CONSUMER BEHAVIOUR

& MARKETING STRATEGY

By:

Sai Dutta Panda R Charan Teja

BEHAVIOURAL ECONOMICS

It is a term for a range of approaches that seek to understand and explain consumer behaviour more accurately than predictions associated with traditional economic theory.

BEHAVIOURAL MODELS
Economic model.
Learning model. Psychological model. Sociological model.

MARKETING STRATEGY

The marketing logic by which the business unit

hopes to create customer value and achieve profitable customer relationships.

MARKETING STRATEGY
For formulation of marketing strategy, 2 questions need to be answered:
Which customers will the company serve?

(targeting and segmentation)

How can we serve these customers best?

(positioning)

MARKETING STRATEGY
Marketing strategy includes:
Positioning. Product strategy. Pricing strategy. Distribution strategy. Market communication strategy. Market research.

CONSUMER BEHAVIOUR
Cultural
Culture Subculture Social Class Social
Reference Groups Family Roles And Status

Personal
Age Occupation Economic Situation Lifestyle Personality & Self Concept

Psychological
Motivation Perception Learning Beliefs & Attitudes

ARE

WE RATIONAL ?

LOSS AVERSION
People dislike losing something twice as much as they like gaining it. More sensitive to losses compared to gains of similar magnitude.

LOSS AVERSION
Disposition Effect: the tendency of investors to

continue holding assets that have dropped in value and to sell assets that have increased in value.

LOSS Endowment AVERSION Effect: the tendency of individuals to

place a higher price or value on an object if they own it than if they do not.
We generally demand more money to part with

something once we own it than we would be willing to pay for it in the first place

STATUS QUO BIAS

Tendency to stick with current choices and

patterns of behaviour
Application: Offer a free subscription for a fixed period, which then reverts automatically to a full payment Automatic enrolment into personal pension plans in the US.(NEST)

DEFAULT OPTION
Tendency of individuals to stick with the default

option offered, rather than make a conscious decision. Termed choice architecture, which encapsulates how choices are framed, or presented, to individuals. Examples: University of Chicago Professors Annual car insurance policies

FRAMING EFFECTS
The appraisal of alternative options can also depend

on the way the choice is presented, or framed. Preference for positive rather than negative frames, (loss aversion).
Example: presentation of past performance

statistics.

ANCHORING EFFECT
Anchoring effect is a type of framing effect where

the appraisal of options is affected by an original starting value (or anchor).

Example: conservative, moderate and aggressive

(0%, 40%, 80%) (40%,70% ,100%)

HYPERBOLIC DISCOUNTING AND PROCRASTINATION

The decision maker makes value comparisons

between immediate and delayed consequences and the decision is influenced by his time preference. The longer the delay, the larger the IDR for future outcome. IDR also declines with the size of the outcome.

HYPERBOLIC DISCOUNTING AND PROCRASTINATION

Simply put, people have a tendency to prefer

short-term gratification over longer term returns. Effects of hyperbolic discounting may be exacerbated by our tendency to procrastinate. Example: Pension Commission.

MENTAL ACCOUNTING
Mental accounting occurs when sums of money

are treated and valued differently depending on where they came from and/or where they are kept. (fungible). Example: people coming to a store to buy at lamp and to buy a dinner table. New York taxi drivers.

AVAILABILITY EFFECT AND SALIENCE

People judge the likelihood of an outcome

occurring by how easily the outcome can be brought to mind or imagined.

Overestimate the likelihood of outcomes that are

particularly memorable, highly emotional or have happened recently.

AVAILABILITY EFFECT AND SALIENCE

Example: High level of insurance purchases made immediately after disasters such as floods and earthquakes.
Tendency to invest too much money in the stock

market when in boom and too little when it has been on the decline.

OVERCONFIDENCE
Example: People rated their own accuracy in prediction of market stocks at 68% while the actual accuracy was only 47%. Consumers opt to forgo the opportunity to insure themselves against unforeseen circumstances. Investors choose actively managed funds rather than passive index trackers

TRUST
The more an individual trusts another individual

or organisation, the less it is necessary to check information and impose controls. Example: voluntary and community organisations may be better placed to deliver financial services.

MARKETING STRATEGY AT BANCO AZTECA

MARKET ANALYSIS Size Composition Location Trends Define, analyse market segments. Select target segments to serve. Articulate desired position in market. Select benefits to emphasise on customers. Strengths Weaknesses Current Positioning Marketing Action Plan.

INTERNAL ANALYSIS

Resources Reputation Constraints Values

COMPETITOR ANALYSIS

Analyse possibilities for differentiation.

Marketing Strategy by Michael R. Pearce