UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

UNIT – 3 Models of Consumer Behaviour

A consumer`s behaviour varies owing to the many factors that influence consumer
behaviour. Consumer Behaviour Models have been developed to substantiate the various
factors that influence consumer behavior and their decision making process.

The ten Consumer Behaviour models explained below are:

 Pavlovian Model
 Economic Model
 Input, Process, Output Model
 Psychological Model
 Howarth Sheth Model
 Sociological Model
 Family Decision making model
 Engel-Blackwell-Kollat Model
 Industrial Buying Model
 Nicosia Model

PAVLOVIAN MODEL

Ivan Pavlov, a famous Psychologist, devised this consumer behaviour model and the
model is named after him. Ivan Pavlov conducted experiments to determine the change in
behaviour with the help of Dogs. He conditioned the dog`s mind to receive a piece of meat
every time a bell is rung and measured the extent of change in behaviour on the basis of
levels of saliva secretion in dogs.

Learning was defined as the changes in behavior which are developed through practice
and personal experience. The learning process consisted of Drive, Drives and
Reinforcement. While a drive refers to a strong internal stimuli which demands an action,
drives are inborn psychological needs arising out of thirst, physical pleasures, hunger and
pain that create a stimuli that gives out a triggering and non-triggering cues. The triggering
(activate the decision process) and non-triggering cues (Only influence the decision
process) help to create a response (purchase or do not purchase) which gets reinforced
over time in a conditional pattern. Pavlovian Model is purely based on psychology and has
been widely accepted around the world.

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ECONOMIC MODEL

According to Economic model of consumer behaviour, consumers try to maximize the

utility from products on the basis of law of diminishing marginal utility. The desire of
consumers to obtain maximum gains by spending a minimum amount acts as the core for
the derivation of this model.

The economic model assumes that there is close similarity between the behaviour of
buyers and that a homogenous buying pattern is exhibited in the market. The model is
based on Income effect, Substitution effect and Price effect.

 Income Effect substantiates that when a person earns more income, he will have
more money to spend and so he will purchase more.
 Substitution Effect substantiates the fact that if a substitute product is available at a
cheaper cost, then the product in question will be less preferred or less utilized by
people.
 Price Effect suggests that when the price of a product is less, consumers tend to
purchase more quantity of that product.

INPUT, PROCESS, OUTPUT MODEL

The input, process, output Model focuses on the product that is being marketed, the
environmental forces and family background of the consumer. Factors that act as inputs
and outputs in this model are:

Inputs are the marketing efforts in terms of product, price, place, promotion taken by an
organization and the environmental forces such as family, reference groups, culture, social
class etc. that influence the decision making process of a consumer. These factors which
act as inputs trigger the consumer to identify his needs and ensure that the consumer gets
the intention to purchase products after careful evaluation of the factors.

Process is concerned with the purchase process. A consumer goes through various steps
like need recognition, awareness, evaluation and purchase in order to make a buying
decision. While a satisfied customer acts as the brand ambassador exerting influence on
future purchases, a dis-satisfied customer acts as a negative reference point spoiling the
marketing efforts of the company to promote the product.

Outputs refer to the consumer’s response to the marketing efforts of the organization.
Some responses that consumers display are regarding:

 Buying decision
 Choice of Product
 Choice of Brand
 Choice of Dealer or Store
 Purchase timing and amount
 Post Purchase behaviour

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PSYCHOLOGICAL MODEL

The Psychological Model is based on the famous psychologist A.H. Maslow’s theory of
Hierarchy of Needs. The psychological model divides the needs into Psychological Needs,
Safety and Security Needs, Social Needs, Ego Needs and Self Actualization Needs. This
division of needs is termed as Hierarchy of Needs.

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According to this model, the behaviour of consumers gets motivated by their needs and
consumer needs never ceases to exist but arise one after another with passing time. A
consumer acts according to the strongest need at a particular time, he strives to satisfy the
basic needs first and then moves on to a higher level of needs and tries to satisfy them.
This process continues till he reaches the highest level in the hierarchy of needs.

HOWARTH SHETH MODEL

Howarth Sheth Model substantiates the complexity involved in consumer behavior and
takes into consideration various factors like attitudes of consumer, their perception levels
and learning capacity that influence consumer behaviour. This model is based on four
variables that are:

 Inputs Parameters
 Constructs that are related to perception and learning
 Output Parameters
 Variables that are external or exogenous in nature.

Input Parameters

As per Howarth Sheth Model, inputs are provided by three types of Stimuli namely,
Significative Stimuli, Symbolic Stimuli and Social Stimuli that are essential to make a
purchase decision.

While a Significative Stimuli refers to the tangible product characteristics like uniqueness,
quality, stock availability, price and service effectiveness, a Symbolic Stimuli refers to
perception of an individual about a particular product characteristic. Social Stimuli takes
into consideration all factors that belong to the societal group to which a consumer
belongs. Some factors related to Social Stimuli are reference groups, family and
background and consumer`s financial status in the society.

