hypothesis, he extensively as well as intensively
surveys a mass of data, abstracts them, tries to find out similarities among the abstracted
data and finally makes a generalization or deduces a preposition in the form of a hypothesis.
Here is an important distinction to be made between formulating a hypotheses and choosing

one. Although a researcher often becomes interested in a question about human behaviour
for personal reasons, the ultimate value of research study depends on the researcher
bringing methodological criteria to bear on the selection of the hypothesis to be tested. In
other words, Good hypothesis are made, not born.
Hypothesis plays a key role in formulating and guiding any study. The hypotheses are
generally derived from earlier research findings, existing theories and personal observations
and experience. For instance, you are interested in knowing the effect of reward on learning.
You have analysed the past research and found that two variables are positively related. You
need to convert this idea in terms of a testable statement. At this point you may develop the
following hypothesis.
Those who are rewarded shall require lesser number of trails to learn the lesson than those
who are not rewarded. A researcher should consider certain points while formulating a
hypothesis:
i) Expected relationship or differences between the variables.

ii) Operational definition of variable.
iii) Hypotheses are formulated following the review of literature
The literature leads a researcher to expect a certain relationship. Hypotheses are the
statement that is assumed to be true for the purpose of testing its validity.
TYPES OF HYPOTHESES
As explained earlier, any assumption that you seek to validate through investigation is
called hypotheses. Hence theoretically, there should be one type of hypotheses on the basis
of the investigation that is, research hypothesis. However, because of the conventions in
scientific enquiries and wording used in the constructions of the hypothesis, Hypotheses can
be classified into several types, like; universal hypotheses, existential hypotheses, conceptual
hypotheses etc. Broadly, there are two categories of the hypothesis:
i. Null hypothesis
ii. Alternative hypothesis

Null Hypothesis: Null hypothesis is symbolised as Ho. Null hypothesis is useful tool in
testing the significance of difference. In its simplest form, this hypothesis asserts that there
is no true difference between two population means, and the difference found between
sample means is, accidental and unimportant, that is arising out of fluctuation of sampling
and by chance. Traditionally null hypothesis stated that there is zero relationship between
terms of the hypothesis. For example, (a) schizophrenics and normal do not differ with
respect to digit span memory (b) There is no relationship between intelligence and height.
The null hypothesis is an important component of the decision making methods of

inferential statistics. If the difference between the samples of means is found significant the
researcher can reject the null hypothesis. It indicates that the differences have statistically
significant and acceptance of null hypothesis indicates that the differences are due to chance.
Null hypothesis should always be specific hypothesis i.e. it should not state about or
approximately a certain value.
The null hypothesis is often stated in the following way:
Ho: μHV < μLV
Thus, the null hypothesis is that mean of the population of those children who have the high
vocabulary (group1) is less than or equal to mean of those who lack the vocabulary (Group
2).
Alternative Hypothesis
Alternative hypothesis is symbolised as H1 or Ha, is the hypothesis that specifies those

values that are researcher believes to hold true, and the researcher hopes that sample data
will lead to acceptance of this hypothesis as true. Alternative hypothesis represents all other
possibilities and it indicates the nature of relationship.
The alternative hypothesis is stated as follows:
H1: μHV > μLV
The alternative hypothesis is that the mean of population of those who have the vocabulary
is greater than the mean of those to lack the vocabulary. In this example the alternative
hypothesis is that the experimental population had higher mean than the controls. This is
called directional hypothesis because researcher predicted that the high vocabulary children
would differ in one particular direction from the low vocabulary children. Sometimes
researcher predicts only that the two groups will differ from each other but the researcher
doesn’t know which group will be higher. This is non directional hypothesis.
The null and alternative hypothesis in this case would be stated as follows:
Ho: μ1 = μ2
H1: μ1 ? μ2
Thus, the null hypothesis is that mean of group 1 equals the mean of group 2, and the
alternative hypothesis is that the mean of group 1 does not equal the mean of group 2.
Errors in Testing a Hypothesis
You have already learned that hypotheses are assumptions that may be prove to be either
correct or incorrect. It is possible to arrive at a incorrect conclusion about a hypothesis for
the various reasons if –
• Sampling procedure adopted faulty

• Data collection method inaccurate
• Study design selected is faulty
• Inappropriate statistical methods used
• Conclusions drawn are incorrect
Two common errors exist when testing a hypothesis.
 Type I error – Rejection of a null hypothesis when it is true.

 Type II error - Acceptance of a null hypothesis when it is false.
Sampling
Researchers usually cannot make direct observation of every individual in the population
under study. Instead, they collect data from a subset of individuals- a sample – and use those
observations to make inferences about the entire population.
Ideally, the sample corresponds to the larger population on the characteristics of (s) of
interest. In that case, the researcher’s conclusions from the samples are properly applicable
to the entire population. Sampling is the process of selection of units (e.g. people,
organisation) from a population of interest so that by studying the sample may fairly
generate results back to the population from which they were chosen.
Definition of Sampling
According to Young (1992) “A statistical sample is miniature picture of cross selection of

the entire group or aggregate from which the sample is taken”. According to Goode and
Hatt(1981) “A sample, as the name implies, is a smaller representative of a large whole”.
According to Blalock (1960) “It is a small piece of the population obtained by a probability
process that mirrors with known precision, the various patterns and sub-classes of
population”.
Sampling Terminology
Before we explain the purpose, uses and method of sampling, it will be better to describe
those fundamental terms which are concerned to sampling concepts and principles.
Population: Population is a well defined set up of all elements pertaining to a given

characteristic. It refers to the whole that include all observations or measurements of a
given characteristic. Population is also called universe or population. It may be defined as
any identifiable and well specified group of individual for example. All primary teachers, no

number of all college teachers and all university students are the example of population. A
population may be finite or infinite.
A finite population is one where all the members can be easily counted. An infinite
population is one whose size is unlimited, and cannot count easily. Population of college
teachers is an example of finite population and production of wheat, and fishes in river are
the example of infinite population. A measure based upon the entire population is called a
parameter.
Sample: A sample is any number of persons selected to represent the population according
to some rule of plan. Thus, a sample is a smaller representation of the population. A measure
based upon a sample is known as a statistic.
Sample size: No. of selected individual for example, no. of students, families from whom
you obtain the require information is called the sample size and usually denoted by the
letter (n).
Sampling design or strategy: The way researcher selects the sample or students or
families etc. is called the sampling design and strategy. It refers to the techniques or
procedures the researcher would adopt in selecting some sampling units from which
inferences about the population are drawn.
Sampling unit: Each individual or case that becomes the basis for selecting a sample is
called sampling unit or sampling elements.
Sampling frame: The list of people from which the sample is taken. It should be
comprehensive, complete and up-to-date. Examples of sampling frame: Electoral Register;
Postcode Address File; telephone book.
Purpose of Sampling
The objective of sampling is to derive the desired information about the population at the
minimum cost or with the maximum reliability. Further, the aims in selecting a sample are
to achieve maximum precision in estimates within a given sample size and to avoid bias in
the selection of sample. Bias in the selection of sample can take place if: (a) the researcher
selects the sample by non random method and influenced by human choice. (b) The
researcher does not cover the sampling population accurately and completely (c) A section
of a sample population is impossible to find or refuses to cooperate.
SAMPLING METHODS
Blalock (1960) indicated that most sampling methods could be classified into two categories:
i) Non probability sampling methods

ii) Probability sampling methods
Non Probability Sampling Methods: Non probability sampling is one in which there is no
way of assessing the probability of the element or group of elements, of population being
included in the sample. In other words, non-probability sampling methods are those that
provide no basis for estimating how closely the characteristics of sample approximate the
parameters of population from which the sample had been obtained. This is because non
probability sample do not use the techniques of random sampling. Important techniques of
non probability sampling methods are:
i) Haphazard, Accidental, or Convenience Sampling
Haphazard sampling can produce ineffective, highly unrepresentative samples and is not
recommended. When a researcher haphazardly selects cases that are convenient, he or she
can easily get a sample that seriously misrepresents the population. Such samples are cheap
and quick; however, the systematic errors that easily occur make them worse than no
sample at all. The person-on-the street interview conducted by television programs is an
example of a haphazard sample. Likewise, television interviewers often select people who
look “normal” to them and avoid people who are unattractive, poor, very old, or inarticulate.
Such haphazard samples may have entertainment value, but they can give a distorted view
and seriously misrepresent the population. For example, an investigator may take student of
class X into research plan because the class teacher of the class happens to be his / her
friend. This illustrates accidental or convenience sampling.
ii) Quota Sampling
Quota Sampling is an improvement over haphazard sampling. In quota sampling, a

researcher first identifies relevant categories of people (e.g., male and female; or under age
30, ages 30 to 60, over age 60, etc.), then decides how many to get in each category. Thus,
the number of people in various categories of the sample is fixed. For example, a researcher
decides to select 5 males and 5 females under age 30, 10 males and 10 females aged 30 to 60,
and 5 males and 5 females over age 60 for a 40-person sample. It is difficult to represent all
population characteristics accurately.
Quota sampling ensures that some differences are in the sample. In haphazard sampling, all
those interviewed might be of the same age, sex, or background. But, once the quota
sampler fixes the categories and number of cases in each category, he or she uses haphazard
or convenience sampling. Nothing prevents the researcher from selecting people who act
friendly or who want to interviewed. Quota sampling methods are not appropriate when the
interviewers choose who they like (within above criteria) and may therefore select those
who are easiest to interview, so, sampling bias can take place. Because not using the random
method, it is impossible to estimate the accuracy. Despite these limitations, quota sampling
is a popular method among non-probability methods of sampling, because it enables the
researcher to introduce a few controls into his research plan and these methods of sampling
are more convenient and less costly than many other methods of sampling.
iii) Purposive sampling
Purposive sampling is a valuable kind of sampling for special situations. It is used in

exploratory research or in field research. It uses the judgment of an expert in selecting cases
or it selects cases with a specific purpose in mind. With purposive sampling, he researcher
never knows whether the cases selected represent the population. Purposive sampling is
appropriate to select unique cases that are especially informative.
For example, a researcher wants to study the temperamental attributes of certain problem
behaviour children. It is very difficult to list all certain problem behavior children and
sample randomly from the list. The researcher uses many different methods to identity
these cases and approach them to obtain the relevant information. The primary
consideration in purposes sampling is the judgment of researcher as to who can provide the
best information to achieve the objectives of the study. The researcher only goes to those
people who in his / her opinion are likely to have the required information and be willing to
share it.
For studying attitude toward any national issue, a sample of journalists, teacher and
legislators may be taken as an example of purposive sampling because they can more
reasonably be expected to represent the correct attitude than other class of people residing
in country.
Purposes sampling is somewhat less costly, more readily accessible, more convenient and
select only those individual that are relevant to research design. Despite these advantages of
purposes sampling, there is no way to ensure that the sample is truly represent of the
population and more emphasis is placed on the ability of researcher to assess the elements of
population.
iv) Snowball Sampling
Snowball sampling is also known as network, chain referral or reputation sampling method.
Snowball sampling which is a non probability sampling method is basically sociometric. It
begins by the collection of data on one or more contacts usually known to the person
collecting the data. At the end of the data collection process (e.g., questionnaire, survey, or
interview), the data collector asks the respondent to provide contact information for other
potential respondents. These potential respondents are contacted and provide more
contacts. Snowball sampling is most useful when there are very few methods to secure a list
of the population or when the population is unknowable.
Snowball sampling has some advantages— 1) Snowball sampling, which is primarily a

sociometric sampling technique, has proved very important and is helpful in studying small
informal social group and its impact upon formal organisational structure, 2) Snowball
sampling reveals communication pattern in community organisation concepts like
community power; and decision-making can also be studied with he help of such sampling
technique. Snowball sampling has some limitations also— 1) Snowball sampling becomes
cumbersome and difficult when is large or say it exceeds 100, 2) This method of sampling
does not allow the researcher to use probability statistical methods. In fact, the elements
included in sample are not randomly drawn and they are dependent on the subjective
choices of the originally selected respondents. This introduces some bias in the sampling.
v) Systematic sampling
Systematic sampling is another method of non-probability sampling plan, though the label
‘systematic’ is somewhat misleading in the sense that all probability sampling methods are
also systematic sampling methods. Due to this, it often sounds that systematic sampling
should be included under one category of probability sampling, but in reality this is not the
case. Systematic sampling may be defined as drawing or selecting every ninth person from a
predetermined list of elements or individuals. Selecting every 5th roll number in a class of 60
students will constitute systematic sampling. Likewise, drawing every 8th name from a
telephone directory is an example of systematic sampling. If we pay attention to systematic
sampling plan, it become obvious that such a plan possesses certain characteristics of
randomness (first element selected is a random one) and at the same time, possesses some
non-probability traits such as excluding all persons between every ninth element chosen.
Systematic sampling is relatively quick method of obtaining a sample of elements and it is

very easy to check whether every ninth number or name has been selected. Further
Systematic sampling is easy to used. Despite these advantages, systematic sampling ignores
all persons between every ninth element chosen. Then it is not a probability sampling plan.
In Systematic sampling there is a chance to happen the sampling error if the list is arranged
in a particular order.
Probability Sampling
Probability sampling methods are those that clearly specify the probability or likelihood of
inclusion of each element or individual in the sample. Probability sampling is free of bias in
selecting sample units. They help in estimation of sampling errors and evaluate sample
results in terms of their precision, accuracy and efficiency and hence, the conclusions
reached from such samples are worth generalisation and comparable to similar population to
which they belong. Major probability sampling methods are:
I) Simple Random Sampling
A simple random sample is a probability sample. A simple random sample requires (a) a
complete listing of all the elements (b) an equal chance for each elements to be selected (c) a
selection process whereby the selection of one element has no effect on the chance of
selecting another element. For example, if we are to select a sample of 10 students from the
seventh grade consisting of 40 students, we can write the names (or roll number) of each of
the 40 students on separate slips of paper – all equal in size and colour – and fold them in a
similar way.
Subsequently, they may be placed in a box and reshuffled thoroughly. A blindfolded person,
then, may be asked to pick up one slip. Here, the probability of each slip being selected is 1-
40. Suppose that after selecting the slip and noting the name written on the slip, he again
returns it to the box. In this case, the probability of the second slip being selected is again
1/40. But if he does not return the first slip to the box, the probability of the second slip
becomes 1/39.
When an element of the population is returned to the population after being selected, it is
called sampling with replacement and when it is not returned, it is called sampling without
replacement. Thus random sampling may be defined as one in which all possible
combinations of samples of fixed size have an equal probability of being selected.
Advantages of simple random sampling are:
1) Each person has equal chance as any other of being selected in the sample.
2) Simple random sampling serves as a foundation against which other methods are
sometimes evaluated.
3) It is most suitable where population is relatively small and where sampling frame is
complete and up-to-date.
4) As the sample size increases, it becomes more representative of universe.
5) This method is least costly and easily assessable of accuracy.
Despite these advantages, some of the disadvantages are:
1) Complete and up-to-date catalogued universe is necessary.

2) Large sample size is required to establish the reliability.
3) When the geographical dispersion is so wider therefore study of sample item has
larger cost and greater time.
4) Unskilled and untrained investigator may cause wrong results.
ii) Stratified Random Sampling
In stratified random sampling the population is divided into two or more strata, which may
be based upon a single criterion such as sex, yielding two strata-male and female, or upon a
combination of two or more criteria such as sex and graduation, yielding four strata,
namely, male undergraduates, male graduates, female undergraduates and female graduates.
These divided populations are called subpopulations, which are non-overlapping and
together constitute the whole population.
Having divided the population into two or more strata, which are considered to be
homogeneous internally, a simple random sample for the desired number is taken from each
population stratum. Thus, in stratified random sampling the stratification of population is
the first requirement. There can be many reasons for stratification in a population.
Two of them are:
1) Stratification tends to increases the precision in estimating the attributes of the

whole population.
2) Stratification gives some convenience in sampling. When the population is divided
into several units, a person or group of person may be deputed to supervise the
sampling survey in each unit.
Advantages of stratified Random Sampling are:

1) Stratified sampling is more representative of the population because formation of
stratum and random selection of item from each stratum make it hard to exclude in
strata of the universe and increases the sample’s representation to the population or
universe.
2) It is more precise and avoids the bias to great extent.
3) It saves time and cost of data collection since the sample size can be less in the
method.
Despite these advantages, some of the disadvantages of stratified sampling are:

1) Improper stratification may cause wrong results.
2) Greater geographical concentration may result in heavy cost and more time.
3) Trained investigators are required for stratification.

iii) Cluster Sampling
A type of random sample that uses multiple stages and is often used to cover wide
geographic areas in which aggregated units are randomly selected and then sample are
drawn from the sampled aggregated units or cluster For example, if the investigator wanted
to survey some aspect of 3rd grade elementary school going children. First, a random
sample of number of states from the country would be selected. Next, within each selected
state, a random selection of certain number of districts would be made. Then within district
a random selection of certain number of elementary schools would be made. Finally within
each elementary school, a certain number of children would be randomly selected. Because
each level is randomly sampled, the final sample becomes random. However, selection of
samples is done to different stages. This is also called multi stage sampling.
This sampling method is more flexible than the other methods. Sub-divisions at the second
stage unit needs be carried out only those unit selected in the first stage. Despite these
merits, this sampling method is less accurate than a sample, containing the same number of
the units in single stage samples.
Methods of Data Collection

It is important for a researcher to know the sources of data which he requires for different
purposes. Data are nothing but the information. There are two sources of information or
data they are - Primary and Secondary data. The data are name after the source. Primary
data refers to the data collected for the first time, whereas secondary data refers to the data
that have already been collected and used earlier by somebody or some agency. For
example, the statistics collected by the Government of India relating to the population is
primary data for the Government of India since it has been collected for the first time. Later
when the same data are used by a researcher for his study of a particular problem, then the
same data become the secondary data for the researcher. Both the sources of information
have their merits and demerits. The selection of a particular source depends upon the (a)
purpose and scope of enquiry, (b) availability of time, (c) availability of finance, (d) accuracy
required, (e) statistical tools to be used, (f) sources of information (data), and (g) method of
data collection.
(a) Purpose and Scope of Enquiry:
The purpose and scope of data collection or survey should be clearly set out at the very
beginning. It requires the clear statement of the problem indicating the type of information
which is needed and the use for which it is needed. If for example, the researcher is
interested in knowing the nature of price change over a period of time, it would be
necessary to collect data of commodity prices. It must be decided whether it would be
helpful to study wholesale or retail prices and the possible uses to which such information
could be put. The objective of an enquiry may be either to collect specific information
relating to a problem or adequate data to test a hypothesis. Failure to set out clearly the
purpose of enquiry is bound to lead to confusion and waste of resources.
After the purpose of enquiry has been clearly defined, the next step is to decide about the
scope of the enquiry. Scope of the enquiry means the coverage with regard to the type of
information, the subject-matter and geographical area. For instance, an enquiry may relate
to India as a whole or a state or an industrial town wherein a particular problem related to a
particular industry can be studied.
(b) Availability of Time:
The investigation should be carried out within a reasonable period of time, failing which the
information collected may become outdated, and would have no meaning at all. For
instance, if a producer wants to know the expected demand for a product newly launched by
him and the result of the enquiry that the demand would be meager takes two years to reach
him, then the whole purpose of enquiry would become useless because by that time he
would have already incurred a huge loss. Thus, in this respect the information is quickly
required and hence the researcher has to choose the type of enquiry accordingly.
(c) Availability of Resources:
The investigation will greatly depend on the resources available like number of skilled
personnel, the financial position etc. If the number of skilled personnel who will carry out
the enquiry is quite sufficient and the availability of funds is not a problem, then enquiry can
be conducted over a big area covering a good number of samples, otherwise a small sample
size will do.
(d) The Degree of Accuracy Desired:
Deciding the degree of accuracy required is a must for the investigator, because absolute
accuracy in statistical work is seldom achieved. This is so because (i) statistics are based on
estimates, (ii) tools of measurement are not always perfect and (iii) there may be
unintentional bias on the part of the investigator, enumerator or informant. Therefore, a
desire of 100% accuracy is bound to remain unfulfilled. Degree of accuracy desired primarily
depends upon the object of enquiry. For example, when we buy gold, even a difference of
1/10th gram in its weight is significant, whereas the same will not be the case when we buy
rice or wheat. However, the researcher must aim at attaining a higher degree of accuracy,
otherwise the whole purpose of research would become meaningless.
(e) Statistical Tools to Be Used:
A well defined and identifiable object or a group of objects with which the measurements or
counts in any statistical investigation are associated is called a statistical unit. For example,
in socio-economic survey the unit may be an individual, a family, a household or a block of
locality. A very important step before the collection of data begins is to define clearly the
statistical units on which the data are to be collected. In number of situations the units are
conventionally fixed like the physical units of measurement, such as meters, kilometers,
quintals, hours, days, weeks etc., which are well defined and do not need any elaboration or
explanation. However, in many statistical investigations, particularly relating to socio-
economic studies, arbitrary units are used which must be clearly defined. This is a must
because in the absence of a clear cut and precise definition of the statistical units, serious
errors in the data collection may be committed in the sense that we may collect irrelevant
data on the items, which should have, in fact, been excluded and omit data on certain items
which should have been included. This will ultimately lead to fallacious conclusions.

(f) Sources of Information (Data):
After deciding about the unit, a researcher has to decide about the source from which the
information can be obtained or collected. For any statistical inquiry, the investigator may
collect the data first hand or he may use the data from other published sources, such as
publications of the government/semi-government organizations or journals and magazines
etc.
(g) Method of Data Collection:
There is no problem if secondary data are used for research. However, if primary data are to
be collected, a decision has to be taken whether (i) census method or (ii) sampling technique
is to be used for data collection. In census method, we go for total enumeration i.e., all the
units of a universe have to be investigated. But in sampling technique, we inspect or study
only a selected representative and adequate fraction of the population and after analyzing
the results of the sample data we draw conclusions about the characteristics of the
population. Selection of a particular technique becomes difficult because where population or
census method is more scientific and 100% accuracy can be attained through this method,
choosing this becomes difficult because it is time taking, it requires more labor and it is very
expensive. Therefore, for a single researcher or for a small institution it proves to be
unsuitable. On the other hand, sample method is less time taking, less laborious and less
expensive but 100% accuracy cannot be attained through this method because of sampling
and non-sampling errors attached to this method. Hence, a researcher has to be very
cautious and careful while choosing a particular method.
Methods of Collecting Primary Data:
Primary data may be obtained by applying any of the following methods:
1. Direct Personal Interviews.

2. Indirect Oral Interviews.
3. Information from Correspondents.
4. Mailed Questionnaire Methods.
5. Schedule Sent Through Enumerators.
1. Direct Personal Interviews:
A face to face contact is made with the informants (persons from whom the information is to
be obtained) under this method of collecting data. The interviewer asks them questions
pertaining to the survey and collects the desired information. Thus, if a person wants to
collect data about the working conditions of the workers of the Tata Iron and Steel
Company, Jamshedpur, he would go to the factory, contact the workers and obtain the
desired information. The information collected in this manner is first hand and also original
in character. There are many merits and demerits of this method, which are discussed as
under:

Merits:
1. Most often respondents are happy to pass on the information required from them when
contacted personally and thus response is encouraging.
2. The information collected through this method is normally more accurate because
interviewer can clear doubts of the informants about certain questions and thus obtain
correct information. In case the interviewer apprehends that the informant is not giving
accurate information, he may cross-examine him and thereby try to obtain the information.
3. This method also provides the scope for getting supplementary information from the
informant, because while interviewing it is possible to ask some supplementary questions
which may be of greater use later.
4. There might be some questions which the interviewer would find difficult to ask directly,
but with some tactfulness, he can mingle such questions with others and get the desired
information. He can twist the questions keeping in mind the informant’s reaction. Precisely,
a delicate situation can usually he handled more effectively by a personal interview than by
other survey techniques.
5. The interviewer can adjust the language according to the status and educational level of
the person interviewed, and thereby can avoid inconvenience and misinterpretation on the
part of the informant.
Demerits:
1. This method can prove to be expensive if the number of informants is large and the area
is widely spread.
2. There is a greater chance of personal bias and prejudice under this method as compared
to other methods.
3. The interviewers have to be thoroughly trained and experienced; otherwise they may not
be able to obtain the desired information. Untrained or poorly trained interviewers may
spoil the entire work.
4. This method is more time taking as compared to others. This is because interviews can be
held only at the convenience of the informants. Thus, if information is to be obtained from
the working members of households, interviews will have to be held in the evening or on
week end. Even during evening only an hour or two can be used for interviews and hence,
the work may have to be continued for a long time, or a large number of people may have to
be employed which may involve huge expenses.
2. Indirect Oral Interviews:
Under this method of data collection, the investigator contacts third parties generally called
‘witnesses’ who are capable of supplying necessary information. This method is generally
adopted when the information to be obtained is of a complex nature and informants are not
inclined to respond if approached directly. For example, when the researcher is trying to
obtain data on drug addiction or the habit of taking liquor, there is high probability that the
addicted person will not provide the desired data and hence will disturb the whole research
process. In this situation taking the help of such persons or agencies or the neighbours who
know them well becomes necessary. Since these people know the person well, they can
provide the desired data. Enquiry Committees and Commissions appointed by the
Government generally adopt this method to get people’s views and all possible details of the
facts related to the enquiry.
Though this method is very popular, its correctness depends upon a number of factors such
as
1. The person or persons or agency whose help is solicited must be of proven integrity;
otherwise any bias or prejudice on their part will not bring out the correct information and
the whole process of research will become useless.
2. The ability of the interviewers to draw information from witnesses by means of

appropriate questions and cross-examination.
3. It might happen that because of bribery, nepotism or certain other reasons those who are
collecting the information give it such a twist that correct conclusions are not arrived at.
Therefore, for the success of this method it is necessary that the evidence of one person
alone is not relied upon. Views from other persons and related agencies should also be
ascertained to find the real position .Utmost care must be exercised in the selection of these
persons because it is on their views that the final conclusions are reached.
3. Information from Correspondents:
The investigator appoints local agents or correspondents in different places to collect

information under this method. These correspondents collect and transmit the information
to the central office where data are processed. This method is generally adopted by news
paper agencies. Correspondents who are posted at different places supply information
relating to such events as accidents, riots, strikes, etc., to the head office. The
correspondents are generally paid staff or sometimes they may be honorary correspondents
also. This method is also adopted generally by the government departments in such cases
where regular information is to be collected from a wide area. For example, in the
construction of a wholesale price index numbers regular information is obtained from
correspondents appointed in different areas. The biggest advantage of this method is that, it
is cheap and appropriate for extensive investigation. But a word of caution is that it may not
always ensure accurate results because of the personal prejudice and bias of the
correspondents. As stated earlier, this method is suitable and adopted in those cases where
the information is to be obtained at regular intervals from a wide area.
4. Mailed Questionnaire Method:
Under this method, a list of questions pertaining to the survey which is known as
‘Questionnaire’ is prepared and sent to the various informants by post. Sometimes the
researcher himself too contacts the respondents and gets the responses related to various
questions in the questionnaire. The questionnaire contains questions and provides space for
answers. A request is made to the informants through a covering letter to fill up the
questionnaire and send it back within a specified time. The questionnaire studies can be
classified on the basis of:
i. The degree to which the questionnaire is formalized or structured.
ii. The disguise or lack of disguise of the questionnaire and
iii. The communication method used.
When no formal questionnaire is used, interviewers adapt their questioning to each

interview as it progresses. They might even try to elicit responses by indirect methods, such
as showing pictures on which the respondent comments. When a researcher follows a
prescribed sequence of questions, it is referred to as structured study. On the other hand,
when no prescribed sequence of questions exists, the study is non-structured.
When questionnaires are constructed in such a way that the objective is clear to the
respondents then these questionnaires are known as non- disguised; on the other hand,
when the objective is not clear, the questionnaire is a disguised one. On the basis of these
two classifications, four types of studies can be distinguished:
1. Non-disguised structured,
2. Non-disguised non-structured,
3. Disguised structured and
4. Disguised non-structured.
There are certain merits and demerits of this method of data collection which are discussed
below:
Merits:
1. Questionnaire method of data collection can be easily adopted where the field of
investigation is very vast and the informants are spread over a wide geographical area.
2. This method is relatively cheap and expeditious provided the informants respond in time.
3. This method has proved to be superior when compared to other methods like personal
interviews or telephone method. This is because when questions pertaining to personal
nature or the ones requiring reaction by the family are put forth to the informants, there is a
chance for them to be embarrassed in answering them.
Demerits:
1. This method can be adopted only where the informants are literates so that they can
understand written questions and lend the answers in writing.

2. It involves some uncertainty about the response. Co-operation on the part of informants
may be difficult to presume.
3. The information provided by the informants may not be correct and it may be difficult to
verify the accuracy.
However, by following the guidelines given below, this method can be made more effective:
The questionnaires should be made in such a manner that they do not become an undue
burden on the respondents; otherwise the respondents may not return them back.
i. Prepaid postage stamp should be affixed
ii. The sample should be large
iii. It should be adopted in such enquiries where it is expected that the respondents would
return the questionnaire because of their own interest in the enquiry.
iv. It should be preferred in such enquiries where there could be a legal compulsion to
provide the information.
5. Schedules Sent Through Enumerators:
Another method of data collection is sending schedules through the enumerators or

interviewers. The enumerators contact the informants, get replies to the questions
contained in a schedule and fill them in their own handwriting in the questionnaire form.
There is difference between questionnaire and schedule. Questionnaire refers to a device for
securing answers to questions by using a form which the respondent fills in him self,
whereas schedule is the name usually applied to a set of questions which are asked in a face-
to face situation with another person. This method is free from most of the limitations of the
mailed questionnaire method.
Merits:
The main merits or advantages of this method are listed below:
1. It can be adopted in those cases where informants are illiterate.
2. There is very little scope of non-response as the enumerators go personally to obtain the
information.
3. The information received is more reliable as the accuracy of statements can be checked by
supplementary questions wherever necessary.
This method too like others is not free from defects or limitations. The main limitations are
listed below:

Demerits:
1. In comparison to other methods of collecting primary data, this method is quite costly as
enumerators are generally paid persons.
2. The success of the method depends largely upon the training imparted to the
enumerators.
3. Interviewing is a very skilled work and it requires experience and training. Many
statisticians have the tendency to neglect this extremely important part of the data
collecting process and this result in bad interviews. Without good interviewing most of the
information collected may be of doubtful value.
4. Interviewing is not only a skilled work but it also requires a great degree of politeness
and thus the way the enumerators conduct the interview would affect the data collected.
When questions are asked by a number of different interviewers, it is possible that
variations in the personalities of the interviewers will cause variation in the answers
obtained. This variation will not be obvious. Hence, every effort must be made to remove as
much of variation as possible due to different interviewers.
Secondary Data:
As stated earlier, secondary data are those data which have already been collected and
analyzed by some earlier agency for its own use, and later the same data are used by a
different agency. According to W. A. Neiswanger, “A primary source is a publication in
which the data are published by the same authority which gathered and analyzed them. A
secondary source is a publication, reporting the data which was gathered by other
authorities and for which others are responsible.”
Sources of Secondary Data:
The various sources of secondary data can be divided into two broad categories:
1. Published sources, and
2. Unpublished sources.
1. Published Sources:
The governmental, international and local agencies publish statistical data, and chief among
them are explained below:
(a) International Bublications:
There are some international institutions and bodies like I.M.F, I.B.R.D, I.C.A.F.E and
U.N.O who publish regular and occasional reports on economic and statistical matters.

(b) Official Publications of Central and State Governments:
Several departments of the Central and State Governments regularly publish reports on a
number of subjects. They gather additional information. Some of the important publications
are: The Reserve Bank of India Bulletin, Census of India, Statistical Abstracts of States,
Agricultural Statistics of India, Indian Trade Journal, etc.
(c) Semi-Official Publications:
Semi-Government institutions like Municipal Corporations, District Boards, Panchayats,

etc. Publish reports relating to different matters of public concern.
(d) Publications of Research Institutions:
Indian Statistical Institute (I.S.I), Indian Council of Agricultural Research (I.C.A.R), Indian
Agricultural Statistics Research Institute (I.A.S.R.I), etc. Publish the findings of their
research programmes.
(e) Publications of various Commercial and Financial Institutions
(f) Reports of various Committees and Commissions appointed by the Government as the
Raj Committee’s Report on Agricultural Taxation, Wanchoo Committee’s Report on
Taxation and Black Money, etc. Are also important sources of secondary data.
(g) Journals and News Papers:
Journals and News Papers are very important and powerful source of secondary data.
Current and important materials on statistics and socio-economic problems can be obtained
from journals and newspapers like Economic Times, Commerce, Capital, Indian Finance,
Monthly Statistics of trade etc.
2. Unpublished Sources:
Unpublished data can be obtained from many unpublished sources like records maintained
by various government and private offices, the theses of the numerous research scholars in
the universities or institutions etc.
Data Analysis
The data collected may or may not in numerical form. Even if data is not in numerical form
still we can carry out qualitative analysis based on the experiences of individual participants.
When data is collected in numerical form than through descriptive statistics findings can be
summarised. This includes measure of central tendency like mean range etc. Another way to
summarised finding is by means of graphs and charts. In any of the research study there is
experimental hypothesis or null hypothesis one the basis of data of both hypothesis, various
test have been devised to take decision. Where decision is taken on the basis statistical test,
it is subject to error, and such correct decision is difficult. But some standard procedures
followed to arrived at proper decision.

