Consumer Behavior

Consumer behavior (in consumer business context) referred to as the study

of when, why, how, where and what people do or do not buy products It

blends elements from psychology, sociology, social, anthropology and

economics. It attempts to understand the buyer decision making process,

both individually and in groups. It studies characteristics of individual

consumers such as demographics and behavioral variables in an attempt to

understand people's wants. It also tries to assess influences on the consumer

from groups such as family, friends, reference groups, and society in

general.

Customer behavior study is based on consumer buying behavior, with the

customer playing the three distinct roles of user, payer and buyer.

Relationship marketing is an influential asset for customer behavior analysis

as it has a keen interest in the re-discovery of the true meaning of marketing

through the re-affirmation of the importance of the customer or buyer.

A greater importance is also placed on consumer retention, customer

relationship management, personalization, customization and one-to-one

marketing. Social functions can be categorized into social choice and

welfare functions. Each method for vote counting is assumed as a social

function but if Arrow’s possibility theorem is used for a social function,

social welfare function is achieved. Some specifications of the social

functions are decisiveness, neutrality, anonymity, monotonocity, unanimity,

homogeneity and weak and strong Pareto optimality .

Black box model

ENVIRONMENTAL FACTORS

BUYER'S BLACK BOXBUYER'S

RESPONSEMarketing Stimuli

Environmental Stimuli

Buyer Characteristics

Decision Process

ProductPricePlacePromotion

EconomicTechnicalPoliticalCultural

AttitudesMotivationPerceptionsPersonalityLifestyle

Problem recognitionInformation searchAlternative evaluationPurchase decisionPost-purchase behavior

Product choiceBrand choiceDealer choicePurchase timingPurchase amount

The black box model shows the interaction of stimuli, consumer

characteristics, and decision process and consumer responses. It can be

distinguished between interpersonal stimuli (between people) or

intrapersonal stimuli (within people).The black box model is related to the

black box theory of behaviorism, where the focus is not set on the processes

inside a consumer, but the relation between the stimuli and the response of

the consumer. The marketing stimuli are planned and processed by the

companies, whereas the environmental stimuli are given by social factors,

based on the economical, political and cultural circumstances of a society.

The buyers black box contains the buyer characteristics and the decision

process, which determines the buyers response.

The black box model considers the buyers response as a result of a

conscious, rational decision process, in which it is assumed that the buyer

has recognized the problem. However, in reality many decisions are not

made in awareness of a determined problem by the consumer.

Information search

Once the consumer has recognized a problem, they search for information

on products and services that can solve that problem. Belch and Belch

(2007) explain that consumers undertake both an internal (memory) and an

external search.

Sources of information include:

Personal sources

Commercial sources

Public sources

Personal experience

The relevant internal psychological process that is associated with

information search is perception. Perception is defined as 'the process by

which an individual receives, selects, organizes, and interprets information

to create a meaningful picture of the world'

The selective perception process

Stage Description

- Selective exposure consumers select which promotional messages they will

expose themselves to.

- Selective attention consumers select which promotional messages they will

pay attention to

- Selective comprehension consumer interpret messages in line with their

beliefs, attitudes, motives and experiences

- Selective retention consumers remember messages that are more

meaningful or important to them

The implications of this process help develop an effective promotional

strategy, and select which sources of information are more effective for the

brands.

Information evaluation

At this time the consumer compares the brands and products that are in their

evoked set. How can the marketing organization increase the likelihood that

their brand is part of the consumer's evoked (consideration) set? Consumers

evaluate alternatives in terms of the functional and psychological benefits

that they offer. The marketing organization needs to understand what

benefits consumers are seeking and therefore which attributes are most

important in terms of making a decision.

Purchase decision

Once the alternatives have been evaluated, the consumer is ready to make a

purchase decision. Sometimes purchase intention does not result in an actual

purchase. The marketing organization must facilitate the consumer to act on

their purchase intention. The provision of credit or payment terms may

encourage purchase, or a sales promotion such as the opportunity to receive

a premium or enter a competition may provide an incentive to buy now. The

relevant internal psychological process that is associated with purchase

decision is integration.

