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CHAPTER 3 CHAPTER 3 Consumer Markets and Consumer Markets and Consumer Buyer Behavior Consumer Buyer Behavior Objective Objective : exploring the : exploring the dynamics of consumer behavior dynamics of consumer behavior and the consumer market and the consumer market

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Page 1: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

CHAPTER 3CHAPTER 3

Consumer Markets and Consumer Markets and Consumer Buyer BehaviorConsumer Buyer BehaviorObjectiveObjective: exploring the dynamics : exploring the dynamics

of consumer behavior and the of consumer behavior and the consumer marketconsumer market

Page 2: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Consumer Buying Consumer Buying BehaviorBehavior

Consumer buying behaviorConsumer buying behavior refers to the refers to the buying behavior of the individuals and buying behavior of the individuals and households who buy goods and services households who buy goods and services for personal consumption. for personal consumption.

Consumer marketConsumer market refers to the refers to the combination of all theses individuals and combination of all theses individuals and households.households.

These diverse consumers make their These diverse consumers make their choices among various products based on choices among various products based on several factors. several factors.

Page 3: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Model of Consumer Model of Consumer BehaviorBehavior

How do consumers respond to How do consumers respond to various marketing efforts that the various marketing efforts that the company might use? The company company might use? The company that understands how consumers will that understands how consumers will respond to product features, prices, respond to product features, prices, advertising has a great advantage advertising has a great advantage over its competitors.over its competitors.

According to the “According to the “model of buyer model of buyer behaviorbehavior”, marketing (4Ps) and other”, marketing (4Ps) and other

Page 4: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

(environmental - economic, (environmental - economic, technological, political and cultural) technological, political and cultural) stimulus starts the response model. stimulus starts the response model. All these enter into the buyer’s head All these enter into the buyer’s head (black box) and then turn into (black box) and then turn into responses as product choice, brand responses as product choice, brand choice, dealer choice, purchase choice, dealer choice, purchase timing, and purchase amount.timing, and purchase amount.

The The buyer behavior is affected bybuyer behavior is affected by; (1) ; (1) the buyer’s characteristic - cultural, the buyer’s characteristic - cultural, social, personal, psychological; (2) social, personal, psychological; (2) the buyer’s decision process.the buyer’s decision process.

Page 5: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Model of Buyer BehaviorModel of Buyer Behavior

Marketing &Marketing &

Other StimuliOther Stimuli Buyer’s Black BoxBuyer’s Black Box Buyer’s ResponseBuyer’s Response

ProductProduct EconomicEconomic BuyerBuyer

PricePrice TechnologicalTechnological characteristiccharacteristic

PlacePlace PoliticalPolitical Buying Buying

PromotionPromotion CulturalCultural decisiondecision

processprocess

Product choiceProduct choice

Brand choiceBrand choice

Dealer choiceDealer choice

Purchase timingPurchase timing

Purchase amountPurchase amount

Page 6: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

The Buyer Decision The Buyer Decision ProcessProcess

The buyer decision process consists of The buyer decision process consists of five stages: (1) need recognition, (2) five stages: (1) need recognition, (2) information search, (3) evaluation of information search, (3) evaluation of alternatives, (4) purchase decision, alternatives, (4) purchase decision, and (5) postpurchase behavior. This and (5) postpurchase behavior. This process shows all the considerations process shows all the considerations involved when a consumer is thinking involved when a consumer is thinking to make a purchase decision.to make a purchase decision.

Page 7: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

The Buyer Decision The Buyer Decision ProcessProcess

Need

recognitionInformation

searchEvaluation ofalternatives

Purchasedecision

Postpurchasebehavior

Page 8: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Need RecognitionNeed Recognition The buying process starts when the buyer The buying process starts when the buyer

recognizes that he has a problem or need.recognizes that he has a problem or need. The need can be felt because of internal The need can be felt because of internal

stimuli (hunger, thirst...) or external stimuli stimuli (hunger, thirst...) or external stimuli (the buyer may feel hungry when he passes by (the buyer may feel hungry when he passes by a bakery, the buyer may need to have a a bakery, the buyer may need to have a vacation when he watches a commercial about vacation when he watches a commercial about Caribbeans on TV).Caribbeans on TV).

At this stage, the marketer must identify the At this stage, the marketer must identify the factors that most trigger interest in the factors that most trigger interest in the product and develop marketing programs that product and develop marketing programs that involve these factors.involve these factors.

Page 9: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Information SearchInformation Search

When the consumer feels his need, he When the consumer feels his need, he satisfies his need with a product near at satisfies his need with a product near at hand. But, if there is not such a hand. But, if there is not such a product, he starts to search for product, he starts to search for information. information.

