Notes of Consumer-Behaviour

MK 0002
Consumer Behaviour
Contents
Unit 1
Understanding Consumer Behaviour 1
Unit 2
Consumers and Market Segmentation 28
Unit 3
Environmental and Group influences on
Consumer Behaviour 47
Unit 4
Perception and Learning 91
Unit 5
Individual Determinants of Consumer Behaviour 124
Unit 6
Consumer Decision Process 187
Unit 7
Consumer Research 226
Unit 8
Diffusion of Innovation 251
Unit 9
Consumerism and Marketing Ethics 276
Unit 10
Business Buyer Behaviour and Decisions 310
Reference 335
Edition: Fall 2007
th
BKID – B0815 5 Dec. 2007
Brig. (Dr). R. S. Grewal VSM (Retd.)
Pro Vice Chancellor
Sikkim Manipal University of Health, Medical & Technological Sciences
Board of Studies
Mr. Rajen Padukone
Member – Academic Senate, Sikkim Manipal University
Ms. Vimala Parthasarathy Prof. K. V. Varambally
HOD Director
Convener Manipal Institute of Management
Department of Management & Commerce Manipal
Directorate of Distance Education
Sikkim Manipal University
Prof. Raj Dorai Mr. Jagadeesh
Industry Consultant and Assistant Professor
Visiting Faculty, IBA, IFIM and BIM, Department of Management &
Bangalore Commerce, Directorate of Distance
Education, Sikkim Manipal University
Mr. Umesh Maiya Mr. R. Ravindra Rao
Assistant Professor Senior Faculty
Department of Management & Commerce Manipal Institute of Management
Directorate of Distance Education Manipal
Content Preparation Team

Content Writing and Compilation
Dr. B. S. Prakash
Visiting Faculty
Management Schools in Bangalore
Bangalore
Format Editing Language Editing
Mr. Jagadeesh Ms. A. K. Prathibha
Assistant Professor Visiting Faculty
Department of Management & Commerce Management Schools in Bangalore
Directorate of Distance Education Bangalore
Edition: Fall 2007

This book is a distance education module comprising of written and compiled
learning material for our students.
All rights reserved. No part of this work may be reproduced in any form by any
means without permission in writing from Sikkim Manipal University of Health,
Medical and Technological Sciences, Gangtok, Sikkim.
Printed and Published on behalf of Sikkim Manipal University of Health, Medical and
Technological Sciences, Gangtok, Sikkim by Mr. Rajkumar Mascreen, GM, Manipal
Universal Learning Pvt. Ltd., Manipal – 576 104. Printed at Manipal Press Limited,
Manipal.
SUBJECT INTRODUCTION
All marketing decisions and strategies are based on assumptions about

consumer behaviour. Hence, the entire marketing management course will
be relevant for the study of consumer behaviour applications. Because of
growing importance, we introduced consumer behaviour as subject for MBA
students.
This book contains 10 units
Unit 1: Deals with understanding Consumer Behaviour.
Unit 2: Explains about Consumers and Market Segmentation.
Unit 3: Deals with Environmental and Group influences on Consumer
Behaviour.
Unit 4: Explain about Perception and Learning.
Unit 5: Deals with Individual Determinants of Consumer Behaviour.
Unit 6: Deals with Consumer Decision Process.
Unit 7: Deals with Consumer Research.
Unit 8: Deals with Diffusion of Innovation.
Unit 9: Explains about Consumerism and Marketing Ethics.
Unit 10: Deals with Business Buyer Behaviour and Decisions.
Consumer Behaviour Unit 1
Unit 1 Understanding Consumer Behaviour

Structure
1.1 Introduction
Objectives
1.2 Meaning and Definition
1.3 Application of consumer behaviour knowledge to marketing
Self Assessment Questions I
1.4 Why study of consumer behaviour in marketing
1.5 Areas of study under consumer behaviour
Self-Assessment Questions II
1.6 Summary
1.7 Terminal Questions
1.8 Answers to Self Assessment Questions and Terminal Questions
1.1 Introduction
Consumer Behaviour is the study of Individuals or Organisations and the
activities undertaken by them to select, procure and use products or
services to satisfy their needs and wants. In this unit, we will be studying the
basics of consumer behaviour from a management perspective, along with
an overview of the concepts of consumer orientation and the competitive
advantages of such a practice.
Objectives
After studying this unit you should be able to:
 Understand the meaning & definition of Consumer Behaviour.
 Understand why Consumer Behaviour study is important.
 Explain the linkage between Marketing Concepts & the study of
Consumer Behaviour.
 Understand the reasons for studying Consumer Behaviour.
 Describe the areas of study under Consumer Behaviour.
Sikkim Manipal University Page No. 1

1.2 Meaning and Definition of Consumer Behaviour
Vignette
Proctor and Gamble (P&G) is an American Global Corporation established
in 1837 with several successful current brands like Tide and Ariel detergent
powders, Duracell batteries, Gillette safety razors, Max Factor cosmetics,
Pantene hair care products, Pampers brand diapers, etc. When they
entered the Japanese market for Pampers in 1977, they used American
product range, American advertising and American sales and promotional
strategies. The product was quite thick designed for American mothers who
would leave the diapers on their babies for long periods.
The Japanese mothers were however highly cleanliness minded and would
change the diapers on their babies at least twice as much as the American
mothers do. Seeing this opportunity many Japanese companies introduced
thinner leak proof diapers better suited to Japanese mothers. This resulted
in Pamper’s market share crashing to 7% in 1985 from a high of 90% in
1977. The company realized their mistakes after a market study and an
improved product with one third of the original thickness was introduced.
This resulted in their improving their share to about 35% in 1990 and the
same product was introduced in the American market with a new brand
name- “Ultra Pampers”
The above example is a classic case of how a study of consumer behaviour

is most important to the success or otherwise of products and for any
marketing oriented company, such a study should be the basic starting point
for all marketing strategy decisions.
Definition of Consumer Behaviour and related concepts

As mentioned in the introduction, “Consumer Behaviour is the study of
Individuals or Organisations and the activities undertaken by them to select,
procure and use products or services to satisfy their needs and wants.”

The activities undertaken by the consumer can be either of the following:

1. Psychological activities involving thinking processes like considering the
need for the product or service, whether to purchase, what to purchase,
when to purchase, how to purchase, comparing the various features and
prices, reading the customer reviews etc.
2. Physical activities like going to a shop, looking and enquiring about the
alternatives, visiting an e-commerce site, transacting on the e-commerce
site, etc.
Sheth & Mittal have further expanded this definition by including the study of
various roles played by a customer like
1. The user (who uses or consumes the product or service)
2. The payer (who pays for such a product or service)
3. The buyer (who physically acts to procure the product or service).
The same person may play all the three roles and in several situations,
there may be more than one person playing different roles. Depending on
the roles being played, the behaviour and decision making process may
change.
Understanding consumer Behaviour is quite complicated since it involves

the following factors, which have strong influence on it:
1. Cultural factors
2. Social factors
3. Personal factors
4. Psychological factors
One has to study both internal factors and the external environment to have
a better knowledge of such behaviour. Only when we are able to decipher
this process, such knowledge can be used in taking decisions that would be
most effective in achieving the marketing objectives.

1.3 Application of consumer Behaviour knowledge to marketing

 Consumer behaviour – Consumer and Managerial Perspectives
Consumer Behaviour can be studied with two different perspectives. The
most popular traditional way is to focus on this subject as a pure science,
wherein the research findings from behavioural sciences like Psychology
and also from social sciences like Sociology, Anthropology and Economics,
are drawn to explain the various facets of Consumer Behaviour. The other
perspective is to analyse this subject as an applied science, with emphasis
on its application in business organisations.
a) Consumer Perspective
In this approach, Consumer behaviour study is focused on enquiring into
how people buy, what they buy, when they buy and why they buy more as a
pure science, not necessarily for applying to marketing decision-making. It
blends elements from psychology, sociology, socio-psychology,
anthropology and economics. It attempts to understand the buyer
consumption process, both individually and in groups. It studies
characteristics of individual consumers such as demographics,
psychographics, and behavioural variables in an attempt to understand
people's wants. It also tries to assess influences on the consumer from
groups such as family, friends, reference groups, and society in general.
This approach focuses more on the nature of consumption experience
rather than the purchase process.
This approach may throw many insights that may or may not be actionable
from a marketer’s perspective. There is no sufficient emphasis on consumer
purchase decision process. Hence this approach may have limited use for
marketers, since they must understand how consumers take purchase
decisions if they have to influence the consumers.

b) Managerial Perspective
In this approach, consumer behaviour is studied as an applied social
science and the main objective of such an approach is to find a basis for
marketing strategies in business organisations. In a managerial perspective,
the stress is on predicting the action sequence of a consumer decision
process to help a marketer in deciding on suitable marketing strategies.
As an improvement of this, a new approach was enunciated by Sheth &

Mittal, who expanded the study of Consumer Behaviour to include several
facets, which would be more practical while applying this knowledge to
practical situations in business organisations. There are two variations in
this approach, which are more meaningful from the managerial perspective:
a) All the different aspects of consumer Behaviour study have been applied
in this new approach to “Business Organisations” as consumers.
Normally most textbooks limit such analysis to individual consumers and
some of them extend it to households. But in the new approach, the
behavioural aspects are looked at from the angle of business-to-
business transactions, which are very relevant and useful in such
situations.
b) The second approach is in extending the consumer behaviour study, to
include different roles of a customer in understanding the decision
making process. Traditionally the consumer is the “User” of the product
or service and most of the studies limit the application of this knowledge
to understand the behaviour of customers as Users/Consumers. The
new approach considers three roles of the customer viz. User, Payer
and Buyer as important, to apply this knowledge in real life situations in
business organisations. In fact the title of the study is called as
“Customer Behaviour” instead of “ Consumer Behaviour” to make it
amply clear that all three roles of the customer have to be looked at in
order to analyse & apply the various research findings more effectively.

In the traditional methods of study of consumer behaviour, the applications

get limited to mostly FMCG products and also to individual/ household
users/ consumers. The second approach expands the applications of these
studies to encompass practically all markets and products in all types of
marketing situations that would make more sense from a managerial
perspective.
 Consumer Orientation
a) Organisational orientations
Depending on the internal and external environments of organisations
and also the top management philosophy, the organisations have
different orientations towards their marketing policies and strategies.
Some of these orientations are as follows:
1. Production Orientation:
This is prevailing in most of the old traditionally managed businesses
wherein the competition is less severe and the economy is in a
developmental stage. The management of such firms concentrate on
improving on their production facilities and their strategies will
concentrate on factors like:
a) Improving production efficiencies
b) Reducing wastages and rejections in their factories
c) Lowering costs of production
d) Resorting to mass production techniques
e) Wide distribution, etc.
The underlying assumption of such organisations is that, the

consumers are mainly looking for a cheaper product that is readily
available. The classic example of this attitude is that of Henry Ford,
who introduced the concept of assembly line manufacturing of
automobiles. His management orientation was clear from his widely

quoted statement-“My customer can have a car painted in any colour

that he wants so long as it is black".
2. Product Orientation:
Many company management believes that, the consumers will
purchase those products, which offer the best quality, a wide range
of innovative features, best performance, excellent service, etc. Such
managements focus their efforts on making superior products and
continuously improve the quality of their products. Such companies
assume that the consumer automatically goes for a superior product
and that, he can efficiently evaluate the product performance and
quality. They often don’t bother about getting more information from
the market place either about the consumer like and dislikes, or the
competitors’ products and activities.
3. Sales Orientation:
This is another very common orientation of many firms. They believe
that their customers voluntarily do not purchase enough quantity of
their products, if left alone. Hence they resort to pressurized selling
and aggressive sales promotions. The underlying assumption is that
the consumers have a lot of mental resistance to buy and they need
constant persuasive efforts to buy. They also assume that their sales
and promotion efforts are most efficient in achieving their sales
objectives. One of the examples is that of Sergio Zyman the former
Chief Marketing Officer of Coca Cola whose famous quote was-“The
purpose of Marketing is to sell more stuff to more people more often
for more money in order to make more profit.”
4. Consumer Orientation:
This is the new Marketing Concept. This is adopted successfully by
many organisations and they shifted the focus of management

efforts to finding out the consumer preferences and then modifying

their products and marketing strategies to suit the consumer needs.
Consumer satisfaction is considered as the most important objective
of the organisation and all the corporate policies and strategies are
decided from this perspective.
 Advantages and disadvantages

i) Production orientation is necessary in businesses, which depend on
high technology and shorter product life cycles. Companies like Intel,
Microsoft, etc. have to continuously depend on intensive R&D efforts
to come out with substantial innovations. They have to keep ahead of
any competitor who may come out with better products. Hence such
companies invest heavily in state of the art R&D facilities and also top
class factories to produce such high technology products. Such
orientation is also effective when the economy is in a developmental
stage, with very little competition or when a company wants to expand
its existing market. However totally concentrating on this concept has
its own pitfalls. These companies will also have to look at what is
happening to the consumer preferences and also the activities of the
competitors and work out their R&D programmes accordingly so that
they are not caught unawares of unexpected developments.
ii) Product orientation is of very limited use today. Total concentration
on the product without proper consumer behaviour knowledge is
suicidal and such a policy has resulted in many companies closing
down their operations. An example is that of WebTV launched in 1996
by Sony & Philips as partners. The concept was of a TV with a set top
box that allowed surfing the net and also watch TV. After spending $50
million on advertising and promotion, they could get only 50,000
subscribers in US. They realized that they had misunderstood totally
the behaviour of the consumer. The Internet surfers were more
interested in using multi media and the processor in WebTV had

inadequate processing power to take care of this consumer need.
Microsoft bought over WebTV and they have now developed a
combination of satellite TV technology and a video recorder unit to
provide interactive features for game shows, sports, etc. as well as
e-mail and internet access.
iii) Sales orientation is prevailing in many organisations even now. Such
a concept is followed by firms which market goods and services which
the consumers normally don’t think of buying like insurance policies,
encyclopedias, domestic water treatment units, vacuum cleaners, etc.
Companies, which are marketing commodity type of products with very
little product differentiation from the competitors’ products, also resort
to such aggressive selling efforts. The effectiveness of such policies
are again limited if these firms ignore a proper understanding of the
consumer behaviour and the market environment. With competition
becoming intense and even commodities being branded total sales
orientation can land such firms in serious difficulties.
iv) Consumer orientation is now well accepted as the most effective
concept for all organisations not only for their growth but also for even
survival.
There are many advantages of consumer orientation of an organisation.

These can be listed as under:
 Retention of customers is the immediate result of the customer

orientation of an organisation. This results in enormous savings in many
different ways:
i) Cost of developing new customers is always much higher than
retaining an existing customer. The time, effort and money spent on a
new customer both before the sale is made and also after the sale is

quite high. The new customer will always demand a higher attention
and may be even an attractive price in the initial stages. Sales persons
dealing with a new customer have to put in lot more efforts and time in
convincing them into buying their products. Whereas the existing
customer will cost comparatively less if they are satisfied with the
company’s products and service. They demand much less attention
and the sales persons need very little time and energy to be spent on
established customers.
ii) The repeated purchases of the existing customers results in larger
production volumes in the factory, which in turn results in economies of
scale in manufacturing.
iii) If a customer is not satisfied, this could result in increase in costs in
many ways. It is to be noted that, not only the loss of the dissatisfied
customer, which will cost the company. It has been found that
dissatisfied customers will tell a lot more people about their bad
experience, resulting in adverse word of mouth publicity. The
disgruntled customer is also likely to delay the payments and also
deduct some amounts while making payments. This is more so in the
case of business-to-business deals. It is hence important to prevent
dissatisfaction and it would be preferable to select the right customer
and retain them by properly satisfying them. It is important not to
create higher expectations in the customer, which is more often the
case in case of Sales Oriented companies where the aggressive sales
people tend to promise more than the actual product features thus
raising the consumer expectations to unrealistic levels.
iv) Word of Mouth publicity by a satisfied customer is the most effective
and cheapest way to increase the business. Such growth does not
require additional sales or marketing costs since the established
customer acts as the company’s effective sales person. In fact many

professions like doctors, lawyers, chartered accountants, etc. depend

solely on word of mouth publicity since they are legally not allowed to
advertise. Such word of mouth communication is most effective in
case of highly technical or high-risk products or services. Such
business development obviously results in cost savings & also
increased revenue without much investment from the company.
 Higher prices: The satisfied customer is likely to pay a higher price
since they would rather pay a premium than switch to a new brand or
firm. There will always be some cost towards changing the suppliers
especially in B2B transactions and unless there is a strong reason to do
so, the satisfied customers are unlikely to change to new suppliers. They
would not mind paying a reasonable premium and it has been found that
in some specialty products the customers were ready to pay a premium
as high as 30%. British Airways and Singapore Airlines are known for
their Corporate Policy of customer orientation that does result in their
customers paying a premium price. These companies have been able to
do this because of their product excellence, service excellence,
company reputation and a general customer oriented culture in their
entire organisations.
 The consumer orientation can also help a company in times of any
business crisis that could result in temporary disruption in supply.
There could be many reasons for such disruption like machinery
breakdowns, labour unrest resulting in strikes/slowing down of
production, unfair competition, etc. Many large well-known companies
like Coca Cola, Cadbury, McDonalds, KFC, etc. have faced strong
protests from political groups or sometimes due to rumours. Cadbury
faced the problem when there were some reports about insects being
found in some chocolates, which were stored for a long time. Coca Cola
faced a crisis when some NGO found higher than permissible amount of

pesticide in some of their bottles. KFC & McDonalds faced social

protests from some local political organisations. Many times there could
be some restructuring due to mergers and acquisitions or due to
changes in some government regulations. In all such cases there will be
a disruption of supplies. The companies who have been consumer
oriented have been found to have a loyal customer base which will
either postpone their purchases or shift to a competitors’ product or
service temporarily. The moment the company comes out of the crisis &
restarts its supplies such loyal customers have been found to go back to
them.
5. Mass Customisation:
The concept of customer orientation is getting further extended, in this age
of internet and computer aided design, to go to the extreme extent of Mass
Customization, wherein the companies are catering to the needs of each
and every consumer.
One example of mass customisation is that of Mattel Toys producing the

Barbie Dolls as per the requirement of each child who wishes to purchase.
They have a website in which the child who wishes to purchase a Barbie
doll can log on to this site & customize her own “My Design” doll. She can
choose the skin colour, hairstyle, hair colour, clothes, accessories and finally
the name for the doll. The company forwards this to their computer system,
which then processes all the orders from thousands of consumers. These
are then fed into their production planning systems and the dolls are made
as per each order of each child. The dolls are then mailed to each child with
the name of the doll printed on the package.
Another example is that of Levi Jeans. If a consumer walks into the Original
Levi's Store in Cincinnati in US, she/he will be greeted by a sales clerk with
a measuring tape in hand and a personal computer on a nearby desk. He

will take the measurements, feed the data into a computer, make final
adjustments to the blueprint of a pair of jeans that pops up on the PC
screen, push the transmit key, give the customer a receipt for the payment
and send the customer home. Forty-eight hours later the jeans arrive at the
customer’s home, delivered by a courier. The jeans must fit the customer
properly or else they can return it for a full refund.
This is how it works: The PC in the retail store transmits the data to the
Levi's factory. There, the computer data is received directly by a robotic
tailor who cuts a bolt of denim precisely to the customer's measurements.
Usually the jeans are shipped back to the store in three weeks; but for a
slight extra charge, customers have the option of receiving them within 48
hours. The service is a blessing to customers, many of whom have difficulty
finding jeans that fit them. When the service for such jeans was introduced,
in the Cincinnati store, sales went up by 300 percent compared with the
same period the previous year.
 How to have the consumer orientation?
Consumer Orientation comes from developing a consumer culture in the
entire organisation. For this purpose the top management has to adopt
Customer Satisfaction as an integral part of the corporate mission. All the
corporate plans and decisions (not just the marketing plans) will have to
include the understanding of Consumer Behaviour as a necessary input.
The employees in the entire organisation including those in factories, R&D,
accounts, finance, purchase, etc. should have a consumer orientation.
Everyone in the firm should understand that satisfying the customer is a
corporate mission to be undertaken by every employee; not just the people
in Marketing Department. In fact the Marketing personnel are asked to
consider the other colleagues as their internal customers & their first job is
to sell to their “internal customers” - the entire concept of consumer
orientation approach in each of their departments. The philosophy of

marketing needs to be owned by everyone from within the organization.

Customer satisfaction can be achieved only when all personnel within the
organisation understand the importance of the customer.
 Marketing Myopia and Consumer Behaviour
a) What is Marketing Myopia?

Myopia also called near- or short-sightedness, is a refractive defect of the
eye. Those with myopia see nearby objects clearly but distant objects
appear blurred. When applied in business marketing context, this refers to
the short sightedness in managerial approach to marketing.
Marketing myopia is a term used in marketing. Indeed, one of the most

important marketing papers ever written was that on `Marketing Myopia' by
Theodore Levitt. This paper was published in the Harvard Business Review,
a journal of which he was an editor. Some commentators have even gone
as far as to suggest that its publication marked the beginning of the modern
marketing movement in general. Its theme was that the vision of most
organizations was constricted in terms of what they, too narrowly, saw as
the business they were in. It exhorted CEOs to re-examine their corporate
vision; and redefine their markets in terms of wider perspectives. It was
successful in its impact because it was, as with all of Levitt's work,
essentially practical and pragmatic. Organizations found that they had been
missing opportunities, which were plain to see once they adopted the wider
view. The impact of the paper was indeed dramatic.
b) Examples of Marketing Myopia

Marketing Myopia, by Theodore Levitt, is one of the most important ideas
ever to come out of academicians. This has forever changed the business
world and the way business is done. Today, most businesses are based on
this theory that firms that define themselves too narrowly dig their own
graves. He said that all corporate policies should emerge from the clear

understanding and enunciation of their business in terms of the benefit

being accrued by the consumer from them. The alertness of the companies
to understand the consumer behaviour at the very beginning of the definition
of their own business formed the foundation of their businesses.
The main example he gives in his essay is the railways in USA, which today
is very minor. The railways were once hailed as one of the key commercial
infrastructure aspect in the United States. Without the railways, the US
wouldn't have been able to do the vast amount of business it currently
conducts. However, today, the railways in USA are virtually insignificant,
and were on the verge of bankruptcy before being nationalized by the
government.
Levitt explains the downfall of the railways as a result of defining their

industry too narrowly. They saw themselves in the 'Railway Industry,' and
thus only focused on competition from other railways. They became too
comfortable when they should've been looking for ways to keep their
competitive advantages. When the interstate highway system was underway
and trucking and air transport became available and cheap, the railways
were caught unawares resulting in heavy migration of their customers. They
neglected the very basic necessity for survival of any business-
understanding consumer behaviour.
If the railways defined themselves as being in the Transportation industry,

they would have perceived the threat of the competition from outside and
would have acted accordingly. Today, most industries define themselves
broadly so as to avoid the same fatal error as the railways in USA.
A successful example of proper implementation of this theory is that of Coca

Cola. Instead of considering themselves as in the business of beverages,
they defined their business as that of “quenching the thirst of the
consumers”. Hence, naturally their main competitor was drinking water

which was available everywhere. This definition resulted in their corporate

policy of distribution of Coca Cola to nooks and corners by having bottling
plants & also the widest possible distribution network.
Another example of this is the photography companies. Companies like

Eastman-Kodak and Polaroid saw themselves too narrowly as being in the
photography industry. Now, they are facing severe competition from
electronics firms that make scanners and digital cameras. If they defined
themselves as being in the memory preservation business, they would have
seen this trend early on and would not be experiencing the woes that they
currently feel.
A good example of another success story is Harley-Davidson. They saw that

defining themselves as being in the motorcycle industry was too narrow, and
changed to the more broad 'brand image' industry while keeping the
motorcycles. They sell their bikes through the image the bike portrays so as
to differentiate themselves from regular motorcycles and competition from
the Japanese and German producers.
Companies are hence forced to deal with their corporate policies at the
highest level by concentrating on and understanding the consumer
behaviour.

1. Consumer Behaviour can be studied with two different perspectives.
___________ and ___________
2. Sheth & Mittal have expanded the definition of Consumer Behaviour by

including the study of various roles played by a customer like
_________, __________ and ________.
3. ___________ ______________ is the new Marketing Concept which

was adopted successfully by many organisations who shifted the focus

of management efforts to finding out the consumer preferences and then

modifying their products and marketing strategies to suit the consumer
needs.
4. The concept of customer orientation is getting further extended in this

age of internet & computer aided design to go to the extreme extent of
__________ ___________.
5. __________ ________ can be achieved only when all personnel within

the organisation understand the importance of the customer.
 Consumer Satisfaction and Marketing Concept
i) Consumer Satisfaction as an objective: The following quotation of

Mahatma Gandhi encapsulates the essence of Consumer Satisfaction
as the main objective of any business:
“A customer is the most important visitor on our premises. He is not

dependent on us. We are dependent on him. He is not an interruption of
our work. He is the purpose of it. He is not an outsider to our business.
He is part of it. We are not doing him a favour by serving him. He is
doing us a favour by giving us the opportunity to do so.”
This customer-focused philosophy is known as the 'marketing concept'.

The marketing concept is a philosophy, not a system of marketing or an
organizational structure. It is founded on the belief that profitable sales
and satisfactory returns on investment can only be achieved by
identifying, anticipating and satisfying customer needs and desires.
ii) Marketing vs. Sales Concepts: Philip Kotler who has been considered
as the world's foremost expert on the strategic practice of marketing was
the first to propose the concept of Marketing as an improvement over
selling concept. In the traditional selling concept, the main strategy of
the company is to find customers for the product manufactured by them

& somehow convince the customer into buying this product. The
approach is through aggressive sales & sales promotion tools with a lot
of emphasis on somehow closing the sale even if it means cutting down
on prices. As a contrast to this the Marketing concept emphasizes the
importance of consumer needs & behaviour. The approach is to first
understand the consumer needs & then approach him with an objective
of satisfying him as the most important pursuit. The emphasis is on
maximizing profits through consumer satisfaction rather than through
just sales maximization. The aim of Marketing is to understand the
consumer & his needs so well that, the product or service so developed
should sell by itself. All that is required is to make customer satisfaction
as an integral part of the company strategy.
 Consumer Needs and Wants
a) What are Needs and Wants?

Traditionally needs are understood as the basic requirements of a human
being like food, clothing, shelter, air, water, etc. Wants are defined as the
luxuries for which a consumer craves for.
However in the context of understanding Consumer Behaviour, the

definitions given by Sheth & Mittal are more precise and useful.
A need is defined as the unsatisfactory condition of the customer that leads

him or her to an action that will make the condition better.
A want is defined as a desire to obtain more satisfaction than is absolutely

necessary to improve an unsatisfactory condition.
Need arousal is driven by a person’s physical or psychological discomfort.

Wants occur when the person desires to take his physical or psychological
condition beyond the state of minimal comfort.

Thus food is a need when a person is hungry; but an ice cream would be a
want. A basic car may satisfy the need of a person to take care of his
personal transport; but a luxury car for the same person may be a want. An
ordinary sweater may be the need in a hill station for a person whereas a
branded expensive sweater- a want for the same person.
b) Needs and Wants in different situations

Need of one person may be the want of another. For example, buying a
refrigerator may be a want for a poor family whereas a higher income family
may consider a refrigerator as a minimal need without which they will feel
the discomfort psychologically.
Wants for a person may become a need for the same person depending on
his stage in life. A teenager for whom a bicycle was a need when going to
school may consider a scooter or a motorbike a need when going to college.
He would feel psychologically uncomfortable going to college in a bicycle
and hence for him the motorbike has become a need.
Certain situations may also define the difference between the need and a
want. In the winter season in Delhi many people in lower income groups like
office boys or clerical staff normally wear full suits with jackets and ties. For
them this becomes a need in that situation since they would psychologically
feel the discomfort, if they don’t wear a suit, especially since all their
colleagues in the same level may be wearing suits.
Hence this definition of needs and wants goes beyond the traditional
concept; but this concept is more relevant for understanding consumer
behaviour since psychological factors are predominant in determining the
consumer behaviour.

 Factors which decide Needs and Wants
 Personal Factors: There are many internal and external factors, which
affect the needs and wants of any person. Some of these internal factors
could be due to the characteristics, which are inherited from birth or may
also be due to his personality traits acquired during his growth in life.
Some factors could be due to the external influences on the person like
for example, the culture of the society in which he is living, his level in
society, his personal assets and wealth or the organisation in which he
is associated.
 Environmental Factors: Similarly there could be effects of the natural

environment like climatic conditions, geographical environment, etc. in
which the person is present or the outside developments like the level of
economy, government policies or the technological advances can also
influence the needs and wants.
 Effects in the marketplace: There are several types of needs and

wants, which decide the type of product to be procured from the market
place. A few examples are:
i) When both the personal needs and environmental needs are
affecting the consumer: Woolen sweater in cold season, flood
insurance in an area prone to flooding of river water, etc.
ii) When the environmental need is there; but it is a personal want.
These are the needs dictated by the geographical environment like
loose fitting clothes in a hot desert town, but the consumer may go
for up-market branded clothes, which are really a want of the person.
iii) When the person has a need but environmentally it is a want.
Examples are that of ready to eat food items like soups, which can
just be cooked and eaten. The person being hungry needs food; but
he goes for a want in an environmental context since he is going for

a technologically easy to prepare food. Shopping through e

commerce sites is another example wherein the consumer is
satisfying a personal need through a technological luxury of
shopping on the internet.
iv) When both the person is looking for a want and the environmentally
also it is a want; examples include going for a music concert, buying
designer clothes in a boutique, etc.
1.4 Why study of consumer behaviour in marketing

a) Consumer Behaviour and Marketing Strategy: All Marketing
decisions and strategies are based on assumptions about Consumer
Behaviour. It is impossible to think of any aspect of decision in
marketing, which can be independent of some analysis of consumer
Behaviour. Before deciding on any marketing strategy, the marketers
have to first base their judgments on explicit assumptions resulting from
sound theory and research rather than implicit intuition. Knowledge of
consumer Behaviour can give an important competitive advantage and
greatly reduce the odds of bad decisions. The first step in developing a
Marketing strategy is to analyse the market in which the firm is
operating. This requires a detailed analysis of the organisation’s
capabilities, strengths and weaknesses of competitors, the economic
and technological factors affecting the market and finally, the current
and future potential customers in the market. On the basis of the
analysis of consumers at this stage, the company identifies the groups
of individuals, households or firms with similar needs. These are known
as market segments, which can be described in terms of demographics,
geographic locations, lifestyles, etc. The firm can then select one or
more of these segments as target markets based on their capabilities in
comparison with the competition, in the given current and forecasted

economic and technological environment. The next step is to formulate

the marketing strategy. The objective of the marketing strategy is to
provide the customer with more value than the competitor’s brands while
maximising the profits for the firm.
Marketing strategy is then formulated in terms of the marketing mix. This
involves the determination of the four ‘P’s of marketing viz. Product
features, pricing, promotional mix and distribution policies, which would
offer superior value to the customer. It is most important to note that an
analysis of the consumer is the key to formulate a sound marketing
strategy and the reaction of the consumer to the marketing mix
determines ultimately the success or failure of the strategy.
b) Study of Consumer Behaviour and Marketing Careers: Most
students of Consumer Behaviour aspire for careers in Marketing
Management, Sales or Advertising. Many students expect that the skills
acquired by them in these courses will be like accounting or science
subjects wherein a set of rules can be applied across a wide variety of
situations to arrive at the correct solution. Unfortunately the consumer is
a living, breathing, changing and many times stubborn individual and
dealing with such an uncertain element can be very frustrating to such
students. However an understanding of the consumer behaviour in its
proper perspective can bring out many understandable situations, which
can be applied in developing suitable marketing strategies. This can
then become a very exciting field. This is not to suggest that scientific
principles and procedures are not applicable in such situations. In fact
many scientific theories and models of psychology, psychoanalysis,
sociology, etc. have been successfully utilized in the study of consumer
behaviour. Successful utilization of these principles in practical situations
have to be done with proper human judgments which in itself can be a
very challenging task leading to excitement and job satisfaction.

1.5 Areas of study under consumer Behaviour

The entire marketing management course will be relevant for the study of
consumer behaviour applications since the very fundamental concept of
marketing is to keep the consumer in the centre and then formulate all the
other strategies. However for the purpose of this course we shall be
covering the following subjects from the perspective of the application of
various consumer behaviour concepts.
a) Consumers and market segmentation: In this unit we shall be
covering the definition of market segmentation and how it is related to
consumer behaviour. Then we shall be covering the bases for market
segmentation, criteria for effective market segmentation and finally
strategies of market segmentation.
b) Environmental influences on consumer Behaviour: In this unit we
shall be discussing the influence of various environmental factors such
as cultures, subcultures, social class & life styles on the behaviour of a
consumer.
c) Influence of group on consumer Behaviour: The groups around
him/her influence the consumer in his Behaviour and this will be the
subject of study in the next unit. The groups which have maximum
influence on a consumer, like social groups, reference groups and family
will be discussed in detail in this unit.
d) Individual determinants of consumer Behaviour: Various internal and
external factors mold the behaviour of any individual. Eminent
psychologists, psychoanalysts, sociologists and economists to identify
and explain the behaviours of different individuals, have developed
various theories and models. The consumer behaviour researchers to
successfully explain the behaviour of a consumer in a market situation
have adopted many such theories. Many of these concepts pertain to
consumer motivation, consumer perception and learning, personal

attitudes, personality, etc. and these concepts will be covered in the next
unit.
e) Consumer Decision process: There are different steps involved in the
decision making process of a consumer and these have to be studied in
detail to understand and work out many strategies in marketing. This is
the subject that will be covered in the next unit.
f) Consumer research: Marketing research with respect to consumer
behaviour involves various quantitative and qualitative techniques and a
study of these techniques is essential to any marketer to ensure a
scientifically developed strategy. In this unit we shall be covering the
process of consumer research and also the managerial application of
consumer research in marketing.
g) Diffusion of innovation: Innovations are most important for any firm for
survival and growth and this is in fact the lifeline of any organisation. For
a successful implementation of marketing strategies for any innovations
a study of the diffusion of innovation is of prime concern. Hence we shall
study the concept of diffusion, the process of innovation diffusion and its
managerial applications in this unit.
h) Consumerism: There is lot of controversy as to whether aggressive
marketing strategies of firms are leading to materialistic tendencies of
consumers and also whether marketers are pushing their products at the
cost of ethical, moral and environmental concerns. Privacy is another
matter, which is causing a lot of irritation among the general public
especially in these days of direct marketing and internet marketing. All
these issues are also important for a student of consumer behaviour in
order to avoid the pitfalls associated with many short term strategies
adopted by some marketers bringing the entire profession into disrepute.
In this unit all these issues will be studied.

i) Business buyer Behaviour and decisions:

Although the concepts which are normally studied in consumer
behaviour courses predominantly cover individual and household
consumers business buying is also an important aspect of marketing
and a study of business buying behaviour will help in taking proper
decisions in such B2B situations. In this unit we shall be studying the
nature of business buying Behaviour, business buying process and also
the factors influencing business-buying Behaviour. We shall also touch
upon the segmentation of business markets.
State whether the following statements are true or false:
1. Traditionally wants are understood as the basic requirements of a
human being like food, clothing, shelter, air, water, etc.
2. Wants occur when the person desires to take his physical or
psychological condition beyond the state of minimal comfort.
3. The underlying assumption of consumer-oriented organisations is that
the consumers are mainly looking for a cheaper product, which is readily
available.
4. Today, most businesses are based on this theory that firms that define
themselves too narrowly dig their own graves.
5. Innovations are most important for any firm for survival and growth and
this is in fact the lifeline of any organisation.
1.6 Summary
In this unit you have learnt how consumer behaviour studies are important
for any organisation to succeed in the marketplace. You also learnt why
organisations will have to be consumer oriented and what the managerial
perspectives are for such an orientation. You also understood the

shortsighted approach of many companies resulting in serious problems for

their very survival. You also found out how marketing concepts are
interwoven with consumer satisfaction as an important goal resulting in long
term profits for the organisation. You also learnt the difference between
needs and wants of a customer and their determinants.

a) What kind of different activities are involved in Consumer Behaviour?
What roles does a customer play in the purchase decision-making
process?
b) What are the different perspectives of studying Consumer Behaviour?
How are they relevant for marketing decisions?
c) What are the different orientations of a business organisation? What are
their advantages and disadvantages?
d) What is “Marketing Myopia” and what is its relevance in the study of
consumer behaviour?
e) What is the difference between Sales and Marketing? What is the
objective of a marketing oriented organisation?
f) What are the differences between Needs and Wants of a customer?
Which factors influence the needs and wants?
1.8 Answers to Self Assessment Questions and Terminal

Questions
1. Consumer, managerial
2. User, Payer and Buyer
3. Consumer Orientation
4. Mass Customisation
5. Customer satisfaction

Self Assessment Questions II

1. False
2. True
3. False
4. True
5. True
Terminal Questions
a) Refer to section 1.2
b) Refer to Section 1.3
c) Refer to Section 1.3
d) Refer to Section 1.3
e) Refer to section 1.3
f) Refer to section 1.3

Unit 2 Consumers & Market Segmentation

Structure
2.1 Introduction
Objectives
2.2 Vignette
2.3 Definitions of Market Segment and Market Segmentation
2.4 Bases for Market Segmentation
2.5 Criteria for effective Market Segmentation
2.6 Strategies for Segmentation
2.7 Targeting Strategy
2.8 Summary
2.10 Answers to SAQs & TQs
2.1 Introduction
Every market place is highly diverse. They are composed of many different
types of customers with different backgrounds, countries or regions of origin,
needs and interests, personalities, perceptions, etc. Such diversity makes it
imperative for a marketer to go for Market Segmentation, which would be an
attractive, viable and potentially high profitable strategy. Improved
segmentation can lead to significantly improved marketing effectiveness.
With the right segmentation, the right lists can be purchased, advertising
results can be improved and customer satisfaction can be increased.
When marketers provide a vide range of products or services targeted at

different market segments, consumers are better satisfied and their overall
happiness, satisfaction and quality of life are ultimately enhanced. Hence

market segmentation results in a positive effect for both consumers &

marketers.
Objectives
 Know the meaning & definition of market segmentation.
 Understand how study of Consumer Behaviour can help market
segmentation.
 Explain the various methods of effective market segmentation.
Describe the strategies of segmentation & targeting.
2.2 Vignette
The decade of the 1980s was a turbulent one for Hindustan Lever Ltd.
(HLL). The giant and undisputed market leader in FMCG products in India
suffered a humiliating defeat at the hands of a new and small firm Nirma
Chemicals. Nirma Washing Powder became a national brand soon after
1982, when Indian television went commercial and started colour telecast.
The product immediately caught the fancy of the middle income customer,
who was finding it difficult to make both ends meet with his limited monthly
income. Nirma became the lowest priced, branded washing powder
available in grocery and cooperative stores. The middle class housewife
was more than satisfied as she now had a lower priced option available.
Nirma also had an impact on upper middle income and higher income
families who used it for inexpensive clothes and linen. Initially, HLL
responded by launching sales promotion campaigns on Surf- by offering a
bucket at a subsidized price or premium brands of toilet soap with every
kilogram of Surf. These schemes however, did not halt the decline of Surf.
HLL then launched a head on attack on Nirma. They came up with an
advertising commercial comparing 1 kg of Surf with 1 kg of low priced yellow

washing powder and showed that Surf washed more clothes than the low
priced yellow washing powder-and hence it was economical to buy Surf.
The commercial did not bring in any substantial results. It was at this time
(around 1984) that HLL decided to take a fresh look at the market. Research
conducted throughout the country revealed that, different income groups of
consumers had varying expectations from detergents or washing powders. It
also showed that different colours of washing or detergent powders were
associated with different types of fabrics. For example, middle and lower
middle or lower income people mainly bought yellow coloured washing or
detergent powder. They washed all their fabrics and associated whiteness in
clothes with a yellow coloured powder. Also, middle-class families used the
blue Rin bar or the white Lux flakes for washing their expensive clothes.
Research further indicated that, blue or white coloured detergent powders
were bought by middle to higher income group people, and these colours
were also associated with washing clothes clean. In fact, the housewife was
known to add “blue”, to her laundry to give that extra whiteness to white
clothes. Interestingly, green was also the colour that was perceived to clean
extra-dirty clothes. Armed with this research on colour perceptions and
income groups, HLL launched the Sunlight (yellow), Wheel (green), Rin
(blue), and Surf Ultra (white) detergent powders for different market
segments. This strategy of segmenting the markets, understanding its
needs and then evolving marketing mix to suit segments' needs helped HLL
win back part of its lost market. In fact, Nirma made all other consumer
product companies sit up and take a fresh look at their markets. It
announced, for many, a beginning of an era of low priced products for a
highly price sensitive Indian market, and to others, the end of a mass
marketing era.

The latter part of the 1980s and early 1990s has taught the Indian firms a
lesson, "one cannot be everything to everyone; but one can be everything to
a select few'. This is the basis of market segmentation.
2.3 Definitions of Market Segment & Market Segmentation

Market Segment
A Market segment is a subgroup of people or organizations sharing one or
more characteristics that cause them to have similar product needs.
Market Segmentation
Market segmentation is the process in marketing, of dividing a market into
distinct subsets (segments) that behave in the same way or have similar
needs. Because each segment is fairly homogeneous in their needs and
attitudes, they are likely to respond similarly to a given marketing strategy.
They are likely to have similar feelings and ideas about a marketing mix,
comprised of a given product or service, sold at a given price, distributed in
a certain way and promoted in a certain way.
Before the marketers started using the concept of market segmentation, the
way the business was done was through mass marketing i.e. offering the
same product and same marketing mix to all consumers. The classic case
of such a practice was that of Henry Ford’s philosophy of offering Ford
Model T with the choice to the consumers of “selecting any colour they want
as long as it is black”.
If all consumers were alike i.e. if all of them had the same needs, desires,
personalities, backgrounds, attitudes, etc. mass marketing would have been
relevant and highly successful. Then only one standardized product is
needed for all consumers, only one advertising campaign and only one
marketing mix. The main advantage in this strategy is that, it costs
substantially less. However as we have seen in the vignette of HLL vs.

Nirma, the consumers are indeed diverse and such a strategy of mass
marketing would be highly risky in today’s market environment.
2.4 Bases for Market Segmentation

The first step in developing a segmentation strategy is, to select the most
appropriate basis on which the market can be segmented. There are many
ways in which this can be done and some most popular variables used for
market segmentation are discussed in following paragraphs:
Geographic Segmentation:
In this method, the market is divided on the basis of location. There can be
different categories in such segmentation also. Some of these are:
a) Region of the world or country: East, West, South, North, Central,
coastal, hilly, etc.
b) City Size: Metropolitan Cities, small cities, towns.
c) Density of population: Urban, Semi-urban, Rural.
d) Climate: Hot, Cold, Humid, Rainy
Demographic variables
This is the second most popular variable used by marketers. Factors like
age, education, income, etc. individually or in combination are commonly
used to segment the market. Some of these variables are discussed here:
a) Age: The assumption here is that people in the same age group will
behave in the same manner. Based on this we can have different
subgroups like infants (new born to 1 year), Child (1 to 12 years), Teens
(13 to 19 years), adolescents (16-19 years), youth (20-35years), middle
aged (36-50 years), elders or seniors (50 years and above).
b) Gender-Male and Female: The male preferences are different from the
female preferences. While some products like garments and cosmetics
are produced exclusively for each segment, there are some products,

which are meant for both segments and these are called as unisexual
products.
c) Education – School, College and University: The level of a
consumer’s education will also affect the preferences and also the level
of awareness. Higher the level of education, higher is then awareness
about the market environment and about different products. Their
awareness about their rights as consumers will also be better.
d) Marital status: Family has been the focus of most marketing efforts and
household continues to be the target for many products and services.
Marketers are interested in determining the profiles of decision makers
in households to develop appropriate marketing strategies. Many
marketers have found it useful to target specific marital status
groupings, like singles, divorced individuals, single parents, dual income
married couples, etc.
e) Income: It is believed that, as the consumer’s income increases their
consumption behavior also changes. Research findings have proven
that, the expenditure on food and basic necessities as a percentage of
total expenditure declines as consumer income increases. The
consumer then starts buying costlier branded products, and also so
called luxuries like automobiles, washing machines, microwave ovens,
holiday packages, air travel, etc. On the basis of income the
segmentation can be - low income, lower middle income, middle
income, higher middle income, high income, etc.
f) Occupation: Occupation is an important variable and different
categories under this can be – self employed, part time employee, full
time employee, etc. or like- professionals(doctors, chartered
accountants, management consultants, etc.), traders & shopkeepers,
businessmen & industrialists, sales personnel, teachers & professors,
housewives, etc.

Psychographic Variables
Marketers have been utilizing psychographic research especially personality
and attitude measurements. This type of consumer research has proven
very valuable to identify promising consumer segments which are likely to
be responsive to specific marketing messages. The psychographic profile of
a consumer segment can be thought of as a composite of consumers’
activities, interests and opinions (AIO’s). As an approach to measuring this,
the consumers’ responses are analysed for a large number of statements
that analyze:
– activities (how the consumer or family spends time- golf, gardening,
volunteering in charitable activities, etc.),
– interests (what are the preferences & priorities like home, fashion, food,
etc.)
– opinions (what are the feelings about a variety of political issues, social
issues, economy, ecology, etc.)
Socio-cultural segmentation
Sociological (group) and cultural variables provide further bases for market
segmentation. Consumer markets have been successfully segmented
based on family life cycle, social class, cultural values, etc. Some of these
are discussed in the following paragraphs:
a) Family Life Cycle: This is based on the fact that many families pass
through similar phases during the lifetime. At each stage the family
needs different products and services. These segments can be like-
young single people, newly weds, parents with infants, parents with
teenage children, etc.
b) Social Class: Social class i.e. the relative status in the community can
be the basis for segmentation. It has been found by research that, the
consumers in different social classes vary in terms of values, product
preferences and buying habits. Social class is measured by a weighted

index of several demographic variables such as education, occupation

and income.
c) Culture & subculture: Members of the same culture tend to share the
same values, beliefs and customs. This type of segmentation is
particularly successful in international marketing and it is important for
the marketers to understand the target country’s beliefs, values and
customs.
Within the larger culture distinct subgroups called subcultures are united by
certain values and beliefs, which make effective market segments.
Consumers are found to be more responsive to promotional messages
which they perceive as related to their own sub culture. Culturally distinct
segments can be prospects for the same product but they can be targeted
more efficiently with different promotional appeals. For example, a bicycle
can be promoted as a means of transportation in Asia, whereas in western
countries it can be promoted as a health and fitness product.
Behavioral Variables
Depending on the consumer behaviour towards consumption parameters
and situations related to such consumption there can a different type of
market segmentation. Some of these examples are discussed in the
following paragraphs:
a) Benefit sought: There can be multiple benefits of the same product
from the point of view of different consumers. For example, the cell
phone may be used by some consumers purely for the purpose of
telephonic conversations. Some others may be using it predominantly
for messaging. Some consumers may look for this as a means of taking
photographs whenever they need to. Depending on the different
benefits sought the segmentation can be made.

b) Occasion: For the same product, different occasions in which they can
be consumed like- birthday parties, weddings, Valentine’s Day,
friendship day, etc. can be another option for segmentation.
c) Product usage rate: Some consumers are heavy users, some
moderate and some light users of the same product. Based on the rate
of consumption target consumers may be segmented.
d) Brand loyalty: Many consumers may be hard core loyal, some may
have split loyalty, some may have shifting loyalty and some may be
habitual switchers. Based on this criterion the marketers may segment
their brand markets.
e) Product end use: Some products may have multiple end uses. This
happens quite frequently in industrial markets wherein the same raw
material or packing material may be used by widely different industries.
This then becomes a useful method of segmentation.
f) User status: The status of the consumer in many situations like new
students, mothers to be, newly weds, etc. also offer another method of
effective segmentations for devising the entire marketing mix for such
segments.
g) Readiness-to-buy stage: This is the stage of preparedness to actually
purchase the product or brand. The consumer may be in different
stages of such preparedness like- unaware, aware, informed, interested,
desiring, intending to purchase. Different promotional strategies can be
devised depending on each of these stages making this as the basis for
segmentation.
h) Attitude towards product: There could be differing attitudes of different
consumers towards the same brand or service based on their
perceptions and past experiences. Some marketers use this as the
basis for segmentation in order to suitably devise their promotional mix

for better effectiveness. Some of these attitudes can be described as-

enthusiastic, positive, indifferent, negative or hostile.
Multiple Variables
No marketer can afford to use only a single basis of market segmentation in
the highly complex market environment. Multiple bases are normally used
by most marketers. Many geographic, psychographic, socio-cultural
variables along with some of the behavioural variables are used as a
combination to segment the markets and design a suitable marketing mix.
When numerous variables are combined to give an in-depth understanding
of a segment, this is referred to as depth segmentation. When enough
information is combined to create a clear picture of a typical member of a
segment, this is referred to as a buyer profile. When the profile is limited to
demographic variables, it is called a demographic profile (typically shortened
to "demography"). A statistical technique commonly used in determining a
profile is cluster analysis.
2.5 Criteria for effective Market Segmentation

Once the basis for market segmentation has been identified the next step is
to select one or more segments to target with an appropriate marketing
strategy. The criteria for successful segmentation is discussed in the
Homogeneity within the segment

By the very definition of a market segment the marketer should ensure that,
each segment should share one or more characteristics to have similar
product needs. In other words, there should be homogeneity among the
consumers of a particular segment in their behaviour towards the product or
brand.

Heterogeneity between segments

The different segments should be differentiable in terms of the consumer
behaviour for the particular brand. For example, two different segments of
married and unmarried women for using a particular brand of perfume may
not be heterogeneous, since the same woman may use the same perfume
before and after marriage. Hence it is important to analyse the segmentation
in terms of heterogeneity, before proceeding further.
Segments should be measurable and identifiable

A marketer should be able to identify the relevant characteristics that have
been selected and also measure the total market in terms of size and other
parameters. Without proper identification and measurement, it is not
possible to plan the marketing mix nor is it possible to measure the
effectiveness of the marketing strategy subsequently.
Segments should be accessible and actionable

Marketers should be able to reach the market segments they want to target
in an economical way. If rural markets are targeted without thoughts about
reaching such consumers, through proper cost-effective medium and
subsequent distribution of the products, the whole purpose of such
segmentation is defeated. Hence accessibility of the target consumers and
utility of the marketing mix are very important criteria for effective market
segmentation.
Segments should be large enough to be profitable

For a market segment to be worthwhile it must consist of sufficient
consumers, who could use the particular product or brand. The size of each
segment should be estimated and the overall costs and profits have to be
projected, before the final decision of freezing such segmentation. One has
to be sure of the profitability of each segment before proceeding further for
designing the marketing mix.


1. Before the marketers started using the concept of market
segmentation, the way the business was done was through _______
_________.
2. Factors like age, education, income, etc. individually or in combination
commonly used to segment the market are called _________
__________.
3. Members of the same _________ tend to share the same values,
beliefs and customs.
4. There should be _________ among the consumers of a particular
segment in their behaviour towards the product or brand.
5. Accessibility of the target consumers and ___________of the
marketing mix are very important criteria for effective market
segmentation.
2.6 Strategies for Segmentation

The process of segmentation is distinct from targeting (choosing which
segments to address) and positioning (designing an appropriate marketing
mix for each segment). The overall intent is to identify groups of similar
customers and potential customers; to prioritize the groups to address; to
understand their behaviour; and to respond with appropriate marketing
strategies that satisfy the different preferences of each chosen segment.
Revenues are thus improved. A few models of segmentation strategy are
discussed in the following paragraphs:
Top-down and bottom-up

George Day (1980) describes model of segmentation as the top-down
approach: You start with the total population and divide it into segments. He
also identified an alternative model which he called the bottom-up approach.
In this approach, you start with a single customer and build on that profile.

