37687579 Consumer Behavior

Consumer BehaviorAn Overview

Brief Overview of topics1. Introduction, nature scope of Consumer Behavior

(CB), Marketing Strategy.2. The Consumer decision Process.3. Pre Purchase Processes and Purchase.4. Post purchase processes.5. Individual determinants of CB: Consumer Motivation.6. Individual determinants of CB: Personality and CB

7. Individual determinants of CB: Consumer Perception.8. Individual determinants of CB: Consumer Learning.9. Individual determinants of CB: Consumer attitudes,

attitude change and values.10. Environmental influences on CB: Reference Groups and

Family & Household influences.11. Environmental influences on CB: Culture, Ethnicity and

Social class.12. Consumer influence and diffusion of innovations.

Introduction to Consumer Behavior

Learning Objectives:• Overview.• Defining Consumer Behavior.• Applications of Consumer Behavior.• Evolution of Consumer Behavior.• How to study Consumer behavior. • What influences consumer behavior.• Underlying Principles of Consumer behavior.• Consumer behavior and Marketing Strategy.• Stimulus – Response model of Consumer behavior.


What is consumer behavior?

• “Consumer behavior is defined as activities people undertake when obtaining, consuming and disposing of products and services.”

• Activities included in the definition are: Obtaining – refers to the activities up to & including the purchase or receipt of a product. Consuming – refers to how, where, when and under what circumstances consumers use product. Disposing – includes how consumers get rid of products and packaging.


Consumer Behavior

Consumer influencesCulture EthnicityPersonality FamilyLife stage ValuesIncome Available resourcesAttitudes OpinionsMotivations Past - experienceKnowledge Peer groupsFeelings

Disposing• How you get rid of product• How much thrown away after use• Is product resold• how product is recycled

Obtaining• How you decide you want to buy• Other products you consider buying• Where you buy • where you pay• How product transported

Organizational influences Brand Product featuresAdvertising PromotionsPrice QualityService PackagingConvenience Loyalty ProgramProduct Store AmbienceAvailability WOM

Consuming• How product used• How product stored• Who uses the product• How much is it consumed• How product compares with expectations

CONSUMER


Some more definitions:

• “Consumer behavior can also be defined as a field of study, focusing on consumer activities.”

• “The field of consumer behavior studies how individuals, groups and organizations select, buy, use, and dispose off goods, services, ideas , or experiences to satisfy their needs and desires.”• "The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose off products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society."


Rationale for studying Consumer Behavior

• Consumer behavior determines success of Marketing programs.• Consumer behavior determines economic health of a nation.• It determines economic health of the consumers.• Consumer behavior helps formulate public policy. • It affects consumers’ personal policy.


Applications of consumer behavior


Marketing Strategy

Social Marketing Makes usbetter consumers

Public Policy

MANUFACTURING ORIENTATION

SELLINGORIENTATION

MARKETINGORIENTATION

COMPREHENSIVECONSUMER

ORIENTATION


Evolution of Consumer Behavior

Manufacturing Orientation:

• The belief that customers prefer products that are widely available and inexpensive.

Selling Orientation:

• The belief that companies must sell and promote their offerings aggressively because consumers will not buy enough of the offerings on their own.


Marketing Orientation:

• The belief that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering and communicating customer value to its chosen target markets.

Comprehensive Consumer orientation:

• It extends the focus of marketing orientation as to how all organizations in demand chain adapt to changing consumer lifestyles and behaviors.


How to study CB or get into the minds of Consumer ?

• Consumer behavior is an applied science drawing from Economics, Psychology, Sociology, Anthropology and Statistics.

• Methods of study include observation, interviews & surveys and experimentation.

• By exploring peoples homes, cars, closets, offices, lifestyles, circles etc.

• By observing consumers’ behavior in different situations such as when using products or eating foods.


• By interviewing in person, asking questions in surveys and recording responses on video cameras.

• Focus groups.

• Repeated studies over a period of time to determine changes in consumers’ opinions, buying and consumption.

• Experimentation - a research methodology. Cause and effect relationships.


What influences Consumer behavior?

• Attitude, Personality, Age, Income, Motivation, Feelings, learning, Knowledge, Past Experiences.

…….Individual factors• Values, Culture, Ethnicity, Family, Opinions, Past experiences.

……. Group factors• Brand, Advertising, Promotions, Price, Service, Convenience, Packaging, Product features, Word of Mouth, Retail Displays, Quality, Store Ambiance, Loyalty Programs, Product Availability.

