MARKETING AND SALES MANAGEMENT
CHECK POINT 82: BUYING BEHAVIOR
Please Select Any Topic In Check Point 82 Below And Click. |
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DO I NEED TO KNOW THIS CHECK POINT?
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1. CLASSIFICATION OF THE BUYERS' MARKETS |
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BUYERS' MARKETS |
Business owners and marketing managers must have a strong understanding of buying behavior to ensure a successful implementation of the marketing management process in various buyers' markets.
Buyers' Markets differ in their nature and size and are classified into several specific types illustrated below. |
CLASSIFICATION OF THE BUYERS' MARKETS |
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The Consumer Market |
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The Organizational Market |
This market consists of all individuals and households that purchase products and services for personal use. |
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This market consists of all individuals and organizations that purchase products and services for a broad range of organizational or commercial purposes. |
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The Organizational Market can be further sub-divided into two categories illustrated below. |
CLASSIFICATION OF THE ORGANIZATIONAL MARKET |
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The Government Market |
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The Business Market |
This market consists of local, state, and federal governmental organizations that purchase products and services to fulfill their functional objectives. |
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This market consists of all individuals and organizations that purchase products and services for various commercial purposes. |
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The Business Market can be further sub-divided into two categories illustrated below. |
CLASSIFICATION OF THE BUSINESS MARKET |
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The Producer Market |
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The Reseller Market |
This market consists of all individuals and organizations that purchase products and services for their own manufacturing needs and supply the produced goods and services to others at a profit. |
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This market consists of all individuals and organizations that purchase products with the sole purpose of reselling them to others at a profit, i.e. wholesalers and retailers. |
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2. KEY QUESTIONS RELATED TO THE BUYERS’ MARKETS |
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UNDERSTANDING BUYING BEHAVIOR
In order to understand Buying Behavior in various markets, it is necessary to provide answers to a number of questions outlined below.
Once the marketing manager is able to find answers to these questions, it will provide a positive beginning to the marketing management process in your company. |
KEY QUESTIONS IN UNDERSTANDING BUYING BEHAVIOR |
No. |
Details |
1. |
Who Buys?
What kind of people initiate the purchasing procedure and who places the actual purchase order? |
2. |
What Do They Buy?
What kind of products or services are being purchased? |
3. |
How Much Do They Buy?
In what quantities and how frequently are products or services being purchased? |
4. |
How Do They Buy?
What procurement methods are being used during the purchasing procedure? |
5. |
Why Do They Buy?
What are the reasons for purchasing specific products or services? |
6. |
When Do They Buy?
Is there any particular time when people may need and, subsequently, buy products or services in larger quantities? |
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3. THE CONSUMER MARKET |
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THE CONSUMER MARKET
The Consumer Market represents people in the United States and all over the world who have money to spend for products and services.
Based on the recent U.S. Census Bureau demographic reports, the consumer market is summarized below.
DATA FROM THE U.S. CENSUS BUREAU
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World Population |
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U.S. Population |
There are approximately 7.05 Billion people in the world today and the world population is expected to increase to about 7.9 Billion in year 2025. |
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There are approximately 315 million people in the USA today and the U.S. population is expected to reach 330 million by the year 2020. |
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The U.S. Market has the largest number of buyers and it includes three main population groups outlined below. |
CLASIFICATION OF THE U.S. BUYERS’ MARKET |
• The Baby Boomer Generation.
- This generation includes about 78 million people born between 1946 and 1964. Today baby boomers account for about 30 percent of the population, but they represent approximately 50 percent of the total personal income. The baby boomers represent a strong market for housing and related products, cars, health food and fitness products, travel and financial services.
• The Generation X, Or GenXers.
- This generation includes about 45 million people born between 1965 and 1976. This generation has limited resources, growing families, and a more skeptical approach. The GenXers are expected to overtake the baby boomers by 2100 and become the largest consumer market in the U.S.
• The Echo Boomers.
- This generation of baby boomers’ children includes about 72 million people born between 1977 and 1994. This generation has very limited resources, but they generate large demand for products designed for children, teenagers, and young adults. This generation is particularly active online and represents, therefore, a serious market potential on the Internet.