This typically requires the use of customer relationship management

software or a database of some kind. Profiles of existing customers are
created and analysed. Various demographic, behavioural, and
psychographic patterns are built up using techniques such as cluster
analysis. This process is sometimes called database marketing or micro-
marketing. Its use is most appropriate in highly fragmented markets.
McKenna (1988) claims that this approach treats every customer as a
"micro majority". Pine (1993) used the bottom-up approach in what he called
"segment of one marketing". Through this process mass customization is
possible.
Price discrimination
Where a monopoly exists, the price of a product is likely to be higher in a
competitive market and the quantity sold is less, generating monopoly
profits for the seller. These profits can be increased further if the market can
be segmented with different prices charged to different segments (referred
to as price discrimination), charging higher prices to those segments willing
and able to pay more and charging less to those whose demand is price
elastic. The price discriminator might need to create rate fences that will
prevent members of a higher price segment from purchasing at the prices
available to members of a lower price segment. This behaviour is rational on
the part of the monopolist, but is often seen by competition authorities as an
abuse of a monopoly position, whether or not the monopoly itself is
sanctioned.
Examples of this exist in the transport industry (a plane or train journey to a

particular destination at a particular time is a practical monopoly), where
Business Class customers who can afford to pay more, may be charged
prices many times higher than Economy Class customers, for essentially the
same service. Microsoft and the Video industry also price exactly the same
product at widely varying prices, depending on the market they are selling to

and try to enforce this with a mix of legislation and Digital Rights
Management.
Mass Customisation
In fact, the concept of customer orientation is getting further extended in this
age of internet and computer aided design, to go to the extreme extent of
Mass Customisation, wherein the companies are catering to the needs of
each and every consumer.
One example of mass customisation is that of Mattel Toys producing the

Barbie Dolls as per the requirement of each child, who wishes to purchase.
They have a website in which the child who wishes to purchase a Barbie
doll can log on to this site and customize her own “My Design” doll. She can
choose the skin colour, hair style, hair colour, clothes, accessories and
finally the name for the doll. The company forwards this to their computer
system which then processes all the orders from thousands of consumers.
These are then fed into their production planning systems and the dolls are
made as per each order of each child. The dolls are then mailed to each
child with the name of the doll printed on the package.
Another example is that of “Levi Jeans”. If a consumer walks into the

Original Levi's Store in Cincinnati in US, she/he will be greeted by a sales
clerk with a measuring tape in hand and a personal computer on a nearby
desk. He will take the measurements, feed the data into a computer, make
final adjustments to the blueprint of a pair of jeans that pops up on the PC
screen, push the transmit key, give the customer a receipt for the payment
and send the customer home. Forty-eight hours later the jeans arrive at the
customer’s home, delivered by a courier. The jeans must fit the customer
properly or else they can return it for a full refund.
This is how it works: The PC in the retail store transmits the data to the
Levi's factory. There, the computer data is received directly by a robotic

tailor who cuts a bolt of denim precisely to the customer's measurements.

Usually the jeans are shipped back to the store in three weeks; but for a
slight extra charge, customers have the option of receiving them within 48
hours. The service is a blessing to customers, many of whom have difficulty
finding jeans that fit them. When the service for such jeans was introduced,
in the Cincinnati store, sales went up by 300 percent compared with the
same period the previous year.
2.7 Targeting Strategy

Target market is the market segment to which a particular product is
marketed. Age, gender, geography often define it, and/or socio-economic
grouping.
Targeting strategy is the selection of the customers the company wishes to

service. The decisions involved in targeting strategy include:
– which segments to targethow many products to offer
– which, products to offer in which segments
There are three steps to targeting:

– market segmentation
– target choice
– product positioning
Targeting strategy decisions are influenced by market maturity, diversity of

buyers' needs and preferences, strength of the competition and the volume
of sales required for profitability. Targeting can be selective (example: focus
strategy, market specialization strategy or niche strategy), or extensive
(example: full coverage, mass marketing, or product specialization). Some
of these are discussed here.

Single Segment Concentration

In this strategy, the firm concentrates on a single segment and gets a strong
knowledge of the segment’s needs. Utilising this knowledge the firm can
achieve a strong marketing presence and simultaneously achieve operating
economies through specialisation in production, distribution & promotion. If
the company can capture the segment leadership they can enjoy high return
on investment. Some of the typical examples of this strategy are Ferrari
sports cars, Volkswagen Buggy, Polaroid camera. There are however high
risks involved in this strategy since any drastic changes in consumer needs,
technological changes etc. can create insurmountable problems which can
even lead to closure of the entire line like it happened in the case
Volkswagen and Polaroid.
Selective Specialisation
In this strategy the company tries to diversify the risk by selecting a number
of segments each of them appropriate and attractive. Many multi national
FMCG companies follow this strategy by having multiple products in multiple
segments. ITC is one example in India, who could diversify into several
segments in different industries very effectively. After realizing that the
single segment concentration in tobacco related products is not advisable in
the long run, they went into hotels, food, etc. and were successful in each of
these segments.
Product Specialisation
This strategy is to diversify the same product into several different
segments. One example could be that of microscopes which are sold to
universities, government laboratories and commercial firms in
pharmaceutical and chemical industries. The same product is suitably
modified for each segment and thus a strong product reputation is built up.
The risk in such strategy is of technological changes, unless the firm keeps
abreast of new technologies and keeps investing to keep up.

Market Specialisation
In this case, the company concentrates on the needs of a particular
consumer group. An example is that of Kores, which produces all types of
office supplies including carbon paper, stationery, etc. meant for all offices.
Full Market Coverage

In this strategy, the company tries to serve a number of customer groups
with a number of products. This is typically done by very large companies
like General Motors, General Electric, Coca Cola, etc. They have two types
of approaches in this:
a) Undifferentiated Marketing:
The differences in different segments are completely ignored and the
company goes for a single marketing strategy common for all segments.
It relies on mass production, mass distribution and mass advertising,
which would eventually cover all segments. The advantage in such
cases is that because of huge economies of scale and lower costs due
to these common costs of R&D, production, distribution, advertising,
etc., the company can offer lower prices to price sensitive segments of
the markets. The presumption is that all segments will contain price
sensitive customers who would be buying such products.
b) Differentiated Marketing:
In this case the company offers different products for different segments
and still operates in several segments simultaneously achieving full
market coverage. Most of the Indian car manufacturers like Maruti,
Hyundai, etc. are following this strategy by having different cars for
different segments, practically covering the entire range of segments
which want different types of cars.


1. The process of segmentation is distinct from targeting and positioning.
2. In the top-down approach, you start with the total population and divide it
into segments.
3. Where a monopoly exists, the price of a product is likely to be lower than
in a competitive market.
4. Target market is the market segment to which a particular product is
marketed.
5. In undifferentiated marketing, the company offers different products for
different segments.
2.8 Summary
In this unit we have learnt the meaning and definition of Market Segment
and Market Segmentation. We also learnt the basis for Market
Segmentation, like Geographic Segmentation, Demographic variables,
Psychographic Variables, Socio cultural segmentation and Behavioural
Variables.
We have also learnt the different criteria for effective Market Segmentation
and also the strategies for Segmentation like Top-down and bottom-up
approach, Price discrimination and Mass Customisation.
We have also understood different Targeting Strategies, like Single

Segment Concentration, Selective Specialisation, Product Specialisation,
Market Specialisation and Full Market Coverage.

1. Define market segmentation and name the various bases used for
segmentation.

2. What are demographic variables? Explain each of them in a few

sentences.
3. How is socio cultural segmentation done?
4. Describe the criteria for effective market segmentation.
5. Explain different types of targeting strategy.

SAQ I
1. mass marketing
2. demographic variables
3. culture
4. homogeneity
5. actionability
SAQ II
1. True
2. True
3. False
4. True
5. False
TQ
1. Refer section 2.3 & 2.4
2. Refer section 2.4

Unit 3 Environmental and Group

influences on Consumer Behaviour
Structure
3.1 Introduction
Objective
3.2 Cultures
3.3 Subcultures
3.4 Social class
3.5 Life styles
3.6 Influence of Group on Consumer Behaviour
3.7 Reference groups and Consumer Behaviour
3.8 Family
3.9 Summary
3.11 Answers to SAQs and TQs
3.1 Introduction
Consumer Environment consists of those factors existing independently of
individual consumers and firms that influence the exchange process. Some
of these environmental factors are cultures, subcultures, social class and
lifestyles, which are discussed here. Consumer group consists of those
groups which influence the exchange process.
This chapter explains the environmental and group influences on consumer

behaviour in detail.

Objectives
 Know the environmental factors and groups affecting Consumer
Behavior.
 Understand different environmental factors like cultures, subcultures,
social class and lifestyle.
 Explain the influence of different groups like reference groups and family
on Consumer Behaviour.
3.2 Cultures
Culture generally refers to patterns of human activity and the symbolic
structures that give such activity significant importance. Different definitions
of "culture" reflect different theoretical bases for understanding, or criteria for
evaluating, human activity. Culture is manifested in music, literature,
painting and sculpture, theater and film. Culture refers not only to
consumption goods, but to the general processes which produce such
goods and give them meaning, and to the social relationships and practices
in which such objects and processes become embedded. Culture thus
includes technology, art, science, as well as moral systems.
Culture has been called "the way of life for an entire society." As such, it
includes codes of manners, dress, language, religion, rituals, and norms of
behavior such as law and morality, and systems of belief. Various definitions
of culture reflect differing theories for understanding, or criteria for
evaluating, human activity. Culture has significant influence on consumer
behaviour and in this unit we shall be discussing ‘Culture” from the
perspective of consumer behaviour.

1. Definition
Culture is defined as the sum total of learned beliefs, values and customs
that serve to direct the consumer behaviour of members of a particular
society. Culture is everything a person learns & shares with members of
society like- ideas, norms, morals, values, knowledge, skills, technology,
tools, material objects & behaviour. Culture excludes genetically inherited
instincts since these are not learned as also the individual behaviours,
norms, knowledge, etc. which are not shared with other members of the
society.
2. Enculturation and acculturation

Enculturation is the process of learning one’s own culture. This is the
process where the culture that is currently established teaches an individual
the accepted norms and values of the culture or society in which the
individual lives. The individual can become an accepted member and fulfill
the needed functions and roles of the group. Most importantly, the individual
knows and establishes a context of boundaries and accepted behavior that
dictates what is acceptable and not acceptable within the framework of that
society. It teaches the individual their role within society as well as what is
accepted behavior within that society and lifestyle. Enculturation is learned
through communication in the form of speech, words, and gestures. The six
things of culture that are learned are: technological, economic, political,
interactive, ideological and worldview.
Enculturation can be conscious or unconscious. There are three ways a

person learns a culture.
– Direct teaching of a culture is done (this is what happens when you don't
pay attention) mostly by the parents, when a person is told to do
something because it is right and not to do something because it is bad.
For example, when children ask for something, they are constantly

asked "What do you say?" and the child is expected to remember to say
"please."
– The second conscious way a person learns a culture is to watch others
around them and to emulate their behavior. An example would be using
different slang with different cliques in school.
– Enculturation also happens unconsciously, through events and
behaviors that prevail in their culture.
All three kinds of enculturation happen simultaneously and all the time.
Acculturation is the process of learning a new culture. If enculturation is

first-culture learning, then acculturation is second-culture learning. This has
often been conceived to be a unidimensional, zero-sum cultural conflict in
which the minority's culture is displaced by the dominant group's culture in a
process of assimilation.
3. Elements of Culture
There are various elements of each culture & each individual learns the
culture by acquiring the knowledge of all these elements. Some of such
elements of culture are:
a. Values: Value is a concept that describes the beliefs of an individual in

a culture. Values are conceptions of what is good and desirable versus
what is bad and undesirable. A set of values may be placed into the
notion of a value system. Values are considered subjective and vary
across people and cultures. Types of values include ethical/moral
values, doctrinal/ideological (political, religious) values, social values,
and aesthetic values.
b. Norms: Norms are rules of behaviour. A norm, or social norm, is a rule

that is socially enforced. Social sanctioning is what distinguishes norms
from other cultural products or social constructions such as meaning and

values. Norms and normlessness are thought to affect a wide variety of

human behavior.
c. Rituals: A ritual is a set of actions, often thought to have symbolic value,

the performance of which is usually advised by a religion or by the
traditions of a community. A ritual may be performed at regular intervals,
or on specific occasions, or at the discretion of individuals or
communities. It may be performed by a single individual, by a group, or
by the entire community; in arbitrary places, or in places especially
reserved for it; either in public, in private, or before specific people. A
ritual may be restricted to a certain subset of the community, and may
enable or underscore the passage between religious or social states.
The purposes of rituals are varied; they include compliance with
religious obligations or ideals, satisfaction of spiritual or emotional needs
of the practitioners, strengthening of social bonds, demonstration of
respect or submission, stating one's affiliation, obtaining social
acceptance or approval for some event — or, sometimes, just for the
pleasure of the ritual itself. Being symbolic behaviour, they have a
meaning in culture.
d. Myths: Myths are stories that express some key values of society. A
myth is generally a sacred story concerning the origins of the world or
how the world and the creatures in it came to have their present form.
The active beings in myths are generally gods and heroes. Myths often
are said to take place before recorded history begins. In saying that a
myth is a sacred narrative, what is meant is that a myth is believed to be
true by people who attach religious or spiritual significance to it. Use of
the term by scholars does not imply that the narrative is either true or
false.

4. Characteristics of Culture:
The concept of culture has the following characteristics:
a. Culture is learnt: Culture is not imbibed from birth. Hence instinctive

behaviour, which is possessed by the individual since birth, is not
culture. Thus, the act of crying, laughing, etc. is not culture. However
knowing when it is proper or improper to cry or laugh is culture since it is
learnt subsequent to birth.
b. Culture regulates society: The individual learns the norms and

standards of behaviour and also the acceptable deviations from
standards as a part of culture. All the people in the society know the
rules to live by which is what regulates society.
c. Culture makes living more efficient: When individuals encounter new

people and new situations within the same culture the responses are
standard and there is no fresh learning required every time. This brings
in efficiency in living since everyone in the same culture is sharing the
culture.
d. Culture is adaptive: Culture is a human response to the environment

and as the environment undergoes changes, culture will adapt itself to
the new environmental characteristics. Adaptation is essential for
survival. An Indian company doing business in China will have to adapt
its ways to the culture in China as otherwise it can not survive there.
e. Culture is environmental: Like environment, the culture is all pervasive

and all around each individual at all times. We take culture for granted
until something unexpected happens. When some cultural norm is
broken, then only our attention is drawn to the existence of culture,
which is otherwise dormant.

f. Multiple cultures are nested hierarchically: The culture of larger

groups constrains and shapes the culture of smaller groups within it. For
example, the culture of a south Indian family is nested in the overall
Indian culture.
5. Variations in Cultural values

The most important characteristic of culture is values. Cultural values may
apply to things, ideas, goals and behaviours. Based on research in a
number of countries, the Dutch scientist Geert Hofstede, has developed a
classification of value orientations. Hofstede demonstrated that there are
national and regional cultural groupings that affect the behaviour of societies
and organizations, and that are very persistent across time. There are a
number of values, which vary across culture and affect consumption.
These can broadly classified as- Other-oriented, Environment oriented and

Self-oriented.
a. Other-oriented values: These reflect a society’s view of the appropriate

relation ship between individuals & groups within that society. These
relationships have a major influence on consumer behaviour. For
example, if the society values collective activity, the consumers will look
towards others for advise in purchase decisions & they will not respond
favourably to any promotions, which have appeal for a person to be “an
individual”.
b. Environment oriented values: These prescribe a society’s relationship

to its economic, technical & physical environment. The consumer
behaviour will be different in a society, which stresses a problem solving,
risk taking, performance oriented approach to its environment & it will be
entirely different in a society that stresses fatalistic, security & status
oriented society.

c. Self-oriented values: These reflect the objectives & approaches to life

that the individual members of society find desirable. These values also
have significant effect on consumer behaviour. For example society’s
position on the value of immediate gratification versus postponed
gratification will decide on whether the consumer will go for credit or not.
6. Dimensions of Cross- Cultural Values

Under the above broad classifications there can be a number of dimensions
of culture related values:
a. Small vs. Large Power Distance – the extent to which the less
powerful members of institutions and organizations expect and accept
that power is distributed unequally. Small power distance (e.g. Austria,
Denmark), expect and accept power relations that are more consultative
or democratic. People relate to one another more as equals regardless
of formal positions. Subordinates are more comfortable with and
demand the right to contribute to and critique the decision making of
those in power. Large power distance (e.g. India), less powerful accepts
power relations that are more autocratic and paternalistic. Subordinates
acknowledge the power of others simply based on where they are
situated in certain formal, hierarchical positions.
b. Individualism vs. collectivism – individualism is contrasted with
collectivism, and refers to the extent to which people are expected to
stand up for themselves and to choose their own affiliations, or
alternatively act predominantly as a member of a life-long group or
organisation. Latin American cultures rank among the lowest in this
category, while the U.S.A. is one of the most individualistic cultures.
c. Masculinity vs. femininity – refers to the value placed on traditionally
male or female values. Masculine cultures value competitiveness,
assertiveness, ambition, and the accumulation of wealth and material

possessions, whereas feminine cultures place more value on

relationships and quality of life. Japan is considered by Hofstede to be
the most "masculine" culture, Sweden the most "feminine." Anglo
cultures are moderately masculine. Because of the taboo on sexuality in
many cultures, particularly masculine ones, and because of the obvious
gender generalizations implied by the Hofstede's terminology, this
dimension is often renamed by users of Hofstede's work, e.g. to Quantity
of Life vs. Quality of Life.
d. Uncertainty avoidance – reflects the extent to which a society attempts
to cope with anxiety by minimizing uncertainty. Cultures that scored high
in uncertainty avoidance prefer rules (e.g. about religion and food) and
structured circumstances, and employees tend to remain longer with
their present employer. Mediterranean cultures and Japan rank the
highest in this category. This has a strong influence on
entrepreneurship, economic development and also on new product
acceptance.
e. Long vs. short term orientation – describes a society's "time horizon,"
or the importance attached to the future versus the past and present. In
long term oriented societies, pragmatism, thrift and perseverance are
valued more; in short term oriented societies, normative statements,
respect for tradition and reciprocation of gifts and favors are valued
more. China and Japan and the Asian tigers score especially high here,
with Western nations scoring rather low and man of the less developed
nations very low; China scored highest and Pakistan lowest.
f. Youth/Age: To what extent the primary activities of a family will focus on
the needs of the children? What role is played by the children play in
family decisions? Are prestige, rank and important social roles assigned
to younger members of the family? These will determine whether the
culture is youth oriented. American society is clearly youth oriented.

There is now evidence that the Asian countries are also becoming
increasingly youth oriented.
g. Extended/Limited Family: Families have a lifelong effect on all
individuals. The rights and obligations of family members vary widely
among different cultures. Cultures also differ widely in the obligations
one family member owes to other family members at various stages of
life. There is wide variation on who is considered as a family member. In
the US, the family definition is fairly narrow and it is less important than
in many other cultures. Strong obligations are felt for only immediate
family members like parents, brothers, sisters and children. This sense
of obligation also reduces after one marries. In many other cultures
including those in Asia, the role of the family is much stronger. The
family definition and the obligations extend to cousins, nieces, nephews,
grandparents and even ancestors. In such cultures consumer choices
are governed by a focus on family to a significant extent for purchase of
even FMCG products, which are commonly shared by family members.
Priority of family over self as a value has many implications. There is
generally a focus on the needs of the child over those of others.
Education and career needs of children are given a lot of importance.
Traditional joint families are still seen in India & are a very organized
phenomenon as far as household consumption & resource pooling goes.
h. Cleanliness: Is cleanliness an important factor or is it a minor matter?
Are homes, offices and public spaces expected to be very clean beyond
reasonable health requirements? In the US, a very high value is placed
on cleanliness and people from other cultures consider Americans to be
paranoid about personal hygiene. On the other extreme, in many
cultures like in China, lack of basic hygiene still causes significant health
problems.

i. Tradition/Change: Is tradition valued simply for the sake of tradition?

How are the consumers embracing change? Are they enthusiastic?
These questions have important effects on consumer behaviour. For
example, in Britain, three- fourths of the population generally claims to
be highly brand loyal compared to only half the population in France and
Germany. The British ads hence are more likely to emphasise tradition
and history.
j. Problem solving or Fatalistic: People in some cultures are
encouraged to react to obstacles and disasters as challenges to be
overcome whereas in some other cultures they adopt- “What will be will
be” attitude (fatalistic). As consumers also such fatalistic attitude makes
them accept any defects in products as something to live with rather
than complain.
k. Nature and environment: Some cultures respect and revere nature and
environment, whereas some other cultures want to tame and conquer
nature. Most of the northern European countries place a high value on
environment and hence packaging and other environmental regulations
are very stringent in these countries. These attitudes will affect the
consumers’ purchase decisions, consumption practices & recycling
efforts.
l. Active/passive: Are physically active approaches to work and play
considered important or passive lifestyle encouraged? Americans are
more prone to engage in action-oriented approach to problems.
Japanese on the contrary are quite passive in comparison. This attitude
will affect the advertising themes and formats.
m. Sensual Gratification / Abstinence: Some cultures frown upon the
desire to pamper oneself, to satisfy one’s desires for food, drink or sex
beyond the minimum requirement. Muslim countries are extremely
conservative in this value. In contrast Brazilian and European cultures

encourage sensual gratification as something normal. Hence ads with

nudity and blatant appeals for sensual gratification may be appealing in
some cultures this may in fact be frowned upon in some other cultures.
n. Material/Non-material: There are two types of materialism-
i. Instrumental Materialism: This is the acquisition of things to enable

one to do something. Examples are that of purchase of automobiles
for transportation.
ii. Terminal Materialism: This is the acquisition of items for the sake of
owning the item itself. Just the owning of these items give the
pleasure rather than what the item does for them.
There are marked differences in the relative emphasis on these two

types of materialisms in different cultures.
o. Hard Work/Leisure: Some cultures value work for itself, independent of
external rewards and in some other cultures work is only a means to an
end. In many Latin American countries work is considered as a
necessary evil whereas in much of Europe work is considered as
essential for a full life. Labour saving devises and instant foods have not
been very successful in countries like Switzerland for this reason.
p. Religious/Secular: In many cultures many of the daily activities are

activities are determined by religious doctrine. U.S is relatively secular.
Many Islamic countries and Catholic countries are very much religiously
oriented. Understanding the extent and type of religious influences
operating in a culture is essential for effectively designing the marketing
mix.
 Cultural Variations in Nonverbal communications
Variations in verbal communications in different cultures are easy to notice
and accept because we realize that language is an arbitrary invention. A
word can mean what a group will agree that it will mean. Hence many word-

to-word translations can lead ad campaigns to convey a totally unintended

meaning, causing a lot of embarrassment. For example, the translation of
the word “Enjoy” has sensual connotations in many countries including
Russia. Many brand names also have these problems. Ford’s Fiera brand
means “terrible, cruel or ugly” in Spanish. However verbal language
translations can be taken care of and they do not pose major problems. The
problem is that each culture has nonverbal communication systems and
these are the arbitrary meanings a culture assigns to actions, events and
things other than words. There are seven such nonverbal variables, which
are important in influencing non-verbal communication. These are time,
space, symbols, friendship, agreements, things and etiquette.
a. Time: The meaning of time varies in two major ways: one is the Time
Perspective, which is the culture’s overall orientation towards Time. Most
western countries and Australians view time as inescapable, linear and
fixed. It is almost like a physical object, which can be scheduled, wasted,
lost and so on. This is known as monochromatic time perspective.
Many Latin Americans and Asians including Indians tend to view time as
being less discrete and less subject to scheduling. They view
simultaneous involvement in many activities as very natural. People and
relationships take priority over schedules and activities occur at their
own pace rather than according to predetermined timetable. This is
known as polychromic time perspective. Marketing activities vary
substantially between these two time perspectives. Personal selling and
negotiation styles and strategies will have to be different as also the ad
campaigns. Contests and sales with deadlines will be more effective in
monochromatic perspective cultures.
Specific uses of time have varying meanings in different cultures.

Americans are normally well prepared with ready answers and they

normally insist on coming to the point directly and quickly whereas in

Japan and Middle East it is exactly the opposite.
Promptness in appointments is considered very important in some

countries like USA and Germany. Even a short delay of 5 minutes in
such culture is intolerable. In some other cultures keeping up to
appointments is an exception rather than a rule.
b. Space: The use people make of space is another form of non-verbal

communication. In America the bigger the better. The office space is
allocated in proportion to the rank of the executive rather than need.
Americans tend to personalize their workspace and consider it their own.
Another major use of space is the Personal Space It is the nearest that
others can come to you in various situations without feeling
uncomfortable. In US the normal business conversations occur at
distances of 3 to 5 feet and highly personal discussions at 18 inches to 3
feet. In most of Latin America this space is considerable shorter & most
Americans feel uncomfortable when the Latin American tries to “enter”
his personal space and invariable steps back to create more space.
Such non-verbal communication results in Americans considering Latin
Americans as pushy and aggressive. The Latin Americans consider the
Americans as snobbish, aloof and cold.
c. Symbols: If an American baby is wearing a pink dress it is most likely to

be female & if it is blue it would be a male. The number four is
considered a symbol of death in Japan. In parts of South East Asia light
blue is associated with death and mourning. A white carnation flower is
a symbol of death in China. The “thumbs up” sign has an offensive
meaning in Russia. These are only some examples how each culture
has its own non-verbal communication in symbols.

d. Friendship: In China friendly relationships are very complex and are

described under the concept of “Guanxi”. The rights and obligations
imposed by friendship are quite strong in Chinese culture. Americans on
the contrary make friends quickly and easily, and drop them also easily.
Friendship & business are deeply entwined in most of the world.
e. Agreements: Some culture like American rely on excessive and

generally highly efficient legal system for ensuring that business
obligations are honored and disagreements if any are resolved. Many
other cultures depend on friendship and kinship. Local moral principles
or informal cultural customs to guide business conduct. Under the
American system the wordings of the proposed contract is examined
very carefully. In the other cultures like in China, the character of the
potential partner is examined very closely. Americans assume that in
almost all instances the prices are uniform for all buyers and reasonably
close to the going rate. In many Latin American and Asian countries,
virtually all the prices are negotiated prior to sale including industrial
products and standard price lists are an exception than a rule.
f. Things: Different cultures attach different meanings to things including

brands. For example, in China a clock is a symbol of funeral and is an
inappropriate gift. In China gifts should be presented privately, whereas
in Arab countries they should be given in front of others. In Japan small
gifts are required to be given in many business situations, whereas in
China it is not appropriate.
g. Etiquette: This represents generally accepted ways of behaving in

social situations. Holding fork and knife in left and right hands is different
in USA as compared to many European cultures. Patting a child on the
head, crossing one’s legs while sitting, speaking loudly, nodding the
head, etc. has different connotations in different cultures. It is hence

important for the sales people to know the culture specific etiquette.
Although people understand that etiquette varies from culture to culture,
there is still a strong emotional feeling that “our way is natural and right”.
3.3 Subcultures
In sociology and cultural studies, a subculture is a set of people with a set of
behaviors and beliefs, culture, which could be distinct or hidden, that
differentiate them from the larger culture to which they belong. If the
subculture is characterized by a systematic opposition to the dominant
culture, then it may be described as a counterculture. It is important to
mention that there is a subtle difference between a counterculture and a
subculture. A subculture is at least somewhat integrated component of a
society, though clearly separated, while a counterculture is actively and
openly opposed to many of the characteristics of a society.
Subcultures can be distinctive because of the age, race, ethnicity, class,

and/or gender. The qualities that determine a subculture as distinct may be
aesthetic, religious, political, sexual or a combination of these factors.
Members of a subculture will often signal their membership through a
distinctive and symbolic use of style. Style includes fashions and
mannerisms.
Therefore, the study of subculture often consists of the study of the

symbolism attached to clothing, music and other visible affectations by
members of the subculture, and also the ways in which these same symbols
are interpreted by members of the dominant culture.
The cultural elements of a society or nation is a composite of two distinct

elements -
1. The unique beliefs, values and customs subscribed to by the members

of specific sub cultures; and

2. The central or core cultural themes that are shared by most of the
population regardless of specific subcultures.
Thus cultures can be subdivided in many ways. One is in terms of regional

or geographical sub-segments. For example, the South Indian culture is a
sub culture in the overall Indian culture. Similarly Punjabi culture can be a
subculture of the North Indian culture. There could be subcultures
categorised on the basis of original nationality, race, age, gender, religion,
occupation social class, etc. Sub cultural analysis enables the marketers to
focus on sizable and natural market segments and these subcultures for
relevant units of analysis for market research.
Change in subcultures:
As such it may be difficult to identify subcultures, because their style
(particularly clothing and music) may often be adopted by main culture, for
commercial purposes, as businesses will often seek to capitalize on the
attraction of the subculture in search of new things, which remains valuable
in the selling of any product. This process of cultural newness may often
result in the evolution of the subculture, as its members adopt new styles,
which appear different from main culture. The subcultures may also adapt to
the main culture in order to merge with the mainstream.
 Sub cultures in India

The Indian sub cultures have been commonly believed to be due to
environmental, historical and cultural causes. These sub cultures are
described as Dravidian South, Indo-Aryan in North, Mixture of Mongoloid
with Aryan in Northeast, etc. Many of these factors include:
1. Environmental circumstances like- geography, crops and foods, clothing,

housing resource availability, weather, coastal vs. interiors, etc. affecting
survival requirements.

2. Historical, cultural, religious, travel, trade, political developments,

affecting social norms and practices.
These events and behaviours affecting consumption may be seen

conspicuously from the number of festivals and religious norms at one end,
to differences in clothing, food and other items of consumption necessitated
by the topography. India is a true melting pot of the world in the context of
cultural assimilation of religion, norms, values, social codes and social
structure. There could be some subcultures out of this melting pot, which
can be of interest for the marketers:
a. Religious Subcultures: The modern integrated Indian entity has been

in existence only for a few decades and the integrated and
homogeneous cultural entity has evolved over nearly two millennia.
There has been a change in the fairly uniform Vedic and Dravidian
cultures over the centuries. Religions with traditions developed over two
millennia are seen to coexist and assumed to interact and influence one
another. Yet the norms for each religion’s culture are fairly codified and
distinct. There also extensions of this like caste and in some cases tribal
origins that lead to cultural and social structures, norms of activity,
lifestyle, consumption patterns, etc.
b. Regional Sub cultures: India has, in the past millennium, seen more
waves of invasion ending in cultural integration and metamorphosis,
than any other country in the world. Each region has its own history of
such cultural and norm evolving events. The south and east had their
own share of independent medieval overseas interactions; but have
been relatively more stable having been isolated from the northwestern
invasions of India.
c. Urban Vs Rural context: There also exists the quasi-cultural divide
and uniquely defining commonality in the urban vs rural context. Cities

have been the first targets of development for centuries. They present a
more cosmopolitan and less codified set of norms and habits, compared
to rural areas. The rural areas have retained more of the prevailing
cultures than the cities. They have also established a socially regulated
system of more strictly adhered to norms even for consumption of goods
and services. This of course varies from region to region and also
depends on the proximity to a city. The presence of TV has been held
more responsible for changing social codes for dressing & interaction
than any other social movement in the interior villages.
1. _________ has been called "the way of life for an entire society."
2. _________ is the process where the culture that is currently established

teaches an individual the accepted norms and values of the culture or
society in which the individual lives.
3. A __________ is a set of actions, often thought to have symbolic value,

performance of which is usually prescribed by a religion or by the
traditions of a community.
4. Like_____________, the culture is all pervasive and all around each

individual at all times.
5. __________ __________ reflects the extent to which a society attempts

to cope with anxiety by minimizing uncertainty.
6. A _____________ is a set of people with a set of behaviors and beliefs,

culture, which could be distinct or hidden, that differentiate them from
the larger culture to which they belong.

3.4 Social class

Social class refers to the hierarchical distinctions between individuals or
groups, in societies or cultures. It is the relative standing of members of a
society so that higher position implies a higher status than those in the lower
class.
Most societies, particularly nation states, seem to have some definition of

social class. Where social classes do exist, the factors that determine class
vary widely from one society to another. Even within a society, different
people or groups may have very different ideas about what makes one
"high" or "low" in the social hierarchy. The most basic class distinction
between the two groups is between the powerful and the powerless. Social
classes with more power usually subordinate classes with less power, while
attempting to cement their own power positions in society. Social classes
with a great deal of power are usually viewed as elites, at least within their
own societies.
In the simplest societies, power/class hierarchies may or may not exist. In

societies where they do exist, power may be linked to physical strength, and
therefore age, gender, and physical health are common delineators of class.
However, spiritual charisma and religious vision can be at least as
important. Also, because different livelihoods are so closely intertwined in
simple societies, morality often ensures that the old, the young, the weak,
and the sick maintain a relatively equal standard of living despite low class.
In so-called non-stratified societies or acephalous societies, there is no

concept of social class, power, or hierarchy beyond temporary or limited
social statuses. In such societies, every individual has a roughly equal social
standing in most situations.
 Factors affecting Social Class

In societies where classes exist, one's class is determined largely by:

a. Occupation
b. Education and qualifications
c. Income- personal, household and per capita
d. Wealth or net worth, including the ownership of land, property,
means of production, etc.
Income and wealth are important factors in determining a person’s social

class; but they are not the only determinants. Social class also depends
considerably on one’s education and occupation so that, despite relatively
low income, a highly educated person or a person in a prestigious
occupation, may be accorded a higher social class and vice versa.
 Characteristics of Social Class:

Some of the characteristics of social class are listed here:
a. Rank Ordering: Social classes are ranked in terms of social prestige.
b. Relative Permanence: A person’s social class does not change from

day to day or even from year to year & it is relatively permanent.
c. Intergenerational mobility: A person is likely to move out of the social

class of his or her birth, into a higher or lower class by acquiring the
values, resources and behaviours of the new class.
d. Internal Homogeneity: Within each social class, they are

homogeneous. Persons belonging to the same social class tend to be
similar in terms of the types of occupations, the kind of neighborhoods
they live in, their food habits, socializing patterns, etc.
e. Distinct from income: Though income is an important determinant of

social class, there is no one-to-one correspondence between the two.
Social class depends equally on other factors like education, occupation,
personal tastes, etc. and it is not uncommon for a person of relatively
middle income to be of upper social class and a person with high income

may be in a lower stratum of social class. For example, many teachers

and priests, who may not have high income, may command significantly
higher prestige and status.
 Manifestations of Social Class
Those who can attain a position of power in a society will often adopt
distinctive lifestyles to emphasize their prestige and to further rank
themselves within the powerful class. Often the adoption of these stylistic
traits are as important as one's wealth in determining class status, at least at
the higher levels:
a. Costume and grooming

b. Manners and cultural refinement. For example, French sociologist
Bourdieu suggests a notion of high and low classes with a distinction
between bourgeois (high status) tastes and sensitivities and the working
class tastes and sensitivities.
c. Political standing vis-à-vis the church, government, and/or social clubs,
as well as the use of honorary titles.
d. Reputation of honor or disgrace
e. Language, the distinction between elaborate code, which is seen as a
criterion for "upper-class", and the restricted code, which is associated
with "lower classes".
Finally, fluid notions such as race/ethnic origin/caste can have widely

varying degrees of influence on class standing. Having characteristics of a
particular ethnic group may improve one's class status in many societies.
However, what is considered "racially superior" in one society can often be
exactly the opposite in another. In situations where such factors are an
issue, a minority ethnicity has often been hidden, or discreetly ignored if the
person in question has otherwise attained the requirements to be of a higher
class. Ethnicity is still often the single most overarching issue of class status

in some societies (like apartheid, the Caste system in India, and the
Japanese Burakumin ethnic minority). However, a distinction should be
made between causation and correlation when it comes to race and class.
Some societies have a high correlation between particular classes and race,
but this is not necessarily an indication that race is a factor in the
determination of class.
 Some Examples
a. Indian Caste System: The Indian caste system is one of the oldest and
most important systems of social class with peculiar rigidity (in the sense
that it lacks upward or downward mobility between castes). It differs from
Varnashrama Dharma found in Hinduism, which allowed people born
into a certain Varna to move upward or downwards depending on their
qualification. It divided society based on skill and qualifications. Briefly,
the Brahmin Varna was idealized as a leisurely priest class devoted to
religious ceremonies, while the Kshatriya defended them as military
princes. The Vaishya Varna artisans, farmers, represented the modern
concept of the middle class and merchants and the lower Varna were
the Shudra laborers. Within this basic framework were arranged a huge
number of jatis, or subcastes. Despite being notorious for its rigidity, it
should be recognised not as a religious system (as Varnashrama
Dharma prescribed in Hinduism), but a social system, which evolved
from Varnashrama Dharma.
b. Chinese Society: Traditional Chinese society divided workers based on
the perceived usefulness of their work. Scholars ranked the highest
because the opportunity to conceive clear ideas in a state of leisure
would lead them to wise laws. Under them were the farmers, who
produced necessary food, and the artisans who produced useful objects.
Merchants ranked at the bottom because they not actually produce
anything, while soldiers were sometimes ranked even lower due to their

destructiveness. The Confucian model is notably different from the

modern Eurocentric view of social class, since merchants could attain
great wealth without reaching the social status accorded to a poor
farmer. In truth, a rich merchant might purchase land to reach farmer
status, or even buy a good education for his heirs in the hopes that they
would attain scholar status and go into the imperial civil service. The
Chinese model was widely disseminated throughout East Asia.
c. Japanese System: The Japanese class structure, while influenced by
the Chinese, was based on a much more feudal environment. The
Emperor, as a deity, was unquestionably at the pinnacle of the
Japanese class structure (and still is, despite no longer being
considered a god). However, for most of Japanese history the emperor
was not allowed outside the palace grounds and his will was
"interpreted" by a shogun, or military dictator. Beneath the shogun,
daimyos, or regional lords, administered the provinces through their
samurai lieutenants. Perhaps through Chinese influences, and perhaps
springing from a lack of arable land, the Japanese class structure also
ranked farmers above merchants and other higher-class people.
3.5 Life styles

In sociology a lifestyle is the way a person lives. This includes patterns of
social relations, consumption, entertainment, and dress. A lifestyle typically
also reflects an individual's attitudes, values or worldview. Having a specific
"lifestyle" means engaging in a characteristic bundle of behaviors that
makes sense to both others and the self in different times and places.
Therefore, a lifestyle can be used to forge a sense of self-identity and to
create cultural symbols for the way a person is. The behaviors and practices
within lifestyles are a mixture of habits, conventional ways of doing things,
and reasoned actions.

In business, "Lifestyles" provide a means of targeting consumers as

advertisers and marketers endeavor to match consumer aspirations with
products. Lifestyles refer to patterns in which, people live spend time and
money. These patterns reflect by demographical factors (the habits,
attitudes, tastes, moral standards, economic level and so on… that together
constitute the mode of living of an individual or group); that include things
such as the individual’s activities in addition to their interests. As a construct
that helps consumers interact with their worlds, lifestyles are a subject to
change every time. Consumer behaviour research uses lifestyle data to
determine which consumers by products.
The term "lifestyle" first appeared in 1939. Alvin Toffler predicted an

explosion of lifestyles ("subcultures") as diversity increases in post-industrial
societies. Pre-modern societies did not require a term approaching sub-
culture or "lifestyle", as different ways of living were expressed as entirely
different cultures, religions, ethnicities or by an oppressed minority racial
group. As such the minority culture was always seen as alien or other.
"Lifestyles", by comparison, are accepted or partially accepted differences
within the majority culture or group. This tolerance of differentiation within a
majority culture seems to be associated with modernity and capitalism.
 Values and Lifestyles (VALS)

VALS is an acronym for Values and Lifestyles, a study undertaken by Arnold
Mitchell at SRI in the 1970s to understand the changing habits and lifestyles
of US consumers. VALS is based on personality research into specific
components of social behavior. VALS asserts that people express their
personalities through their behaviors. People with different personalities
engage in different behaviors or exhibit similar behaviors for different
reasons & fall into one of several categories of individuals in modern society
as defined from answers to Values and Lifestyles (VALS) surveys as
conducted in the late 1970s to early 1980s by SRI (Stanford Research

Institute), now SRI International. VALS places U.S. adult consumers into
one of eight segments based on their responses to the VALS questionnaire.
Descriptions of these VALS types are as under:
a. Innovators: These are successful, sophisticated, active, take-charge

people with high self-esteem and abundant resources. They are
interested in growth, innovation and change. They are the leaders in
business and government.
b. Thinkers: These are mature, satisfied, comfortable, reflective people
who value order, knowledge and responsibility. They are well educated
and are in professional occupations. They are content with their career,
families and station in life.
c. Achievers: They are successful career and work oriented people who
like to feel in control of their lives. Their social lives are structured
around their family, church and career. They live conventional lives and
are politically conservative, respect authority and status quo.
d. Experiencers: These are young, enthusiastic, impulsive and rebellious.
They seek variety and excitement. They are politically uncommitted and
uninformed. Their energy finds an outlet in exercise, sports, outdoor
recreation and social activities. They spend much of their income on
clothing, fast food, music, movies and video.
e. Believers: They are conservative, conventional people with commitment
to family, church, community and the nation. Living by a moral code is
very important to them. They favour established brands. Their income,
education and energy are modest, but sufficient for their lifestyles.
f. Strivers: They seek motivation, self-definition and approval from the
world around them. Unsure of themselves, low on economic, social and
psychological resources, they are concerned about opinions and
approval of others. Many of them seek to be stylish. They emulate those

who own more impressive possessions; but what they wish to obtain is
often beyond their reach. They often feel that life has given them a raw
deal.
g. Makers: They are practical people who have constructive skills. They
live within the traditional context of family, practical work and physical
recreation. They experience the world by working on it- like building a
house, raising children, repairing a car, etc. They have enough skill,
income and energy to carry out their projects successfully. They are not
impressed by material possessions other than those of practical and
functional purpose.
h. Survivors: They tend to be chronically poor, uneducated, low skilled,
elderly and concerned about their health. They are always preoccupied
about their urgent needs of the present moment. Their chief concerns
are safety and security. They represent a very modest market for most
products and services.
3.6 Influence of Group on Consumer Behaviour

 Social group
A Social group is usually defined as a collection of persons, who share
certain characteristics, interact with one another, accept expectations and
obligations as members of the group, and share a common identity. Using
this definition, society can appear as a large group. While an aggregate
comprises merely a number of individuals, a group in sociology exhibits
cohesiveness to a larger degree. Characteristics that members in the group
may share include interests, values, ethnic/linguistic background, and
kinship ties. Social groups also include institutions, which are more
permanent groups with pervasive and universal presence in society, such as
schools, religions and the family.

Institutions are structures and mechanisms of social order and cooperation

governing the behavior of two or more individuals. Institutions are identified
with a social purpose and permanence, transcending individual human lives
and intentions, and with the making and enforcing of rules governing
cooperative human behavior. The term, institution, is commonly applied to
customs and behavior patterns important to a society, as well as to
particular formal organizations of government and public service.
A Reference Group is a group whose presumed perspectives or values are

being used by an individual as the basis for his or her current behaviour. In
other words, a reference group is simply a group that an individual uses as a
guide for behaviour in a specific situation.
All individuals belong to a number of different groups and also aspire to

belong to some other groups. When a person is actively involved in a
particular group it generally functions as a reference group. As the situation
changes the base of such behaviour may shift to an entirely different group,
which then becomes the new reference group. Although an individual may
belong to a number of groups, he/she normally uses only one group as the
primary reference group in any given situation.
 Classification of Groups
Groups can be classified according to three classification criteria: a.
membership, b. type of contact and c. attraction.
a. Nature of Membership: This refers to whether the membership is real

or symbolic. Membership groups are those wherein the head or leader
of the group as also the key members of the group recognise the
membership of the individual who claims membership of this group. In
symbolic groups, there is no provision or procedure for granting
membership and the group leader or the key members may even deny
membership for the individual. However the individual regards himself as

a member of this group by unobtrusively adopting to the group norms &

values & identifies himself with the group. Example of membership
groups are- family, YMCA, Work Organisations, Rotary Club, Lions Club,
etc. Examples of symbolic groups are groups who emulate their heroes
in movies, or celebrities, Fortune 500 Companies, etc.
b. Frequency of Contact: This refers to how much interpersonal contact
the groups have with each other. As the group size increases the
interpersonal contact frequency tends to decrease. Depending on this
characteristic, there are two categories of groups-
1. Primary groups-These are characterized by frequent interpersonal

contact. The members of primary groups consider the opinion or
norms of the entire group as important to follow. The examples are-
family, work organisations, business associations, etc.
2. Secondary groups- Members in secondary groups have limited

interpersonal contact. The norms of secondary groups are
considered as less binding or obligatory. Examples are- distant
relatives, occupational groups like doctors, lawyers, accountants,
theatre artists, etc.
3. Degree of Formality: Based on this there are two classifications. In
a formal group conduct and behaviour are highly codified. Examples
are- School/college, workplace, religious groups, prison, etc. In
informal groups, there are very few explicit rules about the group
behaviour. The examples are- friendship groups, volunteer groups,
community groups, family, relatives, etc.
4. Freedom of Choice: In this also there are two categories- Choice
groups and ascribed or assigned groups. Choice groups are those,
where the individuals voluntarily choose to join. The examples are-
friendship groups, community groups, volunteer groups, etc. The

ascribed or assigned groups are those wherein the membership is

automatic for someone who has the characteristic that defines the
group. The examples are- family, relatives, religious groups, prison,
etc.
3.7 Reference groups and Consumer Behaviour

From a marketing perspective reference groups are groups that serve as
frames of reference for individuals in their purchase or consumption
decisions. This concept is very useful and relevant because there is no
restriction on group size or membership nor is they’re any requirement that
the individuals identify with a tangible group.
Reference groups that influence general or broadly defined values or

behaviour are called as Normative Reference Groups. A child’s normative
reference group is the immediate family, which plays an important role in
molding the child’s general consumer values and behaviour. For example,
the child will learn which foods to select for good nutrition, which are the
appropriate dresses for which occasion, how and where to shop for which
product, etc.
Reference groups that serve as benchmarks for specific narrowly defined

behaviour are called as Comparative Reference Groups. This could be a
neighboring family whose lifestyle appears to be worthy of imitation in
certain aspects like the maintenance of their garden, choice of home
furnishings, types of vacations taken by them, etc.
Both normative and comparative reference groups have significant influence

on every individual. Normative groups influence the basic code of conduct
whereas the comparative groups influence the specific consumer attitudes
and behaviour. It is likely that these specific attitudes are dependant on the

basic values & behaviour patterns established in the person’s early

development by the normative reference groups.
We can also add a third group of reference groups here- Indirect

Reference groups which consist of those individuals or groups with whom
a person does not have a direct face to face contact, such as movie stars,
sports heroes, political leaders, TV personalities, etc.
 Factors that affect Reference Group Influence

The amounts of influence the reference groups have on an individual
depend ion the nature of the individual and the product and also certain
social factors. Some of these factors are discussed here:
a. Information and Experience: A consumer with first hand experience

with a product or service, or the one who is capable of getting the
information easily about the product or service is less likely to be
influenced by any advice or example of others. On the other hand the
consumer who has little or no experience or the one who has no access
to reliable & objective information on the product or service is more likely
to seek out the advice or example of others.
b. Credibility, Attractiveness and Power of the Reference Group:
When a consumer is concerned with obtaining the accurate information
about the product quality or performance, he is likely to get influenced by
someone whom he/she considers as trustworthy and knowledgeable.
Thus high credibility in the reference group is likely to influence the
consumer more effectively. When a consumer is primarily concerned
with the acceptance or approval of the person or group they like, or with
whom they identify or those who offer them some status or benefits, they
are likely to adopt their product due to the attraction. When a consumer
is primarily concerned with the power that a person or group can exert
over him/her, the choice of product may be the one which conforms to

the norms of the person or the group in order to avoid ridicule or

punishment. However unlike the groups, which affect the consumer due
to their credibility or attractiveness, the power groups are unlikely to
change the attitude of the consumer. Different reference groups may
affect a consumer’s beliefs, attitudes and behaviour at different points of
time or under different circumstances. For example the dress habit of a
male may vary depending on the place and role. He may wear
conservative business suits in his work place while he may wear trendy
and fashionable dresses in a party with friends.
c. Conspicuousness of the Product: The influence of the reference

group on a purchase decision of a consumer varies according to how
visually or verbally conspicuous the product is to others. A visually
conspicuous product will is the one, which stands out and be noticed
(such as a car or a fashionable dress or jewellery); a verbally
conspicuous product is the one, which may be highly interesting, or it
may be easily described to others (like a vacation in an expensive
location). Products, which are consumed conspicuously and status
revealing are likely to be purchased with an eye to the reactions of the
reference group. Privately consumed products like detergents,
shampoos, etc., which are less conspicuous, are unlikely to be
purchased with the reference group in mind.
d. Reference Groups and Consumer Conformity: There are different
objectives of different marketers in utilizing the influence of the reference
groups. The market leaders are normally interested in the ability of the
reference groups to change consumer attitudes and behaviour, by
encouraging consumer conformity. In contrast marketers who are
responsible for a new brand or a brand, which is not the market leader,
may wish to devise a strategy, which persuades consumers to be
different and not just follow the crowd when making purchase decisions.

This is called non- conformity appeal. In reality this non-conformity

appeal can be thought of as an attempt to shift the consumer’s reference
from one group (Brand A users) to another (non brand A users or Brand
B users).
 Consumer Related Reference Groups

Consumers are influenced by a number of different types of groups that they
come in contact with or those they may observe. There are five specific
groups, which are quite representative of the different sets of such groups
other than the family. The family is possibly the most compelling reference
group for consumer behaviour and will be covered in the next section. The
other five groups are: a. Friendship Groups, b. Shopping Groups, c. Work
Groups, d. Virtual Groups of Communities and e. Consumer Action groups.
a. Friendship Groups: These are typically classified as informal groups

since they are usually unstructured & lack specific authority levels. In
terms of relative influence, the friendship groups are the most influential
after the family on the behaviour of a consumer. Seeking & maintaining
friendship is a basic drive for most individuals. Friends provide
companionship, security and opportunity to discuss several problems,
which an individual may be reluctant to discuss with the family members.
Friendship is also a sign of maturity and independence, since this
represents the breaking away from the family and forming social ties
with the outside world. The opinions and preferences of friends are thus
an important influence on the consumer in purchase decisions.
Marketers of many products recognise this power and frequently depict
friendship situations in their ads.
b. Shopping Groups: two or more persons who shop together for any
products or services or just to pass time can be called a shopping group.
Such groups are often the offshoots of family or friendship groups and

they are often referred to as purchase pals. The motivation for shopping
with a purchase pal may be just to share time together & enjoy the
company or it may be for helping to reduce the risk when making an
important decision. Or it may just be a defensive process feeling
confident in a collective decision. Many marketers follow what is known
as in-home shopping party, which typically consists of a group that
gathers in a home of a friend to attend the “Party” devoted to
demonstrating & evaluating some specific products. This provides an
opportunity for the marketers to demonstrate the features of their
products simultaneously to a group of potential customers. Given the
spirit & excitement of such parties Tupperware generates a substantial
portion of its business from such consumer parties.
c. Work Groups: Consumer behaviour gets influenced by, both the formal
work group and also the informal friendship-work group. The formal
work group consists of individuals who work together as part of a team
& spend a lot of time together. Hence they influence each other’s
consumption related attitudes and actions. Informal friendship-work
groups consist of people who have become friends as a result of
working in the same firm. Recognizing that many marketers who were
directing their sales people to visit homes is now directing them to make
sales calls to offices during lunch breaks.
d. Virtual Groups or Communities: A virtual community, e-community or
online community is a group of people that primarily interact via some
form of mechanism such as letters, telephone, email or internet rather
than face to face. If the mechanism is a computer network, it is called an
online community. Virtual and online communities have also become a
supplemental form of communication between people who know each
other primarily in real life. There are many virtual communities on the
internet comprising of all age groups & also special interest groups.

