CUSTOMER ANALYSIS

BUYING BEHAVIOR OF CONSUMERS BUILDING CUSTOMER VALUE

UNDERSTANDING CONSUMERS
Sergio Zyman, Former Chief Marketing Officer, Coca Cola Company, says in his recent book End of Marketing : They (consumers) are, quite possibly, the only thing worth thinking about.Every thing that happens to consumers and every thing that consumers do should affect your marketing decisionsYou have to understand the whole environment in which people live.Anything that happens in that environment is going to change what consumers do and dont do.

RISE OF CONSUMER DEMOCRACY

There has been a seismic change in the consumer markets in the past two decades which has been aptly described as the rise of consumer democracy. Suddenly, due to a number of factors, most notably technology and the development of global markets, consumers have more choices than ever before. So marketers have to work harder to make sure that consumer choose their products.

STUDY OF CONSUMER BEHAVIOUR

Because markets are complex , we need to develop some common framework for grasping a markets essentials. The marketer should approach the study of a new market by asking 4 questions : 1. What does the market buy ? 2. 3.

4. organization ( FOUR Os OF A MARKET )

Objects Of Purchase Why does it buy ? Objectives of purchase Who buys ? Organization of purchase How does it buy ? Operations of purchasing

6 Os OF A MARKET
The 4 Os of a market (Objects, Objectives, Organization and Operations) should be grasped before one contemplates the 4 Ps of the marketing mix. Two further questions of a more descriptive nature can also be asked of a market : 5.When does it buy ? Occasions for purchase 6. Where does it buy ? Outlets for purchase

CONSUMER MARKET
Consumer Market is the market for products and services that are purchased or hired by individuals and households for personal (nonbusiness) use. Consumer Products : Products purchased for personal use.

BUYERS V/S CONSUMERS

Mother buying toys for kid (Buyer Mother, Actual user Kid) Marketers focus their promotion on both i.e. buyers and the user (ultimate consumer) For example Maggi and Rasna , both try to influence the buyer and the user. Taste and fun aspects for children (main users) and time saving and economy for mothers (actual buyers).

CLASSIFICATION OF CONSUMER PRODUCTS

(A.) On the basis of their rate of consumption and tangibility : DURABLE GOODS (Tangible goods which normally survive many uses, frequency of purchase is less e.g. Refrigerator, T.V. etc.) NON-DURABLE GOODS (Tangible goods normally are consumed in one or few uses, frequency of purchase is more e.g. Soap, Salt, Tooth paste, Shampoo etc.) SERVICES (Intangibles, Activities,benefits or satisfactions which are offered for sale e.g hair cuts, education, restaurants, airlines etc.)

CLASSIFICATION OF CONSUMER PRODUCTS

(B.) On the basis of consumers shopping habits : CONVENIENCE GOODS (Which the customers usually
purchase more frequently, immediately and with the minimum of efforts in comparing and buying, e.g.Soap, Cosmetics, Tobacco etc.)

SHOPPING GOODS (Which the customers, in the process

of selection and purchase characteristically compares on such basis as suitability,price and style, quality , durability etc., e.g. Furniture, T.V., Automobiles, major appliances etc.)

SPECIALITY GOODS (Goods with unique

characteristics and/or brand identification for which buyers are willing to make a special purchasing effort, e.g. specific brands and types of fancy goods, hi-fi components, technological items, special items etc.)

A SIMPLE MODEL OF CONSUMER BEHAVIOUR

INPUT
External Influences

PROCESS

OUTPUT

Consumer Decision Making

Consumer Decisions and Actions

MODEL OF BUYER BEHAVIOUR

Inferences
Marketing Stimuli Other Stimuli ECONOMICAL CULTURAL GEOGRAP HICAL PROBLEM RECOGNITION BRAND CHOICE SOCIAL INFORMATION SEARCH PLACE DEALER CHOICE TECHNOLO GICAL PERSONAL PSYCHOLOGICAL EVALUATION PURCHASE TIME PROMOTION DECISION POST PURCHASE BEHAVIOUR PURCHASE AMOUNT Buyers Buyers Decision Characteristics Process Buyers Decisions PRODUCT CHOICE PRODUCT

PRICE

BUYERS BLACK BOX

INPUT

PROCESS

OUTPUT

INFLUENCE ON CONSUMER BEHAVIOUR

I. BUYING INFLUENCESPRODUCT CHARACTERISTICS SELLERS CHARACTERISTICS SITUATIONAL ,, ,, BUYERS ,, ,,

II. BUYING SITUATIONS III. BUYING PROCESS IV. BUYING DECISIONS

FACTORS INFLUENCING BUYERS BEHAVIOUR

CULTURAL SOCIAL CULTURE PERSONAL REFERENCE GROUPS AGE,GENDER,LIFE
PSYCHOLOGICAL

SUB-CULTURE FAMILY CYCLESTAGE, OCCUPATION, ROLES AND INCOME,PERSONALITY STATUS SOCIAL CLASS

BUYER
MOTIVATION,PERCEPTION,LEARNING, BELIEF & ATTITUDE

(A.) CULTURAL FACTORS

CULTURE: All aspects of society. It includes Values, Customs, Arts and Skills. Transmitted from generation to generation. SUB-CULTURE: Each culture contains smaller groups of sub-cultures- Nationality, Religion, Race, Geographical location. SOCIAL CLASS: In every society there is inequality in social status among different people and the people are categorized into different social classes.Social scientists have identified six major social classes : UpperUpper, Upper-Middle, Upper-Lower, LowerUpper, Lower-Middle, and Lower-Lower.

