CHAPTER : 6 ANALYZING CONSUMER MARKETS CONNECTING WITH CUSTOMERS.

CHAPTER : 6

ANALYZING CONSUMER MARKETS

CONNECTING WITH CUSTOMERS

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Presentation Outline

• Different actors involved in purchase decision

• Understanding Consumer Behavior

• Cultural, Social, Personal, Psychological factors

affecting Consumer Behavior.

• Buyer Decision Process.

• Types of buyer Behavior.

Purchase, use and

consumption

Initiator

Influencer

DeciderPurchaser

User/consumer

Different actors in the purchase of a product

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Different actors in the purchase of a product

• The initiator is the individual (or individuals) who initiates the search for a solution to the customer’s problem. For example: due to the terrible transportation system in Dhaka, the mother of the family may initiate the search for a solution for her family and is thinking about a car.

• The influencers are those individuals who may have some influence on the purchase decision. For example: through word of mouth, friends and family members have an influence on the purchase of a car brand.

• The decider: taking into account the views of the initiator and influencer, an individual will actually make a decision as to which product to purchase. Example: the father and the mother together decided to purchase a toyota car.

• The purchaser is the individual who actually buys the product or service. He or she is the individual that hands over the cash in exchange for the benefits. Example: the father takes out his bank card and makes the purchase.

• The user is the individual who consumes the product or uses the service. Example: the father, mother, and the children use the car.

CUSTOMERS

WHO

Is involved in buying and consuming?

HOW

Do they use the product?

WHERE

Do they buy?

WHAT

Are their choice criteria?

WHEN

Do they buy/use the product?

WHY

Do they buy/use the product?

Understanding Customers – The Key Questions

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The case of Harley Davidson

• Consumers don’t just want a motor cycle, they want a Harley Davidson.• “Id rather push a Harley than drive a Honda”.• So WHY do consumers feel that way about Harley Davidson?: WHO are these

consumers, HOW does their mind work? WHY do they want a Harley and not a Honda/Yamaha? WHAT makes them love Harley so much?

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The case of Harley Davidson

• The customers of Harley Davison are older, affluent, well educated customers: CEOs/investment bankers etc where 12% of the purchases every year is done by women with income starting from 50 lacs taka per year.

• Consumers don’t just want a ride that is going to get them from point A to point B.

• Harley makes customers feel “Powerful”. It makes them feel like the toughest, baddest guy on the block.

• Harley is a symbol of “freedom” and “independence” which they want as a part of their life and self expression.

• Understanding the consumer is the point of winning in the marketplace.

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What is meant by consumer behavior?

• Bookish definition of consumer behavior is the study of how individuals select, buy, use, and dispose goods and services to satisfy their needs and wants.

• Understanding of consumer behavior is about what happens in the customer mindset. Its about understanding consumer’s thoughts and feelings – and how these thoughts and feelings direct them to take an action as far as making a purchase is concerned to satisfy their needs.

• In this chapter we are going to focus on consumer markets.• Consumer markets are all the individuals and households who

buy or acquire goods/services for personal consumption.

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Factors Affecting Consumer Behavior

• Consumer purchases are influenced strongly by cultural, social, personal and psychological factors.

• These factors are uncontrollable but must be taken into perspective.

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Cultural Factors affecting consumer behavior

• Cultural factors strongly affect how people think and how they consume. • Culture is a collection of shared values and beliefs that are reflected as

“acceptable” behaviour by a specific group of people. Culture comprises of core and secondary beliefs and values.

• Culture is a fundamental determinant of a person’s wants.

•States of deprivation•Masl

ow’s hierarchy of needs.

Needs

•Form that needs take as they are shaped by culture and individual personality – objects that satisfy needs.

Wants

•Wants backed by buying power

Demands

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Japanese way of thinking towards work

If one can do it, I can do it.If none can do it, I must try to do it!

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Arab way of thinking towards work

If one can do it, let him do it.If none can do it, Ya Habibi then

how can I do it?

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Cultural Factors Affecting Consumer Behavior: Sub-Culture

• Each culture comprises of subcultures which are groups of people within a culture with shared value systems based on common life experiences and situations.

• Nationalities, religions, race, geographic regions.• Sub-cultures make up important market segments,

and marketers often design products and services tailored to the needs of the subcultures.

15A presentation by Varqa Shamsi

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Cultural Factors Affecting Consumer Behavior: Social Class

• Social classes are society’s relatively permanent and ordered divisions.

• Usually measured by a combination of occupation, income, and education.