Perceptual and Learning Constructs

Constructs or Psychological variables like Motivation, Attitude, Learning and Perception

influence the decision making process of a consumer. When a consumer receives a
stimuli and interprets it, the interpretation is influenced by two factors that are stimulus
ambiguity and perceptual bias. A stimulus ambiguity occurs when a consumer cannot fully
interpret a stimuli while a perceptual bias occurs when an individual manipulates the
stimuli according to his needs and experience. These two factors influence a consumer to
evaluate a product or brand as good or bad and develop the confidence to purchase it.

Output Parameters

Output in Howarth Sheth Model refers to the final purchase decision and satisfaction or
dissatisfaction levels of a consumer after making a purchase. High satisfaction results in
elevated brand performance while dissatisfaction leads to lower brand performance.

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External or Exogenous variables

External or Exogenous variables refer to the indirect influence exerted on the decision
making process of consumers by factors such as financial status, social class, necessity to
purchase and personality traits of individuals.

All four factors are dependent on each other and influence the decision making process of
a consumer.

ANOTHER WRITER’s EXPLANATION OF HOWARD-SHETH MODEL

This model suggests three levels of decision making:

(i) The first level describes the extensive problem solving. At this level the consumer does
not have any basic information or knowledge about the brand and he does not have any
preferences for any product. In this situation, the consumer will seek information about all
the different brands in the market before purchasing.

(ii) The second level is limited problem solving. This situation exists for consumers who
have little knowledge about the market, or partial knowledge about what they want to
purchase. In order to arrive at a brand preference some comparative brand information is
sought.

(iii) The third level is a habitual response behavior. In this level the consumer knows very
well about the different brands and he can differentiate between the different
characteristics of each product, and he already decides to purchase a particular product.
According to the Howard-Sheth model there are four major sets of variables; namely:
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(a) Inputs– These input variables consist of three distinct types of stimuli(information
sources) in the consumer’s environment. The marketer in the form of product or brand
information furnishes physical brand characteristics (significant stimuli) and verbal or
visual product characteristics (symbolic stimuli). The third type is provided by the
consumer’s social environment (family, reference group, and social class). All three types
of stimuli provide inputs concerning the product class or specific brands to the specific
consumer.

(b) Perceptual and Learning Constructs– The central part of the model deals with the
psychological variables involved when the consumer is contemplating a decision. Some of
the variables are perceptual in nature, and are concerned with how the consumer receives
and understands the information from the input stimuli and other parts of the model. For
example, stimulus ambiguity happened when the consumer does not understand the
message from the environment.

(c) Outputs- The outputs are the results of the perceptual and learning variables and how
the consumers will response to these variables (attention, brand comprehension, attitudes,
and intention).

(d) Exogenous(External) variables- Exogenous variables are not directly part of the
decision-making process. However, some relevant exogenous variables include the
importance of the purchase, consumer personality traits, religion, and time pressure.

The Decision Making Process, which Howard-Sheth Model tries to explain, takes place
at three Inputs stages: Significance, Symbolic and Social stimuli. In both significant and
symbolic stimuli, the model emphasizes on material aspects such as price and quality.
These stimuli are not applicable in every society. While in social stimuli the model does not
mention the basis of decision-making in this stimulus, such as what influence the family
decision? This may differ from one society to another. Finally, no direct relation was drawn

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on the role of religion in influencing the consumer’s decision-making processes. Religion

was considered as external factor with no real influence on consumer, which give the
model obvious weakness in anticipation the consumer decision.

SOCIOLOGICAL MODEL

The Sociological Model of Consumer Behavior is closely related to the society and the
versatile groups involved in the same. These groups can be classified into Primary and
secondary ones. Primary groups consist of close acquaintances, friends, relatives and
family members. Secondary group consists of any member in the society, his personality
type and requirements based on the same. Sociological Model focuses mainly on the
lifestyle and related product requirements of consumers in the society in a holistic manner.

FAMILY DECISION MAKING MODEL

The role every member of a family plays in the purchase decision is unique. There are six
types of members in a family structure who exert influence over the purchasing decision of
the others in the family. They are:

1. The User
2. The Influencer
3. The Preparer
4. The Gatekeeper
5. The Buyer
6. The Decider

The User is the person in the family who plans to use the product being purchased. The
user may be a single person in the family or the whole family. For instance, if the purchase
decision pertains to a car or television, it may be used by all family members. When a
purchase decision pertains to buying a mobile phone or a laptop, it may be for a single
person in the family.

