Kotler, Brown, Adam & Armstrong: International Marketing 3e © 2006 Pearson Education Australia PowerPoint to accompany Philip Kotler, Stewart Adam, Linden Brown & Gary Armstrong

Kotler, Brown, Adam & Armstrong: International Marketing 3e © 2006 Pearson Education Australia Chapter 5 Consumer market behaviour

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 3 Chapter objectives (1) 1. Name the elements in the stimulus-response model of consumer behaviour. 2. Outline the major characteristics affecting consumer behaviour, and list some of the specific psychological, personal, cultural and social factors that influence consumers. 3. Explain the buyer decision process and discuss need recognition, information search, evaluation of alternatives, the purchase decision and post-purchase behaviour.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 4 Chapter objectives (2) 4. Identify and define the consumer buying roles of initiator, influencer, decider, buyer and user. 5. Illustrate different types of buying decision behaviour, including complex, dissonance- reducing, habitual and variety seeking buying behaviour. 6. Express the basics of the buyer decision process for new products and identify stages in the adoption process, individual differences in the adoption of innovation, and the influence of product characteristics on the rate of diffusion of innovation.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 5 What is a Consumer Market? The consumer market consists of all the individuals and households who buy or acquire goods and services for personal consumption.  Australian consumers vary tremendously in age, income, education level, and tastes. And they buy an incredible variety of goods and services. How consumers make their choices among these products takes us into a fascinating field comprised of personal, cultural, and social influences.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 6 A Model of Consumer Behaviour Consumers make buying decisions every day. And they make many different types of purchases. Most marketers undertake consumer research to try to learn more about: what consumers buy, who buys, how they buy, when they buy, where they buy and, most importantly, why they buy. The central question is:  How do consumers respond to the various marketing stimuli the marketing organisation might use?

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 7 Figure 5.1: A Model of Buyer Behaviour 7

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 8 Characteristics Influencing Consumer Behaviour 1. Consumer purchases are strongly influenced by two groups of factors. 2. On one hand there are internal characteristics that determine our behaviour:  psychological  personal 3. And then there are external influences that represent the environment in which the individual behaviour takes place:  cultural and  social

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 9 Figure 5.2: Factors Influencing Consumer Behaviour Cultural Culture Subculture Social Class Social Household type Reference groups Roles & status Psychological Motivation Perception Learning (memory) Beliefs & attitudes Personality & self-concept Personal Age & lifecycle stage Occupation Education Economic situation Buyers’ responses Product service & category selection Brand selection Reseller selection Purchase timing & repurchase intervals Purchase amount Marketing programs Marketing objectives Marketing strategy Marketing mix Environmental influences Economic Technological Political Consumer BUYER DECISION PROCESS Lifestyle Experiences

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 10 Psychological Influences 1. Motivation 2. Perception 3. Learning 4. Beliefs and Attitudes

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 11 Psychological Factors: Motivation When consumers express interest in buying a product there are a number of questions we might ask.  Why?  What is the person really seeking?  What needs is he or she trying to satisfy? A person has many needs at any given time.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 12 Psychological Factors Motivation Theories Sigmund Freud assumes that people are largely unconscious about the real psychological forces shaping their behaviour. He sees the person as growing up and repressing many urges.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 13 Psychological Factors Motivation Theories  Abraham Maslow sought to explain why people are driven by particular needs at particular times. Why does one person spend much time and energy on personal safety and another on gaining the esteem of others? Maslow's answer is that human needs are arranged in a hierarchy, from the most pressing to the least pressing

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 14 Figure 5.3: Maslow’s Hierarchy of Needs Self-Esteem Belongingness Safety Physiological Self Actualisation

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 15 Psychological Factors: Perception A motivated person is ready to act. How the person acts is influenced by his or her perception of the situation. Two people with similar motivation and in the same situation might act quite differently because they perceive the situation differently. Perceptual Processes  Selective Exposure  Selective Distortion  Selective Retention

