Chapter 3 – Analyzing Consumer Markets

 Consumer Buying Behavior - Consumer buying behavior is the study of

individuals, groups, or organizations and the processes they use to select, secure,
use, and dispose of products, services, experiences, or ideas to satisfy needs and
the impacts that these processes have on the consumer and society.
 Factors Affecting Consumer Behavior: There are 5 factors –
 Cultural: Culture is the most fundamental determinant of a person’s want and
behavior. Culture is a set of beliefs and values that are shared by most people
within a group. Each culture consists of smaller sub-cultures that provide more
specific identification and socialization for their members. Sub-culture refers to
a set of beliefs shared by a subgroup of the main culture, which include
nationalities, religions, racial groups and geographic regions. Consumer
behavior is determined by the social class to which they belong. Consumer
behavior is also determined by the social class to which the consumer belongs.
 Social: Our behavior patterns, likes and dislikes are influenced by the people
around us to a great extent. We always seek confirmation from the people
around us and seldom do things that are not socially acceptable. The social
factors influencing consumer behavior are -
a) Family, b) Reference Groups, c) Roles and status.

A reference group is a group of people with whom an individual associates. It is

a group of people who strongly influence a person’s attitudes values and
behavior directly or indirectly.

A person participates in many groups like family, clubs, and organizations. The
person’s position in each group can be defined in terms of role and status.
People tend to choose products that communicate their role and status in
society.

There are two types of families in the consumer’s life - Family of orientation
(father, mother, siblings, etc.) and Family of procreation (spouse, children).
Family members can strongly influence the buyer behavior and the decision-
making process involved in the purchase of goods and services.

 Personal: The important personal factors, which influence buyer behavior

include -
a) Age, b) Occupation, c) Income and d) Lifestyle
 Consumers buy different products at their different age ranges. Their taste,
preference, etc. also change with change with age.
The lifestyles and buying considerations and decisions differ widely according
to the nature of the occupation.

Income is an important source of purchasing power. So, buying pattern of

people differs with different levels of income.

Lifestyle to a person’s pattern or way of living as expressed in his activity,

interests and opinions that portrays the 'whole person' interacting with the
environment

 Psychology: There are four important psychological factors affecting the

consumer buying behavior. These are: perception, motivation, memory, and
emotion.

The level of motivation also affects the buying behavior of customers. Every
person has different needs such as physiological needs, biological needs, social
needs etc. The nature of the needs is that some of them are most pressing
while others are least pressing. Therefore, a need becomes a motive when it is
more pressing to direct the person to seek satisfaction.

There are three different perceptual processes (perceptions) which are

selective attention, selective distortion and selective retention. In case
of selective attention, marketers try to attract the customer attention.
Whereas, in case of selective distortion, customers try to interpret the
information in a way that will support what the customers already believe.
Similarly, in case of selective retention, marketers try to retain information that
supports their beliefs.

Working memory can be described as an information of limited amount that

can be stored in accessible state and making it useful for many tasks. There
are both short-term and long-term memories that subconsciously influence
consumers' buying behavior. A brand association is a mental connection a
customer makes between your brand and a concept, image, emotion,
experience, person, interest, or activity. This association can be immediately
positive or negative and it heavily influences purchase decisions. Encoding is
transforming internal thoughts and external events into short term and long-
term memory. Memory Encoding is the initial learning of information. It is
how the information coming from sensory input is changed into a form so it can
be stored in the brain.
 Emotions create preferences which lead to purchase decisions. Consumers
prefer brand name products because of the emotional attachment they have to
them. In some cases, emotions from the past involving similar experiences
could also influence the choices consumers consider. Two important
associations with brands that are emotion related are brand personality and
narrative.

 Economic: When consumers experience a positive economic environment,

they are more confident to spend on buying products. Whereas a weak
economy reflects a struggling market that is impacted by unemployment and
lower purchasing power.

Economic factors bear a significant influence on the buying decision of a

consumer. Some of the important economic factors are: Personal income,
Family income, Consumer credit, Liquid assets, and Savings.

