Consumer Behavior and Marketing Action

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PONDICHERRY UNIVERSITY (A Central University) DIRECTORATE OF DISTANCE EDUCATION Consumer Behaviour MBA - GENERAL Paper Code : MBGN 3001 MBA - MARKETING Paper Code : MBMM 3001 III SemesterNotes UNIT – I Learning Objectives After studying this chapter, you will be able to: ➢ Familiarize with the terms ‘Consumer’, ‘Customer’, ‘Industrial buyer’ ➢ U nderstand the need of consumer behavioral study, differences between organizational buying behavior and consumer buying behavior ➢ Analyze the nature and model of Consumer Involvement ➢ Understand consumer and Industrial decision making process and decision rules ➢ Appreciate marketing implications of Consumer Behavior ➢ Appreciate the study of Consumer Behavior Modeling Unit Structure Lesson 1.1 - Consumer Behavior and Marketing Action Lesson 1.2 - Consumer Involvement Lesson 1.3 - Consumer Decision Making Process Lesson 1.4 - Consumer Behavior and Marketing Implications Lesson 1.5 - Consumer Behavior Models 3Notes Lesson 1.1 - Consumer Behavior and Marketing Action Introduction Consumer behavior is comparatively a new field of study which evolved just after the Second World War. The seller’s market has disappeared and buyers market has come up. This has led to paradigm shift of the manufacturer’s attention from product to consumer and specially focused on the consumer behavior. The evaluation of marketing concept from mere selling concept to consumer-oriented marketing has resulted in buyer behavior becoming an independent discipline. The growth of consumerism and consumer legislation emphasizes the importance that is given to the consumer. Consumer behavior is a study of how individuals make decision to spend their available resources (time, money and effort) or consumption related aspects (What they buy? When they buy?, How they buy? etc.). The heterogeneity among people makes understanding consumer behavior a challenging task to marketers. Hence marketers felt the need to obtain an in-depth knowledge of consumers buying behavior. Finally this knowledge acted as an imperative tool in the hands of marketers to forecast the future buying behavior of customers and devise four marketing strategies in order to create long term customer relationship. Consumer Behavior: Definition It is broadly the study of individuals, or organizations and the processes consumers use to search, select, use and dispose of products, services, experience, or ideas to satisfy needs and study of its impact on the consumer and society. Customers versus Consumers The term ‘customer’ is specific in terms of brand, company, or shop. It refers to person who customarily or regularly purchases particular brand, purchases particular company’s product, or purchases from particular 4Notes shop. Thus a person who shops at Bata Stores or who uses Raymond’s clothing is a customer of these firms. Whereas the ‘consumer’ is a person who generally engages in the activities - search, select, use and dispose of products, services, experience, or ideas. Need for Study of Consumer Behavior The study of consumer behavior helps everybody as all are consumers. It is essential for marketers to understand consumers to survive and succeed in this competitive marketing environment. The following reasons highlight the importance of studying consumer behavior as a discipline. Importance in Day to Day Life The purpose of studying a discipline is to help oneself to better appreciate its contributions. The reason to study consumer behavior is because of the role it plays in the lives of humans. Most of the free time is spent in the market place, shopping or engaging in other activities. The extra time is usually passed in knowing and thinking about products and services, discussing with friends about them, and watching advertisements related to them. The usage of them significantly reveals our life styles. All these reasons suggest the need for study. However, the purpose may be to attend immediate and tangible reasons. Pertinence to Decision Making Consumer behavior is said to be an applied discipline as some decisions are significantly affected by their behavior or expected actions. The two perspectives that seek application of its knowledge are micro and societal perspectives. The micro perspectives involve understanding consumer for the purpose of helping a firm or organization to achieve its objectives. The people involved in this field try to understand consumers in order to be more effective at their tasks. Whereas the societal or macro perspective applies knowledge of consumers to aggregate- level faced by mass or society as a whole. The behavior of consumer has significant influence on the quality and level of the standard of living. 