UNIT-2

Consumer Behaviour and

Market Selection
 UNIT-2
Consumer Behaviour: Needs for studying consumer
Behaviour; Stages in Consumer buying decision process;
Factors influencing consumer buying decisions.
Market Selection: Choosing market value through STP. Market
Segmentation – bases of segmenting consumer markets. Market
Targeting, Product Positioning- concepts and bases
 Introduction
Questions to be Answered in this Unit:

a. What motivates the consumer to buy?

b. Why does he buy a specific brand from a particular store?
c. Why does he shift his preferences from one store to another or from one
brand to another?
d. How does customer react to a new product introduced in the market or a
piece of information addressed to him?
e. What are the stages he travels through before he makes the decision to
buy?
 Consumer Behaviour And Related Terms

Consumer Behaviour:
* Ostrow & Smith stated that consumer behavior is action of consumers in the market
place and the underlying motives for those actions.
* It is the behaviours that consumers display in searching for, purchasing, using and
evaluation of products and services that they expect will satisfy their needs.
* Acc. to Schiffman and Kanuk, “Consumer behaviour is the study of how individuals
make decisions to spend their available resources (time, money, effort) on consumption-
related items”.
* It includes the study of
What they buy, Why they buy, When they buy, Where they buy, How often they buy it, and
How often they use it.
* It includes consumer behaviour including pre-purchase behavior and post-purchase
behaviour.
 Roles in Buying
Blackwell, Miniard and Engel described the following five roles in buying decision
making process:
a. Initiator: The person who begins the process of considering a purchase.
Information may be gathered by this person to help the decision.
b. Influencer: The person who attempts to persuade others in the group concerning
the outcome of the decision. Influencer typically gathers information and attempts
to impose their choice criteria on the decision.
c. Decider: The individual with the power and/or financial authority to make the
ultimate choice regarding which product to buy.
d. Buyer: The person who conducts the transaction. The buyer calls the supplier,
visits the store, makes the payment and effects delivery.
e. User: The actual consumer/user of the product.
 Need and Importance of Studying Consumer Behaviour
1. Consumer does not always act or react as the theory would suggest: Earlier consumer
considered price levels as if price and quality had positive relation. Today, consumer seeks
value for money, less price but with superior features.
2. Consumer preferences are changing and becoming highly diversified: The shift has
occurred with availability of more choices compared to pre-1991 era.
3. Knowledge of consumer behaviour is necessary to determine the marketing mix that would
satisfy the consumers better.
4. Knowledge of consumer behaviour can serve as a guide to planning and implementing
marketing, strategies to accomplish the goals of the firm.
5. Consumer research has vividly pointed out that consumers dislike using identical products
and prefer differentiated products to reflect their special needs, personalities and life-style.
6. Meeting of special needs of customers requires market segmentation: For e.g. Different
policies of LIC.
7. Rapid introduction of new products with technological advancement has made the job of
studying consumer behaviour more imperative.
8. Implementing the “Marketing Concept” calls for studying the
consumer behaviour.
 Buying Motives of Consumers
• A buying motive induces a buyer to buy a product. It is an influence which
provides an impulse to buy.
• Buying motives are different for different consumers. Hence, it is important to
study the psychology of the customer and design the marketing mix accordingly.
Types of Buying Motives:
• Internal Motives: They often originate in the minds of people and are both
physical and psychological in nature.
a. Rational: Based on logical reasoning
b. Emotional: Based on personal feeling
• External Motives: They originate because of interaction with the external
environment. Buying motives get affected by the factors such as income,
occupation, religion, culture, family and social environment etc.
 Consumer Buying Decision Process
Buying a product involves decision making i.e. a choice among the alternative products
available.

Post-
Need Information Evaluation of Purchase
Purchase
Recognition Search Alternatives Decision
Behavior

