Consumer behavior

[email protected]@gmail.com [email protected]@gmail.com

[email protected]@gmail.com 22

Indian Consumer changes Middle class segment bulging Greater global exposure Larger disposable income Greater appetite & demand for global products Differentiated product & service requirements

[email protected]@gmail.com


FMCG space dynamics Explosion of products Explosion of markets (Kirana & Organized Retail) Rush of new players Global players bringing process and intelligence maturity Increasing competition Supply chain bottlenecks



Marketing can not be standardized, because of

•Cross – cultural styles.

•Fragmented markets.



11,000 New products were introduced by 77 companies. only 58% are present 5 yrs later.

•Only 8% of the new products offered by 112 leading companies reached the market.

•Of he above 83% failed to meet the marketing objectives.



Managers must analyze consumer motivations and behavior.



More successful a firm has been in the past, are more likely to fail. In future.

Why ????.



Because people tend to repeat behavior for which they have been successful and rewarded



Needs and wants = Needs and wants

Problem specific



Ultimate Goal of marketing

To make selling a redundant process

•By being focused on customer– understanding clearly –customer is the end and manufacturer as the means•By understanding the customer’s implicit and explicit needs •Creating a self generating pull for the market offering.



consumers

customer



Customers do not BUYS A PRODUCT !

What do they buy??



Manufacturer specific

Customer specific

Four P’s

Four C’s



MARKET



Is Consumer behavior

The activities that people engage in when selecting, purchasing and using products and services so as to satisfy needs and desires. Such activities involve mental ,emotional processes and physical action



1. Consumer behavior is motivated

2. Consumer behavior includes many activities.

3. Consumer behavior is a process

4. Consumer behavior varies in timing and complexity

5. Consumer behavior involves different roles

6. Consumer behavior is influenced by external factors

7. Consumer behavior differs for different people

These seven aspects hold key to understand consume behavior. Model’s

acronym is “MAPTRIP” [email protected]@gmail.com


customercustomer

•To understand the customer –basic is to know that s/he is buying / using the products as a means to solve or address their own problem, reason and strategy and not yours and therefore unless marketer is customer specific in terms of marketing mix elements, success is usually evasive.

•Customer does not buy a brand s/he buys their perception, and choose a brand which offers the best solution to their problem

•Marketers only brief is to synergize the capabilities of the organization so as to address customer’s specific needs.



Customer defectionsCustomer defections

customer defections

60%20%

11%

1%

3%5%

indifference

product

price

death

relocation

new avenues



Seven sins of serviceSeven sins of service

1. Apathy—indifference,boredom (a matter of attitude)

2. Brush off--- getting rid of customer, not owning responsibility.

3. Coldness---chilly, hostility, curtness, unfriendliness.

4. Condensation---treating customer with a patronizing attitude.

5. Robotize---thank you, have a nice day –next

6. Rule book--- rules above the customer.

7. Run around----sorry you will have to …….

Calling mediocre service excellent doesn't make it excellent [email protected]@gmail.com


Importance of perceived risk•A financial loss-when the product is

faulty and needs replacement or repair at one’s own cost.

•A loss of time – due to hours of making complaints, returning to distributors,

repairs etc.

• a psychological risk- when a bad purchase leads to loss of self esteem or

creates general dissatisfaction•A physical risk- due to consumption or use of products potentially harmful to one’s

health or the environment.



Problem solving approaches

•Extensive problem solving-is adopted when the value of information and/or the perceived risk is high

(unfamiliar brand in an unfamiliar product class)•Limited problem solving- applies to the situation of the buyer confronted with a new, unfamiliar brand in a familiar product class. where existing brands do

not provide an adequate level of satisfaction)•Routine response behavior-is observed in the case where the consumer has accumulated enough

experience and knowledge and has definite preference about one or more familiar brands (low cost,

frequently purchased items)



Ten questions1. Will the product make me feel more

important?2. Will the product make me happier?3. Will the product make me more

comfortable?4. Will the product make me more prosperous5. Will the product make my work easier?6. Will the product give me more security?7. Will the product make me more attractive?

