Af Session 2

Copyright © Amity University

PAN African eNetwork Project

Masters of Business Administration (IB)

Marketing Management

Semester - I

Prof. Mamta Mohan


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Consumer Behavior


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Definitions

• Consumer Buying Behavior– Buying behavior of individuals and

households that buy products for personal consumption.

• Consumer Market– All individuals/households who buy

products for personal consumption.

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Customer vs. Consumer Behavior

• Customer behavior: a broad term that covers both individual consumers who buy goods and services for their own use and organizational buyers who purchase business products

• Consumer behavior: the process through which the ultimate buyer makes purchase decisions


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Based on concepts from

• Psychology• Sociology• Anthropology• Marketing• Economics


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Why do we need to study Consumer Behaviour?

Because no longer can we take the customer/consumer for

granted.


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• Stimulus Response Model– Marketing and other stimuli enter the

buyer’s “black box” and produce certain choice/purchase responses.

– Marketers must figure out what is inside of the buyer’s “black box” and how stimuli are changed to responses.

Model of Consumer Behavior


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Failure rates of new products introduced

• Out of 11000 new products introduced by 77 companies, only 56% are present 5 years later.

• Only 8% of new product concepts offered by 112 leading companies reached the market. Out of that 83% failed to meet marketing objectives.


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Interpersonal Determinants ofConsumer Behavior

• Figure 5.1: Why People Buy New Products


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All managers must become astute analysts of consumer motivation

and behaviour


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Can Marketing be standardised?

No.Because cross - cultural styles,

habits, tastes, prevents such standardisation.


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Unless Managements act

The more successful a firm has been in the past, the more likely is

it to fail in the future.


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Why?

Because people tend to repeat behaviour for which they have

been rewarded.


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Language Problems

• “Please leave your values at the desk” - Paris hotel• “Drop your trousers here for best results” - Bangkok

laundry• “The manager has personally passed all water

served here” - Acapulco restaurant• “Because of the impropriety of entertaining guests

of the opposite sex in the bedroom, it is suggested that the lobby be used for the purpose.” - Zurich hotel

• Ladies are requested not to have children in the bar.”- Norway bar


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“Come alive with Pepsi”

• “Come alive out of the grave” - Germany• “Pepsi brings your ancestors back from

the grave” - China

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Buyer Behaviour

4 P s M a rke tingE n v iro n m e nt

B u yerC h a ra c te ris tics

B u yerD e c is io n P ro c e ss

B u yerD e c is ion

C o n su m er

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Marketing Stimuli

P ro du ct P rice P la ce P ro m o tion

4 P s

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Other Stimuli

E co no m ic T e ch n o lo g ica l P o lit ica l C u ltu ra l

M a rke tingE n v iro n m e nt


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Buyer characteristics

• Cultural• Social• Personal• Psychological

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Buyers Characteristics Affecting Consumer Behavior


• Culture• Subculture

• Social Class

Key Factors Key Factors


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• Groups– Membership– Reference

• Aspirational groups– Opinion leaders

• Buzz marketing

• Family– Children can influence

• Roles and Status



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• Children and Teenagers in Family Purchases– Growing numbers are assuming

responsibility for family shopping– They also influence what parents buy– They represent over 50 million

consumers in their own right

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• Age and life cycle• Occupation• Economic situation• Lifestyle

– Activities, interests, and opinions

– Lifestyle segmentation• Personality and self-concept

– Brand personality


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Brand Personality DimensionsBrand Personality Dimensions

Characteristics Affecting Consumer Behavior

• Sincerity• Ruggedness

• Excitement• Competence

SophisticationSophistication

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• Motivation– Needs provide motives for

consumer behavior– Motivation research– Maslow’s hierarchy of needs

• Perception– Selective attention, selective

distortion, selective retention• Learning

– Drives, stimuli, cues, responses and reinforcement

• Beliefs and attitudes



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Personal Determinants of Consumer Behavior


