UNIT -II

 Theory: an interrelated set of concepts,

definitions and positions that presents a
systematic view of phenomenon (Loudon and
Della Bitta, 1993)
 Theory has 4 functions to:
 Describe
 Explain
 Predict
 Control

 A model is a simplified version of reality

Algebraic models: Fishbein’s Attitude Model

Ao=Σbiei

Ao= the person’s overall attitude towards the

object
bi= the strength of his belief that the object is
related to attribute I
ei= his evaluation or intensity of feelings (liking or
disliking) toward attribute i
n= the number of relevant beliefs for that person
 Early
models derive from economics and
were interested in studying how scarce
resources are allocated to quench an
unlimited amount of wants and needs
(Loudon and Della Bitta, 1993)
 Macroeconomics
 Microeconomics
 Concentrates on the act of purchasing
Interested in knowing what consumers were
purchasing, ignoring the why and how
underpinning their behaviour
MICROECONOMICS

 Assumptions made:–
 Consumers wants and needs are unlimited and
unquenchable
 Consumers allocate their resources to maximise
levels of satisfaction
 Consumers have perfect knowledge
 The additional satisfaction of a unit that is
bought after the first purchase will be less than
the first purchase’s marginal satisfaction
 Price is key
 Consumers are rational
 The Economic Model
 The Sociological Model
 Learning Model
 Psychological Model
 The Howard Sheth Model of
buying behaviour
 The Nicosia Model
 The Engel-Kollat-Blackwell Model
 Engel, Blackwell and Miniard
(EBM) Model
 Webstar and Wind Model of
organizational buying behaviour
 In this model, consumers follow the principle of
maximum utility based on the law of diminishing marginal
utility.
The consumer wants to spend the minimum amount for
maximising his gains.
Economic model is based on:
 Price effect: Lesser the price of the product, more
will be the quantity purchased.
 Substitution effect: Lesser the price of the substitute product,
lesser will be the utility of the original
product bought.
 Income effect: When more income is earned, or more money is
available, more will be the quantity purchased.
 The economic model of consumer behavior
focuses on the idea that a consumer’s
buying pattern is based on the idea of
getting the most benefits while minimizing
costs.
 Thus, one can predict consumer behavior
based on economic indicators such as the
consumer’s purchasing power and the price
of competitive products.
 For instance, a consumer will buy a similar product
that is being offered at a lower price to maximize the
benefits; an increase in a consumer’s purchasing
power will allow him to increase the quantity of the
products he is purchasing.
 The Economic Model, one of the oldest models of
Consumer Behaviour tries to explains what a person is
likely to buy and in what quantity.
 This model takes into consideration the behaviour of an
economic man, who would give foremost importance
to the monetary or financial considerations while
making a decision.
 The ultimate objective of an individual, as per this
model, is the maximization of satisfaction by investing
the minimum money resources for the satisfaction of
needs and wants.
 This model, according to behavioural scientists, is not
complete as it assumes:
 homogeneity of the market
 similarity of buyer behaviour
 Concentrates only on the product or price.
 It ignores all the other aspects such as:
 perception, motivation, learning, attitudes, personality and socio-
cultural factors.
 It is important to have a multi-disciplinary approach, as
human beings are complex entities and are influenced by
external, internal factors.
 Thus, price is not the only factor influencing decision-
making and the economic model according to scientists have
shortcomings.
 Thismodel is based on the idea that
consumer behavior is governed by the
need to satisfy basic and learned needs.
Basic needs include food, clothing and
shelter, while learned needs include fear and
guilt.
 Thus, a consumer will have a tendency to buy
things that will satisfy their needs and provide
satisfaction.
 A hungry customer may pass up on buying a nice
piece of jewelry to buy some food, but will later
go back to purchase the jewelry once her hunger
is satisfied.
 Thismodel suggests that human behavior is
based on some core concepts − the drives,
stimuli, cues, responses and
reinforcements which determine the
human needs and wants and needs
satisfying behavior
  Drive − A strong internal stimulus which compels action.
 Stimuli − These are inputs which are capable of
arousing drives or motives.
 Cues − It is a sign or signal which acts as a stimulus to a
particular drive.
 Response − The way or mode in which an individual
reacts to the stimuli.

