CONSUMER BEHAVIOR

The term consumer behavior is defined as the behavior that consumer display in searching for purchasing using, evaluating and disposing of products and services that they expect will satisfy their needs.

It is therefore the decision processes and acts of people involved in buying and using products

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for.

Consumer behavior focuses on how individuals make decisions to spend their available resources (time, money, effort) on consumption-related items that includes

What they buy?

Why they buy?

When they buy it?

Where they buy it?

How often they buy it?

How often they use it?

Need to understand:

Why consumers make the purchases that they make? What factors influence consumer purchases? The changing factors in our society.

Meaning of consumer market and organizational market

Consumer market-these are all the individuals and companies who purchase goods and services for some use other than personal consumption.

A marketplace is a distinct group of potential customers that a company could target with its products and services. A consumer market is a marketplace consisting of household consumers who buy goods for individual or family consumption

Markets dominated by products and services designed for the general consumer. Consumer markets are typically split into four primary categories: consumer products, food and beverage products, retail products, and transportation products.

Organizational markets usually have fewer buyers but purchase in far greater amounts than consumer markets , and are more geographically concentrated.

Organizational markets are divided into four components:

a) Industrial market- which includes individuals and companies that buy goods and services in order to produce other goods and services.

b) Reseller market- which consists of individuals or companies that purchase goods and services produced by others for resale to consumers

c) Government market- which consists of government agencies at all levels that purchase goods and services for carrying out the functions of government.

d) Institutional market-which consists of individuals and companies such as schools or hospitals that purchase goods and services for the benefit or use of persons cared for by the institution.

IMPORTANCE OF CONSUMER BEHAVIOUR

The modern marketing management tries to solve the basic problems of consumers in the area of consumption. To survive in the market, a firm has to be constantly innovating and understand the latest consumer needs and tastes. It will be extremely useful in exploiting marketing opportunities and in meeting the challenges that the Indian market offers. It is important for the marketers to understand the buyer behavior due to the following reasons.

- The study of consumer behavior for any product is of vital importance to marketers in shaping the fortunes of their organisations.

- It is significant for regulating consumption of goods and thereby maintaining economic stability.

- It is useful in developing ways for the more efficient utilization of resources of marketing. It also helps in solving marketing management problems in more effective manner.

- Today consumers give more importance on environment friendly products. They are concerned about health, hygiene and fitness. They prefer natural products. Hence detailed study on upcoming groups of consumers is essential for any firm.

-  The growth of consumer protection movement has created an urgent need to understand how consumers make their consumption and buying decision.

- Consumers’ tastes and preferences are ever changing. Study of consumer behavior gives information regarding colour, design, size etc. which consumers want. In short, consumer behavior helps in formulating of production policy.

-  For effective market segmentation and target marketing, it is essential to have an understanding of consumers and their behavior. 

Roles players in the buying decision process for consumer organisation market

The Gatekeeper

If you want to sell a product to a large company like Walmart, you can’t just walk in the door of its corporate headquarters and demand to see a purchasing agent. You will first have to get past of a number of gatekeepers, or people who will decide if and when you get access to members of the buying center. These are people such as buying assistants, personal assistants, and other individuals who have some say about which sellers are able to get a foot in the door.

Controls access to the DMU

Controls information input into DMU

Could be an individual (Secretary / PA)

Could be a department (Customer Service, Sales, Procurement)

the Initiator

Initiators are the people within the organization who first see the need for the product. But they don’t stop there; whether they have the ability to make the final decision of what to buy or not, they get the ball rolling. Sometimes they initiate the purchase by simply notifying purchasing agents of what is needed; other times they have to lobby executives to consider making a change the person who recognizes a problem / need to be addressed

DecidersThe decider is the person who makes the final purchasing decision. The decider might or might not be the purchasing manager. Purchasing managers are generally solely responsible for deciding upon routine purchases and small purchases. However, the decision to purchase a large, expensive product that will have a major impact on a company is likely to be made by or with the help of other people in the organization, perhaps even the CEO. The decision may be made by a single decider, or there may be a few who reach consensus. Further, deciders take into

account the input of all of the other participants: the users, influencers, and so forth. Sellers, of course, pay special attention to what deciders want. “Who makes the buying decision?” is a key question B2B sales and marketing personnel are trained to quickly ask potential customers.

