Lecture notes on Consumer Behaviour

what are consumer behavior principles and what is consumer behaviour decision making process and what is consumer behavior examples
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C C CO O ON N NS S SU U UMER MER MER B B BE E EH H HA A AVI VI VIO O OU U UR R R VVVIIISE SE SEMMMEEEST ST STEEERRR BBBBBBAAA (((SpSp Speeeccciiialalaliiizzzaaatttiiion on on-MMMaaarrrkkketi eti etinnnggg))) ( ( ( 2 2 20 0 01 1 11 1 1 A A Ad d dm m mi i is s ss s si i ion on on) ) ) U U UN N NI I IVER VER VERS S SI I ITY TY TY O O OF F F C C CA A AL L LI I IC C CU U UT T T S S SC C CH H HO O OO O OL L L O O OF F F D D DI I IS S ST T TA A AN N NC C CE E E E E ED D DU U UC C CA A AT T TI I IO O ON N N Ca Ca Cal l lic ic icu u ut t t u u un n niv iv ive e er r rs s sit it ity y y P P P. . .O, O, O, M M Ma a al l la a ap p pp p pu u ur r ra a am m m K K Ke e er r ra a al l la a a, , , I I In n nd d dia ia ia 6 6 673 73 73 635. 635. 635.School of Distance Education UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION STUDY MATERIAL BBA(Sp ecialization-Marketing) VI Semester CONSUMER BEHAVIOUR Prepared by: Sri.Praveen M V, Asst. Professor, Dept. of Commerce, Govt. College, Madappally. Scrutinized by: Dr. K. Venugopalan, Associate Professor, Department of Commerce, Govt. College, Madappally. Layout: Computer Section, SDE © Reserved Consumer Behaviour Page 2School of Distance Education Page No. Contents MODULE 1 CONSUMER BEHAVIOUR 4 MODULE 2 20 CONSUMER INVOLVEMENT INDIVIDUAL INFLUENCE ON MODULE 3 28 BUYING BEHAVIOUR MODULE 4 86 CONSUMER BUYING PROCESS CULTURE AND CONSUMER MODULE 5 95 BEHAVIOUR Consumer Behaviour Page 3School of Distance Education MODULE 1 CONSUMER BEHAVIOUR Consumer is the reason why business exists. Without them no company can survive or thrive. In their absence, an organisation doesn’t have a business or purpose. The main purpose of a company is to satisfy customer’s needs and wants. Though similar, consumers are unique in themselves; they have needs and want which are varied and diverse from one another; and they have different consumption patterns and consumption behaviour. The marketer helps satisfy these needs and wants through product and service offerings. For a firm to survive, compete and grow, it is essential that the marketer identifies these needs and wants, and provides product offerings more effectively and efficiently than other competitors. A comprehensive yet meticulous knowledge of consumers and their consumption behaviour is essential for a firm to succeed. Herein, lays the essence of Consumer Behaviour, an interdisciplinary subject, which emerged as a separate field of study in the 1960s. Peter Drucker, a leading management expert, once stated that the aim of marketing is to know and understand the consumer so well that the product or service fits him and sells itself. Ideally, marketing should result in a consumer who is ready to buy. All that should be needed then is to make the product or service available. In short consumer or customer satisfaction is the key to an organisational success. Consumer Any individual who purchases goods and services from the market for his/her end-use is called a consumer. In simpler words a consumer is one who consumes goods and services available in the market. In other words, consumer is an ultimate user of a product or service. According to International Dictionary of Management, “consumers are purchasers of goods and services for immediate use and consumption”. Consumer Behaviour Human being differs from one to another. It is not easy to predict the human behaviour. Human being differs in their taste, needs, wants and preferences. But one constant thing is that we all are consumers. CB is a vast and complex subject. Understanding CB and “knowing consumers’ are not that simple. It is almost impossible to predict with one hundred per cent accuracy, how consumer(s ) will behave in a given situation. Marketers are interested in watching people shopping, flirting, parading, playing, entertaining, as they are keenly interested in the wide variety of behaviours they display. The efforts of all marketers are to influence the behaviour of consumers in a desired manner. The success or failure in this pursuit determines the difference between success and failure of marketing efforts or even the business itself. Consumer behaviour explains the reasons and logic that underlie purchasing decisions and consumption patterns; it explains the processes through which buyers make decisions. Consumer Behaviour 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 behaviour; it continues through pre-purchase activity to the Consumer Behaviour Page 4School of Distance Education 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. Definitions 1. “The behaviour that consumers display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs.”- Schiffman and Kanuk 2. “…..the decision process and physical activity engaged in when evaluating, acquiring, using or disposing of goods and services." - Loudon and Bitta 3. “The study of consumers as they exchange something of value for a product or service that satisfies their needs”- Wells and Prensky 4. “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 5. “The dynamic interaction of effect and cognition, behaviour and the environment by which human beings conduct the exchange aspects of their lives” - American Marketing Association By analysing the above definition, it reveals that the study includes within its purview, the interplay between cognition, affect and behaviour that goes on within a consumer during the consumption process: selecting, using and disposing off goods and services. i. Cognition: This includes within its ambit the “knowledge, information processing and