Consumer Behavior

Consumer Behavior
• It is the study of how individuals, groups, and
organizations select, buy, use, and dispose of
goods, services, ideas, or experiences to
satisfy their needs and wants
• Consumer’s buying behavior is influenced by
cultural, social, and personal factors
 Factors influencing consumer behavior
• Culture, Subculture, and social class are
particularly important influences on consumer
buying behavior
• Culture is the fundamental determinant of a
person’s wants and behavior.
• The growing child acquires a set of values,
perceptions, preferences, and behaviors
through his or her family and other key
institutions.
• A child growing in U.S is exposed to the
following values : achievement and success,
activity, efficiency and practicality, progress,
material comfort, individualism, freedom etc
• A child growing up in a traditional middle-class
family in India is exposed to the following
values : respect and care for elders, honesty
and integrity, hard work, achievement and
success, humanitarianism, and sacrifice
 Subculture
• Each culture consists of smaller subcultures
that provide more specific identification and
socialization for their members.
• Subcultures include nationalities, religions,
racial groups, and geographic regions
• Multicultural marketing grew out of careful
market research
 Social class
• Relatively homogeneous and enduring divisions
in a society, which are hierarchically ordered
and whose members share similar values,
interests, and behavior
• Social class differ in dress, speech patterns,
recreational preferences etc.
• Social class is indicated by a cluster of variables
– occupation, income, wealth, education and
value orientation
 Social Factors
• Social factors such as reference groups, family,
and social roles and statuses affect our buying
behavior
• Reference groups : A person’s reference
groups are all the groups that have a direct
(face-to-face) or indirect influence on their
attitudes or behavior
 Reference groups
• Direct influence – membership groups
• Primary groups – person interacts fairly
continuously and informally, such as family,
friends, neighbors, and coworkers
• Secondary groups – religious, professional and
trade-union groups which trend to be more
formal
 Reference groups influence members

