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1. Decision making in consumer purchasing behaviour of HIGH INVOLVEMENT
VS LOW INVOLVEMENT PRODUCTS.
 The level of involvement reflects how personally important or interested you
are in consuming a product and how much information you need to make a
decision.
LOW - INVOLVEMENT
 Some low-involvement purchases are made with no planning or previous
thought. These buying decisions are called impulse buying.
 Low-involvement decisions aren’t necessarily products purchased on impulse,
although they can be.
 Low-involvement products are often cheap and of low risk to the customer if
he or she makes an error by buying them.
 Low-involvement decisions are more straightforward, require little risk, are
repetitive, and often lead to a habit.
 In these cases, it may not be worth the consumer’s time and effort to search
for exhaustive information about different brands or to consider a wide range
of alternatives.
 A low-involvement purchase usually involves an abridged decision-making
process. In these situations, the buyer typically does little if any information
gathering, and any evaluation of alternatives is relatively simple and
straightforward.
 Products, such as chewing gum, which may be low-involvement for many
consumers often use advertising such as commercials and sales promotions
such as coupons to reach many consumers at once. Companies also try to sell
products such as gum in as many locations as possible.
HIGH - INVOLVEMENT
 By contrast, high-involvement decisions carry a higher risk to buyers if they
fail, are complex, and/or have high price tags. A car, a house, and an insurance
policy are examples. These items are not purchased often but are relevant and
important to the buyer.
 High-involvement decisions can cause buyers a great deal of postpurchase
dissonance (anxiety) if they are unsure about their purchases or if they had a
difficult time deciding between two alternatives. Companies that sell high-
involvement products are aware that postpurchase dissonance can be a
problem. Frequently, they try to offer consumers a lot of information about
their products, including why they are superior to competing brands and how
they won’t let the consumer down.
 Many products that are typically high-involvement such as automobiles may
use more personal selling to answer consumers’ questions. Brand names can
also be very important regardless of the consumer’s level of purchasing
involvement.
 In these cases, a buyer gathers extensive information from multiple sources,
evaluates many alternatives, and invests substantial effort in making the best
decision.
CONSUMER PURCHASING BEHAVIOUR (STEPS)
Stage 1. Need Recognition
 You plan to backpack around the country after you graduate and don’t have a
particularly good backpack. You realize that you must get a new backpack. You
may also be thinking about the job you’ve accepted after graduation and know
that you must get a vehicle to commute. Recognizing a need may involve
something as simple as running out of bread or milk or realizing that you must
get a new backpack or a car after you graduate. Marketers try to show
consumers how their products and services add value and help satisfy needs
and wants. Do you think it’s a coincidence that Gatorade, Powerade, and
other beverage makers locate their machines in gymnasiums so you see them
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after a long, tiring workout? Previews at movie theaters are another example.
How many times have you have heard about a movie and had no interest in
it—until you saw the preview? Afterward, you felt like you had to see it.
Stage 2. Search for Information
 For products such as milk and bread, you may simply recognize the need, go
to the store, and buy more. However, if you are purchasing a car for the first
time or need a particular type of backpack, you may need to get information
on different alternatives. Maybe you have owned several backpacks and know
what you like and don’t like about them. Or there might be a particular brand
that you’ve purchased in the past that you liked and want to purchase in the
future. This is a great position for the company that owns the brand to be in—
something firms strive for. Why? Because it often means you will limit your
search and simply buy their brand again.
 If what you already know about backpacks doesn’t provide you with enough
information, you’ll probably continue to gather information from various
sources. Frequently people ask friends, family, and neighbors about their
experiences with products. Magazines such as Consumer Reports (considered
an objective source of information on many consumer products) or
Backpacker Magazine might also help you. Similar information sources are
available for learning about different makes and models of cars.
 Internet shopping sites such as Amazon.com have become a common source
of information about products. Epinions.com is an example of consumer-
generated review site. The site offers product ratings, buying tips, and price
information. Amazon.com also offers product reviews written by consumers.