Analysis involves estimating the values of unknown parameters of the population and
testing hypothesis for drawing inferences.
Types of Analysis:
a. Qualitative analysis
b. Content analysis
c. Quantitative analysis
d. Descriptive analysis
e. Bivariate analysis
f. Sequential analysis
g. Casual analysis
h. Multivariate analysis
i. Inferential analysis
j. Statistical analysis.
a. Qualitative Analysis:
It is less influenced by theoretical assumption. The limitation of this type of analysis is that
the findings tend to be unrealisable. The information categories and interpreted after, differ
considerable from one investigator to another one. In this system researcher to go through,
research cycle, to increase reliability, repeating the research cycle is of value in some ways,
but it does not ensure that the findings will have high reliability.
Qualitative analyses are carried out in several different kinds of study like interview, case
studies and observational studies.
b. Content Analysis:
Content analysis is used where originally qualitative information is reduced to numerical

terms. It is a method of analysis media output includes articles published in new papers,
speeches made in radio, television and various type of propaganda. This method of analysis
is applied to all most all form of communications.
c. Quantitative Analysis:
The numerical data collected in study through descriptive statistics analysis can be
conducted through measure of central tendency.

d. Descriptive Analysis:
This analysis of one variable is called one dimensional analysis. This analysis measures
condition at particular time.
e. Bivariate Analysis: The analysis in respect of two variables is called bivariate analysis.
In this analysis collected data in placed into tabular form, so that the meaning of the data
can be derived. In this method simple dimensional data is developed and put into two or
more categories.
f. Sequential Analysis:
When only factor is revel in the table at one time, this type of analysis is called sequential
analysis is called sequential analysis. If we do the further analysis of the same data regard
four going showed that person with leave travel concession facilities are more frequently
going on tourism than those who are not gating facilities of casual analysis.
It is concerned with study of one variable affecting another one.
h. Multivariate Analysis:
With an advancement of compute application there is fast development of multivariate

analysis, in which statistical method simultaneously analysis more than two variables.
i. Inferential Analysis:
In order to decide the validity of data to indicate conclusion this analysis is concerned with
tests for significance of hypothesis. One the basis of inferential analysis the task of
interpretation is performed by estimating the population values.
Testing Hypothesis
In business research and social science research, different approaches are used to study
variety issues. This type of research may be formal or informal; all research begins with
generalized idea in form of hypothesis. A research question is usually there. In the
beginning research effort are made for area of study or it may take form of question about
relationship between two or more variable. For example do good working conditions
improve employee productivity or another question might be now working conditions
influence the employees work.
Procession of Hypotheses Testing:
Hypotheses testing is a systematic method. It is used to evaluate the data collected. This
serve as aid in the process of decision making, the testing of hypotheses conducted through
several steps which are given below.
a. State the hypotheses of interest
b. Determine the appropriate test statistic

c. Specify the level of statistical significance.
d. Determine the decision rule for rejecting or not rejecting null hypotheses.
e. Collect the data and perform the needed calculations.
f. Decide to reject or not to reject the null hypotheses.
In order to provide more details on the above steps in the process of hypotheses testing each
of test will be explained here with suitable example to make steps easy to understand.
1. Stating the Hypotheses
In statistical analysis of any research study if includes at least two hypotheses one is null
hypotheses and another is alternative hypotheses. The hypotheses being tested is referred as
the null hypotheses and it is designated as HO. It is also referred as hypotheses of
difference. It should include a statement which has to be proved wrong.
The alternative hypotheses present the alternative to null hypotheses. It includes the
statement of inequality. The null hypotheses are and alternative hypotheses are
complimentary. The null hypothesis is the statement that is believed to be correct through
analysis which is based on these null hypotheses. For example, the null hypotheses might
state the average are for entering management institute is 20 years. So average age for
institute entry = 20 years
2. Determining Appropriate Test Statistic
The appropriate test statistic which is to be used in statistic, which is to be used in

statistical hypotheses testing, is based on various characteristics of sample population of
interest including sample size and distribution.
The test statistic can assume many numerical values. As the value of test statistic has
significant on decision one must use the appropriate statistic in order to obtain meaningful
results. The formula to be used while testing population means is. Z - test statistic, x - mean
of sample µ - mean of population, σ - standard deviation, n – number of sample.
3. The Significance Level
As already explain, null hypothesis can be rejected or fail to reject null hypotheses. A null
hypothesis that is rejected may in really be true or false. A null hypothesis that fails to be
rejected may in reality be true or false. The outcome that a researcher desires is to reject
false null hypotheses or fail to reject true null hypotheses. However there is always
possibility of rejecting a true hypotheses or failing to reject false hypotheses.
Type I and Type II Errors
Type I: error is rejecting a null hypotheses that is true
Type II: Error is failing to rejected a false null hypotheses

4. Decision Rule
Before collection and analyses of data it is necessary to decide under which conditions the
null hypotheses will be rejected or fail to he rejected. The decision rule can be stated in
terms of computed test statistics or in probabilistic terms. The same decision will he
applicable any of the method so selected.
5. Data Collection and Calculation Performance
In research process at early stage method of data collection is decided. Once the research
problem is decided that immediately decision in respect of type and sources of data should
be taken. It must clear that fact that, which type of data will be needed for the purpose of the
study and now researcher has a plan to collect required data.
The decision will provide base for processing and analyzing of data. It is advisable to make
use of approved methods of research for collecting and analysing of data.
6. Decision on Null Hypotheses
The decision regarding null hypotheses in an important step in the process of the decision
rule. Under the said decision rule one has to reject or fail to reject the null hypotheses. If
null hypotheses is rejected than alternative hypotheses can be accepted. If one fails to reject
null hypotheses one can only suggest that null hypotheses may be true.
7. Two Tailed and One Tailed Tests
In the case of testing of hypotheses, above referred both terms are quite important and they
must be clearly understood. A two failed test rejects the null hypotheses.
• If sample mean is significantly

• Higher or lower than the
• Hypothesized value of mean of the population
• Such a test is appropriate, when the null hypotheses is some specified value and the
alternate hypotheses is a value not equal to the specified value and the alternative
hypotheses is value not equal to the specified value of null hypotheses.
Procedure for Testing of Hypotheses:
Testing of hypotheses means to decide the validity of the hypotheses on the basis of the data
collected by researcher. In testing procedure we have to decide whether null hypotheses is
accepted or not accepted. This requirement conducted through several steps between the
cause of two action i.e. relation or acceptance of null hypothesis. The steps involved in
testing of hypotheses are given below.
1. Setting up of Hypotheses
This step consists of hypotheses setting. In this step format statement in relation to
hypotheses in made. In traditional practice instead of one, two hypotheses are set. In case if

one hypothesis is rejected than other hypotheses is accepted. Hypotheses should be clearly
stated in respect of the nature of the research problem.
There are hypotheses are.
a. Null hypotheses and
b. Alternative hypotheses.
Acceptance or rejection of hypotheses is based on the sampling information. Any sample

which we draw from the population will vary from it therefore it is necessary to judge
whether there difference are statistically significant or insignificant. The formulation of
hypotheses is an important step which must be accomplished and necessary care should be
taken as per the requirement and object of the research problem under construction. This
should also specify the whether one tailed or two tailed test will be used.
2. Selecting Statistical Technique
In this stage we will make selection of statistical technique which is going to be used. There
are various statistical test which are being used in testing of hypotheses. There tests are
Z – Test
T – Test
F – Test
X2
It is the job of the researcher to make proper selection of the test. Z- Test is used when
hypotheses is related to a large sample. (30 or more)
T- Test is used when hypotheses is related to small sample (Less than 30)
The selection of test will be dependent on various considerations like, variable involved,
sample size, type of data and whether samples are related or independent.
3. Selecting Level of Significance
This stage consists of making selection of desired level of significance. The researcher
should specify level of significance because testing of hypotheses is based on pre-determined
level of significance. The rejection or retention of hypothesis by the researcher is also based
on the significance level. The level of significance is generally expressed in percentage from
such as 5% or 1%, 5% level of significance is accepted by the researcher, it means he will be
making wrong decision about 5% of time. In case if hypotheses is reject at this level of 5% he
will be entering risk hypotheses rejection ???out of 100 occasions.
The following factors may affect the level of significance.
- The magnitude difference between sample mean

- The size of sample
- The validity of measurement
4. Determining Sampling Distribution
The next step after deciding significance level in testing of hypothesis is to determine the
appropriate sampling distribution. It is, normal distribution and ‘t’ – distribution in which
choice can be excised.
5. Selecting Sample and Value
In this step random sample is selected and appropriate value is computed from the sample
data relating to the test statistic by utilizing the relevant distribution.
6. Performance Computation
In this step calculation of performance is done. The calculation includes testing statistics
and standard error. A hypothesis is tested for the following four possibilities, that the
hypotheses is
a- True, but test lead to its rejection
b- False, but test lead to its acceptance
c- True, but test lead to its acceptance
d- False, but test lead to its rejection
Out of the above four possibilities a and b lends to wrong decision. In this case a lends to
Type I error and, b lends to Type II error.
7. Statistical Decision
Thus is the step in which we have to draw statistical decision involving the acceptance or
rejection of hypotheses. This will be dependent on whether the calculated value of the test
falls in the region of acceptance or in the region of rejection at given significance level.
If hypotheses are tested at 5% level and observed set recorded the possibilities less than 5%
level than we considered difference between hypothetical parameter and sample statistics is
significant.
Testing of Hypothesis Using Various Distribution Test:
A. The Parametric Tests:
The test of significance used for hypothesis testing is of two types the parametric and non-
parametric test. The parametric test is more powerful, but they depend on the parameters or
characteristics of the population. They are based on the following assumptions.

1. The observations or values must be independent.
2. The population from which the sample is drawn on a random basis should be normally
distributed.
3. The population should have equal variances.
4. The data should be measured at least at interval level so that arithmetic operations can be
used.
a) The Z – Test
Prof. R.A. fisher has develop the Z Test. It is based on the normal distribution. It is widely
used for testing the significance of several statistics such as mean, median, mode, coefficient
of correlation and others. This test is used even when binominal distribution or t
distribution is applicable on the presumption that such a distribution lends to approximate
normal distribution as the sample size (n) become larger.
b) The T – Test
The T – Test was developed by W.S. Gossel around 1915 since he published his finding
under a bon name ‘student’, it is known as student’s t – test. It is suitable for testing the
significance of a sample man or for judging the significance of difference between the means
of two samples, when the samples are less than 30 in number and when the population
variance is not known. When two samples are related, the paired t – test is used. The t –
test can also be used for testing the significance of the coefficient of simple and partial
correlation.
In determining whether the mean of a sample drawn from a normal population deviates
significantly from a stated value when variance of population is unknown, we calculate the
statistic.
3 The f- Test
The f – test is based on f – distribution (which is a distribution skewed to the right, and
tends to be more symmetrical, as the number of degrees of freedom in the numerator and
denominator increases)
The f- test is used to compare the variances of two independent sample means at a time. It is
also used for judging the significance of multiple correlation coefficients.
B. The Non-parametric Tests
The non-parametric tests are population free tests, as they are not based on the
characteristics of population. They do not specify normally distributed population or equal
variances. They are easy to understand and to use.
The important non parametric tests are:
- The chi-square test

- The median test
- The Mann-Whitney U test
- The sign test
- The Wilcoxin matched –Paris test
- The Kolmogorow Smornov test.
Report Writing
Meaning and Purpose of a Research Report:
A research report is a formal statement of the research process and its results. It narrates
the problem studied, methods used for studying it and the findings and conclusions of the
study. The purpose of a research report is to communicate to interested persons the
methodology and the results of the study in such a manner as to enable them to understand
the research process and to determine the validity of the conclusions. The aim of the report
is not to convince the reader of the value of the result, but to convey to him what was done,
why it was done, aid what was its outcome. It is so written that the reader himself can reach
his own conclusions as to the adequacy of the study and the validity of the reported results
and conclusions.
Characteristics of a Report:
A research report is a narrative but authoritative document on the outcome of a research

effort. It presents highly specific information for a clearly designated audience. It is non
persuasive as a form of communication. Extra caution is shown in advocating a course of
action even subordinated to the matter being presented. It is a simple readable and accurate
form of communication.
Functions of a Research Report:
A well written research report performs several functions:-
1. It serves as a means for presenting the problem studied methods and techniques used for
collecting and analyzing data, the findings, conclusions and recommendations, in an
organised manner.
2. It serves as a basic reference material for future use in developing research proposals in
the same or related area.
3. A report serves as a means for judging the quality of the completed research project.
4. It is a means for evaluating the researcher’s ability and competence to do research.
5. It provides factual base for formulating policies and strategies relating to the subject
matter studied.

6. It provides systematic knowledge on problems and issues analysed.
Types of Reports:
Research reports may be classified into (a) technical report (b) popular report, (c) interim
report, (d) summary report, (e) research abstract, and (f) research article. These types of
reports vary from one another in terms of the degree of formality, physical form, scope,
style and size.
(a) Technical Report/Thesis:-
This is a comprehensive full report of the research process and its outcome. It is primarily
meant for academic community i.e. the scientists of the researcher’s discipline and other
researcher’s. it is a formal long report covering all the aspects of the research process: a
description of the problem studied, the objectives of the study, methods and techniques used
a detailed account of sampling field and other research procedures, sources of data, tools of
data collection, methods of data processing and analysis, detailed findings and conclusions
and suggestions. There is also a technical appendix for methodological details, copies of
measuring instruments and the like. It is so comprehensive and complete that the study can
be replicated by others. The technical report is essentially technical in nature and scope and
couched in technical language. It follows a specified pattern and consists of several prefatory
section with appropriate heading and paragraphs.
(b) Popular Report:-
This type of report is designed for an audience of executives/administrators and other non-
technical users. The requirement of this audience is different. The reader is less concerned
with methodological details but more interested in studying quickly the major findings and
conclusion. He is interested in applying the findings to decisions. The organization of this
report is very important. The presentation can be more forceful and persuasive without of
course, any distortion of fact. It should be clear, brief and straight forward complicated
statistical techniques and tables need not be used. Instead pictorial devices may be
extensively used. The format of this report is different from that of a technical report. After
a brief introduction to the problem and the objectives of the study, an abstract of the
findings, conclusions and recommendations is presented. The methodological details, data
analysis and their discussions are presented in the second part. More headlines, underlining
pictures and graphs may used. Sentences and paragraphs should be short. There can be a
liberal use of margins and blank space. The style may be more journalistic but be precise
and it should encourage rapid reading and quick comprehension.
(c) Interim Report:-
When there is a long time lag between data collection and the presentation of the results in
the case of a sponsored project, the study may lose its significance and usefulness and the
sponsor may also lose interest in it. One of the most effective ways to avoid such
eventualities is to present an interim report. This short report may contain either the first
results of the analysis or the final outcome of the analysis of some aspects completely
analysed. Whatever may be the coverage of the interim report it fulfils certain functions. It
facilitates the sponsoring agency to take action without waiting for the full report. It helps
to keep alive the agency’s interest in the study and prevent misunderstandings about the
delay. In addition, it serves to spread over a longer period the time consuming process of
discussion of research findings and their implication. The report also enables the researcher
to find the appropriate style of reporting. The interim report contains a narration of what
has been done so far and what was its outcome. It presents a summary of the findings of that
part of analysis which has been completed.
(d) Summary Report:-
A summary report is generally prepared for the consumption of the lay audience, viz. the
general public. The preparation for this type of report is desirable for any study whose
findings are general interest. It is written in non-technical, simple language with a liberal
use of pictorial charts. It just contains a brief reference to the objective of the study, its
major findings and their implications. It is a short report of two or three pages. Its size so
limited as to suitable for publication in daily newspaper.
(e) Research Abstract:-
This is a short summary of the technical report. It is usually prepared by a doctoral students
on the eve of submitting, his thesis. Its copies are sent by the university along with the
letters of request to the examiners invited to evaluate the thesis. It contains a brief
presentation of the statements of the problem, the objectives of the study methods and
techniques used and an overview of the report. A brief summary of the results of the study
may also be added. This abstract is primarily meant for enabling the examiner invites to
decide whether the study belongs to the area of their specialization and interest.
(f) Research Article:-
This is designed for publication in a professional journal. If a study has two or more aspects
that can be discussed independently, it may be advisable to write separate articles rather
than to crowd too many things into single article. A research article must be clearly written
in concise and unambiguous language. It must be logically organised, progressing from a
statement of the problem and the purpose of study, through the analysis of evidence to the
conclusions and implications. A professional journal may have its own special format for
reporting research. It is important to find out in advance whether the publication does have
specific format requirements. For example, the research articles submitted for publication in
the journal of applied psychology should be prepared according to the publication manual of
the American psychological association. The preferred format is:
1. Introduction:- A statement of the nature of the problem and a brief review of previous
studies pertinent to the development of the specific questions or hypotheses to be tested.
2. Method:- A brief statement of what was done where and how it was done, and a
statement of the specific techniques and tools used.
3. Results:- A presentation of the salient findings with tables or charts.
4. Discussions:- A discussion of the salient findings with tables or charts.

5. Conclusion:- A presentation of the contribution of the study to theory and /for practice
and the brand implications of the findings.
The article must be accompanied by an abstract of 100-150 words typed on a separate sheet
of paper. Any reference to an article or other source is to be identified at an appropriate
point in the text by the last name of the author year of publication and paglination where
appropriate, all within parentheses e.g. Sherman (1980); Heller (1976 p. 701) no footnote is
to be used for purpose of citation. All references are to be listed alphabetically by author in
an appendix titled ‘Reference e.g. Grove, A.S. (1983) High Output Management, New York;
Random House.
Tannenbaum A & Schmidt. W (1958) How to choose a leadership pattern. Harvard Business
Review 36 95-10)
Similarly, the Indian Society of Agricultural Economics, Mumbai has prescribed guidelines
for submission of papers of publication in the Indian Journal of Agricultural Economics. The
preferred format is: 1. Introduction, 2. Methodology, 3. Results and discussion, and 4. Policy
Implications/conclusion, followed by references. Only cited works should be included in the
reference list. The style of citations to be followed is:
A.S Kahlon and K. Singh: Managing Agricultural Finance: Theory and Practice, Allied
Publishers Pvt. Ltd., New Delhi, 1984.
Jairam Krishna, “Focus on Wateland Development; Degradation and Poverty.” The

Economic Times, April 13, 1986.
RESEARCH REPORT FORMAT:

In this section, the format of a comprehensive technical report of doctoral thesis is
discussed. Report outline.
A. Prefatory Items
1. Title page
2. Researcher’s declaration
3. The certificate of the research Supervisor
4. Preface/Acknowledgements
5. Table of contents
6. List of tables
7. List of graphs and charts
8. Abstracts or synopsis
1. Introduction
a) Theoretical background of the topic

b) Statement of the problem
c) Review of Literature
d) The scope of the present study
e) The objectives of the study
f) Hypotheses to tested
g) Definition of concepts
h) Model, if any.
B. Body of the Report
2. The design of the study
a) Methodology
1. overall typology
2. methods of data collection
b) Sources of data
c) Sampling plan
d) Data collection instruments
e) Filed work
f) Data processing and analysis plan
g) An overview of the report
h) Limitations of the study
3. Results:- Findings and Discussion
4. Summary, conclusions and Recommendations
C. Terminal Items
1. Bibliography
2. Appendix
a) Copies of data collection instruments
b) Technical details of sampling plan
c) Complex tables
d) Glossary of new terms used in the report.
(A) PREFATORY ITEMS:-
Title Page:
The title page is the first page of a research report. It carries (1) the title of the study (2) the
name of the degree for which it is submitted (3) the name of the author, (4) the name of the
institution on which the report is submitted and the data of presentation. The title should be
precise and reflect the core of the problem under study. It should be printed in capital letters
and cantered in the page.
Researcher’s Declaration:-
In the case of a research undertaken by a student in fulfillment of the requirements of a

degree, he may be required to make a declaration.
Research Supervisor’s Certificate:-
In the case of a student’s research’s work , his research supervision has to certify that is was
a record of independent research work done by the students.
Acknowledgement:-
In this section, the researcher acknowledges the assistance and support received from
individuals and organizations in conducting the research. It is thus intended to show his
gratitude. Good taste calls for acknowledgements to be expressed simply and nicely.
In the case of a research undertaken by a non-student researcher, acknowledgements may

be made in the preface itself, where a brief background of the study is given.
Table of contents:-
A table of contents gives an outline of the contents of the report. It contains a list of the
chapters and their sub-titles with page numbers. It facilitates ready location of topics in the
report. The chapter headings may be typed in capital letters and be the subtitles in small
letters.
List of tables:-
This comes after the table of contents. It is presented in the following format:
Table number The title of the table Page
All the tables may be numbered serially as 1,2,3,4 in one continuous series, or tables in each
chapter may be given a separate serial order as 1.1, 1.2, 1.3 for tables in chapter 1;2, 1,2,2,
2.3, 2.4 for tables in chapter 2: and so on.
Body of the Report:-
After the prefatory items, the body of the report is presented. It is the major and main part
of the report. It covers the formulation of the problem studied, methodology, findings and
discussion and a summary of the findings and recommendations. In a comprehensive report
the body of the report will consist of several chapters.
1. Introduction:- This is the first chapter in the body of a research report, it is devoted for
introducing the theoretical background of the problem, its definition and formulation. It
may consist of the following sections.
(a) Theoretical background of the topic:- The first task is to introduce the background
and the nature of the problem so as to place into a larger context to enable the reader to
know its significance in a proper perspective. This section summarizes the theory or
conceptual frame work within which the problem has been investigated for example, the
theoretical background in the thesis entitled, “A study of social responsibilities of large scale
industrial units in India discuses; the nature of the India economy , the objective of India’s
constitution to establish an egalitarian social order, the various approaches to the concept of
social responsibility property rights approach trusteeship approach, legitimacy approach,
social responsibility approach and their implications for industries in the Indian context.
Within this conceptual framework, the problem was defined the objectives of the study were
set up the concept of social responsibility was operationalised and the methodology of
investigation was formulated.
(b) The statement of the problem:- In this section, why and how the problem was
selected are stated the problem is clearly defined and its facets and significance are pointed
out.
(c) Review of Literature:- This is an important part of the introductory chapter. It is

devoted for making a brief review of previous studies on the problem and significant
writings on the topic under study. This review provides summary of the current state of
knowledge in the area of investigation. Which aspects have been investigated, what research
gaps exist and how the present study is an attempt to fill in that gap are highlighted. Thus
the underlying purpose is to locate the present research in the existing body of research on
the subject and to point out what it contributes to the subject.
(d) The scope of the present study:- The dimensions of the studying terms of the
geographical area covered the designation of the population being studied and the level of
generality of the study are specified.
(e) The objectives of the study:- The objectives of the study and the investigative
questions relating to each of the objectives are presented.
(f) Hypotheses:- The specific hypotheses to be tested are stated. The sources of their
formulation may be indicated.
(g) Definition of concepts:- The reader of a report is not equipped to understand the study
unless he can know what concepts are used and how they are used. Therefore, the
operational definitions of the key concept and variable’s of the study are presented giving
justifications for the definitions adopted.
How those concepts were defined by earlier writers and how the definitions of the
researcher were an improvement over earlier definitions may be explained.
(h) Models:- The models, if any, developed for depicting the relationships between
variables under study are presented with a review of their theoretical or conceptual basis.
The underlying assumptions are also stated.
2. The design of the study:-
This part of the report is devoted for the presentation of all the aspects of the methodology
and their implementation viz. overall typology methods of data collection sample design
data collection instruments, methods of data processing and plan of analysis much of his
material is taken from the research proposal plan. The revisions, if any made in the initial
design and the reasons therefore should be clearly stated. If pilot study was conducted
before designing the main study the details of the pilot study and its outcome are reported.
How the outcome of the pilot study was utilised for designing the final study is also pointed
out.
The detail of the study’s design should be so meticulously stated as to fully satisfy the
criterion of replicability. That is a it should be possible for another researcher to reproduce
the study and test its conclusions. Technical details may be given in the appendix. Failure to
furnish them could cost doubts on the design.
(a) Methodology:- In this section, the overall typology of research (i.e. experimental,
survey, case study or action research) used, and the data collection methods (i.e. observation,
interviewing or mailing) employed are described.
The sources of data the sampling plan and other aspects of the design may be presented
under separate subheadings as described below.
(b) Sources of Data:- the sources from which the secondary and or primary data were
gathered are stated in the case of primary data. The universe of the study and the unit of
study are clearly defined. The limitations of the secondary data should be indicated.
(c) Sampling Plan:- The size of the universe from which the sample was drawn, the
sampling methods adopted and the sample size and the process of sampling are described in
this section. What were originally planned and what were actually achieved and the
estimate of sampling error are to be given. These details are crucial for determining the
limitations of generalisability of the findings.
(d) Data-collection Instruments:- The types of instruments used for data collection and
their contents, scales and other devices used for measuring variables, and the procedure of
establishing their validity and reliability are described in this section. How the tools were
pre-tested and finalised are also reported.
(e) Field work:- When and how the field work was conducted, and what problems and
difficulties were faced during the field work are described under this sub-heading. The
description of field experiences will provide valuable lessons for future researches in
organising and conducting their field work.
(f) Data processing and analysis plan:- The method manual or mechanical adopted for
data processing, and an account of methods used for data analysis and testing hypotheses
must be outlined and justified. If common methods like chi-square test, correlation test and
analysis of variance were used, it is sufficient to say such and such methods were used. If an
unusual or complex method was used. It should be described in sufficient detail with the
formula to enable the reader to understand it.
(g) An overview of the report:- The scheme of subsequent chapters is stated and the
purpose of each of them is briefly described in this section in order to give an overview of
the presentation of the result of the study.
(h) Limitations of the study:- No research is free from limitations and weaknesses. These
arise from methodological weaknesses, sampling, imperfections, non-responses, data
inadequacies, measurement deficiencies and the like. Such limitations may vitiate the
conclusions and their generalisability. Therefore, a careful statement of the limitations and
weaknesses of the study should be made in order to enable the reader to judge the validity of
the conclusions and the general worth of the study in the proper perspective. A frank
statement of limitations is one of the hallmarks of an honest and competent researcher.
Summary Conclusions and Recommendations:-

The presentation on analysis and results is followed by a separate final chapter. This
chapter is more extensive than the abstract give in the beginning of the report. This chapter
should be a self-contained summary of the whole report, containing a summary of essential
background information, findings and inclusions and recommendations. After a brief
statement of the problem, the purpose of the study and the methodology used in the
investigation the findings and conclusions are presented. This summary may be more or
less a reproduction of the topical sentences of the various findings and conclusions
presented in the main body.
Terminal Items
Bibliography:-
This is the first of the terminal items presented at the end of the research report. The
bibliography lists in alphabetical order all published and unpublished reference used by the
writer in preparing the report. All books articles and reports and other documents may be
presented in one common list in the alphabetical order of their authors alternatively
bibliography may be classified into three or four sections: (a) books (b) articles (c) reports,
and (d) other documents, and in each section relevant references may be arranged in
alphabetical order.

Module - VII
Multiple Regression
Multiple regression is an extension of simple linear regression. It is used when we want to

predict the value of a variable based on the value of two or more other variables. The
variable we want to predict is called the dependent variable (or sometimes, the outcome,
target or criterion variable). The variables we are using to predict the value of the
dependent variable are called the independent variables (or sometimes, the predictor,
explanatory or regressor variables).
For example, you could use multiple regression to understand whether exam performance
can be predicted based on revision time, test anxiety, lecture attendance and gender.
Alternately, you could use multiple regression to understand whether daily cigarette
consumption can be predicted based on smoking duration, age when started smoking,
smoker type, income and gender.
Multiple regression also allows you to determine the overall fit (variance explained) of the
model and the relative contribution of each of the predictors to the total variance explained.
For example, you might want to know how much of the variation in exam performance can
be explained by revision time, test anxiety, lecture attendance and gender "as a whole", but
also the "relative contribution" of each independent variable in explaining the variance.
In the pairs of observations, if there is a cause and effect relationship between the variables
X and Y, then the average relationship between these two variables is called regression,
which means “stepping back” or “return to the average”. The linear relationship giving the
best mean value of a variable corresponding to the other variable is called a regression line
or line of the best fit. The regression of X on Y is different from the regression of Y on X.
Thus, there are two equations of regression and the two regression lines are given as
follows:
Regression of Y on X: Y − Y = byx ( X − X )
Regression of X on Y: X −X = bxy (Y − Y)
Where X, Y are the means of X, Y respectively.
Result: Let σx, σy denote the standard deviations of x, y respectively. We have the
following result.

Result:
The coefficient of correlation r between X and Y is the square root of the product of the b
values in the two regression equations. We can find r by this way also.
Application
The method of regression is very much useful for business forecasting.
Principle of Least Squares
Let x, y be two variables under consideration. Out of them, let x be an independent variable
and let y be a dependent variable, depending on x. We desire to build a functional
relationship between them. For this purpose, the first and foremost requirement is that x, y
have a high degree of correlation. If the correlation coefficient between x and y is moderate
or less, we shall not go ahead with the task of fitting a functional relationship between
them.
Suppose there is a high degree of correlation (positive or negative) between x and y.

Suppose it is required to build a linear relationship between them i.e., we want a regression
of y on x.
Geometrically speaking, if we plot the corresponding values of x and y in a 2-dimensional

plane and join such points, we shall obtain a straight line. However, hardly we can expect
all the pairs (x, y) to lie on a straight line. We can consider several straight lines which are,
to some extent, near all the points (x, y). Consider one line. An observation (x1, y1) may be
either above the line of consideration or below the line. Project this point on the x-axis. It
will meet the straight line at the point (x1, y1e). Here the theoretical value (or the expected
value) of the variable is y1e while the observed value is y1. When there is a difference
between the expected and observed values, there appears an error. This error is E1 = y1 –y1.
This is positive if (x1, y1) is a point above the line and negative if (x1, y1) is a point below the
line. For the n pairs of observations, we have the following n quantities of error:
E1 = y1 – y1,
E2 = y2 – y2,
En = yn – yn.
Some of these quantities are positive while the remaining ones are negative. However, the
squares of all these quantities are positive.

i.e., E21 = (y1 – y1 )2 ≥ 0, E22 = (y2 –y2)2 ≥ 0, …, E2n = (yn –yn )2 ≥ 0.
Hence the sum of squares of errors (SSE) = E21 + E22 + … + E2n
= (y1 –y2 )2 + (y2 –y2 )2 + … + (yn –yn)2 ≥ 0.
Among all those straight lines which are somewhat near to the given observations (x1, y1),
(x 2, y2), …, (xn , yn) , we consider that straight line as the ideal one for which the sse is the
least. Since the ideal straight line giving regression of y on x is based on this concept, we
call this principle as the Principle of least squares.
Normal equations
Suppose we have to fit a straight line to the n pairs of observations (x1, y1), (x2, y2), …, (xn ,
yn). Suppose the equation of straight line finally comes as
Y=a+bX (1)
Where a, b are constants to be determined. Mathematically speaking, when we require
finding the equation of a straight line, two distinct points on the straight line are sufficient.
However, a different approach is followed here. We want to include all the observations in
our attempt to build a straight line. Then all the n observed points (x, y) are required to
satisfy the relation
(1). Consider the summation of all such terms. We get

y = ∑ (a + b x ) = ∑ (a .1 + b x ) = ( ∑ a.1) + ( ∑ b x ) = a ( ∑ 1 ) + b ( ∑ x). i.e.
∑ y = an + b (∑ x) (2)
To find two quantities a and b, we require two equations. We have obtained one equation
i.e., (2). We need one more equation. For this purpose, multiply both sides of (1) by
x. We obtain
x y = ax + bx2 .
Consider the summation of all such terms. We get
x y = ∑ (ax + bx2 ) = (∑ a x) + ( ∑ bx2)
Equations (2) and (3) are referred to as the normal equations associated with the regression
of y on x. solving these two equations, we obtain
X 5 6 7 8 9 10 11
Y 2 4 5 5 3 8 7
Note: For calculating the coefficient of correlation, we require ∑X, ∑Y, ∑ Xy, ∑ X2, ∑Y2.
For calculating the regression of y on x, we require∑X, ∑Y, ∑ XY, ∑ X2. Thus, tabular
column is same in both the cases with the difference that∑Y2 is also required for the
coefficient of correlation. Next, if we consider the regression line of x on y, we get the
equation X = a + b y. The expressions for the coefficients can be got by interchanging the
roles of X and Y in the previous discussion. Thus, we obtain
Problem: Consider the following data on sales and profit.
Determine the regression of profit on sales.

