UNIT ONE

Consumer Behavior

Consumer behaviour is the study of individuals, groups, or organizations and all the activities
associated with the purchase, use and disposal of goods and services, including the consumer's
emotional, mental and behavioural responses that precede or follow these activities.

Application Of Consumer Behavior in Marketing

 Analyzing market opportunity

 Selecting the marketing mix
 Determining the product mix

Factors influencing Consumer Behavior

Individual Determinants

 Motivation and involvement

 Attitudes
 Personality and self control
 Learning and memory
 Information processing

External environmental factors

 Cultural influences
 Sub cultural influences
 Social class influences
 Social group influences
 Family influences
 Personal influences

Personal factors

 Age and life cycle stage

 Occupation
 Economic situation
 Life style

Consumer Buying Process

  Need recognition
 Information search
 Evaluation of alternatives
 Purchase decision
 Post purchase behavior

Model Of Family Decision Making

 Influences
The members who influence the purchase of the product by providing information to
the family members, the son in a family may inform the members of a new fast food
joint. He can influence the family members to visit the joint for food and entertainment.
 Gate keepers
These members control the flow of information for a product or brand that they favour
and influence the family to buy the product of their choice. They provide the
information favourable to themselves and, withhold information about other product
which they do not favour.
 Deciders
These are the people who have the power or, money and authority to buy. They play a
major role in deciding which product to buy.
 Buyers
Buyers are the people who actually buy. A mother buying ration for the house etc.
Father buying crayons for his children.
 Preparers
Those who prepare the product in the form it is actually consumed. Mother preparing
food by adding ingredients to the raw vegetable. Frying an egg for consumption, sewing
clothes for the family, etc.
 Users
The person who actually uses or consumes the product. The product can be consumed
individually or jointly by all members of the family. Use of car by the family, use of
refrigerator,TV, etc.

Types Of Buying Behavior

 Complex buying behavior

This type of behavior is encountered when consumers are buying an expensive,
infrequently bought product. They are highly involved in the purchase process and
consumers’ research before committing to invest. Imagine buying a house or a car;
these are an example of a complex buying behavior.
  Dissonance reducing buying behavior

The consumer is highly involved in the purchase process but has difficulties
determining the differences between brands. ‘Dissonance’ can occur when the
consumer worries that they will regret their choice.

Imagine you are buying a lawnmower. You will choose one based on price and
convenience, but after the purchase you will seek confirmation that you’ve made the
right choice.

 Habitual buying behavior

Habitual purchases are characterized by the fact that the consumer has very little
involvement in the product or brand category. Imagine grocery shopping: you go to
the store and buy your preferred type of bread. You are exhibiting a habitual
pattern, not strong brand loyalty.

 Variety seeking buying behavior

In this situation, a consumer purchases a different product not because they weren’t
satisfied with the previous one, but because they seek variety. Like when you are
trying out new shower gel scents.

Buyers decision process for new products

 Awareness : consumer became aware of the product.

 Interest: consumer seeks information about the new product.
 Evaluation: consumer whether trying the new product makes sense.
 Trial: consumer tries the new product on a small scale to improve his estimate of its
value.
 Adoption: consumer decides to make full and regular use of the new product.

UNIT TWO

Consumer Modeling

The economic model

According to Economic model of consumer behaviour, consumers try to maximize the utility
from products on the basis of law of diminishing marginal utility. The desire of consumers to
obtain maximum gains by spending a minimum amount acts as the core for the derivation of
this model.

The economic model assumes that there is close similarity between the behaviour of buyers
and that a homogenous buying pattern is exhibited in the market. The model is based on
Income effect, Substitution effect and Price effect.

 Income Effect substantiates that when a person earns more income, he will have more
money to spend and so he will purchase more.
 Substitution Effect substantiates the fact that if a substitute product is available at a
cheaper cost, then the product in question will be less preferred or less utilized by
people
 Price Effect suggests that when the price of a product is less, consumers tend to
purchase more quantity of that product.

