Module-1: Introduction to Consumer Behaviour

Meaning of consumer behaviour

Consumer behavior is the actions and decisions that people or households make when
they choose, buy, use, and dispose of a product or service. Many psychological,
sociological, and cultural elements play a role in how consumers engage with the
market.
Definition of Consumer behaviour
According to Louden and Bitta, ‘Consumer behaviour is the decision process and
physical activity, which individuals engage in when evaluating, acquiring, using or
disposing of goods and services’.

Important Characteristics of Consumer Behaviour are given below:

1. Consumer Behaviour involves Products, Services, Activities, and Ideas:

In the scope of consumer behaviour, not only products (like toilet soaps), are included
but also the services (flying by an airliner), and activities (getting children vaccinated
for polio), and ideas (saying no to drugs). Thus consumer behaviour rotates around
offerings.

2. Consumer Behaviour involves more than Buying:

Consumer behaviour is not restricted only to buying the offering. It includes buying
(acquiring the offering), using, and disposing. Usage has many connotations – first, it
has important symbolic implications for the consumer. The saree and the jewellery
being put on by ladies in the wedding influence marketing strategies and tactics.

3. Consumer Behaviour is a Dynamic Process:

Consumer Behaviour is dynamic because the thinking, feelings, and actions of
individual consumers, targeted groups, and the society at large are constantly
changing. Maruti Suzuki produces number of cars, as needs and wants may change at
different times for different consumer groups.

4. Consumer Behaviour involves Interactions among Many People:

Consumer behaviour does not mean action of a single individual. Interactions may
take place among a group of friends, a few co-workers, or an entire family. The
individuals may take different roles.

5. Consumer Behaviour involves Many Decisions:

Consumer behaviour needs understanding whether (to acquire/use/ dispose of an
offering), what (to acquire/use/dispose), why (to acquire/use/dispose of an offering or
not)), when (time), where (place), how (ways of acquiring, using, and disposing), how
much (volume), how often (frequency), and how long (till what time) consumers will
buy, use or dispose of an offering.
6. Consumer Behaviour involves Exchanges:
Consumer behaviour involves exchanges between human beings. People give
something of value to receive something of value. Indeed, the role of marketing is to
help society to create value through exchanges by formulating and implementing
marketing strategies.

Difference between customer and consumer

BASIS FOR
CUSTOMER CONSUMER
COMPARISON
Meaning The purchaser of goods or services The end user of goods or
is known as the Customer. services is known as a
Consumer.
Resell A customer can be a business No
entity, who can purchase it for the
purpose of resale.
Purchase of goods Yes Not necessary
Purpose Resale or Consumption Consumption
Price of product or Paid by the customer May not be paid by the
service consumer
Person Individual or Organization Individual, Family or Group
of people

Definition of Customer

By Customer, we mean a person who buys the goods or services and pays the price
thereof. The word customer is derived from the term ‘custom’ which means ‘practice’,
so the word customer means the individual or entity who purchases product or
services from a seller at regular intervals. It can also be known as client or buyer.
They are divided into two categories:

• Trade Customers: The customers who purchase goods in order to add value
and resell them. These include Manufacturers, Wholesalers,
Distributors, Retailers etc.
• Final Customer: They are the customers who purchase it either for their own
use or to hand over it to the final user.

The customers are regarded as the king, in every business because they help in
earning revenue. The businesses focus on converting shoppers into buyers. They also
try to maintain a good relationship with the customers in order to keep the business
going. Below given are the three kinds of customers:

• Former customers or ex-customers

• Existing customers
• Prospective customers

Definition of Consumer
We define consumer, as a person who is the end user of the product. The word
consumer is made from the word ‘consume’ which means ‘to use’. In this way, the
word consumer means a person who purchases the product or service for his own use
or consumption.

Difference between buyer and the user.

The user is the person who uses your product to make progress. But they're not
necessarily the ones paying for it.

The buyer is the person who makes the final decision to purchase your product and
has a set of expectations as a result.

Examples of User, Buyer and Customer

ABC Product used by Twitter's finance team

1. User - The finance team members

2. Buyer - Chief Financial Officer
3. Customer - Twitter

Salesforce used by XYZ Corp

1. User - The sales/account executives

2. Buyer - Chief Revenue Officer
3. Customer - XYZ Corp

(for further clarification students are asked refer text book

Difference between buyer and the user)

Need to study consumer behaviour.