Post purchase evaluation

It is common for customers to experience concerns after making a purchase

decision. This arises from a concept that is known as “cognitive

dissonance”. The customer, having bought a product, may feel that an

alternative would have been preferable. In these circumstances that customer

will not repurchase immediately, but is likely to switch brands next time.

To manage the post-purchase stage, it is the job of the marketing team to

persuade the potential customer that the product will satisfy his or her needs.

Then after having made a purchase, the customer should be encouraged that

he or she has made the right decision.

Internal influences

Consumer behavior is influenced by: demographics, psychographics

(lifestyle), personality, motivation, knowledge, attitudes, beliefs, and

feelings. consumer behavior concern with consumer need consumer actions

in the direction of satisfying needs leads to his behavior behavior of every

individuals depend on thinking process

External influences

Consumer behavior is influenced by: culture, sub-culture, locality, royalty,

ethnicity, family, social class, reference groups, lifestyle, and market mix

factors.

Adoption process for new products

Occurs when a consumer's previous buying experiences are not relevant to

the current problem he or she would like to solve.

Awareness: consumer is aware of, but lacks details of, the brand

Interest: consumer gathers information about the brand

Evaluation: consumer imagines trying the brand and anticipates the

benefit from its use

Trial: consumer tries the brand

Decision: consumer adopts the brand for future use or rejects it

Confirmation: consumer will seek information to support his or her

decision and to reduce tension (cognitive dissonance)

Consumer behavior for industrial markets

Characterized by buyers who:

Less emotional than consumer buyer markets

Look for specific product attributes, such as economy in cost and use,

productivity, and quality

Want to partner with businesses that are reliable, fair, consistent,

speedy, and cooperative

Are generally spending a larger amount of money. thus, the process

tends to be more complex and lengthy

Are more tasks oriented and rational than consumer product buyer?

Have firm motives of Quality, price and delivery against emotional

motives in the other cases.

What is Consumer Buying Behavior?

Definition of Buying Behavior:

Buying Behavior is the decision processes and acts of people involved in

buying and using products.

Need to understand:

Why consumers make the purchases that they make?

What factors influence consumer purchases?

The changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate

consumer. A firm needs to analyze buying behavior for:

Buyer’s reactions to a firms marketing strategy has a great impact on

the firm’s success.

The marketing concept stresses that a firm should create a Marketing

Mix (MM) that satisfies (gives utility to) customers, therefore need to

analyze the what, where, when and how consumers buy.

Marketers can better predict how consumers will respond to

marketing strategies.

Types of Consumer Buying Behavior

Types of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity

of interest in a product in a particular situation.

Buyer’s level of involvement determines why he/she is motivated to

seek information about a certain products and brands but virtually

ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products

visible to others, and the higher the risk the higher the involvement. Types

of risk:

Personal risk

Social risk

Economic risk

The four type of consumer buying behavior are: Routine Response/Programmed Behavior--buying low involvement

frequently purchased low cost items; need very little search and

decision effort; purchased almost automatically. Examples include

soft drinks, snack foods, milk etc.

Limited Decision Making--buying product occasionally. When you

need to obtain information about unfamiliar brand in a familiar

product category, perhaps. Requires a moderate amount of time for

information gathering. Examples include Clothes--know product class

but not the brand.

Extensive Decision Making/Complex high involvement, unfamiliar,

expensive and/or infrequently bought products. High degree of

economic/performance/psychological risk. Examples include cars,

homes, computers, education. Spend alot of time seeking information

and deciding.

Information from the companies MM; friends and relatives, store

personnel etc. Go through all six stages of the buying process.

Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying

Behavior. Product can shift from one category to the next.

For example:

Going out for dinner for one person may be extensive decision making (for

someone that does not go out often at all), but limited decision making for

someone else. The reason for the dinner, whether it is an anniversary

celebration, or a meal with a couple of friends will also determine the extent

of the decision making.

Categories that Effect the Consumer Buying Decision Process

A consumer, making a purchase decision will be affected by the following

three factors:

1. Personal

2. Psychological

3. Social

The marketer must be aware of these factors in order to develop an

appropriate MM for its target market.

