The factors that affect the demands of the consumers

Trends in the consumer behavior in 2011- 2012

HON. EDUARDO G. ONGHON. EDUARDO G. ONGBSC, MBA, LLB, PhD, DPA, DBABSC, MBA, LLB, PhD, DPA, DBA

Diplomate in Business EducationDiplomate in Business EducationFellow in Personnel ManagementFellow in Personnel Management

Fellow in Real Estate ManagementFellow in Real Estate ManagementManagement & Academic ConsultantManagement & Academic Consultant

Professor of Business & Public AdministrationProfessor of Business & Public AdministrationChairman Professional Board of Real Estate Service-PRCChairman Professional Board of Real Estate Service-PRCPresident Phil. Association of Professional Regulatory Boards President Phil. Association of Professional Regulatory Boards

Involves the psychological processes that consumers go through in recognizing needs, finding ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and, if so, which brand and where). Interpret information, make plans, and implement these plans (e.g., by engaging in comparison shopping or actually purchasing a product).

Consumer Buying Behavior Refers to the buying behavior

of final consumers individuals

& households who buy goods

and services for personal

consumption.

CONSUMER

PERCEPTION/SENSATION

COGNITION

AFFECT

BELIEFS

SOCIAL ANDOTHER INFLUENCE

INFOSEARCH

CHOICES

PREFERENCES

COMMUNICATION

MARKETRESEARCH

STRATEGY

If you have bad breath, you cannot smell it yourself.

If you eat a balanced diet, you do not need vitamin supplements.

Using a razor with five blades will reduce the likelihood of cutting yourself and will result in less skin irritation.

Dell Computers tend to be of higher quality than those made by HP and Sony.

Rust stains on clothes can be removed with the use of lemon juice. Bleach actually makes these stains worse.

Are veggie burgers actually healthy? What makeup should you use to get

an “even” skin tone? Do I get any useful benefits from

spending more than Php 5,000.00 on a digital camera?

Should I get a “make-over?” What am I looking for? What should I do?

Is my mechanic honest? Which tie should I wear for a job

interview? Should I give my wife roses,

chocolate, or software?

Consumer problem: Discrepancy between ideal and actual state--e.g., consumer: Has insufficient hair Is hungry Has run out of ink in his or

her inkjet cartridge

Problems can be solved in several ways--e.g., stress reduction <----- vacation, movie, hot bath, medication

INFORMATIONSEARCH

PROBLEMRECOGNITIO

N

EVALUATION OF

ALTERNATIVES PURCHASE

POSTPURCHASE

EVALUATION/BEHAVIORS

Theory

Complications

INTERNAL

EXTERNAL

MemoryThinking

Word of mouth, media,store visits, trial

CATALOG

UNIVERSAL SET

RETRIEVED SET

EVOKED SET

All possible options

Options that readily come to mind

Options that will be considered by the consumer

Note: Retrieved and evoked sets will vary among different consumers

For low involvement products, efforts aimed at affecting internal search tend to be more effective—the consumer is usually not willing to expend energy on external search.

External search is more likely for higher involvement products.

Involvement level Temporary Enduring

Consumer locus of control Internal External

Product category complexity

Consumer knowledge

Compensatory: Decision based on overall value of alternatives (good attribute can outweigh bad ones)

Non-compensatory: Absolutely must meet at least one important criterion (e.g., car must have automatic transmission)

Hybrid: Combination of the two (e.g., one non-compensatory measure, then compensatory tradeoffs on other attributes

Abandoned strategy: Consumer finds initial criteria unrealistic and proceeds to less desirable solution

IMPORTANT

LESSIMPORTANT

If either Coke or Pepsi is on sale, buy that brand; otherwise, buy Coke

The larger the navels, the better the orange

The larger package is likely to offer a lower unit price (not true in reality)

BELIEFSAFFECT

(FEELING)

BEHAVIORALINTENTIONS

Beliefs Can be positive,

negative, or neutral May or may not be

accurate May contradict other

beliefs held by the other person

Affect May be positive or

negative May take on specific

dimension (e.g., pleasure, disgust)

Behavioral Intentions An individual’s plan or

expectations of what he or she will do

May appear inconsistent with beliefs

May not predict well what the individual will do in reality

Statements must be Perceived Comprehended Remembered Believed (at least in part)

