Consumer Behavior

Prof. T.K.
Sabarwal
tksabarwal@gmail.com
Indian Consumer changes Middle class segment bulging Greater global exposure Larger disposable income Greater appetite & demand for global products Differentiated product & service requirements
FMCG space dynamics Explosion of products Explosion of markets (Kirana & Organized Retail) Rush of new players Global players bringing process and intelligence maturity Increasing competition Supply chain bottlenecks
tksabarwal@gmail.com 4
Marketing can not be standardized, because of Cross cultural styles. Fragmented markets.
11,000 New products were introduced by 77 companies. only 58% are present 5 yrs later.
Of he above 83% failed to meet the marketing objectives.
Only 8% of the new products offered by 112 leading companies reached the market.
Managers must analyze consumer motivations and behavior.
More successful a firm has been in the past, are more likely to fail. In future.
Why ????.
Because people tend to repeat behavior for which they have been successful and rewarded
Needs and wants = Needs and wants
Problem specific
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Ultimate Goal of marketing To make selling a redundant process By being focused on customer understanding clearly customer is the end and manufacturer as the means By understanding the customers implicit and explicit needs Creating a self generating pull for the market offering.
customer
consumers
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Customers do not BUYS A PRODUCT ! What do they buy??
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Manufacturer specific Four Ps
Four Cs Customer specific

MARKET
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The activities that people engage in when selecting, purchasing and using products and services so as to satisfy needs and desires. Such activities involve mental ,emotional processes and physical action
Is Consumer behavior
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1. Consumer behavior is motivated 2. Consumer behavior includes many activities.
3. Consumer behavior is a process

4. Consumer behavior varies in timing and complexity 5. Consumer behavior involves different roles 6. Consumer behavior is influenced by external factors 7. Consumer behavior differs for different people
These seven aspects hold key to understand consume behavior. Models acronym is MAPTRIP
customer
To understand the customer basic is to know that s/he is buying / using the products as a means to solve or address their own problem, reason and strategy and not yours and therefore unless marketer is customer specific in terms of marketing mix elements, success is usually evasive.
Customer does not buy a brand s/he buys their perception, and choose a brand which offers the best solution to their problem
Marketers only brief is to synergize the capabilities of the organization so as to address customers specific needs.
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Customer defections
customer defections
3% 1% 11% indifference product price death relocation new avenues 5%
20%
60%
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Seven sins of service

1. Apathyindifference,boredom (a matter of attitude)
2. Brush off--- getting rid of customer, not owning responsibility.

3. Coldness---chilly, hostility, curtness, unfriendliness. 4. Condensation---treating customer with a patronizing attitude. 5. Robotize---thank you, have a nice day next 6. Rule book--- rules above the customer.
7. Run around----sorry you will have to .
Calling mediocre service excellent doesn't make it excellent

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Behavior
Consumer Buying Behavior refers to the buying behavior of final consumers (individuals & households) who buy goods and services for personal consumption. Study consumer behavior to answer: How do consumers respond to marketing efforts the company might use?
Behavior
Product Price Place Promotion
Marketing and Other Stimuli
Economic Technological Political Cultural
Buyers Decision Process
Buyers Black Box
Characteristics Affecting Consumer Behavior
Product Choice Brand Choice
Buyers Response
Purchase Timing Purchase Amount
Dealer Choice
Characteristics Affecting Consumer Behavior

Culture Social Personal Psychological
Buyer
Factors Affecting Consumer Behavior: Culture

Most basic cause of a person's wants and behavior. Values Perceptions
Subculture Social Class
Groups of people with shared value systems based on common life experiences. Hispanic Consumers African American Consumers Asian American Consumers Mature Consumers
People within a social class tend to exhibit similar buying behavior.

