CONSUMER BEHAVIOR

SESSION: III

MODELS OF CONSUMER DECISION MAKING PROCESS

Instructor: Dr. S. Sahney

Visiting Faculty, IIM Raipur

Source: Schiffman and , Kanuk, Wells and Prensky, Peter and Olson, Loudon and Bitta*

IECONOMIC MODELS

-Based on the economic theory.

-Largely explains behaviour on the basis of allocation of scarce resources among unlimited needs and wants.

- micro-economic and macro economics models.*

Micro Economic Models:

The micro economic approach was based on the way an 'average' consumer allocates his resources.

The focus was on the act of purchase in terms of what customer bought and how much would be purchased.

The microeconomists concentrated on explaining what consumers would purchase and in what quantities these purchases would be made.

They chose to ignore why consumers develop various needs and preferences and how consumers rank these needs and preferences.*

Macro economic perspective:

Macro economics, the field focussed on aggregate flows in the economy, their direction and change over time, tries to draw generalisations about the behaviour of consumers, who by their decisions, influence these flows.

Two inputs from the macro economic field are important for our understanding of consumer behaviour:

-relative income hypothesis, and -permanent income hypothesis.*

The relative income hypothesis explains:

-Higher income families spend a lower portion of their disposable income as compared to the lower income families.

-With the rise in economic progress, these proportions do not change as there is a rise in all income levels.

The permanent income hypothesis explains:

- Individuals are slow to change their consumption patterns even when there are sudden changes in their income.

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IITHE PSYCHOLOGICAL MODEL (THE PAVLOVIAN LEARNING MODEL)

The learning model was first introduced by a group of classical psychologists, Pavlov being one of the propounders.

The model suggests that human behaviour is based on some central concepts the drives, stimuli, cues, responses and reinforcements which determine the human needs and needs satisfying behaviour.

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IIITHE PSYCHOANALYTIC MODEL

The model suggests that human needs operate at various levels of consciousness.

The motivational wellsprings embedded in these different levels, are not obvious to the casual observer, nor does the individual himself understand them fully.

They can only be analyzed by vigorous, specialized probing.

The founder of the psychoanalytic school of thought, Sigmund Freud pioneered the procedure of vigorous observation and analysis to understand the personality complexities so as to be able to provide some insight on the basic reason for individual personality differences and resultant behavior.*

Two more contributions from the field of psychology are notable:

a) the Geslalt model, because it gave useful insights and a new angle on human perception.

b) the Cognitive theory which was able to provide valid explanations to many hitherto unexplained aspects of buyer behaviour. *

IVSOCIOLOGICAL MODEL

The sociological model postulates that man's needs and behaviour are largely dependent upon and shaped by the social groups and forces.

People tend to take the cue for their needs and wants, and how to fulfill them, from culture, subcultures, social class reference groups and family.

The social theorist Thorstien Veblen (19th century) suggested that individuals are members of various social groups and they tend, under normal circumstances to conform to largely unwritten but nevertheless powerful behavioural standards or norms of these social groups".

Sometimes they emulate the behavior norms of the higher status groups to which they aspire to belong.

The major source of influence on individual behaviour are the family, the culture and the subcultures that surround the individual, the reference group to which he belongs or aspires to belong and social class.*

CONTEMPORARY MODELS

-HOWARD SHETHS MODEL

-NICOSIAS MODEL

-BETTMANS MODEL

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HOWARD SHETH MODEL A BACKGROUND:

John Howard came out with the first truly integrative model of buyer behaviour in 1963.

He was the first to introduce the difference between problem solving behaviour, limited problem solving and automatic response behaviour.

A more meaningful elaboration was provided in the publication of "The Theory of Buyer Behaviour" in 1969 by Howard and Sheth.

More variables impinging upon the behaviour of the consumer were included and the connection between them was clarified with noteworthy precision, making this model an important landmark in the development of the theory of buying behavior.

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The Howard-Sheth model serves as an integrating framework for a very sophisticated comprehensive theory of consumer behavior.

It should be noted that the authors actually use the term "buyer" in their model to refer to industrial purchases as well as ultimate consumers.

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It distinguishes three levels of decision making:

1 Extensive problem solvingearly stages of decision making in which the buyer has little information about brands and has not yet developed well-defined and structured criteria by which to choose among products (choice criteria).

2 Limited problem solvingin this more advanced stage choice criteria are well defined but the buyer is still undecided about which set of brands will best serve him. Thus, the consumer still experiences uncertainty about which brand is "best."

3 Routinized response behaviorbuyers have well-defined choice criteria and also have strong predispositions toward one brand. Little confusion exists in the consumer's mind and he is ready to purchase a particular brand with little evaluation of alternatives.*

Focussing on repeat buying, the model relies on four major components

-stimulus inputs,

-hypothetical constructs,

-response outputs, and,

- exogenous variables.*

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INPUT VARIABLES

Input variables are depicted in the left portion of the model as stimuli in the environment. Significative stimuli are actual elements of brands that the buyer confronts, while symbolic stimuli are generated by producers representing their products in symbolic form, such as in advertisements.

Social stimuli are generated by the social environment including family and groups.*

OUTPUT VARIABLES

The five output variables in the right-hand portion of the model are the buyer's observable responses to stimulus inputs.