Solution: We have N = 7. Take X = Sales, Y = Profit.
Calculate ∑ X, ∑y, ∑XY, ∑X2 as follows:
X Y XY X2
5 2 10 25
6 4 24 36
7 5 35 49
8 5 40 64

9 3 27 81
10 8 80 100
11 7 77 121
Total: 56 34 293 476
a = {(∑ x2) (∑ y) – (∑ x) (∑ x y)} / {n (∑ x2) – (∑ x)2}
(476 x 34 – 56 x 293) / ( 7 x 476 - 562 )

(16184 – 16408 ) / ( 3332 – 3136 )
- 224 / 196
– 1.1429
b = {n (∑ x y) – (∑ x) (∑ y)} / {n (∑ x2) – (∑ x) 2}
(7 x 293 – 56 x 34)/ 196 = (2051 – 1904)/ 196

147 /196
0.75
The regression of Y on X is given by the equation
Y=a+bX
I.e.,
Y=–1.14+0.75X
Problem: Consider the following data on occupancy rate and profit of a hotel.
Occupancy Rate 40 45 70 60 70 75 70 80 95 90
Profit 50 55 65 70 90 95 105 110 120 125
Determine the regressions of profit on occupancy rate and occupancy rate on profit.
Solution: We have N = 10. Take X = Occupancy Rate, Y = Profit.
Note that in Problems 10 and 11, we wanted only one regression line and so we did not take
∑Y2 . Now we require two regression lines. Therefore,
Calculate ∑ X, ∑Y, ∑XY, ∑X2, ∑Y2.
X Y XY X2 Y2
40 50 2000 1600 2500
45 55 2475 2025 3025

70 65 4550 4900 4225
60 70 4200 3600 4900
70 90 6300 4900 8100
75 95 7125 5625 9025
70 105 7350 4900 11025
80 110 8800 6400 12100
95 120 11400 9025 14400
90 125 11250 8100 15625
Total:695 885 65450 51075 84925
The regression line of Y on X:
Y=a+bX
Where: a ={(∑ x2) (∑ y) – (∑ x) (∑ x y)} / {n (∑ x2) – (∑ x) 2}
And b ={n (∑ x y) – (∑ x) (∑ y)} / {n (∑ x2) – (∑ x) 2}
We obtain: a = (51075 x 885 – 695 x 65450) / (10x51075 - 6952)
(45201375 – 45487750)/ (510750 – 483025)
- 286375 / 27725
- 10.329
b = (10 x 65450 – 695 x 885) / 27725
(654500 – 615075) / 27725
39425 / 27725
1.422
So, the regression equation is Y = - 10.329 + 1.422 X
Next, if we consider the regression line of X on Y, We get the equation X = a + b Y where
a = {(∑ y2) (∑ x) – (∑ y) (∑ x y)} / {n (∑ y2) – (∑ y) 2} b = {n (∑ x y) – (∑ x) (∑ y)} / {n

(∑ y2) – (∑ y) 2}.
a = (84925 x 695 – 885 x 65450) / (10 x 84925 – 8852)
(59022875 – 57923250) / (849250 – 783225)
1099625 / 66025

16.655,
b = (10 x 65450 – 695 x 885) / 66025
(654500 – 615075) / 66025
39425 / 66025
0.597
So, the regression equation is X = 16.655 + 0.597 Y
Note:
For the data given in this problem, if we use the formula for r, we get
(10 x 65450 – 695 x 885) / { √ (10 x 51075 - 6952 ) √ (10 x 84925 - 8852 ) }
(654500 – 615075) / (√ 27725 √ 66025 )
39425 / 166.508 x 256.95
39425 / 42784.23
0.9214
However, once we know the two b values, we can find the coefficient of correlation r
between X and Y as the square root of the product of the two b values. Thus we obtain
r = √ (1.422 x 0.597)
√ 0.848934
0.9214.
Note that this agrees with the above value of r.
Multiple linear regression attempts to model the relationship between two or more
explanatory variables and a response variable by fitting a linear equation to observed data.
Every value of the independent variable x is associated with a value of the dependent
variable y. The population regression line for p explanatory variables x1, x2, ... , xp is defined
to be y = 0 + 1x1 + 2x2 + ... + pxp. This line describes how the mean
response y changes with the explanatory variables. The observed values for y vary about
their means y and are assumed to have the same standard deviation . The fitted
values b0, b1, ..., bp estimate the parameters 0, 1, ..., p of the population regression line.

Since the observed values for y vary about their means y, the multiple regression model
includes a term for this variation. In words, the model is expressed as DATA = FIT +
RESIDUAL, where the "FIT" term represents the expression 0 + 1x1 + 2x2 + ...
pxp. The "RESIDUAL" term represents the deviations of the observed values y from their
means y, which are normally distributed with mean 0 and variance . The notation for
the model deviations is .
Formally, the model for multiple linear regression, given n observations, is

yi = 0 + 1 xi1 + 2 xi2 + ... p xip + i for i = 1,2, ... n.
In the least-squares model, the best-fitting line for the observed data is calculated by
minimizing the sum of the squares of the vertical deviations from each data point to the line
(if a point lies on the fitted line exactly, then its vertical deviation is 0). Because the
deviations are first squared, then summed, there are no cancellations between positive and
negative values. The least-squares estimates b0, b1, ... bp are usually computed by statistical
software.
The values fit by the equation b0 + b1xi1 + ... + bpxip are denoted i , and the residuals ei are
equal to yi - i, the difference between the observed and fitted values. The sum of the
residuals is equal to zero.
The variance ² may be estimated by s² = , also known as the mean-

squared error (or MSE). The estimate of the standard error s is the square root of the MSE.
Discriminant Analysis
Discriminant Analysis finds a set of prediction equations based on independent variables
that are used to classify individuals into groups. There are two possible objectives in a
Discriminant analysis: finding a predictive equation for classifying new individuals or
interpreting the predictive equation to better understand the relationships that may exist
among the variables. In many ways, Discriminant analysis parallels multiple regression
analysis. The main difference between these two techniques is that regression analysis deals
with a continuous dependent variable, while Discriminant analysis must have a discrete
dependent variable. The methodology used to complete a Discriminant analysis is similar to
regression analysis. You plot each independent variable versus the group variable. You
often go through a variable selection phase to determine which independent variables are
beneficial. You conduct a residual analysis to determine the accuracy of the Discriminant
equations.
The mathematics of Discriminant analysis are related very closely to the one-way
MANOVA. In fact, the roles of the variables are simply reversed. The classification (factor)
variable in the MANOVA becomes the dependent variable in Discriminant analysis. The

dependent variables in the MANOVA become the independent variables in the Discriminant
analysis.
Suppose you have data for K groups, with Nk observations per group. Let N represent the
total number of observations. Each observation consists of the measurements of p variables.
The Ith observation is represented by Xki. Let M represent the vector of means of these
variables across all groups and Mk the vector of means of observations in the kth group.
Define three sums of squares and cross products matrices, ST, SW, and SA, as follows:
A Discriminant function is a weighted average of the values of the independent variables.

The weights are selected so that the resulting weighted average separates the observations
into the groups. High values of the average come from one group; low values of the average
come from another group. The problem reduces to one of finding the weights which, when
applied to the data, best discriminate among groups according to some criterion. The
solution reduces to finding the eigenvectors, V, of SW−1 SA. The canonical coefficients are
the elements of these eigenvectors.
A goodness-of-fit parameter, Wilks’ lambda, is defined as follows:

The main purpose of a Discriminant function analysis is to predict group membership
based on a linear combination of the interval variables. The procedure begins with a set
of observations where both group membership and the values of the interval variables
are known. The end result of the procedure is a model that allows prediction of group
membership when only the interval variables are known. A second purpose of
Discriminant function analysis is an understanding of the data set, as a careful
examination of the prediction model that results from the procedure can give insight
into the relationship between group membership and the variables used to predict
group membership.
Discriminant function analysis is used to predict group membership based on a linear

combination of interval predictor variables. The procedure begins with a set of
observations where both group membership and the values of the predictor variables
are known with the end result being a linear combination of the interval variables that
allows prediction of group membership. The way in which the interval variables
combine allows a greater understanding and simplification of a multivariate data set.
Discriminant analysis, based on matrix theory, is an established technology that has the
advantage of a clearly defined decision-making process. Machine learning techniques
such as neural networks may alternatively be used for predicting group membership
from similar data, often with more accurate predictions, as long as the statistician is
willing to accept decision-making without much insight into the process.
For example, a researcher might have a large data set of information from a high school
about their former students. Each student belongs to a single group: (1) did not
graduate from high school (2) graduated from high school or obtained a GED (3)
attended. The researcher wishes to predict student outcome group using interval
predictor variables such as: grade point average, attendance, degree of participation in
various extra-curricular activities (band, athletics, etc.), weekly amount of screen time,
and parental educational level. Given this complex multivariate data set and the
discriminant function analysis procedure, the researcher can find a subset of variables
that in a linear combination allows prediction of group membership. As a bonus, the
relative importance of each variable in this subset is part of the output. Often
researchers are satisfied with this understanding of the data set and stop at this point.
Discriminant function analysis is a sibling to multivariate analysis of variance

(MANOVA) as both share the same canonical analysis parent. Where MANOVA
received the classical hypothesis testing gene, discriminant function analysis often

contains the Bayesian probability gene, but in many other respects they are almost
identical.
This entry will attempt to explain the procedure by breaking it down into its
component parts and then assembling them into a whole. The two main component
parts in discriminant function analysis are implicit in the title: discriminating between
groups and functional analysis. Because knowledge of how to discriminate between
groups is necessary for an understanding of the later functional analysis, it will be
presented first.
Examples
For example, a graduate admissions committee might divide a set of past graduate
students into two groups: students who finished the program in five years or less and
those who did not. Discriminant function analysis could be used to predict successful
completion of the graduate program based on GRE score and undergraduate grade
point average. Examination of the prediction model might provide insights into how
each predictor individually and in combination predicted completion or non-completion
of a graduate program.
Another example might predict whether patients recovered from a coma or not based
on combinations of demographic and treatment variables. The predictor variables
might include age, sex, general health, time between incident and arrival at hospital,
various interventions, etc. In this case the creation of the prediction model would allow
a medical practitioner to assess the chance of recovery based on observed variables. The
medical practitioner might be using the results of a discriminant function analysis when
telling a patient that she has an 80% chance of recovery, even though the medical
practitioner may have obtained this value by entering numbers into a computer
program and have little concept of how it was computed. The prediction model might
also give insight into how the variables interact in predicting recovery.
Discriminating Between Groups
Discriminating between groups with a single variable
The simplest case of discriminant function analysis is the prediction of group

membership based on a single variable. An example might be the prediction of
successful completion of high school based on the attendance record alone. For the rest
of this section, the example will use three simulated groups with Ns equal to 100, 50,
and 150, respectively.
In the example (Figures 1), histograms are drawn separately for each of the three
groups. Secondly, overlapping normal curve models are shown where the normal curve
parameters mu and sigma are estimated by the mean and standard deviation of the
three groups. An ANOVA analysis shows that the three means are statistically different
from each other, but only limited discrimination between groups is possible

Figure 2 shows various possibilities for overlapping group probability models, from
little or no discrimination to almost perfect discrimination between groups. Note that
the greater the difference between means relative to the within group variability, the
better the discrimination between groups.
Given that means and standard deviations can be calculated for each group, different
classification schemes can be devised to classify scores based on a single variable. One
possibility is to simply measure the distance of a particular score from each of the group
means and select the group that has the smallest distance. (In discriminant function
analysis, group means are called centroids.) This system has the advantage that no
distributional assumptions are necessary.
While not absolutely necessary to perform a discriminant function analysis, Bayes

Theorem offers a distinct improvement over distance measures. Bayes Theorem
modifies existing probabilities, called prior probabilities, into posterior probabilities
using evidence based on the collected data. In the case of discriminant function analysis,
prior probabilities are the likelihood of belonging to a particular group before the
interval variables are known and are generally considered to be subjective probability
estimates. Prior probabilities will be symbolized as P(G). For example, P(G1) is the

prior probability of belonging to group 1. In discriminant function analysis programs
(e.g. SPSS), the default option is to set all prior probabilities as equally likely. For
example, if there were three groups, each of the three prior probabilities would be set to
.33333…. Optionally, the prior probabilities can be set to the relative frequency of each
group. In the example data with N’s of 100, 50, and 150, the prior probabilities would
be set to .333…, .16666…, and .75, respectively. Since prior probabilities are subjective,
it would also be possible to set them based on cost of misclassification. For example, if
misclassification as group 1 membership is costly, the prior probability might be set to
.10, rather than .333….
The probability models of the predictor variables for each group can be used to provide
the conditional probability estimates of a score (D) given membership in a particular
group, P(D|G). Using the pdf of the probability model, the height of the curve at the
data point can be used as an estimate of this probability. Figure 3 illustrates this
concept at the data point x, where P(D=x|G1) #60 P(D=x|G2) #60 P(D=x|G3).
Bayes Theorem provides a means to transform prior probabilities into posterior

probabilities given the conditional probabilities P(D|G). Posterior probabilities are the
probability of belonging to a group given the prior and conditional probabilities. In the
case of discriminant function analysis, prior probabilities P(G) are transformed into
posterior probabilities of group membership given a particular score P(G|D). The
formula for computing P(G|D) using Bayes Theorem is as follows:
The Bayesian classification system works by computing the posterior probability at a

given data point for each group and then selecting the group with the largest posterior
probability. If equal prior probabilities are used, then P(Gi) is a constant for all groups
and can be cancelled from the formula. Since the denominator is the same for all groups,
the classification system will select the group with the largest P(D|G). In the case of
the normal curve examples of conditional distributions presented in Figure 3, at any

given point on the x-axis the selected group would correspond to the group with the
highest curve. This is reflected on the last territorial map on the figure. Note how
different it is from the classification system based on distances from each mean. If
unequal prior probabilities are used, then the posterior probabilities are weighted by the
prior probabilities and the territorial maps will necessarily change.
Discriminating between groups with multiple variables
In some cases, especially with multiple groups and complex multivariate data,
discrimination between groups along a single dimension is not feasible and multiple
dimensions must be used to insure reasonably correct classification results. A visual
representation of a fairly simple situation with two dimensions and three groups is
presented in Figure 4. Note that better classification results can be obtained using two
dimensions than any single dimension.
Conceptually, the classification methods are fairly straightforward extensions of the

classification systems along a single dimension, although visual representations become
much more problematic, especially in three or more dimensions.
Various methods of computing distances from the group centroids can be used and the
minimum distance can be used as a classification system. The advantage to using
distance measures is that no distributional assumptions are necessary.
When using a Bayesian classification system, distributional assumptions are necessary.

One common distributional assumption is a multivariate normal distribution. The
requirements for a multivariate normal distribution are much more stringent and
complex than for a univariate normal distribution and therefore harder to meet. For
example, both X1 and X2 could be normally distributed, but the combination might not
be a bi-variate normal distribution. The multivariate normal assumption becomes even
more problematic with many more variables. If the distributional assumptions are
acceptable, then the Bayesian classification system proceeds in a manner like
discriminating between groups with a single variable. The advantage to using a
Bayesian classification system is that posterior probabilities of belonging to each group
are available.
The Simplest Case
The simplest case of Discriminant function analysis is the prediction of dichotomous

group membership based on a single variable. An example of the simplest case is the

prediction of successful completion of a graduate program based on the GRE verbal
score. In this case, since the prediction model includes only a single variable, it gives
little insight into how variables interact with each other in prediction. Thus prediction
of group membership will be the major focus of the next section of this chapter.
With respect to the data file and purpose of analysis, this simplest case is identical to
the case of linear regression with dichotomous dependent variables. As discussed
previously, data of this type may be represented in any number of different forms:
scatter plots, tables of means and standard deviations, and overlapping frequency
polygons. Because overlapping frequency polygons have such an intuitive appeal, they
will be used to describe how Discriminant function analysis works.
Prediction Accuracy
A single interval variable might discriminate between groups in an almost perfect

fashion, not at all, or somewhere in between. For example, if one wished to differentiate
adult males and females, one could collect information on how many bras the person
owned, score on the last statistics test, and height. In the case of the number of bras, the
discrimination would be very good, but not perfect (some women don't own any bras,
some men do). In the case of the score on the last statistics test, little discrimination
would be possible because males and females generally score about the same. In the case
of height, some discrimination between adult males and females would be possible, but
it would be far from perfect.
In general, the larger the difference between the means of the two groups relative to the
within groups variability, the better the discrimination between the groups. The
following program allows the student to explore data sets with different degrees of
discrimination ability.
The figure below shows the results of the program when the discrimination is set to
low.

The next figure shows the results when the discrimination is set to high.
Note that the two frequency polygons overlap a great deal when there is little or
no discriminability between groups and hardly at all when there is high
discriminability. In the same vein, the means are fairly similar relative to their standard
deviations in the low discriminability condition and different in the high
discriminability condition.
Modelling the Data
Discriminant function analysis is based on modeling the interval variable for each
group with a normal curve. The mean of each group is used an estimate of mu for that
group. Sigma for each group can be estimated by using weighted mean of the within
group variances or using the standard deviation of that group. In the case of the
weighted mean the variances are weighted by sample size and can be calculated either
as the denominator for a nested t-test or as the square root of the Mean Squares Within
Groups in an ANOVA, providing identical estimates. When using the weighted mean of
the variances, one must assume that the generating function for each group produces
numbers that in the long run have the same variability.
In the simple case of dichotomous groups and a single predictor variable, it really does
not make a great deal of difference in the complexity of the model if the variability of
each groups is assumed to be equal or not. This is not true, however, when more groups
and more predictor variables are added to the model. For that reason, the assumption of
equality of within group variance is almost universal in discriminant function analysis.
The following program allows the student to explore the relationship between different
generating functions (poor, medium, or good discrimination; equal or unequal
variances), sample size, and resulting model based on the sample. The student should
verify that larger sample sizes provide resulting models that are more similar to the
generating model. The student should also explore the effect of violations of the
equality of variance assumptions on the resulting model.
Probabilities of Group Membership
The normal curve models of the predictor variables for each group and can be used to
provide probability estimates of a particular score given membership in a particular
group. In Discriminant function analysis, the area in the tails under a normal curve
model for a given group between points equally distant from mu is the probability of
either point given that group. This probability is symbolized as P(D/G) on SPSS
output.
For example, suppose that the normal curve model for a given group has a value of 13
for mu and 2 for sigma. The probability of a score of 16 would be the area in the tails of
this normal curve between 10 and 16. The value of 10 was selected as the low score
because 16 is three units above the mean (16-13 = 3) and 10 is three sigma units below
the mean (13-3 = 10). This is all much easier visualized than stated.

This area could be found using the probability calculator by finding the two-tailed
significance level for a score of 10 under a normal curve with mu equal to 13 and sigma
equal to 2.
A score of 10 would have the same probability as a score of 16 because it is an equal

distance from mu.
In a similar manner the probability of membership in this group given a score of 11

could be found as the area in the tails of a normal curve with mu=13 and sigma=2
between a score of 11 and 15.

If the second group had a mean of 17 and the same value for sigma (2), then the
probability of a score of 16 would be equal to .617 and could be found and visualized as
follows:
Computation of low and high scores for large numbers of points could be tedious and is
best left to computers. A program to compute P(D/G) for two groups requires that the
user enter the means for the two groups, the value for Mean Square Within Groups
(from the ANOVA source table), and the score value. Using the preceding examples
with group means of 13 and 17, a Mean Square Within of 4 (22), and a score of 16 would
generate the following results:
Interpretation of P(G/D) is the likelihood of membership in a group given a particular

score. In some cases involving extreme scores, the likelihood of belonging to either
group will be small. In other cases involving scores that fall almost equidistant from
either mean, the likelihood of belonging to either group will be similar. Rather than
simply observing predicted group membership, the student is advised to check
probabilities of membership in all groups.
Prior Probabilities
Prior probabilities are the likelihood of belonging to a particular group given no

information about the person is available. In the classical testing literature prior
probabilities are called base rates. Prior probabilities influence our decisions about group
membership. Prior probabilities will be symbolized as P(G) . For example, P(G1) is the
prior probability of a score belonging to group 1.
Consider the case of prediction of completion of graduate school using GRE verbal
scores. Suppose that 99% of the students who started the graduate program successfully
completed the program (it was a really easy program). Even if a student scored
considerably lower than the mean of the successful group, program completion would
most likely be predicted because almost everyone finishes. Likewise, in a graduate
program where less than 10% of beginning students complete the program, the
likelihood of completion will be fairly low no matter how high the GRE verbal score.
As discussed in the chapter on probabilities in the introductory text, Bayes Theorem

provides a means to transform prior probabilities into posterior probabilities. In the
case of discriminant function analysis, prior probabilities P(G) are transformed into
the posterior probabilities of group membership given a particular score P(G/D) using
information about the discriminating variables. The formula for computing P(G/D)
using Bayes Theorem is as follows:
For example, if the prior probability of membership in group 1 was .10, P(G1)=.10, and
the probability of a score of X=16 given membership in group 1 was .134,
P(D=16/G1)=.134, then the posterior probability, P(G1/D=16, would be .024.
Computation of this result can be seen below.
In a similar manner, if the prior probability of membership in group 2 was .90,

P(G2)=.90, and the probability of a score of X=16, given membership in group 2 was
.617, P(D=16/G2)=.617, then the posterior probability, P(G2/D=16 would be .976.
Computation of this result can be seen below.

These posterior probabilities can be compared with those where the prior probabilities
of group membership is equal to understand the effect of setting different prior
probabilities on the values of the posterior probabilities
The sum of the posterior probabilities for all groups will necessarily be one. In the
previous example P(G1/D=16) + P(G2/D=16) = .178 + .822 = 1.0. Predicted group
membership involves comparing posterior probabilities and selecting the group that has
the largest value. It is possible for a score to be unlikely to belong to either group, yet
have a high posterior probability of belonging to one group or the other, as can be seen
below.
Posterior probabilities are included in the program to compute probabilities in

discrimination function analysis. Note that the default value for prior probabilities is .5
for each group. The SPSS discriminant function analysis program also defaults to
equally likely priors and allows the user to optionally supply different prior
probabilities for group membership.
The effect of setting different prior probabilities can be seen in the following examples.

Conjoint Analysis
Everything in the world is undergoing a change. There is a proverb saying that “the old
order changes, yielding place to new”. Due to rapid advancement in science and technology,
there is fast communication across the world. Consequently, the whole world has shrunk
into something like a village and thus now-a-days one speaks of the “global village”. Under
the present set-up, one can purchase any product of his choice from whatever part of the
world it may be available. Because of this reason, what was a seller’s market a few years
back has transformed into a buyer’s market now?
In a seller’s market of yesterday, the manufacturer or the seller could pass on a product
according to his own perceptions and prescriptions. In the buyer’s market of today, a buyer
decides what he should purchase, what should be the quality of the product, how much to
purchase, where to purchase, when to purchase, at what cost to purchase, from whom to
purchase, etc. A manager is perplexed at the way a consumer takes a decision on the
purchase of a product. In this background, conjoint analysis is an effective tool to
understand a buyer’s preferences for a good or service.
Meaning of Conjoint Analysis
A product or service has several attributes. By an attribute, we mean a characteristic, a

property, a feature, a quality, a specification or an aspect. A buyer’s decision to purchase a
good or service is based on not just one attribute but a combination of several attributes. i.e.,
he is concerned with a join of attributes.

Therefore, finding out the consumer’s preferences for individual attributes of a product or
service may not yield accurate results for a marketing research problem. In view of this fact,
conjoint analysis seeks to find out the consumer’s preferences for a ‘join of attributes’, i.e., a
combination of several attributes.
Let us consider an example. Suppose a consumer desires to purchase a wrist watch. He

would take into consideration several attributes of a wrist watch, namely the configuration
details such as mechanism, size, dial, appearance, colour and other particulars such as strap,
price, durability, warranty, after-sales service, etc. If a consumer is asked what the
important aspect among the above list is, he would reply that all attributes are important
for him and so a manager cannot arrive at a decision on the design of a wrist watch.
Conjoint analysis assumes that the buyer will base his decision not on just the individual
attributes of the product but rather he would consider various combinations of the
attributes, such as
‘mechanism, colour, price, after-sales service’,
or ‘dial, colour, durability, warranty’,
or ‘dial, appearance, price, durability’, etc.
This analysis would enable a manager in his decision making process in the identification of
some of the preferred combinations of the features of the product.
The rank correlation method seeks to assess the consumer’s preferences for individual
attributes. In contrast, the conjoint analysis seeks to assess the consumer’s preferences for
combinations (or groups) of attributes of a product or a service. This method is also called
an ‘unfolding technique’ because preferences on groups of attributes unfold from the
rankings expressed by the consumers. Another name for this method is ‘multi-attribute
compositional model’ because it deals with combinations of attributes.
Steps in the Development of Conjoint Analysis
The development of conjoint analysis comprises of the following steps:
1. Collect a list of the attributes (features) of a product or a service.

2. For each attribute, fix a certain number of points or marks. The more the number of
points for an attribute, the more serious the consumers’ concern on that attribute.
3. Select a list of combinations of various attributes.
4. Decide a mode of presentation of the attributes to the respondents of the study i.e.,
whether it should be in written form, or oral form, or a pictorial representation etc.
5. Inform the combinations of the attributes to the prospective customers.
6. Request the respondents to rank the combinations, or to rate them on a suitable
scale, or to choose between two different combinations at a time.
7. Decide a procedure to aggregate the responses from the consumers. Any one of the
following procedures may be adopted:
i. Go by the individual responses of the consumers.
ii. Put all the responses together and construct a single utility
iii. Function.
iv. Split the responses into a certain number of segments such that within
each segment, the preferences would be similar.
8. Choose the appropriate technique to analyze the data collected from the respondents.
9. Identify the most preferred combination of attributes.
10. Incorporate the result in designing a new product, construction of an advertisement
copy, etc.
Applications of Conjoint Analysis
1. An idea of consumer’s preferences for combinations of attributes will be useful in

designing new products or modification of an existing product.
2. A forecast of the profits to be earned by a product or a service.
3. A forecast of the market share for the company’s product.
4. A forecast of the shift in brand loyalty of the consumers.
5. A forecast of differences in responses of various segments of the product.
6. Formulation of marketing strategies for the promotion of the product.
7. Evaluation of the impact of alternative advertising strategies.
8. A forecast of the consumers’ reaction to pricing policies.
9. A forecast of the consumers’ reaction on the channels of distribution.
10. Evolving an appropriate marketing mix.
11. Even though the technique of conjoint analysis was developed for the formulation of
corporate strategy, this method can be used to have a comprehensive knowledge of a
wide range of areas such as family decision making process, pharmaceuticals,
tourism development, public transport system, etc.
Advantages of Conjoint Analysis
1. The analysis can be carried out on physical variables.

2. Preferences by different individuals can be measured and pooled together to arrive at
a decision.
Disadvantages of Conjoint Analysis
1. When more and more attributes of a product are included in the study, the number
of combinations of attributes also increases, rendering the study highly difficult.
Consequently, only a few selected attributes can be included in the study.
2. Gathering of information from the respondents will be a tough job.
3. Whenever novel combinations of attributes are included, the respondents will have
difficulty in capturing such combinations.
4. The psychological measurements of the respondents may not be accurate. In spite of
the above stated disadvantages, conjoint analysis offers more scope to the
researchers in identifying the consumers’ preferences for groups of attributes.
Illustrative Problem 1: Application of Rating Scale Technique
A wrist watch manufacturer desires to find out the combinations of attributes that a
consumer would be interested in. After considering several attributes, the manufacturer
identifies the following combinations of attributes for carrying out marketing research.
Combination – I Mechanism, colour, price, after-scales service

Combination – II Dial, colour, durability, warranty
Combination – III Dial, appearance, price, durability
Combination – IV Mechanism, dial, price, warranty
12 respondents are asked to rate the 4 combinations on the following 3-point rating scale.
Scale – 1: Less important
Scale – 2: Somewhat important
Scale – 3: Very important
Their responses are given in the following table:
Rating of Combination
Respondent
No. Combination I Combination II Combination III Combination IV
Some Some
Less Very
1 what what
important important
important important
Some Some
Very Less
2 what what
important important
important important
Some Some
Less Very
3 what what
important important
important important
Some
Less Less Very
4 what
important important important
important
Some
Very Very Less
5 what
important
Some Some
Very Less
6 what what
important important
important important
Some
Less Very Less
7 what
important
Some Some
Very Less
8 what what
important important
important important
Some Some
Very Less
9 what what
important important
important important
Some Very Less Some
10
what important important what

important important
Some Some
Very Very
11 what what
important important
important important
Some
Very Less Very
12 what
important
Determine the most important and the least important combinations of the attributes.
Solution:
Let us assign scores to the scales as follows:
Sl. No. Scale Score
1 Less important 1
2 Somewhat important 3
3 Very important 5
The scores for the four combinations are calculated as follows:
Score for No. Of Total

Combination Response Response Respondents score
Less important 1 2 1X2=2
Some what 3 6 3X6=18
I important 5 4 5X4=20
12 40
Less important 1 5 1X5=5
Some what 3 3 3X3=9
II important 5 4 5X4=20
12 34
Less important 1 3 1X3= 3
Some what 3 3 3X3= 9
III important 5 6 5X6=30
12 42
Let us tabulate the scores earned by the four combinations as follows:
Combination Total scores

I 40
II 34
III 42
IV 32
Inference: It is concluded that the consumers consider combination III as the most
important and combination IV as the least important.

Note: For illustrating the concepts involved, we have taken up 12 respondents in the above
problem. In actual research work, we should take a large number of respondents, say 200 or
100. In any case, the number of respondents shall not be less than 30.
Approaches for Conjoint Analysis
The following two approaches are available for conjoint analysis:
1. Multi-factor evaluation approach

2. Two-factor evaluation approach 204
Multi-Factor Evaluation Approach In Conjoint Analysis
Suppose a researcher has to analyze n factors. It is possible that each factor can assume a
value in different levels.
Product Profile
A product profile is a description of all the factors under consideration, with any one level
for each factor.
Suppose, for example, there are 3 factors with the levels given below.
Factor 1 : 3 levels
Factor 2 : 2 levels
Factor 3 : 4 levels
Then we have 3 × 2 × 4 = 24 product profiles. For each respondent in the research survey,
we have to provide 24 data sheets such that each data sheet contains a distinct profile. In
each profile, the respondent is requested to indicate his preference for that profile in a rating
scale of 0 to 10. A rating of 10 indicates that the respondent’s preference for that profile is
the highest and a rating of 0 means that he is not all interested in the product with that
profile.
Example: Consider the product ‘Refrigerator’ with the following factors and levels:
Factor 1 : Capacity of 180 liters; 200 liters; 230 liters
Factor 2 : Number of doors: either 1 or 2
Factor 3 : Price : rs. 9000; rs. 10,000; rs. 12,000
Sample profile of the product
Profile Number :
Capacity : 200 liters
Number of Doors : 1
Price : Rs. 10,000

Rating of Respondent: (in the scale of 0 to 10)
Steps in Multi-Factor Evaluation Approach:
1. Identify the factors or features of a product to be analyzed. If they are too many,
select the important ones by discussion with experts.
2. Find out the levels for each factor selected in step 1.
3. Design all possible product profiles. If there are n factors with levels L1, L2,…Ln
respectively, then the total number of profiles = L1L2…Ln.
4. Select the scaling technique to be adopted for multi-factor evaluation approach
(rating scale or ranking method).
5. Select the list of respondents using the standard sampling technique.
6. Request each respondent to give his rating scale for all the profiles of the product.
Another way of collecting the responses is to request each respondent to award
ranks to all the profiles: i.e., rank 1 for the best profile, rank 2 for the next best
profile etc.
7. For each factor profile, collect all the responses from all the participating
respondents in the survey work.
8. With the rating scale awarded by the respondents, find out the score secured by each
profile.
9. Tabulate the results in step 8. Select the profile with the highest score. This is the
most preferred profile.
10. Implement the most preferred profile in the design of a new product.
Two-Factor Evaluation Approach In Conjoint Analysis
When several factors with different levels for each factor have to be analyzed, the
respondents will have difficulty in evaluating all the profiles in the multi-factor evaluation
approach. Because of this reason, two-factor evaluation approach is widely used in conjoint
analysis. Suppose there are several factors to be analyzed with different levels of values for
each factor, then we consider any two factors at a time with their levels of values. For each
such case, we have a data sheet called a two-factor table. If there are n factors, then the
number of such data sheets is.
Let us consider the example of ‘Refrigerator’ described in the multi-factor approach. For the
two factors (i) capacity and (ii) price, we have the following data sheet.
Data Sheet (Two Factor Table) No
Factor: Capacity of Fridge Price

9000 10000 12000
180 ltr
200 ltr
230 ltr

In this case, the data sheet is a matrix of 3 rows and 3 columns. Therefore, there are 339×=
places in the matrix. The respondent has to award ranks from 1 to 9 in the cells of the
matrix. A rank of 1 means the respondent has the maximum preference for that entry and a
rank of 9 means he has the least preference for that entry. Compared to multi-factor
evaluation approach, the respondents will find it easy to respond to two-factor evaluation
approach since only two factors are considered at a time.
Steps in two-factor evaluation approach:
Identify the factors or features of a product to be analyzed.
1. Find out the levels for each factor selected in step 1.
2. Consider all possible pairs of factors. If there are n factors, then the number of pairs is
For each pair of factors, prepare a two-factor table, indicating all the levels
for the two factors. If L1 and L2 are the respective levels for the two factors, then the
number of cells in the corresponding table is L1L2.
3. Select the list of respondents using the standard sampling technique.
4. Request each respondent to award ranks for the cells in each two-factor table. I.e., rank 1
for the best cell, rank 2 for the next best cell, etc.
5. For each two-factor table, collect all the responses from all the participating respondents
in the survey work.
6. With the ranks awarded by the respondents, find out the score secured by each cell in
each two-factor table.
7. Tabulate the results in step 7. Select the cell with the highest score. Identify the two
factors and their corresponding levels.
8. Implement the most preferred combination of the factors and their levels in the design of
a new product.
Application:
The two factor approach is useful when a manager goes for market segmentation to
promote his product. The approach will enable the top level management to evolve a policy
decision as to which segment of the market has to be concentrated more in order to
maximize the profit from the product under consideration.
Multi-Dimensional Scaling
From a non-technical point of view, the purpose of multidimensional scaling (MDS) is to

provide a visual representation of the pattern of proximities (i.e., similarities or distances)
among a set of objects. For example, given a matrix of perceived similarities between
various brands of air fresheners, MDS plots the brands on a map such that those brands that
are perceived to be very similar to each other are placed near each other on the map, and
those brands that are perceived to be very different from each other are placed far away
from each other on the map.
For instance, given the matrix of distances among cities shown above, MDS produces this
map:
In this example, the relationship between input proximities and distances among points on
the map is positive: the smaller the input proximity, the closer (smaller) the distance
between points, and vice versa. Had the input data been similarities, the relationship would
have been negative: the smaller the input similarity between items, the farther apart in the
picture they would be.
From a slightly more technical point of view, what MDS does is find a set of vectors in p-
dimensional space such that the matrix of euclidean distances among them corresponds as
closely as possible to some function of the input matrix according to a criterion function
called stress.
A simplified view of the algorithm is as follows:
1. Assign points to arbitrary coordinates in p-dimensional space.

