THEORIES OF Consumer Behavior

1. THEORIES OF Consumer Behavior The factors that affect the demands of the consumers Trends in the consumer behavior in 2011- 2012 HON. EDUARDO G. ONG BSC, MBA, LLB, PhD, DPA, DBA Diplomate in Business Education Fellow in Personnel Management Fellow in Real Estate Management Management & Academic Consultant Professor of Business & Public Administration Chairman Professional Board of Real Estate Service-PRC President Phil. Association of Professional Regulatory Boards

2. What would you choose???

5. Consumer Behavior Involves the psychological processes that consumers go through in recognizing needs, finding ways to solve these needs, making purchase decisions (e.g., whether or not to purchase a product and, if so, which brand and where). Interpret information, make plans, and implement these plans (e.g., by engaging in comparison shopping or actually purchasing a product).

6. Consumer Buying Behavior Refers to the buying behavior of final consumers individuals & households who buy goods and services for personal consumption. Consumer Buying Behavior

7. Influences on and of Consumer Behavior PERCEPTION/ SENSATION MARKET RESEARCH INFO SEARCH COGNITION CHOICES STRATEGY AFFECT PREFERENCES BELIEFS CONSUMER COMMUNICATION SOCIAL AND OTHER INFLUENCE

8. If you have bad breath, you cannot smell it yourself. • If you eat a balanced diet, you do not need vitamin supplements. • Using a razor with five blades will reduce the likelihood of cutting yourself and will result in less skin irritation. • Dell Computers tend to be of higher quality than those made by HP and Sony. • Rust stains on clothes can be removed with the use of lemon juice. Bleach actually makes these stains worse. True or False?

9. Are veggie burgers actually healthy? • What makeup should you use to get an “even” skin tone? • Do I get any useful benefits from spending more than Php 5,000.00 on a digital camera? • Should I get a “make-over?” What am I looking for? What should I do? • Is my mechanic honest? • Which tie should I wear for a job interview? • Should I give my wife roses, chocolate, or software? Questions Faced By Consumers

10. Consumer Problems and Recognition • Consumer problem:Discrepancy between ideal and actual state--e.g., consumer: • Has insufficient hair • Is hungry • Has run out of ink in his or her inkjet cartridge • Problems can be solved in several ways--e.g., stress reduction <----- vacation, movie, hot bath, medication

11. CONSUMER DECISIONS:Theory and Reality in Consumer Buying PROBLEM RECOGNITION INFORMATION SEARCH EVALUATION OF ALTERNATIVES PURCHASE POSTPURCHASE EVALUATION/ BEHAVIORS Theory Complications

12. Approaches to Search for Problem Solutions INTERNAL Memory Thinking EXTERNAL Word of mouth, media, store visits, trial CATALOG

13. Options Identified and Considered UNIVERSAL SET All possible options RETRIEVED SET Options that readily come to mind EVOKED SET Options that will be considered by the consumer Note: Retrieved and evoked sets will vary among different consumers

14. REMINDER • For low involvement products, efforts aimed at affecting internalsearch tend to be more effective—the consumer is usually not willing to expend energy on external search. • External search is more likely for higher involvement products.

15. Decision Making Issues • Involvement level • Temporary • Enduring • Consumer locus of control • Internal • External • Product category complexity • Consumer knowledge

16. Evaluation Type • Compensatory: Decision based on overall value of alternatives (good attribute can outweigh bad ones) • Non-compensatory:Absolutely must meet at least one important criterion (e.g., car must have automatic transmission) • Hybrid: Combination of the two (e.g., one non-compensatory measure, then compensatory tradeoffs on other attributes • Abandoned strategy: Consumer finds initial criteria unrealistic and proceeds to less desirable solution IMPORTANT LESS IMPORTANT

17. If either Coke or Pepsi is on sale, buy that brand; otherwise, buy Coke • The larger the navels, the better the orange • The larger package is likely to offer a lower unit price (not true in reality) Heuristics—Low Involvement Decision Rules