(B.) SOCIAL FACTORS

REFERENCE GROUPS : ( PEOPLE AROUND US ) : Our decision of purchase is not only influenced by our life style, our personality and by other psychological factors but also by the people around us, with whom we interact directly or indirectly (influence our purchase decision), e.g. families, friends, neighbors, colleagues, civic and professional organizations. Aspiration Groups (want to belong to) adoption of the opinions and outlook of film stars, sports stars, pop stars etc. Disassociate Groups (do not want to belong to) whose values and behavior an individual rejects, e.g. you may not like to follow the brand choice of your neighbor or your relative etc.

SOCIAL FACTORS
(REFERENCE GROUPS) The degree to which a reference group will affect a purchase decision depends on an individuals susceptibility to reference group influence and the strength of his/her involvement with the group. Reference group influence on products : Strong Influence Cars, Color T.V., Furniture,Refrigerator etc. Weak Influence Tea, Coffee, Soap, Beer, Cig. etc.

SOCIAL FACTORS
FAMILY:
Family of Orientation(Ones parents, brothers and sisters) Family of Procreation(Ones spouse and children) Different family members play different roles. Marketers should study the roles that different family members might play in purchase decisions.(i.e. Initiator,Influencer,Decider,and User).

ROLES AND STATUS:

(Role of a manager carries more status than role of clerk and his status).

(C.) PERSONAL FACTORS

AGE GENDER LIFE CYCLE STAGE *** OCCUPATION INCOME LIFE STYLE PERSONALITY etc.

PERSONAL FACTORS
LIFE CYCLE STAGE *** (The family life cycle) families go through stages, each stage creates different consumer demands :
Single / Bachelor stage (Young unmarried living away from home) Newly married Full nest 1 (youngest child under 6) Full nest 2 (youngest child over 6) Full nest 3 (older married couples with dependent children) Empty nest 1 (older married couples with no children living with them, head still working) Empty nest 2 (,, ,, ,, ,, ,, ,, ,, ,, ,, Head retired) Solitary survivor in labor force Solitary survivor retired Modernized life cycle includes divorced and no children

(D.) PSYCHOLOGICAL FACTORS

MOTIVATION (Need arises-Person seeks its satisfaction-It is known as motive). A motive is an internal energizing force that orients a persons activities toward satisfying a need or achieving a goal. Actions are effected by a set of motives, not just one. If marketers can identify motives then they can develop a better marketing mix. All our needs can be classified as - Primary (Physiological) and Secondary (Acquired these are Psychological make-up)

MASLOWS THEORY OF MOTIVATION

According to Abraham Maslow human needs are arranged in a hierarchy, from the most pressing to the least pressing. People will try to satisfy their most important needs first. When a person succeeds in satisfying an important need, that need will cease being a current motivator, and the person will try o satisfy the next most important need.

HIERARCHY OF HUMAN NEEDS

SelfActualization Needs (self development and realization) Esteem Needs
(self-esteem,recognition,status)

Social Needs (sense of belonging,love) Safety Needs (security,protection) Physiological Needs (hunger, thirst,shelter etc.)

HERZBERGS THEORY OF MOTIVATION

According to Frederick Herzberg there are two factors that are considered by consumers in deciding which brand to buy : dissatisfiers (factors that cause dissatisfaction) and satisfiers (factors that cause satisfaction). The absence of dissatisfiers is not enough; satisfiers must be actively present to motivate a purchase.

PSYCHOLOGICAL FACTORS
PERCEPTION ( How we see the world around us )

(Information inputs are the sensations received through 5 sense organs-Eyes (sight), Ears (hearing), Nose (smell), Tongue (taste) and Skin (touch). Perception is the process of selecting, organizing, and interpreting information inputs to produce meaning, i.e. we chose what information we pay attention to, organize it and interpret it.

PSYCHOLOGICAL FACTORS
(PERCEPTION) How a motivated person actually acts is influenced by his or her perception of the situation, beliefs and attitudes. People can emerge with different perceptions of the same object because of the three perceptual processes : selective attention, selective distortion, selective retention.

