CUSTOMER

ANALYSIS
BUYING BEHAVIOR OF CONSUMERS

BUILDING CUSTOMER VALUE

UNDERSTANDING
CONSUMERS
 Sergio Zyman, Former Chief Marketing
Officer, Coca Cola Company, says in his
recent book “End of Marketing” :
“They (consumers) are, quite possibly, the
only thing worth thinking about…….Every
thing that happens to consumers and every
thing that consumers do should affect your
marketing decisions……You have to
understand the whole environment in which
people live…….Anything that happens in that
environment is going to change what
consumers do and don’t do.”
RISE OF CONSUMER
DEMOCRACY
 There has been a seismic change in the
consumer markets in the past two decades
which has been aptly described as the “rise of
consumer democracy”.
 Suddenly, due to a number of factors, most
notably technology and the development of
global markets, consumers have more choices
than ever before.
 So marketers have to work harder to make sure
that consumer choose their products.
STUDY OF CONSUMER BEHAVIOUR

 Because markets are complex , we need to develop

some common framework for grasping a market’s
essentials.
 The marketer should approach the study of a new
market by asking 4 questions :

1. What does the market buy ? Objects Of Purchase

2. Why does it buy ? Objectives of purchase
3. Who buys ? Organization of purchase
4. How does it buy ? Operations of purchasing
organization
( FOUR Os OF A MARKET )
6 Os OF A MARKET
 The 4 Os of a market (Objects, Objectives,
Organization and Operations) should be grasped
before one contemplates the 4 Ps of the
marketing mix.
 Two further questions of a more descriptive
nature can also be asked of a market :
5.When does it buy ? Occasions for purchase
6. Where does it buy ? Outlets for purchase
CONSUMER MARKET

 Consumer Market is the market for

products and services that are
purchased or hired by individuals
and households for personal (non-
business) use.
 Consumer Products : Products

purchased for personal use.

BUYERS V/S CONSUMERS
 Mother buying toys for kid
(Buyer – Mother, Actual user – Kid)
 Marketers focus their promotion on
both i.e. buyers and the user (ultimate
consumer)
 For example Maggi and Rasna , both try
to influence the buyer and the user.
Taste and fun aspects for children
(main users) and time saving and
economy for mothers (actual buyers).
CLASSIFICATION OF
CONSUMER PRODUCTS
 (A.) On the basis of their rate of consumption
and tangibility :
DURABLE GOODS (Tangible goods which
normally survive many uses, frequency of
purchase is less e.g. Refrigerator, T.V. etc.)
NON-DURABLE GOODS (Tangible goods
normally are consumed in one or few uses,
frequency of purchase is more e.g. Soap, Salt,
Tooth paste, Shampoo etc.)
SERVICES (Intangibles, Activities,benefits or
satisfactions which are offered for sale e.g
hair cuts, education, restaurants, airlines etc.)
CLASSIFICATION OF
CONSUMER PRODUCTS
(B.) On the basis of consumers’ shopping habits
:
CONVENIENCE GOODS (Which the customers usually
purchase more frequently, immediately and with the minimum
of efforts in comparing and buying, e.g.Soap, Cosmetics,
Tobacco etc.)
SHOPPING GOODS (Which the customers, in the
process of selection and purchase characteristically compares
on such basis as suitability,price and style, quality , durability
etc., e.g. Furniture, T.V., Automobiles, major appliances etc.)
SPECIALITY GOODS (Goods with unique characteristics
and/or brand identification for which buyers are willing to make
a special purchasing effort, e.g. specific brands and types of
fancy goods, hi-fi components, technological items, special
items etc.)
A SIMPLE MODEL OF
CONSUMER BEHAVIOUR

INPUT PROCESS OUTPUT

External Consumer
Consumer
Influences Decision Making
Decisions and
Actions
 MODEL OF BUYER
BEHAVIOUR
Inferences
Buyer’s Decisions
Marketing Other Buyer’s Buyer’s Decision
Stimuli Stimuli Characteristics Process

