ConsumerBehavoiur5

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Sub: BUYER BEHAVIORBy: M Rafeeq

UNIT-V

MODELING CONSUMER BEHAVIOR

Public became increasingly concerned about the safety and quality of our physicalenvironment i.e., pollution, so evolved Green Marketing.

Green Marketing ----- Producing and promoting products that are claimed to be

environmentally kind. E.g.: - Packaging.

I. Introduction: -

Studying of Consumer Behaviour is complex, due to involving many variables. So,

Models of Consumer Behaviour have been developed to overcome these difficulties.Def. Model: -

A model is a simplified abstract thing, which represents a original thing.

Types of Models: -

1. Verbal Model2. Diagrammatic Model3. Mathematical Model

The most commonly used Consumer behaviour models are verbal, oftenly supported by a

schematic drawing.

Uses of Models: -

1. To assist in constructing a theory that guides research on Consumer Behaviour.

(A Theory is an interrelated set of concepts, definitions and propositions that presents

systematic view).2. To facilitate learning what is presently known about Consumer Behaviour.

(Facilitate learning is helpful for organizing knowledge. It reminds us about the

interrelationships between relevant variables).

II. Models of Consumer Behaviour: -

a) Traditional models of consumers

b) Behavioural Economicsc) Contemporary models.

A) Traditional Models of Consumers:-

These models are devised by economists to understand economic systems.Economics involves the study of how scarce resources (not enough to meet a demand

readily) are allocated among unlimited wants & needs.

I t has 2 major disciplines

1) Micro economics2) Macro economics

1) Micro Economic Model: -This was developed in 19th century, focused on the pattern of goods and prices in

the entire economy.

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This model is to make an assumption of average Consumer and his act ofpurchase.

Micro economists concentrated on what consumers would purchase and in what

quantities their purchases would he made.The tastes and preferences leading to there purchases were assumed to be known

already i.e., micro economists chose to ignore why consumers develop various needs and

preferences and how consumers ran there needs and preferences.

The assumptions of this theory about consumers.

i) Consumers needs & wants are unlimited and therefore cannot be fully satisfied.

ii) With in a limited budget, a consumer maximizes satisfaction of their wants & needs.iii) Consumers independently develop their own preferences, (without influence of otters)

iv) Consumers have perfect knowledge about the utility of an item.

v) Law of diminishing marginal utility.As additional units of a given product or services are acquired, the marginal

(additional) satisfaction or utility provided by the next will be less than the marginal

satisfaction or utility provided by previously purchases units.vi) Consumers are perfectly rational

Based on above assumptions, an economist says that perfectly rational consumers willalways purchase the good that provides them with highest ratio of additional benefit tocost.

For any given good the benefit/cost ratio is expressed as a ratio of its marginal utility

to price (MU/P).

MU1 MU2 MU3 MUnP1 P2 P3 Pn

If ratio of one product is greater than ratio, then consumer can achieve greater

satisfaction.

2)Macroeconomic model: -

It focuses an aggregate flows in economy i.e., the monetary value of goods andresources, where they are directed, and how they change over time.

Consumers divide their income by: Consumption and Savingsa) Relative income hypothesis- influenced by peers & social groups.

b) Permanent income hypothesis- people do not use actual income.

B) Behavioural Economics: - (George Katona)

Traditional economics focused on the results of economic behaviour (supply,quantity demanded, prices etc.) rather than actual behaviour of consumers themselves.

This approach gives, how psychological variables influence consumers could lead to

deeper understanding of the behaviour of economic agents.

This theory was developedKatona, based on the important changes, which occurred inour economy, especially after World War II.

Rising income levels has increased spending power available after necessities are

purchased. (Discretionary income) E.g.: - Stereos, cars, washing machine, etc.Our economy has changed from one characterised as much for a few to more for many.

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Actual

Economic

Conditions

ConsumerSentiment

EconomicBehaviour

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Fig:- A simplified representation of Katanas behavioural economics perspective.

Actual economic conditions are shown as consumer influencing.