Occupation
Income Education Wealth
Factors Affecting Consumer Behavior: Social

Groups
Membership Reference
Family Husband, wife, kids Influencer, buyer, user
Social Factors
Roles and Status
Factors Affecting Consumer Behavior: Personal
Personal Influences
Age and Family Life Cycle Stage
Economic Situation Occupation
Personality & Self-Concept
Lifestyle Identification
Activities Opinions
Interests
VALS 2
Principle Oriented
Actualizers Status Oriented
Abundant Resources Action Oriented
Fulfilleds
Achievers
Experiencers
Believers
Strivers
Makers
Strugglers Minimal Resources
Factors Affecting Consumer Behavior: Psychological

Motivation
Beliefs and Attitudes
Psychological Factors
Perception
Learning
Maslows Hierarchy of Needs

Self Actualization
(Self-development)
Esteem Needs (self-esteem, status) Social Needs

(sense of belonging, love)
Safety Needs
(security, protection)
Physiological Needs
(hunger, thirst)
Types of Buying
Decisions
High Involvement Significant differences between brands Few differences between brands Complex Buying Behavior DissonanceReducing Buying Behavior Low Involvement VarietySeeking Behavior Habitual Buying Behavior
The Buyer Decision Process

Need Recognition Information Search
Evaluation of Alternatives
Purchase Decision Postpurchase Behavior

Step 1. Need Recognition
Need Recognition
Difference between an actual state and a desired state
Internal Stimuli Hunger

Thirst
External Stimuli
TV advertising
Magazine ad
A persons normal needs
Radio slogan
Stimuli in the environment
The Buyer Decision Process Step 2. Information Search

Personal Sources Commercial Sources
Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product
Public Sources
Experiential Sources

Step 3. Evaluation of Alternatives
Product Attributes
Evaluation of Quality, Price, & Features

Degree of Importance
Which attributes matter most to me?

Brand Beliefs
What do I believe about each available brand? Based on what Im looking for, how satisfied would I be with each product?
Evaluation Procedures
Total Product Satisfaction
Choosing a product (and brand) based on one or more attributes.
The Buyer Decision Process Step 4. Purchase Decision

Purchase Intention Desire to buy the most preferred brand
Attitudes of others
Unexpected situational factors
Purchase Decision

Step 5. Postpurchase Behavior
Consumers Expectations of Products Performance Products Perceived Performance
Satisfied Customer!
Dissatisfied Customer
Cognitive Dissonance
Stages in the Adoption Process

Awareness Interest
Evaluation
Trial Adoption
Adoption of Innovations
Percentage of Adopters
Early Majority Innovators
Late Majority
Early Adopters
13.5%
34%
34%
Laggards
16%
2.5%
Time of Adoption
Early
Late
Awaren ess set Total set
Evoked Set
Choice set
decisiion
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Influences on the Rate of Adoption of New Products

Communicability Can results be easily observed or described to others? Relative Advantage Is the innovation superior to existing products?
Divisibility Can the innovation be used on a trial basis?
Product Characteristics
Complexity Is the innovation difficult to understand or use?
Compatibility Does the innovation fit the values and experience of the target market?
and needs replacement or repair at ones own cost. A loss of time due to hours of making complaints, returning to distributors, repairs etc. when a bad purchase leads to loss of self esteem or creates general dissatisfaction A physical risk- due to consumption or use of products potentially harmful to ones health or the environment.
Importance of perceived risk A financial loss-when the product is faulty
a psychological risk-
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Problem solving approaches

Extensive problem solving-is adopted when the value of Limited problem solving- applies to the situation of the
information and/or the perceived risk is high (unfamiliar brand in an unfamiliar product class)
buyer confronted with a new, unfamiliar brand in a familiar product class. where existing brands do not provide an adequate level of satisfaction) Routine response behavior-is observed in the case where the consumer has accumulated enough experience and knowledge and has definite preference about one or more familiar brands (low cost, frequently purchased items)
Ten questions
1. 2. 3. 4. 5. 6. 7. Will the product Will the product Will the product Will the product Will the product Will the product Will the product better liked. 8. Will the product 9. Will the product health? 10.Is this purchase
make me feel more important? make me happier? make me more comfortable? make me more prosperous make my work easier? give me more security? make me more attractive? Or give me more distinction? improve, protect, or maintain my a bargain for me ?
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Defining Customer Value

(Product, Service, Personnel, & Image Values) (Monetary, Time, Energy, & Psychic Costs) (Profit to the Consumer)
Total Customer Value
Total Customer Cost Customer Delivered Value
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Customer Satisfaction
Customer Satisfaction Results When a Companys Performance Has Fulfilled a Buyers Expectations.
Products Actual Performance
Performance Exceeds ExpectationsCustomer is Delighted
Buyers Expectations Are Based On: Customers Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises
Performance Below Expectations Customer is Dissatisfied
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Total Customer Satisfaction

