Consumer Behaviour

Chapter 1
 Learning Objectives

1) To understand
• the evolution of the marketing concept, the most prominent
tools used to implement marketing strategies,
• the relationship between value and customer retention,
• the objectives of socially responsible marketing.
• the efficacy of Internet and related technologies in improving
marketing transactions
• by adding value that benefits both marketers and customers.

2) To understand
• consumer behaviour in times of economic uncertainty, and how
marketing is evolving to serve the modern, connected customer

Chapter 1 2
 Maslow’s Hierarchy of Needs

Self
Actualisation Higher Order

Esteem

Social

Lower Order
Safety

Physiological

Chapter 1 3
How Can A Car Help Express Its Owners’ Characteristics?

Chapter 1 4
 THE ADVERTISEMENT invites prospective owners to

“Take On the Machine”

and

appeals to Ego and Esteem needs,

which are pervasive psychological needs in our society.

Chapter 1 5
The tagline in Porsche’s Boxster ad appeals to prospective owners’

psychology by addressing conflicts about paying for performance,

stating that “unfulfilled dreams cost a lot more” and assures them

that of all the emotions you can expect while driving a Boxster,

regret will never be one of them

Why people buy cars ?

- Need personal transportation

- But

the types of cars people choose are determined not by needs alone,

but also by how cars express their owners’ characteristics

Chapter 1 6
 Digital Revolution has introduced several drastic changes
into the business environment
• Consumers have more access to
information than ever before
• Consumers have more power than
ever before
• Marketers can offer more services
and products than ever before
• Exchange between marketers and
customers is extremely interactive
and instantaneous

Chapter 1 7
 Experiential Marketing

Physical Consumption Physiological Experience

Application Based Consumption Application Experience

Non-reality Consumption Fantasy Experience

Conspicuous Consumption Social Experience

Risk-free Consumption Well-being Experience

Chapter 1 8
Chapter 1 9
 According to Loudon and Bitta, “a customer is
someone who regularly purchases from a particular
store or company”.

An individual who uses Colgate Toothpaste or who

uses INDANE cylinders can be viewed as a customer of
these firms.

But an individual who purchases any Toothpaste or is

inclined to any of the gas services whichever is
available and at a cheaper rate can be attributed to a
consumer.

Chapter 1 10
 Who is a Consumer?

A Consumer is “an individual who purchases, uses,

maintains, and disposes of products and services ”

Who is an “User”?
According to Merriam – Webster Dictionary “ an user is the one
who can exercise right to the enjoyment of property”

How is it meaningful in “Consumer Behaviour”?

They all have their own independent identity in terms of

behavioural pattern

Chapter 1 11
 Seven O’s of Consumer Behaviour
What They Buy? Object
Why They Buy? Objective
When They Buy? Occasion
Where They Buy? Outlet
How Often They Buy? Occurence
How often They Use It? Operation
How They Evaluate? Output

Chapter 1 12
Chapter 1 13
 Definition

The study of consumer behavior describes what products

and brands consumers buy, why they buy them, when

they buy them, where they buy them, how often they

buy them, how often they use them, how they evaluate

them after the purchase, and whether or not they buy

them repeatedly.

Chapter 1 14
 Valentine & Gordon ( 2000) has defined
CONSUMER in six (6) different ways
• Marginalised
• Statistical
• Secretive
• Sophisticated
• Satellite
• Multi-Headed

Source : Valentine Virginia & Gordon Wendy ( 2000), The 21st Century
Consumer: A New Model of Thinking, International Journal of Market Research

Chapter 1 15
 • Marginalised > sellers market, consumer has less choice,
passive recipients
• Statistical > shifted to buyer’s market, research
methods developed
• Secretive > bundle of hidden motivations, motivational
research
• Sophisticated > someone who consumes advertising as well
as goods and services, awareness of
brands
• Satellite > how to leverage a brand strength, brand
potential can be maximally utilised
• Multi-Headed > consumer making a brand choice on two
different occasions depending on need,
ambience, perceptions about other
factors also play an important role

Chapter 1 16
 Demographic / Economic

Marketing
Suppliers
Intermediaries
Marketing Planning System

Product

Technical
Marketing Mktg Organising &
Political Information / Physical
Target Implementation
/ Legal Systems
Place System
Consumers Price

Promotion

Marketing Organisation System

Competitors Publics

Social / Cultural

Chapter 1 17
 Commonly, Consumers are of two types

Personal Consumer : buying goods and services

for personal / own use , for the use of household when they
are referred to as “End Users”

Organisational Consumer : include profit and non-

profit businesses, government agencies

Consumer Behaviour refers to all the Psychological,

Physiological and Socio-psychological reasons of individual
consumers responding to marketing appeals

Chapter 1 18
 Importance of Consumer Behaviour

Consumers may be irrational and have no idea what they

want, but is a fact that some products sell better than others

and that some advertising works better than others

Therefore, in order to be able to sell, we need to understand

what makes some marketing plans work better than others

when trying to persuade consumers to buy

 Consumer Behaviour

WHO ELSE IT HELPS?

