HARAMBE UNIVERSITY COLLEGE

CONSUMER BEHAVIOR

Course Name: Consumer Behavior

Course contents:
- Unit One: Introduction to Consumer Behavior
- Unit Two: Consumer Research
- Unit Three: Consumer Decision Making
- Unit Four: Market Segmentation
- Unit Five: Culture & Sub Culture
- Unit Six: Group Influence
- Unit Seven: Family
- Unit Eight: Consumer Personality
- Unit Nine: Consumer Needs and Motivation
- Unit Ten: Learning

UNIT ONE:
1. INTRODUCTION TO CONSUMER BEHAVIOR

Objectives of the Chapter:

- At the end of this unit you will be able to:
- Define customer behavior
- Show the evolution of consumer behavior
- Pinpoint areas of consumer behavior knowledge application
- Indicate the ethical dimensions of consumer behavior

1.1. Introduction

Consumer Behavior (C.B.) may be defined as the decision process where individuals engage
in evaluating, while acquiring, using, or disposing of goods and services. (Solomon: 2002)
According to Schiffman,, Consumer behavior is a study about how or why individuals spend
their time, energy and resource while making purchase decisions.
 Technical Terms of Consumer Behavior
i. Customers and Consumers
The term customer is typically used to refer to some one who regularly purchases from a
particular store or company. On the other hand, the term consumer generally refers to anyone
engaged in any of the activities used in our definition of consumer behavior. Therefore, a
customer is defined in terms of a specific firm while a consumer is not. E.g., customer of
Commercial Bank of Ethiopia financial service consumer
ii. The Ultimate Consumer
The primary attention of marketers is directed towards ultimate consumers that are those
individuals who purchase for the purpose of individual or household consumption. Basically
there are two types of consumers. They are personal and organizational.

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iii. The Individual Buyer

The most commonly known consumer situation is that of an individual making a purchase
with little or no influence from others. However, in some cases a number of individuals can
be jointly involved in a purchase decision.
decision. These situations suggest that people can take
different roles such as initiators, influencers, buyers, and users in consumer behavior
definition.
Some purchase situations involve at least one person in each of these roles, while in other
circumstances a single individual can take on several roles at the same time.
However we will focus only on the buyer, i.e. the individual who actually makes the
purchases in terms of analyzing the factors involved in purchase decisions.
iv. The Decision Process
Consumer behavior involves a mental decision process as well as a physical activity. The
actual act of purchase is just one stage in a series of mental and physical activities that occur
during a certain period of time. Some of these activities precede the actual buying, while
others follow it. Therefore, to understand consumers adequately, decision process should be
known in addition to the physical activities.
Consumer decision making process involves the consumers to identify their needs, gather
information, evaluate alternatives and then make their buying decision. The consumer
behavior may be determined by economic and psychological factors and are influenced by
environmental factors like social and cultural values
v. A subset of Human Behavior
Consumer behavior is actually a subset of human behavior. That is, factors affecting
individuals in their daily lives also influence their purchase activities. Internal influences,
such as learning and motives, and external factors, such as social expectations and constraints,
affect our role as consumers. The fact that consumer behavior is a subset of human behavior
advantageous. Several disciplines, collectively referred to as the behavioral sciences have
studied human behavior for sometime, and we can draw their contributions to understanding
consumer. And it included:
- Psychology – which is the study of the behavior and mental process of individuals
- Sociology – the study of the collective behavior of people in groups.
- Social psychology – the study of how individuals influence and are influenced by
groups
- Economics – study of people’s production, exchange, and consumption of goods and
services.
- Anthropology – study of people in relation to their culture.

1.2. Ethics in Consumer Behavior

The primary purpose of studying consumer behavior as part of marketing curriculum is to
understand why and how consumer makes their purchase decisions. These insights enable
marketers to design more effective marketing strategies.

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Some critics are concerned that an in-depth understanding of consumer behavior makes it
possible for unethical marketers to exploit human vulnerabilities (weaknesses) in the market
place. In short, they are concerned that knowledge of consumer behavior gives marketers
unfair advantage.
Newspaper headlines have identified a number of highly unethical, often illegal marketing
practices undertaken by seemingly honest, educated, and respectable business people who
were obviously caught up in the quest for commercial superiority, for profits, for market share
etc. Unethical marketing practices occur at every level of the marketing mix: in the design of
products, in packaging, in pricing practices, in distribution efforts, and in promotional
schemes.
schemes. They also occur at the other side of the marketing equation, with consumers
sometimes practicing unethical behavior as well. Although most studies of marketing ethics
focus on marketers’ practices, some researchers are beginning to study consumer ethics as
well.
Unfortunately, there is no universally accepted definition for the term ethics. A study of
ethical philosophies reveals two different groups of theories: technological theories and
deontological theories

