Consumer behaviour

Consumer behavior is the study of how people buy, what they buy,
when they buy and why they buy. It blends elements from psychology,
sociology, sociopsychology, anthropology and economics. It attempts to
understand the buyer decision processes/buyer decision making process,
both individually and in groups. It studies characteristics of individual
consumers such as demographics, psychographics, and behavioural
variables in an attempt to understand people's wants. It also tries to assess
influences on the consumer from groups such as family, friends, reference
groups, and society in general.

Basic model of consumer decision making

Stage Brief description

Problem The consumer perceives a need and becomes

Motivation
recognition motivated to solve a problem.

The consumer searches for information required

Information search Perception
to make a purchase decision

Information The consumer compares various brands and Attitude

evaluation products formation

Decision The consumer decides which brand to purchase Integration

Post-purchase
The consumer evaluates their purchase decision Learning
evaluation

Problem recognition

Problem recognition is that result when there is a difference between one's desired
state and one's actual state. Consumers are motivated to address this discrepancy and
therefore they commence the buying process.

Sources of problem recognition include:

 • An item is out of stock
• Dissatisfaction with a current product or service
• Consumer needs and wants
• Related products/purchases
• Marketer-induced
• New products

The relevant internal psychological process that is associated with problem

recognition is motivation. A motive is a factor that compels action. Belch and Belch
(2007) provide an explanation of motivation based on Maslow's hierarchy of needs
and Freud's psychoanalytic theory.

Information Search

Once the consumer has recognised a problem, they search for information on products
and services that can solve that problem. Belch and Belch (2007) explain that
consumers undertake both an internal (memory) and an external search.

Sources of information include:

• Personal sources
• Commercial sources
• Public sources
• Personal experience

The relevant internal psychological process that is associated with information search
is perception. Perception is defined as 'the process by which an individual receives,
selects, organises, and interprets information to create a meaningful picture of the
world'

The selective perception process Stage Description Selective exposure consumers

select which promotional messages they will expose themselves to. Selective attention
consumers select which promotional messages they will pay attention to Selective
comprehension consumer interpret messages in line with their beliefs, attitudes,
motives and experiences Selective retention consumers remember messages that are
more meaningful or important to them

You should consider the implications of this process on the development of an

effective promotional strategy. First, which sources of information are more effective
for the brand and second, what type of message and media strategy will increase the
likelihood that consumers are exposed to our message, that they will pay attention to
the message, that they will understand the message, and remember our message.

Information evaluation

At this time the consumer compares the brands and products that are in their evoked
set. How can the marketing organization increase the likelihood that their brand is part
of the consumer's evoked (consideration) set? Consumers evaluate alternatives in
terms of the functional and psychological benefits that they offer. The marketing
organization needs to understand what benefits consumers are seeking and therefore
which attributes are most important in terms of making a decision.

The relevant internal psychological process that is associated with the alternative
evaluation stage is attitude formation. Belch and Belch (2007, p.117) note that
attitudes are 'learned predispositions' towards an object. Attitudes comprise both
cognitive and affective elements - that is both what you think and how you feel about
something. The multi-attribute attitude model explains how consumers evaluate
alternatives on a range of attributes. Belch and Belch (2007) identify a number of
strategies that can be used to influence the process (attitude change strategies).
Finally, there are a range of ways that consumers apply criteria to make decisions.
Belch and Belch (2007) explain how information is integrated and how decision rules
are made including the use of heuristics. The marketing organisation should know
how consumers evaluate alternatives on salient or important attributes and make their
buying.

Purchase decision

Once the alternatives have been evaluated, the consumer is ready to make a purchase
decision. Sometimes purchase intention does not result in an actual purchase. The
marketing organization must facilitate the consumer to act on their purchase intention.
The provision of credit or payment terms may encourage purchase, or a sales
promotion such as the opportunity to receive a premium or enter a competition may
provide an incentive to buy now. The relevant internal psychological process that is
associated with purchase decision is integration.