The Influencer is the person who keeps the family members updated about products and
services new to the market. He convinces them to go in for the same. His influence plays a
crucial role in the ultimate decision taken by the family members

The Preparer is the person who gives a product its final shape in which it is actually going
to be used by the users in the family. Raw vegetables used for cooking food is an example
for the Preparer role where one who cooks is involved in the process.

The Gatekeeper is a person in the family who influences the family members to go in for
products which they feel will be useful to them. They safeguard the gates disallowing any
product or service information that they dislike from reaching their family members. They

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help the family in decision making by filtering information or product attributes to make a
purchase decision.

The Buyer is the person who actually buys the product. Irrespective of the different kinds
of influences exerted by other member of the family, the person playing the role of the
Buyer makes the final purchase of the product or service

The Decider is the person in the family who has the money power to buy a product or
service chosen for purchase. Family members playing this role have an upper hand in the
purchase decision.

Family Decision making Model thus takes into account the many roles played by members
of a family and their influence in decision making pertaining to purchase of products and
services.

ENGEL-BLACKWELL-KOLLAT MODEL

Engel-Blackwell-Kollat Model is based upon four key components namely Information

processing (IP), Central Control Unit (CCU), Decision Making process and influences
exerted by the environment.

Information Processing (IP) is dependent on many factors which act as stimuli both from a
marketing and non-marketing perspective, it consists of four components that are
exposure, attention, comprehension and retention. Information Processing focuses on the
message to which the consumer is constantly exposed (exposure). When the message
instantly grabs the attention of the consumer (attention), the next logical step for him is to
comprehend about the same in the rational manner (comprehension). When all of the
activities happen in the perfect manner the message is retained in the memory of the
consumer (retention).

Central Control Unit (CCU) is based on four factors that are psychological in nature.

 Previous experience of the consumers and their acquaintances about the product
 Criteria based on which a consumer evaluates a product
 Changing mindsets of consumers and
 Personality of the consumer based on which he or she takes the purchase decision.

A consumer processes and interprets all the information on the basis of the above four
factors.

The Decision process consists of recognizing the problem, internal and external
information search, evaluating the alternatives available and finally purchasing the
product. This component deals with the post purchase satisfaction levels as well as
dissatisfaction levels which play a crucial role in the future decision making process of the
consumers.

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The Environmental influences consists of all those factors that may favour or dis-favour
the purchase decision like:

 Income level of consumers

 Financial status and social class in the society
 Family Influences and other societal factors etc.

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ENGEL, BLACKWELL, MINIARD MODEL (OPEN SYSTEM)

This model was created to describe the increasing, fast-growing body of knowledge
concerning consumer behavior. This model, like in other models, has gone through many
revisions to improve its descriptive ability of the basic relationships between components
and sub-components, this model consists also of four stages;

First stage: decision-process stages The central focus of the model is on five basic
decision-process stages:

Problem recognition, search for alternatives, alternate evaluation(during which beliefs may
lead to the formation of attitudes, which in turn may result in a purchase intention)
purchase, and outcomes. But it is not necessary for every consumer to go through all
these stages; it depends on whether it is an extended or a routine problem-solving
behavior.

Second stage: Information input At this stage the consumer gets information from
marketing and non-marketing sources, which also influence the problem recognition stage
of the decision-making process. If the consumer still does not arrive to a specific decision,
the search for external information will be activated in order to arrive to a choice or in
some cases if the consumer experience dissonance because the selected alternative is
less satisfactory than expected.

Third stage: information processing This stage consists of the consumer’s exposure,
attention, perception, acceptance, and retention of incoming information. The consumer
must first be exposed to the message, allocate space for this information, interpret the
stimuli, and retain the message by transferring the input to long-term memory.

Fourth stage: variables influencing the decision process This stage consists of individual
and environmental influences that affect all five stages of the decision process. Individual
characteristics include motives, values, lifestyle, and personality; the social influences are
culture, reference groups, and family. Situational influences, such as a consumer’s
financial condition, also influence the decision process.

This model incorporates many items, which influence consumer decision-making such as
values, lifestyle, personality and culture. The model did not show what factors shape these
items, and why different types of personality can produce different decision-making? How
will we apply these values to cope with different personalities? Religion can explain some
behavioral characteristics of the consumer, and this will lead to better understanding of the
model and will give more comprehensive view on decision-making.

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INDUSTRIAL BUYING MODEL

Industrial Buying Model deals with the cumbersome process involved in making purchase
decisions in a typical industrial set up. The decision making process related to purchase in
an Industrial setup involves many Departments that are concerned with the same in a
direct or indirect manner. This model highlights three crucial characteristics involved in
purchase decisions by Industries.