PRODUCT CHOICE
ECONOMICAL
PRODUCT
CULTURAL PROBLEM
RECOGNITION
BRAND CHOICE
GEOGRAP
PRICE INFORMATION
HICAL SOCIAL
SEARCH
DEALER CHOICE
PLACE
TECHNOLO PERSONAL
EVALUATION
GICAL
PURCHASE TIME
PSYCHOLOGICAL DECISION
PROMOTION
POST PURCHASE AMOUNT
PURCHASE
BEHAVIOUR

BUYER’S BLACK BOX

INPUT PROCESS OUTPUT

INFLUENCE ON CONSUMER
BEHAVIOUR
I. BUYING INFLUENCES-
PRODUCT CHARACTERISTICS
SELLER’S CHARACTERISTICS
SITUATIONAL ,, ,,

BUYER’S ,, ,,

II. BUYING SITUATIONS

III. BUYING PROCESS
IV. BUYING DECISIONS
FACTORS INFLUENCING
BUYER’S BEHAVIOUR

CULTURAL

SOCIAL
PERSONAL
CULTURE REFERENCE PSYCHOLOGICAL
GROUPS AGE,GENDER,LIFE BUYER
SUB-CULTURE FAMILY CYCLESTAGE, MOTIVATION,PERCEP-
TION,LEARNING,
OCCUPATION, BELIEF & ATTITUDE

ROLES AND INCOME,PERSONALITY

STATUS
SOCIAL CLASS
(A.) CULTURAL FACTORS
 CULTURE: All aspects of society. It includes
Values, Customs, Arts and Skills. Transmitted
from generation to generation.
 SUB-CULTURE: Each culture contains
smaller groups of sub-cultures- Nationality,
Religion, Race, Geographical location.
 SOCIAL CLASS: In every society there is
inequality in social status among different
people and the people are categorized into
different social classes.Social scientists have
identified six major social classes : Upper-
Upper, Upper-Middle, Upper-Lower, Lower-
Upper, Lower-Middle, and Lower-Lower.
(B.) SOCIAL FACTORS
 REFERENCE GROUPS : ( PEOPLE AROUND US ) : Our
decision of purchase is not only influenced by our life
style, our personality and by other psychological factors
but also by the people around us, with whom we interact
directly or indirectly (influence our purchase decision),
e.g. families, friends, neighbors, colleagues, civic and
professional organizations.
Aspiration Groups (want to belong to) – adoption of the
opinions and outlook of film stars, sports stars, pop
stars etc.
Disassociate Groups (do not want to belong to) – whose
values and behavior an individual rejects, e.g. you may
not like to follow the brand choice of your neighbor or
your relative etc.
SOCIAL FACTORS
(REFERENCE GROUPS)
 The degree to which a reference group will
affect a purchase decision depends on an
individuals susceptibility to reference group
influence and the strength of his/her
involvement with the group.
 Reference group influence on products :
Strong Influence – Cars, Color T.V.,
Furniture,Refrigerator etc.
Weak Influence – Tea, Coffee, Soap, Beer, Cig.
etc.
SOCIAL FACTORS
FAMILY:
 Family of Orientation(One’s parents, brothers and sisters)

 Family of Procreation(One’s spouse and children)

Different family members play different roles. Marketers
should study the roles that different family members
might play in purchase decisions.(i.e.
Initiator,Influencer,Decider,and User).
ROLES AND STATUS:
(Role of a manager carries more status than role of clerk
and his status).
(C.) PERSONAL FACTORS
 AGE
 GENDER
 LIFE CYCLE STAGE ***
 OCCUPATION
 INCOME
 LIFE STYLE
 PERSONALITY etc.
 PERSONAL FACTORS
LIFE CYCLE STAGE ***
(The family life cycle)
families go through stages, each stage creates different
consumer demands :
 Single / Bachelor stage (Young unmarried living away from home)
 Newly married
 Full nest 1 (youngest child under 6)
 Full nest 2 (youngest child over 6)
 Full nest 3 (older married couples with dependent children)
 Empty nest 1 (older married couples with no children living with
them, head still working)
 Empty nest 2 (,, ,, ,, ,, ,, ,, ,, ,, ,, Head retired)
 Solitary survivor in labor force
 Solitary survivor retired
 Modernized life cycle includes divorced and no children
(D.) PSYCHOLOGICAL
FACTORS
 MOTIVATION