1. To satisfy need of customers

Consumers respond favorably while evaluating the products that best satisfy their
needs. A marketer studies how consumers spend their available resources on the
consumption of related items. It includes the study of what they buy, when they buy it,
where they buy it and how often they use it. So, a knowledge of consumer behavior
will be of immense help to the marketer which will help to satisfy their needs.

2.Helps to understand consumer psychology

The study of consumer behavior enables the marketer to understand the

psychology of consumers. Consumer psychology is based on his knowledge, attitude,
intention and motive.

3. Helps to understand consumer motives

A study of the behavior of a consumer is essential to understand his/her buying

motives. A motive is an urge for which an individual seeks satisfaction
4. Helps to understand consumer choices

It is important for the marketer to understand how consumers make their choices.
Human beings are usually very rational. They make systematic use of information
available to them before they buy. A marketer studies the behavior of the customer
and accordingly alter his presentation, enticing the customer to go for the product.

5. Helps to understand consumer preferences

A business firm which is ignorant of consumer preferences cannot succeed in the

market place. So a firm must plan its production and distribution to suit the needs of
consumers. Thus, the extent of consumer understanding determines the effectiveness
of marketing mechanism.

Importance/need/advantages/need to study consumer behaviour

1. Modern Philosophy:

It concerns with modern marketing philosophy – identify consumers’ needs and

satisfy them more effectively than competitors. It makes marketing consumer-oriented.

It is the key to succeed.

2. Achievement of Goals:

The key to a company’s survival, profitability, and growth in a highly competitive

marketing environment is its ability to identify and satisfy unfulfilled consumer needs

better and sooner than the competitors. Thus, consumer behaviour helps in achieving

marketing goals.

3. Useful for Dealers and Salesmen:

The study of consumer behaviour is not useful for the company alone. Knowledge of

consumer behaviour is equally useful for middlemen and salesmen to perform their
tasks effectively in meeting consumers needs and wants successfully. Consumer

behaviour, thus, improves performance of the entire distribution system.

4. More Relevant Marketing Programme:

Marketing programme, consisting of product, price, promotion, and distribution

decisions, can be prepared more objectively. The programme can be more relevant if
it is based on the study of consumer behaviour. Meaningful marketing programme is

instrumental in realizing marketing goals.

5. Adjusting Marketing Programme over Time:

Consumer behaviour studies the consumer response pattern on a continuous basis. So,

a marketer can easily come to know the changes taking place in the market. Based on

the current market trend, the marketer can make necessary changes in marketing

programme to adjust with the market.

6. Predicting Market Trend:

Consumer behaviour can also aid in projecting the future market trends. Marketer

finds enough time to prepare for exploiting the emerging opportunities, and/or facing
challenges and threats.

7. Consumer Differentiation:

Market exhibits considerable differentiation. Each segment needs and wants different

products. For every segment, a separate marketing programme is needed. Knowledge

of consumer differentiation is a key to fit marking offers with different groups of

buyers. Consumer behaviour study supplies the details about consumer differentiation.

8. Creation and Retention of Consumers:

Marketers who base their offerings on a recognition of consumer needs find a ready

market for their products. Company finds it easy to sell its products. In the same way,
the company, due to continuous study of consumer behaviour and attempts to meet

changing expectations of the buyers, can retain its consumers for a long period.

9. Competition:

Consumer behaviour study assists in facing competition, too. Based on consumers’

expectations, more competitive advantages can be offered. It is useful in improving

competitive strengths of the company.

10. Developing New Products:

New product is developed in respect of needs and wants of the target market. In order

to develop the best-fit product, a marketer must know adequately about the market.

Thus, the study of consumer behaviour is the base for developing a new product

successfully.

11. Dynamic Nature of Market:

Consumer behaviour focuses on dynamic nature of the market. It helps the manager to

be dynamic, alert, and active in satisfying consumers better and sooner than
competitors. Consumer behaviour is indispensable to watch movements of the

markets.

12. Effective Use of Productive Resources:

The study of consumer behaviour assists the manager to make the organizational

efforts consumer-oriented. It ensures an exact use of resources for achieving

maximum efficiency. Each unit of resources can contribute maximum to objectives.

Consumer behavior in marketing

Consumer behavior is important in marketing because it explains how consumers

make decisions about what products to buy when to buy them, and from whom to buy
them. Marketers can develop effective marketing strategies that target the right
consumers with the right message at the right time by understanding consumer
behavior.

⚫ Segmentation: Consumer behavior research helps marketers behavioral

segment markets. Marketers can modify their marketing messages and strategies
to better appeal to each demographic by recognizing these segments.

