CONSUMER BEHAVIOUR Lalit Tank

Course Outline Introduction Consumer Decision Making Process - Consumer Influence & the diffusion of innovations - Consumer Decision Making Consumer As An Individual - Consumer Motivation - Personality & Consumer Behavior - Consumer Perception - Consumer Learning - Consumer Attitude Formation & Change Consumer in their Social & Cultural Settings - Reference Groups & Family Influences - Social Class & Consumer Behavior - Influence of Culture & Consumer Behavior

Consumer Behavior Behavior that consumer display in searching for , purchasing , using , evaluating & disposing of – products & services , that they expect will satisfy their needs .

Consumer Behavior is rooted in the MARKETING CONCEPT Focuses on the needs of the buyer

CB-Introduction Defination of CB The term 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.

What is Consumer Buying Behavior? Definition of Buying Behavior: Buying Behavior is the decision processes and acts of people involved in buying and using products. Need to understand: why consumers make the purchases that they make? what factors influence consumer purchases? the changing factors in our society.

Importance of CB Enables marketers to understand & predict consumer behavior Not only concerned with why , when , where , how & how often they buy it . Integral part of strategic market planning Calls on marketers to fulfill the needs of their target markets – in ways that improve society as a whole Providing customer value Providing customer satisfaction Providing customer retention

A firm needs to analyze buying behavior for: Buyers reactions to a firms marketing strategy has a great impact on the firms success. The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy. Marketers can better predict how consumers will respond to marketing strategies.

Stages of the Consumer Buying Process Note:- Six Stages to the Consumer Buying Decision Process (For complex decisions). Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity 6 Stages :- Problem Recognition (awareness of need) Information search Evaluation of Alternatives Purchase decision Purchase Post-Purchase Evaluation--outcome

Stage :-1 Problem Recognition Problem Recognition (awareness of need)— Difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information--did not know you were deficient? ex:- see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

Stage 2:- Information Search Internal search, memory. External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc. A successful information search leaves a buyer with possible alternatives, the evoked set :- Hungry, want to go out and eat, evoked set is Chinese food Indian food Fast food South Indian Food etc

Stage 3:- Evaluation of Alternatives Need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, Indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.

Stage 4 :- Purchase Decision Choose buying alternative, includes product, package, store, method of purchase etc

Stage 5:- Purchase May differ from decision, time lapse between 4 & 5, product availability

Stage 6:- Post-Purchase Evaluation outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a chinese meal instead.

Cognitive Dissonance cognitive dissonance is an uncomfortable feeling or stress caused by holding two contradictory ideas simultaneously.

The CB describes two different kinds of consumer entities Personal consumer: buys goods and services for his or her own use for the use of household. the products brought for final use by individual who are referred to as end users or ultimate consumers. Organizational consumer include profit and not for profit business, government agencies. All of which must buy products, equipment and services in order to run their organization.

Development of the marketing concept and discipline of consumer behavior The field of consumer behavior is rooted in the marketing concept. A business orientation that involved several alternative approach towards doing business respectively as the Production concept Product concept Selling concept

The role of consumer research Consumer research describes the process and tools used to study consumer behavior. Two theoretical perspectives that guide consumer research methodology. Positivists approach: tend to be objective and empirical, to seek causes for behavior and to conduct research studies that can be generalized to large population. use for strategic managerial decision. Interpritivists approach: tend to be qualitative and based on small sample. View each consumption situation as unique and nonpredectable seek to find common pattern of operative value, meaning and behavior across consumption situation.

Consumer Decision Making and Beyond

Decision Decision is the selection of an option from two or more alternative choices.

Levels of Consumer Decision Making Not all consumer decision making situation require the same degree of information search Extensive Problem Solving- consumers need a great deal of information Limited Problem Solving- search for additional information is more like”fine-tunning”- already have established basic criteria Routine Response Behavior-consumers have experience with the product

Models of Consumers: Four Views of Consumer Decision Making An Economic View- consumer has motivation for price bargaining A Passive View- consumer surrenders to self-serving interests & promotional efforts of marketers . A Cognitive View- consumer are as a thinking problem solver- seek & evaluate information An Emotional View- impulsive

Figure : A Model of Consumer Decision Making External Influences Firm’s Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture Input Consumer Decision Making Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Need Recognition Prepurchase Search Evaluation of Alternatives Process Experience Post decision Behavior Output Purchase 1. Trial 2. Repeat purchase Postpurchase Evaluation

Three Stages of Consumer Decision Making Need Recognition Prepurchase Search Evaluation of Alternatives

Factors that are Likely to Increase Prepurchase Search PRODUCT FACTORS -Long interpurchase time (a long-lasting or infrequently used product) -Frequent changes in product styling -Volume purchasing (large number of units) -High price -Many alternative brands -Much variation in features

Table continued SITUATIONAL FACTORS Experience First-time purchase No past experience because the product is new Unsatisfactory past experience within the product category Social Acceptability The purchase is for a gift The product is socially visible Value-Related Considerations Purchase is discretionary (judgemental) rather than necessary All alternatives have both desirable and undesirable consequences Family members disagree on product requirements or evaluation of alternatives Product usage deviates from important reference group The purchase involves ecological considerations Many sources of conflicting information