The person with the authority to make the decision to buy

May or may not be the person who makes the final choice

Level of seniority depends on importance of purchase / budget / company culture

The Buyer

The person tasked to make the actual purchase

Degree of choice / power depends on organisation structure

May be part of a formal ‘Buying Department’

UsersUsers are the people and groups within the organization that actually use the product. Frequently, one or more users serve as an initiator in an effort to improve what they produce or how they produce it, and they certainly have the responsibility for implementing what is purchased. Users often have certain specifications in mind for products and how they want them to perform. An example of a user might be a professor at your school who wants to adopt an electronic book and integrate it into his or her online course

The person tasked to make the actual purchase

Degree of choice / power depends on organisation structure

May be part of a formal ‘Buying Department’

The person/s who actually use or consume the product / service

Degree of influence on DMU depends on company culture

Importance of feedback / satisfaction depends on company culture

The Financier

The person or department which authorises expenditure

Degree of influence / authority depends on company culture / budget involved

InfluencersInfluencers are people who may or may not use the product but have experience or expertise that can help improve the buying decision. For example, an engineer may prefer a certain vendor’s product platform and try to persuade others that it is the best choice.

Anyone outside of the DMU which has an influence on its members:

Formal ‘consultants’

Informal personal contacts / WoM

Recognised ‘experts’, role models, personalities and endorsees

The Decision Making Unit: B2B B2C

Roles tend to be more formal

Roles tend to be by job title – but some multi-role play

Degree of influence may still be affected by strength of personality

Roles tend to be more informal

Many roles played by one person

DMU sometimes associated with members of Family

Recognises influence of children / non wage earners

2: The Decision Making Process (DMP) Model

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Warning: Do not be rude to or otherwise anger the faculty secretary. This is good advice for salespeople and students as well as faculty members.

Gatekeepers often need to be courted as hard as prospective buyers do. They generally have a lot of information about what’s going on behind the scenes and a certain amount of informal power. If they like you, you’re in a good position as a seller. If they don’t, your job is going to be much harder. In the case of textbook sales, the gatekeepers are often faculty secretaries. They know in advance which instructors will be teaching which courses and the types of books they will need. It is not uncommon for faculty secretaries to screen the calls of textbook sales representatives.

Stages of the Consumer Buying ProcessSix Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next.

The 6 stages are:

1. Problem Recognition (awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat.Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes.

2. Information search-- o Internal search, memory. o External search if you need more information. Friends and relatives (word of

mouth). Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set.

Hungry, want to go out and eat, evoked set is

o chinese food o indian food o burger king o klondike kates etc

3. Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, Indian gets highest rank etc.If not satisfied with your choice then returns to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives.

4. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc.

5. Purchase--May differ from decision, time lapse between 4 & 5, product availability. 6. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive

Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc.After eating an Indian meal, may think that really you wanted a Chinese meal instead.

Types of Consumer Buying BehaviorTypes 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.

Buyers’ 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.

factors influencing consumer and organizational market

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

1. Personal 2. Psychological 3. Social

PersonalUnique 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.

Handout...From choices to checkout...Highlights the differences between male and female shoppers in the supermarket.

Psychological factorsPsychological 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.

Handout...Nutriment Debunked...

Nutriment, a product marketed by Bristol-Myers Squibb originally was targeted at consumers that needed to receive additional energy from their drinks after exercise etc., a fitness drink. It was therefore targeted at consumers whose needs were for either love and Belonging or esteem. The product was not selling well, and was almost terminated. Upon extensive research it was determined that the product did sell well in inner-city convenience stores. It was determined that the consumers for the product were actually drug addicts who couldn't not digest a regular meal. They would purchase Nutrament as a substitute for a meal. Their motivation to purchase was completely different to the motivation that B-MS had originally thought. These consumers were at the Physiological level of the hierarchy. BM-S therefore had to redesign its MM to better meet the needs of this target market.Motives often operate at a subconscious level therefore are difficult to measure.

Perception--

What do you see?? Perception is the process of selecting, organizing and interpreting information inputs to produce meaning. IE we chose what info we pay attention to, organize it and interpret it.Information inputs are the sensations received through sight, taste, hearing, smell and touch.

Selective Exposure-select inputs to be exposed to our awareness. More likely if it is linked to an event, satisfies current needs, intensity of input changes (sharp price drop).

Selective Distortion-Changing/twisting current received information, inconsistent with beliefs.

Advertisers that use comparative advertisements (pitching one product against another), have to be very careful that consumers do not distort the facts and perceive that the advertisement was for the competitor. A current example...MCI and AT&T...do you ever get confused?