One of them is Orkut. Orkut is an Internet social network service run by

Google and named after its creator, Google employee Orkut
Büyükkökten. It claims to be designed to help users meet new friends
and maintain existing relationships. Similar to Friendster and MySpace,
Orkut goes a step further by permitting the creation of easy-to-setup
simple forums (called "communities") of users. Since October 2006,
Orkut has permitted users to create accounts without an invitation. In
April 2007, Orkut introduced polls in communities.
e. Virtual World: This is an extension of the virtual communities and one

most popular example is that of “second life”. Second Life is an Internet-
based virtual world launched in 2003, developed by Linden Research,
which came to international attention via mainstream news media in late
2006 and early 2007. A downloadable client program called the Second
Life Viewer enables its users, called "Residents", to interact with each
other through motional avatars, providing an advanced level of a social
network service combined with general aspects of a metaverse.
Residents can explore, meet other Residents, socialize, participate in
individual and group activities, create and trade items (virtual property)
and services from one another. The stated goal of Linden Lab is to
create a user-defined world of general use in which people can interact,
play, do business, and otherwise communicate. Second Life's virtual
currency is the Linden Dollar (Linden, or L$) and is exchangeable for US
Dollars in a marketplace consisting of residents, Linden Lab and real life
companies.
While Second Life is sometimes referred to as a game, this description

is disputed. It does not have points, scores, winners or losers, levels, an
end-strategy, or most of the other characteristics of games, though it can
be thought of as a game on a more basic level. It is a semi-structured

virtual environment where characters undertake activities for the

purpose of personal enjoyment.
In all, more than 8.9 million accounts have been registered, although
many are inactive, some Residents have multiple accounts, and there
are no reliable figures for actual long-term consistent usage. Despite its
prominence, Second Life has notable competitors, including There,
Active Worlds, and the more "mature" themed Red Light Center.
f. Brand Community: A brand community is a community formed on the

basis of attachment to a product or brand. Recent developments in
marketing and in research in consumer behavior result in stressing the
connection between brand, individual identity and culture. Among the
concepts developed to explain the behavior of consumers, the concept
of a brand community focuses on the connections between consumers.
A brand community can be defined as an enduring self-selected group

of actors sharing a system of values, standards and representations (a
culture) and recognizing bonds of membership with each other and with
the whole. Brands, which are used as examples of brand communities,
include Apple Inc. (Newton, Macintosh, and iPod), Ford Bronco, Jeep,
Lego, Harley Davidson and Royal Enfield motorcycles, Saab, Saturn
automobiles and Subaru. Brand communities are characterized in
shared consciousness, rituals and traditions, and a sense of moral
responsibility.
g. Consumer Action Groups/Consumer Organisations: Consumer
organizations are advocacy groups that seek to protect people from
corporate abuse. Unsafe products, predatory lending, false advertising
and pollution are all examples of corporate abuse. Consumer
organizations may operate via protests, campaigning or lobbying. They
may engage in single-issue advocacy (e.g., the British Campaign for

Real Ale (CAMRA), which campaigned with great success against keg
beer and for cask ale), or set themselves up as consumer watchdogs
such as the Consumers' Association in the UK.
One common method is the independent comparative survey or test of a

particular type of product or service, involving different manufacturers or
companies. Another arena where consumer organizations have operated is
food safety. The needs for campaigning in this area are less easy to
reconcile with their traditional methods, since the scientific, dietary or
medical evidence is normally more complex than in other arenas, such as
the electric safety of white goods. Past lobbying by consumer groups has in
part shaped the current standards on mandatory labeling, in developed
countries. The aim of consumer organizations may be to establish and to
attempt to enforce consumer rights. Effective work has also been done,
however, simply by using the threat of bad publicity to keep companies'
focus on the consumers' point of view.
 Reference Group Appeals:

Appeals by celebrities and other similar reference groups are used very
effectively by ad agencies to communicate & influence their target
consumers. There are many such types of group appeals, which are
commonly used by marketers and some of them are: a. Celebrity Appeals,
b. Expert Appeals, c. Common Man Appeals, d. Executive and Employee
Appeals, e. Trade or Spokes-characters Appeals.
a. Celebrity Appeals: Celebrities like movie stars, TV personalities, sports

heroes, etc. are commonly used types of reference group appeal. For
many consumers, celebrities represent an idealization of life that many
of them imagine that they would love to live. One advantage of celebrity
endorsers is that famous people definitely hold the viewer’s attention.

There are four types of celebrity appeals used by marketers:
i. Testimonial: Based on personal usage, the celebrity attests to the

quality of the product or service.
ii. Endorsement: Celebrity lends his or her name and appears on
behalf of a brand with which he or she may not be an expert.
iii. Actor: Celebrity presents a product or service as part of a
character in the ad story.
iv. Spokesperson: Celebrity represents the brand or company over
an extended period of time. These are also known as Brand
Ambassadors.
Celebrity credibility with the consumer target is the most important

element for the success of this strategy. Celebrity credibility means both
the celebrity’s expertise and trustworthiness. For example, when a
celebrity endorses a single brand the consumers are likely to perceive
this brand in a highly favourable light and get influenced for a greater
intention to purchase it. In contrast if the celebrity endorses a number of
brands, his or her perceived credibility gets reduced because of the
apparent economic motivation underlying the celebrity’s endorsement.
Marketers also fear that if the celebrity endorsing their brand gets a
negative publicity for any reason like some scandal, downfall in their
celebrity status, etc. this will negatively impact the sale of the brand.
b. Expert: a real expert, who because of his or her occupation, special

training or expertise, is in a unique position to help the prospective
consumer to evaluate the brand in comparison with competitor brands,
will do this type of reference group appeal. For example an ad for
kitchen equipment may feature a famous chef.
c. Common Man: This approach uses the testimonials of satisfied

customers. The advantage of the common man appeal is that it

demonstrates to prospective customers that someone just like them

uses and is satisfied with the brand. Many TV ads show a typical person
or family solving a problem by using the advertised brand. These
commercials are known as ‘slice of life’ ads because they focus on real
life situations with which the viewer can identify.
d. The Executive and Employee Spokesperson: Many companies use

their top executives as spokespersons in consumer ads. It helps if such
executives are well known. Like celebrities, the executive spokesperson
seems to be admired by consumers because of their achievements and
the status implicitly conferred on business leaders.
e. Trade or Spokes-characters: Familiar cartoon characters like Ninja

Turtles, Mickey Mouse, R.K.Laxman’s Common Man etc. and trade or
spokes-characters like the one in Amul ads serve as quasi-celebrity
endorsers.
3.8 Family
Family is used to denote a domestic group of people, or a number of
domestic groups linked through descent (demonstrated or stipulated) from a
common ancestor, marriage or adoption. A family may be defined
specifically as a group of people affiliated by consanguinity, affinity, and co-
residence. Although the concept of consanguinity originally referred to
relations by blood, the notion of "blood" must be understood metaphorically.
1. Classification of families
Families worldwide can be classified into four types: a. Authoritarian
Families, b. Neglectful Families, c. Democratic Families and d.
Permissive Families.

a. Authoritarian Families: The head of such families exercises strict

authority on children and children learn to obey their elders in all
matters. Although culture of obedience is considered as a virtue
especially in Asian families, it does curb individuality among children
and consequently their influence on family buying decisions.
b. Neglectful Families: In such families, parents will be distant from

their children and these children are neglected, because of the
priority given by the parents for their own individual affairs. Single
parent families invariably have this problem, because of the time
pressure on the single parent. Children exercise no influence on their
parent’s purchases in such families and are able o exercise relative
autonomy in their own purchases if they are given the resources.
c. Democratic Families: Every member in such families is given equal

choice. Most family matters are discussed among family members,
especially those who would be affected by the decisions. The final
decision could be a joint one or it could be exercised b by the family
head. Children are encouraged to develop self-expression,
autonomy and mature behaviour in such families. Children share
influence in decision making with other members of the family.
d. Permissive Families: In such families the children are giving a lot of

independence in conducting their own affairs, especially in their
adolescent years. Unlike the neglectful parents, permissive parents
watch children’s interests and then exercise freedom.
2. Intergenerational Influence (IGI)

This refers to the transmission of values, attitudes and behaviours from
one generation to another. Such transfer of values has been found to be
significant in some of the market studies. This transfer is likely to take
place in two directions: a. Forward and b. Reverse

a. Forward Influence: This transfer of influence is from parents to the

children. This typically happens when children are young and live with
their parents.
b. Reverse Influence: The revere influence is from children to parents.

This begins to occur when the children grow up and are exposed to new
knowledge and to new role models. Consequently they begin to depend
less on their parents as role models or for guidance and begin to carve
out their own individual identity. This can occur due to two reasons:
i. One when the children acquire greater knowledge and expertise

than their parents in some products, which is acknowledged by the
parents.
ii. The second reason is called democratic justice wherein each family
member is given equal opportunity in voicing his or her opinions in
family decisions. This happens more so in purchase of common
assets like car, furniture, etc. and also for products exclusively used
by the children.
c. Family Characteristics which influence IGI: Forward and reverse IGI
are influenced by family relationship and relative expertise across
generations. Family Relationship refers to then respect and trust
between the parents and the children and also the harmony of relations
and communications among them in all areas of life; not just purchase
decisions.
Relative Expertise is the acknowledgement by the children that the parents

possess expertise about the products or services in case of forward IGI and
for reverse IGI the acknowledgement of parents about the expertise of their
children.


I State whether the following statements are true or false:
1. Social class refers to the hierarchical distinctions between individuals

or groups in societies or cultures.
2. Though income is an important determinant of social class, there is

no one-to-one correspondence between the two.
3. Members in primary groups have limited interpersonal contact.
4. Most of the northern European countries place a high value on
environment and hence packaging and other environmental
regulations are very stringent in these countries.
5. Two or more persons who shop together for any products or services
or just to pass time can be called a work group.
6. Intergenerational Influence refers to the transmission of values,
attitudes and behaviours from one generation to another.
II. What do you understand by inter generational influence?
3.9 Summary
In this unit, we have learnt about Cultures, Subcultures, Social class and
different types of groups, which have their influence on consumer behaviour.
We have also understood the process of Enculturation and acculturation,
Elements of Culture and Characteristics of Culture. You also studied
variations in Cultural values, dimensions of Cross- Cultural Values, cultural
Variations in Nonverbal Communications, Subcultures, and change in
subcultures and also Sub cultures in India. We also studied the meaning of
Social class, factors affecting Social Class, characteristics of Social Class
and manifestations of Social Class with some examples. We also learnt
about the influence of various groups on Consumer Behaviour including a
study of social groups, classification of Groups, Reference groups and

Consumer Behaviour, factors that affect Reference Group Influence,

consumer Related Reference Groups, reference Group Appeals. We also
studied about the concept of Family, classification of families and
Intergenerational Influence (IGI).

1. Explain the concepts of enculturation and acculturation.
2. Describe some of the characteristics of culture.
3. What are the different dimensions of cross-cultural values?
4. Explain some of the cultural variations in non-verbal communications.
5. Describe some of the sub cultures in India.
6. Explain some of the factors, which influence reference group influence.
SAQ I
1. Culture
2. Enculturation
3. Ritual
4. Environment
5. Uncertainty avoidance
6. Subculture
SAQ II
1. True
2. True
3. False
4. True
5. False
6. True

TQ
1. Refer to section 3.2

Unit 4 Perception & Learning

Structure
4.1 Introduction
Objectives
4.2 Perception
4.3 Steps in the Perception Process
4.4 Factors affecting Perception
4.5 Selection in Perceptual Process
4.6 Thresholds in the Perceptual Process
4.7 Perceptual Organisation
4.8 Perceptual Interpretation
4.9 Perceptual process and Marketing Strategy
4.10 Learning
4.11 Theories of Learning
4.12 Characteristics of learning
4.13 Psychology of Simplification and Complication
4.14 Summary
4.1 Introduction
Process of Perception and Learning in an individual, are important factors
for analyzing consumer behaviour. Sensations, Organisation, interpretation
etc. are important steps in the process of perception. Similarly, Motivation,
cues, response and reinforcement are the elements of Learning. This

chapter deals with these factors in detail and then relates them with
consumer behaviour.
Objectives
 Know the meaning and definition of Perception and Learning Processes.
 Explain the factors affecting perception and learning.
 Understand how these processes are important for understanding
Consumer Behaviour.
4.2 Perception
Perception is the process of acquiring, interpreting, selecting, and
organizing sensory information. This has been defined as the process by
which an individual selects, organizes and interprets stimuli received fro the
environment into meaningful and coherent picture. This process is a highly
individual process and two persons who are exposed to identical stimuli, can
perceive them totally differently based on each person’s needs, values and
expectations. The influence of each such variable on the process of
perception and its relevance to marketing will be discussed in this unit.
4.3 Steps in the Perception Process

There are three steps in the process of perception- Sensation, Organisation
and Interpretation.
Sensation:
Sensation is the immediate and direct response of the sensory organs to the
stimuli. A stimulus is any unit of input to any of the five senses- seeing,
hearing, smelling, touching and tasting. Sensory receptors are the five
human organs (the eyes, ears, nose, skin and mouth). A consumer uses all
of these functions, either singly or in combination in the evaluation and use

of most consumer products. Sensitivity refers to the experience of

sensation. Sensitivity to stimuli depends on the quality of the receptive
organs of each person and also the intensity of the stimuli to which this
person is exposed.
For example a blind person may have an increased level of hearing

sensitivity and hence can probably hear much more than another average
sighted person. Sensation also depends on the energy change in the
environment in which the person receives the stimulus. For example the
person living near a railway line for a long time may get so much used to the
noise of the train movements that he may not even perceive the train
movement although it may produce a loud noise. Similarly fishermen used
to the smell of fish all the time may not even perceive the fish smell in the
market.
Organisation
A person will always categorise the sensed stimulus by categorizing it with
similar object categories in the person’s memory. People do not experience
the numerous stimuli they select from the environment as separate &
discrete sensations. They tend to organize them into groups & perceive
them as unified objects. For example, the sensation of eating a pizza will
generate perceptions in the mind of the consumer, who identifies all the
ingredients of sensation like taste, smell, touch, etc., compares these
perceptions with his earlier memories & then classifies it as a specific type
similar to or different fro the pizzas he has eaten earlier.
Interpretation
This is the final step of attaching meaning to the stimulus forming an
impression as to whether it is an object of liking, and of what value this
object could be of. The interpretation of stimuli is also uniquely individual,
since it is based on what individuals will expect in the light of their previous

experience, on the number of alternative explanations they can think of and

also the motives and interest at the time of perception. In the case of the
Pizza example as above, at this stage the consumer judges whether the
pizza tastes good and whether it is better or worse than the earlier
experience.
4.4 Factors affecting Perception

There are three factors, which affect the perception of any stimulus-
Stimulus Characteristics, Context and Consumer Characteristics.
Stimulus Characteristics
These characteristics comprise of the nature of information from the
environment like products, brands, shops, marketing people, friends, family,
etc. Consumers perceive a stimulus differently depending on its
characteristics. Both sensory characteristics and the stimulus content will
affect such perception. The characteristic is considered as sensory if it
stimulates one or more of the sensory organs. Strong sensory
characteristics like bright colours, loud noise, strong smells, etc. attract more
attention. Getting attention is important because the customer faces a large
number of advertisements in his daily life and the marketer has to attract
attention of the customer in this clutter. Incorporating new elements in
advertisements, attractive packaging designs, point of purchase displays,
etc will have to consider this aspect.
Sensory elements like unity of product design (how all the elements of the
design are unified as though they belong together) and how they blend with
the typical design of the product category will determine the consumers’
aesthetic response. This has an important influence on the product
preference. This is the reason many marketers spend huge amounts to

ensure that their products are properly designed, so that the consumers
have a good aesthetic response.
The other characteristic of a stimulus that shapes perception, is its

information content. After an advertisement has achieved the sensory
perception objectives, the information content becomes important. This
helps the consumer in organisation and interpretation. At this stage the
important product features and the benefits for the consumer have to be
communicated. This is most important especially for industrial products and
hence, such marketers consider information content as a key element by
which they can differentiate themselves and create customer loyalty.
Context
This is the setting in which the stimulus is received. While perceiving the
stimulus, the consumers are influenced by the environment in which they
receive this stimulus. This includes social, cultural and organisational
contexts. This has been proven in many blind taste studies of beer taste.
Most consumers associate the taste with the brand name and even when
the bottle of their brand contains some other beer they tend to pick their
favourite brand label as tasty. The taste perception is influenced by the
context the brand name provides.
Consumer Characteristics
Consumer characteristics affect the perception especially when they have
some prior experience with the stimuli. Such previous knowledge and
feelings become expectations i.e. they start believing what this stimulus will
result in. The consumer will then end up seeing what he expects to see. The
consumer who goes to a restaurant about which he has heard excellent
recommendations will end up liking the restaurant much more than another
consumer who might have heard criticisms about the same restaurant. The

principle underlying this is that, the expectations bias the perception process
of an individual.
4.5 Selection in Perceptual Process

Each individual in today’s world gets a huge amount of information every
day and it is essential for being selective at each step of the perception
process. They ignore some stimuli & some interpretation of stimuli. There
are four processes by which the individual manages this selection- selective
exposure, selective attention, selective interpretation and selective blocking.
Selective Exposure
A customer is exposed to a large number of marketing communications
every day and only a few of these communications achieve actual exposure,
depending on the needs and interests of the consumer at that point of time.
Consumers look out for some selected advertisements, some selected shelf
displays in a store, listen to some sales people depending on what they are
planning to purchase. Consumers not interested in a product will totally skip
the advertisements of such products. This selective exposure is also known
as gate keeping. Consumers are becoming more and more selective as the
advertising clutter increases. The usage of internet, wherein the consumer is
able to selectively collect the data pertinent to his need and requirement in a
more efficient manner, is becoming more popular in this regard.
Selective Attention
Even when the consumer is forced to look at an advertisement about a
product which is of no interest to him/her the consumer may still ignore it. A
person’s interest may be initially attracted by the stimulus characteristics;
but beyond initial attention the consumer’s further processing of this
information from the stimulus depends on the personal interest in the
featured product or service. Making use of this principle, some advertisers

choose media which are of specialised nature where the product being
advertised will fit in. For example, the computer laptops are advertised in
computer related sections of the newspaper or magazine. Even on the
internet customer specific banner ads are placed in related web sites. Such
selective placements of ads benefit both the marketers and consumers,
since the marketers get better attention and consumers are saved from all
the clutter.
Selective Interpretation
Consumers tend to interpret the information in the stimulus selectively. After
an important purchase the consumers tend to look for ads of the brand
bought by them which will reinforce reassure the wisdom of their decision.
Consumers also tend to distort any negative information that might threaten
their ego. This phenomenon is called perceptual distortion or perceptual
defense. Perceptual distortion is the process by which the consumers distort
the incoming information whether it is done intentionally or unintentionally.
Individual will see what they want to see and what they expect to see.
Selective Blocking
Consumers tend to protect themselves from being bombarded with stimuli
by simply ‘tuning out’- blocking such stimuli from conscious awareness.
People skipping the TV commercials while watching their favourite
programmes by tuning to other channels is an example of such selective
blocking.
4.6 Thresholds in the Perceptual Process

Sensations can be experienced by individuals at different levels, depending
on the situations. As sensory input decreases, our ability to detect changes
in the input or intensity increases. When the stimulation is at its lowest level,
we attain maximum sensitivity. This ability of the human body to adjust to
the external environment by being more sensitive when needed actually

protects us from damaging, disruptive or irrelevant bombardment when the

input level is very high. These different levels of sensitivity can be classified
as under:
Absolute Threshold
The lowest level at which a person can experience a sensation is called
absolute threshold. This is the point at which the person can differentiate
between ‘something’ and ‘nothing’ for that particular stimulus. For example,
when you feel the cold water in a swimming pool, initially the coldness of
water is very clearly perceived. But once you get into the pool and swim for
sometime the coldness of the water is less noticeable and we often call this
as ‘getting used to’. In the field of perception, the term ‘adaptation’ refers to
this ‘getting used to’ certain sensations, i.e. becoming accommodated to a
certain level of stimulation. Many advertisers face the problem of sensory
adaptation, by which the consumers will get so used to their print ads and
TV commercials, that they will no longer ‘see’ them; that is these ads no
longer provide sufficient sensory input to be noticed. This is the reason why
they change their ad campaigns at regular intervals.
Some marketers try to increase the sensory input in order to get noticed in
all the advertising clutter. Some examples are, the entire page of the
newspaper being taken up, an entire bus painted on all sides with same ad,
etc. Some advertisers try the other route of decreasing the input, by having
a whole lot of empty space in a huge ad with very little space occupied by
the ad. Some TV ads use silence, the absence of audio sound to attract
attention. Some marketers try unusual media to gain attention. Fragrance
marketers include a small sealed swatch containing the perfume in the
magazine ad or the direct mail. Package designers also try to overcome the
absolute threshold levels of the package of the product to attract attention to
their product in the store shelf among all the competitor brands.

Differential Threshold
This is also called as “Just Noticeable Difference”. There is a law called as
Weber’s Law, which proposed the concept of Just Noticeable Difference
(JND). The Weber–Fechner law attempts to describe the relationship
between the physical magnitudes of stimuli and the perceived intensity of
the stimuli. Ernst Heinrich Weber (1795–1878) was one of the first people to
approach the study of the human response to a physical stimulus in a
quantitative fashion. Gustav Theodor Fechner (1801–1887) later offered an
elaborate theoretical interpretation of Weber's findings, which he called
simply Weber's law. According to this law, an additional level of stimulus
equivalent the JND must be added for the majority of people to perceive a
difference between the resulting stimulus and the initial stimulus. In simpler
words, the magnitude of change needed for this change to be noticed
depends on the base quantity. The larger the base quantity, larger is the
magnitude of change required to be noticed. For example, if a company is
marketing two sizes of ice cream bars of 6 inches and 3 inches length. For
cost cutting they reduce the length by half an inch in case of both these
sizes.
According to Weber’s Law the consumer is more likely to notice the

difference in the 3” bar than in the 6” bar. Similarly any product improvement
programme also has to take this into account. They have to improve the
product benefit under improvement to such a level that, it is above the Just
Noticeable Threshold. If it is less than this level, the consumer may not
notice it and if it is much above this level, the cost increase may be higher
than required. Same is the case of changes, which the firm wishes to make
in the size or contents of packing, price, etc. The marketers have to ensure
in such cases that, these changes are below the perceptible level so that the
consumer does not notice either the reduction in the packing size or the
increase in price. Even when marketers want to make any changes in their

packing design (to make it get a contemporary look), which has been in
existence for a number of years, they have to make these changes in
several steps - each change being below the JND level so that the
consumer does not notice the change.
Subliminal Perception
When people are stimulated below their level of conscious awareness, such
a process is called as ‘subliminal perception’ because the stimulus is below
the threshold level. Such stimuli are too weak or too brief to be consciously
seen or heard; but nevertheless strong enough to be perceived by a few
receptor cells. There have been many reports of marketers using subliminal
messages to influence consumption behaviour. Many studies undertaken by
academicians and researchers have found no evidence of subliminal
advertising persuading consumers to buy goods and services.
There is however some evidence that, subliminal methods can indirectly
influence attitudes and feelings towards a brand. There is no confirmation
that, this has influenced consumption motives or actions. There is a gap
between perception and persuasion. There is a general feeling that,
subliminal messages whether effective or not, are intended to deceive
consumers and hence not in public interest. Hence not many advertisers try
this method.
1. __________ is the process of acquiring, interpreting, selecting, and

organizing sensory information.
2. _______________ is the final step of attaching meaning to the stimulus

forming an impression as to whether it is an object of liking, & of what
value this object could be of.

3. _______________ Characteristics comprise of the nature of information

from the environment like products, brands, shops, marketing people,
friends, family, etc.
4. The lowest level at which a person can experience a sensation is called

___________ threshold.
5. ______________ Threshold is also called as “Just Noticeable

Difference”.
4.7 Perceptual Organisation

Consumers experience the stimuli they select from the environment after
organizing them into groups & perceive them as unified wholes. This
method of organizing simplifies the perception process for the consumers.
The principles of perceptual organisation are known as Gestalt psychology
(Gestalt in German means pattern or configuration). Gestalt psychology
(also Gestalt theory of the Berlin School) is a theory of mind and brain that
proposes that the operational principle of the brain is holistic, parallel, and
analog, with self-organizing tendencies; or, that the whole is greater than the
sum of its parts. The classic Gestalt example is a soap bubble, whose
spherical shape (its Gestalt) is not defined by a rigid template, or a
mathematical formula, but rather it emerges spontaneously by the parallel
action of surface tension acting at all points in the surface simultaneously.
There are three basic principles of perceptual organisation- Figure &
ground, Grouping & closure.
Figure and Ground

We have seen earlier that the stimuli, which are in contrast to the
environment, are more likely to be noticed. Simplest example is that of a
figure on a ground (i.e. background). The background is generally
considered as hazy, indefinite and continuous. The figure is perceived more

clearly as solid, well defined and in the forefront. The line which divides the
figure from the background is perceived to belong to the figure and not to
the background. Consider the example of music. Music can be a
‘background’ for their other activities or it can be a ‘figure’, wherein the
listener is totally concentrating on the music. Consumers have a tendency to
organize their perceptions into “figure and ground” relation ships.
There were some advertisements of some airline in USA, which had in the
background the twin towers of the World Trade centre in New York before
September 11 2001(when they were destroyed by terrorists). After this
shocking tragedy, the same advertisement when shown to some viewers
they considered the Twin Towers as the “figure” and the plane as the
“ground”. This reversal was the outcome of the painful events of September
2001. Hence the advertisers have to plan their ads carefully to make sure
that, the stimulus they want to be noticed is the ‘figure’ and not the ‘ground’.
Many advertisements confuse the consumers, because of the lack of clarity
in these two patterns and such campaigns will end up wasting a lot of
money.
Grouping
Consumers tend to group the stimuli so that they form a unified picture or
impression. Such grouping helps the consumer in memorizing the stimuli
and also for recalling them. For example, we tend to group the telephone
numbers into two or three blocks, so that they can be easily remembered. If
we see Thums Up being consumed by youth, who are into many
adventurous activities, we tend to associate Thums Up with youth and
adventure. The marketers use this psychology to imply certain desired
feelings and meanings in connection with their brands.

Closure
All individuals have a need for closure. This need is expressed by
organizing their perceptions to make into a complete picture even when the
pattern of stimuli received by them is incomplete. They consciously or
subconsciously fill in the missing pieces. An incomplete circle with a small
section missing is still perceived as a circle and not as an arc. Incomplete
messages are found to create better recall in the minds of the consumers.
Promotional messages which are required to be ‘filled in’ will compel the
consumer to complete the message and this act of involvement makes them
remember the message for a longer period. Many advertisers run the audio
of their frequently advertised TV commercial on radio without any change.
Consumers who are familiar with the TV ad perceive the audio track as
incomplete and hence in their need for completion will mentally play back
the visual content from memory. This technique has been found to be very
effective in creating strong recall value for these ads.
4.8 Perceptual Interpretation

People selectively perceive the stimuli and then organize them on the basis
of certain psychological principles. Subsequently the individual will interpret
the stimuli and this is also unique to the person. This interpretation depends
on their previous experience, on the possible explanations, and also their
motives and interests at the time of perception. Stimuli are often not very
clear. Some stimuli are weak, because of several factors like poor visibility,
very brief exposure, high background noise, constant fluctuations, different
angles of viewing, changing levels of illumination, etc. When stimuli are
highly ambiguous the consumer is likely to interpret them in such a way as
to serve to fulfill personal needs, wishes, interests, etc. Thus Perceptual
distortion is supposed to take place. Some of the influences that result in
perceptual distortion are discussed in the following paragraphs.

Physical Appearance
People tend to attribute the qualities they associate with certain people, to
others, who may resemble them, whether or not they consciously recognise
the similarity. Attractive men are perceived to be more successful than
average looking men. Hence attractive models are found to be more
persuasive and have a more positive influence on consumer attitudes.
Some other studies have established that highly attractive models are
having expertise regarding products like jewellery, cosmetics, perfume, etc.
and not problem solving products like anti dandruff shampoo, pimple
creams, etc. Advertisers have to keep this in mind while they select their
models so that there is a rational match between the advertised product and
the model used to promote it.
Stereo types
Each person normally carries pictures in his/her mind regarding the meaning
of different kinds of stimuli. These are called as stereotypes and they serve
as expectations in the mind of what specific situations, objects or people will
be like. These are important since such expectations will determine how
these stimuli are subsequently perceived.
First Impressions
It is said that first impressions are lasting impressions. In spite of this, each
person will not know which stimuli are important, relevant or useful for
future. Since first impressions are long lasting, it is essential that any new
product is perfected in all it’s attributes before launching in the market. If the
consumer gets a bad impression in the first use, correcting it subsequently
will not yield good results since any such communication about the
improved will not be accepted easily by the consumer who still carries in his
memory the bad experience.

Jumping to Conclusions
Before examining all relevant data many people tend to jump to conclusions.
Many consumers have the habit of deciding about all the attributes of a
brand being advertised just after listening to the initial portion of the ad. This
can happen in the case of print media also since the consumer may read a
few lines of the ad and come to conclusion. Hence copywriters have to keep
in mind this phenomenon and give all their powerful arguments in the
beginning of the ad. It has also been found by research that, most
consumers do not read the contents in the labels of food packages, not
even the quantity in the package. They just go by the size and shape of the
package and come to conclusion regarding the quantity inside. For example,
consumers concluded that an elongated package contains more volume
than the round package although both contained the same quantity. Such
findings have important applications in package design, advertising, pricing,
etc.
Halo Effect
The halo effect refers to a cognitive bias whereby the perception of a
particular trait is influenced by the perception of the former traits in a
sequence of interpretations. The halo effect is involved in Harold Kelley's
implicit personality theory, where the first traits we recognize in other people
then influence the interpretation and perception of latter ones (because of
our expectations). Attractive people are often judged as having a more
desirable personality and more skills than someone of average appearance.
Celebrities are used to endorse products that they have no expertise in
evaluating. Consumer researchers have expanded this theory to include the
evaluation of multiple objects based on the evaluation of just one dimension.
Using this principle many marketers use an established brand name of one
product to many other products in their range. In brand marketing, a halo
effect is one where the perceived positive features of a particular item

extend to a broader brand. It has been used to describe how the iPod has
had positive effect on perceptions of Apple’s other products. The term is
also widely used in the automotive industry, where a manufacturer may
produce an exceptional halo vehicle in order to promote sales of an entire
range.
4.9 Perceptual process and Marketing Strategy

Practically all the elements of marketing communications get affected by the
perceptual process of the consumer, most important of which are - product
design, brand names, packaging design, in store displays, print ads and
also TV commercials. There are some special areas of marketing strategy
wherein the consumer perceptual process has significant effect. These are
as under:
Price Perception
The price/quality relationship refers to the perception by most consumers
that a relatively high price is a sign of good quality. The belief in this
relationship is most important with complex products that are hard to test,
and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the more of a
premium they are prepared to pay. There are many cases wherein some
products were perceived as low quality when the price was lowered.
However excessive reliance on the price/quantity relationship by consumers
may lead to the raising of prices on all products and services, even those of
low quality, which in turn causes the price/quality relationship to no longer
apply. Premium pricing (also called prestige pricing) is the strategy of pricing
at, or near, the high end of the possible price range. People will buy a
premium priced product because:
1. They believe the high price is an indication of good quality;

2. They believe it to be a sign of self worth - "They are worth it" - It

authenticates their success and status - It is a signal to others that they
are a member of an exclusive group; and
3. They require flawless performance in this application - The cost of

product malfunction is too high to buy anything but the best - example:
heart pacemaker
The term Goldilocks pricing is commonly used to describe the practice of

providing a "gold-plated" version of a product, at a premium price, in order to
make the next-lower priced option look more reasonably priced; for
example, encouraging customers to see business-class airline seats as
good value for money by offering an even higher priced first-class option.
Similarly, third-class railway carriages in Victorian England are said to have
been built without windows, not so much to punish third-class customers (for
which there was no economic incentive), as to motivate those who could
afford second-class seats to pay for them instead of taking the cheaper
option. This is also known as a potential result of price discrimination.
The name derives from the Goldilocks story, in which Goldilocks chose
neither the hottest nor the coldest porridge, but instead the one that was
"just right". More technically, this form of pricing exploits the general
cognitive bias of aversion to extremes.
Consumers will always have a ‘reference price’ in their mind about each
product, at the time of purchase. If the actual price is lower than the
reference price the product is perceived as good value for money. Another
important aspect of consumer psychology is that there is a ‘band’ or
‘latitude’ of price i.e. the maximum and minimum levels of price in the
consumer’s mind about the product, which he/she wishes to purchase. If the
actual price is within this band the consumer will purchase the product. If it
is more than the maximum level, the consumer may perceive it to be too

high and reject the product purchase. If the actual price is below the
minimum level the consumer may perceive it as a substandard product and
again reject. Another way this principle works is that, consumers have
certain cut off levels for accepting a price and prices below this level will be
acceptable. Many marketers like Bata shoe company use this psychology
and adopt the ‘odd pricing’ method like Rs.99.00, 199.00, etc. Consumers
perceive Rs. 99 as below Rs.100 and hence acceptable.
Country of Origin
Country of origin is the country of manufacture, production, or growth where
an article or product comes from. There are differing rules of origin under
various national laws and international treaties. With the globalization and
consequent availability of many products from different parts of the world in
each country, most consumers have fixed perceptions about the quality from
different countries. For example the products from Germany are perceived
to be of high quality standards and those from China are perceived to be of
very low quality. Such negative and positive perceptions may change with
time. For example Japanese products were having a very poor quality
image in early 1960’s and today they are perceived to be top quality
producers.
Corporate Image
A corporate image refers to how a corporation is perceived. It is a generally
accepted image of what a company "stands for". The creation of a corporate
image is an exercise in perception management. It is created primarily by
marketing experts who use public relations and other forms of promotion to
suggest a mental picture to the public. Typically, a corporate image is
designed to be appealing to the public, so that the company can spark an
interest among consumers, create share of mind, generate brand equity,
and thus facilitate product sales.

The company does not solely create A corporation’s image. Other

contributors to a company's image could include news media, journalists,
labour unions, environmental organizations, and other NGOs. Corporations
are not the only form of organizations that create these types of images.
Governments, charitable organizations, criminal organizations, religious
organizations, political organizations, and educational organizations all tend
to have a unique image, an image that is partially deliberate and partially
accidental, partially self-created and partially exogenous.
4.10 Learning
Learning is a change in the content of long term memory. Learning is the
acquisition and development of memories and behaviors, including skills,
knowledge, understanding, values, and wisdom. It is the goal of education,
and the product of experience. Learning ranges from simple forms such as
habituation to more complex forms such as play (activity). The term learning
encompasses the total range from simple- almost reflexive responses to
abstract concepts and complex problem solving. There are four elements of
learning in the marketing context:
Motivation
Motivation acts as a spur to learning. Those who are motivated will
automatically look for education and information search in that particular
product or service. Those who are not motivated may completely avoid any
information on that product. The level of involvement will depend upon the
extent of consumer motivation in achieving the goal object. A person
interested in playing cricket may learn all about cricket through newspaper
reports, telecasting of matches, the product advertisements for the
equipment like bats, balls, pads, gloves etc. A person who is not interested
in cricket will ignore all this information.

Cues
If motives stimulate the learning, the cues are the stimuli, which give
direction to these motives. The person interested in cricket may see the ad
for a summer camp for teaching cricket and he may use this cue or stimulus
to learn it in a methodical way. Cues serve to direct consumer drives when
they are consistent with consumer expectations. Marketers should however
be cautious to provide cues that do not upset their expectations. For
example a person buying an up market fashion garment would expect it in
an elegant store & not in an ordinary shop. Similarly he/she would expect
such a product ad in an upscale fashion magazine. All the elements of the
marketing mix should be able to reinforce the cues to guide the consumer in
taking the final decision of purchase.
Response
How a consumer reacts to a stimulus or cue is the ‘response’. Learning can
occur even when the response is not overt. The marketer may not get any
response to his cues immediately or even for some length of time since the
consumer is not yet interested in this product. However the continuous
exposure to cues may influence the consumer to be favourably inclined
when he/she is ready to purchase this product at a later date. While cues
provide some direction, there will be many cues vying for the consumer’s
attention. Which cue will get the response will heavily depend on previous
learning of the consumer and how related responses were reinforced
previously.
Reinforcement
Reinforcement increases the likelihood of a specific response in future for
particular cues or stimuli. This is especially the case when there are several
steps are involved. For example, for preventing hair fall there may be three
products to be used one after another. If the first product provides some
relief it provides some reinforcement to go in for the second level. If however

there is no relief, the reinforcement does not take place and the consumer
may drop the product usage. This could also be extended to second time
purchase of the same product.
4.11 Theories of Learning

There are different behavioural learning theories also known as ‘stimulus-
response’ theories. Since they are based on the premise that observable
responses to specific external stimuli signal that learning has taken place.
There are different models to explain these responses, which are discussed
in the following paragraphs with their relevance to Marketing.
Cognitive Learning
This is what we normally call for the normal process of learning. This is the
process of acquiring new information from written or oral communication.
This type of learning can also be classified into three categories:
 Rote learning is a technique which avoids understanding the inner

complexities and inferences of the subject that is being learned and
instead focuses on memorizing the material so that it can be recalled by
the learner exactly the way it was read or heard. The major practice
involved in rote learning techniques is learning by repetition, based on
the idea that one will be able to quickly recall the meaning of the
material the more it is repeated.
Rote learning is used in diverse areas, from mathematics to music

to religion. Although it has been criticized by some schools of
thought, rote learning is a necessity in many situations. Many
advertisers aim simply to create a rote memory of their brand name
by repeated presentation. Top of the mind brand awareness helps
consumers to make everyday purchases more efficiently.

 Informal learning occurs through the experience of day-to-day

situations (for example, one would learn to look ahead while walking
because of the danger inherent in not paying attention to where one is
going). It is learning from life, during a meal at table with parents, Play,
exploration, etc. This will also be applicable to preference of certain
brands, which are learnt through this process.
 Formal learning is learning that takes place within a teacher-student

relationship, such as in a school or college system.
Classical Conditioning
Classical Conditioning (also Pavlovian or Respondent Conditioning) is
a form of associative learning, that was first demonstrated by Ivan
Pavlov. The typical procedure for inducing classical conditioning
involves paired presentations of a neutral stimulus along with a
stimulus of some significance. The neutral stimulus could be any
event that does not result in an overt behavioral response from the
organism under investigation. Pavlov referred to this as a Conditioned
Stimulus (CS). Conversely, presentation of the significant stimulus
necessarily evokes an innate, often reflexive, response. Pavlov called
these the Unconditioned Stimulus (US) and Unconditioned Response
(UR), respectively. If the CS and the US are repeatedly paired,
eventually the two stimuli become associated and the organism begins
to produce a behavioral response to the CS. Pavlov called this the
Conditioned Response (CR).
The original and most famous example of classical conditioning involved the
salivary conditioning of Pavlov's dogs. During his research on the
physiology of digestion in dogs, Pavlov noticed that, rather than simply
salivating in the presence of meat powder (an innate response to food that
he called the unconditioned response), the dogs began to salivate in the

presence of the lab technician who normally fed them. Pavlov called these
as “psychic secretions”. From this observation he predicted that, if a
particular stimulus in the dog’s surroundings was present when the dog was
presented with meat powder, then this stimulus would become associated
with food and cause salivation on its own. In his initial experiment, Pavlov
used bells to call the dogs to their food and, after a few repetitions, the dogs
started to salivate in response to the bell. Thus, a neutral stimulus (bell)
became a conditioned stimulus (CS) as a result of consistent pairing with
the unconditioned stimulus (US - meat powder in this example). Pavlov
referred to this learned relationship as a conditional reflex (now called
Conditioned Response).
This type of classical conditioning will be occurring in our everyday lives.

This has been proved in many marketing experiments. In an experiment in a
supermarket, the music pace was varied on different days from slow to fast.
On the days when slow music was played, the shoppers were found
spending more time in the store & also bought more products when
compared to the days on which fast music was played. This principle has
been used by marketers when they pair their brand with a likeable celebrity.
The celebrity’s personality by classical conditioning rubs on to the product
itself. Some business customers boast about their famous clients. Some
manufacturers go out of the way to get associated with prestigious retail
outlets.
Operant Conditioning:
It is also known as Instrumental conditioning and it differs from classical
conditioning primarily in the role and timing of reinforcement and was
developed by B.F.Skinner. Reinforcement and punishment, the core tools of
operant conditioning, are either positive (delivered following a response), or
negative (withdrawn following a response). This creates a total of four basic
consequences:

1. Positive reinforcement occurs when a behavior (response) is followed by

a favorable stimulus (commonly seen as pleasant) that increases the
frequency of that behavior. In the Skinner box experiment, a stimulus
such as food or sugar solution can be delivered when the rat engages in
a target behavior, such as pressing a lever.
2. Negative reinforcement occurs when a behavior (response) is followed
by the removal of an aversive stimulus (commonly seen as unpleasant)
thereby increasing that behavior's frequency. In the Skinner box
experiment, negative reinforcement can be a loud noise continuously
sounding inside the rat's cage until it engages in the target behavior,
such as pressing a lever, upon which the loud noise is removed.
3. Positive punishment (also called "Punishment by contingent stimulation")
occurs when a behavior (response) is followed by an aversive stimulus,
such as introducing a shock or loud noise, resulting in a decrease in that
behavior.
4. Negative punishment (also called "Punishment by contingent
withdrawal") occurs when a behavior (response) is followed by the
removal of a favorable stimulus, such as taking away a child's toy
following an undesired behavior, resulting in a decrease in that behavior.
Marketers make use of this concept by offering extrinsic rewards like

coupons, sweepstakes and rebates when their brand has no intrinsic ally
superior reward compared to competing brands. Many airlines offer frequent
flier programmes that accumulate mileage towards future free redemption.
Modeling
In this model the individual learns by observing others. Children learn from
their parents, from their teachers, individuals learn from experts, etc. This
type of learning is also called as imitation or imitative behaviour. There are
four classes of people who are likely to be imitated by others:

1. Persons superior in age/grade hierarchy

2. Persons superior in social status
3. Persons superior in intelligence ranking system
4. Superior technicians in any field
The choice of the model varies from culture to culture. The age hierarchy
works more in eastern countries like Japan, India, China, etc. where elders
are always respected and emulated. In western countries grade hierarchy is
operational. In most societies the more educated are imitated by less
educated persons, more skilled technicians are imitated by less skilled
technicians and those who are in higher social class, are imitated by those
in lower class. The middle class normally aspires to imitate the rich class.
4.12 Characteristics of learning

There are five characteristics of learning which are applicable irrespective of
the approach.
Strength of Learning
A strong and long lasting learned response requires several parameters.
The strength of learning is influenced by six factors: -importance, message
involvement, mood, reinforcement, repetition and imagery.
Importance
This refers to the value that the consumer places on the information to be
learned. More the importance of the information for the individual, the more
effective and efficient the person becomes in the learning process.
Importance is the dimension which distinguishes the high involvement
learning situations from the low involvement learning situations. Most of the
time marketers are faced with consumers in low involvement learning
situations.

Message Involvement
When a consumer is not very much motivated to learn, the strength of
learning can be increased, by causing the person to get more involved with
the message itself. Marketers use many techniques to increase the
message involvement. They make the ads more interesting by involving
factors such as a plot, possibility of surprise ending, uncertainty on the
message till the very end, etc.
Mood
Research indicates that a positive mood during the presentation of
information enhances its absorption. Learning enhancement caused by a
positive mood suggests to the marketers to enhance the consumer’s mood
through the commercials to improve the learning process.
Reinforcement
Anything that increases the likelihood that a given response will be repeated
in the future, is considered reinforcement. Reinforcement has a significant
impact on the speed at which learning occurs and also the duration of its
effect. Reinforcement could be positive or negative. Positive reinforcement
is a pleasant or desired effect. If a consumer visits a new restaurant and
finds the food tasty, service excellent and ambience very pleasant, will have
a positive reinforcement. Negative reinforcement is the removal or
avoidance of an unpleasant response. Saridon tablet is advertised with the
person suffering from severe headache getting relief with a single Saridon.
This is an example of negative reinforcement.
Punishment
This is the opposite of reinforcement. This is any consequence that
decreases the likelihood that a given response will be repeated in future. In
the example of the person visiting the new restaurant, if the food was not

tasty and the service poor this consumer is unlikely to visits the restaurant
again.
Repetition
More times the people are exposed to the same information the more likely
they will learn it. The effects of repetition will also be related to the
importance of the information and the reinforcement given. Since many
advertisements do not contain information of current importance to the
customers or direct rewards for learning, repetition of ads will play a key role
in the promotion process.
Imagery
The brand name, the corporate slogan, etc. create images in the minds of
the consumer. A properly selected brand name aids learning by leaving
verbal as well as pictorial dimensions in the minds of a consumer. However
marketers have to be careful in selecting a name which depicts a single
attribute of the brand. In such cases the advertised attribute which have
nothing to do with the brand name are difficult to remember. Pictures
associated with the brand are also images & they enhance the consumer’s
visual imagery which is a very effective learning devise. Hence the ads
should contain the key communication points in the form of images or
pictures which should also reinforce the headline. Background music, which
conveys meanings, congruent with the meaning being conveyed through the
verbal medium, has been found to be more effective in improving the
learning process of the consumer.
Extinction
Extinction is forgetting what has been learnt. Extinction occurs when the
reinforcement for the learned response is withdrawn, the learned response
is no longer used or the consumer is no longer reminded of the response.
The rate at which the extinction occurs is inversely related to the strength of
the original learning. There are some situations where the extinction is

desired. For example, manufacturers want consumers to forget some

unfavourable publicity or some outdated product image.
Stimulus Generalisation
The rub off effect is what is termed as stimulus generalisation. This occurs
when a response to one stimulus is elicited by a similar but distinct stimulus.
Thus a consumer, who learns that Surf Excel manufactured by Hindustan
Lever is a good product, assumes that another brand Lux soap made by the
same company should also be good. Stimulus generalisation is quite
common and most brand extensions are based on this premise.
Stimulus Discrimination
This refers to the process of learning to respond differently to similar but
distinct stimuli. At some point the stimulus generalisation becomes less
effective to the company and they would like the consumer to discriminate
the stimulus instead of grouping together. This is achieved by advertising
the specific brand differences. Sometimes, the product itself is altered in
shape, size or colour for increasing the product differentiation.
Response Environment
Consumers tend to learn more information than what they can readily
retrieve from their memory. One thing which helps in proper retrieval is the
strength of the original learning. Stronger the original learning the more
likely relevant information will be retrieved when required. The second factor
which affects this is the similarity of the retrieval environment to the original
environment in which the learning took place. Matching the retrieval
environment similar to learning environment is hence important to
marketers. This requires the knowledge of when and where the consumers
make the brand or store decisions. For example a company may project a
brand in a very pleasant and fun kind of situation without showing the
product package properly, the consumer may find it difficult to retrieve when
faced with many similarly packed products in the shelf of the store. Hence it

may be better to associate the response with the situation which is what the
consumer will face in the actual purchase situation.
4.13 Psychology of Simplification and Complication

In the real world the consumers may not follow the simple path of learning.
They are likely to either simplify or complicate the learning process under
different circumstance.
Simplification:
As the consumer keeps getting the experience of a lot of market related
information in his/her lifetime, the customer develops a strategy of
simplifying this enormous task by a process called ‘psychology of
simplification’. When same problems are encountered repeatedly, such
problems are ‘routinised’ with respect to their solutions. Problem
routinisation will ensure that there is no need to make any new decisions for
these problems. As consumers recall their previous experiences, they
simply purchase the same brand as before. Such a buying strategy is
termed as ‘habitual purchasing’. One of the underlying causes of brand
loyalty is habit purchase. The consumers follow this practice simply because
it simplifies their life. This is the psychology of simplification. With some
exceptions, the consumers tend to reduce their choices; not increase them.
This is needed especially in today’s marketplace which is flooded with too
many choices. Consumers are creatures of habit; the incentives to change
brands come from dissatisfaction with the current brand, lack of distinction
among different brands, or offers of distinctly superior value by a competing
brand.
Complication
The psychology of complication is the desire of the consumer to redefine a
problem so that new decisions can be made. This happens due to three
factors - Boredom, Maturation and forced irrelevance of Current solutions.

Boredom
Human beings inherently desire variety. Repeated experience with the same
stimulus will reduce its utility and the consumer will start looking for variety
and novelty. Such a desire for variety is mostly from products with social or
emotional value rather than performance value. Thus one does not get
bored of using a washing machine; but they may get bored with food,
clothing, perfume, recreational products, etc. which have sensory or
emotional value.
Maturation
Consumers tend to outgrow old tastes as they grow. This is called as
‘maturation’. This is not the case of getting bored with the old; it is rather a
feeling that old choices are no longer appropriate to the current time and
age. Life status change is one reason for maturation. Major events in
consumer’s life that change the status in life like moving to a new place,
family composition changes (marriage, divorce, death, birth, etc.),
employment status (appointment, promotion, etc.). These are some of the
examples of life status change. These changes result in two types of needs.
The first type of need is for products previously not needed like baby
products when the baby is expected. The second type of need is a
modification of the previous solution like an appointment may need more
formal dresses compared to the student life.
Maturation also may happen by a change in the self-concept that happens

from the change in reference groups. A teenager may change his friends
group which may in turn change the type of dresses worn. The third source
of maturation is due to the rising expectations from the same product. As the
consumers get satisfied with their previous expectations, their new
expectations will raise making the old products unsatisfactory. This is what
happens when consumers keep on buying latest models of computers,
automobiles etc.
Forced Irrelevance of Current solutions

This happens when the external environment makes the previous solutions
obsolete and irrelevant. Three sources, which create this change, are
marketers, business organisations and the government. Marketers may
force change by phasing out certain products or by not having adequate
stock at the retail counter or by going out of business. Thus consumer is
forced to look for alternatives. Business organisations may change their
employee medical insurance by which the employee may be forced to
change. Governments may bring in new regulations like banning gutka,
banning smoking in public places, banning certain imports, etc. which will
force the consumer to look for a change.

1. There are three basic principles of perceptual organisation- Figure &
ground, Grouping & closure.
2. The price/quality relationship refers to the perception by most
consumers that a relatively low price is a sign of good quality.
3. Classical Conditioning is a form of associative learning that was first
demonstrated by B.F.Skinner.
4. Anything that increases the likelihood that a given response will be
repeated in the future is considered reinforcement.
5. The psychology of simplification is the desire of the consumer to
redefine a problem so that new decisions can be made.
6. Consumers tend to outgrow old tastes as they grow. This is called as
‘maturation’.
4.14 Summary
In this unit, you have learnt the process of Perception and Learning in an
individual. You have studied the steps in the Perception Process like

Sensation, Organisation and Interpretation, the Factors affecting Perception

and the Thresholds in the Perceptual Process. You have also learnt the
process of Perceptual Organisation and Perceptual Interpretation. We have
understood how this can be helpful in Marketing Strategies. We have also
learnt the process of learning including Motivation, Cues, Response &
Reinforcement. We have also studied various Theories of Learning like
Cognitive Learning, Classical Conditioning, Operant Conditioning &
Modeling. You have also learnt the Characteristics of learning & the
Psychology of Simplification & Complication.
1. Explain the various steps involved in the perception process.