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Social Factors Affecting Consumer Behavior: Reference Groups

• A person’s reference groups are all the groups that have a direct or indirect influence on their attitudes and behavior. – Groups that have a direct influence on a person’s behavior are called membership

groups. Membership groups are the groups that a person belongs to and continuously interacts with such as: family, friends, colleagues, neighbors, religious groups.

– Aspirational groups are those groups that a person hopes to join, however, they do not belong to that group currently.

• Reference groups influence a person in terms of product purchases – example: a person starts purchasing formal suits and dresses once the person starts a corporate job, purchases a fancy mobile.

• Reference groups influence lifestyle – example: a person who wants to be a rockstar starts wearing torn jeans, stops shaving, starts doing drugs in order to feel that they “belong” to a reference group.

• Reference group can be a source of peer pressure and some people change their lifestyle and their attitudes because of this pressure.

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Aspirational group

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Social Factors Affecting Consumer Behavior: Reference Groups

• Dissociative groups are those whose groups whose values and behavior a person rejects and avoids.

• An opinion leader is a person who because of a strong personality, knowledge and a set of skills can influence others. Example: parents can be opinion leaders, a celebrity can be an opinion leader, a religious leader can be an opinion leader.

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Social Factors Affecting Consumer Behavior: Family

• The family is the most important consumer buying group in the society, and family members constitute the most influential primary reference group.

• In the asian sub-continents, the wife has the main purchasing influence for the family in the areas of food, household products and clothing.

• For expensive products and services, such as cars, vacations, or housing, the vast majority of husbands and wives engage in joint decision making.

• When it comes down to technologically advanced products like cell phones, laptops, television, the youngsters in the family influence purchase because they are more tech savvy and understand such products better.

• A family having small children can also influence purchase of products like chocolates, sweets, and restaurants where there exists a playing area.

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Personal Factors Affecting Consumer Behavior: Brand Personality

Sincerity

Excitement

Competence

Sophistication

Ruggedness

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Personal Factors Affecting Consumer Behavior: Lifestyle

• Lifestyle is a person’s pattern of living and how they interact in the world.

• Some consumers have a healthy lifestyle. • Some like to have a trendy lifestyle.• Some like to have a workaholic lifestyle. • Some like to have a sporty lifestyle and some are adventurous.

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Psychological Factors Affecting Consumer Behavior: Needs and motives

• A person has many needs at any given time. • Needs provide motives for consumer behaviour. • Motives are those factors that compel a consumer to take a

particular action. Hence, human beings are motivated to satisfy their unmet needs.

needs motives wants Demand Purchase

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Psychological Factors Affecting Consumer Behavior: Maslow’s Hierarchy of Needs

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Psychological Factors Affecting Consumer Behavior: Maslow’s Hierarchy of Needs

• Hierarchy in needs: are the five basic needs of human beings, arranged in a hierarchy based on their importance.

• Physiological needs: the basic survival needs such as the need for food, water and shelter.

• Safety needs: the need for security and safety from physical harm.

• Social needs: the desire to have satisfying relationships with others and feel a sense of love, affection, and belonging.

• Esteem needs: the need to feel a sense of accomplishment and gain recognition, status and respect from others.

• Self-actualization needs: the need for self fulfilment to realize one’s own potential.


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Which horizontal line is longer?

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What do you perceive when you see this picture?

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Psychological Factors Affecting Consumer Behavior: Perception

• Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world.

• Perceptions from the same stimulus can be formed because of 3 reasons:

• Selective attention• Selective distortion• Selective retention.

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Psychological Factors Affecting Consumer Behavior: Types of Perception

• Selective attention is the tendency for people to screen out most of the information to which they are exposed – marketers need to work really hard to get their attention (be more creative, and do repetitive advertisement).

• Selective distortion is the tendency for people to interpret information in a way that will support what they already believe (e.g. of a brand with a –ve experience).

• Selective retention is the tendency to remember good points made about a brand they favor and forget good points about competing brands (happens when a consumer is extremely loyal to a brand).

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Psychological Factors Affecting Consumer Behavior: Memory

• Long term memory v/s short term memory. • A brand’s knowledge in the customer mindset

needs to be in their long term memory. Otherwise the information about the brand will soon be forgotten. As a result, marketers should do repetitive advertisement to transfer a specific knowledge from short term to long term memory.

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The Buying Decision Process

Problem Recognition

Information Search

Evaluation of

Alternatives

Purchase Decision

Post Purchase

Evaluation

The consumer’s decision making process is generally viewed as consisting of stages through which the buyer passes in purchasing a product or service.

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Problem Recognition

• Problem Recognition stage is significant when the consumer perceives a need and becomes motivated to solve a problem.