Learning model

The model suggests that human behavior is based on some central concepts ; the drive , the
stimuli, cues , responses and reinforcement which determine the human needs and satisfying
behavior.

Psychoanalytic model

The Psychological Model is based on the famous psychologist A.H. Maslow’s theory of
Hierarchy of Needs. The psychological model divides the needs into Psychological Needs, Safety
and Security Needs, Social Needs, Ego Needs and Self Actualization Needs. This division of
needs is termed as Hierarchy of Needs.

According to this model, the behaviour of consumers gets motivated by their needs and
consumer needs never ceases to exist but arise one after another with passing time. A
consumer acts according to the strongest need at a particular time, he strives to satisfy the
basic needs first and then moves on to a higher level of needs and tries to satisfy them. This
process continues till he reaches the highest level in the hierarchy of needs.

Sociological model

The Sociological Model of Consumer Behavior is closely related to the society and the versatile
groups involved in the same. These groups can be classified into Primary and secondary ones.
Primary groups consist of close acquaintances, friends, relatives and family members.
Secondary group consists of any member in the society, his personality type and requirements
based on the same. Sociological Model focuses mainly on the lifestyle and related product
requirements of consumers in the society in a holistic manner.
Howard sheth model

Howarth Sheth Model substantiates the complexity involved in consumer behavior and takes
into consideration various factors like attitudes of consumer, their perception levels and
learning capacity that influence consumer behaviour. This model is based on four variables that
are:

 Inputs Parameters
 Constructs that are related to perception and learning
 Output Parameters
 Variables that are external or exogenous in nature.

Engel Kollat Blackwell model

Engel-Blackwell-Kollat Model is based upon four key components namely Information

processing (IP), Central Control Unit (CCU), Decision Making process and influences exerted by
the environment.

Information Processing (IP) is dependent on many factors which act as stimuli both from a
marketing and non-marketing perspective, it consists of four components that are exposure,
attention, comprehension and retention. Information Processing focuses on the message to
which the consumer is constantly exposed (exposure). When the message instantly grabs the
attention of the consumer (attention), the next logical step for him is to comprehend about the
same in the rational manner (comprehension). When all of the activities happen in the perfect
manner the message is retained in the memory of the consumer (retention).

Central Control Unit (CCU) is based on four factors that are psychological in nature.

 Previous experience of the consumers and their acquaintances about the product
 Criteria based on which a consumer evaluates a product
 Changing mindsets of consumers and
 Personality of the consumer based on which he or she takes the purchase decision

Nicosia model

Nicosia Model deals with the level of exposure a consumer gets with respect to the purchase
decision. This model is based on four fields such that the output of one field acts as the input of
second field and so on.

The First field divided into two sub fields namely:

Sub-field one consists of:

  Product Attributes
 Firm`s Attributes

While subfield two consists of:

 Pre-disposition or existing attitude of a consumer towards the product

 The attributes exhibited by the organization whose products are to be purchased.

The Second Field consists of consumer research and evaluation.

The Third Field is concerned with the buying decision of the consumer.

T h e Fourth Field is concerned with the post purchase behavior, use of product, its storage and
consumption. The consumer who is satisfied with a product or service tends to stock the
product for regular or future usage and develops a positive attitude. On the contrary, a dis-
satisfied customer tends to develop a negative attitude towards the product or the business
house.

Perception

Perception is an intellectual process of transforming sensory stimuli to meaningful information.

It is the process of interpreting something that we see or hear in our mind and use it later to
judge and give a verdict on a situation, person, group etc.

