Consumer Buying Behavior

Consumer Markets and

Consumer Buying Behavior

Consumer behavior is the actions a person takes in

purchasing and using products and services,
including the mental and social processes that
precede and follow these actions

Prof. P.V. Balakrishnan

Consumer Buying Behavior refers to the buying behavior of final

consumers
individuals & households who buy goods and services for
personal consumption.

All these consumers make up the consumer market.

The central question for marketers is:

How do consumers respond to various marketing efforts the

company might use?

CB-2

Value of Customers
1.

Transaction basis
a)

Views each individual interaction as unique

b)

Calculate value of transaction

2.

Lifetime Customer Value

1.

Determine margin on goods sold

2.

Increases efforts towards long-term goals

Primary risk is overestimation of retention rates
Four things are needed to successfully utilize LCV

Assess costs involved with customer acquisition

3.

Margin Acquisition costs

4.

Lifetime Customer Value

Focuses firms efforts on retaining most valuable asset

(Customers)

a)

Unique customer identification

a)

Views each customer as an asset or a series of interactions

b)

Customer purchase history

b)

Calculate value of customer

c)

Customer communication data

d)

Accurate cost information

Determine acquisition and response rates

Compute relevant costs

Cumulative Customer Profit

$

Use acquisition and retention rates to compute lifetime customer

value

Year
CB-3

Model of Buyer Behavior

Marketing and
Other Stimuli

Buyers Black Box

Marketing

Buyer Characteristics
Buyer Decision Process

Product
Price
Place
Promotion

Other

Economic
Technological
Political
Cultural

CB-4

Factors Influencing Consumer Behavior

Buyer Responses

Cultural
Social
Social

Product Choice
Brand Choice
Dealer Choice
Purchase Timing
Purchase Amount

CB-5

Culture
Culture

Reference
Reference
groups
groups

SubSubculture
culture

Family
Family

Social
Social
class
class

Roles
Roles
and
and
status
status

Personal
Personal
Age
Ageand
and
life-cycle
life-cycle
Occupation
Occupation
Economic
Economic
situation
situation
Lifestyle
Lifestyle
Personality
Personality
and
and
self-concept
self-concept

PsychoPsychological
logical

Motivation
Motivation
Perception
Perception
Learning
Learning
Beliefs
Beliefsand
and
Attitudes
Attitudes

Buyer
Buyer

CB-6

Factors Affecting Consumer Behavior:

Culture

Factors Affecting Consumer Behavior:

Culture
Culture is the Most Basic Cause of a Person's
Wants and Behavior.

Culture is the Set of Values, Perceptions, Wants &

Behavior Learned by a Member of Society from
Family.
Social Class

Subculture
Group of people with shared
value systems based on
common life experiences.

Societys relatively
permanent & ordered
divisions whose members
share similar values,
interests, and behaviors.

Hispanic Consumers
African American Consumers
Asian American Consumers

Measured by: Occupation,

Income, Education, Wealth
and Other Variables.

Mature Consumers
CB-7

CB-8

Factors Affecting Consumer Behavior:

Social

Factors Affecting Consumer Behavior:

Personal
Cars are often seen as a status symbol, and
marketers choose which element to present in
their advertising.

Personal Influences

Compare this ad to the one on the next slide.

Click to continue

Groups
Groups
Membership
Membership
Reference
Reference

Family Buying Influence

Children can exert a
strong influence on
family buying decisions.
Johnson & Johnson reminds
customers of its commitment
to the American Family.

What other companies use

children to influence
family buying decisions?

Click or pre ss spa cebar to return

Family
Family (most
(most important)
important)
Husband,
Husband, wife,
wife, kids
kids
Influencer,
Influencer, buyer,
buyer, user
user

Age and Life

Cycle Stage

Social
Social Factors
Factors

Occupation

Economic
Situation

Personality &
Self-Concept

Lifestyle
Lifestyle Identification
Identification

Roles
Roles and
and Status
Status

Activities
Activities

Interests
Interests

Opinions
Opinions

CB-9

CB-10

SRI Values and Lifestyles

(VALS)

Lifestyle

Lifestyle
Lifestyle is
is aa mode
mode of
of living
living that
that is
is
identified
identified by
by how
how people
people spend
spend their
their
time
time and
and resources,
resources, what
what they
they consider
consider
important
important in
in their
their environment,
environment, and
and
what
what they
they think
think of
of themselves
themselves and
and the
the
world
world around
around them.
them.

High Resources

Innovators
Innovators

High Innovation

Thinkers
Thinkers

Achievers
Achievers

Experiencers
Experiencers

Believers
Believers

Strivers
Strivers

Makers
Makers

Low Resources
CB-11

Survivors
Survivors

Low Innovation
CB-12

Factors Affecting Consumer Behavior:

Psychological

Maslows Hierarchy of Needs

Motivation

Self
Actualization

(Self-development)

Beliefs and
Attitudes

Psychological
Factors
Affecting
Buyers
Choices

Esteem Needs
(self-esteem)
Social Needs

Perception

(sense of belonging, love)

Safety Needs

(security, protection)

Physiological Needs

Learning

(hunger, thirst)

CB-13

Attitude

CB-14

Beliefs

An
An attitude
attitude is
is a
a learned
learned predisposition
predisposition to
to
respond
respond to
to an
an object
object or
or class
class of
of objects
objects
in
in aa consistently
consistently favorable
favorable or
or
unfavorable
unfavorable way.
way.

