CHAPTER I

BASICS OF CONSUMER BEHAVIOR

1. Introduction
Consumers are unique in themselves; they have needs and wants which are varied and
diverse from one another; and they have different consumption patterns and consumption
behavior. The marketer helps satisfy these needs and wants through product and service
offerings. For a firm to survive, compete and grow, it is essential that the marketer
identifies these needs and wants, and provides product offerings more effectively and
efficiently than other competitors. A comprehensive yet meticulous knowledge of
consumers and their consumption behavior is essential for a firm to succeed. Herein, lays
the essence of Consumer Behavior, an interdisciplinary subject, which emerged as a
separate field of study in the 1960s. It blends elements from psychology, anthropology,
sociology, economics and socio psychology.

1.1 Consumer Behavior Defined

The American Marketing Association has defined consumer behavior as, “The dynamic
interaction of affect, cognition, behavior, and the environment by which human beings
conduct the exchange aspects of their lives.”
Consumer behavior refers to “the mental and emotional processes and the observable
behavior 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 behavior study.

Consumer behavior 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 behavior is the end result of a long process of
consumer decision-making.

The study involves what consumer’s 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 of the product
after use. For example, consider the product computer, a relatively new but big business
in our country.

A study of consumer behavior in this area would investigate

 What kinds of consumers buy it or would buy 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?

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The answers to these questions can be investigated through consumer research and
provide manufacturers with important data and insight for determining computer features,
promotional strategy etc. Thus, the term consumer behavior is defined as the behavior
displayed by consumers in searching for, purchasing, using, evaluating, and disposing of
products and services that they expect will satisfy their needs.

Understanding of consumer behavior is a challenge for the marketers. It requires them to

probe and investigate a wide range of responses including affective responses (feelings
and emotions are experiences), cognitive responses (beliefs, opinions, attitudes, and
intentions related to products and services), and the behavioral responses (actions
involved while obtaining, using and disposing goods or services.) Moreover, in the long
run it is only those organizations that have been close to their customers and understood
their needs and wants that have been able to compete effectively at the market place.

It is more necessary that marketers understand uniqueness and diversity of consumer

behavior and make product or service offerings accordingly. The success of organizations
will be reflected when consumers accept such offerings and continue to patronize it for a
long period of time.

1.2. Importance of Study of Consumer Behavior

As stated earlier, consumer behavior plays an important role in modern marketing
practices. Most of marketing decisions are based on the study of consumer behavior. It
provides valuable information to design marketing mix and to modify it over time.
Marketing managers can actualize marketing goals only by studying consumer behavior
and responding it by designing a marketing program objectively. It is imperative to know
how consumers react to marketing program (4 P's) to serve them effectively. Role or
importance of study of consumer behavior can be explained with reference to the points
stated as under:-

1. Modern philosophy
It concerns with modern marketing philosophy – identify consumers' needs and satisfy
them more effectively than competitors.
 It makes marketing consumer-oriented.
 It is the key to success and achievement of goals.
 The key to the company's survival, profitability, and growth in a highly
competitive marketing environment.
 Thus, consumer behavior helps in achieving marketing goals.

2. Useful for dealers and salesmen

The study of consumer behavior is not useful for the company alone. Knowledge of
consumer behavior is equally useful for middlemen and salesmen to perform their tasks
effectively in meeting consumers’ needs and wants successfully. Consumer behavior,
thus, improves performance of the entire distribution system.

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 3. More relevant marketing program
Marketing program consisting of product, price, promotion, and distribution decisions
can be prepared more objectively. The program can be more relevant if it is based on the
study of consumer behavior. Meaningful marketing program is instrumental in realizing
marketing goals.
4. Adjusting marketing program over time
Consumer behavior studies consumer response pattern on a continuous basis. So,
marketer can easily come to know the changes taking place in the market. Based on
current market trend, the marketer can make necessary changes in marketing program to
adjust with market.
5. Predicting market trend
Consumer behavior can also aid in projecting the future trends. Marketer finds enough
time to prepare for exploiting the emerging opportunities, and/or facing challenges and
threats.
6. Consumer differentiation
Each segment needs different products. For every segment, a separate marketing program
is needed. Knowledge of consumer differentiation is a key to fit marking offers with
different groups of buyers. Consumer behavior study supplies detail about consumer
differentiations.
7. Creation and retention of consumers
Marketers who base their offering on a reorganization of consumer needs find a ready
market for their products. Company finds sit easy to sell its products. In the same way,
the company, due to continuous study of consumer behavior and attempts to meet
changing expectations of the buyers, can retain its consumers for long period.
8. Competition
Consumer behavior study assists in facing competition, too. Based on consumers'
expectations, more competitive advantages can be offered. It is useful in improving
competitive strengths of the company.
9. Developing new products
New product is developed in respect of needs and wants of the target market. In order to
develop the best-fit product, marketer must know adequately about the market. Thus, the
study of consumer behavior is the base for developing a new product successfully.