thinking” part; It includes the mental processes involved in processing of information, thinking and interpretation of stimuli ( pe ople, objects, things, places and events). In our case, stimuli would be product or service offering; it could be a brand or even anything to do with the 4Ps. ii. Affect: This is the “feelings” part. It includes the favourable or unfavourable feelings and corresponding emotions towards stimuli ( t owards a product or service offering or a brand). These vary in direction, intensity and persistence. iii. Behaviour: This is the “visible” part. In our case, this could be the purchase activity: to buy or not to buy (again specific to a product or service offering, a brand or even related to any of the 4 Ps). Why we study of CB: (I mportance of CB) The term CB is defined as the behaviour that consumers’ display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs. CB focuses on how individuals make decisions to spend their available resources (t ime, money, effort) on consumption related items. The term CB describes two different kinds of consuming Consumer Behaviour Page 5School of Distance Education entities: the personal consumer and the organizational consumers. The Personal consumer buys goods and services for his or her own use, for the use of the household or as a gift for a friend. In each of these contexts, individuals, who are referred to as end users or ultimate consumers, buy the products for fine use. The second category of consumer- the organizational consumer- includes profit and not-for-profit businesses, government agencies (l ocal, state, and national), and institutions ( e .g. Schools, hospitals, and prisons), all of which must buy products, equipments and services in order to run their organization. The subject of Consumer Behaviour is viewed as the edifice of the marketing concept, an important orientation in marketing management. The knowledge of Consumer Behaviour helps the marketer understand and predict the consumption patterns and consumption behaviours 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 ( e nvironmental factors) forces that impel people to act out different consumption patterns and behaviours. 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. Nature of Consumer Behaviour 1. Process: -Consumer behaviour is a systematic process relating to buying decisions of the customers. The buying process consists of the following steps; 1) Need identification to buy the product 2) Information search relating to the product. 3) Listing of alternative brands. 4) Evaluating the alternative (c ost-benefit analysis) 5) Purchase decision. 6) Post-purchase evaluation by the marketer. 2. Influenced by various factors: -Consumer behaviour is influenced by a number of factors. The factors that influenced consumer are as follow; marketing, personal, psychological, situational, social, cultural etc. Consumer Behaviour Page 6School of Distance Education 3. Different for different customers: -All consumers do not behave in the same manner. Different consumers behave differently. The difference in consumer behaviour is due to individual factors such as nature of the consumer’s life style, culture, etc. 4. Different for different products: -Consumer behaviour is different for different products. There are some consumers who may buy more quantity of certain items and very low/no quantity of some other items. 5. Varies across regions: -The consumer behaviour vary across states, regions and countries. For instance, the behaviour of urban consumers is different from that of rural consumers. Normally, rural consumers are conservative (t raditional) i n their buying behaviour. 6. Vital for marketers: -Marketers need to have a good knowledge of consumer behaviour. They need to study the various factors that influence consumer behaviour of their target customers. The knowledge of consumer behaviour enables marketers to take appropriate marketing decisions. 7. Reflects Status: -Consumers buying behaviour is not only influenced by status of a consumer, but it also reflects it. Those consumers who own luxury cars, watches and other items are considered by others as persons of higher status. 8. Result in spread-effect: -Consumer behaviour has a spread effect. The buying behaviour of one person may influence the buying behaviour of another person. For instance, a customer may always prefer to buy premium brands of clothing, watches and other items etc. this may influence some of his friends, neighbours, colleagues. This is one of the reasons why marketers use celebrities like Sharuk khan, Sachin Tendulkar to endorse their brands. 9. Improves Standard of Living: -Consumer buying behaviour may lead to higher standard of living. The more a person buys the goods and services, the higher is the standard of living. 10. Undergoes a change: - The consumer’s behaviour undergoes a change over a period of time depending upon changes in age, education and income level. Etc, for instance,, kids may prefer colourful dresses, but as they grow up as teenagers and young adults, they may prefer trendy clothes. Scope of Consumer Behaviour: The study of consumer behaviour deals with understanding consumption patterns and behaviour. 