Perpetual Process

 Exposure
Initially the consumer is exposed to brand in some manner. This may be from
advertising or some other form of promotion, or it may be from other consumers who
are using the brand, or it may be from visiting a store where the brand is sold. If it is
from advertising, this is referred to as an impression.
 Attention
Attention occurs when the consumer dedicates some time towards the brand or its
communication. This may be as simple as glancing at a billboard advertisement for a
split second, or perhaps closely watching a 3 minute cinema commercial, or simply
observing other people with the brand.
 Interpretation
 If the consumer pays close attention, or the brand and/or its communication gains the
attention of the consumer on several occasions, then the consumer is likely to process
the ‘message’ to some extent.

Factors Responsible for Distortion

Perceptual selection

Perceptual selection is the process by which people filter out irrelevant or less significant
information so that they can deal with the most important matters.

Stimulus Factors

There are numerous market related stimuli that affects consumer perception such as color,
packaging, brand name, claims, endorser , size etc

Expectation

Consumers often perceive products as per their expectations.

Motives

Consumers tend to perceive those things that are top most in their needs and interests.

Selective Exposure

Exposure when consumers senses are activated by stimulus. Consumers are attentive to stimuli
which are relevant, pleasant, or towards which they may be sympathetic and ignore unpleasant
and painful ones.

Selective Attention

Consumers have increased awareness of stimuli that are relevant to their needs.

Adaption

Adaption refers to gradual adjustment to stimuli to which consumers are exposed for
prolonged periods.

Learning
Learning is an important psychological process that-determines human behavior. Learning can
be defined as “relatively permanent change in behavior that occurs as a result of experience or
reinforced practice”.

Components of Learning

Motivation

Motivation is the driving force that impels individuals to action result of unfulfilled needs.

Cues

Cue stimuli are those factors that exist in the environment as perceived by the individual. The
idea is to discover the conditions under which stimulus will increase the probability of eliciting a
specific response.

Responses

The stimulus results in responses. Responses may be in the physical form or may be in terms of
attitudes, familiarity, perception or other complex phenomena.

Reinforcement

Reinforcement is a fundamental condition of learning. Without reinforcement, no measurable

modification of behavior takes place.

UNIT THREE

Personality

The combination of characteristics or qualities that form an individual's distinctive character.

Characteristics of Personality

 Personality is an internal process that guides behaviour.

 It is relatively stable but dynamic in nature..
 Biological and genetic phenomena do have an impact on personality.
 personality is stable – or at least relatively stable.
 Helps in adjusting the individual with the environment
 It is consistent.
 It is unique
Freuds Stages In Personality Development

ATTITUDE

Attitudes refer to feelings and beliefs of individuals or groups of individuals.

Components of Attitudes

 Cognitive Component
The informational component consists of beliefs, values, ideas and other information a
person has about the object. It makes no difference whether or not this information is
empirically correct or real. For example, a person seeking a job may learn from his own
sources and other employees working in the company that in a particular company the
 promotion chances are very favourable. In reality, it may or may not be correct. Yet the
information that person is using is the key to his attitude about that job and about that
company.

 Affective Component
The informational component sets the stage for the more critical part of an attitude, its
affective component. The emotional components involve the person’s feeling or affect-
positive, neutral or negative-about an object. This component can be explained by this
statement.” I like this job because the future prospects in this company are very good”.

 Behavioral Component
The behavioural component consists of the tendency of a person to behave in a
particular manner towards an object. For example, the concerned individual in the
above case may decide to take up the job because of good future prospects. Out of the
three components of attitudes, only the behavioural component can be directly
observed. One cannot see another person’s beliefs (the informational component) and
his feelings (the emotional component). These two components can only be inferred.
But still understanding these two components is essential in the study of organisational
behaviour or the behavioural component of attitudes.

