CONSUMER BEHAVIOUR Prepared By: Mrs. Gurpreet K Chhabra Astt. Prof. MERI Overview of Consumer Behavior 2 Learning Objectives 1. To Understand What Consumer Behavior Is and the Different Types of Consumers. 2. To Understand the Relationship Between Consumer Behavior and the Marketing Concept, the Societal Marketing Concept, as Well as Segmentation, Targeting, and Positioning. 3. To Understand the Relationship Between Consumer Behavior and Customer Value, Satisfaction, Trust, and Retention. 4. To Understand How New Technologies Are Enabling Marketers to Better Satisfy the Needs and Wants of Consumers. Chapter One Slide 3 Overview of Consumer Behavior Definition 1: Consumer behavior: The study of how individuals make decisions: On how to spend their: Available resources( time, money effort) On various consumption- related items. 4 Overview of Consumer Behavior Definition 2: Consumer behavior The behavior that consumers display in : Searching for, Purchasing, Using, Evaluating, And disposing of products and services That they expect will satisfy their needs. 5 Type of Consumers 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. 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. 6 Why do we need to study Consumer Behavior? Because no longer can we take the customer/consumer for granted. 7 Relevance of Consumer Behavior The study of consumer behavior is very relevant for marketers because: Information and knowledge of buyer motives and habits will enable them to draft suitable marketing programmes accordingly. 8 Consumer Behavior & Decision Making interdisciplinary Consumer behavior as a new discipline borrowed concepts from other scientific disciplines such as: Anthropology Psychology Economics History and geography Socio-psychology 9 Anthropology The influence of the culture (within and across) & society on the individuals. Emphasis on cross- cultural differences 10 Psychology Study of human thinking and behavior Some issues Personality Personality Personal development Personal development Cognition (thinking), perception Cognition (thinking), perception Attention and its limitations Attention and its limitations Learninge.g., acquired tastes Learninge.g., acquired tastes 11 Economics Basic economic issues Supply and demand Supply and demand Rational decision making Rational decision making Perfect information Perfect information Emphasis on predicting behavior Complications in real life Behavioral economicse.g., mental accounting mental accounting 12 History and Geography Origins of behavior, perspectives, and traditions Impact of geography on individuals Isolation Isolation Language development Language development Climate Climate Geographic determinism 13 Socio- Psychology Is the study of how persons are influenced by groups. Cultural and interpersonal influences on consumptione.g., Fads, fashions Fads, fashions Diffusion of innovation Diffusion of innovation Popular culture Popular culture 14 Dynamic Consumer Behavior 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 Shorter product life-cycle increases importance of constant innovation 15 Production concept Production concept Product concept Product concept Selling concept Selling concept Marketing concept Marketing concept Societal concept Societal concept Marketing concepts Shift of focus to better serve consumers for major reasons Increased consumer interest in world markets. Increased consumer interest in world markets. Dramatic increase in the quality of consumer and marketing research. Dramatic increase in the quality of consumer and marketing research. Use of technology to identify and know customers personallyUse of technology to identify and know customers personally Ability to track consumer reactionsAbility to track consumer reactions Development of the Internet as a marketing tool. Development of the Internet as a marketing tool. E-marketing potentialE-marketing potential Increased importance of consumer behavior researchIncreased importance of consumer behavior research Ability to conduct marketing research studiesAbility to conduct marketing research studies 17 Successful Relationships Customer Satisfaction Customer Retention Customer Value 18 Impact of Digital Technologies Consumers have more power and access to information. Marketers can gather more information about consumers. The exchange between marketer and customers is interactive and instantaneous and goes beyond the PC. Marketers must offer more products and services. 19 Consumer Research Consumer research has developed as an extension to the field of marketing research with emphasis on consumer behavioral aspects. The initial thrust on studying CB by marketers was done for two reasons: To determine as to why consumers made the purchase decisions. To determine as to why consumers made the purchase decisions. To understand how consumers would react to promotional messages. To understand how consumers would react to promotional messages. 20 Model of Consumer Behavior Model of Consumer Behavior Marketing and Other Stimuli Marketing and Other Stimuli Buyers Black Box Buyers Response Product Price Place Promotion Economic Technological Political Cultural Characteristics Affecting Consumer Behavior Buyers Decision Process Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount The Buyer Decision Process The Buyer Decision Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior The Buyer Decision Process Step 1. Need Recognition External Stimuli TV advertising Magazine ad Radio slogan Stimuli in the environment External Stimuli TV advertising Magazine ad Radio slogan Stimuli in the environment Internal Stimuli Hunger Thirst A persons normal needs Internal Stimuli Hunger Thirst A persons normal needs Need Recognition Difference between an actual state and a desired state Need Recognition Difference between an actual state and a desired state The Buyer Decision Process Step 2. Information Search Family, friends, neighbors Most influential source of information Advertising, salespeople Receives most information from these sources Mass Media Consumer-rating groups Handling the product Examining the product Using the product Personal Sources Commercial Sources Public Sources Experiential Sources The Buyer Decision Process Step 3. Evaluation of Alternatives Product Attributes Evaluation of Quality, Price, & Features Product Attributes Evaluation of Quality, Price, & Features Degree of Importance Which attributes matter most to me? Degree of Importance Which attributes matter most to me? Brand Beliefs What do I believe about each available brand? Brand Beliefs What do I believe about each available brand? Total Product Satisfaction Based on what Im looking for, how satisfied would I be with each product? Total Product Satisfaction Based on what Im looking for, how satisfied would I be with each product? Evaluation Procedures Choosing a product (and brand) based on one or more attributes. Evaluation Procedures Choosing a product (and brand) based on one or more attributes. The Buyer Decision Process Step 4. Purchase Decision Purchase Intention Desire to buy the most preferred brand Purchase Intention Desire to buy the most preferred brand Purchase Decision Attitudes of others Unexpected situational factors The Buyer Decision Process Step 5. Postpurchase Behavior The Buyer Decision Process Step 5. Postpurchase Behavior Consumers Expectations of Products Performance Consumers Expectations of Products Performance Dissatisfied Customer Satisfied Customer! Satisfied Customer! Products Perceived Performance Cognitive Dissonance CONSUMER DECISION RULES Compensatory decision rule- On the basis of this decision rule, a shopper evaluates store or brand alternatives in respect of each salient attribute and assigns weight for each store or brand in a consideration set.The computed value reflects the stores relative edge as a potential purchase choice. The proposition is that the shopper will select the store or brand that scores the highest among the options evaluated. This rule is characterized by allowing a positive evaluation of a store or brand on one attribute to compensate or make for a negative evaluation on some other attribute. Non- compensatory decision rule - on the basis of this rules consumers do not balance positive assessment of store on one dimension against a negative evaluation on other dimensions: ~ Conjunctive rule - Here the shopper establishes a specific, minimal acceptable level as a cut off point for each dimension. If a particular prospective store falls below the cut off point on any dimension (evaluative criteria), it is dropped from the consideration set. ~ Disjunctive rule Here a shopper sets up a specific,minimal acceptable level as a cut off point for each dimension. Acceptability of a store depends if the store meets or exceeds the limit established for any one dimension considered most important by the customer. ~ Lexicographic decision rule Here the shopper first ranks the dimensions in terms of their perceived salience or importance.The shopper then compares the various brand alternatives in terms of a single attribute that is considered most important. If one brand scores sufficiently high on this top-ranked dimension (regardless of the scores on any other attributes),it is selected & process ends, else process continues with next highest alternative. FISKS CONCEPTUAL MODEL OF DEPARTMENT STORE IMAGE DIMENSION DIMENSION DETERMINANTS DETERMINANTS Locational convenience 1) Access route 2) Traffic barrier 3) Travelling time 4) Parking availability Merchandise suitability 1) Number of brands stocked 2) Quality of line 3) Breadth of assortment 4) Depth of assortment 5) Number of outstanding departments in the store Value for price 1) Price of a particular item in a particular store 2) Price of same item in another store 3) Price of another item in the same store 4) Price of same item in the substitute store 5) Trading stamps & discounts Sales effort and store services 1) Courtesy of sales clerks 2) Helpfulness of sales clerks 3) Reliability and usefulness of advertising 4) Billing procedures 5) Adequacy of credit