Beliefs
Beliefs are
are aa consumers
consumers subjective
subjective
perception
perception of
of how
how well
well aa product
product or
or
brand
brand performs
performs on
on different
different attributes.
attributes.

CB-15

CB-16

Characteristics of
Attitudes and Preference
Attitudes: Multi-attribute Model

Valence

Favorable / Neutral / Unfavorable

Positive / Indifferent / Negative

Intensity

Strongly held versus weakly held

Very important to not at all important

Confidence

Evaluation of
Product
Attributes

Brand
Beliefs

(ei)

(bi)

Attribute
Importance

Level of certainty

Brand Specific
Evaluations

Overall
Brand
Evaluations

Intention
to
Buy

(Ao)

(BI)

Behavior

(B)

Social
Norm

Ao = biei + SN
CB-17

Measuring Attitudes

Measuring Attitudes

How important is each of the following attributes

associated with ISPs?
Very
Entertainment Value
Educational Value
Ease of Site Navigation

Not at all

Important

Coding

Important

Evaluate AOL on each of the following attributes?

Excellent

Entertainment Value
Educational Value
Ease of Site Navigation
Coding

Poor

-1

-2

CB-19

Measuring Attitudes

Very
Important

Not at all
Important

Evaluate AOL on each of the following attributes?

Entertainment Value
Educational Value
Ease of Site Navigation

Measuring Attitudes

How important is each of the following attributes associated with ISPs?

Entertainment Value
Educational Value
Ease of Site Navigation

CB-20

Excellent
z

z
z

Poor

Attribute
Importance (ei)

AOL

Roadrunner

Ease of Site
Navigation

5 X

0 =0

2 = 10

Entertainment
Value

4 X

2 =8

0 =0

Educational
Value

3 X

2 =6

0 =0

14

10

Overall Rating

Evaluate Roadrunner on each of the following attributes?

Entertainment Value
Educational Value
Ease of Site Navigation

Excellent

z
z

Poor

CB-21

Factors Influencing Attitude-Behavior Relationship

Measuring Attitudes
0

Ease of Site Navigation

Entertainment Value
Educational Value

CB-22

10

= AOL
= Roadrunner

Evaluation of
Product
Attributes

Brand
Beliefs

(ei)

(bi)

Overall
Brand
Evaluations

Intention
to
Buy

(Ao)

(BI)

Behavior

(B)

Social
Norm

Attitudes

Intentions

Behavior

CB-23

Simultaneous Attribute
Importance-Performance Grid

Strategies

Ao = biei + SN

Attribute
Importance

Our
Performance

Competitors
Performance

Poor

Poor

Strategies to stimulate interest:

Redesign the product
Alter beliefs about the brand
Alter beliefs about competitors brands
Alter the importance weights
Call attention to neglected attributes

High

Simultaneous
Result
Neglected
Opportunity
Competitive
Disadvantage
Competitive
Advantage
Head-to-Head
Competition
Null
Opportunity
False
Alarm
False
Advantage
False
Competition

Good
Good

Poor
Good

Poor

Poor

Low

Good
Good

Poor
Good

Balakrishnan

Types of Buying Decision Behavior

Significant
differences
between
brands
Few
differences
between
brands

High
Involvement

Low
Involvement

1. Complex
Buying
Behavior

3. VarietySeeking
Behavior

2. DissonanceReducing Buying
Behavior

4. Habitual
Buying
Behavior

Buyer Decision Process

Purchase
Decision
Evaluation
of Alternatives

Postpurchase
Behavior

Information
Search

CB-29

Need
Recognition

CB-31

Buyer Decision Process

Step 1. Need Recognition
Evoked Set

An
An evoked
evoked set
set is
is the
the group
group of
of brands
brands that
that
aa consumer
consumer would
would consider
consider acceptable
acceptable
from
from among
among all
all the
the brands
brands of
of the
the
product
product class
class of
of which
which he
he or
or she
she is
is
aware.
aware.

State Where the

Buyers Needs
are Fulfilled and
the Buyer is
Satisfied.

Buyer
Recognizes
a
Problem
or a
Need.

Needs Arising
From:
Internal Stimuli

Hunger
External Stimuli-

Friends

CB-32

CB-33

The Buyer Decision Process

Step 2. Information Search

Personal
Personal Sources
Sources

Family, friends, neighbors

Most effective source of
information

Commercial
Commercial Sources
Sources

Advertising, salespeople
Receives most information
from these sources

Experiential
Experiential Sources
Sources

Step 3. Evaluation of Alternatives

Consumer
Consumer May
May Use
Use Careful
Careful
Calculations
Calculations && Logical
Logical Thinking
Thinking
Consumers
Consumers May
May Buy
Buy on
on Impulse
Impulse and
and
Rely
Rely on
on Intuition
Intuition
Consumers
Consumers May
May Make
Make Buying
Buying Decisions
Decisions
on
on Their
Their Own.
Own.

