Mm i iv customer analysis

Marketing aims at meeting and satisfying target
customers’ needs and wants better than
competitors .Marketers look for emerging
customer trends that suggest new marketing
opportunities.
Eg, the emergence of the mobile phone,
especially with teens and young adults, has
marketers re – thinking their practices

 The study of consumer behaviour enables
marketers to understand and predict consumer
behaviour in the marketplace.
 It is concerned not only with what consumers
buy but also with why, when, where, how, and
how often they buy it.
 Consumer Research is the methodology used
to study consumer behaviour and takes place
at every phase of the consumption process
before, during and after the purchase.

The Rise of Consumer Democracy
.

Marketing In India passed through 3 distinct phases :
1. Previous to independence – Business operated in a subsistent
economy. Imperial government controlled output and there
was very little purchasing power. Seller’s market, product
orientation. Consumers had little choice, branded products
were a rarity.

 2. The second phase – immediately after independence
was socialistic and the public sector dominated the
ownership of large enterprises, characterized by
rationing and the quota system, limited production. The
Seller was dominant, protected by government and
limited competition.
The great Indian middle class - education and salaried
income - supported by land holdings, was on the rise.
Urban markets consolidated and grew. Distribution
channels strengthened. The Great rural urban divide
emerged, with poor rural infrastructure in terms of
transport and communication plus irregular savings and
occupation pattern.

 Radical changes happened in the Indian urban
market. Large middle class with constant and
regular income, adequate savings, support
from agricultural income and benefits of the
welfare state, increased the consumption level
and demand for various products.
 The strength of this market increased from
consumer’s knowledge of his rights and the
redressal mechanism ( Consumer Protection
Act of 1985 )introduced by government, use of
mass media in advertising and marketing and
strengthening of trade intermediaries.

Various brands and products had social status
connotation and a pseudo consumption culture
emerged in the Indian market

 3. The third phase was ushered in during the early
nineties thanks to liberalization. Public sector role
was restricted to operations in a few sectors and
the market opened up to private and multinational
players.
 Abolition of the MRTP Act allowed firms to grow
unhampered. M & As helped in the emergence of
large conglomerates. Foreign equity participation
was also allowed and joint ventures proliferated.
Large multinationals like HL, P & G, LG
Electronics, Ford , Mitsubishi, Honda and
Samsung entered with better technology and more
financial muscle.

 Domestic and foreign financial institutions
gave support to industry through the long term
debt as well as equity route.
 The customer benefited as market power and
survival of companies became directly linked
to efficiency, quality and the Value proposition.
 Indian industry responded positively through
offering better products and services. As urban
markets became stagnant, marketers bridged
the gap between urban and rural, rich and
poor, by offering products and services at all
price points.

 Distribution channels were strengthened ,
concepts like supply chain management and
Just in time technology came to the fore.
 Wide access and products available for all
pockets happened. Shorter manufacturing
cycles, products conforming to global
standards emerged with options offered to a
variety of consumers through instalment
schemes from banks and other financial
institutions.

 Consumers started spending money on
acquiring products and services for
comfortable living and hedonism grew in
society. This spending orientation of a very
aware consumer gave birth to a burgeoning
service sector.
 The digital and telecom revolutions
accelerated the process exponentially.

 The Indian consumer today is voter, judge and
jury of what marketers produce.
 However, the divide between the rich and poor is
increasing and a large section of society is away
from these developments. This implies the
requirement of a developmental orientation from
marketers for penetration into these untapped
bottom of the pyramid markets.
 However, initiatives like HUL’s Project Bharat and
Project Shakti, ITC’s e- choupal and are all
indicators of marketers recognizing the necessity
for deeper penetration into rural markets.

 In 1998 HuL’s personal products unit initiated
Project Bharat, the first and largest rural home-to-
home operation to have ever been prepared by any
company. The project covered 13 million rural
households by the end of 1999.
 During the course of operation, HuL had vans
visiting villages across the country distributing
sample packs comprising a low-unit-price pack each
of shampoo, talcum powder, toothpaste and skin
cream priced at Rs. 15. This was to create awareness
of the company’s product categories and of the
affordability of the products.

 A business concept embedded with social
goals, e-Choupal was designed to empower
farmers and triggers a virtuous cycle of higher
productivity, higher incomes, enlarged
capacity for farmer risk management, and
thereby larger investments to enable higher
quality and productivity.

 ITC e-Choupal is an innovative market-led business
model designed to enhance the competitiveness of
Indian agriculture.
 e-Choupal leverages the power of Information and
Digital Technology and the internet to empower small
and marginal farmers with a host of services related to
know how, best practices, timely and relevant weather
information, transparent discovery of prices and much
more.
 e-Choupals not only connect farmers with markets but
also allow for a virtual integration of the supply chain
and create significant efficiencies in the traditional
system.

