Unit 1 Introduction to Consumer Behavior

Who is a Consumer?

Any individual who purchases goods and services from the market for his/her
end-use is called a consumer. In simpler words a consumer is one who consumes
goods and services available in the market.

What is consumer Interest?

Every customer shows inclination towards particular products and services.

Consumer interest is nothing but willingness of consumers to purchase products
and services as per their taste, need and of course, pocket.

Types of consumers:

 Personal consumers
 Organizational consumers

Definition

“Consumer behaviour refers to the actions and decision processes of people who
purchase goods and services for personal consumption.”

James F Engel, Roger D Blackwell and Paul W Miniard

“The behaviour that consumers display in searching for, purchasing, using,

evaluating and disposing of, if products and services that they expect will satisfy
their needs.”

Leon G Schiffman and Leslie Lazar Kanuk, ‘Consumer Behaviour’, Prentice-

Hall of India, 4th ed. 1991
Consumer behaviour has two aspects: the final purchase activity which is visible
to us and the decision process which may involve the interplay of a number of
complex variables not visible to us.

The study involves what consumer’s buy, why they buy it, how they buy it, when
they buy it, where they buy it, how frequently they buy it and how they dispose of
the product after use.

People might play any of several roles in the buying decision process;

1. Initiator: the person who first suggests or thinks of an idea of buying a

particular product or service i.e., who initiates the buying decision.

2. Influencer: a person whose views or advices carries some weight in making

the final decision.

3. Decider: is the one who ultimately makes a buying decision or any part of it,
i.e. Whether to buy, what to buy, where to buy. One or more people may be a
decider.

4. Buyer: the person who makes the actual purchase.

5. User: the person who uses or consumes the product.

Nature of Consumer Behaviour

1. Process: Consumer behaviour is a systematic process relating to buying

decisions of the customers. The buying process consists of the following steps;

 Identification to buy the product.

 Information search relating to the product.
 Listing of alternative brands.
 Evaluating the alternative (cost-benefit analysis)
  Purchase decision.
 Post-purchase evaluation by the marketer.

2. Influenced by Various Factors: Consumer behaviour is influenced by a

number of factors. The factors that influence consumers include marketing,
personal, psychological, situation based, social, cultural etc.,

3. Different for all Customers: All consumers do not behave in the same
manner. Different consumers behave differently. The difference in consumer
behaviour is due to individual factors such as nature of the consumer’s life
style, culture, etc.,

4. Different for Different Products: Consumer behaviour is different for different

products. There are some consumers who may buy more quantity of certain
items and very low or no quantity of some other items.

5. Region Bounded: The consumer behaviour varies across states, regions and
countries. For instance, the behaviour of urban consumers is different from that of
rural consumers. Normally, rural consumers are conservative (traditional) in their
buying behaviour.

6. Vital for Marketers: Marketers need to have a good knowledge of consumer

behaviour. They need to study the various factors that influence consumer
behaviour of their target customers. The knowledge of consumer behaviour enables
marketers to take appropriate marketing decisions.

7. Reflects Status: The consumer buying behaviour is not only influenced by the
status of a consumer, but it also reflects it. Those who own luxury cars, watches
and other items are considered by others as persons of higher status.
8. Spread-effect: Consumer behaviour has a spread-effect. The buying behaviour
of one person may influence the buying behaviour of another person. For instance,
a customer may always prefer to buy premium brands of clothing, watches and
other items etc. This may influence some of his friends, neighbours, colleagues.
This is one of the reasons why marketers use celebrities like Shahrukh Khan,
Sachin to endorse their brands.

9. Standard of Living: Consumer buying behaviour may lead to higher standard

of living. The more a person buys the goods and services, the higher is the
standard of living.

10. Behaviour Keeps on Changing: The consumer’s behaviour undergoes a

change over a period of time depending upon changes in age, education and
income level. Etc. for instance, kids may prefer colourful dresses, but as they grow
up as teenagers and young adults, they may prefer trendy clothes.

