Consumer Behavior– you are what you buy…25-2-2012 1

Learning objectives• Factors that influence consumer behavior.

• Structure of the consumer buying decision process.

• Nature of organizational buying.

• How an understanding of buying processes can be used

in the development of marketing strategy.

• Why relationship marketing is becoming an increasingly

important strategic marketing tool and how a

relationship marketing program can be developed.

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80 per cent of all

new products launched

fail

WHY?

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• Who is in the market and

what is the extent of their

power with regard to the

organization?

• What do they buy?

• Why do they buy?

• Who is involved in the

buying?

• How do they buy?

• When do they buy?

• Where do they buy?

• What are the customers’

‘hot’ and ‘cold’ spots?

WHAT WE NEED TO KNOW

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This model shows that the marketing and other stimuli enter the consumer’s “black box” and produce certain responses

Stimulus – response model of buyer behavior

Marketers must figure out what is in the buyer’s black box

NEW CONSUMER

• Far more demanding

• Far more discriminating

• Much less brand loyal

• Much more willing to complain

than customers in the past.

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YOUTH MARKET

➡ Far more media literate

➡ Infinitely more advertising literate

➡ Much more brand literate, brand sophisticated and brand discriminating

➡ Far more technologically literate.

Who buys and uses product / service

• Initiator (identifies need for product / service)

• Influencer (provides info or preference)

• Decider (decides on spending the money)

• Purchaser (makes the purchase)

• User

Example: hospital food service

• Initiator: dietitian wants better nutrition

• Influencer: doctors want happy patients

• Decider: administrator wants low cost

• Purchaser: agent wants good contract

• User: patients want edible food

Example: summer vacation

• Initiator: child wants fun

• Influencer: cousin wants place he has found

• Decider: father wants low cost

• Purchaser: mother wants happy family

• User: whole family wants to enjoy themselves

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FACTORS INFLUENCING CONSUMER BEHAVIOR

• Culture is the most basic cause of a person's wants and behavior.– Culture is learned from family and other important

institutions. – Culture reflects basic values, perceptions, wants,

and behaviors.– Cultural shifts create opportunities for new

products or may otherwise influence consumer behavior.

– Subcultures are of interest to marketers.

Culture & Subculture

Social Class

• People within a particular social class are more similar than those from different social classes

• Social class is determined by a series of variables, such as occupation, income, education and values, rather than by a single variable

• Individuals can move from one social class to another.

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Reference Groups Reference Groups

Family (most important)

Husband, wife, kidsInfluencer, buyer, user

Family (most important)

Husband, wife, kidsInfluencer, buyer, user

Roles and StatusRoles and Status

Social FactorsSocial Factors

Reference Group

• Primary membership groups, which are generally informal and to which individuals belong and within which they interact. These include family, neighbors, colleagues and friends.

• Secondary membership groups, which tend to be more formal than primary groups and within which

less interaction typically takes place. Included within these are trade unions, religious groups and professional societies.

• Aspirational groups, to which an individual would like to belong.

• Dissociative groups, whose values and behavior the individual rejects.

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• Influence of reference group varies with PLC

• Opinion leaders in reference groups

• It was believed that opinion leadership was limited primarily to prominent figures within society, this is no longer seen to be the case

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Family

• Family of orientation ( parents, sister, brother)

• Family of procreation (spouse and children)

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Husband-dominant

Wife-dominant

Equal

WifeDominant

HusbandDominant

Joint

100 50 075 25

Women’s clothing

Pots & pans

Child clothing

groceries

vacations

TV sets

Family car Sport equipment

Lawn mower

Paint wallpaper

lamps

Men’s leisure clothing

Men’s business clothing

cameraFinancial planning

furniture

refrigerator

luggage

carpet

NonRx

Toys/games

stereo

hardware

Extent of role specialization

Relative influence of husbands & wives

Informationsearch

Final decision

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• Age and Life-Cycle Stage– People change the goods they buy over their

lifetimes.• Occupation

– Occupation influences the purchase of clothing and other goods.

• Economic Situation– Some goods and services are especially

income-sensitive.

