Lecture- 1

Consumer Behavior: Its Origin

and Strategic Applications
 “Remember Me?”
I'm the fellow who goes into a restaurant, sits down and patiently
waits while the waitresses do everything but take my order.
I'm the fellow who goes into a department store and stands
quietly while the sales clerks finish their little chitchat.
I'm the man who drives into a gasoline station and never blows
his horn, but waits patiently while the attendant finishes reading
his comic book.

"Yes, you might say, I'm a good guy.

But do you know who else I am?
I am the fellow who never comes back, and it amuses me to see
you spending thousands of dollars every year to get me back into
your store, when I was there in the first place, and all you had to
do to keep me was to give me a little service; show me a little
courtesy.”
Understanding Consumer
Behavior
 Understanding Consumer Behavior
• Consumer market refers to all individuals and
households who buy goods and services for personal
consumption.
• Consumer behavior refers to the buying behavior of
final consumers—individuals and households who buy
goods and services for personal consumption.

• So, Consumer Behavior is the behavior that consumers

display in searching for, purchasing, using, evaluating,
and disposing of products and services that they expect
will satisfy their needs.
 Development of the Marketing
Concept
Production
Concept

Product Concept

Selling Concept

Marketing
Concept
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Education Canada Inc.
 The Production Concept

• Assumes that consumers are

interested primarily in product
availability at low prices
• Marketing objectives:
– Cheap, efficient production
– Intensive distribution
– Market expansion

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 The Product Concept
• Assumes that consumers will buy the
product that offers them the highest
quality, the best performance, and the
most features
• Marketing objectives:
– Quality improvement
– Addition of features
• Tendency toward Marketing Myopia
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 The Selling Concept
• Assumes that consumers are unlikely to
buy a product unless they are
aggressively persuaded to do so.
• Marketing objectives:
– Sell, sell, sell
• Lack of concern for customer needs and
satisfaction

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 The Marketing Concept
• Assumes that to be successful, a
company must determine the needs and
wants of specific target markets and
deliver the desired satisfactions better
than the competition
• Marketing objectives:
– Profits through customer satisfaction

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 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research • The process and tools
• Segmentation used to study consumer
• Targeting behaviour
• Positioning

Copyright 2007 by Prentice Hall

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research • Process of dividing the
• Segmentation market into subsets of
• Targeting consumers with
common needs or
• Positioning characteristics

Copyright 2007 by Prentice Hall

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research The selection of one or
• Segmentation more of the segments to
• Targeting pursue
• Positioning

Copyright 2007 by Prentice Hall

 The Marketing Concept
Implementing the
Marketing Concept
• Consumer Research
• Segmentation
• Targeting
• Positioning
Copyright 2007 by Prentice Hall
• Developing a distinct image for
the product in the mind of the
consumer
• Successful positioning includes:
– Communicating the benefits
of the product
– Communicating a unique
selling proposition
This product is
positioned as a
solution to facial
redness.
 The Marketing Mix
• Product
• Price
• Place
• Promotion

Copyright 2007 by Prentice Hall

 Successful Relationships

Customer Customer
Value Retention

Customer
Satisfaction

Copyright 2007 by Prentice Hall

 Successful Relationships
Value, Satisfaction, and Retention

• Defined as the ratio between the

• Customer Value customer’s perceived benefits and
• Customer the resources used to obtain those
Satisfaction benefits
• Customer • Perceived value is relative and
subjective
Retention
• Developing a value proposition is
critical
 Successful Relationships
Value, Satisfaction, and Retention

• Customer • The individual's perception of the

performance of the product or service
Value
in relation to his or her expectations.
• Customer
Satisfaction
• Customer
Retention
 Successful Relationships
Value, Satisfaction, and Retention
• The objective of providing value is to retain
highly satisfied customers.
• The key to customer retention is customer
• Customer satisfaction.
• The need for Customer retention-
Value – highly satisfied customers stay loyal
• Customer longer
– They buy more as the company
Satisfaction introduces new products and upgrades
existing products
• Customer – They are less price sensitive
Retention – They pay less attention to competing
brands
– Offer product and service ideas to the
company
– Servicing them is cheaper
– They spread positive word of mouth
Model of Consumer Behavior
Factors Influencing Consumer Behavior:
1. Cultural factors: Culture is the fundamental
determinant of a person’s wants and behaviors
acquired through socialization processes with
family and other key institutions. Each culture
consists of smaller sub culture that provides
more specific identification and socialization
for their members. Subculture includes-
Nationalities, Religions, Racial groups,
Geographic regions
2. Social factors: i) Reference groups-
Membership groups, Primary groups,
Secondary groups etc.
• ii) Family: Family of Orientation, Family
of Procreation
• iii) Social roles and status
3. Personal factors: i) Age and Life
cycle stage ii) Occupation Wealth
iii) Lifestyle and Values iv) Personality
and Self-concept
4. Psychological Factors
i) Motivation
ii) Perception
iii) Learning Beliefs and attitude
# The Buying Decision Process:
1. Pre-purchase behavior:
• Problem recognition
• Information search
• Evaluation of alternatives