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Information Search

• Once consumers perceive a problem or need that can be satisfied by the purchase a product/service, they begin to search for information needed to make a purchase decision.

• The initial search is called “internal search” whereby consumers attempt to scan information stored in memory to recall past experiences and/or knowledge regarding various purchase alternatives.

• If internal search does not yield enough information, the consumer will seek additional information by engaging in “external search” such as:– Personal sources: friends, relatives, co-workers.– Marketer-controlled sources: print advertisements, TV ads, sales rep, point of purchase

adverts etc. – Public sources: articles in magazines or newspapers, reports on TV and so on.– Personal experiences: such as actually handling, examining, testing the product.

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Evaluations of Alternatives

• The evaluation of alternatives stage signifies the assessment/comparison of alternative brands which can solve a consumer problem and satisfy a need.

• Various models can be utilized to portray the nature of the evaluation process. I am going to teach you a two step process: – The evoked set approach– The multi-attribute approach

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Understanding Evaluation of Alternatives via the Evoked Set Method

• A person’s evoked set consists of the brands he or she considers in a purchase situation.

• Brand may not be a part of the consumer’s evoked set because:– They are part of the consumer’s inept set which comprises of brands that are part of the

memory but are not considered because they elicit negative feelings because of –ve past experiences and –ve WOM.

– They are part of the consumer’s inert set which comprises of brands consumers are not aware of OR brands that consumers are aware of but do not have any positive/negative feelings about them.

Availablealternatives

EvokedSet

ChosenProduct

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Linking the importance of communication with the evoked set approach

• One of the primary goals of advertising is placing the brand name in the evoked sets of consumers.

• In order to do that consumers need to be aware of the brand (brand awareness) – long term memory NOT short term.

• Strong, favourable and unique associations should be linked with the brand (long term memory).

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Understanding Evaluation of Alternatives via the Multi-Attribute Approach

The multi-attribute approach suggests that a consumer ultimate attitude toward a brand is determined by:

• The quality of the different attributes of the brand.• The importance of each attribute to the consumer.Conclusion: The higher the brand rates on attributes that are

important to the consumer, the more likely it becomes that the brand will be purchased.

Important Note: The evoked set approach does not clearly define how the brands in the evoked set are evaluated in order for a purchase to take place. That is when the multi-attribute approach comes into perspective. Hence, both the approaches are actually linked together.

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Purchase Decision Stage

Purchase decision stage is twofold:1. At first Purchase intentions is generated which signifies the

consumer’s aim to buy a particular brand. 2. Then comes actual purchase which means that a consumer

has bought the product/service.• Between purchase intention and actual purchase, there are

two intervening factors: attitude of others and unanticipated situational factors.

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Purchase Decision Stage

• Attitudes of others: e.g. The wife’s attitude that the husband should buy the lowest priced car and not an expensive one he actually intended to; a friend might report dissatisfaction in the car.

• Unexpected situational factors: Sudden economic problem, a close competitor might drop its price, the consumer has lost his job.

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Post Purchase Evaluation Stage

• After using the product/service, the consumer compares the level of performance with expectations and is either satisfied or dissatisfied.

Expectation

Performance

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Satisfaction

Attitudinal loyalty

Behavioural Loyalty

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• Satisfaction means the brand is likely to be retained in the evoked set and increases the likelihood it will be purchased again.

• Dissatisfaction may lead the consumer to form negative attitudes toward the brand, and the brand is eliminated from the evoked set and becomes part of the inept set.


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Types of Buying decision behavior

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Complex Buyer Behavior

• When consumers are highly involved in a particular purchase and perceive significant differences amongst brands.

• Consumers are highly involved when the product is expensive, risky, purchased infrequently, and highly self-expressive.

• Marketers should provide information to the consumers based on the factors that are of high importance to them.

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Dissonance reducing Buyer Behavior

• Consumer buying behavior in situations characterized by high involvement but few perceived differences amongst brands.

• The products are expensive, self expressive, risky, and purchased infrequently.

• Example: furniture, curtains.

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Habitual Buyer Behavior

• Consumer buying behavior in situations characterized by low-consumer involvement and few significantly perceived brand differences.

• Not expensive, not self expressive, and purchased frequently.

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Variety-seeking Buyer Behavior

• Consumers undertake variety seeking buyer behavior in situations characterized by low consumer involvement but significant perceived brand differences.

• In such cases, consumers switch brands quiete often for the sake of variety.

• Not expensive, purchased more frequently.

CHAPTER : 6 ANALYZING CONSUMER MARKETS CONNECTING WITH CUSTOMERS.

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