Personal

Unique to a particular person. Demographic Factors. Sex, Race, Age etc.

Who in the family is responsible for the decision making?

Young people purchase things for different reasons than older people.

Psychological factors

Psychological factors include:

Motives--

A motive is an internal energizing force that orients a person's

activities toward satisfying a need or achieving a goal.

Actions are effected by a set of motives, not just one. If marketers can

identify motives then they can better develop a marketing mix.

MASLOW hierarchy of needs!!

o Physiological

o Safety

o Love and Belonging

o Esteem

o Self Actualization

Need to determine what level of the hierarchy the consumers are at to

determine what motivates their purchases.

Ability and Knowledge--

Need to understand individual’s capacity to learn. Learning, changes

in a person's behavior caused by information and experience.

Therefore to change consumers' behavior about your product, need to

give them new information re: product...free sample etc.

South Africa...open bottle of wine and pour it!! Also educate

American consumers about changes in SA. Need to sell a whole new

country.

When making buying decisions, buyers must process information.

Knowledge is the familiarity with the product and expertise.

Inexperience buyers often use prices as an indicator of quality more

than those who have knowledge of a product.

Non-alcoholic Beer example: consumers chose the most expensive

six-pack, because they assume that the greater price indicates greater

quality.

Learning is the process through which a relatively permanent change

in behavior results from the consequences of past behavior.

Attitudes--

Knowledge and positive and negative feelings about an object or

activity-maybe tangible or intangible, living or non- living.....Drive

perceptions

Individual learns attitudes through experience and interaction with

other people.

Consumer attitudes toward a firm and its products greatly influence

the success or failure of the firm's marketing strategy.

Personality--

All the internal traits and behaviors that make a person unique,

uniqueness arrives from a person's heredity and personal experience.

Examples include:

o Work holism

o Compulsiveness

o Self confidence

o Friendliness

o Adaptability

o Ambitiousness

o Dogmatism

o Authoritarianism

o Introversion

o Extroversion

o Aggressiveness

o Competitiveness.

Traits affect the way people behave. Marketers try to match the store

image to the perceived image of their customers.

There is a weak association between personality and Buying

Behavior; this may be due to unreliable measures. Nike ads.

Consumers buy products that are consistent with their self concept.

Lifestyles--

Recent US trends in lifestyles are a shift towards personal

independence and individualism and a preference for a healthy,

natural lifestyle.

Lifestyles are the consistent patterns people follow in their lives.

Social Factors

Consumer wants, learning, motives etc. are influenced by opinion leaders,

person's family, reference groups, social class and culture.

Opinion leaders--

Spokespeople etc. Marketers try to attract opinion leaders...they

actually use (pay) spokespeople to market their products. Michael

Jordon (Nike, McDonalds, Gatorade etc.)

Roles and Family Influences--

Role...things you should do based on the expectations of you from

your position within a group.

People have many roles.

Husband, father, employer/ee. Individuals role are continuing to

change therefore marketers must continue to update information.

Family is the most basic group a person belongs to. Marketers must

understand:

o that many family decisions are made by the family unit

o consumer behavior starts in the family unit

o family roles and preferences are the model for children's future

family (can reject/alter/etc)

o family buying decisions are a mixture of family interactions and

individual decision making

o Family acts an interpreter of social and cultural values for the

individual.

Social Class--

An open group of individuals who have similar social rank. US is not

a classless society. US criteria; occupation, education, income, wealth,

race, ethnic groups and possessions.

Social class influences many aspects of our lives. IE upper middle

class Americans prefer luxury cars Mercedes.

o Upper Americans-upper-upper class, .3%, inherited wealth,

aristocratic names.

o Lower-upper class, 1.2%, newer social elite, from current

professionals and corporate elite

o Upper-middle class, 12.5%, college graduates, managers and

professionals

o Middle Americans-middle class, 32%, average pay white collar

workers and blue collar friends

o Working class, 38%, average pay blue collar workers

o Lower Americans-lower class, 9%, working, not on welfare

o Lower-lower class, 7%, on welfare

Social class determines to some extent, the types, quality, and quantity

of products that a person buys or uses.

