Post on 06-Jul-2018
8/17/2019 unit 4 MBA
1/36
Unit -IV: Consumer Decision Making
Levels of consumer decision making,
four views of consumer decisionmaking (Economic, Passive, Cognitive
and Emotional), Opinion leadership-
dynamics, measurement and profile
!iffusion of "nnovation- !iffusion and
#doption Process
8/17/2019 unit 4 MBA
2/36
DYNAMICS IN COMMUNICATION : thedynamics that operate in word-of-mouthcommunication
The message and its information content: Amessage may be of dierent kinds and assumevarious forms. The marketing message orinformation content can be classied into threetypes, viz., product news, advice and personaleperience.
i) Product news: !roduct news is any
information that a consumer gathers during hissearch for information. "nce a consumeridenties a need and seeks to satisfy it, hegoes in for a search of information. This
information search could specic, on-going and
8/17/2019 unit 4 MBA
3/36
ii) Adice: As people communicate informallywith family, friends, peers, opinion leaders andeven strangers, they hear of personal
eperiences of others. They are also eposed tostatements that re#ect personal attitudes, viewsand opinions about alternative product andservice oerings and$or brands etc. !ut together
all this form the advice component.iii) Persona! e"#erience: !ersonal eperiencerefers to eperiences of product or service usageby communications partners %i.e. those withwhom a person interacts informally to gaininformation about product and service oeringand$or brands&. 'hile people gain information
through product news %cognition& and advice%co nition and aect&, the often su lement
8/17/2019 unit 4 MBA
4/36
Two$Ste# %!ow of Communication Theor&' : The Two-(tep )low of *ommunication Theory
proposes that the "pinion +eader forms a vitallink in the interpersonal communication process,and has an important role to play intransmission of information. According to the
Two-(tep )low of *ommunication Theory, themessage %information content from themarketer& #ows from the mass media %both printand$or electronic audio-visual& to the "pinion
+eaders and from there it is transmitted to themasses or the "pinion eceivers.
8/17/2019 unit 4 MBA
5/36
Adantages of (OM communication'-'ord-of-mouth communication reduces
the physical and cognitive eort that theconsumer has to take to gatherinformation, evaluate alternatives and take
the right decision.-- t helps an individual seek advice fromthe right person who has interest,knowledge and eperience with a productand service category especially in cases ofhigh involvement products, a person maybe less knowledgeable and less involved
and can take advice from someone who is
8/17/2019 unit 4 MBA
6/36
- 'ord-of-mouth communication also reduces thelevel of uncertainty associated with a purchase.
!eople turn to informal sources for informationso as to be able to be certain with respect to thepurchase decision. This is particularly true forhigh involvement products, as also for products
that need social approval and$or match socialclass and social status.!eople often turn to eperts and opinion leadersfor advice They also look up to reference
groups 'hile eperts provide productknowledge and make consumers feel morecertain about a product alternative, referencegroups lead to an increase in consumer/s
condence about making a product choice that
8/17/2019 unit 4 MBA
7/36
(OD$O%$MOUT* COMMUNICATION ANDOPINION +,AD,S*IP:i& '"0 is informal in nature.ii& t is interpersonal and takes place between twoor more people. The people could be actualconsumers or prospects and are in no way
representative of the marketer.iii& 1nlike commercial sources, the peopleinvolved in '"0 communication do not haveulterior or hidden motives of making a sale and
earning prot.'ord-of-mouth communication generally relatesto face-to-face informal communication. 2owever,it could also occur through a telephonic
conversation or chatting and blogging on the
8/17/2019 unit 4 MBA
8/36
As people communicate with each other in apurchase decision making situation, one of thoseinvolved in the informal communication process is
able to in#uence the attitude and purchasedecision of others. 2e is an "pinion +eader andthe process is known as "pinion +eadership.(chiman denes "pinion +eadership as 3the
process by which one person %the opinion leader&informally in#uences the actions or attitudes ofothers, who may be opinion seekers or merelyopinion recipients4.An identication of "pinion +eaders, theirbehavior and the very dynamics of the "pinion+eadership process is helpful to the marketer.
