Introduction to study of consumer behaviour

Definition of Consumer Behavior:

The behavior that consumers display in searching for, purchasing, using,
evaluating and disposing of products and services that they expect will
satisfy their needs. (Schiffman & Kanuk, 2004)
The decision process and physical activity engaged in when evaluating,
acquiring, using or disposing of goods and services.
(Loudon & Dells Bitta, 2002)
Consumer behaviour refers to the actions and decision processes of
people who purchase goods and services for personal consumption. It
includes those actions directly involved in obtaining, consuming and
disposing of products and services, including the decision processes that
precede and follow these actions. (Engel, Blackwell, Miniard, 1990).
Hence, Consumer behavior may be defined as the interplay of forces
that takes place during a consumption process, within a consumer’s self
and his environment and has the following characteristics:
Cont.
• This interaction takes place between three elements, namely knowledge (cognition), feeling
(affect) and action (behavior).
• It continues through pre-purchase activity to the post purchase experience.
• It includes the stages of evaluating, acquiring, using, and disposing of good and services.
Cognition: This includes within its domain the ‘knowledge’ information processing and thinking
part; it includes the mental processes involved in the processing of information, thinking and
interpretation of stimuli (such as people, objects, things, places and events).
Affect: Affect is the ‘feeling’ part. It includes favorable or unfavorable feelings and corresponding
emotions towards a stimulus (towards a good or service offering or a brand).
Behavior: Behavior is the visible part. This could be both the intent to purchase as well as the
purchase activity: to buy or not to buy.
The study also involves the physical process (transaction) and the cognitive process (decision
making) of buying, using and disposing of goods and services. Such decisions are surrounded by
psychological determinants and sociological influences that affect the manner in which people
think, feel and select between different product or brand alternatives.
Why study Consumer Behavior
The subject of consumer behaviour is viewed as an edifice of the marketing
concept, an important orientation in marketing management.
Knowledge of consumer behaviour can help the marketer understand, predict and
control the consumption patterns and behaviour of people.
The study helps them understand the internal (individual determinants) and
(external factors) forces that impel people to act out different consumption pattern
and behaviours.
With the advances in technology, consumers today are aware and more informed
than in earlier times. The principles that worked earlier are no longer valid today.
People are no longer restricted to local and national media; communication
channels are open through satellite television and the internet. Moreover, with the
globalization, and the world tending to become global community, there has been
change in the socio-economic and cultural environment. This is resulting in changes
in tastes and preferences as well as consumer lifestyle.
Nature and Scope of Consumer Behavior
During the middle of the 20th century, consumer behavior was studied with an
economic perspective, with major explanations being provided by the
microeconomic theory. However, during the later part of the 20th century, it was
realized that explaining consumer behavior purely with an economic perspective
was inadequate. Marketers wanted to understand why people behaved differently
towards goods and services, and towards same marketing mix or the same
marketing program. Even the same person behaved differently at different times. It
was realized it was important to understand consumers, the manner in which they
behaved, and why they behaved like that. It was realized that consumer behavior
was much more complex and explanation to behavior could be found from
interdisciplinary subjects such as psychology, sociology, social psychology and
anthropology. This led to the emergence of consumer behavior as an
interdisciplinary subject.
Characteristics of consumer behavior include the following:
1. Consumer behavior involves a process of exchange between the buyer and the
seller, mutually beneficial for both.
Cont.
2. Consumer behavior is dynamic in nature. The three components of cognition,
affect, and behavior of individual alone or in group, keep on changing. So does the
environment. There is continuous interplay or interaction between the three
components themselves and with the environment. These influence consumption
pattern and behaviors.
3. The subject can be studied at micro or macro levels depending upon whether
consumer behavior is analyzed at the individual level or at the group level.
4. The subject is interdisciplinary. It has borrowed heavily from psychology,
sociology, social psychology, anthropology and economics.
5. The subject is science as well as an art. It uses both (i) theories borrowed from
social sciences to understand consumption behavior and (ii) quantitative and
qualitative tools and technique to understand and predict consumer behavior.
Cont.
The scope of consumer behavior includes within its ambit the answer
to the following:
• ‘What’ the consumers behaviour buy: goods and services
• ‘Why’ they buy it: need and want.