• They expose an individual to new behaviors

and lifestyles, they influence attitudes and
self-concept, and they create pressures for
conformity that may affect product and brand
choices
• Aspirational groups: person hopes to join
• Dissociative groups: values or behavior an
individual rejects
 Opinion leader
• Opinion leader : is the person who offers
informal advice or information about a specific
product or product category, such as which of
several brands is best or how a particular
product may be used
• They are often highly confident, socially
active, and involved with the category
 Family
• The family of orientation consists of parents
and siblings. From parents a person acquires
an orientation toward religion, politics, and
economics, and a sense of personal ambition,
self-worth and love
• A more direct influence on everyday buying
behavior is the family of procreation – namely
one’s spouse and children
 Roles and status
• A person participates in many groups – family,
clubs, organization.
• A ROLE consists of the activities a person is
expected to perform. Each role carries a
STATUS
• Example : A senior vice-president of marketing
has more status than a sales manager
 Personal Factors
• Age and stage in the life cycle: Consumption is
shaped by the family life cycle
• Taste in food, clothes, furniture and recreation
is often age related
• Trends like delayed marriages, children
migrating to distant cities etc
• It should alert banks, lawyers, marriage,
employment
• Occupational and economic circumstances: A
blue- collar workers will buy work clothes,
work shoes.
• A company president will buy dress suits, air
travel, country club memberships
• Economic circumstances: spendable income,
savings and assets, debts borrowing power
• Personality and self-concept: distinguishing
human psychological traits
• Traits – self confidence, dominance, autonomy,
sociability, adaptability
• Personality – analyzing consumer brand choices
• Brand personality – is the specific mix of human
traits that we can attribute to a particular brand
• Lifestyle and values: A lifestyle is a person’s
pattern of living in the world as expressed in
activities, interests, and opinions.
• Lifestyles are shaped partly by whether
consumers are money constrained or time
constrained
• Core values – people’s inner selves, the belief
systems that underlie attitudes and behaviors
 Stimulus-response model
Consumer
Buying Purchase
Psychology
Decision decision
Motivation
Process
Marketing Other Perception
Learning Problem Product
Stimuli Stimuli
Memory Recognition choice
Products & Economic Information Brand
Services Technologic Search choice
Price al Evaluation of Dealer
Distribution Political alternatives choice
Communicati Cultural Purchase Purchase
Consumer
ons decision amount
Characteristics
Postpurchase Purchase
Cultural behaviour timing
Social Payment
Personal method
 Motivation
• A need becomes a motive when it is aroused to a
sufficient level of intensity to drive us to act
• Freud’s theory: When a person examines specific
brands, he or she react not only to their stated
capabilities, but also to other, less conscious cues such
as shape, size, weight, material, color and brand name
• A technique called laddering lets us trace a person’s
motivation
• In-depth interviews, word association, picture
interpretation, and role playing
• Maslow’s theory: why people are driven by particular
needs at particular times
• Human needs are arranged in a hierarchy from most to
least pressing
• Physiological needs – foods, shelter, water
• Safety needs – security, protection
• Social needs – sense of belonging, love
• Esteem needs – self-esteem, recognition, status
• Self-actualization needs – self-development and
realization
• Herzberg’s theory: Two factor theory that
distinguishes dissatisfiers from satisfiers
• Example : computers does not come with
warranty (dissatisfiers)
• First step to avoid dissatisfiers and then
identify major satisfiers to motivate the
purchase
 Perception
• Perception is the process by which we select, organize,
and interpret information inputs to create a
meaningful picture of the world.
• Depends both on physical stimuli as well as
surrounding stimuli
• Perceptions affect consumers’ actual behaviour
• 3 perceptual processes:
– Selective attention
– Selective distortion
– Selective retention
 Selective attention
• Attention – allocation of processing capacity to some
stimuli
• Selective attention - Screening most of the stimuli out
– People are more likely to notice stimuli that relate to a
current need
– People are more likely to notice stimuli they anticipate
– People are more likely to notice stimuli whose deviations
are large in relationship to the normal size of the stimuli
• Marketers may attempt to promote their offers
intrusively in order to bypass selective attention filters
 Selective distortion
• Selective distortion is the tendency to interpret
information in a way that fits our preconceptions.
• Consumers will always distort information to be
consistent with prior brand and product beliefs
and expectations.
• This can work to the advantage of marketers with
strong brands when consumers distort neutral or
ambiguous brand information to make it more
positive.
• Selective retention – Customers are likely to
remember good points about a product they like
and forget even good points about a competing
product. This also works to the advantage of
strong brands
• Subliminal perception – Other perceptual
processes require customers active engagement
and thought. This makes subtle subconscious
effects on the customers in the form of
including subliminal messages in ads or
packaging.
 Learning
• Learning induces changes in behaviour arising from
experience
• Produced through an interplay of drives, cues, responses and
reinforcement
• Drive – strong internal stimulus impelling action
• Cues – minor stimuli that determine when and how a person
responds
• Generalization of responses to similar stimuli – e.g. if HP
computer is good, HP printer will also be good
• Discrimination of responses – vice-versa of generalization,
customer learns to differentiate in sets of similar stimuli
 Memory
• STM (Short term memory) – a temporary and limited repository of
information
• LTM (Long term memory) – a more permanent, essentially
unlimited repository
• Associative network memory model – views LTM as a set of nodes
and links
• Nodes – stored information in memory
• Links – connects nodes, if links are strong, recalling one node leads
to the other
• Brand association – consists of all brand related thoughts, feelings,
perceptions, images, experiences, beliefs and so on that become
linked to the brand node
 Memory processes
• Memory encoding – describes how and where
information gets into memory
• More the attention paid, stronger the encoding
• Memory retrieval – the way information gets out of
memory.
• 3 important factors which influence memory retrieval are;
– Presence of other product information – confuses and slows
down retrieval
– Time between exposure to information & encoding matters –
longer the delay, weaker the association
– Information may be available, but not accessible - proper cues
should be used as reminders
5 stage model of the consumer buying
process
Problem
Recognition

Information
Search

Evaluation of
alternatives

Purchase
decision

Post purchase
behaviour
 Problem Recognition
• Buying process starts when the buyer
recognizes a problem or need triggered by
internal or external stimuli
• Marketers need to identify the stimuli that
trigger consumer interest
 Information search
Sources
• Personal – Family, friends, neighbours
• Commercial – Ads, websites, salespersons, packaging
• Public – Mass media, consumer rating organizations
• Experiential – Handling, examining, using the product
Search dynamics
Total set -----> Awareness set --> Consideration set --> Choice set ---> Decision