(Need arises-Person seeks its satisfaction-It is

known as motive). A motive is an internal
energizing force that orients a person’s
activities toward satisfying a need or
achieving a goal.
Actions are effected by a set of motives, not
just one. If marketers can identify motives
then they can develop a better marketing mix.
All our needs can be classified as - Primary
(Physiological) and Secondary (Acquired
-these are Psychological make-up)
MASLOW’S THEORY OF
MOTIVATION
 According to Abraham Maslow human needs
are arranged in a hierarchy, from the most
pressing to the least pressing.
 People will try to satisfy their most important
needs first.
 When a person succeeds in satisfying an
important need, that need will cease being a
current motivator, and the person will try o
satisfy the next most important need.
HIERARCHY OF HUMAN NEEDS

Self-
Actualization
Needs
(self development
and realization)
Esteem Needs
(self-esteem,recognition,status)
Social Needs
(sense of belonging,love)
Safety Needs
(security,protection)
Physiological Needs
(hunger, thirst,shelter etc.)
HERZBERG’S THEORY OF
MOTIVATION
 According to Frederick Herzberg there
are two factors that are considered by
consumers in deciding which brand to
buy : dissatisfiers (factors that cause
dis-satisfaction) and satisfiers (factors
that cause satisfaction).
 The absence of dissatisfiers is not
enough; satisfiers must be actively
present to motivate a purchase.
PSYCHOLOGICAL FACTORS
PERCEPTION ( How we see the world around us )
 (Information inputs are the sensations received
through 5 sense organs-Eyes (sight), Ears
(hearing), Nose (smell), Tongue (taste) and Skin
(touch).
 Perception is the process of selecting,
organizing, and interpreting information inputs
to produce meaning, i.e. we chose what
information we pay attention to, organize it and
interpret it.
PSYCHOLOGICAL FACTORS

(PERCEPTION)
 How a motivated person actually acts is
influenced by his or her perception of the
situation, beliefs and attitudes.
 People can emerge with different perceptions
of the same object because of the three
perceptual processes :
selective attention,
selective distortion,
selective retention.
PSYCHOLOGICAL FACTORS

 LEARNING (Adult’s human behavior is

learned behavior. Skills & knowledge gained
from past experiences). Most human
behavior is learned. Learning theorists
believe that learning is produced through the
interplay of drives, stimuli, cues, responses,
and reinforcement.
 BELIEF AND ATTITUDE (Descriptive
thoughts are beliefs, Attitudes are feelings
-positive / negative)
THE BUYING DECISION PROCESS

 Marketers have to go beyond the various

influences n buyers and develop an
understanding of how consumers actually make
their buying decisions. Specifically, marketers
must identify who makes the buying decision
(buying roles), the types of buying decisions
(buying behavior / buying situations) and the
steps in buying process ( stages in the buying
decision process).
DIFFERENT ROLES IN BUYING
DECISIONS

 Initiator : A person who first suggests the

idea of buying the particular product or
service.
 Influencer : A person whose view or advice
influences the decision.
 Decider : A person who decides on any
component of a buying decision.
 Buyer : The person who makes the actual
purchase.
 User : A person who consumes or uses the
product or service.
FOUR TYPES OF BUYING BEHAVIOR
(BUYING SITUATIONS)

High Involvement Low Involvement

Significant Complex buying behavior

Differences Variety-seeking buying
(Extensive Problem behavior
between Solving)
Brands
Few Dissonance reducing Habitual buying behavior
Differences buying behavior (Routinized Response
between (Limited Problem Behavior)
Brands Solving)
FIVE STAGE MODEL OF THE
CONSUMER BUYING PROCESS

Problem Information Evaluation of

recognition search alternatives

Post-purchase Purchase
behavior decision
SUCCESSIVE SETS INVOLVED IN
CONSUMER DECISION MAKING

Total Set
Awareness Set

Consideration
Set
Choice
Set
?
Buying Decision
STEPS BETWEEN EVALUATION OF
ALTERNATIVES AND A PURCHASE
DECISION

Attitude
of others
Purchase
Evaluation of Purchase Decision
alternatives intention
Unanticipated
situational
factors
BUILDING CUSTOMER VALUE
DELIVERING PROFITABLE VALUE

Business: is a value delivery system.