• ‘When’ do they buy it (time): day, week, month, year and occasions.
• ‘Where’ they buy it: place
• ‘How often they buy’ it: time interval.
• ‘How often they use’ it: frequency of use.
Consumer behavior and Marketing concept
The marketplace that we witness today has witnessed an evolution in terms of its
orientation and perspective.
After the second world war, the demands for goods and services increased, thereby
leading to a situation where demand exceeded supply. This made the seller more
powerful and led to the production concept, which gradually gave way to the
product and the selling concept.
Production concept: This concept existed between 1850 to the 1920s.
• According to this perspective, consumers would prefer goods that are easily
accessible and inexpensive.
• The seller would benefit if the goods were made widely available and the cost
kept low.
• Thus, the business operated with this perspective focused on (i) mass production
and mass distribution, thereby achieving economies of scale and production-
distribution efficiency and (ii) low cost.
Cont.
Product Concept
The production concept gradually gave way in the 1920s to the product concept, which remained
popular until 1930s.
According to this concept,
• Consumers would prefer goods that have unique features,
• Are high on utility and performance,
• And are good in quality.
The businesses that operated with this concept focused on making good products, and continually
improving upon them.
Selling concept
The next stage in the evolution phase was the selling concept. The concept was popular in the
period between the 1930s and the 1950s. This concept arose because few years before there was
trend of increased supply over demand. It was realized that products manufactured needed to be
sold. The seller realized that buyers exhibited a kind of sluggishness or resistance to purchase goods
and services. This displayed a kind of ‘buyer inertia’ that have to be dealt with forceful and
aggressive selling and promotion effort. Thus, this stage of evolution witnessed a change in focus
from the product to the selling effort.
In all the stages discussed customer needs and wants have been ignored.
Cont.
In the 1950s, the marketplace started getting competitive, it was realized by marketers that to
sustain themselves, it was necessary to have a ‘customer focused’ approach.
It was important that customer needs and wants are determined, and goods and services designed
accordingly, to bring customer satisfaction. This led to marketing concept, whish gradually given way
to societal marketing, customer and holistic marketing concept.
Marketing concept
• This concept is customer-oriented approach to conducting business.
• According to the marketing concept, the only way that a business could achieve profits, and
continually do so, was by following a ‘customer-focused’ approach with the ultimate aim of
customer satisfaction.
• To achieve success and survival for any marketer was to determine the needs and wants of the
target segment and design a marketing mix to satisfy customer in a manner more effective and
efficient than that of the competitors, instead of finding right customer for the product.
• The objective was to create, deliver, and communicate value in a manner that was essentially
customer centric.
Cont.
Societal Marketing concept
With importance being given to (i) public policy, (ii) social, moral and ethical
issues, and (iii) environmental concerns, there was shift in focus, and the
marketing concept was enlarged in scope and practice to include social, ethical,
and environmental concerns.
The scope of business was broadened in addition to customer satisfaction
through identifying needs and wants of the target segment to an extent of
enhanced social and ethical well being and preserved environmental concerns.
It is being realized that business organization need to be socially responsive and
environmentally sensitive.
Use of recyclable, bio-degradable, nonpolluting products and waste
management are increasingly encouraged by socially responsible marketers.
Cont.
Customer Concept
The marketing concept has further evolved into the customer concept, something
that has transformed the manner in which businesses are conducted. Termed as
‘customization’, the focus is not on the needs and wants of the target segment, but
the needs and wants of ‘individual customers.
A large number of companies today are designing their marketing mix as per the
needs and wants of the individual customer.
This is a new marketing paradigm, which focuses on the needs and wants of an
individual, the objective being ‘customer delight’. The outcome of customer delight
can be in terms of earning profits through customer share, customer loyalty, and
customer lifetime value. The concept of customer relationship management,
popular among many big organizations today, is the outcome of customer concept.
Cont.
Holistic Marketing Concept
The holistic marketing concept attempts to bring everybody in the organization together and
integrates the system while acknowledging the breadth and interdependencies of the various parts
of the marketing function as well as the overall organization.
