OLC EUROPE

1. OLC EUROPE PRINCIPLES OF MARKETING Consumer Behaviour Eric Agyemang BSc., MA, PGCE, A1, V1

2. Definitions As a customer, we would engage in a purchase transaction with a supplier of goods for our own or our family's consumption. As a client we would be availing `ourselves of a range of professional services such as accountants, solicitors etc. As a professional, we would be exercising special skills in purchasing, often in large quantities and/or expending millions of pounds, as a part of our job on behalf of an organisation. As a consumer, we are the end user of the product. When we are part of a group combining our influences we are known as a Decision Making Unit.(DMU), CONSUMER BUYING BEHAVIOUR

3. Consumer buying `behaviour can be defined as, 'the decision processes and acts of individuals involved in buying and using products or services.' (Dibb: Marketing Concepts and Strategies, 2001). Consumer buying behaviour is important to the marketing manager for a at least three reasons. The buyer's reaction to the organization's marketing strategy has a major impact on the success of the organisation. It allows the organisation to examine the main influences on what,where, when and how customers buy. Only in this way will they be able to devise a marketing mix that satisfies the needs of the customers. By gaining a better understanding of the factors influencing their customers and how their customers will respond, organisations will be better able to predict the effectiveness of their marketing activities. Definition CONSUMER BUYING BEHAVIOUR

4. Many theories, models, and concepts have been borrowed from other fields as well as developed by marketing researchers in attempts to understand consumer behaviour In many cases, these ideas overlap and even compete with each other as useful descriptions of consumers. To date, no one approach is fully accepted; nor is it likely that a single, grand theory of consumer behaviour can be devised that all researchers would agree on This lesson provides a framework for studying, analyzing, and understanding consumers to help develop successful marketing strategies. In addition, we discuss several levels of consumer analysis. A framework for consumer analysis

5. The wheel of consumer analysis

6. Consumer affect and cognition refer to two types of mental responses consumers exhibit toward stimuli and events in their environment. • Affectrefers to their feelings about stimuli and events, such as whether they like or dislike a product. • Cognitionrefers to their thinking, such as their beliefs about a particular product. Consumer affect and cognition

7. Affective responses can be favourable or unfavourable and vary in intensity. • For instance, affect includes relatively intense emotions such as love or anger, less strong feeling states such as satisfaction or frustration, moods such as boredom or relaxation, and milder overall attitudes such as liking McDonald’s french fries or disliking Bic pens. • Marketers typically develop strategies to create positive affect for their products and brands to increase the chances that consumers will buy them. Affective responses

8. Cognition refers to the mental structures and processes involved in thinking, understanding, and interpreting stimuli and events. • It includes the knowledge, meanings, and beliefs that consumers have developed from their experiences and stored in their memories. • It also includes the processes associated with paying attention to and understanding stimuli and events, remembering past events, forming evaluations, and making purchasing decisions and choices. • Although many aspects of cognition are conscious thinking processes, others are essentially automatic. • Marketers often try to increase consumers’ attention to products and their knowledge about them. cognition

9. Technology That Sees Clearly When You Can't City Safety- At 31 mpg or less, City Safety detects a stopped or slower moving car in front of you, and applies the brakes.  Which is why the Volvo XC60 is known as "The Car That Stops Itself". Volvo ads often feature detailed information about the safety features of the cars to increase consumers’ knowledge and the chances that they will buy Volvos.

10. Behaviourrefers to the physical actions of consumers that can be directly observed and measured by others. • It is also called overt behaviour to distinguish it from mental activities, such as thinking, that cannot be observed directly. • Thus, a trip to The Gap at the mall involves behaviour; deciding whether to go there is not an overt behaviour because it cannot be observed by others. • Examples of behaviours include shopping at stores or on the Internet, buying products, and using credit cards. Consumer behaviour

11. Behaviour is critical for marketing strategy because only through behaviour can sales be made and profits earned. Although many marketing strategies are designed to influence consumers’ affect and cognition, these strategies must ultimately result in Overt Consumer behaviour to have value for the company. Thus, it is critical for marketers to analyze, understand, and influence overt behaviour. This can be done in many ways, including offering superior quality (Toyota), lower prices (Circuit City), greater convenience (Tesco online groceries), and easier availability (Coke is sold in millions of stores and vending machines), Marketers can also influence overt behaviour by offering products, stores, and brands that are trendier (The Gap), sexier (Calvin Klein jeans), and more popular (Nike). Critical nature of behaviour

