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FOUNDATIONS OF CONSUMER BEHAVIOR CUSTOMER ORIENTED MARKETING: ..

the need for studying consumer behaviour emanates from the demands of customer oriented marketing According to Marketing Experts

Successful marketing requires that companies fully connect with their customers. Adopting a holistic marketing orientation means understanding consumers gaining a 360degree view of both their daily lives and the changes that occur during their lifetimes. Gaining a thorough, in-depth consumer understanding helps to ensure that the right products are marketed to the right consumers in the right way Consumers needs and wants, co objectives, integrated strategy Mkt-opportunity analysis, eg fitness centres/ eqpt Target-mkt selection, eg deodorant soap Irish Spring captured 15% mkt share Col Palm identified unique group thru segmentation Mktg-mix determination, eg expensive watches

CONSUMER BUYING BEHAVIOR AND DECISION MAKING MODELS: What is Consumer Buying Behavior? Definition of Buying Behavior: Buying Behavior is the decision processes and acts of people involved in buying and using products. Need to understand:

why consumers make the purchases that they make? what factors influence consumer purchases? the changing factors in our society.

Consumer Buying Behavior refers to the buying behavior of the ultimate consumer. A firm needs to analyze buying behavior for:

Buyers reactions to a firms marketing strategy has a great impact on the firms success. The marketing concept stresses that a firm should create a Marketing Mix (MM) that satisfies (gives utility to) customers, therefore need to analyze the what, where, when and how consumers buy. Marketers can better predict how consumers will respond to marketing strategies.

Stages of the Consumer Buying Process Six Stages to the Consumer Buying Decision Process (For complex decisions). Actual purchasing is only one stage of the process. Not all decision processes lead to a purchase. All consumer decisions do not always include all 6 stages, determined by the degree of complexity...discussed next. The 6 stages are: Problem recognition difference between actual state and desired state Information search - both internal and external including sources controlled by the marketer Information evaluation different process for every consumer, involves weighing product attributes and their ability to deliver benefits Purchase decision form a preference and intention to buy. Actual purchase can be influenced further by attitudes of others and unanticipated situational factos Post-purchase evaluation post purchase satisfaction, post purchase action, post purchase use and disposal Some ways in which marketers can help the consumer at each stage in the decisionmaking process Problem recognition eg advertising demonstrating a problem, its effects, and how the product or service can solve it Information search where appropriate, ensure that the consumer can easily access detailed information through leaflets and brochures, websites, advertising & point of sale materials. Ensure that sales staff have product knowledge, its benefits & advantages Information evaluation the consumer needs a meaningful, relevant & sound reason to buy this particular product instead of a competing one Purchase decision ensure product availability in the kinds of outlets where consumers will want to find it. Persuasive and appealing on pack information. Ensure ease and security of ordering system if using on-line ordering Post-purchase evaluation- for fmcg, reinforcement ads can reassure the consumer that they have made a wise choice. For bigger purchases, follow-up personal customer care calls can also reassure & be used to dispel any lingering doubt (OR) 1. Problem Recognition(awareness of need)--difference between the desired state and the actual condition. Deficit in assortment of products. Hunger--Food. Hunger stimulates your need to eat. Can be stimulated by the marketer through product information--did not know you were deficient? I.E., see a commercial for a new pair of shoes, stimulates your recognition that you need a new pair of shoes. 2. Information search-o Internal search, memory.

External search if you need more information. Friends and relatives (word of mouth). Marketer dominated sources; comparison shopping; public sources etc.

A successful information search leaves a buyer with possible alternatives, the evoked set. Hungry, want to go out and eat, evoked set is chinese food indian food burger king klondike kates etc Evaluation of Alternatives--need to establish criteria for evaluation, features the buyer wants or does not want. Rank/weight alternatives or resume search. May decide that you want to eat something spicy, indian gets highest rank etc. If not satisfied with your choice then return to the search phase. Can you think of another restaurant? Look in the yellow pages etc. Information from different sources may be treated differently. Marketers try to influence by "framing" alternatives. Purchase decision--Choose buying alternative, includes product, package, store, method of purchase etc. Purchase--May differ from decision, time lapse between 4 & 5, product availability. Post-Purchase Evaluation--outcome: Satisfaction or Dissatisfaction. Cognitive Dissonance, have you made the right decision. This can be reduced by warranties, after sales communication etc. After eating an indian meal, may think that really you wanted a chinese meal instead.
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Types of Consumer Buying Behavior Types of consumer buying behavior are determined by:

Level of Involvement in purchase decision. Importance and intensity of interest in a product in a particular situation. Buyers level of involvement determines why he/she is motivated to seek information about a certain products and brands but virtually ignores others.

High involvement purchases--Honda Motorbike, high priced goods, products visible to others, and the higher the risk the higher the involvement. Types of risk:

Personal risk Social risk Economic risk

The four type of consumer buying behavior are:

Routine Response/Programmed Behavior--buying low involvement frequently purchased low cost items; need very little search and decision effort; purchased almost automatically. Examples include soft drinks, snack foods, milk etc.

Limited Decision Making--buying product occasionally. When you need to obtain information about unfamiliar brand in a familiar product category, perhaps. Requires a moderate amount of time for information gathering. Examples include Clothes--know product class but not the brand. Extensive Decision Making/Complex high involvement, unfamiliar, expensive and/or infrequently bought products. High degree of economic/performance/psychological risk. Examples include cars, homes, computers, education. Spend alot of time seeking information and deciding. Information from the companies MM; friends and relatives, store personnel etc. Go through all six stages of the buying process. Impulse buying, no conscious planning.

The purchase of the same product does not always elicit the same Buying Behavior. Product can shift from one category to the next. For example: Going out for dinner for one person may be extensive decision making (for someone that does not go out often at all), but limited decision making for someone else. The reason for the dinner, whether it is an anniversary celebration, or a meal with a couple of friends will also determine the extent of the decision making. Categories that Effect the Consumer Buying Decision Process A consumer, making a purchase decision will be affected by the following factors: 01. Cultural Factor :

Cultural factor divided into three sub factors (i) Culture (ii) Sub Culture (iii) Social Class o Culture: The set of basic values perceptions, wants, and behaviours learned by a member of society from family and other important institutions. Culture is the most basic cause of a persons wants and behaviour. Every group or society has a culture, and cultural influences on buying behaviour may vary greatly from country to country. o Sub Culture : A group of people with shared value systems based on common life experiences and situations. Each culture contains smaller sub cultures a group of people with shared value system based on common life experiences and situations. Sub culture includes nationalities, religions, racial group and geographic regions. Many sub culture make up important market segments and marketers often design products. o Social Class:-

Almost every society has some form of social structure, social classes are societys relatively permanent and ordered divisions whose members share similar values, interests and behaviour.

02. Social Factors :

A consumers behaviour also is influenced by social factors, such as the (i) Groups (ii) Family (iii) Roles and status o Groups : Two or more people who interact to accomplish individual or mutual goals. A persons behavious is influenced by many small groups. Groups that have a direct influence and to which a person belongs are called membership groups. Some are primary groups includes family, friends, neighbours and coworkers. Some are secondary groups, which are more formal and have less regular interaction. These includes organizations like religious groups, professional association and trade unions. o Family: Family members can strongly influence buyer behaviour. The family is the most important consumer buying organization society and it has been researched extensively. Marketers are interested in the roles, and influence of the husband, wife and children on the purchase of different products and services. o Roles and Status : A person belongs to many groups, family, clubs, organizations. The persons position in each group can be defined in terms of both role and status. For example. M & X plays the role of father, in his family he plays the role of husband, in his company, he plays the role of manager, etc. A Role consists of the activities people are expected to perform according to the persons around them.

03. Personal Factors :

It includes i) Age and life cycle stage (ii) Occupation (iii) Economic situation (iv) Life Style (v) Personality and self concept. o Age and Life cycle Stage:-

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People changes the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle. Occupation : A persons occupation affects the goods and services bought. Blue collar workers tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. A Co. can even specialize in making products needed by a given occupational group. Thus, computer software companies will design different products for brand managers, accountants, engineers, lawyers, and doctors. Economic situation : A persons economic situation will affect product choice Life Style : Life Style is a persons Pattern of living, understanding these forces involves measuring consumers major AIO dimensions. i.e. activities (Work, hobbies, shopping, support etc) interest (Food, fashion, family recreation) and opinions (about themselves, Business, Products) Personality and Self concept : Each persons distinct personality influence his or her buying behaviour. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to ones own environment.

04. Psychological Factors :

It includes these Factors. i) Motivation (ii) Perception (iii) Learning (iv) Beliefs and attitudes Motivation :o Motive (drive) a need that is sufficiently pressing to direct the person to seek satisfaction of the need Perception :o The process by which people select, Organize, and interpret information to form a meaningful picture of the world. Learning:o Changes in an individuals behaviour arising from experience. Beliefs and attitudes :o Belief is a descriptive thought that a person holds about something

Attitude, a Persons consistently favourable or unfavourable evaluations, feelings, and tendencies towards an object or idea

CONSUMER BUYING AND PERCEPTION PROCESS: Making a purchase with little or no influence from others Purchase involving joint decision Purchasing for someone else Purchase situation may involve at least one person in each such role, or a single individual can take on several roles Focus on actual buyer useful decisions.. Classification of roles Initiator : who first suggest buying the product or service Influencer: whose comments affects the decision made Decider: who makes all or part of the buying decision Buyer: who physically make the purchase User : who consumes the product or service Marketers need to identify the other buying participants, their buying criteria and their influences on the buyer. (OR)

Initiator individual who determines that some need or want is not being met and authorizes a purchase to rectify the situation Influencer person who by word or action, intentional or unintentional, influences the purchase decision, actual purchase, and/or the use of the product or service Buyer individual actually making the purchase transaction User person most directly involved in the consumption or use of the purchase Consumer behaviour involves

A mental decision process

Physical activity Actual act of purchase is just one stage in a series of mental and physical activities that occur during this phase Some of these activities preceded the actual buying, while others follow it Consumption system who, how, when, where. All these factors capable of influencing the adoption of products or services Primary psychological processes involved are

Motivation Perception Learning Memory CONSUMER DECISION MAKING MODEL:

External environmental variables influencing behaviour culture, subculture, social class, social group, family, personal influences Individual determinants of behaviour learning / memory, personality/ self-concept, attitudes, motivation/ involvement Consumers decision process problem recognition, information search (internal & external), info processing, evaluating, purchase process, post-purchase behaviour Level of Consumer Involvement Decision Heuristics and Biases Mental Accounting The Consumer Decision Model (also known as the Engel-Blackwell-Miniard Model) originally developed in 1968 by Engel, Kollat, and Blackwell and has gone through numerous revisions many of the elements of the model are similar to those presented in the Theory of Buyer Behaviour (Howard AND Sheth 1969), however the structure of presentation and relationship between the variables differs somewhat model is structured around a seven point decision process: need recognition followed by a search of information both internally and externally, the evaluation of alternatives, purchase, post purchase reflection and finally, divestment.

These decisions are influenced by two main factors. Firstly stimuli is received and processed by the consumer in conjunction with memories of previous experiences, and secondly, external variables in the form of either environmental influences or individual differences. The environmental influences identified include: Culture; social class; personal influence; family and situation. While the individual influences include: consumer resource; motivation and involvement; knowledge; attitudes; personality; values and lifestyle (Blackwell,Miniard et al. 2001). STEPS IN CONSUMER DECISION MAKING: The consumers decision making process is the way in which people gather and assess information and make choices among alternative goods, services, organizations, people, places, and ideas. It consists of the process itself and factors affecting the process. The consumer decision making process consists of six basic stages. Factors affecting the decision making process are a consumers demographic, social, and psychological characteristics. STIMULUS: A stimulus is a cue or drive meant to motivate a person to act. A stimulus can be any of the following: Social, Commercial, Noncommercial, Physical. A prospective consumer may be exposed to any or all of these types of stimuli. If a person is sufficiently stimulated, he or she will go on to the next step in the decision process. PROBLEM AWARENESS: During problem awareness, the consumer recognizes that the good, service, organization, person, place, or idea may solve a problem of shortage or unfulfilled desire. Many consumers are hesitant to react to unfulfilled desires because there are risks and the benefits may be hard to judge. INFORMATION SEARCH: Information search involves listing alternatives that will solve the problem at hand and a determination of the characteristics of each. Search can be internal and/or external .As risk increases; the amount of information sought also increases. Once the information search is completed, it must be determined whether the shortage or unfulfilled desire can be satisfied by any alternative. EVALUATION OF ALTERNATIVES: The alternatives are evaluated on the basis ofthe consumers criteria and the relative importance of these criteria. They are then ranked and a choice made. PURCHASE - The purchase act involves the exchange of money or a promise to pay for a product, or support in return of ownership of a specific good, the performance of a specific service, and so on. Purchase decisions remaining at this stage center on the place

ofpurchase, Terms and Availability.If the above elements are acceptable, a consumer will make a purchase. POST-PURCHASE BEHAVIOR: Frequently, the consumer engages in post-purchase behavior. Buying one item may lead to the purchase of another. Re-evaluation of the purchase occurs when the consumer rates the alternative selected against performance standards. Cognitive dissonance, doubt that a correct purchase decision has been made, can be reduced by follow-up calls, extended warranties, and post-purchase advertisements. TYPES OF DECISION PROCESS: Decision making processes are all about making good judgements. There are judgements that are emotional, spur of the moment, horseback or back of envelope a quick decision.Buyer decision processes are the decision making processes undertaken by consumers in regard to a potential market transaction before, during, and after the purchase of a product or service. Several differences between consumers in industrialized nations and those in lessdeveloped and developing ones are cited by the text.With low-involvement purchasing, the consumer minimizes decision making for those goods and services perceived to be socially and/or psychologically unimportant. Brand loyalty is the consistent repurchase of and preference toward a brand. It enables a consumer to minimize risk, time, and thought. TYPES OF DECISION MAKING PROCESSES The decision process is used each time a good or service is bought, often subconsciously. There are three ways in which the decision process may be used. Extensive decision-making process: Occurs when a consumer makes full use of the process. It is used for expensive, complex items with which the consumer has little or no experience. Perceived risk is high and time pressure is low. Limited decision making process: takes place when each step of the process is used, but the consumer does not need to spend a great deal of time on any of them. The consumer has some experience. The thoroughness with which the process is used depends on the amount of experience, the importance of the purchase, and time pressure. Routine decision-making process: involves habitual behavior and skips steps in the process. Regularly purchased items are bought in this manner. Information search, evaluation, and post-purchase behavior are normally omitted.

RESEARCHING THE CONSUMER: Exploratory research consumer feedback, focus groups; primary objective is hyothesis formulation, ie forming a conjectural statement about the relationship between tow or more variables Conclusive research builds upon exploratory research; main objectives are to describe consumer behaviour and to offer explanations for its causes; also, behaviour forecast and methods of influencing it can be determined Market segmentation - a process of dividing a potential market into distinct sub-sets of consumers with common needs and characteristics and selecting one or more segments to target with a distinct marketing mix and helps in expanding the market by better satisfying the specific needs or desires of particular customers.