Today, businesses aim at long-term relationships, both at the back-end (with their suppliers and
vendors) and at the front-end (with their distributors and customers).
Moreover, internal integration within the marketing department and external integration with other
departments in the organization have to be realized.
From the holistic marketing perspective, while determining and implementing marketing strategy,
the overall organization and its stakeholders should be taken into considerations. The four elements
of the holistic marketing concepts are
(i) Relationship marketing, with suppliers, channel members, and customers;
(ii) Integrated marketing, among the marketing department and the 4Ps
(iii) Internal marketing, within the marketing department and across other departments and
(iv) Social marketing, with respect to the society, law, community and the environment.
Cont.
• It was the evolution of the marketing concept in the 1950s that the study of
consumer behavior formally began.
• They both moved parallel and provided impetus to each other.
• Consumer behavior emerged as a separate field of study in 1960s. While the
marketing concept evolved further into more customer- focused orientations
towards the marketplace.
• Initially, the focus lay in the marketers attempts to study the causes of consumer
behavior. The assumption was that if they could identify the reasons behind
consumption behavior, they would be able to predict it. The emphasis was to
predict consumer behavior, and approach came to be known as ‘positivism’.
• Gradually, the focus of study changed; the marketers wanted to understand the
customer better, and this approach came to be known as ‘interpretivism’.
Customer, Client and Consumer
The three terms ‘customer’, ‘client’, and ‘consumer’ are often used interchangeably. This is
because they all go through the buyer decision making process and they all buy goods and
services.
• In the initial phase, right up to the seller concept, the seller was more powerful.
• What ever was offered to the ‘buyer’ the ‘buyer’ had to accept.
• The choice of goods and services that the buyer could choose from was limited.
• The power dynamics was thus tilted in favor of the seller.
• Buyers needs and wants, as also product choices and preferences, were ignored.
• The relationship between ‘buyer’ and ‘seller’ was formal and transactional in nature.
• The objective of the seller was to sell his goods and services to the ‘buyer’ and make
profit.
This was the phase where the ‘buyer’ could be called a ‘customer’, where the power
dynamics was in favor of the sellers.
Cont.
With the change in time, as the marketing concept emerged and evolved into the
customer and the holistic marketing concept, the ‘seller’ realized that in order to
sustain business it was necessary for him to satisfy the ‘buyer’.
• The buyer’s need-want-satisfaction began to assume more importance than
profit making.
• Gradually, the seller also began to realize the importance of loyalty and long-term
relationship.
• It was recognized that the formal transactional approach had to give way to the
informal long-term relational approach.
Thus, began a phase where the ‘buyer’ could aptly be called a ‘consumer’, a term
that was less formal and more value-adding, and referred to one who paid money
to consume the goods and services produced by a seller, and was also the end user
of the same. However, the term ‘customer’ is still in usage, and in common
parlance refers to buyers who are loyal to a brand /store/company or patronize the
same.
Cont.
Further, it was realized that for certain kinds of businesses, especially in industrial
or organizational buying (B2B), where transactions occurred between one business
and another, relationship could not be defined informally. Thus, the ‘buyer’ in such
services was addressed to as a ‘client’.
The changing Marketing Scenario
The marketing environment is changing at a fast pace and thereby raising issues that a marketer
must address. The current marketing environment has witnessed developments that a marketer
must keep as a backdrop against which consumer behavior needs to be understood.
The following are some of the things to keep in mind:
i) Consumers today have wider access to information than ever before. The internet is a
revolution in itself; information is easily available, and often shared between people.
Customer are already well informed about the product and services before the marketer
attempts to communicate. Interpersonal communication via the internet or word-of-mouth is
quick and fast and often considered more trustworthy than marketing communication.
Attitudes are formed and purchase decisions made even before a customer enters the store. It
is becoming difficult for marketers to ‘push’ goods and services on to the aware and intelligent
consumer.
ii) The consumer is powerful, ever demanding, and often assertive. The power dynamics has
shifted in favor of the large number of buyers, with varied needs and wants. Competition is
immense, and marketers are fighting tooth and nail to gain larger market share. Marketers
have realized, they need to deliver the desired value in a manner that is more efficient and
effective than that of the competitors. Companies today reward their loyal customers in
various ways- with points that the customers can redeem later on.
