Module 1 Final

Amity Business School

1

Amity Business SchoolMBA Class of 2011, Semester III

Consumer Behaviour

Module-I (Introduction)

Vivek Singh Tomar

[email protected]


• Consumer demographics

• Consumer life styles

• Retailing implications of consumer

demographics and lifestyle

• Consumer profiles

• Lifestyle marketing

• Environmental factors affecting consumers

Module I (Content)


• To understand consumer behavior and its core concepts

• To understand consumer demographics, psychographics and classification of consumer lifestyles

• To understand the concept of consumer profiling and its retailing implications

• To understand the environmental factors affecting consumers

Module-1 (Objectives)


Consumer Behavior

(Core Concepts)


Consumer• Consumer is a broad label for any individuals or households or organization that use goods

and services generated within the economy

The consumer is the backbone of the Retail

Sales System. The consumer drives the

economy by purchasing goods and services

from vendors.


Personal ConsumerThe 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.


What Is Consumer Behavior?

Activities people undertake when obtaining (Searching and Purchasing), consuming (Using and Evaluating), and disposing of products and servicesRole Theory:

Identifies consumers as actors on the marketplace stage

Consumer Behavior is a Process:Exchange: A transaction in which two or more organizations

give and receive something of value


Some Issues That Arise During Stages in the Consumption Process


ObtainingObtaining ConsumingConsuming DisposingDisposing

ConsumerConsumer

InfluencesInfluencesOrganizationalOrganizational

InfluencesInfluences

Consumer Behavior


Consumer Consumer

InfluencesInfluencesOrganizational Organizational



Consumer Consumer

InfluencesInfluencesOrganizational InfluencesOrganizational Influences

Culture EthnicityPersonality FamilyLife-stage ValuesIncome Available ResourcesAttitudes OpinionsFeelingsMotivationsPast ExperiencesPeer GroupsKnowledge

BrandProduct FeaturesAdvertisingWord of MouthPromotionsRetail DisplaysPriceQualityService Store AmbianceConvenience Loyalty ProgramsPackaging Product Availability



ConsumerConsumer

InfluencesInfluencesOrganizationalOrganizational


Consumer Behavior



•How you decide you want to buy

•Other products you consider buying

•Where you buy

•How you pay for product

•How you transport product home

•How you use the product

•How you store the product in your home

•Who uses the product

•How much you consume

•How product compares with expectations

•How you get rid of remaining product

•How much you throw away after use

•If you resell items yourself or through a consignment store

•How you recycle some products


OBTAINING•How you decide you want to buy•Other products you consider buying•Where you buy •How you pay for product•How you transport product home

CONSUMING•How you use the product•How you store the product in your home•Who uses the product •How much you consume•How product compares with expectations

DISPOSING•How you get rid of remaining product•How much you throw away after use•If you resell items yourself or through a consignment store•How you recycle some products

CONSUMER INFLUENCESCulture EthnicityPersonality FamilyLife-stage ValuesIncome Available ResourcesAttitudes OpinionsMotivations Past ExperiencesFeelings Peer GroupsKnowledge

ORGANIZATIONAL INFLUENCESBrand Product FeaturesAdvertising Word of MouthPromotions Retail DisplaysPrice QualityService Store AmbianceConvenience Loyalty ProgramsPackaging Product Availability

Consumer Behavior


What Is Consumer Behavior?Activities people undertake when obtaining, consuming, and disposing of products and services

A field of study that focuses on consumer activities

Scope goes beyond just why and how people buy to include consumption analysis


Consumption Analysis

Why and how people use products in addition to why and how they buy


Why Study Consumer Behavior?

Consumer Behavior Determines the Economic Health of a Nation

Consumer Behavior Determines the Success of Marketing Programs



Marketing can be used to influence brand choice and purchase, while Demarketing can influence people to stop harmful consumption

“The Customer is King”Organization influenced by consumer needs and wants



Organizations that are Customer-centric use a total marketing approach to focus their resources on satisfying customers

MarketingProcess of transforming or changing an organization to have what people will buy


Why Study Consumer Behavior?