"nce the marketers have identied the "pinion+eaders, marketers can tar et their marketin
8/17/2019 unit 4 MBA
9/36
OPINION +,AD,S AND OPINION,C,I-,S.S,,/,S: n some cases, the"pinion +eader 5ust likes to talk and discussabout a product or service category. 2evoluntarily provides information about theproduct and product category and$or about
brands. The people who form the audience andlisten to him are called "pinion eceivers.n other cases, prior to a purchase, people couldapproach an "pinion +eader and re6uest him for
information and advice about the productcategory and$or about brands. That is, the"pinion +eader would provide information onlywhen asked for. n such cases, the persons
%audience$or the receiver of information& are
8/17/2019 unit 4 MBA
10/36
O+, P+AY,D 0Y OPINION +,AD,S: The ma5or roles played byopinion leaders are, i& authority gure ii& trend setter and iii& localopinion leader. i) Authorit& 1gure: The ro!e that is #!a&ed 2& an O#inion
+eader when he gies #roduct news and adice3 anda!so narrates his #ersona! e"#eriences to consumers3 is4nown as the authorit& 1gure ro!e'
ii) ii) Trend setter: O#inion +eaders act as trend setters'The& are inner oriented and do not 2other a2out what
others in the societ& sa& or do' The& are a!so innoatieand often go in for #urchase of new #roduct and sericeo5erings 6of their interest categor&) and through the#urchase and usage3 the& set the trend
iii)iii) +oca! O#inion +eader: O#inion +eaders are said to acta !oca! o#inion !eaders when a) the& constitute a#erson7s #ositie reference grou#8 and 2) the& #roideinformation a2out such #roduct and serice o5eringsand.or 2rands that he!# satisf& their needs and wants ofthe consumer grou# in a manner that is consistent withgrou# a!ues and norms' As !oca! o#inion !eaders3 the&
#roide 4now!edge and adice3 and narrate #ersona!e" eriences a2out roduct and serice o5erin s' Their
8/17/2019 unit 4 MBA
11/36
MOTI-,S0,*INDOPINION+,AD,S*IP:7. because they are involved and interested in a product
or service category, and love to talk about it %productinvolvement&.
8. '"0 communication gives them an opportunity totalk about their interests to others.
9. they may feel so positively and favorably or negativelyand unfavorably about a product and$or brand that
they feel like telling about it to others %productinvolvement, self involvement and social involvement&
:. they possess knowledge, epertise and eperiencewith a product category,
;. they feel important and powerful when peopleapproach them for information and advice.
8/17/2019 unit 4 MBA
12/36
?. They may be genuinely be benevolent and generous,and out of altruistic concerns may like to help others,especially family, friends, relatives and neighbours
%sel#ess motive@ social involvement&.7. "pinion +eaders may be also trying to reduce their
own level of post-purcahse cognitive dissonance%self-interest&.
77. nterestingly true, many provide information as a& they may be wanting to try out a new product orservice oering after someone else buys and uses itrst or b& c& they may themselves be trying to reassure
themselves of their own purchase decision byrecommending it to others and d& they may be dissatised with a purchase and liketo complain about the purchase of the product and
service and$or brand and$or company and$store from
8/17/2019 unit 4 MBA
13/36
O#inion +eaders #roide 2oth #ositie and negatieinformation: O#inion +eaders #roide 2oth faora2!e andunfaora2!e information a2out #roduct and serice o5eringsand.or 2rands3 and this adds to their credi2i!it&' Com#ared to#ositie and neutra! information and.or ea!uation3 theim#act of negatie information and.or ea!uation is muchgreater and has a 2igger im#act on O#inioneceiers.See4ers' Thus3 the& wou!d aoid such #roduct andserice o5erings and.or 2rands that are s#o4en negatie!& 2&
O#inion +eaders'O#inion +eaders are in;uentia! and #ersuasie: O#inion+eaders are high!& in;uentia! and er& e5ectie at#ersuading #eo#!e around them' The& are credi2!e informa!sources of #roduct 4now!edge3 information and adice'
Peo#!e !oo4 u# to them for adice and the& are good atin;uencing the former 2ecause of the fo!!owing:- they are regarded as sub5ect eperts, i.e. it is believed that opinionleaders are knowledgeable and eperienced about a product orservice category.
- since they receive no monetary compensation, their information,advice, opinion and eperiences about a product or service category,
8/17/2019 unit 4 MBA
14/36
DYNAMICS O% OPINION +,AD,S*IP POC,SS: The"pinion +eadership process is highly dynamic in nature."pinion +eaders communicate informally about product
and service oerings and$or brands. They oer productinformation and advice, and narrate eperiences. Theyare not generic in nature they are specic to a productcategory, and an epert in one product category wouldnot be an epert for another product category. Thus, aperson may be an "pinion +eader for a product categoryand an "pinion eceiver for another.
The dynamic nature of "pinion +eadership is discussedas follows@ O#inion +eaders #roide #roduct
information3 adice and narrate e"#eriences:O#inion +eaders communicate informa!!& a2out#roduct and serice o5erings and.or 2rands8 the&gie #roduct news and adice to consumers
6current and #otentia!) and a!so narrate their#ersona! e"#erience to others' As such the& act as
8/17/2019 unit 4 MBA
15/36
O#inion +eaders are not generic in nature: The&are s#eci1c to a #roduct or serice categor&3 and
#ossess e"#ertise and s#ecia!i
8/17/2019 unit 4 MBA
16/36
O#inion +eaders cou!d a!so 2ecome O#inioneceiers.See4ers: As e"#!ained a2oe3 O#inion+eaders are categor& s#eci1c' The& are e"#ertsin one #roduct.serice categor&3 and act asO#inion +eaders' *oweer3 when it comes toanother #roduct.serice categor&3 the& ma&2ecome O#inion eceiers.See4ers' The& ma&een see4 information from #eo#!e to whom
the& had gien information ear!ier a2outanotherproduct category. Thus, the roles may get reversedfrom "pinion +eaders to "pinion eceivers$(eekers in
the contet of other product$service categories.(ometimes a person may become an "pinioneceiver$(eeker for the same product also. This iswhen he is in a product-relatedconversation$discussion with a "pinion
eceiver$(eeker who is more informed, enlightened
8/17/2019 unit 4 MBA
17/36
M,ASU,M,NT O% OPINION +,AD,S*IP: n order to measure"pinion +eadership, it is essential that "pinion +eaders with respect tothe product$service category are identied. t is also important thatpeople who have the potential to become "pinion +eaders are also
identied. There are three ways in which "pinion +eaders can beidentied these are listed as follows@a& marketers directly ask the consumers whether they are "pinion
+eaders.b& they ask a sub5ect epert to identify who the "pinion +eaders are.c& they study the communication patterns and #ows among
consumers, interpret the dynamics and identify the leaders These methods, in particular the third one help marketers to identify thetraits and characteristics that make up an "pinion +eader for a type ofproduct or service category. t also helps the marketer understand thebehavior of "pinion +eaders and the dynamics underlying the "pinion+eadership process. 0arketers are interested in identifying, measuring
and analyzing the impact of the opinion leadership process onconsumption patterns and consumption behavior.
di h f b i
8/17/2019 unit 4 MBA
18/36
According to ogers, there are four basictechni6ues for measuring "pinion +eadership,viz., i& the self-designating method ii& the
sociometric method iii& the key informantmethod and iv& the ob5ective method.i) The se!f$designating method: A marketingsurvey is conducted and people are asked a
series of 6uestions to determine the degree towhich they behave as "pinion +eaders.Cuestions pertain to@a& the etent to which they have given
information and advice about a product$servicecategory and$or brands to others in the socialsystem
b& how often they have been able to in#uencethe urchase decisions about others.
8/17/2019 unit 4 MBA
19/36
ii) The sociometric method: Thesociometric method of measuring "pinion+eadership basis itself on the study of the
social system, and particularly thecommunication patterns and #ows toidentify those to give information and
advice as act as "pinion +eaders.esearchers eamine complete patterns ofinformal information #ows among
consumers of a particular product$servicecategory, and identify those who provideinformation to others as "pinion +eaders.'hile the techni6ue makes use of theanal sis of the communication #ow, it also
& h l h h h i
8/17/2019 unit 4 MBA
20/36
a&those people to whom they have giveninformation and advice about aproduct$service category. n case the
respondent identies one or manypeople to whom he has providedinformation and advice, he is regarded
as an "pinion +eader. esearchers couldcross-eamine by contacting and6uestioning the receiver$(eekers of
information and conrming from them.b& those people to whom they have gonefor information and advice about aproduct or service category and$orbrand. 2er a ain, researchers could
iii) Th 4 i f t th d D d
8/17/2019 unit 4 MBA
21/36
iii) The 4e& informant method: Dased oncareful observation and analysis of socialcommunication, key informants in a social
system are identied. These key informants areasked to identify and$or designate individuals inthe social group who are "pinion +eaders orwho are most likely to be "pinion +eaders'
The key informants are those who are awareabout the communication patterns in a socialenvironment and able to provide a fair andimpartial assessment of these patterns. They
may or may not be a member of such group%s&they may be active participants or passiveobservers. n this way %where an epert isasked to identify "pinion +eaders&, thetechni ue is better than the self-desi natin
8/17/2019 unit 4 MBA
22/36
i) The o2=ectie method: Theob5ective method is based on simulation.
t identies and measures "pinion+eadership by placing people in controlledenvironments %5ust as controlledeperiments&. !eople are chosen, giveninformation about new products andservice categories, and the asked to actout as "pinion +eaders. The resulting
3web4 and 3patterns4 of informalinterpersonal communication regardingthe relevant product or service category
are traced and analyzed. The techni6ue
)ill in the blanks
8/17/2019 unit 4 MBA
23/36
)ill in the blanks7. Any kind of informal interpersonal communication that takes placebetween individuals as consumers is known as EEEEEEEEEEEEEEEEEcommunication.8. The marketing message or information content can be classied into
three types, viz., product news, advice andEEEEEEEEEEEEEEEEEEEEEE.9. As per the Two-(tep )low of communication Theory, EEEEEEEEEEEEEEEactas middlemen in the entire process of communication.:. EEEEEEEEEEEEEEEEEEEEEEE are those among the masses who neitherin#uence nor are in#uenced by others.;. 3the process by which one person %the opinion leader& informally
in#uences the actions or attitudes of others, who may be opinion seekersor merely opinion recipients4 known asFFFFFFFF..
8/17/2019 unit 4 MBA
24/36
7 . EEEEEEEEEEEEEEEEEEEact as a vital link between the marketer andconsumers.77. "pinion +eaders are said to be performing the EEEEEEEEEEEEEEEEroleas they act as eperts and authorities for a particular product category.78. There are some people who seem to know about everything about
the market and oer their advice about anything and everything. (uchpeople are called EEEEEEEEEEEEEEEEE.79 . The EEEEEEEEEEEEEmethod is based on simulation. t identies andmeasures "pinion +eadership by placing people in controlledenvironments.Geys@ 7. 'ord-of-0outh$nformal interpersonal 8. !ersonal eperience9. "pinion leaders :. nformation receivers ;. %the opinion leader
8/17/2019 unit 4 MBA
25/36
INNO-ATION: n a highly competitiveenvironment, where number of playerseist and vie for a share of the market, the
introduction of new product and serviceoerings becomes crucial for eistence andlong term survival thus, marketers are
always on the move towards introduction ofnew product and service oerings thatwould help meet the evolving needs and
wants of the consumer segment%s&. The#roducts that are o5ered ma& 2es!ight!& di5erent from the e"istinga!ternaties3 some ma& 2e high!&di5erent3 and some tota!! new are
8/17/2019 unit 4 MBA
26/36
(uch innovations fall on a continuum, andillustrate a change in one of few or all of
the :!s, be it in product form %productfeatures, attributes, benets, packaging oreven brand name& , the price %price, termsof payment, installments etc&, place
%physical versus electronic formats oreven personal selling& and$or promotion%media strategy, message strategy etc.&.
To understand 2atter The term9innoation has 2een descri2ed withar&ing #ers#ecties and
orientations3 i
8/17/2019 unit 4 MBA
27/36
a) Firm-oriented: As per this approach,a product or service ofering is regarded
as “new,” i the company startsmanufacturing or marketing it for the rsttime. n other words, the rm orientation
treats the 3newness4 in terms of thecompanyBs perspective. -the product is3innovative4, if it is 3new4 for thecompany. -the eistence of the product in
the market %as competitorBs oering, oreven as consumersB awareness& isdisregarded as long as it is 3new4 to the
company, it is regarded as an innovation.
b) P d t i t d A d t d
8/17/2019 unit 4 MBA
28/36
b) Product-oriented: A product andservice ofering is regarded as an
“innovation”, i the product changes interms of form, attributes, features,and overall benets such changes
have a twofold connotation, one, interms of technology, and two, in termsof consumption usage and behavioral
patterns.-the product is 3innovative4, if it is3new4 in terms of form, attributes and
features.
