Consumer Behaviour : Module 1 Introduction: •Needs are the essence of Marketing Concept. •The key to a company’s survival ,profitability & Growth in a highly competitive market place is its ability to identify and satisfy unfulfilled consumer needs better & sooner than their competitors. •Effective Marketing firm requires insights into consumer’s mind in order to succeed sustainably in today’s cut- throat competitive world. •CB is rapidly growing discipline of study and research by the firms, academicians, service providers etc. •Marketers must fully understand both theories and reality of consumer behavior. Successful Marketers define their market in terms of needs they presume to satisfy ,not in terms of product they sell. •World’s top branded marketers like Wal mart, Singapore airlines, Microsoft, Coca-Cola, Nestle etc focus on identifying and fulfilling the changing need of their customers effectively and efficiently. Concept: CB is more than just how a person buys a product. It is a Complex & multi-dimensional process & reflects the totality of consumer’s decisions and actions with respect to selection, acquisition, consumption and disposal of goods & services, ideas & experiences. Who is a consumer?
Any one who is typically engaged in any one or all of the activities mentioned in the definition. Any one who destroys the utility of the product. Categories of consumers: 1. personal consumer: Buys goods and sevices for personal or household purposes. Buying milk,grocery etc 2. Organisational consumer: Buys Products to reproduce or resell the products for commercial purpose. e. g lemon grass purchased by HUL for their cosmetic products. Who is a customer: Any one who regularly makes purchases from a single store or a company. It is defined in terms of single store or a company. e. g. mother can be a customer for a health drink firm like Nestle but the consumer will be a child. Meaning of Consumer Behaviour: CB = Consumer + Behaviour It is the total buying behavior of the consumer in the consumption process. Behaviour: is the process of responding to a stimuli. CB is the study of how individuals, groups & Organizations makes decisions to spend their resources( time, money . efforts) while during purchases. It is the behavior that a consumer displays in search for, purchasing ,using, evaluating & disposing of products and services that they expect will satisfy their needs.
So, consumer behavior studies: 1. Why consumer buy? 2. What they buy? 3. when they buy? 4. How much they buy? 5. How they buy products? 6. where they buy from? 7. how frequently they buy? Nature of Consumer Behaviour: •Related to buying activities of consumers •It is in Evolving stage • It is a Behavioural science •Pervasive in nature •Insights of Consumer’s mindset •Dynamism •Multi- disciplinary in nature •Involves purchase decision making process •Determined by multi- factors. Consumer Behaviour: A multi- Disciplinary in nature:
It is a Behavioral science in which different social sciences have contributed in their own ways: Psychology: Economics Anthropology •MotivationCost/Benefit Analysis Culture, beliefs,values •PerceptionEvaluation of alternatives Sub –culture, religion •AttitudeMaximising satisfaction race, ethnicity,lifestyle •Personality •learning Sociology: •Group behavior •Group actions and decisions •Group life style •Reference group, family •Social grouping •Opinion Leadership Scope and Importance of Consumer behavior:
CB has a vast scope as it is multi dimentional in nature and includes each and every steps or activities involved the buying process. Broadly speaking it involves: •Pre- Purchase behavior( decisions and actions prior to purchase) •Actual purchase Behavior( actual buying activities) •Post- Purchase behavior (post buying usage, evaluation & disposal of products) Application of Consumer Behaviour in Marketing: Consumer behavior principles & concepts are applied in various areas of Marketing as mentioned below: 1. Analysing Market Opportunity: •Helps in identifying and studying unfulfilled needs and wants of the target consumers. Examining trends in market place, consumer’s life style, income level, socio-political changes & emerging influences. e. g marketing of microven, mosquito repellant. 2. Selecting target market: •Identifying different groups of consumers. •Learning how they behave & make purchase decisions. •Helps the marketer to design their offerings that best suits their customers. 3. Designing Marketing –Mix Strategy (4Ps): •Helps marketer to design appropriate strategies with respect to Place, product, promotion and price variables of marketing. •Formulating marketing program that suits & appeal to the target customer the most. Helps in evaluating the effectiveness of the marketing programme. 4. Used in social & non – profit marketing: •Marketing concepts like Family planning, AIDS control Campaign, •Crime against women(domestic violence) •Jago Grahak jago •Save Tiger campaign etc. Types of Buying Behaviour/ Decisions: It is True that the Buying behavior for toothpaste,Laptop and finanacial services or car would be different. The buying behavior of consumers have been categorized on the basis of degree of buyer’s involvement & degree of differences among the brands. They are as follows: 1.