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AVERAGE HOUSEHOLD SIZE |
According to the U.S. Census Bureau, the Average Household Size in the United States is approximately 2.7 persons per family and the Median Age of the population is about 32 years. The percentages and projections related to the age distribution of the population in the U.S. are illustrated below. |
DISTRIBUTION OF THE U.S. POPULATION BY AGE (%) |
Age Group |
2100 |
2030 |
2040 |
2050 |
Under 5 |
6.6 |
6.4 |
6.4 |
6.4 |
5-13 |
12.5 |
11.7 |
11.5 |
11.6 |
14-17 |
5.9 |
5.3 |
5.3 |
5.2 |
18-24 |
9.8 |
9.1 |
9.2 |
9.0 |
25-34 |
12.7 |
12.4 |
12.4 |
12.5 |
35-44 |
14.8 |
12.9 |
12.9 |
12.2 |
45-64 |
24.9 |
22.1 |
22.1 |
22.5 |
65-older |
12.7 |
20.2 |
20.2 |
20.6 |
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© U.S. Census Bureau, Current Population Reports |
STATISTICAL INFORMATION ABOUT THE CONSUMER MARKETS ONLINE
There is a continuous geographic shift of the U.S. population which affects the overall population growth in various states. Additional statistical information pertinent to consumer markets and actual population numbers may be found in two main sources online:
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ADDITIONAL INFORMATION ABOUT THE CONSUMER MARKETS ONLINE |
There are numerous sources of statistical information online related to consumer and organizational markets. Some of the most popular sources are presented below. |
• Commercial Data Services:
• Online Database Services:
• Internet Data Sources:
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4. A STUDY OF CONSUMER BEHAVIOR |
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CONSUMER BEHAVIOR
A successful implementation of the marketing management process requires the marketing manager to understand various aspects of Consumer Behavior.
The study of consumer behavior entails examination of several issues outlined below.(8) |
KEY ASPECTS IN THE AREA OF CONSUMER BEHAVIOR |
No. |
Details |
1. |
Consumer behavior relates to the behavior of individual buyers in the marketplace and its purpose is to explain the manner in which they purchase and use products and services. |
2. |
Consumer behavior is based on a multi-disciplinary approach and it is supported by information gained from various fields such as psychology, sociology, economics, and demographics research. |
3. |
Consumer behavior entails evaluation of factors that influence the product or service buying decisions and product and service usage during the buying process and after the purchase has been made. |
4. |
Consumer behavior is concerned with the buying process by which consumers reach buying decisions and how that process varies between individuals in relation to products and services they buy. |
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5. CONSUMER BUYING BEHAVIOR FACTORS |
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CONSUMER BUYING BEHAVIOR
Consumer buying behavior is influenced by several factors that must be understood by the marketing and sales managers.
Main Consumer Behavior Factors are illustrated below. |
CONSUMER BUYING BEHAVIOR FACTORS |
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Strategic
Marketing
Factors |
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Consumer's
Individual
Factors |
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Social
And Economic
Factors |
These factors include:
- • Product.
- • Price.
- • Promotion.
- • Place (Distribution).
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These factors include:
- • Culture.
- • Values.
- • Requirements.
- • Attitudes.
- • Experience.
- • Age.
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These factors include:
- • Occupation.
- • Social factors.
- • Economic factors.
- • Family and friends.
- • Lifestyle.
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6. THE CONSUMER DECISION-MAKING PROCESS |
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THE CONSUMER DECISION-MAKING PROCESS
The integral part of an ordinary buying behavior is the consumer decision-making process. This process, illustrated below, has a number of steps that enable the consumer to satisfy specific needs. |
STEPS IN THE CONSUMER DECISION-MAKING PROCESS
Step 1: Identification Of The Problem.
The consumer identifies a specific problem and recognizes the need to solve it.
Step 2: Internal Search For A Solution.
The consumer evaluates existing knowledge and past experience in solving a similar problem.
Step 3: External Search For A Solution.
The consumer examines new information in the marketplace that may lead to solution of the existing problem
Step 4: Making A Buying Decision.
The consumer decides on the most suitable method of solving the existing problem.
Step 5: Evaluation Of The Buying Decision And Subsequent Action.
