Studying Consumer Behavior Module - IV

1. Studying Consumer Behavior Module - IV

2. Consumer Behavior Defined • The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose the products, services, experiences, or ideas to satisfy needs and the impact that these processes have on the consumer and society

3. Marketing Stimuli Product Price Place Promotion Other Stimuli Economic Tech. Political Cultural Model of Buyer Behavior Buyer’s Decision Process Problem Recognition Information Search Evaluation of Alternatives Purchase Decision Post purchase Behavior Buyer’s Characteristics Culture Social class Personal Psychological Buyer’s Decision Product Choice Brand Choice Dealer Choice Purchase Timing Purchase Amount

4. Factors Influencing Consumer Behavior • Cultural Factors • Culture • Most fundamental determinant of person’s wants and behavior • Set of values, perceptions, preferences and behaviors through his or her family or key institutions • Subculture • Provides more specific identification and socialization for their members • Includes nationalities, religions and geographic regions.

5. 3. Social Class • Are relatively homogenous and enduring divisions in a society, which are hierarchically ordered and whose members share similar, interests and behavior. • Each social class tend to behave more alike than persons from two different social classes. • Persons are perceived as occupying inferior or superior positions according to social class • Social class is indicated by a cluster of variables-income, wealth, occupation etc • Individuals can move from one social class to another during their lifetime

6. Social Factors 1. Reference Groups • A person’s reference group consists of all those people that have direct or indirect influence on person’s attitude or behavior, they are also known as membership groups. • Primary reference group consists of family, friends, neighbors and co-workers with whom the person interacts fairly continuously and informally. • Secondary reference group such as religious, professional, and trade union groups which tend to be more formal and require less continuous interaction.

7. Aspirational groups are those the person hopes to join • Dissociative groups are those whose values or behavior an individual rejects. • Opinion Leader is the person in informal product related communications who offers advice or information about specific product category 2. Family • Family members constitute the most influential primary reference group. • Family of orientation: parents and siblings • Family of procreation: spouse and children

8. 3. Roles and Statuses • A person participates in many groups namely family, clubs, organizations etc. • Persons position can be defined in terms of role and status • Role consists of the activities that a person is expected to perform. • Each role carries a Status

9. Personal Factors 1. Age and stage in life cycle • Consumption is shaped by the family life cycle. There are nine stages present in the family life cycle • Bachelor stage : young, single • Newly married couple: Young and no children • Full Nest I: youngest child under six • Full Nest II: youngest child over six • Full nest III: older married couple with grown up dependent children • Empty Nest I: older married couple with no children living with them, head of family earning • Empty Nest II: older married couple staying alone with head of family as retired person • Solitary survivor: earning • Solitary survivor: retired

10. 2. Occupation & Economic circumstances • Marketers try to identify the occupational groups that have above average interest in their products and services. • Product choice is greatly affected by economic circumstances: spendable income, savings and assets, debts, borrowing power and attitude toward spending versus saving. 3. Lifestyle • A lifestyle is the person’s way of living in the world as expressed in activities, interests and opinions. Lifestyle portrays the complete person interacting with his or her environment. • Marketers search for relationship between their products and lifestyle groups.

11. 4. Personality and Self Concept • It refers to distinguishing psychological characteristics that lead to relatively consistent and enduring responses to environment. • Personality is usually described in terms of such traits as self confidence, dominance, autonomy, deference, sociability, defensiveness and adaptability. • Related to personality is self concept. Marketers try to develop brand images that match the target market’s self concept.

12. Psychological Factors 1. Motivation “Motive” is a need that is sufficient enough to drive a person to act. A Need becomes a motive when evoked to a sufficient level of intensity. Three theories of motivation: - * Freud’s Theory * Maslow’s Theory * Herzberg’s Theory

13. 2. Perception Perception is the process by which an individual selects, organizes and interprets information inputs to create a meaningful picture of the world. Perception depends not only on the physical stimuli but also on the stimuli’s relation to the surrounding field and on conditions within the individual

14. Three perceptual processes # Selective Attention * People are more likely to notice stimuli that relate to a current need * People are more likely to notice stimuli they anticipate * People are more likely to notice stimuli whose deviations are large in relation to the normal size of the stimuli.

