Understanding Consumer Behavior

Part 1 of 3

Consumer Environment

The exchange processes by which consumers conduct their lives.

Objectives
To conceptualize basic models of consumer behavior To understand the consumer decision process for goods, services, and ideas

Simplified Model

Marketing Stimuli

Black Box

Target Audience Response

Multiple Stimuli
Marketing Mix Product Price Place Promotion

Black Box

Environmental Events Economic Technology Political Cultural

Expanding the Black Box

Intra-Personal, psychological Influences

Situational Influences Occasion, usage

Inter-Personal, social Influences

Motives, perceptions,..

Culture, social class,..

Mediated by audience characteristics: Gender,age, Decision Process

Multiple Responses
Black Box Potential Buyer Responses

Product choice
Brand choice

Retailer choice
Purchase timing

Need Satisfaction

Why Study Consumer Behavior?

To implement the Marketing Concept . . a plan to influence buyer seller exchanges to meet organizational goals To understand complex influences on consumption processes

To increase a managers confidence to predict consumer responses to their marketing strategy To avoid the Self-Reference Criterion

Self Reference Criterion: Product Knowledge IQ

Low knowledge

MEAN

High knowledge

Information Gaps: Listen to Your Customer(s)

Self Reference: Home Builders
construct what they think customers needed (Presumptuous)

RESULT: Cookie Cutter designs, mass

production for economies of scale and sales pressure

SURPRISE!!! A home builder

(Finally) Surveys Buyers (1996)

Information Gaps: Listen to Your Customer(s)

SURVEY FINDINGS Many Customers prefer doing without . . . Fireplaces Denver - San Fran. Covered Porches Phoenix - South Coffee Bar . . . Bedroom - Kitchen Loffice - A combination loft + office space for a computer

Consumer Decision Processes

Objectives To understand the types of consumer decision processes To understand the steps in the consumers decision process. To discover how buyers learn about and buy products.

Continuum of Decision Process Effort

Gum Cigarettes

New Car

Pure Routine
Water Gas

Limited
Education New House

Extended Negotiation

Impulse Purchase
(no conscious pre planning)

Continuum of Decision Process Involvement

Personal sources Product characteristics Environmental characteristics Situational sources

Low Involvement
Weak attitude

High Involvement
Strong attitude

Degree of perceived Importance:Enduring/situational (Risk: Social, Financial , Physical & Emotional )

Multiple Participants in the Consumers Decision Process

Initiators

Users

Deciders

Influencers (Gatekeeper)

Simplified Linear Model of the Consumer Decision Process

Problem Recognition Evaluation of Alternatives

Information Search

Purchase Decision

Post Purchase Behavior

Expectations

Major Influences in the Consumers Black Box

SITUATIONAL INFLUENCES
Physical and

PSYCHOLOGICAL INFLUENCES
Perception

SOCIAL INFLUENCES
Roles Family Reference Groups Social Classes Culture

Social Surroundings Time Purchase Use Buyers Condition

Motives Learning Attitudes Personality

Consumer Decision Process

Problem Recognition Post Purchase

Buying Process
Problem or need recognition
Increase Gap Size

Existent State

Desired State

Increase Intensity of (Need) Want

Major Causes of Problem Recognition or Opportunity

Science and Technology Advancements new products new information Changing Consumer Circumstances & Expectations improved education family life cycle income adjustments

ICEBERG EFFECT
The act of buying is 10% visible effort

90% of buying process is invisible

Problem recognition Information search Pre evaluation Post Purchase education

Caution: Symptoms Vs. Causes

Applied Marketing

CONVENIENCE. . . CONVENIENCE. . . CONVENIENCE. . . The average consumer (a woman) takes just 21 minutes to do her supermarket shopping buys an avg. of 18 items out of 30 40,000 browse time decreased 25% over past 5yrs. & she doesnt bother to check prices
Proctor + Gamble (WSJ, 1998)

Psychology of Simplification/Complication
Consumers try to simplify decision making by reducing the amount of information processing
High Information Amount

Low
Simple Decision Complex

Psychology of Complication
Gum - colorcrme w/blue specs
sugarorsugar free? Flavor/taste (Cool Mint,?) Chewable ness bubble blowingor not? liquid centeror not ? Shape, chick let casing Family package or individual? Stick to your teeth or not? Length of chew time ?

Buying Process
Information Search
Information Is knowledge

Information Sources
1. Internal Sources (Psychological) experience memory storage/retrieval mental processing
2. External Sources (Social) 2. family 3. friends 4. professionals

Personal interaction

Information Sources
3. Public Sources
government studies product testing magazines media stories

4. Commercial Sources
advertising sales people product pamphlets

Information Source Comparisons

Source #1 Internal (experience) Experiential (examining or testing the product) Effort Required Low High Believability High High High High Low

#2 Personal (friends, relatives) Low #3 Public (consumer reports) High

#4 Commercial (Promotions)

Low

Applied Marketing

Picking Physicians

Surveyed consumers said the most frequent sources for selecting a doctor are:
Referral from friend 24%

Referral from another doctor 14% Referral from family member 10% General word of mouth 9%

Applied Marketing

Researching Services

Consumers spend time researching professional service providers:

Financial Planner 30 hours

Stockbroker
21 hours Lawyer 19 hours Accountant 17 hours

Dentist & Primary Care Physician 16 & 15 hours

Principles: Information Search

Consumers seek to simplify decision making via time, energy & costs. Consumers seek Information credibility & predictive ness

Tactics: Identify the information sources & importance to assure processing of your brands information.