Personal Factors

Personal Factors

• Lifestyle:– Pattern of living as

expressed via a person’s activities, interests, and opinions.

• VALS:– Widely used system

– Classifies consumers with respect to how they spend their time and money.

• Personality refers to the unique psychological characteristics

that lead to relatively consistent and lasting responses to one’s

own environment. Generally defined in terms of traits.

• Brand Personality refers to specific mix of human traits that

may be attributed to a particular brand. For example: Sincerity,

Excitement, Competence, Sophistication, Ruggedness

• Self-concept suggests that people’s possessions contribute to

and reflect their identities. We are what we have.

Personality and Self-Concept

Psychological factors

– Motivation: needs and motives– Perception: selective attention, distortion, and

retention– Learning: drives, stimuli, cues, responses, and

reinforcement– Beliefs and attitudes

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MOTIVATION

• Biogenic needs and Psychogenic needs

• Marshallian Model : Person’s behavior is inherently rational and motivated by economic factors

• Freud’s Theory: psychological factors that influence behavior are for the most part unconscious

• Many purchases are made not by need but by desire for prestige and social standing

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Maslow’s Hierarchy of Needs23

MOTIVATION….. Cont..

Herzberg Two Factor theory :

satisfier and dissatisfierSelf-Actualization

Esteem needsSocial needsSafety needsPhysiological

needs

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Perception

• The process by which an individual uses information to create a meaningful picture of the world by – selecting, – organizing – interpreting

• Perception is important because people selectively perceive what they want and it affects how people see risks in a purchase.

PERCEPTION

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THE BUYING DECISION PROCESS

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•The buying roles within the decision making unit•Type of buying behavior•Decision process

Buying Roles

• Initiator: the person who first suggests or thinks of the idea of buying a particular product or service.

• Influencer: a person whose views or advice carry weight in making the final buying decision

• Decider: the person who ultimately makes the final buying decision or any part of it

• Buyer: the person who physically makes the actual purchase

• User: the person who consumes the product or service

Note: teens are increasingly assuming more of these roles

Think about your past purchase– who was in which role?30

Other people often influence a consumers purchase decision. The marketer needs to know which people are involved in the buying decision and what role each person plays, so that marketing strategies can also be aimed at these people. (Kotler et al, 1994).

Types of Buying Decision Behaviors

• Based on:– Degree of involvement

– Degree of perceived differences between brands

– Influences promotional strategies

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Consumer Decision-Making Process

Postpurchase Behavior

Postpurchase Behavior

PurchasePurchase

Evaluation of Alternatives

Evaluation of Alternatives

Information SearchInformation Search

Need RecognitionNeed Recognition

Cultural, Social, Cultural, Social, Individual and Individual and Psychological Psychological

Factors Factors affect affect

all stepsall steps

Cultural, Social, Cultural, Social, Individual and Individual and Psychological Psychological

Factors Factors affect affect

all stepsall steps

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• How do you know when to shop? What are the triggers that initiate an awareness & search?

• What are the internal & external sources of these triggers?

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Need Recognition

Preferred State

Marketing helps consumers recognize

(or create) an imbalance between present status

and preferred state

• When a current product isn’t

performing properly

• When the consumer is running out of an product

• When another product seems

superior to the one currently used

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The information search stage

An internal search involves the scanning of one's memory to recall previous experiences or knowledge concerning solutions to the problem-- often sufficient for frequently purchased products.

An external search may be necessary when past experience or knowledge is insufficient, the risk of making a wrong purchase decision is high, and/or the cost of gathering information is low.

Personal sources (friends and family)

Public sources (rating services like Consumer

Reports)

Commercial sources (advertising or sales

people)

The evoked set or choice set : a group of brands from which the buyer can choose

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CAR /Generator/ University

• Go back to your past purchase– what were the specific internal and external sources of information that influenced your decision?

• How do you determine (and rate) the credibility of these sources?

• What specific information influenced you?

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Evaluative or Choice Criteria

• Criteria are standards and specifications consumer uses in evaluating products and brands

• E.g. For a car buyer, evaluative criteria are mileage, engine, social image projection.

