CONSUMER BEHAVIOUR

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CONSUMER BEHAVIOUR

1Consumer Behaviour- Schiffman & Kanuk

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Market today….

• Substantial increase in the buying power

• Greater variety of goods and services

• Information explosion

• Greater ease of placing and receiving orders

• Digital Revolution in the market place

• Increased attention towards customer retention


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• “Yeh customer maange more!”

• Customer has become choosy and will select

the one which will give more benefits.

• ‘Delighting’ is the ultimate goal.

• Customer has changed in terms of income

and exposure.


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• Marketing opportunities for young and

women segment.

• 2001 census- 20-44 age group is the

largest segment.

• Youth - quick adapters of change.

• Tendency to buy on credit


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‘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

Consumer Behavior


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The Scope of Consumer Behavior

• What the consumers buy?

• Why they buy it ?

• When they buy it ?

• Where they buy it ?

How do individuals make decisions to spend their resources (time, money, effort)? Includes:


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• How often they buy it ?

• How often they use it ?

• How they evaluate it after the purchase ?

• The impact of such evaluations on the future purchases

• And how they dispose of it ?7Consumer Behaviour- Schiffman &

Kanuk

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What is the difference between a consumer and a customer?

• Customer Person who purchases the goods/service is customer

• Consumer whereas the end users who consumes the good/service is consumer

• For e.g.. If a person buys a chocolate for his son, he is called customer & his son is consumer


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• The term consumer behavior describes two different entities:

1. The Personal Consumer

2. The Organizational consumer


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Personal Consumer

The individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend.


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Organizational Consumer

A business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function.


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Why Study Consumer Behavior?

• In order to design new products and marketing strategies that would fulfill consumer needs, we have to study consumers and their consumption behavior in depth

• By studying consumer behavior we try to understand & gain insight into:– Consumer decision making processes– What we buy, how we buy, and why we buy


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• Enables us to become better consumers and marketers

• We try to gain a better understanding of consumer related behavior and understand why individuals act in the ways they do.

• The task of marketing is to identify consumers’ needs and wants accurately, then to develop products and services that will satisfy them.


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•For marketing to be successful, it is not sufficient to merely discover what customers require, but to find out why it is required.

•Only by gaining a deep and comprehensive understanding of buyer behavior can marketing’s goals be realized.


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• Such an understanding of buyer behavior works to the mutual advantage of the consumer and marketer

• Allows the marketer to become better equipped to satisfy the consumer’s needs efficiently

• Establish a loyal group of customers with positive attitudes towards the company’s products.


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Why & how the field of Consumer Behavior developed


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Development of the Marketing Concept

Production Concept

Selling Concept

Product Concept

Marketing Concept


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Production Concept

Consumer Behaviour- Schiffman & Kanuk

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The Production Concept

• Assumes that consumers are interested primarily in product availability at low prices

• Marketing objectives:– Cheap, efficient production– Intensive distribution– Market expansion


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Product Concept


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The Product Concept

• Assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features

• Marketing objectives:– Quality improvement– Addition of features


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Product Oriented vs Market Oriented Definitions of a Business

Tata Motors

Colgate

Xerox

Liril

Tata Tea

LIC

Deccanairways

KBC

We make cars

We make toothpaste

We make copiers

We make soap

We make tea

We sell insurance

We are an airline

We run quiz program

More car per car

Get strong teeth

Office productivity

Feel Fresh

Refreshing tea

Protect your future

Simply fly

Earn crores

Product Oriented Market Oriented


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Selling Concept


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The Selling Concept

• Assumes that consumers are unlikely to buy a product unless they are aggressively persuaded to do so

• Marketing objectives:– Sell, sell, sell

• Lack of concern for customer needs and satisfaction


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Marketing Concept


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The Marketing Concept

• Assumes that to be successful, a company must determine the needs and wants of specific target markets and deliver the desired satisfactions better than the competition

• Marketing objectives:

– Profits through customer satisfaction


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Consumer Behavior

• Consumer Behavior is essentially a Marketing Concept since marketers have to know needs & wants of consumers.

• Study of Consumer Behavior gives us deep insight into needs & wants of Consumers

• Hence, the field of Consumer Behavior developed as an integral part of development of Marketing Management Philosophies


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• Market Analysis

• Segmentation

• Targeting

• Positioning

• The marketing mix

Marketing strategy and Consumer behavior


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Marketing strategy

and Consumer Behavior

29Consumer Behaviour- Schiffman &

Kanuk

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• Customer Value, Satisfaction ,and retention


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Customer Value

• It is defined as the ratio between the customer’s perceived benefits(economic,functional,and psychological) and the resources (monetary,time,effort,psychological) used to obtain those benefits

• Developing a value proposition (unique selling proposition) is the core of successful positioning.


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E.g. Diners at an exclusive French restaurant in Washington., where a meal with beverages may cost up to $300 per person, may expect unique & delicious food, immaculate service, & beautiful décor.

Some diners may receive even more than they had expected & will leave the restaurant feeling that the experience was worth the money & other resources expended.


