INTRODUCTION OF CONSUMER BEHAVIOR

1. Defining Consumer Behavior 2. Nature, Scope and Application of Consumer

Behavior 3. Application of Consumer Behavior 4. Why Study Consumer Behavior? 5. Evolution of Consumer Behavior6. The Interdisciplinary Nature of Consumer

Behavior

1.1 DEFINING

CONSUMER BEHAVIOR

:

Consumer Behavior may be defined as “the interplay of forces that takes place during a consumption process, within a consumers’ self and his environment. - this interaction takes place between three elements viz. knowledge, affect and behavior; - it continues through pre-purchase activity to the post purchase experience; - it includes the stages of evaluating, acquiring, using and disposing of goods and services”. The “consumer” includes both personal consumers and business/industrial/organizational consumers.

Consumer behavior explains the reasons and logic that underlie purchasing decisions and consumption patterns; it explains the processes through which buyers make decisions. The study includes within its purview, the interplay between cognition, affect and behavior that goes on within a consumer during the consumption process: selecting, using and disposing off goods and services.

OTHER DEFINITIONS:

“The behavior that consumers display in searching for, purchasing, using, evalauting and disposing of products and services that they expect will satisfy their needs.”

Schiffman and Kanuk “…..the decision process and physical activity engaged in when evaluating, acquiring, using or disposing of goods and services."

Loudon and Bitta “ The study of consumers as they exchange something of value for a product or service that satisfies their needs”

Wells and Prensky “Those actions directly involved in obtaining, consuming and disposing of products and services including the decision processes that precede and follow these actions”.

Engel, Blackwell, Miniard “the dynamic interaction of effect and cognition, behavior and the environment by which human beings conduct the exchange aspects of their lives”

American Marketing Association

EVOLUTION OF CONSUMER BEHAVIOR AS A FIELD OF STUDY AND ITS RELATIONSHIP WITH MARKETING

• The discipline finds its roots in the “marketing concept” and has been essentially interdisciplinary in nature. As a subject it emerged as a separate field of study in the 1960s.

• Initially the focus lay in the marketers’ attempts to study the causes of consumer behavior; the assumption was that if they could identify the reasons behind consumption behavior, they would be able to predict it; and if they could predict consumer behavior, they could influence it. So the emphasis was to predict consumer behavior; the approach came to be known as ‘positivism’.

• Gradually, the focus of the study changed; the marketers wanted to understand the customer better, and this approach came to be known as ‘interpretivism’.

NATURE AND

SCOPE OF

CONSUMER

BEHAVIOR:

i The subject deals with issues related to cognition, affect and behavior in consumption behaviors, against the backdrop of individual and environmental determinants. The individual determinants pertain to an individual’s internal self and include psychological components like personal motivation and involvement, perception, learning and memory, attitudes, self-concept and personality, and, decision making. The environmental determinants pertain to external influences surrounding an individual and include sociological, anthropological and economic components like the family, social groups, reference groups, social class, culture, sub-culture, cross-culture, and national and regional influences.

ii. The subject can be studied at micro or macro levels depending upon whether it is analyzed at the individual level or at the group level.

iii. The subject is interdisciplinary. It has borrowed heavily from psychology (the study of the individual: individual determinants in buying behavior), sociology(the study of groups: group dynamics in buying behavior), social psychology (the study of how an individual operates in group/groups and its effects on buying behavior), anthropology (the influence of society on the individual: cultural and cross-cultural issues in buying behavior), and economics (income and purchasing power).

ContContd…d…

iv. Consumer behavior is dynamic and interacting in nature. The three components of cognition, affect and behavior of individuals alone or in groups keeps on changing; so does the environment. There is a continuous interplay or interaction between the three components themselves and with the environment. This impacts consumption pattern and behavior and it keeps on evolving and it is highly dynamic.

v. Consumer behavior involves the process of exchange between the buyer and the seller, mutually beneficial for both.

vi. As a field of study it is descriptive and also analytical/ interpretive. It is descriptive as it explains consumer decision making and behavior in the context of individual determinants and environmental influences. It is analytical/ interpretive, as against a backdrop of theories borrowed from psychology, sociology, social psychology, anthropology and economics, the study analyzes consumption behavior of individuals alone and in groups. It makes use of qualitative and quantitative tools and techniques for research and analysis, with the objective is to understand and predict consumption behavior.

vii. It is a science as well as an art. It uses both, theories borrowed from social sciences to understand consumption behavior, and quantitative and qualitative tools and techniques to predict consumer behavior.

