PART I

Consumer Behaviour
 1
Consumer Behaviour

Customer is profit, all else is overload......

This chapter provides an introduction to consumer behaviour. “Consumer is the most

important person. The business revolves around the consumer.”
After finishing this chapter, one should be able to understand:
• What is meant by consumer behaviour
• Reasons for studying consumer behaviour
• Understanding consumer behaviour
• Marketing strategy and consumer behaviour
 CHAPTER 1
Consumer Behaviour

1.1 Introduction to Consumer Behaviour—Definition

All of us are consumers. We consume things of daily use, we also consume and buy these
products according to our needs, preferences and buying power. These can be consumable
goods, durable goods, speciality goods or, industrial goods.
What we buy, how we buy, where and when we buy, in how much quantity we buy
depends on our perception, self concept, social and cultural background and our age and family
cycle, our attitudes, beliefs, values, motivation, personality, social class and many other factors
that are both internal and external to us. While buying, we also consider whether to buy or not
to buy and, from which source or seller to buy. In some societies, there is a lot of affluence and,
these societies can afford to buy in greater quantities and at shorter intervals. In poor societies,
the consumer can barely meet his barest needs.
Consumer behaviour can be defined as the decision-making process and physical activ-
ity involved in acquiring, evaluating, using and disposing of goods and services.
This definition clearly brings out that it is not just the buying of goods/services that
receives attention in consumer behaviour but, the process starts much before the goods have
been acquired or bought. A process of buying starts in the minds of the consumer, which leads
to the finding of alternatives between products that can be acquired with their relative advan-
tages and disadvantages. This leads to internal and external research. Then follows a process
of decision-making for purchase and using the goods, and then the post-purchase behaviour
which is also very important, because it gives a clue to the marketeers whether his product has
been a success or not.
The marketeers therefore tries to understand the needs of different consumers and
having understood his different behaviours which require an in-depth study of their internal
and external environment, they formulate their plans for marketing.
Consumer generally refers to any one engaging in any one or all of the activities stated
in our definition. The traditional viewpoint was to define consumers strictly in terms of economic
goods and services and purchasers of products offered for sale. The view now has been broadened.
It now also holds that monetory change is not essential for the definition of consumers. Few
potential adopters of free services, or even philosophic ideas can be encompassed by this
definition.

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CONSUMER BEHAVIOUR 5

Sometimes, the goods are bought by the father and the children use it. The children
ultimately become the consumer. A packet of coloured crayons bought by the father and used
by his children in school.
The father buys a refrigerator and the user is the entire household. Therefore, we study
certain consumer behaviour roles.
Table 1.1 Some consumer behaviour roles

Roles Descriptions

Initiator The individual who determines that certain need or want is not being fulfilled and
purchases a product to fulfill the need.
Influencer A person who by some intentional or unintentional word or action influences the
purchase decision.
Buyer The individual who actually makes the purchase transaction mostly is the head of
the family.
User The person or persons who consume or use the purchase product.

To understand the consumer, researches are made. Sometimes, motivational research

is handy to bring out hidden attitude, uncover emotions and feelings. Many firms send
questionnaire to customers to ask about their satisfaction, future needs and ideas for a new
product. On the basis of the answers received a change in the marketing mix is made and
advertising is also streamlined.

1.2 Reasons for Studying Consumer Behaviour

The most important reason for studying consumer behaviour is the role that it plays in our
lives. We spend a lot of time in shops and market places. We talk and discuss with friends
about products and services and get lot of information from T.V. This influences our daily
lives.
Consumer decisions are affected by their behaviour. Therefore, consumer behaviour is
said to be an applied discipline. This leads to the microperspective and societal perspective.
Micro Perspective. It involves understanding consumer for the purpose of helping a
firm or organization to achieve its objectives. All the Managers in different departments are
keen to understand the consumer.
They may be Advertising Managers, Product Designers, Marketing and Sales Manag-
ers and so on.
Societal Perspective is on the macro level. Consumers collectively influenced eco-
nomic and social conditions within a society. Consumers strongly influence what will be prod-
uct, what resources will be used and it affects our standard of living.
Management is the youngest of sciences and oldest of arts and consumer behaviour in
management is a very young discipline. Various scholars and academicians concentrated on it
at a much later stage. It was during the 1950s, that marketing concept developed, and thus the
need to study the behaviour of consumers was recognised. Marketing starts with the needs of
the customer and ends with his satisfaction. When everything revolves round the customer