Business Process : is the task of

delivering value to the market at a profit
.
TWO VIEWS OF VALUE DELIVERY
PROCESS
(A) Traditional Physical Process Sequence :

Make the product Sell the product

Advertise Service
Make Promote
Design Price Sell Distribute
Procure

( Used in Economies of Scarcities )

TWO VIEWS OF VALUE DELIVERY
PROCESS

(B) The Value Creation and Delivery Sequence

Choose the value Provide the value Communicate the value

Sourcing
Product Sales Force
Customer
Value Dev. Distributing
Segmentation
Positioning Sales Promotion
Service Making
Market
Selection / Development
Advertising
Focus Pricing Servicing

( Used in More Competitive Economies )

DELIVERING PROFITABLE VALUE

• Business is a value delivery system.

• Each business is the disciplined choice
of a true winning value proposition and
deliberately designed integration of all
resources and actions around the
profitable delivery of this value
proposition.
• Profitable value is the resulting
experiences customers derive by doing
business with the organization.
DELIVERING PROFITABLE VALUE

• An Organization bases its decision about

products and services and how they are
developed, made and distributed entirely on the
profitable superiority of the resulting
experiences for customers.
• A customer chooses a firm over others because
it offers the greatest positive combination of
end-result benefits and price (i.e. the greatest
value ) in the perception of that customer.
DELIVERING CUSTOMER VALUE
( THE VALUE CHAIN )
• Michael Porter of Harvard proposed the Value
Chain as a tool for identifying ways to create
more customer value.
• Every firm is a collection of activities that are
performed to design, produce, market, deliver
and support its product.
• The value chain identifies nine strategically
relevant activities that create value and cost
in a specific business. These nine value-
creating activities consist of five primary
activities and four support activities.
THE VALUE CHAIN

S
Firm Infrastructure
u
p
p Human Resource Management
o Margin
r Technology Management
t
Procurement

Inbound Outbound
Operations Marketing and Sales Service
Logistics Logistics Margin

Primary Activities

( Margin is the difference between all value chain costs and the price to the customers )
CUSTOMER VALUE

- is defined by the following equation :

V = Q+F / P
Where;
V= Customer Value
Q= Product Quality as Perceived by Customers
F= Product Features Valued by Customers
P= Price of Product to the Customers
- an increase in the numerator or a decrease in the
denominator will increase the value.
CUSTOMER VALUE

• Customer delivered value is the difference

between total customer value and total customer
cost.
( Total Customer Value : is the bundle of
benefits customers expect from a given product
or service ).
(Total Customer Cost : Buyer evaluates time,
energy and psychic costs alongwith the
monetary cost to form a total customer cost ).
CUSTOMER VALUE

• Buyers will buy from the firm that they perceive to offer the
higher customer delivered value.

CUSTOMER
Product
Value
Services Value
Total DELIVERED
VALUE
Differen

Personnel Customer ce

Value
Total
Image
Value
Value
Customer Psychic
Monetary
Cost
Price

Time
Cost
Cost
Energy
Cost
ATTRACTING AND RETAINING CUSTOMERS

 Today, more and more companies are

recognizing the importance of satisfying and
retaining current customers.
 Company’s aim should go beyond satisfying
the customer, it should be delighting the
customer.
 The key to customer retention is Customer
satisfaction. A highly satisfied customer
stays loyal longer, and talks favorably about
the company and its products. HE pays less
attention to competing brands and
advertising and is less sensitive to price.