…….Organizational factors


Underlying Principles of Consumer Behavior


Consumer issovereign

Consumer isglobal

Consumers aredifferent

Consumers arealike

Consumers haverights

Consumer behavior and Marketing Strategy

Purpose of any business is to……..

• To create a consumer.• To develop consumer based corporate strategy.• To understand consumer.• To create product and services that meet the

consumers’ needs and expectations.• To communicate with consumer.• To retain consumer.• To modify and improve products and services.


Strategy, Marketing Strategy and Customer Centricity

• Strategy can be viewed as a decisive allocation of resources (Capital, technology and people) in a particular direction.

• At the operational level, Marketing strategy is a long range, time phased plan designed to achieve, usually at a high return on investment, a market leadership position that competitors can challenge only at prohibitively high costs.

• Customer Centricity is a strategic commitment to focus every resource of the firm on serving and delighting profitable customers.

• It involves producing new or improved products with evolving marketing methods focused on core, but changing market trends.


Characteristics of Customer centric organizations


Shared vision and values

Cross-functional integration

System-wide simultaneous training

Customer-based metrics

Consumer behavior and Marketing Strategy – Consumer driven Market Strategy Process:


Market Analysis

Market Segmentation

Marketing Strategy

Implementation

Marker Analysis

ConsumerCompany

EnvironmentalPolitical-legal

Marketing Mix Strategies

ProductPrice

PromotionBrandPlace7 Rs

Implementation in marketplace

Market segmentation

DemographicSituational

PsychographicBehavioral

CONSUMER


Consumer Centric Marketing Strategy

Market analysis:• It is the process of analyzing changing consumer trends, current and potential competitors, company strengths & resources and technological, legal and economic environments. Process of …….

Analyzing changing consumer trends involves gaining consumer insight. Consumer insight refers to understanding consumers’ expressed and unspoken needs and realities that affect how they make life, brand and product choices. Current and potential trends – demographic trends, personal and group influences.


Company strengths and resources- manpower, assets, financial stability, production capability, research & marketing abilities, competitor (current & potential). Business environment- Political, Economical, Social,

Technological, Environmental and Legal.

Market Segmentation

• It is the process of identifying homogeneity in the market place based on characteristics such as demographic, situational, psychographic and behavioral.


Consumer Characteristics :

Demographics: Age, Gender, Ethnicity, Income, Education, Family Size, Nationality, Life Stage, Marital Status, Occupation, Religion, Living arrangements.

Psychographics: Activities, Interests, Opinions.

Purchase and consumption behavior: Shopping location

preferences, frequency, price sensitivity of purchase, media used, brand loyalty, benefits sought, how used and usage rate.


Marketing – Mix Strategy:

• It involves a plan to meet the needs and wants of the target markets by providing value to the target market better than the competitors.

• Marketing strategy must also include brand strategy. Brand can be viewed as a promise – a promise to consumers that the attributes they desire the most will be obtained if they buy the preferred brand.

• It must involve essential components of the marketing mix that is the four Ps and seven Rs.



Organization Consumer

Research Formulate methodology, Conduct research.

Participate in research.

Rate Speed to market. Speed through shopping process, Usage rates of products.

Resources Commitments to project, effect on pricing.

Payment for product. Scarcity of resources.

Retailing Which outlets to sell products, Location in store and shelf position.

Where they expect to buy product.

Reliability Dependency on Supply chain partners.

Product quality and consistency, Reliability of retailer.

Reward Program to increase purchases and loyalty.

Reward from using product, Reward programs.

Relationship Relationships within supply chain and CRM.

Loyalty to brand and store.

The 7 Rs of theMarketing Mix

Marker Analysis

ConsumerCompany

EnvironmentalPolitical-legal

Marketing Mix Strategies

ProductPrice

PromotionBrandPlace7 Rs

Implementation in marketplace

Market segmentation

DemographicSituational

PsychographicBehavioral

CONSUMER


Consumer Analysis

Consumer Research

Consumer Decision Process

Individual OutcomesSocietal Outcomes

Consumer Centric Marketing Strategy: Marketing Mix and

Implementation

Model of Consumer behavior (Stimulus response model):

MarketingStimuli

ProductPricePlacePromotion

OtherStimuli

EconomicTechnologicalPoliticalCultural

Buyer’sCharacteristics

CulturalSocialPersonalPsychological

Buyer’s decision processProblem recognitionInformation searchEvaluation of AlternativesPurchase decisionPost purchase evaluation

Buyer’s decisionsProduct choiceBrand choiceDealer choicePurchase timingPurchase amount


The Consumer Decision Process


Learning objectives: Introduction. Four views of consumer decision making. Models of consumer behavior. Input, Process and Output model. Engel-Blackwell-Kollat model. Consumer Decision Process (CDP) Model. Types of decision processes. Decision Process continuum. Initial purchase and Repeat purchase. Factors affecting the extent of problem solving. Degree of involvement.