Consumer Behavior Determines the Economic Health of Everyone



The individual’s decisions as a consumer determine their economic health by making more effective consumption decisions while avoiding deceptive practices harmful to them



Public policy leaders and social commentators study consumer behavior to alleviate overconsumption and underconsumption by educating consumers about problems and providing assistance


Educating Consumers About Crises


Understanding consumers’ issues or problems and developing methods to reach and educate consumers

Educating Consumers About Health


Understanding consumers’ issues or problems and developing methods to reach and educate consumers





Consumer Behavior Helps Formulate Public Policy


Understanding consumers’ needs to formulate public policy and predicting behavioral changes that follow

Interest rates

Warning

labels

EconomicsSocial Welfare

Family

Planning

Government

Regulations

Government Protection and Education

Protection from Competitive Markets


Consumer Behavior Affects Personal Policy

Personal policy includes how you behave towards others and in buying situations, your values and beliefs, and how you live your life

A person’s economic quality of life is determined by personal policy


The Underlying Principles of Consumer Behavior

The Consumer Is Sovereign




The Consumer Is Global





Consumers Are Different; Consumers Are Alike


Consumers appear different but respond in similar ways to brands


The Underlying Principles of ConsumerBehavior



Consumers Are Different; Consumers Are Alike

The Consumer Has Rights


Consumer Bill of Rights


The Pyramid of Consumer Behavior


Consumer DemographicsDemographics:

Statistics that measure observable aspects of

a population

Ex.: Age, Gender, Family Structure, Social Class and Income, Race and Ethnicity, Lifestyle, and Geography


Demographics is the size, structure, and distribution of a population

Marketers use demographic analysis as market segment descriptors and in trend analysis

Consumer analysts use demo-graphic trends to predict changes in demand for and consumption of specific products and services

Demographic analysis provides information for social policy

Demographics used in analyzing policy questions related to the aggregate performance of marketing in society (macromarketing)


Industrial demand is ultimately derived from consumer demand

Analysis of demographic trends is important for industrial and business-to-business marketing

In an industrial firm, you must understand not only the customers’minds, but also the minds of the customers’ customers


Demographics

Changing Structure of Markets

Geographic Factors

Economic Resources

Global Markets


Changing Structure of Consumer Markets

Market analysis requires information about

people with needsability to buywillingness to buyauthority to buy



How many people will there be?

birthratenatural increasefertility ratetotal fertility ratepopulation momentum



Birthrate: number of live births per 1,000 population in a given year

Natural increase: surplus of births over death in a given period

Fertility rate: number of live births per 1,000 women of childbearing age (15 to 44 years)



Total fertility rate: average number of children that would be born alive to a woman during her lifetime if she were to pass through all of her childbearing years conforming to age-specific fertility rates of a given year



Population momentum: future growth of any population will be influenced by its present age distribution



Factors affecting birthrates:Age distribution of populationFamily structureSocial attitudes toward family/childrenTechnology



Factors affecting birthrates:Age distribution of populationFamily structureSocial attitudes toward family/childrenTechnology

Increasing life expectancy

Immigration represents about 30% of annual growth in United States


Changing Age Distribution

Changes in age distribution affects the types of products and services that will be bought and consumed in the future

Cohort analysis is fundamental to understanding changing consumer markets

A cohort is any group of individuals linked as a group in some way


Changing U.S. Age Distribution

The key to cohort analysis is examining the influences that are shared by most people in a specific group

Ultimately, these influences affect consumer decision processes and the types of products, brands, and retailers consumers prefer when responding to a firm’s marketing strategy


Children As Consumers

Projected increase in number of young children between 2000 and 2010



Projected increase in number of young children between 2000 and 2010

The importance of children as consumers increases even more, with the higher proportion of first-order babies generating higher demand for quality products and services



Most parents do most of the buying

Children often involved in family purchasing decisions

Children often have their own ability to buy


Generation Y

Born in the 1980s and early 1990s with 72 million members

Greater need for peer acceptance, which often guides product and brand choice

More likely to switch brands quicker than other segments

Teens like the social aspects of shopping with friends


Appealing to Generation Y


Generation X (Young Adults)

Segment of 25-to-34 year olds is declining but will have a slight increase with the inclusion of older Gen Y consumers