 Buying Decision Process - Consumer decision journey is a model of the customer

buying process that describes how consumers make their decisions throughout their
experience or relationship with the brand. The consumer’s decision journey is not a
linear model, so the actions they describe overlap and repeat until the purchase
decision.
 5 Stages of Consumer Decision Making Journey: The five stages include –

 Need/Problem Recognition: This phase of the decision-making process

starts with individuals trying to identify their needs and then searching for
information that will help them satisfy those needs. At this point, consumers
are not yet aware of what they want or don’t want, but they are very interested
in knowing more about what they might need.

Drivers behind recognition of a need would include depletion (a product has

gotten over), dissatisfaction with current product, social influences (opinions of
friends and family), and changes in lifestyle and goals (birth of child, job
promotion, etc.).

 Information Search: The information-gathering phase involves - individual

gathering information about a product, evaluating it, and deciding whether to
purchase it. There are three main steps: searching for relevant product
information, gathering opinions from other people on what they think about the
 product (heightened attention), and general research about the product (active
information search).

Information sources include personal (family and friends), commercial (e-mails,

websites, salespeople, etc.), public (social media, ads, ratings, etc.), and
experiential (in-store experiences, or experiencing the product in proximity to a
current user).

Typically, consumers shortlist products in this fashion - Total set (larger list) 
Awareness set (known brands)  Consideration set (positive affinity or social
influence)  Choice set (based on research and reviews)  Choice (final
preference)

Customers also come up with awareness sets based on brand affinity (popular
brands) or country of origin (German products are considered to be cutting-
edge).

 Evaluation of Alternatives: When consumers have several options to choose

from and they are weighing the costs and benefits, they will use different
criteria to evaluate each alternative before choosing which one will be best for
them. This stage moves people closer to their final decisions about what they
want to buy.

A consumer’s beliefs and attitude towards a brand or product influences their

decision to buy. There are various ways in which a consumer processes and
evaluates all the information available to them, before making a buying
decision. One way they do is using the expectancy-value model, where brand
attributes are weighted. A consumer's beliefs about each brand's attributes are
multiplied by the respective weights to produce a preference ranking of the
alternatives.

 Purchase Decision: The purchase decision typically occurs in-store or online

at that point in time after having completed some form of price comparison
research. Consumers may be undecided about which product or service they
want to buy but are already leaning towards one option over another because
they have done preliminary research into its price and quality attributes.

Sometimes, rather than going through elaborate evaluation processes,

consumers use decision heuristics (mental shortcuts that can facilitate
problem-solving and probability judgments), to make a choice. Sometimes,
 marketers use a technique called ‘Choice Architecture’ to give consumers a
nudge (stimulus) towards buying their product/service. This is done by the
presentation of the choices in a certain way to extract the desired outcome.

There are two means of persuasion with the expectancy-value model - the
central route, where attitude formation or change involves much thought and
is based on a diligent, rational consideration of the most important product or
service information; and the peripheral route, where attitude formation or
change involves comparatively much less thought and is a consequence of the
association of a brand with either positive or negative peripheral cues.
There are two factors that can intervene between the purchase intention and
purchase decision. These are – attitude of others and situational considerations
(like loss of job, loss of interest, etc.).

 Post-purchase Behavior: It describes the way a customer thinks, feels, and

acts after they have bought something. This is where they follow through with
their purchase by using the product or service and testing it out. For instance,
examining the receipts, understanding how to use the product, going back and
make more purchases from the same company, etc.

Post-purchase dissonance happens when a customer feels that they have been
misled or fooled into buying something that was not what they were
expecting. As a marketer, one of the most important steps to take is ensuring
that your customer’s post-purchase experience is as smooth and enjoyable as
possible. It’s also important to remind consumers about replenishing or
repurchasing.

 Conjunction Fallacy: It is a fallacy or error in decision making where people judge

that a conjunction of two possible events is more likely than one or both of the
conjuncts.

 Associative Network Model: Associative networks are cognitive models that

incorporate long-known principles of association to represent key features of human
memory. When two things (e.g., “bacon” and “eggs”), called nodes, are thought
about simultaneously, they may become linked in memory.