⚫ Product design: Understanding consumer behavior can also aid in product

development. Marketers can create products that better meet consumer needs and
preferences by analyzing customer requirements and tastes, leading to increased
sales and customer satisfaction.

⚫ Pricing Strategies: Marketers can use consumer behavior data to determine the
price points at which customers are willing to pay for a product, as well as the
pricing strategies most likely to appeal to each market segment.

⚫ Branding: Consumer behavior research helps in the development of branding

strategies. Marketers can create brand messages and strategies that resonate with
 consumers and build brand loyalty by understanding consumer attitudes and
perceptions of brands.

Applications of consumer behavior:

1) Analyzing market opportunity: Consumer behavior study help in identifying the

unfulfilled needs and wants of consumers. This requires examining the friends and
conditions operating in the Marketplace, consumer’s lifestyle, income levels and
energy influences. This may reveal unsatisfied needs and wants. Mosquito repellents
have been marketed in response to a genuine and unfulfilled consumer need.

2) Selecting target market: Review of market opportunities often helps in

identifying district consumer segments with very distinct and unique wants and needs.
Identifying these groups, behave and how they make purchase decisions enable the
marketer to design and market products or services particularly suited to their wants
and needs.

3) Marketing-mix decisions: Once unsatisfied needs and wants are identified, the
marketer has to determine the right mix of product, price, distribution and promotion.
Where too, consumer behavior study is very helpful in finding answers too many
perplexing questions. The factors of marketing mix decisions are: i) product ii) price
iii) promotion iv) distribution

4) Use in social and non-profits marketing: Consumer behavior studies are useful
to design marketing strategies by social, governmental and not for profit organizations
to make their programs more effective such as family planning, awareness about
AIDS.

Consumer Research Process:

1. Qualitative Consumer Research

Qualitative research is descriptive in nature, It’s a method that uses open-ended

questions, to gain meaningful insights from respondents and heavily relies on the
following market research methods:

Focus Groups: Focus groups as the name suggests is a small group of highly
validated subject experts who come together to analyze a product or service. Focus
group comprises of 6-10 respondents. A moderator is assigned to the focus group,
who helps facilitate discussions among the members to draw meaningful insights

One-to-one Interview: This is a more conversational method, where the researcher

asks open-ended questions to collect data from the respondents. This method heavily
depends on the expertise of the researcher. How much the researcher is able to probe
with relevant questions to get maximum insights. This is a time-consuming method
and can take more than one attempt to gain the desired insights.
 Content/ Text Analysis: Text analysis is a qualitative research method where
researchers analyze social life by decoding words and images from the documents
available. Researchers analyze the context in which the images are used and draw
conclusions from them. Social media is an example of text analysis. In the last decade
or so, inferences are drawn based on consumer behavior on social media.
2.Quantitative Consumer Research

In the age of technology and information, meaningful data is more precious than
platinum. Billion dollar companies have risen and fallen on how well they have been
able to collect and analyze data, to draw validated insights.

Quantitative research is all about numbers and statistics. An evolved consumer who
purchases regularly can vouch for how customer-centric businesses have become
today. It’s all about customer satisfaction, to gain loyal customers. With just one
questions companies are able to collect data, that has the power to make or break a
company.

Online surveys, questionnaires, and polls are the preferred data collection tools. Data
that is obtained from consumers is then statistically, mathematically and numerically
evaluated to understand consumer preference.

Consumer research Process

The consumer research process can be broken down into the following steps:

1. Develop research objectives: The first step to the consumer research process
is to clearly define the research objective, the purpose of research, why is the
research being conducted, to understand what? A clear statement of purpose can
help emphasize the purpose.
2. Collect Secondary data: Collect secondary data first, it helps in
understanding if research has been conducted earlier and if there are any pieces of
evidence related to the subject matter that can be used by an organization to make
informed decisions regarding consumers.
3. Primary Research: In primary research organizations or businesses collect
their own data or employ a third party to collect data on their behalf. This research
makes use of various data collection methods (qualitative and quantitative) that
helps researchers collect data first hand.
4. Collect and analyze data: Data is collected and analyzed and inference is
drawn to understand consumer behavior and purchase pattern.
5. Prepare report: Finally, a report is prepared for all the findings by analyzing
data collected so that organizations are able to make informed decisions and think
of all probabilities related to consumer behavior. By putting the study into practice,
organizations can become customer-centric and manufacture products or render
services that will help them achieve excellent customer satisfaction.