2. Purchase
3. Post purchase behavior
 The Consumer Purchase Decision
Making Process
1. Problem Recognition
– The buying process starts when the buyer
recognizes a problem or need triggered by
internal or external stimuli.
2. Information Search
– Heightened attention (simply becoming more
receptive to information about a product)
– Active information search (asking people)
– Major sources of information include:
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2011 Pearson Commercial, Public, Experiential.
Education, Inc. Publishing
as Prentice Hall
 The Consumer Purchase Decision Making
Process
3. Evaluation of Alternatives

– In evaluation, the consumer sees each product as a

bundle of attributes with varying abilities for
delivering the benefits sought to satisfy this need.

• Cameras: Picture sharpness, camera speed, size,

price
• Hotel: Location, cleanliness, atmosphere, price

Copyright © 2011 Pearson

Education, Inc. Publishing
as Prentice Hall
 The Consumer Purchase Decision
Making Process
4. Purchase Decision
– Even if consumer form brand evaluations, two general factors
can intervene between the purchase intention and purchase
decisions.
– Intervening factors include-
• Attitude of others
• Unanticipated situational factors
 The Consumer Purchase Decision
Making Process
A consumer’s decision to modify, postpone or avoid a purchase
decision is heavily influenced by the following perceived
risks:
1. Functional risk: The product does not perform to
expectations.
2. Physical risk: The product poses a threat to the physical well
being or health of the users or others
3. Financial risk: the product is not worth the price paid.
4. Social risk: the product results in embarrassment in front of
others.
5. Psychological risk: The product affects mental well-being of
the user.
6. Time risk: The failure of the product results in an
opportunity cost of finding another satisfactory product.
 The Consumer Purchase Decision
Making Process
5. Post purchase Behavior:
• The marketer’s job doesn’t end with the
purchase. marketers must monitor the post
purchase satisfaction, post purchase
actions, and post purchase product uses.
• Type of Buyer Behavior:
High Involvement Low Involvement

Significant i) Complex iv) Variety

Differences between seeking
buying
brands buying
behavior
behavior

Few Differences ii) Dissonence iii) Habitual buying

between brands reducing buying behavior
behavior
 Complex Buying Behavior

• Consumers undertake complex buying

behavior when they are highly involved in a
purchase and perceive significant differences
among brands.
• Consumers may be highly involved when the
product is expensive, risky, purchased
infrequently and highly self expressive
• Example : Car, Computer
 Dissonance – Reducing Buying
Behavior
• Consumers undertake dissonance reducing
behavior when they are highly involved in a
purchase and perceive few differences among
brands.
• Buyers may consider most brands (in a
category) in a given price range to be the same.
They may respond primarily to a good price or
convenience.
• After the purchase, consumers might
experience post purchase dissonance
• Example : carpet, medicine, tier
 Variety-Seeking Buying Behavior
• Consumers undertake variety seeking buying
behavior when they are not much involved in a
purchase and perceive high differences among
brands
• Consumers often do a lot of brand switching.
• Brand switching occurs for the sake of variety
rather than dissatisfaction.
• Example : cookies, dresses
 Habitual Buying Behavior
• Consumers undertake habitual buying behavior when they are
not much involved in a purchase and perceive few differences
among brands.

• Consumers may be not be involved when the product is

inexpensive, less risky, purchased frequently and so on.
• As buyers have little involvement, they simply go to the store
and reach for a brand. If they keep on buying the same brand,
its out of habit rather than strong brand loyalty.
• Consumer do not search extensively and passively receive
information. Ad repetition creates brand familiarity rather than
conviction.
• Example : salt, sugar
 Difference between Consumer Marketing and
Business Marketing
Bases Business Marketing
Market characteristics Geographically
concentrated,
Relatively fewer buyers.
Product Characteristics Technical complexity,
Customized.
Service characteristics Service, timely delivery &
availability very important
Buyer behavior  Involvement of various
functional areas in both
buyer & supplier firms,
 Purchase decisions are
mainly made on
rational/performance
basis,
 Technical expertise,
 Stable interpersonal
relationship between
buyers & sellers
Consumer Marketing
Geographically disbursed,
Mass markets.
Standardized
Service, delivery &
availability somewhat
important
 Involvement of family
members
 Purchase decisions are
mostly made on
psychological/social/ph-
ysiological needs,
 Less technical expertise
 Non-personal
relationship
 Difference between Consumer Marketing and
Business Marketing
Bases Business Marketing Consumer Marketing
Decision making Observable stage, Unobservable,
Distinct Mental stage
Channel Shorter, Indirect,
characteristics More direct, Multiple layers of
Fewer intermediaries intermediaries
Promotional Emphasis on personal Emphasis on advertising
characteristics selling
Price characteristics Competitive bidding & List prices or maximum
negotiated prices, retail prices(MRP)
List prices for standard
products