The consumer evaluates the decision and subsequent action, and utilizes the acquired experience in making similar decisions in the future. |
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7. CONSUMER SPENDING PATTERNS |
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CONSUMER SPENDING PATTERNS
Another important element of marketing information which should be taken into account by the marketing manager relates to the changing Consumer Spending Patterns. Some of the most reliable information online related to consumer spending patterns is provided by:
The consumer spending patterns depend upon the Average Income Per Person, or Average Income Per Family, and are summarized below. |
CONSUMER SPENDING AT DIFFERENT INCOME LEVELS |
Expenditure |
Income Level |
$10,000 -15,000 |
$20,000 - 30,000 |
$50,000 And Over |
Food |
17.7 |
15.8 |
12.6 |
Housing |
24.8 |
23.0 |
24.9 |
Utilities |
8.6 |
7.1 |
4.7 |
Clothing |
5.4 |
5.8 |
5.8 |
Transportation |
17.4 |
19.1 |
17.6 |
Health Care |
7.8 |
5.5 |
3.7 |
Entertainment |
3.7 |
4.7 |
6.1 |
Tobacco |
1.5 |
1.2 |
0.5 |
Contributions |
2.2 |
2.9 |
4.3 |
Insurance/ Pensions |
4.5 |
8.2 |
13.2 |
Other |
6.3 |
6.7 |
6.6 |
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Note: All values above are percentages of the Annual Income for each consumer group. |
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© Consumer Expenditure Survey, U.S. Department Of Labor, Bureau Of Labor Statistics, |
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8. CURRENT TRENDS IN THE CONSUMER MARKET |
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TRENDS IN THE CONSUMER MARKET
Marketing managers must realize that the consumer market in the United States undergoes a continuous process of change and adjustment. Some of the typical changes, or trends, in the Consumer Market are summarized below. (9)
All of these trends play an important role in understanding the consumer market behavior and provide a better insight in the overall marketing management process. |
CURRENT TRENDS IN THE CONSUMER MARKET |
No. |
Details |
1. |
Changing demographic environment, where about 78 million Baby Boomers, born between 1946 and 1964, now account for about one third of the total population and represent about 50 percent of the total buying power. |
2. |
The Generation X, or GenXers, which includes about 45 million people, born between 1965 and 1976, are expected to overtake the baby boomers by 2013 and become the largest consumer market in the US. |
3. |
The Echo Boomers, which includes about 72 million people, born between 1977 and 1994, are expected to generate growing demand for products and services online. |
4. |
People marry later in life and have fewer children. |
5. |
The number of married couples continues to decline. |
6. |
Number of working women is increasing dramatically. |
7. |
About 65 percent of women will be in the labor force by 2013. |
8. |
47 percent of all households will be non-family or single parent households by the year 2013. |
9. |
Younger adults move out of their parents’ home earlier in life. |
10. |
The divorce rate is about 50 percent and may increase further due to difficult economic conditions. |
11. |
The percentage of more educated people is increasing. |
12. |
People are becoming increasingly health conscious. |
13. |
People generally live longer. |
14. |
There are an increasing number of people who shop online for products and services. |
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9. THE ORGANIZATIONAL MARKET |
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THE ORGANIZATIONAL MARKET |
The Organizational Market represents another important consideration for the marketing manager.
Although the organizational market is much smaller than the consumer market in terms of the number of buyers, it generates the largest aggregate dollar volume of purchases. As mentioned earlier, the organizational markets can be classified into two types illustrated next. |
TWO TYPES OF ORGANIZATIONAL MARKETS |
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Government
Market |
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Business
Market |
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The Business Markets are further classified into two types illustrated below. |
TWO TYPES OF BUSINESS MARKETS |
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Producers
Market |
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Resellers
Market |
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The organizational market includes all industrial, commercial, and government organizations outlined below. |
ELEMENTS OF THE ORGANIZATIONAL MARKET |
No. |
Details |
1. |
Manufacturers. |
2. |
Service companies. |
3. |
Wholesalers. |
4. |
Retailers. |
5. |
Contractors. |
6. |
Project management companies. |
7. |
Farmers. |
8. |
Government organizations. |
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The organizational market is best characterized by the size of various organizations as illustrated below. |
CLASSIFICATION OF THE ORGANIZATIONAL MARKET BY A COMPANY'S SIZE |
Type
Of
Organization |
Number
Of
Employees |
Percent
Of
Total Companies |
Percent
Of
Total Employees |
Manufacturers |
1 - 9 |
45 |
2 |
10 - 49 |
34 |
10 |
50 - 249 |
16 |
24 |
250 - 999 |
4 |
27 |
1000 - over |
1 |
36 |
Wholesalers |
1 - 4 |
43 |
7 |
5 - 9 |
24 |
12 |
10 - 9 |
29 |
44 |
50 - over |
4 |
37 |
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© County Business Patterns (Adapted) |
The organizational markets generate a continuous need for three types of products and services illustrated below. |
TYPES OF PRODUCTS AND SERVICES
GENERATED BY THE ORGANIZATIONAL MARKET |
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Consumer
Goods |
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Industrial
Goods |
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Organizational
Services |
These include all products that are ultimately purchased and used by individual consumers. |
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These include raw materials, components, capital equipment, accessory equipment, and consumables purchased by organizations. |
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These include all services rendered by individuals or organizations for other organizations. |
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10. CHARACTERISTICS OF ORGANIZATIONAL MARKETS |
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The Organizational Market, and, particularly, the Business Market has certain characteristics, which are outlined below.(10) |
THE CHARACTERISTICS OF ORGANIZATIONAL MARKETS |
No. |
Details |
1. |
There are less potential customers in the business markets in comparison with the consumer markets. |
2. |
The value of the business markets is substantially higher per potential customer in comparison with the consumer markets. |
3. |
Existing and potential customers are concentrated in smaller geographic areas in comparison with the consumer markets. |
4. |
Price changes in the business markets usually do not affect the demand for products and services as much is they do in the consumer markets. |
5. |
Demand for products and services in business markets may fluctuate more frequently in comparison with the consumer markets. |
6. |
There are more people involved in the business decision-making process in comparison with the individual consumer's buying process. |
7. |
The buying process in the business markets is generally formal, more complex, and requires more professional expertise in comparison with the consumer markets. |
8. |
The buying process in the business markets is often based on repetitive orders by buyers who established long-term close relations with reliable suppliers. |
9. |
The buying process in the business markets is often carried out between the suppliers and the end-users, bypassing the intermediaries. |
10. |
The buying process in the business markets is sometimes based on reciprocity and even bartering whereby the buyer and the seller exchange goods or services for mutual benefit. |
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11. ORGANIZATIONAL BUYING BEHAVIOR FACTORS |
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ORGANIZATIONAL BUYING BEHAVIOR
A broad range of products and services is purchased by various organizations in accordance with specific buying practices discussed in Materials Purchasing in Tutorial 4.