15. # Selective Distortion It is the tendency to twist information into personal meanings and interpret information in a way that will fit our preconceptions. # Selective Retention people will forget much that they learn but will tend to retain information that supports their attitudes and beliefs.

16. Learning • It involves changes in an individual’s behavior arising from experience. • Learning theory teaches marketers that they can build up demand for a product by associating it with strong drives, using motivating cues, and providing positive reinforcement. • A drive is a strong internal stimulus impelling action • Cues are minor stimuli that determine when, where and how a person responds.

17. Beliefs & Attitudes • A belief is a descriptive thought that a person holds about something • Belief may be based on knowledge, opinion, or faith. • They may or may not contain emotional charge • An attitude is a person’s enduring favorable or unfavorable evaluations, emotional feelings, and action tendencies toward some object or idea. • Attitudes lead people to behave in a fairly consistent way towards similar objects.

18. Buying Decision Process • Buying Roles • Initiator: - A person who first suggests the idea of buying the product or service • Influencer: - A person whose view or advice influences the decision • Decider: - A person who decides on any component of a buying decision • Buyer: - The person who makes the actual purchase • User: - A person who consumes or uses the product or service

19. High Involvement Low Involvement 2. Buying Behavior Significant Differences between brands Few Differences between brands Henry Assael’s Buying Behavior Model

20. Complex Buying Behavior • At first the buyer develops belief about the product • Next develops attitude about the product • Lastly makes a thoughtful choice • Product is expensive, bought infrequently, risky and highly self expressive • Dissonance Reducing Buyer Behavior • Buyer looks for information in the market • Buys quickly responding to good price or to purchase convenience • Consumer first buys, then acquires new set of beliefs and finally ends up with new set of attitude. • Looks for cues that supports his purchase decision

21. Habitual Buying Behavior • Consumers have little involvement and they go to the store and reach for the brand. • They reach the same brand not due to loyalty but habit • Passive recipients of information through ads and develop brand familiarity rather than brand conviction • Variety Seeking Buying Behavior • Consumer does a lot of brand switching • Brand switching is done more for variety rather than dissatisfaction.

22. Problem Recognition Information Search Evaluation of Alternatives Post Purchase Behavior Purchase Decision Stages of the Consumer Buying Decision Process

23. Awareness Set Consideration Set Choice Set Decision Total Set • Problem Recognition • Internal or External stimuli • Information Search • Heightened attention • Active information search • Personal sources • Commercial sources • Public sources • Experiential sources

24. Evaluation of Alternatives • Evaluation is a process of need identification, benefits sought from the product and thirdly it should portray a bundle of attributes with varying abilities • Consumer develops a set of brand beliefs about where each brand stands on each attribute. • Set of beliefs make up brand image, these vary according to experiences and learning. • Consumer identifies parameters for evaluation and rates each brand.

25. Purchase Decision • Consumer forms an intension to buy the most preferred brand. • Two factors that intervene in between purchase decision and purchase intension are: - • Attitude of others • Unanticipated situational factors • Post Purchase Behavior • Post purchase satisfaction • Post purchase action • Post purchase use & disposal

26. Consumer Adoption Process • It focuses on the individual and how fast he moves through various stages in deciding whether to adopt new goods, service or ideas. • Sequence of events beginning with consumer awareness of a new product leading to trial usage and culminating in full and regular use of the new product • There are five categories of adopters • Innovators • Early adopters • Early majority • Late majority • Laggards

27. Adoption of Innovations Early Majority Late Majority Percentage of Adopters Early Adopters Laggards Innovators 34% 34% 16% 13.5% Time of Adoption 2.5% Late Early

28. B2B Defined • The management process responsible for the facilitation of exchange between producers of goods and services and their organisational customers. • B2B marketing and purchasing is a complex and risky business involving a number of different parties.

29. Nature and Scope of the Business Market The business market consists of all individuals and organizations that buy goods and services for one or more of the following purposes: • To make other goods and services • To resell to other business users or to consumers • To conduct the organization’s operations

30. Any good or service purchased for a reason other than personal or household consumption is part of the business market. • Each buyer within this market is termed a business user. • The activity of marketing goods and services to business users, rather than to ultimate users, is business marketing. • A firm performing the activity is a business marketer. • The distinction of whether a good or service is a consumer or business product depends on the reason it is purchased, not on the item itself!