Or better liked.8. Will the product give me more distinction?9. Will the product improve, protect, or

maintain my health?10.Is this purchase a bargain for me ?



Defining Customer ValueDefining Customer Value

-

=

Total CustomerValue

Total CustomerCost

(Product, Service,Personnel, &

Image Values)

(Monetary, Time,Energy, &

Psychic Costs)

CustomerDelivered Value

(Profit to theConsumer)



Customer Satisfaction

Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations.

Buyer’s Expectations Are Based On:

Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises

Pro

du

ct’s

Act

ual

Per

form

ance Performance Exceeds Expectations-

Customer is Delighted

Performance Below Expectations - Customer is Dissatisfied



Total Customer Total Customer SatisfactionSatisfaction

Highly satisfied (delighted) customers produce benefits:Highly satisfied (delighted) customers produce benefits:– They are less price sensitive,They are less price sensitive,– They remain customers longer,They remain customers longer,– They talk favorably about the company and They talk favorably about the company and

products to others.products to others.

Delighted customers have emotional and rational Delighted customers have emotional and rational preferences for products, and this creates high customer preferences for products, and this creates high customer loyalty. loyalty.

Therefore, the purpose of Marketing is to generate Therefore, the purpose of Marketing is to generate customer value profitably.customer value profitably.



The Need for Customer RetentionThe Need for Customer Retention

NewCustomer

Costs

LostCustomer

Costs

CustomerLifetime

Value

The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider:



Building Customer Satisfaction and Building Customer Satisfaction and Loyalty by Relationship MarketingLoyalty by Relationship Marketing

StructuralTies

StructuralTies

SocialBenefits

SocialBenefits

Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with

Customers and Other Stakeholders.

Methods for Building Relationships Include Offering:

FinancialBenefits

FinancialBenefits



Buying behavior

Buying behavior covers all activity preceding, and following purchase decisions

The purchasing behavior is seen as a process of problem solving and can be grouped into five

stages1. Problem recognition2. Information search

3. Evaluation of alternatives4. Purchase decision

5. Post-purchase behavior



The 5 stage process

1:Problem recognition• The internal recognition by the consumer that their current needs are not being met• Discrepancy between actual & desired state• Leads to motivation• Could be real or imagined, physical or psychological• Implications? Construction of advertising; penetration pricing strategies for new products; importance of peers; social construction of desire.

2:Information SearchNext we ask ourselves the question of how do we solve our problem?•May already be familiar with options available•May consult people whose opinions we respect•May browse around the shops•May consult independent experts•Amount of information required dependent on risk attached•Implications? Role of marketing communications



The 5 stage process (continued)

3:Evaluation of alternatives•In deciding which product to buy we have to weigh up which

product best suits our needs•We construct criteria upon which to base our choice•We already may have a list of criteria or we may form one

during the information search•Compensatory vs. non compensatory evaluation

4: Product choice•Having weighed up the pros and cons between alternatives

eventually we have to make a choice•Could be as a result of the outcome of our evaluation process

against important criteria – best fit.•Choice could be affected by availability, payment options etc.•Implications? Make it easy!



The 5 stage process (continued)

5: Post purchase evaluationOnce we have made our purchase we decide whether its met our expectation

•If it does great positive brand associations and visa versa•Implications? After sales service, marketing communications



Value CreationValue Creation



Reference Group InfluencesReference Group Influences

A reference group is the group A reference group is the group whose perspective an whose perspective an individual takes on in forming individual takes on in forming values, beliefs, attitudes, values, beliefs, attitudes, opinions, and overt behaviors.opinions, and overt behaviors.– They set levels of aspirationThey set levels of aspiration– They help define the actual They help define the actual

items/services considered items/services considered acceptable for displaying acceptable for displaying those aspirations. those aspirations.