These practices are guided by Organizational Buying Behavior and are influenced by a number of factors illustrated below. |
ORGANIZATIONAL BUYING BEHAVIOR FACTORS |
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Strategic
Marketing
Factors |
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Consumer's
Individual
Factors |
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Social
And Economic
Factors |
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Environmental
Factors |
These factors
include:
- • Company's
structure.
- • Policy.
- • Objectives.
- • Plans.
- • Employees.
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These factors
include:
- • Personal
values.
- • Requirements.
- • Buyer's
attitudes.
- • Buyer's
experience.
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These factors
include:
- • Relationships
with existing
suppliers.
- • Relationships
with potential
suppliers.
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These factors
include:
- • External
environment.
- • Economic
conditions.
- • Political
conditions.
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12. THE ORGANIZATIONAL DECISION-MAKING PROCESS |
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THE ORGANIZATIONAL DECISION-MAKING PROCESS
The Organizational Decision-Making Process used by organizational buyers is similar to the consumer decision-making process described earlier. This process includes a number of steps outlined below. |
STEPS IN THE ORGANIZATIONAL DECISION-MAKING PROCESS
Step 1: Identification Of The Problem.
The organizational buyer identifies a specific problem and recognizes the need to solve it.
Step 2: Internal Search For A Solution.
The organizational buyer evaluates existing knowledge and past experience in solving a similar problem.
Step 3: External Search For A Solution.
The organizational buyer examines new information in the marketplace that may lead to the solution of an existing problem.
Step 4: Making A Buying Decision.
The consumer decides on the most suitable method of solving the existing problem.
Step 5: Evaluation Of The Buying Decision And Subsequent Action.
The organizational buyer evaluates the decision and subsequent action and utilizes the acquired experience in making similar decisions in the future. |
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13. INDIVIDUAL BUYING BEHAVIOR |
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INDIVIDUAL BUYING BEHAVIOR
Successful planning and implementation of marketing strategies also depends upon the ability of the marketing and sales employees to understand Individual Buying Behavior of prospective customers or organizational buyers.
When dealing with customers or buyers, particularly in the area of personal selling, it is essential to be aware of a broad range of Personality Types which may exist in the marketplace. Some of these personality types are described below. (11) |
RANGE OF PERSONALITY TYPES IN THE MARKETPLACE |
No. |
Details |
1. |
A Friendly Buyer.
A prospect knows you, your company and your products well from the past experience. |
2. |
A Bargain Hunter.
A prospect is looking for the best deal and will not relax until he gets it. |
3. |
A Prudent Buyer.
A prospect follows the formality and is shopping around by meeting many sellers and getting numerous estimates. |
4. |
An Evasive Buyer.
A prospect does not respond to your phone calls, and it is hard to make an appointment with him. |
5. |
A Complaining Buyer.
A prospect always complains about something, is never satisfied, and is usually demonstrating a negative attitude. |
6. |
An Organized Buyer.
A prospect prepares a detailed list of what he wants to buy. He is very nit-picking and knows exactly what he wants. |
7. |
A Controlling Buyer.
A prospect wants to be in control at all times during the buying process. He may demonstrate some arrogance and even rudeness. |
8. |
A Suspicious Buyer.
A prospect may question everything that he hears about a particular product or service. |
9. |
A Domineering Buyer.
A prospect may demonstrate a strong will and domineering attitude toward everybody with whom he gets into contact. |
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Note:
Any reference to gender means "he" or "she" throughout the text. |
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14. FOR SERIOUS BUSINESS OWNERS ONLY |
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ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY? |
Reprinted with permission. |
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15. THE LATEST INFORMATION ONLINE |
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LESSON FOR TODAY:
People Buy For Their Reasons, Not Yours!
Joe Griffith |
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