2. Compute euclidean distances among all pairs of points, to form the Dhat matrix.
3. Compare the Dhat matrix with the input D matrix by evaluating the stress
function. The smaller the value, the greater the correspondance between the two.
4. Adjust coordinates of each point in the direction that best maximally stress.
5. Repeat steps 2 through 4 until stress won't get any lower.

Input Data
The input to MDS is a square, symmetric 1-mode matrix indicating relationships among a
set of items. By convention, such matrices are categorized as either similarities or
dissimilarities, which are opposite poles of the same continuum. A matrix is a similarity
matrix if larger numbers indicate more similarity between items, rather than less. A matrix
is a dissimilarity matrix if larger numbers indicate less similarity. The distinction is
somewhat misleading, however, because similarity is not the only relationship among items
that can be measured and analyzed using MDS. Hence, many input matrices are neither
similarities nor dissimilarities.
However, the distinction is still used as a means of indicating whether larger numbers in the
input data should mean that a given pair of items should be placed near each other on the
map, or far apart. Calling the data "similarities" indicates a negative or descending
relationship between input values and corresponding map distances, while calling the data
"dissimilarities" or "distances" indicates a positive or ascending relationship.
A typical example of an input matrix is the aggregate proximity matrix derived from a
pilesort task. Each cell xij of such a matrix records the number (or proportion) of
respondents who placed items i and j into the same pile. It is assumed that the number of
respondents placing two items into the same pile is an indicator of the degree to which they
are similar. An MDS map of such data would put items close together which were often
sorted into the same piles.
Another typical example of an input matrix is a matrix of correlations among variables.

Treating these data as similarities (as one normally would), would cause the MDS program
to put variables with high positive correlations near each other, and variables with strong
negative correlations far apart.
Another type of input matrix is a flow matrix. For example, a dataset might consist of the
number of business transactions occurring during a given period between a set of
corporations. Running this data through MDS might reveal clusters of corporations that
whose members trade more heavily with one another than other than with outsiders.
Although technically neither similarities nor dissimilarities, these data should be classified
as similarities in order to have companies who trade heavily with each other show up close
to each other on the map.
Dimensionality
Normally, MDS is used to provide a visual representation of a complex set of relationships

that can be scanned at a glance. Since maps on paper are two-dimensional objects, this
translates technically to finding an optimal configuration of points in 2-dimensional space.
However, the best possible configuration in two dimensions may be a very poor, highly
distorted, representation of your data. If so, this will be reflected in a high stress value.
When this happens, you have two choices: you can either abandon MDS as a method of
representing your data, or you can increase the number of dimensions.
There are two difficulties with increasing the number of dimensions. The first is that even 3
dimensions are difficult to display on paper and are significantly more difficult to
comprehend. Four or more dimensions render MDS virtually useless as a method of making
complex data more accessible to the human mind.
The second problem is that with increasing dimensions, you must estimate an increasing
number of parameters to obtain a decreasing improvement in stress. The result is model of
the data that is nearly as complex as the data itself.
On the other hand, there are some applications of MDS for which high dimensionality is not
a problem. For instance, MDS can be viewed as a mathematical operation that converts an
item-by-item matrix into an item-by-variable matrix. Suppose, for example, that you have a
person-by-person matrix of similarities in attitudes. You would like to explain the pattern of
similarities in terms of simple personal characteristics such as age, sex, income and
education. The trouble is, these two kinds of data are not conformable. The person-by-
person matrix in particular is not the sort of data you can use in a regression to predict age
(or vice-versa). However, if you run the data through MDS (using very high dimensionality
in order to achieve perfect stress), you can create a person-by-dimension matrix which is
similar to the person-by-demographics matrix that you are trying to compare it to.
Stress
The degree of correspondence between the distances among points implied by MDS map
and the matrix input by the user is measured (inversely) by a stress function. The general
form of these functions is as follows:
In the equation, dij refers to the euclidean distance, across all dimensions, between points i
and j on the map, f(xij) is some function of the input data, and scale refers to a constant
scaling factor, used to keep stress values between 0 and 1. When the MDS map perfectly
reproduces the input data, f(xij) - dij is for all i and j, so stress is zero. Thus, the smaller the
stress, the better the representation.
The stress function used in ANTHROPAC is variously called "Kruskal Stress", "Stress
Formula 1" or just "Stress 1". The formula is:
The transformation of the input values f(xij) used depends on whether metric or non-metric
scaling. In metric scaling, f(xij) = xij. In other words, the raw input data is compared
directly to the map distances (at least in the case of dissimilarities: see the section of metric
scaling for information on similarities). In non-metric scaling, f(xij) is a weakly monotonic
transformation of the input data that minimizes the stress function. The monotonic
transformation is computed via "monotonic regression", also known as "isotonic
regression".
From a mathematical standpoint, non-zero stress values occur for only one reason:
insufficient dimensionality. That is, for any given dataset, it may be impossible to perfectly
represent the input data in two or other small number of dimensions. On the other hand,
any dataset can be perfectly represented using n-1 dimensions, where n is the number of
items scaled. As the number of dimensions used goes up, the stress must either come down
or stay the same. It can never go up.
Of course, it is not necessary that an MDS map have zero stress in order to be useful. A
certain amount of distortion is tolerable. Different people have different standards regarding
the amount of stress to tolerate. The rule of thumb we use is that anything under 0.1 is
excellent and anything over 0.15 is unacceptable. Care must be exercised in interpreting any
map that has non-zero stress since, by definition, non-zero stress means that some or all of
the distances in the map are, to some degree, distortions of the input data. The distortions
may be spread out over all pairwise relationships, or concentrated in just a few egregious
pairs. In general, however, longer distances tend to be more accurate than shorter distances,
so larger patterns are still visible even when stress is high. See the section on Shepard
Diagrams and Interpretation for further information on this issue.
From a substantive standpoint, stress may be caused either by insufficient dimensionality,

or by random measurement error. For example, a dataset consisting of distances between
buildings in New York City, measured from the center of the roof, is clearly 3-dimensional.
Hence we expect a 3-dimensional MDS configuration to have zero stress. In practice,
however, there is measurement error such that a 3-dimensional solution does not have zero
stress. In fact, it may be necessary to use 8 or 9 dimensions to bring stress down to zero. In
this case, the fact that the "true" number of dimensions is known to be three allows us to use
the stress of the 3-dimensional solution as a direct measure of measurement error.
Unfortunately, in most datasets, it is not known in advance how many dimensions there
"really" are.
In such cases we hope (with little foundation) that the true dimensionality of the data will be
revealed to us by the rate of decline of stress as dimensionality increases. For example, in
the distances between buildings example, we would expect significant reductions in stress as
we move from a one to two to three dimensions, but then we expect the rate of change to
slow as we continue to four, five and higher dimensions. This is because we believe that all
further variation in the data beyond that accounted for by three dimensions is non-
systematic noise which must be captured by a host of "specialized" dimensions each
accounting for a tiny reduction in stress. Thus, if we plot stress by dimension, we expect the
following sort of curve:

Thus, we can theoretically use the "elbow" in the curve as a guide to the dimensionality of
the data. In practice, however, such elbows are rarely obvious, and other, theoretical, criteria
must be used to determine dimensionality.
Shepard Diagrams
The Shepard diagram is a scatterplot of input proximities (both xij and f(xij)) against output
distances for every pair of items scaled. Normally, the X-axis corresponds to the input
proximities and the Y-axis corresponds to both the MDS distances dij and the transformed
("fitted") input proximities f(xij). An example is given in Figure 3. In the plot, asterisks mark
values of dij and dashes mark values of f(xij). Stress measures the vertical discrepancy
between xij (the map distances) and f(xij) (the transformed data points). When the stress is
zero, the asterisks and dashes lie on top of each other. In metric scaling, the asterisks form a
straight line. In nonmetric scaling, the asterisks form a weakly monotonic function(1), the
shape of which can sometimes be revealing (e.g., when map-distances are an exponential
function of input proximities).
If the input proximities are similarities, the points should form a loose line from top left to
bottom right, as shown in Figure 3. If the proximities are dissimilarities, then the data
should form a line from bottom left to top right. In the case of non-metric scaling, f(xij) is
also plotted.
At present, the ANTHROPAC program does not print Shepard diagrams. It does, however,
print out a list of the most discrepant (poorly fit) pairs of items. If you notice that the same
item tends to appear in a number of discrepant pairs, it would make sense to delete the item
and rerun the scaling.
Interpretation
There are two important things to realize about an MDS map. The first is that the axes are,
in themselves, meaningless and the second is that the orientation of the picture is arbitrary.
Thus an MDS representation of distances between US cities need not be oriented such that
north is up and east is right. In fact, north might be diagonally down to the left and east
diagonally up to the left. All that matters in an MDS map is which point is close to which
others.

When looking at a map that has non-zero stress, you must keep in mind that the distances
among items are imperfect, distorted, representations of the relationships given by your
data. The greater the stress, the greater the distortion. In general, however, you can rely on
the larger distances as being accurate. This is because the stress function accentuates
discrepancies in the larger distances, and the MDS program therefore tries harder to get
these right.
There are two things to look for in interpreting an MDS picture: clusters and dimensions.
Clusters are groups of items that are closer to each other than to other items. For example,
in an MDS map of perceived similarities among animals, it is typical to find (among north
americans) that the barnyard animals such as chicken, cow, horse, and pig are all very near
each other, forming a cluster. Similarly, the zoo animals like lion, tiger, antelope, monkey,
elephant and giraffe form a cluster. When really tight, highly separated clusters occur in
perceptual data, it may suggest that each cluster is a domain or subdomain which should be
analyzed individually. It is especially important to realize that any relationships observed
within such a cluster, such as item a being slightly closer to item b than to c should not be
trusted because the exact placement of items within a tight cluster has little effect on overall
stress and so may be quite arbitrary. Consequently, it makes sense to extract the submatrix
corresponding to a given cluster and re-run the MDS on the submatrix.(2) (In some cases,
however, you will want to re-run the data collection instead.)
Dimensions are item attributes that seem to order the items in the map along a continuum.
For example, an MDS of perceived similarities among breeds of dogs may show a distinct
ordering of dogs by size. The ordering might go from right to left, top to bottom, or move
diagonally at any angle across the map. At the same time, an independent ordering of dogs
according to viciousness might be observed. This ordering might be perpendicular to the
size dimension, or it might cut a sharper angle.
The underlying dimensions are thought to "explain" the perceived similarity between items.
For example, in the case of similarities among dogs we expect that the reason why two dogs
are seen as similar is because they have locations or scores on the identified dimensions.
Hence, the observed similarity between a doberman and a german shepherd is explained by
the fact that they are seen as nearly equally vicious and about the same size. Thus, the
implicit model of how similarity judgments are produced by the brain is that items have
attributes (such as size, viciousness, intelligence, furriness, etc) in varying degrees, and the
similarity between items is a function of their similarity in scores across all attributes. This
function is often conceived of as a weighted sum of the similarity across each attribute,
where the weights reflect the importance or saliency of the attribute.
It is important to realize that these substantive dimensions or attributes need not

correspond in number or direction to the mathematical dimensions (axes) that define the
vector space (MDS map). For example, the number of dimensions used by respondents to
generate similarities may be much larger than the number of mathematical dimensions
needed to reproduce the observed pattern. This is because the mathematical dimensions are
necessarily orthogonal (perpendicular), and therefore maximally efficient. In contrast, the
human dimensions, while cognitively distinct, may be highly intercorrelated and therefore
contain some redundant information.

One thing to keep in mind in looking for dimensions is that your respondents may not have
the same views that you do. For one thing, they may be reacting to attributes you have not
thought of. For another, even when you are both using the same set of attributes, they may
assign different scores on each attribute than you do. For example, one of the attributes
might be "attractiveness". Your view of what an attractive dog, person, fruit or other item
may be very different from your respondents'.
Basic steps of MDS:
1) Assign a number of points to coordinates in n-dimensional space. N-dimensional

space could be 2-dimensional, 3-dimensional, or higher spaces (at least, theoretically,
because 4-dimensional spaces and above are difficult to model). The orientation of
the coordinate axes is arbitrary and is mostly the researcher’s choice. For maps like
the one in the simple example above, axes that represent north/south and east/west
make the most sense.
2) Calculate Euclidean distances for all pairs of points. The Euclidean distance is the “as
the crow flies” straight-line distance between two points x and y in Euclidean space.
It’s calculated using the Pythagorean theorem (c2 = a2 + b2), although it becomes
somewhat more complicated for n-dimensional space (see “Euclidean Distance in n-
dimensional space“). This results in the similarity matrix.
3) Compare the similarity matrix with the original input matrix by evaluating the
stress function. Stress is a goodness-of-fit measure, based on differences between
predicted and actual distances. In his original 1964 MDS paper, Kruskal wrote that
fits close to zero are excellent, while anything over .2 should be considered “poor”.
More recent authors suggest evaluating stress based on the quality of the distance
matrix and how many objects are in that matrix.
4) Adjust coordinates, if necessary, to minimize stress.
Factor Analysis
In a real life situation, several variables are operating. Some variables may be highly
correlated among themselves. For example, if manager of a restaurant has to analyse six
attributes of a new product. He undertakes a sample survey and finds out the responses of
potential consumers. He obtains the following attribute correlation matrix.
We try to group the attributes by their correlations. The high correlation values are
observed for the following attributes:

Attributes 1, 4 with a very high correlation coefficient of 0.95.
Attributes 2, 4 with a high correlation coefficient of 0.85.
Attributes 3, 4 with a high correlation coefficient of 0.85.
As a result, it is seen that not all the attributes are independent. The attributes 1 and 4 have
mutual influence on each other while the attributes 2, 5 and 6 have mutual influence among
themselves. As far as attribute 3 is concerned, it has little correlation with the attributes 1, 2
and 6. Even with the other attributes 4 and 5, its correlation is not high. However, we can
say that attribute 3 is somewhat closer to the variables 4 and 5 rather than the attributes 1,
2 and 6. Thus, from the given list of 6 attributes, it is possible to find out 2 or 3 common
factors as follows:
I.
1) The common features of the attributes 1,3,4 will give a factor
2) The common features of the attributes 2, 5, 6 will give a factor
Or
II.
1) The common features of the attributes 1,4 will give a factor
2) The common features of the attributes 2,5,6 will give a factor
3) The attribute 3 can be considered to be an independent factor
The factor analysis is a multivariate method. It is a statistical technique to identify the

underlying factors among a large number of interdependent variables. It seeks to extract
common factor variances from a given set of observations. It splits a number of attributes or
variables into a smaller group of uncorrelated factors. It determines which variables belong
together. This method is suitable for the cases with a number of variables having a high
degree of correlation.
In the above example, we would like to filter down the attributes 1, 4 into a single attribute.
Also we would like to do the same for the attributes 2, 5, 6. If a set of attributes (variables)
A1, A2, …, Ak filter down to an attribute Ai (1 ≤ i ≤ k), we say that these attributes are
loaded on the factor Ai or saturated with the factor Ai. Sometimes, more than one factor
also may be identified.
Basic concepts in factor analysis
The following are the key concepts on which factor analysis is based.
Factor:
A factor plays a fundamental role among a set of attributes or variables. These variables can
be filtered down to the factor. A factor represents the combined effect of a set of attributes.
Either there may be one such factor or several such factors in a real life problem based on
the complexity of the situation and the number of variables operating.

Factor loading:
A factor loading is a value that explains how closely the variables are related to the factor. It
is the correlation between the factor and the variable. While interpreting a factor, the
absolute value of the factor is taken into account.
Communality:
It is a measure of how much each variable is accounted for by the underlying factors
together. It is the sum of the squares of the loadings of the variable on the common factors.
If A,B,C,… are the factors, then the communality of a variable is computed using the
relation
h2 = (The factor loading of the variable with respect to factor A)2 +
(The factor loading of the variable with respect to factor B)2 +
(The factor loading of the variable with respect to factor C)2 + …..
Eigen value:
The sum of the squared values of factor loadings pertaining to a factor is called an eigen
value. It is a measure of the relative importance of each factor under consideration.
Total Sum of Squares (TSS)
It is the sum of the eigen values of all the factors.
Application of Factor Analysis:
1. Model Building for New Product Development:
As pointed out earlier, a real life situation is highly complex and it consists of several
variables. A model for the real life situation can be built by incorporating as many features
of the situation as possible. But then, with a multitude of features, it is very difficult to build
such a highly idealistic model. A practical way is to identify the important variables and
incorporate them in the model. Factor analysis seeks to identify those variables which are
highly correlated among themselves and find a common factor which can be taken as a
representative of those variables. Based on the factor loading, some of variables can be
merged together to give a common factor and then a model can be built by incorporating
such factors. Identification of the most common features of a product preferred by the
consumers will be helpful in the development of new products.
2. Model Building for Consumers:
Another application of factor analysis is to carry out a similar exercise for the respondents
instead of the variables themselves. Using the factor loading, the respondents in a research
survey can be sorted out into various groups in such a way that the respondents in a group
have more or less homogeneous opinions on the topics of the survey. Thus a model can be
constructed on the groups of consumers. The results emanating from such an exercise will
guide the management in evolving appropriate strategies towards market segmentation.

Cluster Analysis
Clustering is the task of dividing the population or data points into a number of groups such
that data points in the same groups are more similar to other data points in the same group
than those in other groups. In simple words, the aim is to segregate groups with similar
traits and assign them into clusters.
Let’s understand this with an example. Suppose, you are the head of a rental store and wish
to understand preferences of your costumers to scale up your business. Is it possible for you
to look at details of each costumer and devise a unique business strategy for each one of
them? Definitely not. But, what you can do is to cluster all of your costumers into say 10
groups based on their purchasing habits and use a separate strategy for costumers in each of
these 10 groups. And this is what we call clustering.
Now, that we understand what is clustering. Let’s take a look at the types of clustering.
Types of Clustering
Broadly speaking, clustering can be divided into two subgroups:
1) Hard Clustering: In hard clustering, each data point either belongs to a cluster
completely or not. For example, in the above example each customer is put into one
group out of the 10 groups.
2) Soft Clustering: In soft clustering, instead of putting each data point into a separate
cluster, a probability or likelihood of that data point to be in those clusters is
assigned. For example, from the above scenario each costumer is assigned a
probability to be in either of 10 clusters of the retail store.
Types of clustering algorithms
Since the task of clustering is subjective, the means that can be used for achieving this goal
are plenty. Every methodology follows a different set of rules for defining the ‘similarity’
among data points. In fact, there are more than 100 clustering algorithms known. But few
of the algorithms are used popularly; let’s look at them in detail:
1) Connectivity models: As the name suggests, these models are based on the notion
that the data points closer in data space exhibit more similarity to each other than the
data points lying farther away. These models can follow two approaches. In the first
approach, they start with classifying all data points into separate clusters & then
aggregating them as the distance decreases. In the second approach, all data points are
classified as a single cluster and then partitioned as the distance increases. Also, the
choice of distance function is subjective. These models are very easy to interpret but
lacks scalability for handling big datasets. Examples of these models are hierarchical
clustering algorithm and its variants.
2) Centroid models: These are iterative clustering algorithms in which the notion of
similarity is derived by the closeness of a data point to the centroid of the clusters. K-
Means clustering algorithm is a popular algorithm that falls into this category. In
these models, the no. of clusters required at the end have to be mentioned beforehand,
which makes it important to have prior knowledge of the dataset. These models run
iteratively to find the local optima.

3) Distribution models: These clustering models are based on the notion of how
probable is it that all data points in the cluster belong to the same distribution (For
example: Normal, Gaussian). These models often suffer from overfitting. A popular
example of these models is Expectation-maximization algorithm which uses
multivariate normal distributions.
4) Density Models: These models search the data space for areas of varied density of
data points in the data space. It isolates various different density regions and assign
the data points within these regions in the same cluster. Popular examples of density
models are DBSCAN and OPTICS.
Now I will be taking you through two of the most popular clustering algorithms in detail –
K Means clustering and Hierarchical clustering. Let’s begin.
K Means Clustering
K means is an iterative clustering algorithm that aims to find local maxima in each iteration.
This algorithm works in these 5 steps :
1. Specify the desired number of clusters K : Let us choose k=2 for these 5 data points
in 2-D space.
2. Randomly assign each data point to a cluster: Let’s assign three points in cluster 1
shown using red colour and two points in cluster 2 shown using grey colour.
3. Compute cluster centroids: The centroid of data points in the red cluster is shown
using red cross and those in grey cluster using grey cross.

4. Re-assign each point to the closest cluster centroid : Note that only the data point at
the bottom is assigned to the red cluster even though its closer to the centroid of
grey cluster. Thus, we assign that data point into grey cluster
5. Re-compute cluster centroids : Now, re-computing the centroids for both the
clusters.
6. Repeat steps 4 and 5 until no improvements are possible : Similarly, we’ll repeat the
4th and 5th steps until we’ll reach global optima. When there will be no further
switching of data points between two clusters for two successive repeats. It will
mark the termination of the algorithm if not explicitly mentioned.
Here is a live coding window where you can try out K Means Algorithm using scikit-learn
library.
Hierarchical Clustering
Hierarchical clustering, as the name suggests is an algorithm that builds hierarchy of

clusters. This algorithm starts with all the data points assigned to a cluster of their own.
Then two nearest clusters are merged into the same cluster. In the end, this algorithm
terminates when there is only a single cluster left.
The results of hierarchical clustering can be shown using dendrogram. The dendrogram can
be interpreted as:

At the bottom, we start with 25 data points, each assigned to separate clusters. Two closest
clusters are then merged till we have just one cluster at the top. The height in the
dendrogram at which two clusters are merged represents the distance between two clusters
in the data space.
The decision of the no. of clusters that can best depict different groups can be chosen by
observing the dendrogram. The best choice of the no. of clusters is the no. of vertical lines
in the dendrogram cut by a horizontal line that can transverse the maximum distance
vertically without intersecting a cluster.
In the above example, the best choice of no. of clusters will be 4 as the red horizontal line in
the dendrogram below covers maximum vertical distance AB.
Two important things that you should know about hierarchical clustering are:
• This algorithm has been implemented above using bottom up approach. It is also
possible to follow top-down approach starting with all data points assigned in the
same cluster and recursively performing splits till each data point is assigned a
separate cluster.
• The decision of merging two clusters is taken on the basis of closeness of these
clusters. There are multiple metrics for deciding the closeness of two clusters :
o Euclidean distance: ||a-b||2 = √(Σ(ai-bi))
o Squared Euclidean distance: ||a-b||22 = Σ((ai-bi)2)
o Manhattan distance: ||a-b||1 = Σ|ai-bi|
o Maximum distance:||a-b||INFINITY = maxi|ai-bi|
o Mahalanobis distance: √((a-b)T S-1 (-b)) {where, s : covariance matrix}
Difference between K Means and Hierarchical clustering
• Hierarchical clustering can’t handle big data well but K Means clustering can. This
is because the time complexity of K Means is linear i.e. O(n) while that of
hierarchical clustering is quadratic i.e. O(n2).
• In K Means clustering, since we start with random choice of clusters, the results
produced by running the algorithm multiple times might differ. While results are
reproducible in Hierarchical clustering.
• K Means is found to work well when the shape of the clusters is hyper spherical (like
circle in 2D, sphere in 3D).

• K Means clustering requires prior knowledge of K i.e. no. of clusters you want to
divide your data into. But, you can stop at whatever number of clusters you find
appropriate in hierarchical clustering by interpreting the dendrogram
Applications of Clustering
Clustering has a large no. of applications spread across various domains. Some of the most
popular applications of clustering are:
• Recommendation engines
• Market segmentation
• Social network analysis
• Search result grouping
• Medical imaging
• Image segmentation
• Anomaly detection
Example: Cluster analysis embraces a variety of techniques, the main objective of which is
to group observations or variables into homogeneous and distinct clusters. A simple
numerical example will help explain these objectives.
Inspection of Figure 15.1 suggests that the five observations from two clusters. The first
consists of persons a and d, and the second of b, c and e. It can be noted that the
observations in each cluster are similar to one another with respect to expenditures on food
and clothing, and that the two clusters are quite distinct from each other.

These conclusions concerning the number of clusters and their membership were reached
through a visual inspection of Figure 15.1. This inspection was possible because only two
variables were involved in grouping the observations. The question is: Can a procedure be
devised for similarly grouping observations when there are more than two variables or
attributes?
It may appear that a straightforward procedure is to examine all possible clusters of the
available observations, and to summarize each clustering according to the degree of
proximity among the cluster elements and of the separation among the clusters.
Unfortunately, this is not feasible because in most cases in practice the number of all
possible clusters is very large and out of reach of current computers. Cluster analysis offers
a number of methods that operate much as a person would in attempting to reach
systematically a reasonable grouping of observations or variables.
Measures of Distance of Variables

Module - VIII
Sales Analysis
Sales analysis examines sales reports to see what goods and services have and have not sold
well. The analysis is used to determine how to stock inventory, how to measure the
effectiveness of a sales force, how to set manufacturing capacity and to see how the company
is performing against its goals. Some basic ideas of sales analysis are:
1. Sales by SKU: The first, most basic level of analysis is examining sales data by product
and stock keeping unit (SKU); that is, each size and variation of each product by state or
smaller geographic areas and across time. What is the trend in sales of each SKU over
several years for each state, metropolitan service area (MSA) or other geographic areas?
As marketing directors study changes across time, the core question is always, why? Why
are sales trending up in California but down in New York? Answering the “why’’ should be
the ultimate goal of all sales analyses because knowing the “why’’ allows marketers to
project into the future.
2. Sales by channel of distribution: The next level of analysis involves distribution

channels. What is the trend in sales by type of “retail’’ outlet? Large individual retailers
should be looked at separately, and retailers should also be grouped by type (supermarkets,
convenience stores, warehouse club stores, distributors, vending machines, online, etc.).
Sales data take on new meaning and reveal new understanding when examined on some
type of relative basis. Photo Courtesy of 123rf.com | © christianchan
Sales data take on new meaning and reveal new understanding when examined on some
type of relative basis.
Sales of all products might be aggregated to study the distribution of total product sales by
different channels. The changes from year to year, or quarter to quarter, in sales by channel
can be quite revealing. For example, several years ago we were able to detect the growing
influence of Walmart as a distribution channel for groceries by analyzing a food
manufacturer’s historical sales by channel. At the time, Walmart was not on that food
manufacturer’s radar screen, and it probably was not on the radars of other food
manufacturers. By pinpointing the growing importance of Walmart early on, the client was
able to focus attention on Walmart and take advantage of Walmart’s growth.
While looking at sales in total by channel is a great starting point, marketing directors can
also examine sales by SKUs, brands or product categories by channel of distribution,
especially the trends over time.
3. Per capita sales: Sales data take on new meaning and reveal new understanding when
examined on some type of relative basis. Per capita sales analysis is one of these relative
techniques. For example, marketers might take the annual dollar sales – or unit sales – of
one of their brands state by state, divided by the total population of each state. This would
provide the annual sales per person by state.

We once did this type of analysis for a greeting card company and discovered that per capita
sales of the brand declined as a function of distance from corporate headquarters. States
close to corporate headquarters had higher per capita sales, while states farther away had
lower per capita sales. The per capita differences by state reflected the historical
development of the company, as well as the greater attention the closer states received from
the firm’s higher-level executives.
The analysis provided evidence that sales levels per capita in distant states could be
increased with greater managerial attention.
Per capita sales analyses can be based on total population, male population, female
population, adult population, children population, individuals earning more than $50,000 or
any other population group. The analyses can be run by country, states, groups of states,
MSAs, designated marketing areas, by individual cities or areas within cities. The results
are often quite revealing and can lead to improved sales efforts or better targeting of
advertising.
4. Per comparable economic data: Another way to analyze sales data on a relative basis is
to compare sales to various economic data. For example, marketing directors might
compare annual dollar sales or unit sales to gross domestic product (GDP) by state, or to
total electricity consumption by state, or to total gasoline consumption by state, or to
hundreds of other economic variables. These types of analyses help answer the question:
How well is our product, service or brand doing by state (or other geographic areas) in
relation to other measures of economic potential? It may be learned, for example, that the
superstar salesperson in Southern California who is being considered for promotion to
national sales manager is actually selling less in relation to economic potential than
salespeople in other areas. Analyzing sales in relation to economic variables can also be
valuable in helping set sales targets and quotas by geographic areas.
5. Category development index: A widely used measure of product category development

is the category development index (CDI). The index can be calculated for any geographic
entity, such as city, county, state or groups of states.
Let’s suppose marketing executives are interested in the CDI by state. If they have total
annual sales for a product category by state, they can calculate a per capita category sales
number for each state. Next, they would calculate an overall average for per capita sales for
the United States. Then they would divide each state’s per capita sales by the overall
average per capita sales, and multiply by 100.
What is created is an index number where 100 is the average index score. Any state with a
CDI above 100 is an above average market, while those with CDIs below 100 are below
average markets. The CDI provides a reliable and consistent measure of market potential,
or market development, by state for the product category.
6. Brand development index: The brand development index (BDI) is a very similar
measure to CDI, but it focuses on an individual brand within the product category. The
method of calculating the BDI is analogous to that for the CDI: The brand’s per capita sales
by state are determined, and the brand’s per capita sales are calculated for the whole U.S.

