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Amity Business School

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Amity Business SchoolMBA Class of 2010, Semester II

Consumer Behavior

Mamta Mohan

Amity Business SchoolCourse Contents:

Module I -Consumer demographics, consumer life styles. Retailing implications of consumer demographics and lifestyle. Consumer profiles. Lifestyle marketing. Environmental factors affecting consumers.

Module II -Consumer as an Individual, Motivation, Needs, Goals, Personality, Self and Self Images, Perception, Imagery, Learning, Cues, Response, Reinforcement, Behavioral Learning and Cognitive Learning Theory, Brand Loyalty .

Module III -Attitude, Attitude Formation and Change. Shopping attitudes and behavior, where people shop. Consumer Buying Decision Process, types of consumer decision making. Impulse purchases and customer loyalty.

Module IV -Group Dynamics and Reference Groups, Family Decision Making, Social Class, Culture, Subculture

Module V- Opinion Leadership Process, Diffusions of Innovations, Adoption Process.

Text & References: Schiffman and Kanuk, Consumer Behavior, latest edition


The Customer: key to market success

• Satisfy customer: customer culture

• Adopt marketing concept

• Gain legitimacy in society.


Customer behavior & customer orientation

• Cost efficiencies - • Premium prices from established customers• Protection against corporate crisis• increased word of mouth• one stop shopping• new product innovations• Customer orientation creates pride in employees.


What is customer behavior?

CB is the mental and physical activities undertaken by household and business customers that result in decisions and actions to pay for, purchase , and use products and services.


Customer roles- roles specialization

• Buyer• Payer• User/consumer Why ?• Lack of customer expertise about a product or service on the part of

the end user.• Lack of time so purchase is delegated• lack of buying power.• Lack of access• Lack of affordability.• When the subsidies are involved, someone else paying for the part

of the purchase.• When the product is free.

Amity Business SchoolCustomer needs and wants

Determinants of needs and wants:

1 Three personal traits that determine needs

a genetics

b biogenic

c psychogenic

2 customers wants are determined by

• a individual context

• b environment context

Amity Business SchoolMarket values customer seek

• All customer behavior is driven by needs and wants• Marketing myopia• Market value Classification of market values 1. Universal product values2. Personal values3. Social values4. Emotional values5. credit value6. Financing value7. Service value-convenience value8. Personalization value

Amity Business SchoolCB Model


Consumer Decision Making Model- FactorsConsumer Decision Making Model- Factors

Prob Recognition

Inf Search & Evaluation

Pur process

Post Pur Beh

Motivation &

Involvement

Attitudes

Personality & Self-Concept

Learning &

Memory

Sub-Cultural Influences

Social-Class Influences

Cultural

Social-Group Influences

Family Influences

ExternalExternal EnvEnv

ExternalExternal EnvEnv

InternalInternal

DeterminantsDeterminants InternalInternal

DeterminantsDeterminants

Personal Influences

DECISION PROCESS

DECISION PROCESS

DECISION PROCESS

DECISION PROCESS

Amity Business School CONSUMER DECISION PROCESS

Steps in decision making process

NEED RECOGNITIONINFORMATION SEARCHEVALUATION OF ALTERNATIVESPURCHASE & CONSUMPTIONPOST-PURCHASE EVALUATIONDIVESTMENT


My Refrigerator My Refrigerator Has died!Has died!

DECISION MAKING PROCESS

NEED/PROBLEM RECOGNITION

AWARENESS THAT THERE IS A DISCREPANCY BETWEEN ACTUAL STATE AND DESIRED STATE

Amity Business SchoolDEFINING PROBLEM

RECOGNITION

“Problem Recognition” results when a consumer recognizes a difference of sufficient magnitude between what is perceived as the desired state and the actual state.

“Actual State” refers to the way in which a need is already being met.

“Desired state” is the way in which a person would like for the need to be satisfied

Amity Business School Factors affecting the

Desired State

•Reference Groups•Thinking

Factor affecting both

•Financial Considerations•Previous Decisions•Family Characteristics•Culture •Individual Development

Factors affecting actual State

•Arousal of needs•Post purchase evaluation

Desired State Actual State

Opportunity Recognition Need Recognition

Consumer Problem Recognition

Consumer Action No Consumer Action


COGNITIVE AND PERSONAL BIASES IN DECISION MAKING

• Selective search for evidence.• Premature termination of search for evidence.• Conservatism and inertia• Experiential limitation• Selective perception• Wishful thinking & optimism• Recency• Repetition bias.• Anchoring• Group think.• Source credibility bias• Incremental decision making• Inconsistency• Faulty generalizations.• Ascription of causality.•

Amity Business SchoolInfluences on consumer • Consumers’ Past Experiences

• Consumer Characteristics –benefits sought by consumers , to some extent are conditioned by demographics , lifestyles , personalities, Income , Age , Marital Status

• Consumer Motives – Motives are general drivers that direct a consumer’s behaviour towards attaining his/ her needs. Greater the disparity between current situation and desired goals , the greater the motivational drive to act to satisfy consumer needs

• Environmental Influences –like social settings , family , peers

• Past Marketing Stimuli - Past information about brand characteristics and price also affect consumers’ needs . Consumers obtain such information from advertisement , Television , Radio , Sales Representatives , Internet


Discover Consumer problems – – Intuition n logic (eg. Vaccum cleaner)– Survey, focus groups etc– Activity analysis – focus on particular method of activity eg.