Scope of Consumer Behaviour

Consumer behaviour was a relatively new field of study during the second half of
1960s without a history or research of its own. It is in fact a subset of human
behaviour and it is often difficult to draw a distinct line between consumer-related
behaviour and other aspects of human behaviour. The discipline of consumer
behaviour has borrowed heavily from concepts developed in other disciplines
of study such as psychology, sociology, social psychology, cultural
anthropology and economics.

1. Psychology is the study of the individual which includes motivation,

perception, attitudes, personality and learning theories. All these factors are
critical to an understanding of consumer behaviour and help us to comprehend
consumption related needs of individuals, their actions and responses to different
promotional messages and products and the way their experiences and personality
characteristics influence product choices.

2. Sociology is the study of groups. When individuals form groups, their

actions are sometimes quite different from the actions of those very
individuals when they are operating alone. The influences of group
memberships, family and social class on consumer behaviour are important for the
study of consumer behaviour.

3. Social psychology is a combination of sociology and psychology and studies

how an individual operates in a group. It also studies how those whose opinions
they respect such as peers, reference groups, their families and opinion
leaders influence individuals in their consumption behaviour.

4. Cultural anthropology is the study of human beings in society. It explores the

development of core beliefs, values and customs that individuals inherit from
their parents and grandparents, which influence their purchase and
consumption behaviour. It also studies subculture and helps compare consumers
of different nationalities and cultures.

5. Economics: An important aspect of the study of economics is the study of how

consumers spend their funds, how they evaluate alternatives and how they
make decisions to get maximum satisfaction from their purchases.

Applications of Consumer Behaviour (Extra)

Consumer behaviour principles are applied in many areas of marketing as

discussed below:

1. Analysing market opportunity: Consumer behaviour study helps in

identifying the unfulfilled needs and wants of consumers. This requires
examining the trends and conditions operating in the marketplace, consumers’
lifestyles, income levels and emerging influences.

2. Selecting target market: A review of market opportunities often helps in

identifying distinct consumer segments with very distinct and unique wants
and needs. Identifying these groups, learning how they behave and how they make
purchase decisions enables 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.

4. Use in social and non-profits marketing: Consumer behaviour studies are

useful to design marketing strategies by social, governmental and not-for-profit
organisations to make their programmes such as family planning, awareness
about AIDS, crime against women, safe driving, environmental concerns and
others more effective. UNICEF (greeting cards), Red Cross and CRY etc. make
use of consumer behaviour understanding to sell their services and products and
also try to motivate people to support these institutions.

Types of Consumer Behaviour (Extra)

There are four main types of consumer behaviour:

1. Complex buying behaviour: This type of behaviour is encountered when

consumers are buying an expensive, infrequently bought product. They are
highly involved in the purchase process and consumers’ research before
committing to invest. Imagine buying a house or a car; these are an example of a
complex buying behaviour.
2. Dissonance-reducing buying behaviour: The consumer is highly involved in
the purchase process but has difficulties determining the differences between
brands. ‘Dissonance’ can occur when the consumer worries that they will regret
their choice.

3. Habitual buying behaviour: Habitual purchases are characterized by the fact

that the consumer has very little involvement in the product or brand category.
Imagine grocery shopping: you go to the store and buy your preferred type of
bread. You are exhibiting a habitual pattern, not strong brand loyalty.

4. Variety seeking behaviour: In this situation, a consumer purchases a different

product not because they weren’t satisfied with the previous one, but because they
seek variety. Like when you are trying out new shower gel scents.

Importance of the study of consumer behaviour (Extra)

 The study of Consumer behaviour helps the marketers to take vital

decisions on
 marketing strategies for launching their new product.
 To design the optimal product or service for customers.
 To determine where the product or Service should be available that
would easy for the customers to buy.
 To determine what price will the customers give up purchasing product or
service?
 To determine which method of Promotion would be most effective for
getting the customers to buy a product.
 It helps in changing the behavior of the consumers.
 To improve performance of the organization.
 To achieve the organizational objectives
  How customers are influenced by their immediate surroundings, family
members, friends etc.
 Consumer preferences are changing and become highly diversified.
 Rapid introduction of new products with technological advancement
 To sell products that might not sell easily.