5Notes Organizational Buyer versus Individual Buyer The obvious difference between industrial or institutional markets and consumer markets is that, instead of purchases being made for individual consumption industrial markets are made for business use. There are several factors that differentiate consumer markets and their buying behavior from organizational market and their buying behavior. The key factors of differentiation are: 1. Market Structure and Demand 2. Buyer Characteristics 3. Decision Process and Buying Patterns 1. Market Structure and Demand The distinguishing factors of market structure and demand are as follows: ➢ In organizations, buyers are more geographically concentrated than consumer markets. ➢ Organizational buyers are fewer in number but they are bulk buyers compared to individual buyers. ➢ Organizational buyer markets are either vertical or horizontal. In vertical structures they cater only one or two industries, whereas in horizontal structure the buyer base is too broad. ➢ Organizational demand is derived from consumer demand. The nature of the demand is fluctuating and inelastic. 2. B uyer Characteristics The distinguishing factors of buyer characteristics are as follows: ➢ Many individuals or group involvement is seen in decision making process. ➢ Organizational buyers are quite knowledgeable and professional. ➢ The buying motive is mostly rational than individual buyer. 6Notes 3. Decision Process and Buying Patterns The major differences are as follows: ➢ In organizational buying lot of formalities like proposals, quotations, procedures are to be followed unlike consumer buying. ➢ Decision process is much complex with high financial risk, technical aspects, multiple influencing factors etc. ➢ Organizational buying requires more extensive negotiation over larger time period than consumer buying. 7Notes Lesson 1.2 - Consumer Involvement Some consumers are characterized as being more involved in products and shopping than others. A consumer who is highly involved with a product would be interested in knowing a lot about it before purchasing. Hence he reads brochures thoroughly, compares brands and models available at different outlets, asks questions, and looks for recommendations. Thus consumer involvement can be defined as heightened state of awareness that motivates consumers to seek out, attend to, and think about product information prior to purchase. Causes of Consumer Involvement The factors that influences consumer involvement include personal, product and situational. Personal Factors Self-concept, needs, and values are the three personal factors that influence the extent of consumer involvement in a product or service. The more product image, the value symbolism inherent in it and the needs it serves are fitting together with the consumer self- image, values and needs, the more likely the consumer is to feel involved in it. Celebrities for example share a certain self-image, certain values, and certain needs. They tend to use products and services that reflect their life style. They get highly involved in purchasing prestigious products like designer wear, imported cars, health care products etc. Product Factors ➢ The consumer involvement grows as the level of perceived risk in the purchase of a good or service increases. It is likely that consumers will feel more involved in the purchase of their house than in the purchase of tooth paste, because it is a much riskier purchase. 8Notes ➢ Product differentiation affects involvement. The involvement increases as the number of alternatives that they have to choose from, increases. ➢ The pleasure one gets by using a product or service can also influence involvement. Some products are a greater source of pleasure to the consumer than others. Tea and coffee have a high level of hedonic (pleasure) value compared to, say household cleaners. Hence the involvement is high. ➢ Involvement increases when a product gains public attention. Any product that is socially visible or that is consumed in public, demands high involvement. For example, involvement in the purchase of car is more than the purchase of household items. Situational Factors ➢ The situation in which the product is bought or used can generate emotional involvement. The reason for purchase or purchase occasion affects involvement. For example, buying a pair of socks for oneself is far less involved than buying a gift for a close friend. ➢ Social pressure can significantly increase involvement. One is likely to be more self conscious about the products and brands one looks at when shopping with friends than when shopping alone. ➢ The need to make a fast decision also influences involvement. A consumer who needs a new refrigerator and sees a ‘one- day- only sale’ at an appliances retailer does not have the time to shop around and compare different brands and prices. The eminence of the decision heightens involvement. ➢ The involvement is high when the decision is irrevocable, for example when the retailer does not accept return or exchange on the sale items. Thus involvement may be from outside the individual, as with situational involvement or from with in the individual as with enduring involvement. It can be induced by a host of personal-product-and situation related factors, many of which can be controlled by the marketer. It affects the ways in which consumers see, process, and send information to others. 