18. Attitudes―components BELIEFS AFFECT (FEELING) BEHAVIORAL INTENTIONS

19. Attitude Components • Beliefs • Can be positive, negative, or neutral • May or may not be accurate • May contradict other beliefs held by the other person • Affect • May be positive or negative • May take on specific dimension (e.g., pleasure, disgust) • Behavioral Intentions • An individual’s plan or expectations of what he or she will do • May appear inconsistent with beliefs • May not predict well what the individual will do in reality

20. Generating Beliefs Through Advertising • Statements must be • Perceived • Comprehended • Remembered • Believed (at least in part)

21. Marketing and Other Stimuli Model of Buyer Behavior Product Price Place Promotion Economic Technological Political Cultural Buyer’s Black Box Buyer Characteristics Buying Decision Process Buyer’s Response Purchase Timing Purchase Amount Product Choice Brand Choice Dealer Choice

22. Factors Influencing Consumer Behavior Culture Subculture Social class Cultural Social Reference groups Family Roles and status Individual/Personal Age and life-cycle Occupation Economic situation Lifestyle Personality and self-concept Psychological Motivation Perception Learning Beliefs and attitudes Buyer

23. Culture • Most basic cause of a person's wants and behavior. • Subculture • Groups of people with shared value systems based on common life experiences. • Hispanic Consumers • African American Consumers • Asian American Consumers • Mature Consumers • Social Class • Society’s relatively permanent & ordered divisions whose members share similar values, interests, and behaviors. • Measured by: Occupation, Income, Education, Wealth and Other Variables.

24. CELL PHONE CRAZE “ In Filipino Culture everything new and shiny is attractive”

25. Factors Affecting Consumer Behavior:Social • Groups • Membership • Reference • Family • Husband, wife, kids • Influencer, buyer, user Social Factors Roles and Status

26. Reference Group are groups that have direct (face to face)or indirect influence on the person’s attitudes or behavior “ People are often influenced by reference groups to which they do not belong”

27. Family members can strongly influence Buyer behavior Role – consists of the activities people are expected to perform according to the persons around them Each role carries a status reflecting the general esteem given to it by society People often choose products that show their status in society

28. Personal Influences Factors Affecting Consumer Behavior: Individual/ Personal Lifestyle Identification Age and Life Cycle Stage Occupation Personality & Self-Concept Economic Situation Opinions Activities Interests

29. Factors Affecting Consumer Behavior:Psychological Motivation Psychological Factors Beliefs and Attitudes Perception Learning

30. BELIEFS & ATTITUDE A persons beliefs and attitude are acquired through acting and learning. A belief is a descriptive thought that a person has about something An attitude is a person’s consistency favorable or Unfavorable evaluations , feelings and tendencies Toward an object or idea.

31. PERCEPTION Is the process by which people select, organize, and interpret information to form a meaningful picture of the world. The marketer must remember that two people with the same motivation and in the same situation may act differently because they perceive the situation differently.

32. LEARNING Is described as changes in an individual behavior arising from experience.

33. MOTIVATION The process of motivation is initiated by the Tensions an unsatisfied want creates motive (drive) – is a need that is sufficiently pressing to direct the person to seek satisfaction of the need.

34. Theories of Motivation Sigmund Freud's Theory – Assumes that people are largely unconscious about the real psychological forces shaping their behavior. Accordingly, a person does not fully understand his or her motivation. id - is an important part of our personality because as newborns it allows us to get basic needs

35. Sigmund Freud's Theory – Ego- based on reality principle the ego understands that other people have needs and desires and that something being impulsive or selfish can hurt us in a long run Superegomoral parts of us are develops due to moral and ethical restraints placed on us by our caregivers

36. The role of the unconscious is only one part of the model.  Freud also believed that everything we are aware of is stored in our conscious.  Our conscious makes up a very small part of who we are.  In other words, at any given time, we are only aware of a very small part of what makes up our personality; most of what we are is buried and inaccessible. The final part is the preconscious or subconscious.  This is the part of us that we can access if prompted, but is not in our active conscious.  Its right below the surface, but still buried somewhat unless we search for it.  Information such as our telephone number, some childhood memories, or the name of your best childhood friend is stored in the preconscious.