STP (Segmenting, Targeting, Positioning)

The study of consumer behaviour may be applied to segment the market, select the
target market and position the product or service offering. Identifying the target
segment, understanding their needs, providing the right product and service
offering and communicating about the offering – all of these help a marketer
succeed in the long term and ensure his survival and success in a changing
environment.

a) Segment the market: The marketer needs to identify distinct customer

groups with needs and wants, classify them on basis of descriptive
characteristics and behavioural dimensions. The descriptive characteristics may
take forms of age, gender, income, occupation, education, family size, family life
cycle, gender, lifestyle, personality, religion, generation, geography, nationality,
and social class. The behavioural dimensions take forms of benefits, uses, use
occasion, usage rates, and loyalty status.

b) Select target market: The marketer then selects one or more markets to
enter. The segment(s) that should be targeted should be viable; there should be a
fit between the market attractiveness and the company’s objectives and resources.
The marketer would be able to assess the viability of a segment on the basis of the
following criteria, viz., measurability, substantial ability, accessibility,
differentiability, and actionability.
c) Position: the product offering in the mind of the customers: The marketers
should be able to communicate the distinct and/or unique product characteristics.

Market Segmentation

According to Philip Kotler, “Market segmentation is the sub-dividing of market

into homogeneous sub-sections of customers, where any sub-section may
conceivably be selected as a market target to be reached with a distinct marketing
mix.”

Bases for segmentation

Characteristics or Criteria of Effective Segmentation

1. Measurable:

Market segments are usually measured in terms of sales value or volume (i.e., the
number of customers within the segment).

2. Accessible

The segment should be such that the product can reach the segment via distribution
channels and the promotions can reach them via proper media.

3. Substantial/Size

Substantial refers to the fact that the market segments are large or profitable
enough to serve.

- Some segments have one or few customers but the marketers can sell huge
volume of their products to these customers.

- For example: Tomato Ketchup goes to different fast-food shops such as Pizza
Hut, KFC etc. in huge volume rather than individual customers.

4. Actionable

Actionable refer to the fact that effective programs can be designed and
implemented for attracting and serving the segments.

5. Differentiable

Differentiable refers to the fact that the segments are conceptually distinguishable
(separable from each other) and respond differently to different marketing mix
elements and programs.
- For example: Married and Unmarried women can respond differently to different
products such as Clothes, cosmetics, household products, etc. Again, Consumption
of Students and Executives is quite different.

Target Market (Targeting)

A target market refers to a group of potential customers to whom a company wants

to sell its products and services.

This group also includes specific customers to whom a company directs

its marketing efforts.

Identifying the target market is an essential step for any company in the
development of a marketing plan.

Strategies for Reaching Target Markets

1. Undifferentiated marketing/ Mass marketing

Strategy that focuses on producing a single product and marketing it to all

customers; also called mass marketing.

For example, toothpaste isn't made specially for one consumer, and it is sold in
huge quantities.

2.Differentiated marketing

Strategy that focuses on producing several products and pricing, promoting, and
distributing them with different marketing mixes designed to satisfy smaller
segments.
For example, a business selling organic dog food is looking to target a specific type
of person – a health conscious, animal loving and eco-friendly individual.

3. Concentrated Marketing/ Niche Marketing

Focusing marketing efforts on satisfying a single market segment; also called niche
marketing.

Approach can appeal to small firms or to firms that offer highly specialized goods
and services.

For example, the manufacturer of Rolex watches has chosen to concentrate on the
luxury segment of the watch market.

Positioning

Positioning is the act of designing the company’s offering and image to occupy a
distinctive place in the target market’s mind.

You can position your product by following.