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then the study of consumer behaviour becomes a necessity. It starts with buying of goods. Goods
can be bought individually, or in groups. Goods can be bought under stress (to satisfy an
immediate need), for comfort and luxury in small quantities or in bulk. For all this, exchange
is required. This exchange is usually between the seller and the buyer. It can also be between
consumers.
To understand the likes and dislikes of the consumer, extensive consumer research
studies are being conducted. These researches try to find out:
• What the consumer thinks of the company’s products and those of its competitors?
• How can the product be improved in their opinion?
• How the customers use the product?
• What is the customer’s attitude towards the product and its advertising?
• What is the role of the customer in his family?
The following key questions should be answered for consumer research. A market comes
into existence because it fulfils the needs of the consumer. In this connection, a marketeer has
to know the 70s framework for consumer research. Taking from an example of soap.
Table 1.2

Who constitutes the market? Parent, child, male, female Occupants

What does the market buy? Soap, regular, medicated, with glycerine, Objects
Herbal what brand, what size
Who participates in buying? Parent, child, male, female Organisations
How does the market buy? Cash, credit, mail-order etc. Operations
When does the market buy? Monthly, weekly etc. prescribed by doctor Occasions
(medicinal)
Where does the market buy? Supermarket, retail store etc. Outlet
Why does the market buy? For cleansing, bathing, fresh feeling etc. Objectives
(taken from multi-marketeer)

Consumer behaviour is a complex, dynamic, multi-dimensional process, and all market-

ing decisions are based on assumptions about consumer behaviour.
Marketing strategy is the game plan which the firms must adhere to, in order to outdo
the competitor or the plans to achieve the desired objective. In formulating the marketing
strategy, to sell the product effectively, cost-benefit analysis must be undertaken.

1.3 Applying Consumer Behaviour Knowledge

(1) Consumer behaviour knowledge is applied in Marketing Management. A sound
understanding of the consumer behaviour is essential to the long-term success of
any marketing programme. It is the corner stone of marketing concept which stress
on consumer wants and needs, target market selection, integrated marketing and
profits through the satisfaction of the consumers.
(2) Consumer behaviour is also important in non-profit and social organizations. Such
organizations are govt. agencies, religious organizations, universities and charitable
organizations.

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(3) Consumer behaviour is applied to improve the performance of government agencies

as well. For instance, the performance of government transportation is poor. It can
be improved by knowing the needs and wants of the consumers. Getting checks from
them for their likes or dislikes. Same can be applied to other organizations like
universities and charitable organizations.
(4) Consumer behaviour also helps in marketing of various goods which are in scarcity.
People are made aware that gas, fuel, water and natural resources are in scarcity.
Consumers are encouraged to reduce their consumption of these commodities.
(5) Consumer benefit from the investigation of their own behaviour. When the consumer
learns the many variables that affect his behaviour. He gets educated and under-
stands better how to effect his own behaviour. What is learnt about consumer behav-
iour also benefit consumer in a formal sense.
There can be many benefits of a product, for example, for owning a motor bike, one can
be looking for ease of transportation, status, pleasure, comfort and feeling of ownership. The
cost is the amount of money paid for the bike, the cost of maintenance, gasoline, parking, risk
of injury in case of an accident, pollution and frustration such as traffic jams. The difference
between this total benefit and total cost constitutes the customer value. The idea is to provide
superior customer value and this requires the formulation of a marketing strategy. The entire
process consists of market analysis, which leads to target market selection, and then to the
formulation of strategy by juggling the product, price, promotion and distribution, so that a
total product (a set of entire characteristics) is offered. The total product creates an image in
the mind of the consumer, who undergoes a decision process which leads to the outcome in
terms of satisfaction or dissatisfaction, which reflects on the sales and image of the product or
brand.

Attitudes/Needs

Situations
Marketing
activities Problem
Learning Culture recognition
(memory)

Perception Subculture Information

or matio search
I nf n

Consumer Evaluation and

Motives Values
life style selection
Demo-
Pr graphics
ocessing Outlet selection
Personality Social and purchase
status
Reference
Emotions groups Post-purchase process

Households
Situations

Experiences

Fig. 1.1 A simplified framework for studying consumer behaviour

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8 CONSUMER BEHAVIOUR

Figure 1.1 gives in detail the shaping of consumer behaviour, which leads a consumer to
react in certain ways and he makes a decision, keeping the situations in mind. The process of
decision-making varies with the value of the product, the involvement of the buyer and the
risk that is involved in deciding the product/service.
The figures shows the consumer life style in the centre of the circle. The consumer and
his life style is influenced by a number of factors shown all around the consumer. These are
culture, subculture, values, demographic factors, social status, reference groups, household
and also the internal make up of the consumer, which are a consumers’ emotions, personality
motives of buying, perception and learning. Consumer is also influenced by the marketing
activities and efforts of the marketeer.
All these factors lead to the formation of attitudes and needs of the consumer.