12. The consumer environment refers to everything external to consumers that influences what they think, feel, and do. It includes social stimuli, such as the actions of others in cultures, subcultures, social classes, reference groups, and families, that influence consumers. It also includes other physical stimuli, such as stores, products, advertisements, and signs, that can change consumers’ thoughts, feelings, and actions.  The consumer environment is important to marketing because it is the medium in which stimuli are placed to influence consumers. For example, marketers run commercials during TV shows that their target markets watch to inform, persuade, and remind them to buy certain products and brands. Consumer environment

13. In the wheel of consumer analysis model, each of the three elements is connected by a two-headed arrow signifying that any of them can be either a cause or an effect of a change in one or more of the other elements. For example, a consumer sees an ad for a new laundry detergent that promises to clean clothes better than Ariel. This ad changes what the consumer thinks about the new brand and leads to a purchase of it. In this case, a change in the consumer’s environment (the ad for the new detergent) led to a change in cognition (the consumer believed the new detergent was better), which led to a change in behaviour (the consumer bought the new brand). A change in laundry detergent purchase and use could come about in other ways. For example, a consumer receives a free sample of a new liquid detergent in the mail, tries it out, likes it, and then purchases it. In this case, a change in the consumer’s environment (the free sample) led to a change in behaviour (use and purchase), which led to a change in the consumer’s affect and cognition (liking the new brand). RELATIONSHIPS AMONG AFFECT AND COGNITION, BEHAVIOR, AND THE ENVIRONMENT

14. Consumer processes not only involve a dynamic and interactive system but also represent a reciprocal system .   In a reciprocal system , any of the elements can be either a cause or an effect of a change at any particular time (reciprocal determinism). Affect and cognition can change consumer behaviour and environments. Behaviour can change consumers’ affect, cognition, and environments. Environments can change consumers’ affect, cognition, and behaviour. Reciprocal system

15. Viewing consumer processes as a reciprocal system involving affect and cognition, behaviour, and the environment has five implications. First, any comprehensive analysis of consumers must consider all three elements and the relationships among them.  Second, any of the three elements may be the starting point for consumer analysis.  Third, because this view is dynamic, it recognizes that consumers can continuously change.  Fourth, although our example focused on a single consumer, consumer analysis can be applied at several levels.  Finally, this framework for analyzing consumers highlights the importance of consumer research and analysis in developing marketing strategies. Effects of the Reciprocal system

16. From a consumer analysis point of view, a marketing strategy is a set of stimuli placed in consumers’ environments designed to influence their affect, cognition, and behaviour. These stimuli include such things as products, brands, packaging advertisements, coupons, stores, credit cards, price tags, salespeople’s communications, and, in some cases, sounds (music), smells (perfume), and other sensory cues. In our model of the Wheel of Consumer Analysis, Marketing strategy is treated as the hub of the wheel because it is a central marketing activity and is designed by marketing organizations to influence consumers. Clearly, marketing strategies should be designed not only to influence consumers but also to be influenced by them. Marketing strategy

17. The role of consumer research and analysis in marketing strategy

18. A logical sequence is to first research and analyze what consumers think, feel, and do relative to a company’s offerings and those of competitors. In addition, an analysis of consumer environments is called for to see what factors are currently influencing them and what changes are occurring. Based on this research and analysis, a marketing strategy is developed that involves setting objectives, specifying an appropriate target market, and developing a marketing mix (product, promotion, price, place) to influence it. After the target market has been selected based on careful analysis of key differences in groups of consumers, marketing strategies involve placing stimuli in the environment that hopefully will become part of the target market’s environment and ultimately influence its members’ behaviour. Consumer research and analysis should not end when a strategy has been implemented, however. Rather, research should continue to investigate the effects of the strategy and whether it could be made more effective. Logical sequence of consumer analysis

19. LEVELS OF CONSUMER ANALYSIS Consumer research and analysis can be conducted at several different levels. The Wheel of Consumer Analysis is a flexible tool that can aid in understanding different: • societies, • industries, • market segments, or • individual consumers. It can be used fruitfully by both marketing strategists and public policy officials to understand the dynamics that shape each of these levels.