10. Dynamic nature of market

Consumer behavior focuses on dynamic nature of the market. It helps the manager to be
dynamic, alert and, active in satisfying consumers better and sooner than competitors.
Consumer behavior is indispensable to watch movements of the markets.
11. Effective use of productive resources
The study of consumer behavior assists the manager to make the organizational efforts
consumer-oriented. It ensures an exact use of resources for achieving maximum
efficiency.

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1.3. Consumer Behavior Applications in Marketing
Consumer behavior principles are applied in many areas of marketing as discussed
below:
Analyzing market opportunity: Consumer behavior study helps in identifying the
unfulfilled needs and wants of consumers. This requires examining the trends and
conditions operating in the marketplace, consumer’s lifestyles, income levels and
emerging influences. This may reveal unsatisfied needs and wants. The trend towards
increasing number of dual income households and greater emphasis on convenience and
leisure have led to emerging needs for household gadgets such as washing machine,
mixer grinder, vacuum cleaner and childcare centers etc. Mosquito repellents have been
marketed in response to a genuine and unfulfilled consumer need.

Selecting target market: A review of market opportunities often helps in identifying

distinct consumer segments with very distinct and unique wants and needs. Identifying
these groups, learning how they behave and how they make purchase decisions enables
the marketer to design and market products or services particularly suited to their wants
and needs.

1.4. Consumer Behavior Models

Consumer behavior models are nothing but a framework based on particular study by
particular researcher provides guidelines for consumer buying behavior understanding.
The consumer behavior models provide better insight to the marketers for taking
important decisions regarding various marketing mix elements.

A model is very often referred to as an abstract representation of a process or

relationship. We tend to hold various models in our minds, which allow us to make sense
of the world, and also help to predict the likely course of events. To put it simply, models
help us in the development of theories, understanding complex relationships, and
providing the framework for discussions and research work. In this section we have made
efforts to examine the various models having relevance to the consumer decision process.
The primary concern is to use the models to understand consumer behavior. Consumer
behaviorists as well as marketers are interested in understanding how and why certain
decisions are made.

The objectives of modeling have mainly confined to the following:

a. Description of buying behavior
b. Describing the consumer decision processes
c. Predictability and control of consumer behavior.
Some Models of Consumer Behavior are:

1. The Psychoanalytical Model

The psychoanalytical model draws from Freudian psychology. According to this model,
the individual consumer has a complex set of deep seated motives which drive him
towards certain buying decisions. The buyer has a private world with all his hidden fears,

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suppressed desires and totally subjective longings. His buying action can be influenced
by appealing to those desires and longings. According to Freud, human personality has
three parts namely,
[1] The “ID”, the source of all mental energy which drives one to an action.
[2] The “Super Ego”, the internal representation of what is socially approved—one’s
conscience.
[3] The “Ego”, the conscious director of ‘ID’ impulses for finding satisfaction in
socially acceptable manner.
In other words, ‘ID’ represents one’s basic impulses, ‘instincts’ and cravings for
immediate and total satisfaction. These instincts might be even anti-social. The Super
Ego or conscience reflects one's idealized or mended behavior pattern a via media
between the extremes that is the, conflict between “ID” and “Super Ego” is resolved by
Ego. The Ego is the intermediary which mediates and processes the dispute action as a
rational control center between the conflicting extreme sides of ID and Super Ego.

It is Ego that directs ones behavior to satisfy both the “ID” and “Super Ego”. Thus a
person is interested in buying say SONY TV with characteristics of Hi-black Trinitron
Screen—super drum sound system, 100 system memory, 1 tuner digital picture in picture,
A/V Stereo, LD compatibility costing say Birr.40,000 with remote control. Here his ‘ID’
demands the use of consumer credit liberally to buy that costly T.V. set. The Super Ego
dissuades him from heavy borrowing as credit beyond certain limits is not acceptable.
Here the Ego acts like a mediator and comes with a fine compromise of installment
system without away strains and drain on his financial position. Here self-image of a
consumer is a great motivating force inducing him to buy certain products. This model
can be presented as follows:

2. Learning Model
All theories of buyer behavior have been basically based on a learning model namely,
Stimulation- Response or more popularly known as SR model. SR learning theory is very
useful to modern marketing and marketers. Learning is the centrifugal point in the entire
study to human behavior. Learning, as noted earlier, refers to a change in the behavior
which occurs as a result of practice. It is a change in the behavior that results from
previous experience and behavior in similar situations. What is important, learning is a
product of reasoning, thinking, information processing and, of course, perception.
Therefore, behavior is deeply affected by the learning experiences of the buyers. Of all
the psychologists, Pavlovian stimulus or learning of buyer behavior is widely accepted.

