Consumer behavior

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  • 1. tksabarwal@gmail.com tksabarwal@gmail.com 1
  • 2. Indian Consumer changes Middle class segment bulging Greater global exposure Larger disposable income Greater appetite & demand for global products Differentiated product & service requirements tksabarwal@gmail.com tksabarwal@gmail.com 2
  • 3. FMCG space dynamics Explosion of products Explosion of markets (Kirana & Organized Retail) Rush of new players Global players bringing process and intelligence maturity Increasing competition Supply chain bottlenecks tksabarwal@gmail.com tksabarwal@gmail.com 3
  • 4. Marketing can not be standardized, because of •Cross – cultural styles. •Fragmented markets. tksabarwal@gmail.com tksabarwal@gmail.com 4
  • 5. 11,000 New products were introduced by 77 companies. only 58% are present 5 yrs later. •Only 8% of the new products offered by 112 leading companies reached the market. •Of he above 83% failed to meet the marketing objectives. tksabarwal@gmail.com tksabarwal@gmail.com 5
  • 6. Managers must analyze consumer motivations and behavior. tksabarwal@gmail.com tksabarwal@gmail.com 6
  • 7. More successful a firm has been in the past, are more likely to fail. In future. Why ?? ??. tksabarwal@gmail.com tksabarwal@gmail.com 7
  • 8. Because people tend to repeat behavior for which they have been successful and rewarded tksabarwal@gmail.com tksabarwal@gmail.com 8
  • 9. Needs and wants = Needs and wants Problem specific tksabarwal@gmail.com tksabarwal@gmail.com 9
  • 10. Ultimate Goal of marketing To make selling a redundant process •By being focused on customer– understanding clearly –customer is the end and manufacturer as the means •By understanding the customer’s implicit and explicit needs •Creating a self generating pull for the market offering. tksabarwal@gmail.com tksabarwal@gmail.com 10
  • 11. customer consumers tksabarwal@gmail.com tksabarwal@gmail.com 11
  • 12. Customers do not BUYS A PRODUCT ! What do they buy?? tksabarwal@gmail.com tksabarwal@gmail.com 12
  • 13. Manufacturer specific Four P’s Four C’s Customer specific tksabarwal@gmail.com tksabarwal@gmail.com 13
  • 14. MARKET tksabarwal@gmail.com tksabarwal@gmail.com 14
  • 15. The activities that people engage in when selecting, purchasing and using products and services so as to satisfy needs and desires. Such activities involve mental ,emotional processes and physical action tksabarwal@gmail.com Is Consumer behavior tksabarwal@gmail.com 15
  • 16. 1. Consumer behavior is motivated 2. Consumer behavior includes many 3. Consumer behavior is a activities. process 4. Consumer behavior varies in timing and complexity 5. Consumer behavior involves different 6. Consumer behavior is roles influenced by external factors 7. Consumer behavior differs for different people These seven aspects hold key to understand consume behavior. Model’s acronym is “MAPTRIP” tksabarwal@gmail.com tksabarwal@gmail.com 16
  • 17. customer •To understand the customer –basic is to know that s/he is buying / using the products as a means to solve or address their own problem, reason and strategy and not yours and therefore unless marketer is customer specific in terms of marketing mix elements, success is usually evasive. •Customer does not buy a brand s/he buys their perception, and choose a brand which offers the best solution to their problem •Marketers only brief is to synergize the capabilities of the organization so as to address customer’s specific needs. tksabarwal@gmail.com tksabarwal@gmail.com 17
  • 18. Customer defections customer defections 3% 1% 5% 11% 20% tksabarwal@gmail.com 60% tksabarwal@gmail.com indifference product price death relocation new avenues 18
  • 19. Seven sins of service 1. Apathy—indifference,boredom (a matter of attitude) 2. Brush off--- getting rid of customer, not owning responsibility. 3. Coldness---chilly, hostility, curtness, unfriendliness. 4. Condensation---treating customer with a patronizing attitude. 5. Robotize---thank you, have a nice day –next 6. Rule book--- rules above the customer. 7. Run around----sorry you will have to ……. Calling mediocre service excellent doesn't make it tksabarwal@gmail.com tksabarwal@gmail.com excellent 19
  • 20. Importance of perceived risk •A financial loss-when the product is faulty and needs replacement or repair at one’s own cost. •A loss of time – due to hours of making complaints, returning to distributors, repairs etc. • a psychological risk- when a bad purchase leads to loss of self esteem or creates general dissatisfaction •A physical risk- due to consumption or use of products potentially harmful to one’s health or the environment. tksabarwal@gmail.com tksabarwal@gmail.com 20
