CONSUMER BEHAVIOUR AND

CUSTOMER LOYALTY

By

Sunita Sen

CONSUMER BEHAVIOUR

Schiffman & Kanuck

“Consumer behavior refers to the behavior that

consumer display in searching for, purchasing, using,

evaluating and disposing of goods and services that

they expect will satisfy their needs & study of

consumer behavior is the study of how individual

make decisions to spend their available resources like

time, money, efforts on consumption related items.

.

Includes all things in the environment

that influence thoughts, feelings, and

actions of consumers .

Comments from other consumers

Advertisements

Price information

Packaging

Product appearance

WHAT IS CONSUMER BEHAVIOR? (CONT.)

CUSTOMER AND CONSUMER

Customer – regular purchaser of a particular store or company

Consumer – potential purchases of products and services ‘offered for sale’.

purchasing for the purpose of individual or household consumption.

Personal Consumer: Who buys goods and services for his

personal use (e.g. haircut, toothbrush, towel, etc.), or

Household consumption (e.g. sugar, furniture, telephone

service etc.), or a birthday present for a friend (e.g. A pen

set, greeting card, etc.)

These are the “end users” or “ultimate users”.

Organizational Consumer: This includes profit and non-

profit organizations, government agencies (like schools,

hospitals), organizations requiring equipment and services to

run their organizations (e.g. raw materials, technology,

advertising services to communicate to their customers).

DISCIPLINES INVOLVED IN THE STUDY OF CONSUMER BEHAVIOR

1. Psychology: It is the study of the individual, which

includes motivation, perception, attitudes, personality and

learning theories.

2. Sociology: It is the study of groups. The influences of

group memberships, family and social class on consumer

behavior are important for the study of consumer

behavior.

3. Social Psychology: It is a combination of psychology and

sociology and studies how an individual operates in a

group. It also studies how peers, reference groups, their

families and opinion leaders influence individuals in their

consumption behavior

CONTINUED…..4. Cultural Anthropology: It 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. This helps to

compare consumers of different nationalities and

cultures.

5. Economics: It 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.

Thinking, feelings, and actions of individual

consumers, targeted consumer groups, and

society at large are constantly changing.

Requires ongoing consumer research and

analysis of important trends.

Makes development of marketing strategies

difficult and exciting.

Shorter product life-cycle increases importance of constant

innovation.

CONSUMER BEHAVIOR IS DYNAMIC

Interactions among people’s thinking,

feelings and actions, and the environment

Marketers need to understand:

What products and brands mean to consumers?

What consumers must do to purchase and use them?

What influences shopping, purchase, and consumption?

CONSUMER BEHAVIOR INVOLVES INTERACTIONS

Exchange between people involves giving

up of something of value and receiving

something in return.

Role of marketing in society is to help

create exchanges by formulating and

implementing marketing strategies.

CONSUMER BEHAVIOR INVOLVES EXCHANGES

CONSUMER BEHAVIOR APPLICATIONS IN MARKETING1. Analyzing Market Opportunity: Consumer

behavior study helps in analyzing the unsatisfied needs and wants (e.g. trends like consumer’s lifestyles, income levels, etc.)

2. Selecting Target Market: A review of Market opportunities enabled the marketers to design products and promotion strategies for specific segments of consumers as per their requirement only. E.g. Shampoo sachet.

3. Marketing Mix Decisions: Right mix of product, price, distribution and promotion.

CONTINUED…..4. Product: Size, shape, features,

Packaging, Warranties and Accessories etc. E.g. Nestle introducing different flavors in Maggi noodles.

