The Market and Buyer Behavior

THEORY PART

The concepts of exchange and relationships lead to the concept of a market.A market is the set of actual and potential buyers of a product. These buyers share a particular need or want that can be satisfied through exchange relationships.

Marketing means managing markets to bring about profitable customer relationships. However, creating these relationships takes work. Sellers must search for buyers, identify their needs, design good market offerings, set prices for them, promote them, and store and deliver them. Although we normally think of marketing as being carried on by sellers, buyers also carry on marketing. Consumers do marketing when they search for the goods they need at prices they can afford. Company purchasing agents do marketing when they track down sellers and bargain for good terms. Thus, a companys success at building profitable relationships depends not only on its own actions but also on how well the entire system serves the need of final consumers.

Consumer buyer behavior refers to the buying behavior of final consumers-individuals and householders who buy goods and services for personal consumption. All these final consumers combine to make up the consumer market. Consumers make many buying decisions every day. Most large companies research consumer buying decisions in great detail to answer questions about what consumers buy, where they buy, how and how much they buy, when they buy, and why they buy. Marketers can study actual consumer purchases to find out what they buy, where, and how much. But learning about the whys of consumer buying behavior is not so easy-the answers are often locked deep within the consumers mind.

Model of buyer behavior

Marketing and other stimuli

Marketing Other

Product Economic

Price Technological

Place Political

Promotion Cultural

Buyer characteristics

Buyer decision process Product choice

Brand choice

Dealer choice

Purchase timing

Purchase amount

Factors influencing consumer behavior

Cultural Social Personal Psychological

Buyer

Culture

Subculture

Social class Reference groups

Family

Roles and status Age and life-cycle stage

Economic situation

Personality and self concept Motivation

Perception

Learning

Beliefs and atitudes

Regarding Nokia, the largest mobile phone company in the world, it continued to grow in the second quarter thanks to an excellent performance from our device businesses. Nokia's share of the global device market improved to an estimated 38%, while operating margins in our device businesses were at their highest level in three years.

Nokia's second quarter 2007 net sales increased 28% to EUR 12.6 billion, compared with EUR 9.8 billion in the second quarter 2006. At constant currency, group net sales would have increased 32%.

Nokia's second quarter 2007 operating profit grew 57% to EUR 2.4 billion (including the net positive impact of EUR 970 million in special items), compared with EUR 1.5 billion in the second quarter 2006 (including the positive impact of the EUR 276 million special item). The special items for the second quarter 2007 included a EUR 1 883 million gain on the formation of Nokia Siemens Networks (impacting Group Common Functions operating result); EUR 905 million restructuring charges and other one-time items in Nokia Siemens Networks (impacting Nokia Siemens Networks operating profit); a EUR 15 million gain on sale of real estate (impacting Group Common Functions operating result); and EUR 23 million Nokia Siemens Networks related other costs (impacting Group Common Functions operating result). Nokia's second quarter 2007 operating margin was 18.7% (15.3%), including the EUR 970 million net positive impact of the respective special items. Excluding the special items, Nokia's second quarter 2007 operating margin was 11.0% (12.5%).

Operating cash flow for the second quarter 2007 was EUR 1.5 billion, compared with EUR 0.9 billion for the second quarter 2006, and total combined cash and other liquid assets were EUR 8.3 billion, compared with EUR 8.5 billion at December 31, 2006. As of June 30, 2007, our net debt-equity ratio (gearing) was -51%, compared with -68% at December 31, 2006.

In the second quarter 2007, the total mobile device volume achieved by our Mobile Phones, Multimedia and Enterprise Solutions business groups reached 100.8 million units, representing 29% year on year growth and an 11% sequential increase. The overall industry volume for the same period reached an estimated 262 million units, representing 14% year on year growth and a 3% sequential increase.

Converged device industry volumes increased to an estimated 27.0 million units, compared with 18.9 million units in Q2 2006. Nokia's own converged device volume rose to 13.9 million units, compared with 9.0 million units in Q2 2006. Nokia shipped over 9 million Nokia Nseries and almost 2 million Nokia Eseries devices during the second quarter 2007.

The following chart sets out Nokia's mobile device volumes for the periods indicated, as well as the year on year and sequential growth rates by geographic area.