Factors involved in Attitude Formation

 Consumer involvement
 Purchase feasibility
 Personal experience
 Consumers values and beliefs
 Purchase situations

MOTIVATION

Motivation is the word derived from the word 'motive' which means needs, desires, wants or
drives within the individuals. It is the process of stimulating people to actions to accomplish the
goals. In the work goal context the psychological factors stimulating the people's behaviour can
be - desire for money. Success

Characteristics of Motivation
  Need and goals are constantly changing
 Success and failure influences goals
 Unending process
 Psychological concept
 Non fulfillment of a need makes a man sick

UNIT FOUR

Social Stratification

Upper upper : world of inherited wealth

Lower upper: inherited wealth and newer social elites drawn from current high achiever
professional

Upper middle: professional, small business persons.

Lower middle: average pay white color workers.

Working Class: they have sufficient money for basic consumer products, again buying cheap
produced items.

Life style Pattern Of Social Classes

GROUP DYNAMIC

Group

Every organization is a group unto itself. A group refers to two or more people who share a
common meaning and evaluation of themselves and come together to achieve common goals.
In other words, a group is a collection of people who interact with one another; accept rights
and obligations as members and who share a common identity.

Characteristics of a Group:

 Interaction between members

 Awareness
 Group perception
 Common objectives

Reason For The Formation Of Group

 Desire for socialization

 Sense of identification
  Goal achievement
 Security
 Source of information
 Reduction of monotony
 Innovation and creativity
 Esteem and growth needs

Types of Groups:

Formal Group

A formal group is created within an organisation to complete a specific role or task. This may be
a one off objective such as the launch of a particular product or service or a
permanent/ongoing objective such as the provision of Information Technology (IT).

Informal Group

Informal groups are established by individuals who decide they want to interact with each
other. Informal groups usually do not have a specific purpose; often the group forms because
the group members regularly happen to be in the same location or because they enjoy each
other's company. For example people may form a group because they sit close together in an
office or live together in a house.

Primary Group

A Primary group is made up of a small group of people who interact regularly. A small team
with a leader is an example of a primary group. A family can also be called a primary group.
Within the primary group, values, beliefs and culture are all very important.

Secondary Group

When a large number of people get together (who do not normally get together) it is called a
secondary group. Secondary group members do not get the opportunity to get to know each
other as well as primary group members because the interaction with each other is less than in
a primary group. When a secondary group is formed, individuals usually have their own agenda
and goals. The relationship they form is not long term and social interaction within a secondary
group is likely to be low.

Associative Groups

These are the groups that one aspires to belong to and want to join at some future time.

Dissociative Groups

Some individuals do not want to be linked to or identified by a group of individuals, they try to
disassociate themselves from the group.

Types Of Group relevant to Consumer Behavior

 Friendship groups
 Family groups
 Formal social clubs
 Shopping friends groups
 Work group
 Reference group

UNIT FIVE

Consumer Satisfaction
 A customer expects fundamental benefits not fancies
 Customer expects performance and not empty promises
 Customer expects competency.
 Customer wants reliability which is the ability to perform the promised services
 Customer want tangibility or the appearance of physical facilities, equipment
 Customer wants responsiveness
 Customer want assurance

Enhancing Customer Satisfaction

 Strive constantly to provide additional customer value in every transaction

 Try to provide surprise benefits
 Constantly express the expectations that the customer has around your product
 Treat the customer exclusively
  Look for expectations and performance gaps in order to identify opportunities to delight

Relationship Marketing

Relationship marketing is a strategy designed to foster customer loyalty, interaction and long-
term engagement. It is designed to develop strong connections with customers by providing
them with information directly suited to their needs and interests and by promoting open
communication.

Scope

 Focus on providing value to customer

 Emphasis on customer retention
 Provides better basis for achieving competitive advantage
 Happier customer may leads to happier employees
 Long term customer may imitate free word of mouth promotions

Limitations

 Relatively low value products and services

 Consumer products
 Generic commodities
 Switching costs are low
 Clients prefer a single transactions to relationship
 Low customer involvement in production

Customer Retention
Customer retention refers to the ability of a company or product to retain its customers
over some specified period. High customer retention means customers of the product
or business tend to return to, continue to buy or in some other way not defect to
another product or business, or to non-use entirely.