Q1. Define the concepts and meaning of consumer behaviour.

Explain the
characteristics that affect consumer behaviour.

Ans. 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.

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.

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 colourful 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 varies
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:
S:

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:

A 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 deprives 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.
Q2. Define pricing policy. What are the factors to be considered while making a
pricing decision?

Ans. A pricing policy is a standing answer to recurring question. A

systematic approach to pricing requires the decision that an
individual pricing situation be generalised and codified into a
policy coverage of all the principal pricing problems. Policies can
and should be tailored to various competitive situations. A policy
approach which is becoming normal for sales activities is
comparatively rare in pricing.

Most well managed manufacturing enterprises have a clear cut

advertising policy, product customer policy and distribution-
channel policy. But pricing decision remains a patchwork of ad
hoc decisions. In many, otherwise well managed firms, price
policy has been dealt with on a crisis basis. This kind of price
management by catastrophe discourages the kind of systematic
analysis needed for clear cut pricing policies.
Objectives of Pricing Policy:
The pricing policy of the firm may vary from firm to firm
depending on its objective. In practice, we find many prices for a
product of a firm such as wholesale price, retail price, published
price, quoted price, actual price and so on.

Special discounts, special offers, methods of payment, amounts

bought and transportation charges, trade-in values, etc., are some
sources of variations in the price of the product. For pricing
decision, one has to define the price of the product very carefully.

Pricing decision of a firm in general will have considerable

repercussions on its marketing strategies. This implies that when
the firm makes a decision about the price, it has to consider its
entire marketing efforts. Pricing decisions are usually considered
a part of the general strategy for achieving a broadly defined goal.

While setting the price, the firm may aim at the

following objectives:

(i) Price-Profit Satisfaction:

The firms are interested in keeping their prices stable within
certain period of time irrespective of changes in demand and
costs, so that they may get the expected profit.

(ii) Sales Maximisation and Growth:

A firm has to set a price which assures maximum sales of the

product. Firms set a price which would enhance the sale of the
entire product line. It is only then, it can achieve growth.

(iii) Making Money:

Some firms want to use their special position in the industry by

selling product at a premium and make quick profit as much as
possible.

(iv) Preventing Competition:

Unrestricted competition and lack of planning can result in

wasteful duplication of resources. The price system in a
competitive economy might not reflect society’s real needs. By
adopting a suitable price policy the firm can restrict the entry of
rivals.

(v) Market Share:

The firm wants to secure a large share in the market by following

a suitable price policy. It wants to acquire a dominating
leadership position in the market. Many managers believe that
revenue maximisation will lead to long run profit maximisation
and market share growth.

(vi) Survival:

In these days of severe competition and business uncertainties,

the firm must set a price which would safeguard the welfare of
the firm. A firm is always in its survival stage. For the sake of its
continued existence, it must tolerate all kinds of obstacles and
challenges from the rivals.

(vii) Market Penetration:

Some companies want to maximise unit sales. They believe that a
higher sales volume will lead to lower unit costs and higher long
run profit. They set the lowest price, assuming the market is price
sensitive. This is called market penetration pricing.

(viii) Marketing Skimming:

Many companies favour setting high prices to ‘skim’ the market.

Dupont is a prime practitioner of market skimming pricing. With
each innovation, it estimates the highest price it can charge given
the comparative benefits of its new product versus the available
substitutes.

(ix) Early Cash Recovery:

Some firms set a price which will create a mad rush for the
product and recover cash early. They may also set a low price as a
caution against uncertainty of the future.

(x) Satisfactory Rate of Return:

Many companies try to set the price that will maximise current
profits. To estimate the demand and costs associated with
alternative prices, they choose the price that produces maximum
current profit, cash flow or rate of return on investment.
Factors Involved in Pricing Policy:
The pricing of the products involves consideration of the
following factors:

(i) Cost Data.

(ii) Demand Factor.

(iii) Consumer Psychology.

(iv) Competition.

(v) Profit.

(vi) Government Policy.

(i) Cost Data in Pricing:

Cost data occupy an important place in the price setting

processes. There are different types of costs incurred in the
production and marketing of the product. There are production
costs, promotional expenses like advertising or personal selling
as well as taxation, etc.