Mass Media
Consumer-rating groups

Consumers
Consumers May
May Make
Make Buying
Buying Decisions
Decisions
Only
Only After
After Consulting
Consulting Others
Others..

Handling the product

Examining the product
Using the product

Marketers Must Study Buyers to Find Out

How They Evaluate Brand Alternatives
CB-34

The Buyer Decision Process

CB-35

The Buyer Decision Process

Step 4. Purchase Decision

Step 5. Postpurchase Behavior

Purchase
Purchase Intention
Intention

Satisfied Customer!

Desire
Desire to
to buy
buy the
the most
most preferred
preferred brand
brand

Attitudes
of Others

Unexpected
Situational
Factors

Consumers
Expectations of Products Performance.
Products Perceived
Performance.

CognitiveDissonance
Dissonance
Cognitive

Public
Public Sources
Sources

The Buyer Decision Process

Dissatisfied Customer

Purchase
Purchase Decision
Decision
CB-37

CB-38

Complaint Response Behavior

Post Consumption Behavior:

How Customers Dispose of Products

63% of customers with a loss between $1 and

$5 did not complain

Not buy again.

54% Problem unresolved

30% Problem resolved

Not buy again.

Not buy again.

DONT LET IT ARISE!

CB-40

Pentice-Hall

A Conceptual Model Of Service Quality

Loyalty: Retaining Customers

Customer retention = higher profits
5% retention rate increases profit by 25-95%
In e-apparel, repeat customers spend twice as
much in months 24-30
Loyal Customers provide valuable referrals

Referred customers cost lot less to acquire

Word-of-Mouth
Communication
s

Past Experience

Personal Needs

Expected
Services
Gap 5

CUSTOMER

PROVIDER

Perceived Service

Gap 1

E-bay spends less then $10 to get each new customer

Gap 4

Service Delivery
Gap 3

Referred customers use less support

External
Communications
to Customers

Service Quality
Specifications
Gap 2
Management Perceptions
of Customer Expectations

CB-45

Five Critical Gaps

Source: Zeithaml, Parasuraman, and Berry (1990), Delivering Quality Service: Balancing Customer Perceptions and Expectations, The
CB-47
Free Press, New York, New York.

Satisfaction Loyalty Link

1. Service provider does not know what the

customer expects;
2. Wrong service-quality standards are set;
3. Service quality standards are not met;
4. What is delivered does not equal what was
promised;
5. Gaps 1-4 leads to service that does not equal
expectations.
Ref: Jones & Sasser, HBR, 1995
CB-48

Adopter Categories

Percentage of Adopters

Awareness:
Awareness:Consumer
Consumerisisaware
awareof
of
product,
product,but
butlacks
lacks information.
information.
Interest:
Interest: Consumer
Consumerseeks
seeks
Information
Informationabout
about new
newproduct.
product.
Evaluation:
Evaluation:Consumer
Consumerconsiders
considers
trying
tryingnew
newproduct.
product.
Trial: Consumer tries new
product on a small scale.

Early Majority
Innovators

Stages in the Adoption Process

CB-49

Early
Adopters

34%

Late Majority

16%

13.5%
2.5%

Early

Laggards

34%

Time of Adoption
Late

Adoption: Consumer decides

to make regular use of product.
CB-50

CB-51

ACCORD:
Influence (of Product Characteristics) on Rate of Adoption

Adopter Categorization for New Products

Everett Rogers(1950s) surveyed a

large sample of people to find out their
adoption process for new products.

Based on this survey, he came up with the

classification:

2.5% Innovators
13.5% Early Adopters
34% Early Majority
34% Late Majority
16% Laggards

Divisibility
Divisibility

Risk
Risk

Can
Canthe
theinnovation
innovation
be
beused
usedon
onaapilot
pilottest/
test/
trial
trialbasis?
basis?

Do
Doconsumers
consumersperceive
perceive
the
theinnovation
innovationas
asrisky?
risky?
Economic,
Economic,psycho-social?
psycho-social?

Relative
RelativeAdvantage
Advantage

Observability
Observability

Does
Doesthe
theinnovation
innovation
fit
fitthe
thevalues
valuesand
and
experience
experienceof
ofthe
the
target
targetmarket?
market?

Can
Canresults
resultsbe
beeasily
easily
Observed
Observedor
orcommunicated
communicated
to
toothers?
others?

IsIsthe
theinnovation
innovation
superior
superiorto
toexisting
existing
products?
products?

Compatibility
Compatibility

Complexity
Complexity

IsIsthe
theinnovation
innovation
difficult
difficultto
to
understand
understandor
oruse?
use?

CB-53

Balakrishnan

Review of Concepts
Define the consumer market and construct a
simple model of consumer buyer behavior.
Name the four major factors that influence
consumer buyer behavior.
List and understand the stages in the buyer
decision process.
Describe the adoption and diffusion process for
new products.

CB-57