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He says that buyer behavior is capable of being manipulated by human drives, stimuli,
and responses of the buyer. This model banks on man’s ability to leave, forget and
discriminate. Learning process involves three steps namely, Drive - a strong internal
stimulus which impels action. When it is directed towards a drive-reducing object, it
becomes a motive. A drive- need- thus motivates a person for action to satisfy the need.
Drives may be primary-thrust, hunger etc., and secondary - desire for money, pride etc.
Cues are weak stimuli. Cues determine when the buyer will respond. Say, we have cues
such as a product advertisement relevant to the situation and existing in our environment.
Response is the final stage which is needed to fulfill the drive or as a need which was
acting as a strong stimulus. Thus, the thirst can be quenched by an ad. These sequential
components of learning link stimulus cue and response finally resulting in a habit. In
marketing, it is better known as a learning brand loyalty, brand images and store
patronage. Repeated reinforcement leads to a habit formation and the decision process for
an individual becomes a matter of routine.

It is worth emphasizing here that we learn through trial and error and changes in our
behavior are brought about by practice as experience. The SR model of Pavlovian
learning is made clear by given figure:

3. Economic Model
Under economics, it is assumed that man is a rational human being, who will evaluate all
the alternatives in terms of cost and value received and select that product/service which
gives him/her maximum satisfaction (utility).Consumers are assumed to follow the
principle of maximum utility based on the law of diminishing marginal utility. It is
assumed that with limited purchasing power, and a set of needs and tastes, a consumer
will allocate his/her expenditure over different products at given prices so as to maximize
utility.
The law of equi-marginal utility enables him to secure maximum utility from limited
purchasing power. Economic model of consumer behavior is unidimensional. This means
that buying decisions of a person are governed by the concept of utility. Being a rational
man he will make his purchase decisions with the intention of maximizing the
utility/benefits.

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Economic model is based on certain predictions of buying behavior
[1] Price effect- lesser the price of the product, more will be the quantity
purchased,
[2] Lesser the price of the substitute product, lesser will be the quantity of the
original product bought (substitution effect)
[3] More the purchasing power, more will be the quantity purchased (income
effect).
The assumption about the rational behavior of human beings has been challenged by the
behavioral scientists. They are of the opinion that while the predictions are useful, the
model only explains how a consumer ought to behave. It does not throw light on how the
consumer actually behaves. Behavioral scientists argue that the economic model is
incomplete.

Economics is assuming the market to be homogeneous, and that buyers will think and act
alike. And that they will only concentrate on one aspect of the product, i.e., income. This
model ignores all the other aspects such as perception, motivation, learning, attitude and
personality and socio cultural factors. It has always been agreed upon that man is a
complex entity, a puzzle, a riddle. Hence, it is very important to have a multi-disciplinary
approach to understand consumer behavior. Further, in today’s environment, apart from
the various psychological, socio cultural determinants of the consumer, it has been
observed that the consumer also gets influenced by other marketing variables namely -
products (ones which are technologically advanced), effective distribution network and
marketing communication(media and promotion techniques). Thus man cannot be
assumed to be a rational person and price is not the only factor which influences his
purchase decision. Behavioral scientists have opined that a broader perspective has to be
taken while trying to analyze buying behavior, not only economics but the role played by
needs, motives, personality and self-concept and socio cultural factors should be
considered to understand what will be the buyer’s responses to various stimulus and in
turn what will be the effect of this on consumer’s buying behavior.

4. Nicosia Model
Francesco Nicosia was one of the first to develop consumer behavior model in the early
1960s and shift focus from the act of purchase itself to the more complex decision
process that consumers engage in about products and services.
Nicosia presented his model in flow chart format, resembling the steps in a computer
program. Also, all variables are viewed as interactive, with none being inherently
independent or dependent. Thus, the model describes a circular flow of influences where
each component provides input to the next.
The model is viewed as representing a situation where a firm is designing
communications (products, ads etc.) to be delivered to consumers and in turn consumers’
responses influence subsequent actions of the firm.
The model contains four major fields or components: (FIELD-I) the firm’s attributes and
outputs or communications and the consumer’s psychological attributes, (FEELD-II) the

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consumer’s search for and evaluation and of the firm’s outputs and other available
alternatives, (FIELD-III) the consumer’s motivated act of purchase, and (FIELD-IV) the
consumer’s storage or use of the product. Nicosia assumes that the consumer is seeking
to fulfill specific goals and that initially there is no history between the consumer and the
firm, so no positive or negative predispositions towards the firm exist in the consumer’s
mind.

