CHAPTER 3

1. CHAPTER 3 Consumer Markets and Consumer Buyer Behavior Objective: exploring the dynamics of consumer behavior and the consumer market

2. Consumer Buying Behavior • Consumer buying behaviorrefers to the buying behavior of the individuals and households who buy goods and services for personal consumption. • Consumer market refers to the combination of all theses individuals and households. • These diverse consumers make their choices among various products based on several factors.

3. Model of Consumer Behavior • How do consumers respond to various marketing efforts that the company might use? The company that understands how consumers will respond to product features, prices, advertising has a great advantage over its competitors. • According to the “model of buyer behavior”, marketing (4Ps) and otherstimulus

4. (environmental - economic, technological, political and cultural) starts the response model. All these enter into the buyer’s head (black box) and then turn into responses as product choice, brand choice, dealer choice, purchase timing, and purchase amount. • The buyer behavior is affected by; (1) the buyer’s characteristic - cultural, social, personal, psychological; (2) the buyer’s decision process.

5. Model of Buyer Behavior

6. Factors Influencing Consumer Behavior

7. The Buyer Decision Process • The buyer decision process consists of five stages: (1) need recognition, (2) information search, (3) evaluation of alternatives, (4) purchase decision, and (5) postpurchase behavior. This process shows all the considerations involved when a consumer is thinking to make a purchase decision.

8. The Buyer Decision Process

9. Need Recognition • The buying process starts when the buyer recognizes that he has a problem or need. • The need can be felt because of internal stimuli (hunger, thirst...) or external stimuli (the buyer may feel hungry when he passes by a bakery, the buyer may need to have a vacation when he watches a commercial about Caribbeans on TV). • At this stage, the marketer must identify the factors that most trigger interest in the product and develop marketing programs that involve these factors.

10. InformationSearch • When the consumer feels his need, he satisfies his need with a product near at hand. But, if there is not such a product, he starts to search for information. • The consumer can obtain information from several sources; • personal sources: family, friends, neighbors, acquaintances (more important for the consumer to evaluate)

11. commercial sources: advertising, salespeople, dealers, packaging, displays (more important for the consumer to get information) • public sources: mass media, consumer rating organizations • experiential sources: handling, examining, using the product • Here, the marketer is responsible to identify the consumer’s sources of information and their importance, then design its marketing efforts in the way that would increase the awareness and knowledge of the potential consumers.

12. Evaluation of Alternatives • After gathering information, the consumer evaluates each alternative and makes a brand choice. • Consumers pay attention to certain issues when evaluating the alternatives; • product attributes: consumers see products as a bundle of product attributes (e.g. quality, size, price...) Consumers pay the most attention on the attributes that satisfies their need the most.

13. degrees of importance: consumers give different degrees of importance to different attributes according to their needs and wants. • brand beliefs: consumers develop a set of brand beliefs about where each brand stands on each attribute. The set of beliefs that are held about a particular brand is known as the brand image. • total product satisfaction: consumers combine the attributes that give them the highest perceived satisfaction and create their ideal product. • evaluation procedure: consumers approach different brands through some type of

14. evaluation procedure which depends on the individual and specific buying situation. In some cases, consumers use logical thinking, and at other times, emotional. Sometimes, they may decide on their own, or ask their friends, or salespeople for advice. • Here, the marketer should study the buyers to understand how they evaluate each alternative - e.g. which attribute receives the highest attention.

15. Purchase Decision • The consumer ranks all the brands and intends to purchase one. However, sometimes the consumer does not buy the one he intended. Two factors can come between the purchase intention and decision; • attitudes of others; e.g. family may claim that the alternative is better. • unexpected situational factors; unexpected events may change the purchase intention e.g. the consumer may loose his job so that he have to purchase a cheaper brand, a friend my report his dissatisfaction about the product, a competitor may drop its prices...

16. Postpurchase Behavior • After purchasing the product, the consumer will be satisfied or dissatisfied and will engage in postpurchase behavior of interest. • Whether the buyer is satisfied or dissatisfied is determined by the relationship between the consumer’s expectations and the product’s performance.

17. The marketer’s job does not end when the product is bought. The marketer must do research in order to understand whether the consumer is satisfied about the product or not. Responding to consumer complaints help to reduce the number of dissatisfied consumers. E.g. Toyota contacts the new car owners and congratulates them. In addition, places advertising with the favorable words of the new car owners. “I love what you do for me Toyota”

18. The Buyer Decision Process for New Products • The adoption processis the mental process that an individual passes through from first learning about a new product to final adoption (making the decision to become a regular user). • Consumers go through five stages in the process of adopting a new product; • awareness: the consumer becomes aware of the new product but does not have information.

19. interest: the consumer seeks information about the new product. • evaluation: the consumer considers whether trying the new product is a good idea. • trial: the consumer tries the new product to understand its value. • adoption: the consumer decides to make regular use of the new product.

20. Individual Differences in Innovativeness • People differ in their readiness to try new products. After a slow start, an increasing number of people adopt the new product. The number of adopters reaches a peak and then drops off as very little adopters remain. • There are five adopter categorization on the basis of time of adoption of innovations; • Innovators: are the first 2.5 percent of the buyers, they are adventurous, take risk, relatively younger, better educated, have higher income, are more receptive to

21. unfamiliar things, rely more on their own values and judgement, are less brand loyal and more likely to tae advantage of special promotions e.g. discounts. • Early adopters: are the next 13.5 percent, are opinion leaders in their communities and adopt new ideas early but carefully. • Early majority: are rarely leaders but adopt new ideas before the average person. • Late majority: adopt an innovation only after a majority of people have tried it. • Laggards: are suspicious of changes and adopt the innovation only when it has become tradition.

22. Adopter categorization on the basis of relative time of adoption of innovations Source: http://www.ideacouture.com/blog/innovation-early-adopters-beyond-the-bell-curve/

23. Influence of Product Characteristics on Rate of Adoption • The characteristics of the new product affect its rate of adoption. Some products catch on almost overnight e.g. Frisbees; but some take a long time to be accepted e.g. personal computers. Five characteristics are important in influencing an innovation’s rate of adoption; • relative advantage: the degree to which the innovation is seen as superior relative to existing products.

24. compatibility: the degree to which the innovation fits the values and lifestyles of potential consumers. • complexity: the degree to which the innovation is difficult to understand or use. • divisibility: the degree to which the innovation may be tried on a limited basis. (price may influence the divisibility) • communicability: the degree to which the results of using the innovation can be observed or described.