It includes rates of interest, inflation, unemployment, GNP, taxes, incomes, debt.

These are modified to Psychological factors, which include consumers motivation,knowledge, perception and attitudes.

In 1950 Katona began conducting surveys of consumers to develop Index ofconsumer sentiment (ICS), which is published on regular basis, based on economic &

personal finance questions.

C) Contemporary Models: -

(Contemporary --- Occurring or existing on the same time.)

There are 6 comprehensive models of C.B.

1) Nicosia model2) Howard-Sheth model .

3) Engel-Kollat-Blackwell model(Engel-Blackwell-Miniard)

1) NICOSIA MODEL : -

The Nicosia model focuses on the relationship between the firm and its potential

consumer. In the broadest terms, the firm communicates with consumers through itsmarketing messages (advertising), and consumers communicate with the firm by their

purchase responses. Thus the Nicosia model is interactive in design: the firm tries to

influence consumers, and the consumers by their actions (or inactions) influence the firm.

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Psychological

Process

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In its original form, the Nicosia model is an elaborate computer flowchart of the

consumer decision-making process. Above represented figure presents a summary flowchart

that highlights the full model. The Nicosia model is divided into four major fields:

The consumers attitude based on message exposure.

The consumers product search and evaluation.The act of purchase, and

Feedback in the form of consumers experience to both the firm and consumer.

Field 1: The Consumers Attitude Based on the Firms Messages.The first field of the Nicosia model is divided into two sub fields.

Subfield 1includes aspects of the firms marketing environment and communications effortsthat affect consumer attitudes, such as product attributes, the competitive environment,

characteristics of relevant mass media, the choice of coy appeal, and characteristics of the

target market.

Subfield 2 specifies various consumer characteristics (e.g. Personality, experience) that

indicate perception of the firms promotional messages.

The output of Field 1 is an attitude toward the product based on the consumers

interpretation of the message.

Field 2: Search and Evaluation.The second field of the Nicosia model deals with the search for relevant information and

evaluation of the firms brand in comparison with alternative brands. The output of this stage

is motivation to purchase the firms brand. (Evaluation could also lead to rejection of thefirms brand; however, the model illustrates a positive response.)

Field 3:The Act of Purchase.In the third field, the consumers motivation toward the firms brand results in purchase

of the brand from a specific retailer.

Field 4:Feedback.The final field consists of two important types of feedback from the purchase

experience; one to the firm in the form ofsales data, and the other to the consumer in the

form of experience (satisfaction or dissatisfaction). The consumers experience with theproduct affects the individuals attitudes and predispositions concerning future messages from

the firm.

2) HOWARD-SHETH MODEL :

The Howard-Sheth model is a major revision of an earlier systematic effort to develop acomprehensive theory of consumer decision-making. This model distinguishes among three

levels of learning (i.e., stages of decision making):

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1. Extensive problem solving takes place when the consumers knowledge and beliefsabout brands are very limited or nonexistent, and he or she does not have specific

brand preference. Here the consumer actively seeks information concerning a number

of alternative brands.

2. Limited problem solving takes place when the consumers knowledge and beliefs

about the brands are only partially established, and he or she is not fully able to assess brand differences in order to arrive at a preference. Some comparative brand

information is sought, although the decision criteria are likely to be fairly well defined.

3. Routinized response behaviour occurs when the consumers knowledge and beliefsabout the brand and its alternatives are well established, and the consumer is

predisposed to the purchase of one particular brand.

Following table summarizes the main characteristics of each of these three stages

of decision-making.

Table - Characteristics of the Three Stages of Decision Making

Amount ofStage information needed speed of

prior to purchase decision

Extensive Problem Solving Great Slow

Limited Problem Solving Moderate Moderate

Routinized Response Behaviour Little Fast.A simplified version of the basic Howard-Sheth model is shown in Figure (on page

no: 6). The model consists of four major sets of variables: (1) inputs, (2) perceptual and

learning constructs, (3) outputs, and (4) exogenous (external) variables (not shown in Figure).

