UNIT –I: INTRODUCTION

CONSUMER BEHAVIOR

Consumer behavior is defined as the behavior that consumer display in searching for,
purchasing, using, evaluating and disposing of products and services that they
expect will satisfy their needs.

Consumer behavior focuses on how individual make the decisions to spend their
available resources (time, money, effort) on consumption related items. That includes
what they buy, why they buy it, when they buy it, where they buy it, how often they buy
it, how they evaluate it after the purchase and the impact of such evaluations on future
purchases and how they dispose of it.

The term consumer behavior describes two different kinds of consuming entities: the
personal consumer and the organizational consumer. The personal consumer buys goods
and services for his or her own use, for the use of the household, or as a gift for a friend.
The second category of consumer-the organizational consumer- includes profit and not-
for-profit business, government agencies (local, state and national) and institutions, all of
which must buy products, equipment, and services in order to run their organizations.

Interrelationship between marketing Concept and Consumer behavior

The field of consumer behavior is rooted in the marketing concept, a business orientation
that evolved in the 1950s through several alternative approaches toward doing business
referred to respectively as, the production concept, product concept and selling
concept.

The production concept assumes that consumers are mostly interested in product
availability at low prices; its implicit marketing objectives are cheap, efficient production
and intensive distribution. The product concept assumes that consumers will buy the
product that offers them the highest quality, the best performance, and the most features.
The assumption of selling concept is those consumers are unlikely to buy the product the
product unless they are aggressively persuaded to do so.

Thefore marketer realized that consumer behaviors are deeply rooted in market strategy
and this marketing philosophy came to be known as the market concept.

The market concept is based on the premise that a marketer should make what it can sell,
instead of trying to sell what is made.

Customer Value

Customer Value is defined as the ratio between the customers perceived benefits
(economic, functional and psychological) and the resources (monetary, time, effort
psychological) used to obtain those benefits. Perceived value is relative and subjective.
The best example can be McDonald’s restaurants. McDonald Corporation believes in
four core standard – quality, service, cleanliness and value and this core standard is
maintained in all of their chain of restaurants around the global. Thus customer know
what they expect and they feel that they are getting value for the resources they expend.

Customer Retention

For any organization the overall objective is to provide customer value continuously and
effectively than its competitor so as to achieve customer delight and in turn retaining the
customer, which we call as customer retention. Studies have shown that small reduction
in customer defections produce significant decrease in profit because 1) Loyal customers
buy more products.2) loyal customers are less price sensitive.3) servicing existing
customer is cheaper.
Sophisticated marketer builds selective relationships with customers based on where
customers rank in terms profitability rather than merely strive .A customer retention
savvy company closely monitors its customers consumption volume and patterns
establishes tiers of customers according to profitability levels For Ex- Stockbroker
company.

Customer profitability focused marketing tracks costs and revenue of individual

customers and then categorize them into tiers based on consumption behavior .For ex- a
recent study advocates using a “ Customer pyramid” where customers grouped into 4
tiers-1) Platinum tier includes heavy users who are not price sensitive and try new
offering. 2) Gold tier consist of customers who are heavy users but not profitable as they
are very price sensitive.3) Iron tier consist of customers whose spending volume and
profitability do not merit special treatment. 4) Lead tier includes customers who actually
cost the company money because they claim more attention.

Importance of Consumer Behavior

1) The study of CB is useful in determining the form, style, packing etc of the product.
2) The whole aspect of buying behavior determines the durability, price policy, and
utility aspect of goods.
3) Various marketing strategy and policies are formed based on CB.
4) Understanding the buying behavior of customer in various market segments helps
seller in selling the product effectively and efficiently.
5) Successful marketing decision requires extensive information on CB
6) Organization are applying theory and information of CB on daily bases.
7) CB theory provides the manager with the proper question to ask; given the importance
of specific situation and producer category preferred by consumer.
Approaches in CB

Positivism approach

Positivism approach is prediction of a consumer and is based following assumption-

1) A single reality exists.
2) Causes of behavior can be identified by manipulating causes(i.e., inputs) , the
marketer can influence the behavior (i.e., outcome).
3) Rationality- Consumer make decision after weighing alternatives.
4) Events can be objectively measured.
5) Finding can be generalized in larger population.
6) Cause and effects of behavior can be identified and isolated.

Interpretivism / post-modernism / experimentalism approach

Interpretivism is the studying of CB from the point of view of understanding CB and

meaning behind such behavior. Interpretivism study to include many subjective aspect of
CB such as:-
- effects of moods and emotions.
- types of situations in CB.
- the role of fantasy.
- the role of play.
- the role of rituals
- the role of sensory pleasures that certain products of services provide.

Interpretivism considers each purchase experience as unique because of diverse set of

variables at play at that one particular moment in time. , because of its focus on
consumption experience, the interpretive approach is also known as experimentalism.

The purpose of Interpretivism approach is understanding the consumer practices and is

based on the following assumption:-
- cause and effect cannot be isolated
- finding are often not generalized to large population
- reality is subjective
- researcher /respondent interaction affect research finding
- each consumption experience is unique
- there is no single objective truth.

CB knowledge and its application decision making

1) Knowledge of CB is critical for influencing product purchase decision.

2) CB theory provides the manager with the proper question to ask.
3) Marketing decision & regulation are based on assumption about CB.
4) CB knowledge focus on the development ,regulation or effects of marketing strategy.
5) It provide customer value which help an organization in survive in competitive
environment
6) Understanding of CB is the basis for making strategy formulation.