Consumer Buying Behavior (1).pdf

Consumer Buying Behavior What is CBB?  “The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts these processes have on consumers and society.”  P & G: P&G created disposable diaper market in Japan when it was introduced Pampers. The product was an unmodified version of the American product and was marketed using the same approach used in USA. However, Japanese competitors soon reduced P&G’s share to less than 10 percent. “We really don’t understand the consumer,” explained P&G’s CEO  On the basis of consumer research, P&G redesigned diapers to much thinner. It also introduced pink and blue diaper. Advertising changed to indirect approach from direct approach. P&G now is very successful in Japanese market. Diversity in Consumer Behavior There are various reasons for diversity in Consumer Behavior. Some of them are:  Age  Family Size  Education  Culture/Religion  Psychology

 Geographic Location etc Classification of Indian Population Total

Rural

Urban

Total Population

1,21

83

38

Male

62

42

20

Female

59

41

18

Literacy DetailsTotal

Rural

Urban

Literate

76

48

28

Literacy Percentage (2011)

73

67

84

Literacy Percentage (2001)

65

59

80

Applications of Consumer Behavior Social Marketing: it is the application of marketing strategies and tactics to later or create behavior that have positive effect on the targeted individuals or society as a whole.  Informed Individuals:  Availability of information resources.  Companies strategies to educate customers. Customers are using products/services round the clock, during their work and sleep hours also Marketing Strategy & Consumer Behavior-

Market Analysis

Market Segmentation

Marketing Strategy

Consumer Decision Process

Outcomes

Outcomes Individual : ◦ Need satisfaction/dissatisfaction/delight  Firm :

◦ Sales ◦

Market Share

◦

Customer Satisfaction

 Society : ◦ Economic Outcome ◦

Social Welfare

CBB-2

INDIVIDUAL ASPECTS OF CONSUMER BEHAVIOUR-

 Perception  Learning  Motivation and Involvement  Personality  Attitudes PERCEPTION “Perception is the process of selecting, organizing and interpreting or attaching meaning to events or situations in the environment.”  It is mental process, whereby an individual selects data/information from environment, organizes it and then draws significance or meaning from it.  Perception is basically a cognitive or thinking process and individuals activities, emotions, feelings etc. are based on his or her perceptions of their surroundings.

Sensation Sensation may be defined as an immediate direct response of a physical sensory organ.  Sensation is related to a very elementary or basic behavior which is based on physiological functioning.  Perception is something more than sensation.  Perception is determined by both physiological and psychological factors. THRESHOLD ABSOLUTE THRESHOLD: the point at which an individual senses a difference between ‘something’ and ‘nothing’ is referred to as the absolute threshold for a particular stimulus.  Differential Threshold: the minimal difference that can be noticeable between two similar stimuli is known as the differential threshold.  This concept was developed by German Scientist, Ernst Weber in 19th Century. INTERNAL FACTORS Selective Attention  Selective Exposure  Selective Retention  Expectation  Subliminal Perception

CONSUMER IMAGERY Brand and Self Image:  Actual Self Image  Social Self Image  Ideal Self Image  Expected Self Image LEARNING Learning can be defined as a relatively permanent change in behavior occurring as a result of experience.  It involves change  Its continuous process  It is based on some form of experience

Elements of Learning Motive  Cues  Response  Reinforcement  Retention TYPES OF LEARNING PROCESSES ROUTINES: Many of the consumer behavior occurs without the involvement of extensive consideration and reflection.  LEARNING PROCESS: There are different learning processes, which influences purchase behavior. One such type of learning is CONDITIONING, here behavior becomes dependent on certain stimuli or events in the environment. Motivation Motivation: Motivation is the driving force among individual consumers that impel them to action.

 Definition: Motivation may be defined as psychological forces that determine the direction of person’s behaviour, a person’s level of effort, and a person’s level of persistence in the face of obstacles.  In another words, motivation is the process that account for an individual intensity, direction, and persistence of effort towards attaining a goal.  A motive is a construct representing an unobservable inner force that stimulates and compels a behavioral response and provides specific direction to that response.