9Notes Types of Involvement The two types of involvement are: A) Situation B) Enduring Situational Involvement `Situational involvement is temporary and refers to emotional feelings of a consumer, experiences in a particular situation when one thinks of a specific product. Enduring Involvement Enduring involvement is persistent over time and refers to feelings experienced toward a product category across different situations. For example, holiday- makers renting a resort for their trip are highly involved in their choice, but their involvement is temporary. Whereas involvement of a person whose hobby is bike racing endures overtime and affects his responses in any situation related to pre-purchase, purchase and post- purchase of sport bikes. It is observed that involvement is triggered by special situation in the case of holiday makers, but in the second case, it comes from, and is a part of the consumer. The contrast between situational and enduring involvement is important. When marketers measure involvement they examine the extent to which it can be induced by the product or selling situation. After noticing the type of involvement they are facing, marketers work to control products or selling situations. Effects of Consumer Involvement Involvement with the product makes consumers process the product-related information more readily. This information is processed thoroughly; hence, it is retained for a longtime. Because of this the consumers become emotionally high and tend to engage in extended problem solving and word- of-mouth communications. These result into three categories: search for information, processing information, and 10Notes information transmission. Customers who are highly involved tend to search for information and shop around more when compared with low involvement customers. For example, the customer who is highly involved with cars and thinks about buying it is likely to gather information. He sees for alternative models to figure the advantages and disadvantages of each. The more they are involved, the more they learn about the alternatives with in that category. To gather the information they use various sources. One such behavior is to shop around, where they visit various outlets and talk to sales people. The customers of this kind should be encouraged buy retailers to visit the outlets to know, and compare various models to meet information needs. Processing of Information Processing of information means depth of comprehension, extent of cognitive elaboration, and the extent of emotional arousal of information as discussed below. Depth of Comprehension Highly involved customers tend to process product information at deeper levels of understanding than the ones with low involvement. For example educated parents in urban areas are highly involved in baby food purchase decisions than rural uneducated parents. They also retain this information for long time. In this case marketers need to provide information cues to help the consumers to retrieve information from memory. But when the target is low involvement consumers, marketers should make the necessary information as accessible as possible at the time of selection and buying of the product. Extent of Cognitive Elaboration Highly involved customers think more about product choices than consumers with low involvement. Their deep understanding involves support arguments and / or counter arguments. That is, highly involved consumers tend to generate cognitive responses either in support of the product information or against the information provided by the marketers. 11Notes If we talk of the previous example, marketing baby food products, the product all though effective may have significant side effects like obesity. Educated parents are likely to give this the great deal of thought before giving it to their children. To ensure that the parents generate positive thoughts, the marketers have to mention a quality argument that the product benefits outweigh its negative effects. If the arguments are less informed and not persuasive, it is likely to produce negative thoughts resulting in an unfavorable attitude towards the product. Level of Emotional Arousal Highly involved consumers are more emotional than less involved consumers. The highly involved consumers react more strongly to the product- related information which may act for or against marketers. This is because the negative interpretation is likely to be exaggerated more number of times causing the customers to reject the product. Information Transmission Transmission of information is the extent to which greatly involved customers send information about the product to others. This is done usually through word-of-mouth communication. The researchers have shown that if consumers are highly involved they talk about the product frequently than others. Satisfied consumers are likely to speak favourable about the product, while unsatisfied speak negatively. Therefore, marketers catering to highly involved consumers should attempt to enhance consumer satisfaction and decrease dissatisfaction. For example, customer happy with ONIDA television communicates the same to others through word- of-mouth. Models of Consumer Involvement There are four prominent models of consumer behavior based on involvement which help marketers in making strategic decision particularly in marketing communication related strategies. The four models are as follows. 