Social Norms and ConformitySocial Norms and Conformity

Social normSocial norm – any rule or behavior for – any rule or behavior for meeting societal expectations meeting societal expectations normative systemnormative systemConformity pressuresConformity pressures – actions taken to – actions taken to encourage or force members to act, encourage or force members to act, think and/or express themselves in think and/or express themselves in certain ways.certain ways.The more important a group is in our The more important a group is in our lives, the greater our desire to accept lives, the greater our desire to accept and conform to its normsand conform to its norms



Homan’s EquationHoman’s Equation

The difference between the “price” we pay for conformity and the rewards obtained for doing so determines for each of us whether we will conform to group expectations and

to what extent. Price:•Loss of freedoms•Time commitment•Financial commitment•Etc.

Rewards:•Levels of acceptance•Advancement within the group•Prestige gained•Etc.



Reference Group TypesReference Group Types

Primary reference groupPrimary reference group: one with which the : one with which the individual has frequent face-to-face contact individual has frequent face-to-face contact and in which members are close-knit.and in which members are close-knit.– Examples: families, households, study groups, Examples: families, households, study groups,

work teams, roommates, etc.work teams, roommates, etc.Secondary reference group:Secondary reference group: one in which one in which interaction with other members is less interaction with other members is less frequentfrequentFormal group:Formal group: one in which there is some sort one in which there is some sort of structure and/or for which there are specific of structure and/or for which there are specific membership requirements.membership requirements.Informal group:Informal group: one that has no special one that has no special membership or attendance requirements, membership or attendance requirements, other than common interests.other than common [email protected]@gmail.com


Reference Group Types Reference Group Types (continued)(continued)

Membership groupMembership group: one to which a : one to which a person currently belongs.person currently belongs.

Aspirational group:Aspirational group: a group that a a group that a person would like to be part of, but to person would like to be part of, but to which he or she does not currently/ may which he or she does not currently/ may never belongnever belong

DissociativeDissociative group: a group that an group: a group that an individual avoids or denies connection individual avoids or denies connection with.with.



Reference Group Reference Group InfluencesInfluences

Reference groups as Reference groups as – part of the socialization part of the socialization

processprocess– setters of rolessetters of roles– information sourcesinformation sources– normative influencesnormative influences– an expression of self-valuean expression of self-value



Conformity Pressure and Marketplace Conformity Pressure and Marketplace behaviorbehavior

The influence of reference groups The influence of reference groups variesvaries

Groups tend to be more influential Groups tend to be more influential on product decisions than they are on product decisions than they are on either brand or outlet choiceson either brand or outlet choices– Conspicuousness “based on exclusivity” -- Conspicuousness “based on exclusivity” --

product decisions (bikers and black leather product decisions (bikers and black leather jackets)jackets)

– Conspicuousness “associated with the Conspicuousness “associated with the individual” -- brand decisions possible individual” -- brand decisions possible within product class, “allowed personal within product class, “allowed personal expression”expression”



Social PowerSocial Power

Power of reward – praise, Power of reward – praise, approval, acceptance, status, approval, acceptance, status, recognition, etc.recognition, etc.Coercive power – unacceptable Coercive power – unacceptable behavior strongly discouragedbehavior strongly discouragedExpert power – informational Expert power – informational attractionattractionReferent power – closer the Referent power – closer the match between person and match between person and group, more willingness to group, more willingness to conformconform



Total set

Awarenessset

Evoked Set

Choice set

decisiion



PerspectivePerspective

(A mental view of a scene)