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 Consumer Behaviour Page 7School of Distance Education  ‘How often they use’ it: frequency of use The scope of consumer behaviour includes not only the actual buyer but also the various roles played by him/ different individuals. Basic Components: i) D ecision making (C ognitive and Affect) : -this includes the stages of decision making: Need recognition, Information search, Evaluation of alternatives, Purchase activity, Post purchase behaviour. ii) A ctual purchase (Behaviour) : -this includes the visible physical activity of buying of goods and/or service. It is the result of the interplay of many individual and environmental determinants which are invisible. iii) Individual determinants and environmental influences: The environmental factors affect the decision process indirectly, through way of affecting individual determinants. iv) Buying roles: Actual Buyer vis a vis other users. There are five buying roles, viz., Initiator, Influencer, Decider, User, and Buyer. The initiator is the person who identifies that there exists a need or want; the influencer is the one who influences the purchase decision, the actual purchase activity and/or the use of the product or service; the decider is the one who decides whether to buy, what to buy, when to buy, from where to buy, and how to buy; the buyer is the one who makes the actual purchase; and, the user is the person ( s ) who use the product or service. These five roles may be played by one person or by different persons. A person may assume one or more of these roles. This would depend on the product or service in question. Examples: Let us take an example. A child goes to a kindergarten school. She comes back home and asks her parents to buy her a set of colour pencils and crayons. Now the roles played are: 1. Initiator: the child in nursery school 2. Influencer: a fellow classmate 3. Decider: the father or the mother 4. Buyer: the father or the mother 5. User: the child Application of Consumer Behaviour: An understanding of consumer behaviour is necessary for long term success and survival of a firm. It is viewed as the edifice of the marketing concept, an important orientation in marketing management. Consumer Behaviour Page 8School of Distance Education 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-centred 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 behaviour 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: 1. Analyze the environment: The knowledge of consumer behaviour 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 ( t hrough 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. 2. Segmentation, targeting and positioning: The study of consumer behaviour 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. a) Segment the market: The marketer needs to identify distinct customer groups with needs and wants, classify them on basis of descriptive characteristics and behavioural 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 behavioural 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, substantial ability, 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. Consumer Behaviour Page 9School of Distance Education 3. Designing the Marketing Strategy: There exists an interrelation 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 ( know ledge about products and alternatives), Affect ( f eelings of favourableness and unfavourableness) and Behaviour (a ction: 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 ( C ognition, Affect and Behaviour) 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 behaviour 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. 4. Designing the Marketing Mix: 4-Ps The study of consumer behaviour may be applied to design the 4 Ps. a) Product: The term product includes both tangible products and intangible services. The issues to address consist of name ( br and) , size, shape, features, labelling, 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 ( p rice 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 ( di rect 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 ( t he content, appeal and context) . 5. Application in Governmental and Non-profit Organizations and Social Marketing: The knowledge of consumer behaviour 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) Consumer Behaviour Page 10School School School of of of D D Di i is s st t ta a an n nce ce ce E E Ed d du u uca ca cat t ti i ion on on T T Th h he e e In In Int t te e er r rd d di i isc sc sci i ip p pl l li i in n nar ar ary N y N y Nat at atu u ur r re e e of of of C C Con on onsu su sum m me e er r r B B Be e eh h havi avi aviou ou our r r: : : A A As s s a a an n n i i int nt nte e er r rdi di disc sc sci i ipl pl pli i ina na nar r ry y y a a ar r re e ea a a o o of f f st st stud ud udy y y, , , t t the he he subj subj subje e ec c ct t t bor bor borr r row ow ows s s he he hea a avi vi vil l ly y y f f fr r rom om om ps ps psy y yc c chol hol holo o og g gy y y, , , soc soc soci i iol ol olo o og g gy y y; ; ; soc soc soci i ia a al l l ps ps psy y yc c chol hol holog og ogy y y; ; ; a a ant nt nthr hr hropol opol opolog og ogy y y a a and, nd, nd, e e ec c conom onom onomi i ic c cs. s. s. 1. 1. 1. P P Psyc syc sych h hol ol ology: ogy: ogy: T T Thi hi his s s i i inc nc ncl l lude ude udes s s t t the he he st st stud ud udy y y of of of t t th h he e e i i indi ndi ndivi vi vidua dua dual l l a a as s s w w we e el l ll l l a a as s s t t the he he i i indi ndi ndivi vi vidua dua dual l l de de det t te e er r rm m mi i ina na nant nt nts s s i i in n n bu bu buy y yi i in n ng g g b b be e eha ha havi vi viour our our, , , vi vi viz z z., ., ., c c consum onsum onsume e er r r p p pe e er r rc c ce e ept pt pti i ion, on, on, l l le e ea a ar r rni ni nin n ng g g a a and nd nd m m me e em m mo o or r ry y y,,, a a at t tt t ti i it t tude ude ude, , , se se sel l lf f f- - -c c conc onc once e ept pt pt a a and nd nd pe pe per r rsona sona sonal l li i it t ty y y, m , m , mot ot oti i iva va vat t ti i ion a on a on and i nd i nd invol nvol nvolve ve vem m me e ent nt nt, a , a , at t tt t ti i it t tude ude udes a s a s and a nd a nd at t tt t ti i it t tudi udi udina na nal l l c c cha ha han n ng g ge e e a a and, de nd, de nd, dec c ci i isi si sion m on m on ma a aki ki king ng ng... 2. 