Then each state’s per capita brand sales are divided by the average U.S. per capita brand
sales, and multiplied by 100. For the resulting BDI number, 100 is the U.S. average. Above
average states enjoy BDIs greater than 100, and below average states have BDIs below 100.
BDI need not be based on per capita sales for the whole population. BDIs could be based on
adults only, teenagers only or men only, if per capita sales data are available for each of
these groups. BDIs provide a measuring stick to help marketing managers allocate
advertising and promotional expenditures across various states or other geographic areas.
7. Competitive trends: If companies monitor their market share via a syndicated service, or
some type of tracking study, then they know what the total market is doing, and they know
what their competitors are doing. For example, if they know their brand of peanut butter
has a 6 percent market share in Iowa and annual sales in Iowa are $2.5 million, then they
know that the size of the total peanut butter market in Iowa is $41,667,000 annually (100/6
times $2.5 million). This competitive share data also allows companies to calculate how
much peanut butter each of their major competitors is selling in Iowa per year.
Tracking market share is vital because it allows marketing directors to know how well the
company is doing in relation to major competitors. The company may be growing 20
percent per year, but losing ground to competitors.
8. Analytical database: The sad truth is that virtually no company has the important and
relevant sales data and related variables neatly organized and maintained in a pristine
database, and that’s why building an analytical database is often the first step to any type of
sophisticated sales analysis.
An analytical database would contain all of the historical sales data, of course, but it would
also include related competitive data, if available, plus demographic data and economic data
by the smallest geographic units feasible. If budget and time permit, marketing variables
such as advertising spending by media, pricing information, promotional spending by type,
distribution levels, etc., would be continuously added to the analytical database.
The more inclusive and precise the analytical database, the more valuable it is as a
foundation for advanced analyses. With an accurate analytical database, sophisticated
marketing mix modeling is an analytical possibility.
9. Cross-tabulations: Once the analytical database is in place, some very powerful analytic
work can be accomplished by creating cross-tabulations. One method is the “contrast of
extremes.” How do the geographic areas with the highest BDIs contrast to the areas with
the lowest BDIs? What do these differences reveal about the reasons for a product’s success
or failure? What about the contrast between geographic areas receiving heavy media
advertising versus those with little media spending?
What about comparing geographic areas with high unemployment versus those with low
unemployment, or high economic growth areas versus no-growth areas? What do these
comparisons say about a product’s likely performance during periods of economic distress?
10. Multivariate analyses: What’s really driving the sales of a given product category or a
specific brand? Companies always have explanations for the success – or failure – of a
product, but these explanations are typically mythology. Few companies have done the
scientific econometric analyses to measure “cause and effect’’ and determine what variables
are driving a company’s (or brand’s) growth or decline.
Once marketing directors start building their company’s analytical database, they can
enhance it with historical economic data. A great source for high-quality, free economic data
is Federal Reserve Economic Data, offered by the St. Louis Federal Reserve.
The American Community Survey is another source of high-quality government data, as is

the U.S. Government’s Consumer Expenditures Survey. Or economic data can be purchased
from a number of commercial sources. Marketers must identify all of the demographic and
economic data they suspect might be causing their brand’s sales to increase or wane, and
include that data in the analytical database.
Multiple regression is the technique that’s most widely used for this type of analysis.
Marketing directors can use commercially available software, or they can go to
www.decisionanalyst.com and download STATS 2.0 – a free, easy-to-use statistical package.
The dependent variable (the thing marketers are trying to explain or predict) is a brand’s
sales or category sales. The independent variables – those things that might be causing
sales to go up or down – include such information as employment trends, household income
trends, demographic trends, inflation trends, rail shipments, electricity consumption and so
on.
The variables marketing directors choose will vary by industry and product category, of
course. If they have chosen the right variables, then multiple regression should indicate
which variables are most important in explaining sales of their brand. They will want to
experiment with different types of regression and, by lagging some of the variables, to see if
they can improve the model, as measured by R-square – the percentage of variation in the
dependent variable explained by the independent variables.
11. Loyalty programs: Many retailers, but not manufacturers, own reams of loyalty
program data about their customers. Retailers often know exactly what an individual
household is buying, and how those buying patterns have shifted over time. If the analyst is
careful and cautious, some of this loyalty data can be used to supplement the other types of
sales analyses discussed in this article.
By choosing a representative sample of loyalty program records, the analyst can examine
patterns, trends and changes in sales by demographic variables and by time and season of
the year. This micro-level data can often shed light on trends reflected in overall sales.
12. Marketing research: Marketing research is often the “missing link” that helps analysts
understand the patterns and shadows they see in their sales analyses. Sales analysis tends to
be backward looking, since it is based on historical data, but marketing research can help
marketing directors look into the future.
At some point marketing leaders will need to bring in qualitative research (focus groups,
depth interviews, ethnography, etc.) to find answers to the questions raised by insightful
sales analysis. Marketing directors might need to do surveys among their target audience to
measure their brand awareness, advertising message recall, brand image or trial. Or they
might need to test their advertising, promotions and new products among target-market
consumers. Sales analyses can only take you so far.
Some Other Techniques
1. Period Comparisons: Usually a sales analysis will compare one time period to a
comparable period in the past. For example, clothing retailers might want to
examine how their back-to-school sales did compared with last year. They might
take a look at this year's sales from Aug. 1 through Labor Day and then compare
those numbers to the same period a year ago. Other companies look at month-over-
month sales, or sales this month compared with the same month last year, or some
other time period, depending on the nature of the business.
2. Break-Even Analysis: Break-even analysis shows a company what minimum level of
sales is needed to make sure it does not lose money. It also shows how sensitive the
break-even point is to changes in both fixed and variable expenses.
3. Competitor Sales Analysis: In some industries, sales made by your competitors are
listed in public sources. For example, automobile sales are reported monthly by
major manufacturer, major brand and model. This sales data are informative for all
manufacturers, showing how well each competes against the rest. For example, data
are routinely examined to see which automobile company sold the most midsized
sedans, SUVs and trucks.
4. Context for a Sales Analysis: The raw year-over-year numbers or percentage
increases or decreases in sales are typically paired with additional explanatory notes
in the sales analysis. For example, the automotive manufacturer that reports a large
year-over-year increase in sales for one of its midsized sedans could have just
introduced a new sedan that is stealing sales from other manufacturers. Or back-to-
school sales for retailers may be down compared with last year because of a
recession. The sales analysis needs context to be fully understood by all who will use
it.
5. Sales Analysis Review: Any sales analysis needs to be shared with members of the
company who can benefit from having the knowledge. The sales force needs to be
aware of how it is doing against its goals, finance needs to be able to analyze the
company pricing strategy and its impact on sales, and manufacturing needs to be
able to plan capacity. Sharing the sales analysis works best if it is done in regularly
scheduled meetings where people can ask questions, share information and plan
accordingly for the next sales cycle.
Importance of Sales Analysis
1) Missed opportunities: Analyzing the available data can show the company where it has
missed the opportunity and if or not that can be claimed. Market research will play an
important role in this presenting data to compare while the field force will prove of valuable
assistance in informing the practicalities of the situation.
2) Future decisions: Sales data will help a company to take a future decision in terms of
inventory management, marketing activities, schemes or offers to be rolled and changes in
manufacturing processes if applicable. Based on Sales data, major decisions like continuing
or discontinuing a product is taken. Those future decisions will help the external
stakeholders of the company to decide whether or not to invest in the company.
3) Market Trends: Sales analysis will also show the current market trends to the company.
While the company may be preparing to launch a new product, Sales Analysis would show a
drastic increase in Sales of the earlier product after an activity, showing that it was the lack
of awareness which was a hindrance in realizing Sales and not the product. Also, Sales of a
certain product may skyrocket during a festival or decrease seasonally.
4) Customer analysis: Effectively, Sales Analysis is nothing but Customer Analysis.

Answering why did a particular customer buy the product in a particular month may give
crucial customer insights which will help with the planning of the company.
5) Detailed analysis: A detailed Sales Analysis is broken down product wise, customer
wise, year and month wise and geography wise is a source of huge information for the
company.
Advantages of Sales Analysis:
1) Opportunities: Sales analysis of own products as well as competitor products is

important as analyzing sales of competitors allows insights into the market from a different
perspective and may help the company to reach the missed out customers and grab the
missed opportunity.
2) Decision driver: Sales analysis, as explained above acts a decision driver for the
company to make major changes in their products. If the Sales of a product are not up to the
mark, the company may discontinue the product with immediate effect. For example, as the
Sales of Touchscreen phones increased all the traditional button models changed their
phones to touch screens. With the advent of Facebook and Twitter, earlier sites like Orkut
had to be shut down because of lack of revenue and shift of audience from one platform to
other.
3) Customer Service: Knowing the reason behind why a particular sales occurred during
particular time will help the companies to keep the inventory ready and help them to serve
the customers better. Delighting the customers will, in turn, benefit the company by
increased sales further and help to develop goodwill and establish the brand value of the
company.
4) Marketing support: Sales of a certain product may require one-time marketing support
or multiple times or seasonal support. Those decisions are taken based on Sales analysis.
For example, products like cough syrup would require marketing and ad campaigns just
before and during winter while airline services require constant marketing support.
Disadvantages of Sales Analysis:
1) Reliability: A lot of times, Sales Analysis might have done in a haphazard way or the
reasons for the increase in sales of a particular product may go up purely on the effort of the
Salespersons or offers rolled out. This may have nothing to do with customer or trends and
relying on those conclusions can be problematic for the company.
2) Political factors: 12 countries in Europe introduced a single currency in 2002 which

caused temporary disruption of the economy. In such cases, even though the trend may say
that the Sales is supposed to increase, owing to unavailability of purchasing power of
customers, the company may face a dip in sales. The following year to this incident when
the economy may again stabilize, comparing previous years’ data will show askew results
again since the customers are purchasing normally as per their requirement but there would
be a tremendous growth in the analysis.
3) Technical knowledge: High technical knowledge is required for Sales Analysis and not
everyone may be suited to do that. Good arithmetic skills along with high market
knowledge are basic requirements and those may not be fulfilled by every Salesperson.
4) Cost: A detailed Sales Analysis along with its interpretation is outsourced by many
companies. The dedicated firms or software may be costly which the company would have
to bear regularly. Also, the privacy of data would be compromised when sharing the Sales
data to the third party. A Sales analysis performed by an internal employee instead of
outsourcing would increase the cost of the firm in terms of salary, training the person for
technical knowledge and there are chances of human error in Manual Sales Analysis.
Market Potential Analysis
Market potential analysis is a strategic tool to identify market opportunities and invest
resources where they will have the greatest return in the long run. Market potential
analysis is not used for short-term forecasting, but can help to target markets with high
growth potential in the future. Market potential analysis enables companies to:
 Categorize countries as lead markets, break-out markets or emerging markets.

 Quantify market potential for a given product by country, region or globally, now and
in the future.
 Identify growth drivers and barriers in those markets.
 Understand how to exploit growth markets by tailoring marketing, product
development and production strategies to meet customer demands and overcome
market barriers.
Market Potential Influencers
Many forces influence market potential, but there are two broad sets of factors that are key:
demand drivers and inhibitors.
Figure: Demand drivers for IT

Demand Drivers
Demand drivers are the factors that affect the size, readiness or exploitability of markets.
Three are especially important.
• The first is the size and wealth of a market. This determines the number of
households, companies, government agencies and other organizations that can
actually afford to buy a product. This is not a simple calculation, and average figures
such as total population and GDP per capita offer only a starting point. Other
factors include household income distribution and the structure of the business
sector. Much of the value of market potential analysis comes in calculating
accurately the number of potential customers there are for a given product.
• The second is the utility of a product in a particular market. This varies according to
the nature of the product and the characteristics of the market. For instance, if you
are selling an English-only online service, the number of people who speak English
in a given market will determine the value of the service. Similarly, if you are selling
PCs for small businesses, the value of the systems will depend on how easily they
can be networked and communicate internally.
• The third demand driver is the supporting infrastructure for a product. Frozen foods
require refrigerators, and refrigerators require electricity, so the demand for frozen
foods is dependent on the presence of reliable, affordable electrical power. For
information and communication products, the necessary infrastructure can include
telephone lines, satellite uplinks, and human resources such as skilled programmers,
technicians and users. The quality of infrastructure generally corresponds to
national wealth, but there are significant differences among countries at similar
levels of wealth.
Demand Inhibitors
Market potential in a given country can appear to be high, but actual demand remains low.
This is usually due to the presence of demand inhibitors that either raise the cost or lower
the utility of a product. An obvious example is a tax or tariff, which increases the price to
final customers. Quotas and other trade barriers have the same effect. Some inhibitors such
as tariffs are explicit and can be quantified, while others are less visible and can only be
identified through indepth knowledge of a country. For example, the business model of
companies, management culture, and labor environment (e.g., lifetime employment, strong
unions) can inhibit demand.
Market potential describes the maximum capacity of a defined market for a specific product
/ a service within a defined time period. In this context market refers to the total of all
potential consumers with a certain need or desire who are willing or able to satisfy this need
or this desire through the purchase of products / services. The sales potential can then be
derived from the results of the market potential analysis. Market potential consists of the
upper limit of total demand which would theoretically be converged on at (infinite) rise of
marketing expenditures of all relevant providers (see figure).

Applications
Market potential analyses are especially used for growth or unsaturated markets for which
“market size” cannot simply be estimated through the actual market volume. Market
potential analysis offers decision support for specific questions for which such as:
 Exploration of potential (target) markets

 Determination of company locations
 Evaluation of ideas (screening)
 Designation of sales areas
Market Potential Analysis Procedure
Steps to evaluate Market attractiveness
Follow these five steps to evaluate the attractiveness of a new market opportunity and start
prioritizing your business growth initiatives.
1. Research your customers and competition: Use market research to analyze your
customers and competitors on multiple levels. This will help you evaluate whether the
demand for a product/service is real, and whether expanding into a potential new market is
worthwhile for your company.
Identify consumers segments that share common characteristics such as age, gender,
education, income, occupation, and place of residence, or softer variables such as lifestyle

and values. Also consider consumer motivation. What "job" is the customer trying to get
done? What barriers may be constraining consumption?
Knowing who your key competitors are and assessing their strengths and weaknesses can
also illuminate specific growth strategies and ways to differentiate your products and
services.
2. Get a high-level view of the market: However, assessing your customers and
competitors is not enough. You also need to obtain a broader understanding of the market
as a whole and what the potential of success is in the market.
Otherwise, your organization could be trapped into thinking that a few percentage points
increase is enough, where there is actually much more potential. Market researchers are
experts at providing the overall objective picture and can help you step away from intra-
company thinking.
When analyzing a market, these high-level questions come into play:
• What is the market size?

• How quickly is the market expanding or contracting?
• How many buyers are there?
• What are the barriers to entry?
• What is the bargaining power of suppliers?
• What is the industry value chain?
• What is the intensity of the competition?
• Is there a threat of new entrants or substitute products or services?
3. Explore adjacent opportunities: Pursuing adjacent opportunities can also be a winning

strategy. In a five-year study, researchers analyzed the growth and performance of 1,850
corporations. They found that the companies with the most sustained profitable growth had
used a systematic, disciplined approach to expand the boundaries of their core business into
an adjacent space. Some companies expanded from one geographic market to another, while
others applied an existing business model to adjacent segments.
Take Procter & Gamble’s Crest toothpaste brand as an example. In the late 1990s, Crest
was floundering, but Procter & Gamble revitalized the brand by moving into two other
categories — teeth whitening and brushing — with the introduction of Crest Whitestrips
and SpinBrush.
The company used the same channels to reach the same customers with the same marketing
framework and added more than $200 million of new sales for each new brand in one year.
Keeping your finger on the pulse of a market will help you to maintain a proactive approach
and profitably outgrow your rivals by finding ways to expand outside your core business.
4. Understand the business environment factors: Another area to explore is the overall
business environment, which can have a profound impact on company performance and the
ways industries operate.

The business environment includes factors such as:
• Technological developments
• Government regulations
• Geopolitical shifts
• Economic indicators
• Trade policies
• Social and cultural norms
As an example, companies in the life science and healthcare sectors currently face a number
of potential disruptors that contribute to ongoing uncertainty, as noted by market research
firm Kalorama Information, including attempts to repeal and replace the Affordable Care
Act, health IT policies, and President Trump’s statements about drug pricing.
Other factors impacting markets include Brexit, rising out-of-pocket spending on

healthcare, and physician shortages. Any new business opportunity in these sectors will
need to be evaluated in the context of these factors and challenges.
5. Find the market research you need fast: Gathering and synthesizing information about
all these categories can take significant time, effort, and expertise, but market research
reports can give you a helpful leg up.
Example Analysis:
Companies all over the world make goods because there is market for such goods, if there is
no market then there will be no supply of goods by the company and that is the reason why
market potential analysis is the most important part as far as companies are concerned
because if market potential is of 100 units and company is manufacturing 10000 units than
there is no way in this world by which company can sell the remaining units and it will
result in big loss for the company. Market potential never remains constant rather it keeps
changing, given below is the process by which market potential analysis is done –
First Step – The first and foremost step in doing market potential is to analyze the
potential customer base because customer base and population are two different things and
if the company make products according to population rather than the customer base than it
will go wrong, so for example if a life insurance company decides to sell policies to old age
people instead of young people or companies selling air conditioners try to sell its products
in those areas where majority of time there is snow then company cannot achieve success
and so on.
Second Step – After doing an analysis of potential customer base next step is to analyze the
competition which is there in the market for which company is targeting its product because
without analyzing the competition if the company is entering the market than it is
equivalent to person driving the car on a highway blindfolded. Hence for example if a
mobile manufacturer is thinking of selling a mobile phone with a good camera then first it
should analyze what competitors are offering and also the price at which they are offering
and then manufacture and price its own product so that it can be competitive.

Third Step – The last step in the analysis of market potential is the analysis of current
environment conditions that may have an effect on the market potential. Environmental
conditions include things like government policies, economic environment, technological
advancement and many other factors. Hence suppose a car manufacturer has planned to
introduce small car into the market but government introduces additional tax on small cars
then the whole idea of company introducing the small car will fail due to this extra
environmental factor of the government introducing taxes on small cars which in turn will
make the small car expensive.
As one can see from the above that market potential analysis is a very dynamic process and
company should be vigilant in doing this analysis because any mistake on the part of the
company can have disastrous results as far financial position of the company is concerned.
Sales Forecasting
Sales Forecasting: Meaning, Factors, Importance and Limitations!
Meaning
Future is uncertain. Man thinks about future. He may be a businessman, a broker, a

manufacturer, a commission agent etc. All guess about the future in their respective field of
interest. We try to know, through a clear imagination, what will be happening in the near
future—after a weak, month or year. It can be called forecast or prediction. The process of
forecasting is based on reliable data of past and present. Forecasting is not new, as it has
been practiced from time immemorial.
Forecasting is one of the important aspects of administration. The comer-stone of successful

marketing planning is the measurement and forecasting to market demand. According to
American Marketing Association, “Sales forecast is an estimate of Sales, in monetary or
physical units, for a specified future period under a proposed business plan or programme
and under an assumed set of economic and other forces outside the unit for which the
forecast is made.”
A sales forecast is an estimation of sales volume that a company can expect to attain within
the plan period. A sales forecast is not just a sales predicting. It is the act of matching
opportunities with the marketing efforts. Sales forecasting is the determination of a firm’s
share in the market under a specified future. Thus sales forecasting shows the probable
volume of sales.
“Sales forecast is an estimate of sales during a specified future period, whose estimate is tied
to a proposed marketing plan and which assumes a particular state of uncontrollable and
competitive forces.” —Candiff and Still
Factors influencing a Sales Forecasting:
A sales manager should consider all the factors affecting the sales, while predicting the
firm’s sales in the market.
An accurate sales forecast can be made, if the following factors are considered carefully:

1. General Economic Condition: It is essential to consider all economic conditions
relating to the firm and the consumers. The forecaster must see the general economic trend-
inflation or deflation, which affect the business favourably or adversely. A thorough
knowledge of the economic, political and the general trend of the business facilitate to build
a forecast more accurately. Past behaviour of market, national income, disposable personal
income, consuming habits of the customers etc., affect the estimation to a great extent.
2. Consumers: Products like, wearing apparel, luxurious goods, furniture, vehicles; the size
of population by its composition-customers by age, sex, type, economic condition etc., have
an important role. And trend of fashions, religious habits, social group influences etc., also
carry weights.
3. Industrial Behaviours: Markets are full of similar products manufactured by different

firms, which compete among themselves to increase the sales. As such, the pricing policy,
design, advanced technological improvements, promotional activities etc., of similar
industries must be carefully observed. A new firm may come up with products to the
markets and naturally affect the market share of the existing firms. Unstable conditions—
industrial unrest, government control through rules and regulations, improper availability
of raw materials etc., directly affect the production, sales and profits.
4. Changes within Firm: Future sales are greatly affected by the changes in pricing,
advertising policy, quality of products etc. A careful study in relation to the changes on the
sales volume may be studied carefully. Sales can be increased by price cut, enhancing
advertising policies, increased sales promotions, concessions to customers etc.
5. Period: The required information must be collected on the basis of period—short run,
medium run or long run forecasts.
Importance of Sales Forecasting:
1. Supply and demand for the products can easily be adjusted, by overcoming
temporary demand, in the light of the anticipated estimate; and regular supply is
facilitated.
2. A good inventory control is advantageously benefited by avoiding the weakness of
under stocking and overstocking.
3. Allocation and reallocation of sales territories are facilitated.
4. It is a forward planner as all other requirements of raw materials, labour, plant
layout, financial needs, warehousing, transport facility etc., depend in accordance
with the sales volume expected in advance.
5. Sales opportunities are searched out on the basis of forecast; mid thus discovery of
selling success is made.
6. It is a gear, by which all other activities are controlled as a basis of forecasting.
7. Advertisement programmes are beneficially adjusted with full advantage to the firm.
8. It is an indicator to the department of finance as to how much and when finance is
needed; and it helps to overcome difficult situations.
9. It is a measuring rod by which the efficiency of the sales personnel or the sales
department, as a whole, can be measured.
10. Sales personnel and sales quotas are also regularized-increasing or decreasing-by
knowing the sales volume, in advance.

11. It regularizes productions through the vision of sales forecast and avoids overtime at
high premium rates. It also reduces idle time in manufacturing.
12. As is the sales forecast, so is the progress of the firm. The master plan or budget of a
firm is based on forecasts. “The act of forecasting is of great benefit to all who take
part in the process, and is the best means of ensuring adaptability to changing
circumstances. The collaboration of all concerned leads to a unified front, an
understanding of the reasons for decisions, and a broadened outlook.”
13. It helps to determine production volumes considering availability of facilities, like
equipment, capital, manpower, space etc.
14. It forms a basis of sales budget, production budget natural budget etc.
15. It helps in taking decision about the plant expansion and changes in production mix
or should it divert its resource for manufacturing other products.
16. It helps in deciding policies.
17. It facilitates in deciding the extent of advertising etc.
18. The sales forecast is a commitment on the part of the sales department and it must
be achieved during the given period.
19. Sales forecast helps in preparing production and purchasing schedules.
20. Accurate sales forecasting is a very good aid for the purpose of decision making.
21. It helps in guiding marketing, production and other business activities for achieving
these targets.
Following factors should be considered while making the sales forecast:
1. Competition: To assess demand, it is the main factor to know about the existing and
new competitors and their future programme, quality of their product, sales of their
product. Opinion of the customers about the products of other competitors with reference to
the product manufactured by the firm must also be considered.
2. Changes in Technology: With the advancement of technology, new products are

coming in the market and the taste and the likings of the consumer’s changes with the
advancement and change of technology.
3. Government Action: When the government produces or purchases then depending

upon the government policy and rules, the sales of the products are also affected.
4. Factors Related to the Concern Itself: These factors are related to the change in the
capacity of the plant, change in price due to the change in expenditure, change in product
mix etc.
Accurate sales forecasting is essential for a business house to enable it to produce the
required quantity at the right time. Further, it makes the arrangement in advance for raw
materials, equipment’s, labour etc. Many firms manufacture on the order basis, but in
general, every firm produces the material in advance to meet the future demand.
Types of Sales Forecasting:
The Economic Forecast: This type of forecast is important to understand the general
economic trend through a careful study of Five Year Plans, Gross national products.
National income, Government expenditure, Unemployment, Consumer spending habits etc.
This is in order to have an accurate forecast. Big companies, in India, adopt this method.
The Industry Forecast: The future market demand is calculated through industrial
forecast or market forecast. The expected sales forecasts of all the industries, in the same
line of business are combined. Market demand may be affected by controllable-price,
distribution, promotion, etc., and uncontrollable-demographic, economic, political,
technological development, cultural activities etc. The executive must take into account all
these conditions while forecasting.
The Company Forecast: The third step goes to the firm concerned to look into the market
share, for which forecast is to be made. By considering both controllable and uncontrollable,
based on chosen marketing plans within the firm, with that of other industries, steps are
taken in formulating forecasts.
There are three classes of sales forecasts:
1. Short-run Forecast: It is also known as operating forecast, covering a maximum of one

year or it may be half-yearly, quarterly, monthly and even weekly. This type of forecasting
can be advantageously utilized for estimating stock requirements, providing working
capital, establishing sales quotas, fast moving factors. It facilitates the management to
improve and co-ordinate the policies and practice of marketing-production, inventory,
purchasing, financing etc. Short-run forecast is preferred to all types and brings more
benefits than other types. Purposes of Short-Term Forecasting are as follows:
1. To adopt suitable production policy so that the problem of overproduction and short
supply of raw material, machines etc. can be avoided.
2. To reduce the cost of raw materials, machinery etc.
3. To have proper control of inventory.
4. To set the sales targets.
5. To have proper controls.
6. To arrange the financial requirements in advance to meet the demand.
2. Medium-run Forecast: This type of forecast may cover from more than one year to two
or four years. This helps the management to estimate probable profit and control over
budgets, expenditure, production etc. Factors-price trend, tax policies, institutional credit
etc., are specially considered for a good forecast.
3. Long-run Forecast: This type of forecast may cover one year to five years, depending on
the nature of the firm. Seasonal changes are not considered. The forecaster takes into
account the population changes, competition changes, economic depression or boom,
inventions etc. This type is good for adding new products and dropping old ones. Purposes
of Long-Term Forecasting are as follows:
1. To plan for the new unit of production or expansion of existing unit to meet the
demand.
2. To plan the long-term financial requirements.
3. To train the personnel so that man-power requirement can be met in future.
Limitations of Sales Forecast: In certain cases forecast may become inaccurate. The
failure may be due to the following factors:

1. Fashion: Changes are throughout. Present style may change any time. It is difficult to
say as to when a new fashion will be adopted by the consumers and how long it will be
accepted by the buyers. If our product is similar to the fashion and is popular, we are able to
have the best result; and if our products are not in accordance with the fashion, then sales
will be affected.
2. Lack of Sales History: A sales history or past records are essential for a sound forecast
plan. If the past data are not available, then forecast is made on guess-work, without a base.
Mainly a new product has no sales history and forecast made on guess may be a failure.
3. Psychological Factors: Consumers’ attitude may change at any time. The forecaster
may not be able to predict exactly the behaviour of consumers. Certain market
environments are quick in action. Even rumours can affect market variables. For instance,
when we use a particular brand of soap, it may generate itching feeling on a few people and
if the news spread among the public, sales will be seriously affected.
4. Other Reasons: It is possible that the growth may not remain uniform. It may decline or
be stationary. The economic condition of a country may not be favourable to the business
activities-policies of the government, imposition of controls etc. It may affect the sales.
The methods of forecasting discussed above have respective merits and demerits. No single
method may be suitable. Therefore, a combination method is suitable and may give a good
result. The forecaster must be cautious while drawing decisions on sales forecast. Periodical
review and revision of sales forecast may be done, in the light of performance. A method
which is quick, less costly and more accurate may be adopted.
Some Examples
Sometimes, reading about forecasting just isn’t as useful as reviewing examples. Here are
some basic hypothetical scenarios you can consider, to see how sales forecasting are done in
the real world.
Example 1: Forecasting Based on Historical Sales Data
Let’s say that last month, you had $150,000 of monthly recurring revenue and that for the
last 12 months, sales revenue has grown 12% each month. Over the same period, your
monthly churn has been about 1% each month.
Your forecasted revenue for next month would be $166,500.
You multiply last month’s revenue by your expected growth, and subtract your expected
churn:
($150,000 * 1.12) – ($150,000 * .01) = $166,500
Example 2: Forecasting Based on Your Current Funnel

Let’s say you have three open opportunities this month:
1. One where you’ve just had a quick phone call, with an expected value of $1,000.
2. One that has received a full demo, with an expected value of $1,500.
3. And one with an offer, with an expected value of $1,200.
You’ve done your math, and you know that in each of these stages, any given opportunity
has the following likelihood of closing:
• “Connect Call” = 30% chance of closing

• “Demo” = 40% chance of closing
• “Offer” = 70% chance of closing
You multiply that probability with the forecasted value of the deal, and sum them all up to
come up with a total sales forecast of $1,740, like in this example:
Example 3: Forecasting Based on Lead Scores and Multiple Variables
You’ve really done your research, and have lead scoring set up in your CRM. You group
your leads into three groups of varying quality: A, B, and C. These determine how likely an
opportunity is to close.
You also know that companies with less than 50 employees close at a slightly lower rate,
and companies larger than 50 employees are more likely to close.

You could then use average opportunity sizes to calculate the forecasted value of any given
opportunity, using a table like this:
Tools That Help With Forecasting
CRM: CRM software combines the storage and retrieval power of a database with dedicated
sales tools that help reps close deals. These features may include lead tracking, funnel
analytics, call sequences, and reporting features.
Excel: If your company is just starting out or only has a few products, Excel should suffice
for building your sales forecast.
Sales Analytics Platform: Sales analytics tools combine data for many products and
services, build forecasts, and give you deep analytics. Plus, many also have helpful graphs
and charts built in. Lastly, dedicated analytics tools also have the advantage of staying
updated in real time.
Lead Scoring: These tools grade prospects according to actions on your website, outcomes
of conversations, and any other touches that your team deems pertinent to the sales process.
Also, a lead scoring tool can help your marketing team with campaign segmentation and
content personalization.
Project management tools with resource allocation: Follow-through is the most

important part of your sales cycle, and is the only way to build strong customer
relationships. Project management tools help your team stay on task and ensure that the
team has the resources to complete the project.
Accounting Software: If all you want is a new revenue forecast, more basic tools are fine.
However, if you want to forecast gross margins and account for the cost of goods sold, you
may also need to include data from your accounting software in your forecasting exercise.
Methods Used for Sales Forecasting:

Following are the methods generally employed for sales forecasting:
1. Survey of Buyers’ Views:

This is direct method for making forecasting for short-term, in which the customers are
asked what they are thinking to buy in near future say, in the coming year. In this method
all the burden is with consumers, which may misjudge or mislead or may be uncertain about
the quantity to be purchased by them in near future.

The disadvantages of this method are as follows:
1. Consumer’s buying intentions are irregular.

2. When consumers have to select between different alternatives, they are unable to
foresee their choices.
3. Buyers may be anxious for purchasing the products but due to certain limitations
they may be unable to purchase them.
2. Collective Opinion or Sales Force Polling:

In this method forecasting depends upon the salesman’s estimation for their respective
areas, because the sales-man is closest to the customers, hence can estimate more properly
about the consumers’ reaction about the product and their future requirements.
All the estimates of salesmen are consolidated to know the total estimate of the sales. This
final estimate then goes through severs checking to avoid undue imagination which is done
many times by the salesmen.
The revised estimates are then again examined in the light of factors like expected change
in design, change in prices, advertisements, competition, purchasing power of local people,
employment, population etc.
This method of collective opinion takes advantages of collective wisdom of salesmen, senior
executives like production manager, sales manager, marketing officials and managers.
Advantages:
1. This method is simple and requires no statistical technique.
2. The forecasts are based on the knowledge of salesmen, who are directly responsible
for the sales.
3. In practice, this method is much useful in the case of new products.
Disadvantages:
1. This method is useful only for short-term forecasting, i.e. maximum for one year.
2. As the forecasting is dependent upon the salesmen’s estimation and if sales quotas
are fixed then they, in general under-estimate the forecast.
3. As Salesmen have no knowledge about the economic changes, the estimate by them
are not so correct many times.
4. As the estimation is full time job, the quality to look into the future must be with the
salesmen.
3. Trend Projections:
Well-established firms which have considerable data on sales, these data are arranged in a
chronological order, known as ‘time series’. Thus ‘time series’ are analysed before making
the forecasts.
There is a common method known as ‘Project the trend’. In this method the trend line is
projected by some statistical method, generally, by least square method.
The time series forecasts are the demand characteristics over time. These time series data
are analysed for forecasting future activity levels. Time series data refer to a set of values of

some variables measured at the equally spaced time intervals such as monthly production
levels, demands in the market etc.
The demands have following patterns:

(i) Constant Pattern: In this pattern demand remains constant throughout the period.
(ii) Trend Pattern: It refers to the long-term growth or decline in the average level of
demand.
(iii) Seasonal Pattern: It refers to the annually repetitive demand fluctuation that may be
caused by weather, tradition or other factors.
(iv) Cycle Pattern:

Business cycle refers to the large deviation to actual demand values due to complex
environmental influences. These are similar to the seasonable components except that
seasonality occurs at regular intervals and is of constant durations whereas it varies in both
time and duration of occurrence.

(v) Combination of Different Pattern:
In long term forecast (more than 2 years) seasonal factors are ignored and focus is given on
trend component with a minor emphasis on business cycle. In medium term forecasts (few
months to 2 years), the trend factor becomes less important and the seasonal and random
factors are given more importance.
For short duration (one week to 3 months) main concern is random fluctuations. Generally
when a business concern is in operation, combination of trend and seasonal variations are
given importance.
Example 1: The annual sales of a company are as follows:
By the method of least squares, find the trend values for each of the five years. Also estimate
the annual sales for 1973.
Solution:
The forecasting for the year 1973 will be
Y 1973 = 45 + 5 (6) = Rs.75,000

4. Economic Indicators:
In this method the forecasting is dependent upon certain economic indicators, which are
generally published by Central Statistical Organization under the national income
estimates.
Some of these indicators are:

1. Personal income for the demand of consumers’ goods.
2. Agricultural income for the demand of agricultural inputs, implements etc.
3. Construction contracts sanctioned for demand of building materials.
4. Registration of automobiles for the demand of accessories, petrol’s etc.
The forecasting is done with the help of least square equations. The examples illustrated
below will give an idea, how the forecasting is done. This method has some limitations,
likewise.
1. Appropriate economic indicator is difficult to find out.