2. Explain how consumer characteristics affect perception.
3. What is selective interpretation and how does it affect perceptual
process?
4. Explain the meaning of Differential Threshold.
5. Explain “Halo Effect” with examples.

6. Describe how price quality relationship affects quality perception.
SAQ I
1. Perception
2. Interpretation
3. Stimulus
4. Absolute
5. Differential

SAQ II
1. True
2. False
3. False
4. True
5. False
6. True
TQs

Unit 5 Individual Determinants of

Consumer Behaviour
Structure
5.1 Introduction
Objectives
5.2 Motivation
5.3 Attitudes
5.4 Personality
5.5 Self concept
5.6 Summary
5.1 Introduction
Consumer Behaviour is influenced by many factors like, individual, group,
social, economical cultural determinants. Among them individual
determinants like, motivation, personality, attitude and self-concept play a
very important role. This chapter takes you through the details of the said
variables in individual determinants.
Objectives
 Explain the individual determinants of Consumer Behavior.
 Understand how these individual determinants like motivation,
personality, attitude and self-concept influence Consumer Behaviour.
 Describe the theories and models of these determinants of Consumer
Behaviour.

5.2 Motivation
Motivation is what makes people move and act. Motivation refers to the
initiation, direction, intensity and persistence of behavior. Motivation is
having the desire and willingness to do something. It is the driving force of
all human behaviour. This driving force is produced by a state of tension
which is the result of an unfulfilled need. Individuals always try to reduce this
tension by behaving in such a way, which is likely to fulfill their needs and
this response could be conscious or subconscious.
Motivation is formally defined as the state of drive or arousal, which impels

behaviour towards a goal object. Thus motivation is comprised of two
components –
1. Drive or arousal, and
2. Goal Object.
Drive or arousal provides the energy to take action. Goal object is

something which the individual strives to achieve to reduce tension. This
provides the direction to the individual to channelise the energy to act. There
are different types of needs and goal objects, which motivate a consumer.
Needs:
All individuals have needs – some are innate and some are acquired. Innate
needs are biogenic or physiological like food, water, clothing, etc. These are
also known as primary needs. Individuals also acquire needs as a
response to their environment. These are known as acquired needs or
secondary needs. These are generally psychological or psychogenic.
These are also termed as motives. Examples include prestige, affection,
power, etc.
Goal Objects:
These are the results, which each individual seeks. All behaviour is goal
object oriented. There could be generic goals, which are the general

categories of goals, which the consumers seek in order to fulfill their needs.
For example, if the consumer states that he needs something by which he
can clean his teeth, this is the generic goal. In this state the goal object can
be of any product or any brand. The next stage is what is of interest for
marketers and this is the product specific goal object, which clearly
specifies the product as well as the brand. For example, if the consumer
specifies that, he wants Colgate brand toothpaste in 200 Gms tube, this is a
product specific goal object.
Selection of Goals:
For each need there could be different goal objects, that could satisfy the
need. Consumers select their goal objects depending on their experiences,
physical capacity, cultural environment and values, social environment, etc.
The goal object has to be physically accessible and also socially acceptable.
A consumer’s self perception also influences this selection. The consumer
always tries to select a goal object which would be in consonance with the
self image. A product, which would be closest to the consumer’s self image
is most likely to get selected.
Theories of Motivation
There are a number of theories of motivation and many of them are very
useful for a marketer. We shall deal with a few of them in this unit.
 Maslow’s Hierarchy of Needs:

This is a theory in psychology, that Abraham Maslow proposed in his 1943
paper “A Theory of Human Motivation”, which he subsequently extended to
include his observations of humans' innate curiosity. Maslow's theory
contended that as humans meet 'basic needs', they seek to satisfy
successively 'higher needs' that occupy a set hierarchy. Higher level needs
are dormant till the lower levels are satisfied. In effect, according to this
theory, dissatisfaction and not satisfaction motivates behaviour.

This theory is based on four assumptions:

a) All human beings acquire a similar set of motives through genetic
factors as also social influences.
b) Some motives among these are more basic than others.
c) First the more basic motives are to be satisfied to a minimum level
before other motives are activated.
d) As more and more basic motives are satisfied, more advanced motives
come into effect.
Based on the above, Maslow proposed a hierarchy of needs. This

hierarchy consists of the following needs- from the lowest to the
highest (along with examples):
e) Physiological needs (hunger, thirst, etc.)-food, water, medicines, etc.:
This is the need required to sustain biological life; also known as
biogenic or primary needs. These needs are dominant when they are
unsatisfied. For example, for a person who is extremely hungry, he will
have no other interest but food. He will want only food at that time.
f) Safety & security needs (Protection, safety, etc.)- Smoke detectors,
water purifiers, vitamin tablets, insurance, seat belts, safety helmets,
etc. After the first level is satisfied, safety & security needs become the
motivators for an individual’s behaviour. These needs are concerned not
only with physical safety but also with Stability, order, routine, familiarity,
& control over one’s life & environment. Health related products,
insurance, savings accounts, education, vocational training, etc. are
examples of these needs.
g) Belongingness & love needs (social needs) - cosmetics, entertainment,
gifts, greeting cards, gourmet foods, etc. This third level is the need for
love, affection, acceptance, etc. Individuals look for warm and satisfying
human relationships with other people and are motivated by their love

for their families. Because of the importance of such feelings, the

advertisers utilize this theme in many of their advertisements.
h) Esteem & ego needs (self-esteem, recognition, status, etc.)- comfortable
furniture, automobiles, hobbies, good clothes, etc. When social needs
are satisfied, the fourth level becomes operative. This is concerned with
ego needs. This can be inward directed like self acceptance. Self
esteem, success, independence, etc. or outwardly directed like prestige,
reputation, status, recognition, etc. The desire to “show off” one’s
success and achievement through certain product possessions is an
example of outwardly oriented ego need.
i) Self-actualization (self-development) - education, meditation, yoga,
religious rituals, mythologies, museums, etc. Maslow felt that most
people do not satisfy their ego needs sufficiently to move to the next
level i.e. the need for self actualization or self fulfillment. Maslow felt that
the self actualization is not necessarily a creative urge; but it may take
that form. Many large companies try to encourage their highly paid
employees to find gratification and self-fulfillment in the work place by
using this theory.
 McGuire’s Psychological Motives

McGuire proposed a system of classification, by which marketers could
isolate motives likely to be involved in various consumption situations. In this
system, motivation is first divided into four categories based on two criteria:
a) Cognitive motivation or affective motivation: Cognitive motives deal with
a consumer’s need for adapting to the environment and achieving a
sense of meaning while satisfying the need. Affective motive is the one
wherein the individual gets a feeling of satisfaction while attaining
personal goals.

b) Preservation of status quo or growth focus: Status-quo goal emphasizes

on maintaining equilibrium while the growth-oriented motive emphasizes
development.
These four categories are further divided into 16 categories, based on the
source and objective of the motive as under:
a) Whether the behaviour is actively initiated or whether it is in response to
the environment.
b) Whether the behaviour helps the consumer to achieve a new internal
state or whether it creates new external relationship to the environment.
All these 16 motives are described briefly in the following paragraphs:
 Cognitive Preservation Motives:

1. Need for consistency (active, internal): A consumer always desires to
have consistency in attitudes, behaviours, opinions, self-image, etc. If
there is any inconsistency, the consumer will try to reduce such
inconsistency. One of the examples is that of “Cognitive Dissonance”
wherein the consumer tries to resolve the conflict in his mind of a wrong
decision on a purchase by actively supporting decision in his own mind
by selective exposure and search. This will be dealt with more detail
later. It is important for marketers to design their advertising campaigns
so that the consumer beliefs are consistent with the information provided
in the advertisement. If the objective of the marketer is to change the
consumer’s attitude, different strategies have to be used which will be
discussed later.
2. Need for attribution (active, external): This motive attributes the
reason for a favourable or unfavourable outcome of a decision to self or
to some outside element. This is based an area of research called as “
Attribution Theory” When a consumer feels that the salesman who is
describing the product features is doing so for getting his commission,

he/she will discount the advice by attributing sales motive to the

salesman. A similar advice given by a friend or relative may be accepted
more readily since the consumer feels that this person is trying to be
helpful. Since the consumers always attribute motives to the messages
received by them from advertisements or sales people, many of these
messages may not have the intended impact. One approach to
overcome this is to use a credible spokes person in the ads.
3. Need to categorise (passive, internal): Consumers always organize
the information received by them in meaningful and manageable
categories. This will help them to process the vast amount of information
in a proper way. For example, the consumer may categorise the price
parameter of a product while taking a purchase decision. Hence Bata’s
pricing strategy of prices for their footwear such as Rs. 99.95 instead of
Rs. 100 will elicit better response since the consumer will categorise this
product as being below Rs.100 level.
4. Need for objectification (passive, external): Feelings, impressions
and attitudes of consumers are established by observing and comparing
cues and symbols from outside. An individual always compares own
behaviour with that of others and comes to conclusions as to these
impressions. Clothing companies like Raymonds make use of this need
to promote their products by presenting a subtle meaning of the desired
image and lifestyle to the consumer.
 Cognitive Growth Motives:
1. Need for autonomy (active, internal): This is the need for
individuality and independence. This is characteristic of some
cultures like that of USA. All cultures have this need at different
levels, depending on the social acceptance of this need. While in
America this need is actively encouraged from childhood, in
Japan, this need is discouraged. Marketers respond to this need
by designing their products with unique features or by offering a

wide variety of products. Many go for customisation of options as
per the individualistic needs. Many products are advertised as
unique, independent and individualistic to cater to this need.
2. Need for stimulation (active, external): This is a variety seeking

behaviour of a consumer just for self-stimulation. This behaviour
results in brand switching and also impulse purchases. This need
for stimulation keeps changing over time. Some consumers who in
their early years want rapid changes become more stable over a
period of time desiring stability. Some consumers who prefer
stable environments may start getting bored & then look for
stimulation by desiring change.
3. Teleological Need (passive, internal): Consumers have certain

images of desired outcomes and they try to compare that to their
current status. Behaviours are constantly changed and the results
are continuously monitored, by moving towards the desired state.
This motive moves people to prefer certain patterns like good guys
winning, hero and heroine getting together, etc. in mass media like
movies, books, television serials etc. Marketers make use of these
motives by designing their ad campaigns suitably.
4. Utilitarian Need (Passive, external): In this need, consumer is vied

as a problem solver who always approaches situations or
opportunities to acquire useful information and skills. For example,
a consumer may learn new fashions and clothing styles, etiquette,
lifestyles, etc. while watching a movie or a TV serial. Consumers

may also approach advertising campaigns and store displays as a

source of learning for future or current purchase decisions.
 Affective Preservation Motives:

1. Need for tension Reduction (active, internal): Individuals are always
encountering situations which will induce stress and tension. In order to
manage this, consumers look for products and services to reduce
tension. Recreational products, holidays, etc. cater to this need.
2. Need for Expression (active, external): This is the need of the

individual to express his/her identity to others. They feel the need to
communicate to others, who and what they are by their actions, which
include purchase and use of certain products and services. Clothing,
automobiles, holidays in exotic locations, etc. allow the consumers to
express their identity to others since these products have symbolic or
expressive meanings. Many marketers have promoted their products to
cater to this need by proper brand image building.
3. Need for Ego Defense (passive, internal): When a consumer’s identity

is threatened, he/she will be motivated to defend and protect the self-
image by certain behaviours and attitudes. A person who feels insecure
may go for well-known brands for highly visible products to avoid any
chance of socially incorrect purchase.
4. Need for Reinforcement (passive, external): Because of expectation

of appreciation based on past experiences, individuals act in certain
ways. Many brands of clothing, furniture, paintings, handicrafts, etc. are
designed to cater to this need wherein consumer expects appreciation
from the society.

 Affective Growth Motives:

1. Need for Assertion (active, internal): Many individuals seek success,
admiration and dominance and they give a lot of importance to power,
accomplishments and self esteem. Many sports goods and footwear are
catering to this need.
2. Need for Affiliation (active, external): This is the need to develop
mutually helpful and satisfying relationships with others by seeking
acceptance and affection in interpersonal relations. This translates into a
need for membership in groups and it is a critical part of most
consumers’ lives. Many ad campaigns make use of such relationship
themes.
3. Need for Identification (passive, internal): Every individual plays
different roles in different situations. A woman may be a mother to the
children, a cook in the kitchen, an executive in an organisation, a
member of a women’s club, etc. Individuals gain pleasure from adding
new satisfying roles and also by increasing the significance of already
adopted roles. Many marketers promote their products to satisfy this
need by encouraging consumers to assume new roles by using their
products.
4. Need for modeling (passive, external): This is the tendency of
individuals to base their behavior on others. Children try to imitate elders
while learning to be consumers. Marketers use this need by showing
desirable types of individuals using their brands.
Other Models:
 Murray’s List of Psychogenic Needs:
Murray identified six psychogenic needs of individuals resulting in certain
marketplace behaviours. These are:
1. Autonomy need-results in impulse buying, wearing unconventional
clothes, etc.

2. Dominance need- results in aggressively demanding attention in service

organisations
3. Nurturance need – results in donating to humanitarian causes
4. Exhibition need- results in wearing high fashion clothing
5. Cognizance need- results in visiting museums, learning about new
technology, etc.
6. Exposition need- results in playing opinion leaders.
 Dichter’s list of consumption motives:

Ernest Dichter, who was a strong believer in Sigmund Freud’s
Psychoanalytical theory of personality, identified a set of motives, which
underlie an individual’s consumption of diverse products. Since many of
these motives are supposed to influence the consumption decision sub
consciously, many advertisers have utilized this list by incorporating
symbolism in their product advertising. This list of motives and the examples
of consumption articles associated with each motive are as under:
1. Mastery over environment: Kitchen Appliances, Power tools
2. Status: Scotch Whisky, luxury car
3. Rewards: Chocolates, Sweets, Flowers, Gifts
4. Individuality: Tattoos, Flashy garments, Gourmet foods
5. Social Acceptance: Companionship, Sharing Coffee drinking
6. Love and affection: Toys for children, jewellery for wife
7. Security: Full drawer of neatly ironed shirts and pants
8. Masculinity: Toy Guns, heavy Shoes
9. Femininity: Dolls, decorations
10. Eroticism: Licking type Ice Cream bars, certain perfumes
11. Dis-alienation: Listening to and calling in TV talk shows (to stay
connected)
12. Moral Purity/Cleanliness; White bread. Taking bath, khadi garments
13. Magic/mystery: Religious rituals, pyramids, and vastu.

Many more perspectives, theories and models are there in the classic
literature of human needs. Marketers will have to evaluate the various
models while applying for specific marketing problems.
Customer Emotions and Moods:

Emotions
Emotions are closely related to needs. Emotions are also capable of driving
an individual toward a goal object. Deprivations of goal objects may be
experienced as negative emotions and their attainment may be experienced
as positive emotions. A human being always tries to seek positive emotional
experiences and avoid negative emotional experiences.
Emotion, in its most general definition, is a complex psychophysical

process, that arises spontaneously rather than through conscious effort, and
evokes either a positive or negative psychological response or physical
expressions, often involuntary, related to feelings, perceptions or beliefs
about elements, objects or relations between them, in reality or in the
imagination.
Emotions have three components: physiological, behavioural &

cognitive.
Physiological component is the one, which happens by reflex –
instantaneously and automatically as a response to a stimulus. Feelings of
tremors, butterflies in the stomach, sudden perspiration, and sudden burst of
energy, etc. in response to some external cues are examples of this
component.
After this, the next stage is that of the cognitive component- the thinking
stage, when the individual tries to understand the stimulus- its meaning,
whether friend or foe, etc.

Depending on the cognitive appraisal and the understanding of the initial

stimulus, there could be further physiological response or behaviour – this
time at a reduced level after calming down.
Marketers can use this concept in two ways:

1. The product or service may be designed to fit appropriate consumer
emotions. This takes the shape of designing the stimulus.
2. The second application is in helping in the cognitive appraisal. This can
be done by proper communication such as attaching symbolism to
products & services in advertising or in explaining certain deviations
from the expected marketplace outcomes. The recent example is that of
Nokia handling the problem of defective batteries in their cell phones.
Psychologist Robert Plutchic has proposed eight primary emotions &
eight secondary emotions. The primary emotions & the way of
measuring these emotions by using relevant adjectives are as under:
a) Fear: threatened, frightened, intimidated
b) Anger: hostile, annoyed, irritated
c) Joy: happy, cheerful, delighted
d) Sadness: gloomy, sad, depressed
e) Acceptance: helped, accepted, trusting
f) Disgust: disgusted, offended, unpleasant
g) Anticipation: alert, attentive, curious
h) Surprise: puzzled, confused, startled
Other emotions experienced by individuals are the combinations of these
emotions. For example, joy & acceptance combination results in the emotion
of love. The other such secondary emotions are:
Acceptance + Fear = Submission
Fear + Surprise = Awe
Surprise + Sadness = Disappointment
Sadness + Disgust = Remorse

Disgust + Anger = Contempt

Anger + Anticipation = Aggressiveness
Anticipation + Joy = Optimism
There are many research studies linking consumption of products and

services to directly experienced emotions. These studies have helped
marketers in designing many advertising campaigns and also in adding
certain features in the products to take care of positive or negative
emotions.
Moods:
A mood is a relatively less intensive emotional or affective state. Moods
differ from emotions in that they are less specific, often less intense, less
likely to be triggered by a particular stimulus or event, and temporary.
Moods generally have either a positive or negative valence. In other words,
people often speak of being in a good or bad mood, unlike acute, emotional
feelings like fear and surprise. Mood also differs from temperament or
personality traits which are even more general and long lasting. However,
personality traits (e.g. Optimism, Neuroticism) tend to predispose certain
types of moods. Mood is an internal, subjective state, but it often can be
inferred from posture and other observable behaviors. Moods affect the
consumer behaviour in general and also the response of the consumer to
the marketing activities to which he/she is exposed to at the time. Hence this
is a very important concept for marketing.
Some examples of the marketing stimuli, which affect the moods of

consumers (whether positive or negative), are as under:
 The ambience of a store or a restaurant
 The response of a sales person
 The sensory features of the product
 The tone & manner of the advertising

Moods have been found to result in favourable or unfavourable response to

the marketer’s efforts. Consumer researchers have found that customers
are found to linger longer in positive mood environments and feel more
positive towards brands, which create feelings of warmth. The recent
advertisement campaign of Surf Excel – “Daag Achcha Hain Na”, is utilizing
this concept in creating a positive feeling towards their product. Marketers
can use advertising, point of sale material, celebrity endorsements, free
gifts, store ambience, etc. to induce positive moods in consumers to enable
a more positive evaluation of their brand thereby influencing choice.
Motivational Research:
Motivational research is invariably qualitative research, designed to find out
consumers’ subconscious or hidden motivations, based on the assumption
that, the consumers are not always aware of the reasons for their behaviour.
Motivational research has been successfully used to discover underlying
feelings, attitudes and emotions concerning any product, service or brand
use.
However there have been some criticisms of motivational research.

Because of the intensive nature of the qualitative research, samples were
necessarily small. Thus there was concern that about generalizing findings
to the entire market. Criticism was also about the projective tests, which
were originally designed and developed for clinical research, rather than for
consumer behavior specifically.
Despite all these criticisms, motivational research is still regarded as an

important tool by marketers, who want to gain deeper insight into the
unexplained reasons of consumer behavior beyond what conventional
marketing research techniques can yield. Since these motivational
researches often reveal unsuspected consumer motivations concerning
product or brand usage, the principle use of such research is in

development of new ideas for promotional campaigns- ideas, which can

penetrate the consumers’ conscious awareness by appealing to
unrecognized needs.
Motivational research also provides marketers the basic knowledge for new
product development and enables them to predict consumer behaviour to
new product ideas and advertising to avoid costly errors. Further, these
qualitative research findings will pave the way for the researchers to design
structured quantitative marketing research studies, to be conducted on a
larger more representative sample of customers.
In spite of all the criticisms of motivational research, there is new compelling

evidence that, the subconscious is the site of a far larger portion of mental
life. The subconscious mind may understand and respond to non-verbal
symbols, form emotional responses and guide actions for the consumer
largely independent of the conscious awareness. Hence despite some
shortcomings, motivational research has been proved to be of great value to
marketers concerned with developing new product ideas & new advertising
copy appeals.
Motivation Theory and Marketing Strategy:

Consumers do not buy products; they buy motive satisfaction or solutions to
their problems or the benefits. For example, consumers do not buy perfume;
they buy romance, sex appeal, sensual pleasure, sophistication, or many
other emotional and psychological benefits. Marketers should recognise that
they are not selling product attributes; but they are selling product benefits.
It is important to discover the motives that their products and brands can
satisfy and develop marketing mixes around these motives. There are many
instances wherein multiple motives are involved in consumer behaviour.
There are three steps in using these principles in developing suitable
marketing strategies:

a) Discovering Purchase Motives:

When a consumer is asked to tell the researcher the reasons why he
buys a certain product, there are two types of responses, which are
received:
1. Motives, which are known to the consumer and freely admitted, are
called as ‘Manifest Motives’. These are the motives the consumer
immediately communicates without any hesitation. Motives, which
conform to a society’s prevailing value system, are more likely to be
manifest than those in conflict with such values are.
2. The second group of motives which are either unknown to the
consumer or that he /she is reluctant to admit are called as ‘Latent
Motives’.
The task of a Marketer is to determine the combination of manifest as

well as latent motives influencing the target consumer. Manifest motives
are relatively easy to determine. Direct questions will generally produce
reasonably accurate assessments of these motives. Determining the
latent motives is however substantially more complex and difficult.
Motivational research or projective techniques are designed to provide
information on latent motives. Apart from the traditional projective
techniques used on a focus group, there are new developments like
‘laddering’ or constructing a ‘ means-end’ or ‘benefit’ chain. A product or
brand is shown to a consumer who names all the benefits that use of
that product may provide. Then for each benefit mentioned, the
consumer is asked to identify further benefits that each of these named
benefits will provide. This is repeated till the consumer can no longer
identify additional benefits.

b) Designing the Marketing Strategy:

This is the next step after understanding the combination of motives
influencing the consumer. This covers all aspects from product
designing to marketing communications. There are several
considerations while designing these strategies. First, to the extent
possible the product must provide more than one benefit, depending on
its importance and the advertising should communicate these multiple
benefits. Direct appeals are generally effective for manifest motives
since consumers are aware and willing to discuss these motives.
However since the latent motives are quite often not completely socially
desirable, indirect appeals are frequently used. The ad campaign should
cover the target consumer’s manifest as well as latent motives for
purchasing the product.
c) Handling Motivational Conflicts:

With the multiplicity of manifest and latent motives of each consumer
and the many situations in which these motives are activated, there are
frequent conflicts between motives. The marketer should analyse the
situations that are likely to result in a motivational conflict, provide a
solution to the conflict and attract the patronage of these consumers
who are facing the conflict. There are three types of conflict, which are
important to marketers:
d) Approach-Approach conflict: The consumer may face a conflict
between two products or services to take a decision. For example a
consumer may have to decide on whether to take his family for a holiday
or buy an air conditioners for the house with the limited budget. The
conflict is normally resolved by a timely advertisement for either of these
alternatives or a price modification like- ‘buy now pay later’ offer which
could result in the selection of both alternatives.

e) Approach-Avoidance conflict: A person who is worried about his/her

weight and at the same time wanting an ice cream, may face this type of
conflict The development of low calorie or pro-biotic ice cream reduces
this conflict and allows the diet conscious consumer to eat the ice cream
at the same time controlling the calorie intake. Similarly, people who
want to enjoy sunbathing in a beach may be worried about the suntan
and also health risks of sun exposure. The marketer who offers a sun
tan lotion, which will take care of these concerns will reduce the conflict
of the consumer, who can enjoy the sun bathing after applying this
lotion.
f) Avoidance-Avoidance conflict: One example is that of a major
breakdown of the washing machine and the consumer may not spend
on a new washing machine, or pay to have the old machine repaired or
go without the machine. Here again the offer of purchase with
installment payments and offer of exchange of new machine for the old
one will reduce the conflict for the consumer to motivate him to purchase
the new machine. The other option is for the old brand of washing
machine offering an annual maintenance contract, which will take care
of the maintenance problems.
5.3 Attitudes
Attitude is a hypothetical construct that represents an individual's like or
dislike for an item. Attitudes are positive, negative or neutral views of an
"attitude object": i.e. a person, behaviour or event. People can also be
"ambivalent" towards a target, meaning that they simultaneously possess a
positive and a negative bias towards the attitude in question.
Attitudes are defined as learned predispositions to respond to an object or

class of objects in a consistently favourable or unfavourable way.

Attitudes are learnt and they are formed on the basis of some experience or
information about the object. The object in this context refers to many
market related concepts like a product, brand, product category, service,
product use, people, advertisement, price, retail outlet, etc.
Attitudes remain in the mind. This is what is known as predisposition and

this will propel the consumer towards behaving in a certain way or prevent
the consumer from behaving in another way.
Attitudes result in consistent response- favourable or unfavourable.

However despite their consistency attitudes are not necessarily permanent
and they do change.
Attitudes come from judgments. Attitudes develop on the basis of three

factors- affect, behavioral change or conation and cognition. The
affective response is a physiological response that expresses an individual's
preference for an entity. The behavioral intention is a verbal indication of the
intention of an individual. The cognitive response is a cognitive evaluation of
the entity to form an attitude. Most attitudes in individuals are a result of
observational learning from their environment. The link between attitude and
behavior exists but depends on human behavior, some of which is irrational.
For example, a person who is in favor of blood transfusion may not donate
blood. This makes sense if the person does not like the sight of blood, which
explains this irrationality.
The above three factors are discussed in more detail in the following
paragraphs:
Cognitions are also called beliefs. Beliefs are expectations of what

something is or is not; or what something will do or will not do. There are
three types of beliefs- descriptive, evaluative and normative.

Descriptive beliefs are about the quality or attributes of the object or

person. The examples are- ‘this computer has a large memory or’, ‘this
airline is always late”, etc.
Evaluative beliefs are about personal likes and dislikes, preferences, etc.
Normative beliefs are moral & ethical in nature and mostly they relate to
the way someone acts.
Hierarchies in Attitudes
The three components of attitude are related and the sequence in which
these components occur for a person is known as ‘hierarchy of attitudes’
There are three types of attitude hierarchy which are discussed in the
a) Learning Hierarchy: This is the most commonly occurring hierarchy. In
this cognition or thoughts come first, affect or feelings come next and
conative or action comes last. In this case the consumer thinks first,
feels next and acts last. The learning hierarchy assumes brand beliefs
lead to brand feelings and finally to brand purchase. An example is that
of choosing a place for a holiday. In this case the consumer collects all
the information about several alternatives, and based on the judgment of
suitable alternatives evaluate the personal feelings generated by each of
the alternatives and then finally decide on which place to go.
b) Emotional Hierarchy: Here the consumer feels first and then acts and
thinks last. Based on the feelings towards a brand the consumer buys or
avoids a brand. The thinking and learning takes place through product
usage. In this case, considering the example of holiday planning, the
consumer may have some positive feelings about some beach resort,
which the consumer has seen on TV and decide on this without going
into any other information. The cognition or learning process takes place
last when the consumer is staying in the resort.

c) Low Involvement Hierarchy: This is the case wherein the consumer is

not very much involved since not much is at stake unlike in the case of
the earlier hierarchies of learning and emotional hierarchies where the
consumer is highly involved. Take the example of a consumer who sees
a new type of brown bread which seems to be good while shopping for
other products in a store. The consumer may not think much about this
and simply buy it and take it home. Thus the action of purchase
(Conation) comes first in such a case, then the feelings (affect) and then
thoughts (cognitive).
Factors affecting Attitude Change:

Attitudes can be changed through persuasion. The celebrated work of Carl
Hovland, at Yale University in the 1950s and 1960s, helped to advance
knowledge of persuasion. In Hovland's view, we should understand attitude
change as a response to communication. He and his colleagues did
experimental research into the factors that can affect the persuasiveness of
a message:
1. Target Characteristics: These are characteristics that refer to the
person who receives and processes a message. One such is
intelligence trait intelligence – it seems that more intelligent people are
less easily persuaded by one-sided messages. Another variable that has
been studied in this category is self esteem. Although it is sometimes
thought that those higher in self-esteem are less easily persuaded, there
is some evidence that the relationship between self-esteem and
persuasibility is actually curvilinear, with people of moderate self-esteem
being more easily persuaded than both those of high and low self-
esteem levels. The mind frame and mood of the target also plays a role
in this process.

2. Source Characteristics: The major source characteristics are

expertise, Trust trustworthiness and Interpersonal attraction /
attractiveness. The credibility of a perceived message has been found to
be a key variable here. If one reads a report on health and believes it
comes from a professional medical journal, one may be more easily
persuaded than if one believes it is from a popular newspaper. Some
psychologists have debated whether this is a long-lasting effect and
Hovland and Weiss (1951) found the effect of telling people that a
message came from a credible source disappeared after several weeks
(the so-called "sleeper effect"). Whether there is a sleeper effect is
controversial. Received wisdom is that if people are informed of the
source of a message before hearing it, there is less likelihood of a
sleeper effect than if they are told a message and then told its source.
3. Message Characteristics: The nature of the message plays a role in
persuasion. Sometimes presenting both sides of a story is useful to help
change attitudes.
4. Cognitive Routes: A message can appeal to an individual's cognitive
evaluation to help change an attitude. This is studied in more detail in
the coming paragraphs.
Routes for Changing of Attitude

There are many questions faced by marketers like why do some attitudes
persist indefinitely while some others change quite often? To understand
such issues and also to influence changes in consumer attitudes, one has to
understand how attitudes can be formed where none existed before and
how the already existing attitudes can be changed. There are three routes
for attitude formation and change: Cognitive, affective and conative.
a) Cognitive Route: This is the most common and effective approach. In
this case, the cognitive component of the consumer’s attitude is focused

upon. There are four marketing strategies to achieve changes in attitude

through this route:
i) Change beliefs: In this strategy, the marketer tries to shift the
beliefs of the consumer about the performance of the brand in one or
more attributes. This is done by providing facts & statements about
the performance of the particular attribute. When Coca-Cola faced
the accusation that pesticide residues were found in many Coke
bottles, they advertised giving the lab reports of reputed testing
laboratories to prove that the pesticide residue was within tolerable
limits.
ii) Shift importance: Most consumers organize the various attributes
of a brand in their mind in the order of their importance. Marketers try
this method of convincing the consumer that the strong attributes of
their brand are most important to the consumer. For example,
Saffola brand cooking oil advertises that controlling cholesterol is
important to the consumer and by inference since Saffola is known
for this attribute the consumer is persuaded to change to this brand.
iii) Add beliefs: This is another approach in which the marketer tries to
add new beliefs to the already existing set of beliefs, pertaining to
the brand attributes. One beer brand started advertising that date of
packing of beer is important since freshness is an important attribute.
This was relatively unknown to the consumer earlier and the
consumer never bothered to look at the packing date. After this
campaign the consumer started considering the age of beer as a
relevant attribute.
iv) Change ideal: In this strategy, the marketer tries to change the
perceptions of the ideal brand. There are many five star hotels that
have come up recently with proper certification on eco friendly
concept being followed in their hotel. They try to change the attitude

of the hotel guests to consider an eco friendly hotel as an ideal

attribute for an ideal brand.
b) Affective Route: Many companies try to influence consumers’ liking of

their brand without trying to change the beliefs. If the liking for the
product increases in the mind of the consumer, it will lead to positive
beliefs which in turn will lead to purchase of the brand. There are three
basic approaches to achieve this:
i) Classical Conditioning: In this approach a stimulus the consumer
likes such as music is consistently paired with the brand name. Over
a period, some of the positive feelings associated with the music will
get transferred to the brand. Other such stimuli used are pictures,
which create, warm, loving feelings, etc.
ii) Affect towards ad: Positive feelings towards the ad may increase the
liking for the brand. Using humour, celebrities, or emotional stories in
the ads increase the affect towards the ad. Ads which arouse
negative feelings or emotions like fear, guilt, sorrow, etc. can also
bring in attitude change. For example CRY (Child Relief & You) a
charity organisation shows pictures of destitute children to generate
sympathy and thus contributions to the cause.
iii) Mere Exposure: Just by increased exposure brand preference can
be improved. Presenting the brand to the consumer on a large
number of occasions does this. Repetitive advertisements of low
involvement products have been proven to increase the liking of the
consumer and subsequent purchase.
Thus, in this route which utilizes the concept of classical conditioning,

the following points will have to be noted:
– Advertisements with this concept need not contain cognitive (Factual or
attribute) information.

– Liking of the consumer for the ad itself will be critical for this type of
campaign
– Repetition of the ads is most important.
– Traditional types of measuring effectiveness of advertising focusing on
cognitive component will not be appropriate for these types of
campaigns.
Psychological theories for Attitude Change:

The route followed by a marketer for molding or changing the consumer
attitude as discussed earlier are what is done externally to elicit the desired
change in attitude. In the following paragraphs we shall study the theories of
internal psychological processes which occur in the mind of the consumer to
produce these changes. There are four groups of theories, which explain
these processes:
a) Learning Theories:
All the four learning theories viz. classical conditioning, instrumental
conditioning, modeling and cognitive learning can be used to explain &
influence changes in attitude.
i) Classical conditioning methods are used to reposition a brand. Gold
Spot was repositioned as a children’s drink by showing its consumption
in children’s birthday parties. This learning method is used as already
discussed for
– creating new associations by pairing with certain celebrities,
situations or user groups,
– influencing the affective component by presenting emotional stimuli,
– using environmental restructuring (like in the case of IBM
repositioning itself as e-business solution provider rather than
hardware manufacturer).

ii) Instrumental Conditioning can also be used to change attitudes.

Frequent use rewards given by airlines & hotels, free samples, etc. are
examples of inducing attitude change through this method.
iii) Modeling can also change attitudes. The fashion change induced by
fashion shows by well known models is an example of this. By desired
association even clothes which can be drastically different can find
acceptance.
iv) Cognitive learning is the most effective method of attitude change.
Information is generated by the consumer himself or herself by a
process of reasoning which is called ‘inference making’. Based on
some initial information and some logical expectations, the consumer
generates further information internally to fill in missing information.
Price- quality relation ships, country of origin effects are some
examples.
b) Attribution Processes:
Attribution motivation is the motivation to assign causes and to explain
things. For changing attitude, this theory has been used for explaining
consumers’ behaviour in changing to a less preferred brand. When the
consumer does this switch due to a coupon of small amount, the attitude
towards the new brand will be more positive. If the coupon value is high the
consumer is likely to attribute the reason for switch as more due to the
coupon & hence may not have a positive attitude towards the less preferred
brand. Attribution theory has also been used in explaining two strategies
used by marketers known as foot-in-the-door strategy and door-in-the-foot
strategy.
– Foot-in-the-door strategy: The consumer agrees for a small request by
the marketer first although reluctantly. This is attributed by the consumer
as his own decision and when subsequently a larger request is made
the consumer is likely to agree. This method is followed by many

charitable organisations, which ask for a small donation first, followed by

a larger one later, which the individuals are found to agree for.
– Door-in-the-face strategy: Knowing fully well that the request will be
turned down, the marketer asks for a large request first. After it is
refused, he will ask for a smaller request which the consumer is likely to
accede since the consumer may feel bad and sometimes guilty for
having turned down the initial request. This is called Door-in-the-face
strategy.
c) Cognitive Consistency Theories:

Every person has various cognitions and these cognitions have to be
consistent with each other. When there is any inconsistency, the person will
try to reduce the inconsistency by changing one of the cognitions.
Festinger’s Cognitive dissonance theory explains this in more detail.
Cognitive dissonance is a psychological term describing the uncomfortable
tension that may result from having two conflicting thoughts at the same
time, or from engaging in behavior that conflicts with one's beliefs, or from
experiencing apparently conflicting phenomena.
In simple terms, it can be the filtering of information that conflicts with what
you already believe, in an effort to ignore that information and reinforce your
beliefs. In detailed terms, it is the perception of incompatibility between two
cognitions, where "cognition" is defined as any element of knowledge,
including attitude, emotion, belief, or behavior. The theory of cognitive
dissonance states that contradicting cognitions serve as a driving force that
compels the mind to acquire or invent new thoughts or beliefs, or to modify
existing beliefs, so as to reduce the amount of dissonance (conflict) between
cognitions. One example is that of a consumer having made a purchase
starts doubting subsequently whether he has made the right choice.
Assuming that the product can not be returned, the consumer starts feeling
the discomfort of dissonance between two cognitions- pre-purchase & post-

purchase. One frequently observed consumer behaviour in such a situation

is that the consumers become more attentive to the brand information after
they have already bought the product. Such consumers are looking for
positive reinforcements for their purchase decisions to reduce the
dissonance.
There is another theory proposed by Heider known as ‘balance theory’

based on the principle of cognitive consistency. According to this theory,
when a respected opinion leader endorses a brand which was not initially
favoured by the consumer, the consumer will either lower his/her opinion of
the opinion leader or change the attitude towards the brand. By this process
the consistency is brought about in the cognitions of the consumer.
d) High and low involvement information processing:

When a consumer is exposed to some stimuli like an advertisement, there
are two ways in which this information is processed:
– Central processing route: In this route, the consumer actively scrutinizes
the information and examines and interprets it carefully. Hence in such
situations wherein the consumer involvement is high, the quality of
information provided by the advertiser plays a very important role.
– Peripheral processing route: In this, the consumer attends to the
message superficially and tends to make quick decisions by simply
looking at some of the elements of the ad. In this case wherein there is
low involvement, the form of the message rather than the content is
more important in changing the consumer attitude.
After the initial attitudes are formed, it is important that these attitudes must
persist till the actual purchase is done. This attitude persistence is more
associated with high involvement processing. Since all marketers face low
involvement consumers most of the time, it is important to find out the
conditions under which attitude persistence occurs even in low involvement

situations. Research has established that the peripherally processed cues

such as brand names or celebrity endorsers can lead to attitude persistence
and hence marketers have to be extremely cautious while deciding on such
cues.
Functional theory of Attitude

The process of attitude change does not fully explain differences in attitudes
and also the willingness to change in different individuals. Some of this
variation is due to the reasons behind the consumers’ attitudes.
Psychologist Daniel Katz proposed his “Functional theory of Attitude” to
explain this. According to this theory, individuals hold certain attitudes
because the attitudes serve certain functions. He classified these into four
categories – utilitarian, value-expressive, ego-defensive and Knowledge.
a) Utilitarian Function: This function of attitudes guides consumers to
consumers to achieve desired benefits. For example, the consumer who
considers immediate relief and minimum side effects as important in
selecting a pain-reliever is directed to brands, which fulfill these criteria.
Conversely, in their utilitarian role, attitudes direct consumers away from
brands, which unlikely to fulfill their needs.
b) Value Expressive Function: The attitudes can express consumers’ self
images and value systems particularly for high involvement products.
The self image of a consumer who buys a sports car may be of a
domineering person who after the purchase may show aggressiveness
as that fits the image. Similarly, the person who dresses in a
conservative way just because others in the workplace dress
conservatively has accepted the values of conservatism as expression
of success. Advertisers often appeal to the value expressive nature of
attitudes by implying that the use or purchase of a brand will lead to self-
enhancement, achievement or independence. This is an appeal to the
segment of consumers who value their self-expressive traits.

c) Ego-Defensive Function: Attitudes protect the egos from anxieties and

threats. Consumers purchase products like mouthwash to avoid anxiety
producing situations. Most individuals use mouth wash to avoid bad
breath rather than cure it. Advertisers use this theory of consumers’
fears of social ostracism by showing greater social acceptance if they
use certain brands. As a result the consumers develop positive attitude
towards brands which are associated with social acceptance. Mercedes
Benz has capitalized on this concept by projecting that the owners of
Mercedes Benz will feel an air of status, power, social acceptance and
influence.
d) Knowledge Function: Attitudes help the consumers in organizing the
huge amount of information they are exposed to daily. They sort out all
these messages by using the knowledge function, which reduces
uncertainty and confusion. Advertising that gives detailed information on
new brands or new characteristics of their existing brands are valuable
for this purpose.

a) __________ refers to the initiation, direction, intensity and persistence
of behavior.
b) Motivation is comprised of two components- Drive or arousal, &
_________ _________.
c) _____________ is a complex psychophysical process that arises
spontaneously, rather than through conscious effort, and evokes either
a positive or negative psychological response or physical expressions,
often involuntary.
d) Marketers should recognise that they are not selling product attributes;
but they are selling product ___________.

e) _________ are defined as learned predispositions to respond to an

object or class of objects in a consistently favourable or unfavourable
way.
f) All the four learning theories viz. __________ conditioning, instrumental
conditioning, modeling & cognitive learning can be used to explain and
influence changes in attitude.
5.4 Personality
Meaning of Personality
Personality can be defined as a dynamic and organized set of
characteristics possessed by a person that uniquely influences his or her
cognitions, motivations, and behaviors in various situations. Every person
has a consistent way of responding to his or her environment and this is
based on the person’s inner psychological characteristics, which determine
the kind of such response. Personality is thought to be determined largely
by either genetics and heredity, or environment and experiences. There is
evidence for both possibilities. Some even believe it is a combination of
both. We keep describing people in terms of their personality in everyday life
and many such descriptions are- dominant, outgoing, assertive, aggressive,
lively, warm, aloof, sentimental, thick skinned, etc. These are all references
to a person’s personality.
There are many theories to explain how a personality develops. One of

them which is quite simplistic is that a person finds it cumbersome to
develop a new response every time a situation arises and it is more efficient
for the individual to develop a standard response every time a similar
situation arises. The personality traits can have a strong influence on the
way consumers respond to marketer’s promotional efforts and also as to
when, where and how they consume particular products and services.

Hence an understanding of various personality characteristics will be very

useful to plan and finalise various marketing mix strategies.
Nature of Personality
Personality is individualistic
These are due to inherited characteristics as well as those imbibed from the
environment. This combination results in unique personality traits which are
never duplicated. Hence no two individuals can be exactly alike. Two
persons may however resemble in one or more of some personality
characteristics; but never in all the characteristics. Hence personality
becomes a useful tool, which enables a marketer to segment customers into
different categories, depending on one or more of the common traits. If there
are no commonalities at all of at least some of the personality traits among
all the consumers, then it would be impossible to do any market
segmentation and it would be futile to develop products and promotions
targeted at particular segments.
Personality is enduring and consistent

Each individual has a distinct set of psychological traits, which lead to
consistent and also enduring responses to cues and stimuli from the
external environment. These features of a personality help marketers to
explain and predict consumer behaviour on the basis of the personality
characteristics. It is however not possible to change the personality of a
consumer. The objective of a marketer is to find out which consumer
responses are influenced favourably to which particular personality traits, so
that they can try to influence relevant traits in their target group of
customers. Personality is only one of the factors, which influence consumer
behaviour although it is one of the most important factors.

Personality can also change

As the individual grows he cultivates a lot of traits which lead to consistent
behaviour. However there are several circumstances which lead to gradual
changes in the personality of the individual. For example the birth of a child
may lead an aggressive person to become softer and more affectionate.
Similarly major events in life like marriage, death of a loved person,
estrangement from a lover, a big change in career, etc. can lead to
noticeable changes in an individual’s personality. Aging also contributes to
such changes resulting in an older person behaving in a more mature and
calm way to adverse situations. The social changes like women’s
empowerment also has brought in many changes in the general
personalities in women in the last few decades & it has been found that
women are showing many of the personality attributes traditionally exhibited
by men.
Development of Personality
Personality development depends mainly on the genetic make up and the
environmental effects. In the genetic factors, the psychological factors
known as Psychogenic Traits and also the genetic group traits are the basic
building blocks of development. Subsequently the environment in which the
person grows up and lives will determine the personality.
Psychogenic Traits
Personality of an individual starts from the effect of hereditary factors. These
are called psychogenic traits. Genetics have effects on an individual in four
ways:
1. Physiological differences, 2. Hereditary diseases, 3. Biological clock and
4. Psychological effects.

Physiological differences
This is the most obvious effect of genetics. A person’s physical features like
height, weight, facial features, colour of skin, colour & texture of hair, etc.
are all caused by heredity.
Hereditary diseases
Many diseases like hemophilia, Alzheimer’s disease, Schizophrenia,
diabetes, etc. have been proven to be caused by genetic factors.
Biological clock
All living beings are governed by what is called a Biological Clock, which
decides the rhythms of sleep wake cycles in our daily cycle of activity. This
is also known as “Circadian Rhythm.”
Psychological effects
Such effects of genetics constitute the personality of the individual at birth.
There is however an ongoing debate as to whether the behaviour of an
individual gets predominantly influenced by the genetic factors or by the
environmental factors while growing up. The first argument i.e. genetics
being the major contributor credits the behavioral tendencies like our
emotions, love of status, sexual preferences, notions of beauty, sociability,
creativity, morality, etc. to our hereditary factors. The second argument
insists that the personality gets predominantly influenced by the family and
social environment like a person’s upbringing, family life, parental values,
peer group influences, school/college, any religious groups, etc.
The researchers trying to prove this point have studied the birth order of
children. Birth order is the sequence in which the children are born to the
same mother. Such researchers have proven after extensive studies that
the birth order does matter. The older children are proven to be aspiring and
ambitious. Having no younger children in the family during the initial period
of their upbringing, they get influenced by the adult behaviour and learn to

act responsibly, and also maintain and enforce law and order in the family.
The younger children by contrast have been found to take themselves less
seriously, are more sociable, less judgmental, more risk taking, And more
open to new things and change.
Group Traits
These are again due to several hereditary factors like race, gender and age.
These are considered as group traits. An individual is born with these traits
and these traits can not be altered. Researches have analysed these traits
to examine whether significant differences exist between groups of
customers with these common traits.
Race:
This is a person’s genetic heritage. This is the concept of dividing people
into populations or groups on the basis of various sets of characteristics and
beliefs about common ancestry. The most widely used human racial
categories are based on visible traits (especially skin color, facial features
and hair texture), and self-identification. One of the researches which was
conceptualized by using a genetic distance map is given below:

The personality traits of different races have been generally found to have
many common personality traits. For example - the core values of the
Japanese are found to be hard work, loyalty to the group, obligation to
return favours, respect for age and tradition, etc. Indians are found to be
deeply religious, hard working, ambitious, maintain tradition and customs,
humility, self-denial for the sake of group, etc. Chinese are found to value
hard work, long term reciprocal relationships, respect for authority, harmony
in all things, discipline in delaying gratification, etc.
Gender
This is a group trait and is divided into two groups- male and female. These
groups have common traits, which influence consumer values and
preferences. Male Female differences are found to be influenced by the life
cycle. Sex differences between male and female pre-puberty children are
found to be very minimal. However as they move into teenage years, the
differences begin to show up and as they grow into adulthood and
parenthood these differences are found to be more significant. As a person
moves into old age, the differences are found to become less acute.
Age
In this context we are referring to chronological age which is different from
psychological age (how young a person feels). This has a significant
influence on the personality and also the consumer behaviour. Marketers
have successfully segmented the markets based on age criteria.
Environment
There are separate theories and research streams, which consider the
environment as the major determinant of personality. In these studies it has
been proved that a personality can be developed and molded by a society
by means of environmental shaping. The American psychologist
B.F.Skinner is the leading proponent of such a theory known as

Behaviorism Theory. As per this theory, a person develops a pattern of

behavioural responses because of the rewards and punishments offered by
the environment of the person. Skinner believed that children do bad things
because the behavior obtains attention that serves as a reinforcer. For
example: a child cries because the child's crying in the past has led to
attention. These are the responses and consequences. The response is the
child crying, and the attention that child gets is the reinforcing consequence.
Theories of Personality
a) Psychoanalytic theory
Psychoanalysis is a family of psychological theories and methods based on
the work of Sigmund Freud. As a technique of psychotherapy,
psychoanalysis seeks to discover connections among the unconscious
components of patients' mental processes. Psychoanalysis was devised in
Vienna in the 1890s by Sigmund Freud, a neurologist interested in finding
an effective treatment for patients with neurotic or hysterical symptoms. As a
result of talking with these patients, Freud came to believe that their
problems stemmed from culturally unacceptable, thus repressed and
unconscious, desires and fantasies of a sexual nature. As his theory
developed, Freud developed and cast aside a myriad of different
frameworks to model and explain the phenomena he encountered in treating
his patients. These concepts were adopted by researchers in Consumer
Behaviour to analise and explain the behavioural patterns of consumers in a
market situation.
According to this theory the human personality can be broken down into
three significant components: the id, ego and superego.
a) The id is the source of primitive energy that builds up and needs to be
released or expressed in some way. The id is motivated by the pleasure
principle seeking immediate satisfaction without concern for the specific

means of satisfaction of basic physiological needs such as thirst,

hunger, sex, etc.
b) The ego is the structure that helps the id expresses itself. It emerges in
order to realistically meet the wishes and demands of the id in
accordance with the outside world. It operates according to the reality
principle. Ego is the individual’s conscience mediator between the id (i.e.
the unconscious & impulsive forces) and the superego (i.e. the societal
ideals). The ego helps the person to respond in ways acceptable to the
society and such behaviours are called “defense mechanisms”. For
example, a person may want to buy a very beautiful house in a locality
of his choice; but due to financial constraints he decides not to go for
this purchase. It is the superego which reminds the ego that it is unwise
to go for this purchase. To resolve this conflict, the person saves the ego
by arguing that the neighbourhood of this house may really not be
suitable since they are very rich. This argument is an example of the
defense mechanism.
c) Finally, the superego exercises moral judgment and societal rules in
keeping the ego and id in check. The superego is the last function of the
personality to develop and may be seen as an outcome of the
interactions with one's parents during the long period of childhood
dependency.
According to Freud, personality is based on the interaction of these three

components. He enunciated that the personality of an individual is
determined by how that person deals with the conflicts that are experienced
while passing through a number of distinct stages of infant and childhood
development.
Researchers who have applied Freud’s theories to consumer behaviour

believe that, the id and superego operate to create unconscious motives for
purchasing decisions. Since the focus of such research is to understand and

uncover these unconscious motives, application of psychoanalytic theory to

marketing is known as Motivational Research.
Many of the personality traits like aggression, rationalization, withdrawal,

regression etc. in the market place have been explained by this theory.
These theories have also been extended to observe link between the
products purchased or consumed and the selected personality traits. In fact,
there have been theories of Brands assuming personality characteristics
and many companies have successfully exploited such theories in their
brand promotion.
b) Non Freudian Personality theory:

Many researchers have disagreed with the Freudian theory that, personality
is primarily instinctual and sexual in nature. They have viewed human
beings as seeking to attain rational goals. The individual is supposed to
overcome feelings of inferiority by striving for superiority, efforts to reduce
tensions such as anxiety. They have classified the individuals into three
personality groups: compliant, aggressive and detached.
1. Compliant individuals are those who lean towards others(they want to be
loved, wanted and appreciated)
2. Aggressive individuals are those who normally move against others(
they wish to excel and thus win admiration)
3. Detached persons are those who move away from others (they desire
independence, self reliance, self sufficiency and freedom from any
obligations)
These theories have been applied in the context of consumer behaviour. It

has been found that the compliant persons prefer to use branded products,
aggressive persons preferred brands with masculine appeal like Old Spice
deodorant, and detached personalities were less likely to be brand loyal.

c) Trait theory of Personality:

The orientation of trait theory is primarily quantitative as opposed to
psychoanalytical theories, which are qualitative. In this theory a person is
considered as a composite of several personality traits. A personality trait is
a consistent and characteristic way of behaviour of a person. Trait theories
predict that, it is more realistic to expect, personality is linked to how
consumers make choices and to the purchase and consumption of a broad
category of products rather than individual brands. According to this theory
there is more likely to be a relationship between a personality trait and
whether he owns a convertible sports car, whereas this may not result in the
purchase of a particular brand like Ferrari.
Personality traits and personal context
Personal Context
The characteristics of the social, economic and cultural environment, in
which a person has lived and is living, will have significant effect on the
personality. These are termed as personal context. Personal Context has
four dimensions, which affect consumer behaviour: Culture, Institutions &
groups, Personal worth and social class. It is important to analyse these
personal context factors to understand the consumer responses to various
market situations.
Culture
Culture has been called "the way of life for an entire society". As such, it
includes codes of manners, dress, language, religion, rituals, and norms of
behavior such as law and morality, and systems of belief. According to
many theories that have gained wide acceptance, culture exhibits the way
that humans interpret their biology and their environment. According to this
point of view, culture becomes such an integral part of human existence that
it is the human environment, and most cultural change can be attributed to

human adaptation to historical events. Moreover, given that culture is seen

as the primary adaptive mechanism of humans and takes place much faster
than human biological evolution, most cultural change can be viewed as
culture adapting to itself. Culture however excludes the genetically inherited
instincts since these are not learnt. It also excludes the individual
behaviours, knowledge, etc., which are exclusive to the person and not
shared with others.
Culture has a regulatory effect on society. It offers standards and norms of

behaviour and in every culture the members know the rules to follow. Since
we keep interacting with the people with the same culture most of the times
it makes things easier and more efficient to follow the culture. Culture keeps
changing with the environment changes and it has a way of adopting itself. It
envelops the entire society as if it is an environment itself and normally
everyone takes it for granted.
Subculture is a culture within the larger group. This group may share a
number of common characteristics of the larger group and at the same time
have its own distinct features.
Culture has following elements:

a) Values: Value is a concept that describes the beliefs of an individual or
culture. A set of values may be placed into the notion of a value system.
Values are considered subjective and vary across people and cultures.
These are conceptions of what is good & desirable against what is bad
and undesirable.
b) Norms: A norm is a rule that is socially enforced. Social sanctioning is
what distinguishes norms from other cultural products or social
constructions such as meaning and values. These are rules of
behaviour. They are a guide of do’s and don’ts. These dictate
acceptable and unacceptable behaviour.

c) Rituals: A ritual is a set of actions, often thought to have symbolic value,

the performance of which is usually prescribed by a religion or by the
traditions of a community. A ritual may be performed at regular intervals,
or on specific occasions, or at the discretion of individuals or
communities. It may be performed by a single individual, by a group, or
by the entire community; in arbitrary places, or in places especially
reserved for it; either in public, in private, or before specific people.
d) Myths: Myths are stories generally of gods and heroes, which become
somewhat sacred in each society. Ramayana, Mahabharata, Bible, etc.
are all myths.
Effects of Culture
Culture has many effects on the behaviour of individuals, which are as
under:
a) Individualism vs. collectivism:
This concerns the value individuals have, regarding the importance for the
overall group benefits as against their own self-interest. Many cultures
exhibit close ties among individuals with the group interest being given more
importance than the self interest. There are some cultures wherein the
individuals exhibit loose ties with others and also self interest over the group
interest giving a lot of importance for the individual freedom and survival of
the fittest. The United States is an example of Individualism whereas the
Asian countries like Japan, China and India exhibit collectivism. The
implication of this characteristic to a marketer is the kind of emotional appeal
which would be most effective to influence consumer behaviour. In an
individualistic culture the emotional appeals can be ego focused with
emotions like happiness, pride, anger, frustration, etc. being prominent. In
the collectivistic culture, emotions associated with social context like
empathy, peacefulness, indebtedness, shame, etc are more effective in
molding the consumer behaviour.

b) Power Distance:
This refers to the extent of submissive relation with authority in a culture.
The power distance is supposed to be large when the authoritarianism is
greater among different levels of people in the society. This could be among
the members of the family or the different managerial levels in a business
organisation. In societies with a larger power distance, the people in lower
levels are supposed to keep a distance from their superiors. In societies with
smaller power distance, the members of different levels are not so formal.
Decision making is more participative in a culture with smaller power
distance than in the other cultures. Many western countries like USA,
England, Germany, Switzerland, etc. are having a smaller power distance.
Countries like India, Egypt, Malaysia, etc. are having a larger power
distance. This characteristic will help in deciding on promotions and
positioning of products in a marketing mix.
c) Uncertainty avoidance:
Many cultures have very clearly defined explicit and formal rules and
regulations to avoid any ambiguity. In such societies new ideas and
products are not easily accepted and the consumers are interested in
greater dependability, reliability, warranties, guarantees, etc. on which the
marketers have to concentrate in such cultures.
d) Masculinity vs. femininity:

Many societies have a masculine culture, wherein male and female roles
are segregated and masculine roles are considered superior. In a masculine
culture, money, success and material things play a dominant role and in a
feminine culture the dominant features are improving quality of life,
preserving the environment, placing relationships above monetary
considerations, etc.

e) Abstract vs. associative thinking:

In many cultures people associate events which may not have much logical
basis, like associating with the influence of the supernatural or the effect of
Gods etc. In abstract cultures the logical thinking, cause and effect
relationships are important. In these cultures, face to face communication,
eagerness to change and innovate are the predominant behaviours.
Institutions and Groups

Groups can be defined as two or more persons sharing a common goal.
Institutions are structures and mechanisms of social order and cooperation
governing the behavior of two or more individuals. Institutions are identified
with a social purpose and permanence, transcending individual human lives
and intentions, and with the making and enforcing of rules governing
cooperative human behavior. Institutions are more permanent groups.
Schools, colleges, family, religious groups etc. are examples of institutions.
Institutions influence individual behaviour by having some norms, values
and also of conduct.
Types of Groups
Depending on the frequency of contact and interaction, groups can be
divided as Primary groups and Secondary groups. In primary groups, the
members meet frequently and it is important to follow the group opinions
and norms. The examples are family, work organisation, etc. In secondary
groups, the meetings are less frequent and the enforcement of group norms
is less strict and less binding. The examples are distant relatives, musicians,
artists, etc. Another way of differentiating the groups is according to whether
the membership of these groups is real or symbolic. Groups also differ on
whether they are formal or informal, whether the membership to the group is
by choice of the member or whether it is assigned by the group. Different
groups have differing influence on the behaviour of each individual with
family being the most influential among all the groups. Families are

important in all cultures and influence of the members on the decision

making process of one another is significant. Another group which exerts
influence on customer behaviour is the religious group. Religion is the main
influencer of values, customs and beliefs of individuals and thus on his/her
behaviour.
Influence of Reference Groups:

A reference group is a sociological concept referring to a group to which
another group is compared. Reference groups are used in order to evaluate
and determine the nature of a given individual or other group's
characteristics and sociological attributes. Reference groups provide the
benchmarks and contrast needed for comparison and evaluation of group
and personal characteristics. Some behavioural scientists have established
that, reference groups have significant influence on an individual’s
consuming behaviour when the product or service is conspicuous.
Conspicuous consumption is a term used to describe the lavish spending on
goods and services that are acquired mainly for the purpose of displaying
income or wealth. In the mind of a conspicuous consumer, such display
serves as a means of attaining or maintaining social status. In such cases
the reference groups wield enormous influence on the decisions of the
consumer. There are different types of influence of the reference groups:
1. Information: The consumer looks forward to the reference group
member’s advice since he feels that they have the expertise to give such
advice. Professionals like doctors, lawyers, tax consultants etc. for
household customers and management consultants, legal advisors,
chartered accountants, etc. for business customers are examples of
such information influence.
2. Normative: When a consumer is interested in conforming to the
expectations of someone else such influence is known as normative

influence. Senior family members have a normative influence on the

junior members.
3. Identification: When a consumer buys something which makes him/her
to be like the role model this is known as identification influence. Movie
stars, sports persons, etc. serve as reference groups for a huge number
of consumers.
Worth of a Person:
Personal worth is another personal context, which has a direct effect on the
consumer behaviour. This comprises of income of the individual, the wealth
in his/her possession and also the borrowing power. This also has a direct
effect on the consumption patterns in the marketplace.
1. Income: The earnings of a person will largely decide on the kind of
products which are consumed by them. Poor families spend their
income mostly on food, housing & basic clothing. As the income
increases, the proportion of the income spent on food as a percentage
of total income declines & they start spending on clothing, automobiles,
electrical accessories, luxury goods, housing etc. will go up sharply. This
also reaches an upper limit & then the savings go on increasing with the
increase in income.
2. Wealth: This comprises of the assets of the person minus liabilities.
Assets can be in terms of properties, bank balances, investment in
shares, jewellery, etc. & the liabilities could be the loans taken for
housing, luxury goods, automobiles or any other purposes.
3. Borrowing power: This indicates the economic condition of the
individual. Borrowing power depends on the anticipated future income of
the person & asset accumulation. The credit cards & loans granted by
banks for housing, automobiles, electrical goods, etc. are based on their
assessment of this borrowing power.

Social Class:
Social class refers to the hierarchical distinctions between individuals or
groups in societies or cultures. The factors that determine class vary widely
from one society to another. Even within a society, different people or
groups may have very different ideas about what makes one "high" or "low"
in the social hierarchy. The most basic class distinction between the two
groups is between the powerful and the powerless. Social classes with more
power usually subordinate classes with less power, while attempting to
cement their own power positions in society. In societies where such
classes exist, one's class is determined largely by:
1. Occupation
2. Education and qualifications
3. Income (personal & household)
4. Wealth or net worth, including the ownership of land, property, means of
production, etc.
Social classes are normally ranked in terms of their social prestige. The
social class of a person normally does not change in a short period and it is
relatively permanent. There can however be movement from one social
class to another over a long period of time it can be a movement upwards or
downwards depending the changes in the situation of the individual. Within
each strata of a social class there are many homogeneous characteristics.
The kind of houses they live in, the neighborhoods, food habits, socializing
patterns etc. are similar in one stratum of social class. It is to be however
kept in mind that income is not the important determinant of social class and
in most societies higher income does not necessarily mean a higher social
class. It is not uncommon for a person of relatively lower income to be in a
higher social class and vice versa. The social class does have a significant
influence on consumption patterns and a consumer’s behaviour. This is true

in most of the countries and more so in countries like India where the social-
class distinctions are prevailing for many centuries.
Cognitive Personality factors

Cognitive psychology is the school of psychology that examines internal
mental processes such as problem solving, memory, and language. Based
on this there are two predominant personality characteristics – Need for
Cognition and visualisers vs. verbalisers.
Need for Cognition

This measures the person’s need for enjoying of the thinking process.
Researchers have established that, the persons who are high on this need
for cognition are more likely to be responsive to an advertisement, which is
rich in product-related information and description. The consumers who are
low on this need are more attracted to the background of the ad, an
attractive model, a well known celebrity, etc. Consumers who are high in this
need are likely to get convinced by a written matter in the ad whereas those
who are low in this need are likely to get convinced with a cartoon message.
For the first group, the ad message should emphasise forcefully on the
relative benefits of the brand. Need for cognition seems to play a positive
role in the internet usage, especially related to product information, current
events, news, learning, education, etc. All such research findings are very
helpful to marketers in market segmentation efforts as also the framing of
the advertising campaigns to such segments.
Visualisers vs. Verbalisers:

Some people prefer written information as a way of securing information
whereas some others prefer visual images or messages as sources of
information. Based on these traits researchers have classified the
consumers into two groups:

1. Visualisers: These consumers prefer visual information & products that

are rich in visual effects. Some marketers stress on the strong visual
images to attract such consumers.
2. Verbalisers: Such consumers prefer written or verbal information & also
products rich in verbal content. Such consumers respond favourably to
ads, which raise a question and provide an answer, or give detailed
description of product features.
Consumption and possession Traits: These traits can be divided broadly

into three types as follows.
Materialism
There is a long enduring debate on what is the extent to which a person is
considered as materialistic. Americans are considered as materialistic and
this term has more or less acquired the status of a personality trait. This is a
trait, which distinguishes between individuals who regard possessions as
essential to their identities and their lives and those for whom possessions
are secondary. Researchers have found some of the following
characteristics of materialistic people.
1. Such persons especially value acquiring & showing off their
possessions.
2. They are particularly self centered & selfish.
3. They seek lifestyles full of possessions.
4. Their many possessions do not give them greater personal satisfaction.
It has been found by research that the extent of consumer materialism

varies from country to country. The marketing mix, which is successful in a
particular country that is high on materialistic consumption, may not work in
another country where such traits may be low.

Fixated Consumption
Fixation refers, in human psychology, to the state in which an individual
becomes obsessed with an attachment to another human, an animal, or an
inanimate object. Fixated consumers are those who get fixated with regard
to consuming or possessing certain products. This is normally accepted
behaviour in society and fixated consumers frequently display these
products and they openly share with others who have similar interest.
Examples of such fixation are the serious collectors of various objects Even
there could be fixation of games like cricket or football which drives such
consumers to spend huge amounts in such hobbies like collecting coins,
stamps, antiques, vintage cars, etc. Fixated consumers have following traits:
1. A deep and passionate interest in a particular product category,
2. Willingness to put in considerable efforts to secure additional pieces of
such an object or product category, and
3. Spending of substantial money and time in searching for the object or
the product.
Compulsive Consumption
This is an abnormal behaviour. Such consumers who are compulsive have
an addiction and are out of control. Examples are uncontrollable shopping,
drug or alcohol addiction, eating disorders, etc. From a marketer’s point,
compulsive buying can also be a compulsive activity.
Personality influences on Consumer Behaviour

In order to apply these principles in Marketing, one has to understand how
personality influences consumer behaviour. This will help in grouping the
consumers into segments and then target them so that, they are likely to
respond positively to their communications regarding the product or service
being marketed. There are specific personality traits which provide insights
into consumer behaviour.

Innovativeness
Innovators are the persons who are most likely to be the first to try new
products and services. Hence for marketers these are the key people whose
response to their new products and services will indicate the possibility of
success or otherwise of their products. Researchers have developed many
measuring instruments of innovativeness, which provide the nature and
limits of a consumer’s willingness to innovate. Recent studies have
established a positive relationship between innovative users of the internet
and buying on line. Internet shoppers tend to see themselves as being able
to control their own future and they use the internet to seek information.
They enjoy changes and are not afraid of uncertainty.
Dogmatism
This is a trait, which measures rigidity, as opposed to openness displayed
by person’s unfamiliar information that is contrary to their own established
beliefs. A person with high degree of dogmatism is defensive towards
unfamiliar and he will be uncomfortable and uncertain about any such
situation. Consumers who are high in dogmatism are more likely to choose
established brands rather than try out new innovative product alternatives.
However it has also been found that, such highly dogmatic individuals tend
to be more receptive to advertisements of new products and services which
contain an appeal from an authoritative figure. Hence marketers of new
product ideas use experts and well-known personalities to endorse such
products so that, the highly dogmatic consumers accept such new products.
Consumers who are low on dogmatism however are likely to prefer new
products in place of the established alternatives. Such consumers are likely
to be more open to advertisements which contain factual differences in
product benefits & also the information on new product usage.

Social Character
Sociology research has identified the personality trait known as Social
Character. This social personality trait can be of two types as follows:
a) Inner Directed: These are persons who rely on their own standards
and values, in evaluating new products and these persons are more
likely to be product innovators. These consumers are attracted by ads,
which stress on product features and benefits, which will enable them to
do a self-evaluation of these claims of the marketer.
b) Other Directed: These are like to look for others for advising them on
what is right and what is wrong. These are less likely to be innovators.
These persons are more influenced by their thoughts of social approval
of their purchase decisions.
Uniqueness
Many people try to be unique. They avoid conforming to other’s
expectations and standards. It has been found by research that when
consumers are not concerned about their being criticized by others, they are
more likely to make unique choices. Many marketing researchers measure
the Consumer’s Need for Uniqueness to help them in the study of consumer
behaviour.
Stimulation
Some persons prefer calm, simple and uncomplicated living whereas some
others prefer novel, complex and unusual experiences. This is the need for
stimulation and some studies have established that people who respond to
high stimulation levels have a greater willingness to take risks in trying out
new product. They try to be innovative and seek more product-related
information. Consumers whose lifestyles are equivalent to their stimulation
levels appear to be satisfied. Those who are under stimulated are likely to
be bored. An under stimulated consumer is likely to get attracted to a great

amount of activity and excitement, whereas an over stimulated person may

prefer solitude, peaceful environment and relaxation.
Personality of a Business Customer

In a business environment the employees do bring their personality traits
into the work they do. They can be aggressive or subdued, emotional or
unemotional, task oriented or relationship oriented, etc. Some researchers
have divided the business customers into two broad personality traits as
below
Assertive
Such people make their stand in any situation very clear to others. They
tend to be aggressive, forceful and demanding. In any social gathering they
are likely to start a conversation and they normally take charge. They tend
to fight, if placed in an uneasy social situation. In contrast the unassertive
people are unassuming, contented, quiet and easygoing. Such people rarely
express their own ideas and beliefs and also they tend to support other’s
ideas in most of the situations. When facing an uneasy social situation such
people tend to avoid and may even take flight.
Responsive
A responsive person readily expresses all his feelings and emotions like joy,
anger, sorrow, etc. openly. Such a person is normally relation ship oriented.
In contrast an unresponsive individual is a controlling type. He tends to be
reserved, serious and cautious. He also tends to be independent or
indifferent to other’s feelings. He tends to predominantly use logic in taking
decisions and is mostly task oriented.
Based on the above two traits the personality can be divided into four social
styles:

Analytical
This person is normally low in assertiveness as well as in responsiveness.
He tends to react slowly, takes maximum effort to organize. He has
minimum concern for relation ships. He is cautious in any action and tends
to reject any involvement.
Amiable
This person is low in assertiveness, but high in responsiveness. Normally
unhurried, he will put in maximum effort to relate. He has minimum concern
for any change; is always supportive in all actions. He also tends to reject
any conflicts.
Driving
This individual is high in assertiveness and low in responsiveness. Normally
he is swift in taking action. He exerts maximum effort to control, has
minimum concern for caution. He doesn’t like inaction.
Expressive
He is high in both assertiveness as well as responsiveness. He reacts
rapidly with maximum effort to get involved. He doesn’t like routine and
mostly thinking of future. He tends to reject isolation and takes impulsive
action.
Limitations of Personality theories in Consumer Behaviour
Consumer Behaviour researchers have found some limitations in using
personality characteristics to explain buyers’ behaviour in all situations.
Such theories explain only those patterns of behaviour, which are consistent
and enduring. Many times the application is in explaining aberrations rather
than typical behaviour. These theories assume that consumer is motivated
by deep rooted drives in his buying behaviour. Such theories have limited
application when it comes to mundane day to day purchases & researchers
have to look elsewhere to find solutions to such situations.

5.5 Self concept

Self-concept or self-identity is the mental and conceptual understanding and
persistent regard that, individual hold for their own existence. In other words,
it is the sum totals of a person’s feelings, knowledge and understanding of
his or her self as an object. The self-concept is different from self-
consciousness, which is an awareness or preoccupation with one's self.
Components of the self-concept include physical, psychological, and social
attributes, which can be influenced by the individual's attitudes, habits,
beliefs and ideas. These components and attributes can not be condensed
to the general concepts of self-image and the self-esteem.
Self-concept has at least three major qualities of interest to marketers:

(1) it is learned, (2) it is organized, and (3) it is dynamic.
a) Self-concept is learned:
No one is born with a self-concept. It gradually emerges in the early months
of life and is shaped and reshaped through repeated perceived experiences,
particularly with others. The fact that self-concept is learned has some
important implications:
 Because self-concept does not appear to be instinctive, but is a social
product developed through experience, it possesses relatively
boundless potential for development and actualization.
 Because of previous experiences and present perceptions, individuals
may perceive themselves in ways different from the ways others see
them.
 Individuals perceive different aspects of themselves at different times
with varying degrees of clarity.
 Any experience which is inconsistent with one's self-concept may be
perceived as a threat, and the more of these experiences there are, the
more rigidly self-concept is organized to maintain and protect itself.

When a person is unable to get rid of perceived inconsistencies,

emotional problems arise.
 Faulty thinking patterns, such as dichotomous reasoning (dividing
everything in terms of opposites or extremes) or over generalizing
(making sweeping conclusions based on little information) create
negative interpretations of oneself.
b) Self-concept is organized:
Most researchers agree that self-concept has a generally stable quality that
is characterized by orderliness and harmony. Each person maintains
countless perceptions regarding one's personal existence, and each
perception is orchestrated with all the others. It is this generally stable and
organized quality of self-concept that gives consistency to the personality.
This organized quality of self-concept has corollaries.
 Self-concept requires consistency, stability, and tends to resist change.
If self-concept changed readily, the individual would lack a consistent
and dependable personality.
 The more central a particular belief is to one's self-concept, the more
resistant one is to changing that belief.
 Basic perceptions of oneself are quite stable, so change takes time.
 Perceived success and failure affect self-concept. Failure in a highly
regarded area lowers evaluations in all other areas as well. Success in a
prized area raises evaluations in other seemingly unrelated areas.
a. Self-concept is dynamic:
To understand the active nature of self-concept, it helps to imagine it as a
compass: a continuously active system that dependably points to the "true
north" of a person's perceived existence. This guidance system not only
shapes the ways a person views oneself, others, and the world, but it also
serves to direct action and enables each person to take a consistent

"stance" in life. Rather than viewing self-concept as the cause of behavior, it

is better understood as the compass of human personality, providing
consistency in personality and direction for behavior. The dynamic quality of
self-concept also carries corollaries.
 The world and the things in it are not just perceived; they are perceived
in relation to one's self-concept.
 Self-concept development is a continuous process. In the healthy
personality there is constant assimilation of new ideas and expulsion of
old ideas throughout life.
 Individuals strive to behave in ways that are in keeping with their self-
concepts, no matter how helpful or hurtful to themselves or others.
 Self-concept usually takes precedence over the physical body.
Individuals will often sacrifice physical comfort and safety for emotional
satisfaction.
 Self-concept continuously guards itself against loss of self-esteem, for it
is this loss that produces feelings of anxiety.
 If self-concept must constantly defend itself from assault, growth
opportunities are limited.
Interdependent and Independent Self Concepts

The self-concept is different in different cultures. Researchers have
categorised self-concept into two types: independent and
interdependent (also called as separateness and connectedness).
The independent self-concept, places emphasis on personal goals,

characteristics, achievements, desires etc. and this concept is predominant
in western cultures like USA where individuals are inherently separate.
Persons with such self-concept tend to be individualistic, egocentric,
autonomous, self reliant and self contained. These persons define

themselves in terms of what they are, what they have achieved & what they
possess.
The interdependent self-concept emphasizes family, cultural,

professional and social relationships. Such a concept is predominant in
most of the Asian countries in which individuals are inherently connected
with each other. Individuals with interdependent self concept tend to be
obedient, socio-centric, connected and relation oriented. They normally
define themselves in terms of social roles, family relationships, and
commonalties with other members of their groups.
A variation in the degree to which an individual is characterized by

independent versus interdependent self-concept has been found to
influence message preferences, consumption of luxury goods &
products of conspicuous consumption. For example the ads
emphasizing individuality, autonomy, etc are more effective with
consumers wit independent self-concepts and ads emphasizing group
activities, group membership, etc, work better with consumers with
interdependent self-concept.
Possessions and extended Self

Researcher R.W.Belk developed a theory that; the extended self consists
of the self plus possessions. People tend to define themselves in part by
their possessions. Thus some of these possessions are not just
manifestation of the self concept; they become an integral part of self
identity. If such key possessions are lost by the individual he/she will
become a somewhat different person. While some of these key items could
be major items like the house or the car, they can also be some small items
like a souvenir, photograph, a pet, a wedding ring, mangala sutra for a
Hindu wife, or even a favourite cup. These objects have meaning to the
individual beyond their market value to the individual. Some products get

embedded with the person over a long period of usage having got
associated with a lot of memories. For example, one of the products in a
scientist’s extended self could be an old, worn out, cheap briefcase which
he purchased to take to his first academic conference many decades ago &
had accompanied him all round the world. Although worn out it has now
become a part of the scientist and he plans to continue using it as long as
possible.
Measuring Self Concept

Malhotra has developed a set of 15 pairs of adjectives in semantic
differential scale. These have been very effective in describing ideal,
actual and social self-concepts of individuals as well as images of
automobiles and celebrities.
Using Self Concept to Position Products

The product brand image and consumer self concept relation ship will
determine the consumer behaviour to seek brands that improve and
maintain self-concept. Most of the time, this process is not deliberate
at least at the conscious level. This can be used to ensure a match
between the self concept of a target market, the image of a brand, etc.
Hence marketers should develop product images consistent with the
self concept of their target markets. While everyone’s self concept is
unique, there is also a significant overlap across individuals. For
example many consumers see themselves as environmental friendly.
Companies and products, which create an image of being environment
friendly, are likely to be supported by these consumers.
Consumers prefer brands, which are in congruence with their self-concepts;

however the degree to which they would be attracted to such a brand also
depends on symbolism and conspicuousness of that product class.


1. _____________ can be defined as a dynamic and organized set of
characteristics possessed by a person that uniquely influences his or her
cognitions, motivations, and behaviors in various situations.
2. Personality development depends mainly on the genetic make up and
the _______________ effects.
3. All living beings are governed by what is called a Biological Clock or
_________ _________ which decides the rhythms of sleep wake cycles
in our daily cycle of activity.
4. _____________ is a family of psychological theories and methods
based on the work of Sigmund Freud.
5. ______ class refers to the hierarchical distinctions between individuals
or groups in societies or cultures.
6. ______ ______or self identity is the mental and conceptual
understanding and persistent regard that individual hold for their own
existence.
5.6 Summary
In this unit we learnt various Individual Determinants of Consumer
Behaviour like Motivation, Attitudes, Personality and self-concept. Under the
subject of Motivation we studied the Needs, Goal Objects, Selection of
Goals, Theories of Motivation, Customer Emotions and Moods, Motivational
Research, Motivation Theory and Marketing Strategy. While studying
Attitudes, we touched upon Hierarchies in Attitudes, Factors affecting
Attitude Change, Routes for Changing of Attitude, Psychological theories for
Attitude Change and Functional theory of Attitude. Under Personality theory,
we learnt about the Meaning of Personality, Nature of Personality,
Development of Personality, Group Traits, Environment, Theories of

Personality, Personality traits and personal context, Effects of Culture,

Institutions and Groups, Cognitive Personality factors, Consumption and
possession Traits, Personality influences on Consumer Behaviour,
Personality of a Business Customer and Limitations of Personality theories
in Consumer Behaviour. We also studied the concept of Self-concept,
Interdependent and Independent Self-Concepts, Possessions and extended
Self, methods of measuring self-concept and using self-concept to Position
Products.

1. Explain the meaning of Goal Objects with examples.
2. Describe Maslow’s hierarchy of needs from the lowest to the highest

(along with examples).
3. What are the three types of attitude hierarchy? Explain each one in a
few words.
4. Explain the difference between Primary groups and Secondary groups
with examples.
5. Self-concept can be divided into two types: independent and
interdependent. Explain the meaning of each of these.

SAQ I
1. Motivation
2. Goal Object
3. Emotion
4. benefits
5. Attitudes
6. classical

SAQ II
1. Personality
2. environmental
3. Circadian Rhythm
4. Psychoanalysis
5. Social
6. Self-concept
TQS
1. Refer Section 5.2

Unit 6 Consumer Decision Process
Structure
6.1 Introduction
Objectives
6.2 Definition of Consumer Decisions
6.3 Consumers as Decision Makers
6.4 Consumer Decision Making Process
6.5 Consumer choice Selection Models
6.6 Household and Family Decision Making
6.7 Howard-Sheth Model of Buying Behaviour
6.8 The Nicosia Model
6.9 Engel-Blackwell-Miniard Model
6.10 Post Purchase Behaviour
6.11 Summary
6.1 Introduction
Various sociological, cultural and psychological factors influence and
contribute to different patterns of consumer behaviour. In addition to these
we will also have to look at situational variables. We have to understand
how situations and internal and external sources of influence affect the
purchase decision process. This comprises of a series of activities like
problem recognition, information search, evaluation, selection, outlet choice,
decision to purchase, purchase and post purchase processes and activities.

Both cognitive (thinking) and emotional (feeling) factors are required to be

studied at each stage of the decision making process.
Objectives
 Know the various steps in the Consumer Decision Process.
 Understand the psychology of consumers as decision makers.
 Explain the household and family decision making process.
 Know the different models of decision making.
 Describe the post purchase consumer behaviour.
6.2 Definition of Consumer Decisions

Decision is the process of selecting an option from more than one choice.
There could be several examples of decision making in a purchase process
like:
a. Whether or not to make a purchase.
b. Whether to buy brand ‘x’ or brand ‘y’.
c. Whether to purchase from store ‘x’ or store ‘y’.
d. Whether to purchase with cash or credit card.
It is hence clear that the scope of consumer decision is much broader than
the mere selection of one brand from a choice of several brands.
Scope and Levels of Consumer Decision Making

The Consumer Decision Making process takes place in various steps like
problem recognition, information search, evaluative criteria, actual
evaluation process, outlet selection, the purchase process and also post
purchase behaviour. Consumer decision process also involves various
factors, which affect the decision-making and also there will be many factors
influencing the actual decision making process. There could be situational
influences like communications, purchase dispositions, usage, social

influences, etc. There are many models proposed by many marketing

experts to describe and predict the consumer decision making process. We
shall try to cover all these subjects in this unit.
Models of Purchase Decision Process

There are many different models to explain how consumers make purchase
decisions. We will consider four models based on differing views of
consumers’ psychology.
a. Economic View:
In this case, the consumer is assumed to be highly rational. Theoretical
economics is based on this assumption which depicts the consumer to
behave perfectly in a world of perfect competition. For this view to be
universally applicable, the consumer has to have a thorough knowledge of
all available alternatives. Also, he should be capable of ranking them in a
perfect way in terms of their features and benefits and finally be capable of
identifying the best of all these alternatives. However, this is hardly true and
such a perfect world does not exist. The classic economic model is also
unrealistic due to following reasons:
i. Consumers are bound by their pre existing habits, reflexes and skills.
ii. They are also constrained by their values and goals.
iii. They have their limitations of their knowledge.
The consumers are in an imperfect world, in which, they can not make their
decisions on perfect economic considerations of price, quantity,
relationships, marginal utility, indifference curves, etc. In most situations, a
consumer may be happy to settle for a ‘good enough’ or ‘satisfactory’
decision making process and the economic model has been rejected often
for being too idealistic and simplistic. On example is that of a research
finding of the purpose of bargaining by consumers. It has been found by
research that, the motivation for bargaining in most situations may not be

indeed the desire for a better price as is normally thought of. It has been
established that, the real motivation in many cases be related to the need of
the consumer for achievement, affiliation or dominance.
b. Passive view:
Many sales people of the past were of the view that, the consumers can be
manipulated into purchase decisions and the consumers were thought of as
impulsive and irrational in their decision making. They were hence assumed
to be submissive to aggressive promotional efforts of the super sales
people.
This model fails to recognize that the consumer plays an important role in
buying decisions. Sometimes they collect all relevant information and
carefully evaluate all the alternatives before arriving at the decision to
purchase considering the best alternative, which would satisfy their need to
the fullest extent. At other times they may purchase a product impulsively to
serve their emotion or mood at that moment. There are also situations
wherein they are likely to follow the advice of the opinion leaders. In most of
these situations, the consumer can not be considered as passive and hence
capable of manipulation. Hence this simplistic view can also be considered
as unrealistic.
c. Cognitive View:
In this model the consumer is considered as a rational problem solver. In
this view the consumer is supposed to actively search for all the information
when they have to select a product or service to fulfill and enrich their lives.
This model focuses on the process of seeking and evaluating the
information about the products and stores, for making the purchase
decision. Information processing is the major factor in this model. This
model however recognizes that this process does not happen every time the
consumer wants to buy a product. It also predicts that the consumers will

stop seeking information at some stage when they feel that they have
sufficient information to take that particular decision satisfactorily. The
consumer is also found to take some short cuts in decision making in many
situations and such shortcuts are called heuristic. There is also a possibility
of the consumer getting overloaded with excess information and they are
known to cope with such situations also in a suitable manner.
The cognitive view is somewhere between the economic view of a perfect

consumer making perfect decisions and a passive consumer who is easily
manipulated. The consumer in this model is not attributed with total
knowledge; but he is actively involved in seeking and evaluating information
on various alternatives to his satisfaction.
In this view goal setting is of primary concern for the consumer and each
decision-making involves clear-cut goals and the evaluation of alternatives
with respect to these goals. For example he may want a detergent for the
clothes which not only gives a good wash but also ensure that the colours
don’t run and result in fading of coloured clothes.
d. Emotional View:
It is easier for marketers to adopt suitable marketing strategies in case of
either economic or passive models. In reality however the consumer goes
through various emotions while purchasing a product or a service and these
feelings or emotions can be highly involving to the consumer in many
situations. A large number of the purchases made by consumers are quite
impulsive, based on their emotions at the time of purchase and in such
cases there is no careful searching, deliberations and evaluation of various
alternatives before buying. This does not mean that such decisions are
totally irrational. Products which offer emotional satisfaction are also
perfectly rational consumer decisions. Many designer products make use of
this factor to market their products by stressing that the consumer ‘deserves’

this product although very expensive. Many consumers feel better when
they make such expensive purchases on an impulse based on their
emotions.
Mood, which is a temporary emotion, is also important in a consumer

decision making process. A retail environment makes use of this factor to
create a positive mood for the consumer to make a decision to purchase.
However compared to emotions, moods are lower in intensity. It has also
been established by research that the consumers in positive moods recall
the brands for a longer period, than those in a negative mood.
Situational Influences
It has been established that the consumers do not respond to stimuli like
advertisements in isolation. They are influenced by both the stimulus as also
the situation. The situation is the set of factors separated from the consumer
and also the primary stimulus to which the consumer is responding. There
are four situations, which affect the consumer’s decision making as a
response to a stimulus.
a. Communications Situation: When the stimulus is received by the
consumer as a communication, the response depends on the situation in
which this is received. For example, the response will depend upon
whether the one is in a group or alone, in a good mood or a bad mood,
in a hurry or relaxed, etc. Only when the consumer is in a receptive
communication situation the message of the marketer will be effective.
However it is very difficult to always find all the potential customers in a
favourable communication situation at all times.
b. Purchase Situation: The situation at the time of purchase will again

influence the actual product selection. The company in which the
consumer is, the shortage of time, etc. will decide as to many decisions

like choice of the shop, the number of brands considered, and the price
at which the consumer is prepared to buy.
c. Usage Situation: The usage of the product will be influenced by the

situation at the time of consumption. Many advertisements make use of
this fact to communicate to the customers how their products create
satisfaction in relevant consumption situation. It has also been proven
that expanded usage situations can be successfully used to improve the
sales of a well-established product.
d. Disposition Situation: The new environmental awareness of the

consumers has compelled the marketers to create a favourable
disposition situation i.e. the disposal of the used product in a proper
way. Some consumers prefer the products which can easily be recycled.
Socially responsible disposition situations are affecting the way the
consumers decide on a product purchase.
6.3 Consumers as Decision Makers

When we describe consumers as decision makers, it gives a picture of an
individual carefully evaluating the features of different brands and selecting
very carefully after many deliberations, one brand that has all the required
attributes at the least cost. This process is very rational and functional. This
is only part of the true process, which takes place and that too while taking
very important decisions. In many other situations, there could be very little
conscious effort on the part of the consumer while making a purchase
decision. There could be some other situations, wherein the consumer may
be taking brand purchase decisions based more on feelings and emotions,
rather than the attributes and features of the brand. The consumer in such
situations is likely to imagine his/her feelings or the reactions from others in

the society with whom he/she may be interacting while using or consuming
the product.
Most of the times, the consumer will be involved in making a decision to

take care of a single problem, for example - buying of a dress. At some
other time, the consumer may face a convergence of several problems - for
example, whether to buy a ready-made dress or buy the cloth and get it
stitched and if so, from where and what garment design. As the decision
making process starts, the simple problem in the beginning may evolve into
more complex stages. A consumer who sets out to buy a dress may decide
to go to a mall, where he/she may get to buy not only a dress but there
could be some fast food place to eat something and then probably watch a
movie in a multiplex. Depending on the level of involvement, the consumer
may go through different levels of complexities in decision making. We can
consider different types of decision making situations based on several
factors. However, one should keep in mind that, these situations and levels
of decision making are not totally distinct from one another and there could
be overlapping of these in actual practice. The effort required for the search
and other decision- making processes varies with the relative complexity of
the decision. Depending on such effort level, the decision making process
can be divided into different categories.
While studying these situations one should consider two types of

involvement viz. purchase involvement and product involvement.
Purchase Involvement
This is the level of concern for or interest in the purchase process, triggered
by the need to consider the particular purchase. This could be a temporary
involvement in most situations and it happens mostly for an individual or
household. This could be the result of the interaction individual, product and
situational characteristics. There could be some situations where the

purchase involvement could be very low, although the consumer may have
strong brand loyalty. For example, the consumer may be very loyal to a
particular brand of toothpaste; but when he/she goes for the purchase, the
process could be a very routine involvement in the purchase process,
without much thought, because of several reasons like time pressure.
Purchase involvement is different from product involvement, which is
normally a long enduring involvement with strong brand loyalties. There
could be different processes of purchase depending on the involvement
level of the purchase process. These are described in the following
paragraphs.
Habitual Decision Making (Nominal Decision Making or Routine

Problem Solving):
This is the strategy used for purchase problems, which have been solved
previously. The consumer has the experience and well established criteria
with which to evaluate the purchase decision choices. If at all required, there
could be a minor effort to collect some additional information, which may not
be very critical. This is quite common in business to business situations
wherein the search costs are normally very high and hence most of such
purchases are routinised. In this situation, there is no decision making
involved, since there is only a single preferred decision for the brand to be
purchased. There will not be any evaluation of alternatives, unless the
preferred brand fails to perform as expected. When there is low involvement
with the purchase this process occurs. This is true for most routine
purchases of the daily usage products, wherein the family members have
fixed preferences and these products may be picked up from the store shelf,
without even checking the price or the other brands. Such a decision making
process may be again bifurcated into two categories- brand loyal decisions
and repeat purchases.

Brand Loyal Decisions

In the initial stages of selection of the brand of a particular product, the
consumer may be highly involved in the purchase process with a lot of
deliberations regarding various alternatives, their attributes, their prices, etc.
After having decided the particular brand & purchasing it, the consumer may
be very happy with this decision. The consumer gets committed to the brand
in such situations since he/she believes that this brand meets the needs to
the best extent & there will be an emotional attachment to the particular
brand. This is the brand loyalty which is very difficult to be broken by the
competitors. In such situations there will be a high degree of product
involvement but a low degree of purchase involvement because of the brand
loyalty. If this consumer really wants to change the brand at some point of
time it will mostly involve a high degree of involvement in the purchase
process with a lot of thinking of various alternatives and their attributes.
Repeat Purchases
There may not be much brand loyalty and the consumer may feel that, all
the brands are more or less the same. This particular purchase may not be
very important from the consumer’s perspective and hence he/she may just
repeat the same brand more out of habit, than due to any loyalty. If at any
point of time the consumer decides to try a new brand, due to some external
stimuli like an effective advertisement or some in-store promotion, this
consumer may not think much before switching the brand.
Limited Decision Making

This strategy is adopted when the cost and risks involved are not very high
and the product is not very complex, in terms of its technical features. There
is a familiarity of the product, but there is also a desire for variety, or the
previous choice is not readily available. In such situations, the consumer
invests very limited time and effort to make the purchase decision. In this
case, the consumer may involve in limited search, very few alternatives,

simple process of decision parameters or attributes and very limited

prepurchase evaluation. This is somewhere between “Habitual Decision
Making” and “Extended Decision making” and it somewhat resembles
habitual decision making in its simplest form. For example, the consumer
may just decide on buying the cheapest available brand of detergent
displayed in the store at that time. Limited decision making may also happen
when there is an emotional or environmental need. The consumer may just
change the brand to try out something new, although he/she may be
perfectly happy with the current brand. The decision making in such a case
may involve only checking up some new brands and novelty aspects.
Another example is that of a consumer trying out another option, depending
on the anticipated reaction from the friends or relatives. For example, the
teenager may decide to buy a new brand just because the friends may
approve that brand although he/she might have been happy with the earlier
brand. Limited Decision-Making is hence involving internal and limited
external search and a few alternatives are evaluated on the basis of limited
number of attributes and selection rules. There is very little evaluation of the
actual purchase and use of the product post purchase, unless there is a
product failure or some post sale service problem.
Extended Decision Making

This strategy is required in situations wherein the purchase costs are quite
high and the risk of a wrong purchase is also pretty steep. This could also
be true when the product itself is very complex or when the consumer’s ego
is involved. In these situations the consumer has no established criteria for
evaluation of alternatives. There has to be an extensive effort involving more
deliberations and also in some cases more number of people. Such decision
making is most likely when the consumer has a high involvement with the
product. Certain facilitating conditions are also necessary for this strategy.
The most important is the availability of adequate time for the decision

making. If the decision has to be taken quickly such extended problem

solving exercise will not be feasible. The other condition is the availability of
sufficient information. Insufficient or inaccurate information also can result in
delay in decision making in such cases. The third condition is the capability
of the consumer to evaluate various alternatives.
If the consumer gets confused and is not able to process the information of
different choices, there could be delay in the process. In this situation, the
consumer is involved in an extensive internal and external search for
information followed by a complex evaluation of various alternatives and
there will also be a likelihood of serious post purchase evaluation. This
happens due to high level of purchase involvement. Even after the purchase
there could be a doubt about the correctness of the decision and hence
there could be a thorough evaluation post purchase. Very few decisions of
the consumer are likely to reach this level in daily life situations. The
products which are normally at this level are appliances like stereo systems,
personal computers, refrigerators, air conditioners, etc., automobiles,
houses and so on. Even highly emotional decisions like buying some
birthday gift for the boy friend or girl friend would involve high level of
decision making.
6.4 Consumer Decision making process

The process of consumer decision making consists of various steps as
follows:
First Step: Problem Recognition

The decision process begins with this step. The consumer first notices &
recognizes the need to be satisfied or problem to be solved for fulfilling
some need. A consumer feels the thirst & looks for water or a beverage.
Another consumer finds that the ink in his pen is over & hence looks out for

a refill. Problem recognition is the state in which the consumer feels the
need to buy something to help him/her get back to the original state of
physical or psychological comfort. There are two types of stimuli which
result in problem recognition:
1. Internal Stimulus: This is internal state of physical or psychological
discomfort felt by the consumer, for example- hunger, thirst, boredom,
etc.
2. External Stimulus: This is the outside influence like an advertisement of
a product, or the fresh bread smell near a bakery which would stimulate
the need in the mind of the consumer.
The external stimuli can influence a consumer in three different states
of mind.
i. When the consumer has already recognized the problem and is
looking for a solution. This is when the consumer may even actively
pursue the external stimuli like advertisements or the salesmen to look
at various alternatives.
ii. When the consumer had recognized the problem in the past but was
not able to find a solution for various reasons like not having the time,
not a priority, etc. For example a consumer wanted to buy a
microwave oven which was getting postponed & when a neighbour
bought a microwave oven, the need surfaced strongly to push the
consumer to look at alternatives.
iii. When a problem, which was dormant was not recognized in the past.
This happens with most of the technological advances and
innovations. The consumer who would have been happy with an old
product may feel that the old product not satisfying his/her need when
the new product is advertised. For example, before the e-mail the
consumer never recognized the normal snail mail, which took so much
effort, cost and delays as a problem.

Based on these facts there are two types of demand for a product or a
service:
1. Primary Demand: This is the demand for the category of the product or
service itself, which seeks to convert a non-buyer of it into a buyer. All
the marketing efforts for promoting a new product or service are to
generate the primary demand. This is done normally by educating the
consumer about the benefits of the new product/service and also as to
how this can solve a problem which has not been noticed or recognized
till now.
2. Secondary or selective demand: This is the conversion of the demand
from one brand to another. In mature markets of any product the
marketers concentrate on the secondary demand creation.
There has been a controversy in the basic function of marketing- whether it

is to create a need or whether it is satisfy an already existing need. Many
people argue that, no one needed many of the products like a video camera,
a mobile phone etc. and that high profile marketing efforts created such
demand. However when one defines the needs in proper perspective,
incorporating the principles of Marketing Myopia, it is easy to figure out how
these new concepts and products are catching up and why these are just
satisfying the dormant needs of a consumer.
Second Step: Prepurchase Search:

This is the second step in the consumer decision process. Once the
problem has been recognized by the consumer, the next step is to search
for relevant information to solve the problem. This search is confined to a
set of brands which can be classified as follows:
1. Awareness Set: This is the set of brands, which the consumer is aware
of.

2. Recalled Set: This is the set of brands, which the consumer can
remember when deciding.
3. Considered Set: This is the set of brands, which the consumer
considers for the final selection after discarding the other brands.
The pre-purchase information may be obtained from various sources, like

advertisements, brochures, salesmen, shop displays, company website, etc.
which is basically given by the marketer. The consumer may also get the
information from friends and acquaintances or from his/her own past
experience.
Nowadays there are many other sources, most important of which is the
internet, which can produce a huge number of alternatives to the consumer,
whether he/she intends to buy the product/service online or offline. In fact
some researchers have listed the following benefits of an internet search
which is responsible for the phenomenal popularity of this medium:
1. Cost: the internet offers the lowest cost for information search, which is
the most attractive feature of this source.
2. Selection: The consumers are able to get a fairly large number of
alternatives by searching the internet very quickly.
3. Reliability: The consumers find the internet sources more reliable than
the store salesmen or advertisements. In fact many websites, blogs, etc.
that encourage actual consumer reviews have increased the credibility
of this information.
4. Quick product comparison: There are many sites which give product
comparisons and this has again helped the consumers in taking more
informed quick decisions which would have been either too laborious or
time consuming before the advent of this feature in the internet.

The extent of search effort by a consumer depends on many factors. These

are as under:
 Perceived Risk: This is the extent of loss incurred by the consumer if

he takes a wrong decision, in the buying process. There can be many
risks involved in making a purchase decision by a consumer like:
a. The product may not perform as well as the expectation.
b. Your immediate social circle may disapprove.
c. The consumer may not be feeling comfortable psychologically with
the product, although it may not have any product-related problems.
d. There may be another equivalent brand, which is lower in price or
the same brand may be available at a cheaper rate at some other
outlet.
e. This product may become obsolete in the near future and the new
products may have much better features.
When the perceived risk of the buyer is high he/she is likely to go for
extensive search. The consumer may not find much risk in routine
purchases and hence may not seek a lot of information before the
purchase decision.
 Involvement: This is the perceived importance of the product for the
consumer. There are some products, which a consumer buys routinely
without much thought and there are some products, which will involve a
great deal of involvement and care of the consumer in decision making.
This depends on how the consumer considers the importance of the
product either financially or psychologically. Sometimes the emotional
involvement of the consumer in a buying decision may be high although
the cost of the product/service may not be high. Such high purchase
decision involvement results in extensive search of prepurchase
information.

 Experience: The consumer may have the previous experience with the
product or the brand, which will lead to less extensive search for
prepurchase information. In such situations the purchase decisions will
be routinely made. This may get disturbed only in certain situations like:
f. When the experience is not satisfactory after the previous purchase.
g. When there are some new innovations and products introduced in
the market after the previous purchase.
h. When the consumer is interested in an assortment of different
brands of the same product.
i. If the previous experience is quite old & there is an urge to
reconsider.
j. When the perceived risk of wrong decision is high even with the
previous experience.
k. When the consumer is highly involved with the product & hence
enjoys the entire experience of evaluating various alternatives.
 Urgency: when there is urgency for taking the decision quickly the
extent of search gets restricted. Many marketers have taken advantage
of this aspect and have devised marketing strategies aimed at
consumers who value time by offering products and services, which
would save time for them.
 Brand Parity: when the competing brands are not very distinguishable
from each other, the consumer has to resort to more search efforts in
terms of getting more reviews by past consumers or by comparing their
features more extensively.
Sometimes, too much information results in the consumer get confused, as
to how to sort out this excessive information. Many products are advertised
with so many features, that the consumer finds it very difficult to understand
the relative importance of these features, which could result in a decision,
which may not be favourable to the marketer. Hence it is important for the

marketers to consider carefully what information is important from the

consumer’s perspective and avoid excessive information which is termed as
‘information overload’.
Third Step: Evaluation of Alternatives

After completing the search of relevant information, the consumer has to
evaluate the various alternatives. For this purpose we have to first
understand how consumers make choices. There are different methods by
which a consumer makes a choice, some of which are discussed below.
i. Affective Choice: This is based on the feelings of the consumer rather
than the actual benefits of the product or service. Buying of a dress,
having a holiday, etc. will normally involve the anticipated feelings of the
consumer while using the product or service. The decision will be based
mostly on such anticipated feelings rather than the attributes of the
product or service. In such situations, marketers have to design products
and services, which will provide appropriate emotional response in the
consumers. The advertising strategy also has to take care of helping the
consumers visualize how they will feel while consuming the product or
service. The advertising campaign –“God’s own Country” for Kerala
Tourism was very effective in following this strategy, to evince the right
emotions and feelings for the travelers looking for such experience of
nature.
ii. Cognitive Choice: This is based on the rational comparison of various
attributes of the product or service. This requires the knowledge of all
the relevant attributes at the time the choice is made and also it involves
the comparison of each attribute of various brands. This requires a lot of
time and effort and generally results in an optimal decision. Such choice
is more relevant in the case of more complex decision making when the
cost of purchase is high & the perceived risk of wrong decision is also
high. This approach is also resorted to when the relevant brand wise

information on various attributes are readily available. Many marketers

use this strategy to introduce brands, which are lacking in strong brand
image or reputation in a competitive market.
iii. Attitudinal Choice: This involves the general attitudes, impressions and
intuitions of the consumer rather than an informed choice. A variety of
situations force a consumer to go for this type of choice in preference to
other types. Time pressure, lack of relevant information, etc. would result
in a consumer decide on this method. Many marketers follow a dual
strategy for important & expensive products and services by targeting
both types of consumers viz. those going for cognitive choice as well as
those going for attitudinal choice.
Criteria for Evaluation

The various dimensions, features and benefits, which a consumer looks for
in response to the recognized problem, are termed as evaluation criteria.
These are mainly the product benefits and features as well as the costs.
There are various evaluative criteria used by consumers while making
purchase decisions. These criteria can differ in type, number and
importance. The type of criteria can be tangible factors like cost and
performance features or they can be intangible benefits like style, taste,
image, etc. The number of criteria can vary from product to product and
normally these are limited in case of simple products and more in case of
complex decisions like buying a house or an automobile. The importance of
criteria may vary among different consumer segments or even from
consumer to consumer. Depending on the relative importance of each
criterion the ultimate decision of purchase may vary.
Measurement of evaluative criteria: It is important for a marketer to

determine the following factors to decide on a suitable marketing strategy:
l. The evaluative criteria used by a consumer

m. How the various alternatives are perceived by the consumer on each

criterion.
n. The relative importance of each criterion.
There are direct as well as indirect methods used to measure evaluative

criteria. In direct methods, simple straightforward questions are asked and
the consumers are assumed to provide correct data on desired attributes.
Indirect methods like projective techniques are used to get results, by asking
indirect questions and here the assumption is that the consumers will not or
can not express correctly the evaluative criteria. Perceptual mapping is
another technique of indirect collection of data by ranking different brands
indicating pairs of brands and pairs of attributes which are similar.
Conjoint analysis is another most popular indirect method. In this method,

the consumer is asked to rank a set of product descriptions in which
evaluative criteria vary in each description. Many times what are known as
‘Surrogate indicators’ are used to evaluate consumer’s evaluation of
alternatives. A surrogate indicator is an attribute used to stand for or indicate
another attribute. For example price has been found to influence the
perceived quality of many products. Higher the price, higher is the
consumer’s confidence in the product. Hence price has been the most
popular surrogate indicator in such studies.
Fourth Step: Outlet Selection and Purchase

In this step the consumer has three alternatives for the final purchase
process.
1. Brand first and Outlet later: In the discussions so far only the brand
selection process has been dealt with in detail. It has been assumed that
the consumer will first decide on the brand of the product which he
wishes to purchase and then select the store from which to purchase

based on various parameters like the lowest price, easy access, good
image, good service, etc.
2. Outlet first and Brand later: Many consumers may follow this
alternative for certain products. In such cases, the consumer may be
familiar with some store, which is regularly patronized and hence he/she
may visit this store for purchasing the product.
3. Brand and Outlet simultaneously: When the consumer has no
particular preference for either the brands or the stores, he/she may visit
a couple of stores and evaluate the brands in all these outlets on the
spot. The final purchase decision may be taken on the basis of the
attributes of both brands and the stores. For example, the consumer
may prefer to buy a second best product from a store, which is
perceived as giving better after sales service.
Even the final purchase process can be further broken into three sub-steps:
a. Preferred Brand identification: Based on the various evaluative criteria
and the process of choice model, the consumer identifies the brand,
which he/she prefers to buy.
b. Purchase Intent: At this stage the consumer finally decides and
determines that he/she will go ahead with the purchase. This requires
the consumer having the necessary funds/ budget approval for making
the purchase.
c. Purchase implementation: This is the final stage of the purchase
process. This involves finalization of payment terms, seeking and
obtaining the transfer of title or ownership, making the payment and
receiving possession.
While going through these steps there could be delays due to various
reasons. Some of the factors which could cause this are- lack of time, need
for more information, inability to afford the product at that point of time, etc.

If the marketers can understand the correct reasons for such delays by
consumers they can devise their strategies to overcome these problems to
push the consumer for taking the final step.
The final step of purchase can also get altered when the consumer decides
to deviate from the identified choice. This could happen due to several
reasons like-
a. The identified brand may be out of stock.
b. Some new information either in the store or from some new external
source may reopen the evaluation process.
c. Financial terms offered by the store may not be feasible for the
consumer who may decide either to abandon the purchase or change
the brand.
6.5 Consumer choice Selection Models

There are some models of selection of choices by consumers and most of
these models are only indicative and not very precise since the mental
processes of consumers are often unconscious and unpredictable. These
models try to predict how a consumer tries to organize the attributes of
different brands and evaluate them to arrive at his/her choice. There are two
types of such models- compensatory and non-compensatory. Non
compensatory models consider that, very good performance of one attribute
can not compensate for the poor performance of another attribute. We shall
cover four non-compensatory models and one compensatory model in this
unit. Each model will yield a different choice. Hence, the marketers should
first understand as to which model is most suitable for explaining the
decision making process of their target customers and accordingly decide
on positioning and promotional strategies for their brand.

 Compensatory Model:
In this model, the consumer will average out some very good features with
some less attractive features of a brand in determining the overall
preference for the brand. The compensatory decision model states that the
brand that rates highest in the sum of the consumer’s judgments of the
relevant evaluative criteria will be chosen. In this model the total mix of the
relevant attributes must be considered to be superior to those of the
competition.
 Conjunctive Model:
In this model, the consumer establishes the minimum required performance
standards for each evaluative criterion and selects the first of all brands that
surpasses these minimum standards. Since individuals have limited ability
to process information, this model is frequently used to reduce the size of
the information processing task to a manageable level. This model is often
used to eliminate the alternatives which are out the consumer’s price range,
or they are outside the preferred location or they do not offer some desired
features. This model is often used in purchases of products like houses,
automobiles, computers, mobiles and also low involvement products. In all
such cases the consumer will select the first brand which meets all his
minimum requirements.
 Disjunctive Model:
In this model the consumer establishes a minimum level of performance for
each important attribute. All brands which surpass the performance level for
any key attribute are considered acceptable. When this model is used, it is
critical to surpass the consumer’s requirement on at least one of the key
criteria. In this model, since the consumers are supposed to purchase the
first brand, which exceeds one of the important retirements, extensive
distribution and predominant shelf space in a store display play vital roles.

 Elimination-by-aspects model:
This requires the consumer to rank the evaluative criteria in terms of their
importance and to establish a cutoff point for each criterion. All brands are
first evaluated on the most important criterion and those which are not up to
the mark are dropped from further consideration. If more than one brand
passes this stage, the process is repeated for the second most important
attribute. This repeated till only one brand remains in the end. In this model,
it is critical to exceed the consumer’s expectation in one more attribute than
the competition. Many advertising campaigns for products use this model for
emphasizing on the high level of one attribute which other brands do not
have.
 Lexicographic Model:
In this model the consumer first ranks the attributes in the order of
importance & then selects the brand, which performs the best in the most
important attribute. If two are more brands are equal in this comparison,
then they are again evaluated on the second most important attribute and so
on till only one brand remains in the end. In this model the brand which
surpasses others in the most important attribute will be chosen. This
superiority should be emphasised in the advertising campaigns for such
products.
1. __________ View is the case of assuming the consumer to be highly

rational.
2. __________ Decision Making (Nominal Decision Making or Routine

Problem Solving) is the strategy used for purchase problems which have
been solved previously.
3. _________ or selective demand is the conversion of the demand from
one brand to another.

4. _________ Risk is the extent of loss incurred by the consumer if a

wrong decision is taken by him in the buying process.
5. After completing the search of relevant information, the consumer has to
__________ the various alternatives.
6.6 Household and Family Decision Making

“Household” is defined as all the people who occupy a housing unit (a
house, flat, group of rooms, single room, etc.). A “Family” is defined as a
group of two or more people related by birth, marriage or adoption and living
together. A “Family Household” is defined as a household consisting of a
family and any unrelated people residing in the same hosing unit. A “Non-
family Household” is a householder living alone or exclusively with others to
whom he or she is not related.
In this chapter we shall be focusing on family households since several

members influence the decision making in such households and it is
distinctly different from individual decision making.
The family decision making is different from individual decision making in

many ways. There are influences of one family member on another while
taking decisions and the roles of initiator, influencer, payer, buyer and user
may be played and shared by different family members in different decision
making situations. Invariably the family purchases are inherently emotional
and affect the relationships among the family members. The processes the
families use to make purchase decisions and their outcomes have long
standing and important effects on the well being of individual family
members and the family itself.

Roles of Family Members in Decision Making

There are six roles in a family decision process which are played by
individual members jointly or individually in different purchase situations.
 Initiator: This is the member who first recognizes the need for purchase
and initiates the process of purchase.
 Information Gatherer: This member normally has the expertise and
also interest to collect information in a particular purchase process.
Different members may also seek information on different aspects of
purchase or at different times.
 Influencer: this member has maximum influence on the process of
evaluation of alternatives and the final choice.
 Decision Maker: This member makes the final decision.
 Buyer: This member is involved in the actual buying action.
 User: this member uses the product/service.
In all the above roles there could be more than one member at each level of
decision making.
It is important for marketers to understand this concept of different roles

played by different family members especially for their brands so that they
can formulate their marketing strategies to ultimately influence the purchase
decision.
Husband-Wife Decision Roles

Family decision making has been categorized as ‘husband dominant’, ‘wife
dominant’, ‘joint’ or ‘individual’. Depending on the product and the situation
the above patterns of relative influence may vary in the same family. There
are several factors which affect these decision sharing patterns. Some of
them are discussed here

I. Gender Role: In each culture and in each family the specific behaviours
and norms are linked to a person’s gender. In certain cases it could also
depend on the product or service being purchased and each gender
may have a specific role in the decision making process. For example, in
Indian families the kitchen related products are the domains of the wife.
II. Wife’s Employment Status: It has been found that the wife’s status of
employment directly affects the gender roles in a decision making
process. A working wife has more importance in joint decisions & in
many situations the wife takes individual decisions. She is considered to
be more knowledgeable because of the exposure to the outside world
and since she is contributing to the family finances she will have more
say in all-important decisions of the family.
III. Family Stage: The different stages of the family like- newly married
couple, couples with small children, with teenage children, etc. affect the
decision making process of the families. In the initial stages of marriage
the couples are found to take joint decisions & as they grow, the
decisions pertaining to their individual chores get more distinct and
consequently the decision making process also gets affected.
IV. Time Pressure: Families under high time pressure may rely less on joint
decisions and in many situations individual decisions are taken although
joint decisions would have been more efficient.
V. Complexity of Purchase: More complex the decision more the

possibility of joint decisions. Such cases may be when the cost of
purchase is very high or when the risk of a wrong decision is pretty high.
These are mostly decisions which the family has to live with for a long
period- like purchase of a house or a car.

Conflict in Family decisions

Family decision making may give rise to conflict if the family decision
process involves joint decision-making. There could be disagreements on
goals or market values or on perceptions or evaluation of alternatives. The
nature of conflict will differ depending on whether the disagreement is in one
or both of these areas. There could be four alternatives and for each of
these the resolution of conflict also could differ.
a. When goals are agreed upon but evaluations are not: this is a case of
solution conflict as in the case of a family vacation when the conflict is
in the place for vacation. In such cases the conflict is resolved through
problem solving. This requires gathering of more information or to add
more alternatives.
b. When goals are divergent and evaluation is also differing: this is a case
of compounded complex and this normally happens in case of
important decisions like buying a new home. There could be differences
in both the selection of the goal as also the evaluations. In such a case
the conflict resolution takes place through politicking and bargaining.
Bargaining requires trading favours like agreeing upon some preference
of the husband and some of the wife in selecting the home.
c. The third type is when the goals are divergent and the evaluation is
agreed upon. Such cases result in Goal conflict, as in the case of what
product to buy. The wife may want a safe and large car for
accommodating the whole family whereas the husband may want to buy
a powerful and sleek car. Resolution of this conflict is through
persuasion by analyzing the goal hierarchy, i.e. which goals take
precedence over which other goals in the given situation.
d. The fourth situation is when both goals and the evaluations are
convergent when there is obviously no conflict.

6.7 Howard-Sheth Model of Buying Behaviour Schematic

Diagram
Description of the model
The above is a schematic diagram of this model. This model provides the
framework for including various concepts like learning, perception, attitudes,
etc., which play a role in influencing consumer behaviour. Many of these
concepts have already been discussed in detail in the earlier paragraphs.
The factors affecting consumer behaviour are explained below.
Howard-
Howard-Sheth Model of Consumer Behavior
Howard-Sheth
Inputs Perceptual Constructs Learning Constructs Outputs

Social, Symbolic and Direct Stimuli
Motives Atte ntion

Overt Search
Confide nce
Sti mulus Brand
Brand Compre he ns ion
Ambiguity Compre he ns ion
Choice Crite ria Attitude

Attention Attitude
Atte ntion
Intention
Perceptual Bi as
Satisfaction Purchase
Inputs: In the Howard Sheth theory, the most significant stimulus affecting
the buying behaviour is the information cues about the attributes of the
product. These cues may come to the buyer from the marketing firm or from
other sources. These product attributes acting as information cues are
quality, price, distinctiveness, service, availability, etc. These cues could
come from impersonal sources like mass media communications and
advertising, over which the firm has no control. The information may also
come from sources like sales and service personnel who are involved in the
marketing efforts of the firm. The third source is social information cues
which could affect buying behaviour towards the product or brand and these

sources include family, friends or other members of the group with whom
buyer comes into contact or to which he aspires to be in. The social source
is also personal and the company has no control over this source.
Perceptual Constructs: This refers to all the complex states or

psychological processes (perception) and how the individual deals with the
information cues received from various sources.
It can be seen that all information available is not attended to (attention) and
may not always be crystal clear in its meanings (ambiguity). Although the
individual may be engaged in his/her own overt search for information,
sometimes he/she may be receiving unwanted information. Moreover, any
information cues to which the individual may attend may be distorted
(perceptual bias) as result of his own frame of reference.
Learning Constructs: The second set of hypothetical constructs in this

theory are more complex and numerous.
‘Motives’ refers to the goals the individual attempts to achieve through

his/her buying behaviour. These goals are derived from the various drives
(needs), which may be acting as a cue for his/her motive. More closely
related to the buyers intention is his attitude towards the product/brand-
whether he/she forms a positive attitude towards the product/brand. Other
learning constructs include ‘brand comprehension’ i.e.,
knowledge/awareness about the brand attributes which form the basis for
the buyers evoked set of alternatives; choice criteria, and the confidence the
individual has about his/ her brand comprehension, attitudes, or intentions.
Finally, the model includes a construct, ‘satisfaction’. This refers to
‘feedback’ mechanism, i.e., the post purchase and post use evaluation of
the output of the process.

Output: The purchase decision is the output. If after using the product, the
consumer is satisfied with it, this will reinforce his positive attitude and
purchase intent about the product and brand. Also, the positive attitude
makes the consumer more attentive to the product/brand’s stimuli and
further increases his brand comprehension. If the consumer is dissatisfied
with experience of using the product/brand, it will trigger off a reaction of
negative attitude, low attention to the product stimuli. Poor brand
comprehension and negative intention to purchase.
External Variables: This model also includes a number of variables, which

are not explained but have a bearing on some or all of the constructs
discussed above and indirectly influences the output or consumer response.
1. Social and organizational setting: Man is basically a social animal.
Because of his interactions with various groups and society, they get
influenced by each other regarding decisions on what to buy, how to
buy, etc.
2. Social class: In order to conform to the norms of the social class to
which he/she belongs, the individual will be engaged in behaviour, which
will be acceptable to the social class to which it belongs. Income may or
may not have a bearing on the social class, which is based on many
other factors like the occupation, education, etc.
3. Culture: refers to the shared, somewhat consistent pattern of behaviour
of a group of people. Each culture has a set of beliefs, values, etc. So
the pattern of buyer behaviour will be based on a pattern of behaviour
shared in a specific subset of a larger culture-a subculture trait.
4. Purchasing power/ Financial status: The money/income available for
purchasing goods and services during some specific time period also
plays a role in influencing the consumption pattern and thereby his
buying behaviour.

6.8 The Nicosia Model

In an early study of the buyer decision process literature, Frank Nicosia
(Nicosia, F. 1966) identified three types of buyer decision making models.
They are the univariate model (He called it the "simple scheme") in which
only one behavioural determinant was allowed in a stimulus-response type
of relationship; the multi-variate model (He called it a "reduced form
scheme") in which numerous independent variables were assumed to
determine buyer behaviour; and finally the system of equations model (He
called it a "structural scheme" or "process scheme") in which numerous
functional relations (either univariate or multi-variate) interact in a complex
system of equations. He concluded that only this third type of model is
capable of expressing the complexity of buyer decision processes. Nicosia
builds a comprehensive model involving five modules. The encoding module
includes determinants like "attributes of the brand", "environmental factors",
"consumer's attributes", "attributes of the organization", and "attributes of the
message". Other modules in the system include consumer decoding, search
and evaluation, decision, and consumption.
The model is split into four key fields:

(1) The source of a message to the consumers’ attitude
(2) The search for and evaluation of alternatives
(3) The act of purchase
(4) Storage and the use of the purchased product.
The model attempts to demonstrate how the company influences the

consumer through its promotional and advertising activities.
6.9 Engel-Blackwell-Miniard Model

The features of this model have also been discussed in the earlier
paragraphs in this unit in detail.

The main attraction of the model is that it deals with low-involvement

situations. It is suggested that in low involvement situation the degree to
which the various stages in the model are undertaken decreases. The
problems with this model are that there is no way of testing it. There is also
no specific theory i.e. the variables are named in superficially plausible way
but not specified in any operational detail.
This model breaks down the consumer decision making process into 5
steps. These steps are as under:
1. Problem recognition: the consumer will recognise a difference between

his or her actual state and what the ideal state should be. This may
occur on account of external stimuli.
2. Information search: Initially the information available with the consumer

may be consistent to other beliefs and attitudes held by him or her.
While being involved in an information seeking or search stage, the
consumer will try to gather more information from various sources. The
individual gets exposure of the stimuli which may catch his or her
attention, be received and retained in memory. This method of
information is selective in nature and the consumer will accept the
information, which is in consonance with what is perceived by them.
3. Alternative evaluation: Now the individual will evaluate the alternate

brands. The methods used for evaluating the various brands will depend
on the consumer’s underlying goals, motives and personality. The
consumer also has certain predetermined beliefs about the various
brands in terms of the characteristics associated with the different
brands.
4. Choice: the consumer’s choice will depend on his or her intention and
attitude and is influenced by other people like friends, family members
etc.
5. Outcome: The outcome may either be positive or negative.

Apart from these 5 steps the model also includes a number of other related
variables grouped into five categories.
Information input
Information processing
Product-brand evaluation
General motivating influences
Internalized environmental influences
This model consists of four components:
i. Information processing
ii. Central control Unit
iii. Decision Process and
iv. Environmental influences
i. Information processing: this component comprises the consumer’s

selective exposure, attention, comprehension and retention of stimuli
relating to a brand received from marketing and non-marketing sources.
As a marketer, the first step is to ensure that a consumer is exposed to
the message or stimuli, pays attention to it, understands what it is all
about and also remembers it.
ii. Central Control Unit: The stimuli thus received and retained are
processed in the central control unit. The stimuli are processed and
interpreted with the help of four psychological filters:
a. Stored information and past experience about the product/brand

which serves as a memory for comparing different alternatives;
b. Evaluative criteria which the consumer uses in judging the

alternatives;

c. General and specific attitudes which influence the purchase

decision;
d. Basic personality traits, which influence how the consumer is likely

to respond to various alternatives.
iii. Decision process: The decision process component of the model

consists of:
a. Problem recognition
b. Internal search and evaluation
c. External search and evaluation
d. Purchase processes
e. Decision outcomes
If the purchase decision is such that it requires extensive problem

solving, the consumer would go through all the above five stages. In
case of limited problem solving or routinised response behaviour, some
of the intermediate stages may be skipped and the consumer may
directly reach the purchase decision.
iv. Environmental Influences: The environmental factors that may

influence the consumer’s purchase decision are income, culture, family,
social class and physical situations.
Depending on the specific product under consideration, these factors may

have a favorable or unfavorable influence on the purchase decision.
6.10 Post purchase Behaviour

As the consumers use the product, they evaluate the performance critically
in the initial stages by comparing with their expectations. Such an evaluation
may lead to following three outcomes:

a. Performance matches expectations: This leads to a neutral feeling

and satisfaction. There is a likelihood of this consumer buying this brand
again in future from the same store.
b. Performance exceeds expectations: This could lead to a strong brand
and store loyalty in future purchases.
c. Performance is below expectations: In this case especially if the
involvement is intensive, the consumer may respond in different ways as
explained below.
i. Cognitive Dissonance: This may result in doubting the wisdom of

the choice which creates what is called “Cognitive Dissonance”
which is a disturbance in the mind. The consumer may then try to
reduce such disturbance by trying to justify the soundness of the
decision by seeking further positive information about their choice
and avoid any negative inputs they may get at this stage. Thus they
will re-read the product brochures, giving positive features and avoid
competitors’ advertisements, or any negative inputs by friends or
acquaintances. Marketers can make use of this psychology, by
asking their sales people to get a feedback from the consumers,
which may reveal some of the positive features neglected by them
previously.
ii. Exit: This is the extreme reaction when the consumer is totally
convinced that the choice was indeed bad. He/she may then decide
not to buy this brand again. They may go through the entire process
of the purchase process from the very beginning when they need to
buy the product again.
iii. Complain: Dissatisfied customers may either complain or just keep

quiet. The likelihood of the consumer voicing a complaint depends
on three factors-

a) Extent of dissatisfaction (whether the dissatisfaction is serious or

not),
b) Attribution to marketer (whether the consumer feels that this

complaint can definitely be attributed to the marketer) or
c) Consumer’s personality (degree of aggressiveness/

submissiveness, self-confidence, assertiveness etc.)
If this results in a complaint and if the marketer successfully redresses the

complaint, the consumer may perceive that justice has been done. Such a
result is possible when the consumer feels that he/she was treated with
respect during the process of conflict resolution, the policy and procedure
followed was fair and the final decision was justified. If the consumer is
satisfied that justice has been done, he is likely to continue with the same
brand and store. If the consumer is dissatisfied with this the hostility
increases. There could be adverse word of mouth publicity. It has been
found by research that consumer complaints are good for the marketers. A
relatively low percentage of consumers actually complain and if the
complaint is redressed they are likely to become loyal customers. A majority
of dissatisfied consumers may not complain; but simply turn to competitors
brands. It has also been found by research that the negative publicity of
dissatisfied customers is much more widely done than the positive publicity
of satisfied customers. The satisfied customers are less likely to spread the
word across about the good features of the product. However the
dissatisfied customer is more likely to take the initiative to spread the word
around about the negative aspects of his/her experience which could be
more damaging. Hence complaint redressal system is a very important part
of a successful marketing strategy.

1. There are six roles in a family decision process which are played by
individual members jointly or individually in different purchase situations.
__________ is the member who first recognizes the need for purchase
and initiates the process of purchase.
2. _________ is the member who is involved in the actual buying action.
3. Family decision making has been categorized as ‘husband dominant’,

‘__________ dominant’, ‘joint’ or ‘individual’.
4. When goals are agreed upon but evaluations are not is a case of
‘__________ conflict’.
5. In the Howard Sheth theory, the most significant stimulus

affecting the buying behaviour is the information __________ about the
attributes of the product.
6.11 Summary
In this unit, we have discussed how Consumer Decision process takes
place. In this, we learnt the Definition and Scope of Consumer Decisions,
Levels of Consumer Decision-Making, Models of Purchase Decision
Process, Situational Influences and Consumers as decision- makers. We
also studied the steps in the Consumer Decision making process like
Problem Recognition, Prepurchase Search, Evaluation of Alternatives,
Outlet Selection and Purchase and post purchase behaviour. We also learnt
about various Consumer choice selection models like Compensatory Model,
Conjunctive Model, Disjunctive Model, Elimination-by-aspects model and
Lexicographic Model. We also covered various facets of Household and
Family Decision-Making including Roles of Family Members in Decision-
Making, Husband-Wife Decision Roles and Conflict in Family decisions. We

also studied Howard-Sheth Model of Buying Behavior, The Nicosia Model

and Engel-Blackwell-Miniard model.

1. Describe the Scope and Levels of Consumer Decision-Making process.
2. Explain the Lexicographic Model of consumer choice selection.
3. When is the Limited Decision Making strategy adopted by the
consumer? Explain with examples.
4. Describe the different types of Conflict in Family decisions.
5. List the three outcomes of post purchase behaviour. Explain the
meaning of Cognitive Dissonance.
SAQI
1. Economic
2. Habitual
3. Secondary
4. Perceived
5. evaluate
SAQII
1. Initiator
2. Buyer
3. wife
4. solution
5. cues
TQ
a. Refer Section 6.2
b. Refer Section 6.5
c. Refer Section 6.3
d. Refer Section 6.6
e. Refer Section 6.10

Unit 7 Consumer Research
Structure
7.1 Introduction
Objectives
7.2 Primary Research
7.3 Qualitative Research
7.4 Quantitative Research
7.5 Experimental Methods
7.6 Secondary Research
7.7 Managerial application of consumer research in marketing
7.8 Summary
7.1 Introduction
Research is the scholarly or scientific practice of gathering existing or new
information in order to enhance one's knowledge of a specific area.
Research has many categories, from medicine to literature. Marketing
research, or market research, is a form of business research and is
generally divided into two categories: consumer market research and
business-to-business (B2B) market research, which was previously known
as industrial marketing research. Consumer marketing research studies the
buying habits of individual people, while business-to-business marketing
research investigates the markets for products sold by one business to
another. Consumer marketing research is a form of applied sociology that

concentrates on understanding the behaviours, whims and preferences, of

consumers in a market-based economy. Arthur Nielsen pioneered the field
of consumer marketing research as a statistical science with the founding of
the ACNielsen Company in 1923.
Depending on whether the data required already exists or not, there are two
classifications: a. Primary Research & b. Secondary Research.
Objectives
 Know the different types of consumer research.
 Understand various methods of qualitative & quantitative research.
 Explain the managerial applications of consumer research.
7.2 Primary Research

Primary research (also called field research) involves the collection of data
that doesn't already exist. The term is widely used in market research. There
are different methods of collecting primary data. Some of these are:
 Observation: Looking at and recording what people do and how they
behave. Today, store cameras can be used to observe consumer
behaviour.
 Experiments: Market researchers can use experimental techniques. For
example- test marketing, blind taste tests.
 Surveys: Involves asking questionnaires to respondents.
 Consumer panels: A select group of consumers that the company
regularly surveys to identify changing attitudes.
There are two broad categories of primary research to understand

consumer behaviour.

a. Qualitative Research: This involves measuring in terms of general

descriptions and categories.
b. Quantitative Research: In this category, the measurement is in terms

of numbers.
7.3 Qualitative Research

Qualitative research involves an in-depth understanding of consumer
behavior and the reasons that govern that behavior. Unlike quantitative
research, qualitative research relies on reasons behind various aspects of
behavior. Simply put, it investigates the why and how of decision-making, as
compared to what, where and when of quantitative research. Hence, the
need is for smaller but focused samples rather than large random samples,
which qualitative research categorizes data into patterns as the primary
basis for organizing and reporting results. Unlike quantitative research,
which relies exclusively on the analysis of numerical or quantifiable data,
data for qualitative research comes in many mediums, including text, sound,
still images, and moving images.
In qualitative research, the method does not ask the consumer to limit his or
her answers to pre-assigned response categories. The responses are verbal
rather than numbers and the respondent is asked to rate the answer in his
or her own words. If the answer is a True/False or a multiple-choice
category, this is a quantitative answer. If the answer is in terms of an essay,
it is qualitative. In this method, the researcher may not even know what the
possible answers could be and in fact this method is adopted precisely for
that reason. This approach allows the researcher to discover the
consumption motives, attitudes, opinions, perceptions, preferences,
experiences, actions, future intentions, etc. There are different techniques in

qualitative research. Some of them are described in the following

paragraphs:
Focus Groups
A focus group is a form of qualitative research, in which a group of people is
asked about their attitude towards a product, service, concept,
advertisement, idea, or packaging. Questions are asked in an interactive
group setting where participants are free to talk with other group members.
Focus groups are seen as an important tool for acquiring feedback
regarding new products, as well as various topics. In particular, focus
groups allow companies wishing to develop, package, name, or test market
a new product, to discuss, view, and/or test the new product before it is
made available to the public. This can provide invaluable information about
the potential market acceptance of the product.
In traditional focus groups, a screened (qualified) group of respondents

gathers in the same room. They are screened to ensure that they are part of
the relevant target market and that the group is a representative subgroup of
this market segment. There are usually 6 to 10 members in the group, and
the session usually lasts for 1 to 2 hours. A moderator guides the group
through a discussion that probes attitudes about a client's proposed
products or services. The discussion is loosely structured, and the
moderator encourages the free flow of ideas. The moderator is typically
given a list of objectives or an anticipated outline. He/she will generally have
only a few specific questions prepared prior to the focus group. These
questions will serve to initiate open-ended discussions.
Client representatives observe the discussion from behind a one-way mirror.

Participants cannot see out, but the researchers and their clients can see in.
Usually, a video camera records the meeting so that, it can be seen by
others who were not able to travel to the site. Transcripts can be created

from the videotape. If the participants speak a different language than the
clients, a simultaneous interpreter may be used.
Researchers examine more than the spoken words. They also try to
interpret facial expressions, body language, and group dynamics.
Moderators may use straight questioning or various projective techniques,
including fixed or free association, story telling and role-playing. Focus
groups are often used to garner reaction to specific stimuli such as
concepts, prototypes and advertising.
It is often suggested that, respondents feel group pressure to conform and

this can contaminate the results. Others hold that, by using trained and
experienced moderators who appropriately manage the discussion, this
potential problem can be mitigated. Further, despite the potential for
groupthink, marketers and sociologists find that group dynamics are useful
in developing new streams of thought and covering an issue thoroughly.
Focus group discussions are not representative of the total population of the
target consumers since this sample is not representative. This group is a
window to the customer’s mind, bringing to surface those things, which the
marketer may not have known about the consumer & his/ her views on
many issues.
Types of focus groups: Different types of focus groups include

i. Two-way focus group – one focus group watches another focus group
and discusses the observed interactions and conclusions.
ii. Dual moderator focus group – one moderator ensures the session
progresses smoothly, while another ensures that all the topics are
covered.
iii. Dueling moderator focus group – two moderators deliberately take
opposite sides on the issue under discussion.

iv. Respondent moderator focus group – one or more of the respondents

are asked to act as the moderator temporarily.
v. Client participant focus groups – one or more client representatives
participate in the discussion, either covertly or overtly.
vi. Mini focus groups – groups are comprised of 4 or 5 members rather
than 8 to 12.
vii. Teleconference focus groups - telephone network is used.
viii. Online focus groups – computers and internet network is used.
Traditional focus groups can provide accurate information, and are less
expensive than other forms of traditional marketing research. There can be
significant costs however if a product is to be marketed on a nationwide
basis, it would be critical to gather respondents from various locales
throughout the country since attitudes about a new product may vary due to
geographical considerations. This would require a considerable expenditure
in travel and lodging expenses. Additionally, the site of a traditional focus
group may or may not be in a locale convenient to a specific client, so client
representatives may have to incur travel and lodging expenses as well.
The use of focus groups has steadily evolved over time and is becoming
increasingly more widespread.
On Line Focus Groups

With the advent of large-scale computer networks, such as the Internet, it is
now possible to link respondents electronically. Respondents share images,
data, and their responses on their computer screens. This avoids a
significant amount of travel expenses. It allows respondents from all over
the world to gather, electronically, while avoiding countless logistical
headaches. Like in-person focus groups, online groups are usually limited to
8-10 participants.

Such a system eliminates the logistical headaches and travel expenses

associated with conducting focus groups. Many platforms even allow for a
'back room', so that clients can observe and talk among each other and with
the moderator as the group proceeds, just like in-person focus groups, even
though they are physically apart from the moderator. In this way, questions
can be added in real time to further probe a particular response. Such a
system prohibits participation on the different chat discussions based on the
class of the participant (moderator, observer, and participant).
In addition to the savings on travel, online focus groups often can be

accomplished faster than traditional groups because respondents are
recruited from online panel members who are often qualified to match
research criteria.
Applications of Focus Groups

Some of the applications of focus groups are as under:
a. Generating ideas for product improvements or new products. The
discussions will focus on the customers currently face in using the
product or as to how the product can be made more useful and this can
suggest new directions for product research and development. Some
customers in fact use some products innovatively and this can in fact
lead to new uses of the same product, which the firm can capitalize on.
b. Understanding customer perceptions of competing brands. The
firm’s brand is displayed along with the competing brands without
revealing the identity of the client’s brand and the consumers are
encouraged to compare these brands.
c. Testing new concepts. New product concepts, packaging prototypes,
new distribution channels, new brand names, advertising art works, new
commercials can be shown to the focus group to get their feed back.

Customer Visits
A programme of customer visit involves visiting a predetermined number of
customers, to hold interviews with these customers and observe each
customer’s experience. A team from different functional departments like
R&D, production, marketing, logistics, etc makes the visit. Specific
objectives of the visit is developed and communicated to the customer well
ahead. The purpose of the visit is to understand the customer’s experience
and not to sell the product.
Advantages of Customer Visits

There are several advantages of such visits. Some of them are as follows:
a. It affords a good opportunity to understand customer requirements.
Face to face interactions help to develop the specifications of the
product jointly so that the product may be better fit of the customer
requirements and also easier for the firm to produce.
b. The technical team from the factory and R&D can understand and
respond to the customer’s thought process first hand and will help the
whole process task oriented.
c. The technical people will become more customer oriented since they
understand the customer psychology & needs first hand rather than get
to know from a third person from the marketing department. They feel
confident that they are getting unfiltered information about the consumer
behaviour without any biases brought in by the marketing people.
d. Certain things can be learned not by interviews, but by observing the
actual handling of the product, by the customer. In fact, even logistics
person of the firm may observe how the customer handles the
packaging, so that there could be some new ideas, which may occur for
improvement of packaging.

Disadvantages and criticism of Focus Groups

However, focus groups also have disadvantages:
The researcher has less control over a group than a one-on-one interview,
and thus time can be lost on issues irrelevant to the topic; the data are
tough to analyze because the talking is in reaction to the comments of other
group members; observers/ moderators need to be highly trained, and
groups are quite variable and can be tough to get together. Moreover, the
number of members of a focus group is not large enough to be a
representative sample of a population; thus, the data obtained from the
groups is not necessarily representative of the whole population, unlike in
opinion polls.
A fundamental difficulty with focus groups (and other forms of qualitative

research) is the issue of observer dependency: the results obtained are
influenced by the researcher, raising questions of validity. The design of the
focus group study (e.g. respondent selection, the questions asked, how they
are phrased, how they are posed, in what setting, by whom, and so on)
affects the answers obtained from respondents. In focus groups,
researchers are not detached observers but always participants.
Researchers must take this into account when making their analysis.
Motivation Research
This type of research is directed at discovering the reasons for a person’s
behaviour. In consumer behaviour, motivation research is conducted to find
out the conscious and subconscious reasons that motivate people to buy or
not to buy a brand, to patronize or avoid a store, to accept or reject a
marketing communication, etc. A number of techniques are used in
motivation research:
a. Non-disguised structured techniques: In this design, the research
purpose will be obvious and may seek response along pre-specified

response categories. The researchers often ask for opinions or attitudes

on pertinent topics by using rating statements, which clearly indicate the
purpose of study and the responses like ‘agree/disagree’ or ‘true/false’
will make the response also unambiguous. Normally, political exit polls
and referendums are examples of such design.
b. Non-disguised non-structured Techniques: In this type, the purpose
of the study is not disguised; but the consumer response categories are
not predetermined. The questioning is open-ended, encouraging the
consumer to supply whatever answer he/she feels fit. This set is also
known as unstructured interviews, qualitative interviews, non-directive
interviews, etc. The researcher simply names a broad topic and
encourages the respondent to talk about whatever he/she thinks, knows
and feels about the topic.
c. Disguised structured techniques: In this design, the real purpose is
disguised; but the response categories are provided. For example, a
researcher may ask- “Of the following, who is most likely to own a Maruti
800 car: a. a professor, b. a student, c. an actor, or d. a mechanic.” The
respondent’s answer will reveal the image he/she holds of a Maruti 800
owner.
d. Disguised non-structured techniques: in this, the respondent knows

neither the purpose of research nor the response categories pre-
structured. The respondent is given a fairly vague stimulus and is then
asked to interpret the stimulus. These are also called as projection
techniques. This technique is very helpful in uncovering motives that
respondents would not knowingly and voluntarily reveal. The specific
techniques used in this design are word association, sentence
completion and story completion.

e. Word Association: In this technique, the researcher either reads or

flashes a set of words before the consumer who is instructed to respond
with whatever word comes to his/ her mind. For example, the word or
expression ‘ instant coffee’ may bring out such associations as
tasteless, ordinary, cheap, etc. revealing the reason this set of
consumers may not buy this. Another group who are heavy users of
instant coffee may respond with words like convenient, quick,
invigorating, etc.
f. Sentence Completion: This is similar to word association excepting
that the respondent is presented with an incomplete sentence and is
asked to complete the sentence. An incomplete sentence like- ‘I drink
instant coffee only when I am ______’ might get such responses like- “
in a hurry”, “ in the office”, “ relaxing”, “at home”, etc.
g. Story Completion: The most popular form of story completion is
“Thematic Apperception Test”(TAT). The Thematic Apperception Test
has been amongst the most widely used, researched, and taught
projective psychological tests. Its adherents claim that it taps a subject's
unconscious to reveal repressed aspects of personality, motives and
needs for achievement, power and intimacy, and problem-solving
abilities. The TAT is popularly known as the picture interpretation
technique because it uses a picture (like in a product buying or usage
situation) about which the subject must tell a story. The subject is asked
to tell as dramatic a story as he/she can for each picture, including:
– what has led up to the event shown
– what is happening at the moment
– what the characters are feeling and thinking, and
– what is the outcome of the story.

Interpretative Research
This is another qualitative research method. In this method, the researcher
observes a customer or a group of customers in their natural setting and
interprets the behaviour based on an extensive understanding of the social
and cultural characteristics of that setting. The researcher in fact becomes a
participant observer of the scene. These are also called ethnographic
studies. The purpose here is not limited to the buying behaviour of the
consumer; it also covers the consumer’s lifestyle, his/her satisfaction level,
the role of material objects and worldly activities in his/her life, etc.
There are many advantages of interpretative research. First the researcher

will be observing the behaviour of the consumer in the natural setting and
hence the artificialness of surveys, focus group rooms, or other laboratory
type settings are avoided. Second, The consumer is observed over a long
period of time stretching from a few hours to a few weeks rather than a few
minutes. Third, the researcher gets a first hand knowledge of the consumer
behaviour rather than getting third party respondents’ reactions. Fourth,
because of the extended mutual exposure between the researcher & the
customer, a greater trust is built which can then lead to customer answers
being more sincere and honest. Finally the customer activity being analysed
& questioned is much more immediate and physically present.
This method however has a few shortcomings. It requires highly skilled

and well-trained researchers who are less preoccupied with recording the
responses than the interpretation of their observations. This is also very time
consuming and quite expensive. The interpretation of data is quite
subjective in spite of following certain analytical procedures. Finally these
methods are good at generating hypotheses; but not at confirming
hypotheses or suggesting any general principles.


1. __________ research (also called field research) involves the collection
of data that doesn't already exist.
2. Unlike quantitative research, qualitative research relies on reasons
behind various aspects of behavior and investigates the _________ and
_________of decision making, as compared to what, where, and when
of quantitative research.
3. A ________ group is a form of qualitative research in which, a group of
people are asked about their attitude towards a product, service,
concept, advertisement, idea, or packaging.
4. The __________ __________Test has been amongst the most widely
used, researched, and taught projective psychological tests.
5. __________ Research is another qualitative research method in which
the researcher observes a customer or a group of customers in their
natural setting and interprets the behaviour based on an extensive
understanding of the social and cultural characteristics of that setting.
7.4 Quantitative Research

Quantitative marketing research is the application of quantitative research
techniques to the field of marketing. It has roots in the modern marketing
viewpoint that marketing is an interactive process in which both the buyer
and seller reach a satisfying agreement on the "four P's" of marketing:
Product, Price, Place (location) and Promotion. As a social research
method, it typically involves the construction of questionnaires and scales.
People who respond (respondents) are asked to complete the survey.
Marketers use the information so obtained to understand the needs of
individuals in the marketplace, and to create strategies and marketing plans.
Both descriptive and inferential statistical techniques can be used to analyse

data and draw conclusions. It involves a quantity of respondents, sometimes

ranging in number from ten to ten million, and may include hypotheses,
random sampling techniques to enable inference from the sample to the
population. Marketing research may include both experimental and quasi-
experimental research designs.
Steps involved in Quantitative Research: There are five important steps

involved in the research process:
a. Defining the Problem: This involves problem audit and problem

definition i.e. – What is the problem? What are the various aspects of
the problem? What information is needed?
b. Research Design: This involves conceptualization and
operationalisation i.e. – How exactly do we define the concepts
involved? How do we translate these concepts into observable and
measurable behaviours?
Hypothesis specification: What claim(s) do we want to test?

a. Research design specification: What type of methodology to use? -
examples: questionnaire, survey
b. Question specification: What questions to ask? In what order?
c. Scale specification: How will preferences be rated?
d. Sampling design specification – What is the total population? What
sample size is necessary for this population? What sampling method to
use?- examples: Probability Sampling: (cluster sampling, stratified
sampling, simple random sampling, multistage sampling, systematic
sampling) and Non- probability sampling: (Convenience Sampling,
Judgment Sampling, Purposive Sampling, Quota Sampling, Snowball
Sampling, etc.).
e. Data Collection: Use mail, telephone, internet, mall intercepts. Make
adjustments to the raw data so it is compatible with statistical techniques

and with the objectives of the research – examples: assigning numbers,

consistency checks, substitutions, deletions, weighting, dummy
variables, scale transformations, scale standardization.
c. Analysis:
Statistical analysis – Perform various descriptive and inferential
techniques on the raw data. Make inferences from the sample to the
whole population. Test the results for statistical significance.
a. Interpret and integrate findings – What do the results mean? What
conclusions can be drawn? How do these findings relate to similar
research?
d. Report Writing & presentation- Report usually has headings such as:
1) xecutive summary; 2) objectives; 3) methodology; 4) main findings;
5) etailed charts and diagrams.
7.5 Experimental Methods

One limitation of the survey method of quantitative marketing research is
that the questions are limited to assessing consumer opinions and thoughts.
In respect of behaviour, these survey methods can only measure what the
respondents say they will do; not what they actually do. To avoid this
problem experimental methods are used. An experiment is a method in
which the researcher places respondents in a situation that does not
normally occur and then observes and records their response. On important
example of this method is Test Marketing.
Test Marketing
A test market, in the field of business and marketing, is a geographic region
or demographic group used to gauge the viability of a product or service in

the mass market prior to a wide scale roll-out. The criteria used to judge the
acceptability of a test market region or group include:
1. A population that is demographically similar to the proposed target

market; and
2. Relative isolation from densely populated media markets so that
advertising to the test audience can be efficient and economical.
The test market ideally aims to duplicate 'everything' - promotion and

distribution as well as `product' - on a smaller scale. The technique
replicates, typically in one area, what is planned to occur in a national
launch; and the results are very carefully monitored, so that they can be
extrapolated to projected national results. The `area' may be any one of the
following:
* Television area
* Test town
* Residential neighborhood
* Test site
A number of decisions have to be taken about any test market:

* Which test market?
* What is to be tested?
* How long a test?
* What success criteria?
The simple go or no-go decision, together with the related reduction of risk,
is normally the main justification for the expense of test markets. At the
same time, however, such test markets can be used to test specific
elements of a new product's marketing mix; possibly the version of the
product itself, the promotional message and media budget, the distribution

channels and the price. In this case, several `matched' test markets (usually
small ones) may be used, each testing different marketing mixes.
Clearly, all test markets provide additional information in advance of a

launch and may ensure that launch is successful: it is reported that, even at
such a late stage, half the products entering test markets do not justify a
subsequent national launch. However, all test markets do suffer from a
number of disadvantages:
1. Replicability - Even the largest test market is not totally representative

of the national market, and the smaller ones may introduce gross
distortions. Test market results therefore have to be treated with
reservations, in exactly the same way as other market research.
2. Effectiveness - In many cases the major part of the investment has
already been made (in development and in plant, for example) before
the `product' is ready to be test marketed. Therefore, the reduction in
risk may be minimal; and not worth the delays involved.
3. Competitor warning- All test markets give competitors advance
warning of your intentions, and the time to react. They may even be able
to go national with their own product before your own test is complete.
They may also interfere with your test, by changing their promotional
activities (usually by massively increasing them) to the extent that your
results are meaningless.
4. Cost- Although, the main objective of test markets is to reduce the
amount of investment put at risk, they may still involve significant costs.
Simulation and Virtual Reality Techniques

The considerable amounts of time and resources necessary to conduct test
markets restrict the amount of test markets, which can be conducted by
companies. The risk to reveal a new product design too early is another

concern for companies in fast moving and highly competitive markets, which
is independent from any cost and time considerations. To overcome these
limitations a new type of test markets, so called Virtual Test Markets, was
devised. Virtual Test Markets are computer simulations of consumers,
companies and the market environment. The technological basis for this
kind of test market is a Multi-agent system as well as methods from Artificial
Intelligence. In a Virtual Test Market, new products or marketing and
distribution strategies can be tested without the risk and time constraints
discussed above. Another advantage is the ability to test many different
products in one Virtual Test Market, as the computer simulation can always
be reset to the original situation before the introduction of a new product.
Advanced computer technology including graphic ability is now available to

simulate the entire procedure on computers. To do this the real world store
environment is mimicked on the computer. For example, the computer can
show store shelves with the test brand and other brands displayed exactly
as they would be in the real store. The advertisements, aisle displays, shelf
tags, store specials, point of purchase ads, manufacturer’s coupons, etc. are
all displayed and made available on the computer. The consumer sits on the
computer terminal and ‘goes’ on a weekly shopping trip. The computer
automatically records his/her purchases.
7.6 Secondary Research

Secondary research (also known as desk research) involves the summary,
collation and/or synthesis of existing research rather than primary research,
where data is collected from, for example, research subjects or experiments.
A researcher’s first attempt should always be to study secondary data since
they already exist & can save the expense of collecting primary data.
However often the secondary data is outdated or the information sought by
the researcher may not exist. Then there is no other choice but to go for
primary research.
There are two types of secondary data: a. Public sources & b. Proprietary
sources.
a. Public Sources: Secondary data from public sources are mostly
government, semi government or industry associations. Some such
sources in India are Census of India; National Readership surveys
(NRS), National Council of Applied Economic Research (NCAER),
Bombay Stock Exchange Directory, and Centre for Monitoring Indian
Economy (CMIE), etc.
b. Proprietary Data: Private business firms for their own use normally
collect such data, or they could be firms who are in the business of
collecting and marketing such information. Some such sources are
Thompson Urban and Rural Indices, Kothari’s Industrial Directory, etc.
7.7 Managerial application of consumer research in marketing

There are a number of applications of consumer research & some of them
are discussed in the following paragraphs:
Attitude Research:
A person’s evaluations of an object, such as brand or service can be
measured, by various types of scales.
a. Semantic Differential Scale: In this method, the respondent is asked to
rate the object in terms of pairs of traits – for example- like/dislike,
agree/disagree, poor/excellent, effective/ineffective, etc.
b. Likert Scale: In this method the respondent is asked to giving a
numerical rating to the extent to which they agree or disagree with a
statement. For example, the respondent ‘s response is requested by
circling the appropriate number from the options as under:

1. Strongly agree, 2. Agree, 3. Undecided, 4. Disagree and 5. Strongly

disagree
c. Pictorial scale: Pictorial scales are used for less literate respondents or
respondents who speak a different language. Pictures of various facial
expressions can also be used when the research purpose is to measure
the emotions the respondent experiences. They can also be useful for
researching children as customers.
Image/Self-concept Measurement
Consumers’ own self image and also their image of specific brands and
services can be measured by using semantic differential scale like-
modern/traditional, economic/uneconomic, pleasant/unpleasant, feminine/
masculine, etc. The researchers present a series of statements about
possible activities, interests, opinions, etc. and the respondents indicate
their agreements or disagreements with these statements. Some of the
examples of such psychographics, which are measured are- ‘child-oriented’,
‘optimist’, ‘price conscious’, ‘fashion conscious’, etc.
Multi-attribute Attitude model

A consumer’s attitude towards a brand or service can be a result of his/her
beliefs about a set of attributes or characteristics of the brand. Each attribute
may have different weightage for the consumer. Hence consumer’s
perceptions or beliefs about the attributes of the product are measured first
and then the importance assigned by the consumer for these attributes are
measured. Then the weighted average is calculated for each of the attribute
which will give the multiattribute attitude of the person.
Perceptual or preference mapping:

Perceptual mapping is a graphics technique used by marketers that
attempts to visually display the perceptions of customers or potential

customers. Typically the position of a product, product line, brand, or

company is displayed relative to their competition.
Perceptual maps can have any number of dimensions but the most common
has two dimensions. Any more is a challenge to draw and confusing to
interpret. The perceptual map below shows consumer perceptions of
various automobiles on the two dimensions of sportyness/conservative and
classy/affordable. This sample of consumers felt Porsche was the sportiest
and classiest of the cars in the study (top right corner). They felt Plymouth
was most practical and conservative (bottom left corner).
The consumer sees cars that are positioned close to each other as similar
on the relevant dimensions. For example consumers see Buick, Chrysler,
and Oldsmobile as similar. They are close competitors and form a
competitive grouping. A company considering the introduction of a new
model will look for an area on the map free from competitors. Some
perceptual maps use different size circles to indicate the sales volume or
market share of the various competing products.

Eye Movement
A number of methods are available for conducting research by quietly
observing the consumers as to what information they are acquiring and
evaluating. An eye camera is a devise to capture the pupil movement as the
consumer looks through a piece of information. This method can be used to
study consumer’s information acquisition while reading or viewing an
advertisement, looking at aisle displays, examining the package information
in a supermarket, etc. The researcher uses the data gathered by the eye
camera to identify the information at which the consumer gazed the longest.
Such studies help the researcher to pinpoint the selective appeal and use of
information by the consumer.
Galvanic Skin Response

Galvanic skin response (GSR), also known as electro dermal response
(EDR) is a method of measuring the electrical resistance of the skin. There
has been a long history of electro dermal activity research, most of it dealing
with spontaneous fluctuations. There is a relationship between sympathetic
activity and emotional arousal, although one cannot identify the specific
emotion being elicited. The GSR is highly sensitive to emotions in some
people. Fear, anger, startle response, orienting response and sexual
feelings are all among the emotions, which may produce similar GSR
responses. This concept is used to indicate the consumer’s response to a
stimulus, such as an item of advertisement (like price) or an emotional story
line of an advertisement.
Electroencephalography
Electroencephalography is the neurophysiologic measurement of the
electrical activity of the brain by recording from electrodes placed on the
scalp or, in special cases, subdurally or in the cerebral cortex. The resulting
traces are known as an electroencephalogram (EEG) and represent a

summation of post-synaptic potentials from a large number of neurons.

These are sometimes called brainwaves, though this use is discouraged,
because the brain does not broadcast electrical waves. The EEG is a brain
activity test. One of the activities measured in this way is called Alpha
activity. Alpha activity inversely measures the brain’s attentiveness. Alpha
activity is high when we are sleeping, resting or inactive. This will be low
when we are paying attention to a commercial. When measured while
viewing different ads, they will indicate the ad’s ability to attract and hold
viewer’s attention.
1. Qualitative Research method typically involves the construction of
questionnaires and scales.
2. A test market is a geographic region or demographic group used to
gauge the viability of a product or service in the mass market prior to a
wide scale roll-out.
3. Virtual Test Markets are computer simulations of consumers, companies
and the market environment.
4. Primary research (also known as desk research) involves the summary,
collation and/or synthesis of existing research.
5. Perceptual mapping is a graphics technique used by marketers that
attempts to visually display the perceptions of customers or potential
customers.
7.8 Summary
In this unit we learnt about different types of consumer research like
Primary Research, Qualitative Research, Quantitative Research,
Experimental Research Methods and Secondary Research. Under
Qualitative research we covered Focus Groups, Customer Visits, Motivation
Research and Interpretative Research. Under Experimental Methods we

studied Test Marketing, Simulation and Virtual Reality Techniques. We also
understood the various Managerial applications of consumer research in
marketing. We also learnt various types of Attitude Research like
Image/Self-concept Measurement, Multiattribute Attitude model, Perceptual
or preference mapping and also the usage of latest technologies like
recording of Eye Movement, Galvanic Skin Response &
Electroencephalography in such research.

1. What are Focus Groups? Describe any three types of focus groups.
2. List jand explain four types of Motivation Research.

3. Describe five Steps involved in Quantitative Research.
4. Explain the meaning & uses of Test Marketing & explain how it is
conducted.
5. Explain how Perceptual Mapping is done with a schematic diagram.
SAQ I
1. Primary
2. why and how
3. focus
4. Thematic Apperception
5. Interpretative
SAQ II
1. False
2. True

3. True
4. False
5. True
TQS

Unit 8 Diffusion of Innovation
Structure
8.1 Introduction
Objectives
8.2 Concept of Diffusion
8.3 Process of Adoption
8.4 Opinion Leadership
8.5 Market Mavens
8.6 Consumer Innovator
8.7 Managerial applications
8.8 Summary
8.10 Answers to SAQs And TQs
8.1 Introduction
Diffusion is the process by which the acceptance of an innovation (a new
product, new service, new idea, or new practice) is spread by
communication (mass media, sales people, informal conversations) to
members of a social system (the target customers) over a period of time.
Consumer behaviour towards new products or innovative products etc. is
related to the process of diffusion. Different parameters which influence
diffusion is discussed in this chapter.
Objectives
 Know the meaning and definition of innovation and diffusion.
 Understand the process of adoption.

 Explain the characteristics of consumer innovator.

 Know the managerial applications of these concepts.
8.2 Concept of Diffusion

Diffusion is the movement of particles of a substance from an area of high
concentration to an area of low concentration, resulting in the uniform
distribution of the substance. In the marketing context, this refers to the
process by which innovations spread i.e. how they are assimilated by the
market.
The definition of diffusion includes four basic elements of the diffusion

process:
1. The innovation, 2. The channels of Communication, 3. The social
System and 4. Time.
The Innovation: When studying the diffusion of innovations it is important to

understand that you are not just looking at the spread of an innovation
through a society but rather the spread of different kinds of innovations
through a society. An innovation is an item, thought, or process that is new
to a certain area but not necessarily to the world.
The term innovation may refer to both radical and incremental changes to
products, processes or services. The often unspoken goal of innovation is to
solve a problem. Innovation is an important topic in the study of economics,
business, technology, sociology, and engineering. Since innovation is also
considered a major driver of the economy, the factors that lead to innovation
are also considered to be critical to policy makers. In the organisational
context, innovation may be linked to performance and growth through
improvements in efficiency, productivity, quality, competitive positioning,
market share, etc. All organisations can innovate, including for example
hospitals, universities, and local governments.

While innovation typically adds value, innovation may also have a negative
or destructive effect as new developments clear away or change old
organisational forms and practices. Organisations that do not innovate
effectively may be destroyed by those that do. Hence innovation typically
involves risk. A key challenge in innovation is maintaining a balance
between process and product innovations, where process innovations tend
to involve a business model, which may develop shareholder satisfaction
through improved efficiencies, while product innovations develop customer
support however at the risk of costly R&D that can erode shareholder
returns.
Innovations can be classified in four ways depending on the orientation.

a. Company Oriented: This approach treats the newness from the
perspective of the manufacturer. When the product is “new” to the
company, it is considered new although it may not be new in the
marketplace. This approach is not useful when we want to understand
the consumer acceptance of a new product.
b. Product Oriented: This approach focuses on the features inherent in
the product and on the effect these features have on consumers’
established consumption patterns. Depending on the extent to which a
new product is likely to disrupt the established consumption patterns,
this is further classified into three categories:
i. Continuous Innovation: This type of innovation is a simple
changing or improving of an already existing product where the
adopter still uses the product in the same fashion as they had
before. An example of a continuous innovation is now seen in the
automobile industry as it continues to change and develop. This
involves modifications in the existing product rather than a totally
new product. This has the least disruptive influence on established

practices of the consumer. Examples are that of “improved Surf

Excel”, “New Taste maker in Maggi Noodles” etc.
ii. Dynamically Continuous Innovation: Here the innovation can
either be a creation of a new product or a radical change to an
existing one. Here the consumption patterns of people are altered
some. An example of this type of innovation would be compact discs.
This may involve the creation of a new product or a modification of
the existing product which does not alter the established
consumption patterns. This somewhat more disruptive than a
continuous innovation. Some examples are that of “Maruti 800 with
MPFI engine”, Camcorders with DVD recording”, etc.
iii. Discontinuous Innovation: This is a totally new product in the
market. This is the big idea innovation. In this situation, because the
product has never been seen before, there are total changes to
consumers buying and using patterns. This requires consumers to
adopt to totally new consumption patterns. Examples are-
locomotives, airplanes, radios, TVs, automobiles, home computers,
internet, etc.
c. Market Oriented: In this approach the newness of the product is judged

in terms of how much exposure the consumers have to the new product.
There are two definitions of a new product in this approach:
d. If the product has been purchased by a relatively small percentage of
the potential target consumers, it is considered as a new product.
e. A product is considered new if it has been in the market for a relatively
short period of time.
Both these definitions are quite subjective since the researcher has to
establish the degree of sales penetration or how long is considered as
short time for the purpose of considering the product as new.

f. Consumer Oriented: Some researchers favour this approach wherein

any product which is judged by the consumer as new is considered
“new”. In other words the newness of the product is based on the
consumer’s perception of the product rather than the physical features
or the market penetration.
Characteristics of Innovations
There are five different characteristics of innovations. Each characteristic
affect the rate of adoption of an innovation differently. Like a lot of things in
life, the innovation does not have to be better or easier to use than the
product it is competing with but only be perceived to be better or easier to
use by the consumer. This idea of perception is stronger than information is
seen throughout the advertising world. All products that are new do not have
equal potential for consumer acceptance. Some products are accepted
almost immediately whereas some products take a long time before they are
accepted. If the marketers can anticipate the reasons for this and also if they
can anticipate how consumers will react to their new products, their
uncertainties will be reduced. For example if the marketer knows in advance
that certain features of the product are likely to inhibit its usage, some
strategy to compensate for this can be designed.
Market Researchers have identified five product characteristics, which seem

to influence consumer acceptance of new products as below.
1. Relative advantage, 2.Compatibility, 3. Complexity, 4. Divisibility and
5. Communicability/Observability.
 Relative Advantage: This characteristic expresses to what extent the
new product is better than the one it is replacing. Of course, the first
thought would be greater profit potential. Although profit does fit into the
equation, relative advantage can be judged on other factors like ease of
use and storage as well as uncontrollable factors like war. During

wartime when workers are gone fighting industries find relative

advantage in innovations that do not require as many laborers to run.
 Compatibility: No matter how superior or efficient an innovation is it will
not be successful if it does not take into consideration local values and
customs of the adopters. Compatibility is the level of which an innovation
fits into the specific society. The smoother the innovation fits into the
culture, the faster the rate of adoption. The diffusion of certain types of
birth control pills in certain areas is unattainable due to religious beliefs
and cultural values. The perception of the consumers in feeling that the
new product does really take care of their present needs, values and
practices is a measure of its compatibility. For example it is difficult to
imagine men using hair removers used by women for removing their
facial hair although this may solve the problem of shaving everyday
since it is incompatible with most men’s current values.
 Complexity: This type of innovation is the extent of how difficult it is for
an adopter to understand and use an innovation. It is very logical to think
that the harder an innovation is to use, or at least perceived to use, the
less likely that an adopter would be to consume it. A contemporary
example would be the Internet. Although the Internet is easy to use, for
someone who has never been on a computer it is extremely intimidating.
The degree to which a new product is difficult to understand or use
affects the product acceptance. On the contrary if it is easier to
understand the use of product easily, it is more likely to be accepted
faster. The recent example is the fast popularity and acceptance of Ipod,
which has easy usage features and which are consumer friendly.
Four predominant types of “technological fear” (also called
‘technophobia’) act as barriers to new product acceptance: 1. Fear of
technical complexity, 2. fear of rapid obsolescence, 3. fear of social
rejection and 4. fear of physical harm.

 Divisibility/Trialability: This refers to the degree to which a new

product is capable of being tried on a limited basis. The greater the
opportunity to try the new product easier it is for the consumers to
evaluate & then adopt it. Marketers, who are aware of this, provide
either free samples or free limited period trial offer with a guarantee to
take back if the consumer is not satisfied. Being able to try out a product
before purchase helps increase the rate of adoption drastically.
 Communicability/Observability: This is the ease with which a
product’s benefits can be observed, imagined or described to potential
consumers. Products which are highly visible like fashion garments are
more easily diffused than the products which are used in private. A
tangible product is easier to promote than an intangible product. When
an innovation’s benefit does not directly or immediately solve or fix a
consumers problem or need it will not diffuse through a society as
quickly compared to an innovation that is more of solution to a problem.
A fictional example that helps understand this principle would be a new
drug on the market that you would take everyday to ward off headaches
before they come. Although the drug may work, because the results do
not fit into our first problem then solution ideal, it would take more time
for it to be adopted.
It is important to note that these five characteristics are not the only ones
that affect the rate of adoption. Also the adoption of an innovation is not
always a positive occurrence. Over-adoption, where adopters act irrationally
without all the information or without full comprehension of an innovation
can actually be harmful to the diffusion process.
Some new products are almost instant successes, whereas some others
have to really struggle to get accepted by the consumers. To understand the
reasons for this, marketers look at the product characteristics as described
above. The extent of consumer resistance is found to increase when the

perceived relative advantage, compatibility, trialability and observability are

low and the perceived complexity is high.
The channels of Communication

The communications between the marketer and the consumer and also the
communication among consumers are important determinants in the speed
with which the innovation spreads through the market. Both impersonal
sources like advertising and press coverage and interpersonal sources like
sales people and opinion leaders are important in this regard. Increasingly
new sources like the internet are becoming powerful information channels
for new products. Product comparison sites like Mouthshut.com in India are
also helping the internet savvy consumers in arriving at quick decisions on
new innovations.
It was first thought that, the communication process of the diffusion of

innovations was only a one-step process, from the mass media channels to
the individual with little or no interaction between the individuals. This
obviously is not the case. Not only do individuals communicate with each
other, some individuals pass along their influence as well as their knowledge
to other individuals. Opinion leaders are individuals in a social system that
others come to for information and guidance. With the understanding of
opinion leaders in society it is clear to see that the original one-step process
invalid. Now the process takes us through mass media channels to opinion
leaders then to the individuals. This two-step flow of communication is
probably not complete as well, but the important idea to arrive at is that no
matter how many steps are involved there will always be a two-step
exchange of knowledge/influence at any given step during the diffusion
process.
With the addition of steps to the communication process, the idea of

personal influence comes into play. Personal influence refers to any

communication between two individuals where one individual creates a

change in consumer behavior in the other. A more practical way of stating
personal influence is peer pressure.
Looking at the three different types of selectivity shows why personal

influence can be a stronger factor in the diffusion process than mass media.
a. Selective exposure – the idea, that an individual will be more
susceptible to channels of communication, that already agree with their
current attitudes and feelings.
b. Selective perception – the idea, that an individual will view new ideas
in relation to their old ones.
c. Selective retention – the idea, that an individual will mainly remember
a new idea, if directly relates to their-own situation or remedy a specific
problem.
The Social System

A social system is a physical, social or cultural environment to which people
belong and within which they function. For the purpose of consumer
behaviour we can define this as market segment or target market of the
innovation. For example, for a new drug for cancer, the community of cancer
specialists will be the social system. The diffusion of the new product is
normally examined within the boundary of the social system. The orientation
of the social system with its own special values and norms will have
significant influence on the acceptance or rejection of the innovation. When
the social system is modern in orientation the innovation is likely to be
accepted quickly. If the social system is traditional, innovations which are
perceived as radical, are likely to be rejected.
Social systems can be split into two categories of norms: traditional and
modern. According to researchers, traditional norms are characterized by:

1) A less developed or complex technology

2) Low levels of literacy and education
3) Little communication between the social system and outsiders
4) Lack of economic rationality
5) One-dimensional in adapting and viewing others
Modern norms are characterized by:

1) A developed technology with complex jobs
2) Strong importance placed on education
3) Acceptance of free thought and new ideas
4) Strong preparation and high importance on economic considerations
5) Ability to see and understand other peoples situations
Not only do modern systems accept and adapt to innovation faster and
easier than traditional system but the individual is more likely to be
innovative in thinking and doing in a modern society.
Time for Diffusion: Time is the main constituent of the diffusion process.
This affects diffusion in three distinct but interrelated ways:
a. The amount of purchase time,
b. The identification of adopter categories, and
c. The rate of adoption.
a. The amount of purchase time: This is the amount of time that elapses
between consumer’s initial awareness of the new product & the point at
which he/she purchase or reject it. This is important because the
average time the consumer takes to adopt a new product will be the
precursor to the overall length of time it will take for widespread
adoption. For example if the individual purchase time is short, then the
rate of diffusion will be faster.
b. Adopter Categories: This involves a classification that indicates where
a consumer is situated in comparison with other consumers in terms of

time. The process of adoption over time is typically illustrated as a

classical normal distribution or "bell curve." Everett Rogers (1931)
achieved academic fame for his Diffusion of innovations theory. He
proposed that adopters of any new innovation or idea could be
categorized as innovators (2.5%), early adopters (13.5%), early majority
(34%), late majority (34%) and laggards (16%), based on Bell curve
mathematic division. These categories, based on standard deviations
from the mean of the normal curve, provided a common language for
innovation researchers. Each adopter's willingness and ability to adopt
an innovation would depend on their awareness, interest, evaluation,
trial, and adoption. People could fall into different categories for different
innovations.
The model indicates that the first group of people to use a new product
is called "innovators," followed by "early adopters." Next come the early
and late majority, and the last group to eventually adopt a product are
called "laggards”.
 Innovators: venturesome, educated, multiple info sources; Very
eager to try new ideas, more cosmopolitan social relationships,
Communicate with other innovators.
 Early adopters: social leaders, popular, educated; More integrated
into the local social system, the persons to check with before
adopting a new idea, greatest number of opinion leaders, role
models.

 Early majority: deliberate, many informal social contacts; adopt new

ideas just prior to the average time, seldom hold leadership
positions, think for sometime before adopting.
 Late majority: skeptical, traditional, lower socio-economic status;
adopt new ideas just after the average time, adopting may be due to
economic necessity or due to peer pressures. Innovations
approached cautiously.
 Laggards: neighbours and friends are main info sources, fear of
debt; the last people to adopt the innovation, most ‘localite’ in
outlook, oriented to the past, suspicious of the new.
c. Rate of Adoption: This is concerned with how long it takes a new

product or service to be adopted by members of a social system, i.e.
how quickly it takes a new product to be accepted by those who will
ultimately adopt it. The diffusion of new products worldwide is becoming
more rapid now, compared to earlier decades. The time taken to reach
the same level of penetration for different products have been coming
down rapidly. For example, radio took 38 years, telephone-25 years,
cable television-10 years and now internet has taken less than 5 years
to reach the same level of penetration.
Marketers would like to gain acceptance of their new products as quickly as

possible. They desire a rapid rate of product adoption to penetrate the
market and quickly establish market leadership before competitors start
responding. A penetration policy is usually accompanied by a relatively low
introductory price designed to discourage the competition from entering the
market.
Under certain circumstances, marketers may prefer to avoid rapid adoption.

For example, marketers who wish to use a high pricing strategy which will
enable them to recover their product development costs quickly, may follow

what is known as skimming policy. They first make the product available at
very high price to select consumers who are willing to pay and then
gradually lower the price in several steps to attract additional market
segments at each price reduction.
8.3 Process of Adoption

The second major process in the diffusion of innovation is adoption. The
stages through which a consumer passes while arriving at a decision -to try
or not to try, or to continue using or discontinue using a new product- is
called “Adoption process”.
There are five stages in arriving at a decision to purchase or reject a new

product.
1. Awareness, 2. Interest, 3. Evaluation, 4. Trial and 5. Adoption
(or Rejection)
1. Awareness: The consumer is first exposed to the new product. At this
stage the innovation is introduced to the person but there is no true
knowledge of the product. Because of this lack of information the person
does not feel the need to run out and find out more information, much
less consider consuming it. The awareness stage merely sets the
groundwork for the following stages. It is argued that a person often
stumbles upon the innovation on accident during the awareness stage it
will provide little incentive to get more information. Others feel that for a
person to become aware, the innovation must fill a particular need in
their life for them to notice.
2. Interest: The consumer is interested in the product & starts searching
for additional information. At this stage, the person decides to invest
time and energy into finding out more about the innovation. At this point
the person feels good about the innovation but does not really know how

or if it can be useful in his/her own life. The interest stage is purely to

gather knowledge, not to decide whether to adopt.
3. Evaluation: Consumer decides whether or not to believe that this
product or service will satisfy his/her need. At this stage, the person
firsts begins to make a decision about the innovation. How could I use
it? Do I really need it? Would it be to my advantage if I had it? These are
all question the consumers ask themselves during the evaluation stage.
Then if the innovation appears to be positive for their life they will try it
out. If the innovation has a negative connotation to the individual they
may seek the advice and knowledge of their peers.
4. Trial: Consumer uses the product on a limited basis. This is the next
stage called the trial stage. Here the individual physically gives the
innovation a chance by trying it out for a limited basis. What they are
looking to find out during this trial stage is how the innovation can fit into
their needs and desires. Research proves that most people will not
adopt an innovation without personally testing it first to see if it really
“works”.
5. Adoption/Rejection: If trial is favourable, the consumer decides to use
the product on a full scale basis; if unfavourable, the consumer decides
to reject. This final stage is the adoption stage. Here the individual uses
information that they have gathered in the interest and evaluation stages
and with the outcome of the trial stage decides to adopt the innovation.
At this point in the adoption process the individual not only adopts the
innovation but embraces it for the future. There is, however, another
possible stage to adoption process. After the individual adopts the
innovation they may decide to reject it for whatever reason. This
decision to reject the innovation after agreeing to adopt it is called
discontinuance.

This is a very simplistic model, as there could be several other steps

involved in this process. In many cases the post adoption or post purchase
evaluation can lead to a strengthened commitment, or to a decision to
discontinue use.
The adoption of some products may have very little effect on the
behavioural and lifestyle changes of consumers. Some innovations may
lead to major changes in these spheres. Examples of innovations which had
major impact on society include the automobile, locomotive, telephone,
refrigerator, television, airplane, personal computer, etc.

1. In the marketing context, __________ refers to the process by which
innovations spread i.e. how they are assimilated by the market.
2. An __________ is an item, thought, or process that is new to a certain
area but not necessarily to the world.
3. ___________ Innovation is a simple changing or improving of an
already existing product where the adopter still uses the product in the
same fashion as they had before.
4. Divisibility or _________ refers to the degree to which a new product is
capable of being tried on a limited basis.
5. The amount of _________ time is the amount of time that elapses
between consumer’s initial awareness of the new product & the point at
which he/she purchase or reject it.
6. Adopters of any new innovation or idea could be categorized as
innovators (2.5%), early adopters (13.5%), early majority (34%), late
majority (34%) and __________ (16%).
7. The stages through which a consumer passes while arriving at a
decision -to try or not to try, or to continue using or discontinue using a
new product- is called “___________ process”.

8.4 Opinion Leadership

Opinion Leadership is a concept that arose out of the theory of two-step flow
of communication propounded by Paul Lazarsfeld and Elihu Katz. This
theory is one of several models that try to explain the diffusion of
innovations, ideas, or commercial products. The opinion leader is the agent
who is an active media user and who interprets the meaning of media
messages or content for lower-end media users. Typically the opinion leader
is held in high esteem by those that accept their opinions. Opinion
leadership tends to be subject specific, that is, a person that is an opinion
leader in one field may be a follower in another field. An example of an
opinion leader in the field of computer technology might be a neighbourhood
computer service technician. The technician has access to far more
information on this topic than the average consumer and has the requisite
background to understand the information.
Another example of Key Opinion Leaders (KOLS) is that of physicians, who

influence their peers' medical practice, including but not limited to
prescribing behavior. Pharmaceutical companies generally engage key
opinion leaders early in the drug development process to provide advocacy
activity and key marketing feedback. Key opinion leaders generally belong
to specific area of expertise, such as oncology, cardiology, diabetes, or
sometimes do specialized in very niche therapeutic areas such as
Colorectal Cancer, Non small Cell Lung Cancer, etc. Some KOLs also
belong to administration, the FDA or government labs. Pharmaceutical
companies engage KOLs in publications, conducting of clinical trials, or
conducting marketing research through online panels.
8.5 Market Mavens

A maven is a trusted expert in a particular field, who seeks to pass his or her
knowledge on to others. The role of mavens in propagating knowledge and

preferences has been established in various domains. Market Mavens have

been defined as individuals, who have information about many kinds of
products, places to shop and other facets of markets and initiate discussions
with consumers and respond to requests from consumers for market
information. Market mavens are different from opinion leaders in that, the
opinion leaders’ expertise and influence is limited to a specific product
category or related products. In comparison, market mavens are
knowledgeable about the marketplace in general – about what new products
are available, what price deals are being offered where, where can you find
specific products with such price deals, etc. To fulfill this self assumed role,
market mavens attend to diverse sources of market information, window-
shop more, enjoy shopping, frequently engage in market related
conversations with others.
8.6 Consumer Innovator

These are the relatively small groups of consumers who are the earliest
purchasers of a new product. As already discussed in the bell curve model
of Everett Rogers, 2.5% of the social systems are innovators.
Innovativeness has been defined in different ways by different researchers.
Some researchers define innovators as those who purchase the new
product within the period in which the new product is considered ‘new’. For
example, some products may be considered new for a period of 3 months
after it is introduced in the market & the innovators in this case are those
who purchase the product within these three months. Other researchers
have defined them in terms of their innovativeness, i.e. their purchase of a
minimum number of new products from a select group of new products. Non
innovators have been defined as those who purchase none or very few of
the new products which are available.

In any case the consumer innovator is very important for the marketers for
the success of their innovations. The characteristics of such innovators are
very important for marketers. Some of these characteristics are discussed in
the following paragraphs:
 Interest in the Product category
The consumer innovators are much more interested in the product
category in which the innovation is introduced, than the later adopters or
non-adopters. For example early adopters in non fat cooking oil are
those who have a high interest in such a product because they are
health and diet conscious. Such consumers are also more likely to
search for information from many sources and are also likely to involve
in more deliberations in purchasing these products. Sometimes it may
not be true that the innovators of new products are heavy users of that
product category. For example, the professional photographers are
found to shun the automatic digital cameras and prefer the cameras with
manual controls.
 Innovators as Opinion Leaders

There is a strong tendency of consumer opinion leaders to be
innovators. The consumer innovators provide other consumers with
information and advice about new products and such consumers, who
receive such advice, follow this advice. Thus in the role of an opinion
leader the consumer innovator often influences the acceptance or
rejection of new products. When innovators are enthusiastic about the
new products and advise others to try such products, the product is
likely to receive broader and quicker response. When such innovators
are dissatisfied with a new product, the acceptance of the product may
get severely affected and may even lead to total failure. Because
motivated consumer innovators can influence the rate of acceptance or
rejection of a new product, they influence its eventual success or failure.

 Personality Traits
Consumer innovators are found to be less dogmatic than non
innovators. They tend to approach the new products with considerable
openness and little anxiety. In contrast the non-innovators are found to
fear new products and they prefer to delay purchase till the success of
the product is clearly established.
The consumer innovator is also found to have a need for uniqueness.

Marketers try to appeal to this need for uniqueness to gain rapid
acceptance of a new product.
Consumer innovators are also found to differ in their social character.

These are inner-directed i.e. they rely on their own values or standards
when making a decision about a new product. In contrast they non-
innovators are other-directed, i.e. they look for guidance from others on
how to respond to a new product rather than trusting their own personal
values or standards.
There is also a link between optimum stimulation level & consumer

innovativeness. Individuals who seek high stimulation level i.e. those
who seek a lifestyle rich with novel. Complex, unusual experiences are
more willing to risk trying new products.
Consumers who are variety seeking tend to be brand switchers and

also purchasers of innovative products and services. They are also open
minded, extroverts, low in authoritarianism and creative.
 Perceived Risk
This is the degree of uncertainty or fear about the consequences of
purchase that a consumer feels when considering the purchase of a new
product. Consumers who perceive little or no risk in the purchase of a
new product are much more likely to make innovative purchases than
consumers who perceive a great deal of risk. In other words, consumer
innovators normally don’t perceive high risk in their purchase decisions

of new products.
 Purchase and consumption characteristics

Consumer innovators have purchase and consumption traits which are
distinctly different from those of non innovators. For example, consumer
innovators are fewer brands loyal; they are more prone to brand
switching. They are also more attracted by special promotional offers
and deals like free coupons, samples, etc. They are also likely to be
heavy users of the product category in which they innovate.
A positive relationship exists between innovative behavior and heavy

usage. Hence consumer innovators form an important segment not only
for starting the usage of the product but also substantial users after
adopting the new product. However one should also remember they are
more prone to switching brands and also get attracted by new
promotional schemes and hence they will stick to this brand only till they
find a new and potentially better alternative.
 Media Habits
Innovators have somewhat greater total exposure to magazines than
non innovators, particularly special interest magazines devoted to the
product category in which they innovate. Consumer innovators are also
less likely to watch television than non innovators. This view has been
consistently supported by several researches. It has been proven that
consumer innovators have higher than average magazine exposure and
lower than average TV exposure.
 Social Characteristics
Consumer innovators are more socially accepted and socially involved
than non-innovators. They also belong to more social groups and
organisations than non-innovators. This greater social acceptance and

involvement of consumer innovators helps explain why they function as

effective opinion leaders.
 Demographic Characteristics
Research suggests that consumer innovators tend to be younger than
either late adopters or non-innovators. Consumer innovators have more
formal education, have higher personal or family incomes and are more
likely to have high occupational status. In other words, consumer
innovators tend to be more upscale than the other consumer segments
and can therefore better afford the risk of making a mistake should the
innovative new product proves to be unacceptable.
 Consumer innovators are product specific

Consumer innovators in one product category are unlikely to be
consumer innovators of other product categories. The overlap of
innovativeness over product categories exists to limited extent to those
categories which are closely related to the same interest area. Research
also suggests that consumers who innovate within a specific product
category will innovate again within the same product category. For the
marketer such a pattern suggests that it is a good marketing strategy to
target a new product to consumers who were the first to try other
products in the same basic category.
 Change Leaders and Technophiles

In the area of high tech innovations, there will be generalized high tech
innovators and these are called “Change Leaders”. Such individuals
tend to embrace and popularize many of the innovations that are
ultimately accepted by the mainstream population. They tend to have a
wide range of personal and professional contacts representing different
occupational and social groups.

Change leaders also appear to fall into one of the two distinct groups:
1. A younger group that can be characterized as being simulation

seeking, sociable and having high levels of fashion awareness or
2. A middle aged group that is highly self confident and have very high
information seeking needs.
Similar to change leaders, “Technophiles” are individuals who purchase

technologically advanced products soon after they are introduced in the
market. Such individuals tend to be technically curious people. Such
consumers are typically younger, better educated and more affluent.
8.7 Managerial applications

New product marketers are vitally concerned with identifying the consumer
innovators so that, they may direct their promotional campaigns to these
consumers, who are most likely to try their new products, adopt them and
influence others. Consumer research has identified a number of consumer
characteristics like product interest, opinion leadership, personality factors,
purchase and consumption traits, media habits, social characteristics,
demographic characteristics, etc. which distinguish the consumer innovators
from others. These have already been discussed in detail. These serve as
useful indicators for marketers for segmenting their markets specifically for
new product introductions.
Diffusion research has focused on five elements:

1) The characteristics of an innovation which may influence its adoption;
2) The decision-making process that occurs when individuals consider
adopting a new idea, product or practice;
3) The characteristics of individuals that make them likely to adopt an
innovation;

4) The consequences for individuals and society of adopting an innovation;

and
5) Communication channels used in the adoption process.
When looking at the diffusion process it is hard not to see the importance to
the advertising world. Learning the process an individual as well as a society
goes through before they will accept an innovation is vital to the success of
any company that plans to be on the frontier of innovation. Just coming up
with the idea first only gets you a part of the way there. You must realize
and be catalysts for its diffusion into society.

1. Consumer Innovation is a concept that arose out of the theory of two-
step flow of communication propounded by Paul Lazarsfeld and Elihu
Katz.
2. Market Mavens have been defined as individuals who have information
about many kinds of products, places to shop and other facets of
markets and initiate discussions with consumers and respond to
requests from consumers for market information.
3. Innovators have been defined as those who purchase none or very few
of the new products which are available.
4. There is a strong tendency of consumer opinion leaders to be
innovators.
5. Consumers who perceive little or no risk in the purchase of a new
product are much more likely to make innovative purchases than
consumers who perceive a great deal of risk.
6. Consumer innovators in one product category are likely to be consumer
innovators of other product categories.

7. “Technophiles” are individuals who purchase technologically advanced

products soon after they are introduced in the market.
8.8 Summary
In this unit, we have studied the concept of Diffusion of Innovation and its
managerial applications. First we dealt with the meaning of Diffusion and
Innovation. Later we dealt with the channels of Communication, The Social
System and Time for Diffusion. We also learnt how the Process of Adoption
takes place starting from Awareness, Interest, Evaluation, Trial and finally
Adoption/Rejection. We then studied the meanings of Opinion Leadership,
Market Mavens and Consumer Innovators. We also touched upon the
factors influencing Innovators like Interest in the Product category,
Innovators as Opinion Leaders, Personality Traits, Perceived Risk,
Purchase and consumption characteristics, Media Habits, Social
Characteristics, Demographic Characteristics, Consumer innovators being
product specific and finally Change Leaders and Technophiles. We also
studied the Managerial applications of the concept of diffusion of innovation.

1) List the four classifications of Innovation depending on the orientation
and describe briefly each one of them.
2) Explain briefly the five steps involved in the process of adoption.
3) Describe some of the characteristics of an Opinion Leader.
4) Explain at least 5 characteristics of a Consumer Innovator.
5) Describe some of the applications of the concept of Diffusion of
Innovation in Marketing.


SAQ I
1. Diffusion
2. innovation
3. Continuous
4. Trialability
5. purchase
6. laggards
7. Adoption
SAQII
1. False
2. True
3. False
4. True
5. True
6. False
7. True
TQS

Unit 9 Consumerism and Marketing Ethics
Structure
9.1 Introduction
Objectives
9.2 Consumerism In India
9.3 Conspicuous Consumption
9.4 Anti-Consumerism
9.5 Consumer safety and Consumer Protection
9.6 Environmental concerns and green movement
9.7 Green Marketing
9.8 Organic Foods
9.9 Consumer privacy
Self-Assessment Questions I
9.10 Business and Marketing Ethics
9.11 Corporate Social Responsibility
9.12 Summary
9.1 Introduction
Consumerism is the equating of personal happiness with the purchasing of
material possessions and consumption. It is often associated with criticisms
of consumption starting with Karl Marx and many others. Although
consumerism is commonly associated with the Western world, it is multi-
cultural and non-geographical, as seen today in Japan, Singapore,
Indonesia, Hong Kong, China, Taiwan, Israel, Bahrain, India, Dubai, etc.
Consumerism, as in people purchasing goods or consuming materials in

excess of their basic needs, is as old as the first civilizations (like Ancient
Egypt, Babylon and Ancient Rome). Since consumerism began, various
individuals and groups have consciously sought an alternative lifestyle
through simple living. While consumerism is not a new phenomenon, it has
only become widespread over the 20th century and particularly in recent
decades, under the influence of capitalism.
In many critical contexts, consumerism is used to describe the tendency of

people to identify strongly with products or services they consume,
especially those with commercial brand names and obvious status-
enhancing appeal, e.g. an expensive automobile, expensive jewelry. A
culture that is permeated by consumerism can be referred to as a consumer
culture. Impulse buyers who cannot resist spending money are commonly
termed shopaholics.
Opponents of consumerism argue that many luxuries and unnecessary

consumer products are social signals that allow people to identify like-
minded individuals through consumption and display of similar products.
Some believe that relationships with a product or brand name are
substitutes for the healthy human relationships lacking in dysfunctional
modern societies and along with consumerism itself are part of the general
process of social control and cultural hegemony in modern society.
Objectives
 know the meaning and definition of Consumerism, Consumer safety and
Consumer Protection
 understand about environment safety, green movement and green

marketing
 explain the linkage between Marketing Concepts and Marketing Ethics

9.2 Consumerism In India

"Consumerism" is likely to dominate the Indian market in the current
Millennium, thanks to the economic reforms ushered in and the several
agreements signed under the World Trade Organisation. The transition is
from a predominantly "sellers market" to a "buyers market" where the choice
exercised by the consumer will be influenced by the level of consumer
awareness achieved. By "consumerism" we mean the process of realizing
the rights of the consumer as envisaged in the Consumer Protection Act
(1986) and ensuring right standards for the goods and services for which
one makes a payment. This objective can be achieved in a reasonable time
frame only when all concerned act together and play their role. The players
are the consumers represented by different voluntary non-government
consumer organisations, the government, the regulatory authorities for
goods and services in a competitive economy, the consumer courts,
organisations representing trade, industry and service providers, the law-
makers and those in charge of implementation of the laws and rules.
9.3 Conspicuous Consumption

Conspicuous consumption is a term used to describe the lavish spending on
goods and services that are acquired mainly for the purpose of displaying
income or wealth. In the mind of a conspicuous consumer, such display
serves as a means of attaining or maintaining social status. A very similar
but more colloquial term is "keeping up with the Joneses". With significant
improvement of living standards and the emergence of the middle class in
the 20th century, the term conspicuous consumption is now broadly applied
to individuals and households with expendable incomes whose consumption
patterns are prompted by status seeking rather than their substantial needs
and are thereby socially wasteful.

9.4 Anti-Consumerism
Anti-consumerism is the rejection of consumerism. It is similar but not
identical to anti-corporate activism. Consumerism is a term used to describe
the effects of the market economy on the individual. "Consumer" has come
to be a derogatory term within selling companies and debt-management
consultants. It implies the mindless purchasing and disposing of any product
delivered through the market. Concern over the treatment of consumers has
spawned much activism, as well as the incorporation of consumer education
into school curricula. Anti-consumerist activism often has parallels with
environmental activism and anti-globalization, and sometimes animal-rights
activism, in their condemnation of the practices of modern organizations
such as the McDonald's Corporation.
Opposition to economic materialism primarily comes from two sources:

religion and social activism. Religions oppose materialism, some stating that
it interferes with connection with the divine, or that it leads to an immoral
lifestyle. Various notable individuals have claimed that spiritual inspiration
led them to a simple living lifestyle, such as Mahatma Gandhi and Jesus of
Nazareth. Social activists have linked forms of materialism with wars,
crimes, and general social malaise.
9.5 Consumer safety and Consumer Protection

Consumer protection is a form of government regulation, which protects the
interests of consumers. For example, a government may require businesses
to disclose detailed information about products—particularly in areas where
safety or public health is an issue, such as food, electrical goods, Children's
toys, etc. Consumer protection is linked to the idea of consumer rights (that
consumers have various rights as consumers), and to the formation of

consumer organizations, which help consumers make better choices in the

marketplace.
Consumer protection law or consumer law is considered an area of public

law that regulates private law relationships between individual consumers
and the businesses that sell those goods and services. Consumer protection
covers a wide range of topics including but not necessarily limited to product
liability, privacy rights, business Cartels and other unfair business practices,
fraud, misrepresentation, and other consumer/business interactions.
a. Consumer Protection Act in India

The issues relating to consumer welfare affects the entire 11 billion people
since everyone is a consumer in one way or the other. Ensuring consumer
welfare is the responsibility of the government. Accepting this, policies have
been framed and the Consumer Protection Act, 1986, was introduced. A
separate Department of Consumer Affairs was also created in the Central
and State Governments to exclusively focus on ensuring the rights of
consumers as enshrined in the Act. This Act has been regarded as the most
progressive, comprehensive and unique piece of legislation. In the last
international conference on consumer protection held in Malaysia in 1997,
the Indian Consumer Protection Act was described as one "which has set in
motion a revolution in the fields of consumer rights, the parallel of which has
not been seen anywhere else in the world."
The special feature of this Act is to provide speedy and inexpensive

redressal to the grievance of the consumer and provide him relief of a
specific nature and award compensation wherever appropriate. The aim of
the Act is also to ensure the rights of the consumer, viz. the right of choice,
safety, information, redressal, public hearing and consumer education.
The Act defines the consumer as one who purchases goods and services
for his/her use. The user of such goods and service with the permission of

the buyer is also a consumer. However, a person is not a consumer if he

purchases goods and services for resale purpose.
The most important feature of the Act is the provision for setting up three-tier
quasi-judicial machinery popularly known as "consumer courts" at national,
state and district levels. The apex court, National Commission functions in
Delhi. Every State Government has a State Commission. The third tier is in
each district and is called district forum.
9.6 Environmental concerns and green movement

The environmental movement (a term that sometimes includes the
conservation and green movements) is a diverse scientific, social, and
political movement for addressing the concerns of environmentalism. In
general terms, environmentalists advocate the sustainable management of
resources and stewardship of the natural environment through changes in
public policy and individual Behaviour. In its recognition of humanity as a
participant in (not enemy of) ecosystems, the movement is centered on
ecology, health, and human rights. The environmental movement is
represented by a range of organizations, from the large to grassroots. Due
to its large membership, varying and strong beliefs, and occasionally
speculative nature, the environmental movement is not always united in its
goals. At its broadest, the movement includes private citizens, professionals,
religious devotees, politicians, and extremists. Environmentalists are also
often linked with other social movements, such as human and animal rights
and pacifism.
Today, the sciences of ecology and environmental science, rather than any
aesthetic goals, provide the basis of unity to most serious environmentalists.
As more information is gathered in scientific fields, more scientific issues like
biodiversity, as opposed to mere aesthetics, are a concern. Conservation

biology is rapidly developing field. Environmentalism now has proponents in

business: new ventures such as those to reuse and recycle technical
equipment are becoming more and more popular. Computer liquidators are
just one example.
In recent years, the environmental movement has increasingly focused on

global warming as a top issue. As concerns about climate change moved
more into the mainstream, from the connections drawn between global
warming and Hurricane Katrina to Al Gore's film An Inconvenient Truth,
many environmental groups refocused their efforts. In the United States,
2007 witnessed the largest grassroots environmental demonstration in
years, Step It Up 2007, with rallies in over 1,400 communities and all 50
states for real global warming solutions.
The Green movement is a political movement which advocates goals

common to Green parties, including environmentalism, sustainability,
nonviolence, and social justice concerns. Supporters of the Green
movement, called Greens, adhere to Green ideology and share many ideas
with the ecology, conservation, environmental, feminist, and peace
movements.
The political term Green, as an adjective, was first applied to supporters of

the nascent Green ideology in the late 1970s, as the first local Green parties
were founded in various countries. The term political ecology is sometimes
used in Europe and in academic circles.
9.7 Green Marketing

Green marketing is the marketing of products that are presumed to be
environmentally safe. Thus green marketing incorporates a broad range of
activities, including product modification, changes to the production process,
packaging changes, as well as modifying advertising. Yet defining green

marketing is not a simple task. Other similar terms used are Environmental
Marketing and Ecological Marketing.
The term green marketing came into prominence in the late 1980s and early
1990s. The American Marketing Association (AMA) held the first workshop
on "Ecological Marketing" in 1975. The proceedings of this workshop
resulted in one of the first books on green marketing entitled "Ecological
Marketing".
From an organizational standpoint, environmental considerations should be

integrated into all aspects of marketing — new product development and
communications and all points in between. The holistic nature of green also
suggests that besides suppliers and retailers new stakeholders be enlisted,
including educators, members of the community, regulators, and NGOs.
Environmental issues should be balanced with primary customer needs.
One of green marketing's challenges is the lack of standards or public

consensus about what constitutes "green". In essence, there is no definition
of "how good is good enough" when it comes to a product or company
making green marketing claims. This lack of consensus -- by consumers,
marketers, activists, regulators, and influential -- has slowed the growth of
green products, because companies are often reluctant to promote their
green attributes, and consumers are often skeptical about claims.
Despite these challenges, green marketing has continued to gain adherents,

particularly in light of growing global concern about climate change. This
concern has led more companies to advertise their commitment to reducing
their climate impacts, and the effect this is having on their products and
services.

9.8 Organic Foods

Organic foods are produced according to certain production standards. For
crops, it means they were grown without the use of conventional pesticides,
artificial fertilizers, human waste, or sewage sludge and that they were
processed without ionizing radiation or food additives. For animals, it means
they were reared without the routine use of antibiotics and without the use of
growth hormones. In most countries, organic produce must not be
genetically modified.
Increasingly, organic food production is legally regulated. Currently, the

United States, the European Union, Japan and many other countries require
producers to obtain organic certification in order to market food as organic.
Historically, organic farms have been relatively small family-run farms -

which is why, organic food was once only available in small stores or
farmers' markets. Now, organic foods are becoming much more widely
available. Organic food sales within the United States have grown by 17 to
20 percent a year for the past few years while sales of conventional food
have grown at only about 2 to 3 percent a year. This large growth is
predicted to continue, and many companies are jumping into the market.
9.9 Consumer privacy

Consumer privacy laws and regulations seek to protect any individual from
loss of privacy due to failures or limitations of corporate customer privacy
measures. They recognize that the damage done by privacy loss is typically
not measurable, nor can it be undone, and that commercial organizations
have little or no interest in taking unprofitable measures to drastically
increase privacy of customers - indeed, their motivation is very often quite
the opposite, to share data for commercial advantage, and to fail to officially

recognize it as sensitive, so as to avoid legal liability for lapses of security

that may occur.
 Consumer privacy concerns

This issue date back to the first commercial couriers and bankers, who in
every culture took strong measures to protect customer privacy, but also in
every culture tended to be subject to very harsh punitive measures for
failures to keep a customer's information private. The Hippocratic Oath
includes a requirement for doctors to avoid mentioning ills of patients to
others, not only to protect them, but to protect their families - the same basic
idea as modern consumer privacy law and regulation, which recognizes that
innocent third parties can be harmed by the loss of control of sensitive
information, and that therefore there is a responsibility beyond that to the
'customer' or 'client'. Today the ethical codes of most professions very
clearly specify privacy measures beyond that for the 'consumer' of an
arbitrary service.
 Consumer privacy measures

These measures are those taken by commercial organizations to ensure
that confidential customer data is not stolen or abused. Since most such
organizations have a strong competitive incentive to retain an exclusive
access to these data, and since customer trust is usually a high priority,
most companies take some security engineering measures to protect
customer privacy.
Since they operate for-profit, commercial organizations also cannot spend

an unlimited amount on precautions and remain competitive - a commercial
context tends to limit privacy measures, and to motivate organizations to
share data when working in partnership. This has led to many moral
hazards and outrageous customer privacy violation incidents, and has led to
consumer privacy laws in most countries.

Some services, notably telecommunications including Internet, imply

collecting a vast array of information about user's activities in the course of
things, and may also require consultation of these data to prepare bills.
Telecom data must be kept for seven years in the US and Canada, to permit
dispute and consultation about phone charges. Telecom regulation has
always enforced a high level of confidentiality on these very sensitive
customer communication bills and the underlying records. However, this
approach has to a degree been outmoded as other industries also now
gather sensitive data.
Such common commercial measures as software-based customer

relationship management, rewards programs and target marketing tend to
drastically increase the amount of information gathered (and sometimes
shared). These very drastically increase privacy risks, and have accelerated
the shift to regulation, rather than relying on corporate desire to preserve
goodwill.

1. _________ , as in people purchasing goods or consuming materials in
excess of their basic needs, is as old as the first civilizations.
2. Impulse buyers who cannot resist spending money are commonly
termed ________.
3. _____________ _____________is a term used to describe the lavish
spending on goods and services that are acquired mainly for the
purpose of displaying income or wealth.
4. The special feature of the _______ __________Act is to provide
speedy and inexpensive redressal to the grievance of the consumer and
provide him relief of a specific nature and award compensation wherever
appropriate.

5. The _____________________is a political movement which advocates

goals common to Green parties, including environmentalism,
sustainability, nonviolence, and social justice concerns.
6. _____________________is the marketing of products that are
presumed to be environmentally safe.
7. __________ foods mean they were grown without the use of
conventional pesticides, artificial fertilizers, human waste, or sewage
sludge and that they were processed without ionizing radiation or food
additives.
8. _______________________measures are those taken by commercial
organizations to ensure that confidential customer data is not stolen or
abused.
9.10 Business and Marketing Ethics

Business ethics is a form of the art of applied ethics that examines ethical
principles and moral or ethical problems that can arise in a business
environment.
In the increasingly conscience-focused marketplaces of the 21st century,

the demand for more ethical business processes and actions (known as
ethicism) is increasing. Simultaneously, pressure is applied on industry to
improve business ethics through new public initiatives and laws.
Business ethics can be both a normative and a descriptive discipline. As a

corporate practice and a career specialization, the field is primarily
normative. In academia descriptive approaches are also taken. The range
and quantity of business ethical issues reflects the degree to which business
is perceived to be at odds with non-economic social values. Historically,
interest in business ethics accelerated dramatically during the 1980s and
1990s, both within major corporations and within academia. For example,
today most major corporate websites lay emphasis on commitment to

promoting non-economic social values under a variety of headings (e.g.

ethics codes, social responsibility charters). In some cases, corporations
have redefined their core values in the light of business ethical
considerations (e.g. BP's "beyond petroleum" environmental tilt).
Marketing ethics is the area of applied ethics which deals with the moral
principles behind the operation and regulation of marketing. Some areas of
marketing ethics (ethics of advertising and promotion) overlap with media
ethics.
Some of the specific issues in marketing ethics are discussed in the

Market research
Ethical danger points in market research include:
* Invasion of privacy: Invasion of privacy is a legal term essentially defined

as a violation of the right to be left alone. The right to privacy is the right to
control property against search and seizure, and to control information about
oneself. The right to privacy refers to your right to be left alone. There are
several different ways a person's right to privacy can be invaded. The most
common privacy invasions recognized by law are as follows:
 Intrusion of solitude - physical or electronic intrusion into one's private
quarters.
 Public disclosure of private facts -- the dissemination of truthful private

information which a reasonable person would find objectionable
 False light - the publication of facts which place a person in a false light,
even though the facts themselves may not be defamatory.
 Appropriation -- the unauthorized use of a person's name or likeness to

obtain some benefit.