2. 2. S S Soc oc oci i iol ol ology ogy ogy: : : T T Thi hi his s s i i inc nc ncl l lud ud ude e es s s t t the he he st st stud ud udy y y of of of g g gr r roups oups oups a a as s s w w we e el l ll l l a a as s s t t the he he gr gr group oup oup d d dy y yna na nam m mi i ic c cs s s i i in n n bu bu buy y yi i in n ng g g be be beha ha havi vi viour our our,,, vi vi viz z z., f ., f ., fa a am m mi i il l ly y y i i inf nf nfl l lu u ue e enc nc nce e es, l s, l s, li i if f fe e es s st t ty y yl l le e es a s a s and va nd va nd val l lue ue ues, s, s, a a and s nd s nd soc oc oci i ia a al l l gr gr group i oup i oup inf nf nfl l lue ue uenc nc nce e es. s. s. 3. S 3. S 3. Soc oc oci i ial al al p p psyc syc sych h hol ol ology: ogy: ogy: T T Thi hi his i s i s inc nc ncl l lude ude udes t s t s the he he st st stud ud udy y y of of of h h how ow ow a a an i n i n indi ndi ndivi vi vidua dua dual l l ope ope oper r ra a at t te e es i s i s in g n g n gr r roup/ oup/ oup/g g gr r roups oups oups a a and i nd i nd it t ts s s e e ef f ff f fe e ec c ct t ts on bu s on bu s on buy y yi i in n ng g g b b be e eha ha havi vi viour our our vi vi viz z z, r , r , re e ef f fe e er r re e enc nc nce e e gr gr groups oups oups a a and soc nd soc nd soci i ia a al l l c c cl l la a ass i ss i ss inf nf nfl l lue ue uen n nc c ce e es. s. s. 4. 4. 4. A A An n nt t th h hr r rop op opol ol ology: ogy: ogy: T T Thi hi his s s i i is s s t t the he he i i inf nf nfl l lue ue uenc nc nce e e of of of soc soc soci i ie e et t ty y y on on on t t the he he i i indi ndi ndiv v vi i idua dua dual l l vi vi viz z z., ., ., c c cul ul ult t tur ur ura a al l l a a and nd nd c c cr r ross oss oss- - -c c cul ul ult t tur ur ura a al l l i i issue ssue ssues i s i s in bu n bu n buy y yi i in n ng g g be be beha ha havi vi vio o our ur ur, na , na , nat t ti i iona ona onal l l a a and r nd r nd re e eg g gi i iona ona onal l l c c cul ul ult t tur ur ure e es e s e s et t tc c c... 5. 5. 5. E E Ec c con on onom om omi i ic c cs: s: s: T T Thi hi his s s i i is s s t t the he he st st stud ud udy y y of of of i i inc nc ncom om ome e e a a and nd nd pur pur purc c cha ha hasi si sin n ng g g pow pow powe e er r r, , , a a and nd nd i i it t ts s s i i im m mpa pa pac c ct t t on on on c c consum onsum onsume e er r r be be beha ha havi vi viour our our. . . T T Th h he e e unde unde under r rl l ly y yi i in n ng g g p p pr r re e em m mi i ise se se i i is s s t t th h ha a at t t c c consum onsum onsume e er r rs s s m m ma a ak k ke e e r r ra a at t ti i iona ona onal l l c c choi hoi hoic c ce e es s s w w whi hi hil l le e e m m ma a aki ki kin n ng g g pu pu pur r rc c cha ha has s se e e de de dec c ci i isi si sions. ons. ons. W W Whi hi hil l le e e r r re e esour sour sourc c ce e es s s a a ar r re e e l l li i im m mi i it t te e ed d d a a and nd nd ne ne nee e eds ds ds a a and nd nd w w wa a ant nt nt m m ma a an n ny y y, , , c c consu onsu onsum m me e er r rs s s c c col ol oll l le e ec c ct t t i i inf nf nfor or orm m ma a at t ti i ion, on, on, a a and e nd e nd eva va val l lua ua uat t te e e t t the he he va va var r ri i ious ous ous a a al l lt t te e er r rna na nat t ti i ive ve ves t s t s to f o f o fi i ina na nal l ll l ly y y m m ma a ake ke ke a a a r r ra a at t ti i iona ona onal l l d d de e ec c ci i isi si sion. on. on. A A As s s di di disc sc scusse usse ussed d d b b be e ef f for or ore e e, , , c c consum onsum onsume e er r rs s s a a ar r re e e uni uni unique que que i i in n n t t the he hem m mse se sel l lve ve ves. s. s. A A A c c com om ompr pr pre e ehe he hensi nsi nsive ve ve y y ye e et t t m m me e et t ti i ic c cul ul ulou ou ous s s know know knowl l le e edge dge dge of of of c c consum onsum onsume e er r rs s s a a and nd nd t t the he hei i ir r r c c consum onsum onsumpt pt pti i ion on on be be beha ha havi vi viour our our i i is s s e e ess ss sse e ent nt nti i ia a al l l f f for or or a a a f f fi i ir r rm m m t t to o o suc suc succ c ce e ee e ed. d. d. I I In n n or or orde de der r r t t to o o unde unde under r rst st sta a and nd nd a a and nd nd pr pr pre e edi di dic c ct t t c c consum onsum onsumpt pt pti i ion on on pa pa pat t tt t te e er r rns ns ns a a and nd nd be be beha ha havi vi viour our ours s s w w wi i it t thi hi hin n n se se seg g gm m me e ent nt nt ( ( (s s s ) ) ), , , m m ma a ar r rke ke ket t t r r re e ese se sea a ar r rc c ch be h be h bec c com om ome e es e s e s ess ss sse e ent nt nti i ia a al l l... M M Mar ar ark k ke e et t t R R Re e ese se sear ar arc c ch h h an an and d d C C Con on onsu su sum m me e er r r B B Be e eh h havi avi aviou ou our r r: : : C C Consum onsum onsume e er r rs s s a a ar r re e e di di dif f ff f fe e er r re e ent nt nt a a and nd nd he he het t te e er r ro o oge ge gene ne neous. ous. ous. H H Ho o ow w we e eve ve ver r r, , , l l li i ike ke ke- - -m m mi i inde nde nded d d c c cl l lust ust uste e er r rs s s of of of c c cust ust ustom om ome e er r rs s s do do do e e ex x xi i ist st st; ; ; t t the he hey y y a a ar r re e e hom hom homo o og g ge e enous nous nous w w wi i it t thi hi hin n n suc suc such h h c c cl l lust ust uste e er r rs s s a a and nd nd he he het t te e er r ro o og g ge e en n ne e eous ous ous out out outsi si side de de; ; ; t t the he hese se se a a ar r re e e r r re e ef f fe e er r rr r re e ed d d t t to o o a a as s s se se seg g gm m me e ent nt nts. s. s. M M Ma a ar r rke ke ket t te e er r rs s s i i ide de dent nt nti i if f fy y y se se seg g gm m me e ent nt nts s s a a and nd nd t t ta a ar r rg g ge e et t t one one one or or or f f fe e ew w w of of of t t the he hese se se s s se e egm gm gme e ent