Introduction

• Consumer decision making comes about as an attempt to solve consumer problems.• Four schools of thought that depict consumer decision making in distinctly different ways are:

Economic view, Passive view, Cognitive view and Emotional view.


• The economic view portrays a world of perfect competition, characterizing consumer as making rational decisions.• The economic model of an all rational consumer is unrealistic for following reasons:

Consumers are restricted by their knowledge, skills, habits and reflexes. They are limited by their existing values and goals.

• Consumers operate in imperfect world and do not maximize their decisions in terms of economic considerations.


• The passive view depicts the consumer as submissive to the self- serving interests and promotional efforts of marketers.

• Consumers are perceived to be impulsive and irrational.

• The Limitation of the view is that it fails to recognize that the consumer plays an equal role in buying situations.

• The consumer seeks information about alternatives and selects products that appear to offer greatest satisfaction or satisfy emotion of the moment.


• Cognitive view portrays the consumer as thinking problem solver. It focuses on the processes by which consumers seek and evaluate information about products.

• The cognitive or problem solving view describes a consumer who falls somewhere between extremes of the economic and passive views.

• The consumer does not have full knowledge about the product and hence can not make perfect decisions but seeks information about available alternatives to make satisfactory decisions.


• As per Emotional view the consumer is likely to associate deep feelings or emotions such as joy, fear, love, hope or fantasy with certain purchases or possessions.

• Consumers make many purchases based on whims or impulse rather than searching for and evaluating alternatives.

Models of Consumer behavior

• A number of models have been proposed including those based on any or combinations of from amongst four views from time to time.


• Some of the Models are:

1. Economic model.2. Psychological model.3. Pavlovian model.4. Input, Process, Output model- Gandhi, Kotler.5. Sociological model.6. Howrath Sheth model.7. Engel-Blackwell-Kollat model.8. Model of family decision making.9. Nicosia model.10. A model of Industrial buying behavior.


Input, Process and Output model

• It is a simple model where input for the consumer is the firm’s marketing effort and social environment.

• The elements of the process of decision making consist of need recognition, Product awareness, Evaluation and intention.

• The output comprises of Purchase and Post purchase behavior. If the purchase and use of product is a satisfying experience, it leads to repeat purchase otherwise discontinuation.


Input, Process and Output model

Firm’sMarketingEffort

SocialEnvironment

P e r s o n a l I t y

A t t i t u d e s

Motivation

Perception

NeedRecognition

ProductAwareness

Interest Breakdown

EvaluationInterest

Intention Purchase

Post-purchaseBehavior

Repeatpurchase

Discontinuation


Engel-Blackwell-Kollat Model


Information Processing

Decision Process

Environmental Influences

Central Control unit

Engel-Blackwell-Kollat model


Consumer Decision Process (CDP) Model• Consumer decision making comes about as an attempt to solve consumer problems.• No one buys a product unless one has a problem, a need or want.• The CDP Model represents a roadmap of consumers’ minds that we as marketers can use to help us guide Product mix, communication and Marketing Strategies.• It captures activities that occur when decisions are made and depicts how internal and external forces interact to affect how consumers think, evaluate and act.


The Consumer Decision Process (CDP) Model


Need Recognition

Search for Information

Pre-Purchase Evaluation

Purchase

Consumption

Post-Consumption Evaluation

Divestment

Need Recognition: Need or problem recognition occurs when the consumer senses a difference between what he or she perceives to be ideal versus the actual state of affairs.

Memory Need

Recognition

EnvironmentalInfluences

• Culture• Social Class• Family• Personal influences• Situation

IndividualDifferences

• Consumer Resources• Motivation• Knowledge• Attitudes• Personality, values and Lifestyle


Search for Information: • Environmental influences and Individual differences are sources for search for information. Internal Search External Search Internal; retrieving from the memory or genetic tendencies. External; influenced by Marketer and Non-Marketer dominated stimuli. It involves collecting information from peers, family and the marketplace.