 By Product Attributes and Benefits

 By Price and Quality
 By Use and Application
 By product user
 By product Class
 By Competitor
 By symbols

What is Product Differentiation?

Product differentiation is simply the characteristics that define your product and
make it unique to customers.

You may hear it called the unique selling proposition or abbreviated as the USP.

You can differentiate your product by following.

Customer Based Brand Equity (CBBE) Model

Customer Based Brand Equity or the CBBE Model explores the overall brand
equity through the customer perspective in order to create a strong and a
sellable brand in the market. It was first proposed and developed by marketing
professor and expert Kevin Keller in 1993. The CBBE Model has 4 distinct levels
across 6 branding components.

There are 3 main models of assessing and understanding the brand equity-

 Financial based
 Customer based and
 Employee based

CBBE model focuses on the customer's perspective.

Importance of Customer-Based Brand Equity (CBBE) Model

Keller's CBBE model states that creating a positive and strong brand image or
equity requires focusing on customers and how they perceive, experience and
position the brand in their mind. The overall brand identity of the products or the
brand should be such that the customers respond positively to it. The CBBE model
helps in making a strong brand equity from customer's perspective so that the
brand becomes an important brand in the category and leads to higher sales of the
products. The model helps to see a brand from various factors so that the overall
brand equity can be created from customer's perspective.

The 4 Stages or Levels in the Customer-Based Brand Equity (CBBE) Model

There are 4 levels in the Customer based Equity Model - Identity, Meaning,
Response and Relationships. The stages are made up of 6 components which are
discussed after the stages.

Stage 1 - Identity

Brand identity is where the brand salience (noticeable or important) is established

so that the customer is aware about the brand and makes it part of the consideration
set. Brand identity is the first step where a company puts together different brand
elements (name, logo, colour etc. that create recognizable image for your
business) in order to create a positive brand image. The expected output is
enhancing image, awareness and recall.

Stage 2 - Meaning

This stage in the model talks about the Performance and Imagery of the brand.
This is still controlled by the brand managers in order to create a positive brand
experience and makes sure that the brand meets the customer requirements as
expected with a positive brand experience. This stage leads to the third stage called
response.

Stage 3 - Response

A response stage is where the customers now respond to brand's existence along
with its performance and image. The response is in terms of first the judgements
and then the feelings. Positive Feelings about a brand is big win for a brand and
as per this model leads to loyalty and eventually improvements in sales and repeat
customers

Stage 4 - Relationships

This is the final stage in the CBBE model where the customer forms a
relationship with the brand. The customer is loyal and shows positivity towards
the brand. Few brands manage to reach this stage in the market. More than
customer loyalty, brand advocacy is a true measure of a strong brand relationship.
6 Constituents of the CBBE Model

As per the stages above the following 6 components are part of 4 levels:

1. Brand Salience

Salience is about brand awareness, identification and recall from customer's

perspective. Salience should be such that customer considers the brand when
planning a purchase.

2. Performance

Performance in the model talks about the ability of the brand to meet the needs
as well as wants of the customer in terms of functions, branding, packaging,
pricing etc.

3. Imagery

Imagery deals the with the overall brand image in the mind of customers
through identity created in the way customer identifies the brand as positive. The
imagery should match and appeal the target audience so that the customer can
identify with it through his or her own experiences

4. Judgements

After imagery, an important and a higher-level component of the CBBE is brand

judgement. It talks about complex image of brand in the mind of the customer
based on one's own opinions and decisioning. It is built on top of the performance
and imagery of the brand

5. Feelings

Similar to judgements, brand feelings are also complex form of creating brand
equity. Feelings can be of fun, adventure, warmth, security etc. on associating
with the brand. Feelings and judgement together form an important layer of the
CBBE model as seen in the image.

6. Resonance

Brand Resonance is the ultimate step or stage in the CBBE model. Built on top of
salience, performance, imagery, judgement and feelings, the Resonance is where
the customer is totally in sync with the brand equity. The customer is not only
loyal to the product but becomes an advocate of the product and responds to the
changes perfectly.