INVOLVEMENT Involvement: Involvement is a reflection of strong motivation in the form of high perceived personal relevance of a product or service in a particular context.  In other words, involvement consists of differences in the intensity of interest with which consumers approach their dealings with the marketplace.  Involvement can vary in individuals depending on different situations  Involvement is related to some form of arousal. Involvement can be of 3 types

Personality Personality can be described as the psychological characteristics that both determines and reflect how a person responds to his or her environment.  How Personality is help full in marketing: Because no two people are exactly the same, marketers can look for certain similar personality traits in different consumers. These consumers can then be grouped together based on this identified personality.  Product/Brand Personality includes: manly, adventurous, sporting, stylish, mature, etc.

 Colour can influence our emotions, our actions and how we respond to various people, things and ideas.  Nature/characteristics of Personality. Personality reflects individual differences: Because the inner characteristics that constitutes an individuals personality are a unique combination of factors, no two individuals are exactly alike Example: Hero Honda- Splender and Hero Honda- Karizma Personality is consistent and enduring: Personality is a set of response tendencies that are consistent and endure over time. Consistency means that the characteristics contributing to an individual's personality tend to carry over to a variety of situations. Examples: Raymonds, Maruti 800. Personality is subject to change: Personality is,however, subject to change over time, in response to situations and events in life and, also, as part of a gradual maturing process. Examples: Godrej shaving creams, Mc Donald’s. ATTITUDE A learned orientation toward an object or situation, which provides a tendency to respond favorably or unfavorably to the object or situation.  It like , likes or dislike  Its an overall evaluation that allows one to respond THEORIES OF ATTITUDE-

 Affective Cognitive Consistency Theory: is about the consistency between a person’s over all attitude towards an object and on his beliefs about its relationship to his more general values.  According to this theory Attitudes are related to one aspect of cognitive structure between the object and the goal. THEORIES OF ATTITUDE Cognitive Dissonance Theory: is motivating state of affairs just as hunger impels us to eat, so does dissonance impel a person to change his opinions or his behavior.  In this theory, individual gets additional information in three ways:  One information is overshadowing other  Both information’s are in opposite direction  Both information’s are not related to each other CBB-3 External Influences on Buying BehaviorExternal Influences• Reference Groups • Family • Social Class • Culture

Group“A group may defined as two or more people who interact to accomplish either individual or mutual goals.” Types of Group• Groups can be classified in a number of ways like by Structure, Regularity of Contact, Size, Membership etc. • Primary and Secondary Group • Formal and Informal Group • Membership Group • Consumer Relevant Group Consumer Relevant Group• The Family • Friendship Group • Social Group • Shopping Group • Work Group

• Consumer Action Group Reference Group“A reference groups is any person or group that serves as a point of comparison (or reference) for an individual in forming either general or specific values, attitudes, or behavior.” • Normative Reference Group: these reference groups influence our broadly defined values and behavior. • Comparative Reference Group: these are benchmarks for narrowly defined or specific attitudes or behavior. • Amplified Reference Group: these are people with whom we don’t interact, but still they play important role in our decision making. • Positive Reference Group: a positive reference group inspires the members to behave in a manner coinciding with its values. It has a positive influence on its members. • Negative Reference Group : is one which inspires an individual to behave exactly opposite to its own values. Marketing Applications• Informational Influence • Comparative Influence • Normative Influence FAMILY-

• “Family can be defined as two or more persons related by blood, marriage or adoption who reside together.” • INDIAN FAMILY STRUCTURE • Joint Family • Nuclear Family • Extended Family • Western Family Structure • Married Couple • Nuclear Family • Extended Family • Live in Relationship FAMILY LIFE CYCLE• Young Singles • Newly Married • Full Nest I (Children below 6 yrs) • Full Nest II (Children 6-12 yrs) • Full Nest III (Teenage Children)