These interventions have helped transform
village communities into vibrant economic
organisations, by enhancing incomes and co-
creating markets. ITC’s e-Choupals serve
40,000 villages and 4 million farmers, making it
the world’s largest rural digital infrastructure
created by a private enterprise.

Copyright © 2009 Pearson
Education, Inc. Publishing
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Cultural Factors
Social Factors
Personal Factors

 Culture, subculture and social class are
particularly important influences on consumer
buying behaviour.

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Culture is the fundamental determinant of a
person’s wants and behaviors acquired
through socialization processes with family
and other key institutions.

 The growing child acquires a set of values,
perceptions, preferences, and behaviours
through his or her family and other key
institutions.
 Eg a child growing up in a traditional middle
class Indian family imbibes the following
values:
 Respect and care for elders, honesty and
integrity, hard work, achievement and success,
humanitarianism and sacrifice.

 Each culture consists of smaller sub-cultures
that provide more specific identification and
socialization for their members.

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Nationalities
Religions
Racial groups
Geographic regions

 When subcultures become large and affluent
companies design specialized marketing
programmes to serve them.
Multicultural marketing programmes were the
result of marketing research which revealed
that different ethnic and demographic niches
did not always respond favourably to mass
market advertising.

 All human societies exhibit social stratification,
eg. a caste system where members of different
castes are reared for certain roles and cannot
change their caste membership.
OR
 Social classes, relatively homogeneous and
enduring divisions in a society, which are
hierarchically ordered. Members share similar
values, interests and behaviour.

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Upper uppers
Lower uppers
Upper middles
Middle class
Working class
Upper lowers
Lower lowers

 Based on SEC ( Socio- economic classification)
combination of education and occupation of
the chief wage earner into 8 broad categories :
A1, A2, B1, B2, C, D, E1 and E2.
( A1 has the highest purchase potential and E2
the lowest)

 The occupation of the chief wage earner and
the type of house is used to classify into 4
broad categories from R1 to R4 in descending
order of purchase potential

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 Within a class, people tend to behave alike
 Social class conveys perceptions of inferior or
superior position
 Class may be indicated by a cluster of variables
(occupation, income, wealth)
 Class designation is mobile over time

 Different social classes have different brand
and product preferences in:
 Clothing, home furnishings, leisure actives and
automobiles.
 Also in media preferences, - with upper class
customers preferring magazines and books and
lower class consumers preferring television.
 Even within a media category such as TV
upper class consumers prefer news and drama
and lower class consumers prefer soap operas
and sports programmes.

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Reference
groups
Social
roles
Statuses
Family

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Membership groups
Primary groups
Secondary groups
Aspirational groups
Dissociative groups

 A person’s reference groups are all the groups that
have a direct ( face – to - face ) influence on their
attitudes and behaviour. Groups that have a direct
influence are called membership groups.
 Some of these are primary groups with whom
there is frequent and informal interaction such as
family, friends, neighbours and co –workers.
 Others are secondary groups such as religious,
professional and trade – union groups which are
less frequently met and with whom interaction is
more formal.

 1. They expose an individual to new
behaviours and lifestyles.
 2.They influence attitudes and self-concept.
 3. They create pressures for conformity that
may affect products and brand choices.

 People are also influenced by groups to which
they do not belong.
 Aspirational groups are those to whom a
person hopes to belong to.
 Dissociative groups are those whose values or
behaviours an individual rejects.

 Where reference groups influence is strong,
marketers must determine how to reach and
influence the group’s opinion leaders.
 An opinion leader is the person who offers
informal advice or information about a specific
product or product category, such as which of
several brands is best or how a particular
product may be used.

Opinion leaders are often highly confident,
socially active, and involved with the category.
Marketers try to reach opinion leaders by
identifying their demographic and psychographic
characteristics, identifying the media they read,
and directing messages at them.
Brand Ambassadors and endorsers of products are
are an example of this.

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

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 Family of Orientation
 Family of Procreation

Family of orientation consists of parents and
siblings. From parents a child acquires an
orientation towards religion, politics, and
economics, and a sense of personal ambition,
self – worth and love. This influence can be long
lasting, especially where parents live with grown
children.
A more direct influence on everyday buying
behaviour is the family of procreation, namely
one’s spouse and children

 In traditional joint families the influence of
grandparents on major purchase decisions and
to some extent on the lifestyles of the younger
generations is till intact, though diminishing.
 Western researchers have focused largely on
husband, wife and child dominance. With
millions of kids under 17, online marketers
have jumped on line offering freebies in
exchange for personal information.

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What degree of status is
associated with various
occupational roles?

We can define a person’s position in each group to
which he belongs in terms of group and status
A role consists of the activities a person is expected to
perform. Each role carries a status
People choose products that reflect and communicate
their role and actual or desired status in society.
Marketers need to be aware of the status – symbol
potential of products and brands.

