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Introduction to &

Diversity ofConsumer Behavior

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One Definition

Consumer behavior: Thebehaviour that consumersdisplay in searching for,purchasing, using, evaluatingand disposing of products andservices that they expect willsatisfy their needs ..

2 kinds of consuming entities :Personal Consumer

Organizational consumer(NGOs,institutions ,govt agencies etc )

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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 otherinstitution (profit or nonprofit) that buys the

goods, services, and/or equipment necessary

for the organization to function.

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Why study consumer behavior? 1) Shorter product life cycles--- Consumers today are

more demanding & look for change .

E.g. changing needs & preferences has resulted in shorter life of mobile

phones, cameras, electronic item

2) Evolving Consumer preferences--- E.g. Colgate herbaltoothpaste that appeals to consumer aspiration of health

3) Environmental concerns---- Environment friendly pdcts e.g.HUL launched washing powder that uses less water to clean clothes .

4) Changing lifestyles--- Pepsi & Coca-cola launched sugar freedrinks to target health conscious & diabetic population

5) Faster technology adoption----

Advent of internet led toinformation boom .E.g. on-line purchase of air tickets 4

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Applications of Consumer

Behavior

Marketing Strategy To satisfy target consumer

needs

Regulatory Policy To protect consumers

Social Marketing

- To help consumers

Informed Individuals To better understand how

societies function 5

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Example 1

During periods when consumers are not shopping

much (e.g., bad economy), store managers often

play slow music within stores

During busy periods (e.g., holiday season), fast

music is played

Why?

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Example 2.

In the US, the Marlboro cowboy is usually shown

alone

Ad.

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Example 2.

In Japan, the Marlboro cowboy is usually shown

as part of a group

Ad.

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WHY??

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Solution.

Culture has an influence on consumer behavior

US culture = importance of individual; not true in

Asia

Japanese consumers think a single cowboy lookslonely and poor Just an ordinary worker on a farm

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In general, important to

understand consumer

psychology to design successfulmarketing tactics

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Development of the Marketing

ConceptProduction

Concept

Selling Concept

Product Concept

Marketing

Concept

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The Production Concept

Assumes that consumers are

interested primarily in product

availability at low prices

Marketing objectives:

Cheap, efficient production

Intensive distribution

Market expansion

Eg Manufacture of sugar , China pdcts

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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


Quality improvement

Addition of features

Tendency toward Marketing Myopia

E.g. digital & non digital cameras

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The Selling Concept

Assumes that consumers are unlikely

to buy a product unless they are

aggressively persuaded to do so


Sell, sell, sell

Lack of concern for customer needs

and satisfaction

Eg Insurance policies

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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


Make what you can sell

Focus on buyers needs

Eg Head & Shoulders shampoo

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ConsumerResearch

Segmentation

Targeting

Positioning

The process andtools used to study

consumer behavior

Two perspectives:

Positivist approach

Interpretivist

approach

Implementing the

Marketing Concept

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ConsumerResearch

Segmentation

Targeting

Positioning

Process of dividingthe market into

subsets of

consumers with

common needs orcharacteristics

Implementing the

Marketing Concept

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Zen Estello Young trendy

peopleOmni---Need to transport

goods

Wagon R Smarter people (executive Alto- small car small family

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ConsumerResearch

Segmentation

Targeting

Positioning

The selection of oneor more of the

segments to pursue

Implementing the

Marketing Concept

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ConsumerResearch

Segmentation

Targeting

Positioning

Developing a distinct imagefor the product in the mind

of the consumer

Successful positioning

includes:

Communicating the

benefits of the product

Communicating a unique

selling proposition

Implementing the

Marketing Concept

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This product is

positioned as

a solution to

facial redness.

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The Marketing Mix

Product

Price

Place Promotion

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Successful Relationships

CustomerValue

CustomerSatisfaction

CustomerRetention

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CustomerValue

Customer

Satisfaction

CustomerRetention

Defined as the ratio between

the customers perceivedbenefits and the resources

used to obtain those

benefits

Perceived value is relativeand subjective

Developing a value

proposition is critical

Value, Satisfaction,

and Retention

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Discussion Question

How does McDonalds create value for

the consumer?