Model of Buyer Behavior

Marketing andOther Stimuli

Marketing andOther Stimuli

Buyer’s Black BoxBuyer’s Black Box

Buyer’s ResponseBuyer’s Response

ProductPricePlacePromotion

EconomicTechnologicalPoliticalCultural

Buyer Characteristics

Buying Decision Process

Product ChoiceBrand ChoiceDealer Choice

Purchase TimingPurchase Amount

Factors Influencing Consumer Behavior

Culture

Subculture

Socialclass

Social

Referencegroups

Family

Rolesand

status

Individual/Personal

Age andlife-cycle

OccupationEconomicsituationLifestyle

Personalityand

self-concept

Psychological

MotivationPerceptionLearning

Beliefs andattitudes

Buyer

Cultural

Social Class• Society’s relatively

permanent & ordered divisions whose members share similar values, interests, and behaviors.

• Measured by: Occupation, Income, Education, Wealth and Other Variables.

Social Class• Society’s relatively

permanent & ordered divisions whose members share similar values, interests, and behaviors.

• Measured by: Occupation, Income, Education, Wealth and Other Variables.

Culture Most basic cause of a person's wants and

behavior.

Culture Most basic cause of a person's wants and

behavior.

Subculture• Groups of people with

shared value systems based on common life experiences.

• Hispanic Consumers

• African American Consumers

• Asian American Consumers

• Mature Consumers

Subculture• Groups of people with

shared value systems based on common life experiences.

• Hispanic Consumers

• African American Consumers

• Asian American Consumers

• Mature Consumers

“ In Filipino Culture everything new and shiny is attractive”

CELL PHONE CRAZE

Groups• Membership• Reference

Groups• Membership• Reference

Factors Affecting Consumer Behavior:Social

Family• Husband, wife, kids• Influencer, buyer, user

Family• Husband, wife, kids• Influencer, buyer, user

Roles and StatusRoles and Status

Social FactorsSocial Factors

Reference Group are groups that have direct (face to face)or indirect influence on the person’s attitudes or behavior

“ People are often influenced by reference groups to whichthey do not belong”

Family members can strongly influenceBuyer behavior

Role – consists of the activities people areexpected to perform accordingto the persons around them

Each role carries a status reflecting thegeneral esteem given to it bysociety

People often choose products that show their status in society

Factors Affecting Consumer Behavior:Individual/ Personal

Personal InfluencesPersonal Influences

Age and Life CycleStage

Age and Life CycleStage OccupationOccupation

Economic SituationEconomic Situation

Lifestyle IdentificationLifestyle Identification

ActivitiesActivities OpinionsOpinions

InterestsInterests

Personality & Self-ConceptPersonality & Self-Concept

Factors Affecting Consumer Behavior:PsychologicalFactors Affecting Consumer Behavior:Psychological

Psychological Factors

MotivationMotivation

PerceptionPerception

LearningLearning

Beliefs and Attitudes

Beliefs and Attitudes

BELIEFS & ATTITUDE

A persons beliefs and attitude are acquired through acting and learning.

A belief is a descriptive thought that a person has about something

An attitude is a person’s consistency favorable orUnfavorable evaluations , feelings and tendenciesToward an object or idea.

PERCEPTION

Is the process by which people select, organize, and interpret information to form a meaningful picture of the world.

The marketer must remember that two people with the same motivation and in the same situation may act differently because they perceive the situation differently.

LEARNING

Is described as changes in an individual behavior arising from experience.

MOTIVATION

The process of motivation is initiated by the Tensions an unsatisfied want creates motive (drive) – is a need that is sufficiently pressing to direct the person to seek satisfaction of the need.

Sigmund Freud's Theory –

Assumes that people are largely unconscious about thereal psychological forces shaping their behavior. Accordingly, a person does not fully understand his or her motivation.

id - is an important part of our personality because as newborns it allows us to get basic needs

Sigmund Freud's Theory –

Ego- based on reality principle the ego understands that other people have needs and desires and that something being impulsive or selfish can hurt us in a long run

Superego moral parts of us are develops due to moral and

ethical restraints placed on us by our caregivers

The role of the unconscious is only one part of the model.  Freud also believed that everything we are aware of is stored in our conscious.  Our conscious makes up a very small part of who we are.  In other words, at any given time, we are only aware of a very small part of what makes up our personality; most of what we are is buried and inaccessible. The final part is the preconscious or subconscious.  This is the part of us that we can access if prompted, but is not in our active conscious.  Its right below the surface, but still buried somewhat unless we search for it.  Information such as our telephone number, some childhood memories, or the name of your best childhood friend is stored in the preconscious. 

HENRY MURRAY’s THEORY

Henry Alexander Murray (May 13, 1893 – June 23, 1988) was an American psychologist who taught for over 30 years at Harvard University. He was founder of the Boston Psychoanalytic Society and developed a theory of personality based on "need" and "press". He also is developer of the Thematic Apperception Test (TAT) which is widely used by psychologists.

Murray classified needs as being either:

Primary needs (which are biologically based): food, water, air, sex, avoidance of pain

Secondary needs (which either derive from our biological needs or are inherent in our psychological nature): achievement, recognition, acquisition dominance, aggression, autonomy affiliation, play, cognizance (asking questions of others) Murray believed that stronger needs are expressed more often over time and lead to more intense behaviour.

WILLIAM MCGUIRE

William McGuire has described the steps an individual must be persuaded to pass through to assimilate a desired behavior.

These steps are:Exposure to the messageAttention to the messageInterest in or personal relevance of the messageUnderstanding of the messagePersonalizing the behavior to fit one’s lifeAccepting the changeRemembering the message and continuing to agree with itBeing able to think of itMaking decisions based on bringing the message to mindBehaving as decidedReceiving positive reinforcement for behaviorAccepting the behavior into one’s life

Maslow’s Hierarchy of Needs

Esteem Needs(self-esteem, status)

Social Needs(sense of belonging, love)

Safety Needs(security, protection)

Physiological Needs(hunger, thirst)

Self Actualization

(Self-development)

Consumer Decision-Making Process

Postpurchase Behavior

Postpurchase Behavior

PurchasePurchase

Evaluation of AlternativesEvaluation

of Alternatives

Information SearchInformation Search

Need RecognitionNeed Recognition

Cultural, Social, Cultural, Social, Individual and Individual and Psychological Psychological

Factors Factors affect affect

all stepsall steps

Cultural, Social, Cultural, Social, Individual and Individual and Psychological Psychological

Factors Factors affect affect

all stepsall steps

Complete model of consumer behavior

Stimuli (marketer dominated, other)

External search

Memory

Internal search

Exposure

Attention

Comprehension

Acceptance

Retention

Search

Need recognition

Alternative evaluation

Purchase

Outcomes

Dissatisfaction Satisfaction

Individual differences• resources• motivation & involvement• knowledge• attitudes• personality, values, lifestyle

Influences• culture• social class• family• situation

Start

• How do you know when to shop? What are the triggers that initiate an awareness & search?

• What are the internal & external sources of these triggers?

Need Recognition

Marketing helps consumers recognize (or

create) an imbalance between present status

and preferred state

• When a current product isn’t

performing properly

• When the consumer is running out of an product

• When another product seems

superior to the one currently used

The information search stage

An internal search involves the scanning of one's memory to recall previous experiences or knowledge concerning solutions to the problem-- often sufficient for frequently purchased products.

An external search may be necessary when past experience or knowledge is insufficient, the risk of making a wrong purchase decision is high, and/or the cost of gathering information is low.

Personal sources (friends and family)

Public sources (rating services like Consumer Reports)

Marketer-dominated sources (advertising or sales people)

The evoked set: a group of brands from which the buyer can choose

• go back to your past purchase– what were the specific internal and external sources of information that influenced your decision?

• how do you determine (and rate) the credibility of these sources?

• what specific information influenced you?

Determinants of External Search

Buyer Behavior

• Initiator: the person who first suggests or thinks of the idea of buying a particular product or service.

• Influencer: a person whose views or advice carry weight in making the final buying decision

• Decider: the person who ultimately makes the final buying decision or any part of it

• Buyer: the person who makes the actual purchase

• User: the person who consumes the product or service

Other people often influence a consumers purchase decision. The marketer needs to know which people are involved in the buying decision and what role each person plays, so that marketing strategies can also be aimed at these people. (Kotler et al, 1994).

Note: teens are increasingly assuming more of these roles

Think about your past purchase– who was in which role?