SET OF PERSPECTIVES IN CONSUMER BEHAVIOR

MARKETER CONSUMER PUBLIC POLICY

MAKETERS AND CONSUMERS ARE ACTIVE ON DAILY BASIS

MARKETING DECISIONS

CONTROLLABLE (4P’s) UNCONTROLABLE (5C’s) Marketing mix

elementsCustomers Channels

Conditions CompetitorsCompany,



Realistic viewRealistic view

This realistic view is important to the marketer because ,

1. It gives an external view of the customer.

2. An aggregate view of the customer

3. A product specific view of the customer

4. A brand preference /purchase point of view

5. A behavioral influence orientation

• who does or does not use the product

• Who uses the competitors Brand



Comparison of two perspectivesComparison of two perspectives

Perspective Perspective characteristicscharacteristics

Marketer’s Marketer’s perspective perspective

Customer’s Customer’s perspectiveperspective

Point of view Point of view External External (buyers)(buyers)

InternalInternal(me)(me)

Level of Level of interestinterest

AggregateAggregate(markets)(markets)

IndividualIndividual(myself)(myself)

Scope of Scope of interestinterest

Product Product specificspecific(what I make)(what I make)

Across Across productsproducts(what I buy)(what I buy)

correct correct choice choice

Brand specificBrand specific(my brand)(my brand)

Best Best alternativealternative(best brand for (best brand for me)me)

Role of Role of influenceinfluence

Influence Influence behaviorbehavior

Handle Handle behavioralbehavioralinfluencesinfluences



Perspectives-contd.Perspectives-contd. customercustomer marketermarketerMost behaviors are internally Most behaviors are internally focused –we think silently-observe focused –we think silently-observe privately-& evaluate according to privately-& evaluate according to our own dictatesour own dictates

Marketer can only have an Marketer can only have an external view.external view.

Focus on themselves as individualsFocus on themselves as individuals Market segmentation as a process Market segmentation as a process of comprehending markets. of comprehending markets. Marketers try to find sub markets Marketers try to find sub markets within the total markets for within the total markets for economic viability.economic viability.

Not an expert for many of their Not an expert for many of their purchasespurchases

An expert for his brand / categoryAn expert for his brand / category

Choose only one brand from a Choose only one brand from a given set, meaning , making a given set, meaning , making a wrong choice from the point of wrong choice from the point of view of every marketer but, one.view of every marketer but, one.(branding helps)(branding helps)

Best brand is the one that we Best brand is the one that we make (building brand equity helps)make (building brand equity helps)

someTime and effort required to someTime and effort required to react to stimuli. (only if it is react to stimuli. (only if it is interest to me otherwise ignored)interest to me otherwise ignored)

Targeting markets of interest. Targeting markets of interest. Creating stimuli-intrinsically Creating stimuli-intrinsically interesting to consumers interesting to consumers stimuli are simple and easy on stimuli are simple and easy on consumersconsumers



PURCHASE

CONVICTION

PREFRENCE

LIKING

KNOWLEDGE

AWARENESS

Publicity -advertising campaign

Cognitive

The realm of thoughts. Ads provide information & facts

Affective

The realm of emotiions.Ads change attitudes & feelings

Competitive ads.

Argumentative copy

“image” ads

Status glamour appeals

POP ads/deals/price appeals / testimonials

Conative

The realm of motives, ads stimulate or direct desires

Lavidge hierarch of effects model



Black box/CIP modelsBlack box/CIP models

Consumer’sMind

Black box

Consumer”s Mind CIP

inputs outputs

outputinputs

Externalworld

Externalworld

Externalworld

Externalworld



INTERNAL INTERNAL WORLDSWORLDS

EXTERNALWORLD

SENSORYREGISTER

SHORT TERM MEMORY(STM) ORWORKING MEMOTY

LONG TERM

MEMORY (ltm)

STIMULI

Short and long term memoryShort and long term memory



AttitudesGlobal evaluative judgments

IntentionsSubjective judgments by people about how they will behave in the future

BeliefsSubjective judgments about the relationship between two or more things

FeelingsAn affective state (e.g. current mood state) or reaction (e.g. emotions experienced during product consumption) [email protected]@gmail.com


Relationships between consumer beliefs, feelings, attitudes and intentions



Consumer beliefsA sampling of consumer beliefs

– If a deal seems to good to be true, it probably is.