Inputs:

The input variables consist of three distinct types of stimuli (information sources) in theconsumers environment.

1. Physical brand characteristics (signifcative stimuli)

2. Verbal or visual product characteristics (symbolic stimuli) are furnished by the

marketer in the form of product or brand information.3. Consumers social environment (family, reference groups, social class).

All three types of stimuli provide inputs concerning the product class or specific brands to

the prospective consumer.

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Perceptual and Learning Constructs:The central component of the Howard-Sheth model consists ofpsychological variablesthat are assumed to operate when the consumer is contemplating a decision. These constructs

are treated as abstractions, and are not operationally defined or directly measured. Some of

the variables are perceptual in nature and are concerned with how the consumer receives and

processes information acquired from the input stimuli and other parts of the model. Forexample, stimulus ambiguity occurs if a consumer is unclear about the meaning of

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information received from the environment; perceptual bias occurs if the consumer distortsthe information received so that it fits his or her established needs or experiences.

Learning constructs serve the function of concept formation. Included in this category arethe consumers goals, information about brands in the evoked set, criteria for evaluation

alternatives, preferences, and buying intentions. The proposed interaction (linkages) between

the various perceptual and learning variables and the variables in other segments of the modelgive the Howard-Sheth model its distinctive character.

Outputs:

The model indicates a series of outputs that correspond in name to some of the perceptualand learning construct variables (attention, brand comprehension, attitudes, intention), in

addition to the actual purchase.

Exogenous Variables:

Exogenous variables are not directly part of the decision making process and are not

shown in the model presented here. Relevant exogenous variables include the importance ofthe purchase, consumer personality traits, time pressure, and financial status.

3) ENGEL-KOLLAT-BLACKWELL MODEL :The Engel-Kollat-Blackwell model of consumer behaviour (also known as the Engel-

Blackwell-Miniard model) was originally designed to serve as a framework for organizing the

fast-growing body of knowledge concerning consumer behaviour. Like the Howard-Sheth

model, it has gone through a number of revisions aimed at improving its descriptive abilityand clarifying basic relationships between components and subcomponents. Figure (on page

no: 8) depicts the model as consisting of four sections:

(1) Decision-process stages.(2) Information input,

(3) Information processing, and

(4) Variables influencing the decision process.

Decision-Process Stages.

The central focus of the model is on five basic decision-process stages: problem

recognition, search, alternative evaluation (during which beliefs may lead to the formation ofattitudes, which in turn may result in a purchase intention), purchase, and outcomes. The

number of stages that figure in a specific purchase decision, and the relative amount of

attention given to each stage, are functions of how extensive the problem-solving tasks are feltto be. For example, in extended problem-solving behaviour, consumers presumably pass

through all five stages: in routine problem-solving behaviour, consumers presumably do not

require external search and altrnativeevaluation they know what they want.

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Information InputInformation from marketing and non-marketing sources feeds into the information

processing section of the model. After passing through the consumers memory, which serves

as a filter, the information has its initial influence at the problem recognition stage of thedecision-making process. Search for external informations activated if additional information

is required in order to arrive at a choice, or if the consumer experiences dissonance because

the selected alternative is less satisfactory than expected.

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Information Processing

The information processing section of the model consists of the consumers exposure,

attention, comprehension/perception, yielding/acceptance and retention of incoming marketer-dominated and nonmarketing information. Before a message can be used, the consumer must

first be exposed to it, allocate information-processing capacity to it, interpret the stimulus, be

persuaded by it, and retain the message by transferring the input to the long-term memory asinformation and experience, the message must pass through sensory memory which

analyses the input in terms of its physical properties and short-term memory, where the

message (stimulus) is analysed for meaning.

Variables Influencing the Decision Process

The last section of the model consists of individual and environmental influences that

affect all five stages of the decision process. Individual characteristics include motives,values, lifestyle, and personality; the social influences are culture, reference groups and

family. Situational influences, such as a consumers financial condition, also influence the

decision process.

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