Chapter 4 –Analyzing Business Markets

 Business Markets: A business market is a sales market in which businesses sell to
other businesses, including both retail and wholesale. With a business-to-business
(B2B) transaction, the buyer company purchases products from a seller company,
then uses those products to aid in the production of other goods or resells the
purchased products directly to the consumer.
 Differences between Business and Consumer Markets: Some key differences
include –
 Fewer buyers, who purchase larger quantities
 Close supplier – customer relationships. They may even buy from each other.
 Professional purchasing/procurement processes
 Several buying influences – senior leaders, product and functional experts, etc.
 Derived demand from consumer markets
 Demand is more inelastic in the short run than consumer markets, because
consumers can quickly switch suppliers
 High demand fluctuation owing to a larger percentage increase in demand for
plant and equipment
 Buyers are generally concentrated in the same geographic region
 Businesses often buy directly from manufacturers, eliminating the need for
intermediaries

 Buying Situations: The business buying situations are distinguished by four

characteristics – like newness to decision makers, number of alternatives to be
considered, inherent uncertainty in the buying decision, and the amount of
information required for making a buying decision.
 New Buy: A buying situation in which the customer has no previous
experience with the purchase of a product within a given category.
 Modified Rebuy: A buying situation in which the customer buys goods that
have been purchased previously but changes the supplier or some term of a
previous order.
 Straight Rebuy: A buying situation in which the customer buys the same
goods on the same terms from the same supplier.
 Buying Centers: Buying centers refer to the groups of people from within or
outside a company who have a certain degree of influence on the buying process.
Everyone in the buying center can perform one or a few of these roles –
  Initiator: Someone who notices the problem or the new opportunity and voices
out the new requirements.
 User: Someone who is actually going to use the product and feels the need for
it.
 Influencer: Someone significant, possibly from the outside of an organization,
whose opinion can influence the buying decision.
 Deciders: People who take a call on the suppliers and product requirements.
 Gatekeeper: Someone who controls the flow of information in the organization.
For instance, the receptionist.
 Decision-Maker or Approvers: Someone who makes a final call and approves
the purchase.
 Buyer: Someone who formally buys the solution. Their role is to select vendors
and negotiate terms.

 Selling to Buying Centers: The buying centers comprise of people with varied
interests, influences, thought processes, and lineages. They could be from various
departments within the organization, and they could each have a different agenda
while evaluating potential suppliers. Hence, it’s important for marketers to have
insights into the participants in the buying centers.

 Buying Process for Businesses: Businesses usually have a more formal approach
toward purchasing. Rather than make impulse purchases, businesses will compare
prices, compare suppliers, and compare the quality of goods and services before
completing a sale. Here are a few of the key steps involved –
 Problem Recognition: The purchasing process does not begin until someone
identifies a problem within the organization, which can be solved by
purchasing a good or service. Anyone within the organization can initiate this,
triggered by a machine breakdown, unsatisfactory performance of current
product, or owing to some external stimuli.
 Need Description: After a problem is identified, the organization determines
which product or service is required. The stakeholders in the buying center
describe what they believe is needed, the features it should have, how much of
it is needed, where, and so on.
 Product Specification: The company will typically assign a product-value-
analysis engineering team to the project. Product Value analysis is a
systematic review of the production, purchasing and product design processes
to reduce overall product costs. Suppliers can use this tool to position
themselves as a key contender.
  Supplier Search: If the company doesn't already have an established
relationship with a vendor that offers the product, then often the company
must look online, attend trade shows, contact suppliers by mail/phone, etc.
Purchasers determine if the suppliers are reputable, financially stable and if
they'll be around for future requirements.