A A A A ?
B B B B
C C C
D D
E
F
 Market partitioning
• Marketers need to identify the hierarchy of attributes
that guide consumer decision making in order to
understand different competitive forces and how
these various sets are formed. Identifying the
hierarchy is called Market Partitioning
• Various types are
– Brand dominant hierarchy
– Nation dominant hierarchy
– Price dominant hierarchy
– Type dominant hierarchy etc.
 Evaluation of alternatives
• The customer arrives at attitudes towards
various brands through an attribute evaluation
process
• Then develops a set of beliefs where each
brand stands on attitude
• Expectancy value model – consumers evaluate
products and services by combining their brand
beliefs – positives & negatives – according to
importance
 Expectancy value model for a range of
computers
Computer Attributes
Memory Graphics Size and Price
capacity capability weight
A 8 9 6 9
B 7 7 7 7
C 10 4 3 2
D 5 3 8 5
Each attribute is rated from 0 to 10, 10 being the highest for that attribute. Price, however is
indexed in the reverse manner as lower prices are highly desirable.

Each attribute multiplied with the weights of the beliefs assumed by each consumer
and summed up finally will give the expectancy value of each brand, and the one with
the highest perceived value suits the needs the consumers more accurately.
 Strategies to stimulate interest in a
brand
• Redesign the product
• Alter beliefs about the brand
• Alter beliefs about the competitors’ brand
• Alter the importance weights
• Call attention to neglected attributes
• Shift the buyers’ ideals
 Purchase decision
• Expectancy value model – compensatory model
• Non compensatory models of consumer choice – consumers take
mental shortcuts (heuristics) in the decision process instead of
the former
3 main choice heuristics
• Conjunctive heuristics – consumers accept a minimum cut off
level for each attribute
• Lexicographic heuristics – chooses the best perceived brand in
the market
• Elimination-by-aspects heuristics – consumer compares brands
on an attribute selected probabilistically – where the probability
of choosing an attribute is positively related to its importance –
and eliminates brands that do not meet minimum acceptable
cutoffs.
Steps between evaluation of alternatives and
a purchase decision

Purchase decision

Unanticipated
Attitudes of
situational
others
factors

Purchase intention

Evaluation of
alternatives
 Perceived risks by customers
Customers may perceive many types of risk in buying and
consuming a product
1. Functional risk – product does not perform up to
expectations
2. Physical risk – product poses a threat to well-being
3. Financial risk – product is not worth the price
4. Social risk – product results in embarrassment
5. Psychological risk – product affects the mental well-being
of the user
6. Time risk – Failure of the product results in opportunity
cost of finding another satisfactory product
Marketers should aim to minimize these perceived risks of the
customers
 Post purchase behavior
• Marketers job does not end with purchase alone.
They must monitor post purchase satisfaction,
post purchase actions and post purchase product
uses.
Post purchase satisfaction
• Disappointed - if performance falls short of
expectations
• Satisfied – if performance meets expectations
• Delighted – if performance exceeds expectations
 Post purchase behavior (…contd)
Post purchase actions:
•Satisfied customer – likely to purchase the product again, tends to say
good things about the brand to others
•Dissatisfied customers – may abandon or return the product, may take
public action by complaining to the company or to other groups
(business or govt. agencies), stops buying the product (exit option) and
warns friends (voice option).

Post purchase use and disposal:

•Product consumption rate which is the key driver of sales frequency
should be monitored
•Customers generally over estimate the life span of the product . One
way to increase frequency is to speed up replacement of product parts
(batteries etc.) by reminders or at specific time frames.
Participants in the Business
buying process
 The Buying Center
• The decision making unit of an organization –
Webster & Wind
• Consists of all those individuals and groups
who participate in the purchasing decision-
making process, who share some common
goals and the risks arising from the situations
• Includes all the members of the organization
who play any of the following 7 roles
 Buying center members
1. Initiators – users or others who request something
must be purchased
2. Users – those who will use the product/service.
They initiate the buying proposal and define the
specs
3. Influencers – people who influence by adding more
information to specs or evaluating alternatives
4. Deciders – people who decide upon
requirements/suppliers
 Buying center members
5. Approvers – those who authorize the proposed
actions of deciders and buyers
6. Buyers – people who have formal authority to select
the supplier and arrange the purchase terms, and
negotiating deals. May include high-level managers
too
7. Gatekeepers – people who have the power to
prevent sellers or information from reaching the
buying center. E.g. purchasing agents, receptionists,
telephone operators
 Buying center influences
• Buying centers usually include several participants with
differing interests, authority and status
E.g.
• Engineering personnel – want to maximize the
performance of the product
• Production personnel – want ease of use &reliability of
supply
• Financial personnel – the purchase should be economical
• Purchasing dept – considers the operating and
replacement costs
• Union officials – emphasize labor safety
 Buying center targeting
• Business marketers need to figure out the following –
– Who are the major decision forces?
– What decisions do they influence?
– What is their level of influence?
– What evaluation criteria do they use?
• Marketers should understand the organizations’ purchase
processes, roles played by different people and the criteria used
by different functionaries
• Small sellers concentrate on reaching the ‘key buying influences’
• Large sellers go for ‘multilevel in-depth selling’ to reach as many
participants as possible
 Buying situations
• Buyer faces many decisions in making a
purchase
• They are based on
– Complexity of the problem being solved
– Newness of the buying equipment
– Number of people involved
– Time required
 3 types of buying situations
• Straight rebuy – purchasing department reorders supplies
such as office supplies, bulk chemicals on a routine basis
and chooses from suppliers on an approved list.
• Suppliers make an effort to maintain product and service
quality and often propose reordering systems to save time
• Out-suppliers offer something new or exploit
dissatisfaction with the current supplier. Their goal is to
get a smaller order and enlarge their purchase share over
time.
 3 types of buying situations
• Modified rebuy – this buyer wants to modify
product specifications, prices, delivery
requirements etc.
• Usually involves additional participants on both
the sides
• The in-suppliers become nervous and want to
protect their account
• Out-suppliers see this as an opportunity to
propose a better offer to gain some business
 3 types of buying situations
• New task – a purchaser buys a product or service for the
first time (an office building)
• The greater the cost/risk – the larger the number of
participants, the greater the information gathering and a
longer time to make a decision
• Business buyers make the fewest decisions in the straight
rebuy and mostly in the new task situation. After some
time, new tasks become straight rebuys and routine
purchase behaviour
• New task buying – marketers’ greatest opportunity &
challenge
• This process passes through several stages – awareness,
interest, evaluation, trial and adoption.
Buyphases – stages in the buying process
The following table is called as the Buygrid framework

BUYCLASSES
New task Modified rebuy Straight rebuy
1. Problem recognition Yes May be No
2. General need Yes May be No
description
3. Product specification Yes Yes Yes
BUYPHASES

4. Supplier search Yes May be No

5. Proposal solicitation Yes May be No
6. Supplier selection Yes May be No
7. Order-routine Yes May be No
specification
8. Performance review Yes Yes Yes
 Problem recognition
• Buying process begins when someone in the company
recognizes a problem or a need that can be met by
acquiring a good/service
• Can be triggered by internal or external stimuli
• Internal stimuli – company decides to make a new
product, needs new equipments, machine break down etc
• External stimuli – buyer may get ideas at a trade show, see
an ad etc
• Biz marketers can stimulate problem recognition by direct
mail, telemarketing & calling on prospects
 General need description
• Buyer determines the general characteristics
of the need and the required quantity
• For complex items, buyers need to work
closely with engineers to define characteristics
• Business marketers can help by describing
how their products meet/exceed customer’s
needs
 Product specification
• The product-value-analysis (PVA) engineering
team or someone equivalent puts down the
technical specifications
• PVA is an approach to cost reduction whether
the desired components can be redesigned,
standardized or made by cheaper means of
production
• Suppliers can use PVA as a tool for positioning
themselves to win an account
 Supplier search
• Buyer tries to identify suppliers through trade directories,
contracts with other companies, trade shows and the Internet.
• Companies that purchase over the Internet are utilizing them in
several forms:
– Catalog sites – companies can order thousands of items
through e-catalogs distributed by e-procurement software
such as indiamart.com, pakimpex.com
– Vertical markets – Companies buying industrial products such
as plastics, chemicals can go to specialized websites called e-
hubs. Plastics.com allows plastic buyers to search from
thousands of plastic sellers
– “Pure Play” auction sites – online market places like eBay,
freemarkets.com could not have been realized without the
Internet. They provide online auctions for buyers and sellers.
 Internet supplier search
― Spot (or exchange) markets – On the spot electronic markets, prices
change by every minute. Chemconnect.com is an exchange for
buyers and sellers of bulk chemicals such as benzene and is a huge
success. About 1 million barrels are traded daily.
― Private exchanges – HP, IBM and Wal-Mart operate private
exchanges to link with specially invited groups of suppliers and
partners over the web.
― Barter markets – here, participants offer to trade goods or services
― Buying alliances – several companies buying the same goods join
hands together to form purchasing consortia to gain deeper
discounts on volume purchases