As shown in the figure, the firm produces some type of communication (product, service,
ad etc.) that the consumer is exposed. Attributes of the message and the consumer
determine the nature of consumer’s exposure to it and its influence on the individual. One
consequence is that the message will influence the consumer’s attitude towards the brand.
This attitude is the input to the FIELD-II.

The consumer will probably become motivated to gain information at this point, and
search activity is likely to occur. Some search activity will involve searching internal
memory for relevant information about the communication (product, service, company
etc.). External search may also occur, where the consumer visits stores or reads reports
etc. This is likely to lead to evaluation. If the consumer processes relevant information
and begins to favor the firm’s brand, she/he will be motivated, leading to FIELD-III, and
if nothing intervenes, this information is likely to precipitate shopping activity and
purchase of the brand. At this point, a number of outcomes can occur.

One outcome is that the firm receives feedback (FIELD-IV) and another is that the
consumer’s attitude towards the brand may change because she/he gains experience with
the product during storage and use. This experience is feedback to the consumer’s
predispositions.

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Limitations of Model:
 The Nicosia model offers no detail explanation of the internal factors, which may
affect the personality of the consumer, and how the consumer develops his attitude
toward the product. For example, the consumer may find the firm’s message very
interesting, but virtually he cannot buy the firm’s brand because it contains
something prohibited according to his beliefs. Apparently it is very essential to
include such factors in the model, which give more interpretation about the
attributes affecting the decision process.
 A number of assumptions have been made that question the validity of this model,
for instance:
 What type of consumer are we talking about?
 The company and the consumer have an existing relationship? What type?
 Is this for a new product?
 Is this the first exchange the consumer has had with the producer?
 Overlapping between firm’s attributes and consumers attributes.

5. Howard-Sheth Model
The Howard-Sheth Model represents a major revision of an earlier systematic effort to
develop a comprehensive theory of buyer decision making.
This model depicts and creates a distinction among three stages of decision-making.
1. Extensive Problem Solving: This occurs when a consumer has little or no prior
knowledge, and any beliefs about the brand do not exist and she/she has no specific
brand preference. The consumer seeks information actively about several
alternative brands in the category.
2. Limited Problem Solving: In this situation the consumer has some limited
knowledge and beliefs about the available brands. Because of limited knowledge,
she/he is not in a position to evaluate brand differences to establish a preference.
The consumer seeks some comparative brand information, although the decision
criteria are quite likely to be fairly established.
3. Routinized Response Behavior: This refers to a situation when the consumers’
knowledge and beliefs about the brand and its alternative are well established and
the consumer is predisposed to the purchase at one particular band.

The model has four major sets of variables:

1. Inputs
2. Perceptual and learning constructs
3. Outputs
4. External variables
Inputs
These variables include three distinct types of information sources (stimuli) present in the
consumer’s environment. Significative stimuli represent the brand’s physical attributes,
the marketer provides the symbolic stimuli in the form of brand information and could be
visual or verbal, and the third kind of information is furnished by consumer’s social

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environment such as family, reference groups, and social class. All these three types of
stimuli furnish information inputs to the potential consumer concerning the product
category or the brand.

Perceptual and Learning Constructs

The central element in the Howard-Sheth Model includes psychological variables that are
assumed to operate when the consumer is involved indecision-making process. These
psychological variables are treated as simply ideas, and are not defined operationally or
evaluated directly. Some of these variables are perceptual in nature and focus on how the
consumer receives and processes information gained from input and other parts of the
model. For instance, stimulus ambiguity occurs when the consumer is not sure about the
meaning of information gained from the environment Perceptual bias occurs in case the
consumer distorts the received information so that it suits the consumers’ established
needs, wants, or experiences.

Learning constructs perform the function of consumer’s concept formation and include
her/his goals, information about the brands in the evoked set, criteria for evaluating
alternatives, and intentions to buy. The proposed interaction (shown with arrows and
solid and dotted lines) between various perceptual and learning variables and the
variables in other segments of the model give the Howard-Sheth Model a distinct
character.

Outputs
The model shows a series of outputs that are similar in name to some of the perceptual
and learning construct variables that include attention, brand comprehension, attitudes,
intentions, and finally the act of purchase.

