Consumer Behavior

By Prof. Rajeev Kumar

The behavior that consumers display in searching for, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their needs.

Personal Consumer
The individual who buys goods and services for his or her own use, for household use, for the use of a family member, or for a friend.

Organizational Consumer
A business, government agency, or other institution (profit or nonprofit) that buys the goods, services, and/or equipment necessary for the organization to function.

FACTORS INFLUENCING CONSUMER BUYING BEHAVIOR

Cultural factors: Culture Sub- Culture eg: Kelloggs

SOCIAL CLASS
Upper Class Upper Middle Class Middle Class Lower Class

SOCIAL FACTORS
Social Groups Colleagues at work Consumer Action Groups Reference Groups Family

PERSONAL FACTORS
Age and Life Cycle stage Occupation and Financial status Life-style

PSYCHOLOGICAL FACTORS
MOTIVATION PERCEPTION ATTITUDE LEARNING

Needs and Motivation

Needs are the essence of the marketing concept. Motivation is the driving force within individuals that impels them to action.

Copyright 2007 by Prentice Hall

Consumer Motivation
Represents the drive to satisfy both psychological and physiological needs through product purchase and consumption. gives insights into why people buy certain products. stems from consumer needs: industries have been built around basic human needs.

Types of Consumer Needs

Physiological needsFundamental human needs, including food, water and shelter Safety and Health needsThreats to our safety and health motive purchases for personal security and protection.

 Safety and Health needs Protecting our personal information and computers represents new types of safety needs. Businesses provide a variety of products and services to appeal to safety and health conscious consumers.

Safety and Health Needs

Motivational conflicts and need priorities

satisfying a need often comes at the expense of another need- this causes motivational conflicts.

Maslows Hierarchy of Needs Figure 4.10

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Figure 4.1 Model of the Motivation Process

Figure 4-2a Goals Structure for Weight Control

The Dynamic Nature of Motivation

Needs are never fully satisfied New needs emerge as old needs are satisfied People who achieve their goals set new and higher goals for themselves

This ad reflects a need for accomplishment with a toothpaste.

Motivating with Money

PERCEPTIONS
The process by which an individual selects, organizes and interprets stimuli into meaningful thoughts and pictures. (Customers perceive their environment through the sense of touch, smell, taste, hearing, etc.

BELIEFS AND ATTITUDE

A belief is a descriptive image or thought that an individual holds about something. A persons attitude is a set of his feelings and the way in which he reacts to a given idea or thought.

LEARNING
Consumer learning is a process which evolves and changes as a result of newly acquired knowledge or experience

Consumer Influences

Organizational Influences

Obtaining

Consuming

Disposing

Consumer Behavior

Consumer Influences Culture Ethnicity Personality Family Life-stage Values Income Available Resources Attitudes Opinions Feelings Motivations Past Experiences Peer Groups Knowledge

Organizational Influences Brand Product Features Advertising Word of Mouth Promotions Retail Displays Price Quality Service Store Ambiance Convenience Loyalty Programs Packaging Product Availability

Consumer Influences

Organizational Influences

Obtaining

Consuming

Disposing

Consumer Behavior

CONSUMER INFLUENCES Culture Ethnicity Personality Family Life-stage Values Income Available Resources Attitudes Opinions Motivations Past Experiences Feelings Peer Groups Knowledge

ORGANIZATIONAL INFLUENCES Brand Product Features Advertising Word of Mouth Promotions Retail Displays Price Quality Service Store Ambiance Convenience Loyalty Programs Packaging Product Availability

OBTAINING yHow you decide you want to buy yOther products you consider buying yWhere you buy yHow you pay for product yHow you transport product home

CONSUMING yHow you use the product yHow you store the product in your home yWho uses the product yHow much you consume yHow product compares with expectations

Consumer Behavior

DISPOSING yHow you get rid of remaining product yHow much you throw away after use yIf you resell items yourself or through a consignment store yHow you recycle some products

Customers?
Who are our existing / potential customers? What are their current / future needs? How can we satisfy these needs?
Can we offer a product/ service that the customer would value? Can we communicate with our customers? Can we deliver a competitive product of service?

Why should customers buy from us?

Becoming a Winner : A Three Dimensional Approach

Efficiency Ladder Ability to Focus ( Specialization Ladder ) Ability To Achieve Lower cost

Ability to Delight Customers ( Market Orientation - Learning Ladder )

Successful Relationships

Customer Value Customer Satisfaction

Customer Retention

Successful Relationships
Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
Defined as the ratio between the customers perceived benefits and the resources used to obtain those benefits Perceived value is relative and subjective Developing a value proposition is critical

Successful Relationships
Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
The individual's perception of the performance of the product or service in relation to his or her expectations. Customers identified based on loyalty include loyalists, apostles, defectors, terrorists, hostages, and mercenaries

Successful Relationships
Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
The objective of providing value is to retain highly satisfied customers. Loyal customers are key They buy more products They are less price sensitive They pay less attention to competitors advertising Servicing them is cheaper They spread positive word of mouth

Customer Profitability-Focused Marketing

Tracks costs and revenues of individual consumers Categorizes them into tiers based on consumption behavior A customer pyramid groups customers into four tiers

Customer Profitability-Focused Marketing

Tier 1: Platinum Tier 2: Gold Tier 3: Iron Tier 4: Lead

Traditional Marketing Concept Vs. Value and Retention Focused Marketing Table 1-2
Traditional Marketing Concept
Make only what you can sell instead of trying to sell what you make

Value and Retention Focused Marketing

Use technology that enables customers to customize what you make

Do not focus on the product; focus on Focus on the products the need that it satisfies perceived value, as well as the need that it satisfies Market products and services that match customers needs better than competitors offerings Utilize an understanding of customer needs to develop offerings that customers perceive as more valuable than competitors offerings

Why Study Consumer Behavior?

"All marketing decisions are based on assumptions and knowledge of consumer behaviour," (Hawkins and Mothersbaugh, 2007). Researching consumer behaviour is a complex process, but understanding consumer behaviour is critical to marketers-they can use it to:

Provide value and customer satisfaction. Effectively target customers. Enhance the value of the company. Improve products and services. Create a competitive advantage Understand how customers view their products versus their competitors' products. Expand the knowledge base in the field of marketing, Apply marketing strategies toward a positive effect on society (encourage people to support charities, promote healthy habits, reduce drug use etc.)

Educating Consumers About Crises

Educating Consumers About Health

Understanding consumers issues or problems and developing methods to reach and educate consumers

Educating Consumers About Health

Understanding consumers issues or problems and developing methods to reach and educate consumers

Evolution of ConsumerBehavior

Consumers Increasing Influence

Wholesaler

Manufacturer

Retailer

Consumer

Manufacturing Orientation U.S. 1750-1850 1850-WWII 1760-WWII

Selling Marketing Consumer Orientation Orientation Orientation 1970-2000 1970-2000 2000+ 2000+

Europe 1750-1850

Consumer Behavior Is Interdisciplinary

Psychology Sociology Social psychology Anthropology Economics

A Simplified Model of Consumer Decision Making Figure 1-1

The Underlying Principles of Consumer Behavior

The Consumer Is Sovereign The Consumer Is Global Consumers Are Different; Consumers Are Alike