Consumer Behavior’sInterdisciplinary Roots

• Psychology: This includes the study of the individual as well as the individual determinants in buying behavior, viz., consumer perception, learning and memory, attitude, self-concept and personality, motivation and involvement, attitudes and attitudinal change and, decision making.

• Sociology: This includes the study of groups as well as the group dynamics in buying behavior, viz., family influences, lifestyles and values, and social group influences.

• Social psychology: This includes the study of how an individual operates in group/groups and its effects on buying behavior viz, reference groups and social class influences.

• Anthropology: This is the influence of society on the individual viz., cultural and cross-cultural issues in buying behavior, national and regional cultures etc.

• Economics: This is the study of income and purchasing power, and its impact on consumer behavior. The underlying premise is that consumers make rational choices while making purchase decisions. While resourcse are limited and needs and wants many, consumers collect information, and evaluate the various alternatives to finally make a rational decision.

• The study of consumer behavior deals with understanding consumption patterns and behavior. It includes within its ambit the answers to the following: -

• ‘What’ the consumers buy: goods and services • - ‘Why’ they buy it: need and want • - ‘When’ do they buy it: time: day, week, month,

year, occasions etc. • - ‘Where’ they buy it: place • - ‘How often they buy’ it: time interval • - ‘How often they use’ it: frequency of use

The scope of consumer behavior includes not only the actual buyer but also the various roles played by him/ different individuals.

Scope of Consumer Behavior:

Consumer Behavior as an Academic Discipline and an Applied Science

• Factors that contributed to the growing interest in consumer behavior:– accelerated rate of new product development– consumer movement– public policy concerns– environmental concerns– the opening of national markets throughout

the world

WHY STUDY CONSUMER BEHAVIOR?

The knowledge of Consumer Behavior helps the marketer understand and predict the consumption patterns and consumption behaviors of people. It helps them gain insights as to why a consumer behaves differently to another consumer; as well as, why a consumer behaves differently in different times and buying situations. The study helps them understand the internal (individual determinants) and external (environmental factors) forces that impel people to act out different consumption patterns and behaviors.

The study helps the marketer in: • a) Analyzing the environment: identifying opportunities and fighting

threats b) Segmenting, targeting and positioning • c) Designing the marketing-mix • d) Designing the marketing strategy • e) Governmental and Non-profit Organization and Social Marketing

FAQS

1. Define Consumer Behavior?2. List out the individual determinants and

environmental influences that affect consumption behavior?

3. Is the subject of Consumer Behavior interdisciplinary?

4. What are the basic components in consumption behavior?

5. What are the various Buying Roles. 6. Which are the various disciplines that have

contributed to the study of Consumer Behavior?

7. What are the various environmental influences that affect consumption behavior?

Fill in the blanks1. The three interplay of forces, ------------------, affect and behavior that takes

place during a consumption process, within a consumers’ self and his environment.

2. The “consumer” includes both personal consumers and ---------------------consumers.

3. As we know that the subject consumer behavior is interdisciplinary in nature and most of It has borrowed from--------------

4. Consumer behavior involves the process of ---------------between the buyer and the seller, mutually beneficial for both.

Keys: 1.knowledge 2. business/industrial/organizational 3. psychology 4. exchange

Application of Consumer Behaviour in Marketing.

According to the marketing concept, the marketer should be able to determine needs and wants of the target segment and provide product and service offerings more effectively and efficiently than competitors. It is essentially a customer-centered philosophy, which aims at understanding customer needs and wants, providing the right product and service, and deriving customer satisfaction; “ make what you can sell” rather than “sell what you make.” An understanding of the study of consumer behavior helps formulate appropriate marketing strategies for a firm keeping in view the consumer and his environment.