Customer-Based Brand Equity (CBBE) Model Example

Let us take an example of Apple iPhone which is a good example to explain the
model. It has strong brand awareness and salience in the market. Customers or not,
people are aware about the product. In the second stage or level, performance and
imagery of iPhone brand is positive in the loyal customer base which leads to good
Response every time new model or version is launched in the market. At every
launch, the customer base upgrade the models mostly. The iPhone customers are
well known to be very loyal and brand advocates.

What is Brand Equity?

Brand Equity is a qualitative measure of the brand’s positive recognition or

goodwill in the minds of the consumers considering the brand as an independent
entity.
Brand Equity is the tangible and intangible worth of a brand. The degree of
premium that a brand can charge on its offering is a direct measure of the equity it
possesses with its customers.
Brand Equity is kind of power that the brand has over its competitors or the generic
brands and is developed over time. It represents the overall value of the brand in
the market.

Importance of Brand Equity

Brand Equity is quite important in the fact that it helps one brand gain importance
and additional revenue as when compared with the competitor. Brand Equity
is a complex parameter which takes into account a lot of parameters like brand
image, brand identity, brand awareness, brand loyalty, brand association etc. It is
mainly subjective and qualitative but can be represented quantitatively.

Brand Equity is driven by marketing strategy & efforts over the years and
consistency which results in customer perception and brand knowledge which may
be positive or negative. Positive perception would result in increase in brand
equity. Effectively communicating the product benefits to the customers helps in
brand building. Companies spend huge sums of money in advertising using
integrated marketing communications (IMC) channels to promotes its goods &
services.

Elements & Components of Brand Equity

Brand equity is a function of several other qualitative parameters which a customer

can associate with a brand.

Some of the main components or elements of brand equity are as follows:

1.Brand Image
The image which is formed in customer's mind. Brand image is the most
important parameter when it comes to creating brand equity.

2.Brand Identity
The image what the company is trying to form. Brand identity is created by the
company to try to form positive brand image but it depends on how customers
perceive.

3.Brand Awareness
Awareness is what is the level of awareness about a brand on products and
services. Awareness should be high for good brand equity.

4.Brand Loyalty
How loyal is customer to the brand and will buy the products again even if
options are there?

High brand switching can lead to less brand equity.

5.Brand Association
Does the customer associate brand to a positive attribute or not? Sometimes
association something existing like event or celebrity can contribute to brand
equity.

6.Customer Perception
What is the overall perception and experience of the customer related to the
brand?

Since brand equity gives a qualitative outlook, it is quite complicated to define it

through numbers or a value.
Steps to Calculate & Measure Brand Equity

Brand equity is a subjective concept based on customer & market perception.

Measuring brand equity can be done by both qualitative research as well as
quantitative research. Brand Equity can be measured on the basis of three
important parameters which are:

1.Consumer Metrics
This measure of brand equity focuses on evaluating brands & products on the basis
of factors like customer perception, attitude, belief, brand association etc.

2.Financial Metrics
Financial factors like revenue, profits, cost of new acquisition, growth, market
share etc. help in measuring brand equity.

3.Strength Metrics
The strength of the brand in terms of brand recall, brand awareness, brand loyalty
etc. are used in the measurement of brand equity.
All the above data can be collected by marketers using consumer research where
customers can be given surveys or questionnaires to have their feedback.
Qualitative feedback can be open-ended and other factors can be given weights
which can help in the calculation of overall brand equity. Creating brand equity is a
gradual process & takes years of efforts in establishing a particular brand image or
perception in the mind of the consumer.

Example of Brand Equity

Some examples of brand equity are as follows. Consumers pay more for a Garnier
beauty product than another local product. A brand can also have negative equity
in cases where it does not fit well with its consumers. As an example, Tata Nano
users reported some fire incidents with the product which led to its negative equity
for a while.

Since brand equity is based on several parameters like brand image, brand identity,
customer perception etc., it is primarily a qualitative parameter for a brand or
company.