Teleology: deals with the moral behavior as determined by its consequences . One’s choice is
based on what is best for every one involved. Utilitarianism, a teleological theory, is
summarized best by the notion of “the greatest good for the greatest number.” According to
this theory, it is perfectly ethical for a company to conceal potentially negative consequences
of a production from early consumers. If a large number of people are likely to benefit, the
product is perfected. To a utilitarian, ethics is evaluated on the basis of a cost/benefit
analysis: i.e., as long as the benefits to society exceed the costs, a behavior is considered
ethical.
Ideally, a cost/benefit analysis should explore human and financial, long-and short-range
implications of a business decision. Responsible decisions require that all individuals who
may be affected by the decision should be correctly identified, and the consequences of the
contemplated actions should be anticipated. It is especially important that ethical decision
makers anticipate all negative consequences that may occur, and take actions to avert such
outcomes.

Deontology deals with the methods and intentions involved in a particular behavior.
Deontological theories focus on the results of a particular action, and they tend to place
greater weight on personal and social values than on economic values.
Kant’s categorical imperative is a deontological theory. It suggests that individuals should be
willing to have their actions become universal laws that would apply equally to themselves as
well to others. The reverse of the “golden rule,” which most of us learned in grammar school,
aptly expresses the notion of ethical behavior in marketing: "Do not do unto others what you
would not have others do unto you (or your loved ones)." Clearly, this is a deontological
theory, not a utilitarian theory. Of the two dominant traditions, deontology is favored by most
moral philosophirs today.

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Ethics is clearly a two-way street. For the marketing process to work beneficially for all of the
society, marketers and consumers alike must understand and practice ethical behavior. Once
again, the golden rule should prevail. (See 9.6.4.1 for unethical activities of consumer
behavior).
1.3. The Development of Consumer Behavior as a Discipline
There are a number of reasons why the study of consumer behavior developed as a separate
marketing discipline.

Marketers had long noted that consumers do not always act or react as marketing theory
suggested they would.
Consumer preferences are changing and becoming highly diversified. Even in industrial
markets, where needs for products are always more homogeneous than in consumer markets,
buyers are exhibiting diversified preferences and less predictable purchase behavior
To better meet the needs of specific groups of consumers: Most marketers adopted a policy of
market segmentation, which called for the division of their total potential markets into
smaller, homogenous segments for which they could design specific products and promotional
campaigns.
campaigns.
They also use promotional techniques to vary the image of their products so that they shall be
perceived as better fulfilling the specific needs of certain segments – /a process now known as
positioning/.
Other reasons for the developing interest in consumer behavior includes the rate of new
product development, growth of the consumer movement, public policy concerns,
environmental concerns, and the growth of both non-profit marketing and international
marketing.
Indeed, a major stumbling block of many international marketing efforts has been the general
lack of familiarity with the needs, preferences, and consumption habits of consumers in
foreign markets. Marketers now use cross-cultural consumer studies as the basis for product
development and promotional strategies to meet the needs of targeted foreign consumers.

Development of Marketing Concept (Historical Perspective)

The field of consumer behavior is rooted in the marketing concept, a marketing strategy that
evolved in the late 1950s, after marketers passed through a series of marketing approaches
referred to as the production concept,
concept, the product concept
concept and the selling concept.
concept.
When World War I ended, marketers could sell almost all products they could produce to
consumers, where until then manufacturing facilities were dedicated to the production of war
materials. This marketing approach is called a production orientation;
orientation; its implicit marketing
objectives are cheap, efficient production and intensive distribution. A production orientation
is a feasible marketing strategy when consumers are more interested in obtaining the product
than they are in its specific features. When demand exceeds supply, a production orientation
can work. Consumers will buy what’s available, rather than wait for what they really want.