 A buyer’s decisions are also influenced by
personal characteristics including :
 Buyer’s age and stage in the life cycle
 Occupation and economic circumstances
 Personality and self – concept
 Lifestyle and values
Many of these characteristics have a very direct
impact upon consumer behaviour.

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Age
Values
Life cycle
stage
Occupation
Personality
Self-
concept
Wealth
Lifestyle

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People buy different goods and services at
different times in their lives. Taste in food,
clothes, furniture and recreation is age related.
Consumption is shaped by the family life cycle.
Delayed marriages, children going abroad,
working couples, acquiring automobiles and
houses in early stages of their career result in
different opportunities for marketers at
different stages in the consumer life cycle.
Marketers need to consider critical life events
or transitions as these give rise to new needs.

•Occupation influences consumption patterns.
Clothes, shoes.travel etc are different for different
economic groups.
•Product choice is greatly affected by economic
circumstances ; spendable income, savings and
assets, debts, borrowing power, attitudes towards
spending and saving.
•Luxury goods makers such as Gucci, Prada, and
Burberry are badly hit by economic downturns.
Recessions cause marketers to redesign, reposition
and re -price their products or focus on discount
brands offering value to consumers.

 Personality implies a set of distinguishing human
psychological traits that lead to relatively
consistent and enduring responses to
environmental stimuli.
 Each person has personality characteristics that
influence his or her buying behaviour.
 Personality can, therefore, be a useful variable in
analyzing brand choices.
 It is theorized that brands have personalities and
consumers are likely to choose brands whose
personalities match their own.

 Brand personality is the specific mix of human
traits that we can attribute to a particular brand.
 Jennifer Aaker ( Stanford U)has classified brand
personalities into 5 traits :
 Sincerity
 Excitement
 Competence
 Sophistication
 Ruggedness
 However, different countries turn up different
attributes and Aaaker’s classification can by no
means be considered Universal.

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Sincerity
Excitement
Competence
Sophistication
Ruggedness

 Aaaker’s analysis showed a number of well known
brands strong on one particular trait
 Eg:
 Levi : ruggedness
 MTV: excitement
 CNN: competence
 Campbell : sincerity
 However, a brand personality may have several
attributes :
 Eg Levi’s suggests a personality that is youthful,
rebellious, authentic and American.

 In general consumers choose brands that have
a brand personality consistent with their own
actual self – concept ( how we view ourselves).
 More true for publicly consumed products than
for privately used ones.
 However, “self – monitors” – that is sensitive to
how others see them- are more likely to choose
brands whose personalities fit the consumption
situation.
 Different situations/different people can evoke
multiple aspects of themselves.

 People from the same subculture, social class
and occupation may lead quite different lifestyles.
A lifestyle is a person’s pattern of living in the
world as expressed in activities, interests and
opinions. It portrays the whole person interacting
with his environment.
Marketers search for relationships between their
products and lifestyle groups.

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 Customers who worry about the environment,
want products to be produced in a sustainable
way and spend money to advance their personal health
development and potential have been named LOHAS
( Lifestyles of Health and Sustainability)
 Sustainable Economy
 Healthy Lifestyles
 Ecological Lifestyles
 Alternative Health Care
 Personal Development

 Organic Foods
 Energy efficient appliances and solar panels
 Alternate medicines
 Yoga tapes
 ecotourism

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Multi-tasking
Time-starved
Money-constrained

 Lifestyles are shaped partly by whether
consumers are money constrained ( Lower-
cost products and services eg Walmart/Big
Bazaar or time constrained ( Convenient
products and services).
 Consumer decisions are also influenced by core
Values, the belief systems that underlie
attitudes and behaviours.

Values , Attitudes and Lifestyles

Evolution of VALS
The original VALS system was built by consumer futurist Arnold Mitchell.
Mitchell created VALS to explain changing U.S. values and lifestyles in the
1970s.
VALS was formally inaugurated as an SRI International product in 1978 and
was cited by Advertising Age as "one of the ten top market research
breakthroughs of the 1980s.“
In 1989, VALS was redefined to maximize its ability to predict consumer
behavior. A team of experts from SRI International, Stanford University, and
the University of California, Berkeley, determined that consumers should be
segmented on the basis of enduring personality traits rather than social
values that change over time.
By using psychology to analyze and predict consumer preferences and choices,
the current VALS system creates an explicit link between personality traits
and purchase behavior. The current VALS system is described in depth in The
VALS Segments

VALS segments
Description
VALS™ places U.S. adult consumers
into one of eight segments based on
their responses to the VALS
questionnaire. The main
dimensions of the segmentation
framework are primary motivation
(the horizontal dimension) and
resources (the vertical dimension).