2. For newer products, no past data are available.
Example 2:
Suppose a firm is manufacturing automobiles and finds a relationship between sale of
automobile and the Index demand for cars.
The sales for the last five years are:
Find the relation between the demand index and sale of automobile. Further, make a
forecast for the year 1975; supposing the demand index rise to 210. Use least square
method.
Solution:

Thus equation (vi) is the relation between the demand Index and sales.
Forecasting for year 1975 with demand Index 210.
Y = 53.6 + 0.66 (210) = 192 automobiles.
Elements of a Good Sales Forecasting:

Following four elements are suggested for adopting a sales forecasting method:
1. Accuracy: The previous method must be checked for want of accuracy by observing
that the predictions made in past are accurate or not.
2. Simplicity: The method must be simple and easily understandable. It should satisfy
top management people.
3. Economy: For an undertaking, cost is a main factor so the method adopted should
consider the minimum cost.
4. Availability: The technique must be able to produce meaningful results quickly.
The technique which takes much time to produce useful information is of no use.
Procedure of Making a Sales Forecast:

1. State whether the forecasting is short-term or long term, its objectives, only for a
single undertaking or for whole industry.
2. Select a good method of forecasting.
3. Select different variables which are affecting the forecasting.
4. Gather data for different variables.
5. Determine best possible relationship by some statistical method between different
variables.
6. Make forecast and interpret the result.
Following points must be made clear before making a forecast:
1. Forecast must be made in terms of rupees of sale volume or in units.

2. Forecast must be made on annual basis and then further divided as requirement, i.e.
by month-wise, week-wise, or so on the basis of previous year’s records.
3. Forecast for new product by month-wise, may be done either using other
manufacturing concern’s data or by survey.
4. Forecast must be made in terms of product groups and broken for individual
products, the division may be according to the sizes, brands, cables, colours etc. A
typical example show how the product group is divided.
Example 3:
In the table, some previous year’s records are shown. Now if the forecast for product group
for 1975 is Rs.150,000, then divide this product group and find the forecast for product Y.
Now the forecast can be broken under two conditions:
(i) According to trend, supposing the sales increase as per trend, then this year the per-
centage of sales of product X will be 26%.
(ii) According to average, the average of the percentage of the last three years is 22%.
Thus the forecast for product X according to trend is Rs.39,000 and according to average
Rs.33,000 i.e. 26% and 22% of 1,50,000 respectively.
Following points must be considered before making forecast of a new product:

1. Treat the demand for the new product as of an existing old product.
2. Treat the new product as a replacement for some existing product.
3. Estimate demands by making inquiries from purchaser.
4. Offer the new products for sale in a sample market.
5. Survey the customers’ reactions via dealers.
Selection of a Forecast:
There are several guidelines for selecting a forecast from available forecasts, one of
them is as follows:
1. Prefer those forecasts which have reasoning’s underlying forecast.
2. Prefer those forecasts which are prepared by qualified personnel, as the future is
uncertain, he must tell his assumptions on which forecast is based.
3. Look into the previous year’s forecasts, surveys should be examined as to why the
forecasts are right or wrong.
4. Use only those forecasts which are reliable. Prefer only those of the forecasts which
are prepared using different techniques.
5. Reject that particular forecast in which forecaster injected himself too strongly as an
individual into his forecast.
Uses of Sales Forecast:

The sales forecast are helpful for various divisions of a concern.
Some of such uses are given hereunder:

1. Product Planning:
From forecasts we find out which product is more profitable and which should be
manufactured and which should be dropped.
2. Planning Expansions:
Long range forecasts can predict future demand trends, which will enable the planning for
expansion of the concern.
3. Financial Planning:
Sales forecast permits an evaluation of expenses and income etc.
4. Inventory Control:
It facilitates better planning and control over the inventories.
5. Production Control:
It will help in better production control, i.e. better use of equipment’s, controls over-time of
labour, better deliveries, better control over work-in-progress inventories.
6. Sales Planning:
It helps in finding out which territory needs more attention. Various sales programme can
be reassessed looking to their achievements.
Statistical Data Helpful in Sales Forecasting:

(A) For assessing general economic conditions of the country:
1. Industrial Production Index:
This index is based on the physical output of the factories and mines.
2. Bank Debits:
This will give overall financial condition of the business.
3. Employment:
Increased employment anticipates growth in demand, while decline in employment
anticipates decline in production.
(B) For Assessing Future Price Trends:

1. Money in Circulation:
Increase of money in circulation without corresponding increase in goods supply indicates
prices will rise.
2. Crop Production:
It indicate the trend of prices for agricultural products.
3. Price Index:
It is a reliable indicators prepared by the government.
(C) For Assessing Purchasing Power of the Consumer:

1. Rate of Wages:
Wage rates, bonus etc., indicates worker’s purchasing power.
2. Disposal Income:
This shows the actual amount of money the consumer is left to spend.
Applications of Sales Forecast: Sales forecast can be used for following purposes:
1. It helps the management to decide marketing strategies.

2. It helps in preparing the budget and for setting financial policies.
3. With reliable sales forecast it is possible to produce at an average rate so that plant
capacity and man power is fully utilized during the entire period. Thus the forecast-
ing enables to overcome seasonal variations.

4. It helps in material planning and avoids the evils of both the over-stocking and
under stocking.
5. From forecasts we can find out which product is more profitable and which should
be manufactured and which should be dropped.
6. Long range forecasts can predict future demand trends, which will enable the plan-
ning for expansion of the concern.
It helps in finding out which territory needs more attention. Various sales programmes can
be reassessed looking to their achievements.
Market Segmentation
What Is Market Segmentation?
Market segmentation is a marketing term that refers to aggregating prospective buyers

into groups or segments with common needs and who responds similarly to a marketing
action. Market segmentation enables companies to target different categories of consumers
who perceive the full value of certain products and services differently from one another.
Understanding Market Segmentation: Companies can generally use three criteria to

identify different market segments:
• Homogeneity, or common needs within a segment

• Distinction, or being unique from other groups
• Reaction, or a similar response to the market
For example, an athletic footwear company might have market segments for basketball
players and long-distance runners. As distinct groups, basketball players and long-distance
runners respond to very different advertisements. Market segmentation is an extension of
market research that seeks to identify targeted groups of consumers to tailor products and
branding in a way that is attractive to the group. The objective of market segmentation is to
minimize risk by determining which products have the best chances for gaining a share of a
target market and determining the best way to deliver the products to the market. This
allows the company to increase its overall efficiency by focusing limited resources on efforts
that produce the best return on investment (ROI).
Companies can segment markets in several ways:

• Geographically by region or area
• Demographically by age, gender, family size, income, or life cycle
• Psychographically by social class, lifestyle, or personality
• Behaviorally by benefit, use, or response
The objective is to enable the company to differentiate its products or message according to
the common dimensions of the market segment.
Types of Market Segmentation
Psychographic segmentation: The basis of such segmentation is the lifestyle of the

individuals. The individual’s attitude, interest, value help the marketers to classify them into
small groups.
Behaviouralistic Segmentation: The loyalties of the customers towards a particular brand
help the marketers to classify them into smaller groups, each group comprising of
individuals loyal towards a particular brand.
Geographic Segmentation: Geographic segmentation refers to the classification of market

into various geographical areas. A marketer can’t have similar strategies for individuals
living at different places.
Nestle promotes Nescafe all through the year in cold states of the country as compared to
places which have well defined summer and winter season.
McDonald’s in India does not sell beef products as it is strictly against the religious beliefs
of the countrymen, whereas McDonald’s in US freely sells and promotes beef products.
Basis of Market Segmentation
Gender: The marketers divide the market into smaller segments based on gender. Both
men and women have different interests and preferences, and thus the need for
segmentation.
Organizations need to have different marketing strategies for men which would obviously
not work in case of females.
A woman would not purchase a product meant for males and vice a versa.
The segmentation of the market as per the gender is important in many industries like
cosmetics, footwear, jewellery and apparel industries.
Age Group: Division on the basis of age group of the target audience is also one of the
ways of market segmentation.
The products and marketing strategies for teenagers would obviously be different than kids.
• Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams

• Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
• Age group (20 years and above) - Cosmetics, Anti-Ageing Products, Magazines,
apparels and so on
Income: Marketers divide the consumers into small segments as per their income.
Individuals are classified into segments according to their monthly earnings.
The three categories are:
• High income Group

• Mid Income Group
• Low Income Group
Stores catering to the higher income group would have different range of products and
strategies as compared to stores which target the lower income group.

Pantaloon, Carrefour, Shopper’s stop target the high income group as compared to Vishal
Retail, Reliance Retail or Big bazaar who cater to the individuals belonging to the lower
income segment.
Marital Status: Market segmentation can also be as per the marital status of the
individuals. Travel agencies would not have similar holiday packages for bachelors and
married couples.
Occupation: Office goers would have different needs as compared to school / college
students.
A beach house shirt or a funky T Shirt would have no takers in a Zodiac Store as it caters
specifically to the professionals.
Examples of Market Segmentation
Market segmentation is evident in the products, marketing, and advertising that people use
every day. Auto manufacturers thrive on their ability to identify market segments correctly
and create products and advertising campaigns that appeal to those segments.
Cereal producers market actively to three or four market segments at a time, pushing
traditional brands that appeal to older consumers and healthy brands to health-conscious
consumers, while building brand loyalty among the youngest consumers by tying their
products to, say, popular children's movie themes.
A sports-shoe manufacturer might define several market segments that include elite
athletes, frequent gym-goers, fashion-conscious women, and middle-aged men who want
quality and comfort in their shoes. In all cases, the manufacturer's marketing intelligence
about each segment enables it to develop and advertise products with a high appeal more
efficiently than trying to appeal to the broader masses..
Market segmentation offers the following potential benefits to a business:
Better matching of Customer needs differ. Creating separate products for each segment
customer needs makes sense
Customers have different disposable incomes and vary in how
Enhanced profits for
sensitive they are to price. By segmenting markets, businesses can
business
raise average prices and subsequently enhance profits
Market segmentation can build sales. For example, customers can
Better opportunities
be encouraged to "trade-up" after being sold an introductory,
for growth
lower-priced product
By marketing products that appeal to customers at different stages
Retain more
of their life ("life-cycle"), a business can retain customers who might
customers
otherwise switch to competing products and brands.
Businesses need to deliver their marketing message to a relevant
Target marketing
customer audience. By segmenting markets, the target customer can
communications
be reached more often and at lower cost
Through careful segmentation and targeting, businesses can often
Gain share of the
achieve competitive production and marketing costs and become the
market segment
preferred choice of customers and distributors
Product Research
Product research is the marketing research that provides information on the desired
characteristics of a product or service. Product research helps companies to understand
what the customers really want, so that the product can be tailored to match the needs of
the customer. This research can help to refine new product ideas.
Product research is a very important activity in new product development – it can be

carried out at several stages of new product development. In the initial stages, product
research can be carried out to identify and screen new ideas. This testing will help reduce
costs by avoiding product development costs in the discarded ideas.
In the later stages of product development, product research can help companies to identify
which features are important and hence retain them and which features can be discarded. A
newly developed product is also tested with customers, to identify any changes to be made
to packaging etc. Once the product is launched, consumer satisfaction with the product is
tested. Most common techniques used in product research include focus group discussions,
interviews and surveys.
A product is any object which has an identifiable physical existence. According to Philip
Kotler “A product is a bundle of physical service and provides satisfaction to the buyer.”
Product planning is the starting point of all marketing decisions. Products which are
marketed include physical goods, services, and ideas.
Physical goods are consumer, consumer-durable and industrial goods and services are of
varied types, i.e., courier, Air lines, transport, communication and hospitality and tourism
etc. Idea can be thought, patent and information etc.
Product research is essentially concerned with satisfying the need of the consumer in the
best possible way by giving him the most optimum product. Product research would set out
to position the product on its attributes in a manner that the desired benefits are perceived
by the customer.
Depending on the stage of life cycle in which the product is, the task of product research can
be:
1. Development of a new product altogether.

2. Improvements in product features of an existing product—Product line extension,
brand extension by evaluating what a product stands for.
3. Introduction of new functional features in the product.
4. Test marketing a new product.
5. Revitalising a declining product.
Scope of Product Research Product research includes the study of the following dimensions:
1. Raw Materials used in various proportions in the final mix.

2. Attributes of the product.
3. Saleable points of the product.

4. Product Planning.
5. Product Appraisal.
6. Product Classification.
7. Product Design.
8. Product Development.
9. Product Branding or Trademarks.
Product research includes the study of planned obsolescence or products. Products grow
older, and exit, and make room for new products. Product research should cover the
decision-making on the following:
i. Which product should the company produce?

ii. Should company expand or simplify the product line?
iii. What brand, package and label should be used for each product?
iv. How should the product be designed?
v. How should the product be priced?
vi. In what quantities should each item be produced?
Product research allows one to collect credible information concerning consumer

preferences with regard to proposed offer. It makes it possible to get more familiar and
better understand the needs of:
1) Decision-makers in the purchasing process,

2) Customers making purchases,
3) End users.
This type of research constitutes a valuable source of information about the possibility of
boosting the value of a specific product in the eyes of a particular customer group.
Conclusions from such research often determine the success or failure of a given offer
available on the market. They may result in the development of breakthrough ideas and the
creation of innovative products.
Product research yields data that is essential for effective product management at each stage
of the life-cycle. It plays a huge role at the stage of concept development and market launch
– allowing one to minimize the risks associated with misguided ideas. Yet, that research is
of significant importance also at the stage of sale decrease – at that point it may become an
important source of inspiration on how to prolong the product’s life.
Product research areas
Below we present sample questions posed by companies in the course of offer design and
development to which product research may provide answers:
• Is there a need for a new product on the market? If “yes”, what features should it
possess, how can it stand out from the already available offer and who will be
interested in it?
• Does a given product meet all key consumer expectations? If “not”, what could be
changed to make it respond to recipients’ expectations more?

• How is the product utilized? Does it, for example, have functionalities that are not
used? If “yes” then why and what can be done about it?
• What drives the purchase of a given product? What really makes a difference for
people making purchasing decisions?
• Is the product considered attractive in comparison with other competitive and
substitute products on the market? If “not”, in the development of which features one
should invest?
• Are promotional actions (packaging, logo, visual elements, catchphrases, advertising
campaigns) effective and well-perceived by recipients? If “not”, which from the
considered ideas should be implemented?
Example: One of the product research types is functionality testing. Just like all other types
of consumer research, also this one plays a significant role in both, the B2C as well as B2B
channel. Its value has been proven, among other things, by one of the projects conducted by
PMR for a producer of medical equipment.
Creative sessions conducted together with medical personnel helped to obtain detailed
information, e.g. with respect to the methods of using disposable equipment. Yet, what
proved to be equally important was the fact that research participants together with a
professional drawer prepared a draft of an ideal device that would fulfill all their needs. As a
result, an ideal device could be introduced for sale in medical equipment stores.
Concept tests: What proves really helpful to managers at the stage of new product creation
are concept tests, that is studies devoted to various ideas and designs considered by a given
producer or distributor. Within that group of studies what may be subject to analysis are
concepts for products, packaging, marketing communication (visual materials, texts) as well
as advertising campaigns.
Concept testing yields detailed information concerning the needs of recipients. Yet, what
should be borne in mind is that one should not stop after receiving superficial opinions but
continue to get to the ones hidden in our subconscious. Thanks to that, time and effort will
be later devoted exactly to those projects that are most likely to be successful on the market.
Example: One of the examples of this type of research is a study conducted by PMR for a
new dairy product dedicated to lactose-intolerant consumers. In the course of in-depth
interviews PMR researchers identified taste, packaging and marketing concepts that were
best suited to the preferences of customers. As a result, it was possible to introduce an offer
that meets all key expectations of that narrow, yet demanding group of customers.
Product studies: Product studies are most commonly conducted in the course of new offer
preparation. Conclusions that can be drawn from them may be helpful in adjusting existing
concepts. They also constitute basis for taking strategically important decisions concerning,
for example, the offer structure, positioning of particular product versions in comparison
with the competition as well as marketing and sales strategies.
This type of research is used more and more commonly by companies when they strive to
modify a product that is already available on the market. What should be taken into account
in this case are both, product features and their functionality as well as packaging, price and
associated marketing activities. The overriding goal of such research projects is to
determine how the current offer should be modified to adjust it to the changing expectations
of customers. It is of utmost importance in case of end-of-life products for which sale drops
are recorded.
Example: One of the interesting projects conducted by PMR in the field of product research
was a project dedicated to flooring systems. Using the concept of online community as well
as research tools that were specifically developed for the purposes of this project, the PMR
team managed to discover even those needs and expectations of customers which initially
seemed unidentifiable but in the end turned out to be hidden in the realm of the
unconscious. Proper execution of the research has, therefore, led to gaining unique
knowledge about consumers, which allowed one to build a competitive advantage.
Price tests: One of the key aspects considered in the course of offer preparation is price. It
has to cover the costs of production, logistics and distribution and also bring a desired
return on investment. Yet, from the customer perspective the price must primarily be
attractive and offer good value for benefits that a given product provides. Customers
evaluate the purchase cost by taking into account a whole range of various factors – price as
compared with competitors does not have to be the most important thing.
Price tests help entrepreneurs to take a number of significant decisions concerning pricing.
They indicate how much customers are ready to pay for the offered product. They show
how price elasticity of demand develops. They also facilitate price positioning of various
versions of the same product. What is also important to remember is the fact that price tests
do not always lead to price decreases.
Example: In one of the research projects PMR team accompanied a company from the
tourist industry in the process of a new offer launch. The biggest challenge preceding
portfolio expansion was the assessment of price sensitivity of customers from various
countries using various currencies. Price tests made it possible to create a consistent pricing
strategy that was adjusted to the specificity of each researched customer group. And this –
in combination with the improvement of offer parameters as such – resulted in the
development of a very favorable and interfering tourist offer for customers.
New Product Development Process
The definitions of new product development are given as under:
“By new product we mean original products, product improvements, product modification
and new brands that the firm develops through its own research and development efforts”.
In the light of above definition, a new product will be considered anything which is
perceived as such by the consumer or with which the firm has no previous experience. It
means that a consumer views a product as new if any new thing is experienced or any
additional variants are provided with the existing product.
It is quite difficult to give the concept of a new product. A product may be new to company
but not new to customers or the product may be new to customers but not new to the
company.

Booz, Allen and Hamilton have identified six categories of new product in the terms of their
newness to the company and to the market place.
1. New to the world – New products that create an entirely new product.
2. New product lines – New Product that allows a company to enter an established
market for the first time.
3. Additions to the existing product lines – New products that supplement a
company’s established product line.
4. Improvements in revision to existing product – New products that provide
improved performance or greater perceived value and replace existing product.
5. Repositioning – Existing products that are targeted to new markets or market
segmentation.
6. Costs reductions – New product that provides similar performance at lower costs.
Concept of New Product Development:
A new product is a product that is new to the company introducing it even though it may
have been made in same form by others. In the area of toilet soaps, different brands
introduced by each company are that way, new products as it is new to the company. New
products are those whose degree of change for customers is sufficient to require the design
or re-design of marketing strategies.
Product development is the next step to product planning. Product development is the
process of finding out the possibility of producing a product. It includes the decision as to
whether it would be feasible or not to produce the product and whether it would be
profitable or not for the enterprise to do so.
W.J. Stanton, M.J. Elzel and B.J. Walker define ‘new product’ as, “A new product is one
which is really innovative which is significantly different from existing and imitative
products that are new to the company.”
If a company once has carefully segmented the market, chosen its target customers,
identified their needs, and determined its market positioning, it is better able to develop new
products. Marketers play a key role in the new-product process, by identifying and
evaluating new-product ideas and working with R&D and others in every stage of
development.
The need for new product development on various counts described below:
a. Putting All Eggs in One Basket: If an organization depends on only one product to get
all the business and profits, it faces the danger of losing everything in one stroke. E.g.
Automobile Products of India (API) selling Lambretta scooters lost its business to Bajaj
Auto and it had no option but to close down.
Similarly, Amrutanjan, India’s number one pain balm, a single product company, and Vazir
Sultan Tobacco Company, manufacturer of the largest selling cigarette, Charminar, again a
single product company, closed when they lost business to rival products.
b. Creating New Avenues for Growth: The market is always evolving itself and newer
consumer needs and demands are created. To take care of such situations, organizations
must come out with new products that will create new avenues for the growth of
organizations. Organizations that are slow in creating new avenues fall behind others in
business.
E.g. Godrej, the only organization manufacturing refrigerators in India (GEC, the other
brand used to be imported), did not come out with smaller refrigerators to take care of the
middle class willing to buy them and lost business first to Kelvinator/Leonard/Gem (all
manufactured by Kelvinator but marketed by self/Blue Star/Voltas) and then to Hyderabad
Alwyn and now Whirlpool/LG etc.
c. Giving Choice to Consumers for Selection: The consumer needs and demands keep
changing and upgrading/downgrading and organizations should create products in both
upward and downward changes.
E.g. Maruti launched its 800 and van initially and then went on to introduce Zen, Esteem,
1000, Swift, Swift Dezire, WagonR, Ecco, SX4 etc., to give the consumers various choices
and keep them tied to its own products.
d. Multiple Attacks on Competition: When competition is the market leader,

organizations introduce multiple products to corner small portions of the competitor’s
market share and collectively win a larger market share. E.g. Vadilal ice-cream introduced
as many as 24 flavours to beat Quality Ice-cream and become the market leader (Quality
sold out to Walls to become Quality Walls, a HUL company).
e. Cater to New Tastes of Consumers: Consumers keep changing their expectations and
the organization needs to give them newer products to take care of new needs. E.g.
Introduction of dish washers and food processors in India by most of the electronics
companies.
f. Taking Advantage of Market Fads/Fashion: There are many fads and fashions that
rule a particular time and organizations need to take care of them by introducing products
for such fads/fashions. E.g. KeMnator had introduced refrigerators with various scenes like
the Taj Mahal on Its door. It became an instant success and was followed by all the other
companies.
Broadly new products can be classified into the following four categories:
i. New to the World: These products represent innovative novel creations that did not
exist before. A large number of products that are now taken for granted and considered old
were once new to the world. Consider products such as microprocessor, nylon, post-it notes,
transistor, television, and airplane were new products when they were created for the first
time. Sony introduced to the world a device called Walkman that allowed people to listen to
music on the go.
ii. New to the Company: As the name of this category suggests, these products are not
new to the world but are new for the company. Companies expand their offering to grow
like ITC added readymade apparels and food products to its portfolio. Addition of new
product lines fall into this category.

Micromax started its operations as a mobile handset marketer and added television line
later. Sony added digital camera line to its existing portfolio in 1996.
iii. Additions to Product Line: Firms add new items to their existing product line in order
to meet evolving consumer and competitive conditions. For instance, Pepsi added Pepsi
Blue to cash in on a particular cricketing season. Nokia added Asha to its mobile phone line.
Sony introduced a new model to its mobile phone line, Sony Xperia Z2, which they
promoted as the ‘best phone ever’.
iv. Product Improvement: Improved products are considered new because of their
newness. These are linear improvements to a product. For instance, Maruti launched its
cars with new K Series engines that delivered superior fuel efficiency.
Blue Star improved its air conditioners by improving its compressor to inverter technology.
Sony listened to customer feedback and it was the first to improve its camera by making
their devices dustproof and waterproof.
Steps in New Product Development

New Product development is a journey. It’s the road which leads to the actual product and
then the actual product to the market. Every product goes through a number of stages
before being introduced in the market.
1. Idea Generation
The first stage of the New Product Development is the idea generation. Ideas come
from everywhere, can be of any form, and can be numerous. This stage involves
creating a large pool of ideas from various sources, which include –
a. Internal sources – many companies give incentives to their employees to
come up with workable ideas.
b. SWOT analysis – Company may review its strength, weakness,
opportunities and threats and come up with a good feasible idea.
c. Market research – Companies constantly reviews the changing needs,
wants, and trends in the market.
d. Customers – Sometimes reviews and feedbacks from the customers or even
their ideas can help companies generate new product ideas.
e. Competition – Competitors SWOT analysis can help the company generate
ideas.
2. Idea Screening
Ideas can be many, but good ideas are few. This second step of new product
development involves finding those good and feasible ideas and discarding those
which aren’t. Many factors play a part here, these include –
a. Company’s strength,
b. Company’s weakness,
c. Customer needs,
d. Ongoing trends,
e. Expected ROI,
f. Affordability, etc.
3. Concept Development & Testing

The third step of the new product development includes concept development and
testing. A concept is a detailed strategy or blueprint version of the idea. Basically,
when an idea is developed in every aspect so as to make it presentable, it is called a
concept.
All the ideas that pass the screening stage are turned into concepts for testing
purpose. You wouldn’t want to launch a product without its concept being tested.
The concept is now brought to the target market. Some selected customers from the
target group are chosen to test the concept. Information is provided to them to help
them visualize the product. It is followed by questions from both sides. Business tries
to know what the customer feels about the concept. Does the product fulfil the
customer’s need or want? Will they buy it when it’s actually launched?
Their feedback helps the business to develop the concept further.
4. Business Strategy Analysis & Development
The testing results help the business in coming up with the final concept to be
developed into a product.
Now that the business has a finalized concept, it’s time for it to analyse and decide
the marketing, branding, and other business strategies that will be used. Estimated
product profitability, marketing mix, and other product strategies are decided for the
product.
Other important analytics includes
a. Competition of the product
b. Costs involved
c. Pricing strategies
d. Breakeven point, etc.
5. Product Development
Once all the strategies are approved, the product concept is transformed into an
actual tangible product. This development stage of new product development results
in building up of a prototype or a limited production model. All the branding and
other strategies decided previously are tested and applied in this stage.
6. Test Marketing
Unlike concept testing, the prototype is introduced for research and feedback in the
test marketing phase. Customers’ feedback are taken and further changes, if
required, are made to the product. This process is of utmost importance as it
validates the whole concept and makes the company ready for the launch.
7. Commercialization
The product is ready, so should be the marketing strategies. The marketing mix is
now put to use. The final decisions are to be made. Markets are decided for the
product to launch in. This stage involves briefing different departments about the
duties and targets. Every minor and major decision is made before the final
introduction stage of the new product development.
The following are the probable measures to be followed to attain success of product:
1. Proper research and development activities are to be carried out for the identification
of new product concept.
2. Proper studies are to be conducted to know accurately the market conditions.
3. Product ideas are to be refined and redefined by the research team.

4. Proper co-ordination is needed at all the levels of management. The Research and
Development department, production wings, purchase, finance, marketing etc., have
to with co-operation & co-ordination.
5. Successfully launch the product with needed promotional support.
6. Property conduct the sample-test, pre-launch offer before heavy investment in
production.
7. Be ready to modify the product in case market expects slight modification.
8. Add the values to the products which would satisfy the customers for the long-term.
The following are a few reasons for the failure of new products:
i. Faulty Product Idea: Every new product is based on a product idea or product concept.
A company generally tests this idea or concept before launching the new product. If a
company fails to study the idea or concept properly, it might launch the new product on a
faulty idea or concept. The new product in such a case will definitely fail in the market.
ii. Poor Timing of Launch: A new product must be launched at the appropriate time. A too
late entry, a too early entry, launch during an economic downturn, launch along with
strong competitor etc. will not help the product. If the product is launched at the
inappropriate time it will fail in the market.
iii. Improper/Insufficient Planning: A new product must be launched only after sufficient
planning of several aspects related to the launch. The planning should include market study,
product designing, consumer analysis etc. If the planning is not done properly, the product
will fail in the market.
iv. Lack of Demand: Every new product, to be successful needs a certain amount of
demand. Demand analysis based on market research, is an important part that should

precede a new product launch. If a manufacturer launches a product without such analysis
and if the demand is lesser or absent, the product will fail in the market.
v. Technical Problems: Certain products involve a sufficient amount of technology and all
these aspects must be sufficiently studied, tested and perfected before the launch. If the
products have some technological snags in them, the customers will reject the product.
vi. Wrong Target: Every company, before introduction of a new product should study the
market and define its target Customers, the product should be designed to suit such target
customers, if the targeting is not done properly, the product will not suit the target
customers’ needs and will fail in the market.
vii. High Price: The challenge of a new product is to design it appropriately, offer it to the
customer at the acceptable price but still earn sufficient profit. If the product is priced very
highly in terms of the customers’ expectations and willingness to pay, it will fail in the
market.
viii. Product Promotion: Every new product, even if it is well designed and priced, needs
to be supported by promotion activities. If a company does not promote its product well, the
product will fail in the market.
ix. Improper Distribution: A product to be successful should be well distributed so that it

is easily available. A consumer should be able to purchase it very conveniently. If a company
does not put in place a proper distribution system, it will fail in the market.
x. Absence of Sales Service: Some products require an effective after sales service because
of their technical nature. If the company does not offer well after sales service or if the spare
parts are not available, the product will fail in the market.
xi. Too Advanced Product: Customers are generally accustomed to a certain level of
technology and if a product is much more advanced than that level pf technology, the
customers will reject the product.
xii. Product not Up to the Expectation: Some companies create a high level of
expectations about the products in the minds of the consumers and if the product does not
rise up to the expectation created, customers feel cheated and they reject the product.
xiii. Tough Competition: A company might design a good product and do everything
perfectly but if the competitors do it in a much better, manner, the company’s product will
fail in the market.
xiv. Improper Positioning: The success of a product depends on its positioning. If the
positioning is not done properly, customers will not have clarity and will reject the product.
xv. Absence of Uniqueness: Customers look forward to something new in every a product
and if the new product has nothing new or unique, it might not be accepted by the market.
Test Marketing
Meaning and Considerations of Test Marketing: The term ‘test marketing’ is also some-
times called ‘field-testing’. The word ‘test’ means examination or trial. Test marketing, thus,
means testing the product in the market before the product is commercialised on a large
scale. This is done with a view to understand the market and the marketing considerations
like nature of competition, nature of demand, and the consumers’ needs, etc.
Considerations of Test Marketing: In test-marketing, the following considerations are

essential:
1. Identification of the different uses of the product.

2. Classification of the market from geographical angle with reference to the major
uses or applications of the product.
3. Selection of one or two such cross-sectional markets as samples that represent the
features and conditions of the whole market where the product is contemplated to be
sold.
4. Classification of customers such as rural vs. urban, white collar population vs.
working class, age-wise analysis, etc. for the cross-sectional market areas.
5. Identification and grouping of the customers into consumer market, industrial
market, reseller market, government market, etc. in order to distinguish the
marketing characteristics.
6. Collection of pertinent information regarding the product and its features including
the price from the different cross sections of the customers on whom the tests are
made so that an in-depth analysis can be undertaken to understand their buying
behaviour and interest.
Purposes of Test Marketing: The purpose of undertaking test marketing are:
1. To ascertain various uses of the product, the class or category of users, and the
motives that prompt the users or buyers.
2. To gauge the nature of general competitive situations, latest trend in demand, etc.
3. To elicit the following fundamental information necessary for arriving at the proper
marketing decision: specific product advantages and disadvantages, new uses or
applications of the product, necessity or otherwise for the modification or
improvement of the product, etc.
In a word, the basic objectives behind the test marketing are:
(i) To sharpen the knowledge of the territory for marketing and

(ii) To decide marketing strategy with respect to pricing, promotions and distribution
systems.
Procedures in Test Marketing Plan: In test marketing, the following procedures are
usually adopted:
1. The number of cities or towns or markets as test markets is determined at the

outset. In doing so, the marketing management should consider the factors like
representativeness of the area, cost of testing, regional differences, competitors’
efforts, etc.
2. While deciding the above for test purposes, it is examined whether such markets are
having the characteristics like – existence of trade centers, industrial infra-structure,
population-mix, etc.
3. After having decided the test markets, the marketing manager carries out the test
for a certain period. The duration of the test period depends on a variety of
considerations. Of than the important factors are, existing position of competition,
probable expenditure, and average repurchase period.
The competitive position influences the test duration in the sense that longer
duration will give the competitors enough time to improve their products and
introduce the same in the said markets. Again, too short a duration will not yield the
desired results.
Again, higher the test duration higher will be the cost of such tests. Further, the
repurchase period is directly proportional to the test duration. If the repurchases
by the customers are very frequent, then a shorter duration of the test may give the
required data.
4. The next step is collection of pertinent information, during test marketing, by the
marketing management for the purpose of detailed analysis. The marketer usually
decides beforehand about the types of needed information which in general includes
and extends to the product, customers, distribution channels, buyers’ behaviour,
habits and customs, etc.
5. After having tested the market, the marketing management decides about the
marketing mix and marketing strategy. If the sales are excellent and highly
promising, a decision to commercialise a product is taken.
If the sales are not so bright, the underlying reasons are investigated for further
improvement or modification and a retest is undertaken. If the sales indicated by test
are poor, the management may drop the idea altogether.
Test marketing is the process of putting marketing variations in front of customers as a

business experiment. It is an extremely common practice that is used to innovate by trying
a large number of ideas in the field. Test marketing can also be used to reduce risk by
testing marketing strategies in an inexpensive way before scaling them. The following are
common examples of test marketing.
1. Products & Services: Selling products and services on a limited basis before a full
product launch. For example, a donut shop that tries 50 new donuts in two locations
each to decide which to launch on a nationwide basis.
2. Customer Service: Customer service changes that are introduced as a pilot. For
example, a restaurant that introduces a no tipping policy together with an incentive
program for employees to earn bonuses when customers are satisfied.
3. Customer Experience: Customer experience testing such as a hotel that
experiments with a floor for parents with small children and babies. The rooms on
the floor have features such as cribs, toys and complimentary diapers.
4. Distribution: Distribution experiments such as entering a new region or country on
a trial basis.
5. Pricing: Experimenting with pricing structures and strategies such as a telecom
company that introduces flat pricing in one city to measure the impact on demand.
6. Promotion: Promotional experiments such as testing variations of an advertisement
on a limited basis before a major campaign.
7. Branding: Brand related tests such as releasing a new logo variation to see if it
impacts brand recognition and sales.