They may necessitate an upward fixing of price. For example, the

prices of petrol and gas are rising due to rise in the cost of raw
materials, such as crude transportation, refining, etc. If costs go
up, price rise can be quite justified. However, their relevance to
the pricing decision must neither be underestimated nor
exaggerated. For setting prices apart from costs, a number of
other factors have to be taken into consideration. They are
demand and competition.

Costs are of two types:

Fixed costs and variable costs. In the short period, that is, the
period in which a firm wants to establish itself, the firm may not
cover the fixed costs but it must cover the variable cost. But in the
long run, all costs must be covered. If the entire costs are not
covered, the producer stops production.

Subsequently, the supply is reduced which, in turn, may lead to

higher prices. If costs are not covered, the producer stops
production. Subsequently, the supply is reduced which, in turn,
may lead to higher prices. If costs were to determine prices why
do so many companies report losses?

There are marked differences in costs as between one producer

and another. Yet the fact remains that the prices are very close for
a somewhat similar product. This is the very best evidence of the
fact that costs are not the determining factors in pricing.

In fact, pricing is like a tripod. It has three legs. In addition to

costs, there are two other legs of market demand and
competition. It is no more possible to say that one or another of
these factors determines price than it is to assert that one leg
rather than either of the other two supports a tripod.
Price decisions cannot be based merely on cost accounting data
which only contribute to history while prices have to work in the
future. Again it is very difficult to measure costs accurately. Costs
are affected by volume, and volume is affected by price.

The management has to assume some desired price-volume

relationship for determining costs. That is why, costs play even a
less important role in connection with new products than with
the older ones. Until the market is decided and some idea is
obtained about volume, it is not possible to determine costs.

Regarding the role of costs in pricing, Nickerson observes that

the cost may be regarded only as an indicator of demand and
price. He further says that the cost at any given time represents a
resistance point to the lowering of price. Again, costs determine
profit margins at various levels of output.

Cost calculation may also help in determining whether the

product whose price is determined by its demand, is to be
included in the product line or not. What costs determine is not
the price, but whether the production can be profitably produced
or not is very important.

Relevant Costs:

The question naturally arises: “What then are the relevant costs
for pricing decision? Though in the long run, all costs have to be
covered, for managerial decisions in the short run, direct costs
are relevant. In a single product firm, the management would try
to cover all the costs.”

In a multi-product firm, problems are more complex. For pricing

decision, relevant costs are those costs that are directly traceable
to an individual product. Ordinarily, the selling price must cover
all direct costs that are attributable to a product. In addition, it
must contribute to the common cost and to the realisation of
profit. If the price, in the short run, is lower than the cost, the
question arises, whether this price covers the variable cost. If it
covers the variable cost, the low price can be accepted.
But in the long run, the firm cannot sell at a price lower than the
cost. Product pricing decision should be lower than the cost.
Product pricing decision should, therefore, be made with a view
to maximise company’s profits in the long run.

(ii) Demand Factor in Pricing:

In pricing of a product, demand occupies a very important place.

In fact, demand is more important for effective sales. The
elasticity of demand is to be recognised in determining the price
of the product. If the demand for the product is inelastic, the firm
can fix a high price. On the other hand, if the demand is elastic, it
has to fix a lower price.

In the very short term, the chief influence on price is normally

demand. Manufacturers of durable goods always set a high price,
even though sales are affected. If the price is too high, it may also
affect the demand for the product. They wait for arrival of a rival
product with competitive price. Therefore, demand for product is
very sensitive to price changes.

(iii) Consumer Psychology in Pricing:

Demand for the product depends upon the psychology of the

consumers. Sensitivity to price change will vary from consumer to
consumer. In a particular situation, the behaviour of one
individual may not be the same as that of the other. In fact, the
pricing decision ought to rest on a more incisive rationale than
simple elasticity. There are consumers who buy a product
provided its quality is high.

Generally, product quality, product image, customer service and

promotion activity influence many consumers more than the
price. These factors are qualitative and ambiguous. From the
point of view of consumers, prices are quantitative and
unambiguous.

Price constitutes a barrier to demand when it is too low, just as

much as where it is too high. Above a particular price, the
product is regarded as too expensive and below another price, as
constituting a risk of not giving adequate value. If the price is too
low, consumers will tend to think that a product of inferior
quality is being offered.