 Individuals who hail from different backgrounds, possessing varying psychological

outlook are involved in the decision making process
 Joint decision making is inevitable in an Industrial setup
 Decisions pertaining to a purchase may lead to opinion clashes between concerned
departments or individuals before an amicable solution is found

Individuals in decision making capacities may be from various departments in an

organization. Some Departments concerned are Research and Development Department,
Quality Control Department, Finance Department, Manufacturing Department and
Technical Support Department amongst the many others. The committee that is formed for
making purchase related decision may comprise individuals who

 Have different perceptions

 Hail from varying backgrounds
 Have differing satisfaction levels related to past experience
 Obtain information from different sources
 Search experience that is totally dependent on their skills

The purchase decision in an Industrial setup is dependent on many factors. These factors
may be specifically related to products or to the organization that manufactures the
concerned products. The product specific factors are the kind of purchase done by
consumers, probable risks involved in choosing a particular alternative and the pressure
pertaining to the timely delivery of product. The Organization Specific factors focus on
solving problems that arise due to the purchase decision from time to time, the persuasion
and bargaining issues connected with the same and other factors pertaining to situations
that may arise every now and then.

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NICOSIA MODEL

Nicosia Model deals with the level of exposure a consumer gets with respect to the
purchase decision. This model is based on four fields such that the output of one field acts
as the input of second field and so on.

The First field divided into two sub fields namely:

Sub-field one consists of:

 Product Attributes
 Firm`s Attributes

While subfield two consists of:

 Pre-disposition or existing attitude of a consumer towards the product

 The attributes exhibited by the organization whose products are to be purchased.

The Second Field consists of consumer research and evaluation.

The Third Field is concerned with the buying decision of the consumer.

The Fourth Field is concerned with the post purchase behavior, use of product, its storage
and consumption. The consumer who is satisfied with a product or service tends to stock
the product for regular or future usage and develops a positive attitude. On the contrary, a
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dis-satisfied customer tends to develop a negative attitude towards the product or the
business house.

The feedback from Fourth Field acts as input for field one. Feedback from field four
compels a firm to change the product attributes which in turn act as in put for field two. A
change in product attributes bring a change in consumers perception about the product
and hence may affect his buying decision and subsequently his post purchase behavior.

ANOTHER WRITER’s EXPLANATION OF NICOSIA MODEL ( CONFLICT MODEL)

NICOSIA MODEL (CONFLICT MODEL)

This model focuses on the relationship between the firm and consumers. The firm
communicates with consumers through its marketing messages (advertising), and the
consumers react to these messages by purchasing response. Looking to the model we will
find that the firm and the consumer are connected with each other, the firm tries to
influence the consumer and the consumer is influencing the firm by his decision. The
Nicosia model is divided into four major fields:

Field 1: The consumer attitude based on the firms’ messages. The first field is divided
into two subfields. The first subfield deals with the firm’s marketing environment and
communication efforts that affect consumer attitudes, the competitive environment, and
characteristics of target market. Subfield two specifies the consumer characteristics e.g.,
experience, personality, and how he perceives the promotional idea toward the product in
this stage the consumer forms his attitude toward the firm’s product based on his
interpretation of the message.

Field 2: search and evaluation The consumer will start to search for other firm’s brand
and evaluate the firm’s brand in comparison with alternate brands. In this case the firm
motivates the consumer to purchase its brands.

Field 3: The act of the purchase The result of motivation will arise by convincing the
consumer to purchase the firm products from a specific retailer.

Field 4: Feedback This model analyses the feedback of both the firm and the consumer
after purchasing the product. The firm will benefit from its sales data as a feedback, and
the consumer will use his experience with the product affects the individuals attitude and
predisposition’s concerning future messages from the firm.

The Nicosia model offers no detail explanation of the internal factors, which may affect the
personality of the consumer, and how the consumer develops his attitude toward the
product. For example, the consumer may find the firm’s message very interesting, but
virtually he cannot buy the firm’s brand because it contains something prohibited
according to his beliefs. Apparently it is very essential to include such factors in the model,
which give more interpretation about the attributes affecting the decision process.

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CONSUMER BEHAVIOUR IN INDIA

Indian consumer durables market is broadly segregated into urban and rural markets, and
is attracting marketers from across the world. The sector comprises of a huge middle
class, relatively large affluent class and a small economically disadvantaged class. Global
corporations view India as one of the key markets from where future growth is likely to
emerge. The growth in India’s consumer market would be primarily driven by a favorable
population composition and increasing disposable incomes.

Per capita GDP of India is expected to reach US$ 3,273.85 in 2023 from US$ 1,983 in
2012. The maximum consumer spending is likely to occur in food, housing, consumer
durables, and transport and communication sectors.

