Importance of consumer behavior

1. CONSUMER BEHAVIOR
What is consumer behavior
And why do we need to understand it?

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http://www.consumerpsychologist.com/
• One "official" definition of 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 needs and the impacts that these
processes have on the consumer and society."

4. CONSUMER BEHAVIOR
• Behavior occurs either for the individual, or in the context of a
group (e.g., friends influence what kinds of clothes a person wears)
or an organization (people on the job make decisions as to which
products the firm should use).
• Consumer behavior involves the use and disposal of products as
well as the study of how they are purchased. Product use is often of
great interest to the marketer, because this may influence how a
product is best positioned or how we can encourage increased
consumption. Since many environmental problems result from
product disposal (e.g., motor oil being sent into sewage systems to
save the recycling fee, or garbage piling up at landfills) this is also an
area of interest.
• Consumer behavior involves services and ideas as well as tangible
products.
• The impact of consumer behavior on society is also of relevance.
For example, aggressive marketing of high fat foods, or aggressive
marketing of easy credit, may have serious repercussions for the
national health and economy.

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• The study of consumers helps firms and organizations improve their
marketing strategies by understanding issues such as how
• The psychology of how consumers think, feel, reason, and select
between different alternatives (e.g., brands, products, and
retailers);
• The psychology of how the consumer is influenced by his or her
environment (e.g., culture, family, signs, media);
• The behavior of consumers while shopping or making other
marketing decisions;
• Limitations in consumer knowledge or information processing
abilities influence decisions and marketing outcome;
• How consumer motivation and decision strategies differ between
products that differ in their level of importance or interest that they
entail for the consumer; and
• How marketers can adapt and improve their marketing campaigns
and marketing strategies to more effectively reach the consumer.

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• The most obvious is for marketing strategy—i.e., for making better marketing
campaigns. For example, by understanding that consumers are more receptive to food
advertising when they are hungry, we learn to schedule snack advertisements late in the
afternoon. By understanding that new products are usually initially adopted by a few
consumers and only spread later, and then only gradually, to the rest of the population,
we learn that (1) companies that introduce new products must be well financed so that
they can stay afloat until their products become a commercial success and (2) it is
important to please initial customers, since they will in turn influence many subsequent
customers’ brand choices.
• Social marketing involves getting ideas across to consumers rather than selling
something. Marty Fishbein, a marketing professor, went on sabbatical to work for the
Centers for Disease Control trying to reduce the incidence of transmission of diseases
through illegal drug use. The best solution, obviously, would be if we could get illegal
drug users to stop. This, however, was deemed to be infeasible. It was also determined
that the practice of sharing needles was too ingrained in the drug culture to be stopped.
As a result, using knowledge of consumer attitudes, Dr. Fishbein created a campaign that
encouraged the cleaning of needles in bleach before sharing them, a goal that was
believed to be more realistic.
• As a final benefit, studying consumer behavior should make us better consumers.
Common sense suggests, for example, that if you buy a 64 liquid ounce bottle of laundry
detergent, you should pay less per ounce than if you bought two 32 ounce bottles. In
practice, however, you often pay a size premium by buying the larger quantity. In other
words, in this case, knowing this fact will sensitize you to the need to check the unit cost
labels to determine if you are really getting a bargain.

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1. Problem Recognition
• You look at an old pair
of running shoes and
think you NEED new
ones
• The NEED has to be
addressed for you to go
back to feeling NORMAL

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2 – Information Search
• Shift from traditional shopping to the online front.
• Product information
• Reviews are IMPORTANT

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3 – Evaluating Alternatives
• Is this the right
product?
• Pros vs Cons
• Do I really need this?
• What is the best deal?

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4 - Purchase
• What to purchase and
where to purchase
• Decision based on:
– Logical assessment
– Emotional connections
– Marketing campaigns
– Combination of above

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5 – Post Purchase
Satisfaction/Dissatisfaction
• Did the product satisfy the need?

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• Select a product you
want to purchase
• List down the factors
you may consider
before purchasing the
product

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http://60secondmarketer.com/blog/2011/03/13/5-consumer-
behavior-secrets-you-can-use-to-grow-sales-and-revenue/
• Not long ago, Baylor University conducted a blind taste
test between Coke and Pepsi. They took 100 people,
gave them unlabeled samples of Coke and Pepsi and
asked them to choose which one they preferred.
• Interestingly, the participants in the study were split
50/50. Half the room chose Coke and half the room
chose Pepsi.
• A short while later, the researchers asked the same
group to again choose which soft drink they liked
better — only this time, the drinks had their labels on
them. In other words, the participants knew when they
were drinking Coke and when they were drinking Pepsi.

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80%chose coke.

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ACTION PARALYSIS
• Would you be willing to
help by giving a
donation?
• Would you be willing to
help by giving a
donation? Every penny
will help.
1 2

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THE RESULTS
First Second
28% 50%
People are more likely to take action when minimal parameters are set.

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INTERNAL LABELS
• A study examined the voting patterns of 133
adults
– Half the participants were selected and random
and told they were much more likely to vote since
they had been deemed by the researchers to be
more “politically active”
– The other half weren’t told anything.

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15%HIGHER TURNOUT
POLITICALLY ACTIVE

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WHY?
• We like being CONSISTENT.
• We like being PART OF A GROUP, as long as we
approve of it.
• E.g. “gold” or “platinum status works
effectively for customer loyalty programs
• People who are labeled as “SUPERIOR”
customers tend to spend more.

23. CONSUMER BEHAVIOR
BUYING PAIN

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STRATEGIES FOR TIGHTWADS
?
Reframing
Value
Small Stuff
Reduce
Pain Points
with
Bundling

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REFRAMING VALUE

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REDUCE PAIN POINTS WITH BUNDLING
Bundle Cost: Rs. 75
Individual Cost: Rs. 60
- Internet: Rs. 30
- Daily Motion: Rs. 30

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SMALL STUFF
• Study: Carnegie Mellon University
• Impact of a single word on conversion rates
A $5 FEE
A SMALL
$5 FEE
VS.
20%increase in response rate

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HOW TO HANDLE SHORTCOMINGS
• Is it a good idea to admit to your faults?
• Research from social psychologist Fiona Lee:
– Two fictitious company reports
– Both listed reasons why the company had
performed poorly last year

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Admitting to shortcomings shows that
As opposed to

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USE URGENCY THE RIGHT WAY
• The effect of fear on attitude and behavior

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Urgency can be
blocked by
your
customer’s
minds
if you don’t give them
specific instructions on how
to solve the problem.

38. CONSUMER BEHAVIOR
Fortune 500
The Fortune 500 is an annual list compiled and published by Fortune magazine that ranks 500 of the
largest U.S. corporations by total revenue for their respective fiscal years. The list includes public
companies, along with privately held companies for which revenues are publicly available.
Fortune 500 - Wikipedia, the free encyclopedia
https://en.wikipedia.org/wiki/Fortune_500

39. CONSUMER BEHAVIOR
ASSIGNMENT
• Select a Fortune 500 company
• Collect the following information:
1. Company Mission Statement and Basic Facts
2. What Sets the Company Apart From its
Competitors?
3. What is Being Said About the Company in the News
and Through Social Networks?
4. How the Company is Structured
5. Who’s in Charge?
6. One print ad

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REFERENCES
• http://theconsumerfactor.com/en/5-stages-
consumer-buying-decision-process/
• http://www.professionalacademy.com/blogs-
and-advice/marketing-theories---explaining-
the-consumer-decision-making-process
• http://www.consumerpsychologist.com/
• http://www.consumerpsychologist.com/intro_
Consumer_Behavior.html