Highly satisfied (delighted) customers produce benefits:
They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others.
Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. Therefore, the purpose of Marketing is to generate customer value profitably.
The Need for Customer Retention

The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider:
New Customer Costs
Lost Customer Costs
Customer Lifetime Value
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Building Customer Satisfaction and Loyalty by Relationship Marketing

Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with Customers and Other Stakeholders. Methods for Building Relationships Include Offering:
Financial Benefits
Social Benefits Structural Ties

Buying behavior
Buying behavior covers all activity preceding, and following purchase decisions The purchasing behavior is seen as a process of problem solving and can be grouped into five stages 1. Problem recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase behavior
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The 5 stage process

1:Problem recognition The internal recognition by the consumer that their current needs are not being met Discrepancy between actual & desired state Leads to motivation Could be real or imagined, physical or psychological Implications? Construction of advertising; penetration pricing strategies for new products; importance of peers; social construction of desire. 2:Information Search Next we ask ourselves the question of how do we solve our problem? May already be familiar with options available May consult people whose opinions we respect May browse around the shops May consult independent experts Amount of information required dependent on risk attached Implications? Role of marketing communications
The 5 stage process (continued)
3:Evaluation of alternatives In deciding which product to buy we have to weigh up which product best suits our needs We construct criteria upon which to base our choice We already may have a list of criteria or we may form one during the information search Compensatory vs. non compensatory evaluation 4: Product choice Having weighed up the pros and cons between alternatives eventually we have to make a choice Could be as a result of the outcome of our evaluation process against important criteria best fit. Choice could be affected by availability, payment options etc. Implications? Make it easy!
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The 5 stage process (continued)
5: Post purchase evaluation Once we have made our purchase we decide whether its met our expectation If it does great positive brand associations and visa versa Implications? After sales service, marketing communications
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Social Norms and Conformity

Social norm any rule or behavior for meeting societal expectations normative system Conformity pressures actions taken to encourage or force members to act, think and/or express themselves in certain ways. The more important a group is in our lives, the greater our desire to accept and conform to its norms
Homans Equation
The difference between the price we pay for conformity and the rewards obtained for doing so determines for each of us whether we will conform to group expectations and to what extent.
Price: Loss of freedoms Time commitment Financial commitment Etc.
Rewards: Levels of acceptance Advancement within the group Prestige gained Etc.
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Reference Group Types

Primary reference group: one with which the individual has frequent face-to-face contact and in which members are close-knit.
Examples: families, households, study groups, work teams, roommates, etc.
Secondary reference group: one in which interaction with other members is less frequent Formal group: one in which there is some sort of structure and/or for which there are specific membership requirements. Informal group: one that has no special membership or attendance requirements, other than common interests. tksabarwal@gmail.com 55
Reference Group Influences

A reference group is the group whose perspective an individual takes on in forming values, beliefs, attitudes, opinions, and overt behaviors.
They set levels of aspiration They help define the actual items/services considered acceptable for displaying those aspirations.
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Reference Group Types (continued)

Membership group: one to which a person currently belongs. Aspirational group: a group that a person would like to be part of, but to which he or she does not currently/ may never belong Dissociative group: a group that an individual avoids or denies connection with.
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Reference Group Influences

Reference groups as
part of the socialization process setters of roles information sources normative influences an expression of self-value
Conformity Pressure and Marketplace behavior
The influence of reference groups varies Groups tend to be more influential on product decisions than they are on either brand or outlet choices
Conspicuousness based on exclusivity -product decisions (bikers and black leather jackets) Conspicuousness associated with the individual -- brand decisions possible within product class, allowed personal tksabarwal@gmail.com 59 expression
Social Power
Power of reward praise, approval, acceptance, status, recognition, etc. Coercive power unacceptable behavior strongly discouraged Expert power informational attraction Referent power closer the match between person and group, more willingness to conform
Black box/CIP models
External
world
External world
inputs
Consumers outputs Mind Black box

External world Consumers External world
inputs
Mind CIP
output
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Short and long term memory

EXTERNAL WORLDS WORLD INTERNAL
STIMULI
SENSORY REGISTER
SHORT TERM MEMORY(STM) OR WORKING MEMOTY
LONG TERM
MEMORY (ltm)
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Lavidge hierarch of effects model

