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Consumer behaviour unit 2
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Consumer behaviour unit 1

  1. 1. Consumer Behavior SYBMS SEMESTER 3
  2. 2. Unit 1 – Introduction To Consumer Behavior  Meaning of Consumer Behavior, Features and Importance  Types of Consumer (Institutional & Retail), Diversity of consumers and their behavior- Types Of Consumer Behavior  Profiling the consumer and understanding their needs  Consumer Involvement  Application of Consumer Behavior knowledge in Marketing  Consumer Decision Making Process and Determinants of Buyer Behavior, factors affecting each stage, and Need recognition.
  3. 3. What is consumer behavior?  Consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy their needs and wants.
  4. 4. Importance of Consumer Behavior  To design the best possible product or service that fully satisfies consumer's needs and demands.  To decide where the service or product would be made available for easy access of consumers.  To decide the price at which the consumers would be ready to buy that product or service.  To find out the best method of promotion that will prove to be effective to attract customers to buy a product.  To understand why, when, how, what and other factors that influence buying decision of the consumers.
  5. 5. Disciplines involved in Consumer Behavior Psychology Sociology Social psychology Cultural anthropology Economics
  6. 6. Psychology  It is the study of the individual which includes motivation , perception , attitudes, personality and learning theories.  Example: someone may buy a Reid and Taylor suiting just because Amitabh Bachchan endorses it and he feels that his personality would resemble Amitabh’s after wearing it.
  7. 7. Sociology  It is the study of groups.  The influences of group memberships, family and social class on consumer behavior.  Example: someone might eat at a restaurant just because the mennmbers of the social group to which he belongs insists in him in doing so,even if he personally dislikes eating at that place.
  8. 8. Social Psychology  It is the combination of sociology and psychology and studies how an individual operates in a group,  It also studies how those whose opinions they respect as peers,refrence groups, their families and opinion leaders influence individuals in their consumption behavior.
  9. 9. Cultural Anthropology  It is the study of human beings in society.  It explores the development of core beliefs,values and customs that individuals inherit from their grandparents.  It also studies subcultures and help compare customers of different nationalities and cultures.  Examples: people in India drink more tea than coffee and its just the opposite in US.
  10. 10. Economics  It is the study of how customers spend their funds, how they evaluate alternatives and how they make decisions to get maximum satisfaction from their purchases.  Example: people might buy tide because its cheaper than Ariel or Surf excel and gives more of less same results.
  11. 11. Consumer Involvement  Consumer involvement refers to degree of information processing or extent of importance that a consumer attaches to a product.  The degree of involvement has a very significant effect on consumer behavior.  When more expensive products are to be purchased, the consumer gets more involved in purchase process but he may not be equally involved in a product which is just a rupee or two priced.
  12. 12. Examples  CAR- As it is a expensive product so consumer will get highly involved resulting in higher involvement.  BOOK- The book purchased by a student for preparing competitive exam may not be as expensive as car, yet the customer gets highly involved because it is a important product.  MEDICINE- When a medicine is being purchased, which may not be very expensive, yet the customer may be highly involved in checking that it shouldn’t react him.
  13. 13. Low- involvement High- involvement Brand beliefs are formed first by passive learning Brand beliefs are formed by active learning Consumer makes purchase decision Consumer evaluates various brands There may or may not be post-purchase evaluation Consumer makes purchase decision High and Low involvement Hierarchy
  14. 14. LEVELS OF INVOLVEMENT Habitual decisions Simple decisions Lengthy decisions eg. Tea, toothbrush, eg. Skin cream, eg. Cars, diamond, Washing powder. Torch, snacks. Property. HIGH INVOLVEMENT LOW INVOLVEMENT SOME INVOLVEMENT
  15. 15. Major Dimensions Of Involvement Moderating Factors Opportunity to Process  Ability to process Person Stimulus/Object Situation Intensity Direction Persistence Search Information Processing Decision or Persuasion Involvement Variable Involvement Properties Response Factors
  16. 16. INVOLVMENT VARIABLES  PERSON- The variable related to person refer to personal needs, values, interests & experiences etc. For example: a person interested in computers is very likely to have personal interest in computer related magazines to learn about new development.  STIMULUS/OBJECT- refers to product or stimuli that consumer perceives to be closely related to his/her values, experience and interest. For example: in case of computers, one should not expect the same level of involvement for all consumers.
  17. 17. INVOLVEMENT PROPERTIES  INTENSITY: Involvement intensity refers to the severity of involvement as experienced by the consumer and is generally categorized as high or low.  DIRECTION: Direction refers to the focus of involvement and involvement variables will strongly affect this focus. The focus could be a product, service, ad or purchase decision.  PERSISTENCE: Persistence describes the length of time the consumer remains involved with purchase decision.
  18. 18. RESPONSE FACTORS  Response factors concern how a consumer behaves under involvement condition of different intensity.  These factors includes different pattern of information search, information processing, evaluation of alternatives and post-decision actions.  One may expect that consumer is high in enduring involvement for a product will undertake regular, ongoing search for information & low involvement will result in little search for information.
  19. 19. Different Types Of Consumers  A product manufacturing company needs to understand the type of consumers it is targeting with its goods because it is essential to be confident a market exists for the products they intend to introduce into the market.  Knowing the types of consumers for goods is also important because it enables the company to appropriately present the product to the potential purchaser, hence increasing sales and profitability.
  20. 20. Seasonal Consumers  Many consumers purchase and consume products on a seasonal basis. They shop at certain times when the need for them arises.  Cash flow for a business selling seasonal products can be very difficult. Long periods of the year may be without sales, so it is vital to quickly and effectively target seasonal consumers. Examples of products that rely on seasonal consumers:  Umbrellas during the rainy season  Cold or icy drinks during the hot seasons  Christmas trees and decorations in December  Beach wear in summer.
  21. 21. Personal Consumers  These types of consumers are individual consumers who purchase goods for the sole purpose of personal, family or household use. Examples  Going to the supermarket and shopping for goods which are to be used in the house  Purchasing a car that you intend to use personally  Purchasing clothes for personal use from a clothing mall  Purchasing a mobile phone for personal communication.  Manufacturers selling products to personal consumers are constantly looking for ideas for upgrades and add-ons to enhance the appeal of their goods to individuals.
  22. 22. Organizational Consumer  Organizational consumers purchase products for organizations, governments or businesses, They often buy in bulk and may place long-term recurring orders. For this reason, an organizational consumer is generally highly prized and sought after.  Products and services sold to organizational consumers are often required to meet very strict standards. They may need to be adapted to meet the specific requirements of the buyer, and specific prices are negotiated.  Manufacturers and service providers who target organizational consumers are expected to be flexible in their approach to negotiating a sale, but rigid in maintaining quality.  Goods may be offered for resale at a profit to the organizational purchaser. Or an organization may buy raw materials that are aimed at producing other goods which will later be offered for sale to other consumers.
  23. 23. Impulse Buyers  Impulse buyers are consumers who make unplanned buying decisions.  Impulse buyers make swift buying decisions and immediately purchase when they 'connect' with the product and its features. There is often some kind of emotional appeal.  Products impulse consumers purchase are not initially in their plans, so product placement is very important. Manufacturers who target impulse buyers need their goods to be featured prominently in a store. For example:  Chocolates near the check-out counter  Cookies at eye level on the shelf  Bright, eye-catching novelty items where children can spot them.  Service providers can also target impulse buyers, often by offering significant discounts or immediate service.
  24. 24. Need Based Consumers  Need based consumers are those types of consumers who buy goods and services when they need them and not any other time. Many of the products in a hardware store, for instance, are sold to need based consumers.  A need for a certain product will necessitate buying it because it is needed immediately for a certain purpose. The challenge for marketers is to create a sense of 'need' to promote the sale of products and services. Examples:  Paint when a wooden house needs to be protected from the weather  Light bulbs when we need to see at night  Heaters or air-conditioning if we need to be comfortable in our homes.  Life insurance sales increase if we are convinced we need to be sure our families are taken care of if we die.
  25. 25. Discount Driven Consumers  Discount driven consumers are the type of consumers who purchase goods and services primarily for the discounts on offer. They may not engage in any buying activity until they hear or see large discounts being offered on products they like.  Discount driven buyers are price sensitive and would rather wait to purchase products when they come with discounts as opposed to when they are sold for full price.  Coupons and stock-take sales are popular with this type of consumer.  An increasing number of manufacturers, retailers and service providers offer discounts during recession or harsh economic climates.
  26. 26. Habitual Consumer  Habitual consumers are those who feel compelled to use certain brands or types of goods.  Marketers work hard to create brand loyalty among this type of consumer. It may be as simple as always choosing the same brand of deodorant, the same brand of soda, or shopping in the same store for groceries or clothes.  Cigarettes and alcohol are classic examples of products that target habitual consumers. A beer drinker can be expected to always buy the same type of beer, and smokers have been known to leave a store and go to a different sales outlet if their brand of cigarette is not available.  Advertising often encourages a persona associated with a specific product to appeal to habitual consumers.
  27. 27. Types of Consumer Buying Behavior Complex Buying Behavior Dissonance- Reducing Buying Behavior Habitual Buying Behavior Variety- Seeking Buying Behavior
  28. 28. Complex Buying Behavior  Complex buying behavior is exhibited by the consumers, when the involvement level in a purchasing is high and also there are different brands available in the market that represent different values. In such cases the product searched for buying is relatively expensive and risky. The product also covers the aspect of self expression and the frequency of purchase is also occasionally.  For example, if a consumer wants to purchase a personal computer, then he cannot get the clear idea of computer through his RAM, Processor etc. Instead, he first tries to make his beliefs about the categories of different brands of computers. After which he develops his attitudes and finally purchase a certain personal computer on the basis of his learning process.
  29. 29. Dissonance Reducing Buying Behavior  Dissonance Reducing Buying Behavior represents such case in which the involvement of the consumers is high, but the available brands show less differences. The purchase of the product is relatively quicker in this kind.  For example, customers who want to purchase the newly arrived LED TVs will not find many differences between the brands but the price of the product and its technicality will make them involve more.
  30. 30. Habitual Buying Behavior  Habitual Buying Behavior is one of the types of Consumer Buying Behavior in which the involvement of consumers in the purchase is low along with the few differences among the alternative brands. In this case the products offered are cheap and purchased frequently.  For example, if a consumer purchases sugar from the market, he exhibits habitual behavior in such a way that he does not inquires different brands and prices of sugar. Instead, he buys it simply from the first shop without making any extra efforts.
  31. 31. Variety-Seeking Buying Behavior  The fourth type of Consumer Buying Behavior is variety-seeking buying behavior in which the involvement of consumer is low, but the brands exhibit much perceived difference. In such situations, consumers are switched more from one product to another.  For example, a consumer wants to buy a cookie, so he does not try to learn different brand and specifications of cookies, rather, he simply buys a certain brand of cookie and make use of it to make an evaluation, and the next time he may buy another brand of cookie. This switching of consumer from one brand to another is not based on the dissatisfaction, but on the base of testing the variety.
  32. 32. Application of Consumer Behavior knowledge in Marketing 1) Analyzing market opportunity  Consumer behavior study helps in identifying the unfulfilled needs and wants of consumers.  This requires examining the trends and conditions operating in the marketplace, consumers' lifestyles, income levels and emerging influences.  This may reveal unsatisfied needs and wants. the trend towards increasing number of dual income households and greater emphasis on convenience and leisure have led to emerging needs for household gadgets such as washing machine, mixer grinder, vacuum cleaner and childcare centres etc.  Mosquito repellents have been marketed in response to a genuine and unfulfilled consumer need.
  33. 33. 2)Selecting target market  A review of market opportunities often helps in identifying distinct consumer segments with very distinct and unique wants and need.  Identifying these groups, learning how they behave and how they make purchase decisions enables the marketer to design and market products or services particularly suited to their wants and needs.  For example, consumer studies revealed that many existing and potential shampoo users did not want to buy shampoo packs priced at Rs. 60 or more and would rather prefer a low priced sachet containing enough quantity for one or two washes. The finding led companies to introduce the shampoo sachet which became a good seller.
  34. 34. 3) Marketing-mix decisions  Once unsatisfied needs and wants are identified, the marketer has to determine the right mix of product, price, distribution and promotion.  Here too, consumer behavior study is very helpful in finding answers to many perplexing questions.
  35. 35. 3a) Product  The marketer designs the product or service that would satisfy unfulfilled needs or wants. Further decisions regarding the product concern to size, shape and features.  The marketer has also to decide about packaging important aspects of service, warranties and accessories etc.  Eg: Nestle first introduced Maggie noodles in masala and capsicum flavours. Subsequently, keeping in view the consumer preferences in some regions, the company introduced garlic, Shabhar and other flavours.
  36. 36. 3b) Price  The second important component of marketing mix is price.  Marketers must decide what price to charge for the product or service.  These decisions will influence the flow of revenue to the company.  the marketer must understand the way the company's product is perceived by consumers, the importance of price as a purchase decision variable and how different price levels would affect sales.  It is only through consumer behaviour study in actual buying situations that the marketer can hope to find answers to these important issues.
  37. 37. 3c)Distribution  The next decision relates to the distribution channel, that is, where and how to offer products and services for sale.  Should the products be sold through all the retail outlets or only through selected ones? Should the marketer use only the existing outlets, which also sell competing brands, or should new exclusive outlets selling only the marketer's brands be created? Is the location of retail outlets important from consumers' point of view? Should the company think of direct maketing?  The answer to these question are furnished by consumer behaviour research.
  38. 38. 3d) Promotion  The marketer has to decide which method would be most suitable to effectively reach the consumers. Should it be advertising alone or should it be combined with sales promotion? The company has to know the target consumers, their location, what media do they have access to and what are their media preferences, etc.  In most cases of industrial products there is very little or no advertising. Brochures containing technical specifications are often posted to the clients and the salespeople make follow-up visits.  Consumer products get the maximum share of advertising. Pharmaceutical industry exclusively use personal selling for prescription drugs. Insurance companies use both advertising and personal selling.
  39. 39. 4)Use in Social and Non-profits Marketing  Consumer behavior studies are useful to design marketing strategies by social, governmental an not-for-profit organizations to make their programmes such as family planning, awareness about AIDS, crime against women, safe driving, environmental concerns and other more effective.  UNICEF (greeting cards), Red Cross and CRY etc. make use of consumer behavior understanding to sell their services and products and also try to motivate people to support these institutions.
  40. 40. Consumer profiling  A consumer profile is a way of describing a consumer categorically so that they can be grouped for marketing and advertising purposes.  By target advertising to a specific market segment, companies and marketers can find more success in selling a particular product and increase profits.  As a short-hand way of talking about consumers, market segments are often represented by consumer profiles.
  41. 41. The six elements of a customer profile  Start with your data. Consolidate and add KPIs such as revenue per customer, email responsiveness, product mix and purchase channel. Remove duplications and create Single Customer Views.  Enhance and enrich first party data using third party data. This is an optional step but it is advisable that you ensure your data is sufficient, thorough and strong enough before proceeding to the next step.  Segment your customer groups so you can target your best customers or the customers you feel represent the greatest opportunity.  Create a rich picture of these customers on and offline (and your competitors’ customers) so you can target them and ensure your campaign messaging, channels, locations and times of day, are relevant.  Deploy your targeted cross-channel campaigns to the selected customer segments.  Measure the effectiveness of your campaigns over time by each customer group. Keep track of changes in your competitors’ customers, spatial trends concerning where your best customers are and where they interact with you
  42. 42. Review Questions  Is it important to consider the behavior of consumers while deciding on the marketing mix of the company ? Why? Explain with suitable examples  It is said that each consumer is unique, and any study that concentrates on the “average consumer” is meaningless. Discuss its implication.  Why is it so important to conduct a consumer research before the launch of any campaign?  “It has become important for marketers to understand the psyche of the consumer ”. Comment.
  43. 43. Caselet on consumer decision making process  NEW BALANCE, OUT OF STEP1.  Explain the consumer decision-making process when purchasing a new pair of sneakers. - Consumers decision process is comprised of 5 steps:-  Determining a need for a produce- a need for a new pair of runningsneakers - Search for information- using the internet or reading reviews in Runner’s World Magazine  - Evaluation of alternatives- should I purchase the New Balance 875 or theNike’s and others  - Making the choice- going to a store or purchase online  - Post choice evaluation- Did I make the right decision to purchase NewBalance over Nike