VALS segments
VALS types description
 Innovators (formerly Actualizers)
Innovators are successful, sophisticated, take-charge people
with high self-esteem. Because they have such abundant
resources, they exhibit all three primary motivations in
varying degrees. They are change leaders and are the most
receptive to new ideas and technologies. Innovators are very
active consumers, and their purchases reflect cultivated
tastes for upscale, niche products and services.
Image is important to Innovators, not as evidence of status or
power but as an expression of their taste, independence, and
personality. Innovators are among the established and
emerging leaders in business and government, yet they
continue to seek challenges. Their lives are characterized by
variety. Their possessions and recreation reflect a cultivated
taste for the finer things in life.

VALS segments
 Thinkers (formerly Fulfilleds)
Thinkers are motivated by ideals. They are mature,
satisfied, comfortable , and reflective people who
value order, knowledge, and responsibility. They tend
to be well educated and actively seek out information in
the decision-making process. They are well-informed
about world and national events and are alert to
opportunities to broaden their knowledge.
Thinkers have a moderate respect for the status quo
institutions of authority and social decorum, but are
open to consider new ideas. Although their incomes
allow them many choices, Thinkers are conservative,
practical consumers; they look for durability,
functionality, and value in the products they buy.

VALS segments
 Achievers
Motivated by the desire for achievement, Achievers
have goal-oriented lifestyles and a deep commitment
to career and family. Their social lives reflect this focus
and are structured around family, their place of
worship, and work. Achievers live conventional lives,
are politically conservative, and respect authority and
the status quo. They value consensus, predictability,
and stability over risk, intimacy, and self-discovery.
With many wants and needs, Achievers are active in the
consumer marketplace. Image is important to
Achievers; they favor established, prestige products
and services that demonstrate success to their peers.
Because of their busy lives, they are often interested in a
variety of time-saving devices.

VALS segments
 Experiencers
Experiencers are motivated by self-expression. As
young, enthusiastic, and impulsive consumers,
Experiencers quickly become enthusiastic about new
possibilities but are equally quick to cool. They seek
variety and excitement, savoring the new, the offbeat,
and the risky. Their energy finds an outlet in exercise,
sports, outdoor recreation, and social activities.
Experiencers are avid consumers and spend a
comparatively high proportion of their income on
fashion, entertainment, and socializing. Their purchases
reflect the emphasis they place on looking good and
having "cool" stuff.

VALS segments
 Believers
Like Thinkers, Believers are motivated by ideals. They
are conservative, conventional people with concrete
beliefs based on traditional, established codes: family,
religion, community, and the nation. Many Believers
express moral codes that are deeply rooted and literally
interpreted. They follow established routines, organized
in large part around home, family, community, and
social or religious organizations to which they belong.
As consumers, Believers are predictable; they choose
familiar products and established brands. They favor
American products and are generally loyal customers.

VALS segments
 Strivers
Strivers are trendy and fun loving. Because they are
motivated by achievement, Strivers are concerned
about the opinions and approval of others. Money
defines success for Strivers, who don't have enough of it
to meet their desires. They favor stylish products that
emulate the purchases of people with greater material
wealth. Many see themselves as having a job rather
than a career, and a lack of skills and focus often
prevents them from moving ahead.
Strivers are active consumers because shopping is both
a social activity and an opportunity to demonstrate to
peers their ability to buy. As consumers, they are as
impulsive as their financial circumstance will allow.

VALS segments
 Makers
Like Experiencers, Makers are motivated by self-
expression. They express themselves and experience
the world by working on it-building a house, raising
children, fixing a car, or canning vegetables-and have
enough skill and energy to carry out their projects
successfully. Makers are practical people who have
constructive skills and value self-sufficiency. They
live within a traditional context of family, practical
work, and physical recreation and have little interest in
what lies outside that context.
Makers are suspicious of new ideas and large
institutions such as big business. They are respectful of
government authority and organized labor, but
resentful of government intrusion on individual rights.
They are unimpressed by material possessions other
than those with a practical or functional purpose.
Because they prefer value to luxury, they buy basic
products.

VALS segments
 Survivors (formerly Strugglers)
Survivors live narrowly focused lives. With few
resources with which to cope, they often believe that
the world is changing too quickly. They are comfortable
with the familiar and are primarily concerned with
safety and security. Because they must focus on
meeting needs rather than fulfilling desires, Survivors
do not show a strong primary motivation.
Survivors are cautious consumers. They represent a
very modest market for most products and services.
They are loyal to favorite brands, especially if they can
purchase them at a discount.