nt nts, s, s, a a and nd nd t t the he her r re e eb b by y y f f ful ul ulf f fi i il l l t t the he he qua qua qual l li i if f fi i ic c ca a at t ti i ions ons ons of of of t t the he he m m ma a ar r rke ke ket t ti i ing ng ng c c con on onc c ce e ept pt pt; ; ; f f fi i ir r rst st st,,, m m ma a ar r rke ke ket t te e er r rs s s i i ide de dent nt nti i if f fy y y c c cust ust usto o om m me e er r r ne ne nee e eds ds ds a a and nd nd w w wa a ant nt nts; s; s; a a and nd nd t t the he hen, n, n, de de del l li i ive ve ver r r p p pr r roduc oduc oduct t t a a an n nd d d se se ser r rvi vi vic c ce e e of of off f fe e er r ri i in n ng g gs s s so so so a a as s s t t to o o s s sa a at t ti i isf sf sfy y y t t th h he e e c c cust ust ustom om ome e er r rs s s m m mor or ore e e e e ef f ff f fi i ic c ci i ie e ent nt ntl l ly y y a a and nd nd e e ef f ff f fe e ec c ct t ti i ive ve vel l ly y y t t tha ha han n n t t the he he c c co o om m mpe pe pet t ti i it t tor or ors. s. s. I I In n n or or orde de der r r t t to o o unde unde under r rst st sta a and nd nd a a and nd nd pr pr pre e edi di dic c ct t t c c consum onsum onsumpt pt pti i ion on on pa pa pat t tt t te e er r rns ns ns a a and nd nd be be beha ha havi vi viour our ours w s w s wi i it t thi hi hin se n se n seg g gm m me e ent nt nt ( ( (s s s ) ) ), m , m , m a a ar r rke ke ket t t r r re e ese se sea a ar r rc c ch be h be h bec c com om ome e es e s e s esse sse ssent nt nti i ia a al l l... M M Mar ar ark k ke e et t t r r re e ese se sear ar arc c ch h h m m may ay ay b b be e e d d de e ef f fi i in n ne e ed d d as: as: as: - - - an an an organi organi organize ze zed d d e e ef f ff f fort ort ort t t to o o gat gat gathe he her r r i i inf nf nfor or orm m mat at ati i ion on on about about about t t the he he m m mark ark arke e et t t and t and t and the he he c c cust ust ustom om ome e ers. rs. rs. C C Co o on n ns s su u ume me mer r r B B Be e eh h ha a av v viiio o ou u ur r r P P Pa a ag g ge e e 1 1 11 1 1School of Distance Education - Systematic collection, analysis and interpretation of data related to the market and the surrounding environment. The environment surrounding a Company may be grouped as the “micro-environment” and the “macro environment”. The micro-environment comprises forces in the environment that is close to the company and affects the company directly; for example, the company’s internal environment, the founder/leader and his vision and mission, the customers, competitors, suppliers, and channel intermediaries. The macro- environment on the other hand, comprises forces in the environment that first affect the micro environment and through that they affect the company; in other words they affect the company indirectly; examples are the demographic factors, socio-economic factors, political factors, technological factors, cultural factors, natural factors etc. The forces in the macro environment affect all the companies operating in a same industry in a similar manner. The micro-environment is studied in terms of strengths (S ) and weaknesses ( W ) , while the macro- environment is studied in terms of opportunities ( O ) and threats ( T ). The analysis of both of these put together comprises the SWOT analysis. Relationship between Marketing Research and Consumer Research Marketing research → Consumer Research ( F rom Market Research, evolved the subset Consumer Research) Marketing research Consumer Research Objective Objective - To study the marketing environment and the - To study consumers as individuals or customers who are a part of it. as groups Focus - To establish trends, and identify opportunities Focus and threats in the environment.- To study the - To understand consumption behaviour market and forecast potential- To predict buying and consumption patterns patterns based on modeling and simulation End result End result -Customer connect with company - Individual -Customer connect with company - marketing and customization Individual marketing and customization Approaches to Consumer Behaviour Research: Broadly speaking there are two approaches towards consumer behaviour research. These are ( a ) Traditional approach ( b ) Current approach. These can be further divided into sub approaches. Consumer Behaviour Page 12School of Distance Education (a ) Traditional approach: This is further divided into two approaches, Positivist and Interpretivist. i) Positivist approach: This approach also referred to as “modernism”, is the earliest approach to studying consumer behaviour and treats the study as an applied science; the paradigm lays emphasis on science as a means of explaining behaviour. It lays emphasis on the causes of consumer behaviour and as per its proponents; these causes are directly related to effects. Thus, it treats consumers as “rational” human beings, who make purchase decisions after collecting information and weighing all alternatives. The process of consumer decision making is looked upon as one of “rationality.” “Rational decision is making and problem solving” is the key. The approach is based on certain assumptions viz.,  Consumer actions based on cause and effect relationship can be generalized; they can be objectively measured and empirically tested;  If a marketer/researcher could identify the reasons behind consumption behaviour; he would be able to predict it; and if they could predict consumer behaviour, they could influence it.  