They are arranged in order from attention to actual purchase and are defined as follows:

Attentionthe magnitude of the buyer's information intake. Comprehensionthe buyer's store of information about a brand.Attitudethe buyer's evaluation of a particular brand's potential to satisfy his or her motives.Intentionthe buyer's forecast of which brand he or she will buy.Purchase behaviorthe actual purchase act, which reflects the buyer's predisposition to buy as modified by any inhibitors.*

HYPOTHETICAL CONSTRUCTS

They are categorized into two major groups:

(1) perceptual constructs dealing with information processing, and

(2) learning constructs dealing with the buyer's formation of concepts.

The three perceptual constructs of the model can be described as follows:

Sensitivity to informationthe degree to which the buyer regulates the stimulus information flow.

Perceptual biasdistorting or altering information.

Search for informationactive seeking of information about brands or their characteristics.*

The buyer's six learning constructs are defined as:

Motivegeneral or specific goals impelling action.

Brand potential' of the evoked setthe buyer's perception of the ability of brands in his or her evoked set (those that are actively considered) to satisfy his or her goals.

Decision mediatorsthe buyer's mental rules for matching and ranking purchase alternatives according to his or her motives.

Predispositiona preference toward brands in the evoked set expressed as an attitude toward them.

Inhibitorsenvironmental forces such as price and time pressure which restrain purchase of a preferred brand.

Satisfactionthe degree to which consequences of a purchase measure up to the buyer's expectations for it.*

EXOGENOUS VARIABLES

At the top of the black box the model lists a number of external variables that can significantly influence buyer decisions.

These variables were not as well defined as other aspects of the model because they are external to the buyer.

Some of the exogenous variables are importance of the purchase, time at the disposal of the buyer, personality traits, financial status etc.*

MODEL DYNAMICS

The process starts when the buyer confronts an input stimulus and it achieves attention.

The stimulus is subjected to perceptual bias as a result of the influence of the buyer's predispositions as affected by his or her motives, decision mediators, and evoked set.

The modified information will also influence these variables which, in turn, will influence his or her predisposition to purchase.

The actual purchase is influenced by the buyer's intentions and inhibitors, which are confronted.

A purchase leads the buyer to evaluate his or her satisfaction with it, and satisfaction increases the buyer's predisposition toward the brand.

As the buyer acquires more information about brands, he or she engages in less eternal search for information and exhibits more routine purchase behavior.*

MODEL EVALUATION

The Howard-Sheth model represents a significant contribution to understanding consumer behavior.

It identifies many of the variables influencing consumers and details how they interact with each other.

Also, the modeland the earlier work on which it is basedrecognizes explicitly for the first time different types of consumer problem solving and information-search behaviors.

It also recognizes that outcomes of consumers' decisions are more than just purchases.*

Of course, the model has certain limitations.

First, it does not make sharp distinctions between exogenous and other variables.

Second, some of the variables are not well defined and are difficult to measure.

The model also has limited generality.

For example, it is not highly useful in explaining joint decision making between family members or other members of an organization.

The distinction between the exogenous and endogenous variables is not clear cut. Finally, the model is quite complex, making it difficult to comprehend, especially for those new to the field.*

The major advantage and strength of the theory lies in the precision with which a large number of variables have been linked in the working relationships to cover most aspects of the purchase decision and the effective utilization of contribution from the behavioural sciences.

The weakness stems from the fact .that, there being substantial measurement error, the theory cannot be realistically tested. *

NICOSIA'S MODEL OF CONSUMER DECISION PROCESS

-Francesco Nicosia was one of the first consumer-behavior modelers to shift focus from the act of purchase itself to the more complex decision process that consumers engage in about products and services.

-He presented his model in flow-chart format, resembling the steps in a computer program.

-Also, all variables are viewed as interacting, with none being inherently dependent or independent.

-Thus, the model describes a circular flow of influences where each component provides input to the next.

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This model elaborates the decision making steps that the consumers adopt before buying goods or services.

The main fields and subfields of the model are as following:

1.Marketer's Communication affecting consumers attitude.2.Consumer's search and evaluation 3.Purchase action4.Consumption experience and feedback*

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Nicosia's model provides insights about how the non-action kind of variables present in the environment and related to the consumers trigger actions at the consumers end.

The flowcharting approach followed by the model systemises the presentation of the model considerably.

But, it also forces boundaries on the set of possibilities before the consumers. The boundaries may be even unrealistic.

This kind of situation limits the scope and flexibility of the model.*

BETTMAN'S INFORMATION PROCESSING MODEL OF CONSUMER CHOICE

In this model the consumer is seen in the center of a host of information processing activities.

The consumer is the recipient of a large amount of information from the marketer, competitors and rest of the environment.

Moreover, he has his own database built over time from his experiences, personality and set of values.

Since handling such a large amount of information simultaneously can be very complex, the model believes that the consumers use certain simplifying strategies. By using these decision strategies (heuristics), he need not process all the information together.

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This model is also built around several flowcharts.

These flowcharts describe the components and interconnections among themselves that are involved in the decision process.

The main components of the model are the following:i)Processing Capacity ii) Motivationiii) Attention and Perceptual Encodingiv) Information Acquisition and evaluationv) Memoryvi) Decision Processvii)Consumption and Learning viii) Scanner and Interrupt Mechanisms*

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