Complex Buying behavior: •Highly involved in the purchase and perceive significant differences among the brand. •The product is expensive, risky, purchased infrequently & highly self- expressive. E. g. Car •Here consumer first develop beliefs about the product, then attitude and then make a thoughtful purchase decision. 2. Dissonance reducing Buying Behaviour: •Consumer is highly involved in the purchase •Perceives little or no difference among the brands in the same price range. •The product is expensive, risky, purchased infrequently & highly self- expressive. E. : Carpet •After purchase consumer might experience post- purchase dissonance. 3. Habitual Buying decision/behavior: •Low involvent of buyer in purchase Have little significant difference among brands. •Products are low priced, frequently purchased, low differences. e. g salt •Belief ? Behaviour? Attitude •Cosumer simply go to store and purchase the brand,if he purchases the same brand it is outr of habit not the brand loyalty. 4. Variety seeking Buying Behaviour/ decisions: •Low consumer involvement in purchase but perceives high significant differences among brands. Low priced, frequently purchased, self expressive. e. g chocolates, •Here consumer do lot of brand switching for the sake of variety not because of dissatisfaction. Consumer Decision making process Every day each of us make several decisions concerning every aspect of our life. We make these decisions without realizing how we make them what is involved in the particular decision – making process. What is a Decision? : A decision is a selection of an option from two or more alternative choices. To make a decision, choice of alternatives must be available. e. choice between a jeans pant or cotton pant. Hobson’s choice: If the consumer has no alternatives from which to chose and literally forced to make a particular purchase or take an action,it is no-choice decision. This no- choice consumption is very rare. So consumers make several decision with respect to what, when, where, how, why to buy the products. Views of Consumer decision making :(Models of Consumer) Several school of thoughts have professed buying decision making in different ways,specifically: there are four different views of consumer buying decisions: An Economic View: Consumers are considerd to be rational decision maker in the perfect completion. •They always go for cost/ benefit Analysis •This model assumes: 1. consumers make extensive information search 2. aware of all available products 3. capable of ranking each available alternatives in terms of their benefits & disadvantages 4. be able to chose the best one of the available alternatives. •Consumer researcher have criticized this theory as consumers rarely have all the informations about all products or suffeciantly accurate information or adequate information to make so called Perfect decision. This economic model of consumer is unrealistic for the following reasons: 1. people are limited by their existing skills, knowledge, habits etc 2. people are limited by their existing goals & values 3. consumer operate in imperfect world •It is considered to be too idealistic and simplistic •Recently through research it was found that prime motivation for price haggling(bargaining) is no more to get good price value rather to achieve sence of achievement, dominanace. A Passive View: •Considers the consumers basically submissive to self- serving interest and promotional efforts. Consumer is perceived as impulsive & irrational. this was assumed by the old sales people who considered consumer as object to be manipulated. •Fails to recognize that consumer plays equal if not dominant role in the buying situations. Theory of motivation, communication, attitude,selective perception etc suggest that consumers are rarely the object for manipulations. A Cognitive View( information based approach) •This model holds consumer as a thinking problem solver. •They are pictured as either receptive or actively searching for products and servicesthat fulfill their needs and enrich their lives. Here consumers are viewed as information processor,and this information processing leads to preference generation and ultimately leads to purchase intention. •Consumers often develop short-cut decision rules(heuristics) to facilitate the decision making process & to cope with information overload. •Here consumer does’nt make perfect decision but attempts to make satisfactory decision. An