Factors Influencing Consumer Behaviour

There are several factors influencing consumer buying behaviour. They are:

A) Internal Factors: Internal influences are also known as personal influences and it
includes perceptions, attitude, motivation, lifestyle, learning and roles. These internal
influences affect all our purchase decisions

1. Psychological Factors

Human psychology influences an individual’s thinking and hence also decisions

regarding purchases. Some important psychological factors affecting consumer
behaviour are:

⚫ Motivation: The motivation to achieve or possess something is a strong emotion

that influences a consumer's buying behaviour. An individual makes purchases
mainly to fulfil his needs. Needs can be of different types- basic needs, security,
social needs, need to enhance the status, and self-actualisation needs. Since basic
and security needs are most important, the consumer is motivated to fulfil these
needs first.
⚫ Perception: A consumer’s buying is also influenced by perception. An
advertisement in the newspaper or roadside hoardings, a review, or feedback all
form an image in the consumer’s mind about a particular product. This perception
influences the consumer’s buying decision.
⚫ Learning: Learning is of two types- conditional or cognitive. In either case, the
consumer uses his knowledge and skill to purchase the product.
⚫ Attitudes and Credence: Consumer buying is also influenced by preformed
notions or attitudes and acceptance. The preformed notion regarding the quality
of a product draws the consumer towards particular brands. Faith in the quality
and performance of a product based on earlier experience of using it pulls the
consumer towards the same product. Understanding this behaviour helps
marketers to produce and market their products accordingly.
⚫ Beliefs: A belief is a descriptive thought, which a person holds about certain
things. It may be based on knowledge, opinion, faith, trust and confidence. People
 may hold certain beliefs of certain brands/products. Beliefs develop brand images,
which in turn can affect buying behaviour.

2. Lifestyle

Lifestyle is the way an individual lives in society. This, too, shapes their buying
behaviour. A consumer indulging in a healthy lifestyle will shop for healthy foods and
different outfits. Individuals who have to travel alone will invest in good, sturdy, well-
fitting attire and so on.

B) External Factors: These influences are also recognized as social influences and it
includes cultures, social norms, subcultures, family roles, household structures, and
groups that affect an individual’s purchase decision.

1. Social Factors: Consumer buying behaviour is also affected by the people among-
est whom they live and move around.

⚫ Social Class

Social class, which is determined by such factors as occupation, wealth, income, education,
power, and prestige, is another societal factor that can affect consumer behavior. The best-
known classification system includes upper-upper, lower-upper, upper-middle, lower-middle,
upper-lower, and lower-lower class. Lower-middle and upper-lower classes comprise the
mass market.

⚫ Reference Groups

People with whom the consumer associates influence their buying choices. Usually,
all members of such groups have common product choices, shopping outlets, and
similar buying behaviour.A reference group helps shape a person's attitudes and behaviors.
Such groups can be either formal or informal. Churches, clubs, schools, notable individuals,
and friends can all be reference groups for a particular consumer. Reference groups are
characterized as having individuals who are opinion leaders for the group.

⚫ Family: The family has a major influence on the buying behaviour of a consumer.
A person’s likes and preferences are formed since childhood, so they buy certain
products through habit and are guided by the belief that they are good even when
the consumer has grown up. One of the most important reference groups for an
individual is the family. A consumer's family has a major impact on attitude and
behavior. The interaction between husband and wife and the number and ages of children
in the family can have a significant effect on buying behavior.
⚫ Status: The status of an individual affects his spending. A person who is in a
high post and moves around an elite posh circle will spend lavishly as they have
to maintain status. Individuals with a lesser income will have a different buying
pattern since their buying capacity differs from the elite group.

2. Cultural Factors

Culture includes race and religion, tradition, caste, moral values, etc. Culture also
include sub-cultures such sub-caste, religious Sects, language, etc.
⚫ Culture: It influences consumer behaviour to a great extent. Cultural values and
elements are passed from one generation to another through family, educational
institutions, religious bodies, social environment, etc. Cultural diversity
influences food habits, clothing, customs and traditions, etc. For instance,
consuming alcohol and meat in certain religious communities is not restricted, but
in certain communities, consumption of alcohol and meat is prohibited.
⚫ Sub-Culture: Each culture consists of smaller sub-cultures that provide specific
identity to its members. Subcultures include sub-caste, religious sects geographic
regions as South Indians, North Indians, and based on languages etc. The
behaviour of people belong to various sub-cultures is different. Therefore,
marketers may adopt multicultural marketing approach, i.e., designing and
marketing goods and services that cater to the tastes and preferences of
consumers belonging to different sub-cultures.

