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Introduction to consumer behavior

  1. Introduction to Consumer Behavior MRS. PUSPANJALI BHANDARI
  2. Introduction: Consumers are unique in themselves; they have needs and wants which are varied and diverse from one another; and they have different consumption patterns and consumption behaviour. The marketer helps satisfy these needs and wants through product and service offerings. For a firm to survive, compete and grow, it is essential that the marketer identifies these needs and wants, and provides product offerings more effectively and efficiently than other competitors. For a firm to succeed, understanding and acknowledging each different needs and behaviours of consumer is crucial fact to be accepted.
  3.  Consumer Behaviour may be defined as “the interplay of forces that takes place during a consumption process, within a consumers’ self and his environment.  This interaction takes place between three elements viz. knowledge, affect and behaviour.  it continues through pre-purchase activity to the post purchase experience; - it includes the stages of evaluating, acquiring, using and disposing of goods and services”.  The “consumer” includes both personal consumers and business/industrial/organizational consumer.
  4. Cognition Affect Behaviour
  5.  Cognition: It includes the mental processes involved in processing of information, thinking and interpretation of stimuli (people, objects, things, places and events).  Affect: It includes the favorable or unfavorable feelings and corresponding emotions towards a stimuli (eg. towards a product or service offering or a brand).  Behaviour: This is the “visible” part. In our case, this could be the purchase activity: to buy or not a buy.
  6. Definitions “The behavior that consumers display in searching for, purchasing, using, evalauting and disposing of products and services that they expect will satisfy their needs.” - Schiffman and Kanuk “The decision process and physical activity engaged in when evaluating, acquiring, using or disposing of goods and services. -Loudon and Bitta
  7. “The dynamic interaction of effect and cognition, behavior and the environment by which human beings conduct the exchange aspects of their lives” -American Marketing Association “ The study of consumers as they exchange something of value for a product or service that satisfies their needs” - Wells and Prensky
  8. Buying Roles: 1. Initiator: The initiator is the person who identifies that there exists a need or want 2. Influencer: the influencer is the one who influences the purchase decision 3. Decider: the decider is the one who decides whether to buy, what to buy, when to buy, from where to buy, and how to buy; 4. Buyer: the buyer is the one who makes the actual purchase. 5. User: the user is the person who use the product or service.
  9. Example: 1 A child goes to a kindergarten school. She comes back home and asks her parents to buy her a set of color pencils and crayons. Now the roles played are: 1. Initiator: the child in nursery school. 2. Influencer: a fellow classmate. 3. Decider: the father or the mother. 4. Buyer: the father or the mother. 5. User: the child.
  10. Nature of buyer behaviour:  Constant change: Customer’s behaviour is not static. It undergoes a change over a period of time depending on the nature of product. Change may result because of varies factors like; age & growth, income level, marketing factors,etc.  Unique Customers: All consumers do not behave in the same manner. Different consumers behave differently. The differences in consumer behaviour are due to individual factors such as the nature of the consumers, lifestyle and culture. Example: Some people are technoholics; they tends to buy every new gadgets by any means.
  11.  Varies from region-region or country-country: The consumer behaviour varies across states, regions and countries. For example, the behaviour of the urban consumers is different from that of the rural consumers.  Important to marketers: The knowledge of consumer behaviour enables marketers to take appropriate marketing decisions.
  12.  Varies from product to product: Consumer behaviour is different for different products. There are some consumers who may buy more quantity of certain items and very low or no quantity of other items. For example, teenagers may spend heavily on products such as cell phones and branded wears, but may not spend on general and academic reading, whereas the aged citizens turns out to be more concerned about saving and future security.
  13.  Reflects status: The consumer behaviour is not only influenced by the status of a consumer, but it also reflects it. The consumers who own luxury cars, watches and other items are considered belonging to a higher status. The luxury items also give a sense of pride to the owners.  Spread Effect: The buying behaviour of one person may influence the buying behaviour of another person. This may influence some of his friends, neighbors, colleagues. This is one of the reasons why marketers use celebrities like Shahrukh Khan, Paras Khadka to endorse their brands.
  14. Consumer buying/Organizational buying (Nature) Consumer buying 1. Personal Consumption. 2. Also known as personal buying. 3. Day to day purchases by individuals to satisfy their daily needs. 4. Individual customer involves in purchase activity. 5. Small scale buyers. 6. In a consumer market consumers demand for goods when they recognize their needs. Organizational Buying 1. Organizational Purpose. 2. Also known as business buying. 3. Purchasing goods and services to produce another good with the intention of reselling. 4. Organization itself plays a role in purchase activity. 5. Large scale buyers. 6. The demand for goods in business market is derived from the summation of the demand for goods in the consumer market.
  15. Consumer buying/Organizational buying (Process) Consumer Buying 1. Problem Recognition: Reacts to needs when they arise 2. Information Search: Limited Search by the means of discussions with their friends and family, media and advertisements, etc. 3. Alternative Evaluation: compares with the basic features, quality, price, affordability, etc. 4. Purchase Decision: limited analysis with the available sources and the need/want drives towards purchase decision. 5. Post-purchase Evaluation: Individual experience leads to positive or negative results (satisfaction). Organizational Buying 1. Problem Recognition: Anticipates and plans for purchase on a regular basis. 2. Information Search: Looks out through; general need description, product specification, extensive search that extends to supplier search. 3. Alternative Evaluation: Compares offerings from one supplier to other. Tender process. 4. Purchase Decisions: Made after extensive evaluation of information collected. 5. Post-purchase Evaluation: Extensive comparison made and feedback given, concern with quality management at source.