Lower class people tend to stay close to home when shopping; do not

engage in much pre purchase information gathering.

Stores project definite class images.

Family, reference groups and social classes are all social influences on

consumer behavior. All operate within a larger culture.

Culture and Sub-culture--

Culture refers to the set of values, ideas, and attitudes that are

accepted by a homogenous group of people and transmitted to the

next generation.

Culture also determines what is acceptable with product advertising.

Culture determines what people wear, eat, reside and travel. Cultural

values in the US are good health, education, individualism and

freedom. In American culture time scarcity is a growing problem. IE

change in meals. Big impact on international marketing.

Customer satisfaction

Customer satisfaction, a business term, is a measure of how products and

services supplied by a company meet or surpass customer expectation. It is

seen as a key performance indicator within business and is part of the four

perspectives of a Balanced Scorecard .

In a competitive marketplace where businesses compete for customers,

customer satisfaction is seen as a key differentiator and increasingly has

become a key element of business strategy.

There is a substantial body of empirical literature that establishes the

benefits of customer satisfaction for firms.

Measuring customer satisfaction

Organizations are increasingly interested in retaining existing customers

while targeting non-customers; measuring customer satisfaction provides an

indication of how successful the organization is at providing products and/or

services to the marketplace.

Customer satisfaction is an ambiguous and abstract concept and the actual

manifestation of the state of satisfaction will vary from person to person and

product/service to product/service. The state of satisfaction depends on a

number of both psychological and physical variables which correlate with

satisfaction behaviors such as return and recommend rate. The level of

satisfaction can also vary depending on other options the customer may have

and other products against which the customer can compare the

organization's products.

Because satisfaction is basically a psychological state, care should be taken

in the effort of quantitative measurement, although a large quantity of

research in this area has recently been developed.

The usual measures of customer satisfaction involve a survey with a set of

statements using a Likert Technique or scale. The customer is asked to

evaluate each statement and in term of their perception and expectation of

performance of the organization being measured.

Improving Customer Satisfaction

The International Customer Service Institute (TICSI) has released The

International Customer Service Standard (TICSS). TICSS enables

organizations to focus their attention on delivering excellence in the

management of customer service, whilst at the same time providing

recognition of success through a 3rd Party registration scheme. TICSS

focuses an organization’s attention on delivering increased customer

satisfaction by helping the organization through a Service Quality Model.

TICSS Service Quality Model uses the 5 P's - Policy, Processes, People,

Premises, Product/Services, as well as performance measurement. The

implementation of a customer service standard should lead to higher levels

of customer satisfaction, which in turn influences customer retention and

customer loyalty.

Customer satisfaction research

Customer satisfaction research is that area of marketing research which

focuses on customers' perceptions with their shopping or purchase

experience.

Many firms are interested in understanding what their customers thought

about their shopping or purchase experience, because finding new customers

is generally more costly and difficult that servicing existing or repeat

customers.

Many people are familiar with "business to customer" (B2C) or retail-level

research, but there are also many "business to business" (B2B) or wholesale-

level projects commissioned as well.

Methods

Quantitative Research Studies

Quantitative studies allow a firm to develop an understanding of the "big

picture" of their customers' experiences based upon a relatively small

number of interviews. This "sample" of the firm's customers must be

carefully designed and drawn if the results of the study are to be considered

representative of the customer population as a whole. In most cases, the

results of quantitative studies are based upon the responses of a relatively

"large" number of interviews. Depending upon the size of the population and

the amount of segmentation desired, "large" can be as few as 50 responses or

range from several hundred to thousands of interviews. Mail-based,

telephone-based, and (more recently) Internet-based surveys and related data

collection methods.

Qualitative Research Studies

Qualitative studies are used by firms to provide a more detailed and/or

unconstrained understanding of customer experiences. In most cases, the

results of qualitative studies are based upon dozens of interviews.

Qualitative studies are not designed to provide insights that are project able

to the customer population: qualitative studies are used for initial exploration

of experiences and topics or to probe more deeply the reasons behind

customer perceptions. Focus groups (group depth interviews) and "one-on-

ones" (individual depth interviews) are common examples of qualitative

studies.