12Notes 1. Low Involvement Learning Model 2. Learn-Feel-Do Hierarchy model 3. Level of Message Processing Model 4. Product versus Brand Involvement Model 1. Low Involvement Learning Model Low Involvement products are those which are at low risk, perhaps by virtue of being inexpensive, and repeatedly used by consumers. Marketers try to sell the products without changing the attitudes of consumers. New product beliefs replace old brand perceptions. Marketers achieve low– involvement learning through proper positioning. For example, writing pen with the ‘uninterrupted flow’, and tooth paste with ‘mouth wash’ positioning attracts new consumers. 2. Learn-Feel-Do Hierarchy Model Buying decisions vary according to the way they are taken. Some decisions are taken with lot of thinking others are taken with great feelings. Some are made through force of habit and others are made consciously. The learn-feel-do hierarchy is simple matrix that attributes consumer choice to information (learn), attitude (feel), and behavior (do) issues. The matrix has four quadrants, each specifying a major marketing communication goal to be informative, to be effective, to be habit forming, or promote self-satisfaction. Thinking and feeling are shown as a continuum - some decisions involve one or the other and many involve elements of both. High and low importance is also represented as a continuum. HIGH INVOLVEMENT Thinking Feeling 1. Informative 2. Aeff ctive (Thinker) (Feeler) Model: Learn-Feel-Do Model: Feel-Learn-Do 3. Habit Formation 4. Self- Satisfaction (Doer) Reactor) Model: Do-Learn-Feel Model: Do-Feel-Learn LOW INVOLVEMENT 13Notes (I) High Involvement / High Thinking Purchases in first quadrant require more information, both because of the importance of the product to the consumer and thinking issues related to the purchases. Major purchases such as cars, houses and other expensive and infrequently buying items come under this category. The strategy model is learn-feel-do. Marketers have to furnish full information to get consumer acceptance of the product. (ii) High Involvement / High Feeling The purchase decisions in second quadrant involve less of information than feeling. Typical purchases tied to self-esteem- jewelry, apparel, cosmetics and accessories come under this category. The strategy model is feel-learn-do. To encourage purchases marketers must approach customers with emotion and appeal. (iii) Low Involvement / Low Feeling The purchases in this quadrant are motivated primarily by the need to satisfy personal tastes, many of which are influenced by self-image. Products like news paper, soft drinks, Liquor etc., fall under this category. Group influences often lead to the purchase of these items. The strategy model is do-feel-learn. It helps marketers to promote products through reference groups and other social factors. (iv) Low Involvement / Low Thinking It involves less in thinking and more of habitual buying. Products like stationery, groceries, food etc., fall under this category. Over a period of time any product can fall in this segment. The role of information is to differentiate any ‘point of difference’ from competitors. Brand loyalty may result simply from the habit. The strategy model is do-learn-feel. It suggests that marketers induce trial through various sales promotion techniques. 3. Level of Message Processing Model Consumer attention to advertisements or any other marketing communication depends on four levels of consumer involvement: Pre- attention, focal attention, comprehension and elaboration. Each calls 14Notes for different level of message processing. Pre-attention demands only limited message processing - the consumer only identifies the product. Focal attention involves basic information as product name or usefulness. In comprehension level, the message is analyzed and the content of the message is integrated with other information, through elaboration, which helps to build attitude towards the product. It is suggested that marketers make advertisements which can induce elaboration. 4. Product versus Brand Involvement Model Sometimes consumer is involved with the product category but may not be necessarily involved with the particular brand or vice versa. For example, house wives know more about kitchen ware but may not know the details of various brands. According to the consumer involvement in either product or particular brand, consumer types can be divided into four categories as described below. (i) Brand Loyals: These consumers are highly involved with both the product category and with particular brand. For example, cigarette smokers and paper readers fall in this category. (ii) I nformation Seekers: These buyers are involved more with product category but may not have preferred brand. They are likely to see information to decide a particular brand. For examples, air- conditioners and washing machine buyers fall under this category. (iii) Routine Brand Buyers: These consumers are not highly involved with the product category but may be involved with the particular brand within that category. They have low emotional attachment with the product category and tied mainly with their brand. For example users of particular brand of soap for years, regular visitors to particular restaurant fall in this category. (iv) B rand Switching: Consumers in this category have no emotional attachment either with product category or any brand within it. They typically respond to price. For example stationery items, fashion products come under this category. 