Conative The realm of motives, ads stimulate or direct desires PURCHASE POP ads/deals/price appeals / testimonials
CONVICTION
Affective The realm of emotiions.Ads change attitudes & feelings Cognitive
PREFRENCE LIKING KNOWLEDGE
Competitive ads. Argumentative copy image ads Status glamour appeals Publicity -advertising campaign
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The realm of thoughts. Ads provide information & facts tksabarwal@gmail.com
AWARENESS
Attitudes
Global evaluative judgments
Intentions
Subjective judgments by people about how they will behave in the future
Beliefs
Subjective judgments about the relationship between two or more things
Feelings
An affective state (e.g. current mood state) or reaction (e.g. emotions experienced during product consumption) tksabarwal@gmail.com 64
Relationships between consumer beliefs, feelings, attitudes and intentions
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Consumer beliefs
A sampling of consumer beliefs
If a deal seems to good to be true, it probably is. You cant believe what most advertising says these days. Auto repair shops take advantage of women. People need less money to live on once they retire. Its not safe to use credit cards on the Internet.
Appliances today are not as durable as they were 20 years ago.

Extended warranties are worth the money. You get what you pay for: lower price means lower quality. Changing the oil in your car every three thousand miles is a waste of money.
Consumer beliefs
Expectations Brand distinctiveness
Inferential beliefs
Consumer confusion
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Consumer expectations
Expectations are beliefs about the future
Consumers willingness to spend is influenced by beliefs about their financial future
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Brand distinctiveness
Why should a consumer want to buy your brand instead of the competitors? The desirability of products having something unique to offer to their consumers is also known as the Unique Selling Proposition (USP)
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Inferential beliefs
Consumers use information about one thing to form beliefs about something else Beliefs are often inferred when product information is incomplete Also undertaken when consumers interpret certain product attributes as signals of product quality, e.g. price-quality inferential beliefs
Consumer confusion
Sometimes consumers do not know what to believe due to many different reasons
May arise due to conflicting information and knowledge Mistaking one companys product for the product of another company Due to changes in a products position and image
Consumers respond to confusion by:

Undertaking further information search Basing their decision on things that are perfectly clear, e.g. price Deferring product purchase indefinitely
Types of consumer feelings

Upbeat
Active Adventurous Alive Attractive Confident Creative Elated Energetic Good Happy Pleased
Negative
Angry Annoyed Bad Bored Critical Defiant Disgusted Fed-up Insulted Irritated Regretful
Warm
Affectionate Calm Concerned Contemplative Emotional Hopeful Kind Peaceful Pensive Touched Warm-hearted
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Attitude towards objects
Attitudes---people form attitudes toward objects on the basis of their beliefs (perception and knowledge ) about these objects, beliefs in turn acquired by processing information which is obtained by Direct experience with objects and from communications about them received from other sources Informationexperience based with objects +communication received about objects from others. Belief---perceptions and knowledge
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Fishbeins model of ATO

IS DESIGNED TO DETERMINE A PERSONS OVERALL ATTITUDE TOWARD AN OBJECT. IT IS BASED ON HIS /HER BELIEFS AND FEELINGS ABOUT VARIOUS ATTRIBUTES OF THE PRODUCT/OBJECT. MODEL IS ALSO REFERRED TO AS MULTIATTRIBUTE MODEL. model
Ao biei
e 1
Ao = a persons overall attitude towards the object.
Bi = the strength of his/her belief that object is related to attribute I

Ei = evaluation or intensity of feeling towards attribute I
N = number of relevant beliefs for that person.
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Fishbein
Behavior as a function of intentions to behave in a certain manner+ other intervening factors Attitude attitude towards acting in that manner + subjective norms,.(others perceptions)
B BI w1( Ab) w2(SN )

behavior Behavior intention Attitude Towards Performing behavior
Subjective Norms about behavior tksabarwal@gmail.comand w2 are the weights of relative influence of W1 Ab +SN on Behavioral intention
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Continued.
To predict behavior We determine Ab & SN Each is then weighted to reflect importance (add up to 1.0)
Ab=the individual Oveeerall attitude performing specific behavior. B1=persons belief that performing that behavior results in consequence. E1 =persons evaluation of the consequences I. And n= number of relevant behavior beliefs. Where SN=the individual's subjective norms regarding the specific behavior. Bi= normative belief that reference group or person I thinks he should or should not perform the behavior. Mi= his motivation to comply with the thoughts of referent I.k= the number of relevant 76 references
Ab biei
i 1
SN
bimi
i 1
BI model
Beliefs about Consequences of behavior Evaluation of consequences
Attitude towards behavior
BI
Belief about Perception of others Motivations to comply