Memory

Need Recognition

Search

ExternalSearch

InternalSearch

Search for information



• Culture• Social Class• Family• Personal influences• Situation


• Consumer Resources• Motivation• Knowledge• Attitudes• Personality, values and Lifestyle

Information Processing

Memory

Attention

Exposure

Comprehension

Acceptance

Retention

Stimuli

• Marketer Dominated• Non Marketer Dominated


Pre-Purchase Evaluation of alternatives:

• Consumers compare, contrast and select from various products or services.• Different Consumers employ different criteria.• Evaluation of choices is influenced by both Individual and Environmental influences.• Attributes on which evaluations are based may be salient or determinant. Both affect advertising and marketing strategies.


• Salient attributes include price, quality, reliability and factors that vary little between similar products. Consumers think about these as potentially the most important.• Determinant attributes (Such as style and finish) usually determine which brand or store consumers choose especially when salient attributes are same.• Consumers often monitor attributes such as size, quality and price . Changes in these affect their brand and product choices.


Pre-Purchase Evaluation of alternatives: EnvironmentalInfluences

• Culture• Social Class• Family• Personal infl.• Situation


• Consumer Resources,• Motivation,• Knowledge,• Attitudes and• Personality, values and Lifestyle

Need Recognition

Memory

Pre-Purchase Evaluation ofAlternatives

Exposure

Attention

Comprehension

Acceptance

Retention

Stimuli


Search InternalSearch

External Search


Purchase:

After deciding whether to purchase or not, the consumers move through two stages. In the first phase they choose the form of retailing and choice of retailers. For example, Electronic sale, Internet based marketing or direct marketing. During the second phase, consumers make in store choices. Best retailers manage the overall attributes and image of the store to ensure satisfying experience for the consumer.


Purchase:

Stimuli


External Search

Exposure

Attention

Comprehension

Acceptance

Retention

Memory

InternalSearch

Need Recognition






Purchase

Search


Consumption and Post consumption Evaluation:

Consumption may be immediate or delayed. How consumers use the products affects how satisfied they are with the purchases and determines whether they will make repurchase. How carefully consumers use or maintain the product determines how long the product will last and when will the repurchase be made. During post consumption evaluation stage, consumers experience satisfaction or dissatisfaction.


Satisfaction occurs when consumers’ expectations are matched by perceived performance. Even if the product works well, consumers second guess their purchase decisions. This phenomenon is called post purchase regret or cognitive dissonance. Higher is the price, higher is the level of cognitive dissonance. Emotions also play a role when consumer evaluates a product or service. It is a reaction to a cognitive appraisal of events and is normally expressed physically through gestures, posture or facial expressions etc.






Need Recognition

Search


Purchase

Consumption

InternalSearch

Memory

Exposure

Attention

Comprehension

Acceptance

Retention

External Search

Stimuli


Post-ConsumptionEvaluation

Consumption & Post-Consumption Evaluation:

Dissatisfaction Satisfaction


Divestment: EnvironmentalInfluences




Need Recognition

Search

Pre-Purchase Evaluation ofAlternatives Purchase

Consumption

Post-ConsumptionEvaluation

InternalSearch

Memory

Exposure

Attention

Comprehension

Acceptance

Retention

Stimuli


External Search

SatisfactionDissatisfaction

Divestment


What influences Consumer decision making?


Individual Differences

Psychologicalprocesses


Individual Differences


Demographics, Psychographics,

Values andPersonality

Motivation Attitudes

ConsumerResources



Culture

Situation

Family Personal Influence

Social Class

Psychological Processes


Perception

Learning Attitude and Behavior change

InformationProcessing

The Consumer Decision ProcessTypes of Decision Processes

The extent to which each of the seven stages is followed precisely can vary from one situation to another. Sometimes consumers undertake a complex decision process investing substantial time and effort. In most situations consumers follow more simplistic processes.

Decision Process continuum

When consumers make decisions for the first time, their actions are based on some form of problem solving.

When the process is very complex, it is called ‘Extended Problem Solving’ (EPS). ‘Limited Problem Solving’ (LPS) represents a lower degree of complexity. ‘Midrange Problem Solving’ (MPS) falls somewhere between the two. Most purchases are made on a repeat basis when the consumer may engage in problem solving again or may simplify the process by choosing the same brand purchased previously. This represents ‘Habitual decision making’, the least complex of the processes.