Influences on Intensity of Information Search

Personal factors - ability to process product
information, physical energy and mobility to search out alternative information .. Shopping propensity special sales, return policies.

Social factors - social pressures for right

choice, time pressure on the purchase Environmental Factors availability of product substitutes, supplier alternatives and resources to search Product life (long or short?)

Applied Marketing

Information Gaps

Examples of Dells Customer Feedback

- Wheres the power button? - Wont work after I washed the keyboard - Wheres the any key? (Click any key to continue) - fax wont work - I refuse to read manual

Questions and (Sometimes) Answers

(All Day Counts Include Weekends)
Web site What we asked What happened Coca-cola How much caffeine No response. is in coke? Reebox Is it dangerous to wear Four weeks later running shoes to play basketball? 3M Do post-it notes get less Twenty days later sticky from just sitting around?

Principle: Information Overload

With greater amounts of information available, Consumers make poorer choices (Threshold effects) Tactic: focus on product information (features) that is important (salient) to consumers

Principle: Information Wear out

Repetition increases consumer learning Too much repetition = wear out (consumers decrease attention over time) Tactic: Change information and/or format Pictures are better than words

Information search leads to a Consideration Set of Brand Alternatives All brands in a product class Unknown brands
Brands found accidentally
Brands found through search

Known brands Evoked set

Unrecalled brands

Consideration set of brand choice alternatives

+ I like o Neutral - I dislike

Buying Process
Evaluation of Alternatives

Utility Theory - Consumers perform

rational, quantitative calculations to maximize personal utilities .. economic, behavioral & societal.

3 Major Evaluation Criteria

Economic: cost/performance Behavioral: prestige/status/peer influence/lifestyle Societal: product externalities Lots of storage environmental effects Performance societys long run welfare
Safety

Variety of colors

Evaluation Criteria
Principle: Evaluation criteria change over time and among market segments.
Promotions frame certain product attributes (evaluation criteria) to influence their perceived relative importance

Supermarket Selection Criteria Change over time

1974
#1

1981

1985

Cleanliness attractive location Labeling of Products

Product Quality

Low prices

Low prices
Product variety Cleanliness attractive

Location
Product Variety Courteous employees

Economic Theory
Economic Rationality is price and quality = value.
Assumptions: Complete product knowledge, freedom of choice & ability to measure utilities (satisfaction)

Economic Theory Limitations

Consumers are not always economically rational due to social & emotional motives & imperfect knowledge. Expenditures do not vary with income due to varying resource constraints

Law of Diminishing Returns (Marginal Utility)

28

24
Utility 20 Satisfaction 15 10

3
Beer

Applying Evaluative Criteria

(Behavioral,Societal,Economic)
Toothpaste
Decay Prevention and Price
Taste and Flavor Packaging Economic Attributes Behavioral Attributes Societal Attributes

(safety, recyclable, resources)

Evaluation criteria are the basis of product attitudes

Retailer Attributes Product Attributes - Price (value), - location, - Quality, - credit terms, - return policies,etc. - style, etc. + relative + relative importance (utility) importance (utility) = Attitude toward = Attitude toward Product Retailer (Image)

Product Attitude
Product Beliefs x Evaluations = Attitude An overall evaluation of a good, service or idea . . .with a predisposition to purchase the type of product or specific brand Generally, a weak predictor of product or brand choice due to mediators (time,situation,money)

Product attitudes lead to . . . Behavioral intentions

Of each 100 persons who stated a definite intention to buy a (brand) appliance.
44% bought the appliance 68% bought the brand intended 32% changed brands

Brand A

56% did not buy the appliance

Factors that weaken the relationship between intention and behavior

Intervening time

Different levels of specificity

Unforeseen environmental context

Unforeseen event

Degree of voluntary control

Instability of intentions

New information

Buying Process
Purchase Decision(s)
WHO BUYS? WHAT? WHEN? WHERE? AND WHY?

Influences on Purchase Decisions

Purchase Situation(s) Usage (Social or Private) Time Perspective (long or short) Resource Capabilities Level of personal control

Purchase Decisions
Principle: Consumers dislike making decisions/choices Tactic: Show satisfied customers
ordinary people experts celebrities

Buying Process
Post-Purchase Behavior

Cognitive dissonance: postpurchase tension .

Post Purchase Behavior

Product Experience
Actual Benefits
Gap Size

Actual Expectations

Satisfied

Dissatisfied

Post Purchase Behavior

Principle: Dissatisfied customers
communicate more negative word of mouth than satisfied customers communicating positive word of mouth

Post Purchase Behavior

Cognitive Dissonance
Lack of confidence (doubts) about the correctness of a prior purchase decision and efforts to reconcile doubts
Did I Do the Right Thing?

Cognitive Dissonance
Causes: Perceived Risk
Performance risk Physical risk (wear-out) High financial commitment High involvement level High social visibility Information Overload

Cognitive Dissonance
Potential Reactions
Return product Seek confirming information

Marketing Tactic
Provide post decision positive information

Cognitive Dissonance

A Model of Consumer Decision Making

Information in the environment Interpretation Exposure,attention, and comprehension Memory Product knowledge and involvement Knowledge, meanings and beliefs Consumer decision making

Integration Attitudes and intentions Decision/Behavior

Questions?