 Proposal Solicitation: For large purchases, organizations usually write out a

formal RFP (Request for Proposal) and then send it to their preferred suppliers.
An RFP outlines what the vendor can offer in terms of its product—its quality,
price, financing, delivery, after-sales service, whether it can be customized or
returned, etc. Alternatively, they may make the process public so that anyone
can send in a proposal. For smaller purchases, this could be as simple as
looking at the price on a website.
 Supplier Selection: Supplier proposals and prices are evaluated to determine
who is offering the best price and the best quality. Often, price alone is NOT
enough to win an organization's business, as many businesses will weigh the
price against financing options, supplier reputation, supply reliability, and
whether a supplier can provide the organization with future goods and
services.
 Contract Negotiation: The actual order is put together at this stage. The
order includes the agreed-upon price, quantities, expected time of delivery,
return policies, warranties, and any other terms of negotiation. It can also be a
one-time order or be a blanket order (a.k.a stockless purchase plans). In some
cases, businesses shift the responsibility of inventory replenishment to the
supplier – this is called vendor-managed inventory.
 Performance Review: After the product has been delivered or the service
has been performed, the organization will review the purchase to see if it
meets acceptable standards. Some buyers establish on-time performance,
quality, customer satisfaction, and other measures for their vendors to meet,
and provide those vendors with the information regularly, such as trend
reports that show if their performance is improving, remaining the same, or
worsening.

 Systems Selling and Buying: Many business buyers prefer to buy a total solution
to a problem from one seller, rather than buying different components from different
sellers. Systems selling is the process of selling interrelated goods or services
together as a package rather than selling them separately or independently. Under
systems selling, the goods that are clubbed together are mostly complimentary
goods. For e.g., large govt deals, or defense projects, etc.
 Corporate Credibility: It’s the extent to which consumers believe that a firm can
design and deliver products and services that satisfy customer needs and wants.

 Opportunism: A behavior that is self-interest seeking, with guile. It is manifested in

behaviors such as stealing, cheating, dishonesty, and withholding information.
Opportunism negatively impacts relational exchange tenets such as trust,
commitment, cooperation, and satisfaction.

Chapter 5 – Conducting Market Research

 Marketing Research: It is the systematic collection, analysis, and interpretation of

data to help solve marketing challenges. The fundamental reason for carrying out
marketing research is to find out the change in the consumer behavior, owing to the
change in the elements of the marketing mix (product, price, place, promotion).
Market research is a vital element when developing the marketing strategy. When
done correctly, it can provide the solution to many key marketing activities – such
as understanding the requirements of your target audience, helping to understand
what key messages you should convey and how to convey them.
 Marketing Insights: Insights are a crucial part of developing and implementing
marketing campaigns. Marketing insights are collections of data that provide
marketers with valuable information on the wants and needs of the brand's target
demographic. It differs from regular data science in that the numbers themselves
are only representative of the insights. What really matters are the conclusions the
marketers can make based on these sets of data, such as which times of year are
best for business or which demographics are most likely to engage with their good
or service.
 Types of Market Research Firms: There are primarily three types –
 Syndicated: Looks at the market requirements and prepares their reports
accordingly. For instance, AC Nielsen regularly create reports on buying
patterns, industry analysis and sector analysis, which is then sold at a cost to all
companies.
 Custom: They prepare custom reports based on the customer’s needs.
 Specialty: They are involved with in depth analysis of a customer’s specific
requirements. Their specialty lies is conducting market feasibility studies for
specific industries or segments.
 Marketing Research Process: The MR process includes five steps –
1. Define the problem. Focus on the core customer challenge to solve. The
research could be exploratory (goal is to identify problem and suggest possible
solution), descriptive (seeks to quantify demand), or casual (to test cause-and-
effect relationship).
2. Develop the research plan. Create a roadmap that includes identifying the
target audience, research tools, approach/sampling plan, contact methods,
timeline, and other resources for the project.
Research can be done either using primary data or secondary data. Researchers
mostly look to use secondary data to save on costs, unless the data is not
reliable, in which case they will have to look at collecting primary data. Primary
data can be gathered through Observation, Ethnographic, Focus Groups,
Surveys, Behavioral Data, and Experiments.

Observational Research is collected by observing customers shop or consume

products, in an unobtrusive way.
Ethnography is a qualitative method for collecting data often used in the social
and behavioral sciences. Ethnographic research is typically conducted by
anthropologists who aim to understand a particular culture or society from an
insider’s perspective. It often relies heavily on qualitative data collected through
participant observation and interviews.
A focus group is a research method that brings together a small group of people
to answer questions in a moderated setting. The group is chosen due to
predefined demographic traits, and the questions are designed to shed light on
a topic of interest.
Survey research means collecting information about a group of people by
asking them questions and analyzing the results. It can be used to study a wide
variety of basic and applied research questions.
Behavioral research observes the behavior of customers to come out with
insights on how to improve the product or the presentation of the product for
the customers.