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• Needs and Motives– Need: an imbalance between a consumer’s

actual and desired states– Motives: inner states that direct a person

toward the goal of satisfying a felt need


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• Maslow’s Hierarchy of Needs

Esteem Needs

Social Needs

Safety Needs

Physiological Needs

Self-Actualization

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Physiological NeedsPhysiological NeedsProductsProducts Vitamins, herbal supplements, medicines, food, Vitamins, herbal supplements, medicines, food,

exercise equipment, fitness clubsexercise equipment, fitness clubs

Marketing Marketing themesthemes

Pepcid antacidPepcid antacid—”—”Just one and hearburnJust one and hearburn’’s dones done””Puffs facial tissuesPuffs facial tissues—”—”A nose in need deserves Puffs A nose in need deserves Puffs indeedindeed””Ocean Spray cranberry juiceOcean Spray cranberry juice—”—”Crave the waveCrave the wave””

Safety NeedsSafety Needs

ProductsProducts Cars and car accessories, burglar alarm systems, Cars and car accessories, burglar alarm systems, retirement investments, insurance, smoke and retirement investments, insurance, smoke and carbon-monoxide detectors, medicinescarbon-monoxide detectors, medicines

Marketing Marketing themesthemes

FiremanFireman’’s Fund insurances Fund insurance—“—“License to get on with it.License to get on with it.””American General Financial GroupAmerican General Financial Group—“—“Live the life Live the life youyou’’ve imagined.ve imagined.””VolvoVolvo—“—“Protect the body. Ignite the soul.Protect the body. Ignite the soul.””

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BelongingnessBelongingnessProductsProducts Beauty aids, entertainment, clothing, carsBeauty aids, entertainment, clothing, carsMarketinMarketing themesg themes

Old NavyOld Navy—”—”Spring Break from coast to coastSpring Break from coast to coast””Washington Mutual banksWashington Mutual banks—”—”More human interestMore human interest””TJ Maxx clothing storeTJ Maxx clothing store—”—”You should goYou should go””

Esteem NeedsEsteem NeedsProductProduct Clothing, cars, jewelry, hobbies, beauty spa servicesClothing, cars, jewelry, hobbies, beauty spa servicesMarketinMarketing themesg themes

Lexus automobilesLexus automobiles——The relentless pursuit of The relentless pursuit of perfectionperfection””Van Cleef & ArpelsVan Cleef & Arpels—“—“The pleasure of perfection.The pleasure of perfection.””Accutron watchesAccutron watches—“—“Perhaps itPerhaps it’’s worthy of your trust.s worthy of your trust.””Jenn-Air kitchen appliancesJenn-Air kitchen appliances—“—“The sign of a great The sign of a great cook.cook.””Self-ActualizationSelf-Actualization

ProductsProducts Education, cultural events, sports, hobbies, luxury Education, cultural events, sports, hobbies, luxury goods, technology, travelgoods, technology, travel

MarketinMarketing themesg themes

GatoradeGatorade—“—“Is it in you?Is it in you?””DePaul UniversityDePaul University—”—”Turning goals into Turning goals into accomplishmentsaccomplishments””Dodge cars and trucksDodge cars and trucks—”—”Grab life by the hornsGrab life by the horns””


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• Perceptions: the meaning that a person attributes to incoming stimuli gathered through the five senses – sight, hearing, touch, taste, and smell.

• Perceptual screens: the filtering processes through which all inputs must pass


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• Attitudes– A person’s enduring favorable or

unfavorable evaluations, emotional feelings, or action tendencies toward some object or idea

– Attitude components:• Cognitive• Affective • Behavioral


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• Learning– An immediate or expected change in

behavior as a result of experience.– The learning process includes the

component of:• Drive• Cue• Response• Reinforcement


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• Applying Learning Theory to Marketing Decisions– Shaping: process of applying a series of

rewards and reinforcements to permit more complex behavior to evolve over time


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• Self-Concept– A person’s multifaceted picture of himself or

herself, composed of the:• Actual( real) self• ideal self-(image)• Expected self


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• Applying Learning Theory to Marketing Decisions– Shaping: process of applying a series of

rewards and reinforcements to permit more complex behavior to evolve over time

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Types of Buying-Decision Behavior