20. STAGES IN THE BUYING PROCESS The general stages in the buying process have been identified as follows. • Need recognition • Information search • Evaluation of alternatives • Purchase decision • Post purchase evaluation

21. THE PROCESS OF CONSUMER BUYING BEHAVIOUR Awareness set Need recognition Information Search Evaluation of Alternatives Purchase decision Internal factors Post Purchase evaluation

22. Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Needs can be triggered by: Internal stimuli Normal needs become strong enough to drive behavior External stimuli Advertisements Friends of friends The Buyer Decision Process Stages

23. Attempt to stimulate need recognition

24. Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Consumers exhibit heightened attention or actively search for information. Sources of information: Personal Commercial Public Experiential Word-of-mouth The Buyer Decision Process Stages

25. Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Evaluation procedure depends on the consumer and the buying situation. Most buyers evaluate multiple attributes, each of which is weighted differently. At the end of the evaluation stage, purchase intentions are formed. The Buyer Decision Process Stages

26. EVALUATION OF ALTERNATIVES Consumers are likely to build up a set of brand beliefs about the position of each brand with regard to each attribute. The sum of these brand beliefs will make up the brand image. In order to ensure that the brand has the best chance of being chosen by the consumer, the marketer has a range of options for action including the following. • Modifying the brand. Kotler calls this 'real repositioning'. • Altering beliefs about the brand. Kotler calls this 'psychological repositioning'. • Altering beliefs about competitors' brands. This can be referred to as 'competitive repositioning'. • (d) Altering the importance weighting of attributes. • (e) Calling attention to neglected attributes, • (f) Shifting the buyer's ideals.

27. AWARENESS SET • Schiffman and Kanuk (1991) describe a model to show how 'set' works in consumers' brand choice. • There will be some brands of which the individual will not be aware at all. This unawareness set will not impact on his decision. • There will be a group of brands of which the customer is aware - his awareness set - and from which he will make his selection. • Within the awareness set, there will be a group of brands which the consumer will call to mind and consider purchasing. This is called the evoked set. There are further subsets, according to the individual's evaluation of the brands within the awareness set. By definition, the evoked set includes brands which have been positively evaluated, but there may also be: • An inert set of brands, of which the individual is aware but about which he is completely indifferent • An inept set of brands of which the individual is aware, but about which he is negative - because of past bad experience, negative associations or poor reports.

28. CATEGORISING BRAND X Do you know brand X? No Yes Awareness set Awareness set Do you like brand X? Yes No opinion No Evoked set Inept set Inert set Consumer purchase

29. IMPLICATIONS OF AWARENESS SET Awareness sets represent consumer perceptions, so they can be a useful indicator of a brand's position. • The presence of a brand in the evoked set of most consumers is very positive. Awareness campaigns would be required to remind the market of the brand's presence and key features, in order to keep it in the set. • The presence of a brand in the unawareness set of most consumers would indicate the need for a marketing strategy to raise the brand's profile in the market place. • The presence of a brand in the inert set of most consumers would indicate the need for a marketing strategy to persuade consumers to try the brand - by giving more information, stressing positive features, or offering samples. • The presence of a brand in the inept set of most consumers would indicate the need to improve the product, or promotional message, to counteract its negative image.

30. Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Two factors intercede between purchase intentions and the actual decision: Attitudes of others Unexpected situational factors The Buyer Decision Process Stages

31. Need recognition Information search Evaluation of alternatives Purchase decision Postpurchase behavior Satisfaction is key: Delighted consumers engage in positive word-of-mouth. Unhappy customers tell on average 11 other people. It costs more to attract a new customer than it does to retain an existing customer. Cognitive dissonance The Buyer Decision Process Stages

32. Buyer Decision Process for New Products • New Products • Good, service or idea that is perceived by customers as new.

33. Buyer Decision Process for New Products • Stages in the Adoption Process • Marketers should help consumers move from awareness to adoption.

34. Buyer Decision Process for New Products Stages in the Adoption Process Awareness Interest Evaluation Trial Adoption

35. Buyer Decision Process for New Products • International ConsumerBehavior • Values, attitudes and behaviors differ greatly in other countries. • Physical differences exist that require changes in the marketing mix. • Customs vary from country to country. • Marketers must decide the degree to which they will adapt their marketing efforts.