Practical
application of
VALS
Example
Business segment
Commercialization
A European luxury automobile manufacturer used VALS to
identify online, mobile applications that would appeal to
affluent, early-adopter consumers within the next five years.
VALS research identified early-adopter groups and explored
their reactions to a variety of mobile services for use in
automobiles. The VALS analysis enabled the company to
prioritize applications for development and determine the
best strategic alliances to pursue.
VALS™ facilitates successful
product launches and helps avoid
costly mistakes. Understanding the
needs of different consumer groups
guides new product and services
development.
Positioning
A Minnesota medical center planned to offer a new line of
service: cosmetic surgery. It used VALS to identify target
consumers (those most interested and able to afford the
service). By understanding the underlying motivations of the
target, the center and its ad agency were able to develop a
compelling selling proposition. The resulting advertising was
so successful that just a few weeks into the campaign, the
center exceeded its scheduling capabilities.
VALS identifies which market
opportunities are strongest.
Relating features and benefits to
distinct segment needs clarifies
strategies for targeting and
expansion.
Communications
VALS shows you how to craft more
effective messaging campaigns.
Understanding what motivates
consumers illuminates how to
speak to them in ways that will
initiate action.
A U.S. long-distance carrier used VALS to select its
spokesperson in a major television campaign to increase its
customer base. By understanding consumers who are heavy
users of long-distance service, the company was able to select
a spokesperson to whom the target could relate.

 Consumer responses are fundamentally
influenced by
 Motivation
 Perception
 Learning
 Memory

 Marketing and environmental stimuli enter the
consumer’s consciousness , and a set of
psychological processes combine with certain
consumer characteristics to result in decision
processes and purchase decisions.
 The Marketer’s task is to understand what
happens in the consumer’s consciousness
between the arrival of the outside marketing
stimuli and the ultimate purchase decisions.

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Motivation
Memory
Learning
Perception

 Three big theorists : Freud, Maslow, Herzberg
 Needs :
 A) Biogenic (arising from physiological states
of tension – hunger, thirst, discomfort)
 B) Psychogenic (arising from psychological
states of tension ) – recognition, esteem,
belonging.
 A need becomes a motive when it is aroused to
a sufficient level of intensity to drive us to act.

 Motivation has both Direction and Intensity
resulting in Goal selection and the vigour with
which a goal is pursued.
Freud – Unconscious psychological forces shape
People’s behaviour and a person cannot fully
understand his or her own motivations.
When a person examines specific brands he /she
will react not only to their stated capabilities, but
also to less conscious cues such as shape, size,
weight, material, colour and brand name.

Laddering is a technique that traces a person’s
motivations from the stated instrumental ones to
the more terminal ones. Then the marketer
can decide at what level to develop the message
and appeal.

 Different products can satisfy different motives
eg whiskey can satisfy the need for social
relaxation, status or fun. Hence different whiskey
brands can be positioned in one of the three
appeals.
Maslow tried to explain why people are driven by
particular needs at particular times. He theorized
that human needs are arranged in a hierarchy form
most to least pressing and once he succeeds in
satisfying an important need he will next try to
satisfy the next most important need.

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 Two factor theory :
 Distinguished dissatisfiers ( factors that cause
dissatisfaction) from satisfiers (factors that cause
satisfaction).The absence of dissatisfiers is not
enough to motivate a purchase; satisfiers must be
present.
 Eg a computer without a warranty would be a
dissatisfier .
Yet the presence of a product warranty would not
act as a satisfier or motivator of a purchase,
because it is not a source of intrinsic satisfaction.
Ease of use would be a satisfier.

 Two implications of Herzberg’s theory
 Sellers should do their best to avoid
dissatisfiers. ( eg. a poor training manual or a
poor service policy).Although these may not
sell the product they might easily unsell it.
 Second, the seller should identify the major
satisfiers or motivators of purchase in the
market and then supply them

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Freud’s
Theory
Behavior
is guided by
subconscious
motivations
Maslow’s
Hierarchy
of Needs
Behavior
is driven by
the lowest,
unmet need
Herzberg’s
Two-Factor
Theory
Behavior is
guided by
motivating
and hygiene
factors

 A motivated person is ready to act. How he
acts is influenced by how he perceives the
situation. Perception is more important than
reality and is the process by which we select,
organize and interpret information inputs to
create a meaningful picture of the world.
 In Marketing, perceptions are more important
than the reality, as it is the perceptions that will
affect the consumer’s actual behaviour.

4-88
Selective Attention
(notice)
Subliminal Perception
(embed covert messages)
Selective Retention
(remember)
Selective Distortion
(interpret information
to fit preconceptions)

 Attention is the allocation of processing
capacity to some stimulus.
 Voluntary attention is something purposeful;
involuntary attention is grabbed by someone or
something. The average person is exposed to
over 1500 ads or brand communications per
day.
 Selective attention : Screening out of stimuli.
This presents a huge challenge to marketers as
they must identify which stimuli people will
notice.

 People are more likely to notice stimuli that
relate to a current need.
 People are more likely to notice stimuli they
anticipate.
 People are likely to notice stimuli whose
deviations are large in relationship to the
normal size of the stimuli.
 Though much is screened out, unexpected
stimuli influence us. Marketers may attempt to
promote their offers intrusively in order to
bypass selective attention filters.