• Married Couple Without Children • Unmarried Couple • Young Single Parents • Middle Aged Single Parents

Family Roles• Influencer • Expert • Gate Keeper • Deciders • Buyers • Users • Maintainers • Disposers Functions of Family• Economic Well Being • Emotional Support • Suitable Lifestyle for the Family • Socialization of Family Member

Socialization of Family Members – Children

• Observation • Co-shopping • Direct Experience • Application: - Child Models - Children as Influencers SOCIAL CLASS“A group consisting of number of people who have approximately equal position in society. These positions may be achieved rather than described, with some opportunity for upward or downward movement of other class”

Two Level Social Class• Blue Collar and White Collar or • Lower and Upper Class

Four Level Social Class-

• Upper Class • Upper Middle • Lower Middle • Lower Five Level Social Class• Upper Class • Upper Middle Class • Lower Middle Class • Working Class • Lower Class Six Level Social Class• Upper-Upper • Lower-Upper • Upper-Middle • Lower-Middle • Upper-Lower • Lower

Social Class-

Factors Deciding Social Class• Occupation • Education • Income • Social System • Lifestyle • New Wealthy Class • Mobility Applications in Marketing-

• Advertising • Market Segmentation • Distribution • Product Development CULTURE-

“Culture can be defined as a set of learned beliefs, values, attitudes, habits and forms of behavior that are shared and are transmitted from generation to generation within that society.” Culture is also called as personality of the society. CULTURE• Religion • Rituals • Culture is shared • Culture is learned CHARACTERSTICS OF INDIAN CULTURE• Liberty and Equality • Influence of Religion

• Respect of Elders • Respect to Religious Leaders • Importance of Cross Culture • Care of Tomorrow INDIAN CORE VALUES VIS-VIS CORE VALUES OF OTHER MARKETS• Individualism • Cleanliness • Languages • Work • Pleasure and Holidays • Morality and Sex • Value of Time CULTURE AND MARKETING• Geographical Factor • Languages • Religion • Segmentation

• Advertising PDF-1: modelsofconsumerbehaviour

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The Economic Model Learning Model Psychological Model The Sociological Model The Howard Sheth Model of buying behaviour The Nicosia Model The Engle-Kollat-Blackwell Model Engle, Blackwell and Miniard (EBM) Model Webstar and Wind Model of organizational buying behaviour The Sheth Model of Industrial buying Traditional Models

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The Economic Model

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Learning Model

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Psychological Model The Sociological Model Contemporary Models

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The Howard Sheth Model of buying behaviour

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The Engle-KollatBlackwell Model Engle, Blackwell and Miniard (EBM) Model Webstar and Wind Model of organizational buying behaviour The Sheth Model of

The Nicosia Model

This model assumes that with limited purchasing power and a set of needs and tastes, a consumer will allocate his/ her expenditure over different products at a given prices so as to maximize utility. Bases for Economic Model:

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Price Effect Substitution Effect Income Effect Criticism:

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Fails to explain how does the consumer actually behave. Incompleteness in the Model. Lack of broader perspective.

This model help marketers to promote association of products with strong drivers and cues, which would lead to positive reinforcement from the consumers.

In marketing context, ‘learning’ will help marketers to understand how consumer learn to respond in new marketing situations, or how they have learned and respond in the past in similar situations.

As Consumers also learn to discriminate and this information will be useful in working out different marketing strategies.

This model based on the work of psychologists who were concerned with personality. The view was human needs and motives operates on buying. This theory was developed by Sigmund Frued. Acc. To him human behaviour is the outcome of

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Id

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Super Ego Ego

This model is concerned with personality and says that human behaviour to a great extent is directed by a complex set of deep seated motives.

Helps the marketer to know how buyers influenced by symbolic factors in buying a product.

As per this model, an individual buyer is a part of the institution called society, gets influenced by it and in turn, also influences it in its path of development.

The interactions with all the set of society leave some impressions on him and may play a role in influencing his buying behaviour.