3. Gather information. Whether surveys, interviews or other methods are used,

researchers gather and organize data. They can rely on qualitative and/or
quantitative data to help them get started.
4. Analyze the data. Review the data for meaningful insights and home-in on key
points that will help inform the marketing campaigns and strategies.
 5. Develop a strategy. Determine how the business can shape future products and
services with the marketing research.
6. Take action. Plan those next steps, which may include new product
development, further concept testing, a new product launch, or a fresh
marketing campaign.
 Physiognomy
 Neuromarketing
 Market Mix Modeling (MMM): It is a technique which helps in quantifying the
impact of several marketing inputs on sales or market share. The purpose of using
MMM is to understand how much each marketing input contributes to sales, and how
much to spend on each marketing input.
 Measurement Pathways:
 The customer metrics pathway looks at how prospects become customers.
 The cash-flow metrics pathway focuses on efficiency of marketing expenditures
in achieving short-term returns
 The brand metrics pathway seeks to track the development of the longer-term
impact of marketing through brand health
 The unit metrics pathway is used to describe the process of tracking and
measuring the success of specific marketing activities or initiatives.

Chapter 6 – Identifying Market Segments and Target Customers

 Targeting: Breaking the target audience into segments and then designing
marketing activities that will reach the segments most likely to be responsive to
your efforts.
 Mass Marketing vs. One-to-One Marketing: Mass marketing is where a firm
tries to satisfy the entire market, and there’s no customer segmentation. One-to-one
marketing is where the firm offers customized solution by differentiating customer
needs and treats individual customers separately with different offers.
 Strategic vs. Tactical Targeting: Strategic marketing outlines what you are
trying to achieve, while tactical marketing covers how you will try to achieve it.
Strategic marketing involves defining the bigger picture and answering the big
questions about what you want to accomplish. Tactical marketing gets into the
weeds to discover what actions will best serve the strategy. They are NOT mutually
exclusive.
 A key strategic targeting trade-off is to forgo/sacrifice a few customers, in the
interest of catering to and retaining a larger group of customers.
 Core Competencies: Resources and capabilities that comprise the strategic
advantages of a business. A modern management theory argues that a business
must define, cultivate, and exploit its core competencies to succeed against the
competition.
 Product Specialization: It’s a marketing technique where businesses focus their
marketing or branding efforts on a specific product or product line. These marketing
efforts often focus on the benefits and quality of the product that may attract
potential customers.
 Market Specialization: In this coverage pattern, you concentrate on a specific
segment and provide a variety of products or variations of a product which match
the benefits that customers in that segment care about.
 Market Segmentation: It is the process of dividing the market into subsets of
customers who share common characteristics. The four pillars of segmentation
marketers use to define their ideal customer profile (ICP) are demographic,
psychographic, geographic, and behavioral.
 Demographic Segmentation: It is a precise form of audience identification
based on data points like age, gender, marital status, family size, income,
education, race, occupation, nationality, and/or religion. It's among the four
main types of marketing segmentation, and perhaps the most used method.
 Behavioral Segmentation: It’s the process of dividing the market into minor
groups based on people’s buying habits, needs, and wants. Customers
performing similar buying patterns can be clubbed together in a group that will
be targeted with higher precision.
 Geographic Segmentation: It’s a marketing strategy to target products or
services based on where consumers reside. Division in terms of countries,
states, regions, cities, colleges or areas is done to understand the audience and
market a product/service accordingly.
 Psychographic Segmentation: A market segmentation technique where
groups are formed according to psychological traits that influence consumption
habits drawn from people’s lifestyle and preferences. It is mainly conducted on
the basis of “how” people think and “what” do they aspire their life to be.
 VAL’s Framework: This framework helps split the addressable markets into
different groups according to the psychometric behavior of customers. It explains
how each customer would behave differently in terms of Values, Attitudes, and
Lifestyles often termed together as VAL. It classifies US adults into 8 primary groups
in terms of their responses to a questionnaire featuring 4 demographic and 35
attitudinal questions.
 Pareto Principle: It states that for many outcomes, roughly 80% of consequences
come from 20% of causes (the "vital few"). Other names for this principle are the
80/20 rule, the law of the vital few, or the principle of factor sparsity.
 Behavioral Decision Theory: It examines the psychological underpinnings of
human judgment, decision making, and behavior. Traditionally, normative decision
theory has studied decision phenomena and has assumed the rationality of
individuals and the concept of a “homo economics” that is capable of such rational
decision making.