36. INFLUENCES ON BUYING BEHAVIOUR • The core processes of consumer buying behaviour is influenced by a number of outside variable classified into: • Cultural – the learned beliefs, values, customs, artefacts and rituals of a society or groups • Social - societal factors such as reference groups, family, social role and status which have a direct role on behaviour. • Personal - include such factors as age and life cycle, occupation, economic circumstances and lifestyle. • Psychological – include such factors like motivation, perception, learning and beliefs and attitudes.

37. CUTURAL FACTORS • Belief and Values • Beliefs are perceived states of knowing, on the basis of objective and subjective information • Values are key beliefs which are relatively enduring, relatively general and fairly widely accepted as a guide to culturally appropriate behaviour • Customs • Customs are modes of behaviour which represent culturally approved ways of responding to given situations • Rituals • A ritual is a type of activity which takes on symbolic meaning, consisting of a fixed sequence of behaviour. Ritualised behaviour tends to be public, elaborate, formal and ceremonial. Rituals commonly require artefacts • Language • Language is an important element of culture that makes the learning and sharing of meanings possible through verbal and non verbal communication • Symbols • Symbols are important aspect of language, carrying different meanings and associations for different people

38. CHARACTERISTICS OF CULTURE Culture comprises the following underlying characteristics: • Social • Culture exists to satisfy the needs of people in a society • Learned • Cultural norms and values are taught or ‘transferred’ to each new member of society, formally or informally by socialisation • Shared • A belief or practice must be common to a significant proportion of a society or group before it can be defined as a cultural characteristic. • Cumulative • Culture is ‘handed down’ to each new generation, and while new situations teach new responses, there is a strong historical element to many aspects of culture • Adaptive • Culture must be adaptive or evolutionary in order to fulfil its need-satisfying function

39. MICRO-CUTURE • For marketing (and segmentation) purposes, it is possible to subdivide a macroculture into micro-culture (or sub-cultures) • The main micro-culture relevant to the United Kingdom inclde • Class • Nationality • Ethnicity • Geography / region • Religion • Age • Gender • Marketers need to be aware of micro-cultural variations for the purpose of segmentation and targeting. • Marketers however need to avoid exaggerating the exclusivity of micro-cultures, since each consumer is simultaneously a member of many micro-cultural segments.

40. SOCIALISATION • Socialisation is the process by which the individual learns the social expectations, goals, beliefs, values, and attitudes that enable him to exist in society. • It is the process by which the individual acquires sufficient knowledge of a society and its ways, to be able to function and participate in it. • The learning of gender-related, consumer and occupational roles is part of the socialisation process. • The various influences on socialisation include: • Family • Religion • Education • Reference group • Mass media • Consumer Socialisation is the process by which children acquire skills, knowledge and attitudes that enable them function in society as consumers.

41. SOCIAL FACTORS • Societal factors such as reference groups, family, social role and status have a direct effect on buying behaviour. • Reference Groups: • ‘Groups with which an individual identifies so much that he or she takes on many of the values, attitudes or behaviours of group members’ • Four types are identified • Primary membership group – family, friends, neighbours & colleagues • Secondary membership group – more formal like trade unions, professional associations, religious groups etc • Aspirational Group – to which the individual would like to belong - Lodge • Dissociative Groups – whose values and behaviour the individual rejects

42. OPINION LEADERS • Opinion leaders are those individuals who reinforce the marketing messages sent and to whom other receivers look for information • In targeting the customer in relation to reference groups, one of the tasks of the marketer is to identify the groups with which the individual identifies, and within that group identify the opinion leaders. • Apart from reinforcing the marketing messages received, opinion leaders may communicate a marketing message to those members of the group who may have missed the original message. • The task of identifying opinion leaders is made more difficult by the fact that opinion leadership is dynamic, and not confined to a few prominent members of society. • A person who may be an opinion leader in certain circumstances, may be an opinion follower in other circumstances