People prefer “independent” sources such as this when they are looking for
product information. However, they also often consult non-neutral sources of
information, such advertisements, brochures, company Web sites, and
salespeople.
Stage 3. Product Evaluation
 Obviously, there are hundreds of different backpacks and cars available. It’s
not possible for you to examine all of them. In fact, good salespeople and
marketing professionals know that providing you with too many choices can
be so overwhelming that you might not buy anything at all. Consequently, you
may use choice heuristics or rules of thumb that provide mental shortcuts in
the decision-making process. You may also develop evaluative criteria to help
you narrow down your choices. Backpacks or cars that meet your initial
criteria before the consideration will determine the set of brands you’ll
consider for purchase.
 Evaluative criteria are certain characteristics that are important to you such
as the price of the backpack, the size, the number of compartments, and color.
Some of these characteristics are more important than others. For example,
the size of the backpack and the price might be more important to you than
the color—unless, say, the color is hot pink and you hate pink. You must
decide what criteria are most important and how well different alternatives
meet the criteria.
 Companies want to convince you that the evaluative criteria you are
considering reflect the strengths of their products. For example, you might
not have thought about the weight or durability of the backpack you want to
buy. However, a backpack manufacturer such as Osprey might remind you
through magazine ads, packaging information, and its Web site that you
should pay attention to these features—features that happen to be key selling
points of its backpacks. Automobile manufacturers may have similar models,
so don’t be afraid to add criteria to help you evaluate cars in your
consideration set.
Stage 4. Product Choice and Purchase
 With low-involvement purchases, consumers may go from recognizing a need
to purchasing the product. However, for backpacks and cars, you decide which
one to purchase after you have evaluated different alternatives. In addition to
which backpack or which car, you are probably also making other decisions at
this stage, including where and how to purchase the backpack (or car) and on
what terms. Maybe the backpack was cheaper at one store than another, but
the salesperson there was rude. Or maybe you decide to order online because
you’re too busy to go to the mall. Other decisions related to the purchase,
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particularly those related to big-ticket items, are made at this point. For
example, if you’re buying a high-definition television, you might look for a
store that will offer you credit or a warranty.
Stage 5. Postpurchase Use and Evaluation
 At this point in the process you decide whether the backpack you purchased
is everything it was cracked up to be. Hopefully it is. If it’s not, you’re likely to
suffer what’s called postpurchase dissonance. You might call it buyer’s
remorse. Typically, dissonance occurs when a product or service does not
meet your expectations. Consumers are more likely to experience dissonance
with products that are relatively expensive and that are purchased
infrequently.
 You want to feel good about your purchase, but you don’t. You begin to
wonder whether you should have waited to get a better price, purchased
something else, or gathered more information first. Consumers commonly
feel this way, which is a problem for sellers. If you don’t feel good about what
you’ve purchased from them, you might return the item and never purchase
anything from them again. Or, worse yet, you might tell everyone you know
how bad the product was.
 Companies do various things to try to prevent buyer’s remorse. For smaller
items, they might offer a money back guarantee or they might encourage their
salespeople to tell you what a great purchase you made. How many times
have you heard a salesperson say, “That outfit looks so great on you!” For
larger items, companies might offer a warranty, along with instruction
booklets, and a toll-free troubleshooting line to call or they might have a
salesperson call you to see if you need help with product. Automobile
companies may offer loaner cars when you bring your car in for service.
 Companies may also try to set expectations in order to satisfy customers.
Service companies such as restaurants do this frequently. Think about when
the hostess tells you that your table will be ready in 30 minutes. If they seat
you in 15 minutes, you are much happier than if they told you that your table
would be ready in 15 minutes, but it took 30 minutes to seat you. Similarly, if
a store tells you that your pants will be altered in a week and they are ready
in three days, you’ll be much more satisfied than if they said your pants would
be ready in three days, yet it took a week before they were ready.
