CONSUMER BEHAVIOR

Consumers around the world vary tremendously in age, income, education level and tastes. They also buy an incredible variety of goods and services. How these diverse consumers connect with each other and with other elements of the world around them impact their choices among various products, services and companies. Since modern marketing revolves around customer satisfaction it is essential to understand How consumers behave and Why they behave the way they do.

Consumer behavior relates to an individual persons decisions regarding selection, purchase and use of goods and services. It is defined as the process whereby individuals decide what, when, how and from whom to purchase goods and services. This can be contrasted from Consumption Behavior which does not refer to individual decisions but rather concentrates on the buying decisions of a whole group like a family, certain age group etc.

Importance of Studying Consumer Behavior To understand why a customer or buyer makes a purchase is an important part of the marketing process because without such an understanding, businesses find it hard to respond to the customers needs and wants. I f a marketer can successfully study consumer buyer behavior; he or she will be in a better position to target products and services at them. The understanding of consumer behavior can be applied on each of the four major areas of marketing: Economic Factors Psychological Factors
Influence

Sociological Factors

CONSUMER
Develop

Product Choice

Product
To Design

MARKETER

Study

Location Choice Cost Choices Other Preferences

Price Place Promotion

Production Policies Price Policies Promotion Policies Distribution Policies

Students should be able to expand on this how buying motives influence the decision regarding 4 Ps

Factors Influencing Buyer Behavior Consumer purchases are influenced strongly by cultural, social, economic, personal and psychological characteristic. For the most part, markets cannot control such factors but they must take them into account. These factors can be classified into four basic categories: Cultural Factors Culture is the most basic cause of a persons wants and behavior. Human behavior is largely learned. Growing up in a society a child learns basic values, perceptions, wants and behaviors from the family and other important institutions. These aspects explain why people behave differently from people belonging to different cultures. Cultural factors can be divided into three sub factors Culture - The set of basic values learned by a member of society from family and other important institutions. Every group or society has a culture, and cultural influences on buying behavior may vary greatly from country to country. Sub Culture - A group of people with shared value systems based on common life experiences and situations. Sub culture includes nationalities, religions, racial group and geographic regions. Language, Values and Norms Social Factors A consumers behavior also is influenced by social factors, Reference Groups: Two or more people who interact to accomplish individual or mutual goals formulate a group. A persons behaviors are influenced by many small groups. Groups that have a direct influence and to which a person belongs are called membership groups. Some are primary groups includes family, friends, neighbors and coworkers. Some are secondary groups, which are more formal and have less regular interaction. These include organizations like religious groups, professional association and trade unions. Aspiration group is a group to which one currently does not belong but would like to become a member of. Dissociative groups are ones to which one does not wish to be connected with.

Family: Family members can strongly influence buyer behavior. Marketers are interested in the roles, and influence of the husband, wife and children on the purchase of different products and services. Roles and Status: A person belongs to many groups, family, clubs, and organizations. The persons position in each group can be defined in terms of both role and status. For example. M & X plays the role of father, in his family he plays the role of husband, in his company, he plays the role of manager, etc. A Role consists of the activities people are expected to perform according to the persons around them. Social Class - Social classes is one common way of ranking members of a society. Classes are societys relatively permanent and ordered divisions whose members share similar values, interests and behavior.

Personal Factors Age and Life cycle Stage: People change the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle. Occupation: A persons occupation affects the goods and services bought. Blue collar workers tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. A Co. can even specialize in making products needed by a given occupational group. Thus, computer software companies will design different products for brand managers, accountants, engineers, lawyers, and doctors. Economic situation: A persons economic situation will affect product choice Life Style: Life Style is a persons Pattern of living, understanding these forces involves measuring consumers major AIO dimensions.i.e. activities (Work, hobbies, shopping, support etc) interest (Food, fashion, family recreation) and opinions (about themselves, Business, Products) Personality and Self concept: Each persons distinct personality influences his or her buying behavior. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to ones own environment.

Psychological Factors Motivation: Motive (drive) a need that is sufficiently pressing to direct the person to seek satisfaction of the need. Student may discuss Maslows Theory of Needs. Perception: The process by which people select, organize, and interpret information to form a meaningful picture of the world. Learning: Changes in an individuals behavior arising from experience.