emotional View: •Although long aware of the impulsive or emotional model of consumer decision making, marketers often prefer to think him as a economic or passive decision maker. In reality however, all of us associate deep feelings or emotions such as joy, fear, love, sexuality, fantacy etc with certain purchases or possessions. E. g a Favourite fountain pen( if lost). •I we analyse our purchase records we will be surprised to know the amount of impulsive buying we have made without adequate information,searching, deliberating & evaluating before buying. •During emotional purchases ,a lot of emphasis is givent on current mood and feelings. •Emotional Purchases are not irrational. Buying products that afford emotional satisfaction is perfectly rational. •Consumer’s mood plays important role n purchase decisions. mood is defined as “feeling state” or state of mind. •Compare to emotions it is less intensified( short period of time) •Some retailers attempt to create a mood in the shoppers even thoug they enter eith pre- existing mood. Mood can decide the duration of stay of the shopper. The buying decision making process : How consumers actually make their buying decisions? Marketers must understand every facet of consumer decisions like what, when, where,why, how purchase decisions are made. Smart companies tempt to understand the whole purchase decision process of consumers. e. Honda engineers took videos of shoppers. The buying process starts long before the actual purchase & has consequences long afterwards. Generally consumer passes through different stages in the buying process which are as follows: 1. Need Recognition: the buying process starts with need or problem recognition. The need can be triggered by internal or external stimuli(Inputs) Internal stimuli include hunger, sex, thirst, need for love, affection, affiliation etc. External stimuli can be from external environment or may be generated by the marketer. 2. Search for information: An aroused customer will go for information search.
This information search can be internal or external. Internal search includes scanning info from past experience , memory etc. External search includes searching or seeking relevant information from external sources, they are •Personal: family, friends, neighbours etc •Commercial: ad, websites, sales persons, packages, hoardings, dealers, showrooms etc •Public: mass media, consumer rating organizations etc •Experiential: handling, examining, trial usage Consumers receive most of the product related information from commercial sources but the most effective information often comes from the personal sources. 3. Evaluation of alternatives:
In this stage , consumer compares different alternatives. He tries to find out answer for question what is the best for them? Different evaluation criteria is used( standards & specification) to make comparison between different brands & products. They give priority to specific attribute and compare the products accordingly. e. g: Cameras: picture sharpness, motion sensors, camera size, price, etc hotels: location, cleanliness, customer service, interior decor, price etc through evaluation they narrow down their awareness set and select the best one. Total set->Awareness set-> Consideration set->Choice set->decision? . Purchase Decision: After evaluation, consumer develops certain preferences among the brands in choice set. Consumer may also form an intention to buy the most preferred brand. In executing the purchase intention, consumers may go for five sub- decisions: brand, dealer, quantity, timing, payment mode. After purchase intention consumer goes for actual purchase decision. However there are two factors that can intervene between purchase intention & purchase decision •Attitude of others •Unanticipated situational factors So, we can say preferences and purchase intentions are not completely reliable predictors of purchase behavior.
A consumer’s decision to modify, postpone or cancel the purchase decision is heavily influence by perceived risk. Many types of risk perceived by the consumer with every purchase like: •Functional risk: is product going to perform up to expectations •Physical risk: product poses threat to physical-well being •Financial risk: not the worth price paid •Social risk: product result in humiliation, embarrassment from others •Psychological Risk: product affect the mental –well being •Time Risk: opportunity cost involved in finding replacement 5.