  16. Strategic use of consumer behaviour knowledge in marketing and public policy decisions Consumer behaviour Consumer environment Consumer affect & cognition Marketing Strategy
  17.  Explicit or implicit beliefs  Decisions based on explicit beliefs tends to be more beneficial than that of decisions solely based on implicit beliefs.  Knowledge of consumer behaviour can be important competitive advantage and can greatly reduce the odds of bad decisions and market failures.
  18. Regulatory Policy:  Various regulatory bodies exists to develop, interpret and/or implement policies designed to protect and aid consumer.  Effective regulation of many marketing practices requires an extensive knowledge of consumer behaviour.  Example: Sausage,Noodles, Pustakari, ketchup,etc.
  19. Marketing Organization Marketing Strategies Public Policy Government and Political Organization Consumer Activities Consumers
  20. Consumer Behaviour & Marketing:  Analysing Market Oppourtunity  Identifying the target market.  Market-mix Decisions  Use in social and non-profit marketing ( AIDS, Family Planning, women safety and empowerment, safe driving, environmental concern, etc. )
  21. Public Policy Decisions & Consumer Behaviour  The set of policies (laws, plans, actions, behaviours) of a government; plans and methods of action that govern that society; a system of laws, courses of action, and priorities directing a government action.  Public policy, as government action, is generally known as the principled guide to action taken by the administrative or executive branches of the state with regard to a class of issues in a manner consistent with law and institutional customs.  Shaping public policy is a complex and multifaceted process that involves the interplay of numerous individuals and interest groups competing and collaborating to influence policymakers to act in a particular way. 
  22. Nepal’s Consumer Protection Act from 1998 clearly states that any activity that intends to deceive consumers is strictly punishable by law. Provisions of the Act protect consumers from irregularities such as the quality, quantity and prices of consumer goods or services; ensuring that no one lowers or removes the attributes or usefulness of consumer goods or services; preventing circumstances in which monopolies and unfair trading practices may lead to an increase in prices, as well as false and misleading propaganda about the use and usefulness of consumer goods or services. The Act includes provisions on selling, supplying, importing, exporting and storing safe and quality consumer goods or services, and protecting the rights and interests of consumers through the establishment of an agency for redress.
  23. It consists of various government and political organizations. These include government agencies in monitoring and regulating exchanges between marketing organizations and consumers. This is accomplished through the development of public policies that affect marketing organizations and consumers. Political organizations include consumer activists such as Students Against Drunk Driving and various industry and trade organizations. These groups exert pressure on marketing organizations and consumers to behave in certain ways. The third group interested in consumer behaviour includes both consumers and organizational buyers who exchange resources for various goods and services.
  24. Consumerism: Consumerism can be defined as an organized-efforts by individuals, groups, and governments to help protect consumers from policies and practices that infringe consumer rights to fair business practices. In simple words, it is the promotion and protection of the consumer's interests.
  25. Pros & Cons of consumerism: Pros  Low cost of living  More jobs  Better for business Cons  Low Quality Products  Unethical Practice
  26. Consumer Movement Background “Consumer movement consists of the organized efforts of individual citizens and private, not-for- profit organizations to enhance the rights and collective welfare of consumers” “Primary goal of the movement is to advance efficiency and equity in the marketplace”
  27.  The consumer movement consists of a broad and loosely coordinated set of individuals and private, not-for-profit organizations that consciously seek to advance the welfare of consumers.  Policies aimed at regulating products, services, methods and standards of manufacture, selling, advertising in the interests of the buyer.
  28. Consumer Movement Worldwide  US recognized leader  Common link: food and drug regulation  Labeling: multiple languages  Legislation in one country leads to similar laws in other countries  Information is borderless
  29. Examples:  International Consumer Protection and Enforcement Network  International Consumer Rights Protection Council  FTC(Fedrel Trade Commission) Office of International Affairs
  30. Global consumer movement Introduction: The United States was founded on the free market system, however, by the late 19th century there were situations (e.g., monopolies) that led to the desire for consumer protection.  1880s Monopolies,Railroads (Pacific Railway Company)  Telephones (American Bell Telephone renamed…..AT & T in 1899)
  31. • 1980s saw less government intervention. • 1990s had little emphasis on consumer protection but environmental issues gained support. • Attention paid to corporate scandals (WorldCom, Enron) and the need for consumer protection and anti-trust legislation.
  32. Credit CARD Act of 2009 It is comprehensive credit card reform legislation that aims “ to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes.”
  33. Patient Protection and Affordable Care Act (PPACA) of 2010  The PPACA reforms certain aspects of the private health insurance industry and public health insurance programs, including increasing insurance coverage of pre-existing conditions and expanding access to insurance to over 30 million Americans being challenged in state courts as to the constitutionality of the Act.
  34. Consumer Financial Protection Bureau (CFPB) July 21, 2011  Elizabeth Warren was chosen by President Barack Obama last year to set up the new Consumer Financial Protection Bureau.