37. HENRY MURRAY’s THEORY Henry Alexander Murray(May 13, 1893 – June 23, 1988) was an Americanpsychologist who taught for over 30 years at Harvard University. He was founder of the Boston Psychoanalytic Society and developed a theory of personality based on "need" and "press". He also is developer of the Thematic Apperception Test (TAT) which is widely used by psychologists.

38. Murray classified needs as being either: Primary needs (which are biologically based): food, water, air, sex, avoidance of pain Secondary needs (which either derive from our biological needs or are inherent in our psychological nature): achievement, recognition, acquisition dominance, aggression, autonomy affiliation, play, cognizance (asking questions of others) Murray believed that stronger needs are expressed more often over time and lead to more intense behaviour.

39. WILLIAM MCGUIRE William McGuire has described the steps an individual must be persuaded to pass through to assimilate a desired behavior. These steps are: Exposure to the message Attention to the message Interest in or personal relevance of the message Understanding of the message Personalizing the behavior to fit one’s life Accepting the change Remembering the message and continuing to agree with it Being able to think of it Making decisions based on bringing the message to mind Behaving as decided Receiving positive reinforcement for behavior Accepting the behavior into one’s life

40. Maslow’s Hierarchy of Needs Self Actualization (Self-development) Esteem Needs (self-esteem, status) Social Needs (sense of belonging, love) Safety Needs (security, protection) Physiological Needs (hunger, thirst)

41. Need Recognition Information Search Cultural, Social, Individual and Psychological Factors affect all steps Evaluation of Alternatives Purchase Postpurchase Behavior Consumer Decision-Making Process

42. Complete model of consumer behavior Start Need recognition Internal search • Influences • culture • social class • family • situation Search Exposure Memory Stimuli (marketer dominated, other) Attention Alternative evaluation Comprehension • Individual • differences • resources • motivation & • involvement • knowledge • attitudes • personality, • values, lifestyle Purchase Acceptance Retention Outcomes External search Dissatisfaction Satisfaction

43. How do you know when to shop? What are the triggers that initiate an awareness & search? • What are the internal & external sources of these triggers?

45. Need Recognition • When a current product isn’t • performing properly • When the consumer is running out of an product • When another product seems • superior to the one currently used Marketing helps consumers recognize (or create) an imbalance between present status and preferred state

46. The information search stage An internal search involves the scanning of one's memory to recall previous experiences or knowledge concerning solutions to the problem-- often sufficient for frequently purchased products. Personal sources (friends and family) Public sources (rating services like Consumer Reports) An external search may be necessary when past experience or knowledge is insufficient, the risk of making a wrong purchase decision is high, and/or the cost of gathering information is low. Marketer-dominated sources (advertising or sales people) The evoked set: a group of brands from which the buyer can choose

47. go back to your past purchase– what were the specific internal and external sources of information that influenced your decision? • how do you determine (and rate) the credibility of these sources? • what specific information influenced you?

48. Determinants of External Search

49. Buyer Behavior Other people often influence a consumers purchase decision. The marketer needs to know which people are involved in the buying decision and what role each person plays, so that marketing strategies can also be aimed at these people. (Kotler et al, 1994). • Initiator: the person who first suggests or thinks of the idea of buying a particular product or service. • Influencer: a person whose views or advice carry weight in making the final buying decision • Decider: the person who ultimately makes the final buying decision or any part of it • Buyer: the person who makes the actual purchase • User: the person who consumes the product or service Note: teens are increasingly assuming more of these roles Think about your past purchase– who was in which role?

50. Relative influence of husbands & wives Wife Dominant Child clothing Women’s clothing Information search Final decision groceries Pots & pans NonRx lamps Toys/games furniture luggage carpet Paint wallpaper refrigerator vacations Men’s leisure clothing Joint Men’s business clothing stereo TV sets camera Financial planning Family car Sport equipment hardware Lawn mower Husband Dominant Extent of role specialization 100 75 50 25 0