It has a number of applications; the main application bases are as follows: Analyze the environment : The knowledge of consumer behavior can be applied to help identify opportunities and fight threats. The opportunities could be in terms of newer customers, newer markets, unfulfilled needs and wants (through a study of consumer individual determinants and other environmental influences). The threats could be fought by developing and implementing appropriate marketing strategies to best fit the environment. The marketing strategies need to be dynamic and constantly evolving keeping in view the uncertainty in the environment; Environmental uncertainty is a function of complexity and dynamism. Complexity is defined in terms of the number, strength and interrelatedness of the various factors in the environment that a firm has to deal with. Dynamism relates to how quickly the changes take place in the environment. Segmentation, targeting and positioning: The study of consumer behavior may be applied to segment the market, select the target market and position the product or service offering. Identifying the target segment, understanding their needs, providing the right product and service offering and communicating about the offering – all of these help a marketer succeed in the long term and ensure his survival and success in a changing environment.

Contd….

Contd…a) Segment the market: The marketer needs to identify distinct customer groups with needs and wants, classify them on basis of descriptive characteristics and behavioral dimensions. The descriptive characteristics may take forms of age, gender, income, occupation, education, family size, family life cycle, gender, lifestyle, personality, religion, generation, geography, nationality, and social class. The behavioral dimensions take forms of benefits, uses, use occasion, usage rates, and loyalty status. b) Select target market: The marketer then selects one or more markets to enter. The segment(s) that should be targeted should be viable; there should be a fit between the market attractiveness and the company’s objectives and resources. The marketer would be able to assess the viability of a segment on the basis of the following criteria, viz., measurability, substantialability, accessibility, differentiability, and actionability. c) Position the product offering in the mind of the customers: The marketers should be able to communicate the distinct and/or unique product characteristics

Contd…

Designing the Marketing Strategy: There exists interrelatedness between the Consumer, the Environment and the Marketing strategy.

a) Consumer: The consumer has his needs and wants as well as product preferences; Thus, there exists an interplay of Cognition (knowledge about products and alternatives), Affect (feelings of favorableness and unfavorableness) and Behavior (action: buy or not to buy).

b) Environment: This refers to forces in the environment, which make the environment complex and dynamic.

c) Marketing strategies: This implies setting up of goals and then achieving them through the design of an appropriate marketing mix. The Marketing Strategy should be designed to influence consumers (Cognition, Affect and Behavior) and be influenced by them. It should be flexible and ever evolving with changes in the customer needs and wants; as well as, changes in the environment in which it operates. The knowledge of consumer behavior can be applied to develop a “best fit” between consumer needs and wants, the environment in which the firm operates; and, the firms’ goals and objectives.

Contd…Designing the Marketing Mix (4 Ps):a) Product: The term product includes both tangible products and intangible

services. The issues to address consist of name (brand), size, shape, features, labeling, packaging, accessories and supplementary products, terms of sale and services, after sales etc.

b) Price: This includes the pricing of the product offering. The major components include, form of payment, terms and conditions of payment, discounts, price sensitivity, differential prices and customer reaction, imagery (price increase and customer reaction, price decrease and customer reaction).

c) Place and Distribution: This includes the marketing channel, and comprises decisions regarding choice of channel (direct or indirect), location, accessibility and availability of product offering, wholesaling, retailing, logistics etc.

d) Promotion: This includes marketing communication, and the major issues comprise decisions on communication/promotion mix, the message and media strategy (the content, appeal and context).

contd…

Application in Governmental and Non-profit Organizations and Social Marketing:

The knowledge of consumer behavior finds relevance even in Governmental and Non-profit Organizations and Social Marketing. Governmental and Non-profit Organizations have the society as its customers and need to understand them so as to be able to serve them better. Social marketing involves propagation of ideas; attempts at such circulation and spread of ideas for moral and social upliftment can be more successful if there is a proper understanding of the these consumers (i.e., the public and society)