WifeDominant

HusbandDominant

Joint

100 50 075 25

Women’s clothing

Pots & pans

Child clothing

groceries

vacations

TV sets

Family car Sport equipment

Lawn mower

Paint wallpaper

lamps

Men’s leisure clothing

Men’s business clothing

cameraFinancial planning

furniture

refrigerator

luggage

carpet

NonRx

Toys/games

stereo

hardware

Extent of role specialization

Relative influence of husbands & wives

Informationsearch

Final decision

Consumer decision making varies with the level of involvement in the

purchasing decision

• Extensive: problem solving occurs when buyers purchase more expensive, less frequently purchased products in an unfamiliar product category requiring information search & evaluation; may experience cognitive dissonance.

• Limited: problem solving occurs when buyers are confronted with an unfamiliar brand in a familiar product category

• Routine: response behavior occurs when buyers purchase low cost, low risk, brand loyal, frequently purchased, low personal identification or relevance, items with which they are familiar.

Increase in Consumer evaluation processes

Factors affecting Consumer involvement

• Previous experience: low level involvement

• Interest: high involvement

• Perceived risk of negative consequences: high involvement

• Situation: low to high due to risk

• Social visibility: involvement increases with product visibility

• Offer extensive information on high involvement products• In-store promotion & placement is important for low involvement products• Linking low-involvement product to high-involvement issue can increase sales

So…

Types of consumer involvement and decision making

Routine Limited Extensive

Involvement Short Low to moderate

High

Time Low Short to moderate

Long

Cost Short Low to moderate

High

Information Search

Internal only Mostly internal

Internal & external

Number of alternatives

one few many

Compensatory Decision: Using product characteristics to guide decision

• Select the best overall brand-- evaluates brand options in terms of each relevant attribute and computes a weighted or summated score for each brand. The consumer chooses the brand with the highest score.

• Compensatory model because a positive score on one attribute can outweigh a negative score on another attribute.

• Conjunctive Decision Rule (cutoff criteria)-- Consumer sets a minimum standard for each attribute and if a brand fails to pass any standard, it is dropped from consideration .

• Reduces a large consideration set to a manageable size.• Often used in conjunction with another decision rule.

• Disjunctive Decision Rule (rank by importance)-- sets a minimum acceptable standard as the cutoff point for each attribute--any brand that exceeds the cutoff point is accepted.

• Reduces large consideration set to a more manageable number of alternatives.• Consumer may settle for the first satisfactory brand as final choice or may use

another decision rule.

• Synthesized decision rule-- Consumers maintain overall evaluations of brands in their long term memories. Brands on not evaluated on individual attributes but on the highest perceived overall rating.

• think of an important purchasing decision you have made

• what are some of the thoughts you have had following your purchase? Any regrets?

• what has influenced those thoughts?

• how have you dealt with the discomfort?

• how has the company anticipated or dealt with your discomfort?

Post purchase Behavior

Can minimize through:Effective Communication

Follow-upGuaranteesWarranties

Under promise & over deliver

Cognitive DissonanceCognitive Dissonance

??Did I make a good decision?Did I make a good decision?

Did I buy the right product?Did I buy the right product?

Did I get a good value?Did I get a good value?

Sour Grapes– a story of cognitive dissonance

…after being unable to reach the grapes the fox said, “these grapes are probably sour, and if I had them I would not eat them.” --Aesop

Cognitive Dissonance

• psychological discomfort caused by inconsistencies among a person’s beliefs, attitudes, and actions

• varies in intensity based on importance of issue and degree of inconsistency

• induces a “drive state” to avoid or reduce dissonance by changing beliefs, attitudes, or behaviors and thereby restore consistency

Tendency to avoid information can be countered by eliciting interest, norm of fairness, or perceive usefulness of information

Post-decision “buyer’s remorse” may be increased by importance or difficulty or irreversibility of decision

Counter-attitudinal action, freely chosen with little incentive or justification, leads to attitude change (e.g., new product at special low price)

Applications:

• think of an innovation in your field

• describe different groups of employees in your organization who would respond early and favorably, as well as later and unfavorably

• what are the differences between these groups?

• how could you use this information to market the innovation to them more effectively?

• Identify an innovation in your organization or an organization you are familiar with

• Identify the subgroups who responded to the innovation using the Rogers & Shoemaker stakeholder model

• What could have been done to facilitate acceptance by each of these groups?

Decision Processing

THANK YOUfor listening!

HON. EDUARDO G. ONGBSC,MBA,LLB,PHD,DPA,DBA

Professor of Business Management &

Public Administration