1. Need Recognition
• In the absence of need recognition, the consumer will not search for any information. In fact, need is
the catalyst which triggers the buying decision process to satisfy the need.
• Consumer become aware of the need as a result of internal stimuli (e.g. basic needs like hunger, strike
etc.) or external stimuli (e.g. advertisement, word of mouth, general discussion and so on).
• The stimuli activate the consumer to engage in the purchase decision making process.
 Consumer Buying Decision Process
2. Information Search: Once the need is identified, the consumer starts to seek information about
possible alternatives to satisfy the need.
a. Internal Search: Refers to retrieving information from memory. Personal preferences, past
experiences and knowledge of available food options.
b. External Search: Sources of External information include:
# Personal Sources - Relatives, friends, neighbors and chat groups
# Professional Sources - Information from professionals, magazines, journals, internet search etc.
# Experiential Sources – Direct experience through trial, inspection and observation.
# Commercial Sources: Marketer initiated efforts such as advertisements, displays, sales
promotion, sales persons, packages etc.
# Public Sources: Mass media, consumer rating organization, report of governmental agencies etc.
3. Evaluation of Alternatives: Emphasize is on ‘Evaluative Criteria’ which is referred as those
features which the consumers considers in making the selection among all the available alternatives.
These criteria's can either be objective (e.g. government taxes) or subjective (e.g. favorable image of
projector).
Most commonly used evaluation criteria are: product attributes, relative importance of each
attribute to the consumer, brand image or brand beliefs, utility function for each attribute,
attitudes towards different brands or alternatives under consideration.
Consumer Buying Decision Process
4. Purchase Decision: After evaluation of alternatives, the customer arrives at a decision to buy a product
to satisfy a particular need. To strengthen his purchase attention, consumer decides the brand to be
purchased and chooses the retail store from where to purchase.
This is followed by the purchase decision for materializing the intention or wish to purchase. However,
purchase intention does not always result in actual purchase because of two intervening variables: first,
the influence of others and secondly, contingency factors.

5. Post Purchase Behavior:

Post Purchase Behaviours

Dissonance

Satisfaction Dissatisfaction
 Factors Influencing Consumer Buying Decision
Cultural Social Factors Personal Factors Psychological Factors
Factors
Culture Reference Group Age and Life cycle Motivation
Stage
Sub-Culture Family Occupation Perception
Social Class Role and Status Economic Learning
Conditions
Life Style Beliefs and Attitude
Personality and
Self concept
 Cultural Factors
• The study of culture encompasses all aspects of a society such as religion, knowledge,
language, customs, traditional music, art, technology, work pattern, products etc. Culture is
the sum total of learned beliefs, values and customs which serve to guide and direct the
consumer behaviours of all members of the society. Culture is something which passes from
one generation to another.
• Culture influences can provide an important basis for maker segmentation, product
development, advertising etc.
✓ Culture and Consumption: Culture is prescriptive and decides the consumption habits,
eating habits, food preferences and food preparation. e.g. beef eating.
✓ Sub Culture: A sub culture is an identifiable and distinct group that has unique
characteristics. A sub culture is a psychological, religious, social and geographical source of
group identification.
✓ Social Class: A social class means an open group of individuals with similar social rank.
Quite often people in a society are classified into upper, middle and lower classes on the
basis of their income and occupation.
 Social Factors
Social factors such as economic conditions of the family and role and status of family exert
a powerful influence on buying decision. The buying pattern of rich family will be totally
different from that of a poor family.

Family Reference Group Roles and Status

The family has major influence
on the behaviours of its
members. The emergence of
working women also affects
the consumption pattern of the
concerned family.
A reference group consists of
group that has direct/indirect
influence on the forming of
individual and group values,
attitudes and behaviours.
Membership: To which an
individual actually belongs.
Aspirational: To which one
aspires to belong
Dissociative: A group to which
a person does not wish to be
associated.
An individual has many roles
to play. The type of status one
can have in the society depends
upon the relative position at
home, work and society.
Products must be prepared not
only as per the customer’s
requirement, the role of status
that individual enjoy help them
target customers at right place.
Personal Factors
A consumer is influenced by age and life cycle stage, occupation, economic circumstances,
life style, personality and self concept.
Age and Life cycle Stage
A person’s age is important decider of his
needs. Consumer behaviours is also influenced
by specific stage of family life cycle.
Economic Condition
Marketers target customer needs that can be
converted into wants and demands. Personal
income, savings, borrowing power, etc. decides
the economic capacity of the customer to buy a
product. Thus, marketers use trends and
patterns in income, savings, etc. of the people
to assess their capacity to buy the products.
Occupation
The occupation of a person decides the
consumption pattern. For example difference in
buying behavior of a teacher and an executive of
a company.
Life Style
Activities, Interests, Opinions and Demographics
(AIOD) of customer tells about their lifestyle.
Activities: Work, hobbies, Social events, vacations,
sports etc.
Interests: Family, home, Job, Community, Media and
Achievement
Opinion: Themselves, Social Issues, Politics,
Business, Economic, Education, Product and Culture.
Demographics: Age, Education, Income, Occupation,
Family Size etc.
 Psychological Factors
A consumer calculates at mental level to determine choices for buying the product.

Motivation Perception Learning

A “motive” is a stimulated need
that an individual seeks to
satisfy. Motivation can be
conscious or sub-conscious- a
force that underlies a behaviours.
Perception is the process of Changes in an individual’s
selecting, organizing and behaviours due to information
interpreting information to drive and experience are called
meaning. Different people learning. A consumer tends to
perceive the same thing at the repeat purchase actions which
same time in different ways. create satisfaction.