The focus lies on prediction of consumer behaviour. The methodology is essentially quantitative, with techniques including surveys, observations, and, experiments. It aims at drawing conclusions on large samples. ii) Interpretivist approach: This approach is also referred to as “post-modernism or experientialist.” Gradually there was a shift in the approach towards the study of consumer behaviour and the positivist approach gave way to a new approach that came to be called post-modernism. The approach lays emphasis on understanding the customer better. It treats consumer decision making process as one which is “subjective.” Thus while the approach is essentially subjective, the researchers following this approach try to identify common patterns. This approach is also based on certain assumptions viz.:  Consumer actions are unique and different both, between two consumers, and/or within the same consumer at different times and situations.  A cause and effect relationship cannot be generalized; consumption patterns and behaviours are unique; these are unpredictable.  They cannot be objectively measured, empirically tested and generalized.  The focus lies on the act of consumption rather than the act of purchase. The methodology is essentially qualitative, with techniques including in depth interviews, focus group techniques, and projective techniques. It aims at drawing conclusions on small samples. ( b ) Current approach: ‘Dialectical’: The term ‘dialectics’ considers all forms of human behaviour; thus the current approach to the study of consumer behaviour research is broader in scope. This is further divided into four approaches, Materialism, Change, Totality and Consumer Behaviour Page 13School of Distance Education Contradiction. i) Materialism: This approach implies that consumer behaviour is shaped by the ‘material environment’ e.g. money, possessions etc. ii) Change: Consumer behaviour is ‘dynamic’ in nature; it is always in a process of continuous motion, transformation and change. iii) Totality: Consumption behaviour is ‘interconnected’ with other forms of human behaviour, like personal self and the surrounding environment. iv) Contradiction: Views changes in consumer behaviour as arising from their internal contradictions, like moods, emotions etc. The approach studies the consumer as a complex total whole and views consumer purchase as well as consumption processes. The current approach to studying Consumer Behaviour uses both the quantitative as well as qualitative approaches. Research Perspectives on Consumer Behaviour: There are three broad research perspectives in consumer behaviour. They are as follows: the Decision-Making perspective, the experiential perspective, and Behavioural-Influence perspective. 1. The Decision-Making Perspective: According to the decision making perspective, the buying process is a sequential in nature, with the consumer perceiving that there exists a problem and then moving across a series of logical and rational steps to solve the problem; stages being problem recognition, information search, evaluation of alternatives, purchase decision, and post purchase behaviour. This perspective emphasizes the rational, logical and cognitive approach to consumer decision making and purchase process. 2. The Experiential Perspective: The experiential perspective believes that not all buying may be rational and logical; in some cases, buying results from a consumers’ desire for fun and fantasy, hedonic pleasures, emotions and moods. The perspective emphasizes that consumers are “feelers” as well as thinkers. 3. The Behavioural Influence Perspective: This perspective holds that forces in the environment stimulate a consumer to make purchases without developing beliefs and attitudes about the product. Research Paradigms in Consumer Behaviour: The research paradigm in the study of consumer behaviour focuses on two approaches viz., Quantitative research, used by the positivists and, Qualitative research: used by the interpretivists. The positivists and interpretivists as two schools of thought have already discussed. The current Consumer Behaviour Page 14School of Distance Education approach or the ‘dialectic’ approach to studying Consumer Behaviour makes use both the approaches. a) Q uantitative Research in Consumer Behaviour: As the name suggests, the approach makes application of quantitative research techniques to the study of Consumer Behaviour. It comprises (i ) research techniques that are used to gather quantitative data over large samples randomly, and ( i i) statistical tools and techniques, inclusive of survey techniques, observation and experiments. This type of research is descriptive and empirical in nature. It is primarily used by the positivists while studying consumer behaviour, with a focus on prediction of consumer behaviour. The findings can be generalized to marketing situations. As mentioned above, the quantitative techniques are also used by “dialectics”. b) Q ualitative Research in Consumer Behaviour: This approach makes application of qualitative research techniques to the study of Consumer Behaviour. It comprises ( i ) research techniques that are used to gather qualitative data over small samples randomly and, ( i i) non-statistical tools and techniques, inclusive of depth interviews, focus group, projective techniques and even observation. The type of study is subjective and non- empirical in nature. It lays emphasis on the holistic “what, where, when, why and how” of human behaviour”. The focus is on understanding consumption behaviour and consumption patterns. The objective is to gain an understanding of consumer behaviour and the underlying causes that govern such behaviour. The approach assumes that all marketing situations are unique; and, hence the findings cannot be generalized to marketing situations. This approach is primarily used by the interpretivists while studying consumer behaviour. However, as mentioned above, the qualitative techniques are also used by “dialectics”. c) C ombining the two approaches: Now a day, the two approaches are used