 If the response to a given stimulus is “rewarding”,

it reinforces the possibility of similar response
when faced with the same stimulus or cues. Applied
to marketing if an informational cue like
advertising, the buyer purchases a product
(response); the favourable experience with the
product increases the probability that the response
would be repeated the next time the need stimulus
arises (reinforcement).
 The sociological model primarily considers the
idea that a consumer’s buying pattern is based
on his role and influence in the society.
 A consumer's behavior may also be influenced by
the people he/she associates with and the
culture that her society exhibits.
 For instance, a manager and an employee may have
different buying behaviors given their respective roles
in the company they work for, but if they live in the
same community or attend the same church, they
may buy products from the same company or brand.
 As per this model, an individual buyer is a part
of the institution called society, gets
influenced by it and in turn, also influences it
in its path of development.
 The interactions with all the set of society leave
some impressions on him and may play a role
in influencing his buying behaviour.
 The marketers, through a process of market
segmentation can work out on the common
behaviour patterns of a specific class and group
of buyers and try to influence their buying
pattern
 This model is concerned with the society. A
consumer is a part of the society & he may
be a member of many groups in a society.
 His buying behavior is influenced by these
groups.
 primary groups of family, friends & close
associates influence a lot on his buying
behavior.
 The psychoanalytical model takes into
consideration the fact that consumer behavior
is influenced by both the conscious and the
subconscious mind.
 The three levels of consciousness discussed by
Sigmund Freud (id, ego and superego) all
work to influence one’s buying decisions and
behaviors.
 A hidden symbol in a company’s name or logo may have
an effect on a person’s subconscious mind and may
influence him to buy that product instead of a similar
product from another company.
 Psychologists have been investigating the causes which
lead to purchases and decision-making.
 This has been answered by A.H. Maslow in his
hierarchy of needs.
 The behaviour of an individual at a particular time is
determined by his strongest need at that time.
 This also shows that needs have a priority.
 First they satisfy the basic needs and then go on for
secondary needs.
 The purchasing process and behaviour is governed by
motivational forces.
 Motivation stimulates people into action.
 Motivation starts with the need. It is a driving force and
also a mental phenomenon.
 Need arises when one is deprived of something.
 A tension is created in the mind of the individual which
leads him to a goal directed behaviour which satisfies
the need.
 Once a need is satisfied, a new need arises and the
process is continuous.
 5. Self-actualisation: Self-fulfilment
 4. Ego Needs: Prestige, Status, Success, Self-respect,
etc.
 3. Social Needs: Affection, Friendship, Belonging,
etc.
 2. Safety and Security Needs: Protection, Order,
stability
 1. Physiological needs: Food, shelter, air
 This is a simple model of consumer behaviour, in which
the input for the customer is the firm’s marketing
effort (the product, price, promotion and place) and the
social environment.
 The social environment consists of the family, reference
groups, culture, social class, etc. which influences the
decision-making process. Both these factors together
constitute the input in the mind of the consumer.
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 Nicosia model

 is a structural model of the purchase decision-making

process by an individual consumer or a whole family
 model shows the interactive relationship between the
company and the consumer
 they arise between them for mutual communication
 company communicates with consumers
through promotional activities,
 while consumers by making purchases
 the author of a model Nicosia identified three stages that
gradually move the consumer in process
 preferences, attitudes, motivations
 In Nicosia Model the decision-making process is
divided into four areas:
 Area 1 - includes consumer attitudes shaped
by information from the market.
 In this area information flows from the source of their
creation to the recipient.
 Area 2 - consumer is looking for
information about specific products and gives
them value.
 During the evaluation the consumer allocates
appropriate weight to each information piece.
 When the result of the evaluation of a given product
from the consumer's point of view is satisfactory,
consumer is motivated to buy.
 Area 3 - act of purchase.
 Motivation - established in advance by consumer
prompts him to acquire the product.
 Area4 - feedback, as result of
the consumption of the product, the
consumer acquires a new experience and
base on it his new preferences
(predisposition).
 This last step is not only the consumption of a
product but also a very important factor for the
future decisions of the consumer.
 Feedback is also a very important factor for the
company, which acquires a new information that
could be used in preparing future product policy,
its advertising and communications
 Francesco Nicosia presented model in flow chart format
 All variables are viewed as interacting , with none being
inherently dependent or independent.
 Thus the model describes a circular flow of influences
where each component provides input to the next.
 The model contains four major components:
 1.firm’s attributes, communications and consumer’s psychological
attributes
 2.consumer’s search for evaluation of alternatives
 3.consumer’s motivated act of purchase
 4.Consumer storage or use of the product

 Proposed by Francesco Nicosia in 1970s

 Limitations:
 Incomplete in a number of aspects, very reductionist
 Variables in the model have not been clearly defined
 Howard-Sheth model is based on the assumption that :
 the consumer behaves rationally during purchase,
 process is repeatable and
 is result of incentives which have their source in the
environment (input variables).
 It consists of four main groups of variables:
 I. Input variables: stimuli arising from the marketing activities
and social environment of the consumer. Include three different
types of stimuli:
 significant incentives - physical characteristics and the
attributes of a product, such as price, quality, originality and
accessibility, brand characteristics,
 symbolic incentives - verbal or visual characteristics of the
product, form of product perceived by buyer/customer,
effect of advertising and promotion messages used by seller,
 social stimuli - whose source is the social consumer
environment, family, reference groups, and society in general.
 II. Hypothetical constructs, including the psychological
variables influencing consumer behaviour during the decision-
making process.
 It is regarded by the authors as abstract, not defined and not
intended directly. They distinguished two main constructs:
 perceptual constructs - describe obtaining and processing information,
attention to stimulus, sensitivity to messages, receptivity, blocking
information, prejudice, etc.,
 learning constructs - how buyer forms attitudes, opinions, and knowledge
influencing his buying decisions, evaluation after purchase, brand
comprehension, etc.

 III. Output variables: purchase intention,

attitude, brand perception and attention.
 They are noticeable effects of internal processes, for example: decision
to implement the purchase, disclosure of customer view and interest, as
well as the declaration of other activities.
 The most important output variable from the point of view
of marketing is actual purchase
 attention - scope of information accepted after exposing buyer
to stimulus,
 comprehension - amount of information actually processed and
stored in buyer mind,
 cognition - forming attitude towards products,
 intention - to buy or not to buy particular product,
 purchase behaviour.

 IV. External variables

 not been presented in the Howard and Sheth model and are not direct
part of the decision-making process,
 however, have a significant impact on consumer decisions and are used
in marketing activities as a criterion for segmentation.
 These include such variables as: value of purchase for the
buyer, character traits of the consumer, membership of a social
group, financial status of a consumer, pressure of time.
 These do not properly fall within the
Howard Sheth model
 Exogeneous variables:
 Importance of purchase
 Personality variables
 Social class
 Culture
 Organization
 Time pressure
 Financial status
 The HSD has only been partially tested
 It does not explain the non-systematic
behaviour
 The HSD does recognizes the exogeneous
factors but explains little on the same