The marketers, through a process of market segmentation can work out on the common behaviour patterns of a specific class and group of buyers and try to influence their buying pattern. It attempts to throw light on the rational brand behaviour shown by buyers when faced with situations involving incomplete information and limited abilities.

The model refers to three levels of decision making:

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Extensive problem solving Limited problem solving Routinized response behaviour

The model has borrowed the learning theory concepts to explain brand choice behaviour when learning takes places as the buyer moves from extensive to routinized problem solving behaviour. The model makes significant contribution to understand consumer behaviour by identifying the variables which influence consumers.

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Input variables Output variables Hypothetic constructs

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Exogenous variables

Input Variables: these variables acts as stimuli in the environment. Stimuli can be of Significative, Symbolic & Social

Significative stimuli are those actual elements of brands which the buyer confronts, where as Symbolic stimuli are those which are used by marketers to represent their products in a symbolic form. Social stimuli are generated by the social environment such as family, friends, groups etc.

These are which buyer’s observable responses to stimulus inputs. They appear in the sequence as below:

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Attention: Based on the importance of the buyer’s information intake. Comprehension: the store of information the buyer has about the brand. Attitude: the buyer’s evaluation of the particular brand's potential to satisfy his or her motives. Intention: the brand which the buyer intends to buy. Purchase behaviour: the act of actually purchasing, which reflects the buyer’s predisposition to buy as modified by any of the inhibitors.

The model proposes a number of intervening variables which have been categorised into two major groups: perceptual and learning constructs.

Perceptual Constructs include:

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Sensitivity to information: the degree to which the buyer regulates the stimulus information flow.

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Perceptual bias: refers to distorting or altering information

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Search for information: it involves actively seeking information on the brands or their characteristics. The buyer’s learning constructs can be defined as:

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Motives are general or specific goals impelling action. Brand potential of the evoked set refer to the buyer’s perception on the ability of brands in his pr her evoked set to satisfy his or her goals. Decision mediators are based on the motives. The buyer will have certain mental rules for matching and ranking the purchase alternatives.

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Predisposition refers to a preference towards brand in the evoked set which expresses an attitude towards them. Inhibitors refers to environmental forces like price and time pressure which may inhibit or put restrain on the purchase of a preferred brand. Satisfaction the extent to which, post actual purchase will measure upto the buyer’s expectation Exogenous variables:

These are list of a number of external variables (external to the buyer) which can significantly influence buyer decisions.

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There is a absence of sharp distinctions between exogenous variables and other variables.

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Some of the variables, which are not well defined, and are difficult to measure too.

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The model is quite complex and not very easy to comprehend.

This model attempts to explain buying behaviour by establishing a link between the organisation and its prospective customer. It analyse human being as a system with stimuli as the input to the system and the human behaviour as an output of the system.

The model suggests that message from the first influences the predisposition of the consumer towards the product or services. Based on the situation, the consumer will have a certain attitude towards the product. This may result in a search for the product or an evaluation of the product attributes by the consumer.

If the customer satisfies with above it may result in a positive response, with a decision to buy the product The Nicosia Model explains in 4 basic areas: Field 1:- the consumer attribute and the firm’s attributes. The advt. message sent from the company will reach the consumer attributes.

Field 2:- it is related to the search and evaluation, undertaken by the consumer, of the advertised product and also to verify if other alternatives are variable.

Field 3:- it explains how the consumer actually buys the product.

Field 4:- it is related to the uses of the purchased items. It can also be related to an output to receive feedback on sales results by organisation.

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The flow is not completed and does not mention the various factors internal to the consumer.

The assumption about the consumer being involved in the decision process with no predisposition about the various brands is restricting.

Overlapping between firm’s attributes and consumers attributes. This model talks of consumer behaviour as a decision making process in the form of five steps (activities) and other related variables which occur over a period of time.