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 16 Psychological Factors: Learning When people act, they learn. Learning describes changes in an individual's behaviour arising from experience. The significance of learning theory to marketers is that they can build demand for a product by associating it with strong drives, using motivating cues and providing positive reinforcement.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 17 Psychological Factors: Beliefs and Attitudes Through acting and learning, people acquire their beliefs and attitudes A belief is a descriptive thought or conviction that a person holds about something, and involves holding an opinion. Incorrect beliefs about product features or brand image can block sales.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 18 Psychological Factors: Beliefs and Attitudes An attitude describes a person’s relatively consistent evaluations, feelings and tendencies towards an object or idea People have attitudes towards political parties, music and food types as well as companies and brands

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 19 Tricomponent attitude model Cognitive-thought driven, rational influences on attitudes Affective- emotionally driven attitudes Conative- behavioural

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 20 Personal Influences A buyer's decisions are also influenced by personal characteristics such as:  Age and life-cycle stage  Occupation  Education  Economic situation  Personality & Self Concept  Consumer lifestyle

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 21 Lifestyles and Psychographics Activities, Interests and Opinions (AIO) SRI Values and Lifestyles (VALS) Inner-directed and Outer-directed Roy Morgan Lifestyles groups (10 groups that describe ‘typical’ Australian lifestyles)

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 22 Cultural Factors Cultural factors exert the broadest and deepest influence on consumer behaviour. Marketers need to understand the role played by:  culture,  subculture  social class

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 23 Example: KFC caters for different cultural requirements

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 24 Social influences A consumer's behaviour is also influenced by social factors, such as the consumer's household type and reference groups, as well as social roles and status. These social factors can strongly affect consumer responses, companies must take them into account when designing their marketing strategies.

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 25 Social influences Household types: changing lifestyles and buying roles affect marketing decisions Groups  Membership groups  Reference groups Opinion leaders Roles and Status

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 26 Public Luxuries Public Necessities Private Luxuries Private Necessities Group Influence on Product Choice Strong Weak Group Influence on Brand Choice Strong Weak Figure 5.4: Extent of group influence on product and brand choice

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 27 Family and Lifestyle Influences Family Influences Age and Life Cycle Stage Occupation Economic Situation Lifestyle Identification Activities Opinions Interests

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 28 Figure 5.5: Consumer Buying Roles Decider Buyer User Influencer Initiator Key Family Decision Roles

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 29 Example: ‘Crèche tested’ Mercedes

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 30 Types of Buying Decisions 1. Complex Buying Behaviour 2. Dissonance-Reducing Buying Behaviour 3. Habitual Buying Behaviour 4. Variety-Seeking Buying Behaviour

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 31 Figure 5.6: Types of Buying Decisions Complex Buying Behaviour Dissonance- Reducing Buying Behaviour Variety- Seeking Behaviour Habitual Buying Behaviour High Involvement Significant differences between brands Few differences between brands Low Involvement

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 32 Figure 5.7: The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Post - purchase Behaviour

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 33 Example: Loveable: Purchases are influenced by those around us

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 34 Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 35 Figure 5.8: Adoption of Innovations Percentage of Adopters Time of Adoption Early Late Innovators Early Adopters Early Majority 2.5% 13.5% 34% 16% Laggards Late Majority

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 36 Influences on Rate of Adoption Influences Relative Advantage Communicability DivisibilityCompatibility Complexity

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 37 Influence of Product Characteristics on Rate of Adoption  The characteristics of the new product affect its rate of adoption. Some products are adopted almost overnight (Internet-50 million users in 4 years), some are fast (mobile telephones), others take longer to gain acceptance (personal computers-50 million users in 16 years).

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 38 Influence of Product Characteristics on Rate of Adoption Relative Advantage: the degree to which an innovation appears superior to existing products Compatibility: the degree to which the innovation fits the values and experiences of potential consumers Complexity: the degree to which the innovation is difficult to understand or use Divisibility: the degree to which the innovation may be tried on a limited basis Communicability: the degree to which the results of using the innovation can be observed or described to others

Kotler, Adam, Brown & Armstrong: International Marketing 3e © 2006 Pearson Education Australia 39 Consumer behaviour across international borders Consumers in different countries may have some things in common but their values, attitudes and behaviours may vary a lot Marketers often adjust their products and communications to reflect the differences Differences are often subtle and may result from physical differences in consumers and their environment Other differences may include gestures, body posture and manners