Analyzing Consumer Markets: Tutored By: Prof. Sunil D’ Anto

Analyzing Consumer Markets Tutored by : Prof. Sunil D’ Anto

Learning Agenda • How do consumer characteristics influence buying behavior? • What major psychological processes influence consumer responses to the marketing program? • How do consumers make purchasing decisions? • How do marketers analyze consumer decision making?

Tata Steel used steeljunction® to encourage consumers to go steel shopping and to develop deeper understanding of individual and household customers.

Consumer Behavior

Consumer behavior is the study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, or experiences to satisfy their needs and wants.

Influences on Consumer Behavior

Cultural Factors

Social Factors

Personal Factors

1. Culture Culture (a set of beliefs, perceptions, preferences & behaviour)

is the fundamental determinant of a person’s wants and behaviors acquired through socialization processes with family, and other key institutions.

Subcultures Nationalities

Religions Racial groups

Geographic regions

2. Social Classes Upper uppers Lower uppers Upper middles Middle class Working class Upper lowers Lower lowers

Social Classes A1 A2 B1 B2 C D

E1 E2

Characteristics of Social Classes • Within a class, people tend to behave alike • Social class conveys perceptions of inferior or superior position • Class may be indicated by a cluster of variables (occupation, income, wealth) • Class designation is mobile over time

Social Factors

Reference Groups*

Family*

Social roles & Statuses*

* Reference Groups Membership groups Primary groups (family, friends, neighbours, coworkers)

Secondary groups (social, professional groups)

Aspirational groups Dissociative groups

Provogue uses teenage icons as brand ambassadors and a youth targeted website to connect to its customers

Radio Shack Targets Women with Female Store Managers

Family Family of orientation: parents and siblings  Family of procreation: spouse and children 

Roles and Status What degree of status is associated with various occupational roles?

3. Personal Factors Age* SelfConcept*

Life cycle Stage*

Lifestyle*

Occupation

Values

Wealth

(the belief systems)

Personality*

Age & The Family Life Cycle

Age and Stage of Lifecycle

Personality Personality refers to a set of distinguishing human psychological traits that lead to relatively consistent and enduring responses to environmental stimuli.

Personality can be a useful variable in analyzing consumer brand choices.

Self Concept & Brand Personality Sincerity Excitement Competence

Sophistication Ruggedness

Lifestyle Influences

Multi-tasking Time-starved Money-constrained

Bank of Baroda, India & Faysal Bank of Pakistan has extended banking hours for timepressed executives.

LOHAS (Lifestyles of Health and Sustainability) Market Segments • • • • •

Sustainable Economy Healthy Lifestyles Ecological Lifestyles Alternative Health Care Personal Development

Model of Consumer Behavior

Key Psychological Processes

Motivation

Perception

Learning

Memory

Motivation

Freud’s Theory

Maslow’s Hierarchy of Needs

Herzberg’s Two-Factor Theory

Behavior is guided by subconscious motivations

Behavior is driven by the lowest, unmet need

Behavior is guided by motivating and hygiene factors

Maslow’s Hierarchy of Needs

Herzberg’s Two-Factor Theory

Perception Selective Attention Selective Retention Selective Distortion *(game!)

Subliminal Perception (ref. Freud's Theory)

Learning  learning induces change in behavior, based on experience  Most human behavior is “learned”! (although incidental)  Learning

is produced trough the interplay of drives, stimuli, cues, responses & reinforcement :

Drive: A strong internal stimulus impelling action  Cues: Minor stimuli that determine when, where, and how a person responds  Generalization/Discrimination: Learning to recognize differences in sets of similar stimuli and adjusting our responses accordingly Hedonic Bias : attributing success to self & failure to other causes! 

Emotions (customer response is not always cognitive & rational)

Memory

• Short term memory (STM) • Long term memory (LTM) • Memory encoding • Memory retrieval  Brand Associations

State Farm Mental Map (*hypothetical)

Consumer Buying Process Problem/Need Recognition Information Search Evaluation Purchase Decision Postpurchase Behavior

1. Problem /need Recognition

2.a. Sources of Information

Personal

Commercial

Public

Experiential

2.b. Successive Sets Involved in Consumer Decision Making

Market partitioning: the process of identifying the hierarchy of attributes that guide the consumer decision making sets

3. Evaluation of Alternatives: (a) Beliefs and Attitudes

3. Evaluation of Alternatives: (b) Expectancy-Value Model

Stages between Evaluation of Alternatives and Purchase

Non-Compensatory Models of Choice

• Conjunctive (chooses first alternative that meets the minimum acceptable cutoff level for a particular attribute)

• Lexicographic (chooses the best brand on the basis of its perceived most important attribute)

• Elimination-by-aspects (the consumer compares brands on a attribute selected and brands not meeting this attribute are eliminated.

Consumers do not adopt only one type of choice rule and may combine two or more decision rules.

Perceived Risk Functional Physical Financial Social Psychological Time

How Customers Use and Dispose of Products

Rural Consumer Behaviour • Rural consumers are more brand loyal • Restrictions on consumption • Collective consumption behaviour: for family rather than individual • Seasonality of consumption based on seasonality of agricultural production/income • Specific patterns in the five-stage buying decision process

FYI: Other Theories of Consumer Decision Making * Heuristics :experience-based techniques for problem solving, learning, and discovery

Involvement • Elaboration Likelihood Model • Low-involvement marketing strategies • Variety-seeking buying behavior

Decision Heuristics • Availability • Representativeness • Anchoring and adjustment

Framing

• Choice architecture • Nudge

Mental Accounting (the way consumers code, categorize & evaluate financial outcomes)

• Consumers tend to… • Segregate gains (categorize benefits to “make sum greater than the whole”)

• Integrate losses (additional exp over house cost) • Integrate smaller losses with larger gains (equated tax payment vs. lumpsum)

• Segregate small gains from large losses (rebates on big ticket purchases)

Wake up!

for Review…

• How do consumer characteristics influence buying behavior? • What major psychological processes influence consumer responses to the marketing program? • How do consumers make purchasing decisions? • In what ways do consumers stray from a deliberate rational decision process?