Table continued PERSONAL FACTORS Demographic Characteristics of Consumer Well-educated High-income White-collar occupation Under 35 years of age Personality Low dogmatic (code of belief) Low-risk perceiver Other personal factors, such as high product involvement and enjoyment of shopping and search

Issues in Evaluation of Alternatives Evoked Set (consideration set) Criteria Used for Evaluating Brands Consumer Decision Rules Lifestyles as a Consumer Decision Strategy Incomplete Information and Non comparable Alternatives Series of Decisions Decision Rules and Marketing Strategy Consumption Vision

The Evoked Set as a Subset of All Brands in a Product Class Known Brands Unknown Brands (1) Evoked Set Inept Set Inert Set Acceptable Brands Unacceptable Brands Indifferent Brands Overlooked Brands (2) (3) (4) Purchased Brands Not Purchased Brands (5)

Consumer Decision Rules 2 categories Compensatory Noncompensatory(2 rules) Conjunctive Decision Rule Disjunctive Decision Rule Lexicographic Rule

Compensatory Decision Rules A type of decision rule in which a consumer evaluates each brand in terms of each relevant attribute and then selects the brand with the highest weighted score.

Non-compensatory Decision Rules A type of consumer decision rule by which positive evaluation of a brand attribute does not compensate for a negative evaluation of the same brand on some other attribute.

Conjunctive Decision Rule A non compensatory decision rule in which consumers establish a minimally acceptable cutoff point for each attribute evaluated. Brands that fall below the cutoff point on any one attribute are eliminated from further consideration. -useful in quickly reducing the number of alternatives to be considered

-mirror image of conjunctive rule. Estb higher level Disjunctive Rule A non compensatory decision rule in which consumers establish a minimally acceptable cutoff point for each relevant product attribute. -mirror image of conjunctive rule. Estb higher level

Lexicographic Rule A non compensatory decision rule - consumers first rank product attributes in terms of importance, then compare brands in terms of the attribute considered most important.

Affect Referral Decision Rule A simplified decision rule by which consumers make a product choice on the basis of their previously established overall ratings of the brands considered, rather than on specific attributes.

Table :- Hypothetical Use of Popular Decision Rules in Making a Decision to Purchase an Ultra light Laptop DECISION RULE MENTAL STATEMENT Compensatory rule “I selected the computer that came out best when I balanced the good ratings against the bad ratings.” Conjunctive rule “I selected the computer that had no bad features.” Disjunctive rule “I picked the computer that excelled in at least one attribute.” Lexicographic rule “I looked at the feature that was most important to me and chose the computer that ranked highest on that attribute.” Affect referral rule “I bought the brand with the highest overall rating.”

Types of Purchases or Purchase behavior Trial Purchases Repeat Purchases Long-Term Commitment Purchases

Outcomes of Postpurchase Evaluation Objective of Post Purchase evaluation is to increase The consumer’s satisfaction with the purchase Actual Performance Matches Expectations Neutral Feeling Actual Performance Exceeds Expectations Positive Disconfirmation (validity) of Expectations Performance is Below Expectations Negative Disconfirmation of Expectations

Gifting Behavior Gifting is an act of symbolic communication, with explicit (loud & Clear) and implicit (hidden) meanings ranging from congratulations and love, to regret, obligation, and dominance.

Table :- Reported Circumstances and Motivations for Self-Gift Behavior Personal accomplishment Feeling down Holiday Feeling stressed Have some extra money Need Had not bought for self in a while Attainment of a desired goal Others MOTIVATIONS To reward oneself To be nice to oneself To cheer up oneself To fulfill a need To celebrate To relieve stress To maintain a good feeling To provide an incentive toward a goal Others

Gifting Subdivisions Inter group Gifting Inter category Gifting Intra group Gifting Inter personal Gifting Intra personal Gifting

Table :- Gifting Relationships Inter group Inter category EXAMPLE DEFINITION A Christmas gift from one family to another family A group giving a gift to another group A group of friends chips in to buy a new mother a baby gift An individual giving a gift to a group or a group giving a gift to an individual Intra group Interpersonal A family buys a VCR for itself as a Christmas gift A group giving a gift to itself or its members Valentine’s Day chocolates presented from a boyfriend to a girlfriend An individual giving a gift to another individual Intrapersonal A woman buys herself jewelry to cheer herself up Self-gift

Figure A Simple Model of Consumption Choice or Purchase Decision Consumption Set Added to one’s assortment or portfolio Input Consuming Style How the individual fulfills his or her consumption requirements Process of Consuming and Possessing Consuming and Possessing Things and Experiences Using, Possessing, Collecting, Disposing Feelings, Moods, Attitudes, Behavior Output Altered consumer satisfaction, change in lifestyle and/or quality of life, learning and knowledge, expressing and entertaining oneself

Relationship Marketing Marketing aimed at creating strong, lasting relationships with a core group of customers by making them feel good about the company and by giving them some kind of personal connection with the business.

Figure: A Portrayal of the Characteristics of Relationship Marketing The Firm provides The Customer provides Products/Services Individualized attention Continuous information Price offers Customer services Extras and perks, etc. Repeat Purchase Increased Loyalty Goodwill Positive word-of-mouth Lower costs for the firm Trust and promises

Consumers Are Less Loyal - Why? Abundance of choice Availability of information Entitlement (consumer ask “what have you done for me lately”) Commoditization (most products seem to be similar) Insecurity (consumers financial problems) Time scarcity