Market Size

 The growing purchasing power and rising influence of the social media have enabled Indian
consumers to splurge on good things. Import of electronic goods reached US$ 53 billion in
FY18.
 Indian appliance and consumer electronics (ACE) market reached Rs 2.05 trillion (US$
31.48 billion) in 2017. India is one of the largest growing electronics market in the world.
Indian electronics market is expected to grow at 41 per cent CAGR between 2017-20 to
reach US$ 400 billion.
 Television industry in India is estimated to have reached Rs 740 billion (US$ 10.59 billion)
in CY2018 and projected to reach Rs 955 billion (US$ 13.66 billion) in CY2021.
 As of FY18, washing machine, refrigerator and air conditioner market in India were
estimated around Rs 7,000 crore (US$ 1.09 billion), Rs 19,500 crore (US$ 3.03 billion) and
Rs 20,000 crore (US$ 3.1 billion), respectively.
 India’s smartphone market grew by 14.5 per cent year-on-year with a shipment of 142.3
million units in 2018. India is expected to have 829 million smartphone users by 2022. In
2019, India is expected to manufacture around 302 million handsets.

Investments

According to the Department for Promotion of Industry and Internal Trade, during April
2000 – June 2019, FDI inflows into the electronics sector stood at US$ 2.45 billion.

Following are some recent investments and developments in the Indian consumer market
sector.

 In November 2019, Nokia entered in partnership with Flipkart to enter consumer durables
market in India and plan to launch smart TVs.
 In October 2019, Apple Inc. entered in agreement with Maker Maxity mall, co-owned by
Reliance Industries to open its first company-owned iconic outlet in India.
 In August 2019, Voltas Beko launched India’s first five star washing machine.
 In July 2019, Voltas Limited entered into partnership with Energy Efficiency Services
Limited (EESL) to manufacture and sell 5-star rated Inverter Air Conditioners.
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 In April 2019, TCL Electronic announced its entry into home appliances market in India.
 Xiaomi became the India’s largest brand network in the offline market, having presence in
over 790 cities in the country.
 Bosch Home Appliances to invest US$ 111.96 million to expand in India.
 Number of TV households and viewers in India reached 197 million 835 million,
respectively in 2018.
 According to the retail chains and brands, there is 9-12 per cent increase in the sales of
consumer electronics in Diwali season in October 2019.
 The smartphone shipment witnessed a year-on-year growth of 9.3 per cent in July-
September 2019 with 46.6 million unit shipped.
 Consumer durables loans in India increased by 68.8 per cent to Rs 5,445 crore (US$ 780
million) in September 2019.
 Intex Technologies will invest around Rs 60 crore (US$ 9.27 million) in 2018 in technology
software and Internet of Things (IoT) startups in India in order to create an ecosystem for its
consumer appliances and mobile devices.
 Micromax plans to invest US$ 89.25 million by 2020 for transforming itself into a consumer
electronics company.
 Haier announced an investment of Rs 3,000 crore (US$ 415.80 million) as it aims a two-fold
increase in its revenue by 2020.

Government Initiatives

 National Policy on Electronics Policy was passed by the Ministry of Electronics &
Information Technology in February 2019.
 A new Consumer Protection Bill has been approved by the Union Cabinet, Government of
India that will make the existing laws more effective with a broader scope.
 The mobile phone industry in India expects that the Government of India’s boost to
production of battery chargers will result in setting up of 365 factories, thereby generating
800,000 jobs by 2025.
 The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for
investors by amending the M-SIPS scheme, in order to further incentivise investments in
electronics sector, create employment opportunities and reduce dependence on imports by
2020.
 The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) under
the automatic route in Electronics Systems Design & Manufacturing sector. FDI into single
brand retail has been increased from 51 per cent to 100 per cent; the government is planning
to hike FDI limit in multi-brand retail to 51 per cent.

Changing Consumer Behaviour in India

As India continues to evolve as an economic power in the global scenario, Consumerism is
undergoing tremendous changes in the business arena. Liberalization, Globalization and
Increasing income and purchasing power among the people of India can be attributed as the
main reasons for the prevalent market trend and changing consumer behaviour in India. The
affluence levels have exerted tremendous influence over the consumer market and changing
consumer behaviour in India.
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Few changes in the Indian consumer market are:

 The consumers have become more aware, demanding and quality conscious.
 Liberalization and globalization has increased competition giving rise to consumer
oriented products and marketing techniques.
 The overall costs are rising, prices are falling and profit margins are decreasing.

Changing Consumer Behaviour in India

Consumer Behavior has gone through many changes in the attitude, motivation, perception,
spending habits, and post purchase behaviour during the past few decades in India. Some of
the key factors that have contributed towards changing consumer behaviour in India are:

 Rapid Urbanization leading to changes in the mindset of consumers

 Increasing income levels
 Shift in approach towards family systems

Rapid Urbanization

In 1980`s, a typical consumer in India had very limited choices. Consumer choice was
restricted by low income, supply shortages, non-availability of products, traditional buying
methods, low competition, limited choice, import restrictions. Rapid urbanization in the
country is brought a huge change in the mindset of Indian population. Liberalization and
globalization in the 1990`s opened new avenues for marketing, advertising, travel and
communication which in turn helped in increasing the GDP of the country. Innovative
marketing techniques, increasing competition and product branding made the consumers
more aware, demanding and quality conscious. Now consumers have wide product choices
at competitive prices.