5. Price: How the Company’s product is perceived by the consumer.

6. Promotion: Different promotional efforts for personal and organizational consumer.

7. Distrbution:

CONSUMER DECISION MAKING: THE PROCESS AND

OUTCOME

CONSUMER DECISION MAKING – THE PROCESS:

Need Recognition Pre-purchase Search Evaluation of Alternatives

NEED OR PROBLEM RECOGNITION The realization

that there is a difference between actual and desired statesThe higher the

gap, the stronger the need (or bigger the problem)

INFORMATION SEARCH Depending on need intensity two states

on individual’s are: Heightened attentionActive information

Sources of information searchPersonalCommercialPublicExperiential

TYPE OF INFORMATION SEARCH: INTERNAL & EXTERNAL SEARCH

INFORMATION SEARCH AND MARKETING STRATEGY Get products into consumers’ evoked

set Limit information search if your brand is

the preferred brand Increase information search if your

alternative is not the preferred brand Use point-of-purchase advertising

effectively

EVALUATION OF ALTERNATIVES Objective characteristics (features

and functionality of the product) Subjective characteristics (perception

and perceived value of the brand by the consumer or its reputation). “evoked set”: “The evoked set”

(“consideration set”) is the set of brands or products with a probability of being purchased by the consumer (because he has a good image of it or the information collected is positive).

“inept set” is the set of brands or products that have no chance of being purchased by the shopper (because he has a negative perception or has had a negative buying experience with the product in the past).

“inert set” is the set of brands or products for which the consumer has no specific opinion.

Evoked Set

Purchase!

PURCHASE OF PRODUCT Consumer Buying Decision Process and

his decision process may also depend or be affected by such things as the quality of his shopping experience or of the store (or online shopping website), the availability of a promotion, a return policy or good terms and conditions for the sale.

POST PURCHASE BEHAVIOUR If the experience with the product was

average or disappointing, the consumer is going to repeat the 5 stages of the Consumer Buying Decision Process during his next purchase but by excluding the brand from his “evoked set”.

Consumer Decision Making Model

TYPES OF DECISION PROCESS

Extensive Problem Solving

Limited Problem Solving

Routine Response Behaviour

LEVEL OF CONSUMER DECISION MAKING

1. Extensive Problem-Solving: It is usually initiated by the motive that is fairly central to the self-concept and the decision is perceived to carry a fair degree of risk.  

2. Limited Problem Solving: It usually involves recognizing a problem for which there are several solutions. There is limited amount of external search and more internal search, simple decision rules are followed on a few attributes and a little post-purchase evaluation is required.

3. Routinized Problem Solving: When a consumer buys a brand he has bought before, it usually involves little or no information seeking and is performed quickly. There is a likelihood that repeat purchases are made on the basis of habits or routines.            

LIMITED PROBLEM SOLVING

Limited Problem Solving: If the item being purchased is low value and frequently bought, it follows that the buyer will spend less time and effort and will have less involvement with the purchase.

Extended Problem Solving: An expensive high risk infrequent purchase will require a lot of detailed information and careful analysis before deciding which one to purchase.

CONSUMER LEARNING:

A process by which individuals acquire the purchase and consumption knowledge and experience that they apply to future related behavior.

Simplified model of consumer learning:

There are two approaches to the study of learning,

Behavioural approach: learning takes place

in response to events/happenings in a person’s external environment. Classical conditioning Operant conditioning

Cognitive approach to learning: learning takes place as a result of a person’s conscious and deliberate information processing and storage activity

CLASSICAL CONDITIONING THEORY

Pairing a stimulus with another stimulus that elicits a known response to produce the same response when used alone.

Strategic Applications of Classical Conditioning:

Repetition : Signs, symbols, logos, colours and jingles help facilitate consumer learning through the process of association Cosmic variation Substantive variation

Stimulus Generalization: This is defined as phenomenon that occurs when a stimulus is so similar to another stimulus, that the former evokes the same response as the Latter. Example “me too” products. The inability to perceive differences between slightly dissimilar stimuli.

Stimulus Discrimination: the ability to differentiate a particular stimulus from among similar stimuli.