External Variables
These variables are not directly involved in the decision-making process. The relevant
external variables include importance of the purchase, consumer’s personality traits,
Culture time pressure, Social class and availability of funds.

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Criticism to Howard Sheth Model
 There is an absence of sharp distinctions between exogenous variables and other
variables
 All purchase decisions are not systematic or sequential for all products. Some
decisions are taken with no prior planning, and they do not follow the model’s
sequence.
 The model is quite complex and not very easy to comprehend

6. The Engel – Kollat – Blackwell Model

This model talks of consumer behavior as a decision making processing the form of five
step (activities) which occur over a period of time.

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The five steps (activities) involved in the decision process stage are briefly explained
hereunder:
1) Problem Recognition: The consumer will recognize a difference between his or her
actual state and what the ideal state should be. This may occur on account of external
stimuli, for example a young girl has seen an advertisement of an exhibition of
American Diamonds and may feel the desire to possess the same or seeing a beautiful
dress displayed in the show-room may make a youngster to feel the need for a new
dress. It may be noted that the consumer must perceive a sufficiently large
discrepancy between actual and ideal states in order to be activated, recognize a
problem and find a way to solve it.

2) Information Search: Initially the information available with the consumer may be
consistent to the beliefs and attitudes held by him or her. While being involved in an
information seeking or search stage, the consumer will try to gather more information
from various sources. These sources could be sales persons, personal or friends or
neighbors or mass communication media. The information processing takes place in
various stages. The individual gets exposure of the stimuli which may catch his or her
attention, be received and stored or retained in memory. This method of information
processing is selective in nature and the consumer will accept the information which
is conclusive to what is perceived by them.

3) Alternative Evaluation: Now the individual will evaluate the alternative brands. The
methods used for evaluating the various products will be dependent on the consumers
underlying goals, motives and personality. The consumer also has certain
(predetermined) beliefs about the various brands in terms of the characteristics
associated with the different brands. Based on these beliefs the consumer will respond
either positively or negatively towards a particular brand.

4) Choice: The consumer’s choice will depend on his or her intention and attitude. The
choice will also depend upon normative compliance and anticipated circumstances.
Normative compliance relates to the extent to which the consumer is influenced by
other people like friends, family members etc. Thus normative compliance and
anticipated circumstances will attempt to influence the individual. The person’s
choice of the product can also be dependent on the sensitivity of the individual to
handle unanticipated circumstances like losing the job, funds diverted for another
urgent cause etc. At this stage, a purchase decision is likely to occur unless when
confronted by unanticipated circumstances. In case of the latter occurring, it may act
as a barrier to the purchase decision.
5) Outcome: The outcome may be either positive or negative. If the end result is
positive, the outcome will also be positive. Conversely, if there is dissonance, that is,
a feeling of doubt experienced by the consumer, about the choice made by him or her
outcome will not be positive.
Now the consumer will search for more information to support his or her choice.

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The Engel, Kollat & Blackwell Model of Consumer Behavior or consists of four distinct
stages;

 Information Input Stage: At this stage the consumer gets information from
marketing and non-marketing sources, which also influence the problem
recognition stage of the decision-making process. If the consumer still does not
arrive to a specific decision, the search for external information will be activated
in order to arrive to a choice or in some cases if the consumer experience
dissonance because the selected alternative is less satisfactory than expected.

 Information Processing Stage: This stage consists of the consumer’s exposure,

attention, perception, acceptance, and retention of incoming information. The
consumer must first be exposed to the message, allocate space for this
information, interpret the stimuli, and retain the message by transferring the input
to long-term memory.
 Decision Process Stage: The central focus of the model is on five basic decision-
process stages: Problem recognition, search for alternatives, alternate evaluation
(during which beliefs may lead to the formation of attitudes, which in turn may
result in a purchase intention) purchase, and outcomes. But it is not necessary for
every consumer to go through all these stages; it depends on whether it is an
extended or a routine problem-solving behavior.
 Variables Influencing the Decision Process: This stage consists of individual
and environmental influences that affect all five stages of the decision process.
Individual characteristics include motives, values, lifestyle, and personality; the
social influences are culture, reference groups, and family. Situational influences,
such as a consumer’s financial condition, also influence the decision process.

The above mentioned Engel-Kollat-Blackwell model has taken into consideration a large
number of variables which influences the consumer. The model has also emphasized on
the conscious decision making process adopted by a consumer. The model is easy to
understand and is flexible, that is, it recognizes that a consumer may not go through all
the steps always. This is because in case of repeat purchases the consumer may bypass
some of the steps.

THE END!

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