Attitude Personality
Attitude refers to an individual’s Personality is often described in
enduring evaluation, feelings and terms of traits such as self-
behavioral tendencies towards an confidence, dominance, sociability,
object or idea. For e.g. everyone adaptability etc. Personality
has attitude towards food, politics influences the type of brand and
and music etc. products purchased.
 Market Selection

A. Market Segmentation: The total market for many products is not

homogeneous but too much heterogeneous as people have different needs and
wants. For e.g. there may be total market for textiles, detergent, bikers, cars, TVs
etc. but within the total market for each of these products, there might actually
exits many sub-markets which differ virtually from each other.
B. To take advantage of this situation, the marketers may divide the total market
into smaller groups of consumers called segments, on the basis of significant
differences in buyer characteristics or buyer response to marketing programs.
C. Acc. To Stanton, “Market segmentation consists of taking the total
heterogeneous market for a product and dividing in into several sub-markets or
segments each of which tends to be homogeneous in all significant aspects” .
 Market Segmentation
✓ A market segment is that portion of a large market in which the customer share one
or more characteristics that cause them to have relatively similar product needs. It is
possible that a market creates a niche.
✓ Niche is a narrowly defined group of customers having a distinct and complex set
of needs. In the niche, there are few or no competitors and the product might
command a premium price.
✓ Market Segmentation is consistent with modern marketing concept as it studies
needs and expectations of different consumer groups and helps in designing an
appropriate marketing offering.
✓ Here producers employs a Rifle Approach (pinpoint the target and draws specific
plan to meet their needs).
 Need For Market Segmentation

1. Diverse Consumer Preferences. e.g. Smartphone companies.

2. Effective resource allocation.
3. Customized Marketing strategies. E.g. Retail Industry
4. Product Development and Innovation. E.g. Skin craft
5. Competitive Advantage
Market Segmentation is essential because it enables companies to understand, connect with
and satisfy the diverse needs and preferences of their target consumer. By effectively
segmenting the market, business can allocate resources wisely, develop tailored strategies,
innovate products and gain a competitive advantage, ultimately driving growth and success in
dynamic and ever evolving business landscape.
 Bases of Market Segmentation
Geographic Segmentation

• It involves diving a market based on geographic factors such as location, region, climate or
population density. This variable can be effective in targeting consumers who are
geographically concentrated or have specific needs related to their location.
• This segmentation is useful for local businesses and companies with location specific
products or services.
• It helps in providing the right product and services to the right customer in the right
location.
• For e.g. Winter sports equipment and apparel
 Demographic Segmentation
• Demographic segmentation divides a market based on demographic factors such as age,
gender, income, education, occupation and family size.
• Demographic segmentation is often considered a fundamental and reliable method because it
provides a clear understanding of consumer groups based on easily measurable and
accessible attributes.
• Age: Teenagers, Adults, Retired
• Gender: Male, Female, Third Gender
• Occupation:
• Income Level:
• Family cycle
 Psychographic Segmentation
• It considers consumer’s psychological and lifestyle characteristics, including their values,
beliefs, interests, personalities, attitude and behaviours. This variable helps marketer
understand motivation, aspiration and purchasing behavior, enabling them to create targeted
and personalized marketing messages.
• Roger has identified four group of consumer personalities according to the way they adopt
new products:
• Innovators: Cosmopolitan people who are eager to try new ideas. They are highly
venturesome and willing to assume the risk of an occasional bad experience with a new
product.
• Early Adopters: These are influential people with whom the average person checks out an
innovation.
• Late Majority: This group is cautious and adopts new idea after an innovation has received
public confidence.
• Laggards: Past-oriented people. They are suspicious of change and innovation.
 Psychographic Segmentation
Following are psychographic segmentation variables on the basis of which homogeneous
segments can be prepared:
a. Personality: Marketers consider personality as the basis of segmentation. For e.g.
authoritarian, aggressive, extrovert and competitive
b. Lifestyle: The life style of an individual is reflected in his activities, interests, opinions and
activities.
c. Values: Values such as self-respect, sense of belonging, sense of accomplishment and
enjoyment different from individual to individual
d. Social Class: Education level, place of residence etc. reflects social class. Educated people
tend to be better informed and more vigilant in buying.
 Behavioural Bases of Segmentation
Behavioural segmentation is based on the consumer response to his requirements. The consumer
are segmented on the basis of their behaviours through need-motivation, perception, learning-
involvement, attitude, occasion, benefits, user-status etc.
a. Purchase Occasion:
b. Readiness Status: Immediate buyers, trial buyers, qualified enquiries etc.
c. User Status: non-users, ex-users, potential users, first time users, regular users etc.
d. Usage Rate: low, medium, higher product users
e. Loyalty level: Complete loyal, partial loyal and non-loyal.
 Behavioural Segmentation
Need-Motivation Shelter, Safety, Security, Affection, sense of self-worth
Perception Low, Moderate, High
Learning-Involvement Low Involvement, High Involvement
Attitude Positive, Negative, Neutral
Occasion Regular occasion, Special occasion
Benefits Convenience, Prestige, Economy, Quality, Service, Speed
Readiness Stage Unaware, Aware, Informed, Interested, Desirous, Intending to buy
Time Leisure, Work, Rush, Morning, Night
Objective Personal use, Gift, Fun, Achievement
Location Home, office, Friend’s office, In store
Person Self, Friends, Boss, Peers
Place New, old
Usage Rate Heavy user, medium user, light user
Loyalty Status None, Medium, Strong, Absolute
 Benefit Segmentation
• The main benefit sought in a product can also be used as a basis to classify consumers. High quality, low
price, good taste, speed are some example of benefits. For e.g. some air travelers prefer economy class
(low price), while others seek executive class (status and comfort). Some consumers of toothpaste give
greater importance to freshness while others prefer taste or brightness of teeth.
• Consumer behavior depends more on the benefit sought in a product/service than on demographic
factors. Each market segment is identified by the major benefit it is seeking.
 Levels of Segmentation