2. BREAK EVEN ANALYSIS
BENEFITS
 Focuses entrepreneur on how long it will take before a start-up reaches
profitability – i.e. what output or total sales is required
 Helps entrepreneur understand the viability of a business proposition, and
also those who will lend money to, or invest in the business
 Margin of safety calculation shows how much a sales forecast can prove over-
optimistic before losses are incurred
 Helps entrepreneur understand the level of risk involved in a start-up
 Illustrates the importance of a start-up keeping fixed costs down to a
minimum (higher fixed costs = higher break-even output)
 Calculations are quick and easy – great for giving quick estimates
(enables a business organization to:)
 Measure profit and losses at different levels of production and sales.
 Predict the effect of changes in sales prices.
 Analyze the relationship between fixed and variable costs.
 Predict the effect of cost and efficiency changes on profitability.
LIMITATIONS
 Unrealistic assumptions – products are not sold at the same price at different
levels of output; fixed costs do vary when output changes
 Sales are unlikely to be the same as output – there may be some build up of
stocks or wasted output too
 Variable costs do not always stay the same. For example, as output rises, the
business may benefit from being able to buy inputs at lower prices (buying
power), which would reduce variable cost per unit.
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 Most businesses sell more than one product, so break-even for the business
becomes harder to calculate
 Break-even analysis should be seen as a planning aid rather than a decision-
making tool
 Assumes that sales prices are constant at all levels of output.
 Assumes production and sales are the same.
 Break even charts may be time consuming to prepare.
 It can only apply to a single product or single mix of products.
3. BCG MATRIX
1) Cash Cows in the BCG MATRIX
The cornerstone of any multi product business, cash cows are products which are
having a high market share in a low growing market. As the market is not growing,
that cash cow gains the maximum advantage by generating maximum revenue due
to its high market share. Thus for any company, the cash cows are the ones which
require least investment but at the same time give higher returns. These higher
returns enhance the overall profitability of the firm because this excess revenue
can be used in other businesses which are Stars, Dogs or Question marks.
Strategies for cash cow – The cash cows are the most stable for any business and
hence the strategy generally includes retention of the market share. As the market
is not growing, acquisition is less and customer retention is high. Thus customer
satisfaction programs, loyalty programs and other such promotional methods
form the core of the marketing plan for a cash cow product / SBU.
Strategic choices: Product development, diversification, divestiture, retrenchment
2) Stars in the BCG Matrix
The best product which comes in mind when thinking of Stars is the telecom
products. If you look at any top 5 telecom company, the market share is good but
the growth rate too is good. Thus because these two factors are high, the telecom
companies are always in competitive mode and they have to juggle between
investment and harvesting vis investing money and taking out money time to time.
Unlike cash cows, Stars cannot be complacent when they are top on because they
can immediately be overtaken by another company which capitalizes on the
market growth rate. However, if the strategies are successful, a Star can become
a cash cow in the long run.
Strategies for Stars – All types of marketing, sales promotion and advertising
strategies are used for Stars. This is because in cash cow, already these strategies
have been used and they have resulted in the formation of a cash cow. Similarly,
in Stars, because of the high competition and rising market share, the
concentration and investment needs to be high in marketing activities so as to
increase and retain market share.
Strategic choices: Vertical integration, horizontal integration, market penetration,
market development, product development
3) Question Marks in the BCG Matrix
Several times, a company might come up with an innovative product which
immediately gains good growth rate. However, the market share of such a product
is unknown. The product might lose customer interest and might not be bought
anymore in which case it will not gain market share, the growth rate will go down
and it will ultimately become a Dog.
On the other hand, the product might increase customer interest and more and
more people might buy the product thus making the product a high market share
product. From here the product can move on to be a Cash Cow as it has lower
competition and high market share. Thus, Question marks are products which may
give high returns but at the same time may also flop and may have to be taken out
of the market.