3. Personal Factors

Personal factors differ from person to person, so there is no similarity in consumer

behaviour. Personal factors include −

⚫ Age

Age plays a vital role in deciding the choices of individuals. There will be a difference
between the purchases of school-going teenagers and college-going adults. Young
couples spend on household items and luxury goods, whereas middle-aged people
have a subdued choice.

⚫ Income

The income level also decides an individual's buying capacity and behaviour.
Consumers belonging to the higher income bracket have higher disposable income
and splurge on indulgences besides the usual purchases. Individuals from the middle-
income and low-income groups use most of their income to provide basic needs like
groceries, clothes, and education to the family.

⚫ Occupation

Individuals belonging to different occupations show different buying behaviour. A

person from the corporate sector will spend on formal clothing while a creative
designer or writer will go for casual wear.

Education: Highly educated persons may spend on books, personal care products, and
so on. But a person with low or no education may spend less on personal grooming
products, general reading books, and so on.

4. Economic Factors
 The economy of a country somehow affects the buying habits of a consumer. A nation
with a strong economy results in higher purchasing capacity for the consumer and
thus increased money supply in the market. A nation with a weak economy has a
weak market, consumers with low purchasing power and those plagued with
unemployment have a bad impact on it.

Some economic factors influencing consumer behaviour are as follows:

⚫ Personal Income

After fulfilling the basic needs, a consumer with higher disposable income spends
freely on other items and things of value and interest. With the decrease in disposable
income, such spending is reduced.

⚫ Family Income

Family Income means the total income of all the earning members of the family.
Several earning members result in higher income, and this increased income is
substantial to fulfil basic needs and luxuries. So higher family income results in the
shoppers buying freely and more.

⚫ Consumer Credit

Easy credit for purchasing goods results in increased spending. Availing credit
through credit cards, bank loans, hire purchases, easy instalments, etc., results in
buying luxury and comfort items.

⚫ Liquid Assets

Consumers use liquid assets to spend on comfort and luxuries. Liquid assets like bank
savings, securities, cash in hand, and others provide the consumer with confidence
towards spending on luxury items.

⚫ Savings

A consumer’s decision to save a larger part of his salary/ income decreases their
spending, but if the consumer wishes to save a smaller amount, then most of his
money will be spent on buying different products.

5. Situational Influences

Major situational influences include the physical surroundings, social surroundings,

time, the nature of the task, and monetary moods and conditions.

⚫ Physical Surroundings: The physical surroundings at the place of purchase

affects buying behaviour. For instance, when a customer is shopping in a store,
the features that affects buying behaviour would include the location of the store,
the decor, the layout of the store, the noise level, the way merchandise is
displayed, and so on.
⚫ Social Surroundings: The social surroundings of a situation involve the other
people with the customer that can influence buying decision at the point of
purchase. For instance, a bargain hunter shopping with an impatient friend may
do quick purchases, and may not bargain over the price, so as to please the
impatient customer.
⚫ Time Factor: Customers may make different decisions based on when they
purchase – the hour of the day, the day of the week, or the season of the year. For
instance, a consumer who has received a pay cheque on a particular day may shop
more items, than at the end of the month when he is short of funds.
⚫ Momentary Conditions: The moods and conditions of the customer at the time
of purchase may also affect the buying decision. A customer who is very happy
would make a different buying decision, as compared to when he is not happy.

6. Cultural Factors: Culture includes race and religion, tradition, caste, moral values,
etc. Culture also include sub-cultures such sub-caste, religious Sects, language, etc.

⚫ Culture: It influences consumer behaviour to a great extent. Cultural values and

elements are passed from one generation to another through family, educational
institutions, religious bodies, social environment, etc. Cultural diversity
influences food habits, clothing, customs and traditions, etc. For instance,
consuming alcohol and meat in certain religious communities is not restricted, but
in certain communities, consumption of alcohol and meat is prohibited.
⚫ Sub-Culture: Each culture consists of smaller sub-cultures that provide specific
identity to its members. Subcultures include sub-caste, religious sects geographic
regions as South Indians, North Indians, and based on languages etc. The
behaviour of people belong to various sub-cultures is different. Therefore,
marketers may adopt multicultural marketing approach, i.e., designing and
marketing goods and services that cater to the tastes and preferences of
consumers belonging to different sub-cultures.