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Customer Satisfaction

• Customer Satisfaction is the individual’s perception of the performance of the product or service in relation to his or her expectations.


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Types of Customers

• Loyalists: Completely satisfied customers who keep purchasing

• Apostles: Whose experiences exceed their expectations and who provide very positive word of mouth to others

• Defectors: Who feel neutral or merely satisfied and are just as likely to stop doing business with the company

• Terrorists: who have had negative experiences with the company and who spread negative word of mouth


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Contd……….

• Hostages: are unhappy customers who stay with the company because of a monopolistic environment or low prices and who are difficult and costly to deal with because of their frequent complaints

• Mercenaries :are very satisfied customers who have no real loyalty to the company and may defect because of a lower price elsewhere


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Company should strive for

• Creating apostles

• Raise the satisfaction of defectors and turn them into loyalists

• Avoid having terrorists or hostages ,and reduce the number of mercenaries


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Customer retention

• The maintenance of the patronage of people who have purchased a company's goods or services once and the gaining of repeat purchases. Customer retention occurs when a customer is loyal to a company, brand, or to a specific product or service, expressing long-term commitment and refusing to purchase from competitors


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Customer pyramid• Customers are grouped into four tiers

• The Platinum tier :heavy users who are not price sensitive and who are willing to try new offerings

• The Gold tier: consists of customers who are heavy users but not as profitable because they are more price sensitive than those in the higher tier, ask for more discounts ,and are likely to buy from several providers


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• The iron tier :consists of customers whose spending volume and profitability do not merit special treatment from the company.

• The lead tier :includes customers who actually cost the company money because they claim more attention than is merited by their spending, and spread negative word of mouth


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The Traditional Marketing concept Versus –Value -and Retention –Focused Marketing

The Traditional Marketing concept

1. Make only what you can sell instead of trying to sell what you make

2. Do not focus on the product; focus on the need it satisfies

3. Market products and services that match customers’ needs better than competitors’ offerings

1. Use technology that enables customers to customise what you make

2. Focus on the product’s perceived value ,as well as the need it satisfies

3. Utilize an understanding of customer needs to develop offerings that customers perceive as more valuable than competitor’s offerings

Value -and Retention –Focused Marketing


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4. Research Consumer needs and characteristics

5. Understand the purchase behaviour process and the influences on consumer behaviour

6. Realise that each customer transaction is a discrete sale

4. Research the levels of profit associated with various consumer needs and characteristics

5. Understand consumer behaviour in relation to the company’s product

6. Make each customer transaction part of an ongoing relationship with the customer

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7.. Segment the market based on customers’ geographic, demographic,psychological,sociocultural ,lifestyle, & product-usage related characteristics

8. Target large groups of customers that share common characteristics with messages transmitted through mass media

9. Use one way promotions whose effectiveness is measured through sales data or marketing surveys

7. Use hybrid segmentation that combines the traditional segmentation bases with data on the customer’s purchase levels and patterns of use of the company’s products

8. Invest in technologies that enables you to send one-to-one promotional messages via digital channels

9. `Use interactive communications in which messages to customers are tailored according to their responses to previous communications

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Contd…10. Create loyalty programs based on the

volume purchased

11. Encourage customers to stay with the company and buy more

12. Determine marketing budgets on the basis of the numbers of customers you are trying to reach

10. Create customer tiers based on both volume and consumption patterns

11. Make it very unattractive for your customers to switch to a competitor and encourage them to purchase ‘better’ –in a manner that will raise the company’s profitability levels

12. Base your marketing budget on the 'lifetime value’ of typical customers in each of the targeted segments compared with the resources needed to acquire them as customers


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Contd…13. Conduct customer

satisfaction surveys and present the results to management

14.Create customer trust and loyalty to the company and high levels of customer satisfaction

13. Conduct customer satisfaction surveys that include a component that studies the customer’s word of mouth about the company, and use the results immediately to enhance customer relationships

14. Create customer intimacy and bonds with completely satisfied, 'delighted’ customers


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Disciplines involved in the Study of Consumer Behaviour

• Psychology( the study of an individual)• Sociology( the study of groups)• Social Psychology (the study of how an

individual operates in a group)• Anthropology(the influence of society on

the individual)• Economics (individuals act rationally to

maximise their satisfaction)


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Ethics in Marketing• Ethics has been experiencing a growth in interest due to:• Business scandals leading to a study of ethics in business

schools• Exploitation of consumers leading to the growth of the

consumer movement• Ethics being seen as a corporate ‘strategic tool’ by many

organizations• Organizations promoting products to children in

‘unethical’ ways• The growth of the ‘societal marketing concept’


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Ethics and Marketers

• Do Marketers Manipulate Consumers?

• Do Marketers Create Artificial Needs?

• Do Marketers promise miracles?