1.4 Marketing Strategy and Consumer Behaviour

(i) Marketing Analysis
(a) Consumer
(b) Company
(c) Competition
(d) Condition
(ii) Marketing Segmentation
(e) Identify product-related needs
(f) Group customers with similar need sets
(g) Describe each group
(h) Select target market
(iii) Marketing Strategy
(i) Product
(j) Price
(k) Distribution
(l) Communication
(m) Service
(iv) Consumer Decision Process
(n) Problem recognition
(o) Information search—internal, external
(p) Alternative evaluation
(q) Purchase
(r) Use
(s) Evaluation
(v) Outcomes
(t) Customer satisfaction
(u) Sales
(v) Product/Brand image
Fig. 1.2 Marketing strategy and consumer behaviour

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Then follows the process of decision-making, as shown in the rectangle which consists of
the problem recognition, information search (which is both internal and external) then the
evaluation and selection procedure, and finally the purchase. After the purchase and use of
the product, the customer may be satisfied or dissatisfied with the product. This is known as
post-purchase behaviour. The existing situations also play an important role in the decision-
making process. The dotted line show the feedback.

1.5 Market Analysis

Market analysis requires an understanding of the 4 Cs which are consumer, conditions,
competitor and the company. A study is undertaken to provide superior customer value, which
is the main objective of the company. For providing better customer value, we should learn the
needs of the consumer, the offering of the company, vis-a-vis its competitors and the environment
which is economic, physical, technological, etc.
A consumer is anyone who engages himself in physical activities of evaluating, acquiring,
using or disposing of goods and services.
A customer is one who actually purchases a product or service from a particular
organization or a shop. A customer is always defined in terms of a specific product or company.
However, the term consumer is a broader term which emphasises not only the actual
buyer or customer, but also its users, i.e., consumers. Sometimes, a product is purchased by
the head of the family and used by the whole family, i.e., a refrigerator or a car. There are some
consumer behaviour roles which are played by different members of the family.
Table 1.3

Role Description

Initiator The person who determines that some need or want is to be met (e.g., a daughter
indicating the need for a colour T.V.).
Influencer The person or persons who intentionally or unintentionally influence the decision to
buy or endorse the view of the initiator.
Buyer The person who actually makes a purchase.
User The person or persons who actually use or consume the product.

All the consumer behaviour roles are to be kept in mind but, the emphasis is on the
buyer whose role is overt and visible.
(a) The consumer. To understand the consumer; researches are made. Sometimes mo-
tivational research becomes handy to bring our hidden attitudes, uncover emotions and feel-
ings. Many firms send questionnaires to customers to ask about their satisfaction, future needs
and ideas for a new product. On the basis of the answers received, changes in the marketing
mix is made and advertising is also streamlined.
(b) The external analysis (company). The external analysis may be done by the
feedbacks from the industry analyst and by marketing researches. The internal analysis is
made by the firm’s financial conditions, the quantum of the sales force and other factors within
the company.

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The study of these factors leads to a better understanding of the consumer and his
needs.

1. Geography
2. Population
3. Urban-Rural
4. Sex
5. Age factor Indian
6. Literacy level
7. Incentive level consumer
8. Linguistic diversity
9. Religion
10. Dress, food
11. Habits and fashion