Consumer Decision Process Continuum


Decision Making processes for initial purchases

Extended Problem Solving (EPS)

Mid-range Problem Solving

MPS

Limited Problem Solving LPS

High Degree of complexity Low

Decision Making processes for initial purchases

Extended Problem Solving (EPS)

Mid-range problem solving MPS

Limited problem solving LPS

Habitual decision making

High Degree of complexity

Low


Initial Purchase

Extended Problem Solving: EPS occurs when decision process is detailed and vigorous. It is commonly used by consumers purchasing automobiles, expensive clothing and consumer durable goods. In EPS, all stages of CDP are followed, may not be in exact order. Limited Problem Solving: In most situations consumers have neither time, resources nor the motivation to engage in EPS. In LPS, there is little information search or pre-purchase evaluation, need recognition leads to buying action.

Repeat Purchases

When repeat purchases occur, there are two possibilities:

Repeated Problem Solving Habitual Decision making Repeat purchase requires continued problem solving especially when dissatisfaction with previous purchase or stock-outs occur. Habitual Decision making: In many situations, purchases are made on the basis of habits or routines that ‘simplify’ life for the consumers.



Habitual behavior can take different forms depending on the decision process followed in the initial purchase. It may be:

Brand or company loyalty and Inertia

If the consumer expectations are met resulting in satisfaction, they often reward the companies with continued repurchase over time resulting in brand or company loyalty. In case of products where there is limited brand loyalty, buying habits are based on inertia. Although there may not be any incentive to switch, it may occur when the brand is promoted as offering something new.

The Consumer Decision ProcessImpulse buying

It refers to unplanned or spur of the moment action triggered by product display or point of sale promotion.

It is the least complex form of LPS. Its characteristics are:

A sudden and spontaneous desire to act accompanied by urgency. A state of psychological disequilibrium in which a person can feel temporarily out of control. Onset of conflict and struggle that is resolved by an immediate action.

Minimal objective evaluation exists – emotional considerations dominate. A lack of regard for consequences. A high sense of emotional involvement short circuits the reasoning process and motivates immediate action. Variety seeking When consumers express satisfaction with their present brand and yet engage in brand switching – the motive is variety seeking. It occurs most often when there are similar alternatives and high purchase frequency.


Factors affecting the Extent of Problem Solving


Degree ofInvolvement

Degree ofDifferentiation

Availability ofTime

The Consumer Decision ProcessDegree of Involvement:

It is the level of perceived personal importance and/or interest evoked by a stimulus with in a specific situation. The consumer acts to minimize the risk and maximize the benefits gained from purchase and use.

It ranges from low to high and depends on how important the consumer perceives the product or service to be.

Involvement becomes activated and felt when intrinsic personal characteristics (needs, values and self concept) are confronted by appropriate marketing stimuli.

Degree of involvement is determined by: Personal factors, Product factors, Situational factors and Consumer's mood state. The degree of involvement tends to be higher when the

outcome of decision affects the person directly. Personal factors include self image, health, beauty or physical

condition.



Involvement will be the strongest when the product or service is perceived as enhancing self image.

Products and brands also become involving if there is some perceived risk in purchasing and using them. Some of the perceived risks are:

Physical (Risk of bodily harm), Psychological ( Especially negative effect on self image), Performance related (Fear that the product will not perform

as expected) and Financial (Risk that outcome will lead to loss of earnings).


The greater the perceived risk, the greater is the likelihood of high involvement.

When perceived risk becomes unacceptably high, there is motivation to avoid the purchase and use altogether or minimize the risk through search and pre-purchase evaluation stages.

Situational involvement includes factors such as whether product is purchased for personal use or as a gift and whether it is consumed alone or with others.

The Consumer Decision Process Situational involvement changes over time; it may be

strong on a temporary basis and recede once purchasing outcomes are resolved.

Involvement can increase when social pressures are felt.

Degree of differentiation between alternatives

EPS is more probable when choice alternatives are differentiated.

Time availability

Extended Problem solving (Higher degree of involvement) is followed when time pressures are low.


Recap: Introduction. Four views of consumer decision making. Models of consumer behavior. Input, Process and Output model. Engel-Blackwell-Kollat model. Consumer Decision Process (CDP) Model. Types of decision processes. Decision Process continuum. Initial purchase and Repeat purchase. Factors affecting the extent of problem solving. Degree of involvement.

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37687579 Consumer Behavior