Marketing research

Marketing research, or market research, is a form of business research and is

generally divided into two categories: consumer market research and business-to-
business (B2B) market research, which was previously known as industrial marketing
research. Consumer marketing research studies the buying habits of individual people
while business-to-business marketing research investigates the markets for products
sold by one business to another.

Consumer market research is a form of applied sociology that concentrates on

understanding the behaviours, whims and preferences, of consumers in a market-
based economy, and aims to understand the effects and comparative success of
marketing campaigns. The field of consumer marketing research as a statistical
science was pioneered by Arthur Nielsen with the founding of the ACNielsen
Company in 1923[1].
Thus marketing research is the systematic and objective identification, collection,
analysis, and dissemination of information for the purpose of assisting management in
decision making related to the identification and solution of problems and
opportunities in marketing

Marketing research characteristics

First, marketing research is systematic. Thus systematic planning is required at all the
stages of the marketing research process. The procedures followed at each stage are
methodologically sound, well documented, and, as much as possible, planned in
advance. Marketing research uses the scientific method in that data are collected and
analyzed to test prior notions or hypotheses.[3]

Marketing research is objective. It attempts to provide accurate information that

reflects a true state of affairs. It should be conducted impartially. While research is
always influenced by the researcher's research philosophy, it should be free from the
personal or political biases of the researcher or the management. Research which is
motivated by personal or political gain involves a breach of professional standards.
Such research is deliberately biased so as to result in predetermined findings. The
motto of every researcher should be, "Find it and tell it like it is." The objective nature
of marketing research underscores the importance of ethical considerations, which are
discussed later in the chapter.[3]

Marketing research involves the identification, collection, analysis, and

dissemination of information. Each phase of this process is important. We identify or
define the marketing research problem or opportunity and then determine what
information is needed to investigate it., and inferences are drawn. Finally, the
findings, implications and recommendations are provided in a format that allows the
information to be used for management decision making and to be acted upon
directly. It should be emphasized that marketing research is conducted to assist
management in decision making and is not: a means or an end in itself. The next
section elaborates on this definition by classifying different types of marketing
research

Comparison with other forms of business research

Other forms of business research include:

• Market research is broader in scope and examines all aspects of a business

environment. It asks questions about competitors, market structure,
government regulations, economic trends, technological advances, and
numerous other factors that make up the business environment (see
environmental scanning). Sometimes the term refers more particularly to the
financial analysis of companies, industries, or sectors. In this case, financial
analysts usually carry out the research and provide the results to investment
advisors and potential investors.

• Product research - This looks at what products can be produced with

available technology, and what new product innovations near-future
technology can develop (see new product development).
 • Advertising research - is a specialized form of marketing research conducted
to improve the efficacy of advertising. Copy testing, also known as "pre-
testing," is a form of customized research that predicts in-market performance
of an ad before it airs, by analyzing audience levels of attention, brand linkage,
motivation, entertainment, and communication, as well as breaking down the
ad’s flow of attention and flow of emotion. Pre-testing is also used on ads still
in rough (ripomatic or animatic) form. (Young, pg. 213)

Classification of marketing research

Organizations engage in marketing research for two reasons: (1) to identify and (2)
solve marketing problems. This distinction serves as a basis for classifying marketing
research into problem identification research and problem solving research.[4]

Problem identification research is undertaken to help identify problems which are,

perhaps, not apparent on the surface and yet exist or are likely to arise in the future.
Examples of problem identification research include market potential, market share,
brand or company image, market characteristics, sales analysis, short-range
forecasting, long range forecasting, and business trends research. A survey of
companies conducting marketing research indicated that 97 percent of those who
responded were conducting market potential, market share, and market characteristics
research. About 90 percent also reported that they were using other types of problem
identification research. Research of this type provides information about the
marketing environment and helps diagnose a problem. For example, a declining
market potential indicates that the firm is likely to have a problem achieving its
growth targets. Similarly, a problem exists if the market potential is increasing but the
firm is losing market share. The recognition of economic, social, or cultural trends,
such as changes in consumer behavior, may point to underlying problems or
opportunities. The importance of undertaking problem identification research for the
survival and long term growth of a company is exemplified by the case of PIP
printing company.[4]