This uncertainty gives the quadrant the name “Question Mark”. The major
problem associated with having Question marks is the amount of investment
which it might need and whether the investment will give returns in the end or
whether it will be completely wasted.
Strategies for Question marks – As they are new entry products with high growth
rate, the growth rate needs to be capitalized in such a manner that question marks
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turn into high market share products. New Customer acquisition strategies are the
best strategies for converting Question marks to Stars or Cash cows. Furthermore,
time to time market research also helps in determining consumer psychology for
the product as well as the possible future of the product and a hard decision might
have to be taken if the product goes into negative profitability.
Strategic choices: Market penetration, market development, product
development, divestiture
4) Dogs in the BCG matrix
Products are classified as dogs when they have low market share and low growth
rate. Thus, these products neither generate high amount of cash nor require
higher investments. However, they are considered as negative profitability
products mainly because the money already invested in the product can be used
somewhere else. Thus, over here businesses have to take a decision whether they
should divest these products or they can revamp them and thereby make them
saleable again which will subsequently increase the market share of the product.
Strategies for Dogs – Depending on the amount of cash which is already invested
in this quadrant, the company can either divest the product altogether or it can
revamp the product through rebranding / innovation / adding features etc.
However, moving a dog towards a star or a cash cow is very difficult. It can be
moved only to the question mark region where again the future of the product is
unknown. Thus, in cases of Dog products, divestment strategy is used.
Strategic choices: Retrenchment, divestiture, liquidation
Strategies based on the BCG Matrix.
There are four strategies possible for any product / SBU and these are the
strategies which are used after the BCG analysis. These strategies are
1) Build – By increasing investment, the product is given an impetus such that
the product increases its market share. Example – Pushing a Question mark into
a Star and finally a cash cow (Success sequence)
2) Hold – The company cannot invest or it has other investment commitments
due to which it holds the product in the same quadrant. Example – Holding a
star there itself as higher investment to move a star into cash cow is currently
not possible.
3) Harvest – Best observed in the Cash cow scenario, wherein the company
reduces the amount of investment and tries to take out maximum cash flow from
the said product which increases the overall profitability.
4) Divest – Best observed in case of Dog quadrant products which are generally
divested to release the amount of money already stuck in the business.
Thus the BCG matrix is the best way for a business portfolio analysis. The
strategies recommended after BCG analysis help the firm decide on the right line
of action and help them implement the same.
4. Decision-making model of change in distribution.
Why Should You Re-Assess Your Distribution Strategy?
Reason 1: The Company Enters a New Market
If you decide to explore a new market that the existing distributors do not service,
you have the perfect opportunity to start fresh.
Reason 2: Distribution is Loosing Business to Competing Channels
It’s a fact: some type of retailers just can’t keep up with the modern day
competition. For example small mom and pop shops are loosing business to big
retail chains that are able to provide a wider product assortment at much lower
prices. If you sell your products through these smaller distributors, you are
probably experiencing flat sales. While they might represent a solid foundation
because of their loyalty, in order to grow sales you will have to complement this
channel with a more dynamic one.
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Reason 3: Existing Distribution Does Not Provide Enough Margin 6. Service quality – SERQUAL (5 dimensions).

Selling through big box stores might look like the ideal model because of the TANGIBLES
volume they generate. However, they are also famous for squeezing the
manufacturer of the last marketing dollar for things such as advertising and RELIABILITY
product placement. Their strict product placement rules, aggressive promotion of
their private label brands and lack of loyalty are also well documented. So if you RESPONSIVENESS
find that the existing distribution channel does not provide enough ROI then it’s
ASSURANCE
time to explore more profitable channels such as the Internet.
EMPATHY
5. Application of marketing mix (elements) & positioning strategies for new
product launched.
Appearance of physical facilities, equipment, personnel,
and communication materials
Ability to perform the promised service dependably and
accurately
Willingness to help customers and provide prompt service
Knowledge and courtesy of employees and their ability to
convey trust and confidence
Caring, individualized attention the firm provides its
customers