Difference between Difference between brandsbrands

SignificantSignificantDifferencesDifferences

Complex Complex buying buying

behaviorbehavior

LowLow

FewFewDifferencesDifferences

Dissonance-Dissonance-reducing reducing buying buying

behaviorbehavior

Habitual Habitual buying buying

behaviorbehavior

Variety-Variety-seeking seeking buying buying

behaviorbehavior

HighHighInvolvement LevelInvolvement Level


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The Consumer Decision Process• Consumers complete a step-by-

step process when making purchase decisions– High-involvement purchase

decisions are those with high levels of potential social or economic consequences

– Low-involvement decisions are routine purchases that pose little risk to the consumer

SearchSearch

Alternative Alternative EvaluationEvaluation

Purchase Purchase DecisionDecision Purchase ActPurchase Act Post-purchase Post-purchase

EvaluationEvaluation

Problem Problem Opportunity Opportunity RecognitionRecognition


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Buyer’s Decision Process• Problem Recognition• Information Search• Evaluation of Alternatives• Purchase Decision• Consumption• Postpurchase behaviour


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– Integrated Model of the Consumer Decision Process


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• Problem or Opportunity Recognition– Consumer becomes aware of a

significant discrepancy between the existing situation and the desired situation

– Motivates the individual to achieve the desired state of affairs


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• Search– Consumer gathers information related to

their attainment of the desired state of affairs– Identifies alternative means of problem

solution– May cover internal or external sources of

information– Brands that a consumer actually considers

buying before making a purchase decision are known as the evoked set

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Evoked Set Evoked Set ModelModel

All All BrandsBrands

Unknown Unknown BrandsBrands

Known Known Brands Brands

OverlookedOverlookedBrandsBrands

UnacceptableUnacceptableBrandsBrands

AcceptableAcceptableBrandsBrands

Rejected Rejected Brands Brands

PurchasedPurchasedBrandBrand

EvokedEvokedSetSet

InertInertSetSet


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• Evaluation of Alternatives– Consumer evaluates the evoked set– Difficult to completely separate the second

and third steps, since some evaluation takes place as the search progresses

– Outcome of the evaluation stage is the choice of a brand or product (or possibly a decision to renew the search)

– Evaluative criteria: features that a consumer considers in choosing among alternatives


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• Purchase Decision and Purchase Act– Consumer narrows the alternatives

down to one– The purchase location is decided


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• Postpurchase Evaluation– After the purchase, consumers are either

satisfied or experience post-purchase anxiety

– Cognitive dissonance: Post-purchase anxiety that results from an imbalance among an individual’s knowledge, beliefs, and attitudes after an action or decision is taken


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Buyer Decision Process for New Products

• Individual Differences in Innovativeness– Consumers can be classified into five adopter

categories, each of which behaves differently toward new products.

• Product Characteristics and Adoption– Five product characteristics influence the

adoption rate.

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Product CharacteristicsProduct Characteristics

Buyer Decision Process for New Products

• Relative Advantage• Compatibility

• Complexity• Divisibility

CommunicabilityCommunicability


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Buyer’s Decision

• Product Choice• Brand Choice• Dealer Choice• Purchase Timing• Purchase Amount


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Buying Roles

• Initiator• Influencer• Decider• Buyer• User


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Buying Behaviour

• Complex• Dissonance - Reducing• Habitual• Variety seeking


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Post - Purchase Behaviour

• Satisfaction• Actions• Use and Disposal


STP process

• Identifying those particular groups of customers, which your product/service is capable of meeting their requirements (needs) most.

• Each of these groups constitute a market segment

• Selecting one or more segments to enter

• Establishing and communicating the product’s key distinctive benefits in that market


Issues

• What are the different levels of market segmentation?

• How can the company divide a market into segments?