With an improvement in incomes, the average consumer becomes

quality conscious. This may lead to an increase in the demand for
durable goods. People of high incomes buy products even though
their prices are high. In the affluent societies, price is the
indicator of quality.

and sales promotion also contribute very much in increasing the

demand for advertised products. Because the consumer thinks
that the advertised products are of good quality. The income of
the consumer, the standard of living and the price factor
influence the demand for various products in the society.

(iv) Competition Factor in Pricing:

Market situation plays an effective role in pricing. Pricing policy

has some managerial discretion where there is a considerable
degree of imperfection in competition. In perfect competition, the
individual producers have no discretion in pricing. They have to
accept the price fixed by demand and supply.

In monopoly, the producer fixes a high price for his product. In

other market situations like oligopoly and monopolistic
competition, the individual producers take the prices of the rival
products in determining their price. If the primary determinant
of price changes in the competitive condition is the market place,
the pricing policy can least be categorised as competition based
pricing.

(v) Profit Factor in Pricing:

In fixing the price for products, the producers consider mainly

the profit aspect. Each producer has his aim of profit
maximisation. If the objective is profit maximisation, the critical
rule is to select the price at which MR = MC. Generally, the
pricing policy is based on the goal of obtaining a reasonable
profit. Most of the businessmen want to hold the price at
constant level.
They do not desire frequent price fluctuation. The profit
maximisation approach to price setting is logical because it forces
decision makers to focus their attention on the changes in
production, cost, revenue and profit associated with any
contemplated change in price. The price rigidity is the practice of
many producers. Rigidity does not mean inflexibility. It means
that prices are stable over a given period.

(vi) Government Policy in Pricing:

In market economy, the government generally does not interfere

in the economic decisions of the economy. It is only in planned
economies, the government’s interference is very much.
According to conventional economic theory, the buyers and
sellers only determine the price. In reality, certain other parties
are also involved in the pricing process. They are the competition
and the government.

The government’s practical regulatory price techniques are

ceiling on prices, minimum prices and dual pricing. In a mixed
economy like India, the government resorts to price control. The
business establishments have to adopt the government’s price
policies to control relative prices to achieve certain targets, to
prevent inflationary price rise and to prevent abnormal increase
in prices.
Q2. Define pricing policy. What are the factors to be considered while making a
pricing decision?

Ans. A price is a value in monetary terms that one party pays to another in a
transaction in exchange for some goods or services. So the definition of price is
the amount of money the buyer will pay as consideration to the seller in
exchange for goods or services.

Pricing isn’t always as easy as setting a price the seller hopes to obtain. It
involves aspects such as demand and supply, cost of the product, its
perception and value for the customer and many such factors.

So while pricing a product, the company has to take immense care and
consideration. If the price is too high or even too low the product will fail in
the market. This is also the reason why the determination of price is not a one-
time event. A company changes the prices according to the market conditions
and other circumstances.

company has to keep in mind various factors while determining the price of a
product. Some such important factors are given here.

1] Cost of the Product

The most important factor affecting the price of a product is the product cost.
The same principle also applies in case of services. The product cost will be
inclusive of the cost of production, the distribution costs and the selling and
promotion costs. This cost will act as a benchmark for setting the price.

In the long run, the company will obviously try to cover the entire cost of the
product. And in addition, it will set for itself a profit margin over and above
such cost. But perhaps in the short run, the company may set a price lower
than the cost of the product. This is a marketing strategy to boost sales and
capture a share in the market. But in the long run, no company can survive
unless the prices of the products/services do not even cover their costs.

Let us also learn about the three types of costs of a company

• Fixed Cost: These costs are fixed. They have no relation to the level of
activity or production of the company. Even if there is no production of
goods these costs will occur. For example, the rent of the factory is a fixed
cost.
• Variable Cost: These are the costs that vary in direct proportion to the
production levels of an entity. Higher the production, higher the cost and
vice versa. The raw material is a classic example of a variable cost
• Semi-Variable Costs: These costs also vary with the production levels. But
they are not directly proportional. Say for example the salary of a manager
is 10,000/- a month fixed and then 10% of his sales. This is a semi-variable
cost.
2] The Demand for the Product

The cost of the product will only give you a benchmark to determine the price.
The upper limit of the price range will depend on the utility the product has
and hence its demand in the market. So the cost of the product is the seller’s
concern. The buyer’s concern is the utility of the product. The demand for the
product will depend on its utility and its price. The law of demands states that
lower the price higher the demand.