Increasing income levels

Increasing households Income have increased the spending capabilities of people, making
India one of the top countries in the Consumer market segment. Now consumers do not
settle for sub-standard products but demand high quality products at competitive prices.
Consumers have access to abundant information through newspapers, T.V. and internet
which bought about a change in marketing techniques of businesses. Marketers strive to
differentiate their products and services through pricing, packaging, promotions, customer
service and branding. With radical revolution in information technology consumer
satisfaction was given more importance as consumer expectations had increased and all
consumers had multiple options to satisfy their respective needs.

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Shift in approach towards family systems

India has been witnessing a shift with respect to family systems and family influence on
consumer behaviour. Joint families are decreasing in number giving way to nuclear
families. The spend ratio has increased by leaps and bounds owing to the increasing number
of nuclear family systems. Lifestyle amenities get more priority amidst the younger
generation who opt for nuclear family structures. Less number of Gatekeepers and matured
influencers in such nuclear families gave rise to what was considered as ‘unnecessary
spending’ by earlier generations. The food, apparel and entertainment industries have
gained maximum owing to the tendency of the younger generation to keep up with the latest
trends at all points of time.

However, marketers must keep the following points in mind to effective adjust to the
changing consumer behaviour in India –

 It is essential to communicate with customers.

 All marketing efforts must be directed towards the customer.
 Products and services must be developed keeping in mind the needs and desires of
consumers.
 Efforts must be made to understand the mindset of the consumer for which a
feedback mechanism must be developed.
 All strategies must aim at providing customer satisfaction and delight.

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Difference between CONSUMER BUYING Behavior

and ORGANIZATIONAL BUYING Behavior

Robinson, Faris & Wind states that when understanding the Industrial Buying
Behavior a permanent process of problem solving and decision – making must be
taken into consideration. All members in a business who become involved in such a
buying process are centered to specify group – These processes and group
members may vary when purchasing different kinds of products and services.

An important part of the marketing process is to understand why a Customer or

Buyer makes a purchase. Without such an understanding, business finds it hard to
respond to the customer’s needs and wants. Marketing theory traditionally splits
analysis of buyer or customer behavior into TWO broad group of analysis –
Consumer Buying and Industrial Buying.

Consumer Buying

The study of how and why people purchase goods and services is termed as
Consumer Buying.

The term covers the decision making processes from those that precede the
purchase of goods and services to the final experience of using the product or
services.

Models of Consumer Buying Behavior draw together the various influences on the
process of the buying decision. They attempt to understand the proverbial “Black
box” (Buyer’s mind) of what happens within the consumer between his/her
exposure to marketing stimuli and the actual decision to purchase.

Consumer Buying Process

(i) Recognition of need

(ii) Information Search

(iii) Evaluation of Alternatives

(iv) Purchase decision

(v) Post Purchase Behavior

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

INDUSTRIAL BUYING

Industrial purchasing stands for more than half of the whole economic activity in
Industrialized countries. Hardly any consumer has the buying authority as
organization and any given end product is made up by many industrial purchase
that is important to understand how industries perform buying activities.

Industrial buying behavior is in essence the arrangement of how Industrial

Organizations purchase goods and services. This area is essential for the
understanding of the consumer needs and must be taken into consideration for
successful suppliers.

Industrial Buying Process

(i) Problem Recognition

(ii) General need description

(iii) Product specification

(iv) Supplier search

(v) Proposal solicitation

(vi) Supplier selection

(vii) Order routine specification

(viii) Performance review

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

1. Need Recognition
Organizational buying process starts from need recognition. In an organization, a
certain person recognizes need of certain goods and after buying the needed
goods, need is fulfilled. Needs in organization can be recognized in two ways. They
are: external stimuli and internal stimuli. If a company decides to produce new
goods, it is internal stimuli. It needs to buy new goods and equipment. Similarly,
when a buyer observes trade exhibition, s/he may make his/her idea to buy new
goods. Such idea is external stimuli, because this idea is made from outer
environment and materials should be purchased for this.

2. Need Description
After the need is recognized, the buyers should describe need. This task is
completed in the second stage of organizational buying process. While describing
need, features of needed goods and needed quantity should be described. If the
goods have standard, this task becomes easy; if otherwise, it becomes
complicated. Help of engineers, users and consultants should be taken for complex
goods.

3. Product Specification
The task of preparing specific description of goods is the third stage of
organizational buying process. In this stage, description performance of goods is
prepared to solve the problems. Technician’s help should be taken for this task. In
this stage, the value of goods is analyzed.