Post Purchase Behaviour: After the purchase, consumer might experience dissonance that comes from certain disquieting feature or hearing favorable things about other brands. The marketer’s job therefore does not end here with the purchase, they must monitor post purchase satisfaction, post purchase action and post purchase product uses. •Post purchase Satisfaction: What determines customer satisfaction with a purchase? Satisfaction is the function of closeness between customer expectation (CE)and product’s perceived performance (PP) PP > CE = Dissatisfaction
PP = CE = Satisfaction PP< CE = Over Delight The large the gap between customer expectation and product perceived performance, more will be the dissatisfaction. The importance of post purchase satisfaction suggests that product claims must truthfully represent the product performance. •Post Purchase Actions: satisfaction level with the product would determine the post purchase action of the consumer. A satisfied customer would be a repeat buyer and be a brand endorser in the society. A dissatisfied customer may abandon or return the product. Post Purchase Use and Disposal: Marketers should also monitor and evaluate how consumer uses and disposes the product. E. g colgate, tea remnants. Factors Affecting Consumer’s Purchase decisions: A consumers purchase decisions are strongly influenced by various determining forces: which are 1. Cultural factors: •Culture •Subculture(Nationality,religion, ethnicity, race,colour, customs,tradition,beliefs) •Values & ethics •A child born in american culture are subjected to following value system involvement, achievement, success,youthfulness, individualism,freedom 2.
Social Factors: certain social factors are •Groups: i. reference Group: having direct or indirect influence on the behavior of individual, they are of two types Primary group & secondary group. ii. Membership Group: have direct influence or to which an individual belongs. iii. Aspirational Group: which individual wishes to belong iv. disassociative group: which an individual is not interested to join. •Opinion leadership:person within a reference group who because of special skills, knowledgr & personality or other characteristics,exert influence over others. Marketers target them to ensure buzz marketing. Family Structure: influence of wife, husband, children in the decision process is quite high in india. Today structure of family is changing like DINKY, SINKY, extended family, nuclear family, single parent family etc •Family Life cycle: •Roles & status 3. Personsl factors: •AGE •Life cycle stage •Occupation •Economic situation •Lifestyle •Personality & self concept 4. Psychological Factors: •Motivation •Attitude •Learning •Beliefs & perceptions MODELS OF CONSUMER DECISION MAKING PROCESS: A model is the simple depiction of reality and includes those aspects that interests the model developer.
The major models that tends to describe the consumer decision making process in their own ways are as follows NICOSIA MODEL: Francesco Nicosia was the first to develop CB model in the early 1960s. This model focuses on the relationship between the firm and its potential consumers. The firm communicates with consumers through its marketing messages (advertising), and the consumers react to these messages by purchasing response. Looking to the model we will find that the firm and the consumer are connected with each other, the firm tries to influence the consumer and the consumer is influencing the firm by his decision.
The Nicosia model is divided into four major fields: Field 1: The consumer attitude based on the firms’ messages. The first field is divided into two subfields. The first subfield deals with the firm’s marketing environment and communication efforts that affect consumer attitudes, the competitive environment, and characteristics of target market. Subfield two specifies the consumer characteristics e. g. , experience, personality, and how he perceives the promotional idea toward the product in this stage the consumer forms his attitude toward the firm’s product based on his interpretation of the message.
Field 2: search and evaluation The consumer will start to search for other firm’s brand and evaluate the firm’s brand in comparison with alternate brands. In this case the firm motivates the consumer to purchase its brands. Field 3: The act of the purchase The result of motivation will arise by convincing the consumer to purchase the firm products from a specific retailer. Field 4: Feed back This model analyses the feedback of both the firm and the consumer after purchasing the product.
The firm will benefit from its sales data as a feedback, and the consumer will use his experience with the product affects the individuals attitude and predisposition’s concerning future messages from the firm. The Nicosia model offers no detail explanation of the internal factors, which may affect the personality of the consumer, and how the consumer develops his attitude toward the product. For example, the consumer may find the firm’s message very interesting, but virtually he cannot buy the firm’s brand because it contains something prohibited according to his beliefs.
Apparently it is very essential to include such factors in the model, which give more interpretation about the attributes affecting the decision process. HOWARD-SHETH MODEL:( John Howard & jagdish Sheth -1969) This model suggests three levels of decision making: 1. The first level describes the extensive problem solving. At this level the consumer does not have any basic information or knowledge about the brand and he does not have any preferences for any product. In this situation, the consumer will seek information about all the different brands in the market before purchasing. 2.