in combination to study consumer behaviour. Qualitative research is very often a prelude to quantitative research; the findings from qualitative research are used to prepare scales for surveys and experiments. Consumer Behaviour Audit The consumer behaviour audit is a fundamental part of the marketing planning process. It is conducted not only at the beginning of the process, but also at a series of points during the implementation of the plan. The consumer behaviour audit considers both internal and external influences on marketing planning, as well as a review of the plan itself. There are a number of tools and audits that can be used, for example SWOT analysis for the internal environment, as well as the external environment. Other examples include PEST and Five Forces Analyses, which focus solely on the external environment. In many ways the consumer behaviour audit clarifies opportunities and threats, and allows the marketing manager to make alterations to the plan if necessary. This portion tells you the basics of the consumer behaviour audit, and introduces a consumer behaviour audit checklist. The checklist Consumer Behaviour Page 15School of Distance Education is designed to answer the question, what is the current marketing situation? Let’s consider the consumer behaviour audit under three key headings: I. The Internal Marketing Environment. II. The External Marketing Environment. III. A Review of Our Current Marketing Plan I. The Internal Marketing Environment. In respect of internal marketing environment the following are the imporant elements of checklist; Ø How is our marketing team organised? Ø How efficient is our marketing team? Ø How effective is our marketing team? Ø How does our marketing team interface with other organisations and internal functions? Ø How effective are we at Customer Relationship Management (CRM) ? Ø What is the state of our marketing planning process? Ø Is our marketing planning information current and accurate? Ø What is the current state of New Product Development? (Product) Ø How profitable is our product portfolio? (Product) Ø Are we pricing in the right way? (Price) Ø How effective and efficient is distribution? (Place) Ø Are we getting our marketing communications right? (P romotion) Ø Do we have the right people facing our customers? (People) Ø How effective are our customer facing processes? (Process) Ø What is the state of our business's physical evidence? (P hysical Evidence) II. The External Marketing Environment. As a market orientated organisation, the important areas we must analyse are; Ø What is the nature of our 'customer?' Such as: Their needs and how we satisfy them. Their buyer decision process and consumer behaviour. Their perception of our brand, and loyalty to it. The nature of segmentation, targeting and positioning in our markets. Ø What customers 'value' and how we provide that 'value?' Consumer Behaviour Page 16School of Distance Education Ø What is the nature of competition in our target markets? Our competitors' level of profitability. Their number/concentration. The relative strengths and weaknesses of competition. The marketing plans and strategies of our competition. Ø What is the cultural nature of the environment( s)? Beliefs and religions. The standards and average levels of education. The evolving lifestyles of our target consumers. The nature of consumerism in our target markets. Ø What is the demography of our consumers? Such as average age, levels of population, gender make up, and so on. Ø How does technology play a part? The level of adoption of mobile and Internet technologies. The way in which goods are manufactured. Information systems. Marketing communications uses of technology and media. Ø Is the political and legal landscape changing in any way? Laws, for example, copyright and patents. Levels of regulation such as quotas or tariffs. Labour/labour laws such as minimum wage legislation. III. Review of Our Current Marketing Plan Under this heading marketer analysis are sniffed into the following questions: Ø What are our current objectives for marketing? Ø What are our current marketing strategies? Ø How do we apply the marketing mix? ( Including factors covered above in (a ) ) Ø Is the marketing process being controlled effectively? Ø Are we achieving our marketing budget? Ø Are we realising our SMART objectives? Ø Are our marketing team implementing the marketing plan effectively? Ø Levels of staffing. Staff training and development. Experience and learning. Consumer behaviour audits are useful instruments in assessing all the features of decision making in marketing including positioning, segmentation and other elements of the marketing mix. Fundamentally, a consumer behaviour audit seeks to discover the attitudes of consumers concerning a certain product, any necessary improvements, as well as their usage of the specific products. The outline for auditing consumer behaviour has been simplified and generalized below, but the execution of the process can be invaluable for identifying challenges and opportunities for improving marketing strategy. Marketing Decision Areas Market segmentation – division of all possible product users ( i .e., consumers) into groups with similar needs to satisfy for product development and media selection. Consumer Behaviour Page 17School of Distance Education Product positioning – determination of a desirable product or brand position in the mind of the consumer relative to competing brands. Price – pricing policy consistent with the determined product position. The price is the all inclusive set of consideration that the consumer must tender in exchange for the product or service, such as time, patience, learning, and money. Place ( D istribution Strategy) – channel or distribution strategy, such as retail, wholesale, or Internet, etc. consistent with the determined product position at which title to the product is relinquished or the service is performed. Promotion – advertising, visual packaging, publicity, promotion, website, telemarketing and direct sales force activities. Product – physical product characteristics or service to be experienced for each market segment. Customer satisfaction – post-purchase policies to promoted customer use, loyalty, reference and repeat purchases. 