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

4. Supplier Search
At this stage of organizational buying process, the buyer searches proper suppliers
or sellers. Buyer prepares a list of suppliers to select good and proper suppliers.
This list is prepared by looking at trade directory, searching in Internet, asking other
companies for suggestions etc. If the goods to be bought are new, complicated and
costly, it needs long time to search suppliers.

5. Proposal Solicitation
Proposal solicitation is the fifth stage of organizational buying process. At this
stage, buyer calls best suppliers for submitting proposal. As the reaction, some
send catalog or sellers to the organization. If the product is costly and complicated,
the buyer demands detailed proposal, and if the product is technical, business
organization calls for presenting the product itself.

6. Supplier Selection
At the sixth stage of organizational buying process, buyers assess the proposal and
select one or more suppliers. For selecting the suppliers, a list is prepared and
rating is made on the basis of their attribute and importance. Then the best supplier
is selected. Analysis of the suppliers is done in the following ways.

Rating
Supplier attribute Very poor Poor Fair Good Excellent
(1) (2) (3) (4) (5)

Price competitiveness x

Product quality, reliability x

Service and repair capabilities x

On-time delivery x
Quality of sales representatives x
Overall responsiveness to
customer needs
x

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

Overall reputation Average

Score = 4.29
X

7. Order Routine Specification

After the best suppliers have been selected, the buyer prepares final order. In this
order, all the matters such as attribute of goods, quantity, specification, time for
supply, warranty, method of payment, service after sale etc. should be clearly
mentioned.

8. Performance Review

This is the last process of organizational buying. At this stage, the buyer reviews
suppliers’ performance. This type of review helps to take decision whether to
continue relation with the supplier or change or end the relation. If the performance
of the supplier is satisfactory, the relation can be continued; if it is somewhat
defective, if partial correction is made and the relation is maintained. But if the
performance is disagreeable, it is broken.
Buying situations
Stages of the buying process New Modified Straight
task rebuy rebuy

1. Problem recognition Yes May be No

2. General need description Yes May be No

3. Product specification Yes Yes Yes

4. Supplier search Yes May be No

5. Proposal solicitation Yes May be No

6. Supplier selection Yes May be No

7. Order-routine specification Yes May be No

8. Performance review Yes Yes Yes

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

DIFFERENCES

Bases Consumer Buying Behavior Organizational Buying Behavior

The individual consumers buy goods The organizations buy goods and
and services for ultimate use or satisfy services for their business needs. The
Purpose of
their needs. The buying purpose of buying purpose of them is to earn
Buying
such consumers is not to earn profit by profit by using and reselling the goods
reselling the goods and services. and services.
Organizational buying is done in large
quantities. There are several reasons
why organizations must buy the goods
Although consumers buy various kinds
they need in bulk. In the first place,
of goods, the quantity of goods
they use large quantities of each item
Quantity remains small. They buy only the
and must maintain inventories at a
necessary quantity of goods, which
level high enough that they will not
they need for regular use.
run out of stock. Secondly, it is
cheaper and more efficient to make
large-volume purchases.
Organizational purchasing is a rational
Consumer buying takes decision by
process because the purchasing
consumers themselves. Sometimes
Purchase behavior of organizations is guided by
they can consult with family members
Decision objective factors having to do with
and friends. They need not fulfill any
production and distribution. It takes
formality like organizational buying.
long time than consumer buying.
Organizational purchase criteria are
specifically defined. Organizational
Most of the consumers may not have
buyers usually have fewer brands to
adequate knowledge and information
choose from than do individuals, and
Market about market situation, available goods
their purchases must be evaluated on
Knowledge and services, etc. The educated
the basis of criteria that are specific to
customers may be aware and have
the overall needs of the organization.
knowledge about market and goods.
The organizational buyers have full
knowledge of market and suppliers.
Consumers buy many goods to use to Organizational buyers buy limited
Types of Goods
satisfy personal or family needs. goods to use to conduct business.
Many individuals are involved in the
buying process. Within large
organizations, rarely is one individual
Consumer buying behavior is effected solely responsible for the purchase of
Effect by age, occupation, income level, products for the purchase of products
education, gender etc. of consumers. or services. Instead, many individuals
and departments may be involved and
departments may be involved in the
buying process.

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

Bases Consumer Buying Behavior Organizational Buying Behavior

The consumer buying process is very
Buyers and sellers in the
simple. No need to fulfill any
Buying Process organizational market must maintain
formality. There is also no need to
extensive contact.
maintain extensive contact with sellers.

 Consumer products are :- eatable products, usable products etc.

 Industrial products are :- raw materials, fabrication parts and materials,
installation, accessories, equipments etc.

From the above , we conclude that without industrial buying production cannot be
done. If the production is not done then consumer will not be able to get their
wanted and needed things. If they will not get the things, they will not do the buying,
i.e. consumer buying will not be done.