The second level is limited problem solving. This situation exists for consumers who have little knowledge about the market, or partial knowledge about what they want to purchase. In order to arrive at a brand preference some comparative brand information is sought. 3. The third level is a habitual response behavior. In this level the consumer knows very well about the different brands and he can differentiate between the different characteristics of each product, and he already decides to purchase a particular product. According to the Howard-Sheth model there are four major sets of variables; namely: )Inputs. These input variables consist of three distinct types of stimuli (information sources) in the consumer’s environment. The marketer in the form of product or brand information furnishes physical brand characteristics (significative stimuli) and verbal or visual product characteristics (symbolic stimuli). The third type is provided by the consumer’s social environment (family, reference group, and social class). All three types of stimuli provide inputs concerning the product class or specific brands to the specific consumer. b)Perceptual and Learning Constructs,
The central part of the model deals with the psychological variables involved when the consumer is contemplating a decision. Some of the variables are perceptual in nature, and are concerned with how the consumer receives and understands the information from the input stimuli and other parts of the model. For example, stimulus ambiguity happened when the consumer does not understand the message from the environment. Perceptual bias occurs if the consumer distorts the information received so that it fits his or her established needs or experience.
Learning constructs category, consumers’ goals, information about brands, criteria for evaluation alternatives, preferences and buying intentions are all included. The proposed interaction In between the different variables in the perceptual and learning constructs and other sets give the model its distinctive advantage. c)Outputs The outputs are the results of the perceptual and learning variables and how the consumers will response to these variables (attention, brand comprehension, attitudes, and intention). d)Exogenous(External) variables
Exogenous variables are not directly part of the decision-making process. However, some relevant exogenous variables include the importance of the purchase, consumer personality traits, religion, and time pressure. The decision-making process, which Howard-Sheth Model tries to explain, takes place at three Inputs stages: Significance, Symbolic and Social stimuli. In both significative and symbolic stimuli, the model emphasizes on material aspects such as price and quality. These stimuli are not applicable in every society.
While in social stimuli the model does not mention the basis of decision-making in this stimulus, such as what influence the family decision? This may differ from one society to another. Finally, no direct relation was drawn on the role of religion in influencing the consumer’s decision-making processes. Religion was considered as external factor with no real influence on consumer, which give the model obvious weakness in anticipation the consumer decision. ENGEL-KOLLAT-BLACKWELL MULTI MEDIATION MODEL:(EBIC MODEL): This model was created to describe the increasing, fast-growing body of knowledge concerning consumer behavior.
This model, like in other models, has gone through many revisions to improve its descriptive ability of the basic relationships between components and sub-components, this model consists also of four stages; First stage: decision-process stages: The central focus of the model is on five basic decision-process stages: Problem recognition, search for alternatives, alternate evaluation (during which beliefs may lead to the formation of attitudes, which in turn may result in a purchase intention) purchase, and outcomes.
But it is not necessary for every consumer to go through all these stages; it depends on whether it is an extended or a routine problem-solving behavior. Second stage: Information input: At this stage the consumer gets information from marketing and non-marketing sources, which also influence the problem recognition stage of the decision-making process. If the consumer still does not arrive to a specific decision, the search for external information will be activated in rder to arrive to a choice or in some cases if the consumer experience dissonance because the selected alternative is less satisfactory than expected. Third stage: information processing: This stage consists of the consumer’s exposure, attention, perception, acceptance, and retention of incoming information. The consumer must first be exposed to the message, allocate space for this information, interpret the stimuli, and retain the message by transferring the input to long-term memory. Fourth stage: variables influencing the decision process:
This stage consists of individual and environmental influences that affect all five stages of the decision process. Individual characteristics include motives, values, lifestyle, and personality; the social influences are culture, reference groups, and family. Situational influences, such as a consumer’s financial condition, also influence the decision process. This model incorporates many items, which influence consumer decision-making such as values, lifestyle, personality and culture.
The model did not show what factors shape these items, and why different types of personality can produce different decision-making? How will we apply these values to cope with different personalities? Religion can explain some behavioral characteristics of the consumer, and this will lead to better understanding of the model and will give more comprehensive view on decision-making. By Mahesh Sharma BIITM, bhubaneswar