Consumer Behaviour

Chapter 1: Introduction and Determinants of Consumer Behaviour

1.1) Meaning of Customers & Consumers:

A customer is the individual/business/organization which buys the offering from the seller via a financial
transaction or monetary exchange. In simple terms – Customer is the buyer of the offering. Customers
are important because they drive revenues; without them, businesses have nothing to offer.
Example: A person buying a gift for someone from a gift shop - the person is a customer of the gift shop.
In general, businesses tend to focus on getting more customers as they help them grow and gain more
profits.
A consumer is an individual who is the end-user of the product/service offered by a business. In simple
terms - Consumer is the end-user who consumes the offering.
Example: Take a kid who recently got candy from his dad. Even though his dad was the customer who
bought the candy, this child is the consumer who ends up consuming the product.
1.2) Consumer Roles:
Consumers play an important role in society from the methods they use to research and review
products to their decisions on which brands to use and where to make purchases.
(a) Initiator: Consumers determine the products and services they need, whether they are shopping
for themselves, friends, family members or business clients. The media help to persuade, inform
and remind them about products and services that are available for consumption. Once a
consumer becomes interested in a product or service, regardless of the brand name associated
with it, he begins to gather information to determine if making the purchase is a reasonable,
wise- buying decision.

(b) Influencer: Consumers undoubtedly look to family, friends and colleagues for opinions when
they're making a purchase. A referral for a business or a personal experience with a product holds
more weight with a consumer than a well- orchestra print advertisement or commercial. In fact,
Business Wire reports that women often look to blogs and social networks to research products
before they make a decision to buy. Companies offer customers an opportunity to review their
services and products online, and consumers use this information to gauge quality, service,
features, benefits and pricing.
(c) Decider: Children, for example, may initiate the idea of a purchase by mentioning a new cereal
to a parent. The parent decides whether or not to make the purchase after researching the cereal
to determine its price, its availability and how healthy it is. Consumers who assume the role of a
decider have the financial authority to decide whether a good or service can be purchased.

(d) Buyer: Consumers purchase products and services with their money, a spouse's money, or by
using a company credit card. Whether they visit a store in person, make a purchase online or
place an order over the phone, the buyer gives a payment and receives a good or service in
exchange.

(e) User: Consumers typically use the products they buy, unless they make the purchase for a family
member, friend or colleague. Regardless of who makes the purchase, the user is the person who
ultimately consumes the good or service that's purchased by the buyer.
1.3) Consumerism:
Consumerism is the organized form of efforts from different individuals, groups, governments and various
related organizations which helps to protect the consumer from unfair practices and to safeguard their
rights. In a market economy, the concept of consumer is given the highest priority, and every effort is
made to encourage consumer satisfaction. However, there might be instances where consumers are
generally ignored and sometimes, they are being exploited as well. Therefore, consumers come together
for protecting their individual interests. It is a peaceful and democratic movement for self- protection
against their exploitation. Consumer movement is also referred as consumerism.
Definition:
“Consumerism is concerned with protecting consumers from all organizations with which there is
exchanged relationship. It encompasses the set of activities of government, business, independent
organizations and concerned consumers that are designed to protect the rights of consumers". McMillan
Dictionary (1985)
Importance of Consumerism:
1. Stop unfair trade practices
2. Provide complete and latest information.
3. Discourage anti-social activities
4. Implementation of consumer protection laws
5. Protect against exploitation
1.4) Demarketing:
Kotler and Levy define demarketing as "discouraging customers in general or a certain class of customers
in particular on either a temporary or a permanent basis".
Meaning:
Demarketing basically refers to when a company discourage its customers to buy the product produced
by them. It's because of shortage of supply want to promote their other products and the company is not
having so much profit with the sale of that product.
Example:
1. This happened in case of Tata Nano, when the demand for Tata Nano increased from its supply level
then Tata started promoting their other products and completely stopped the promotion of Tata Nano.
2. When Maruti A-star was launched, for the promotion of A-star Maruti started
discoursing its customers to buy Maruti Xtilo.