1. Undifferentiated or Mass Marketing: Markets targets the whole market. For e.g. Coca Cola
2. Differentiated or Segmented Marketing: The marketers divides the whole market into
several segments and design separate offer for each. For e.g. HUL products. For e.g.
Detergent
3. Concentrated or Niche Marketing: The marketers concentrates on a few smaller segments
called niche. The manufacturers of luxury articles follow niche marketing and charge
premium prices for their products.
4. Micro Marketing: The marketer customizes his offer to each individual customer. Micro
marketing includes: Local Marketing and Individual Marketing.
 Criteria for Effective Segmentation

1. Identifiable: Identification of similar behavior of members of

segments.
2. Measurable and Obtainable: The size, profile and other relevant
characteristics of the segment must be measurable.
3. Substantial: Segment should be large enough to be profitable.
4. Accessibility: Segments should be reachable in terms of promotion and
distribution.
5. Responsiveness:
6. Actionable: The segments which a company wishes to pursue must be
actionable in the sense that there should be sufficient finance, personnel
and capability to take them all.
 Targeting
Market Targeting is the process of evaluating each market segment’s attractiveness
and selecting one or more segments to enter. Targeting is not relevant for firms
producing for the mass market as customer are not classified into any segments and the
whole population is considered a homogeneous market.
Evaluation of Market Segments
a. Size of the segment and growth prospects: It should be substantial to be profitable.
b. Attractiveness of the segment: The target market is attractive if there are few
competitors and there are few substitutes.
c. Firm’s objective and resources: Attractiveness should match with the firm’s
objective. Moreover, the firm must have adequate resources to enter the target market
and succeeds in the long run.
 Selection of Target Market Segments

BROAD Targeting NARROW Targeting

Undifferentiated Differentiated Concentrated Micro-Marketing

Marketing Marketing Marketing (Local or
(Mass) (Segmented) (Niche) Individual)
 Undifferentiated (Mass) Marketing
• The firm following this strategy goes after the whole market with one product type and ignores
segment differences.
• This strategy focuses on generic needs of the consumers and so designs a product and a
marketing program to have appeal to the largest number of consumers.
• It uses mass advertising and mass distribution of the standardized product produced on a mass
scale. This leads to lower costs of production and distribution and as a result the firm can offer its
product at lower prices to win the price sensitive customers.
• For e.g. salt and sugar
• Further to restrict the entry of competitors in the market, the product needs to be differentiated.
 Differentiated Marketing
• It attempts to appeal to the entire market by designing different products and
marketing programs for different segments of the market. By doing so, marketers
hope to achieve additional sales and increased identification with brand or company
name. This type of marketing is followed by most medium and large sized firms
doing business in many markets with a broad product line.
• Foe e.g. products of HUL
• Such marketing usually involves some differentiation among products and brands as
well as in pricing, promotion and distribution.
 Concentrated Marketing or Niche Marketing
• It is concerned with focusing all available resources on one segment within the total market. It is
an attempt to match what the firm can do best with a market niche devoid of strong competitors, a
strategy of differential advantage.
• It means one marketing mix, a rather narrow product line and some unique competence, which
is the basis for the firm’s competitive advantage in the chosen segment.
• For e.g. high fashion boutiques and design oriented houseware stores. Such marketing has been
followed by Ford, Rolls Royce, Rolex watches and Johnson’s & Johnson’s is good example of
concentrated marketing.
 Micro Marketing and Local Marketing