FAQS(FREQUENTLY ASKED QUESTIONS) Assignment questions:1. As a marketer, how do you think that you can apply what you study in Consumer Behavior? 2. How has the study of Consumer Behavior evolved? 3. Is the subject of Consumer Behavior interdisciplinary? Discuss.4. List out how the knowledge of Consumer Behavior helps a marketer in Designing the 4 Ps? True/false: 1. The study of consumer behavior is viewed as the edifice of the selling concept. 2. The knowledge of consumer behavior does not find relevance in Governmental and Non-profit

Organizations and Social Marketing Fill up the blanks: 1. The _____________________ concept believes in “ make what you can sell” approach rather than “sell

what you make” approach. 2. Environmental uncertainty is a function of ________________ and dynamism. 3. There exists interrelatedness between the Consumer, the _________________ and the Marketing

strategy. 4. During the evolution of the discipline, marketers realized that there was a need to understand the

customer better. This approach came to be known as ______________. 5. The marketer needs to identify distinct customer groups with needs and wants, classify them on basis of

descriptive characteristics and behavioral dimensions this process is known as…………….Keys: 1.Marketing 2. complexity 3.environmental 4. interpretivism 5. Segmentation of market:

CONSUMER BUYING PROCESS OR CONSUMER DECISION MAKING PROCESS

Decision : A decision is defined as choosing an option of the few/many available. Decision making is the process of choosing between two or more alternatives; It is the selection of an alternative out of the few/many choices that are available. Decision making is: a) a goal oriented process. b) it is a problem solving process: helps take advantage of opportunities and fight threats.

Decisions Making can be of two types, a) Programmed decision making: This is applied for problems that are routine and

regular. Such problems are simple to deal with and guidelines to sort out such problems exist. Such decisions are made without much thought. With respect to marketing, these are decisions related to day to day purchases or convenience and shopping goods; these are generally low involvement purchases. They may also be habitual in nature, and brand loyalty could easily develop. Examples: Purchases made for staples, toiletaries etc.

b) Non-programmed decision making: This is applied for problems that arise suddenly and are unique or novel. As the problem is sudden and novel, it is complex and requires a lot of information gathering, deliberation and thought. With respect to marketing, these are decisions related to infrequent purchases or specialty goods and emergency goods; these are high involvement purchases. Examples: Purchases made for laptops, real estate etc. .

CONSUMER DECISION MAKING: A consumer purchase is actually a response to a problem. Consumer Decision Making pertains to making decisions regarding product and service offerings. It may be defined as a process of gathering and processing information, evaluating it and selecting the best possible option so as to solve a problem or make a buying choice. Consumer Decision Making pertains to the following decisions: a) What to buy: Products and Services (and the Brands?) b) How much to buy: Quantity c) Where to buy: Place d) When to buy: Time e) How to buy: Payment terms. All purchase decisions are not similar. The effort put into each decision making is different.

A Simplified Model of Consumer Decision Making

• The decision-making process can be viewed as three interlocking stages:– The input stage:

• marketing efforts• sociological influences

– The process stage:• psychological factors

– The output stage:• purchase behavior• postpurchase evaluation

Firm’s Marketing Efforts1. Product2. Promotion3. Price4. Channels of distribution

Sociocultural Environment1. Family2. Informal sources3. Other noncommercial

sources4. Social class5. Subculture and culture

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Postpurchase Evaluation

Purchase1. Trial2. Repeat purchase

Need Recognition

Prepurchase Search

Evaluation of Alternatives

Psychological Field1. Motivation2. Perception3. Learning4. Personality5. Attitudes