Selective Retention-Remember inputs that support beliefs, forgets those that don't.Average supermarket shopper is exposed to 17,000 products in a shopping visit lasting 30 minutes-60% of purchases are unplanned. Exposed to 1,500 advertisement per day. Can't be expected to be aware of all these inputs, and certainly will not retain many.

Interpreting information is based on what is already familiar, on knowledge that is stored in the memory.

Handout...South Africa wine....

Problems marketing wine from South Africa. Consumers have strong perceptions of the country, and hence its products.

Ability and Knowledge--

Need to understand individuals 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.

Handout...Oldsmobile.....

Oldsmobile vs. Lexus, due to consumers attitudes toward Oldsmobile (as discovered by class

Honda "You meet the nicest people on a Honda", dispel the unsavory image of a motorbike rider, late 1950s. Changing market of the 1990s, baby boomers aging, Hondas market returning to hard core. To change this they have a new slogan "Come ride with us".

Attitudes and attitude change are influenced by consumers personality and lifestyle.

Consumers screen information that conflicts with their attitudes. Distort information to make it consistent and selectively retain information that reinforces our attitudes. IE brand loyalty.

There is a difference between attitude and intention to buy (ability to buy).

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 Workaholism o Compulsiveness o Self confidence o Friendliness o Adaptability o Ambitiousness o Dogmatism o Authoritarianism o Introversion o Extroversion o Aggressiveness o Competitiveness.

Traits effect 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.

EXAMPLE healthy foods for a healthy lifestyle. Sun tan not considered fashionable in US until 1920's. Now an assault by the American Academy of Dermatology.

Handout...Here Comes the Sun to Confound Health Savvy Lotion Makers..Extra credit assignment from the news group, to access Value and Lifestyles (VALS) Program, complete the survey and Email alex@udel.edu the results. This is a survey tool that marketers can use to better understand their target market(s).Return to Contents List

Social FactorsConsumer 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.)

Can be risky...Michael Jackson...OJ Simpson...Chevy Chase

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.

The Family life cycle: families go through stages, each stage creates different consumer demands:

o bachelor stage...most of BUAD301 o newly married, young, no children...me o full nest I, youngest child under 6 o full nest II, youngest child 6 or over o full nest III, older married couples with dependant children o empty nest I, older married couples with no children living with them, head in labor

force o empty nest II, older married couples, no children living at home, head retired o solitary survivor, in labor force o solitary survivor, retired o Modernized life cycle includes divorced and no children.

Handout...Two Income Marriages Are Now the Norm

Because 2 income families are becoming more common, the decision maker within the family unit is changing...also, family has less time for children, and therefore tends to let them influence purchase decisions in order to alleviate some of the guilt. (Children influence about $130 billion of goods in a year) Children also have more money to spend themselves.

Reference Groups--

Individual identifies with the group to the extent that he takes on many of the values, attitudes or behaviors of the group members.

Families, friends, sororities, civic and professional organizations.Any group that has a positive or negative influence on a persons attitude and behavior.Membership groups (belong to)Affinity marketing is focused on the desires of consumers that belong to reference groups. Marketers get the groups to approve the product and communicate that approval to its members. Credit Cards etc.!!

Aspiration groups (want to belong to)Disassociate groups (do not want to belong to)Honda, tries to disassociate from the "biker" group.

The degree to which a reference group will affect a purchase decision depends on an individuals susceptibility to reference group influence and the strength of his/her involvement with the group.

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, 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 prepurchase 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.

Handout...Will British warm up to iced tea?

No...but that is my opinion!!...Tea is a part of the British culture, hot with milk.

Different society, different levels of needs, different cultural values.

Culture can be divided into subcultures:

o geographic regions o human characteristics such as age and ethnic background.

IE West Coast, teenage and Asian American.

Culture effects what people buy, how they buy and when they buy.

Understanding Consumer Buying Behavior offers consumers greater satisfaction (Utility). We must assume that the company has adopted the Marketing Concept and are consumer oriented.

The Marketing Mix(The 4 P's of Marketing)

Marketing decisions generally fall into the following four controllable categories:

Product Price Place (distribution) Promotion

The term "marketing mix" became popularized after Neil H. Borden published his 1964 article, The Concept of the Marketing Mix. Borden began using the term in his teaching in the late 1940's after James Culliton had described the marketing manager as a "mixer of ingredients". The ingredients in Borden's marketing mix included product planning, pricing, branding, distribution channels, personal selling, advertising, promotions, packaging, display, servicing, physical handling, and fact finding and analysis. E. Jerome McCarthy later grouped these ingredients into the four categories that today are known as the 4 P's of marketing, depicted below: