Week 2: Consumer behaviour

Consumer behaviour models (56% of Indian customers abandon their shopping carts..why?)

Usefulness of consumer behaviour models in marketing:

- Helping find broad trends and behaviours (to be able to broadly understand the
behaviour of customers)
- We can predict how customer will react to a marketing communication or price discount
or a promotional discount (to be able to, thereafter, predict the likely outcomes of
manipulating marketing stimuli)
- Different consumer behaviour models have different variables
- Different consumer behaviour models have different levels of complexity
- Models are simplified versions of reality
- In real life 100% accurate predictions are next to impossible
- Different people in the same segment may not react similarly to the same stimuli (Same
ad cannot generate the same level of interest among all customers)

Most popular consumer behaviour models

Aimed at finding individual consumer behaviour:
1) Pavlovian model
Learning changes our behaviour and that behaviour becomes strengthened when we practise it
more and it has more meaning when it is our personal experience - learning is change in
behaviour developed through practice and personal experience (ex: going to a restaurant and if
you get a loose stomach you have learned the place is unhygienic)
Practice: if you drink a soup everyday at 9:00 during breaking news then you’ll want a soup
every time it's 9:00)
The change in behaviour or learning comes from “drive”, “drives” and reinforcement
- Drive: strong internal stimuli that demands action
- Drives: inborn psychological needs born out of physical triggers
- Reinforcement: revalidation of the reward or penalty which shapes behaviour
These drives create triggers to either buy or not buy

2) Economic model (states man is a rational animal - but in reality people are highly
emotional)
For any given resource - trying to maximise outcome (core of the model: maximum benefits
using minimum resources)
Belief that consumers try to maximise the utility derived from products on the basis of law of
diminishing utility - if you have x amount of money trying to make sure in a rational way do the
pros and cons analysis, cost benefit analysis of a range of products and choose the best one
that suits their needs (sometimes we buy products we don’t generally need or the economic
means to buy it with a single instalment)
Products that are emotionally connect to us like coca cola - rationality of the decision
making may or may not be in action
Three principles of the economic man:
 - Income effect: more the income more the quantity that will be purchased (not be always
true because after a certain point of time the law of diminishing utility sets in and you do
not need desire the product in the same quantity anymore)
- Substitution effect: if there is a substitute product at a lower price it will be preferred
- Price effect: higher the price, lower the quantity that will be bought
Cases when this principle may not be in action: surf ads of the late 80s talked about wisdom lies
in buying only surf but that's appealing to the rational, logical, wise, wisdom part of a consumer’s
mind
On the other hand - apple iphone selling for a high price even through the product does not cost
that much to build and there are equally good quality options in the market, but since the apple
brand such a strong relation with the customers, the money doesn’t seem much - so this is
definitely not an economic man

3) Input, process, output model

Marketing stimuli: marketer controls unlike the external factors
Buyer’s characteristics: personal characteristics - demographics, level of education, etc.
Buyer’s decision making process - Decision - buy or not buy
Black box: every customer behaves a different way to ex: a 50% clearance sale and the
same customer may not behave in the same way with the similar stimuli at different times so
very difficult to analyse and predict behaviour (but we can average out an entire segment’s
behaviour we might get certain decisions => output)
(most acceptable and easy to understand model of consumer behaviour)

4) Psychological model
Dropping away from materialism, raising level of thinking, reducing physical objects you desire,
doing things for the community, etc.
You would go in a sequential fashion from psychological to finally self actualization
Psychological - dominos
Safety - LIC life insurance
Belongingness - friendship bands
Esteem - Rolex watch (seeking confidence, success, sense of achievement)
Self-esteem - doing something for your country or society (seeking people for Indian air force)
People may actually jump needs - so there has been some criticism of this model but helps
marketers understand where the largest part of their target audience are on the segment.

5) Howard sheth model

Significance elements - have a utilitarian function and also a symbolic function (ex: Apple
iphone has a much bigger symbolic meaning than the utilitarian function)
Perceptual constructs - where you search for information
Stimulus ambiguity: sometimes communications are not clear what they want their
consumers to think but force the consumers to think anyways
Perceptual bias: people like to see and hear about brands they already like
Learning constructs: each component helps different people to learn differently about a given
brand
Outputs: purchase or positive intention to buy the product in the future, positive attitude towards
the brand, understanding what the company stands for (brand comprehension), listening to what
they are saying or attention

3 kinds of decision making:

 ● Extensive problem solving: we haven't’ bought before, not familiar with the product so
seek a lot of information, check out blogs, talking with people in showroom - lot of time
used (Ex: camera)
● Limited problem solving: not too much involvement (ex: sunscreen) - done little bit of info
search and consciousness seeking out of info, not very high in importance
● Habitual response behaviour: more a matter of habit, you don’t really process all the
information available out there every time you want to buy or refill (ex: tea)
Brands in each category market differently since the level of problem solving is different in each

6) Sociological model
Model is based on the sociological idea of membership groups - groups to which a consumer
belongs - family, peer group, school group, young adults group, etc.
Primary group: immediate family, friends, relatives, etc.
Secondary group: farther removed groups like teacher’s association/doctor's association,
etc. - can move from one teachers group to another when switching schools
Reference groups - a group to which a consumer would like to belong (aspiring to belong to the
“Rich Club”, or the “Adventurous Gang”). Cues from these groups determine how you behave in
terms of products that bring you closer to the aspirational groups you look up to.
This model is generally used to predict lifestyle goods purchase likelihood - approval from peers
and family members
Ex: family holiday; a crowd of doctors what watch they buy, how much ad what class
they fly, their car

7) Family decision making model

Different members play one or more roles in the purchasing process
- The user (the final user of the product who has a lot of say in the product bought)
- The influencer (giving right cues and suggesting to different members of the family what
kind of products would be best suited for a given sales/income level)
- The preparer (applicable in the case of kitchen equipment - housewife decides on what
vegetables, equipment to procure since she is a designated expert in that domain and
they become the preparer who decided on what products to be bought)
- The gate keeper (person who allows or disallows info to get inside family decision
making
- Buyer (who is spending the money - consumer)
- The decider (person who may or may not be the one spending money - there may be
family members who are more dominant and may not be the one spending the money)
Roles differ from one situation to another and often you have to reach a compromise

8) Engel-blackwell-kollat model
4 main elements:
- Information processing (IP) - exposure (seeing ad or demonstration), attention,
comprehension (ability to understand what is being communicated), retention (how much
of the communication have you been able to retain) of any communication from a brand
or agency
 - Central control unit (CCU) - past experience, evaluation criteria (can change over period
of time ex: when you are younger brand matters more and when you get older money
becomes more important), consumer preference (constantly changing), consumer’s
personality (also evolves a period of time) ex: your behaviour in bargaining changes
- Decision making process (DMP) - 5 step model - need awareness, information search
(online or offline or hybrid), evaluation of alternatives (cost benefit or pros and cons
analysis of alternatives for which info has been searched for), purchase decision, post
purchase behaviour (do we become a loyal customer, wom, satisfied our needs?)
- External environmental influences (EEI) - income, culture, family, social class, caste,
physical, etc.
Ex: club membership; searching for college education

9) Industrial buying - characteristics

How B2B units buy or behave in buying situations
A buying team - a group of people from different functional areas like finance,
accounting, production team, marketing and sales team, etc.
Ex: a power generating turbine system
- Complex process with many layers (buying process may proceed through many
hierarchical layers before it gets closed)
- Multiple stakeholders/multiple departments
- Usually had large stake - high monetary value involved compared to B2C
- Longer decision making time frames because of the hierarchical levels to cross - Many
guidelines and approvals needed
- Harder negotiations (everytime a product is bought in the B2B world, the more they are
able to negotiate from point of strength and the seller would have to give better deals)
- Personality clashes (since people are there from different departments from all levels or
intra group dynamics that can jeopardise the way consumer decision happens)
- Diverse cultural backgrounds of buying team members
- Joint/consensus decision making (not possible everyone would agree all the time - team
would have to work on consensus building)
- Long term perspective (after sales become very important and ownership and
operational cost becomes a major issue compared to just the upfront cost)
- Structured process (steps to follow and levels to cross)

Factors affecting consumer behaviour

Cultural, social and personal - the customer cannot control and the marketer cannot control
unlike the psychological
 1. Culture - learned values, perceptions, wants, and behaviour from family and other
important institutions (family, school, peer groups, etc.)
Ex: marriages in hindu communicates are held on auspicious dates so the there are increased
purchases during these seasons
Colours also have different meaning in different cultures

Subcultures: are groups of people within a culture with shared value systems based on common
life experiences and situations
Indian culture - being respectful to others, being wise with money, saving as a means on
living life properly, hard work
But within subcultures will have different views on how they perceive the world
Ex: India is very diverse so important to understand how people in different subcultures
behave towards a given stimulus
Ex: Gujarati - Business oriented, enterprising, compulsive snackers
Ex: Tamilian - conservative, non-ostentatious, simple living
Ex: Bengali - intellectual thinking, foodies, budget travellers
Ex: Caste - Brahman vegetarian menu
Ex Language - Hindi speaking belt
Ex: community - youth - fast food, beverages, peer driven, need for belongingness

Social class: are society’s relatively impermanent and ordered divisions whose members share
similar values, interests and behaviours (people can move up and down the caste - social
classes encourage people to buy aspirational products and services)
Measured by a combination of occupation, income, education, wealth, and other
variables (e.g. clan, community, tribe; where you were educated, etc.)
Differentiates people with respect to - media pattern, style of speech, leisure time
activities, dress patterns etc.
Social class also be defined by geography or address or pincode (ex: south delhi vs east delhi)
McKinsey classifies Indians into five economic classes with respect to real annual disposable
income (remaining money after spending on needs) - globals (>10 lakhs); strivers (5-10 lakh);
seekers (2-5 lakh); aspirers (90k - 2 lakh); deprived (<90k) => gives the marketer an idea of
what kind of promotion or communication or pricing to be done if chasing a certain group

2. Second social determinants of consumer behaviour: Group & Social networks

Membership groups: groups with direct influence to which a person belongs (family, school)
Consumer socialisation process - how consumers socialise into becoming a intelligent
and wise and good at negotiating by learning by observing others in membership group

Aspirational groups: groups an individual wishes to belong to (CEOs, doctors, lawyers, sports
people, entertainers) - once you become a member it becomes a membership group

Reference groups: groups that form a comparison or reference in forming attitudes or behaviour
(peer group, neighbours)
Group and social networks:
- WOM influence (credibility is more than company sponsor info and more truer - outside
the control of marker and mostly customer to customer convo) and buzz marketing
(where marketer seeds conversation in a particular way so its carried on in open social
network in a particular direction)
*Opinion leaders - are people within a reference group who exert social influence on
others
People who spread their knowledge and time - someone in a group can be tech, movie
or fashion expert who influence the behaviours of others
*Market Mavens - are people who share information about products and retail locations
with others (even strangers) out of an altruistic purpose of “doing good” - they are driven
by the objective of helping other people with info on the market place, retail locations
and places where you can get better bargains, time of year when you can get best deals
and have a lot of knowledge on many different categories of products (market and
consumer knowledge helpers)
*Also called influentials or leading adopters (spread opinion on product or brand)
Marketers identify them and engage as brand ambassadors

Family:

Family/household is the most important consumer-buying organisation in society

Family of orientation (the one you are born into) - parents play a big role in determining
how you behave as a person in society and a consumer - child begins to learn by observing
siblings or parents in how they behave as consumers, bargain, negotiate, look for info, etc.
Family of procreation (the one you start)

Structure of the household has a big role to play (joint family => nuclear family => single parent
family - double or single income and number of kids
Stages of the household life cycle - going from just parents to having children and their growth
and empty nest stage (different needs)

- Social roles and status are determined by groups like family, clubs, and organisations
that a person belongs to (determined by family, clubs and organisations you belong to) -
 status in the home is very different from status outside (Ex: successful CEO women can
just be a wife or mother at home)
- Family decision making roles - initiator, info gatherer, gatekeeper, preparer, influencer,
decider, buyer, user (one person can play all these roles or two or more and they switch
based on situation) - initiator starts the convo on buying a certain product and
information gatherer is usually the younger person in the family who is tech savvy or
have good market knowledge; (Influencer - may or may not be the most knowledgeable
about everything but by virtue of their authority - ex: eldest member of the joint family)

3. Personal factors
Age and life cycle stage - Child, teen, senior citizen, adults have different requirements (ex: LIC
policy for kids - Jeevan Ankur)
Occupation affects the goods and services bought by consumers (ex: tata ace)
Economic situation includes trends in: (although our saving culture has changes a bit - EMI)
Personal income Savings Interest rates (based on RBI rules are and economic situation)

Lifestyle: a person’s pattern of living as expressed in his or her psychographics (attributes,

interest, opinions, activities of people towards certain brands, leisure, activities, etc.)
Measures a consumer’s AIOs (Activities, interests, opinions) to capture information
about a person’s pattern of acting and interacting in the environment - how different segments of
the market behave with the environment is a very important consideration for marketers to
determine how to strategize their communication, engagement, trying to get the customer to
think positively about the brand)

Personality and self-concept:

Personality refers to the unique psychological characteristics that lead to consistent and
lasting responses to the consumer’s environment (Ex: some customers will bargain)
Research suggests that messages which appeal to an individual personality traits are
better received than ones which focus on demographics (age, income, gender, level of
education, etc.), the conventional metrics used by advertisers
(if you appeal to the personality traits or the self-concept like I’m a successful person, or a loser,
an aspirer, still striving to find my place under the sun - if you appeal to that there is a higher
possibility of being accepted than focusing on demographics)
Big five personality traits are - (OCEAN) - Openness to experience (experimental,
looking for novelty, variety), Conscientiousness (honest, integrity, committed), Extraversion
(outgoing, large network of friends, acquaintances), Agreeableness (submissive, not picking up
fights, not confrontational), Neuroticism (obsession with the self, bordering on narcissism,
negative tendency but marketers love it because neuroticism and narcissism are inward focused
which are good for making messages that appeal to them at a very high level
Ex: Agreeable individuals value a sense of belonging, compassion, and interpersonal
harmony, while open individuals value intellectual and aesthetic pursuits, novelty, uniqueness,
trying new things, being experimental, etc.
(ex: Raymond moving from being successful in the workplace to being equality successful in the
house - showing a kinder, softer, complete man)
 4. Psychological determinants: Need driven motivation
A motive is a need that is sufficiently pressing to direct the person to seek satisfaction - need:
stage of disequilibrium, state of unfulfillment and the motivation comes from the fact that the
need must be fulfilled
Motivation research refers to qualitative research designed to probe consumers’ hidden,
subconscious motivations (ex: questionnaires on if you would buy the product if it was priced at
x amount - people answer in a politically correct or diplomatically safe way - however motivation
research is about diving deep into understanding why people do what they do)
How needs are categorised (ex: Maslow’s needs hierarchy)

Perception: the process by which people select, organise, and interpret information to form a
meaningful picture of the world using three perceptual processes
Perception can be positive, negative, pessimistic, optimistic and sometimes indifferent to
the world - how people find meaning within the ecosystem within which they exist

Selective attention (process of focusing on a particular object in the environment for a certain
period of time - relating to a current need; focusing only on food brand advertisements when
hungry)

Selected distortion (to twist information in line with our preconceived notions; blind sample tests)
- if we believe a certain thing is going to be good or bad, we will twist or modify of colour the
information to fit with the notion we have in our mind - ex: if someone says something bad about
McDonalds, you tell them it's probably a one off case and you’ve been there many times and
you have never had a bad experience

Selective retention (retain information that supports own beliefs and attitudes; for apple fans,
everything Apple does is world class - only retain good points about brands you like and not
remembering the competitors good points and find ways to criticise them like Samsung)

Learning: is the change in an individual’s behaviour arising from experience and occurs through
interplay of:
Drives (status) - any force that moves you towards fulfilling your need
Stimulus (ad for Rolex) - if you are a status seeker, then when you see an ad for Rolex it
can trigger than drive
Cues (people) - other people who are successful wearing such experience watched
Response (purchase)
Reinforcement (appreciation by peers or strangers)
(Ex: when learning that Maggie had MSG or lead in it, it lead to a certain behaviour against it)

Beliefs:
Belief is a descriptive thought that a person has about something based on:
- Knowledge (deeper sense of awareness - ex: if a certain brand is part of HUL then it’ll be
good)
 - Opinion (feeling about a particular product or brand based on some info you might be
having - may not be right always)
- Faith (if people or news might say something bad about a brand, your faith in the brand
makes you believe it’s good, strong, reliable, faithful)

What does the TATA name/logo convey to you on - Trustworthiness, reliable, good quality
A packet of Tea Leaves? A steel bar? An automobile?

Attitudes: describes a person’s relatively consistent evaluations, feelings, and tendencies toward
an object or idea - it is not permanent (ex: having a bad perception on made in china products
but when you finally get a made in china product which is slightly expensive where the quality is
top class, it may change your opinion on made in china products)
Can change between positive, negative, indifferent
Some brand extensions don’t work - ex: Amul has many dairy and confectionery products but
the confectionary has not done that well compared to the diary products - but there is some
synergy between the two)
However, Nirma’s extension to a beauty soap but people couldn’t see it as a beauty soap since
the brand was positioned at the bottom of the pyramid, lower mid market, so attitudes toward
Nirma could not be changed to the brand being a beauty product even though they changed the
name of the soap to NIMA.

Types of buying decision behaviour:

Large number of background people come from even within the same culture, subculture (all
have different economic, educational, family background)
Consumers have different cultural, social, personal and psychological backgrounds
These different backgrounds have an impact on perception (how we see the world
outside), motivation (drives that trigger us into action), learning (how we process info and add to
existing knowledge and how it changes behaviour which leads to attitude formation), attitude
formation (stable outlook people have about an object or thing - marketers try very hard to
change this attitude if it's negative or validate and reinforce it if it’s positive until the bon
becomes extremely strong and leads to customer loyalty) and decision making
Different market situations affect the buying decision making process
Monopoly (one member is dominant in terms of consumer base and market share), duopoly,
oligopoly (reasonable number of competitors - 3 or 4 controlling market share and remaining are
tiny market shares), free competition (any provider is free to come in and exit - entry and exit
barriers are low - so customer may get a fantastic deal however the competition may be
extremely cut throat)
Personal use (are you using from a B2C or B2B perspective), organisational use (B2B), defence
use (national purposes - very long time frames during which the product will be used so price
will not be the only thing you see and rather the capacity to ward off enemy and attacks are key)
Types of buying decision behaviour: (broad categories most consumers fall into)
Complex buying behaviour
Dissonance - reducing buying behaviour
Habitual buying behaviour
Variety-seeking buying behaviour

Significant between brands - tougher to choose between them

Habitual buying behaviour - already bought it many times to simple to make buying
decision
Variety-seeking buying behaviour - you bought something before to solve a problem but
next time when you buy in that product category you may try to find a different brand - entire
need recog., info search, evaluation of alternatives are easy to follow expect there is a brand
change since you seek novelty
Dissonance-reducing buying behaviour: Do not go to extensive info search, just to
reduce your dissonance so if you are unhappy with a particular product you bought earlier in a
particular product category - ex: you bought an ice cream and did not like it, next time you may
buy a variant that is more popular or something you have tried earlier

Habitual buying decision behaviours:

Key characteristics: low involvement, few perceived differences between brands
Buying cues: favourite brand, what’s available in the store, cheapest option available
Ex: a loaf of bread gets bought because of brand familiarity. If that brand is not available the
customer normally switches to the nearest substitute brand. There is lower brand loyalty.
Not much research is put into searching for alternatives
Very low brand loyalty
Ex: salt
Needs high frequency ads to have higher brand recall and familiarity and to induce trial by price
group promotions and sales schemes and promotions - influenced by mass media
advertisements
To induce trial marketers have to do price drop promotions and sales schemes and promotions
Markets should attract customers based on visual imagery and symbols in their advertisement -
culturally significant symbols and has a lot of relevance to the target market’s lifestyle
Variety seeking buying decision behaviour:
Key characteristics: low involvement, high perceived differences between brands
Buying cues:
- Boredom and curiosity are buying decision drivers (not dissatisfied)
- A lot of brand switching happened (switching cost is low since involvement is very low)
- Need for variety (urge for novelty)
- Brand switching happens almost unintentionally, subconsciously
(Britaria cookies product can be perceived differently from Amul product)
Marketers trying to have many flavour to reduce switching to customers can get novelty from
within the brand
Brands have to adopt strategies like dominating shelf space and packing it with
similar/related brands of the same company and entice habitual buyers familiar with the brand
Marketers must avoid out-of-stock situations, sponsor frequent advertising, offer lower
prices, discounts, deals, coupons and free samples

Dissonance reducing buying decision behaviour:

Ex: electric lawn mower, diamond ring
Key characteristics: high involvement but low perceived differences between brands (very little
difference between diamond of two brands - looks very similar)
Buying cues:
High prices
Infrequency
Low availability of choices
Product availability, time availability, budget availability
Limited info search
Marketers have to ensure that products in this category are easily available for the
customer not to have to make extensive search ops.
Make all info about the brand available to the customers

Extensive problem solving buying behaviour (real problem solving in a detailed manner - ex:
hybrid electric vehicle)
Key characteristics: high involvement, high perceived difference between brands
(Toyota is very different from other car brands + there is also an emotional attachment
and in this particular case, the environment)
Buying cues:
Infrequent purchase
Expensive/unfamiliar product
Extensive research and consulting with family, friends and experts
Social and psychological costs play an important role
Social cost - benefit - people sees you as a environmentally concerned person willing to
pay a premium
Psychological - satisfaction of contributing to reducing of carbon footprint
 Buyer passes through a learning process - develops beliefs about the product/brand ->
builds attitudes -> arrives at a purchase decision
Beyond the actual functionality of the product - the brand must communicate how the
product can be a perfect fir for their way of living, peer/social status and lifestyle
Marketers must help the customer understand how the product will help in their lives in a deeper
sense than mere utilitarian problem - advertising must influence buyer attitudes and beliefs
The buyer decision process:
Process can follow a linear or non-linear path

Consumer becomes aware of a need

Evaluating alternatives, Pros and cons, collects info from various sources
Comparative analysis, benefits and costs involved, one brand over the other
Happiness, delight, anger, dissatisfaction

Need recognition: buyer recognized a problem or need triggered by an:

Internal stimuli (psychological, safety, belonging, self-esteem & self-actualization needs)
- these stimuli may be internal to the consumer (someone who have fulfilled one layer of the
hierarchy they may want to buy products to move to the next level)
External stimuli - PESTLE factors (marketing stimuli, technological developments,
environmental factors, govt regulations, etc.)

Information search: sources of info

Personal sources - family and friends
Commercial sources - advertising, internet (biggest source)
Public sources - mass media, consumer organisations
Experimental sources - handling, examining, using the product

Ex: buying a white formal shirt (Total set: no one knows all possible companies that makes white
apparel - known ones: total set)
Awareness set: Out of the known ones - the consumer may be aware of 4 ot 5 brands (more
knowledgeable about these)
Consideration set: Fewer set of brands the consumer has narrowed down to
Choice set: What brings it down to neck and neck race - one of them the customer will buy
(winner) - (reason consumer might have chosen one over the other: price, finish, switch, fabric,
design factor)
So marketer has not won until the consumer has chosen has chosen that brand at the end
stage

Evaluation of alternatives step: Linear process

How the consumer processes info to arrive at brand choices: consumer uses shortcuts
or heuristics, consult people, read blogs, reviews, dig into past experiences
Ex: motorcycle
Need category awareness - transportation
Product category choice - 2 wheelers (vs 4 wheelers) since not much money (motorised or
non-motorized scooter but he has gone for the motorised one)
Product type - motorcycles (vs scooters and mopeds)
Product brand - Hero (vs Bajaj, Suzuki, Hondo)
Product variant - Hero Splendor plus (vs Maestro, Xtreme)

Linear vs non-linear customer journeys

- Linear: sequential steps, easier to control by the marketer, chances of dropping out in
favour of competitors was lower, and did not often go backwards after a stage was
covered.
If it reached reached the decision making stage it would rarely go back to search for info or
assessing alternatives stage

- Non-linear: multiple touchpoints in no particular sequence, many influencer, back and

forth journeys very much possible, marketer has less control, the marketer has to be at
all the touch points where customer are present or moving to and from (Ex: almost
putting a product in cart and then seeing an appealing ad) - more complex and more
challenging and impossible to know exactly where the customer is going

Traditional marketing funnel - linear stages (brand had to be present in two broad areas)
New marketing touchpoints - important for marketer to be present in all of these touchpoints so
no matter where the customer is in a given point in time the brand is there alongside to guide
them through the awareness set, consideration set, and the choice set and finally the purchase
decision - job of the market in the new context is much more complicated and 24/7 trying to
keep track of customers

Purchase decision step: consumer buys the product of their preferred brand (marketers have to
take customer through the A.I.D.A model)
A - Awareness
I - interest
D - Desire
A - Action (purchase or try the product - whatever objective the marketer has set)
At this stage, the factors affecting the purchase decision are:
- Feedback and reactions from peers (peer pressure)
- Sudden and unexpected change in circumstances (emergencies, acts of god, etc.) - ex:
fire insurance of earthquake insurance after an incident

Post-purchase behaviour step:

The satisfaction or dissatisfaction that the consumer feels about the purchase
Relation between: consumer expectations vs. product’s perceived performance
The larger the gap between expectation and performance - the greater the consumer’s
dissatisfaction (A hyped-up restaurant’s - ITC Maurya - food turning out to be mediocre)
Cognitive dissonance - mental discomfort caused by a post-purchase conflict (you buy an Alexa
and 2 days later there is a 25% discount)
Consumer satisfaction - key to building profitable relationships with consumer - base level
engagement he customer must have with the brand - the more important engagement is
customer delight which is essential to keeping, growing conusmers and reaping their CLTV
(customer lifetime value)

Need recognition: let people know that Amul has come up with a brand of dark chocolate and if
it is already in the market place make more and more people aware through mass advertising
and on the ground engagement - ex: tastings or recipe contests for the launch event
Purchase decision: Discount as a trial incentive or combine the bars and come up with
promotional discounts
Institutional buying characteristics determinants process
B2B buying decision process: (much more structured than B2C)

Ex: warehouse lighting systems

Need and product specification: good lighting system, intensity, space between
each, etc.
Supplier: philips, bajaj, etc. who will be asked to provide a bid or a proposal
Based on pricing and technical expertise, shortlist, recruited, selected and empanelled
as the supplier of choice
If Philips get selected - if they are always able to deliver quality products on time and
have on site assistance available for the buyer
Evaluate performance for Philips lighting for a few months and decision will be taken to
either carry on with the brand or replace them
(can have a brand as backup if chosen supplier doesn’t deliver on time)
Most important - relationship building since it is not easy to switch suppliers

Geographically clustered - ex: buyers for cnc machines can be in places like Maharastra,
Delhi, etc.
 (Buyer’s perspective)
Selection stage: making a contract for the suppliers in the end
Deliver selection stage: Making transaction routine based on performance of supplier
Nature of organizatioanl buying process:
- Interaction between buyer and seller are structured and rule based which are
written down
- The past “track-record” determines if supplier is included in “evoked”
(consideration) set
- Relationships build loyalty (long-term relationships)
- Usually team selling and team buying happen (not one person who does
everything - person from each functional group involved - sales, finance, tech,
etc.)
- Interpersonal dynamics have an impact on the decision making (diversity,
conflicts)
- Compromise/consensus approach in decision making is adopted
- Technical approval frist, then move on to commercial aspects - whenever a bid is
accepted technical ability to meet tech specifications first and then proceed to the
pricing/commercial part
- Empanelment process is very stringent and time consuming (due to lots of
money involved)
Buyers are spending more time in research -
- From trusted sources (peers, colleagues, industry leaders, google search)
- Marketers should: focus on SEO and on adding informational value through blog posts;
join social media sites and forums like Likedin and Quora to engage with prospects as
they are in the research phase
Buyers value testimonials -
- Referrals and testimonials - prospects expect the least amount of bias from them (most
customer give more credence and credibility to supplier’s customers rather than
suppliers themselves - you have customers that have given you shining testimonials, we
should make that available for other people to use and help make decisions
- Marketers should: showcase proof of the value of their product or service in high-traffic
channels; start a referral program; ask loyal customers for testimonials to display on the
marketer’s site

New trends in B2B buying behaviour:

The buyer spend only 17% of the decision journey time with the sales rep (Gartner research)
Prospects (yet to be customers - not yet clients but likely to become) are less swayed by sales
calls now. They spend most of their time looking into options and weighing pros and cons
independently - buyers are vey savvy in using information that is widely and freely available
However, marketers should not disregard sales calls an unimportant. They should look to “sell”
in more indirect ways, such as through the brand website, SEO content, social media, sales
assets, blogs, youtube videos, etc. - and one or two in the org should be identifies as the
spokesperson who should be able to record videos and conversations related to the industry
and showcase their expertise and capability and make that a hook for prospects to become
customers.

- Buyers want a unified positive experience from a brand before buying-in (the experiential
marketing process starts much before the buying process)
Sales and marketing must work in tandem (ex: IBM)
Messaging must be excellent and aligned (ex: Qualcomm, anti-dystopian messaging
which is positive and hopeful of the future of a technology swapped world unlike George
Orwell’s)
Marketers should find a brand personality that you have created for yourself (ex: a
reliable supplier or for Volvo - its safety) and stick to a consistent voice that will resonate
with the audience. For sales teams, operate using a sales system that uses a sales
funnel regularly, instead of ad hoc, knee-jerk reactions (sales in B2B should be operating
in a very structured manner)
- Buyers prefer online marketplaces to compare. Marketers should partner with an online
marketplace to make it easier for buyers to decide (eg. Tie-ups with Indiamart, Udaan,
etc.) - just like we look at different options in the market based on policybazaar.com or
makemytrip.com or trivago.com; B2B buyers also look at online marketplaces where
they can compare products of different brands at one place

Porter’s 5 forces:
Meaning of “porter’s five forces”
To identify the strength and weakness of the industry we are dealing in (ex: steel or gov
industry) + helps build a corporate strategy
 - There are certain parameters which are common across each industry and helps us to
determine strengths and weaknesses of the industry
- Porter’s 5 forces is used to analyze the industry and build corporate strategy
- The framework is artwork of the renowned Harvard professor named Micheal E. Porter
Indian railways - monopoly so no competition but other industries have a lot of gov
manufacturers (gov industry competitors) and retailers (fabric industries competitors)
We have a lot of choices available - so important to understand what industry the
company is functioning in, who are the competitors, what target are they addressing and how do
we have out strategy aligned with that of competitors so we don’t lag behind

Industry competition:
- The parameter assesses how strong kthe competition is in the market. It takes into
account the number of competitors and what they are capable of doing
- Industry competition is more when: only a few players are selling a particular
product/service; Industry is growing and there is low switching cost for consumer
- In such case, chances of price wars are there which affect the company’s profits
Strength of the competition - how many, how they are functioning, profit cuts of each competitor,
what market share they are holding, how strong they are, how capable are they, better tech?
reach? Marketing strategies?, etc.
The more number of players we have - the lesser switching cost for customers (more availability
and easy choices for customers to switch) - price wars occur when it is a tight knit industry
wherein the products differ very slightly and quality is kind of similar and it can affect company
profitability

Threat of new substitute:

- This parameter assesses how tough or easy it is for the customer to make a switch from
a player’s service/product to that of another player
- When there are many substitutes available for a product/service, that segment becomes
unattractive to pursue
How easy it is for a customer to switch from one product to another (ex: apple user shifting to
android is not an easy switch)
- Also, if many substitutes are there, it may confuse the potential customers and cause
dilation of brand identity
Even in one company there are different varieties
- When the competition becomes high in substitute products and services, the prices
usually fall and company’s profits take a hit
High substitute market - easier for consumers to make a shift - loose market share - so to retain
that market share - firms try to cut prices which is going to impact profit target
Threat of new entrant:
- This parameter takes into account how tough or easy it is for new players to join the
market
How easy or tought it is for a company to enter an industry (ex: tough to enter the airline
industry) - if it is easy for a player to enter they have a risk of loosing market share
- If it is easy for a new player to get entry into the marketplace, it means that there is a risk
of losing market share for an established player
- There are various barriers to entry as well as for the new entrant which are as follows:
economies of scale, brand equity, access to information and cost advantages
You have to produce a larger quantities and have a minimum margin for each product sold - so
if a new entrant is not able to establish a bigger unit then they might not be able to get that profit
cut
If a firm already has a very strong brand in the market - they may not be very much affected by
the competition (Brand equity) ex: maggie
Cost advantages - located near resources, they have certain connections with supplier, higer
plant fostering economies of scale

Bargaining power - Buyer

- This parameter described the power customers have in the exchange process
- It refers to how many buyers a firm has and the importance of such a consumer for the
firm
- If there is a small clientele then each client is having a huge power over firm - there will
be more power means having more negotiation for lower prices and deals
- If there is a larger number of buyers then individual customer has very less power over
firm. There will be more power with the firm to change prices and reap profits.
Ex: B2B industry manufacturing machinery for colouring fabric threads - very few buyers
who will be working in the fabric industry who will be in the manufacturing units (5-6
buyers and each buyer has a considerable amount of money they are willing to send and
we have very limited relations so we have to take into consideraiton the needs of each
buyer and negotiations of each buyer and make a win win situation since they are
important for us) - each buyer has more share and more power
Ex: grocery item - soaps (so we have a huge customer base and we can’t have one to
one negotiation with each customer and so the customer has very little bargaining
power)

Bargaining power - supplier

- This parameter describes the power of suppliers over the firm
- It is the number of suppliers supplying the goods/services and availability of such
suppliers
- If in case there is some unique material which cannot be provided by other suppliers or
there can be huge switching cost to shift to other supplier, in such cases supplier gains
power
- One seller has the bargaining power it can increase the cost of inputs
If you need a product only a few suppliers carry and the raw material is very rare - they have a
power over you
If supplier is giving a unique material - you are dependent on them and if you already have a
relation with a supplier and the switching cost if very high because you don’t know the quality of
other supplier then

Analyzing competition: who all are trying to fulfill the same need and gap
- Competitor analysis helps to assess the strength and weaknesses of the offering relative
to the competitors (potential customers). Assessment involves identification and
quantification which is important for crafting competitive strategy.
- Comparative assessment - it involves SWOT analysis of the firm relative to the
competitors
- Competitor analysis is often confused with competitive intelligence
- Competitive intelligence is broader than competitor analysis as it involves systemic
accumutlaiton, analysis and management of external information that may have an
impact on the company’s strategies and operations
Accumulation of info over a period of time, keep on analyzing it to stay on top of market (using
external info on what the competitor is doing - ex: diversifying their prodiuct or adding features
to their product

Importance of competitor analysis

continuous comparison with competitors and staying ahead

in terms of analysis their opportunities and threats in the market

Categories of competitors:
Similar product/services: Smart watch vs fitbit (ex: for an athlete who just wants to measure
calories both serves his need so in this situation a smart watch can be a competitor to fitbit)
Could offer: potential threat - they (comeptitors) can provide a similar offering you are providing -
need to keep a track on them
Could remove the need of product/service: you have a particular need as of now but that can be
completely scrapped away because of a new entrant that comes up in the market (ex: having
coils for mosquitoes and over a period of time liquid plugged ones introduced or creams or hit
spray)
4 levels of competition:

Brand competition: when competitors offer similar products/services to the same set of
customers and at a similar price it can be said that the company is facing brand competition -
cut to cut competition trying to solve same need and hardly any difference
The competitors may have similar size and structure of the company too - thay may have
similar economies of scale and production units
Ex: Coca-cola, pepsi, thumbs up, sprite etc. are all beverages prices parallel

Industry competition:
When competitors aren’t of similar size and structure, but the competitors produce
similar goods and compete in more limited geographical space or variety of the product
Example: British airways (brilliant out of london) vs singapore airways (brilliant out of singapore)
both in Airline industry (thus choice depends on home airport)

Form competition:
When competitors aren’t producing same goods/services but the competitors are trying to fulfilll
the same need (same gap addressed)
(Ex: Railways and Airways both are trying to address the gap of travelling)

Generic competition:
When consumers aren’t competing on the same business for the income spent by the consumer
(every busines is comepting for share of pocket - consumers will make a choice if they want to
spend their limited money on one thing over another)
Ex: making a choice between buying a new house vs foreign vacations
Effectively conducing competitor analysis:
● Plan (why are we doing the analysis, what are the results and outcomes, how do we use
those results) - devising a right strategy
● People (who are the people who will be helping in the competitor analysis) - right people
with right skills
● Position - information flows across departments internally y and externally - so support
and involvement needed with all positions involved
● Process - Right data, convert the data through process, and communication across
departments
● Performance - what are the results of the analysis, quantifying it (having measurement)
and feedback
Four stages in competitor analysis
* Collecting data
* Integrate fata with other relevant information: Internal and external info integrating data - full
proof documentation for each info obtained for where it was obtained from and what is the
authenticity of that piece of info
* Communicating results: Converting the data to meaningful information
* Countering competitors’ moves (Making timely decision from the information)