  • 21. Problem solving approaches •Extensive problem solving-is adopted when the value of information and/or the perceived risk is high (unfamiliar brand in an unfamiliar product class) •Limited problem solving- applies to the situation of the buyer confronted with a new, unfamiliar brand in a familiar product class. where existing brands do not provide an adequate level of satisfaction) •Routine response behavior-is observed in the case where the consumer has accumulated enough experience and knowledge and has definite preference about one or more familiar brands (low cost, frequently purchased items) tksabarwal@gmail.com tksabarwal@gmail.com 21
  • 22. Ten questions 1. 2. 3. 4. 5. 6. 7. Will the product Will the product Will the product Will the product Will the product Will the product Will the product better liked. 8. Will the product 9. Will the product health? 10.Is this purchase tksabarwal@gmail.com make me feel more important? make me happier? make me more comfortable? make me more prosperous make my work easier? give me more security? make me more attractive? Or give me more distinction? improve, protect, or maintain my a bargain for me ? tksabarwal@gmail.com 22
  • 23. Defining Customer Value Total Customer Value = (Product, Service, Personnel, & Image Values) Total Customer Cost (Monetary, Time, Energy, & Psychic Costs) Customer Delivered Value (Profit to the Consumer) tksabarwal@gmail.com tksabarwal@gmail.com 23
  • 24. Customer Satisfaction Product’s Actual Performance Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations. tksabarwal@gmail.com Performance Exceeds ExpectationsCustomer is Delighted Buyer’s Expectations Are Based On: Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises Performance Below Expectations Customer is Dissatisfied tksabarwal@gmail.com 24
  • 25. Total Customer Satisfaction Highly satisfied (delighted) customers produce benefits: – – – They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others. Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. Therefore, the purpose of Marketing is to generate customer value profitably. tksabarwal@gmail.com tksabarwal@gmail.com 25
  • 26. The Need for Customer Retention The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider: New Customer Costs Lost Customer Costs Customer Lifetime Value tksabarwal@gmail.com tksabarwal@gmail.com 26
  • 27. Building Customer Satisfaction and Loyalty by Relationship Marketing Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with Customers and Other Stakeholders. Methods for Building Relationships Include Offering: Financial Financial Benefits Benefits Social Social Benefits Benefits tksabarwal@gmail.com Structural Structural Ties Ties tksabarwal@gmail.com 27
  • 28. Buying behavior Buying behavior covers all activity preceding, and following purchase decisions The purchasing behavior is seen as a process of problem solving and can be grouped into five stages 1. Problem recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase behavior tksabarwal@gmail.com tksabarwal@gmail.com 28
  • 29. The 5 stage process 1:Problem recognition • The internal recognition by the consumer that their current needs are not being met • Discrepancy between actual & desired state • Leads to motivation • Could be real or imagined, physical or psychological • Implications? Construction of advertising; penetration pricing strategies for new products; importance of peers; social construction of desire. 2:Information Search Next we ask ourselves the question of how do we solve our problem? •May already be familiar with options available •May consult people whose opinions we respect •May browse around the shops •May consult independent experts •Amount of information required dependent on risk attached •Implications? Role of marketing communications tksabarwal@gmail.com tksabarwal@gmail.com 29
  • 30. The 5 stage process (continued) 3:Evaluation of alternatives •In deciding which product to buy we have to weigh up which product best suits our needs •We construct criteria upon which to base our choice •We already may have a list of criteria or we may form one during the information search •Compensatory vs. non compensatory evaluation 4: Product choice •Having weighed up the pros and cons between alternatives eventually we have to make a choice •Could be as a result of the outcome of our evaluation process against important criteria – best fit. •Choice could be affected by availability, payment options etc. •Implications? Make it easy! tksabarwal@gmail.com tksabarwal@gmail.com 30