The consumer can obtain information The consumer can obtain information from several sources;from several sources; personal sourcespersonal sources: family, friends, : family, friends,

neighbors, acquaintances (more important neighbors, acquaintances (more important for the consumer to evaluate)for the consumer to evaluate)

Page 10: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

commercial sourcescommercial sources: advertising, : advertising, salespeople, dealers, packaging, displays salespeople, dealers, packaging, displays (more important for the consumer to get (more important for the consumer to get information)information)

public sourcespublic sources: mass media, consumer : mass media, consumer rating organizationsrating organizations

experiential sourcesexperiential sources: handling, examining, : handling, examining, using the productusing the product

Here, the marketer is responsible to Here, the marketer is responsible to identify the consumer’s sources of identify the consumer’s sources of information and their importance, then information and their importance, then design its marketing efforts in the way design its marketing efforts in the way that would increase the awareness and that would increase the awareness and knowledge of the potential consumers.knowledge of the potential consumers.

Page 11: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Evaluation of AlternativesEvaluation of Alternatives

After gathering information, the After gathering information, the consumer evaluates each alternative consumer evaluates each alternative and makes a brand choice. and makes a brand choice.

Consumers pay attention to certain Consumers pay attention to certain issues when evaluating the alternatives;issues when evaluating the alternatives; product attributesproduct attributes: consumers see products : consumers see products

as a bundle of product attributes (e.g. as a bundle of product attributes (e.g. quality, size, price...) Consumers pay the quality, size, price...) Consumers pay the most attention on the attributes that most attention on the attributes that satisfies their need the most. satisfies their need the most.

Page 12: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

degrees of importancedegrees of importance: consumers give : consumers give different degrees of importance to different different degrees of importance to different attributes according to their needs and attributes according to their needs and wants.wants.

brand beliefsbrand beliefs: consumers develop a set of : consumers develop a set of brand beliefs about where each brand brand beliefs about where each brand stands on each attribute. The set of beliefs stands on each attribute. The set of beliefs that are held about a particular brand is that are held about a particular brand is known as the known as the brand imagebrand image. .

total product satisfactiontotal product satisfaction: consumers : consumers combine the attributes that give them the combine the attributes that give them the highest perceived satisfaction and create highest perceived satisfaction and create their ideal product.their ideal product.

evaluation procedureevaluation procedure: consumers approach : consumers approach different brands through some type ofdifferent brands through some type of

Page 13: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

evaluation procedure which depends evaluation procedure which depends on the individual and specific buying on the individual and specific buying situation. In some cases, consumers situation. In some cases, consumers use use logical thinkinglogical thinking, and at other , and at other times, times, emotionalemotional. Sometimes, they . Sometimes, they may decide on their own, or ask their may decide on their own, or ask their friends, or salespeople for advice.friends, or salespeople for advice.

Here, the marketer should study Here, the marketer should study the buyers to understand how they the buyers to understand how they evaluate each alternative - e.g. evaluate each alternative - e.g. which attribute receives the which attribute receives the highest attention. highest attention.

Page 14: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Purchase DecisionPurchase Decision

The consumer ranks all the brands and intends The consumer ranks all the brands and intends to purchase one. However, sometimes the to purchase one. However, sometimes the consumer does not buy the one he intended. consumer does not buy the one he intended. Two factors can come between the purchase Two factors can come between the purchase intention and decision;intention and decision; attitudes of othersattitudes of others; e.g. family may claim that the ; e.g. family may claim that the

alternative is better.alternative is better. unexpected situational factorsunexpected situational factors; unexpected events ; unexpected events

may change the purchase intention e.g. the consumer may change the purchase intention e.g. the consumer may loose his job so that he have to purchase a may loose his job so that he have to purchase a cheaper brand, a friend my report his dissatisfaction cheaper brand, a friend my report his dissatisfaction about the product, a competitor may drop its prices...about the product, a competitor may drop its prices...

Page 15: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Postpurchase BehaviorPostpurchase Behavior

After purchasing the product, the After purchasing the product, the consumer will be satisfied or consumer will be satisfied or dissatisfied and will engage in dissatisfied and will engage in postpurchase behavior of interest. postpurchase behavior of interest.

Whether the buyer is satisfied or Whether the buyer is satisfied or dissatisfied is determined by the dissatisfied is determined by the relationship between the consumer’s relationship between the consumer’s expectations and the product’s expectations and the product’s performance.performance.

