Chapter 7: Consumer Behaviour and Brand Buying Decisions

1. Chapter 7: Consumer Behaviour and Brand Buying Decisions

2. Contents Concept of consumer behaviour (CB) with respect to branding Brand perception Changing demographic trends and lifestyles Model of consumer brand buying decision process Various factors affecting consumer behaviour Various factors affecting brand loyalty

3. Introduction According to Davis (2000) “... to maximize the customer-brand relationship, a company must understand how customers think, act, perceive, and make purchase decisions”. This highlights the necessity of understanding the consumer’s brand purchase behaviour by the brand managers

4. Definition “The behaviour that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs” (Schiffman and Kanuk 2004).

5. Importance of CB • The post modern study of consumer behaviour is not to predict and manipulate consumer behaviour but to better understand consumer behaviour. • The focus of marketers should not be objective reality but instead consumer perceptions. • The net result of the changing role of the consumer is that companies can no longer act independently. They need to understand how the consumer is behaving, how they are gathering information, their major considerations while purchasing the brand, and the factors influencing the purchase behaviour. • Learning about how the customer finds and executes the optimum solution in a given market makes it easier for an organization to earn their long-term trust, purchases, and loyalty. • It is believed that knowledge of the factors that influence consumer behaviour can, with practice, be used to develop sound marketing strategies. • These marketing strategies need to be integrated with the brand development activity for holistic development of the firm in the long term.

6. Consumer behaviour and the role of branding • The last decade has seen the marketplace flooded with brands both national and international. The customer has a number of options to choose from and their attitude towards a brand is very influential in the purchase decision-making process. • Some brands are purchased ‘not once but repeatedly, in many cases in predictably regular patterns; hence the truth of the saying that when we build brands we are making customers and not just sales. • It has been studied that ‘two-thirds of buyers normally buy (with varying degrees of irregularity) more than one brand. This introduces the extremely important concept of the repertoire of brands. • This consistent habit of repeat purchase in most of the markets highlights the need to build strong brands. • Brand name serves as “shorthand” for quality by providing consumers with a bundle of information about the product. • A brand promises the consumer quality and value and communicates a distinct advantage to the consumer. Companies recognize the value of having strong brands in their portfolio as it helps them build a loyal customer base

7. Brand evaluation and perception by customers Brand evaluation / perception Functional /utilitarian component Symbolic / expressive component Components Rational and practical evaluation of brand Emotional evaluation of brand Evaluation of the brand • Evaluation of performance capabilities • Usage effectiveness • Value for money • Reliability • Availability • Taste • Pride • Self expression • Belongingness to a group • Sense of prestige • Social approval Perception about Benefits Intrinsic Extrinsic

8. Brand gap Brand image is defined as ‘the customer’s perception of brand identity.’ Brand identity portrayed by the organization can be same or different from the brand image formed by customers on the basis of their experience. If the brand image is the same as the brand identity then no brand gap exists. For this to happen companies need to have an understanding of the attitude and purchase process of the consumers

9. The Indian consumer Changing demographic trends and lifestyles The young Indian consumer Rising household income Spending habits and brand behaviour Rise of the Indian women as a consumer Changing consumer expectations Changing lifestyle Regional differences

10. Model of Consumer Decision Making Stages Components Factors influencing • Marketing communications • Brand equity Marketing effort of the firm (4Ps/7Ps and brand name) Input • Cultural • Culture • Sub-culture Socio-cultural environment • Social • Reference group • Family role • Status Consumer decision making Need recognition Information search Evaluation of alternative • Personal / Psychological factors • Motivation • Beliefs • Attitude • Personality • Age and lifecycle stages • Occupation • Economic circumstances • Lifestyle • Self concept • Perception • Learning and Memory Process Experience Post Purchase Behaviour Purchase Post Purchase evaluation Dissatisfaction Satisfaction Brand name Output Brand loyalty Divestment Feedback

11. Factors affecting consumer behaviour Socio-cultural environment Motivation Beliefs Attitude Personality Age and life-cycle stages Occupation and economic circumstances Lifestyle Self-concept and perception Learning and memory Role of the family

12. Brand loyalty • Brand loyalty is defined as the consumer’s commitment towards a particular brand so much so that they are constantly looking out for marketing activities associated with the brand and are motivated to obtain the brand exclusively on every purchase. • Research shows that • a 1% increase in customer loyalty equals 10% cost reduction and • 5% increase in customer loyalty increases the profitability of the company by 40-95% • Also, the cost of attracting a new customer is five times more than the cost of retaining an existing customer

13. Brand loyalty benefits • Lowers vulnerability to competitors marketing strategies • Increases marketing communication effectiveness and reduces marketing costs • Companies can charge higher margins • Increases the probability of success in brand extension and licensing opportunities • Brand loyal customers are less price-sensitive. Thus they do not readily shift over with the change in prices by the competitor brands. • When a brand is promoted, non-loyal customers are likely to purchase the promoted brand in small quantities but the brand loyal customers are found to buy more of the promoted brand than they would normally buy • Brand loyalty has more influence on purchase decisions than price promotions.

14. Factors affecting brand loyalty Brand trust Childhood association Family ties Brand Loyalty Customer satisfaction Involvement Perceived value Commitment

15. Brand commitment • The consumer’s commitment links them to the marketing organization and is ‘the act of maintaining a relationship with a commercial partner’. • If a customer is committed towards a brand, it can be safely presumed that the customer is brand loyal, frequently purchases the brand, and has a favourable attitude towards the brand. • Commitment can be built by building brand communities online or by forming clubs.

16. Quick Recapitulation • Concept of consumer behaviour with respect to branding • Brand perception • Changing demographic trends and lifestyles • Model of consumer brand buying decision process • Various factors affecting consumer behaviour • Various factors affecting brand loyalty

17. Questions?