IMPLICATIONS FOR MARKETERS: The Pavlovian Theory has implications for

marketers. Consumers respond to learning via classical conditioning when:

-The level of perceived risk is low (and cognitive effort is not required)

Products are low on differentiation Purchases are routine; convenience

goods and impulse items

OPERANT CONDITIONING learning based on a trial-and-error

process, with habits forced as the result of positive experiences (reinforcement)

The Operant Conditioning Theory has implications for marketers. Consumers respond to learning via instrumental conditioning when: Trial can be attempted before purchase Purchases are linked to desirable affective

experiences There is higher involvement and greater

cognitive activity

TYPES OF REINFORCEMENT

INSTRUMENTAL CONDITIONING AND MARKETING

Make the product the ultimate reward

Provide samples and free trials Provide non-product rewards Practice relationship marketing Reinforcement Schedules

Shaping

COGNITIVE LEARNING THEORY

Learning through problem solving, which enables individuals to gain some control over their environment.

Factors that can affect a consumer's ability to process, store and retrieve knowledge are familiarity with the information, relevance of the information, interest in the information, the form in which it is provided etc.

INFORMATION PROCESSING AND INVOLVEMENT THEORY Central and Peripheral Routes to Persuasionhighly involved consumers are best reached

through ads that focus on the specific attributes of the product (the central route)

uninvolved consumers can be attracted through peripheral advertising cues such as the model or the setting (the peripheral route).

ELABORATION LIKELIHOOD MODEL (ELM) a person’s level of involvement

during message processing determines which route to persuasion is likely to be effective

THE ELABORATION LIKELIHOOD MODEL

Involvement

Central RoutePeripheral

Route

Message Arguments Influence Attitudes

Peripheral Cues

Influence Attitudes

HIGHLOW

MARKETING IMPLICATION: For low-involvement purchases,

marketing communication through TV is the right media; consumers learn via repetition, i.e. exposure to the same message over TV again and again.

On the other hand, in cases of high-involvement purchases, the print media acts as right choice while selection of media.

MODELS OF CONSUMER BEHAVIOUR:Monadic models1. Economic

model2. Response

hierarchy model

3. Black box model

Eclectic or multivariable models:

1. Howard Sheth model

2. Nicosia3. Engel, Blackwell

and Miniard model

4. Product adoption model

1. Elasticity model: As price increases, other things remaining

constant, demand of the commodity will go down.

Purely economic model

2. Response Hierarchy model: Purely Psychological model Defines sequence of mental stages that

consumer passes through before buyingCognitive

Affective

Behaviour

3. The Black Box Model: Stimulus – response model The stimuli that is presented to the consumer by

the marketer and the environment is then dealt with by the buyer’s black box. The buyer’s black box, comprises two sub components, viz., the buyer’s characteristics and the buyer decision process.

HOWARD- SHETH MODEL Represents a major revision of an earlier

systematic effort to develop a comprehensive theory of buyer decision making.

This model depicts and creates a distinction among three stages of decision-making.Extensive Problem SolvingLimited Problem SolvingRoutinised Response Behaviour

MAJOR COMPONENTS

Inputs: environmental stimuli that the consumer is subjected to, and is communicated from a variety of sources

Significative stimuli Symbolic stimuli Social stimuli

Hypothetical construct can be classified as: Perceptual construct: serve to control, filter and process

the stimuli that are received. Sensitivity to information. Perceptual bias. Search for informationLearning constructs: perform the function of

consumer’s concept formation. Motive, evoked set, decision mediators, predispositions, inhibitors, satisfaction

Output: The output variables on the right of the model represent the

buyers’ response. Attention refers to the degr ee or level of information th at a

buyer accept s when exposed to a stimulus. It reflects the magnitude of the buyer's information intake.

- Comprehension is the amount of information that he actually processes and stores; here, it refers to brand comprehension which is buyers’ knowledge about the product/service category and brand.

- The attitude is the composite of cognition, affect and behaviour towards the offering; the attitude reflects his evaluation of the brand and the like/dislike based on the brand potential.

- Intention refers to the buyer’s intention to buy or not to buy a particular offering.

- Purchase behavior refers to the actual act of buying. The purchase behavior is a cumulative result of the other four constituents.