• Micro marketing occurs when target market is further bifurcated and the
needs of the smaller customer groups are addressed on a local basis. In this
marketing you don’t put out adverts and contents in the hope of being all
things to all men, rather you carefully craft content that will directly speak to
your chosen segment.
 Ten Rules for building relationship
with customer
1. The average customer does not exist.
2. Make customer’s experience special. Give customer something to talk about
3. If something goes wrong, fix it quickly.
4. Guarantee customer satisfaction.
5. Trust customer and customer will trust the company.
6. Customer’s time is as important as company’s.
7. Don’t take customer for granted.
8. The details are important to customer, as they should be to the company.
9. Employ people who are ready and willing to serve customer.
10. Customer cares to find out whether company is a responsible corporate citizen.
 Criteria/Factors Affecting Choice of
Targeting Strategy
1. Resources
2. Product Homogeneity
3. Life cycle stage of product
4. Market Homogeneity
5. Competition
 Product Positioning: Concept and Strategy

• Once a firm has decided which segments of a market it will enter, it must decide what
“positions” it wants to occupy in those segments.
• Marketers ability to bring attention to a product and to differentiate it in a favorable
way from similar products goes a long way toward determining the product’s
revenues and the company’s profits.
• Acc. To Kotler and Armstrong “A product’s position is the way the product is
defined by consumers on important attributes – the place the product occupies in
consumer’s minds relative to competing products”.
• Acc. To William Stanton, “ Positioning means developing the image that a product
projects in relation to competitive products and to firm’s other products.”
 Concept

• Positioning is the means by which a product or service can be differentiated from

others to give consumers reasons to buy. It encompasses the following two elements:
• Highlighting the physical attributes, the functionality and capability that a
product/brand offers e.g. a refrigerator’s compressor specification, its design, size,
cooling etc.
• Communicating the product/brand to the consumers so as to enter their mind, i.e.,
how consumers perceives the product/brand relative to other competing product/brands
in the market.
• Thus differentiating the product from others in the market and creating a positive
image of the product in the minds of consumers are the two tests of market positioning
of a product.
 Importance of Positioning
• Distinctive Product Image.
• Competitive Advantage
• Unique selling proposition
• Concern for customers
• Retention of customers
Repositioning: Positioning of a product may not last long due to technological
advancements, popularity of competitive products/brands, and emergence of new threats
and opportunities in the market.
• It means providing a product/brand with a fresh position accompanied by new
attributes and uses.
• For e.g. Maggi
 Ways to Reposition the Product/Brand

a. Changing the tangible attributes of a product and communicating the new

product offer to the market.
b. Changing the way the product is communicated to the original market.
c. Changing the target market and offering the existing product.
d. Changing both the product attributes and the target market.
Example:
a. Taco Bell: Cheap Mexican Food to Youth Lifestyle Brand
b. Gucci: Sleek and Sexy to Insta- Worthy and Progressive
c. Spotify: Free Music to Content Creator & Taste Maker
 Choosing a Positioning Strategy
• Developing a positioning strategy requires that management identifies key competitors, relent
attributes, competitors positions and analyze the market segments; the groups of customers.
The position decision also involves selection of the desired position, its implementation and
monitoring.
• Each firm has to differentiate its offer by building a unique, unmatched bundle of competitive
advantages that appeals to a substantial group of consumers in the segment. For e.g. Quality.
• Positioning strategy consists of steps as follows:
a. Identification of possible Competitive Advantage: product, product performance, product style
and design, product’s consistency, durability, reliability, reparability, best quality, lower costs.
b. Choosing the right competitive advantage
c. Selecting an overall positioning strategy
d. Developing a positioning Statement
e. Communicating and delivering the chosen position to the market
 Major Bases of Positioning A Product

1. Positioning by Product Attributes:

2. Positioning by Product Benefits
3. Positioning by Use/Application
4. Positioning by Price/Quality
5. Positioning by Product Class
6. Positioning by Competitors
7. Positioning by Product User
8. Positioning by Geographical Area of Origin
9. Positioning by Ingredients
10. Positioning by Cultural Symbols
 Criteria for Effective Positioning

1. Clarity
2. Consistency
3. Creditability
4. Competitiveness