Fig. 1.3 Characteristic features of Indian consumer

(c) The competition. In the analysis of the market, a study of the strengths and
weaknesses of the competitors, their strategies, their anticipated moves and their reaction to
the companies’ moves and plans is to be made. The company after getting this information,
reacts accordingly and changes its marketing mix and the offering is made in a manner which
can outdo the competitor. This is a very difficult process and it is easier said than done. To
have correct information about the competitors and to anticipate their further moves is the job
of the researcher.
(d) The conditions. The conditions under which the firms are operating has also to be
seriously considered. The factors to be studied are the economy, the physical environment, the
government regulations, the technological developments, etc. These effect the consumer needs,
i.e., the deterioration of the environment and its pollution may lead to the use and innovation
of safer products. People are health conscious and are concerned with their safety. Hence, in
this case, safer products have a better chance with the consumer. In case of recession, the flow
of money is restricted greatly. This leads to the formulation of different marketing strategies.
(e) Market segmentation. The market is divided into segments which are a portion of
a larger market whose needs are similar and, they are homogeneous in themselves. Such
segments are identified with similar needs.
(f ) Need set. By need set, it is meant that there are products which satisfy more than
one need. An automobile can fill the transportation needs, status needs, fun needs or time-
saving needs. So, the company tries to identify the need sets, which its product can fulfil. Then
we try to identify the groups who have similar needs, i.e., some people need economical cars,
others may go for luxury cars.
(g) Demographic and psychographic characteristics. These groups are identified
and they are described in terms of their demographic and psychographic characteristics. The
company finds out how and when the product is purchased and consumed.
(h) Target segment. After all, the above preliminary work is done, the target customer
group known as the target segment, is chosen, keeping in mind how the company can provide
superior customer value at a profit. The segment which can best be served with the company’s
capabilities at a profit is chosen. It has to be kept in mind that different target segments

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require different marketing strategies and, with the change in the environmental conditions
the market mix has to be adjusted accordingly.
Attractiveness of the segment can be calculated by marking the various criteria on a
1 to 10 scale as given below:
Table 1.4 1 2 3 4 5 6 7 8 9 10

Criterion Score on 1 to 10 scale with company

being most favourable

Segment size —
Segment growth rate —
Competitor strength —
Customer satisfaction with existing product —
Fit with company image —
Fit with company objectives —
Fit with company resources —
Fit with other segments —
Investment required —
Stability/Periodicability —
Zest to serve —
Sustainable advantage available —
Leverage to other segments/markets —
Risk —
Other factors —

Marketing Strategy
Strategies are formulated to provide superior customer value. In formulating market strate-
gies, the 4 Ps are directed at the target market.

Product, Price, Promotion, Place Target market

Fig. 1.4 Decision-making process generally followed by consumers

(i) Product. Product is anything that is offered to the consumer which is tangible and
can satisfy a need and has some value.
(j) Price. Price is the amount of money one must pay to obtain the right to use the
product.
(k) Distribution (Place). The goods can be distributed by many channels. These could
be retailers, wholesalers, agents or by direct selling. Distribution outlets play an important

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role in reaching the goods to the consumer. They provide, time, place and possession utilities.
Some goods need to be marketed through the channels or the middleman. Others can be mar-
keted directly by the company to the actual consumer.
(l) Promotion. Promotion is the means of changing the attitudes of the consumer, so
that it becomes favourable towards the company’s products. Various means of promotion are
advertising, personal selling, sales promotion and publicity.
(m) Service. Service refers to auxiliary service that enhances the value of the product
or the service. For instance, while buying a car, free services are provided over a certain period
of time. Check-ups are free and maintenance is also covered on the charge of an adequate
amount along with the product purchased. These auxiliary services are provided at a cost with
money. These provide value to the product or the customer. These services give an advantage
to the customer and he is free from the botheration of occasional check-ups or risk. The risk is
considerably reduced and, the customer derives satisfaction with his decision to purchase.

Questions
1. What do you understand by consumer behaviour? What information is sought in consumer
researches?
2. What are the reasons for studying consumer behaviour?
3. How would you formulate the strategy for consumer behaviour?

Case Study
The marketeer has to learn about the needs and changing of the consumer behaviour and
practice the Marketing Concept. Levi Strauss & Co. were selling jeans to mass market and did
not bother about segmenting the market till their sales went down. The study into consumer
behaviour showed their greatest market of the baby boomers had outgrown and their needs
had changed. They therefore came out with Khaki or dockers to different segments and
comfortable action stocks for the consumers in the 50 age group. Thus, by separating the
market and targetting various groups and fulfilling their needs, they not only made up for the
lost sales but far exceeded the previous sales. They also targeted the women consumers for
jeans and both men and women started wearing jeans in greater numbers. The offering given
by the company must be enlarged to suit various segments.
For example Maruti Udyog Ltd. has come out with many models. Maruti 800, Maruti
Van, Zen, Alto, WagonR, Versa, Gypsy, Esteem, Baleno and other models. For successful mar-
keting, one should:
1. Find consumer needs of various segments.
2. Position products (new and existing) to these segments.
3. Develop strategies for these segments. Practice greater selectivity in advertising
and personal selling and creating more selective media and distribution outlets.