Need to buy products to set up households and for young children

With many needs and greater financial restraints, they often shop at value-oriented retailers


Baby Boomers or Muppies

This group (45 to 64 years) is projected to grow by 19 million by 2010

Good market for luxury travel, spas, health clubs, cosmetics, salons, diet plans foods, and health foods

Group represents the greatest share of the workforce, the greatest share of income, and the greatest share of voting power, and political influence


Young Again Market

Also referred to as mature market, seniors, and elderly

These segments are expected to grow substantially

Despite advanced chronologic age, many in this segment feel, think, and buy young


Young Again Market

Cognitive age: the age one perceives one’s self to be

Cognitive age is measured in terms of how people feel and act, express interests, and perceive their looks

Can be used with chronologic age to better target segments, create more effective content, and select the most efficient media channels


Young Again Market

Important segmentation variables for this group include health, activity level, discretionary time, engagement in society, and gender

Communicating with this segment often requires alteration of traditional messages and materials

- larger type and bright colors- newspapers and AM radio- sensitive to revealing their age


Macromarketing to an Aging Population

The aging populations of the United States, Japan, Canada, and Europe will have enormous effects on macromarketing and social policy

Younger consumers may have considerably less financial resources at their disposal due to future contributions to Social Security and Medicare


Macromarketing to an Aging Population

One solution to this problem includes increasing the age at which benefits begin, thus changing the age at which people and organizations expect to retireQuasi-retirement is another option where more experienced workers fill in for younger workers during vacations, sabbaticals, training, or maternity leaves


Demographic Analysis to Predict Consumer Behavior

Demographics

Age Structure of Markets

Geographic Factors

Economic Resources

Global Markets


Changing Geography of Demand

Geodemography, refers to where people live, how they earn and spend their money, and other socioeconomic factors

The study of demand related to geographic areas assumes that people who live in proximity to one another also share similar consumption patterns and preferences

Cities are the most important unit of analysis in most marketing plans



Metropolitan statistical area (MSA): a free-standing metropolitan area surrounded by non-metropolitan counties and not closely related to other metropolitan areas

Primary MSA (PMSA): metropolitan area closely related to another city

Consolidated MSA (CMSA): a grouping of closely related PMSAs



The greatest gains in population are expected in California, Texas and Florida

These states are considered prime candidates for new stores compared to other states where populations may be declining

Growth rate may be deceptive unless the size of the population is also taken into account

Geographic variables affect many components of a firm’s marketing strategy



Demographics


Geographic Factors

Economic Resources

Global Markets


Economic Resources

The ability to buy, typically measured by income and wealth


Economic Resources

Income: money from wages and salaries as well as interest and welfare payments


Economic Resources

What consumers think will happen in the future (consumer confidence) heavily influences consumption

Influences whether consumers will increase their debt or defer spending to pay off debt

Measures of consumer confidence are important in making decisions about inventory levels, staffing, or promotional budgets


Economic Resources

Income: money from wages and salaries as well as interest and welfare payments

Wealth: a measure of a family’s net worth or assets in things such as bank accounts, stocks, and a home, minus its liabilities such as home mortgage and credit card balances


Economic Resources

Net worth influences willingness to spend but not necessarily ability to spend, because much wealth is not liquid and cannot be spent easily

How much people accumulate over the years is more a function of how much they save rather than how much they earn


Targeting the Up Market

The superaffluent represent the top quintile of consumers in terms of income

Households often consists of two income earners who place a high value on time

They value extra services provided by some retailers

Saving money is as important as spending it for many individuals in this group


Targeting the Up Market

Shop discount stores, use coupons, and wait for sales

More print oriented in communications

Simple ads that promote image

Credibility of source selling product

Product reviews influence this group


Targeting the Down Market

Throughout the world, the majority of consumers are low income

Retailers such as Wal*Mart have found success by providing good products at reasonable prices

Closeout stores offer brand name products at deep discounts to at all income-level consumers

Dollar stores are one of the fastest growing retail categories


Targeting the Down Market

Provide good products at reasonable prices

Maintaining attractive stores

Offering stylish and up-to-date products

Have friendly employees that treat customers with respect



Demographics


Geographic Factors

Economic Resources

Global Markets


Global Market Analysis

The most attractive markets are countries that are growing both in population and in economic resources




Which countries will grow the most in the future?