* Stereotyping: Stereotyping occurs because any analysis of real

populations needs to make approximations and place individuals into
groups. Stereotypes are seen by many as undesirable beliefs imposed to
justify the acts of discrimination and oppression. Other effects are:
justification of ill-founded prejudices or ignorance
unwillingness to rethink one's attitudes and Behaviour towards stereotyped

group
There's usually more than one stereotype for the same group. For example,
according to stereotypes about Black Americans, Black men are generally
supposed to be good musicians and basketball players, but at the same
time seen as aggressive, prone to lives of crime, and likely to be on drugs.
The effects of stereotypes can have positive and negative effects: In some
market research studies, students who were implicitly made aware of their
gender behaved as the stereotype suggested.
Asian-American women performed better in math tests when being aware of

being Asian, and did worse when being reminded of being women.
Stereotyping can also be created by the media, showing an incorrect

judgment of a culture or place.
Target Market
Ethical danger points include:
* Targeting the vulnerable (e.g. children, the elderly) and

* Excluding potential customers from the market:
Selective marketing is used to discourage demand from undesirable market

sectors or disenfranchise them altogether.
Examples of unethical market exclusion or selective marketing are past

industry attitudes to the gay, ethnic minority and obese ("plus-size")

markets. Contrary to the popular myth that ethics and profits do not mix, the
tapping of these markets has proved highly profitable. For example, 20% of
US clothing sales are now plus-size. Another example is the selective
marketing of health care, so that unprofitable sectors (i.e. the elderly) will not
attempt to take benefits to which they are entitled. A further example of
market exclusion is the pharmaceutical industry's exclusion of developing
countries from AIDS drugs.
In the case of children, the main products are unhealthy food, fashion ware
and entertainment goods. Children are a lucrative market; but are not
capable of resisting or understanding marketing tactics at younger ages. At
older ages competitive feelings towards other children are stronger than
financial sense. The practice of extending children's marketing from
television to the school ground is also controversial.
Other vulnerable audiences include emerging markets in developing

countries, where the public may not be sufficiently aware of skilled
marketing ploys transferred from developed countries, and where,
conversely, marketers may not be aware how excessively powerful their
tactics may be. For example Nestle infant milk formula scandal which
discouraged breast feeding.
C. Pricing practices
Some of the unethical practices include
 Price fixing: The practice of two or more sellers agreeing on the price to
charge for similar products or services. Price fixing is an agreement
between business competitors to sell the same product or service at the
same price. In general, it is an agreement intended to ultimately push
the price of a product as high as possible, leading to profits for all the
sellers. Price-fixing can also involve any agreement to fix, peg, discount
or stabilize prices. The principal feature is any agreement on price,

whether express or implied. Methods of price fixing can include selling at

a common target price; setting a common "minimum" price; buying the
product from a supplier at a specified "maximum" price; adhering to a
price book or list price; engagement in cooperative price advertising;
standardizing financial credit terms offered to purchasers; using uniform
trade-in allowances; limiting discounts; discontinuing a free service or
fixing the price of one component of an overall service; adhering
uniformly to previously-announced prices and terms of sale; establishing
uniform costs and markups; imposing mandatory surcharges;
purposefully reducing output or sales; or purposefully sharing or
"pooling" markets, territories, or customers.
 Price skimming: The practice of ‘price skimming’ involves charging a
relatively high price for a short time when a new, innovative, or much-
improved product is launched onto a market. The objective with
skimming is to “skim” off customers who are willing to pay more to have
the product sooner; prices are lowered later when demand from the
“early adopters” falls. The success of a price-skimming strategy is
largely dependent on the inelasticity of demand for the product either by
the market as a whole, or by certain market segments. High prices can
be enjoyed in the short term where demand is relatively inelastic. In the
short term the supplier benefits from ‘monopoly profits’, but as
profitability increases, competing suppliers are likely to be attracted to
the market (depending on the barriers to entry in the market) and the
price will fall as competition increases. The main objective of employing
a price-skimming strategy is, therefore, to benefit from high short-term
profits (due to the newness of the product) and from effective market
segmentation.
 Price discrimination: practice of selling a commodity at different prices
to different buyers, even though sales costs are the same in all of the

transactions. Discrimination among buyers may be based on personal

characteristics such as income, race, or age or on geographic location.
For price discrimination to succeed, other entrepreneurs must be unable
to purchase goods at the lower price and resell them at a higher one.
Legislation against price discrimination has usually sought to prevent its
use by one seller to drive a competing seller out of business by
underselling the competitor in his own market while selling at higher
prices in other markets
 Variable pricing: Most firms use a fixed price policy. That is, they
examine the situation, determine an appropriate price, and leave the
price fixed at that amount until the situation changes, at which point they
go through the process again. The alternative has been variable pricing,
a form of first degree price discrimination, characterized by individual
bargaining and negotiation, and typically used for highly differentiated
high value items. Two variants of variable pricing are price shading (in
which sales people are given the authority to vary the price by a certain
amount or percentage), and auctions (in which potential buyers have the
option of bidding on a product and thereby varying the price).
Consumers generally prefer fixed prices because they don’t need to
worry about being out-negotiated by a professional with expert
knowledge and skills.
 Predatory pricing: Predatory pricing (also known as destroyer pricing)
is the practice of a firm selling a product at very low price with the intent
of driving competitors out of the market, or create a barrier to entry into
the market for potential new competitors. If the other firms cannot
sustain equal or lower prices without losing money, they go out of
business. The predatory pricer then has fewer competitors or even a
monopoly, allowing it to raise prices above what the market would
otherwise bear. Predatory pricing through sharp discounting is not

beneficial to a business in the short run, as it may result in a price war

and will cause loss of revenue and/or profits. Yet businesses may
engage in predatory pricing because it may pay dividends in the long
run. This is because competitors who are not as financially strong as the
predator will suffer even more, either due to loss of business or reduced
profit margin caused by the aggressive price competition. The predation
continues until the competitor is driven to failure and forced to leave the
market. After the weaker competition has been driven out, the surviving
business can raise prices above competitive levels (to "supra
competitive pricing"). The business hopes to thereby reap revenues and
profits that will more than offset the losses during the predatory pricing
period.
 Supra competitive pricing: Supra competitive pricing is pricing above
what can be sustained in a competitive market. This may be indicative of
a business that has a unique legal or competitive advantage, or possibly
of anti-competitive Behaviour that has driven competition from the
market. An example of a unique legal advantage would be a drug
company that is the first to discover and successfully manufacture a
medication to treat a certain disease. Initially, as the only market player,
the drug company may be able to charge supra competitive prices until
other companies catch up. In this case, the regulatory hurdle for drug
approval may prove a substantial barrier to new competition. However,
other companies may not be able to enter the market due to another
barrier to entry, intellectual property (IP) rights. The drug company may
have a patent on the new formulation, barring competitors until the
patent expires unless they can license rights from the IP owner. An
example of a competitive advantage may be a large company with a
trusted brand name and a substantial marketing budget that simply
overwhelms a local competitor by driving demand for its product over the

competitor's product, at least in the short term. Supra competitive pricing

may also result following a period of predatory pricing, which has
potential antitrust implications for the predator.
 Price war: Price war is a term used in business to indicate a state of

intense competitive rivalry accompanied by a multi-lateral series of price
reductions. One competitor will lower its price, then others will lower their
prices to match. If one of the reactors reduces their price below the
original price cut, then a new round of reductions is initiated. In the
short-term, price wars are good for consumers who are able to take
advantage of lower prices. Typically they are not good for the companies
involved. The lower prices reduce profit margins and can threaten
survival. In the long term, they can be good for the dominant firms in the
industry however. Typically the smaller more marginal firms will be
unable to compete and will shut down. The remaining firms absorb the
market share of the terminated ones. The real losers then, are the
marginal firms and the people that invested in them. In the long-term,
the consumer could lose also. With fewer firms in the industry, prices
tend to increase, sometimes to a level higher than before the price war.
 Bid rigging: Bid-rigging is an illegal agreement between two or more

competitors. It is a form of collusion, which is illegal. It is a form of price
fixing and market allocation, and involves an agreement in which one
party of a group of bidders will be designated to win the bid. It is often
practiced where contracts are determined by bid, for example with
government construction contracts. There are some very common bid-
rigging practices:
o Subcontract bid-rigging occurs where some of the conspirators agree
not to submit bids, or to submit cover bids that are intended not to be
successful, on the condition that some parts of the successful bidder's

contract will be subcontracted to them. In this way, they "share the

spoils" among themselves.
o Bid suppression occurs where some of the conspirators agree not to
submit a bid so that another conspirator can successfully win the
contract.
o Complementary bidding, also known as cover bidding or courtesy
bidding, occurs where some of the bidders bid an amount knowing that it
is too high or contains conditions that they know to be unacceptable to
the agency calling for the bids.
o Bid rotation occurs where the bidders take turns being the designated
successful bidder, for example, each conspirator is designated to be the
successful bidder on certain contracts, with conspirators designated to
win other contracts. This is a form of market allocation, where the
conspirators allocate or apportion markets, products, customers or
geographic territories among themselves; so that each will get a "fair
share" of the total business, without having to truly compete with the
others for that business.
 Dumping (pricing policy): The practice of selling merchandise in

foreign markets at lower prices than those charged in the domestic
markets. In economics, "dumping" can refer to any kind of predatory
pricing. However, the word is now generally used only in the context of
international trade law, where dumping is defined as the act of a
manufacturer in one country exporting a product to another country at a
price which is either below the price it charges in its home market or is
below its costs of production. A standard technical definition of dumping
is the act of charging a lower price for a good in a foreign market than
one charges for the same good in a domestic market. This is often
referred to as selling at less than "fair value." Under the WTO
Agreement, dumping is condemned (but is not prohibited) if it causes or

threatens to cause material injury to a domestic industry in the importing

country.
D. Advertising and promotion

a. Issues over truth and honesty: In the 1940's and 1950's, tobacco
used to be advertised as promoting health. Today an advertiser who
fails to tell the truth not only offends against morality but also against
the law.
b. Issues with violence, sex and profanity: Sexual innuendo is a
mainstay of advertising content and yet is also regarded as a form of
sexual harassment. Violence is an issue especially for children's
advertising and advertising likely to be seen by children.
c. Taste and controversy: The advertising of certain products may
strongly offend some people while being in the interests of others.
Examples include: feminine hygiene products, hemorrhoid and
constipation medication. The advertising of condoms has become
acceptable in the interests of AIDS-prevention, but are nevertheless
seen by some as promoting promiscuity. Some companies have
actually marketed themselves on the basis of controversial
advertising - see Benetton. Sony has also frequently attracted
criticism for unethical content (portrayals of Jesus which infuriated
religious groups
d. Negative advertising techniques, such as attack ads. In negative
advertising, the advertiser highlights the disadvantages of competitor
products rather than the advantages of their own. The methods are
most familiar from the political sphere.
e. Advertising Media: Direct marketing is the most controversial of
advertising channels, particularly when approaches are unsolicited.
TV commercials and direct mail are common examples. Electronic

spam and telemarketing push the borders of ethics and legality more
strongly.
E. Marketing strategy
The main theoretical issue here is the debate between free markets and
regulated markets. In a truly free market, any participant can make or
change the rules. However when new rules are invented which shift power
too suddenly or too far, other participants may respond with accusations of
unethical behaviour, rather than modifying their own behaviour to suit (which
they might not be able to anyway). Most markets are not fully free: the real
debate is as to the appropriate extent of regulation.
Some of the unethical or controversial marketing strategies are as follows:
 Bait and switch

In retail sales, a bait and switch is a form of fraud in which the fraudster
lures in customers by advertising a product or service at an unprofitably
low price, then reveals to potential customers that the advertised good is
not available but that a substitute is. The goal of the bait-and-switch is to
convince some buyers to purchase the substitute good as a means of
avoiding disappointment over not getting the bait, or as a way to recover
sunk costs expended to try to obtain the bait. It suggests that the seller
will not show the original product or product advertised but instead will
demonstrate a more expensive product. Other advertising practices,
such as the use of sales techniques to steer customers away from low-
profit items, depend on many of the same psychological mechanisms as
a bait and switch. In the United States, courts have held that the
purveyor using a bait and switch operation may be subject to a lawsuit
by customers for false advertising, and can be sued for trademark
infringement by competing manufacturers, retailers, and others who
profit from the sale of the product used as bait. However, no cause of

action will exist if the purveyor is capable of actually selling the goods
advertised, but aggressively pushes a competing product. Likewise,
advertising a sale while intending to stock a limited amount of, and
thereby sell out, the loss-leading item advertised is legal in the United
States. The purveyor can escape liability if they make clear in their
advertisements that quantities of items for which a sale is offered are
limited. Unscrupulous estate agents commonly engage in bait and
switch by continuing to advertise attractive properties in their windows
that they have already sold.
 Pyramid scheme
A pyramid scheme is a non-sustainable business model that involves
the exchange of money primarily for enrolling other people into the
scheme, usually without any product or service being delivered. A
pyramid scheme is a fraudulent investing plan that has unfortunately
cost many people worldwide their hard-earned savings. The concept
behind the pyramid scheme is simple and should be easy to identify;
however, it is often presented to potential investors in a disguised or
slightly altered form. For this reason, it is important to not only
understand how pyramid schemes work, but also to be familiar with the
many different shapes and sizes they can take. As its name indicates,
the pyramid scheme is structured like a pyramid. It starts with one
person - the initial recruiter - who is on top, at the apex of the pyramid.
This person recruits a second person, who is required to "invest" Rs.100
which is paid to the initial recruiter. In order to make his or her money
back, the new recruit must recruit more people under him or her, each of
whom will also have to invest Rs.100. If the recruit gets 10 more people
to invest, this person will make Rs.900 with just a Rs.100 investment.
The 10 new people become recruiters and each one is in turn required
to enlist an additional 10 people, resulting in a total of 100 more people.

Each of those 100 new recruits is also obligated to pay Rs.100 to the
person who recruited him or her; recruiters get a profit of all of the
money received minus the initial Rs.100 paid to the person who
recruited them. The process continues until the base of the pyramid is
no longer strong enough to support the upper structure (meaning there
are no more recruits).
 Planned obsolescence
Planned obsolescence (also built-in obsolescence) is the decision on the
part of a manufacturer to produce a consumer product that will become
obsolete and/or non-functional in a defined time frame. Planned
obsolescence has potential benefits for a producer in that it means a
consumer cannot just purchase a product once that will last indefinitely -
the life of the product's usefulness or functionality is fixed, so that at
some point the consumer must purchase again, whether returning to the
original manufacturer for a newer model, or buying from the competition.
It also has potential benefits for consumers, because they are not forced
to spend extra for an over-engineered product, thus becoming unable to
afford a more technologically advanced product, with greater
functionality, in the future. For an industry, it stimulates demand in the
marketplace by ensuring a customer must come back into a buying
mode sooner than had the product been built to last longer or
indefinitely. It exists in many different products from vehicles to light
bulbs, from buildings to software. There is, however, the potential
backlash of consumers that become aware of such obsolescence; such
consumers can shed their loyalty and buy from a company that caters to
their desire for a more durable product.

 Vendor lock-in
In economics, vendor lock-in, also known as proprietary lock-in,
customer lock-in, lock-in is where a customer is dependent on a vendor
for products and services and cannot move to another vendor without
substantial switching costs, real and/or perceived. Frequently, the term
connotes some level of intention on the vendor's part to create a lock-in
situation, but often a client may be said to be "locked in" in situations
that arose unintentionally. The razor and blades business model
involves products which regularly consume some material, part, or
supply. In this system, a reusable or durable product is inexpensive, and
the company draws its profits from the sale of consumable parts that the
product uses. To ensure the original company alone receives the profits
from the sales of consumable, they use a proprietary approach to
exclude other companies. Inkjet computer printers are a common
example of this model. While the consumer is forced to purchase their
consumables from a single source, this is often not considered lock-in
because the cost to change, especially in the razor and consumer
printer examples, is limited to the inexpensive non-consumable plus any
unused, proprietary consumables remaining at the time of change. The
extra costs to the customer create a situation which favors the vendor at
the expense of the consumer.
A monopoly may result when lock-in costs create market barriers to

entry. Lock-in may eventually also be damaging to the company or
industry in question. One way to create artificial lock-in for items without
it is to create loyalty schemes. Examples include frequent flyer miles or
points systems associated with credit card offers that can be used only
with the original company, creating a perceived loss or cost when
switching to a competitor. Vendor lock-in is rampant in the computer and
electronics industries. In the computer industry, both hardware and

software, vendor lock-in can be used to describe situations in which

there is a lack of compatibility or interoperability between equivalent
components. This can make it difficult to switch systems at many levels;
the application program, the file format, the operating system, or various
pieces of computer hardware ranging from a video card to a whole
computer or even an entire network of computers. Note that in many
cases, there are no technical standards that would allow creation of
interoperable systems. At nearly any level of systems architecture, lock-
in may occur. This creates a situation where lock-in is often used as
leverage to get market share, often leading to monopolies and antitrust
actions.
 Viral marketing
Viral marketing and viral advertising refer to marketing techniques that
use pre-existing social networks to produce increases in brand
awareness, through self-replicating viral processes, analogous to the
spread of pathological and computer viruses. It can be word-of-mouth
delivered or enhanced by the network effects of the Internet. Viral
marketing is a marketing phenomenon that facilitates and encourages
people to pass along a marketing message voluntarily. Viral promotions
may take the form of funny video clips, interactive Flash games,
advergames, images, or even text messages. It is claimed that a
satisfied customer tells an average of three people about a product or
service he/she likes, and eleven people about a product or service which
he/she did not like. Viral marketing is based on this natural human
behaviour. The goal of marketers interested in creating successful viral
marketing programs is to identify individuals with high Social Networking
Potential and create Viral Messages that appeal to this segment of the
population and have a high probability of being passed along.

 Guerilla marketing: Guerrilla marketing is an unconventional way of

performing promotional activities on a very low budget. Such promotions
are sometimes designed so that the target audience is left unaware they
have been marketed to and may therefore be a form of undercover
marketing (also called stealth marketing). The ethics of guerrilla
marketing have often been called into question due to an alleged
deceptive, misleading, or subtle nature of the campaigns. It is up to the
guerrilla marketer to be creative and devise unconventional methods of
promotion. The marketer must use all of his or her contacts, both
professional and personal, and must examine his company and its
products, looking for sources of publicity. Many forms of publicity can be
very inexpensive, others are free. It is argued that when implementing
guerrilla marketing tactics, small size is an advantage. Small
businesses, according to this argument, are able to obtain publicity more
easily than large companies; they are closer to their customers and
considerably more agile.
 Anti-competitive practices: Anti-competitive practices are business or

government practices that prevent and/or reduce competition in a
market. Anti-competitive practices can include:
o Dumping, where products are sold into a market at a low price which
renders competition impossible, in order to wipe out competitors.
o Exclusive dealing, where a retailer or wholesaler is ‘tied’ to purchase
from a supplier.
o Barriers to entry (to an industry) designed to avoid the competition that
new entrants would bring.
o Price fixing, where companies collude to set prices, effectively
dismantling the free market.
o Refusal to deal, e.g., two companies agree not to use a certain vendor

o Dividing territories, e.g., you get everything North of India, we take

everything South.
o Limit Pricing, where the price is set by a monopolist to discourage
economic entry into a market.
o Product tying, where products that aren't naturally related must be
bought together; this prevents consumer choice.
o Resale price maintenance, where resellers are not allowed to set prices
independently.
o Coercive monopoly - all potential competition is barred from entering the
market
o Absorption of a competitor or competing technology, where the powerful
firm effectively co-opts or swallows its competitor rather than see it either
compete directly or be absorbed by another firm.
o Subsidies from government which allow a firm to function without being
profitable, giving them an advantage over competition or effectively
barring competition
o Regulations which place costly restrictions on firms that less wealthy
firms cannot afford to implement
o Protectionism, Tariffs and Quotas which give firms insulation from
competitive forces
F. Controversial Internet marketing strategies:

* Search engine optimization: Search engine optimization (SEO) is the
process of improving the volume and quality of traffic to a web site from
search engines via "natural" search results. Usually, the earlier a site is
presented in the search results or the higher it "ranks", the more searchers
will visit that site. SEO can also target different kinds of search, including
image search, local search, and industry-specific vertical search engines. As
a marketing strategy for increasing a site's relevance, SEO considers how
search algorithms work and what people search for. SEO efforts may

involve a site's coding, presentation, and structure, as well as fixing

problems that could prevent search engine indexing programs from fully
spidering a site. Other, more noticeable efforts may include adding unique
content to a site, ensuring that content is easily indexed by search engine
robots, and making the site more appealing to users.
* Spamdexing: Spamdexing is any of various methods to manipulate the

relevancy or prominence of resources indexed by a search engine, usually
in a manner inconsistent with the purpose of the indexing system. It is a
form of search engine optimization. Search engines use a variety of
algorithms to determine relevancy ranking. Some of these include
determining whether the search term appears in the META keywords tag,
others whether the search term appears in the body text or URL of a web
page. Many search engines check for instances of spamdexing and will
remove suspect pages from their indexes. The rise of spamdexing in the
mid-1990s made the leading search engines of the time less useful, and the
success of Google at both producing better search results and combating
keyword spamming, through its reputation-based Page Rank link analysis
system, helped it become the dominant search site late in the decade,
where it remains. Although it has not been rendered useless by
spamdexing, Google has not been immune to more sophisticated methods
either. The problem arises when site operators load their Web pages with
hundreds of extraneous terms so search engines will list them among
legitimate addresses. The process is called "spamdexing," a combination of
spamming — the Internet term for sending users unsolicited information —
and "indexing."
*Embrace, extend and extinguish: "Embrace, extend and extinguish," also
known as "Embrace, extend, and exterminate," is a phrase that the U.S.
Department of Justice alleged was used internally by Microsoft to describe
their strategy for entering product categories involving widely used

standards, extending those standards with proprietary capabilities, and then

using those differences to disadvantage its competitors. The more widely
used variation, "embrace, extend and extinguish," was first introduced in the
United States v. Microsoft antitrust trial when the vice president of Intel,
Steven McGeady, testified that Microsoft vice president Paul Maritz used the
phrase in a 1995 meeting with Intel to describe Microsoft's strategy toward
Netscape, Java, and the Internet. In this context, the phrase means to
highlight the final phase of Microsoft's strategy, which was to drive
customers away from smaller competitors.
* Spyware: Spyware is computer software that is installed surreptitiously on

a personal computer to intercept or take partial control over the user's
interaction with the computer, without the user's informed consent. While the
term spyware suggests software that secretly monitors the user's behaviour,
the functions of spyware extend well beyond simple monitoring. Spyware
programs can collect various types of personal information, but can also
interfere with user control of the computer in other ways, such as installing
additional software, redirecting Web browser activity, or diverting advertising
revenue to a third party. In an attempt to increase the understanding of
spyware, a more formal classification of its included software types is
captured under the term privacy-invasive software. In response to the
emergence of spyware, a small industry has sprung up dealing in anti-
spyware software. Running anti-spyware software has become a widely
recognized element of computer security best practices for Microsoft
Windows desktop computers. A number of jurisdictions have passed anti-
spyware laws, which usually target any software that is surreptitiously
installed to control a user's computer.
*Adware: Adware or advertising-supported software is any software

package which automatically plays, displays, or downloads advertising

material to a computer after the software is installed on it or while the

application is being used.
Adware is software with advertising functions integrated into or bundled with

a program. It is usually seen by the programmer as a way to recover
programming development costs, and in some cases it may allow the
program to be provided to the user free of charge or at a reduced price. The
advertising income may allow or motivate the programmer to continue to
write, maintain and upgrade the software product. Some adware is also
shareware, and so the word may be used as term of distinction to
differentiate between types of shareware software. What differentiates
adware from other shareware is that it is primarily advertising-supported.
Users may also be given the option to pay for a "registered" or "licensed"
copy to do away with the advertisements
There are concerns about adware because it often takes the form of
spyware, in which information about the user's activity is tracked, reported,
and often re-sold, often without the knowledge or consent of the user. Of
even greater concern is malware, which may interfere with the function of
other software applications, in order to force users to visit a particular web
site.
9.11 Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a concept which encourages
organizations to consider the interests of society by taking responsibility for
the impact of the organization's activities on customers, employees,
shareholders, communities and the environment in all aspects of its
operations. This obligation is seen to extend beyond the statutory obligation
to comply with legislation and sees organizations voluntarily taking further
steps to improve the quality of life for employees and their families as well
as for the local community and society at large.

A main approach for CSR is community-based development projects, such

as the Infosys Foundation's involvement in community projects, Microsoft's
involvement in Anti-AIDS campaign, etc. A more common approach of CSR
is through the giving of aid to local organizations and impoverished
communities in developing countries. Some organizations do not like this
approach as it does not help build on the skills of the local people, whereas
community-based development generally leads to more sustainable
development.

1. Marketing ethics is the area of applied ethics which deals with the moral
principles behind the operation and regulation of marketing.
2. Price skimming is an agreement between business competitors to sell
the same product or service at the same price.
3. The practice of ‘price fixing’ involves charging a relatively high price for a
short time when a new, innovative, or much-improved product is
launched onto a market.
4. Predatory pricing (also known as destroyer pricing) is the practice of a
firm selling a product at very low price with the intent of driving
competitors out of the market, or create a barrier to entry into the market
for potential new competitors.
5. In retail sales, a pyramid scheme is a form of fraud in which the fraudster
lures in customers by advertising a product or service at an unprofitably
low price then reveals to potential customers that the advertised good is
not available but that a substitute is.
6. There are concerns about adware because it often takes the form of
spyware, in which information about the user's activity is tracked,
reported, and often re-sold, often without the knowledge or consent of
the user.

9.12 Summary
In this unit we have covered the topic of Consumerism & Marketing Ethics
with particular reference to Consumerism in India. We also understood the
meaning & concept of Conspicuous Consumption, Anti-Consumerism,
Consumer safety & Consumer Protection & Consumer Protection Act in
India. We also studied the Environmental concerns and green movement,
concept of Green Marketing & Organic Foods. The subject of Consumer
privacy including Consumer privacy concerns & Consumer privacy
measures have been discussed. We also touched upon Business &
Marketing Ethics in various fields like Market research, Target Market,
Pricing practices, Advertising and promotion, Marketing strategy & also
Controversial Internet marketing strategies.

1. Explain briefly the concepts of Conspicuous Consumption & Anti-
Consumerism.
2. Describe the meaning of Green Marketing along with examples of
organic foods.
3. Explain the differences between Price Fixing & Price Skimming.
4. What is the meaning of Vendor Lock In? Explain with examples.
5. Explain the differences between Spyware & Adware.

SAQI
1. Consumerism
2. shopaholics
3. Conspicuous consumption
4. Consumer Protection
5. Green movement

6. Green marketing
7. Organic
8. Consumer privacy
SAQII
1. True
2. False
3. False
4. True
5. False
6. True
TQ
1. Refer sections 9.3 & 9.4
2. Refer sections 9.7 & 9.8

Unit 10 Business Buyer Behaviour and

Decisions
Structure
10.1 Introduction
Objective
10.2 Nature of business buying behaviour
10.3 Business buying process
10.4 Buying Center
10.5 Different Types of Business buying
10.6 Factors influencing business buying Behaviour
10.7 Segmentation of business markets
10.8 Summary
10.1 Introduction
The study of business buyer behaviour and decision making is important in
analyzing market strategies adopted by different institutions. Thorough
knowledge about definition and nature of business buying behaviour along
with business market segmentation is required to understand consumer
behaviour in totality.
Objectives
 Know the nature and definition of Business Buying Behaviour and
Buying Center.

 Understand different types of Business buying.

 Explain the factors influencing Business Buying Behaviour.
 Describe the segmentation of business markets.
10.2 Nature of business buying behaviour

Business-to-business or “B2B” is a term commonly used to describe the
transaction of goods or services between businesses, as opposed to that
between businesses and other groups, such as transactions between
business and individual consumers (B2C) or business to government
organisations (B2G) transactions. B2B is typically performed in much higher
volumes than (B2C) applications. B2B can also encompass marketing
activities between businesses, and not just the final transactions that result
from marketing, though B2B can be used to identify sales transactions
between businesses (also sometimes referred to as 'Institutional Sales'). For
example, a company selling photocopiers would likely be a B2B sales
organization, as opposed to a B2C sales organization. The term 'Business
to Business' can also mean all transactions made in an industry value chain
'before' the finished product is sold to the end-consumer for final
consumption.
Purchasing refers to a business or organization attempting to acquire goods
or services to accomplish the goals of the enterprise. Though there are
several organizations that attempt to set standards in the purchasing
process, processes can vary greatly between organizations. Typically the
word “purchasing” is not used interchangeably with the word “procurement”,
since procurement typically includes Expediting, Supplier Quality, and
Traffic and Logistics in addition to Purchasing.
Purchasing managers/directors and procurement managers/directors guide
the organization’s acquisition procedures and standards. Most organizations

use a three-way check as the foundation of their purchasing programs. This

involves three departments in the organization completing separate parts of
the acquisition process. The three departments do not all report to the same
senior manager to prevent unethical practices and lend credibility to the
process. These departments can be purchasing, receiving; and accounts
payable or engineering, purchasing and accounts payable; or a plant
manager, purchasing and accounts payable. Combinations can vary
significantly, but a purchasing department and accounts payable are usually
two of the three departments involved.
Historically, the purchasing department issued Purchase Orders for

supplies, services, equipment, and raw materials. Then, in an effort to
decrease the administrative costs associated with the repetitive ordering of
basic consumable items, "Blanket" or "Master" Agreements were put into
place. These types of agreements typically have a longer duration and
increased scope to maximize the Quantities of Scale concept. When
additional supplies are required, a simple release would be issued to the
supplier to provide the goods or services.
Purchasing managers realized once contracts for the low rupee value
consumables are in place, procurement can take a smaller role in the
operation and use of the contracts. There is still oversight in the forms of
audits and monthly statement reviews, but most of their time is now
available to negotiate major purchases and setting up of other long term
contracts. These contracts are typically renewable annually.
10.3 Business buying process

Almost all buying decisions include factors like delivery and handling,
marginal benefit, and price fluctuations.

Buying process in modern businesses usually consists of seven steps:

Information Gathering: If the potential customer does not already have an
established relationship with sales/ marketing functions of suppliers of
needed products and services, it is necessary to search for suppliers who
can satisfy the requirements.
Supplier Contact: When one or more suitable suppliers have been

identified, Requests for Quotation (RFQ), Requests for Proposals (RFP),
Requests for Information (RFI) or Requests for Tender (RFT) may be
advertised, or direct contact may be made with the suppliers.
Background Review: References for product/service quality are consulted,

and any requirements for follow-up services including installation,
maintenance, and warranty are investigated. Samples of the
products/services being considered may be examined or trials undertaken.
Negotiation: Negotiations are undertaken, and price, availability, and

customisation possibilities are established. Delivery schedules are
negotiated, and a contract to acquire the products/services is completed.
Fulfillment: Supplier preparation, shipment, delivery, and payment for the

products/services are completed, based on contract terms. Installation and
training may also be included.
Consumption, Maintenance and Disposal: During this phase the

company evaluates the performance of the products/services and any
accompanying service support, as they are consumed.
Renewal: When the products/services has been consumed and/or disposed

of, the contract expires, or the product or service is to be re-ordered,
company experience with the products/services is reviewed. If the
products/services is to be re-ordered, the company determines whether to
consider other suppliers or to continue with the same supplier.

10.4 Buying Center

A buying center (also known as a decision-making unit) is a group of
employees responsible for purchasing an item for the organization. In a
business setting, major purchases typically require input from various parts
of the organization, including finance, accounting, purchasing, information
technology management, and senior management. Highly technical
purchases, such as information systems or production equipment, also
require the expertise of technical specialists. In some cases the buying
center is an informal ad hoc group, but in other cases, it is a formally
sanctioned group with specific mandates, criteria, and procedures. The
employees that constitute the buying center will vary depending on the item
being purchased.
In a generic sense, there are typically five roles within any buying center.
They are:
a) User: These are normally the workers, technicians, engineers, chemists

etc. on the shop floor or a laboratory of a business organisation. These
could also be programmers in a software firm. These are the people who
are the indenters of the goods & services required by them for
uninterrupted production.
b) Influencer: These could be normally located inside the organisation like
senior management personnel in the same or different department or
they could be outside experts like consultants.
c) Decider: This is the person who takes the final decision to purchase.
Depending on the organisational structure and the corporate policies
and also depending on the criticality of the product or service, this could
be the factory manager, purchase manager, or even the CEO. Higher
the cost and the risk of purchase, higher will be the level at which the
decision will be taken.

d) Buyer: This is the person who is involved in the actual buying function
and he will have to ensure that there is no disruption in production due
to procurement problems. Normally he will be in the purchase or
materials department.
e) Gatekeeper: He/she is a very important person who plays the critical
role of flow of information in the organisation for any procurement
decision. This could be a secretary or a clerk in purchase or accounts
departments, or even the receptionist. The technical or economic factors
may not be important to the gatekeeper. It is important for any sales
person to identify the gatekeeper and understand their expectations to
ensure that the sale is made.

1. A __________ _________(also known as a decision making unit), is a
group of employees responsible for purchasing an item for the
organization.
2. __________ is the person who is involved in the actual buying function
and he will have to ensure that there is no disruption in production due
to procurement problems.
3. __________ is a very important person who plays the critical role of flow
of information in the organisation for any procurement decision.
10.5 Different Types of Business buying

Depending on the type of buying organisation, the nature of material under
procurement, corporate philosophy, etc. there is different types of business
buying. Some of them are discussed below.
Competitive tendering
Business buying often involves competitive tendering. This is a process
where a purchasing organisation undertakes to procure goods and services
from suitable suppliers. Due to the high value of some purchases (for
example buying a new computer system, manufacturing machinery, or

outsourcing a maintenance contract) and the complexity of such purchases,
the purchasing organisation will seek to obtain a number of bids from
competing suppliers and choose the best offering. An entire profession
(strategic procurement) that includes tertiary training and qualifications has
been built around the process of making important purchases. The key
requirement in any competitive tender is to ensure the following:
* The business case for the purchase has been completed and approved.
* The purchasing organisation's objectives for the purchase are clearly

defined.
* The procurement process is agreed upon and it conforms to fiscal

guidelines and organisational policies.
* The selection criteria have been established.
* A budget has been estimated and the financial resources are available.
* A buying team (or committee) has been assembled.
* A specification has been written.
* A preliminary scan of the market place has determined that enough

potential suppliers are available to make the process viable (this can
sometimes be achieved using an expression of interest process).
* It has been clearly established that a competitive tendering process is the

best method for meeting the objectives of this purchasing project. If (for
example) it was known that there was only one organisation capable of
supplying; best to get on with talking to them and negotiating a contract.

Non-tender purchasing
All industrial sales need not involve competitive tendering. Tender
processes are time consuming and expensive, particularly when executed
with the aim of ensuring probity. Government agencies are particularly likely
to utilize elaborate competitive tendering processes, due to the expectation
that, they should be seen at all times to be responsibly and accountably
spending public monies. Private companies are able to avoid the complexity
of a fully transparent tender process, but are still able to run the
procurement process with some rigor.
Reverse Auction
A reverse auction (also called e-auction, sourcing event, and e-sourcing) is
a tool used in industrial business-to-business procurement. It is a type of
auction in which the role of the buyer and seller are reversed, with the
primary objective to drive purchase prices downward. In an ordinary auction
(also known as a forward auction), buyers compete to obtain a good or
service. In a reverse auction, sellers compete to obtain business.
In a typical auction, the seller puts an item up for sale. Multiple buyers bid
for the item and depending on the nature of the auction, and one or more of
the highest bidders buy the goods at a price determined at the conclusion of
the bidding.
In a reverse auction, a buyer contracts with a market maker to help make

the necessary preparations to conduct the reverse auction. This includes:
finding new suppliers, training new and incumbent suppliers, organizing the
auction, managing the auction event, and providing auction data to buyers
to facilitate decision making.
The market maker, on behalf of the buyer, issues a request for quotation
(RFQ) to purchase a particular item or group of items (called a "lot"). At the

designated day and time, several suppliers, log on to the auction site and
will input several quotes over a 30-90 minute period. These quotes reflect
the prices at which they are willing to supply the requested good or service.
Quoting performed in real-time via the Internet results in dynamic bidding.

This helps achieve rapid downward price pressure that is not normally
attainable using traditional static 3-quote paper-based bidding processes.
The prices that buyers obtain in the reverse auction reflect the narrow
market, which it created at the moment in time when the auction is held.
Thus, it is possible that better value - i.e. lower prices, as well as better
quality, delivery performance, technical capabilities, etc. - could be obtained
from suppliers not engaged in the bidding or by other means such as
collaborative cost management and joint process improvement.
The buyer may award contracts to the supplier who bid the lowest price. Or,
a buyer could award contracts to suppliers who bid higher prices, depending
upon the buyer's specific needs with regards to quality, lead-time, capacity,
or other value-adding capabilities. However, buyers frequently award
contracts to incumbent (i.e. current) suppliers, even if prices are higher than
the lowest bids, because the switching costs to move work to a new supplier
are higher than the potential savings that can be realized. This outcome,
while very attractive to buyers, is often strongly criticized by both new and
incumbent suppliers.
The use of Optimization software has become popular since about 2002, to
help buyers determine which supplier to source the work to. It includes
relevant buyer and seller business data, including constraints.
Reverse auctions are used to fill both large and small value contracts for
public and private commercial organizations. In addition to items traditionally
thought of as commodities, reverse auctions are also used to source buyer-

designed goods and services, and has even been used to source reverse
auction providers.
Purchasing Cards
Another method of decreasing administrative costs associated with
repetitive contracts for common material is the use of company credit cards,
also known as "Purchasing Cards" or simply "P-Cards". P-card programs
vary, but all of them have internal checks and audits to ensure appropriate
use. Purchasing managers realized once contracts for the low dollar value
consumables are in place, procurement can take a smaller role in the
operation and use of the contracts. There is still oversight in the forms of
audits and monthly statement reviews, but most of their time is now
available to negotiate major purchases and setting up of other long term
contracts. These contracts are typically renewable annually.
Supply chain management (SCM)

Supply chain management is the process of planning, implementing, and
controlling the operations of the supply chain as efficiently as possible.
Supply Chain Management spans all movement and storage of raw
materials, work-in-process inventory, and finished goods from point-of-origin
to point-of-consumption.
Importantly, it also includes coordination and collaboration with channel

partners, which can be suppliers, intermediaries and third-party service
providers. In essence, Supply Chain Management integrates supply and
demand management within and across companies.
Supply chain management is a cross-functional approach to managing the

movement of raw materials into an organization and the movement of
finished goods out of the organization toward the end-consumer. As
corporations strive to focus on core competencies and become more

flexible, they have reduced their ownership of raw materials sources and
distribution channels. These functions are increasingly being outsourced to
other corporations that can perform the activities better or more cost
effectively. The effect has been to increase the number of companies
involved in satisfying consumer demand, while reducing management
control of daily logistics operations. Less control and more supply chain
partners led to the creation of supply chain management concepts. The
purpose of supply chain management is to improve trust and collaboration
among supply chain partners, thus improving inventory visibility and
improving inventory velocity.
10.6 Factors influencing business buying behaviour

There are many factors, which affect the business buying behaviour, which
can be classified into two categories- situation specific & organisation
specific.
I. Situation Specific Factors

There are three factors under this category:
a. Buyclass
There are three buy classes: new task purchase, modified rebuy, and
straight rebuy. A new task purchase is a problem or requirement that has
not arisen before such that the buying center does not have any relevant
experience with the product or service. A modified rebuy is a situation such
that the buying center has some relevant experience to draw upon. The
alternatives considered, however, are different, or changed from the ones
considered the last time a similar problem arose. A straight rebuy is the
purchase of standard parts; maintenance, repair, and operating items and
supplies; or any recurring need that is handled on a routine basis.

The concept of buyclass is important because the purchase process is

different among these three classes.
b. Perceived risk, Importance and Complexity:

Perceived Risk refers to the expected probability that the purchase may not
produce a satisfactory outcome. This is due to two factors: 1. The degree of
uncertainty that the choice mat be wrong. 2. The amount at stake in case
the choice happens to be wrong. The new tasks have the highest
uncertainty and the straight rebuy the lowest. The amount at stake can be
the financial loss or the performance loss in case of wrong decision.
Financial loss depends on the purchase price and performance loss pertains
to the product not performing to standards.
The importance of purchase is a combination of the amount at stake and

the extent to which the product plays a strategic role in the organisation.
Higher the amount at stake and more strategic the product’s role- the more
important is the purchase.
Complexity refers to the extensiveness of the effort required to understand

and manage the product during its acquisition. This has two dimensions:
1. The number of performance specifications and

2. The technical and the specialist knowledge required understanding these
specifications.
The above three factors, viz. perceived risk, importance and complexity
influence how extensive and involved the purchase decision process will be.
c. Time Pressure
Customers behave differently when they are under time pressure. This
refers to how urgently the item is needed. When the item is needed urgently,

the purchase decision will tend to short circuit the usual process, make the
process less deliberative and give more direct role to the user.
II. Organisation Specific Factors
There are four organisational factors, which affect buying behaviour:

1. Size, 2. Structure, 3. Purchase resources and 4. Purchase
orientation.
a. Size: The size of the organisation not only determines the customer’s
potential purchase volume but also the sophistication of the buying
process. Small business organisations and entrepreneurial firms behave
more like a family usually consisting of one person and large
organisations have larger buying groups or buying centers and more
formalized procedures.
b. Structure: This refers to the number of departmental units and

geographical locations over which the units are spread out and also its
degree of centralization. If the organisation has more number of
departments it will have larger buying group/centre, & the buying
process is likely to be prolonged.
c. Purchase Resources: This refers to the availability of professional

buyers and the extent to which the purchase office is staffed with the
required type and number of experts as well as equipment. Generally
large and professionally managed firms will have better resourced
purchase departments leading to well evaluated decisions and also
formal and rigorous vendor evaluation.
d. Purchase Orientation: This refers to the philosophy of purchase, i.e.

which can vary from ‘purchasing simply as an administrative function for
organising materials needed at most economical rates’, to ‘viewing it as

a strategic managerial function whose goal is to add value to the

organisation’s ability, to offer better value to its customers’.
As a strategic function purchasing involves several key activities:

 Evaluating make versus buy decisions. This questions the very need to
buy something or make it in house – either the whole product or an
intermediate product.
 Continuously finding better products materials and technology.
 Developing long term sources of supply and building relationships with
the suppliers.
10.7 Segmentation of business markets

A Market segment is a subgroup of people or organizations sharing one or
more characteristics that cause them to have similar product needs.
There are many other definitions with words of the same effect; most of
which do not take into account the differences between companies within a
specific segment. Every company wants to differentiate itself from
competitors. Therefore, any marketing stimulus needs to be specific to a
time and situation, and perhaps even to the target of the company.
This is also true in business markets. Despite the many changes, the
underlying criteria remain the same, e.g. geography, culture, industry, size,
technology position, buying strategy, business models, etc. The challenge is
in the patterns and combinations of these criteria, plus in the accelerated
rate of change, which require more dynamic and flexible segmentation
models.
Segmentation is one of the most important concepts in business markets. It

is the basis whereby market analysis and deeper understanding of
customers can be developed into an organisational response that yields

sustainable competitive advantage. The ‘what’ and ‘why’ of segmentation

provides strong justification for its practice.
Criteria for Business Market Segmentation:

The following three criteria are critical in segmenting business markets:
Measurability: Unless the segment is measurable, the scheme will not be

operational. While this would be an absolute ideal, its implementation can
be very difficult in some markets. The first barrier is, it often necessitates
field research, which is expensive and time-consuming. Second, it is
impossible to accurate strategic data on a large number of business
customers. Third, if gathered, the analysis of the data can be daunting task.
These barriers lead most companies to use more qualitative and intuitive
methods in measuring customer data, and more persuasive methods while
selling, hoping to compensate for the gap of accurate data measurement.
Substantiality: i.e. “the variable should be relevant to a substantial group of

customers”. The challenge here is finding the right size or balance. If the
group gets too large, there is a risk of diluting effectiveness; and if the group
becomes too small, the company will loose the benefits of economies of
scale. Also, there are often very large customers that provide a large portion
of a suppliers business. These single customers are sometimes distinctive
enough to justify constituting a segment on their own. This scenario is often
observed in industries which are dominated by a small number of large
companies, e.g. aircraft manufacturing, automotive, turbines, printing
machines and paper machines.
Operational relevance to marketing strategy: Segmentation should

enable a company to offer the suitable operational offering to the chosen
segment, e.g. faster delivery service, credit payment facility, 24-hour
technical service, etc. This can only be applied by companies with sufficient

operational resources. For example, just-in-time delivery requires highly

efficient and sizeable logistics operations, whereas supply-on-demand
would need large inventories, tying down the supplier’s capital. Combining
the two within the same company - e.g. for two different segments - would
stretch the company’s resources.
Models for Business Market Segmentation

One of the recommended approaches in segmentation is for a company to
decide whether it wants to have a limited number of products offered to
many segments or many products offered to a limited number of segments.
Businesses are encouraged not to offer many product lines to many
segments, as this would dilute their focus and stretch their resources too
much. Yet this happens relatively often in practice, which hints to the
question, to what extent the recommended models realistic.
Two-Stage Market Segmentation (Wind & Cardozo Model)

Yoram Wind and Richard Cardozo (1974) suggested industrial market
segmentation based on broad two-step classifications of macro-
segmentation and micro-segmentation. This model is one the most common
methods applied in industrial markets today. It is sometimes extended into
more complex models to include multi-step and three- and four-dimensional
models.
Macro-segmentation centers on the characteristics of the buying
organisation, thus dividing the market using following criteria:
– Company / organisation size: one of the most practical and easily
identifiable criteria, it can also be good rough indicator of the potential
business for a company. However, it needs to be combined with other
factors to draw a realistic picture.
– Geographic location is equally as feasible as company size. It tells a
company a lot about culture and communication requirements. For

example a company would adapt a different bidding strategy with an

Asian company than an American customer. Geographic location also
relates to culture, language and business attitudes. For example, North
Indian, South Indian, etc. normally have different sets of business
standards and communication requirements.
– Industry classification can be a good indicator for application-based

segmentation. However it is based only on relatively standard and basic
industries, and product or service classifications such as sheet metal
production, springs manufacturing, construction machinery, etc. Many
industries that use a number of different technologies or have innovative
products are classified under the ‘other’ category, which does not bring
much benefit if these form the customer base.
– Purchasing situation, i.e. new task, modified re-buy or straight re-buy.

This is another relatively theoretical and unused criterion in real life. As a
result of increased competition and globalisation in most established
industries, companies tend to find focus in a small number of markets,
get to know the market well and establish long-term relationship with
customers. The general belief is, it is cheaper to keep an existing
customer than to find a new one. When this happens, the purchase
criteria are more based on relationship, trust, technology and overall
cost of purchase, which dilutes the importance of these criteria.
– Decision-making stage. This criterion can only apply to newcomers. In

cases of long-term relationship, which is usually the objective of most
industrial businesses, the qualified supplier is normally aware of the
purchase requirement, i.e. they always get into the bidding process right
at the beginning. Sheth and Sharma have suggested “with increasing
turbulence in the marketplace, it is clear that firms have to move away

from transaction-oriented marketing strategies and move towards

relationship-oriented marketing for enhanced performance”.
– Benefit segmentation: The product’s economic value to the customer,

which is one of the more helpful criteria in some industries. It
“recognises that customers buy the same products for different reasons,
and place different values on particular product features. For example,
the access control industry markets the same products for two different
value sets: Banks, factories and airports install them for security
reasons, i.e. to protect their assets against. However, sports stadiums,
concert arenas and the London Underground installs similar equipment
in order to generate revenue and/or cut costs by eliminating manual
ticket handling.
– Type of institution: for example, banks would require designer furniture

for their customers while government departments would suffice with
functional and durable sets. Hospitals would require higher hygiene
criteria while buying office equipment than utilities. And airport terminals
would need different degrees of access control and security monitoring
than shopping centres. However, type of buying institution and the
decision-making stage can only work on paper. As institutional buyers
cut procurement costs, they are forced to reduce the number of
suppliers, with whom they develop long-term relationships. This makes
the buying institution already a highly experienced one and the suppliers
are normally involved at the beginning of the decision-making process.
This eliminates the need to apply these two items as segmentation
criteria.
– Customers’ business potential assuming supply can be guaranteed
and prices are acceptable by a particular segment. For example, ‘global
accounts’ would buy high quantities and are prepared to sign long-term

agreements; ‘key accounts’ medium-sized regional customers that can

be the source of 30% of a company’s revenue as long as competitive
offering is in place for them; ‘direct accounts’ form many thousands of
small companies that buy mainly ob price but in return are willing to
forego service.
– Purchasing strategies, for example, global vs. local decision-making
structure, decision-making power of purchasing officers vs. engineers or
technical specialists.
– Supply Chain Position: A customer’ business model affects where and
how they buy. If he pursues a cost leadership strategy, then the
company is more likely to be committed to high-volume manufacturing,
thus requiring high-volume purchasing. To the supplier, this means
constant price pressure and precise delivery but relatively long-term
business security, e.g. in the commodities markets. But if the company
follows a differentiation strategy, then it is bound to offer customised
products and services to its customers. This would necessitate
specialised high-quality products from the supplier, which are often
purchased in low volumes, which mostly eliminates stark price
competition, emphasises on functionality and requires relationship-
based marketing mix.
Micro-segmentation
Micro-segmentation on the other hand requires a higher degree of
knowledge. While macro-segmentation put the business into broad
categories, helping a general product strategy, micro-segmentation is
essential for the implementation of the concept. “Micro-segments are
homogenous groups of buyers within the macro-segments”. Macro-
segmentation without micro-segmentation cannot provide the expected
benefits to the organisation. Micro-segmentation focuses on factors that

matter in the daily business. The most common criteria include the
characteristics of the decision-making units within each macro-segment, for
example:
– Buying decision criteria (product quality, delivery, technical support,

price, supply continuity). “The marketer might divide the market based
on supplier profiles that appear to be preferred by decision-makers, e.g.
high quality – prompt delivery – premium price vs. standard quality –
less-prompt delivery – low price”.
– Purchasing strategy, which falls into two categories: First, there are
companies who contact familiar suppliers (some have vendor lists) and
place the order with the first supplier that fulfils the buying criteria. These
tend to include more OEM’s than public sector buyers. Second,
organisations that consider a larger number of familiar and unfamiliar
suppliers, solicit bids, examine all proposals and place the order with the
best offer. Experience has shown that considering this criterion as part
of the segmentation principles can be highly beneficial, as the supplier
can avoid unnecessary costs by, for example not spending time and
resources unless officially approved in the buyer’s vendor list.
– Structure of the decision-making unit can be one of the most effective
criteria. Knowing the decision-making process has been shown to make
the difference between winning and losing a contract. If this is the case,
the supplier can develop a suitable relationship with the person / people
that has / have real decision-making power. For example, the medical
equipment market can be segmented on the basis of the type of
institution and the responsibilities of the decision makers. A Company
that sells protective coatings for human implants would adapt a totally
different communication strategy for doctors than hip-joint
manufacturers.

– Perceived importance of the product to the customer’s business (e.g.

automotive transmission, or peripheral equipment, e.g. manufacturing
tool)
– Attitudes towards the supplier: Personal characteristics of buyers
(age, education, job-title and decision style) play a major role in forming
the customers purchasing attitude as whole. Is the decision-maker a
partner, supporter, neutral, adversarial or an opponent? Industrial power
systems are best “sold” to engineering executive than purchasing
managers; industrial coatings are sold almost exclusively to engineers;
matrix and raw materials are sold normally to purchasing managers or
even via web auctions.
The above criteria can be highly beneficial depending on the type of

business. However, they may be feasible to measure only in high-capital,
high-expense businesses such as corporate banking or aircraft business
due to high cost associated with compiling the desired data. There are
serious concerns in practice regarding the cost and difficulty of collecting
measurements of these micro-segmentation characteristics and using them.
The prerequisite to implementing a full-scale macro- and micro-

segmentation concept is the company’s size and the organisational set-up.
A company needs to have beyond the certain number of customers for a
segmentation model to work. Smaller companies would not need a formal
segmentation model as they know their customers in person.
Nested Approach to Segmentation (Bonoma & Shapiro Model)

Taking the Wind & Cardozo model, Bonoma & Shapiro extended this into a
multi-step approach in 1984. As the application of all the criteria
recommended by Wind and Cardozo and subsequent scholars who
expanded upon their two-stage theory became increasingly difficult due to

the complexity of modern businesses, Bonoma and Shapiro suggest that the
same / similar criteria be applied in multi-process manner to allow flexibility
to marketers in selecting or avoiding the criteria as suited to their
businesses. They proposed the use of the following five general
segmentation criteria which they arranged in a nester hierarchy:
i. Demographics: industry, company size, customer location.

ii. Operating variables: company technology, product/brand use status,
customer capabilities.
iii. Purchasing approaches: purchasing function, power structure,
buyer-seller relationships, purchasing policies, purchasing criteria.
iv. Situational factors: urgency of order, product application, size of
order.
v. Buyers’ personal characteristics: character, approach.
The idea was that the marketers would move from the outer nest toward the
inner, using as many nests as necessary. As a result this model has
become one of the most adapted in the market, rivaling the Wind & Cardozo
model. One of the problems with the nested approach is that there is no
clear-cut distinction between purchasing approaches, situational factors and
demographics. Bonoma and Shapiro are aware of these overlaps and
suggest that the nested approach is intended to be used “flexibly with a
good deal of managerial judgment”.

1. Private companies are particularly likely to utilize elaborate competitive
tendering processes due to the expectation that, they should be seen at
al times to be responsibly and accountably spending public monies.

2. A reverse auction is a type of auction in which the role of the buyer and
seller are reversed, with the primary objective to drive purchase prices
downward.
3. Supply Chain Management spans all movement and storage of raw

materials, work-in-process inventory, and finished goods from point-of-
origin to point-of-consumption.
4. A modified re-buy is the purchase of standard parts; maintenance,

repair, and operating items and supplies; or any recurring need that is
handled on a routine basis.
5. The size of the organisation not only determines the customer’s potential
purchase volume but also the sophistication of the buying process.
6. Personal characteristics of buyers (age, education, job-title and decision

style) play a major role in forming the customers purchasing attitude as
whole.
10.8 Summary
In this unit we learnt about the Business buyer Behaviour and the decision
making process. We studied the Nature of business buying Behaviour &
also Business buying process including Information Gathering, Supplier
Contact,
Background Review, Negotiation, Fulfillment, Consumption, Maintenance

and Disposal and finally Renewal. We also understood the concept of a
Buying Centre & the Different Types of Business buying like Competitive
tendering, Non-tender purchasing, Reverse Auction, Purchasing Cards
and Supply chain management. We also learnt about the Factors
influencing business buying Behaviour including Situation Specific Factors &
also the Organisation Specific Factors. We also touched upon the

Segmentation of business markets and the Criteria for Business Market

Segmentation. We also studied a few Models for Business Market
Segmentation.

1. What are the seven steps in the business buying process? Please
explain each of them in one or two sentences.
2. What is a Buying Centre? Who are its members?

3. Explain the meaning of Reverse Auction and describe how it is
conducted.
4. List out the four organisation specific factors, which affect business-
buying behaviour.
5. Which are the three critical factors, which are critical in segmenting
business markets? Describe each of them briefly.
SAQI
1. buying center
2. Buyer
3. Gatekeeper
SAQII
1. False
2. True
3. True
4. False
5. True
6. True
TQ


References:
1. Marketing Management 12th Edition by Kotler & Keller
2. Customer Behaviour – A Management Perspective by Sheth & Mittal
3. Consumer Behaviour by Schiffman & Kanuk
4. Consumer Behaviour – Building Marketing Strategy by Hawkins, Best,
Coney & Mookerjee
5. Consumer Behaviour – A Strategic Approach by Henry Assael

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What are the 7 steps in the business buying process?

What are the 7 steps in the business buying process?

What is a Buying Centre? Who are its members?

What is a Buying Centre? Who are its members?

MK 0002

Content Preparation Team

Edition: Fall 2007

All marketing decisions and strategies are based on assumptions about

Unit 1 Understanding Consumer Behaviour

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1.2 Meaning and Definition of Consumer Behaviour

The above example is a classic case of how a study of consumer behaviour

Definition of Consumer Behaviour and related concepts

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The activities undertaken by the consumer can be either of the following:

Understanding consumer Behaviour is quite complicated since it involves

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1.3 Application of consumer Behaviour knowledge to marketing

Sikkim Manipal University Page No. 4

As an improvement of this, a new approach was enunciated by Sheth &

Sikkim Manipal University Page No. 5

In the traditional methods of study of consumer behaviour, the applications

The underlying assumption of such organisations is that, the

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quoted statement-“My customer can have a car painted in any colour

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efforts to finding out the consumer preferences and then modifying

 Advantages and disadvantages

interested in using multi media and the processor in WebTV had

There are many advantages of consumer orientation of an organisation.

 Retention of customers is the immediate result of the customer

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professions like doctors, lawyers, chartered accountants, etc. depend

Sikkim Manipal University Page No. 11

pesticide in some of their bottles. KFC & McDonalds faced social

One example of mass customisation is that of Mattel Toys producing the

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marketing needs to be owned by everyone from within the organization.

 Marketing Myopia and Consumer Behaviour

a) What is Marketing Myopia?

Marketing myopia is a term used in marketing. Indeed, one of the most

b) Examples of Marketing Myopia

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understanding and enunciation of their business in terms of the benefit

Levitt explains the downfall of the railways as a result of defining their

If the railways defined themselves as being in the Transportation industry,

A successful example of proper implementation of this theory is that of Coca

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which was available everywhere. This definition resulted in their corporate

Another example of this is the photography companies. Companies like

A good example of another success story is Harley-Davidson. They saw that

Self Assessment Questions I

2. Sheth & Mittal have expanded the definition of Consumer Behaviour by

3. ___________ ______________ is the new Marketing Concept which

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of management efforts to finding out the consumer preferences and then

4. The concept of customer orientation is getting further extended in this

5. __________ ________ can be achieved only when all personnel within

3. _ ____ is the new Marketing Concept which

5. __ can be achieved only when all personnel within