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Production orientation should not be confused with a product orientation, which assumes that
consumers will buy the product that offers them the highest quality, the best performance, and
the most features.
As pointed above the product orientation leads a company to strive constantly to improve the
quality of its product, with a result often referred to as “marketing myopia” which is a focus
on the product, rather than on the consumer needs it presumes to satisfy. A marketer in love
with its product may improve it far beyond its worth to the consumer, passing the cost of
unneeded quality or special features to the public. In highly competitive markets, some
companies keep adding unnecessary features in hopes of attracting buyers.
A natural evolution from both a production and product orientation is a selling orientation,
orientation, in
which a marketer’s primary focus is selling the products that it has unilaterally decided to
produce. The implicit assumption in the selling orientation is that consumers are unlikely to
buy a product unless they are actively and aggressively persuaded to do so. The problem with
a selling philosophy is that it does not take consumer satisfaction into account.
In the late 1950s some marketers began to realize that they could sell more products, more
easily; if they produce only those goods that they had predetermined consumers would buy.
Instead of trying to persuade customers to buy what the firm had already produced, marketing
oriented firms endeavored to produce only products that they had first confirmed consumers
would buy. Consumer needs and wants became the firm’s primary focus. This consumer –
oriented marketing philosophy came to be known as the marketing concept. concept. The key
assumption underlying the marketing concept is that, to be successful, a company must
determine the needs and wants of specific target markets, and deliver the desired satisfactions
better than the competition. The marketing concept is based on the premise that a marketer
should make what it can sell, instead of trying to sell what it has made. While the selling
concept focused on the needs of the seller, the marketing concept focuses squarely on the
needs of the buyer. To identify unsatisfied consumer needs, companies had to engage in
extensive marketing research. Thus, the marketing concept laid the groundwork for the
application of consumer behavior principles to marketing strategy. Marketing concept uses a
pull strategy while the others use push strategy.
strategy. In short the marketing concept assumes that
selling is the beginning of marketing.

1.4. Why Do We Study Consumer Behavior?

Understanding the reasons for studying consumer behavior enables one to better appreciate its
contributions. Some of the reasons are:

i. Significance in daily lives

In a general sense, the most important reason for studying consumer behavior is the
significant role it plays in our lives. Much of our time is spent directly in the market place,
shopping or engaging in other activities. A large amount of additional time is spent thinking
about products and services, talking to friends about them, and seeing or hearing

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advertisements about them. In addition, the goods we purchase and the way in which we use
them significantly influence how we live our daily lives.
These general concerns alone are enough to justify our study. However, many seek to
understand the behavior of consumers for what are thought to be more immediate and tangible
reasons.

ii. Application in consumers’ decision making

Consumers are often studied because certain decisions are significantly affected by their
behavior or expected actions. For this reason, consumer behavior is said to be applied
discipline. Such applications can exist at two different levels of analysis.

 Micro perspective: This involves understanding consumers for the purpose of helping a
firm or as organization to accomplish its objectives. Advertisement managers, product
designers, and many others in profit oriented businesses are interested in understanding
consumers in order to be more effective at their tasks. In addition, managers of various
non-profit making organizations have benefited from the same knowledge.
 Macro perspective:
perspective: on the Macro/aggregate level we know that consumers collectively
influence economic and social conditions within an entire society. In market systems
based on individual choice, consumers strongly influence what to be produced.
Consequently, the collective behavior of consumers has a significant influence on the
quality and level of our standard of living.

Understanding consumer behavior from a macro perspective can provide insight into
aggregate economic and social trends and can perhaps even predict such trends. In addition,
this understanding may suggest ways to increase the efficiency of the market system and
improve the well being of people in society. It also includes understanding the implication of
political and technological factors on a consumer purchase behavior.

 Application Areas of consumer behavior knowledge

The field of consumer behavior has a variety of practical applications. The applications could
be from macro or micro perspectives. Together they contribute to the importance of
understanding consumers for solving a variety of contemporary problems. Some of the
applications included:
i. Consumer Behavior and Marketing Management
Effective business managers are realizing the importance of marketing to the success of their
firm.

Marketing is the process of planning and executing marketing strategies, pricing, promotion
and distribution of ideas, goods and services to create exchanges that satisfy individual and
organizational objectives.

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A sound understanding of consumer behavior is essential to the long run success of any
marketing program. In fact, it is seen as a corner stone of the marketing concept, an important
orientation of philosophy of many marketing managers. The essence of the marketing concept
is captured in three interrelated orientations:

a. Consumers want and needs:needs:

When the focus is on identifying and satisfying the wants and needs of consumers, the
intention of the firm is not seen as merely providing goods and services. Instead, want and
need satisfaction is viewed as the purpose of providing products and services as a means to
achieve that end.
b. Company objectives:
Consumer’s wants and needs are numerous. Therefore, a firm that concentrates on satisfying a
small proportion of all desires will most effectively utilize its resources. Company objectives
and any of the firm’s special advantages are used as criteria to select the specific wants and
needs to be addressed.
c. Integrated strategy:
An integrated effort is most effective in achieving a firm’s objective. Consumer marketing
efforts can closely be coordinated with each other and with other activities of the firm.
Several major activities can be undertaken by an organization in a market oriented way. These
include market opportunity analysis, target market selection and marketing mix
determination, which includes decisions on the proper combination of marketing variables to
be offered to consumers.
 Marketing opportunity analysis – this activity involves examining consumers’ needs and
wants that are not being fully satisfied. The analysis begins with a study of general market
trends, such as consumers’ life styles and income levels, which may suggest satisfied
wants and needs.
 Target – market selection.
selection. The process of reviewing market opportunities often results in
identifying distinct groupings of consumers who have unique wants and needs. This can
result in a decision to approach each market segment with a unique marketing offering.
(Market segmentation).
 Marketing – Mix determination – This stage involves developing and implementing a
strategy for delivering an effective combination of want – satisfying features to
consumers. There are four major ingredients frequently referred to as the marketing mix
variables: product, price, place, and promotion.
- Product – The nature of the physical product and service features are of concern here.
Among decisions that need to be considered by consumer behaviors are:
 What product to offer?
 What size, shape, and features should a product has?
 How should it be packaged?
 What aspects of service are most important to consumers?
 What types of warranties and service programs should be provided?