Cont.
iii) The earlier pattern of consumer decision making, which was essentially socially
directed and collective in nature, has evolved into a system that is ‘me and I’, rather
than ‘we and us’. There has been a shift towards individualism. Marketers have begun
to adapt to this change through ‘customization’ of goods and services. Today, interior
designing, apparel-wear design, as well as jewellery design are customized.
iv) Online shopping is on the rise. However, its diffusion into the Indian social system is
restricted to (a) certain product categories and (b) consumers with particular
demographics. In online shopping, consumers search for information, compare
various alternatives and make the final choice. Ordering and payment is also made
online.
v) The key to success is not ‘customer satisfaction’, but customer delight. The marketer
can not make a stop at meeting customer needs and satisfying them. In order to catch
the customer unaware with a pleasant surprise, to ‘delight’ him, it is essential that
innovations are made, and newer goods and services are launched at a continuous
pace. Nestle, Unilever, Samsungs and Google, for example, have been popular brands,
and these companies have provided people with delightful experiences.
Application of Consumer Behavior
An understanding of the study of consumer behaviour is necessary for the long-term success and survival
of a firm. Consumer behaviour is viewed as the edifice of the marketing concept. The knowledge of
consumer behaviour would help formulate appropriate marketing strategies for a firm. It would help
tailor a suitable marketing mix to be able to meet the needs of the consumers in a better manner.
Consumer behaviour has a number of applications, and the main application bases are as follows:
1. Analysing the environment
Knowledge of consumer behaviour can be applied to help identify opportunities and fight threats. The
opportunities could be in terms of newer customers, newer markets and unfulfilled needs and wants. The
threat could be fought by developing and implementing appropriate marketing strategies to ‘best-fit’ the
environment.
Marketing strategies need to be dynamic and constantly evolving, keeping in view the uncertainty in the
environment.
2. Segmentation, targeting, and positioning
The study of consumer behaviour may be applied to 1. identify segments in the market, 2. select target
market(s) and 3. position the goods or service offerings. Identifying the target segment, understanding
their needs, providing the right goods and services, and communicating about the offerings- all of these
help a marketer earn profits, and grab a larger market share.
Cont.
1. Identifying segments in the market
The marketer needs to identify distinct customer groups with certain needs and wants,
based on their descriptive characteristics and behavioral dimensions. The descriptive
characteristics may take the form of age, gender, income, occupation, education, family
size, family life cycle, lifestyle, personality, religion, geography, nationality and social class.
The behavioural dimensions take the form of benefits, uses, use occasion, usage rates and
loyalty status.
2. Select the target market
It is on the basis of consumption behavior of the segment that a marketer would select one
or more markets to enter. The segment targeted should be viable and should be a fit
between the market attractiveness and the company’s objectives and resources.
3. Position the product offering in the mind of the customers
The marketers should be able to communicate the distinct or unique product
characteristics.
Cont.
3. Designing the marketing strategy
An understanding of consumer behavior would enable marketers to design appropriate
marketing strategies. There exists interrelatedness between the consumer, the
environment, and the marketing strategy. It is basically setting up goals and then achieving
them through the design of an appropriate marketing mix.
4. Designing the marketing mix (4 Ps)
The study of consumer behaviour may be applied to designing the marketing mix or the 4
Ps:
Product: The term ‘product’ includes both tangible goods and intangible services. The
issues to address consist of name (brand), size, shape, features, labelling, packaging,
accessories and supplementary products, terms of sale and services and after sale.
Price: The ‘pricing’ of the goods or service offering relates to decision in the form of
payment, discounts, terms and conditions of payment, price sensitivity, differential prices
and customer reaction, price decrease and customer reaction.
Cont.
Place and distribution
Decision with respect to ‘place and distribution’ include the marketing channels, and comprises
decisions regarding choice of channel, location, accessibility and availability of product offering,
wholesaling, retailing and logistics.
Promotion
‘Promotion’ refers to marketing communication, and the major issues comprise decisions o
communication/promotion mix, the message, and the media strategy (the content, appeal, and
context).