Which countries will grow the most in the future?

Which countries have the highestper capita income?



Low income countries offer an advantage to firms looking to buy products from the lowest-cost source

There are pockets ofconsumers who areable to buy products, even in the poorest countries


Emerging Markets

Marketing programs should focus on creating brand awareness (because competitors will follow) and stimulating product trial

Marketers may have to teach consumers about products taken for granted (deodorant)

Products may have to be adapted to local values


Consumer Behavior in the Pacific Rim


Consumer Behavior in the Pacific Rim

South Asia

India

China

Australia

Japan


Consumer Behavior in Latin America


Consumer Behavior in Latin AmericaSome of the most attractive markets include Brazil, Venezuela, Colombia, Argentina, and Chile

Most countries have high population growth rates, moderately high incomes close proximity

Intermarket segmentation provides a basis to identify segments that can afford certain items


Consumer Behavior in Eastern Europe


Consumer Behavior in Eastern EuropeThe attractiveness of Eastern European markets lies in their similar preferences to Western consumers

Hungary and Poland have received much attention from global marketers

Marketers have launched a myriad of successful brands


Consumer Behavior in The EU



The EU is a market larger than the United States

Extremely low population growth makes customer retention extremely important for marketers

Products and people move across borders easily

Efficiencies include logistics, financial arrangements, and marketing economies of scale



Efficiencies include logistics, financial arrangements, and marketing economies of scale

Marketers can approach Europe as a single market, but national identity still exists among consumers


A Lesson Learned

• Nike was forced to pull this advertisement for a running shoe after disabilities rights groups claimed the ads were offensive.

• How could Nike have done a better job of getting its message across without offending a powerful demographic?


Psychographics & Lifestyle


Psychographic analysis is . . .

. . . the attempt to measure the life-styles of consumers.


Life-Style and Psychographic

Analysis• Life-style refers to how people live, how they

spend their money, and how they allocate their

time

• Life-style and personality are different, yet are

closely related


The distinction between personality

and life-style:

– Personality refers to the internally based

dispositions of the person. In contrast, life-

style refers to the external manifestations of

how a person lives.

• Psychographics is the quantitative

investigation of consumers’ life-styles,

personality, and demographic

characteristics.

Amity Business SchoolLifestyle and consumption process


AIO statements identify consumer

activities, interests, and opinions

– Activity questions ask consumers to indicate what

they do, what they buy, and how they spend their

time.

– Interest questions focus on what the consumers’

preferences and priorities are.

– Opinion questions ask for consumers’ views and

feelings on such things as world, local, moral,

economic, and social affairs.


Excerpts from AIO InventoryInstructions: Please read each statement and place an “x” in the box that best indicates

how strongly you “agree” or “disagree” with the statement.

I feel that my life is moving faster and faster,

sometimes just too fast.

If I could consider the “pluses” and “minuses,”

technology has been good for me.

I find that I have to pull myself away from e-mail.

Given my lifestyle, I have more of a shortage of

time than money.

I like the benefits of the Internet, but I often don’t

have the time to take advantage of them.

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

[1] [2] [3] [4] [5] [6] [7]

Agree Completely

Disagree Completely


SRI developed two psychographic

inventories: VALS and VALS 2

• VALS is based upon motivational and

developmental psychological theories

particularly Maslow’s hierarchy of needs

theory.

• VALS 2 was developed specifically to

measure consumer buying patterns.


STRUGGLERS

FULFILLEDS

BELIEVERS

ACHIEVERS EXPERIENCERS

STRIVERS MAKERS

Low Resources

High Resources

Action OrientedStatus OrientedPrinciple Oriented

ACTUALIZERS

VALS 2

Amity Business SchoolVALS 2 Segments and Participation in Selected Sports

Percent of adults in each VALS 2 type who participated in selected sports in 1995.

