Consumer behavior

1. Consumer Behavior MARKETING UTOPIA

2. INTRODUCTION Consumer buying behavior is the buying behavior of final consumers- individuals & households who buy goods & services for personal consumption. Factors influencing consumer buying behavior: Cultural factors: Culture: It is the set of basic values, perceptions, wants & behavior learned by a member of society from family & other important institutions. Our culture reflects what we eat, what we wear, & our buying habit, consumption pattern & the way we use & dispose products.

3. FACTORS INFLUENCING CONSUMER BEHAVIOR Subculture: Each culture contains smaller subcultures, or group of people who share value systems based on common life experience & situation. Sub-culture include nationalities, religions, racial groups & geographic regions. Many subcultures make up important market segments, & marketers often design products & marketing programs tailored to their needs. Social class: They are relatively homogeneous & enduring divisions in a society, which are hierarchically ordered & whose members share similar values, interests & behavior. Social class can be divided into upper class, upper-middle class, middle class & lower class.

4. Cont……………. Social factor: Reference group: An individual’s attitude, value & behavior are influenced by different small groups called the reference group. These have direct & indirect influence on the individual. Reference groups include both primary groups (family, friend, neighbors, co-workers) & secondary groups(religion, professional & trade-union groups). Reference group also includes aspirational reference group, disclaiment reference group, avoidance group.

5. Cont……………….. Family: It includes family of orientation & family of procreation. Roles & status Personal factors: Age & stage in the life cycle: It includes Bachelor stage Newly married couples Full nest I Full nest II Empty nest I Empty nest II Solitary survivor Occupation & economic circumstances

6. Cont……………. Personality & self-concept: Personality means a set of distinguishing human psychological traits that lead to relatively consistent & enduring responses to environmental stimuli. Personality is often described in terms of traits like- self-confidence, dominance, autonomy, defense, etc. Personality can be a useful variable in analyzing consumer brand choices. Brands also have personalities & consumers are likely to choose brands whose personalities match their own. Brand personality can be defined as the specific mix of human traits that may be attributed to a particular brand. E.g. sincerity, excitement, competence, sophistication etc. Consumers often choose & use brands that have a brand personality consistent with their own self-concept (how one views oneself).

7. Cont…………….. Lifestyle & value: A lifestyle is a person’s pattern of living in the world as expressed in activities, interests & opinions. Psychological factors: Motivation: A motive is a strong urge that drives a person’s activities towards unfulfilled needs & wants. An important theory in this reference is Maslow’s Hierarchy. Perception: It is the process by which an individual selects, organizes & interprets information inputs to create a meaningful picture of the world. People can emerge with different perceptions of the same object because of 3 perceptual processes: Selective attention Selective distortion Selective retention Subliminal perception

8. Cont………….. Learning: It involves changes in an individual’s behavior arising from experience. Leaning theory teaches marketers that they can build demand for a product by associating it with strong drives. Memory: It includes short-term memory & long-term memory. Beliefs & attitudes: A belief is a descriptive thought that a person holds about something. People’s beliefs about a product or brand influence their buying decisions. An attitude is a person’s enduring favorable or unfavorable evaluations, emotional feelings & action tendencies toward some object or idea. People have attitudes toward almost everything. It is difficult to change an attitude. Thus, a company would be well-advised to fit the product into existing attitudes rather than to change people’s attitude.

9. The Buying Decision Process Problem Recognition Information Search: Personal, Commercial, Public , Experiential Evaluation of alternatives Purchase decisions - It includes non-compensatory models of consumer choice: Conjunctive heuristic Lexicographic heuristic Elimination-by-aspects heuristic Its also influenced by attitudes of others & unanticipated situational factors 5. Post-purchase behavior Post-purchase satisfaction Post-purchase action Post-purchase use & disposal

10. Buying Roles Initiators: The person who first suggests the idea of buying the product or service. Influencers: The person whose view or advise influences the decision Deciders: The person who decides on any component of a buying decision; whether to buy, what to buy, how to buy, or where to buy. Buyer: The person who makes the actual purchase User: The person who consumes or uses the product or service.

11. Other Theories of Consumer Decision Making Level of consumer involvement: Complex buying behavior Dissonance-reducing buying behavior Habitual buying behavior Variety –seeking buying behavior Decision Heuristics & Biases: Heuristics are rules of thumb or mental shortcuts in the decision process. The different types of heuristics are: The availability heuristic The representiveness heuristic The anchoring & adjustment heuristic

12. Measuring satisfaction A number of methods exists to measure customer satisfaction: Periodic surveys: They can track customer satisfaction directly. Respondents can be asked additional questions to measure repurchase intention & the likelihood or willingness to recommend the brand & company to others. Customer loss rate: In this the companies contact customers who have stopped buying or who have switched to another supplier to learn why this happened. Hiring mystery shoppers: Companies can hire mystery shoppers to pose as potential buyers & report on strong & weak points experienced in buying the company’s & competitor’s products. Managers themselves can enter company & competitors sale situations where they are unknown & experience first hand the treatment they receive.

13. Maximizing Customer Lifetime Value Customer profitability: A profitable customer is a person, household or company that over time yield a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling & servicing that customer. Customer profitability analysis: It is best conducted with the tools of an accounting technique called Activity-Based Costing (ABC). The company estimates all revenue coming from the customer , less all costs. The cost should include not only the cost of making & distributing the products & services, but also such costs as taking phone calls from the customer, travelling to visit the customer, entertainment & gifts-all the company’s resources that went into serving the customer. When this is done for each customer, it is possible to classify customers into different profit tiers: platinum customers(most profitable), gold customers(profitable), iron customers(low profitability but desirable), lead customers(unprofitable & undesirable).

14. Cont…………………. Competitive advantage: It is a company’s ability to perform in one or more ways that competitors cannot or will not match. Any competitive advantage must be seen by customers as a customer advantage. For example, if a company delivers faster than its competitors , this will not be a customer advantage if customers do not value speed. Companies must focus on building customer advantage. Then they will deliver high customer value & satisfaction, which leads to high repeat purchases & ultimately to high company profitability. 2. Measuring Customer Lifetime Value: It describes the net value of the stream of future profits expected over the customer’s lifetime purchases. The company must subtract from the expected revenues the expected costs of attracting, selling & servicing that customer, applying the appropriate discount rate . CLV calculations provide a formal quantitative framework for planning customer investment & help marketers to adopt a long-term perspective. One challenge in applying CLV is to arrive at reliable cost & revenue estimates. Marketers who use CLV concepts must also be careful to not forget the importance of short-term brand-building marketing activities that will help to increase customer loyalty.

15. Cont………………. Customer Equity: It is the total of the discounted lifetime values of all of the firm’s customers. Clearly, the more loyal the customers, the higher the customer equity. Value equity: It is the customer’s objectives assessment of the utility of an offering based on perceptions of its benefits relative to its costs. The sub-drivers of value equity are quality, price & convenience. Each industry has to define the specific factors underlying each sub-driver in order to find programs to improve value equity. Brand equity: It is the customer’s subjective & intangible assessment of the brand, above & beyond its objectively perceived value. The sub-drivers of brand equity are customer brand awareness, customer attitude toward the brand, & customer perception of brand ethics. Companies use advertising, public relations, & other communication tools to affect these sub-drivers.

16. Cont………………….. Relationship equity: It is the customer’s tendency to stick with the brand , above & beyond objective & subjective assessments of the worth. Sub-drivers of relationship equity includes- loyalty programs, special recognition, community building program, knowledge- building programs. It is important where personal relationship count for a lot & where customers tend to continue with suppliers out of habit or inertia.