Demarketing may be adopted because of multiple reasons, some of which are listed below:
 The supply cannot meet the demand.
 Resources, especially natural resources, must be conserved.
 Cost of advertising for the product is extremely high.
 Inadequate or absent distribution channel.
 Price of selling in a particular locality is extremely high.
 Save the consumer from potential harm, such as from alcohol or tobacco.
2.1.0) Culture & Sub-Culture
2.1) Meaning, Characteristics, a Relevance to Marketing
Decision:
“CULTURE is the distinct way of life of a group of people and their complete design for living." Culture is
that complex whole which includes knowledge, belief, art, law, morals, customs and any other
capabilities and habits acquired by humans as members of society. Culture influences the pattern of
living, of consumption, of decision-making by individuals. It has certain characteristics and is transmitted
from one generation to another. It is a comprehensive concept and includes all those things that
influence an individual in his thinking and behaviour.
Characteristics of Culture:
(a) Culture is invented by 3 inter-dependent systems:
(i) Ideological system-mental system consisting of ideas, beliefs, values and ways of reasoning
(good or bad).
(ii) Technological system consists of skills, techniques to produce.
(iii) Organizational system (family and social class) coordinates behaviour.
(b) Culture is socially shared by human beings living in societies.
(c) Culture as similar yet different. Athletics, sports language music rituals are observed by all but are
different.
(d) Culture is acquired. It can be acquired from the family, from the region or from all that has been
around us while we were growing up and learning the ways of the world.
(e) Culture forms a boundary within which an individual thinks and acts. When one thinks and acts
beyond these boundaries, he is adopting a cross-cultural behaviour and there are cross-cultural

influences as well.

2.2) Sub-Culture:
While culture is defined as the "personality of a society", (inclusive of language, customs and traditions,
norms and laws, religion, art and music, etc), it is not entirely homogenous in nature. Not all people
within a social system, share the same language, religion, customs and traditions. Every society is
composed of smaller sub-units, homogenous within, and heterogeneous outside, all of which when put
together make a complex society. Such sub-units or sub-groups are known as sub-cultures; people within
sub-cultures possess distinctive sets of values, beliefs, customs and traditions etc.
For example, while we are all Indians, and our culture is Indian (with a common national language, Hindi,
and common festivals like Diwali), North Indians are different from South Indians. While North Indians,
celebrate Lohri, as a harvest festival in January, the South Indians celebrate Pongal as their harvest
festival at the same time. In other words, people within smaller units share the same language, religion,
customs and traditions; and, this would be different in smaller or larger magnitude to people in other
sub-units.
Types of Sub-Culture
Based on the varying criteria, there can be different types of sub-cultures. The important sub-cultural
categories are nationality, geographical location, religion, race and caste, gender and age.

 Nationality: Sub-cultures could be based on nationality. While we are all Asians, we are distinct
with respect to culture, and are different in terms of language, customs and traditions etc.
Thus, we are classified as Indians, Burmese, Nepalese, Pakistani etc.

 Geographical location: Within a country, we could be different across geography, climatic

conditions, regions and terrains, and density of population. This is more so in cases where the
country is large and borders spread across a huge population occupying a vast territory. People tend
to develop regional affinity and identification, and this gets reflected in the food they eat, clothes
they wear, interests they pursue, etc. As consumers, our needs are different and would translate into
various wants, for example, (i) differences in food habits (ii) differences in clothing, and demand for
cottons, woollens and silk.

 Religion: People also exhibit differences when it comes to the religions that they belong to. Hindus,
Muslims, Christians, Sikhs, Parsis etc. are all different from one another and have different values
and beliefs, customs and traditions etc. As consumers, they make purchase choices and purchase
decisions that are influenced by the dictates of their religious leaders, scriptures, and holy books. In
fact, many products/services are symbolically and ritualistically associated with religion. For
 example, as per Islam, non- vegetarian food must be "Halal", and this itself comprises a huge
segment that marketers across national boundaries are catering to.