How do they communicate this value?

Think Globally Act Locally

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CustomerValue

Customer

Satisfaction

CustomerRetention

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


and Retention

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Different types of Customers

1) Loyalists--- Satisfied customers who keep purchasing

2) Apostles --- Experiences exceed their expectation & they providepositive word-of-mouth

3)Defectors --- Feel neutral or merely satisfied & are likely to stopdoing business with the company

4) Terrorists--- Have had negative experiences with the company &spread negative word of mouth

5) Hostages ---- Are unhappy customers who stay with the companybecause of a monopolistic environment or low prices & who are difficult

& costly to deal with because of frequent complaints .

6) Mercenaries ---While being really satisfied customers they do not

have any loyalty to the company & may defect for a lower priceelsewhere. 30

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R

esearchers propose:

Companies should strive to create Apostles

Raise Satisfaction of the Defectors & turn them

into Loyalists

Avoid having terrorists orhostages

Reduce the number ofMercenaries

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CustomerValue

CustomerSatisfaction

CustomerRetention

The objective of providing value

is to retain highly satisfiedcustomers.

Loyal customers are key

They buy more products

They are less price sensitive

They pay less attention tocompetitors advertising

Servicing them is cheaper

They spread positive word of

mouth


and Retention

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Disciplines involved in the Study of

Consumer Behavior

Cultural

Anthropology

Economics History and

geography

Psychology

Sociology

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Cultural Anthropology ( study of

human beings in society )

The study of people

within and across

cultures

Emphasis on cross-cultural differences

Development of core

beliefs, values &customs that individuals

inherit from parents &

grandparents .34

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Economics (how consumers spendfunds )

How consumers ---Spend their funds

----How they evaluate

alternatives

---How they make decisions

to get maximum satisfaction

from purchases

Behavioral economics

e.g.,mental accounting

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History and Geography

Studies how an individualbehaves in a group( Consumer respects opinion of peers,

reference groups, families, opinion

leaders etc)

Impact of geography on

individuals

Isolation

Language development

Climate

Geographic determinism

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Psychology( study of individual )

Study of human thinking

and behavior

Some issues

Personality

Personal development

Cognition (thinking),

perception Motivation & Attitudes

Learninge.g., acquired

tastes

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Sociology( Study of groups )

Cultural and

interpersonal

influences on

consumptione.g.,

Fads, fashions

Diffusion of

innovation

Popular culture

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Consumer BehaviorApplications in

Marketing

Analyzing Market OpportunityCBB helps in identifying needs & wants of consumers

( e.g. trend towards dual income & emphasis on convenience &

leisure lead to needs for household gadgets like Washing

Machines, mixer grinder ,Vaccum Cleaner)

Selecting Target MarketCBB helps in identifying distinct consumer segments with

distinct needs

( studies proved that consumers do not prefer shampoo priced at

Rs 60 but prefer sachets , hence sachets introduced )

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Consumer BehaviorApplications in

Marketing ( cont)

M

arketing-

mix decisions(Product / Price/ Distribution / Promotion)

Product--- designed to satisfy needs e.g. Maggie noodles first inmasala & capsicum flavors & now in garlic & sambar flavors

Price--- decision will improve flow of revenue to the companyFor eg should the marketer charge same price or higher or low

Distribution--- CBB helps in deciding the distribution channel

e.g. Eureka Forbes vacuum cleaner

Promotion--- Which promotion methods to be used advertising,Personal selling ,Publicity , direct marketing etc

Use in Social & Non-profit Marketing UNICEF , CRY use CBB to sell pdcts & services to motivate

people to support these institutions 40

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A Simplified Model of Consumer Decision Making

Influences

consumers

recognition of a

pdct need

Influences how

consumer

makes

decisions

Post decision

activities

cbb lect 1

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