Consumer Behaviour is a science which serves not only the
marketer but also others like
• Entrepreneurs – to take correct and timely investment
decisions and improve the chances of success of operations

• Economist – to take note of consumer behaviour forecasts

while planning for communities

• Consumer – to get an insight and understanding of rationale

behind their own behaviour
Once corrected, they become more value-oriented and emerge as
wiser users

Chapter 1 20
 Consumer Behaviour

CHANGING ROLE OF PRODUCER,MARKETER & CONSUMER

Earlier Role
Producer – Most important person in the economy,
produced what he found possible

Trader - Distributed efficiency what was

produced, faced competition but
managed it mostly by price – financial
management

Consumer - Bought what was made available and

what he could afford within means

Chapter 1 21
 Consumer Behaviour

CHANGING ROLE OF PRODUCER,MARKETER & CONSUMER

Current Role

Consumer – Most important person, constantly tries

to achieve a better living standard by
acquiring goods and services

Marketer - constantly helps and leads the consumer to

determine what he wants, improvements
required, change possible

Producer - takes decision from the marketer and

consumer , tries to produce anything
consumer wants . Prioritise on Innovation,
service and relationship management

Chapter 1 22
 UNDERLYING PRINCIPLES OF CONSUMER BEHAVIOUR

Consumer is Sovereign - Products or services are accepted or

rejected on the basis of the extent to
which they are perceived as relevant
to needs and lifestyle

Consumer Is Global - “World Is The Market Place”; Use of

Internet has reduced the gap between
organisation and consumers

Consumers are Different - Stressing on segmentation that focusses

Consumers are alike on the similarities within a group of
consumers, while recognizing the
differences between groups

Consumer Has Rights - Needs that are real are expressed in the
purchases consumers make and in those
purchases they choose to forego

Chapter 1 23
 Class Exercise

How does McDonald’s create

value for the consumer?

How do they communicate

this value?

Chapter 1 24
 The Consumer’s Magna Carta

Right
Right to
to Safety
Safety Right
Right to
to Be
Be Informed
Informed

Right
Right to
to Choose
Choose Right to Be Heard

Chapter 1 25
 Consumer Expectations

• “Fair value” for money spent

• Product that meets “reasonable” expectations

• Full disclosure of product specifications

• Truthful advertising

• Safe products

• Removal of dangerous products

Chapter 1 26
 A social movement seeking to augment the
Consumerism
rights and powers of buyers in relation to sellers

Arguments For Advertising Arguments Against Advertising

 Increases standard of living  Lowers standard of living

 Increases consumer satisfaction
 Efficient means of
distributing information
 Effective
 Low cost
 Decreases consumer satisfaction
 Inefficient means of
distributing information
 Ineffective
 High cost

Chapter 1 27
 Arguments for Advertising

• The lifeblood of the free-enterprise system

• Stimulates competition
• Provides information for comparison buying
• Provides competitive information to
competition
• Sales response provides a mechanism for
immediate feedback
• Provides social and economic benefits

Chapter 1 28
 Arguments against Advertising

Ambiguity Exaggeration

Employment of
Concealment
Psychological
of Facts
Appeals

Chapter 1 29
 Exchange Processes and Consumer Behavior

Exchange is the process

that involves the “transfer

of something tangible or

intangible, actual or

symbolic, between two or

more social actors.”

Chapter 1 30
 Prerequisites for Exchange

– Two or more parties must be present

– Each party has something of value to the other

– Each party is capable of communication and delivery

– Each party must be free to accept or reject the other's

offer

– Each party must believe that it is appropriate or

desirable to deal with the other

Chapter 1 31
 Elements of Exchange

Six Types of Resources Are Exchanged:

• Goods • Information

• Service • Status

• Money • Feelings

Chapter 1 32
 Dimensions of Exchange Relations

Four types of consumer exchange relations have

been identified:

– Restricted versus Complex Exchanges

– Internal versus External Exchanges

– Formal versus Informal Exchanges

– Relational versus Discrete Exchanges

Chapter 1 33
 Ethical Issues in Consumer Exchange Relations

• Ethics is the study of the

normative judgments
concerned with what is
morally right and wrong,
good and bad.

• Free riding: example of an

unethical action.

Chapter 1 34
 Ethical Judgments

• Deal with serious human injuries and benefits

– may, or may not, be laid down by authority

– override self interest

– are based on impartial considerations

• Ethical dilemma : a decision that involves the trade-off

between lowering one’s personal values in exchange for
increased organizational or personal profits.

• Ethical exchange

– both parties know full nature of agreement

– nothing intentionally misrepresented or omitted

– no undue influence takes place via power.

Chapter 1 35
 An Organizing Model of Consumer Behavior

The model has five primary components:

– The Buying Unit

– The Exchange Process

– The Marketer’s Strategy

– The Individual Influencers

– The Environment

Chapter 1 36
 • Buying Unit

– consumers, firms, government, non-profits, etc.

– Individual influencers
• information processing
• behavioral learning
• motivation and personality
• beliefs, attitudes and behaviors
• communications
• decision making

• Marketer, Who Develops Strategy

– marketing mix
– segmentation and positioning
– employs marketing research to understand consumers

Chapter 1 37
 Environmental Analysis:

The marketer assesses the impact of each of the

below facets of the environment on the firm.

• situations

• groups and families

• culture

• subculture

• cross cultural issues

• regulatory environment

Chapter 1 38
 Managerial Applications Analysis (PERMS)

– Five factors to consider when using consumer behavior

principles to develop managerial strategy :

• Positioning and Differentiation

• Environmental Analysis

• Research in Marketing

• Marketing Mix

• Segmentation

Chapter 1 39
 Lessons from the Consumers Movement

1. Achieve a fair and just marketplace for all consumers

2. Provide public oversite where:

 Corporations lack the incentives to regulate their own

behavior

 Issue of health, safety and other special concerns

3. Provide resources, authority, and support for public

watchdogs

4. Intensify the fight for affordable goods and services, fair

financial practices, and a chance at a decent standard of
living

5. Curb wasteful overconsumption that threatens the

environment

Chapter 1 40