Consumer Buying Behavior & Opinion leadership

RUSHIKESH.T.PAWAR(07)

2012

CONSUMER BEHAVIOUR R.K.T College of Education

 College Name Year Subject Name Project On Project By Submitted To University

: R.K.T College of Education. : 2012-2013. : Consumer Behavior. : Consumer Buying Behavior & Opinion leadership : Rushikesh Pawar (07) : Professor. Neetu Mulchandani. : Mumbai

Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

Acknowledgement
I express my sincere thanks to Prof. Neetu Mulchandani for giving me an opportunity to work on a topic like Consumer Buying Behavior and Opinion leadership which gave a brief idea about how the process of Consumer Buying Behavior and Opinion leadership. Her expert guidance, constructive suggestion and sincere support and most of all for being an inspirational source in conducting this project successfully.

Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

Introduction
What influences consumers to purchase products or services? The consumer buying process is a complex matter as many internal and external factors have an impact on the buying decisions of consumers. Consumers do not spend much time thinking about the purchase of low value products which are bought on impulse. Manufacturers of such products will need to implement strategies that encourage consumers to buy on impulse from them instead of their competitors. When consumers purchase high value products or non impulse products; they often go through a set process. This process is discussed below. On the next page there is a discussion of what influences consumer buying behavior and the different types of buying behavior.

Problem or Need Recognition

How do you decide which particular product or service to purchase? It could be that your Blue-Ray DVD player stops working and you now have to look for a new one; otherwise you will not be able to play your Blue-Ray films So you have a problem or a new need. This is the first step in the consumer buying process.

Information search
So we have a problem, our Blue-Ray player no longer works and we need to buy a new one. What is the solution? Yes go out and purchase a new one, but which brand? Shall we buy the same brand as the one that blew up? Or stay clear of that just in case the new player experiences the same problems as the old one? Consumer often goes on an information search to help them choose their product. Sources of information include family, friends, and retail staff and in this digital age the internet. The internet contains information about products (specifications), product reviews and online product forums. Information search
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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

may involve a visit to a retail store to view products that the consumer is interested in purchasing. In our example the consumer is on an information search to solve an immediate problem; they intend to make a purchase at the end of the process. Consumers also acquire and store information for future purchases. Firms will take such consumers into account when designing their marketing strategies, in the hope that when such a consumer is ready to buy they will use the "stored" information about their product into account and buy their products.

Evaluation of different purchase options

So what Blue-Ray DVD player do we purchase? Will it be a Sony, Toshiba or Samsung player? Consumers often create a point system in their minds where products are scored based on how many of their features appeal to them. So for one customer, brand may be more important than price and for another customer product appearance may be important. In the case of a DVD player consumers may be reviewing sound and picture quality. An evaluation system is particularly useful when there are a large number of options. Marketing strategies will try and influence this stage of the process by highlighting product features that they think will appeal to consumers. Appealing product features will be emphasized on product packaging, promotional materials and the manufacturer's websites.

Purchase decision
After the evaluation process consumers will select the product they would like to purchase. Once product may be a clear winner or the consumer may have to reprioritize their criteria to help them select a product. The job of the seller is to ensure that the purchase process is simple and effective. Even at this stage the purchaser could change their mind and select a competitor product or cancel the purchase altogether. A long queue, impolite sales staff or complicated sales process can all dissuade consumers from buying. Even if a consumer buys on this occasion a negative buying experience could stop them buying in the future. Therefore sellers need to make the buying process as simple and enjoyable as possible to safeguard this and future purchases.

Post Purchase Behavior

Ever have doubts about the product after you purchased it? Research shows that this feeling is common post purchase behavior. Manufacturers of products clearly want purchasers to feel proud of their purchase, so that they will purchase from them again and recommend them to family and friends. It is therefore just as important for manufacturer's promotions to reassure purchasers, as it is for them to attract new customers. Promotions should make purchasers feel that they have bought their product from a strong and reputable organization with "good" products. Consumer behavior is affected by many uncontrollable factors. Just think, what influences you before you buy a product or service? Your friends, your upbringing, your culture, the media, a role model or influences from certain groups?

Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

Status and Culture

Culture is one factor that influences behavior. Simply culture is defined as our attitudes and beliefs. But how are these attitudes and beliefs developed? As an individual growing up, a child is influenced by their parents, brothers, sister and other family member who may teach them what is wrong or right. They learn about their religion and culture, which helps them develop these opinions, attitudes and beliefs (AIO). These factors will influence their purchase behavior however other factors like groups of friends, or people they look up to may influence their choices of purchasing a particular product or service. Reference groups are particular groups of people some people may look up towards too that have an impact on consumer behavior. So they can be a singer like the Lady Gaga or your immediate family members. Opinion leaders are those people that you look up to because your respect their views and judgments and these views may influence consumer decisions. So it maybe a friend who works with the IT trade who may influence your decision on what computer to buy. The economical environment also has an impact on consumer behavior; do consumers have a secure job and a regular income to spend on goods? Marketing and advertising obviously influence consumers in trying to evoke them to purchase a particular product or service. People's social status will also impact their behavior. What is their role within society? Are they Actors? Doctors? Office worker? And mothers and fathers also? Clearly being parents affects your buying habits depending on the age of the children, the type of job may mean you need to purchase formal clothes; the income which is earned has an impact. The lifestyle of someone who earns 250000 would clearly be different from someone who earns 25000. Also characters have an influence on buying decision. Whether the person is extrovert (out going and spends on entertainment) or introvert (keeps to themselves and purchases via online or mail order) again has an impact on the types of purchases made.

Maslows Hierarchy of Needs

Abraham Maslow hierarchy of needs theory sets out to explain what motivated individuals in life to achieve. He set out his answer in a form of a hierarchy. He suggests individuals aim to meet basic psychological needs of hunger and thirst. When this has been met they then move up to the next stage of the hierarchy, safety needs, where the priority is with job security and knowing that you have a regular income. Social needs come in the next level of the hierarchy, the need to belong or be loved is a natural human desire and people strive for this belonging. Esteem need is the need for status and recognition within society, status sometimes drives people, the need to have a good job title and be recognized or the need to wear branded clothes as a symbol of status. Self-actualization the realization that an individual has reached their potential in life. The point of self-actualization is down to the individual, when do you know you have reached your point of self-fulfillment? But how does this concept help an organization trying to market a product or service? Well as we have established earlier within this website, marketing is about meeting needs and providing benefits, Maslows concept suggests that needs change as we go along our path of striving for self-actualization. Supermarket firms develop value brands to meet the psychological needs of hunger and thirst. Harrods develops products and services for those
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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

who want have met their esteem needs. So Maslows concept is useful for marketers as it can help them understand consumer needs and wants.

Types of buying behavior.

There are four typical types of buying behavior based on the type of products that intends to be purchased. Complex buying behavior is where the individual purchases a high value brand and seeks a lot of information before the purchase is made. Habitual buying behavior is where the individual buys a product out of habit e.g. a daily newspaper, sugar or salt. Variety seeking buying behavior is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the mornings! Dissonance reducing buying behavior is when buyers are highly involved with the purchase of the product, because the purchase is expensive or infrequent. There is little difference between existing brands an example would be buying a diamond ring, there is perceived little difference between existing diamond brand manufacturers.

Consumer behavior refers to the mental and emotional process and the observable behavior of consumers during searching, purchasing and post consumption of a product or service. Consumer behavior involves study of how people buy, what they buy, when they buy and
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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

why they buy. It blends the elements from psychology, sociology, sociopsychology, anthropology and economics. It also tries to assess the influence on the consumer from groups such as family, friends, reference groups and society in general. Buyer behavior has two aspects: the final purchase activity visible to any observer and the detailed or short decision process that may involve the interplay of a number of complex variables not visible to anyone.

Factors Affecting Consumer Buying Behavior

Consumer buying behavior is influenced by the major three factors: 1. Social Factors2.Psychological Factors3.Personal Factors.