– You can’t believe what most advertising says these days.

– Auto repair shops take advantage of women.

– People need less money to live on once they retire.

– It’s not safe to use credit cards on the Internet.

– Appliances today are not as durable as they were 20 years ago.

– Extended warranties are worth the money.

– You get what you pay for: lower price means lower quality.

– Changing the oil in your car every three thousand miles is a waste of money.



Consumer beliefsExpectations

Brand distinctiveness

Inferential beliefs

Consumer confusion



Consumer expectations

Consumers’ willingness to spend is influenced by beliefs about their financial future

Expectations are beliefs about the future



Why should a consumer want to buy your brand instead of the competitor’s?

The desirability of products having something unique to offer to their consumers is also known as the Unique Selling Proposition (USP)

Brand distinctiveness



Inferential beliefs

Consumers use information about one thing to form beliefs about something else

Beliefs are often inferred when product information is incomplete

Also undertaken when consumers interpret certain product attributes as signals of product quality, e.g. price-quality inferential beliefs



Consumer confusionSometimes consumers do not know what to believe due to many different reasons

– May arise due to conflicting information and knowledge

– Mistaking one company’s product for the product of another company

– Due to changes in a product’s position and image

Consumers respond to confusion by:

– Undertaking further information search

– Basing their decision on things that are perfectly clear, e.g. price

– Deferring product purchase indefinitely



Types of consumer feelings

NegativeNegative WarmWarmUpbeatUpbeat

AngryAnnoyedBadBoredCriticalDefiantDisgustedFed-upInsultedIrritatedRegretful

AffectionateCalmConcerned ContemplativeEmotional HopefulKindPeacefulPensiveTouchedWarm-hearted

ActiveAdventurousAliveAttractiveConfidentCreativeElatedEnergeticGoodHappyPleased



Attitude towards objectsAttitude towards objects

• Attitudes---people form attitudes toward objects on the basis of their beliefs (perception and knowledge ) about these objects, beliefs in turn acquired by processing information which is obtained by Direct experience with objects and from communications about them received from other sources

• Information—experience based with objects +communication

received about objects from others.

• Belief---perceptions and knowledge



Fishbeins model of ATOFishbeins model of ATO

IS DESIGNED TO DETERMINE A PERSON’S OVERALL IS DESIGNED TO DETERMINE A PERSON’S OVERALL ATTITUDE TOWARD AN OBJECT.ATTITUDE TOWARD AN OBJECT.

IT IS BASED ON HIS /HER BELIEFS AND FEELINGS ABOUT IT IS BASED ON HIS /HER BELIEFS AND FEELINGS ABOUT VARIOUS ATTRIBUTES OF THE PRODUCT/OBJECT.VARIOUS ATTRIBUTES OF THE PRODUCT/OBJECT.

MODEL IS ALSO REFERRED TO AS MULTIATTRIBUTE MODEL IS ALSO REFERRED TO AS MULTIATTRIBUTE MODEL.MODEL.

n

e

bieiAo1

model

Ao = a persons overall attitude towards the object.

Bi = the strength of his/her belief that object is related to attribute “I”

Ei = evaluation or intensity of feeling towards attribute “I”

N = number of relevant beliefs for that person.



)()( SNwAbwBIB 21

behavior

Behaviorintention

Attitude TowardsPerformingbehavior Subjective

Norms aboutbehavior

W1 and w2 are the weights of relative influence of Ab +SN on Behavioral intention

Behavior –as a function of intentions to behave in a certain manner+ other intervening factorsAttitude– attitude towards acting in that manner + subjective norms,.(others perceptions)

Fishbein Fishbein



Continued.Continued.