 We tend to retain information that supports
our attitudes and beliefs. Because of selective
retention we are likely to remember good
points about a product we like and forget good
points about competing products.
 Selective retention again works to the
advantage of strong brands. It also explains
why marketers need repetition- to make sure
the message is not overlooked

 Selective distortion is the tendency to interpret
information in a way that fits our preconceptions.
Consumers will often distort information to be consistent
with prior brand and product beliefs and expectations.
eg in blind taste tests one group of customers samples a
product without knowing which brand it is while another
group knows. Invariably , the groups have different
opinions , despite consuming exactly the same product.
Strong brands can work to the marketers advantage.
Thus, beer may seem to taste better, a car may seem to drive
more smoothly, the wait in a bank line seem shorter
depending on the brands involved

 Subliminal perception is the argument that
marketers embed, covert, subliminal messgaes
in ads or packaging. These are messages that
consumers are not consciously aware of ,yet
they affect behaviour.
 However, there is no evidence to support this.

 When we act, we learn. Learning induces
changes in our behaviour arising from
experience. Most human behaviour is learned,
although much learning is incidental.
 Learning is produced through an interplay of
drives, stimuli, cues, responses.
 Two approaches to learning are : Classical
conditioning and Operant conditioning.

PAVLOV’S DOG
 Classical conditioning was accidentally discovered
around the beginning of the 20th century by Russian
physiologist Ivan Pavlov.
Pavlov was studying digestive process in dogs when
he discovered that the dogs salivated before they
received their food. In fact, after repeated pairing of
the lab attendant and the food, the dogs started to
salivate at the sight of the lab assistants.

 Pavlov coined this phenomena
“psychic secretions." He noted that
dogs were not only responding to a
biological need (hunger), but also a
need developed by learning. Pavlov
spent the rest of life researching why
this associate learning occurred, which
is now called classical conditioning.

 To experiment on classical conditioning, Pavlov
utilized a tuning fork and meat powder. He hit the
tuning fork and followed the sound with the meat
powder.
 Pavlov presented the sound (tuning fork) with the
meat powder at the exact same time increments. In
the beginning, the dog salivated only to the meat
powder, but after this was repeated, salivated at the
sound of the tuning fork. Even when Pavlov took
away the meat powder, the dog continued to salivate at
the sound of the tuning fork.

 B.F. Skinner (1938) coined the term operant conditioning; it means
roughly changing of behavior by the use of reinforcement which is
given after the desired response. Skinner identified three types of
responses or operant that can follow behavior.
 • Neutral operants: responses from the environment that neither
increase nor decrease the probability of a behavior being repeated.
 • Reinforcers: Responses from the environment that increase the
probability of a behavior being repeated. Reinforcers can be either
positive or negative.
 • Punishers: Responses from the environment that decrease the
likelihood of a behavior being repeated. Punishment weakens
behavior.

 Behavior modification is a set of therapies /
techniques based on operant conditioning
(Skinner, 1938, 1953). The main principle
comprises changing environmental events that
are related to a person's behavior. For example,
the reinforcement of desired behaviors and
ignoring or punishing undesired ones.

The main principles of operant conditioning, as
defined by Skinner, are reinforcement,
punishment, shaping, extinction,
discrimination, and generalization.

 Skinner showed how negative reinforcement
worked by placing a rat in his Skinner box and
then subjecting it to an unpleasant electric current
which caused it some discomfort. As the rat moved
about the box it would accidentally knock the
lever. Immediately it did so the electric current
would be switched off.
 The rats quickly learned to go straight to the lever
after a few times of being put in the box. The
consequence of escaping the electric current
ensured that they would repeat the action again
and again.

 Skinner showed how positive reinforcement
worked by placing a hungry rat in his Skinner box.
The box contained a lever in the side and as the rat
moved about the box it would accidentally knock
the lever.
 Immediately it did so a food pellet would drop
into a container next to the lever. The rats quickly
learned to go straight to the lever after a few times
of being put in the box. The consequence of
receiving food if they pressed the lever ensured
that they would repeat the action again and again.

 In fact Skinner even taught the rats to avoid the
electric current by turning on a light just before
the electric current came on. The rats soon
learned to press the lever when the light came
on because they knew that this would stop the
electric current being switched on.
 These two learned responses are known as
Escape Learning and Avoidance Learning.

 A drive is a strong internal stimulus impelling
action.
 Cues are minor stimuli that determine when,
where and how a person responds.
 Discrimination means we have learned to
recognize differences in sets of similar stimuli
and can adjust our responses accordingly.