Advertising Research
Advertising research is the systematic, scientific and continuous process of studying

consumers within the context of market situations, product attributes and competitors'
strategies. A well-conducted research programme provides inputs that are the foundation of
an advertising campaign.
Definition: Advertising research is defined as the systematic gathering recording and

analysing of data relating to the effectiveness of advertising.
Need for Advertising Research:
1. Target Audience: It can be identified through ad research and accordingly the

message can be directed to the right audience.
2. Media Mix: It enables to determine the proper media mix that can be employed to
run the ad campaign. Proper media is selected to reach more effectively to particular
groups of potential customers.
3. Unique Selling Proposition (USP): Advertising research helps to discover USP
that can be effectively presented in the ad.
4. Costly Errors can be Minimised: Advertising research can prevent the advertiser
from making costly mistakes. It can be over-budgeting, selecting wrong media,
directing the ad message to wrong audience etc.
5. Budget Amount: Advertising research also enables to determine the proper amount
that can be effectively spent on advertising. Proper budget amount can be allocated
and utilised using the ad at the right time and at the right frequency.
6. Layout, Copy and Illustration: It can help to develop effective layout, copy and
illustrations that would be most effective in gaining consumer attention and in
inducing effective readership of ad.
7. Appeals in Advertising: Through proper conduct of consumer research, one can
understand their likes and dislikes, tastes and preferences. The study can be made of
their buying motives. Accordingly appropriate appeals can be developed to stimulate
demand among the various groups of prospects.
8. Competitive Advertising: Proper advertising research can help to develop not only
creative ads but also competitive ads. To face the challenges posed by competitors
claimed in their advertisement and other marketing efforts.
Importance of Research in Advertising: Following points justify the need and importance
of advertising research:
1. Target Audience: Target market/audience can be identified through ad research

and accordingly the message can be directed to the right target audience.
2. Media-Mix: It enables to determine the proper media/media-mix that can be
employed to run the ad campaign. Proper media is selected to reach more effectively
to particular groups of potential customers.
3. Unique-Selling Proportion (USP): Research may reveal a unique buyer benefit
that no one had thought of before. Advertising research helps to discover USP that
can be effectively presented in the ad.

4. Costly Errors Can be Minimized: Advertising research can prevent the advertiser
from making cost mistakes. Mistakes can often be committed in over budgeting,
selecting wrong media. Directing the ad message to wrong audience etc.
5. Budget Amount: Advertising research also enables to determine the proper amount
that can be effectively spent on advertising. Proper budget amount can be allocated
and utilized by using the ads at the right time and at the right frequency.
6. Layout, Copy and Illustrations: It can help to develop effective layout, copy
illustration that would be most effective in gaining consumer attention and in
inducing effective readership / viewer ship of the ads.
7. Appeals in Advertising: Through proper conduct of consumer research, one can
understand their likes, dislikes, tastes and preferences. A study can be made of their
buying motives. Accordingly appropriate appeals can be developed to stimulate
demand among the various groups of prospects. And as such the most effective ad
campaign theme can be devised and used to bring about desired response from the
consumers.
8. Competitive Advertising: Proper advertising research can help to develop not only
creative ads but also competitive ads to face the challenges posed by competitors
claims in their advertisement and other marketing efforts.
Types of advertising research: Advertising research can be sub-divided into the three
major areas:
a. Budget Research: It is covered with the amount of money allocated to advertising.

b. Media Research: It concerned with advertising research, frequency, efficiency and
the effectiveness of different media and combinations of media in reaching target
customers.
c. Copy Research: It deals with what is said and how it is said in the employed media.
All these areas are interrelated and interdependent. For example, the use of
inappropriate media would affect even the most effective advertising message. Media
effectiveness may also be influenced by the available budget.
TESTING OF AN ADVERTISEMENT
Ad testing deals with the measurement advertisement effectiveness. What constitutes

effectiveness? Which variables (s) should be tested, or, measured to know the degree of
advertising effectiveness?
Meaning: In practice, the following four categories of variables, are, generally, tested viz.
(1) message variables, (2) media variables, (3) scheduling variables and (4) budgeting
variables.
1. Message Variables: In the case of an advertising message in an advertising message

in a typical print advertisement the variable to be tested would be the headline, the
illustration, the body test, the layout, and the typography, individually as well as
severally. In the case of television commercials, the variables to be tested would be
appeals, themes, propositions, rhetorical style, audio-visual devices, format
illustration technique, staging casting music, sound effects, etc.
2. Media Variables: The media testing opportunities are considered at the following
four levels, viz.,

a. The advertiser must decide the type of media, such as, newspapers,
magazines, television, radio or direct-mail, etc., he intends to use.
b. The advertiser then, must decide the sub-class of media, he is to use. For
example, what king of newspapers : Daily Sunday,
c. Evening or Morning Newspapers. Likewise, what kind of television and / or
radio: sport, Network, or, Regional channels, in the same way, what kind of
magazines : General, Women, Sports, Healthcare, etc.
d. The advertiser, then must selected specific media vehicles, what newspapers
in Mumbai, which television channels in Delhi, and what media mix is to be
used?
e. Finally, he must determine space units i.e. full page, or, half pages, or, quarter
pages broadcast time units, such as 60 seconds, 20 seconds, and the position
of the ad in print media as well as in television.
3. Scheduling Variables: Consumer behaviour is generally influenced by the time
factor, such as season of the year, occasions like Diwali, Christmas, Id day of month
or week, etc. timing of television commercials frequency continuity are also
important factors.
4. Budgeting Variables: Budget affects, and is affected by all other advertising
variable. How much money should be spent on advertising? How should be the total
amount of money be allocated to markets, to media to sales territories and to specific
items in the product line? The advertiser must measure the relationship between
budgeting variables and profit yields.
Need of Evaluating Advertising Effectiveness:
1. Achieve Awareness: Testing of advertisement will show whether there is an

increased influence of the advertising message, product or service advertised.
Testing enables, the advertiser to be aware of all the reasons why an advertisement
has been effective or otherwise.
2. Affects Attitudes: Testing enables the advertiser to know whether the attitude of
the prospects towards the advertised product or service has been changed or not, it
also enables him to understand whether any message of the advertisement is
recollected by the customer.
3. Actuate Action: Advertisement testing enables the advertiser to analyse the
response by the prospects to an advertisements. It gives him an idea of when, how,
why a customer’s accepts a particular products or rejects it. This will help him to
present the product in such manner that he (prospects) takes a favourable or positive
action.
4. Judge Overall Effectiveness: Testing of advertisement-helps the advertiser
injudging the total effectiveness of a particular advertisement in respect of their
headlines, layout, copy, illustrations, layout or any other quality that is important
within the advertisement.
Thus, advertising evaluation can be done before the campaign is over. The main object of
evaluating the campaign is “to get all the bugs out” before sending precious money. When
advertisements are tested after the campaign it is called “postmortem” of an advertisement
effectiveness.

The advertising can be evaluate or tested before or after its application. Both have got
various advantages.
Pre-Testing Methods: An advertisement can be tested at two stages namely: (a) prior to
the commencement, and (b) after the commencement of the advertising campaign. The
former stage is called pre-testing and the later post-testing.
The following are the pre-testing methods:
1. Proposition Tests: Tests of creative strategies are called proposition tests. Strategy
refers to the alternative course which can be tried to know most suitable course of
action. For example, the advertising campaign of a watch manufacturing company
might follow such strategies as: (i) It is stylish watch for fashion conscious man. (ii)
It is a dependable watch. (iii) It is an inexpensive watch and looks like a watch that
costs twice the price.
Each proposition reflects a different advertising strategy for watches. Fashionable
appearance, expensive appearance and reliable. To choose which is the best
representative sample of prospective watch buyers would be shown all three on
individual cards as if they were different watches. The sample respondents would
then be asked to choose between the watches, and to give their choices. The most
widely acceptable proposition would be established as an advertising strategy.
2. Concept Testing: Under this method, testing is carried out in the same way as
Proposition Testing, except that roughly drawn advertisement concepts are used
instead of placing alternative strategies on the cards. As the public is not used to
look at rough advertisement concept, the respondents must be explained in advance
that what they are about to be shown are rough layout of the artist. Headlines
should be shown clearly and such irrelevant details must be excluded as: Cufflinks on
a shirt because this may give a chance to worry the respondents about why they are
there, whether they are fashionable and so on. Concept tests are used to measure the
interest and credibility of different advertising approaches.
3. Sales Area Testing: The most reliable method of testing the effectiveness of any
advertising is initially to run it in one or two selected areas. This testing is used to
facilitate launching advertising campaign on a large scale, because effectiveness is
first tested in a smaller area.
4. Folio Tests: Folio tests are used for press advertisements that are finished or near
finished form. Test advertisement along with a couple of advertisements is placed
into a folder. The Folio composed in this way is then placed before the selected few
consumers who are expected to give their reactions. The rest advertisement is
singled out later in the interview and the consumer is asked to discuss its appeal and
motivational power in creating interest, arousing desire and attracting attention.
This method of pre-testing spots out the most responsive advertisement.
5. Project Tests: Television commercials are sometimes tested in consumers‟ home
by means of portable movie projectors. Often the commercial is inserted in a short
sequence from an entertainment film. After showing the film to the consumers, the
interviewer asks their opinion about the commercial.
6. Trailer Tests: In trailer testing, a trailer or van is parked in a parking zone of a
shopping centre and people are invited to come in for interviews. Everyone who
enters the trailer is shown a television commercial on a rear screen projector and

questioned about it. This method is very economical for it costs less to bring people
into, the trailer for interview.
7. Consumer Jury Tests: Consumer jury tests are based on the rating given on
advertisement by a typical group of consumers. Rating implies comparison of one
advertisement with several others. A consumer jury test is made in a variety of ways.
The usual procedure is to ask a relatively small group of consumers, who represent
potential buyers of the product to rate alternative pieces of copy. Different data
collection methods may be used in implementing a consumer jury test. For example,
personal interviews may be used or a group may be assembled and the members may
be asked to rate on the alternative copy.
8. Rating Scales: This method of copy testing requires the establishment of standards
for effective copy and numerical weights for each standard. The weights or values
indicate the relative worth of a standard in the overall success of copy.
Advertisements are then rated according to scale value and a numerical score is
obtained.
9. Portfolio Tests: These tests are named after the manner in which advertisements to
be tested are packaged. A group of advertisements usually a mixture of
advertisements to be tested is placed in portfolio. Sometimes, advertisements are
actually placed in dummy copies of newspapers and magazines. Respondents are
given the folio and asked to go through it, reading whatever interests them and
taking as much time as they want. After completing this task, the respondents are
asked to recall the advertisements what they can remember.
10. Simulated Tests: Simulated tests are tests in which consumers are exposed to
alternative pieces of copies through point of purchase displays of direct mail. These
tests are simple and less expensive to implement than actual sales tests. However,
they are artificial.
Benefits of Pre-Testing:
• To check clerical, grammatical, printing or technical errors.

• To make communication more effective from readers points of view.
• Minimise waste in advertising.
• To make it m ore meaningful and effective.
• It is simple, less time consuming, and less costly.
Methods of Post-Testing:
Tests that are applied after the commencement of the advertising campaign are called post-
tests. Post-testing enables to study the impact of advertising on the effective sales
promotion. The following are the methods of Post-testing:
1. Recognition Tests: Under this method the respondents are asked to point out the
contents of those advertisements which they might have seen. The objective of this
test is to know the degree of effective impact of advertisement.
2. Recall Tests: Under recall tests the entire advertising campaign is considered as
against recognition tests. Where only specific advertisements are considered Recall
tests are applied to measure the attention, interest and memory value of
advertisements after they have been launched.

3. Inquiry and Coupon Response: Under inquiry testing, the advertiser sends a free
sample to the reader, on request. The reader is expected to mail the coupon to take
advantage of the offer. It is quite likely that such advertisements are given
simultaneously in different publications of the newspaper or magazine. The
advertisements are keyed in order to know which of the several advertisements
resulted into more response. It is assumed that the advertisement which brings
largest number of inquiries is superior to others.
4. Split-Run Test: It is a modification of inquiry test. An advertiser takes two
advertisements in magazine offering split-run facilities. The two advertisements
differ in one respect only e.g., one advertisement presents the cold drink in a
transparent bottle and the other advertisement presents the cold drink in a non-
transparent bottle. The advertisement is keyed. Now, in two different markets i.e.,
cold drink marketed in transparent bottle is more, it is taken for granted that this
advertisement has been more successful compared to the second one.
5. Psychological Tests: A variety of psychological tests are used which include story
telling, word association, sentence completion, depth interviewing etc. This test
attempts to find out what the respondent has been in different advertisements and
what they mean to him. These tests can be conducted only by trained interviewers.
6. Focus Interviews: In this method some selected consumers are called and are asked
to deliberate discussion on the advertisements presented to them. The attention of
the members of the panel is focused on certain aspect of the advertisement. The
opinion expressed by the participants becomes the basis to study the effectiveness of
advertising.
7. Readership Test: This method attempts to study the impact of advertising in
increasing the product awareness by the consumers. Readership test facilitates the
relative importance and effectiveness of advertisement published in national press.
The readers are asked to tell where they have read the advertisement and how it has
increased their awareness about the product.
The various methods used to study the effectiveness of an advertisement provide

information about the impact of an advertisement on the product awareness and bringing
about a change in the attitude of the consumers.
Benefits of Post-Testing:
• To find out the extent to which the ad has been noticed, seen or read.
• To find the extent to which the message is understood by the readers.
• To measure the memory value of advertising.
• To find the impact of advertising on consumer buying behaviour.
• To see whether ad is accomplishing its objectives.
• To evaluate the comparative effectiveness of different ads in terms of appeals, layout
illustration etc.
• To improve future advertising efforts.
PRE-TESTING METHODS
Before the advertising campaign is undertaken, the advertiser checks or test advertisement
in respect to its effectiveness. The main object of evaluating the advertisement before the

campaign is “to get all the bugs out” from it. The pre-testing methods of checking
advertising effectiveness are as follows:
1. Check List Method: It is simplest method of testing. In this method a questionnaire is

prepared by the researcher containing items that are commonly found in all types of ads.
Then he has to put a tick mark against the item appearing in the ad. This method can be
used to find out attention value, interest value, under-standing and education value etc. It is
easy to conduct, less time and money is consumed. But it is difficult to judge consumer
reactions by a mere check list.
The jury members of consumers are asked certain question like:

• Which of these ads would you notice first?
• Which of these ads would you like most?
• Which of these ads would make you to buy the brand?
• Which of these ads can be easily read and understood?
• Which of these ads are more believable?
2. Consumer Jury Method: A consumer jury is a small group of people who may be
considered typical buyers of the product or service advertised. The advertiser enquires with
them and their opinions on an advertisement are sought. On the basis of their opinions, he
may accept or reject the advertisement campaign.
a. Order of Merit Rating: In this case various ads are shown to the jury of consumers
at a time and asked to place them in rank order. Each rank can be assigned certain
points, then chart will be prepared and maximum points to be assigned by all
members will be selected.
b. Paired Comparison: In this type, a member of jury is shown two ads at a time and
is asked to select the better one. This procedure will continue until each ad from the
lot is paired with every other ad. The final conclusion may be drawn.
Merits of Consumer Jury Test:
1. It can be conducted within a short period of time.

2. Less costly.
3. It does not require actual running of ads.
4. Size of jury members need not be large i.e. 10 to 50 members.
5. Members can be motivated to give unbiased replies.
Demerits of Consumer Jury Test:

1. It is unrealistic as the ads are not seen in real life condition.
2. There may be biased opinion.
3. Selection of jury members is a real problem.
4. Test based on opinion rather than study.
5. There may be inconsistency in ranking by different members.
3. Sales Area Test: In this method a campaign, is run with different appeals in separate
comparable markets (usually cities) for a particular period of time, the effectiveness of the ad
campaign is evaluated by comparing actual sales made to consumers in different markets.

That sales are which is giving highest sales is considered as more effective and accordingly
ad copy is selected.
4. Procedure: The procedure is to select two groups of cities (market area), one group is
called (Control group of cities) and other is called (The test group of cities) each group
contains three cities. The existing ad campaign is continued in control group and new ad
campaign is run in test group. The testing period is divided into three stages, ranging
between 3 to 6 months.
• First stage is called as Pre-test. During this period sales are checked in several
groups to determine the trends in sales in normal conditions.
• Second stage is called as “actual test period”, in which test campaign is seen in the
test group of cities.
• The third stage is called as “Post-test period”, in which sales are checked to find out
effect of advertising campaign.
• Now sales results of the control groups are compared with the results of the test
groups. If the sales show a better performance, the new campaign is treated as
effective and later on is run over the entire market area.
• Evaluation: Ad. campaign is run on a small scale to find out - its effectiveness before
running the ad over entire market of this test is conducted properly, it provides
authentic results. However, (i) It is time consuming, (ii) It is expensive, (iii) It poses
a problem in respect of selection of cities maintaining comparable situations.
4. Inquiry Coupon Response: Under this, the advertiser sends an inquiry coupon through
newspapers or magazines which will have to be sent back to the advertiser duly filled in by
the respondent. The number of inquiries or coupons sent back will ascertain the
effectiveness of the advertisement. The enquiry test can also be conducted by direct mail.
One of the types of this test is called as split run test. In this case two Ads are selected for
the test. First ad is published in first half of the number of copies and second Ad is given
remaining half of the number of copies. The ad showing maximum response is selected.
Merits:
1. It can be used to check the relative effectiveness of several ads by remaining them on
a limited basis.
2. It is easily implemented and comparable.
Demerits: 1. It is time consuming. 2. It is expensive.
Other Methods:
Projective Technique: The purpose of this test is to avoid the drawback of direct
questioning and allow the respondent to reveal his feelings about an advertising situation
various types of projective techniques are:
a. Depth Interview: The respondent is given the advertising material and is asked to
express his opinion freely. The interviewer studies the respondent about his feelings
and motivation.

b. Word Association: The researcher presents a word and the respondent is asked to
reply with first word or throught that comes to his mind. For example? What is the
first things you think I say toothpaste? Or automobile?
c. Sentence Completion: The researcher shows an incomplete picture or puts an
incomplete sentence and the respondent is asked to complete the picture or sentence.
POST-TESTING METHODS:
Advertising evaluation can be done even after the advertising campaign is over When
advertisements are tested after the campaign is over, it is known as “postmortem” of the
advertisement effectiveness. The post-testing methods of advertising effectiveness are as
follows:
1. Recall Tests: This test is made to measure the memory value of the reader (respondent).
The procedure is to select a group of respondents and it is confirmed that they have read the
particular issue of the magazine. The respondents are given cards on which the names of all
products advertised in the issue are shown. The respondents are asked to list each ad they
think have seen and tell what it looks like. Question can be asked on the message, colour,
headline, etc. to find out the impact value.
The merit of the test is to measure the depth of impression which an ad leaves on the
respondents mind. This test can also be conducted with some aid and are called as “aided
recall test”.
2. Readership Test: This test finds out what the readers read and how well they remember
it. The advertisement to be tested is to be published in a newspaper or a magazine. The an
interviewer carrying a copy of that medium asks the persons to be interviewed and asks
them which newspapers or magazines, they read, what advertisements have been seen and
remembered and their effectiveness. The advantage of this method is that, a comparative
evaluation is possible and it focuses on the ways of getting attention.
However, the drawback of this method is that it assumes that readership means sales. It is
not always that whatever advertisements we read we do buy.
Attitude and Opinion Test:
These tests are conducted to measure the attitudes and opinions of the customers towards a
firm’s advertising, its products and policies. For such tests measuring scales have been
developed to study the consumer attitudes and opinion.
Keying on an Advertisement
After preparation of an advertisement is over, it is to be inserted in newspaper and/or

magazines. Thereafter, the advertiser has to check the effectiveness of the advertisement.
For this purpose, he has to adopt certain methods to ascertain what enquiry is received from
which advertisement. This process of identifying the enquiries pertaining to a specific
advertisement is known as keying an advertisement. Advertisement can be keyed by
inserting coupons in the advertisement is known as keying an advertisement.
Advertisement can be keyed by inserting coupons in the advertisement itself. This coupon is
given a key number or some identification mark which helps their sorting. The readers are
requested to fill in their names and addresses in the coupons and mail them to the advertiser
for getting a catalogue of further information. The number of coupons received back gives
an idea about the effectiveness of the advertisement.
COPY RESEARCH
Copy testing is a specialised discipline of market research that evaluates the effectiveness of
an advertisement based on consumer responses, feedback, and behaviour. Copy testing is
also known as pre-testing. It encompasses testing of all media channels including television,
social media, print, radio, and internet. Pre-testing is worthwhile for a company to
comprehend whether an advertisement carries a message strong enough to register in its
prospects’ mind.
Before the release of an advertisement, there are multiple tests which are done to measure
the effectiveness of the campaign. These assessments are conducted even after the ad is
transmitted to determine the effectiveness of it.
The main resolve of copy testing is to square ads which are unlikely to connect with the
audience. If in case the prospects don’t connect with the ad, the chances are that they might
get a wrong message or that the ad might go unnoticed. Organisations often employ market
research firms for evaluation. The ad is relayed to a small group of people, and their
responses are evaluated. The responses are further quantified to give a meaningful review to
the company. Here the market analysts analyse real-time responses post watching the
advertisement. The analysis is done with respect to various factors like the facial expression
after watching the ad, how and what the respondents felt, and so on. Copy testing often
evaluates ad based on demographics and certain changes in the ad are made with respect to
its demographics.
Memory tests (recall/recognition), direct response tests, persuasion tests, continuous

measurement tests, psychological response tests are some of the quantitative methods of
copy testing. These techniques are based on statistical principles and reliability.
MEDIA RESEARCH
It is the study of the effects of the different mass media on social, psychological and physical
aspects. Research survey that segments the people based on what television programs they
watch, radio they listen and magazines they read.
For example: Time a person spends with a particular medium.
It includes achievements and effects of media and a study about the development of media.
Newspapers, magazines, radio, TV, Cinema or other mass media analysis and collection of
information’s. It helps to understand the ways in which media can meet the needs of the
audience. Whether it can provide information and entertainment to more and different types
of people. New technological improvements that helps to improve or enhance the medium.
Thus in order to deal with social and political issues insightfully, management and
regulation of media is needed. Unbiased evaluation of data can be achieved through media
research.

We need to understand:
• The nature of medium being used

• The working of the medium
• Technologies involved in it
• Difference and similarities between it and other media vehicles
• Functions and services provided by it
• Cost associated and access to new medium
• Effectiveness and how it can be improved
As decision process depends on data, thus media research has grown to be utilized for long
range planning. Research is in growth phase due to competitions between different media.
Media research includes a whole range of study about the development of media, their
achievements and effects. It includes the methods used in collecting and analyzing
information with regard to newspapers, magazines, radio, TV, Cinema or other mass media.
It also concerns with an expanded discussion of the scientific methods of research. While
studying any medium of communication we may ask series of questions.
• What is the nature of the medium?

• How does it work?
• What technology does it involve?
• How is it different or similar to any other media in any ways?
• What function and/or services does it provide?
• How much does it cost?
• Who will have access to the new medium?
• Is this medium effective?
• Can its performance be improved?
Media research also accumulates information about the uses of the mass media and also the
users of the mass media. In this connection we may ask:
• How the people use a medium or the various media?

• Whether it is used for information only and/or for entertainment and education
also?
• Which category of people use the different media more and why?
• What gratification do the media provide?
• What types of uses the media are put to?
Media Research has proposed five broad hypotheses for content analysis.
• Content reflects the social reality: Mass media can be seen as the mirror images of
the society and whatever important happens in the society is contained in the
various media. Thus the users of media in fact witness whatever is happening around
them through the media. Thus content analyses of media will be an indicator of the
events and value systems of the society of whose media are analyzed.

• The content of mass media is influenced by the socialization and attitudes of the
media workers: The manner in which the content of the media is selected or rejected
and also processes vary from media to media but at operational levels it is more or
less an individual decision. This decision of acceptance or rejection of an item and
the manner in which the content is presented depends upon the training, attitude,
opinion, bias, etc. of the media person who is involved in the process.
• Experiments have shown that same information given to different sub-editors leads
to a wide variety of news reports. Similarly different reporters witnessing the same
event reported differently. Sociological research reveals that individual
characteristics of the media persons play an important role in deciding the content of
the media.
• Content is influenced by media organizational routines: Every media organization
has its own work culture. We are all familiar with the stylebooks of news
organizations. Each news organization has its own stylebook and this influences the
presentation of the content. A traditional newspaper will cover events up to late
evening only. But a more dynamic newspaper can even take up events that happened
late in night. The editorial policies or the content policies of the media organizations
also influence the content a great deal.
• Content is influenced by social institutions and forces: Media organizations do not
function in isolation. They are the sub -systems of the social, political and economic
system of the society. The broad systems are bound to influence the sub -systems
and hence the content of the media is also determined by the priorities of the socio-
economic values of the society.
• Content of the media is a function of ideological positions and maintains the status
quo: According to the Cultural Ratification Theory of the media effects the content
of media is such that it helps to maintain the status quo. In other words, nothing
goes in media, which is drastically challenging or revolutionary to the existing
structure and function of the society. The content of the media helps to maintain the
status quo.
TYPES OF COPY TESTING
Advertisements can be pretested at several levels. Pretesting that occurs in the creative
process is called concept testing. Pretesting done in the later stages is called copy testing.
These tests are helpful to select one amongst various ad executions. Copy tests are usually
conducted using quantitative research methods.
Types of Copy Testing: There are seven main copy testing techniques namely-
1. Consumer Jury
2. Rating Scales
3. Portfolio tests
4. Psychological tests
5. Physiological tests
6. Sales tests
7. Day-after recall Tests

1. Consumer Jury Test:
• A consumer jury test is a method of testing advertisements that involves asking

consumers to compare, rank and evaluate your advertisements.
• It is the most traditional and simplest amongst all the copy testing methods. A
personal interview may be conducted, or a group of about 50 to 100 people may be
assembled and requested voting based on their preferences, interests or even
influences to purchase the product.
• It then presents a rating given by a group of audiences who mostly represent the
potential buyers of the product. A consumer jury method is controlled and cost-
effective.
This method has a few disadvantages like
• The consumer may become a self-appointed expert.

• Possibilities of a halo effect
• Numbers of evaluated ads are limited.
• Preferences may overpower objectivity.
Example: Analyzing Television programs and commercials using a Program Analyzer.
2. Rating Scale Copy Testing
• Rating scale requires established standards for a productive copy and numerical
weights for each standard. Advertisements are later rated according to scale values,
and a numerical grade or a percentage is obtained.

• A rating scale test provides a list against which you can check your ad. It also assists
in determining and singling out the elements that are good and bad in an ad copy.
• The weights may be assigned to different aspects on the basis of which the copy is to
be tested depending on their scale of significance.
• This method is mostly used by professional advertising agencies which rate
advertisements without any trouble.
Example of Rating Scale Copy Testing
3. Portfolio Tests
• Portfolio testing is a copy testing technique in which some dummy copies are kept in
a folio along with the regular advertisement.
• A group of ads mostly test ads and control ads, or a combination of both are placed
in a portfolio.
• After going through a portfolio of a different variety of a particular advertisement,
respondents nominated from the target market are asked to remember in detail those
ads that they remember.
• The ad giving a minimum playback is considered to be the best one.
• It is important to observe whether the choice of advertisement is a dummy
advertisement or the regular one.
• If found dummy, the actual advertisement is improvised accordingly.
Disadvantages of portfolio tests
• Various factors other than creativity and presentation may affect recall.
• Recalling may not prove to be the best way.
4. Psychological Tests
• Psychological Copy testing is a technique in which various methods including word

association, sentence completion, depth, interview and storytelling are welcome.
• A catalogue of reactions namely self-pity, security, fear, nostalgia, and so on are set.
• Alternative ads are then rated based on how readers respond.
• The psychological technique is difficult to implement since skilled interviewers are
required.
• Copy testing is psychological in nature; hence some psychological tests are
administered.
READABILITY AND COMPREHENSION
In this test, the ease of readability is ascertained by a series of questions and techniques
developed by psychologists before the ad is relayed. This technique ascertains the depth of
understanding of the reader through the advertisement.
TESTS OF BELIEVABILITY
The effectiveness of an advertisement can be gauged by the degree of credibility the

consumers have in the product. Scale technique is used to measure the credibility by putting
forward certain statements of product claims. The statement that gets the maximum votes
is declared as the most effective statement.
ATTITUDE TESTS
Psychologists have come up with various attitude tests that can be applied to copy testing.
In this, the prospective consumers are exposed to sample messages. The psychologist or the
interviewer asks a series of questions to ascertain the attitudes evolved from the messages.
TRIPLE HOSTILITY TESTS
This advertising technique seeks consumer association with the product and its brand name.
This test is helpful when an advertisement relays a specific theme or slogan, which the
reader may recall. This is also known as a theme presentation technique.
5. Physiological Testing
In physiological copy testing, tests are conducted using special laboratory equipment’s
which records individual physiological responses to the ads.
• Here the physiological reaction of the respondents is considered more crucial than
what he says.
• There are three elementary instruments that are used in these kinds of tests- the Eye
Moment Camera, Galvanometer and the Pupilometric device.
EYE MOMENT CAMERA
Eye moment camera measures the eye moments of consumers across the layout of test ads.
The direction of the eyes and the pauses made are taken note of so that the areas of interest
are gauged.
GALVANOMETER
A galvanometer measures skin responses to ad stimuli like the perspiration through the
palms. Increase in the perspiration decreases resistance and faster the current passes, hence
tension is generated. The greater the tension, more effective the ad is considered to be. This
technique cannot be used for ads that are very sensitive.

PUPILOMETER OR PERCEPTOSCOPE DEVICES
Pupilometer was designed by Eckhard Hess and James Polk. A pupilometer records changes
in pupil dilation. Dilation demonstrates reading and attention. Contraction depicts dislike of
the respondents to what is being read. It evaluates interesting visual stimuli. The left eye is
photographed to record dilation.
6. Sales Copy Testing
• In this technique, advertising campaigns are conducted in the markets chosen for
testing.
• The effectiveness is ascertained by the actual sales in these markets.
• The market with the highest sales is considered as the best market for an effective
sales campaign.
• Certain suitable changes are made in the other markets for the campaign.
• Sales tests are very practical measures to evaluate advertising effectiveness when
advertising is the dominant element and the only variable in a company’s marketing
plan.
• Sales tests cannot be conducted instantly.
• These forms of tests, especially the field studies prove to be very expensive and time-
consuming.
7. Day-After Recall Test
• A day after recall test is a method of measuring the percentage of people who recall
seeing the ad the day-after it was relayed on the television.
• It is done to make sure that the ad message is passed on to the consumers.
• The consumer response is possessed by conducting interviews on a one-on-one basis.
• Test standardization is employed to avoid misleading results.
• Day-after recall test advocates increase in sample size.
• The day-after recall tests are one of the oldest forms of copy testing.
• Few advertisers still employ because of limited data and analysis.
There are a few disadvantages of this copy testing technique
• Interviews prove to be expensive.