  • 31. The 5 stage process (continued) 5: Post purchase evaluation Once we have made our purchase we decide whether its met our expectation •If it does great positive brand associations and visa versa •Implications? After sales service, marketing communications tksabarwal@gmail.com tksabarwal@gmail.com 31
  • 32. Value Creation tksabarwal@gmail.com tksabarwal@gmail.com 32
  • 33. Reference Group Influences A reference group is the group whose perspective an individual takes on in forming values, beliefs, attitudes, opinions, and overt behaviors. – They set levels of aspiration – They help define the actual items/services considered acceptable for displaying those aspirations. tksabarwal@gmail.com tksabarwal@gmail.com 33
  • 34. Social Norms and Conformity Social norm – any rule or behavior for meeting societal expectations  normative system Conformity pressures – actions taken to encourage or force members to act, think and/or express themselves in certain ways. The more important a group is in our lives, the greater our desire to accept and conform to its norms tksabarwal@gmail.com tksabarwal@gmail.com 34
  • 35. Homan’s Equation The difference between the “price” we pay for conformity and the rewards obtained for doing so determines for each of us whether we will conform to group expectations and to what extent. Price: •Loss of freedoms •Time commitment •Financial commitment •Etc. tksabarwal@gmail.com Rewards: •Levels of acceptance •Advancement within the group •Prestige gained •Etc. tksabarwal@gmail.com 35
  • 36. Reference Group Types Primary reference group: one with which the individual has frequent face-to-face contact and in which members are close-knit. – Examples: families, households, study groups, work teams, roommates, etc. Secondary reference group: one in which interaction with other members is less frequent Formal group: one in which there is some sort of structure and/or for which there are specific membership requirements. Informal group: one that has no special membership or attendance requirements, other than common interests. tksabarwal@gmail.com 36 tksabarwal@gmail.com
  • 37. Reference Group Types (continued) Membership group: one to which a person currently belongs. Aspirational group: a group that a person would like to be part of, but to which he or she does not currently/ may never belong Dissociative group: a group that an individual avoids or denies connection with. tksabarwal@gmail.com tksabarwal@gmail.com 37
  • 38. Reference Group Influences Reference groups as – part of the socialization process – setters of roles – information sources – normative influences – an expression of self-value tksabarwal@gmail.com tksabarwal@gmail.com 38
  • 39. Conformity Pressure and Marketplace behavior The influence of reference groups varies Groups tend to be more influential on product decisions than they are on either brand or outlet choices – Conspicuousness “based on exclusivity” -product decisions (bikers and black leather jackets) – Conspicuousness “associated with the individual” -- brand decisions possible within product class, “allowed personal tksabarwal@gmail.com 39 tksabarwal@gmail.com expression”
  • 40. Social Power Power of reward – praise, approval, acceptance, status, recognition, etc. Coercive power – unacceptable behavior strongly discouraged Expert power – informational attraction Referent power – closer the match between person and group, more willingness to conform tksabarwal@gmail.com tksabarwal@gmail.com 40
  • 41. Awaren ess set Evoked Set Choice set decisiion Total set tksabarwal@gmail.com tksabarwal@gmail.com 41
  • 42. Perspective (A mental view of a scene) SET OF PERSPECTIVES IN CONSUMER BEHAVIOR MARKETER CONSUMER PUBLIC POLICY MAKETERS AND CONSUMERS ARE ACTIVE ON DAILY BASIS MARKETING DECISIONS CONTROLLABLE (4P’s) Marketing mix elements tksabarwal@gmail.com UNCONTROLABLE (5C’s) Customers Channels Conditions Competitors Company, tksabarwal@gmail.com 42
  • 43. Realistic view This realistic view is important to the marketer because , 1. It gives an external view of the customer. 2. An aggregate view of the customer 3. A product specific view of the customer 4. A brand preference /purchase point of view 5. A behavioral influence orientation • who does or does not use the product • tksabarwal@gmail.com Who uses the competitors Brand tksabarwal@gmail.com 43
  • 44. Comparison of two perspectives Perspective Marketer’s characteristics perspective Point of view External (buyers) Level of Aggregate interest (markets) Scope of Product interest specific (what I make) correct Brand specific choice (my brand) Role of tksabarwal@gmail.com tksabarwal@gmail.com Influence Customer’s perspective Internal (me) Individual (myself) Across products (what I buy) Best alternative (best brand for me) 44 Handle