Cooking, combing– Product analysis – examine purchase/use of particular product

eg. Clothing, laptops– Problem Analysis – with list of problems respondents indicate

activities, products or brands associated with those problems. Eg. ------------------- packages are hard to open

– ------------packages are hard to reseal/don’t fit the shelf/ don’t pour well/ wastage

– Human Factors Research – determines human capabilities…flexibility, response time, strength, vision, fatigue

– Emotion Research – emotion associated with certain product or products associated with reducing or arousing emotions


• Help Consumers Recognize problems

• Generic PR discrepancy that a variety of brands within a pdt. category can reduce

• Problem is latent or low importance

• Product in early PLC

• Firm has high market %

• External search after PR limited

• Industry wide cooperative efforts


• Selective PR discrepancy only one brand can solve• Firm to gain or maintain market share• Expand total market• INFLUENCE D.S. – advertise desired pdt benefits

eg. Happydent, scholls, baind-aid shapes• INFLUENCE A.S. – advertise concern eg. Deo,

pastes, two wheelers• TIMING OF PR – purchase a solution when difficult

or impossible eg. Insurance,fog light,cold medicine• SUPPRESSING PR – Mc Dowells soda, small

warning prints


Respond to Consumer problems

• Structure the mktg. mix• Develop new product• alter existing one• Modify channels of distribution• Change pricing policy• Revise advertising strategy• Eg. Balanced diet options



INFORMATION SEARCH

INTERNAL AND EXTERNAL SEARCH

Amity Business SchoolInformation Source

Internal Information

External Information

Active Passive Active

•Past Searches

•Personal Experience

•Low-involvement learning

•Independent Groups

•Personal contacts

•Marketer Info

•Experiential


Brand ImageBrand Image Storage/ PerformanceStorage/ Performance

Style &Style & DesignDesign

PricePrice


ALTERNATIVE EVALUATION

DETERMINE CHOICE CRITERIA TO EVALUATE PRODUCT ALTERNATIVES

Amity Business School All Potential Alternatives

Awareness Set

Evoked Set Inert Set Inept Set

Specific Alternatives purchased

Alternatives considered but not purchased


I’ll takeI’ll takethat onethat one..


PURCHASE

CHOOSE WHICH BRAND TO BUY OR NOT TO BUY


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Why did I buyWhy did I buysuch an expensivesuch an expensivecar?car?


POST-PURCHASE EVALUATION

PURCHASE SATISFACTIONCOGNITIVE DISSONANCE


CLASS EXERCISE - EXPLAIN THE CONSUMER DECISION MAKING PROCESS WITH THE ABOVE EXAMPLE


Consumer Demographics, Consumer life styles

Demography – science of population.Demographic +psychographic basis of segmentation.e.g. Retail banking 334 million bank accounts 60 million house holds are really ‘banked’Around 91 million households9 incomes between 40,000 and rs. 180,000 per annum needs to be tapped by the banking sector. if 30 million additional households are tapped by the the organized financial service providers it would expand the revenue pool--------- e.g. Mobile marketing

Amity Business SchoolConsumer demographics

A trillion dollar marketThe income Pyramid-Rising incomes-the sizable urban middle class -fifth largest consumer-A virtuous cycle-Economic structure: (deprived, aspires, seekers, strivers,

global Indians).-The deprived class-A middle class country.-Globals will become a major spending force -A widening distribution of income.- Consumption growth

Amity Business SchoolConsumer demographics

Towns and citiesTier 1: major cities8 cities population>4 millionIncome>100 billion rupees.Tier 2: mainstrem cities26 cities,

population>1 millionTier 3: climbers33 cities population

>500,000Tier 4 small towns-5,094 towns


Mumbai, Calcutta, delhi chennai, hyderabad, pune , Ahmedabad

Surat kanpur , nagpur,


Three ways of analyzing consumer behavior

1. Economic models

2. Psychological models

3. Consumer behavior models


Model of decision making: consist of following steps

1. Need recognition;

2. Search for information on products that could satisfy the needs of the buyer;

3. Alternative selection

4. Decision making on buying the product;

5. Post purchase behaviour


Alternative models- steps in the marketing promotional process is often seen as the most generally useful;

Awareness

Interest

understanding

Attitudes

Purchase.

repeat purchase.


Table IEstimated households

by annual income

Table IIStructure of the Indian consumer market (1995-96)

Annual income (in Rupees) at

1994-95 prices

No. of househol

ds (in million)

Annual income

(in Rupees) at 1994-95

prices

Classification

Number of households (in million)

Urban Rural Total

<25,000 80.7 <16,000 Destitutes 5.3 27.7 33.0

25,001-50,000

50.416,001-22,000

Aspirants 7.1 36.9 44.0

50,001-77,000

19.722,001-45,000

Climbers 16.8 37.3 54.1

77,001-106,000

8.245,001-215,000

Consumers 16.6 15.9 32.5

>106,000 5.8 >215,000 The rich 0.8 0.4 1.2

Total no. of households: 164.9 million

Total no. of households 46.6 118.2 164.8

Source: National Council of Applied Economic Research (NCAER). The above presentation has been slightly modified by IndiaOneStop.Com

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