2. Customer Influences External influences  Culture, subculture, and values  Demographics, income, and social class  Reference groups and family / households  Marketing activities by the company (e .g., product attributes, packaging, advertisements, sales presentation, and retail outlet) Internal influences  Needs, motives, and emotions  Perceptions, learning and memory  Personality and lifestyle  Attitudes Situation influences  Physical features  Time perspective  Social surroundings  Task definition Consumer Behaviour Page 18School of Distance Education  Antecedent states and situations ( e .g., product or offer communications, purchase, use, or definition) Decision process influences (i .e., stages)  Problem recognition  Information search  Alternative evaluation  Outlet selection  Purchase  Post-purchase processes (e .g., use, disposition, and evaluation) By interweaving the decision areas with the relevant customer influences listed above, it is possible to outline the areas in which data should be gathered in order to construct a complete consumer behaviour audit template as follows:  Step 1: Market segmentation (… ) Identify customer influences  Step 2: Product positioning (… ) Identify customer influences  Step 3: Price (… ) Identify customer influences  Step 4: Place (D istribution strategy) (… ) Identify customer influences  Step 5: Promotion (… ) Identify customer influences  Step 6: Product (… ) Identify customer influences  Step 7: Customer satisfaction (… ) Identify customer influences By completing the above steps and answering all the associated questions regarding customer influences at each of the stages, the marketing manager should have a thorough understanding of the influences on consumer behaviour and the key decision areas in which the influences are activated. Consumer Behaviour Page 19School of Distance Education MODULE 2 CONSUMER INVOLVEMENT Meaning, Nature and Types of Consumer Involvement Another component that closely relates to motivation is involvement. Involvement is defined as a psychological state that motivates people to be more aware and careful about persons/objects/situations. It also indicates a level of personal importance that the person attaches to such persons/objects/situations. Thus, there are ( a) high and low-involvement consumers; (b ) high and low-involvement purchases. Meaning of Consumer Involvement: Consumer involvement is defined as a state of mind that motivates consumers to identify with product/service offerings, their consumption patterns and consumption behaviour. Involvement creates within consumers an urge to look for and think about the product/service category and the varying options before making decisions on brand preferences and the final act of purchase. It is the amount of physical and mental effort that a consumer puts into a purchase decision. It creates within a person a level of relevance or personal importance to the product/service offering and this leads to an urge within the former to collect and interpret information for present/future decision making and use. Involvement affects the consumer decision process and the sub processes of information search, information processing, and information transmission. As Schiffman has put it “Involvement is a heightened state of awareness that motivates consumers to seek out, attend to, and think about product information prior to purchase”. It is the perceived interest and importance that a consumer attaches to the acquisition and consumption of a product/service offering. Herbert Krugman, a researcher is credited with his contribution to the concept of consumer involvement. According to him, consumers approach the marketplace and the corresponding product/service offerings with varying levels and intensity of interest and personal importance. This is referred to as consumer involvement. Involvement of consumers while makes purchase decisions varies across persons, across product/service offerings in question as well as purchase situations and time at hand. Some consumers are more involved in purchase processes than others. For example, a person who has a high level of interest in a product category would expend a lot of time making a decision with regard to the product and the brand. He would compare brands across features, prices etc. Another example is a person who is risk aversive; he would also take a longer time making a decision. Involvement also varies across product/service offerings. Some products are high involvement products; these are products that are high in value and expensive, possess sufficient amount of risk, are purchased infrequently, and once purchased, the action is irrevocable, i.e. they cannot be returned and/or exchanged . On the other hand, there are low involvement products, which are moderately expensive or generally inexpensive, possess little risk and are purchased regularly on a routine basis. Further, such consumer involvement based on their personal traits or on the nature of product/service offering is also impacted by the buying situation and time in hand for making purchase decisions. Very often, due to time constraints or emergency situations, a consumer may Consumer Behaviour Page 20

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