Beliefs and attitudes: Belief is a descriptive thought that a person holds about something Attitude, a Persons consistently favorable or unfavorable evaluations, feelings, and tendencies towards an object or idea Buying Motives A motive can be defined as a drive or an urge for which an individual seeks satisfaction. It becomes a buying motive when the individual seeks satisfaction through the purchase of something. Human behavior is fundamentally related to instincts. It is these instincts which make a person behave differently at different times. The appropriate motive must be crystallized if the marketing program is to be effective and appropriate in terms of product features and advertising strategy.

Types of Buying Motives Buying motives are normally classified into two types BUYING MOTIVES

Product Motives

Patronage Motives

Rational

Irrational

Rational

Irrational

Product Motives attempt to explain why a consumer buys a certain product. Many people buy their daily requirements from a certain store; this area is concerned with patronage motives. The choice of a particular store depends on factors such as location, variety of goods stocked, reputation of the store, attitude adopted by the salesman in the store, the services offered by the store, the general appearance of the store etc. Some people prefer shopping at glamorous stores, others select economical stores. Thus persons prefer to match with their status or standard of living with that of the store.

Common product buying motives include comfort, to attract opposite sex, welfare of beloved ones, freedom from fear and danger, to be superior, social approval, to live longer etc. All buying motives are not equally important. Some of them are discussed below: Freedom from fear and danger: Fear is a negative motive but is a very powerful one. The most basic instinct of a human being is self-preservation. Fear is a very powerful

and compelling force in human affair. The marketing man must ascertain the possible fear of death, fear of loss and fear for the future, fear can sell anything like hair oil through fear of getting bald. Desire for economy: Persons desire money to satisfy their other desires. The businessman wants money to make more profits or lower costs. The manufacturers make purchase of high priced heavy machinery to lower down their cost of production and thereby increases profits. In the same way every customer likes his moneys worth. Vanity: Women spend much time, thought and money on their personal appearance like cosmetics, hairdo and new styles. Hence vanity is a powerful motive in the hands of the marketing man being the safest appeal that may be used. Appreciation: Everybody desires to be appreciated and complimented. He likes to be recognized as an important person. Because of this human in trait, it may be useful to use indirect method in place of direct methods that might prove offensive. Fashion: It is the desire of everyone to imitate what others are doing. This may also be called imitation motive. It is closely linked with pride or desire for importance. This motive can be well exploited by the marketer. Possession: The instincts of possession or a desire to call things as mine leads persons to hoard and collect things. Some persons collect postage stamps and old coins. Sex or romance: Fancy clothes, cosmetics, perfumes, etc. are in great demand on account of the instinct of sex or a desire to attract the opposite sex. It is no wonder why this instinct is very often used by marketing men. Love of others: This motive plays an important part when parents purchase all kinds of things for their children like toy, fancy garments and other presents, may go in for life insurance to make provision for their future. A bachelor going to marry will purchase numerous domestic articles. Therefore, this particular motive is as time described as that of home building. This instinct is also related to comfort and convenience motive. Health or physical well-being: Many persons purchase health foods, vitamin tablets and patent medicines to maintain their health and physique well-being. Comfort and convenience: Most people dont like to exert much. Hence this motive may be well exploited by the marketing particularly for selling luxury items like motor, cars, sofa sets, furniture, vacuum cleaners, washing machine, television sets, etc. The sale of air conditioners and water coolers, fans is motivated in summer by this motive for comfort.

Buyer Decision Process Many models have tried to explain a consumers behavior and his decision making process. When a buyer is considered as a decision maker it is observable that a series of

decisions are made to finally come to a choice of what is to be purchased. The process of coming to that conclusion is depicted below:

Internal Stimulus

Need Recognition Information Search Alternative Evaluation Purchase Post Purchase Evaluation

Marketers can influence the external stimulus by Promotions

External Stimulus

Consumers search for more information over the internet, by referring to their friends, newspapers etc Consumers evaluate the different choices on the basis of how well they satisfy the needs identified earlier. The final exchange where the customer pays for the product and acquires its ownership. Could be Positive or Negative Positive behavior implies customer satisfaction and repeat purchases. Negative behavior signifies dissatisfaction, bad repute and cognitive dissonance

Types of Buying Behavior Buyer behavior exhibited by customer varies greatly depending on the type of product they are about to choose. It is obvious, for example, that customers would not go through the same process to purchase toothpaste, as they would to purchase a car. More complex decisions involve more effort on the part of the customer and buyers tend to compare different brands. At the same time, there are events when customers do not compare brands and pick the one they have always bought.