Thus we can say that without Industrial buying, Consumer Buying cannot be done.
As Industrialists always try to fulfill the needs of consumers.

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

NATURE AND FACTORS AFFECTING INDUSTRIAL BUYING

Industrial buying behavior is the pattern of actions by a company involved in

manufacturing, processing and other heavy industry. Many of these companies are
required to make regular purchases as a means of supplying their businesses.
Although each company — and each industry — will have buying behavior affected
by its own set of factors, there are several main variables that can affect industrial
buying as a whole.

1. Demand

Perhaps the main driver of industrial buying is demand. The amount of buying that
an industrial concern will do is directly depended on the amount of business that
the company can expect in the near future. Generally, if a company expects higher
demand, then it will stock up on raw materials as a means of ensuring that it will be
able to meet consumer demand and maximize revenue.

2. Price

Buying patterns are also affected by the price of the materials the companies are
purchasing. When prices are higher or the company expects a decrease in the near
future, the company may choose to hold off making purchases, so as to save
money. This can involve some difficult decision making. For example, a company
that uses fuel in the production of its products may attempt to guess the direction of
oil prices.

3. Economy

In addition to current demand and the current prices for a product, industrial
companies may look to the economy as an indication of the future availability of
materials relative to the consumer demand for them. If the economy is trending
upward, the company may purchase more based on the expectation of a future rise
in sales, while a downward trending economy may push it to the opposite course of
action.

4. Technological Changes

In addition, industrial companies are heavily influenced by changes in technology

that affect both the provision of goods and their own requirements. For example, if
purchasing a piece of technology means that a raw material becomes cheaper to
use, then the company may choose to invest in the new technology. Similarly, the
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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

acquisition of new technology will often change the company’s buying habits, as the
technology will have different raw material requirements to run.

5. Political/Legal Factors

Government influence on the Industrial marketing environment. From the time of

Jawaharlal Nehru to the time of Mr. Atal Behari Vajapayee there has been major
influence of the Government in the industry to protect the Indian industries’ foreign
investment or for that matter, foreign participation of any kind has not been allowed
in the areas of defence, steel, drugs, fertilisers, machine tools etc.

More encouragement was given to small scale and cottage industry. Even the
banks were nationalised, the multinationals which were present in India till about
1980s were engaged in commerce, trade and finance or export of tea. Indian
Government felt that in areas where adequate Indian skills and capital are
available, there was no need for foreign collaboration.

In fact, in 1977 Coca-Cola was asked to wind up operations in India, and IBM was
to dilute equity to stay. Some companies like Alkali Chemicals, Dunlop, Goodyear
and Asbestos Cement were allowed to remain as they were operating in non-
priority areas. Today the Government having realised the importance has
liberalised in many areas.

Still controls the industries do not contribute to an extent the effective and fair
functioning of the economy. The Government acts as a regulatory agency in import
and export matters. It controls the tax and interest rates. It provides economic
stabilisation through control of inflation. It is environmentally and socially conscious.
It passes rules, regulations and laws from time to time to ensure that general public
interest is not compromised.

The Government has placed a large number of drugs with dubious justification
under the scanner. Doubts persist about safety of a host of drugs including
CISAPRIDE, the drug for night heart burn, and PPA, an ingredient in certain
paediatric preparations. The review of iron preparations containing zinc, amino
acids and vitamins decision could be of grave concern to many leading MNCs as
these drugs are high margin products.

The Government can also change the marketing environment by making changes
to its procedures for example Mr. Chandra Babu Naidu, Ex-Chief Minister of Andhra
Pradesh, has decided to experiment with online procurement in four of its
government departments.

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UNIT – III ( BBA – 406 ) CONSUMER BEHAVIOUR

Department E-purchase
Andhra Pradesh Technology Services All IT related procurement for the State
(APTS) Government
Andhra Pradesh State Road Transport Spares, Oil, Lubricants, bus body building
Corporations services and office products
All tenders of value more than Rs 1 crore,
Commissionerate of Tenders projects relating to irrigation, roads and
building
Drugs, All civil and medicare related
Andhra Pradesh Housing Infrastructure
products and services

The impact of this decision is that the industries supplying to the Government are
hoping to supply must gear up for IT invasion and must be able to bid and make
tenders through a computer. The marketing strategies will have to be adjusted to
accommodate these changes.

Since Government transcends all levels of the industrial environment, it is capable

of influencing and being influenced by environmental elements at all levels. Thus
industrial marketers must keep careful watch pending regulations to ensure that
their respective business plans will meet the government’s approval. Industrial
marketers must be constantly in touch with the laws, regulations and sanctions of
the Government.

REFERENCE & CREDITS

1. Various educational Websites.

2. https://indiafreenotes.com/
3. https://bbamantra.com/bba-notes/

PREPARED & COMPILED BY:- VIBHOR KUMAR

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