• Few people report seeing an un-seen ad.
Example: HUL launched an ad for AXE Signature, in which a subtle form of romance is
used with the main message of its lasting fragrance. If the consumer after watching the ad
can only recall the romance part then the ad is not considered to have done well on a recall
test.
The marketing campaign is an expensive affair. To ensure that your organization obtains
maximum benefits for its investment, it is critical that you conduct research and testing
before the campaign, and repeat its effectiveness again. In general, copy testing is
appropriate for a strategic research in which one aims to scrutinize the relative effectiveness

of one advertising theory over the other. Copy testing assists in the evaluative research in
which one attempts to take a final call.
Brand Positioning
Brand positioning research is a very powerful tool in the market research world. Brand
positioning research is your opportunity to see how you stack up against your competitors,
and – when taken over time – your opportunity to track if your branding efforts are
effective in helping you improve your brand recognition and positioning.
Positioning research is an informal way to really get an idea of how the customer “feels”
about your company and brand. It’s not necessarily about who they’re going to use, or who
has the best products, services, and pricing. Rather, it’s about determining what emotions
your brand sparks in the consumer, since those emotions are going to play a role in your
company’s long-term branding efforts.
How to Conduct Brand Positioning Research
1. Figure out the Important Qualities for Customers: Through panels,

brainstorming sessions, customer satisfaction research, and so on, try to find out
what qualities customers look for in your type of business. You have to know this
information ahead of time in order to make sure that you’re researching the right
components of a successful brand.
2. Create a Survey: Once you have that information, create a survey through
SurveyMethods that focuses on the “feelings” people have about those issues, and the
brands they associate them with. Remember, the focus is on feelings, since branding
is about instant reactions and emotions. Make sure you collect all of the brands you
compete with as well.
3. Run the Survey: Find a large sample and run the survey. Make sure you’re using a
random sample, and that you’re not introducing your own biases into the survey. It
may be a good idea not to brand the survey at all, and possibly consider a third party
to avoid causing the results to tilt in your favour.
4. Listen and Respond: Once you get back the results, analyze your results and try to
determine what you can do to compete with those ahead of you. Then take action.
Over time, you can run the survey again and see how your position has improved,
dropped, etc. based on the actions you’ve taken. Don’t forget to utilize additional
survey research to figure out the appropriate actions.
Overall, brand positioning research is a great tool for understanding how to turn yourself
into the #1 choice for consumers. Make sure that you’re actively researching your brand’s
position as part of your standard market research efforts.
Brand Positioning Research Services Offered
To ensure the best possible positioning for your brand, we at Outsource2india offer the
following brand positioning services to our customers -

1. Positioning Strategy - Learn how to best position your business against your
competitors in a crowded marketplace, based on your strengths and their
weaknesses. We will also help you identify new business opportunities
2. Selection of Marketing/Promotional Mediums - We will perform extensive
research to determine what platforms will work best to promote and market your
business in a competitive marketplace
3. Customer Reaction Study - To ensure that your branding strategies are working
as intended, we will conduct detailed studies to gauge customer reactions and make
key adjustments
4. Perceptual Mapping - By using advanced perceptual mapping tools, we can show
you how your brand is perceived publicly in comparison to your business rivals
5. Optimization of Brand Positioning - By using the data gathered in other research
studies and analysis, we can determine how to optimize and tweak you brand
position over time
6. Brand Value Monitoring - The value of your brand may rise and fall depending on
the actions and interactions of your marketing efforts. We will work with you to
ensure that your brand is properly monitored
Motivational research
For many years before World War II, researchers in the fields of psychology, psychiatry,
sociology and social- anthropology had been conducting research into the behavior of
consumers, particularly probing of sub-conscious mind. Marketing research, today, can be
conveniently divided into two parts ‘quantitative’ and ‘qualitative’.
The former concentrates on finding the answers to the questions: ‘What’ ‘Who’ ‘How many”
Where’ and ‘When’ the consumer wants a product or service? On the other hand, qualitative
research focuses its attention mainly on ‘Why he wants a product or service?
Put in other words, consumer ability to buy is not that important; what is more important
are motives behind such buying.
In course of time, motivation research became integrated with traditional marketing

research and influenced and expanded the inventory of marketing research and research
techniques. It reached its high peak of popularity in the latter half of 1950s and early 1960s.
What is Motivation Research?
Motivation research is a form of consumer research which has gained ground over the
recent years. Motivation Research is the currently popular term used to describe the
application of psychiatric and psychological techniques to obtain a better understanding of
why people respond as they do to products, ads and various other marketing situations.
It is an attempt to discover and explain why the consumer behaviour differs; why he or she
behaves in a particular way? What appeals and sales programmes will best influence his or
her decision to act or buy or not to act or not to buy?
It concentrates on emotional or hidden stimuli to consumer action.

Thus, motivation research is an attempt to uncover the consumer’s suppressed (conscious)
and repressed (unconscious) motives. In suppression, the consumer remains aware of his
motives but does not care to admit their existence to others for the fear of ridicule,
punishment or being ostracized.
Information about the motivating factor remains in the conscious mind, however.
Repression implies a more serious rejection of knowledge about a motive because; the
individual will not admit motive’s existence even to himself. It is a careful probing beyond
the surface “why” offered by consumers to explain their actions. As a branch of marketing
research, it aims to discover the real reasons for their purchasing preferences via sample
questionnaires, interviews and the like.
The theme of above definitions is that motivation research is to discover underlying

motives, desires, instincts and emotions which provoke human behaviour and, in market
research, true reasons why people buy or do not buy certain goods as distinct from the
reasons they express or even imagine they act upon. The distinguishing feature of
motivation research is probing “beneath the skin”, or “below the surface”.
Today, the most challenging task of marketing research is to predict how people will react
and why they react in a particular way in a given situation. “How they react”? Can be
answered with ease and confidence. Say, how the consumers receive the new product,
package advertising message and the like where surveys cross tabulations and analysis can
help to find the answers. However, more difficult task is one of finding out “why people”
react in a particular way? By merely asking consumers why they like or dislike a product or
an advertisement or a package, one cannot get satisfactory answers.
The answers differ widely and are misleading very often. These answers are misleading not
because people are dishonest, but merely because they do not know really why? Wrong or
unbelievable answers are given because of two possible reasons:
1. Conscious or unconscious attempt to rationalize their behaviour and

2. Preference for not disclosing their real reasons for ranking.
Conventional research does not answer this but motivation research does. It is the psycho-
analysis that helps in overcoming the inability or the reluctance of people to tell why they
like or dislike a product or a service. This is known as penetrating below the surface to
reach sub-consciousness. The relations between a consumer and a product are partly
conscious and partly subconscious. The ‘price’ of a motor car, for example, is conscious
relationship.
A person no doubt is worried and particular about kilometers per litre, cost per kilometer,
boot-space acceleration and the like but his product preference of sub-conscious type is
‘gender symbol’. Car is an extension of man’s personality which is known by motivation
research. Precisely, motivation research is the art of finding out why?
The best example of understanding is one of choosing a girl as a housewife. Ask a sober
looking young man as to what type of woman he wants to marry; the answer may be “the
quiet, home-loving more concerned about the food she cooks for me than the clothes,
ornaments and make-up aids she wants”. Observe him at parties and get-togethers and you
will find that he is after a woman attractively clothed with gleaning make-up appealing to
his hidden motives. Thus, motivation research is something that goes beneath the line.
Thus, it is an attempt to market below the line.
Techniques of Motivation Research: The techniques used in motivation research are

of two types namely, Projective Techniques and Depth Interviews.
1) Projective Techniques: These projective techniques represent the test conducted

to establish the personalities of the respondents and their reactions to product media
advertisement package product design and the like. They project or reflect the
subject’s thought about what he or she sees, feels, perceives thus producing the
reactions.
These tests are derived from clinical psychology and work on the postulation that if an
individual is placed in an ambiguous situation, he is guided by his own perceptions to
describe the situation. They often provide, an insight into the motives that lie below the
level of consciousness and when the respondent is likely to rationalize his motives
consciously or unconsciously; his responses tend to reflect his own attitudes and beliefs by
indirection and discretion; they are his own perceptions and interpretations to the situation
to which he is exposed. There are five most commonly administered tests of this kind
namely:
1. Thematic Appreciation Test.

2. Sentence Completion Test.
3. Word Association Test.
4. Paired Picture Test and
5. Third Person Test.
1. Thematic Appreciation Test (TAT): Under this test, the respondent is presented with
a picture or series of pictures of a scene or scenes involving people and objects associated
with goods or services in questions. These are unstructured, doubtful in action and very
often neutral giving no expression or motions. The respondent is to study the picture or the
pictures and construct a story.
His narrations or readings are interpreted by a skilled analyst. Thus, the picture may be of a
young man scribbling on a piece of a paper. Here, the respondent is to read as to whether
the person in picture is writing. If so what? For whom? And why? And so on.
2. Sentence Completion Test (SCT): Sentence completion tests are designed to discover
emotional responses of the respondent. It is the easiest, most useful and reliable test to get
the correct information in an indirect manner. The respondent is asked to complete the
sentence given.
For instance, the questions may be, in case of ladies:
1. I like instant coffee because……………
2. I use talcum powder because…………..
3. I use electric kitchen gadgets because………………….
4. I do not use pain-killers like aspirin because……………..

5. I do not like red, brown and black colours because…………………….. In case of men,
these questions may be
(a) I liked filter tipped cigarettes because………………….
(b) I gave up smoking because…………………
(c) I love natural proteins because………………..
(d) I prefer cold coffee because………………
(e) I do not use foam beds because……………….
The way the questions are asked, do not reflect right or wrong answers. However, the
emotional values and tensions are reflected in the answers so given.
3. Word Association Test (WAT): Word association test is similar to that of sentence
completion test. The only difference is that instead of an incomplete sentence, a list of words
ranging from twenty-five to seventy-five is given. This is the oldest and the simplest kind of
test.
The respondent is to match the word. That is, the word suggested by the researcher is to be
associated by the respondent by the most fitting word he thinks. This is widely used to
measure the effect of the brand names and advertising messages. Here, it is not possible to
give all the seventy-five words. On illustrative basis, let us have fifteen words:
1. Perfume………..
2. Tooth paste
3. Hair oil………..
4. Shampoo……………………….
5. Shoes…………
6. Two-wheelers…………
7. Four-wheelers…………
8. Tyre………………………
9. Glass wares………….
10. Ink………..
11. Pencils…………
12. Fridges…………………….
13. Cupboards…………
14. Television………………….
15. Video cassettes………………
Thus, a respondent may give his preferences as ‘Colgate’ or ‘Promise’ or ‘Close-up’ or

‘Forhans’ in case of tooth paste. On the basis of such answers, it is possible to determine a
scale of preference.
4. Paired Picture Test (PPT): This is another very appealing and easy to administer test.
Paired picture test means that the respondent is given a pair of pictures almost identical in
all respects except in one. For instance, the researcher may be interested in knowing the
reaction of respondents to a new brand of refrigerator.
The pair of pictures may show a woman opening refrigerator which is moderately priced
with a usual brand; another picture of the same woman opening the refrigerator door of
another brand.
Looking to these two pictures, the respondent is to give his own feelings or reactions.
Though the same pair is shown to so many respondents, the reactions differ from person to
person. Instead of using the usual figures, cartoons may be introduced. The analyst gets
here the inner feelings of an individual for this analysis purpose.
5. Third Person Test (TPT): The format of this test is that the respondent is given a
photograph of a third person—may be a friend, a colleague, a neighbour, a star, a player, a
professional and the like The point involved is that the researcher is interested in knowing
what the third person thinks of an issue as heard through the respondent. It is assumed that
the respondent’s answer will reveal his own inner feelings more clearly through the third
person than otherwise it would have been possible.
The best example of this kind the test conducted on American house-wives in connection
with ‘instant coffee’. Prior to the test, the attitude of house-wives was “It does not taste
good”, with the test being conducted, the real attitude was “A lady using instant coffee is
lazy, spend-thrift and not a good housewife”. This amply clears the fact how the test
revealed the naked truth.
Advertisement Research:
Advertising Research is a scientific technique of depth analysis of consumers’ behaviors.

Advertising research is a detailed study on a particular subject, which leads to a successful
and effective campaign. Advertising research also decides the success of an advertising
campaign by measuring the impact over its audience. The purpose of advertising research is
to either establish a brand image or to improve one. Research also helps in arriving at a
creative idea. A creative advertisement is one that engages the target audience. And what
helps in developing advertisement creative is the advertising research that takes place
before its creation. Before entering the markets, the idea may go through many iterations
and improvements until it’s ready for the market.
One should conduct a full- fledged advertising research as it helps in
• Developing creativity: when all the information is accessible, a well- formed

strategy could be designed to develop the organization further.

• Improves your position in the field: Advertising research enables a company to
find a suitable time and ways to launch their products.
• Rank your image: Advertising research enables comparisons between
organizations. So it helps a company to know its place in the market compared to
others.
• Predicts likely issues: Advertising research predicts forthcoming problems that an
organization might face.
• Monitors progress: It analyzes your organization’s performance.
• Fewer chances of failures: There is reduced risk of failures if the advertising
research is thorough.
Scope of advertising research
1. Increases awareness: Advertising research increases the knowledge about the

market, which helps in building a brand campaign.
2. Analyzes changing market: Knowing your customer is very important for any
business. A customer’s attitude is subject to change with the change in market
conditions. Advertising research analyzes these changing attitudes of your
customers.
3. Public feedback: Advertising research records the feedback of your audience.
4. Results: Final campaigns that are created are based on the results of the research.
Types of advertising research
Pre-testing advertising research is carried out to test the ads before the launch of the
advertising campaign. Pre-testing research is an important part of the advertising research,
as it decides the key points on which the brand will be built. It factors in preferences of the
consumers, public surveys, and finding out the target audience’s reaction to the brand. The
other is the post-testing advertising research, which is carried out after the launch of the
advertising campaign. They get the feedback of the campaign that they have launched. This
helps the company to know how effective the advertising campaign has been.
Pre-testing research - Every process begins with an idea. Turning an idea into reality is
not an easy task. It involves a lot of risks. The more complex the idea, the more is the risk
involved. 65% of the ideas and campaigns fail due to creative issues. You need to ensure that
your idea must take a different route to reach the same destination, i.e. your target audience.
The pre-test phase of the advertising research helps at this point. The pre-test phase
includes a detailed study of your target audience and the brand. This phase will decide if the
idea will be accepted or rejected. As the pre- test advertising research majorly focuses on
the target audience, it will help the agency to figure out the tastes of the public and work
accordingly. Pre-testing provides a final opportunity to check whether the original idea is
still coming through, and whether that the ad does resonate with the intended audience.
This helps the agency to optimize their campaigns before they go into the tedious process of
production. As soon as things are approved, the campaign can be run on various platforms.
Pre-testing includes three test routes, which are:
1. Concept testing: This route is a major part of the creative plan. This covers
effectiveness and the basic communication concept.
2. Theme testing: An advertising campaign is based on a subject, which may revolve
around various themes.
3. Copy research: After a lot of brain storming, the ideas get noted down and are
transformed into a crisp and precise copy.
Post-testing research - Communication is a two way process. A communication process

gets completed only when the feedback is received. With the launch of the advertising
campaign, one-way communication gets initiated. However, to complete the whole process,
it is important to receive the feedback. And to gain the feedback, a post-study is followed
after the launch of an advertisement. It will measure the output of the campaign that the
agency has created. The effectiveness of the brand campaign is assessed in the post-testing
research. A study is conducted to see if the advertisement has been successful in creating or
increasing awareness about the brand or service of the client. Ultimately it will determine, if
the advertisement has been able to influence customers or not. Post-testing advertising
research helps to monitor the brand’s performance, including awareness, preference product
usages and attitudes. Post- testing research involves a tracking process.
Tracking can be done in many ways, which are:
1. Inquiry & Coupon Response: These experiments are conducted in a field. The
consumers are sent an inquiry form related to the brand, which they are asked to fill.
The responses describe the effectiveness of the brand advertisements.
2. Split-run Tests: This enables comparison testing between two or more ads in the
same position, and publication, with each ad reaching a comparable group of
audience.
3. Recall Tests: The respondents are asked to answer what they have seen, heard or
read about the brands, without allowing them to look at or listen to those ads while
answering.
4. Sales Test Method: This is the direct method where the effectiveness of the brand
can be specified. This is done by directly measuring the sales of the product or
service once the campaign has been initiated.
Campaign pre-testing - A new area of pre-testing driven by the realization that what
works on TV does not necessarily translate in other media. Greater budgets allocated to
digital media in particular have driven the need for campaign pre-testing. The addition of a
media planning tool to this testing approach allows advertisers to test the whole campaign,
creative and media, and measures the synergies expected with an integrated campaign.
Essentials of Advertising Research - Following are the essentials of advertising

research that support researcher to complete the research task successfully −
1. Research Equipment − It is the basic requirement of advertising research. It

includes a skilled person, computer system with internet, and relevant newspapers
and magazine. However, field research is also important. For example, interviewing
people in the market or their residential places.
2. Media Research − To determine, which media is the most effective advertisement
vehicle, media research is necessary. It helps to reach the potential customers in a
short period of time and at lower cost.

3. Marketing Trends − Knowledge of marketing trends help advertisers to know
what products people are buying and what are the specific features of the products,
which compels people to buy. With this information, manufacturers can modify their
product according to the trend on competitive price.
4. Target Audience − For any advertising research, it is very important to identify
target audience and geographic location.
Benefits of Advertising Research
Conducting research before launching a new product and subsequently developing an ad has
the following advantages −
1. Develops creative design and strategy − Once, all information is available, it is

very simple to develop an eye-catching design. It also helps in making a well-defined
strategy to develop your business.
2. Identifies Opportunity in the Market − Research suggests — what is the right
time to launch the product. It also tells which geographical location is the best for
the product.
3. Measures Your Reputation − It is always beneficial to know your competitor’s
reputation and credit in the market. It helps to develop faultless strategy.
4. Identifies Major Problems − Research helps to identify the potential problems.
5. Analyzes Progress − It helps to analyze the performance of your product. Likewise,
you can monitor your progress.
Minimize the Risk − If you have done a thorough market research, there is least chance of
failure.
International Marketing Research

International marketing research is the systematic design, collection, recording, analysis,
interpretation, and reporting of information pertinent to a particular marketing decision
facing a company operating internationally.
International Market Research is a particular discipline of Market Research, focusing on

certain geographical areas.
International Market Research is concerned with consumer goods, but also with any
resource or service within a value chain which will be commercially utilized or further
processed – which is the area of industrial goods and B2B-Marketing.Introduction
Marketing Research in a Global Environment
Marketing research practices and techniques have become truly global. For example, the
world’s largest research firm, Nielsen, is headquartered in the U.S. but derives almost two-
thirds of its revenue from outside the U.S. It is standardizing much of the data it routinely
collects in 27 different countries.
The main factors which influence the marketing research in different countries are

1. Cultural differences: Culture refers to widely shared norms or patterns of behavior
of a large group of people.
a. Product: When a soft drink was launched in Arab countries, it has a label
with six-pointed stars. The sales were very low as the stars were associated
with Israel.
b. Price: An American firm was willing to set a reasonable price for the product
they intended to sell to the Japanese. A detailed presentation was made to the
Japanese businessmen, but it was followed by a deep silence. The Americans
thought that the Japanese were going to reject the price and offered a lower
price. The Japanese kept silence again. After that the Americans lowered the
price again saying that it was the lowest they could sell at. After a brief
silence the offer was accepted. Later the Japanese confessed that the first
offered price was quite acceptable, but they had a tradition to think over the
offer silently. An American company suffered great losses in this case.
c. Place: A company wanted to enter the Spanish market with two-liter drinks
bottles and failed. Soon they found out that Spaniards prefer small door
fridges and they could not put large bottles into them.
d. Promotion: Pepsico came to Taiwan with the ad ‘Come Alive with Pepsi’.
They could not imagine that is it translated ‘Pepsi will bring your relatives
back from the dead’ into Chinese.
2. Racial Differences: This refers to the differences in physical features of people in
different countries.
3. Climatic Differences: These are the meteorological conditions such as temperature
range or degree of rain. For example, Bosch-Siemens adapted their washing
machines to the markets they sell. In Scandinavia, where there are very few sunny
days, they sell washing machines with a minimum spin cycle of 1,000 rpm and a
maximum of 1,600 rpm, whereas in Italy and Spain a spin cycle of 500 rpm is
enough.
4. Economic Differences: Economic development of various countries is different and
when a company introduces a new product it adapts it to that new market. There are
factors which show the level of economic development
a. Buying power and revenue of the market: In developed countries with
higher income of revenue people prefer complicated product with advanced
functions, while in poor countries simple product are preferable.
b. The infrastructure of the market: Such elements of the infrastructure of
the country as transport, communication system and others influence the
product. When Suzuki entering the Indian market the suspension was
reinforced as the state of roads in India is very poor.
5. Religious Differences: Religion affects the product greatly and makes companies
adapt their product to religious norms. If a company exports grocery products to
Islamic countries it must have a special certificate indicating that the animal was
slaughtered according to ‘Halal’ methods.
6. Historical Differences: Historical differences affect the consumer behavior. For
instance, Scotch whiskey is considered fashionable in Italy and not very trendy in
Scotland.
7. Language Differences: The correct translation and language adaptation is very
important. For example, when Proctor & Gamble entered the Polish markets it

translated properly its labels but failed. Later they found out that imperfect language
must have been used in order to show that the company fits in.
Besides the differences mentioned above, there may be differences in the way that
products or services are used, differences in the criteria for assessing products or
services across various markets and differences in market research facilities and
capabilities.
International Marketing Research Process
a. International Marketing Research Categories
International marketing research is the systematic design, collection, recording, analysis,

interpretation, and reporting of information pertinent to a particular marketing decision
facing a company operating internationally. International marketing managers need to
constantly monitor the different forces affecting their international operations.
There are three general categories of research based on the type of information required.
1. Exploratory research deals with discovering the general nature of the problem and
the variables that relate to it. Exploratory research is characterized by a high degree
of flexibility, and it tends to rely on secondary data, convenience or judgment
samples, small-scale surveys or simple experiments, case analyses, and subjective
evaluation of the results.
2. Descriptive research is focused on the accurate description of the variables in the
problem model. Consumer profile studies, market-potential studies, product-usage
studies, attitude surveys, sales analyses, media research, and price surveys are
examples of descriptive research. Any source of information can be used in a
descriptive study, although most studies of this nature rely heavily on secondary
data sources and survey research.
3. Causal research attempts to specify the nature of the functional relationship
between two or more variables in the problem model. For example, studies on the
effectiveness of advertising generally attempt to discover the extent to which
advertising causes sales or attitude change.
There are three types of evidence to make inferences about causation: (1) concomitant
variation, (2) sequence of occurrence, and (3) absence of other potential casual factors.
Concomitant variation, or invariant association, is a common basis for ascribing cause. For
example, the advertising expenditures vary across a number of geographic areas and
measure sales in each area. To the extent that high sales occur in areas with large
advertising expenditures and low sales occur in areas with limited advertising expenditures,
it is inferred that advertising is a cause of sales. It must be stressed that this have been only
inferred, it is not proved that increased advertising causes increased sales.
Sequence of occurrence can also provide evidence of causation. For one event to cause
another, it must always precede it. An event that occurs after another event cannot be said
to cause the first event. The importance of sequence can be demonstrated in the last
example of advertising causing sales. It is supposed that further investigation showed that
the advertising allocation to the geographic regions had been based on the last period’s sales
such that the level of advertising was directly related to past sales. Suddenly, the nature of
our causal relationship is reversed. Now, because of the sequence of events, it can be inferred
that changes in sales levels cause changes in advertising levels.
A final type of evidence that is used to infer causality is the absence of other potential causal
factors. That is, if one could logically or through our research design eliminate all possible
causative factors except the one he/she is interested in, he/she would have established that
the variable he/she is concerned with was the causative factor. Unfortunately, it is never
possible to control completely or to eliminate all possible causes for any particular event.
Always there is a possibility that some factor of which one is not aware has influenced the
results. However, if all reasonable alternatives are eliminated except one, one can have a
high degree of confidence in the remaining variable.
b. Steps of International Marketing Research Process
The international marketing research process as well as domestic one is a serious of

separate steps. However, the international marketing research process has some
peculiarities such as the national differences between countries arising out of political, legal,
economic, social and cultural differences and, the comparability of research results due to
these differences.
Step 1. Research Problem Definition: Problem definition is the most critical part of the
research process. Research problem definition involves specifying the information needed by
management. Unless the problem is properly defined, the information produced by the
research process is unlikely to have any value.
Step 2. Information Value Estimation: Information has value only to the extent that it
improves decisions. The value of information increases as
(1) the cost of a wrong decision increases,
(2) our level of knowledge as to the correct decision decreases, and
(3) the accuracy of the information the research will provide increases.
The principle involved in deciding whether to do more research is that research should be
conducted only when the value of the information to be obtained is expected to be greater
than the cost of obtaining it.
Step 3. Selection of the Data Collection Approach: There are three basic data collection
approaches in international marketing research: (1) secondary data, (2) survey data, and (3)
experimental data. Secondary data were collected for other purpose than helping to solve
the current problem. Primary data are collected expressly to help solve the problem at hand.
Survey and experimental data are therefore secondary data if they were collected earlier for
another study; they are primary data if they were collected for the present one. Secondary
data are virtually always collected first because of their time and cost advantages.

Step 4. Measurement Technique Selection: Four basic measurement techniques are used
in marketing research: (1) questionnaires, (2) attitude scales, (3) observation, and (4) depth
interviews and projects techniques. As with selecting the data collection method, selection
of a measurement technique is influenced primarily by the nature of the information
required and secondarily by the value of the information.
Step 5. Sample Selection: Most marketing studies involve a sample or subgroup of the
total population relevant to the problem, rather than a census of the entire group. The
population is generally specified as a part of the problem definition process.
Step 6. Selection of Methods of Analyses: Data are useful only after analysis. Data
analysis involves converting a series of recorded observations into descriptive statements
and/or inferences about relationships. The types of analyses, which can be conducted,
depend on the nature of the sampling process, measurement instrument, and the data
collection method.
Step 7. Evaluation of the Ethics of the Research: It is essential that marketing

researchers restrict their research activities to practices that are ethically sound. Ethically
sound research considers the interests of the general public, the respondents, the client, and
the research profession as well as those of the researcher.
Step 8. Estimation of Time and Financial Requirements: Time refers to the time needed
to complete the project. The financial requirement is the monetary representation of
personnel time, computer time, and materials requirements. The time and finance
requirements are not independent.
Step 9. Preparation of Research Proposal: The research design process provides the
researcher with a blueprint, or guide, for conducting and controlling the research project.
This blueprint is written in the form of a research proposal. A written research proposal
should precede any research project. The research proposal helps ensure that the decision
maker and the researcher are still in agreement on the basic management problem, the
information required, and the research approach.
International Secondary Data Sources
1. The Nature of International Secondary Data - Secondary data for international

marketing decisions are subject to some disadvantages. Unfortunately, many of the
disadvantages are multiplied when the data involve more countries. An additional problem
is that most secondary data are available only in the host country’s language. Thus, multi-
country searches require utilizing specializing firms or maintaining a multilingual staff.
Data availability, recency, accessibility, and accuracy vary widely from country to country.
Until recently, there were few commercial databases in Japan because of the difficulty of
using Japanese characters on computers. Now the problem is resolved. The Japanese
government prepares many potentially useful reports, but even Japanese firms seldom use
them because they are poorly organized and indexed. Secondary data in many non-
democracies often reflect political interests more closely than reality. In general, the amount
of secondary data available in a country varies directly with its level of economic
development.
Even when the accurate data are accessible, it may not be possible to make multinational
comparisons. Data from several countries may not be comparable because the data were
collected at different times, use different units of measurement, cover slightly different
topics, or define the classes (such as age groups) differently. This has become a major
problem in the European Community as firms begin to analyze the market as a whole rather
than as a collection of individual countries. To resolve part of the problem, ESOMAR has
proposed a standardized set of questions to gather demographic data in both government
and private surveys. Similar work is underway in Brazil, India, and the Middle East.
2. Internal Sources of International Secondary Data - The internal sources of data for
international decisions can be classified into four broad categories – accounting records,
sales force reports, miscellaneous records and internal experts. However, utilizing
international internal data can be difficult. Different accounting systems, decentralized
(often on a country basis) management and information systems, sales forces organized by
country or region, and so forth, all this increases the difficulty of acquiring and using
internal data in a timely manner. To deal with these problems global firms implement
international information systems and require some standardization across countries in
terms of internal recordkeeping and reporting.
3. External Sources of International Secondary Data - For a example, when a company

starts an external search for international secondary data it consults general guides to this
type of data, such as International Marketing Handbook of the US Department of
Commerce’s International Trade Administration, The World of Information (Africa Guide),
or it contacts Euromonitor, the leading provider of world business information and market
analysis. An alternative to conducting such a search “in house” is to use a specialist firm
such as PricewaterhouseCoopers and McKinsey.
4. Issues in International Primary Data Collection - Primary data are the data collected
to help solve a problem or take advantage of an opportunity on which a decision is pending.
The main advantage of primary data lies in the fact that it is collected for solving the exact
problem and that is why it is characterized by high usefulness and novelty. The
disadvantage is that the costs of collecting primary data are much higher in foreign
developing markets as there is the lack of an appropriate marketing research infrastructure.
The international primary data is collected with the help of qualitative and quantitative
research approaches. Qualitative research is particularly used as a first step in studying
international marketing phenomena (focus groups, observation). However, the main
constraint is that responses can be affected by culture as individuals may act differently if
they know they are being observed.
Quantitative researches are more structured. They involve both descriptive research
approaches, such as survey research, and causal research approaches, such as experiments.
More respondents take part in quantitative research, although it highlights fewer problems
than qualitative research.
5. Survey Methods of International Marketing Research - The techniques of data

collection used in international marketing research have both advantages and
disadvantages.
1. Personal interviews are considered to be the most popular method of data collection in
international marketing research. However, there are several constraints for the usage of
this technique. In the Middle East countries personal interviews are treated with great
suspicion. Moreover, the personnel for the survey should be male and they may conduct
interviews with housewives only when their husbands are at home. In Latin American
countries, where tax protest movement is being developed, the interviews are thought to be
tax inspectors.
2. Mall intercept surveys may be used in the United States, Canada and the European
countries. As far as the developing countries are concerned they are not common.
3. Telephone interviews have several advantages over other survey methods of international
marketing research. The time and costs of international telephone calls are reducing, the
surveys may be conducted from one place, the results of telephone interviews are considered
reliable and it is easier to perform the client and interviewer control. But telephone surveys
also have some limitations because of poor telecommunication systems in several countries.
For example, in India telephone penetration is only 1 per cent and telephone surveys reduce
the survey coverage greatly. But even in such developed countries as Great Britain
telephone penetration comprises only 80 per cent. That is why a lot of marketers are very
skeptical about telephone surveys and nowadays there is a great reduction in their
application.
4. Mailing surveys are widely used in industrialized countries, where there is a high level of
literacy, good mailing services and availability of mailing lists. However, the use of this
method in developing countries has some constraints. In some countries people consider the
mailing surveys to be the invasion into their private life and the effectiveness of these
surveys is reduced.
5. Electronic surveys become more popular in the United States and Europe and they are
used for the products which require technological literacy such as computers and computer
software. E-mail surveys begin to replace mail and telephone surveys. The limiting factors
for electronic surveys are as follow: there are still many countries with low internet access,
the internet versions available in various countries may not be compatible and there may be
a big number of non-responses because of technical issues. At the same time the speed of
getting responses and low costs of surveys makes this method suitable for international
marketing research.
6. Conduct Data Analysis - The most important aspect of market research is being able to
analyze the data once it has been collected. A thorough analysis should guide you on how to
act on the insights you have gathered. It is therefore crucial that the research agency,
through their insights report, address the questions you had set out at the start of your
survey.
7. Complete a Post Project Review- Having a session with the research team after
completion of your project to share feedback and discuss the project execution is sometimes
overlooked. Such an undertaking involves various departments but is important to
understand why a project did or did not go as smoothly as planned. A post-project review
session helps in both parties knowing what areas worked and which ones the agency or the
client will need to improve for their next project.

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MODULE 1 – CONSUMER BEHAVIOR

Introduction and Concept:

1 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

Some selected definitions of consumer behaviour are as follows:

Nature of Consumer Behaviour:

a. Marketing factors such as product design, price, promotion, packaging, positioning

2. Undergoes a constant change: Consumer behaviour is not static. It undergoes a change

2 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

5. Information on consumer behaviour is important to the marketers: Marketers need

6. Leads to purchase decision: Positive consumer behaviour leads to a purchase decision.

Concept of Consumer Behavior

The behaviour of consumer is an attempt at prediction of his action while evaluating,

4 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

A. The Economic Model - Under economics, it is assumed that man is a rational

Models of Buyer Behavior

CONTEMPORARY MODELS OF CONSUMER BEHAVIOUR

The Howard-Sheth Model of Buying Behaviour - The Howard-Sheth Model provides an

The model refers to three levels of decision making:

6 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

(1) Perceptual constructs deal with information processing and include:

8 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

The Engel-Kollat-Blackwell Model - This model considers consumer behaviour as a

The five steps involved in the decision process stage are:

9 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

(i) Information Input - The marketer provides information to the prospective

10 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

11 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

12 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

The Sheth-Newman-Gross Model - The Sheth-Newman-Gross (SNG) Model (1991) of

(i) Functional value,

(i) Functional value - Traditionally, functional value is presumed to be the primary

13 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

14 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

Motivation is the ‘why’ of behaviour. It is an intervening variable between stimulus and

Therefore, motives can be conscious or unconscious, rational or emotional, positive or

Marketing management is concerned with the understanding of the process of perception

Perception has its own impact on consumer behaviour or consumer decision-making.

15 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

Product and brand perception:

A product disliked is to be liked by the consumers. It is really a difficult process. Attitude

18 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

The personality types may be introvert or extrovert or another classification as tradition

Attitudes Influence of Buying Behavior

19 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

20 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

How Attitude is Developed?

1. Family Influences: - Family is an important influence on purchase decisions. Bennet

Individual Determinants of Buyer Behavior:

21 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

1. Needs - Every individual has need. They are

Motives - Motives can be rational and emotional

Motivation: Motivation can be positive or negative

• Positive motivation: The person is driven towards an object/condition/situation.

• Negative motivation: The person is driven away from an

22 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

The Dynamic nature of motivation

• Needs and wants exhibit multiplicity. Various kinds of physiological and

3. Cognitive Arousal – this occurs when we come across some information

Maslow’s hierarchy of needs - Abraham Maslow, a clinical psychologist in 1943,

Example: savings accounts, insurance policies.

24 – Dr. Ashish Adholiya, Asst. Professor, PBS, Udaipur (Rajasthan)

Motivation theory and market strategy

3. Avoidance-Avoidance conflict- happens when the consumer has to decide between

1. Situational involvement - This is a state of arousal directed towards attaching

2. Enduring involvement - When the level of involvement towards the

Personality and self-concept

Personality defined as a sum total of outer physiological as well as inner psychological