To consider all these different behaviors, buyer behavior is normally classified into four types. Consumer Buying Behavior

Complex Variety Seeking

Dissonance reducing

Habitual

These behaviors are differentiated on the basis of two dimensions: 1. Involvement of the buyer the extent to which the customer is conscious regarding what he purchases.

2. Difference between brands the extent of variance between two or more brands that can be selected. When classified on these dimensions, we have four different types of buyer behavior, as illustrated below. A person will have complex buyer behavior while purchasing certain product, while other products would be purchased using habitual buying behavior.

Complex Buying Behavior: this behavior is usually used for products that are available in many brands offering very different features. Cars are a valid example as a number of brands are available (Toyota, Mercedes, Volvo) and yet the brands are significantly different from each other. Purchase for this category implies that there is a lot of difference between brands available for this type of product and customers are very alert regarding there purchase. Customers carefully compare the different brands before making the final choice. Variety Seeking Buying Behavior: Purchase under this category show that customers consider brands to be very different from each other but do not make a lot of effort while selecting one (low involvement). This is possible for products like chocolate, fruit juice, pens where we see a lot of brand switching. Even though brands are very different from each other (compare Pepsi and Canada Dry), consumers may select a different brand just out of boredom. Dissonance Reducing Buying Behavior: this behavior occurs when consumers are highly involved with an expensive, infrequent or risk purchase but see little difference between brands. The decision is very important for the buyer but he cannot really make out which brand would be the best choice. This is often seen in case of selecting the wall paint for a new room, the perfect dress etc. If the buyer is not careful under these situations it often results in cognitive dissonance i.e. after-sale discomfort.

Habitual Buying Behavior: the final category deal with products where the customers are not very involved in the purchase decision and they do not consider brands to be very different from each other either. These are brands we have always used with no specific reason. A common example is washing powder if a family purchases Aerial, it does not really mean that they know how it is different from Omo or Tide. All brands are considered similar to each other; one is picked and continuously used out of habit.

Customer Value and Customer Satisfaction Customer value is the amount of benefit that a customer will get from a service or product relative to its cost. Some businesspeople explain customer value as realization compared to sacrifice. Realization is a formal term for what customers get out of their purchases. Sacrifice is what they pay for the product or service. Businesses of all sizes use customer value as part of a greater analysis to determine how well they are supplying their customer base.

If customers believe that their realization is more than their sacrifice, the concept of customer satisfaction emerges how happy customers are with what they are getting. Customer satisfaction is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator in a competitive marketplace where businesses compete for customers. Customer Satisfaction is the feeling of fulfillment and contentment that end users gain by consumption of a product when it matches there desired level of quality standards and performance levels. Customer satisfaction depends on a variety of things and varies from time to time. The key is to fulfill customer requirements and give them a little extra to make them happier. Common ways of measuring customer satisfaction involves Conducting customer satisfaction surveys Managing customer complaints Mystery Shopping/Ghost Shopping

Customer Relationship Marketing Customer Relationship Marketing is a practice that encompasses all marketing activities directed toward establishing, developing, and maintaining successful customer relationships. The focus of relationship marketing is on developing long-term

relationships and improving corporate performance through customer loyalty and customer retention.

Customer relationship marketing is an emerging concept and involves certain steps.

Creating a Database

Identifying Key Customers

Creating Customer Profile

Getting Closer to Customers

Maintaining Relations

It is clear that following these steps successfully result in long term customer relationship and a better fulfillment of customer needs. There are many benefits of relationship marketing and that is why it is one of the latest philosophies in marketing today. Benefits to the organization include Repeat Businesses Enhanced Brand Loyalty Increased Long Term Profitability Brand Building

Customers also gain a lot from relationship marketing and some of the major advantages are better products and services, attention to customer complaints and customization of products/services as per needs.