15Notes Lesson 1.3 - Consumer Decision Making Process The most important environment in which firms operate is their customer environment because the basic belief of marketing oriented company – that the customer is the centre around which the business revolves. Therefore, marketing people need to understand the processes that their customers go through when making decision. The consumer decision making process involves series of related and sequential stages of activities. The process begins with the discovery and recognition of an unsatisfied need or want. It becomes a drive. Consumer begins search for information. This search gives rise to various alternatives and finally the purchase decision is made. Then buyer evaluates the post purchase behavior to know the level of satisfaction. The process is explained below with the help of diagram. Steps In Decision Making Process Need Recognition Information Search Evaluation of Alternatives Purchase Decision Post-Purchase Behavior 16Notes 1. Need Recognition Lesson 1.3 - Consumer Decision Making Process When a person has an unsatisfied need, the buying process begins to satisfy the needs. The need may be activated by internal or external factors. The intensity of the want will indicate the speed with which a person will move to fulfill the want. On the basis of need and its urgency, the order of priority is decided. Marketers should provide required information of The most important environment in which firms operate is their selling points. customer environment because the basic belief of marketing oriented company – that the customer is the centre around which the business 2. Information Search revolves. Therefore, marketing people need to understand the processes that their customers go through when making decision. Identified needs can be satisfied only when desired product is known and also easily available. Different products are available in the The consumer decision making process involves series of related market, but consumer must know which product or brand gives him and sequential stages of activities. The process begins with the discovery maximum satisfaction. And the person has to search out for relevant and recognition of an unsatisfied need or want. It becomes a drive. information of the product, brand or location. Consumers can use many Consumer begins search for information. This search gives rise to various sources e.g., neighbors, friends and family. Marketers also provide relevant alternatives and finally the purchase decision is made. Then buyer evaluates information through advertisements, retailers, dealers, packaging and the post purchase behavior to know the level of satisfaction. The process is sales promotion, and window displaying. Mass media like news papers, explained below with the help of diagram. radio, and television provide information. Nowadays internet has become an important and reliable source of information. Marketers are expected Steps In Decision Making Process to provide latest, reliable and adequate information. Need Recognition 3. Evaluation of Alternatives This is a critical stage in the process of buying. Following are important elements in the process of alternatives evaluation Information Search a. A product is viewed as a bundle of attributes. These attributes or features are used for evaluating products or brands. For example, in washing machine consumer considers price, capacity, technology, Evaluation of Alternatives quality, model and size. b. Factors like company, brand image, country, and distribution network and after-sales service also become critical in evaluation. Purchase Decision c. Marketers should understand the importance of these factors with regards to the consumers while manufacturing and marketing their products. Post-Purchase Behavior 17Notes 4. Purchase Decision Outcome of the evaluation develops likes and dislikes about alternative products or brands in consumers. This attitude towards the brand influences a decision as to buy or not to buy. Thus the prospective buyer heads towards final selection. In addition to all the above factors, situational factors like finance options, dealer terms, falling prices etc., are also considered. 5. Post- Purchase Behavior Post-purchase behavior of consumer is more important as far as marketer is concerned. Consumer gets brand preference only when that brand lives up to his expectation. This brand preference naturally repeats sales of marketer. A satisfied buyer is a silent advertisement. But, if the used brand does not yield desired satisfaction, negative feeling will occur and that will lead to the formation of negative attitude towards brand. This phenomenon is called cognitive dissonance. Marketers try to use this phenomenon to attract users of other brands to their brands. Different promotional-mix elements can help marketers to retain his customers as well as to attract new customers. Consumer Decision Rules These are generally referred to as information processing strategies. These are procedures that help consumers to evaluate