A.Social Factors
Social factors refer to forces that other people exert and which affect consumers purchase behavior. These social factors can include culture and subculture, roles and family, social class and reference groups. Example: By taking into consideration Reference group, these can influence/ affect theconsumer buying behavior. Reference group refers to a group with whom anindividual identifies herself/ himself and the extent to which that person assumesmany values, attitudes or behavior of group members. Reference groups can befamil y, school or college, work group, club membership, citizenship etc. Destructive behavior. For example, if fresher student joins a college / university, he/she will meet different people and form a group, in that group there can be behavior patterns of values, for example style of clothing, handsets which most of group member prefer or even destructive behavior such as excessive consumption of alcohol, use of harmful and addictive drugs etc. So, according to how an individual references him / her to that particular reference group, this will influence and change his/her buying behavior.

B.Psychological Factors
These are internal to an individual and generate forces within that influenceher/his purchase behavior. The major forces include motives, perception, learning, attitude and personality. Example: Attitude is an enduring organization of motivational, emotional, perceptualand cognitive processes with respect to some aspect of our environment.Consumer form attitude towards a brand on the basis of their beliefs about the brand. For example, consumers of Sony products might have the belief that the products offered by Sony are durable; this will influence those customers to buy Sony products due to this attitude towards the brand.

C.Personal Factors
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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

These include those aspects that are unique to a person and influence purchase behavior. These factors include demographic factors, lifestyle, and situationalfactors . Example: Lifestyle is an indicator of how people live and express themselves on the basis of their activities, interests, and opinions. Lifestyle dimension provide a broader view of people about how they spend their time the importance of things in their surroundings and their beliefs on broad issues associated with life and living and themselves. This is influenced by demographic factors and personality. E.g. a CEO or Manager is likely to buy more formal clothes, ties and shoes or PDAs and less informal clothes like jeans as compared to a Mechanic or Civil engineer. So according to their lifestyle and profession, the buying behavior of people differs from one another.

Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

What is Opinion Leadership?

Opinion Leadership is the process by which the opinion leader informally influences the actions or attitudes of others, who may be opinion seekers or merely opinion recipients. Opinion receivers perceive the opinion leader as a highly credible, objective source of product information who can help reduce their search and analysis time and perceived risk. Opinion leaders are motivated to give information or advice to others, in part doing so enhances their own status and self image and because such advice tends to reduce any post purchase dissonance that they may have. Other motives include product involvement, message involvement or any other involvement. Market researchers identify opinion leaders by such methods as self designation, key informants, the sociometric method and the objective method. Studies of opinion leadership indicate that this phenomenon tends to be product category specific, generally one of their interests. An opinion leader of one product range can be an opinion receiver for another product category. Generally, opinion leaders are gregarious, self confident, innovative people who like to talk. Additionally, they may feel differentiated from others and choose to act differently (or public individuation). They acquire information about their areas of interest through avid readership of special interest magazines and evinces and by means of new product trials. Their interests may often overlap into adjacent areas and thus their opinion leadership may also extend into those areas.

Who is a market maven?

The market maven is an intense case of a opinion leader kind of person. These consumers possess a wide range of information about many different types of products, retail outlets, and other dimensions of markets. They both initiative discussions with other consumers and respond to requests for market information over a wide range of products and services. Market mavens are also distinguished from other opinion leaders because their influence stems not so much from product experience but from a more general knowledge or market expertise that leads them to an early awareness of a wide array of new products and services. The opinion leadership process usually take place among friends, neighbors and work associates who have frequent physical proximity and thus have ample opportunity to hold informal product related conversations. These conversations usually occur naturally in the context of the product-category usage. The two step flow of communication theory highlights the role of interpersonal influence in the transmission of information from the mass media to the populations at large. This theory provides the foundation for a revised multi step flow of communication model, which takes into account the fact that information and influence often are 2 way processes and that the opinion leaders both influence and are influenced by opinion receivers. It is important for the marketers to segment their audiences into opinion leaders and opinion receivers for their respective product categories. When marketers can direct their promotional efforts to the more influential segments of these markets, these opinion leaders will transmit the information to those who seek product advice. Marketers try to simulate and stimulate opinion leadership. They have also found that they can create opinion leaders for their products by taking socially involved or influential people and deliberately increasing their enthusiasm for a product category. The diffusion process and the adoption process are 2 closely related concepts concerned with the acceptance of new products by customers. The diffusion process is a macro process that focuses on the spread of an innovation from its source to the consuming public.
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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