  • 45. Perspectives-contd. customer marketer Most behaviors are internally focused –we think silently-observe privately-& evaluate according to our own dictates Marketer can only have an external view. Focus on themselves as individuals Market segmentation as a process of comprehending markets. Marketers try to find sub markets within the total markets for economic viability. Not an expert for many of their purchases An expert for his brand / category Choose only one brand from a given set, meaning , making a wrong choice from the point of view of every marketer but, one. (branding helps) Best brand is the one that we make (building brand equity helps) someTime and effort required to Targeting markets of interest. react to stimuli. (only if it is Creating stimuli-intrinsically tksabarwal@gmail.com tksabarwal@gmail.com interest to me otherwise ignored) interesting to consumers stimuli are simple and easy on 45
  • 46. Lavidge hierarch of effects model Conative The realm of motives, ads stimulate or direct desires Affective The realm of emotiions.Ads change attitudes & feelings Cognitive The realm of thoughts. Ads provide information & facts tksabarwal@gmail.com PURCHASE POP ads/deals/price appeals / testimonials CONVICTION PREFRENCE Competitive ads. Argumentative copy LIKING KNOWLEDGE AWARENESS tksabarwal@gmail.com “image” ads Status glamour appeals Publicity -advertising campaign 46
  • 47. Black box/CIP models External world inputs External world Consumer’s outputs Mind Black box External world Consumer”s inputs tksabarwal@gmail.com tksabarwal@gmail.com Mind CIP External world output 47
  • 48. Short and long term memory INTERNAL EXTERNAL WORLDS WORLD STIMULI tksabarwal@gmail.com SENSORY REGISTER SHORT TERM MEMORY(STM) OR WORKING MEMOTY tksabarwal@gmail.com LONG TERM MEMORY (ltm) 48
  • 49. Attitudes Global evaluative judgments Intentions Subjective judgments by people about how they will behave in the future Beliefs Subjective judgments about the relationship between two or more things Feelings An affective state (e.g. current mood state) or reaction (e.g. emotions experienced during product consumption) tksabarwal@gmail.com tksabarwal@gmail.com 49
  • 50. Relationships between consumer beliefs, feelings, attitudes and intentions tksabarwal@gmail.com tksabarwal@gmail.com 50
  • 51. Consumer beliefs A sampling of consumer beliefs – If a deal seems to good to be true, it probably is. – You can’t believe what most advertising says these days. – Auto repair shops take advantage of women. – People need less money to live on once they retire. – It’s not safe to use credit cards on the Internet. – Appliances today are not as durable as they were 20 years ago. – Extended warranties are worth the money. – You get what you pay for: lower price means lower quality. – Changing the oil in your car every three thousand miles is a waste of money. tksabarwal@gmail.com tksabarwal@gmail.com 51
  • 52. Consumer beliefs Expectations Brand distinctiveness Inferential beliefs Consumer confusion tksabarwal@gmail.com tksabarwal@gmail.com 52
  • 53. Consumer expectations Expectations are beliefs about the future Consumers’ willingness to spend is influenced by beliefs about their financial future tksabarwal@gmail.com tksabarwal@gmail.com 53
  • 54. Brand distinctiveness Why should a consumer want to buy your brand instead of the competitor’s? The desirability of products having something unique to offer to their consumers is also known as the Unique Selling Proposition (USP) tksabarwal@gmail.com tksabarwal@gmail.com 54
  • 55. Inferential beliefs Consumers use information about one thing to form beliefs about something else Beliefs are often inferred when product information is incomplete Also undertaken when consumers interpret certain product attributes as signals of product quality, e.g. price-quality inferential beliefs tksabarwal@gmail.com tksabarwal@gmail.com 55
  • 56. Consumer confusion Sometimes consumers do not know what to believe due to many different reasons – May arise due to conflicting information and knowledge – Mistaking one company’s product for the product of another company – Due to changes in a product’s position and image Consumers respond to confusion by: – Undertaking further information search – Basing their decision on things that are perfectly clear, e.g. price – Deferring product purchase indefinitely tksabarwal@gmail.com tksabarwal@gmail.com 56
  • 57. Types of consumer feelings Upbeat Active Adventurous Alive Attractive Confident Creative Elated Energetic Good Happy Pleased tksabarwal@gmail.com Negative Angry Annoyed Bad Bored Critical Defiant Disgusted Fed-up Insulted Irritated Regretful tksabarwal@gmail.com Warm Affectionate Calm Concerned Contemplative Emotional Hopeful Kind Peaceful Pensive Touched Warm-hearted 57