Page 16: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

The marketer’s job does not end when The marketer’s job does not end when the product is bought. The marketer the product is bought. The marketer must do research in order to must do research in order to understand whether the consumer is understand whether the consumer is satisfied about the product or not. satisfied about the product or not. Responding to consumer complaints Responding to consumer complaints help to reduce the number of help to reduce the number of dissatisfied consumers. E.g. Toyota dissatisfied consumers. E.g. Toyota contacts the new car owners and contacts the new car owners and congratulates them. In addition, places congratulates them. In addition, places advertising with the favorable words of advertising with the favorable words of the new car owners. “I love what you do the new car owners. “I love what you do for me Toyota”for me Toyota”

Page 17: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

The Buyer Decision The Buyer Decision Process for New Process for New

ProductsProducts The The adoption processadoption process is the mental is the mental

process that an individual passes process that an individual passes through from first learning about a new through from first learning about a new product to final adoption (making the product to final adoption (making the decision to become a regular user).decision to become a regular user).

Consumers go through five stages in the Consumers go through five stages in the process of adopting a new product;process of adopting a new product; awarenessawareness: the consumer becomes aware of : the consumer becomes aware of

the new product but does not have the new product but does not have information.information.

Page 18: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

interestinterest: the consumer seeks : the consumer seeks information about the new product.information about the new product.

evaluationevaluation: the consumer considers : the consumer considers whether trying the new product is a whether trying the new product is a good idea.good idea.

trialtrial: the consumer tries the new : the consumer tries the new product to understand its value.product to understand its value.

adoptionadoption: the consumer decides to : the consumer decides to make regular use of the new product.make regular use of the new product.

Page 19: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Individual Differences in Individual Differences in InnovativenessInnovativeness

People differ in their readiness to try new People differ in their readiness to try new products. After a slow start, an increasing products. After a slow start, an increasing number of people adopt the new product. number of people adopt the new product. The number of adopters reaches a peak and The number of adopters reaches a peak and then drops off as very little adopters remain.then drops off as very little adopters remain.

There are five adopter categorization on the There are five adopter categorization on the basis of time of adoption of innovations;basis of time of adoption of innovations; InnovatorsInnovators: are the first 2.5 percent of the : are the first 2.5 percent of the

buyers, they are adventurous, take risk, buyers, they are adventurous, take risk, relatively younger, better educated, have higher relatively younger, better educated, have higher income, are more receptive toincome, are more receptive to

Page 20: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

unfamiliar things, rely more on their own unfamiliar things, rely more on their own values andvalues and

judgement, are less brand loyal and more judgement, are less brand loyal and more likely to tae advantage of special promotions likely to tae advantage of special promotions e.g. discounts.e.g. discounts.

Early adoptersEarly adopters: are the next 13.5 percent, are : are the next 13.5 percent, are opinion leaders in their communities and opinion leaders in their communities and adopt new ideas early but carefully.adopt new ideas early but carefully.

Early majorityEarly majority: are rarely leaders but adopt : are rarely leaders but adopt new ideas before the average person.new ideas before the average person.

Late majorityLate majority: adopt an innovation only after : adopt an innovation only after a majority of people have tried it.a majority of people have tried it.

LaggardsLaggards: are suspicious of changes and : are suspicious of changes and adopt the innovation only when it has become adopt the innovation only when it has become tradition.tradition.

Page 21: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Adopter categorization on the Adopter categorization on the basis of relative time of basis of relative time of adoption of innovationsadoption of innovations

34% 34%34% 34%

early lateearly late

13.5 % majority majority13.5 % majority majority

earlyearly 16% 16%innovators adoptersinnovators adopters laggardslaggards

2.5%2.5%

Page 22: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

Influence of Product Influence of Product Characteristics on Rate of Characteristics on Rate of

AdoptionAdoption The characteristics of the new product The characteristics of the new product

affect its rate of adoption. Some products affect its rate of adoption. Some products catch on almost overnight e.g. Frisbees; but catch on almost overnight e.g. Frisbees; but some take a long time to be accepted e.g. some take a long time to be accepted e.g. personal computers. Five characteristics personal computers. Five characteristics are important in influencing an innovation’s are important in influencing an innovation’s rate of adoption;rate of adoption; relative advantagerelative advantage: the degree to which : the degree to which

the innovation is seen as superior relative the innovation is seen as superior relative to existing products.to existing products.

Page 23: CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

compatibilitycompatibility: the degree to which the : the degree to which the innovation fits the values and lifestyles of innovation fits the values and lifestyles of potential consumers. potential consumers.

complexitycomplexity: the degree to which the : the degree to which the innovation is difficult to understand or use. innovation is difficult to understand or use.

divisibilitydivisibility: the degree to which the : the degree to which the innovation may be tried on a limited basis. innovation may be tried on a limited basis. (price may influence the divisibility)(price may influence the divisibility)

communicabilitycommunicability: the degree to which the : the degree to which the results of using the innovation can be results of using the innovation can be observed or described.observed or described.