 Gender: Because gender roles have an impact on acts of behaviour, gender constitutes an
important cultural sub-group. Males and females across all cultures are assigned different traits and
characteristics that make them masculine and feminine. They also perform different roles in society
and are two distinct sub-groups.

 Age: Infants, kids, teenagers and adolescents, adults and the aged, may all be looked up as distinct
sub-groups. They have different values and beliefs, and all this impacts upon their priorities in life.
Daily lifestyles, activities and interests, fashion and accessories, food and diet, etc. receive varying
priorities across the various sub-groups. For example, an aged person would prioritize health and go
in for nutritious home food as opposed to young man who would prioritize work and go in for fast
food.

3.1.0) Social Class

A social class is an open group of individuals with similar social rank. Social class influences people's
spending, saving, and credit practice. Perhaps the simplest model to define social class is a three-tiered
approach that includes the rich, the middle class, and the poor. Other models have as many as a dozen
levels. People in the same social class tend to have similar attitudes, live in similar neighbourhoods, dress
alike, and shop at the same type of stores.
3.1) Measurement of social class:
The measurement of social class as also the techniques to be used, have been a subject of debate.
Researchers have not been able to agree on the methodology that needs to be used for measuring social
class. A wide variety of tools and techniques have been used to measure social class. Broadly speaking,
the various techniques that are used are subjective measures, reputational measures, and objective
measures of social class.

 Subjective Measures: The subjective approach to measure social class requires a self-
assessment on the part of the individual who is asked to specify the class to which he belongs. In other
words, the individual self-perceives his social class in response to a question like, "Which one of the
following best describes your social class: the lower class, the middle class, or the upper class? People are
often conscious or shy or may even refrain from giving the true response and have a safe say by opting
for the middle class, when they should have been correctly classified as belonging to either the lower or
upper class. However, the problem with this approach is that it leads to a lot of responses that fall in the
mid-range (or the middle class).

 Reputational Measures: The reputational measure to measure social class, requires

independent informants from the society, to identify and make comments related to the social class
membership of people in the community. Assigning people in the community to the various class
categories based on his knowledge, expertise and experience. The methods lack reliability and has
proved to be impractical, primarily in studies related to marketing and consumer behaviour.
  Objective Measures: Objective measures make use of demographic and particularly
socioeconomic variables for assessing the social class of individuals. The researchers use
questionnaires that are administered to people in the community. Such questionnaires directly or
indirectly help in determining their social class. Questions relate to their address (so as to determine
place of residence), and particularly to the more important variables like occupation, income and
education. Such demographic and socioeconomic indicators help determine the social-class
membership.

3.2) Effect on lifestyle:

The life style that is consumer behaviour of various social classes differ widely. A person in lowest class is
able to buy only bare minimum requirements of life. In India and some other countries there are persons
'below the poverty line'. This class is not able to meet even basic minimum and live on the mercy of state
and/or social organizations for their shelter, education of children and meeting their day-to-day
requirements.

On the other extreme there are rich elites. But researchers have established that lifestyle of one social
class in terms of attitude towards life, activities (like visiting clubs, hotels) behaviours (liking or disliking of
certain products and activities), beliefs and behaviour tend to be similar. For instance, the rich class has a
small family. They are in the market for jewellery, antiques, homes, and foreign vacations. While small as
group they serve as a reference group to others to the extent that other social classes imitate their
consumption decisions.
4.1) Social Groups:
A social group consists of two or more individuals who share a set of norms, values or beliefs and have
certain implicitly or explicitly defined relationship with one another, such that their behaviour is
interdependent. Groups give an opportunity to individuals to learn and socialize. Marketers use the
knowledge of group influences when designing market strategy.