PSYCHOLOGICAL FACTORS
LEARNING (Adults human behavior is learned behavior. Skills & knowledge gained from past experiences). Most human behavior is learned. Learning theorists believe that learning is produced through the interplay of drives, stimuli, cues, responses, and reinforcement. BELIEF AND ATTITUDE (Descriptive thoughts are beliefs, Attitudes are feelings positive / negative)

THE BUYING DECISION PROCESS

Marketers have to go beyond the various influences n buyers and develop an understanding of how consumers actually make their buying decisions. Specifically, marketers must identify who makes the buying decision (buying roles), the types of buying decisions (buying behavior / buying situations) and the steps in buying process ( stages in the buying decision process).

DIFFERENT ROLES IN BUYING DECISIONS

Initiator : A person who first suggests the idea of buying the particular product or service. Influencer : A person whose view or advice influences the decision. Decider : A person who decides on any component of a buying decision. Buyer : The person who makes the actual purchase. User : A person who consumes or uses the product or service.

FOUR TYPES OF BUYING BEHAVIOR (BUYING SITUATIONS)

High Involvement Significant Differences between Brands Few Differences between Brands Complex buying behavior (Extensive Problem Solving) Dissonance reducing buying behavior (Limited Problem Solving)

Low Involvement

Variety-seeking buying behavior

Habitual buying behavior (Routinized Response Behavior)

FIVE STAGE MODEL OF THE CONSUMER BUYING PROCESS

Problem recognition

Information search

Evaluation of alternatives

Post-purchase behavior

Purchase decision

SUCCESSIVE SETS INVOLVED IN CONSUMER DECISION MAKING

Total Set Awareness Set Consideration Set Choice Set ? Buying Decision

STEPS BETWEEN EVALUATION OF ALTERNATIVES AND A PURCHASE DECISION

Attitude of others Evaluation of alternatives Purchase intention

Purchase Decision

Unanticipated situational factors

BUILDING CUSTOMER VALUE

DELIVERING PROFITABLE VALUE Business: is a value delivery system. Business Process : is the task of delivering value to the market at a profit .

TWO VIEWS OF VALUE DELIVERY PROCESS

(A) Traditional Physical Process Sequence :
Make the product
Make Design Procure Price Sell

Sell the product

Advertise Promote

Service Distribute

( Used in Economies of Scarcities )

TWO VIEWS OF VALUE DELIVERY PROCESS

(B) The Value Creation and Delivery Sequence
Choose the value Provide the value
Product Value Positioning Market Selection / Focus Dev. Service Development Pricing Servicing Making Sourcing Distributing Sales Promotion Advertising

Communicate the value

Sales Force

Customer Segmentation

( Used in More Competitive Economies )

DELIVERING PROFITABLE VALUE Business is a value delivery system. Each business is the disciplined choice of a true winning value proposition and deliberately designed integration of all resources and actions around the profitable delivery of this value proposition. Profitable value is the resulting experiences customers derive by doing business with the organization.

DELIVERING PROFITABLE VALUE

An Organization bases its decision about products and services and how they are developed, made and distributed entirely on the profitable superiority of the resulting experiences for customers. A customer chooses a firm over others because it offers the greatest positive combination of end-result benefits and price (i.e. the greatest value ) in the perception of that customer.

DELIVERING CUSTOMER VALUE ( THE VALUE CHAIN )

Michael Porter of Harvard proposed the Value Chain as a tool for identifying ways to create more customer value. Every firm is a collection of activities that are performed to design, produce, market, deliver and support its product. The value chain identifies nine strategically relevant activities that create value and cost in a specific business. These nine value-creating activities consist of five primary activities and four support activities.

THE VALUE CHAIN

S u p p o r t

Firm Infrastructure Human Resource Management Technology Management Procurement

Margin

Inbound Logistics

Operations

Outbound Logistics

Marketing and Sales

Service

Margin

Primary Activities

( Margin is the difference between all value chain costs and the price to the customers )

CUSTOMER VALUE
- is defined by the following equation : V = Q+F / P Where; V= Customer Value Q= Product Quality as Perceived by Customers F= Product Features Valued by Customers P= Price of Product to the Customers - an increase in the numerator or a decrease in the denominator will increase the value.

CUSTOMER VALUE
Customer delivered value is the difference between total customer value and total customer cost. ( Total Customer Value : is the bundle of benefits customers expect from a given product or service ). (Total Customer Cost : Buyer evaluates time, energy and psychic costs alongwith the monetary cost to form a total customer cost ).

CUSTOMER VALUE
Buyers will buy from the firm that they perceive to offer the higher customer delivered value.
Product Value Services Value Personnel Value Image Value
CUSTOMER

Total Customer
Difference

DELIVERED VALUE

Value Total Customer Cost

Time Cost Energy Cost Psychic Cost

Monetary Price

ATTRACTING AND RETAINING CUSTOMERS

Today, more and more companies are recognizing the importance of satisfying and retaining current customers. Companys aim should go beyond satisfying the customer, it should be delighting the customer. The key to customer retention is Customer satisfaction. A highly satisfied customer stays loyal longer, and talks favorably about the company and its products. HE pays less attention to competing brands and advertising and is less sensitive to price.