Chapter 10 – Building Strong Brands

 Brand: A brand is a name, term, design, symbol or any other feature that
distinguishes one seller's good or service from those of other sellers.
 Branding: It is the process of giving a meaning to specific organization, company,
products or services by creating and shaping a brand in consumers’ minds. It is a
strategy designed by organizations to help people to quickly identify and experience
their brand and give them a reason to choose their products over the competition’s,
by clarifying what this brand is and is not.
 Strategic Brand Management: It is meant to support companies in getting (or
improving) brand recognition, boosting revenue, and achieving long-term business
goals.
 Brand Equity: It refers to a value premium that a company generates from a
product with a recognizable name when compared to a generic equivalent.
Companies can create brand equity for their products by making them memorable,
easily recognizable, and superior in quality and reliability.
 Brand Power: It is an intangible asset reflecting the dependability, familiarity, and
value of a company's products and services.
 Brand Audit: It’s a process of assessing your brand’s current position in the
market. The brand audit allows you to spot strengths and opportunities and
compare your company to your competitors. The process provides you with a health
check of your company. As a result, you will get a list of actionable insights you can
implement to boost your company’s overall results.
 Brand Essence: It’s also known as a Brand Mantra, and it is a short statement that
expresses the core of what that brand represents or the image it seeks to project. A
brand essence statement is often just two to three words. Although formats can
vary, the statement's tone is most important.
 Brand Personality: It is the process of bringing a human element to a company
brand or product through a set of recognizable personality traits. It’s an effective
 tool that can differentiate a brand and enhance customer perception. Or, put
another way — it is the set of human characteristics you attribute to that brand.
 Brand Hierarchy (a.k.a brand architecture): It refers to the organization of
brand elements as an attempt to use corporate brand equity to increase brand
recognition. It summarizes the branding strategy by grouping the company’s
products and services accordingly to their similarities and differences.
 Brand Portfolio: It is the collection of smaller brands that fall under a larger,
overarching 'brand umbrella' set by a firm, company, or conglomerate. The roles of
brands in a portfolio include –
 Flankers (or fighters): Positioned with respect to the competitors’ brands
so that the flagship or more important brands are protected. Care should be
taken so as not to cannibalize the flagship brand.
 Cash Cows: These may be showing falling sales but still command decent
profits despite less marketing support.
 Low-End Entry Level: Relatively low-priced brands designed to attract the
first-time consumer to the brand franchise. These customers can later be
‘traded up’ to higher-priced brands.
 High-End Prestige: Higher-priced brands to add prestige and credibility to
the entire portfolio