5 steps involved in the decision process:

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Problem Recognition Information Search Alternative Evaluation Choice Outcome Other related Variables included in this model: •Information input •Information processing •Product – brand evaluation •General motivating influences •Internationalised environment influences

About the model

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The model has emphasised on the conscious decision making process adopted by a consumer. The model is easy to understand and is flexible. This model recognises that a consumer may not go through all the steps always. This is because in case of repeat purchases the consumer may bypass some of the steps.

One limitation, the inclusion of environmental variables and general motivating influences but not specifying the effect of these on the buyer behaviour.

It shares certain things with Howard-Sheth model.

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The core of the EBM model is a decision process which is augmented with inputs from information processing and other influencing factors.

Four sections of the Model: Input Information Processing Decision process and Variables influencing decision process. The EBM Model when compared to the Howardseth model is more coherent and flexible than the latter.

This model also includes human processes like memory, information processing and considers both the positive and negative purchase out comes.

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 PDF-2: Organizational Buying Behavior

Organizational Buying Behavior

Problem Recognition

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General Description of Need Product Specifications Supplier Search

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Acquisition and Analysis of Proposals Supplier Selection Selection of Order Routine Evaluation and Feedback

Organizational Buying Process New Task

◦ Firm has no experience in purchasing the product; requires : extensive problem solving

◦ Problem or need is different from anything previously experienced ◦ Lack well-defined criteria and supplier loyalty ◦ Business Marketer Strategy

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Purchase Types Straight Rebuy A recurring requirement; buyers have substantial experience with the purchase . ◦ Continuing or recurring requirements ◦ Routine problem solving

 Operational resources ◦ Buying decision approaches

 Causal purchases  Routine low priority

Purchase Types Modified Rebuy ◦ Believe can derive significant benefits by reevaluating alternatives ◦ Limited problem solving

 ◦ Buying decision approaches

 Simple modified rebuy  Complex modified rebuy ◦ Business Marketer Strategy

 In-supplier  Out-supplier

Purchase Types Environmental Forces

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Group Forces Individual Forces

Organizational Forces

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Forces Shaping Organizational Buying Behavior Environmental Forces ◦ Economic influences ◦ Technological influences ◦ Political Influences

 Forces on Organizational Buying Organizational Forces ◦ Role of purchasing agents ◦ Should it be centralized?

 Benefits ◦ Better integrate purchasing ◦ Cut costs ◦ Favorable terms ◦ Specialization

 When to centralize or decentralize?

Forces on Organizational Buying

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Differing Evaluative Criteria Responsive Marketing Strategy Information-processing Selective processing ◦ Selective exposure ◦ Selective attention ◦ Selective perception ◦ Selective retention Risk-reduction strategies

ndividual Forces Group Forces Buying Center ◦ Different people play different roles

◦ New task ◦ Straight rebuy/modified rebuy

Forces on Organizational Buying Group Forces (cont’d) ◦Buying center influences Users Gatekeepers Influencers Deciders

Buyers

Forces on Organizational Buying

 Formal authority to sign contracts

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Member of purchasing department Influences the vendor selection Not in technical details Main criteria: price + terms and conditions of the contract

Buyer Person working with the product

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Interested in benefits and unobstructed function of the product to buy

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Large knowhow and preconceived opinion

User A person with high technical knowledge and practical experience Defines minimum requirements on technical or company standards

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 Influencer Controls the flow of information within the buying center

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Assistant of decision maker Influence by preparing the decision and the relevant documents

Gatekeeper Right to say yes or no

Mightiest person Decider

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 Person who brings new ideas and solutions into the company

Initiator Long decision taking process

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Complex buying center The specific competitive situation

Specific marketing considerations in the industrial facilities business Focuses on innovation

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Has to care for high flexibility in research and development And manufacturing and assembling

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Product policy Strict bid and tender rules

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High transparency Add value with service offering to achieve a differentiating position Another aspect: financing and sourcing models

Price Focus on negotiation phase

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Provide excellent people in the selling center High technical knowledge Distribution policy

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