Experience

LEVELS OF DECISION MAKING: While decision making is defined as the selection of an alternative to solve a problem, the time and effort required to complete the process varies across buying situations. We may define three kinds problem solving spread over a continuum; these are referred to as the levels of consumer decision making;(i) Extensive problem solving (EPS):In EPS, the consumer is unfamiliar with the product/service category; he is not informed of the product or service offering, and thus, the situation requires extensive information search and evaluation. 1.These goods are ones of high involvement; they are expensive; they are infrequently bought; there is considerable amount of risk involved. 2.These are generally first time purchases Examples: Jewellery, electronic goods, Real estate and property etc. (ii) Limited problem solving (LPS) :The consumer is familiar of the product or service offering; but he is unaware of the various brands. The case is one where the buyer is familiar with the product category but unfamiliar with the brands. The types of products and / situations where we generally have LPS: 1.These goods are ones of low involvement; they are generally moderately priced; they are frequently bought; there is lesser amount of risk involved. 2.These are generally recurring purchases. Exceptions: They may also be cases where an expensive product is being repurchased. Examples: A laptop replacing a desktop, a second TV for the home.

(iii)Routinized problem solving (RPS) or Routinized response behavior:The consumer is well informed and experienced with the product or service offering. The consumer is aware of both the decision criteria as well as the various brands available. Here, the goods are ones of low involvement; they are inexpensive; they are frequently bought; there is no risk involved. These are routine purchases and are a direct repetition, where the consumer may be brand loyal. Examples: Staples, Cold drinks, Stationery etc.

Comparisons between EPS, LPS and RPS EPS LPS RPS

1.Complexity of decision making High Medium Low 2.Time taken to make decisions High Low to High Low 3.Information gathering Yes Yes No 4.Information sources Many Few Few or none 5.Awareness and knowledge of:a)Decision criteria No No Yes b)Alternative brands available Somewhat Yes Yes 6. Evaluative criteria Complex Moderate Simple (if at all) 7. Brands considered Many Few One (Repeat purchase)8. Cognitive dissonance High Rare None 9. Consumer Involvement High Medium Low 10.Information search Extensive Limited Minimum

Contd….Comparisons between EPS, LPS and RPS

EPS LPS RPS

11. Evaluation of alternatives Complex Moderate Simple (if at all)

5. Purchase Gradual after a cognitive process Not so gradual Immediate 6. Post purchase processes Cognitive dissonance is high Cognitive dissonance Brand loyalty. . Brand loyalty if satisfied would be rare Repeat purchase

7. Types of goods Specialty goods Mixed Convenience

BUYING ROLES: Consumer decision making is a complex process. It is an interplay of reactions amongst a consumer and his cognition, affect and behavior on the one hand, as well as the environmental forces on the other hand. The actual transaction/ exchange is preceded by considerable amount of thought processes and influences. This could be explained in terms of the five “Buying Rolesa) Initiator: The person who identifies a need and first suggests the idea of buying a particular product or service. b) Influencer: The person(s) who influences the buyer in making his final choice of the product. c) Decider: The person who decides on the final choice: what is to be bought, when, from where and how. d) Buyer: The person who enters into the final transaction and exchange process or is involved in the physical activity of making a purchase. e) User: The person(s) who actually consumes the product or service offering. so The marketer needs to understand these to frame suitable strategies.Example A boy enters college and needs a laptop for doing assignments. i) Initiator: The boy himself ii) Influencer: His friends and classmates. iii) Decider: The boy himself. iv) Buyer: The boy himself. v) User: The boy himself.

FAQS (FREQUENTLY ASKED QUESTIONS):1. Define Consumer Decision Making.2. Compare and contrast the various levels(EPS,LPS&RPS) of Consumer

Decision Making.3. Mention the five buying roles. 4. Mention the two types of decision making. 5. Mention the three kinds problem solving.6. True/false:a) With respect to marketing, programmed decisions are related to

infrequent purchases or specialty goods and emergency goods. b) In case of LPS brand loyalty is high. c) As far as Buyer Behavior is concerned, the users’ role is the most

important. Fill in the blanks:1. A decision is defined as choosing an -------------of the few/many available.2. Programmed decision making is applied when problems are ---------to deal

with and guidelines to sort out such problems exist.3. ----------------decision making is applied for problems that arise suddenly and

are unique or novel.

Keys: 1. option 2. simple3. Non-programmed

Thanks It is the end of unit 1