various options and reduce the risk of making complex decisions by providing the guidelines. Decision rules have been broadly classified into two categories: 1. Compensatory Decision Rules: Consumers evaluate brand or model in terms of each attribute and computes a weighted score for each brand. The computed score reflects the brand’s relative merit as a potential purchase choice. The assumption is that consumer will select the brand that scores highest among alternative brands. The unique feature of this rule is that it balances the positive evaluation of a brand on one attribute to balance out a negative evaluation on some other attribute. For example, positive attribute like high fuel efficiency is balanced with the negative evaluation of high maintenance cost. 18Notes 2. Non-compensatory Decision Rules: In contrast to the above rule non-compensatory rules do not allow consumers to balance positive evaluation of a brand on one attribute against negative evaluation on some other attribute. There are three types of non-compensatory rules. Conjunctive Decision Rule: In conjunctive decision rule the consumer establishes a different, minimally acceptable level as a cut off point for each attribute. In this the option is eliminated for further consideration if a specific brand or model falls below the cutoff point on any attribute. Disjunctive Rule: It is the ‘mirror image’ of conjunctive rule. Here the consumer establishes a separate minimally acceptable cut off level for each attribute. In this case if an option meets or exceeds the cut off established for any one attribute, it is accepted. Lexicographic Decision Rule: In this rule the consumer initially ranks the attributes in terms of perceived relevance or importance. Later he compares different alternatives in terms of the single attribute that is considered most important. On this top ranked alternative, regardless of the score on any other attribute, if one option scores sufficiently high it is selected and the process ends. Levels Of Consumer Decision Making The consumer decision making process is complex with varying degree. All purchase decisions do not require extensive effort. On continuum of effort ranging from very high to very low, it can be distinguished into three specific levels of consumer decision making: 1 Extensive Problem Solving (EPS) 2. Limited Problem Solving (LPS) 3. Routine Problem Solving (RPS) 1. Extensive Problem Solving (EPS): When consumers buy a new or unfamiliar product it usually involves the need to obtain substantial information and a long time to choose. They must form the concept 19Notes of a new product category and determine the criteria to be used in choosing the product or brand. 2. L imited Problem Solving (LPS): Sometimes consumers are familiar with both product category and various brands in that category, but they have not fully established brand preferences. They search for additional information which helps them to discriminate among various brands. 3. Routine Problem Solving (RPS): When consumers have already purchased a product or brand, they require little or no information to choose the product. Consumers involve in habitual and automatic purchases. 20Notes Lesson1.4 - Consumer Behavior and Marketing Implications The basic belief of marketing-oriented company is that the customer is the hub around which the business revolves. Therefore, understanding what makes people in general buy and what makes your customer in particular buy, is a vital part of business success. Market itself means – customer, around whom all marketing strategies are formulated and implemented. In order to meet competition at the market place, the marketing managers are using various methods to add value to the final product which will reach the hands of the consumers. It means in ever changing marketing environment, there is a growing concern or awareness among marketers to go for a careful study of the consumer behavior around which all marketing activities are made. Following are the key marketing implications of consumer behavior. Consumer Behavior and Marketing Strategies Understanding the consumer behavior is the basis for marketing strategy formulation. Consumer’s reaction to strategy determines the organization success or failure. In this competitive environment organizations can survive only by offering more customer value - difference between all the benefits derived from a total product and all the costs of acquiring those benefits - than competitors. Providing superior customer value requires the organization to do a better job of anticipating and reacting to the customer needs than the competitor. Marketing strategy is basically the answer to the question: How will company provide super ior customer value to its target market? The answer to this question requires formulation of marketing - mix – product, price, place and promotion - strategies. The right combination of these elements meets customer expectation and provides customer value. For example, marketer of a bike must know the customers performance expectations, desired service, price willing to pay, information he seeks and after-sales service to provide superior customer value. 21

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