Exogenous variables:These are explained as Inhibitors or

environmental forces that restrain the purchase of a favoured brand; e.g.., importance of the purchase, price, financial status of the buyer, time at the disposal of the buyer, personality traits, social pressures etc

HOWARD-SHETH MODEL:

NICOSIA MODEL The model describes a flow of influences

where each component acts as an input to the next

This Model concerns with the Inter-relationship between: The firms marketing communications The attributes of the consumer The consumers decision process including search

and evaluation process, Actual decision process The feedback of the consumers response to the

firm This is a Dynamic Model.

ENGEL, BLACKWELL AND MINIARD MODEL

EKB model shows the various components of consumer decision making and the relationships/interactions among them.

The model consists of five parts, viz. information input, information processing, decision process stage, decision process variables, and external influences.

CRITICAL EVALUATION: It tries to explain clearly the interrelationships

between stages in the decision process and the various variables.

They attempted to relate belief-attitude-intention. An attempt was made to define the variables and specify functional relationships between the various constructs.

However, the model fails to adequately explain as to how each of these influences consumer decision making. Critics argue that there are too many variables; these have not been defined; the model is vague and complex; and the validity of the model has been questionable.

PRODUCT ADOPTION MODEL:

Diffusion of innovations theory popularised by Everett Rogers tries to demonstrate how, at what rate and why innovated products and technology are spread and what type of consumers adopt them at various stages of product life cycle

Categories of adopters: Innovators: these people are willing to take risk & experience

the new ideas. They generally belong to highest social class. Early adopters: these people have highest degree of opinion

leadership and are second fastest category of consumer to adopt innovation.

Early majority: these people belonging to above average status and are slower in adopting innovations.

Late majority: these people have high degree of scepticism and adopt product after majority of people adopted the innovation.

Laggards: they are last to adopt the innovation and show no opinion leadership

ORGANISATIONAL BUYING BEHAVIOUR: The business market consists of all the

organizations, that buy goods and services for further use in the production and supply of other goods and services that are sold to others.

Also called B2B markets, the product and service offering is bought by one business organization and further processed/transformed/assembled consumer for further sale either to another business consumer or a personal consumer.

Characteristic include:Huge in terms of size and investmentContain fewer but larger and bulkier buyersThey are geographically concentrated It’s a derived demand and there is more

inelasticityDemand also fluctuates very rapidly.The buying decision is taken in a very

formal and professional manner by a group of people who are referred to as the buying centre.

MODEL OF ORGANISATIONAL BUYER BEHAVIOUR

FACTORS AFFECTING ORGANISATIONAL BUYER BEHAVIOUR:

DECISION MAKING PROCESS OF ORGANISATIONAL BUYER: Problem recognition: The buying process begins

when someone in the organization identifies a need. A need could be triggered off by an internal stimulus or an external stimulus.

General need description: The product/service requirement is laid out in very broad terms.

Product specification: Then the concerned department/person specifies the product’s characteristics and requirements.

Supplier search: Business organizations generate for themselves a list of vendors. This list is drawn up from trade directories, websites, trade shows etc. In case of a straight rebuy or a modified rebuy, the buyer can refer to such a database. In cases of a new-task, he would have to search for new vendors.

Proposal solicitation: Thereafter, the buyer would invite suppliers to submit their trade proposals; such an invitation could be placed in the newspapers, trade journals and company websites. The vendors are asked to submit details related to the product specifications, features, price, delivery time and period etc.

Supplier selection: After the proposals have been submitted by the vendors, the buyer would go in for an evaluation of the suppliers. The buying centre would establish the evaluative criteria, i.e. the basis on which the vendors would be evaluated. These criteria would vary across products/services, buying situations etc.

Order-routine specification: Once the buying center has taken a decision on the selection of the vendor, the formal requisition is made in terms of listing the technical specifications, quantity required, delivery terms, negotiated price, payment terms, damages, return policies etc.

Performance review: The buyer reviews the performance of the chosen supplier(s) on a regular basis. This evaluation helps the buyer later in cases of straight rebuy and modified rebuy. On the basis of an evaluation, the relationship/contract with the supplier is continued or terminated.