 According to Learning Theory marketers can
build demand for a product by associating it with
strong drives, using motivating cues, and
providing positive reinforcement.
 A new company can enter the market by appealing
to the same drives that competitors use and by
providing similar cues, because buyers are more
likely to transfer loyalty to similar brands or the
company might design its brand to appeal to a
different set of drives and offer strong cue
inducements to switch ( discrimination)

 The hedonic bias says people have a general
tendency to attribute success to themselves and
failure to external causes.
 Consumers are thus more likely to blame a
product than themselves, putting pressure on
marketers to carefully explicate product
functions in well – designed packaging and
labels, instructive ads and websites.

 Cognitive psychologists distinguish between
Short Term Memory ( STM) – a temporary and
limited repository of information and Long
Term Memory ( LTM) – a more permanent and
essentially unlimited repository.

 The Associative Network Memory model views
LTM as a set of nodes and links. Nodes are stored
information connected by links that vary in
strength.
 Verbal, visual, abstract and contextual information
can be stored in the memory network. A spreading
activation process from node to node determines
how much we retrieve and what information we
can actually recall in any given situation

 In this model consumer brand knowledge is a
node in memory with a variety of linked
associations. How these associations are
organized and their strength will determine the
information we can recall about the brand.

 Brand associations consist of all brand – related
thoughts, feelings, perceptions , images, experiences,
beliefs, attitudes, that become linked to the brand node.
Marketing is a way of making sure consumers have the
right type of product and service experiences to create
the right brand knowledge structures an maintain
them in memory.
Companies like P & G, Nike etc create mental maps of
consumers depicting their knowledge of a particular
brand in terms of the key associations that are likely
to be triggered in a marketing setting and
their relative strength, favorability and uniqueness to
consumers.

 Memory encoding : describes how and where
information gets into memory. The strength of
the association depend on how much we
process the information at encoding – how
much we think about it and in what way.
Memory retrieval is the way information gets
out of memory. A strong brand association is
both more accessible and more recalled by
spreading activation.

 Presence of other product information in memory
can produce interference effects and cause us to
either overlook or confuse new data.
 The time between exposure to information and
encoding matters - the longer the time delay, the
weaker the association.
 Information may be available in memory but not
accessible without the proper retrieval cues or
reminders.

as Prentice Hall
6-118
Problem Recognition
Information Search
Evaluation
Purchase Decision
Postpurchase
Behavior

as Prentice Hall
6-119
Personal
Experiential
Public
Commercial

Personal : Family, friends, neighbours,
acquaintances
Commercial : Advertising, websites, sales
persons, dealers, packaging, display
Public: Mass media, consumer rating
organizations
Experiential : Handling and examining the
product

as Prentice Hall
6-121

 The consumer is trying to satisfy a need
 The consumer is looking for certain product
benefits from the product solutions
 The consumer sees each product as a bundle of
attributes with varying abilities for delivering
the benefits sought to satisfy this need.

 Through experience and learning people acquire
beliefs and attitudes.
 Beliefs are descriptive thoughts that a person holds
about something.
 Attitudes are a person’s enduring favorable or
unfavourable evaluations, emotional feelings, and
action tendencies towards some objects or ideas.
 Attitudes are difficult to change and company’s need
to fit their products into existing attitudes rather than
trying to change attitudes.

 This posits that a consumer arrives at attitudes
towards various brands through an attributive
evaluation procedure. The expectancy value
model of attitude believes that consumers
evaluate products and services by combining
their brand beliefs – the positives and negatives
- according to importance.

 Suppose Linda has narrowed her choice set to
four laptop computers (A, B, C, and D).
Assume she’s interested in four attributes:
memory capacity, graphics capability, size and
weight, and price. Table 6.4 shows her beliefs
about how each brand rates on the four
attributes. If one computer dominated the
others on all the criteria, we could predict that
Linda would choose it.

as Prentice Hall
6-126

 Attributes a consumer considers important are
rated on scale from 1 to 10 where 10 is most
important (with Price going backwards) and
weights are given to her belief about the
importance of each attribute.

But, as is often the case, her choice set consists of brands
that vary in their appeal. If Linda wants the best memory
capacity, she should buy C; if she wants the best graphics
capability, she should buy A; and so on. If we knew the
weights Linda attaches to the four attributes, we could more
reliably predict her laptop choice.
Suppose she assigned 40 percent of the importance to the
laptop’s memory capacity, 30 percent to graphics capability,
20 percent to size and weight, and 10 percent to price. To find
Linda’s perceived value for each laptop according to the
expectancy-value model, we multiply her weights by her
beliefs about each computer’s attributes