43. THE FAMILY • The family is a major social influence on buyer behaviour , particularly with regard to the roles and relative influence exerted by different family members. • Three patterns of decision making within the family have been identified by researchers with the sorts of product categories with which each is typically associated:. • Husband dominated – insurance, cars, computers and televisions • Wife dominated – washing machines, carpets, kitchenware and non-living room furniture • Equal – living room furniture, holidays, housing and entertainment

44. PERSONAL FACTORS • Personal factors are those factors peculiar to the individual’s circumstances that affect their buying behaviour • Factors classified as personal include: • Age – relevant to products like clothes, cars, furniture and recreation • Stage in Life Cycle – Single, married, Yuppie, Dinky, retired etc (different stages in life cycle is characterised with different consumption patterns • Occupation - A person occupation will influence their consumption • Economic circumstances – consists of such variables as • Spendable income, its stability and time patterns • Savings and assets, including percentage of liquidity • Borrowing power and credit worthiness • Attitude towards spending versus savings • Lifestyle – an individual’s mode of living as identified by his or her activities, interests and opinions. Marketers will search for relationships between their products and lifestyle groups

45. LIFESTYLE CLASSIFICATIONS • CATEGORYCOMMENT • Upwardly mobile, ambitious Seeking a better and more affluent lifestyle, principally through better paid and more interesting work, and a higher material standard of living. • Traditional and Sociable Compliance and conformity to group norms bring social approval and reassurance. Conformist purchasing pattern • Security and status seeking Stressing safety and ego-defensive needs. This lifestyle links status, income and security. It encourages the purchase of strong and well known product brands, - those product and services which confer status and make life as secure and predictable as possible. • Hedonistic preferable Places emphasis on ‘enjoying life now’ and the immediate satisfaction of wants and needs. Little thought is given to the future

46. PSYCHOLOGICAL FACTORS • Buyer behaviour is influenced by four major psychological factors • Motivation • ‘An inner state that energises, activates or moves, that directs or channels behaviour towards a goal (Assael) • Perception • ‘The process by which people select, organise and interpret sensory stimuli into a meaningful and coherent picture’ (Assael) • Learning • Learning describes changes in an individual’s behaviour arising from experience • Beliefs and attitudes • A belief is a descriptive thought that a person holds about something • An attitude comprises a person’s enduring favourable or unfavourable cognitive evaluation, emotions and action tendencies toward some object or idea.

47. MOTIVATION • Motivation arises from two types of perceived needs. • Biogenic needs • Psychogenic needs • Biogenic • Biogenic needs arise from physiological states of tension such as thirst, hunger, and discomfort • Psychogenic • Psychogenic needs arise from psychological states of tension such as the need for recognition, esteem and belonging • A number of different theories of human motivation have been propounded which have different implications for marketing and communications activity

48. FREUDS MOTIVATION THEORY • Freud’s theory of motivation assumes that the real psychological forces influencing people’s behaviour are unconscious • Freud regards the process of growing up and accepting social rules as one which forces an individual to repress many of the natural urges • These urges can never be eliminated or totally controlled and can emerge in dreams, slips of tongue or neurotic behaviour • From a marketing perspective, Freud’s theory implies that people buy a product, not only on for the rational reasons that they may state overtly, but also for a hidden set of underlying unconscious motives that they may not articulate • The marketer therefore need be aware of the impact of all aspects of the product that could trigger consumer emotions that stimulate purchase

49. HERZBERG • Hertzberg's two-factor theory of motivation distinguishes between factor that cause dissatisfaction and factors that cause satisfaction • The task of the marketer is therefore to avoid dissatisfiers such as poor after sales service • In addition the marketer should identify the major satisfiers or motivators of purchase and make sure that they are supplied to the customer

50. MASLOW’S NEEDS HIERARCHY • Maslow’s theory of motivation holds that: • People are driven by particular needs at particular times • That human needs are arranged in a hierarchy in their order of importance: physiological needs, safety needs, social needs, esteem needs and self actualisation needs. • That the lowest ‘level’ or need which is unsatisfied is dominant • Once satisfied the next level ‘up’ the hierarchy becomes the dominant motivating impulse, until it in turn is satisfied • A a satisfied ‘lower level’ need can become dominant again through renewed deprivation. • The levels overlap in practice and more than one level of need may operate at the same time, but the prime motivator will be the lowest need that is substantially unsatisfied.