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1.6 Consumer Behaviour and Market Segment

By market segmentation we imply that the entire market is broken down into smaller groups
having similar wants. They are homogeneous in themselves and heterogeneous with other
groups. The market can be broken down on various bases. These are Demographic,
Psychographic, Benefit Segmentation etc.
The concept of divide and rule applies to the market segmentation. You divide the mar-
ket, choose your target market and then master it. Segmentation and choosing the target
market is like shooting with a rifle and not by 12-bore. If the marketing effort is spread over
a wide area it does not have that effect but if it is concentrated on a point like a rifle it can go
much further and can be more effective.

Entire market Segmented market

Fig. 1.5

The segmented market shows 3 groups which are homogeneous in themselves and het-
erogeneous amongst themselves.
Market segmentation is a process of dividing a potential market into distinct sub-sets of
consumers with common needs and characteristics and selecting one or more segments to
target with a distinct marketing mix.
Consumers are better satisfied when a wide range of products are available to them.
Thus, market segmentation has proved to be a positive force for both consumers and markets
alike. If the market was not segmented the same product will be sold to every prospect with a
single marketing mix it satisfies a generic or a common need, and it becomes ineffective and
ends up appealing to none.
Since the consumers are different in their needs, wants, desire and are from different
backgrounds, education experience therefore segmenting the market is very necessary for
effective marketing of goods/services.
Segmentation helps in expanding the market by better satisfying the specific needs or
desires of particular customers.
Today, nearly every product category in the consumer market is highly segmented. For
instance, billion dollar vitamin market is segmented by age for children, young adults, the
elderly etc. The vitamin market provides benefits like increased energy, illness, tension and
stress reduction, enhanced sexuality, improved skin.
Hotels also segment their market, for example Marriott/operates fairfield for short stay.
Residential thus Inn for extended stay which are for budget-oriented traveller and are
cheap.
Courtyard for the price-conscious businessmen.
Marriott Hotel for full business travellers.

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Marriott resorts for leisure vacation guests.

Marriott time sharing for those seeking affordable resort ownership.
Marriott senior living environment for elderly people.
Maruti, for instance, have positioned the 800cc basic model and Omini Van for the lower
income groups, the Zen, Swift, Alto and Gypsy for the middle income groups, and the Baleno,
Esteem etc. for the higher income groups.

1.7 Bases for Segmentation

There are various bases for segmentation. These are as under:

Geographic Segmentation
Region North, South, East, West
City Size Major metropolitan areas, small cities, towns
Density of Area Urban, suburban, exurban, rural
Climate Temperate, hot, humid

Demographic Segmentation
Age Under 11, 12–17, 18–34, 35–49, 50–64, 65–74, 75+
Sex Male, Female
Marital Status Single, married, divorced, living together, widowed
Income Under $ 15,000, $15,000-$24,999, $25,000-$39,999,
$40,000-$64,4999, $65,000 and over
Education Some high school, high school graduate, some college
graduate, postgraduate
Occupation Professional, blue-collar, white-collar, agricultural

Psychological/Psychographic
Segmentation
Needs-Motivation Shelter, safety, security, affection, sense of self worth
Personality Extroverts, introverts, aggressives, compliants
Perception Low risk, moderate risk, high risk
Learning-Involvement Low involvement, high involvement
Attitudes Positive attitude, negative attitude
Psychographic (Lifestyle) Swingers, straights, conservatives, status seekers

Sociocultural Segmentation
Culture American, Italian, Chinese, Mexican
Subculture
Religion Jewish, Catholic, Protestant, Other
Race/Ethnicity African-American, Caucasian, Oriental, Hispanic

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Social Class Lower, middle, upper

Family Lifestyle Bachelors, young marrieds, empty nesters

Use-Related Segmentation
Usage Rate Heavy users, medium users, light users, nonusers
Awareness Status Unaware, aware, interested, enthusiastic
Brand Loyalty None, some, strong

Use-Situational Segmentation
Time Leisure, work, rush, morning, night
Objective Personal use, gift, snack, fun, achievement
Location Home, work, friend’s home, in-store
Person Self, friends, boss, peer

Benefit Segmentation
Convenience prestige, economy, value-for-the money

Hybrid Segmentation
Demographic/Psychographic Combination of demographic and psychographic
Profile characteristics
Geodemographics Young Suburbia Blue-Estates
VALS 2 Actualizer, fulfilled, believer, achiever, striver.
The above shows a list of bases for segmentation. Demography helps to locate target
market where as psychographic segmentation and socio-cultural characteristics to describe its
members i.e., how they think and feel. We shall now discuss the psychographic or life style
segmentation.

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