4-129
 Conjunctive Heuristic
 minimum set of acceptable cutoff for each attribute
and choose 1st alternative that meets the minimum
standard for all attributes (e.g., computer speed)
 Lexicographic
 Choose the best brand on the basis of its perceived
most important attribute (e.g., printer versatility)
 Elimination-by-aspects
 Compares brands on an attribute selected
probabilistically (where the probability of choosing an
attribute is positively related to its importance) and
brands are eliminated if they do not meet minimum
acceptable cutoff levels (e.g., cell phone memory)

as Prentice Hall
6-130

 Richard Perry and John Cacioppo’s Elaboration
Likelihood Model describes how consumers evaluate
in low and high involvement circumstances.
 The two means of persuasion in their model are :
 A)The Central Route – where attitude formation or
change stimulates much thought and is based on
diligent, rational consideration of important product
information
 B) The Peripheral Route – where attitude formation or
change provokes much less thought and results from
the association of a brand with either + ive or - ive
peripheral cues. Peripheral cues for customers include
a celebrity endorsement, a credible source, or any other
object that generates positive feelings

 Consumers follow the central route only if they
possess sufficient motivation, ability, and
opportunity. If these factors are lacking
consumers follow the peripheral route and
consider more extrinsic factors.
 Low - involvement – Products like salt are
bought under conditions of low involvement
and in the absence of significant brand
differences.

 Link product to some involving issue : eg
Toothpaste to avoiding cavities
 Link product to some involving situation :
Fruit juice with strengthening vitamins
 Advertising to trigger some strong emotions
related to personal values or ego defense –eg
heart healthy cereals/cooking oils.
 Fourth – Add an important feature – PUF with
refrigerators.

 Low involvement but significant brand
differences eg Biscuits. Brand switching may
happen due to desire for variety not
dissatisfaction.
 Market leader strategy would be to dominate
shelf space with a variety of related but
different product versions, avoiding stock –
outs and frequent reminder ads.
 Challenger firms will encourage variety
seeking by offering lower prices, deals,
coupons, free samples and creative advertising.

 Researchers have found that consumers use
mental accounting when they handle their
money. Mental accounting refers to the way
consumers code, categorize and evaluate
financial outcomes of choices, not always
logically.

 Derives in part from Prospect Theory which
maintains that customers frame their
decision alternatives in terms of gains and
losses according to a value function.
Consumers are generally loss averse. They
tend to overweight low probabilities and
underweight very high probabilities.

 Segregate gains eg evaluating multiple benefits
separately.
 Integrate losses – Small Cost being added to another
large purchase is not an obstacle to buying.( House
plus parking)
 Integrate smaller losses with larger gains-eg monthly
taxation is viewed more favorably than a lump sum
deducted on a smaller pay amount
 Segregate small gains from large losses. Rebates on
large purchases like cars are viewed favorably by
consumers

as Prentice Hall
6-138
Functional
Physical
Financial
Social
Psychological
Time

 Functional Risk eg Machine not working
 Physical Risk eg Adventure sport
 Financial Risk eg An investment
 Social Risk eg Last year’s fashion
 Pyschological Risk eg hurt to esteem
 Time Risk eg Late delivery of consignment

 After purchase consumers might experience
dissonance from noticing negative things about
the product or service or on hearing favorable
things about other brands. And will be alert to
information that supports his decision. Marketing
communications should supply beliefs and
evaluations that reinforce the consumer’s choice
and help him feel good about the brand.
 Markets must, therefore, monitor, postpurchase
satisfaction, postpurchase actions and
postpurchase product uses.

as Prentice Hall
6-141

 The consumer adoption process is the mental steps
through which an individual passes from first
hearing about an innovation to final adoption.
These steps are :
 Awareness
 Interest
 Evaluation
 Trial
 Adoption

The consumer becomes aware of the innovation
but lacks information about it.

 The consumer is stimulated to seek information
about the innovation

 The consumer considers whether to try the
innovation

 The consumer tries the innovation to improve
his or her estimate of its value.

 The consumer decides to make regular use of
the innovation.

 Everett Rogers defines a person’s level of
innovativeness as “ the degree to which an
individual is relatively earlier in adopting new
ideas than the other members of his social
system.”

Figure 6-7:
Adopter Categories Based
on Relative Time of Adoption

 A) Innovators are technology enthusiasts: they are
venturesome and enjoy tinkering with new
products and mastering their intricacies.
 B) Early adopters are opinion leaders who
carefully search for new technologies that might
give them a dramatic competitive advantage. They
are less price sensitive and willing to adopt the
product if given personalized solutions and good
service support

 C) Early majority are deliberate pragmatists
who adopt the new technology when its
benefits are proven and a lot of adoption has
already taken place. They make up the
mainstream
 D) Late majority are skeptical conservatives
who are risk averse, technology shy and price
sensitive.
 E) Laggards are tradition bound and resist the
innovation until the status quo is no longer
defensible.

6 - 152
Product Characteristics
Relative Advantage
Compatibility
Complexity
Divisibility
Communicability

6 - 153
 International Consumer Behavior
 Values, attitudes and behaviors differ greatly in
other countries.
 Physical differences exist that require changes in
the marketing mix.
 Customs vary from country to country.
 Marketers must decide the degree to which they
will adapt their marketing efforts.

Mm i iv customer analysis

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