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 What types of accessories and associated products should be offered?

- Price - Marketers must make decisions regarding the prices to change for the
company’s products or services and any modification of those prices. These decisions
will determine the amount of revenues the firm will generate. A few of the factors
involving consumer behavior are: -
 Analyzing factors that affect price/internal & external/ factors?
 How is the price awareness of consumer in the relevant product category?
 How sensitive are consumers to price differences among brands?
 How large a price reduction is needed to encourage purchases during new
product introductions and sales promotions?
 What size of discount should be given to those who pay with cash?

- Place - The place variables involves consideration of where and how to offer products
and services. Same decisions influenced by consumer behavior include:
 What type of retail outlet should a firm select?
 Where should it be located, and how many outlets should there be?
 What arrangements are needed to distribute products to retail?
 What image and clients should the retailer seek to cultivate?
 What internal and external variables affect modes of distribution and channel
relation?
- Promotion - Of concern here are the goals and methods of communicating aspects of
the firm and its offerings to target consumers. Consumer related decisions include:
 What methods of promotion are best for each specific situation
 What are the most effective means for gaining consumers’ attention?
 What methods best convey the intended message?
 How often should a given advertisement be repeated?
 How can sub mixer of promotion be manipulated?
These examples indicate the relevance of consumer behavior to marketing – management
decision making.

ii. Consumer Behavior in Non Profit and Social Marketing

Can crime prevention, charitable contribution, or the concept of family planning be sold to
people in much the same way that some business firms sell their products? The answer is
simply yes.

A number of scholars have suggested that various social and non-profit organizations have
services or ideas that they need to market for their target groups. Such organizations include
governmental agencies, religious organizations, universities and charitable institutions. Often
these groups must also appeal to the public for support in addition to attempting to satisfy
some want or need in society. Clearly a sound understanding of consumer decision processes
can assist their efforts. A single example is the role of public relations (PR).
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iii. Consumer Behavior and Governmental Decision-making

In recent years the relevance of consumer behavior principles to governmental decision-
making has become quite evident. The two major areas of activity that have been affected (by:
government services) are:
a. Government policies that provide service to the public result in decisions that influence
consumer behavior. The effectiveness of these decisions will be influenced by the extent
to which they are based on an adequate understanding of consumers. This requires
knowledge of people’s attitudes, beliefs, perceptions, habits as well as reactions under a
variety of circumstances
b. Consumer protection. Many agencies at all levels of government are involved with
regulating business practices for the purpose of protecting consumers’ welfare. Some
government programs are also designed to influence certain consumer actions directly
and discourage others.

But researches show that the effect of many consumer protection efforts has been
considerably less than expected, and in some cases the efforts may actually have had negative
consequences for consumers. This is because officials have not made their decisions on the
basis of consumers.

iii. Consumer behavior and Remarketing

The history of the world in general has long been characterized by the intensive efforts of
private enterprises to stimulate the public for greater levels of consumption.

Various government policies have supported such efforts because of their favorable effect on
economic development. Recently, however, it has become increasingly clear that we are
entering an era of scarcity in terms of some natural resources such as oil, natural gas, and even
water. These scarcities have led to promotions stressing conservation rather than
consumption.

The term “demarketing” refers to all such efforts to encourage consumers to reduce their
consumption of a particular product or service. Some demarketing efforts have met with
considerable success while many others have made hardly any impact on changing long
established consumption patterns. An analysis of the successes and failures of various efforts
strongly suggested that demarketing programs must be based on a sound understanding of
consumer’s motives, attitudes, and historically established consumption behavior.

iv. Consumer Behavior and Consumer Education

Consumers also stand to benefit directly from orderly investigations of their own behavior.
This can occur on an individual basis or as part of more formal educational programs. As we
study what has been discovered about the behavior of others, we can gain insight into our own
interactions with the market place. What is learned about consumer behavior can also directly

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benefit the consumer in more formal sense. To be most effective, these educational programs
should be based on a clear understanding of the important variables influencing consumers.

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