Subjective norms About behavior Other Intervening factors
behavior
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Consumer Decision-Making Process

Problem Recognition
Information Search
Individual and Social Factors and Buying Situation
Evaluation of Alternatives
Purchase Post-purchase Behaviour
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s of Consumer Buying Decisions
Routine Response Behaviour
Limited Decision Making
Extensive Decision Making
Less Involvement Length of time; Cost of goods; information lacking And number of alternatives available
More Involvement
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Decisions
The buying-decision process not always straightforward, e.g. level of involvement
Level of involvement is the amount of effort that is expended in satisfying a need. Level of involvement normally higher when Consumer lacks information
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Factors Affecting Involvement Levels

Previous Experience
Interest
Factors Influencing Involvement
Perceived Risk
Situation Social Visibility

Marketing Implications of Involvement
High involvement: promotion extensive and informative. Provide information and specify benefits. Low involvement: In-store promotions and packaging important. Must be eyecatching and easily
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Influencing CB
Perception
Perception is the process of receiving, organising, and
assigning meaning to information or stimuli detected

by our five senses Selective perception/exposure Selective distortion Selective retention
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Influencing CB
Motivation
All behaviour start with a need Maslow Theory - Adverts play on motives
Physiological - Beer bill boards Safety - Burglar alarms, Insurance Affiliation - Hansa/Tea (part of a family)
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Consumer Behavior

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Prof. T.K.

Of he above 83% failed to meet the marketing objectives.

Managers must analyze consumer motivations and behavior.

Needs and wants = Needs and wants

Customers do not BUYS A PRODUCT ! What do they buy??

Manufacturer specific Four Ps

Four Cs Customer specific

1. Consumer behavior is motivated 2. Consumer behavior includes many activities.

3. Consumer behavior is a process

Seven sins of service

2. Brush off--- getting rid of customer, not owning responsibility.

7. Run around----sorry you will have to .

Calling mediocre service excellent doesn't make it excellent

Economic Technological Political Cultural

Buyers Decision Process

Buyers Black Box

Characteristics Affecting Consumer Behavior

Product Choice Brand Choice

Purchase Timing Purchase Amount

Characteristics Affecting Consumer Behavior

Factors Affecting Consumer Behavior: Culture

People within a social class tend to exhibit similar buying behavior.

Income Education Wealth

Factors Affecting Consumer Behavior: Social

Family Husband, wife, kids Influencer, buyer, user

Roles and Status

Factors Affecting Consumer Behavior: Personal

Personality & Self-Concept

Actualizers Status Oriented

Abundant Resources Action Oriented

Strugglers Minimal Resources

Factors Affecting Consumer Behavior: Psychological

Beliefs and Attitudes

Maslows Hierarchy of Needs

Esteem Needs (self-esteem, status) Social Needs

The Buyer Decision Process

The Buyer Decision Process

Internal Stimuli Hunger

A persons normal needs

The Buyer Decision Process Step 2. Information Search

The Buyer Decision Process

Evaluation of Quality, Price, & Features

Which attributes matter most to me?

Total Product Satisfaction

Choosing a product (and brand) based on one or more attributes.

The Buyer Decision Process Step 4. Purchase Decision

Unexpected situational factors

The Buyer Decision Process

Stages in the Adoption Process

Early Majority Innovators

Awaren ess set Total set

Influences on the Rate of Adoption of New Products

Divisibility Can the innovation be used on a trial basis?

Complexity Is the innovation difficult to understand or use?

Importance of perceived risk A financial loss-when the product is faulty

Problem solving approaches

Defining Customer Value

Total Customer Value

Total Customer Cost Customer Delivered Value

Products Actual Performance

Performance Exceeds ExpectationsCustomer is Delighted

Performance Below Expectations Customer is Dissatisfied

Total Customer Satisfaction