If one wants to be a member of the group, one has to conform to the standards of the group. Their
values and attitudes have to be appreciated and adopted, and one tends to buy and use the products
which the group uses and appreciates. More homogeneous groups, or group members having similar
characteristics are more susceptible to attitude changes than the groups whose members are less
homogeneous. Some individuals have a strong sense of identification with a group because they derive
strong material or psychological benefit by being associated with that group. Sometimes, there are
pressures of buying, known as conformity pressures, and one adheres to the norms of the group.
Conformity pressures can be noticed with norms set by schools and colleges, other membership
organization and military or police organization and the like. These can be exerted directly or indirectly on
the members of the group.
4.2) Reference Groups:
Reference Groups: Reference group is a group of people whom you refer to, while
making buying decisions. They help you in buying items like clothing, etc. Reference groups influence
consumer behaviour by building aspirations for the individual and, helping him to choose the product for
a particular lifestyle. They are small groups and consist of family, close friends, work groups, neighbours
or any other group of people you associate with. These groups regulate the lives and set standards for
norms and conduct.

Reference groups are considered a social influence in consumer purchasing. So, if a reference group
endorses a product, either through use or statements about the product, those that look to the group
will often purchase that product. On the other hand, if a reference group disapproves of a product, those
that associate with that group will probably not purchase the product.
5.1.0) Family
A consumer's family is one of the most significant factors because a family helps shape an individual's
attitudes and behaviours. One way to understand the family's impact on consumer behaviour is to
identify the decision maker for a purchase. A decision maker for a purchase can be a husband, wife, or
even a child, and sometimes decisions are made in collaboration. Often, the decision maker changes
based on the type of purchase or the size of the purchase. A new refrigerator, for example, is likely to be
a joint decision, while a week's groceries might be selected by a single member of the family.
1. Family Life Cycle and Purchasing Decisions: Another aspect of understanding the impact of
families on buying behaviour is the family life cycle. Most, though certainly not all, individuals and
families pass through an orderly sequence of life stages that can be used to understand their
purchasing patterns

 The bachelor stage: This stage can stretch up to 35 years of age. Some singles live with their
family, others live independently. They have an average age of about 24 and are free from worldly
cares, live an active and carefree life. They do not have financial obligations. They manage their
affairs themselves, and are fond of sports and other recreational activities.

 Newly married couples: Young no children (empty nest). After getting married, the life style
changes slightly. They lead a joint life style. They share new experiences and responsibilities. Start
spending on furnishing and household goods. They also tend to have a dual income and spend
heavily on outings, vacations, luxury, restaurants, meals, etc.
 Full nest 1: Young married with child. With the addition in family, purchases are concentrated on
baby foods, clothing, medical care, health products. A change is brought about in the lifestyle and
most activities revolve round the care of the child. Discretionary funds are also reduced.
 Full nest 2: Older married with children. More children lead to more expenses. Children start
going to school and there is more expenditure on books, stationery and college fees. Toys, bicycle,
insurances also become a part of the expenses, parents start spending less on themselves.
Full nest 3: Older married with dependent children. Income is high at this stage. Parents grow older.
They become experienced buyers and are less interested in new product purchases.

 Full nest 3: Older married with dependent children. Income is high at this stage. Parents grow
older. They become experienced buyers and are less interested in new product purchases.

 Empty nest: Older married with no children living with them. Financial position stabilizes and
there is no expense on children. The couple is free to enjoy their own pursuits and spend on luxury
or self-improvement items and medical care.

 Solitary survivor: Older single retired people. Retired people living alone after the death of a
partner. Life becomes lonely and income may reduce due to retirement. This again changes the
consumption pattern and living style of old people. Another point to note is that the family life cycle
concept segments the families on the basis of demographic variables, and ignores the psychographic
variables (families' interest and opinions) of family members.
 The stages at which families find themselves, affect the nature of the goods and services required,
their wants and consumption patterns, as well as the volume of consumption on specific products.