• Evaluative criteria may vary from consumer to consumer. Several evaluative criteria are salient (important) to the consumer, some are determinant ( they are most important). This is dynamic.

• The number and type of evaluative criteria may vary by product . Consumers use more evaluative criteria for high involvement products as compare to low involvement products.

• Evaluative criteria also change over time.

Factors influencing consumer consideration of certain brand

• Product’s attributes

• Relative importance to the consumer

• Consumer’s perception of each brand’s image

• Consumer’s utility function for each of the attribute

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Marketing Strategy Implication

• Changing the physical product

• Changing belief about the product (psychological repositioning)

• Changing belief about the competitor’s product ( competitive repositioning)

• Changing the relative importance of particular attribute

• Emphasizing ignored product feature

• Changing buyers’ expectations40

Comprehensive Models of Consumer Behavior

• Nicosia Model

• Engel, Kollat, and Blackwell Model

• The Howard and Sheth Model

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Criticism on Consumer Models?

• Unrealistic

• Too simple

• Many purchases are impulsive

• Difference between low involvement and high involvement products purchse

• Consumer often limit their information processing………

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ORGANIZTIONAL BUYING BEHAVIOR

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• Who makes up the market?

• What buying decisions do they make?

• Who are the key participants in the buying process?

• What are the principal influences upon the buyer, and what

organizational rules and policies are important?

• What procedures are followed in selecting and evaluating

competitive offerings, and how do buyers arrive at their decisions?

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Characteristics

• Small but large buyers

• Geographically concentrated

• Close relationship between suppliers and customers

• Inelastic demand

• Derived demand

• Professional buying

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Types of buying decisions

• Straight rebuy

• Modified rebuy

• New task

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Copyright 2007, Prentice-Hall Inc.

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Participants in Business Buyer Behavior• Buying center: Decision-making unit of a buying

organization is called its buying center.

• Not a fixed and formally identified unit.

• Membership will vary for different products and buying situations.

• Buying roles:– Users: who will actually use the product

– Influencers: who affect the buying decision;they help define specifications and also provide information for evaluating alternatives

– Buyers: Who make actual purchase

– Deciders: who have formal or informal power to select or approve the final suppliers

– Gatekeepers: who control the flow of information to others

Salesperson’s challenge:

– To understand who participates,

– What role they play, and

– How much influence they have in the decision

Types of Buyers• Loyal buyers, who remain loyal to a source for considerable

periods• Opportunistic buyers, who choose between sellers on the basis

of who will best further their long-term interests• Best deal buyers, who concentrate on the best deal available at

the time• Creative buyers, who tell the seller precisely what they want in

terms of the product, service and price• Advertising buyers, who demand advertising support as part of

the deal• Chisellers, who constantly demand extra discounts• Nuts and bolts buyers, who select products on the basis of the

quality of their construction.48

GROUP ACTIVITY

• Arrange yourself in a group of FIVE.

• You can sit in a circle to interact easily with

your group members.

• Share your group efforts with the class.

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Activity 1 (15 mints)FACTORS INFLUENCING

CONSUMER BEHAVIOR

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• How might the model shown on previous slide be used to increase our understanding of consumer buying patterns for

1.Food stuffs? [Group 1], [Group 5]

2.Mobile Phones? [Group 2]

3.Fashion Clothing? [Group 3]

4.Cars ? [Group 4]• Which are the seemingly most important influences

upon consumer choice in each case? What are the implications for the marketing planner?

Activity 2

• Identify examples of the four types of buying behavior and consider the implications for marketing planning

1.Complex buying behavior [Gp. 1] [Gp. 5]

2.Variety seeking buying behavior [Gp. 2]

3.Dissonance reducing buying behavior [Gp. 3]

4.Habitual buying behavior [Gp. 4]

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Activity 3

• Case Study – The Consumer is a Rearview Mirror

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The principal influences on industrial buyers

Product Influence on Marketing Strategy

• Replacement rate

• Gross margin

• Amount of adjustment

• Time of consumption

• Amount of searching time

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• Red goods: High replacement rate, Low on other dimensions

• Orange goods: Medium score on all five dimensions

• Yellow goods: Low rate of replacement, high on other dimensions.

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