 House Of Brands: It is a brand architecture strategy that markets a company's

various products or services independently from one another. Under this method,
each brand within an organization has its own unique messaging to reach a target
audience. E.g., P&G, Unilever
 Branded House: It is a strategy where more than one company's products are sold
under one name/branding umbrella. This approach is optimal if the master
brand/company wants more control over the end product's production, distribution,
and cost. E.g., Apple, Google, etc.
 Sub-Brand: It’s an extension or subsidiary of the main brand that has its own
name, identity, and positioning. It can be used to target new markets or launch new
products without diluting the main brand. E.g., Coca cola, McDonald’s, Hilton,
Samsung, Reliance, etc.
 Flagship Product: A major product of a company, which is typically why the
company was founded and/or what made it well known.
 Brand Extension: It is the introduction of a new product that relies on the name
and reputation of an established product. Brand extension works when the original
and new products share a common quality or characteristic that the consumer can
immediately identify. E.g., Dove, Sunsilk, Townbus
 Brand Variants: Variants are different versions of the same product, distinguished
by features such as flavor, price, quality or calorie content, etc.
 Co-branding: It is a form of partnership, where two companies or brands share
their brand names, logos, etc., on one project, one product, or one piece of software.
Co-branding presents one offer, using the combined resources and marketing power
of two (or more) brands to sell it.
 Ingredient Branding: It is a specific form of brand collaboration, distinct from co-
branding that highlights a specific component or brand attribute to enhance a
product or service that can potentially become a category point-of-parity, create
multi-level visibility, awareness, differentiation, and preference in the down-stream
value chain. E.g., Intel Inside.
 Brand Value Chain: It dictates the process, from start to finish, of how a brand
creates value. Using a brand value chain model guides a company through
necessary steps needed to improve their value.
 Brand Repositioning: It is how a business alters a brand's position in the market
while keeping its identity intact. Changes to the marketing strategy, such as
product, price, location, or promotion, are frequently made as part of this process.
 Line Extension: It refers to the process of expanding an existing product line. This
is when a company with an established brand introduces additional items in a
product category. The company uses the value of the existing product to market
and introduce new choices to consumers. The goal of line extension is to satisfy a
refined customer segment in the market. E.g., Coca-Cola
 Brand Dilution: It happens when a company's brand equity diminishes due to an
unsuccessful brand extension, which is a new product the company develops in an
industry that they don't have any market share in.

Chapter 19 – Building Customer Loyalty

 Customer Acquisition Funnel: This funnel outlines the stages that customers go
through before making a purchase. The steps are summarized as -
Awareness  Appeal  Ask  Act  Advocate
 Customer Conversion Rate: It is the percentage of potential customers who take
a specific desired action.
 Customer Retention Rate: It’s the percentage of existing customers who remain
customers after a given period. Your customer retention rate can help you better
understand what keeps customers with your company and can also signal
opportunities to improve customer service.
 Maslow’s Hierarchy of Needs: It is a
motivational theory in psychology comprising a
multi-tier model of human needs, often depicted
as hierarchical levels within a pyramid. Maslow
used the terms "physiological", "safety", "social
needs", "esteem needs", and "self-actualization"
to describe the pattern through which human
needs and motivations generally move.
 Mystery Shopping: It is a process in which a
person visits a retail store, restaurant, bank branch or any such location with the
objective of measuring the quality of customer experience. Mystery shoppers visit
the store location pretending to be a customer and make careful note of things they
have been asked to measure.
 Customer Relationship Management (CRM): It is a process, strategy, or
software/technology that enables organizations to manage relationships with their
customers. A CRM software system collects customer data from multiple sources
and applications and stores it in a centralized location, tracks prospects and
customers through their purchase journey, identifies upselling and cross-selling
opportunities, and automates repetitive sales.
 Customer Value Management (CVM): It is an approach to managing all aspects
of the “value journey” that a customer takes — from initial contact with prospective
buyers — whether that is through a targeted marketing campaign or through the
active sales cycle to on-going customer relationship management following a sale.
 Permission Marketing: It refers to a form of advertising where the intended
audience is given the choice of opting in to receive promotional messages.
 Customer Lifetime Value (CLV or CLTV): It is a metric that indicates the total
revenue a business can reasonably expect from a single customer account
throughout the business relationship. The metric considers a customer's revenue
value and compares that number to the company's predicted customer lifespan. It’s
also known as ‘Customer Equity’.
 Activity-Based Costing (ABC): It is a costing method that identifies activities in
an organization and assigns the cost of each activity to all products and services
according to the actual consumption by each. Therefore, this model assigns more
indirect costs (overhead) into direct costs compared to conventional costing.
 Freud’s Theory of Personality: Freud’s personality theory saw the psyche
structured into three parts (i.e., tripartite), the id, ego, and superego, all developing
at different stages in our lives. These are systems, not parts of the brain, or in any
way physical. The id is the primitive and instinctual part of the mind that contains
sexual and aggressive drives and hidden memories, the super-ego operates as a
 moral conscience, and the ego is the realistic part that mediates between the
desires of the id and the super-ego.
 Herzberg's Two-Factor Theory: It is a well-known concept in the field of human
resource management and organizational behavior. This concept puts forward two
factors that motivate employees: job satisfaction and job dissatisfaction. While these
might seem like opposites, they work together in a cycle.