0 2 4 6 8 10 12 14

Strugglers

Believers

Strivers

Fulfilleds

Makers

Achievers

Experiencers

Actualizers

Mountain/rock climbing Jet skiing/wave running/water biking Inline skating


Size of VALS Segment as Percent of U.S. Population

VALSVALSTMTM SEGMENTSEGMENTPERCENT OF PERCENT OF

POPULATIONPOPULATION

Actualizer

10.5

11.7%

Struggler

Maker

Experiencer

Striver

Achiever

Believer

Fulfilled

9.5

12.0

12.9

11.8

14.7

17.0


The VALS 2 Inventory• Goal of VALS 2 is to identify specific relationships between

consumer attitudes and purchase behavior.

• Three self-identify orientations: principle oriented people, status oriented people, and action oriented people.

• Three resource orientations: financial, psychological, and material. Based upon total number of resources, people could be categorized based upon their level of resources.

• VALS 2 used by corporations to understand the basis for consumer lifestyles, which is useful for developing promotional strategy and even where to place retail stores such as The Sharper Image.


The List of Values (LOV) Scale

• The list of values (LOV) scale was developed

to correct some of the problems of VALS.

• Goal is to assess the dominant values of a

person (i.e., it does not use AIO statements).


Nine values are assessed by the

LOV scale:

• Sense of belonging

• Being well-respected

• Security

• Fun and enjoyment

• Warm relationships

with others

• Self-fulfillment

• Excitement

• Sense of accomplishment

• Self-respect


Yankelovich’s Monitor Mindbase

• Based on values, lifestyles, and motivation

• Position on core set of values with lifecycle

stage

• 32 target segments, 8 segments


Yankelovich’s Monitor Mindbase

– Up & Comers (16%)

– Aspiring Achievers (8%)

– Realists (12%)

– New Traditionalists (14%)

– Family centered (14%)

– Individualistic (6%)

– Renaissance Masters (13%)

– Maintainers (17%)


Geo-Demographic Analysis

• PRIZM

• 62 lifestyle clusters, 12 broad social groups– Fur & Station Wagoners

– Pools & Patios

– Young Suburbia

– Blue Chip Blues

– Blue Collar Nursery

– Middle America

– Emergent Minorities

– Shotguns & Pickups


International Lifestyles

• Global Scan

– 14 countries

• Strivers (26%)

• Achievers (22%)

• Pressured (13%)

• Adapters (18%)

• Traditionals ( 16%)


A Warning

• Psychographic inventories often result in clever descriptions of a target market that can result in stereotypes.

• It can result in managers disparaging the target group.

• It can cause managers to view the target market as more homogeneous than it really is.


Managerial Implications

• Position and differentiate product based upon the dominant personality or psychographic characteristic of the target market.

• Scan the environment to identify the dominant cultural values of the target market.

• Use market research to identify the personality, self-concept, and psychographic characteristics that distinguish the target market.

• Develop promotions to be consistent with the dominant personality characteristics of target market. Create products that fulfill the motivational needs of target—e.g., low risk products for the low need for arousal group.

• Use personality and psycholographics to identify segments of consumers to target, such as one-price auto dealers for low bargain prone.


Consumer Profiles


A Hypothetical Psychographic Profile of the

Techno-Road-Warrior

•Sends and/or receives 15 or more e-mail messages a

week

•Regularly visits Web sites to gather information

and/or to comparison shop

•Often buys personal items via 800 numbers and/or

over the Internet

•May trade stocks and/or make travel reservations over

the Internet

•Earns $100,000 or more a year


Demographic-Psychographic Profile of Newsweek

• Total adult readers 19,593,000

• Men

• Professionals/ Managers

• Age 35-49

• Household income >$100,000

• Married

• Own laptop PC

• Spent $3000+ on vacation last year

% Index

100.0 100

55.9 117

35.3 174

36.5 114

25.1 172

62.4 109

12.0 150

12.3 164


Demographic-Psychographic Internet Shopping Styles

• E-bivalent Newbies

• Time-Sensitive Materialists

• Clicks & Mortar

• Hooked, Online, & Single

• Hunter-Gatherers

• Brand Loyalists


Lifestyle Marketing


• Adbusters Quarterly is a Canadian magazine devoted to culture jamming. This mock ad skewers Benetton.

Module 1 Final

Documents

Transcript of Module 1 Final