31. Characteristics of Business Market Demand Four demand characteristics differentiate the business market from the consumer market: • Buyers are well informed •  Typically, business buyers are better informed about what they are buying than ultimate consumers. • Demand is derived • The demand for business products is generated from the demand for the consumer products in which that business product is used. • Implications are: to estimate the demand for a product, a business marketer must be very familiar with how it is used; the producer of a business product may find it worthwhile to engage in marketing efforts to encourage the sale of its buyers’ products.

32. Demand is inelastic • Elasticity of demand refers to how responsive demand is to a change in the price of a product. • The industry demand for many business products is relatively inelastic, which means that the total demand for all producers of the product responds very little to changes in its price. • Demand fluctuates • Although the demand for many business goods does not change much in response to price changes, it does respond to other factors. • Market demand for most classes of business goods fluctuates considerably more than the demand for consumer products.

33. Factors Influencing Business Buyer Behavior

34. The Buying Center • Initiators (who request the purchase) • Users (One who will finally use the product) • Influencers (people who give specifications and help in evaluation of alternatives) • Deciders (Decide on product requirements or suppliers) • Approvers (who authorize the proposed action of deciders or buyers) • Buyers (people who formally have the authority to select the supplier and arrange the purchase terms • Gatekeepers (people who prevent sellers or information from reaching the member of buying center)

35. Business Buying Process

36. Problem Recognition • Internal or external stimuli • General Need Description • Buyer determines the needed item’s characteristics and required quantity. • Product Specification • Development of the items technical specification product value analysis (PVA) is done. • PVA is an approach to cost reduction in which components are carefully studied to determine if they can be redesigned or standardized or made by cheaper methods of production • Supplier Search • Identification of the most appropriate supplier • Proposal Solicitation • Buyer invited qualified suppliers to submit proposals

37. Supplier Selection • Buying center will specify desired supplier attributes and indicate their relative importance • It rates each supplier on the identified attributes • Price • Supplier reputation • Product reliability • Service reliability • Supplier flexibility • Order Routine Specification • Buyer negotiates the final order listing the technical specifications, the quantity needed, the expected time of delivery, return policies, warranties etc. • Performance Review • Supplier evaluation can be done by • Contacting the end user and asking for feedback • Buyer may rate the supplier on various criteria using weighted score method

38. CLASSIFYING BUSINESS BUYING SITUATIONS • Business buying behavior involves degree of effort involved in the decision and the levels within the organization in which these decisions are made. Straight Rebuying • A recurring purchase decision in which a customer reorders a product that has satisfied needs in the past. • Purchaser see little reason to assess competing options. • Marketers who maintain good relationships with customers can go a long way toward ensuring straight rebuys. • High-quality products. • Superior service. • Prompt delivery.

39. Modified Rebuying • Purchaser willing to reevaluate available options. • May occur if supplier has let a rebuy circumstance deteriorate because of poor service or delivery performance. New-Task Buying • First-time or unique purchase situations that require considerable effort by the decision makers. • Most complex category of business buying. • Often requires purchaser to consider alternative offerings and vendors.

40. Abundant Resources Actualizers VALS 2 Status Oriented Action Oriented Principle Oriented Fulfilleds Achievers Experiencers Believers Strivers Makers Minimal Resources Strugglers

41. Psychographics is the science of measuring and categorizing consumer lifestyles. • VALS 2 framework (SRI International) divides consumers into two categories: - • People with greater resources • Actualizers: successful, sophisticated, active, take charge. Purchase upscale niche oriented products • Fulfilleds: mature, satisfied, comfortable, reflective. Favor durability, functionality, and value in products. • Achievers: successful, career and work oriented. Favor established, prestige products that demonstrate success to their peers. • Experiencers: young, vital, enthusiastic, impulsive and rebellious. Spend on clothing, fast food, music, movies etc.

42. People with fewer resources • Believers: conservative, conventional and tradtional. Favor familiar products and established brands. • Strivers: uncertain, insecure, approval seeking, resource constrained. Favor stylish products that emulate the purchase of those with greater material wealth. • Makers: practical, self sufficient, traditional, family oriented. Favor products with practical or functional purpose. • Strugglers: elderly, resigned, passive, concerned and resource constrained. Cautious customers who are loyal to favorite brands.