Another factor to consider when determining the price is the elasticity of

demand. This means the corresponding change in demand to the change in the
price of a product. If the demand is inelastic then the company can charge a
higher price for their products.

3] Price of Competitors

One factor that affects price termination is the price the competition charges
for their product. Not only their price but their products, its features and other
factors like distribution channel, promotions etc. should also be studied.

In a market, with free competition, the prices have to be very competitive. You
cannot risk pricing yourself out of the market. But on the other hand, if your
products have special r additional features this must be reflected in the price.
4] Government Regulation

The government has a duty to protect its citizens from unfair practices and
pricing. So it may impose certain laws and regulations with regards to the
pricing of a product. It can even regulate the prices of goods that it considers
essential goods.

This generally happens in the pharmaceutical industries. Manufacturers charge

exuberant prices for life-saving drugs and the buyers have no choice but to
pay. In such cases, the government may step in and regulate the prices of
these essential medicines.

Q3. Discuss different steps in the process of personal selling.

Ans. Personal selling can take a lot of time and effort. This method
is used mainly in high-value or highly personalised product
transactions.

The personal selling process approach includes:

• Face-to-face interaction- Personal selling requires the

salesperson to meet customers face-to-face. In the past,
sellers could only do this in person. Nowadays, video
conferencing tools such as Zoom or Google Meet allow
salespeople and prospects to meet online anytime,
anywhere. This removes the geographical constraint and
saves marketing effort.
• Persuasion - Personal selling relies on the salesperson's
interpersonal skills to convince customers to make a
purchase. However, this doesn't mean salespeople can force
the product on the customer. Instead, they listen to
understand the prospect's needs and then provide relevant
information to help them reach a buying decision.
• Handling objections - Objections happen all the time in
personal selling. It occurs when customers are not ready to
make the purchase. The salesperson's job is to find out their
concerns and address them.
• Clear communication - The sales pitch should be informative
and engaging. This may require the salesperson to prepare
 and practice the sales presentation before approaching the
customers.
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Personal Selling Process Marketing

The personal selling process is an integral part of marketing.

Both B2B and B2C products can be sold using this method.
However, there are several things that salespeople have to keep in
mind when applying the personal selling process:

Personal selling process: choose the right leads

A lead is a person or an organisation interested in the product

you're selling. However, not all leads are actual buyers.

A person might be interested in a product but has no intention of

buying it because they already have a similar one and do not have
enough budget. When approached by a salesperson, they might
make excuses to avoid the transition no matter how good the deal
is.

To save time and effort, companies need to choose the right

leads.

This is done through a process known as lead qualification. It

means choosing customers based on their willingness to purchase
the product and their budget. Companies can assess leads using a
scoring model, in-depth research, and a suitable framework. 1
The key is to narrow the list of prospective customers (to the ones
most likely to purchase) to reduce wasting marketing efforts.
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Personal selling process: create customer value

The personal selling process should always put the customer first.
This means the salesperson needs to listen to customers, provide
relevant information, and help them reach a good decision.
There should be no force-selling as it might destroy potential
buying in the future. The customer might purchase this time but
never return for another product.
The ultimate goal of personal selling should be to offer a solution
to the customer's problem.

Personal selling process: use stories

Genius entrepreneur and marketer Seth Godin once said:

People don't buy goods & services. They buy relations, stories,
and magic.
One key to personal selling is to deliver a good sales pitch. This
means keeping the audience's attention to the end and arousing
interest.

The way to do this is to use stories. Compile the sales pitch into a
true, consistent, and authentic story.
Q4. Define green marketing. What green marketing chosen by most marketing?

Ans. Green marketing refers to the practice of developing and

advertising products based on their real or perceived
environmental sustainability.