  • 58. Attitude towards objects • Attitudes---people form attitudes toward objects on the basis of their beliefs (perception and knowledge ) about these objects, beliefs in turn acquired by processing information which is obtained by Direct experience with objects and from communications about them received from other sources • Information—experience based with objects +communication received about objects from others. • Belief---perceptions and knowledge tksabarwal@gmail.com tksabarwal@gmail.com 58
  • 59. Fishbeins model of ATO IS DESIGNED TO DETERMINE A PERSON’S OVERALL ATTITUDE TOWARD AN OBJECT. IT IS BASED ON HIS /HER BELIEFS AND FEELINGS ABOUT VARIOUS ATTRIBUTES OF THE PRODUCT/OBJECT. MODEL IS ALSO REFERRED TO AS MULTIATTRIBUTE MODEL. n model Ao = ∑biei e =1 Ao = a persons overall attitude towards the object. Bi = the strength of his/her belief that object is related to attribute “I” Ei = evaluation or intensity of feeling towards attribute “I” tksabarwal@gmail.com tksabarwal@gmail.com N = number of relevant beliefs for that person. 59
  • 60. Fishbein Behavior –as a function of intentions to behave in a certain manner+ other intervening factors Attitude– attitude towards acting in that manner + subjective norms,.(others perceptions) B ≈ BI = w1( Ab) + w2( SN ) behavior Behavior intention Attitude Towards Performing behavior Subjective Norms about behavior tksabarwal@gmail.comand w2 are the tksabarwal@gmail.com W1 weights of relative influence of Ab +SN on Behavioral intention 60
  • 61. Continued. To predict behavior •We determine Ab & SN •Each is then weighted to reflect importance (add up to 1.0) Ab=the individual Oveeerall attitude n Ab =∑ iei b i= 1 k b ∑ imi SN = i= 1 tksabarwal@gmail.com performing specific behavior. B1=persons belief that performing that behavior results in consequence. E1 =persons evaluation of the consequences I. And n= number of relevant behavior beliefs. Where SN=the individual's subjective norms regarding the specific behavior. Bi= normative belief that reference group or person I thinks he should or should not perform the behavior. Mi= his motivation to comply with the thoughts of referent I.k= the number of relevant 61 tksabarwal@gmail.com references
  • 62. BI model Beliefs about Consequences of behavior Evaluation of consequences Belief about Perception of others Attitude towards behavior BI Subjective norms About behavior Motivations to comply tksabarwal@gmail.com tksabarwal@gmail.com Other Intervening factors behavior 62
  • 63. he Consumer Decision-Making Process Problem Recognition Information Search Individual and Individual and Social Factors Social Factors and Buying and Buying Situation Situation Evaluation of Alternatives Purchase Post-purchase Behaviour tksabarwal@gmail.com tksabarwal@gmail.com 63
  • 64. Types of Consumer Buying Decisions Routine Routine Response Response Behaviour Behaviour Limited Limited Decision Decision Making Making Extensive Extensive Decision Decision Making Making Less Involvement Length of time; Cost of goods; information lacking Length of time; Cost of goods; information lacking tksabarwal@gmail.com And number of alternatives available And number of alternatives available tksabarwal@gmail.com More Involvement 64
  • 65. Decisions The buying-decision process not always straightforward, e.g. level of involvement Level of involvement is the amount of effort that is expended in satisfying a need. Level of involvement normally higher when Consumer lacks information tksabarwal@gmail.com tksabarwal@gmail.com 65
  • 66. actors Affecting Involvement Levels Previous Previous Experience Experience Factors Factors Influencing Influencing Involvement Involvement Interest Interest Perceived Risk Perceived Risk Situation Situation Social Visibility Social Visibility tksabarwal@gmail.com tksabarwal@gmail.com 66
  • 67. Involvement High involvement: promotion extensive and informative. Provide information and specify benefits. Low involvement: In-store promotions and packaging important. Must be eyecatching and easily tksabarwal@gmail.com tksabarwal@gmail.com 67
  • 68. Influencing CB Perception Perception is the process of receiving, organising, and assigning meaning to information or stimuli detected by our five senses Selective perception/exposure Selective distortion Selective retention tksabarwal@gmail.com tksabarwal@gmail.com 68
  • 69. Influencing CB Motivation All behaviour start with a need Maslow Theory - Adverts play on motives Physiological - Beer bill boards Safety - Burglar alarms, Insurance Affiliation - Hansa/Tea (part of a family) tksabarwal@gmail.com tksabarwal@gmail.com 69