Once a problem or opportunity has been identified, as in the case of PIP, problem
solving research is undertaken to arrive at a solution. The findings of problem solving
research are used in making decisions which will solve specific marketing problems.
More than two-thirds of companies conduct problem solving research.[4]

The Stanford Research Institute, on the other hand, conducts an annual survey of
consumers that is used to classify persons into homogeneous groups for segmentation
purposes. The National Purchase Diary panel (NPD) maintains the largest diary panel
in the United States.[2]

Standardized services are research studies conducted for different client firms but in
a standard way. For example, procedures for measuring advertising effectiveness have
been standardized so that the results can be compared across studies and evaluative
norms can be established. The Starch Readership Survey is the most widely used
service for evaluating print advertisements; another well-known service is the Gallup
and Robinson Magazine Impact Studies. These services are also sold on a syndicated
basis.[2]
Customized services offer a wide variety of marketing research services customized
to suit a client's specific needs. Each marketing research project is treated uniquely.
Some marketing research firms that offer these services include Burke Marketing
Research, Market Facts, Inc., and Elrick & Lavidge.

Limited-service suppliers specialize in one or a few phases of the marketing research

project. Services offered by such suppliers are classified as field services, coding and
data entry, data analysis, analytical services, and branded products. Field services
collect data through mail, personal, or telephone interviewing, and firms that
specialize in interviewing are called field service organizations. These organizations
may range from small proprietary organizations which operate locally to large
multinational organizations with WATS line interviewing facilities. Some
organizations maintain extensive interviewing facilities across the country for
interviewing shoppers in malls.[2]

Coding and data entry services include editing completed questionnaires,

developing a coding scheme, and transcribing the data on to diskettes or magnetic
tapes for input into the computer. NRC Data Systems provides such services.

Analytical services include designing and pretesting questionnaires, determining the

best means of collecting data, designing sampling plans, and other aspects of the
research design. Some complex marketing research projects require knowledge of
sophisticated procedures, including specialized experimental designs, and analytical
techniques such as conjoint analysis and multidimensional scaling. This kind of
expertise can be obtained from firms and consultants specializing in analytical
services.[2]

Data analysis services are offered by firms, also known as tab houses, that specialize
in computer analysis of quantitative data such as those obtained in large surveys.
Initially most data analysis firms supplied only tabulations (frequency counts) and
cross tabulations (frequency counts that describe two or more variables
simultaneously). With the proliferation of software, many firms now have the
capability to analyze their own data, but, data analysis firms are still in demand.

Marketing research methods

Methodologically, marketing research uses the following types of research designs:[5]

Based on questioning:

• Qualitative marketing research - generally used for exploratory purposes -

small number of respondents - not generalizable to the whole population -
statistical significance and confidence not calculated - examples include focus
groups, in-depth interviews, and projective techniques
• Quantitative marketing research - generally used to draw conclusions - tests
a specific hypothesis - uses random sampling techniques so as to infer from
the sample to the population - involves a large number of respondents -
examples include surveys and questionnaires. Techniques include choice
modelling, maximum difference preference scaling, and covariance analysis.
Based on observations:

• Ethnographic studies -, by nature qualitative, the researcher observes social

phenomena in their natural setting - observations can occur cross-sectionally
(observations made at one time) or longitudinally (observations occur over
several time-periods) - examples include product-use analysis and computer
cookie traces. See also Ethnography and Observational techniques.
• Experimental techniques -, by nature quantitative, the researcher creates a
quasi-artificial environment to try to control spurious factors, then manipulates
at least one of the variables - examples include purchase laboratories and test
markets

Researchers often use more than one research design. They may start with secondary
research to get background information, then conduct a focus group (qualitative
research design) to explore the issues. Finally they might do a full nation-wide survey
(quantitative research design) in order to devise specific recommendations for the
client

Distribution

Distribution (or place) is one of the four elements of marketing mix. An organization
or set of organizations (go-betweens) involved in the process of making a product or
service available for use or consumption by a consumer or business user.

The other three parts of the marketing mix are product, pricing, and promotion.