arrangements 6) Delivery promptness and care 7) Eating facilities Congeniality 1) Store layout 2) Store dcor 3) Merchandise displays 4) Class of customers 5) Store traffic and congestion Post-transaction satisfaction 1) Satisfaction with good in use 2) Satisfaction with returns and adjustments 3) Satisfaction with price paid 4) Satisfaction with accessibility to store CUSTOMER VALUE Customers are value maximisers,and they tend to take rational purchase decisions Concept of customer Delivered value/customer perceived value-it is the difference between prospective custmers evaluation of all the costs of an offering and the alternatives. Customer delivered value=total customer value-total customer cost. Total customer value-is the percieved monetary value of the bundle of the bundle of economic,functional & psychological benefits that customer expect from a given market offering. Total customer cost-is the bundle of costs,customers expect to incur in evaluating,obtaining,using&disposing off,the given market offering. Customer satisfaction-S=P-E S=SATISFACTION LEVEL P=PERFORMANCE AS PERCIEVED BY CUSTOMER E=PERFORMANCE AS ALREADY EXPECTED BY THE CUSTOMER. Therefore,P E. Consumer Buying Decision Process Who Makes the Buying Decision Types of Buying Decisions Stages in the Buying Process Marketers Must Identify and Understand: CONSUMER BUYING BEHAVIOR BUYING ROLES: initiator--a person who first suggests the idea of buying the product or service initiator--a person who first suggests the idea of buying the product or service influencer--a person whose views or advice influences the decision influencer--a person whose views or advice influences the decision decider--a person who decides on any component of a buying decision decider--a person who decides on any component of a buying decision buyer--the person who makes the actual purchase buyer--the person who makes the actual purchase user--a person who consumes the product/service. user--a person who consumes the product/service. Types of Buying Decisions Complex Buying Behavior Dissonance- Reducing Buying Behavior Variety- Seeking Behavior Habitual Buying Behavior High Involvement Significant differences between brands Few differences between brands Low Involvement VARIOUS TYPES OF BUYING SITUATIONS Complex buying situation-purchasing a car, computer, house etc.stress is on pre-purchase councelling.Involvement on marketers part is very high because brands differ widely. Habitual buying situation-purchasing grocery items, low involvement because brands differ marginally marketers job is to make it available easily. Dissonance-reducing buying situation-purchasing carpets, I-tech electric devices, personal computers etc.High involment is required at post purchase level so as to reduce post purchase dissonance of customers. Variety-seeking buying situation-purchasing cookies,perfumes,cosmetics products,clothes,shoes etc.Low involvement.stress is on attracting retailers& customers through attractive offers, prompting them to switch brands. Levels of Consumer Decision Making Extensive Problem Solving Limited Problem Solving Routine Response Behavior 38 Levels of Consumer Decision Making Extensive Problem Solving A lot of information needed A lot of information needed Must establish a set of criteria for evaluation Must establish a set of criteria for evaluation Limited Problem Solving Criteria for evaluation established Criteria for evaluation established Fine tuning with additional information Fine tuning with additional information Routinized Response Behavior Usually review what they already know Usually review what they already know 39 Chapter Fifteen Slide Extensive Problem Solving A search by the consumer to establish the necessary product criteria to evaluate knowledgeably the most suitable product to fulfill a need. Problem solving occurs when buyers purchase more expensive important or technically complicated product/service for the first time. less frequently purchased products in an unfamiliar product category requiring information search & evaluation 40 Limited Problem Solving A limited search by a consumer for a product that will satisfy his or her basic criteria from among a selected group of brands. Problem solving occurs when buyers are confronted with an unfamiliar brand in a familiar product category. Often occurs when consumer purchasing new, updated version of something already purchased before. 41 Routinized Response Behavior At this level, consumers have experience with the product category and a well-established set of criteria to evaluate the brands is considered. Response behavior occurs when buyers purchase low cost, low risk, brand loyal, frequently purchased, low personal identification or relevance, items with which they are familiar. 42 Types of consumer involvement and decision making RoutineLimitedExtensive InvolvementShort Low to moderate High TimeLow Short to moderate Long CostShort Low to moderate High Information Search Internal only Mostly internal Internal & external Number of alternatives onefewmany 43