The adoption process is a micro process that examines the stages through which an individual consumer passes when making a decision to accept or reject a new product. The definition of the term innovation can be 1. Firm oriented (new to the firm), 2. Product oriented (a continuous innovation, a dynamically continuous innovation, or A discontinuous innovation), 3. Market oriented (how long the product has been on the market or an arbitrary percentage of the potential target market that has purchased it), or 4. Consumer oriented (new to the customer). Market-oriented definitions of innovation are most useful to consumer researchers in the study of the diffusion and adoption of new products. Five Product Characteristics influence the consumers acceptance of a new product: 1. 2. 3. 4. 5. Relative Advantage Compatibility Complexity Trial ability Observability

Diffusion researchers are concerned with 2 aspects of communication the channels through which word about a new product or service is spread to the public and the types of messages that influence the adoption or rejection of new products or services. Diffusion is always examined in the context of a specific social system, such as a target market, a community, a region or even a nation. Time is an integral consideration in the diffusion process. Researchers are concerned with the amount of purchase time required for an individual customer to adopt or reject a new product/service, with the rate of adoptions and with the identification of sequential adopters. The 5 adopter categories are innovators, early adopters, early majority, late majority and laggards. Marketing Strategists try to control the rate of adoption through their new product pricing policies. Companies who wish to penetrate the market to achieve market leaderships try to acquire wide adoption as quickly as possible by using low prices. Those who wish to recoup their developmental costs quickly use a skimming pricing policy but lengthen the adoption process. The traditional adoption process model describes 5 stages through which an individual consumer passes to arrive at the decision to adopt or reject a new product: 1. 2. 3. 4. 5. Awareness, Interest, Evaluation Trial Adoption

To make it more realistic, an enhanced model is recommended as one that considers the possibility of a pre existing need or problem, the likelihood that some form of evaluation might occur through the entire process, and that even after adoption there will be post adoption or purchase evaluation that might either strengthen the commitment or alternatively lead to discontinuation of the product/service.

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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

Companies marketing new products are vitally concerned with identifying the consumer innovator so that they may direct their promotional campaigns to the people who are most like to try new products, adopts them and influences others. Consumer Research has identified a number of consumer related characteristics, including product interest, opinion leadership, personality factors, purchase and consumption traits, media habits, social characteristics, and demographic variables that distinguish consumer innovators from later adopters. These serve as useful variables in the segmentation of markets for new product introductions. Who are the innovators and early adopters for your products and services? How have you planned your diffusion strategy for the current products and the new products?

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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

Word-Of-Mouth Marketing - WOM Marketing

When a consumer's interest for a company's product or service is reflected in their daily dialogs. Word-of-mouth marketing can be encouraged through different publicity activities set up by companies, or by having opportunities to encourage consumer-to-consumer and consumer-tomarketer communications. It includes buzz, viral, blog, emotional and social media marketing. Word of mouth has been with us forever. But word of mouth marketing is a new marketing specialty that is as actionable, tractable, and plan able as any other form of marketing. Word of mouth marketing (WOM) is an umbrella term for dozens of techniques that can be used to engage and energize customers. WOM includes viral marketing, blogs, communities, loyalty programs, and other techniques that get customers talking about your products. In many cases, WOM isn't actually "marketing" at all. It's great customer service that earns customer respect. And it's fantastic products that get customers talking about you. Just as important, WOM is never about deception. Stealth marketing, shilling, or anything that hides the marketer's involvement is strictly forbidden by the Word of Mouth Marketing Association (WOMMA) Code of Ethics. Honest word of mouth marketers live by earning the respect of their customers, and anything that breaks that trust will backfire. With that said, there are five basic steps that all word of mouth marketing campaigns share the Five Ts of word of mouth marketing: Talkers, Topics, Tools, Taking Part, and Tracking. Learn to identify these, and you'll be able to implement WOM in all of your marketing programs.

The Five Steps in Word of Mouth Marketing

Step

Easy

Advanced Influencer, agent, evangelism programs

1. Talkers Volunteers, customers, bloggers 2. Topic 3. Tools

Special offer, great service, new Viral campaign, buzz stunt, new feature product Tell-A-Friend email, coupon form, forwardable Message board, online communities, blogs

4. Take Join blog & Part conversation 5. Track Blogpulse, Google

message

board Outreach teams, campaigns by PR and customer service Advanced metrics program, trend analysis

Feedster,

Technorati,

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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

1. Talkers: People who are more likely to relay your word of mouth message
Talkers are often referred to as "influentials," but they can be any group of people who have the enthusiasm and connections to relay your message to target audience. They may be part of a formal evangelism program, or they can be bloggers who happen to cover your topic. Sometimes they are new customers bubbling with enthusiasm; sometimes they are rabid fans willing to spread your message. The challenge: To learn to identify the right core group and give them a topic that they are willing to talk about.

2. Topics: Portable concepts for people to talk about, simple ideas that are word-of-mouth friendly
All word of mouth centers on creating the message that you want to spread. Good topics are portable: simple ideas that one person can relay to another. They can be sophisticated brandbuilding concepts, something as simple as a special discount coupon, or a tangential idea like "JetBlue has TVs." The specifics of the message don't matter, but you need to give people something a clear, simple idea that can be relayed successfully. The challenge: Find a topic that is interesting enough to motivate your talkers, and then give them tools to help facility that conversation.

3. Tools: Techniques and technology that make it easier for word of mouth conversations to take place
Word of mouth marketers make their biggest impact when they provide the infrastructure to help messages spread. The recent growth of word of mouth as a marketing technique is largely due to the growth of the tools that we have to support WOM conversations. A special friends-and-family discount may be worth talking about, but it has exponential marketing power when you pack it into an easy-to-forward email. A blog is a tool that enables a company to talk directly with fans, giving them a story to share. Online communities create a home and focus for otherwise disparate conversations. Formal evangelism programs provide the support and encouragement that keeps fans them talking. The challenge: Keep that conversation going by taking part in it.

4. Taking part: Participating in the word of mouth conversation and engaging in a genuine two-way dialog
This is the hardest part for most marketers to work with. When you open the door to real people, and encourage them to start talking about your brand, they expect you to participate in that conversation. You need to respond to their messages, you need to accept comments on your blog, you need to participate in the discussion board, and you need to answer the phone. Once you open the door to word of mouth conversations with your talkers, there is no way to shut it again. You'll get negative feedback, you'll get crackpots, and you'll need to assign staff to listen and learn from the conversation. At the same time, however, you'll be earning the respect and recommendation of your customers and building powerful long-term relationships. The challenge: Track the conversation and build it into your marketing plan.
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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR

5. Tracking: Measuring the online conversation

Amazing tools have been developed in the past year that enable us to understand how word of mouth conversations travel and how we can follow what consumers are saying about companies. The rapid growth of blogs and online communities have put much of the verbal consumer-to-consumer conversations in writing, and when it's written down it's much easier to measure. From there, we can take that online conversation and project it into the offline world. This represents a major knowledge boom for marketers. It lets you understand what consumers really think about your brand, your marketing, and your products. It provides a level of genuine understanding that is more authentic that the data squeezed out of focus groups. The challenge: Learn to value this raw consumer feedback and to use it to build better companies.

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Consumer Buying Behavior and Opinion leadership | CONSUMER BEHAVIOUR