8/17/2019 unit 4 MBA
29/36
c) Market-oriented: The market-orientedapproach views “innovation” purely rom amarketers’ perspective, in the sense that aproduct is regarded as 3new4, depending on howmuch eposure the consumersB have about thenew product or service oering, and the total
sales penetration that has occurred in thespecied short period of time.- the product is regarded 3new4 if the marketdoes not have much eposure of it. - sales
penetration has been low. 2ere again, there canbe two bases that underlie a market-orienteddenition viz.,i& a product or service oering is regarded as
3new4, if it has been in the market for a short
d) Consumer oriented: The consumer oriented
8/17/2019 unit 4 MBA
30/36
d) Consumer-oriented: The consumer-orientedapproach to dening “innovation”, is a avoredapproach over others, especially in consumer
behavior research, and more specically inresearch related to diusion of innovation, andadoption the reason is that the concept of3newness4 or 3innovation4 is dealt through focus
on consumer, and his$her reaction towards thenew product and service oering, in terms ofacceptance and re5ection. As per this approach,any product is regarded as 3new4, if the
consumer believes it to be so it is purely basedon the consumersB perception of the newness ofthe product, rather than on technological changesthat the product embodies. Amidst the varyingers ectives and orientations, the a roach(es
8/17/2019 unit 4 MBA
31/36
DI%%USION POC,SS: 3Hiusion4 is dened asa macro process that deals with the spread of anew product or service oering amongst the
potential market it relates to theacceptance$re5ection of an innovation by thesegment%s&. 3Hiusion of nnovation4 is dened asa process by which an innovation spreadsamongst and gets the absorbed$accepted orassimilated by the market.(chiman denes 3diusion4, as 3the process by
which the acceptance of an innovation is spreadby communication %mass media, salespeople, orinformal conversations& to members of a socialsystem %a target market& over a period of time4.
The denition comprises four basic elements of
8/17/2019 unit 4 MBA
32/36
ADOPTION POC,SS: The second ma5orprocess in Hiusion of nnovation is
3Adoption4. Adoption is a micro conceptthat lays emphasis on the various phasesor stages through an individual consumer
passes while accepting$re5ecting a newproduct or service oering.(chiman denes adoption as 3the stagesthrough which an individual consumer
passes while arriving at a decision to tryor not to try or to continue using or todiscontinue using a new product4.
Jenerally speaking, the consumer passes
-arious Mode!s of the Ado#tion Process:
8/17/2019 unit 4 MBA
33/36
-arious Mode!s of the Ado#tion Process:A'*ierarch& of ,5ects Mode!(tages@7. Awareness@ the stage involves initial awareness on
the part of the consumer of the innovative product$service oering.
8. Gnowledge@ the consumer gets to know about theproduct$service, the attributes, features, benets,
price etc.9. +iking@ he develops feeling of like$dislike towards theinnovation.
:. !reference@ the feeling of like$dislike gets deeperinto preference to buy or not to buy the innovativeproduct$service.
;. *onviction@ the consumer develops condence anddecides with certainty to buy the product$service.
8/17/2019 unit 4 MBA
34/36
0' o2ertson7s Mode! 6(tages& @?' Pro2!em recognition: the consumer realizes that there is a
need.@' Awareness@ he becomes aware of the product$service oering.
' Com#rehension: he gathers information on the variousproduct$service oerings as also on the brands he comprehendsthis information and develops an understanding of theproduct$service oering and the various brands.
B' Attitude@ based on his comprehension, the consumer develops a
feeling of liking$favorableness or dislike$unfavorableness towardsthe product$service oering and the various brands.' +egitimi
8/17/2019 unit 4 MBA
35/36
oger7s Mode!:6Stages):?' Gnowledge@ the consumer becomes aware of the
innovative product$service oering, and gains
knowledge and understanding about the oering,features, attributes, benets, value, price etc.
8. !ersuasion@ this is the stage of attitude formation theconsumer forms a favorable$unfavorable feeling
towards the innovation. This depends on the perceivedcharacteristics of the innovation %in terms of relativeadvantage, compatibility, compleity, trialability andobservability&.
9. Hecision@ based on his attitude, the prospect mentally
decides to adopt$re5ect the roduct$service oering hemay purchase and use the oering, re5ect it or go in foranother alternative.
:. mplementation@ the consumer implements his
decision the stage involves trial and use of the
8/17/2019 unit 4 MBA
36/36
%i!! in the 2!an4s:7. As per the EEEEEEEEEEE approach, a product or service oering is regarded as 3new,4if thecompany starts manufacturing or marketing it for the rst time.8. As per the product-oriented approach, innovations can be classied into three
categories,continuous innovations Hynamically continuous innovations, and EEEEEEEEEEinnovations.9. Amidst the varying perspectives and orientations, the approach%es& that receiveswideattention are the EEEEEEEEEEEEEEEEand the consumer-oriented approaches to studying3innovation4.
:. Jenerally speaking, the consumer passes through ve stages of adoption, viz.,awareness,
EEEEEEEEEEEEEEEEEEEE, EEEEEEEEEEEEEEEEEEtrial, and adoption %or re5ection&;. The products that are oered may be slightly dierent from the eistingalternatives, some may be highly dierent, and some totally new are referred to asan 3FFFF.
. the product is 3innovative4, if it is 3new4 in terms of form, attributes andFFFF...?. "onsumer-oriented “innovation”, is a avored approach over others, especially in
related research