Examples of green marketing include advertising the reduced

emissions associated with a product’s manufacturing process, or
the use of post-consumer recycled materials for a product's
packaging. Some companies also may market themselves as being
environmentally-conscious companies by donating a portion of
their sales proceeds to environmental initiatives, such as tree
planting.

Appeals to a new market

By using green marketing strategies, companies can attract

different demographics. A growing number of consumers are
concerned with how large corporations are affecting the
environment.

Consumers want to know how products are made and how using
those products can impact the world they live in, and with green
marketing, an organization can attract these individuals. These
initiatives also help organizations compete against other
companies that may not implement environmentally friendly
practices.

Increases profitability and brand loyalty

Companies that are the first in their sector to offer a green

product or service benefit enormously from green marketing.
This strategy can help companies stand out from their
competitors, as environmentally conscious consumers
purposefully seek out companies with sustainable promises.
Therefore, green marketing can help businesses effectively
rebrand their products to increase profitability and brand loyalty.

Lowers overhead costs

Switching to environmentally conscious manufacturing processes

or using sustainable materials can sometimes lower a company's
overhead costs. By saving water and energy, a company's monthly
operating expenses can decrease substantially.

Using sustainable materials can drive waste disposal costs down

as well. Even using eco-friendly construction materials when
building offices, warehouses or manufacturing sites can save
companies money in the long run, as they often need less
maintenance and upkeep.

Helps the environment

Not only does true green marketing allow companies to garner

more profit and gain more loyal consumers, it helps the planet.
Companies that follow through on their promises can help
significantly slow climate change and conserve the environment.

This should be the main focus of green marketing techniques

because it is why consumers' attitudes and preferences shifted in
the first place — they want businesses to practice accountability.
Q5. Define personal selling. Discuss the process of personal selling?

Ans. Personal selling is an act of convincing the prospects to buy a

given product or service. It is the most effective and costly
promotional method. It is effective because there is face to face
conversation between the buyer and seller and seller can change its
promotional techniques according to the needs of situation. It is
basically the science and art of understanding human desires and
showing the ways through which these desires could be fulfilled.

According to American Marketing Association, “Personal selling is the

oral presentation in a conversation with one or more prospective
purchasers for the purpose of making sale; it is the ability to
persuade the people to buy goods and services at a profit to the
seller and benefit to the buyer”.

In the word of Professor William J. Stanton, “Personal selling consists

in individual; personal communication, in contrast to mass relatively
impersonal communication of advertising; sales promotion and
other promotional tools”.

Personal selling is a different form of promotion, involving two way

face-to-face communications between the salesmen and the
prospect. The result of such interaction depends upon how deep
each has gone into one another and reached the height of the
common understanding. Basically the essence of personal selling is
the interpretation of products and services benefits and features to
the buyer and persuading the buyer to buy these products and
services.

The process of personal selling includes prospecting and evaluating,

preparing, approach and presentation, overcoming objections,
closing the sale and a follow up service.

1. Prospecting and evaluating:

The effort to develop a list of potential customers is known as

prospecting. Sales people can find potential buyers, names in
company records, customer information requests from
advertisements, telephone and trade association directories, current
and previous customers, friends, and newspapers. Prospective
buyers predetermined, by evaluating (1) their potential interest in the
sales person’s products and (2) their purchase power.

2. Preparing:

Before approaching the potential buyer, the sales person should

know as much as possible about the person or company.

3. Approach and presentation:

During the approach, which constitutes the actual beginning of the

communication process, the sales person explains to the potential
customer the reason for the sales, possibly mentions how the potential
buyer’s name was obtained, and gives a preliminary explanation of what
he or she is offering. The sales presentation is a detailed effort to bring
the buyer’s needs together with the product or service the sales person
represents.

4. Overcoming objections:

The primary value of personal selling lies in the sales person’s ability to
receive and deal with potential customers’ objections to purchasing the
product. In a sales presentation many objections can be dealt with
immediately. These may take more time, but still may be overcome.

5. Closing the sale:

Many sales people lose sales simply because they never asked the buyer
to buy. At several times in a presentation the sales person may to gauge
how near the buyer is to closing.

6. Follow up:

To maintain customer satisfaction, the sales person should follow up after

a sale to be certain that the product is delivered properly and the
customer is satisfied with the result.
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