To predict behavior

•We determine Ab & SN

•Each is then weighted to reflect importance (add up to 1.0) Ab=the individual Oveeerall attitude

performing specific behavior. B1=persons belief that performing that behavior results in consequence. E1 =persons evaluation of the consequences I. And n= number of relevant behavior beliefs.

k

i

n

i

iiSN

iib

mb

ebA

1

1

Where SN=the individual's subjective norms regarding the specific behavior. Bi= normative belief that reference group or person I thinks he should or should not perform the behavior.

Mi= his motivation to comply with the thoughts of referent I.k= the number of relevant references



Beliefs about Consequences of

behavior

BI modelBI model

Evaluation of consequences

Belief about Perception of

others

Motivations to comply

Attitude towardsbehavior

Subjective normsAbout behavior

BI

Other Intervening

factors

behavior



The Consumer Decision-Making The Consumer Decision-Making ProcessProcess

Post-purchase Behaviour

Purchase

Evaluation of Alternatives

Information Search

Problem Recognition

Individual and Social Factors

and Buying Situation

Individual and Social Factors

and Buying Situation



Types of Consumer Buying Types of Consumer Buying DecisionsDecisions

LessInvolvement

MoreInvolvement

RoutineResponseBehaviour

RoutineResponseBehaviour

LimitedDecisionMaking

LimitedDecisionMaking

ExtensiveDecisionMaking

ExtensiveDecisionMaking

Length of time; Cost of goods; information lackingAnd number of alternatives availableLength of time; Cost of goods; information lackingAnd number of alternatives available



Types of Consumer Buying Types of Consumer Buying DecisionsDecisions

The buying-decision process not always The buying-decision process not always straightforward, e.g. level of involvementstraightforward, e.g. level of involvement

Level of involvement is the amount of effort that Level of involvement is the amount of effort that is expended in satisfying a need.is expended in satisfying a need.

Level of involvement normally higher when Level of involvement normally higher when

Consumer lacks informationConsumer lacks information

If consumer believes the sum of money involved If consumer believes the sum of money involved is largeis large

The product has considerable social importanceThe product has considerable social importance

Product is perceived to provide significant Product is perceived to provide significant benefitsbenefits



Factors Affecting Involvement Factors Affecting Involvement LevelsLevels

SituationSituation

InterestInterest

Perceived RiskPerceived Risk

Previous ExperiencePrevious

Experience

Social VisibilitySocial Visibility

Factors Influencing Involvement

Factors Influencing Involvement



Marketing Implications of Marketing Implications of InvolvementInvolvement

High involvement: promotion High involvement: promotion extensive and informative. Provide extensive and informative. Provide information and specify benefits.information and specify benefits.

Low involvement: In-store promotions Low involvement: In-store promotions and packaging important. Must be and packaging important. Must be eye-catching and easily recognisable. eye-catching and easily recognisable.

Tactics such as 2-for-the-price-of-1, Tactics such as 2-for-the-price-of-1, coupons and special offers often used.coupons and special offers often used.



Individual Factors Individual Factors Influencing CBInfluencing CB

PerceptionPerception

Perception is the process of Perception is the process of receiving, organising, and receiving, organising, and assigning assigning meaning to informationmeaning to information or stimuli or stimuli detected by our five sensesdetected by our five senses

Selective perception/exposure Selective perception/exposure

Selective distortionSelective distortion

Selective retentionSelective [email protected]@gmail.com


Individual Factors Individual Factors Influencing CBInfluencing CB

MotivationMotivation

All behaviour start with a needAll behaviour start with a needMaslow Theory - Adverts play on Maslow Theory - Adverts play on motivesmotives

Physiological - Beer bill boardsPhysiological - Beer bill boardsSafety - Burglar alarms, InsuranceSafety - Burglar alarms, InsuranceAffiliation - Hansa/Tea (part of a family)Affiliation - Hansa/Tea (part of a family)Esteem (self respect) - cigarette "jet setter"Esteem (self respect) - cigarette "jet setter"


Date post:	06-May-2015
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Consumer behavior

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