The distribution channel

Frequently there may be a chain of intermediaries, each passing the product down the
chain to the next organization, before it finally reaches the consumer or end-user. This
process is known as the 'distribution chain' or the 'channel.' Each of the elements in
these chains will have their own specific needs, which the producer must take into
account, along with those of the all-important end-user.

[edit] Channels

A number of alternate 'channels' of distribution may be available:

• Selling direct, such as via mail order, Internet and telephone sales
• Agent, who typically sells direct on behalf of the producer
• Distributor (also called wholesaler), who sells to retailers
• Retailer (also called dealer or reseller), who sells to end customers
• Advertisement typically used for consumption goods

Distribution channels may not be restricted to physical products alone. They may be
just as important for moving a service from producer to consumer in certain sectors,
since both direct and indirect channels may be used. Hotels, for example, may sell
their services (typically rooms) directly or through travel agents, tour operators,
airlines, tourist boards, centralized reservation systems, etc.

There have also been some innovations in the distribution of services. For example,
there has been an increase in franchising and in rental services - the latter offering
anything from televisions through tools. There has also been some evidence of service
integration, with services linking together, particularly in the travel and tourism
sectors. For example, links now exist between airlines, hotels and car rental services.
In addition, there has been a significant increase in retail outlets for the service sector.
Outlets such as estate agencies and building society offices are crowding out
traditional grocers from major shopping areas.

[edit] Channel members

Distribution channels can thus have a number of levels. Kotler defined the simplest
level, that a of direct contact with no intermediaries involved, as the 'zero-level'
channel.

The next level, the 'one-level' channel, features just one intermediary; in consumer
goods a retailer, for industrial goods a distributor. In small markets (such as small
countries) it is practical to reach the whole market using just one- and zero-level
channels.

In large markets (such as larger countries) a second level, a wholesaler for example, is
now mainly used to extend distribution to the large number of small, neighborhood
retailers.

In Japan the chain of distribution is often complex and further levels are used, even
for the simplest of consumer goods.

In Bangladesh Telecom Operators are using different Chains of Distribution,

especially 'second level'.

In IT and Telecom industry levels are named "tiers". A one tier channel means that
vendors IT product manufacturers (or software publishers) work directly with the
dealers. A one tier / two tier channel means that vendors work directly with dealers
and with distributors who sell to dealers. But the most important is the distributor or
wholesaler.

[edit] The internal market

Many of the marketing principles and techniques which are applied to the external
customers of an organization can be just as effectively applied to each subsidiary's, or
each department's, 'internal' customers.

In some parts of certain organizations this may in fact be formalized, as goods are
transferred between separate parts of the organization at a `transfer price'. To all
intents and purposes, with the possible exception of the pricing mechanism itself, this
process can and should be viewed as a normal buyer-seller relationship. The fact that
this is a captive market, resulting in a `monopoly price', should not discourage the
participants from employing marketing techniques.

Less obvious, but just as practical, is the use of `marketing' by service and
administrative departments; to optimize their contribution to their `customers' (the rest
of the organization in general, and those parts of it which deal directly with them in
particular). In all of this, the lessons of the non-profit organizations, in dealing with
their clients, offer a very useful parallel.

Promotion (marketing)

Promotion involves disseminating information about a product, product line, brand,

or company. It is one of the four key aspects of the marketing mix. (The other three
elements are product marketing, pricing, and distribution.)

Promotion is generally sub-divided into two parts:

• Above the line promotion: Promotion in the media (e.g. TV, radio,
newspapers, Internet and Mobile Phones) in which the advertiser pays an
advertising agency to place the ad
• Below the line promotion: All other promotion. Much of this is intended to be
subtle enough that the consumer is unaware that promotion is taking place.
E.g. sponsorship, product placement, endorsements, sales promotion,
merchandising, direct mail, personal selling, public relations, trade shows

The specification of these four variables creates a promotional mix or promotional

plan. A promotional mix specifies how much attention to pay to each of the four
subcategories, and how much money to budget for each. A promotional plan can have
a wide range of objectives, including: sales increases, new product acceptance,
creation of brand equity, positioning, competitive retaliations, or creation of a
corporate image