Unit 1: Introduction to Consumer

Behaviour
Class 19PY/AC/FC35

Credits 5

End Sem Exam Yes

Semester 3

1.1 Definition and Meaning of Consumer

Behaviour
What are the three facets of human behaviour?

Affect (emotions, moods, feelings)

Cognition (mental processes, retention, comprehension, memory)

Behaviour (overt/observable, covert/non-observable)

UNIT 1.1
Marketing is the activity, set of institutions, and processes for creating,
communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society.

The core of marketing is identifying unfilled needs and delivering products and
services that satisfy these needs.

Consumer behaviour is the study of consumers’ actions during searching for,

purchasing, using, evaluating, and disposing of products and services that they
expect will satisfy their needs.

Unit 1: Introduction to Consumer Behaviour 1

 Consumer behaviour explains how individuals make decisions to spend their
available resources (i.e., time, money, effort) on goods that marketers offer for sale.

The study of consumer behaviour describes what products and brands consumers
buy, why they buy them, when they buy them, where they buy them, how often they
buy them, how often they use them, how they evaluate them after the purchase,
and whether or not they buy them repeatedly.

Positioning is an essential component of marketing. Positioning is conveying the

product’s benefits and image to potential (or existing) customers so that the product
stands out distinctly in their minds and is not viewed as a “me too” item.

Example

People buy cars because they need personal transportation. However, the
types of cars people buy are determined not by needs alone, but also by how
cars express their owners’ characteristics.

Therefore, car marketers differentiate their products by how specific car brands
and models appeal to buyers’ psychology.

Porsche ad

The tagline in Porsche’s Boxster ad states that “unfulfilled dreams cost a lot
more,”* and its copy urges buyers to “fulfil their dreams rather than deny
them.”

Porsche recognized that many people daydream about luxurious items, but,
even if they can afford them, they feel guilty about the purchase and often
think: “Oh, it costs too much” and “What if I don’t like it?” The ad’s copy
resolves such conflicts with a simple rationale: “It is expensive to fulfil one’s
dreams, but it is worth the expense.”

The ad anticipates that some buyers will feel guilty after purchasing the car
and assures them that “of all the emotions you can expect while driving a
Boxster, regret will never be one of them.”

It ends with Porsche’s classic tagline: “Porsche. There is no substitute.”

Egotism and power are pervasive psychological needs, and marketers

often appeal to them in advertisements.

Toyota

Unit 1: Introduction to Consumer Behaviour 2

 The Scion ad invites potential buyers to “Take On the Machine.” Toyota
positioned Scion as a car for drivers who like to face challenges, and feel
powerful and in control of their environment.

In terms of affordability, Porsche and Scion target contrasting groups of

people because their prices are very far apart. Nevertheless, the two
carmakers share the same objective, which is to persuade drivers to buy
their cars.

In order to do so, each car must have a distinct image (or perception) in
people’s minds and appeal to their needs.

Porsche’s ad tells consumers that although the car is very pricey, it is worth the
price because owning it is a dream fulfilled.

The Scion, which is a very affordable car, calls upon drivers to take on a
personal challenge, presumably because Scion’s target market is young people
(some of whom might be buying a new car with their own money for the first
time) and are likely to respond when “dared.”

Although they target entirely different segments, both ads induce (or even
provoke) psychological, presumably unfilled needs, and illustrate their
marketers’ understanding of car buyers’ mindsets.

INTRODUCTION TO CONSUMER BEHAVIOUR

Consumers are unique in themselves. Their needs and wants vary and are diverse
from one another. They have different consumption patterns and behaviours.

Marketing & behaviour stem from the marketing concept, that is, creating value.
(make you aspire to want it) and retaining customers (innovation, loyal, pricing).

Therefore, companies must produce only those goods that they have already
determined that consumers would buy.

For example, Classico’s pasta sauce contains the same ingredients that
consumers use when they make their own sauce. The slogan “We made it like
you’d make it,” means that the product fulfills consumers’ needs and they would
buy it.

Unit 1: Introduction to Consumer Behaviour 3

 But as companies study consumer needs and offer products that satisfy them well,
companies begin to offer more products, more versions models and features.

LINE EXTENSION; convenience, innovation & affordability. Do so by

understanding the pulse of the consumers.

The production concept, a business approach conceived by Henry Ford,

maintains that consumers are most interested in product availability at low prices;.

Product concept

As more and more companies studied customers’ needs and offered products that
satisfied them well, companies began offering more and more versions, models,
and features, often indiscriminately.

Companies are guided by the product concept which assumes that the consumers
will buy the product that offers them the "highest quality and "best performance" as
well as the "most features".

Marketing Myopia

A product orientation leads the company to strive constantly to improve the quality
of its product and to add new features if they are technically feasible, without finding
out first whether consumers really want these features.

A product orientation leads to marketing myopia (i.e.) a focus on the product rather
than the needs it presumes to satisfy. Eg: Britannia and old madras baking
company.

Marketing myopia occurs when companies ignore crucial changes in the

marketplace and look “in the mirror rather than through the window.”

For example, in the 1980s, Apple bundled its software and hardware together
and ignored customers who wanted to buy them separately. Apple sold its
software, which was better than other operating systems, only when installed on
its own, expensive computers.

In contrast, Microsoft licensed DOS (disk operating system)—the less efficient

and
harder-to-operate software—to any manufacturer that wanted to install it on its
computers. Most consumers bought the less expensive, DOS-operated
computers,

Unit 1: Introduction to Consumer Behaviour 4

 For many years Apple was an insignificant player in the industry. Apple focused
on its product and lost sight of the fact that consumers wanted to buy hardware
and software separately.

Selling concept

Evolving from the production concept and the product concept, the selling concept
maintains that marketers’ primary focus is selling the products that they have
decided to produce.

The assumption of the selling concept is that consumers are unlikely to buy the
product unless they are aggressively persuaded to do so—mostly through the
“hard sell” approach.

This approach does not consider customer satisfaction, because consumers who
are aggressively induced to buy products they do not want or need, or products of
low quality, will not buy them again.

Unhappy buyers often communi- cate their dissatisfactions with the product through
negative word-of-mouth that dissuades potential consumers from making similar
purchases.

Implementing the marketing concept requires sellers to use consumer research, market
segmentation, a combination of the product, price, place, and promotion strategies,
provide value and result in long-term customer satisfaction and retention.

Marketing Concept

Marketing-oriented companies do not try to persuade consumers to buy what

the firm has already produced, but rather to produce only products that they
know they can sell, thereby satisfying consumers’ needs and turning them into
loyal customers.

The marketing concept evolved from several prior business orientations

focused on production, the product itself, and selling.

Production Concept

Unit 1: Introduction to Consumer Behaviour 5

 The production concept, a business approach conceived by Henry Ford,
maintains that consumers are most interested in product availability at low
prices;.

Its implicit marketing objectives are cheap, efficient production and intensive
distribution.

This approach makes sense when consumers are more interested in obtaining
the product than they are in specific features, and will buy what’s available
rather than wait for what they really want.

HENRY FORD

Before the 20th century, only wealthy consumers could afford automobiles,
because cars were assembled individually and it took considerable time and
expense to produce each vehicle.

Early in the 20th century, Henry Ford became consumed with the idea of
producing cars that average Americans could afford. In 1908, Ford began
selling the sturdy and reliable Model T for $850—an inexpensive price for that
day.

Soon he found out that he could not meet the overwhelming consumer demand
for his cars, so in 1913 he introduced the assembly line.

The new production method enabled Ford to produce good-quality cars more
quickly and much less expensively.

In 1916, Ford sold Model Ts for $360 and sold more than 100 times as many
cars as he
did in 1908.

In only eight years, Americans got the product that led to our nation’s extensive
system
of highways and the emergence of suburbs and large shopping malls.

Henry Ford’s near-monopoly of the car industry did not last. In 1923, as the
automobile market was rapidly growing thanks to Ford’s mass production.

Alfred P. Sloan became president and chairman of General Motors. He inherited

a company that was built through takeovers of small car companies that had
been producing ill-assorted models unguided by clear business objectives.

Unit 1: Introduction to Consumer Behaviour 6

 Sloan
reorganized the company and in 1924 articulated the company’s product
strategy as “a car for every purse and purpose.”

While Ford continued to produce the Model T until 1927 and stubbornly held
onto the production concept,
GM offered a variety of affordable mass-produced models, from the
aristocratic Cadillac to the proletarian Chevrolet.

In addition, Sloan stated: “The best way to serve the customer is the way the
customer wants to be served.”

About 30 years before the birth of the marketing concept, Alfred

Sloan understood the core elements of marketing: all consumers
are not alike and firms must identify and cater to different
customer groups (or segments) and provide solid customer
service.

Although Ford was the industry’s pioneer and considered unsurpassed, within
several years GM took over a large portion of Ford’s market share and became
America’s largest car company.

Consumer Research

Consumers are complex individuals, subject to a variety of psychological and

social needs, and the needs and priorities of different consumer segments differ
dramatically.

To design products and marketing strategies that fulfill consumer needs,

marketers must study consumers’ consumption behavior in depth.

The term consumer research refers to the process and tools used to study
consumer behavior.

Consumer research is a form of market research, a process that links the

consumer,
customer, and public to the marketer

Unit 1: Introduction to Consumer Behaviour 7

 through information in order to identify marketing opportunities and problems,
evaluate marketing actions, and judge the performance of marketing strategies.

The market research process outlines the information required, designs the
method for collecting information, manages the data collection process,
analyzes the results, and communicates the findings to marketers.

Market Segmentation, Targeting, and Positioning

The focus of the marketing concept is satisfying consumer needs. At the same
time, recognizing the high degree of diversity among us, consumer researchers
seek to identify the many similarities that exist among the peoples of the world.

For example, we all have the same kinds of biological needs, no matter
where we are born: the needs for food and nourishment, for water, for air,
and for shelter from the environment’s elements.

We also develop or acquire needs after we are born, which are shaped
by the environment and culture in which we live, our education, and our
experiences.

The interesting thing about acquired needs is that many people share the same
ones. This commonality of need or interest constitutes a market segment, which
enables the marketer to target consumers with specifically designed products
and/or promotional appeals that satisfy the needs of that segment.

The marketer must also adapt the image of its product (i.e., “position” it), so that
each market segment perceives the product as better fulfilling its specific needs
than competitive products.

The three elements of this strategic framework are market segmentation, targeting,
and positioning. They are the foundation of turning consumers into customers.

Market Segmentation

Market segmentation is the process of dividing a market into subsets of

consumers with common needs or characteristics. It consists of defining or
identifying groups with shared needs that are different from those shared by
other groups.

Targeting

Unit 1: Introduction to Consumer Behaviour 8

 Targeting means selecting the segments that the company views as
prospective customers and pursuing them.

Positioning

Positioning is the process by which a company creates a distinct image

and identity for its products, services, and brands in consumers’ minds.

The image must differentiate the company’s offering from competing ones
and communicate to the target audience that the particular product or
service fulfills their needs better than competing offerings do.

Successful positioning focuses on communicating the benefits that the

product provides.

Because there are many similar products in almost any marketplace, an

effective positioning strategy must communicate the product’s distinct
benefit(s).

In fact, most new products (including new forms of existing products, such
as new flavors and sizes) fail to capture significant market shares and are
discontinued
because consumers
perceive them as “me-too” products lacking a unique image or benefit.

Example
How can consumer behavior enable marketers to understand the consumers at
the lower end of the socio-economic spectrum?

In the Indian context, Horlicks Asha, a milk food that costs half the price of
the existing offerings, was tested in Andhra Pradesh.

Coca Cola sold powdered beverage Vitingo at Rs 2.50 in Orissa.

Pepsi Co. was working on a beverage and snack priced between Rs. 1 and
5 for people who suffer from inadequate nutrition.

Lower-income value explorers may be slum dwellers (about seven cores of

the population) who have a household income 32000 per year (approx.).

They constitute a significant segment of consumers for low-priced or

packaged fast moving consumer goods (FMCG) products,

Unit 1: Introduction to Consumer Behaviour 9

 Hence, marketers need to think how consumer behavior principles can be
applied to these contexts and how these principles inferent in terms of their
application from other contexts.

Socially Responsible Marketing

The marketing concept, fulfilling the needs of target audiences is somewhat

shortsighted. Some products that satisfy consumer needs are harmful to
individuals and society and others cause environmental deterioration.

Studying consumer behavior results in an understanding of why and how

consumers make purchase decisions, so critics are concerned that an in-depth
underding of consumer behavior can enable unethical marketers to exploit
human vulnerabilities in the marketplace and engage in other unethical
marketing practices to achieve business objectives.

Because all companies prosper when society prospers, marketers would be

better off if they integrated social responsibility no their marketing strategies.

All marketing must balance the needs of society with the needs of the individual
and the orgaazation.

The societal marketing concept requires marketers to fulfill the needs of the
target audience in ways that improve, preserve, and enhance society's well-
being while simultaneously meeting their business objectives. Regrettably,
some marketers
more laws and market potentially harmful products.

ADDITIONAL
Consumer behaviour is a rapidly growing application-oriented discipline of study.
Brisk strides in the areas of technology and digital communication are influencing
consumer behaviour in significant ways.

Consumer behaviour means more than just how a person buys products. It is a
dynamic, complex and multi-dimensional process and reflects the totality of
consumers' decisions with respect to acquisition, consumption or use and disposal
activities.

There is perpetual interaction among people's environment, thinking, feelings and

behaviours. We, as consumers, exhibit very significant differences in our buying

Unit 1: Introduction to Consumer Behaviour 10

 behaviour and play an important role in local, national or international economic
conditions.

One of the very few aspects common to all of us is that we are all consumers and
the reason for a business firm to come into being is the presence of consumers who
have unfulfilled, or partially fulfilled needs and wants.

No matter who we are - urban or rural, male or female, young or old, rich or
poor, educated or uneducated, believer or non-believer, or whatever - we are all
consumers.

We consume or use on a regular basis food, shelter, clothing, vehicle, fuel,

education, stationery, entertainment, domestic help, healthcare services,
comforts, luxuries, necessities and even ideas etc.

Business and other organisations realise that their marketing effectiveness in

satisfying consumer needs and wants depends on a deeper understanding of
consumer behaviour.

Our consumption related behaviour influences the development of technology and

introduction of new and improved products and services.

Most marketers today understand the significance of marketing concept, which

means they are keen to understand their customers and are committed to serving
them by developing quality products and services and selling them at a price that
gives consumers high value.

In developed and developing countries, consumers have access to an abundance

of information about products and services. They are no more dependent on
marketer controlled information sources. The Internet has emerged as a powerful
marketing tool.

It has become necessary for companies to have sophisticated approaches and

detailed data about consumers and develop marketing strategies.

Some of the important issues that marketing executives in business organisations face
include:
1. What do consumers think about our products and those of our competitors?
2. What do they think of possible improvements in our products?
3. How do they actually use our products?

Unit 1: Introduction to Consumer Behaviour 11

 4. What are their attitudes toward our products and our promotional efforts?
5. What they feel are their roles in the family and society?
6. What are their hopes and dreams for themselves and their families?

To succeed in a dynamic and increasingly complex marketing environment where

individuals and businesses are faced with more and more choices, marketers have
an urgent need to learn and anticipate whatever they can about consumers.

The better they know and understand consumers, the more advantageous it would
prove in accomplishing their organisational objectives.

Marketers want to know what consumers think, what they want, how they work, how
they entertain themselves, how they play etc.

They also need to comprehend personal and group influences, which have a
significant impact on consumer decision-making process.

DEFINITION OF CONSUMER BEHAVIOUR

“It is a scientific study of the behaviour of consumers, that is, the

dynamic interaction of affect and cognition, behaviour and
environmental events by which human beings conduct the
exchange aspects of the lives” by the American Marketing
Association.

A consumer is an individual who uses the products, goods or

services of some organisation

Consumer behaviour refers to "the mental and emotional processes

and the observable behaviour of consumers during searching for,
purchasing and post consumption of a product or service."

How consumers make decisions to spend their available resources such as money,
time and effort on consumption and use-related items is the subject of consumer
behaviour study.

Unit 1: Introduction to Consumer Behaviour 12

 Consumer behaviour has two aspects:

the final purchase activity which is visible to us

And the decision process which may involve the interplay of a number of
complex variables not visible to us.

In fact, purchase behaviour is the end result of a long process of consumer

decision-making.

The study involves what consumers buy, why they buy it, how they buy it, when they
buy it, where they buy it, how frequently they buy it and how they dispose off the
product after use.

For example, consider the product computer, a relatively new but big business
in our country. A study of consumer behaviour in this area would investigate
what kinds of consumers buy it or would buy it for home and personal use.
What features do they look for? What benefits do they seek including post-
purchase service? How much are they willing to pay? How many are likely to
buy now? Do they wait for prices to come down? Do they look for some
freebies?

The answers to these can be investigated through consumer research and

provide manufacturers with important data and insight for determining computer
features and promotional strategy etc.

The study of consumers helps firms and organisations improve their marketing
strategies by understanding issues such as how -

the psychology of how consumers think, feel, reason, and select between different
products or alternatives

the psychology of how the consumer is influenced by his/her environment (family,

peer group, media, culture, etc.) and the behaviour of consumers while shopping or
making other marketing decisions.

Consumer behaviour refers to the mental and emotional processes and the
observable behaviour of consumers during searching for purchasing and post-
consumption of a product or service.

Unit 1: Introduction to Consumer Behaviour 13

 Consumer and Customer
A consumer is anyone who typically engages in any one or all of the activities
mentioned in the definition. Traditionally, consumers have been defined very strictly
in terms of economic goods and services wherein a monetary exchange is involved.

This concept, over a period of time, has been broadened. Some scholars also
include goods and services where a monetary transaction is not involved and thus
the users of the services of voluntary organisations are also thought of as
consumers.

This means that organisations such as UNICEF, CRY, or political groups can
view their public as "consumers."

The term consumer is used for both personal consumers and organisational
consumers and represents two different kinds of consuming entities.

A personal consumer buys goods and services for his/her personal use (such as
cigarettes or haircuts), or also as a household consumer he/she buys goods and
services for family consumption or use (such as sugar, furniture, telephone service
etc.), or for just one member of the family (such as a pair of shoes for the son), or a
birthday present for a friend (such as a pen set).

They are referred to as end users or ultimate consumers, as the goods are bought
for final use.

An organisational consumer includes profit or non-profit organisations, they can

be government agencies or institutions (such as local or state government,
schools, hospitals etc.), and they buy products, equipment and services required for
running these organisations.

They also indulge in advertising. For example, Manufacturing firms buy raw
materials to produce and sell their own goods. They buy advertising services to
communicate with their customers. Similarly, advertising service companies buy
equipment to provide the services they sell.

Government agencies buy office products needed for everyday operations.

Unit 1: Introduction to Consumer Behaviour 14

 Anyone who regularly makes a purchase from a store or a company is termed as a
"customer" of that store or company. Thus, a customer is typically defined in terms
of a specific store or company.

Eg: Customers of Apple, Nilgris, etc.

ADDITIONAL

Buyers and Users

The person who buys a particular product may not necessarily be the user or the
only user of this product.

Likewise, it is also true that the person who purchases the product may not be the
decision-maker.

For example, the father buys a bicycle for his school-going son (the son is the
user), or he buys a pack of toothpaste (used by the entire family), or the mother
is the decision maker when she buys a dress for her three-year-old daughter.
The husband and wife together may buy a car (both share the decision).

It is clear that in all cases buyers are not necessarily the users of products
they buy. They also may not be the persons who make the product selection
decisions

Unit 1: Introduction to Consumer Behaviour 15

 The question faced by marketers is - whom should they target for their promotional
messages, the buyer or the user?

Some marketers believe that the buyer of the product is the suitable
prospect, while others believe that the user of the product is the right choice; still,
others believe that it is safe to
direct their promotional messages to both buyers as well as users.

These approaches are visible when ads for toys and games appear during TV
programmes meant for children, same products are promoted in magazines meant
for parents, or there are dual campaigns designed to reach parents and children
both (such as Discovery Channel programmes).

Whenever consumer behaviour occurs in the context of a multi-person household,

several different tasks or roles may be performed in acquiring and consuming a
product or service.

Different household members can perform each of the roles singly or collectively.

For example, in deciding which video cassette or OTT platform to rent/buy for
entertainment, parents might decide on the movie but children may play a role
directly by making their preferences known, or indirectly when
parents keep the children's likes in mind. One parent may actually go to the
store to get the video, but the entire family may watch it.

Unit 1: Introduction to Consumer Behaviour 16

 Development of Consumer Behaviour Field
For a variety of reasons, the study of consumer behaviour has developed as an
important and separate branch in marketing discipline. Scholars of marketing had
observed that consumers did not always behave as suggested by economic theory.

The size of the consumer market in all the developed and rapidly developing
economies of the world was extensive. A huge population of consumers was
spending large sums of money on goods and services.

Besides this, consumer preferences were shifting and becoming highly diversified.
Even in case of industrial markets, where the need for goods and services is
generally more homogenous, buyers' preferences were
becoming diversified and they too were
exhibiting less predictable purchase behaviour.

Marketing researchers involved in studying the buying behaviour of consumers

soon appreciated the fact that though there were many similarities, consumers were
not all alike.

There were those who used products currently in vogue while many consumers
did not like using "me too" types of products and showed a preference for highly
differentiated products that they felt met their special needs and reflected their
personalities and lifestyles.

These findings led to the development of market segmentation concept, which

required dividing the total heterogeneous but potential market into relatively smaller
homogenous groups or segments for which they could design a specific marketing
mix.

They also used positioning techniques and developed promotional programmes to

vary the image of their products, so that they were perceived as a better means to
satisfying the specific needs of certain segments of consumers.

Other important factors that contributed to the development of consumer behaviour

as a marketing discipline include

shorter product life cycles,

increased environmental concerns,

Unit 1: Introduction to Consumer Behaviour 17

 interest in consumer protection,

growth of services marketing,

opening up of international markets and

the development of computers and sophisticated techniques of statistical

analysis.

Development of Marketing Concept

The concept evolved in late 1950s as a result of challenges experienced in the
market place.

This leads to fresh thinking of conducting business more effectively and the field of
consumer behaviour is deeply rooted in this concept.

After World War II, there was great demand for almost all kinds of products and the
marketing philosophy was to produce cheap goods and make them available at as
many places as possible.

This approach suited the marketers because demand exceeded supply and
consumers were more interested in obtaining the product rather than in any specific
features.

UNIT 1.2

NATURE OF CONSUMER BEHAVIOR

Process:
The subject deals with issues related to cognition, affect and behaviour in consumption
behaviours taking into consideration the individual and environmental determinants.

Individual determinants refer to the internal self-wants including memory personality

and learning. The emotions, perception, and association around the buying of the
product come under individual determinants.

Environmental determinants refer to the place where the purchase occurs or the
place where it is influenced.

Unit 1: Introduction to Consumer Behaviour 18

 Consumer behaviour is a systematic process relating to buying decisions of the
consumer. The buying process consists of the following steps:

1. Need identification to buy the product.

important to the individual and the selection is subjective

takes into consideration the affordability

2. Information search relating to the product

cognitive dissonance - Proposed by Leon Festinger. According to this

theory, cognitive dissonance describes the discomfort experienced when
two cognitions are incompatible with each other. It is an internal conflict
that people have when their differing beliefs and opinions collide. Eg: ??

3. Listing of alternatives brands

it is the consumer who decides where to stop the list

4. Evaluating the alternative (cost-benefit analysis)

5. Purchase decision

Depends on the nature of the product (expensive, cheap) and the individual
determinants as well.

6. Post-purchase evaluation

It refers to the period when consumers question their purchases like - Is it

worth it? Are we content with it? Should we continue with the same brand or
switch?

Influenced by various factors

The factors that influence psychological, social, personal, economical, situational,
culture and marketing.

Different for all customers

All the consumers do not behave in the same manner. The difference in consumer
behaviour is due to individual factors such as the nature of the consumers’ lifestyle,
culture, etc.

Different for different products

Unit 1: Introduction to Consumer Behaviour 19

 There are some consumers who may buy more quantity of a certain item or a very
low/ no quantity of some other items.

Region Bound
Consumer behaviour varies across states, regions and countries.

Reflects Status
A consumer’s buying behaviour is not only influenced by the status of the consumer
but also reflects it

Consumer behaviour keeps changing

Consumer behaviour undergoes a change over a period of time depending upon
changes in age, education and income levels.

IMPORTANCE OF CONSUMER BEHAVIOR

An understanding of consumer behaviour is necessary for the long-term success or
behaviour of the firm. It is viewed as the edifice of the marketing concept, an
important orientation in marketing management.

According to the marketing concept,

The marketer should be able to determine the needs and wants

of the target segment and provide products and services that
are offered more effectively and efficiently than his/her
competitors.

It is essentially a customer-centered philosophy, which aims at understanding

customer needs and wants, providing the right product and service, and

Deriving customer satisfaction through, “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.

Unit 1: Introduction to Consumer Behaviour 20

 MARKETING APPLICATIONS
Some of the marketing applications of consumer behaviour knowledge include:

Marketing opportunity analysis

Marketers do a lot of research in order to find a market for a said product, they
examine and assess the opportunities.

This involves examining trends and conditions in the marketplace to identify

consumers’ needs and wants that are not being fulfilled.

Eg: unique restaurants, boxed food, customising meals, etc.

Target market selection

This has to deal with identifying a distinct grouping of customers who have
unique wants and needs and the selection of segment that matches the firms’
strengths and also offers better opportunities.

Eg: Designer jewellery, sustainable clothing, destination weddings, etc.

Marketing - mix determination

This involves developing and implementing a strategy for delivering an effective

combination of want-satisfying features to consumers within target markets.

The market-mix is made up of 4 components: (The Four Ps)

Product or service: The features, designs, brands, and packaging offered,

along with post-purchase benefits such as warranties and return policies.

Price: The list price, including discounts, allowances, and payment

methods.

Promotion: The advertising, sales promotion, public relations, and sales

efforts designed to build awareness of and demand for the product or
service.

Place or Location: The distribution of the product or service through stores

and other outlets.

Market strategy

Understanding of consumer behaviour is needed in strategic marketing

activities. This is because marketing strategies and and tactics are based on

Unit 1: Introduction to Consumer Behaviour 21

 explicit or implicit beliefs about consumers’ behaviour

Eg: Mobile Service providers like Vi, Jio, Airtel, etc.

Customisation and delivery

Effective regulatory policy

In terms of marketing practices, there is a requirement of extensive knowledge

of consumer behaviour.

Eg: FSSAI, TRAI, ISI, AGMARK, NCAP, etc.

Social marketing

Also requires an in-depth understanding of consumers and their behaviour or

attitudes.

Social marketing is the application of marketing strategies or tactics to alter or

create behaviours that have a positive effect on target individuals or society as
a whole.

Social marketing has been used in altempts to reduce smoking, to increase the
percentage of children receiving their vaccinations in a timely manner, to
encourage environmentally sound behaviours, to reduce behaviours potentially
leading to AIDS, to enhance support of charities, to reduce drug use, and many
other important courses.

UNIT 1.3

MODELS OF CONSUMER BEHAVIOUR

Psychological model

General model of consumer behaviour

Economic model

other models include Input, Process Output Model-Gandhi: Philip Kotler, Sociological
Model, Howarth Sheth Model, Engel-Blackwell-Kollat Model & Nicosia Model.

Unit 1: Introduction to Consumer Behaviour 22

 Buying a product is not always the function of a product, it is also the social
environment of the consumer, other consumers competing for products in the
marketplace and the brand marketing strategy.

There are two main parts to a model:

A description of a population of ‘consumers’ who each choose (buy) repeatedly

one of a number of competing ‘brands’.

A description of ‘brand management’ i.e. the strategy of the brand managers

when changing the attributes of a brand such as price or quality in response to
events in the marketplace.

FACTORS IN THE MODELS

The main features which were included in the various models are:

Loyalty

Loyalty is the tendency for (some) consumers to stick to the same products.

The stronger the loyalty, the slower the changes in numbers of people buying
particular products.

Another aspect of loyalty, not allowed for in our models so far, would be a

memory effect, to represent people returning to products they had previously

used, after trying something new they then didn't like.

With this as a key effect, deterministic, continuous-time models will be

systems of ordinary differential equations. For discrete-time models, the
degree of loyalty corresponds to the size of diagonal elements in a
transition matrix.

Memory effect: This could be taken into account perhaps by using

recurrence relations or differential equations of higher than first order (or
even employing delay-differential equations).

Sociology

Sociology in this context is concerned with how one person's buying is

influenced by that of others.

Unit 1: Introduction to Consumer Behaviour 23

 With some sort of tendency of people to buy the same brands, there is a
possibility of "lock-in', with one product dominating the market, even if its
competitors have more or less identical 'qualities' (including price).

This effect and its opposite, people wanting to be different, are easily modelled
by ODE and discrete-time models.

Psychology

Psychology covers what, and how, aspects of the actual items on the shelves
influence people to make their choices, possibly buying something different
from previously.

More specifically, the following four properties have been identified by Unilever
as being important and their influences were included in one or more models:

1. Minimise Anticipated Regret: This refers to how just two products

compare with each other as regards different qualities, which can include
price (or ‘affordability’
= 1/price). A consumer might judge one item to be
superior to another in all respects. The first is then a safe choice for the
consumer.

2. Attribute Change: The introduction of a new product onto the market

can change the way consumers, or at least some of them, view established
brands. This might be by
drawing attention to some quality which was not
previously much regarded
. The former can be considered to be a special
case of the latter.

3. Outlier Avoidance: When a number of products are in many aspects

quite similar, there can be a
tendency for people to avoid 'strange' ones,
i.e. others which are substantially different from the majority in price or
some other respect.
Items near the average can be favoured.

4. Decision Process Change: A straight choice between two items might

be relatively easy

Unit 1: Introduction to Consumer Behaviour 24

 ; they can be compared according to price, size etc. and a
decision made.
With three or more, comparisons might be made between
two things at a time
, one could be eliminated and then the winner contrasted
with a third.

POSSIBLE PREDICTED EFFECTS OF CONSUMER MODEL'S

STUDY
The models which were looked at during the course of the Study Group were
intended to shed light on:

How a 'decoy' product might influence the market.

The appearance of a third product might significantly change the market shares
of two others, while getting minimal sales itself.

The dynamics of market share;

How sales of products can vary over time.

For example, even if two products are equal in all relevant aspects, then after a
long time of consumer activity it might be that

each product takes 50% market share (preserving the symmetry),

or one product takes nearly 100% market share (breaking the symmetry),

or that there is no steady state, with market dominance alternating between

the two brands.

How a new product will fare,

given its quality profile compared with existing brands.

This question is complementary to that of the decoy, asking what market share
a new product will gain rather than how it will affect the market shares of
existing products.

Choice overload:

Unit 1: Introduction to Consumer Behaviour 25

 when there are just too many possible options for potential consumers to pick
from, and many will walk out of the shop without making a purchase.

General model of consumer behaviour

This model helps to consider and deal with the variables and relationships that can
affect consumer behavior. Generally, a model is a simple representation of
something that is in fact more complicated. The model leaves out some of the
complexity of consumer behavior.

Nonetheless, this model contains the most fundamental and the most important
elements found in other common models of consumer behavior. In a sense, it is a
simplified schematic illustration of the theory and research that we call consumer
psychology.

Unit 1: Introduction to Consumer Behaviour 26

Unit 1: Introduction to Consumer Behaviour 27
 Stimulus situation

It is shown to influence the consumer. The stimulus situation is the complex of

conditions that collectively act as a stimulus to elicit responses from the
consumer.

This suggests that consumer behavior is not typically thought of as being by a

single stimulus. Rather, consumer behavior is considered to be the
consequence of patterns or constellations of stimuli.

For example, when the consumer purchases a can of "Coca-cola" brand

beverage, that consumer behavior was not merely the result of the cost of
the product.

Instead, we would have to consider the cost of product, characteristics of the

advertisement of the product, packaging of the product, individual’s past
experience of the product, placement of the product on shelves, and so on.

At first glance, this might appear frustrating to the budding consumer

psychologist; the stimulus situation that impacts upon the consumer seems to
be unmanageably complex.

However, it is important to recognize that the world in which consumers behave

is, in reality, extremely complex, filled with continual commercials, pretty
packaging, and confusing choices. It is very full and busy.

INTERNAL PROCESSES

Next, the model specifies a number of internal processes. These

internal processes are a related
series of changes that occur within
the individual.

Internal processes can be viewed as consequents that are caused by

something else, or as antecedents that cause something else.

When viewed as consequents, internal processes are thought of as the result

of the stimulus situation, the individual's own behavior, the social context, the
cultural context, other internal processes, and the interactions between these
sets of variables.

Unit 1: Introduction to Consumer Behaviour 28

 Research that views a given internal process as a consequent treats
it as a
dependent variable that is influenced by some independent
variable(s).

When viewed as antecedents, internal processes can be considered the cause

of intentions, behavior, or some other internal processes.

Research that views a given internal process as an antecedent treats it as an

independent variable that influences some dependent variable(s).
Eg: One special case of the use of internal processes as independent variables is
the concept of psychographics. This refers to the use of individual differences in the
internal processes to predict consumer behavior.

The internal processes are considered from both the perspective of

consequents that are caused by something else (i.e., dependent variables)
and the perspective of antecedents that cause something else (i.e.,
independent variables).

Perception

Perception is typically defined as the psychological processing

of information received by the senses.

The result of the internal process of perception is awareness of the product, or

awareness of attributes of the product.

Cognition & Memory

Cognition refers to the processes of knowing or thought. The result of cognition

is a collection of beliefs about or evaluations of the product.

Memory refers to the retention of information regarding past events or ideas.

The result of this process is the acquisition, retention, and remembering of
product information.

Learning

Learning describes a relatively permanent change in responses as a

result of practice or experience.

Unit 1: Introduction to Consumer Behaviour 29

 The result of this internal process is the formation of associations between
stimuli or between stimuli and responses.

Emotion

Emotion is a state of arousal involving conscious experience and visceral

changes. The result of this internal process is feelings about the product.

Motivation

Motivation is a state of tension within the individual that arouses, directs, and
maintains behavior toward a goal.

The result of this internal process is desire or need for the product.

Note on Internal Processes

These internal processes were defined as a related series of changes. Discussing
each process separately requires the establishment of somewhat arbitrary
distinctions between interdependent events. For example, after the college student
first sees a commercial for Coca-cola, he or she might express an interest in the
product, and a desire to buy it.

Perception seems to have occurred, because the consumer is aware of the

product;

cognition has taken place, insofar as the consumer has evaluated Loca-cola as
being worthy of consideration;

motivation may have been engaged, if the student really wants to try the
product; and so on.

This is to emphasize that, although we can conceptualize these internal

processes as separate entities, we must address their interrelationships in order to
obtain a full appreciation for their effects on subsequent events
(specifically, their effects on other internal processes, intentions, and behavior).

Another important thing to recognize about this model is the lack of any
predetermined sequencing of the internal processes.

That is, the model does not assume that some internal processes must
occur before other internal processes can occur. Thus, any internal process

Unit 1: Introduction to Consumer Behaviour 30

 might come before, and influence, any other internal process.

Intention

Intention refers to a plan to perform some specific behavior.

Within the context of consumer behavior, intention refers to the plan to

purchase or use the product. Bear in mind that this applies whether the product
is a brand of toothpaste, a course in school, or a political candidate.

Behaviour

Behavior is typically defined as an act or a response.

Behavior refers to the actual purchase or use of the product.

Both intention and behavior are characterized in the Figure as resulting

from the direct and interactive effects of the internal processes.

Note that behavior may influence the internal processes of the consumer.

Social Context

Social context refers to the totality of social stimulation that influences the
individual. This can include friends, family, or sales personnel.

Cultural Context

The cultural context refers to the totality of cultural stimulation that influences
the individual and his or her social context.

This can include the individual's culture (e.g., late 20th-century America),
subculture (e.g. rural southeastern United States university students), social
class (e.g., middle class), and so on.

Note: The individual (with his or her internal processes, intentions, and behavior)
exists within, and is influenced by, a social context. Further, the individual's social
context exists within, and is influenced by, a cultural context.

Psychological model of consumer behaviour

Hierarchy of Needs ~ Abraham Maslow

Unit 1: Introduction to Consumer Behaviour 31

 Pavlonian Learning Model ~ Ivan Pavlov

Hierarchy of Needs

Unit 1: Introduction to Consumer Behaviour 32

 Psychologists have been investigating the causes which lead to purchases and
decision-making. This has been answered by AH. Maslow in his hierarchy of
needs.

The behaviour of an individual at a particular time is determined by his

strongest need at that time
.

This also shows that needs have a priority. First they satisfy the basic needs and
then go on for secondary needs.

The purchasing process and behaviour is governed by motivational forces.

Motivation stimulates people into action.

Motivation starts with the need. It is a driving force and also a mental
phenomenon.

Need arises when one is deprived of something. A tension is created in the

mind of the individual which leads him to a goal directed behaviour which

Unit 1: Introduction to Consumer Behaviour 33

 satisfies the need.

Once a need is satisfied, a new need arises and the process is continuous.

DEPRIVATION → NEED → MOTIVATION → ACTION (Purchasing Process)

Pavlovian Learning Model

Learning refers to the relatively permanent change in knowledge or behaviour
that is the result of experience (previous).

Learning refers to the process by which consumers change their behaviour after
they gain information or experience.

It’s the reason you don’t buy a bad product twice.

Learning doesn’t just affect what you buy; it affects how you shop.

People with limited experience with a product or brand generally seek out more
information than people who have used a product before.

Behavioural learning theories assume that learning takes place as the result of
responses to external events.

For example, if a song we remember fondly from high school gets repeatedly
paired with a brand name, over time our warm memories about the tune will rub
off onto the advertised product.

Proposed by Ivan Pavlov, a Russian physiologist, in the 1920s, this pioneering work
was based on the famous experiments that were conducted on dogs.

Pavlov believed: all living beings are passive in nature; they can be taught how to
behave through repetition or conditioning; and, learning occurs as a repeated
connection/association between stimulus and response (Stimulus → Response) or
(S - R).

Example

Unconditioned Stimulus | Food

Unconditioned Response | Salivation

Conditioned Stimulus | Fast food Logo

Conditioned response | Salivation

Unit 1: Introduction to Consumer Behaviour 34

 Neutral Stimulus | Fast food Logo (repeated pairing)

The learning process consist of the following factors - Drive, cues and respose.

DRIVE

Drive is a strong internal stimulus impelling action. It may be innate such as hunger,
thirst, or sex, or it may be learned such as need for status. A drive is general and
implies a particular response only in relation to a configuration of cues. Because of
the drive, a person is stimulated to action to fulfil his desires.

CUES

The cue is a weak stimulus in the environment determining, when, where and how
the individual responds to the drive.

They can be innate (in-born) which stem from physiological needs, such as
hunger, thirst, pain, cold, sex, etc. Learned drive, such as striving for status
or social approval.

We have:

Triggering Cues: These activate the decision process for any purchase.

Non-triggering Cues: These influence the decision process but do not activate
it.
These are of two kinds:

1. Product cues are external stimuli received from the product directly, e.g.,
colour of package, weight, style, price, etc.

2. Informational cues are external stimuli which provide information about the
product, like advertisement, sales promotion, talking to other people,
suggestions of sales personnel, etc.

RESPONSE

The reaction to the cue is the response. Response is what the buyer does i.e buys
or doesn’t buy a product. Individuals react differently to cues based on how
rewarding their responses have been.

Eg: when a person has a need to buy, say clothing, and passes by a
showroom and is attracted by the display of clothing, their colour and style,

Unit 1: Introduction to Consumer Behaviour 35

 which acts as a stimulus (cue), and he makes a purchase.

He uses it, and if he likes it, an enforcement takes place and he is happy
and satisfied with the purchase. He recommends it to his friends as well,
and visits the same shop again.

Learning part, thus is an important part of buyer behaviour and the marketer
tries to create a good image of the product in the mind of the consumer for
repeat purchases through learning.

Economic model of Consumer Behaviour

In this model consumers follow the principle of maximum utility based on the law
of diminishing marginal utility. The consumer wants to spend the minimum
amount for maximising gains.

Economics models are based on the following:

Price effect: lesser the price of the product, more will be the quantity purchased.

Substitution effect: lesser the price of the substitute product, lesser will be the
utility of the original product bought.

Income effect: When more income is earned, or more money is available, more will
be the quantity purchased

The utility maximization is developed based on the following assumptions:

Consumers are assumed to be rational, trying to get the most value for their money.

Consumers have clear preferences for various goods and services; thus they know
their MU for each successive units of the product.

Every item has a price tag. Consumers must choose among alternative goods with
their limited money incomes.

Consumers decide to allocate their money incomes so that the last rupee spent on
each product purchased yields the same amount of extra marginal utility.

The law of diminishing marginal utility

Unit 1: Introduction to Consumer Behaviour 36

 The law states that commodities become less valuable as more of them are
acquired.

During consumption, as more and more units of a commodity are used, every
successive unit gives utility with a diminishing rate, provided other things remaining
the same; although, the total utility increases.”

Short coming of thie economic model:

This model, according to behavioural scientists, is not complete as it assumes

the homogeneity of the market
, similarity of buyer behaviour and concentrates only on the product or price.

Price and product alone are not the only consideration for consumption or factors
influencing decision-making.

It ignores all the other aspects such as perception, motivation, learning, attitudes,
personality and socio-cultural factors.

It is important to have a multi-disciplinary approach, as human beings are complex

entities and are influenced by external and internal factors.

Unit 1: Introduction to Consumer Behaviour 37