1-4848Consumer Behaviour- Schiffman &

Kanuk

PRODUCT• Safety• Shoddy goods• Inadequate warranties• Environmental pollution

PRICE• Excessive markups• Price differentiation• Price discrimination• Cartels

PACKAGING• Deceptive quantities• Deceptive quality

Unethical Marketing Behavior

PROMOTION• Exaggerated claims• Tasteless advertising• Surrogate Advertising • Deceptive advertising

• Social exploitation

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Unethical Consumer Practices

• Shoplifting• Returning clothing that has been worn• Abusing products and returning them as damaged goods• Returning products bought at sale and demanding the full-price refund• Stealing belts from store clothing• Returning partially used products for full store credit• Abusing warranty or unconditional guarantee privileges• Damaging merchandise in a store • Duplicating copyrighted materials without permission


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The Right to Safety - to be protected against the marketing of goods which are hazardous to health or life. The Right to Choose - to be assured, wherever possible, access to a variety of products and services at competitive prices: and in those industries where competition is not workable and Government regulation is substituted, an assurance of satisfactory quality and service at fair prices. The Right to Information - to be protected against fraudulent, deceitful or grossly misleading information, advertising, labeling, or other practices, and to be given the facts s/he needs to make an informed choice. The Right to be Heard - to be assured that consumer interests will receive full and sympathetic consideration in the formulation of Government policy, and fair and expeditious treatment in its administrative tribunals


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The Consumer Movement In India

• Philip Kotler-It is an organised movement of citizens and government to enhance the rights and power of buyers in relation to sellers.

• BIRTH OF ‘COPRA’

Consumer Protection Act


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Consumer Protection Act (COPRA)1986 is unique in the world

• Exclusive courts for consumer disputes in all districts, state and national capitals.

• 6 consumer rights specified.

• Consumer Protection Councils from national to state and district levels.

• Covers private, public, cooperative sectors.


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Consumer's Rights under Section 6 of Consumer Protection Act 1986

1.1. Right to SAFETY against hazardous goods and Right to SAFETY against hazardous goods and services.services.

2.2. Right to be INFORMED about quality, quantity, Right to be INFORMED about quality, quantity, purity, standard, price.purity, standard, price.

3.3. Right to CHOOSE from a variety at Right to CHOOSE from a variety at competitive prices.competitive prices.

4.4. Right to BE HEARD.Right to BE HEARD.5.5. Right to seek REDRESSAL.Right to seek REDRESSAL.6.6. Right to CONSUMER EDUCATION.Right to CONSUMER EDUCATION.


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Responsibility• Responsibility towards safe waste disposal

• Most often we consume without sparing any thought for what's going to be left behind as waste. More and more percentage of waste generated in urban areas today consists of non-biodegradable waste.

• . Urban consumers are making use of plastic, paper and cardboard packaging, disposables batteries, plastic throw-away pens, use and throw nappies ,empty cans etc are becoming a common feature of an urban dustbin

• Consumers need to become accountable for their consumption patterns and their serious environmental and economic implications.


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Responsibility to endorse safer products· Ecolabelling Eco-mark' is one way of knowing which products conform to environmental standards and are more envrionment-friendly than others. set by the Ministry of Environment and Forests.

•Ecolabelling is a methodology practised by many countries in the world, including India. The Indian government has formulated a scheme whereby some categories of products are awarded the ‘Ecomark' if they conform to certain standards set by the Ministry of Environment and Forests.

•Unfortunately, in India, the scheme has not taken off due to consumer apathy and lack of response. The market has manipulated this situation to lobby with the government to make ecolabelling a voluntary scheme, which will allow manufacturers to disclose and cover information at will.


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Ecomark Logo


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Consumer Bonding The consumer movement needs active participation of consumers to lobby with the government, pressure the market to deliver better quality, and to support consumer rights campaigns.

Young Consumers and Consumer Responsibility Young consumers should consume in moderation and buy a product on the basis of its quality and merit and not because of the brand image


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Societal Marketing Concept

• A revision of the traditional marketing concept that suggests that marketers adhere to principles of social responsibility in the marketing of their goods and services; that is, they must endeavor to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole.

• All companies prosper when society prospers.• Companies, as well as individuals, will improve if social

responsibility was an integral component of every marketing decision.

• Requires all marketers adhere to principles of social responsibility.


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• Societal marketing is the business driven, profit orientated way of changing the world as a means of developing revenue based product. Societal is about the direct benefits for the organisation (profit) and secondary benefit for the community


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• Social marketing is about the social gain, target market’s gain, and the flow of benefits where profit may not actual exist, or if it does, then it’s just an incidental secondary benefit for the campaign.


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Benefits of Consumerism

• Consumer education

• Liaison with the government and the producer

• Product Research and inform the Consumers


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Consumer Behaviour Applications in Marketing

• Analysing market opportunity

• Selecting target market

• Marketing mix decisions(Product,Price,Promotion,

distribution)

• Use in social and non-profits marketing


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Use in social and non-profits marketing

• Make use of consumer behaviour to sell their services and products and also try to motivate people to support this institutions

• The programme organised by NGO include family planning, awareness about AIDS, crime against women etc.


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CONCLUSION“Customer is a King” in the Market

Customer Delight is the need of the day.

It is a greatest challenge for any company to retain the existing customer & maintain a long term relationship with the customer in order to retain a competitive position in the market place.


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