• How can a company choose a most attractive segment?

• What are the requirements for effective segmentation?


Market Segment

• A large identifiable group within a market with similar wants, purchasing power, geographical locations, buying attitudes


Levels of segments:

• Mass marketing• Micromarketing; segments, niches, local

areas, and individuals


Niche Marketing• What is an attractive niche ?• A distinct set of needs• A premium can be charged • Not likely to attract competition• Gains certain economies through

specialization• Sufficient size, profit and growth

potential


Local Marketing• When the marketing mix is altered to suit

the local conditions

e.g.. Giving a higher/ lower discount than what’s prevailing in the rest of the markets or implementing a different promotion scheme


Individualized Marketing

• When the firm deals with each customer on a one – to – one basis

• Customerization- When products are customized for the customer


Bases for Segmentation• Geographic –territory demarcations

• Demographic – age, family size, sex, income,education, religion, generation social class etc.

• Psychographic – lifestyle, personality, values

• Behavioral –decision roles, user status, usage, Occasions, benefits, rate, buyers readiness, loyalty status, Attitude


Segmenting by Income and Segmenting by Income and Expenditure PatternsExpenditure Patterns

– Engel’s Laws,Engel’s Laws, as family income increases:• A smaller percentage of expenditures go for food• The percentage spent on housing and household

operations and clothing remains constant• The percentage spent on other items (such as

recreation and education) increases.

• Psychographic Segmentation Psychographic Segmentation – Divides a population into groups that have

similar psychological characteristics, values, and lifestyles

– Lifestyle: people’s decisions about how to live their daily lives, including family, job, social, and consumer activities

– The most common method for developing psychographic profiles of a population is to conduct a large-scale survey

• AIO statements• VALS and VALS 2

“Values and Lifestyles”


• Using Psychographic Using Psychographic SegmentationSegmentation – Psychographic profiles

produce rich descriptions of potential target markets

– Greater detail aids in matching a company’s image and its offerings with the types of consumers who are likely purchasers.

Behavioral variables

• Occasions – birthdays, lunchtime, vacations• Benefits – eg. travel – business, vacation,

educational• User status – non users, ex users, first time

users, regular users, potential users• Usage rate – light, medium, heavy

• Loyalty status – diehards, shifters, switchers• Buyer Readiness – unaware – aware – informed

– interested – desire – intention to buy• Attitude – enthusiastic, positive, indifferent,

negative, hostile

• Brand LoyaltyBrand Loyalty– Segmenting consumers grouped according to the

strength of brand loyalty felt toward a product– Frequent flyer programs of airlines and many hotels


Criteria for segmentation

• Measurable• Substantial• Accessible• Differentiable• Actionable


The Market Segmentation Process

• Develop a Relevant Profile for each Segment

• Forecast Market Potential• Forecast Probable Market Share• Select Specific Market Segments

Market Targeting( strategies)• Single segment concentration• Selective specialisation• Product specialisation• Market specialisation• Full Market coverage• -undifferentiated marketing • -differentiated marketing


Undifferentiated Marketing• Single product addressing all segments

with a single marketing program.• Mass production is possible giving scale

economies• Pushes price downwards enabling to

attract price sensitive segments


Differentiated Marketing• A separate market offering for every

segment• Marketing programs for every segment

could be different• Pushes up costs at various levels,

necessitating sufficient volumes for viability

• Generates inter-segment rivalry


– Positioning:Positioning: a marketing strategy that emphasizes serving a specific market segment by achieving a certain position in buyers’ minds

• Attributes• Price/quality• Competitors• Application• Product user• Product class

– Positioning mapPositioning mapGraphic illustration that shows differences in consumers’ perceptions of competing products

– RepositionReposition Marketing strategy to change the position of its product in consumers’ minds relative to the positions of competing products


Hypothetical Competitive Positioning Map for Selected Retailers

Thank You

Please forward your query To: [email protected]: [email protected]

mailto:[email protected]

Documents

Af Session 2